# EDGAR Filing Document

**Accession Number:** 0001173382
**File Stem:** 0001173382-25-000027
**Filing Date:** 2025-6
**Character Count:** 1072221
**Document Hash:** 0bfa252acb7fef38d70307e6fc286b34
**Contains OCR:** False
**Source Format:** 

## Filing Content

## Filing Summary
**0001173382-25-000027.hdr.sgml**: 20250620

**ACCESSION NUMBER**: 0001173382-25-000027

**CONFORMED SUBMISSION TYPE**: 6-K

**PUBLIC DOCUMENT COUNT**: 115

**CONFORMED PERIOD OF REPORT**: 20250331

**FILED AS OF DATE**: 20250620

**DATE AS OF CHANGE**: 20250620

**FILER**: 

**COMPANY DATA:**
- **COMPANY CONFORMED NAME:** CAE INC
- **CENTRAL INDEX KEY:** 0001173382
- **STANDARD INDUSTRIAL CLASSIFICATION:** MISCELLANEOUS ELECTRICAL MACHINERY, EQUIPMENT & SUPPLIES [3690]
- **ORGANIZATION NAME:** 04 Manufacturing
- **EIN:** 000000000

**FILING VALUES:**
- **FORM TYPE:** 6-K
- **SEC ACT:** 1934 Act
- **SEC FILE NUMBER:** 001-31402
- **FILM NUMBER:** 251060649

**BUSINESS ADDRESS:**
- **STREET 1:** 8585 COTE DE LIESSE
- **CITY:** ST-LAURENT
- **STATE:** A8
- **ZIP:** H4T 1G6
- **BUSINESS PHONE:** 514-341-6780

**MAIL ADDRESS:**
- **STREET 1:** 8585 COTE DE LIESSE
- **CITY:** ST-LAURENT
- **STATE:** A8
- **ZIP:** H4T 1G6

**UNITED STATES**

**SECURITIES AND EXCHANGE COMMISSION**

**Washington, DC 20549**

**Form 6-K**

**REPORT OF FOREIGN ISSUER PURSUANT TO RULE 13A-16 OR 15D-16 UNDER THE SECURITIES EXCHANGE ACT OF 1934**

For the month of: June 2025&nbsp;&nbsp;&nbsp;&nbsp;Commission File Number: 1-31402

**CAE INC.**

(Translation of registrant's name into English)

8585 Cote de Liesse

Saint-Laurent, Quebec

Canada H4T 1G6

(Address of Principal Executive Offices)

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F:

Form 20-F&nbsp;&nbsp;&nbsp;&nbsp;___&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Form 40-F <u>X</u> 

**INCORPORATION BY REFERENCE**

&nbsp;&nbsp;&nbsp;&nbsp;Exhibits 99.1 and 99.2 of this Form 6-K are incorporated by reference as additional exhibits to the registrant's Registration Statements on Form S-8 (File Nos. 333-97185, 333-155366, 333-213708, 333-267775 and 333-275323).

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**SIGNATURES**

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

**CAE Inc.**

Date: June 20, 2025&nbsp;&nbsp;&nbsp;&nbsp;By:&nbsp;&nbsp;&nbsp;&nbsp;<u>/s/ Mark Hounsell&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</u>

Name:&nbsp;&nbsp;&nbsp;&nbsp;Mark Hounsell

Title:&nbsp;&nbsp;&nbsp;&nbsp;Chief Legal and Compliance Officer, and Corporate Secretary

**EXHIBIT INDEX**

99.1<sup>&nbsp;&nbsp;&nbsp;&nbsp;</sup>&nbsp;&nbsp;&nbsp;&nbsp;<u>[Notice and Management Proxy Circular dated June 12, 2025](caeproxy2025.htm)</u>

99.2&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<u>[Annual Report for the year ended March 31, 2025](annualreport2025.htm)</u>

**&nbsp;&nbsp;&nbsp;&nbsp;**

## Exhibit 99.1

![proxycover.jpg](proxycover.jpg)

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**Table of Contents**

Letter to Shareholders from the Chair of the Board&nbsp;&nbsp;&nbsp;&nbsp;i

Company Overview&nbsp;&nbsp;&nbsp;&nbsp;iv

Proxy Circular Summary&nbsp;&nbsp;&nbsp;&nbsp;vii

About CAE&nbsp;&nbsp;&nbsp;&nbsp;ix

Useful Information&nbsp;&nbsp;&nbsp;&nbsp;xiv

Notice of 2025 Annual and Special Shareholders' Meeting&nbsp;&nbsp;&nbsp;&nbsp;xv

**Section 1** About Voting Your Shares&nbsp;&nbsp;&nbsp;&nbsp;1

**Section 2** Business of the Meeting&nbsp;&nbsp;&nbsp;&nbsp;7

**Section 3** About the Nominated Directors&nbsp;&nbsp;&nbsp;&nbsp;13

**Section 4** Corporate Governance&nbsp;&nbsp;&nbsp;&nbsp;31

**Section 5** Board Committee Reports&nbsp;&nbsp;&nbsp;&nbsp;46

**Section 6** Director Compensation&nbsp;&nbsp;&nbsp;&nbsp;51

**Section 7** Executive Compensation&nbsp;&nbsp;&nbsp;&nbsp;56

Compensation Discussion and Analysis&nbsp;&nbsp;&nbsp;&nbsp;59

Executive Summary&nbsp;&nbsp;&nbsp;&nbsp;60

Shareholder Engagement&nbsp;&nbsp;&nbsp;&nbsp;63

Succession Planning&nbsp;&nbsp;&nbsp;&nbsp;64

Compensation Philosophy&nbsp;&nbsp;&nbsp;&nbsp;65

Executive Compensation Programs&nbsp;&nbsp;&nbsp;&nbsp;67

FY2025 Compensation Outcomes&nbsp;&nbsp;&nbsp;&nbsp;78

Determination of NEOs' Individual Performance&nbsp;&nbsp;&nbsp;&nbsp;83

Compensation Governance&nbsp;&nbsp;&nbsp;&nbsp;88

Alignment of Compensation and Performance&nbsp;&nbsp;&nbsp;&nbsp;94

Compensation of our Named Executive Officers&nbsp;&nbsp;&nbsp;&nbsp;97

Summary Compensation Table&nbsp;&nbsp;&nbsp;&nbsp;97

Outstanding Share-Based Awards and Option-Based Awards&nbsp;&nbsp;&nbsp;&nbsp;99

Incentive Plan Awards – Value Vested or Earned During the Year&nbsp;&nbsp;&nbsp;&nbsp;100

Pension Arrangements&nbsp;&nbsp;&nbsp;&nbsp;101

Termination and Change of Control Benefits&nbsp;&nbsp;&nbsp;&nbsp;102

**Section 8** Other Important Information&nbsp;&nbsp;&nbsp;&nbsp;107

**Appendix A** – Board of Directors' Charter&nbsp;&nbsp;&nbsp;&nbsp;109

**Appendix B** – Non-IFRS and Other Financial Measures&nbsp;&nbsp;&nbsp;&nbsp;113

**Appendix C** – Summary of the Employee Stock Option Plan&nbsp;&nbsp;&nbsp;&nbsp;120

**Appendix D** – Summary of the Omnibus Incentive Plan&nbsp;&nbsp;&nbsp;&nbsp;124

**Appendix E** – Amendments to the General By-law&nbsp;&nbsp;&nbsp;&nbsp;131

\| CAE INC. \| 2025 \| Management Proxy Circular

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**Letter to Shareholders from the Chair of the Board**

June 12, 2025

Dear fellow Shareholders,

It is our pleasure to invite you to CAE's 2025 Annual and Special Meeting of Shareholders (the "Meeting").

***Year in review***

This year was one of strong performance, driven by disciplined execution and efficient capital management. Leadership executed our strategy with focus and operational rigour. Purposeful actions generated very strong free cash flow\*, positioning the Company to meet its year-end leverage target and further strengthening CAE's balance sheet.

Our Defense & Security ("D&S") business accelerated its path to greater profitability with solid program execution and near doubling of adjusted backlog. Despite the headwind of constrained aircraft availability and drop in U.S. pilot hiring, our Civil Aviation segment delivered strong results and achieved nearly 40% growth in adjusted backlog\*.

The ability to deliver this level of success during a period of formidable geopolitical and economic challenges speaks to the resilience of our business model and the strength of CAE's global franchise.

***Organizational highlights***

Actions taken during the year further maximized our strategic positioning and focus, building momentum for continued success and delivery of shareholder value.

Given the significant opportunities ahead for us in the defence sector, we created D&S Canada as a standalone division and appointed France Hébert Division President and Global Operations Lead. France joined CAE in 2019 and has over 35 years of experience working primarily in defence and aerospace. She brings to this new role extensive leadership experience and a proven track record of winning and executing complex programs.

We also streamlined operations and strengthened leadership by introducing a Chief Operating Officer, and evolving the roles of the Chief Strategy and Performance Officer and Chief People and Sustainability Officer, driving efficiencies and financial savings at the corporate and division levels.

Through our SkyAlyne joint venture, we were awarded a 25-year contract to support Canada's Future Aircrew Training (FAcT) program, the single largest contract in CAE's history and an important milestone for us. We are also proud to be identified as a strategic partner to the Government of Canada to work with the Royal Canadian Air Force to design and co-develop the Future Fighter Lead-in Training (FFLIT) program, which will prepare and train pilots to operate Canada's advanced fighters.

By increasing our ownership stake in SIMCOM Aviation Training, we solidified CAE's presence in its core business aviation training market. Under this transaction, we secured a five-year extension on our training exclusivity agreement with Flexjet.

Under our commitment to sustainability, we made important advances in our decarbonization strategy, including receiving approval of our targets from the Science Based Targets initiative and introducing formal plans within our Civil Aviation and D&S businesses. Detailed information on our sustainability efforts can be found at **<u>https://www.cae.com/sustainability</u>**.

\*Non-IFRS and Other Financial Measures (see Appendix B).

i \| CAE INC. \| 2025 \| Management Proxy Circular

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***Re-establishment of NCIB***

Alignment of CAE's performance and outcomes with the interests of our Shareholders continued to be a priority. As part of CAE's capital allocation priorities, we established a Normal Course Issuer Bid ("NCIB") to be used opportunistically. The Board's decision to re-establish the NCIB reflects confidence in CAE and the cash-generative nature of our highly recurring revenue business.

***CEO appointment***

Last fall, we announced Marc Parent's departure from his role as President and CEO as of the upcoming Meeting. Following a rigorous global selection process overseen by the Board, we appointed Matthew Bromberg as our President and CEO, effective immediately after the Meeting. We look forward to having Matthew lead the Company's growth and drive its continued evolution into the future. Matthew is a proven leader with deep experience in both aerospace and defence, involving large-scale international operations. He comes to CAE with a track record of driving operational excellence, transformation and growth in commercial and military aerospace markets for major global publicly traded companies.

Our Board has absolute confidence that CAE's future will be bright with Matthew at the helm, working together with the exceptionally talented leadership team that is in place. His strategic vision and deep industry expertise position him to lead CAE into its next phase of growth and innovation.

***Board renewal and appointments***

In fiscal year 2025, CAE also undertook significant governance initiatives centered on Board renewal. Appointments were made to ensure fresh perspectives and representation by independent and qualified directors who will contribute to CAE's strategic direction and long-term success. These changes reflect constructive and continuous dialogue over an extended period with several CAE Shareholders.

Joining me on the Board over this past year were Patrick Decostre, Ian L. Edwards, Peter Lee, Katherine A. Lehman and Louis Têtu, each of whom brings unique expertise that will benefit the Company and its Shareholders.

In conjunction with the CEO succession, the Board announced the expansion of my Board Chair role to Executive Chairman and the introduction of a Lead Independent Director position, reflecting CAE's commitment to best-in-class governance. The two appointments take place after the Meeting, subject to our election to the Board.

As Executive Chairman, I look forward to working closely with Matthew on the next chapter of growth and value creation, in addition to continuing to chair the Board of Directors.

On behalf of the Board I want to express our deep appreciation to Marc Parent for his 16 years of devoted service as President and CEO, during which time he led the transformation of CAE from primarily a simulator manufacturer to a world leader in aviation training solutions. Marc has left a lasting impact on CAE and global aerospace and has created a solid foundation for us to continue to build on.

We also thank Alan N. MacGibbon, who served as a director and Board Chair for many years, and outgoing directors Michael E. Roach, Andrew J. Stevens, Margaret S. (Peg) Billson, François Olivier and David G. Perkins for their service and the valuable contributions made during their tenure.

***Looking forward***

The Board is highly confident in the Company's strategy and the leadership in place. D&S is exceptionally well positioned for long-term growth and profitability, while the outlook in Civil Aviation reflects a position of strength. CAE is poised for continued growth in fiscal 2026, with a larger base of business supported by higher margins and strong free cash flow\*.

In the pursuit of CAE's noble mission and vision, we will continue leveraging technology to elevate safety to new heights through the lens of sustainability, always with an unwavering commitment to deliver Shareholder value.

\*Non-IFRS and Other Financial Measures (see Appendix B).

ii \| CAE INC. \| 2025 \| Management Proxy Circular

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***Closing words***

To our Shareholders — thank you for your continued confidence and support of CAE. The Board values your input and insights and looks forward to continued dialogue.

To CAE employees — your passion for what we do and steadfast commitment to delighting our customers set us apart. You are the drivers of our One CAE culture.

We will hold the Meeting in a hybrid format — both virtually via live webcast at **<u>https://meetings.lumiconnect.com/400-779-914-351</u>** and in person for Shareholders only at Lumi Experience Montréal, 1250 René-Lévesque Boulevard West, Suite 3610, Montréal, Québec, H3B 4W8, on August 13, 2025, at 11:00 a.m. (EDT). As a Shareholder, you have the right to vote your Shares on all items that come before the Meeting. Your vote is important to us, and we encourage you to exercise your right either in person or online at the Meeting, or by proxy.

As in prior years, important matters affecting our Company will be considered at the Meeting. We will, as always, review CAE's financial position, including business operations and the value delivered to Shareholders. We will also respond to your comments and questions.

This Circular gives you details about all the items for consideration and how to vote. It also contains profiles of the nominated directors, information on the auditors, and sections on the Board committees and CAE corporate governance practices. Whether or not you plan to attend the Meeting, we encourage you to review the enclosed information, consider the resolutions put forth by the Board and vote your Shares.

The Board remains committed to acting in the best interests of the Company and all its Shareholders.

We thank you for your continued confidence in, and support of, CAE and look forward to hearing from you at this year's Meeting.

---

| | |
|:---|:---|
| ![image_2.jpg](image_2.jpg) | ![image_3.jpg](image_3.jpg) |
| ![image_2.jpg](image_2.jpg) | Calin Rovinescu<br>**Chair of the Board** |

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iii \| CAE INC. \| 2025 \| Management Proxy Circular

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![image_4.jpg](image_4.jpg)

iv \| CAE INC. \| 2025 \| Management Proxy Circular

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![image_5.jpg](image_5.jpg)

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![image_6.jpg](image_6.jpg)

vi \| CAE INC. \| 2025 \| Management Proxy Circular

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Proxy Circular Summary

<br>This summary highlights some of the important information you will find in this Management Proxy Circular ("Circular"). These highlights do not contain all the information that you should consider, and **you should read this entire Circular before voting your Shares**.

**Shareholder Voting Matters**

---

| | | |
|:---|:---|:---|
| Voting Matter  | Board Vote Recommendation | Page Reference for More Information |
| &nbsp;&nbsp;&nbsp;Election of 13 Directors | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**FOR** each nominee | 8 |
| &nbsp;&nbsp;&nbsp;Appointing PricewaterhouseCoopers LLP (PwC) <br>as Auditors | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**FOR**  | 10 |
| &nbsp;&nbsp;&nbsp;Advisory Vote on Executive Compensation | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**FOR** | 11 |
| &nbsp;&nbsp;&nbsp;Approving the By-law Amendments | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**FOR** | 12 |

---

vii \| CAE INC. \| 2025 \| Management Proxy Circular

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**Review this Proxy Circular and Vote in One <br>of the Following Ways**

**Voting by Proxy is the Easiest Way**

Below are the different ways in which you can give your voting instructions, details of which are found in the enclosed proxy form or your voting instruction form, as applicable. **Please also refer to Section 1 – About Voting Your Shares for more information on the voting methods available to you:**

![image_45.jpg](image_45.jpg)&nbsp;&nbsp;&nbsp;&nbsp;by mail: sign, date and return your proxy form in the envelope provided.

![image_11.jpg](image_11.jpg)&nbsp;&nbsp;&nbsp;&nbsp;by telephone: call the telephone number on your proxy form.

![image_47.jpg](image_47.jpg)&nbsp;&nbsp;&nbsp;&nbsp;on the Internet: visit the website listed on your proxy form.

![image_13.jpg](image_13.jpg)&nbsp;&nbsp;&nbsp;&nbsp;by appointing another person to attend and vote at the Meeting in person or online on your behalf.

**Voting In Person at the Meeting**

![image_14.jpg](image_14.jpg)&nbsp;&nbsp;&nbsp;&nbsp;Attend in person at **Lumi Experience Montréal, 1250 René-Lévesque Blvd. W., Suite 3610,<br>Montréal, Québec** and follow the steps listed in the Section "Attending and Participating."

**Voting Online at the Meeting**

![image_15.jpg](image_15.jpg)&nbsp;&nbsp;&nbsp;&nbsp;Log in online at **<u>https://meetings.lumiconnect.com/400-779-914-351</u>** and follow the steps listed in the Section "Attending and Participating."

viii \| CAE INC. \| 2025 \| Management Proxy Circular

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About CAE

**Who We Are**

At CAE, we exist to make the world safer. We deliver cutting-edge training, simulation, and critical operations solutions to prepare aviation professionals and defence forces for the moments that matter. Every day, we empower pilots, cabin crew, maintenance technicians, airlines, business aviation operators, and defence and security personnel to perform at their best and when the stakes are the highest. Around the globe, we're everywhere customers need us to be with approximately 13,000 employees at around 240 sites and training locations in over 40 countries. For nearly 80 years, CAE has been at the forefront of innovation, consistently seeking to set the standard by delivering excellence in high-fidelity flight simulators and training solutions, while embedding sustainability at the heart of everything we do. By harnessing technology and enhancing human performance, we strive to be the trusted partner in advancing safety and mission readiness—today and tomorrow.

Founded in 1947 and headquartered in Montreal, Canada, CAE has built an excellent reputation and long-standing customer relationships based on experience, strong technical capabilities, a highly trained workforce and global reach. CAE's common shares are listed on the Toronto and New York stock exchanges (TSX / NYSE) under the symbol CAE.

**Our Purpose, Mission and Vision**

Our purpose is to make the world safer.

Our mission is to deliver cutting-edge training, simulation and critical operations solutions to prepare aviation professionals and defence forces for the moments that matter.

Our vision is to be the trusted partner in advancing safety and mission readiness, defining the standard of excellence in training and critical operations by harnessing technology and enhancing human performance.

**Our Operations**

Our operations are managed through two segments:

**Civil Aviation:** We provide comprehensive training solutions for flight, cabin, maintenance, ground personnel and air traffic controllers in commercial, business and helicopter aviation, a complete range of flight simulation training devices, ab initio pilot training and crew sourcing services, as well as airline operations digital solutions. The civil aviation market includes major commercial airlines, regional airlines, business aircraft operators, civil helicopter operators, aircraft manufacturers, third-party training centres, flight training organizations, air navigation service providers, maintenance, repair and overhaul organizations and aircraft finance leasing companies.

**Defense & Security**: We are a global training and simulation provider delivering scalable, platform-independent solutions that enable and enhance force readiness and security. The defence and security market includes defence forces, OEMs, government agencies and public safety organizations worldwide.

ix \| CAE INC. \| 2025 \| Management Proxy Circular

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**Our Strategy**

**CAE's Four Strategic Pillars** 

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| | |
|:---|:---|
| ![image_19.jpg](image_19.jpg) | **Efficient Growth**<br>Our business features a high degree of recurring revenues due to the underlying characteristics of our technology-enabled solutions and regulatory requirements across our markets. We seek to maximize the benefits of our strong competitive position to deliver premium growth and profitability through a focus on operational rigour, cost optimization, capital efficiency, and a disciplined approach to pursuing organic and inorganic growth. |
| ![image_20.jpg](image_20.jpg) | **Technology and Market Leadership**<br>We have a rich and long-dated history of customer centricity, innovation and delivering state-of-the-art technology solutions that define the forefront of the industries in which we operate. As a result, we constantly seek new ways to enhance the performance of our customers by fostering a culture of continuous improvement and innovation. This drives technology leadership, deeper customer partnerships, and new customer development, enabling us to capitalize on the ample headroom in our large, growing addressable markets. Furthermore, our solutions are deployed with a focus on integrated sustainability. |
| ![image_21.jpg](image_21.jpg) | **Revolutionizing Training and Critical Operations**<br>We are a global leader in the application of training, digital immersion, critical operations, and modelling and simulation technologies. We seek to use data-driven applications and advanced analytics to produce measurable and demonstrated outcomes in our markets. The efficacy of our technology solutions enables customized, collaborative, and multi-domain offerings. |
| ![image_22.jpg](image_22.jpg) | **Skills & Culture**<br>Our core values are innovation, integrity, empowerment, excellence and One CAE. We employ these values across a diverse global team to drive a unique social impact. We seek to create an employee experience and environment that values teamwork, professional growth, and engagement. As a result, our employees across the globe share a passion to prepare our customers for the moments that matter. |

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x \| CAE INC. \| 2025 \| Management Proxy Circular

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Executive Compensation Highlights

—Executive short-term incentive payout based on a corporate performance factor of 103% reflective of CAE's performance against its strategic plan and financial objectives in FY2025

—63% payout factor for Performance Share Units that vested in FY2025 (with a performance measurement period from FY2023 to FY2025), aligned with shareholder experience over the period

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| |
|:---|
| Our Executive Compensation Best Practices |
| &nbsp;&nbsp;&nbsp;Minimum threshold levels of corporate performance to be met to allow for payments under <br>the annual and long-term incentives |
| &nbsp;&nbsp;&nbsp;Caps on annual bonuses and Performance Share Units ("PSU") payout factors |
| &nbsp;&nbsp;&nbsp;Balanced mix of short, medium and long-term compensation |
| &nbsp;&nbsp;&nbsp;Pensionable earnings based on actual years served  |
| &nbsp;&nbsp;&nbsp;Change of control severance limited to two times salary and bonuses |
| &nbsp;&nbsp;&nbsp;Robust clawback policy, including a market-leading ability to clawback incentive-based compensation in circumstances of misconduct without the need for a financial restatement |
| &nbsp;&nbsp;&nbsp;Minimum share ownership and option profit retention guidelines |
| &nbsp;&nbsp;&nbsp;Anti-hedging policy |
| &nbsp;&nbsp;&nbsp;Post-employment Share ownership requirement for CEO |
| &nbsp;&nbsp;&nbsp;Double trigger vesting of equity in case of change of control |

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xi \| CAE INC. \| 2025 \| Management Proxy Circular

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Governance Highlights

The following table shows some of the ways CAE continues to adhere to the highest standards in corporate governance.

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| | |
|:---|:---|
| Our Corporate Governance Best Practices |  |
| Number of Director nominees | &nbsp;&nbsp;&nbsp;13 |
| Number of non-employee Independent Director nominees | &nbsp;&nbsp;&nbsp;12/13<sup>1</sup> |
| Board Committee members (including the Governance Committee, which is responsible for recommending new Directors to join the Board) are all independent. |  |
| Average age of Director nominees | &nbsp;&nbsp;58 |
| Annual election of Directors |  |
| Other Board commitments and interlocks policy |  |
| Separate Chair and CEO roles |  |
| Director tenure and age term limits |  |
| Share ownership requirements for Directors and executives |  |
| Board orientation/education program |  |
| Number of Board meetings held during FY2024 | &nbsp;&nbsp;&nbsp;14 |
| Number of financial experts on the Audit Committee | &nbsp;&nbsp;&nbsp;1 |
| Code of Business Conduct |  |
| Annual advisory vote on executive compensation |  |
| Formal Board and Committee evaluation processes |  |
| No dual-class shares |  |
| Enterprise risk management oversight including sustainability matters |  |

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&nbsp;&nbsp;&nbsp;&nbsp;1.&nbsp;&nbsp;&nbsp;&nbsp;All non-employee Directors are currently independent. However, as previously announced, effective at the conclusion of the Meeting and subject to his election, Mr. Rovinescu will become Executive Chairman of the Board, at which time he will no longer be considered independent.

xii \| CAE INC. \| 2025 \| Management Proxy Circular

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Our Director Nominees

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| | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|
| Name | Age | Director Since | Position | Independent | Committee Memberships | Board and Committee Attendance FY2025 | Other Public Boards |
| **Ayman Antoun** | 59 | 2022 | Corporate Director | YES | Audit | 96% | 1 |
| **Sophie Brochu** | 62 | 2023 | Corporate Director | YES | GC (Chair), HRC | 100% | 2 |
| **Matthew Bromberg**<sup>1</sup> | 55 | N/A | Incoming President and CEO, CAE | NO | N/A | N/A | N/A |
| **Patrick Decostre** | 52 | 2024 | President and CEO, Boralex Inc. | YES | Audit | 94% | 1 |
| **Elise Eberwein** | 60 | 2022 | Corporate Director | YES | GC, HRC | 97% | N/A |
| **Ian L. Edwards** | 63 | 2024 | President and CEO, AtkinsRéalis | YES | Audit | 92% | 1 |
| **Marianne Harrison** | 61 | 2019 | Corporate Director | YES | Audit (Chair) | 100% | N/A |
| **Peter Lee**<sup>2</sup> | 39 | 2025 | Co-Founder and Partner, Browning West, LP | YES | HRC | 100% | 1 |
| **Katherine A. Lehman**<sup>2</sup> | 50 | 2025 | Partner, Palladium Equity Partners, LLC | YES | GC | N/A<sup>3</sup> | 1 |
| **Mary Lou Maher** | 65 | 2021 | Corporate Director | YES | HRC (Chair) | 100% | 2 |
| **Calin Rovinescu**<sup>2,4</sup> | 69 | 2025 | Corporate Director | YES | N/A | 100% | 2 |
| **Patrick M. Shanahan** | 62 | 2022 | President and CEO, Spirit AeroSystems Inc. | YES | HRC | 92% | 2 |
| **Louis Têtu**<sup>2</sup> | 61 | 2025 | Executive Chair, Coveo Solutions Inc. | YES | Audit | 100% | 2 |

---

&nbsp;&nbsp;&nbsp;&nbsp;1.&nbsp;&nbsp;&nbsp;&nbsp;Mr. Bromberg does not currently serve as a Director on the Board of CAE and will become a Director following his election at the Meeting.

&nbsp;&nbsp;&nbsp;&nbsp;2.&nbsp;&nbsp;&nbsp;&nbsp;Ms. Lehman and Messrs. Lee, Rovinescu and Têtu were appointed to the Board of CAE on February 14, 2025.

&nbsp;&nbsp;&nbsp;&nbsp;3.&nbsp;&nbsp;&nbsp;&nbsp;Ms. Lehman was unable to attend the sole Board meeting to which she was invited in FY2025 because of a commitment predating her appointment to the Board and which could not be rescheduled.

&nbsp;&nbsp;&nbsp;&nbsp;4.&nbsp;&nbsp;&nbsp;&nbsp;As of the date of this Circular, Mr. Rovinescu is considered independent. However, as previously announced, effective at the conclusion of the Meeting and subject to his election, Mr. Rovinescu will become Executive Chairman of the Board, at which time he will no longer be considered independent.

xiii \| CAE INC. \| 2025 \| Management Proxy Circular

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Useful Information

**<br>Certain Defined Terms**

In this document, referred to as this "Circular", the terms "you" and "your" refer to the Shareholder, while "we", "us", "our", "Company" and "CAE" refer to CAE Inc. and where applicable, its subsidiaries.

**Currency, Exchange Rates and Share Prices**

All amounts referred to in this Circular are presented in Canadian dollars, unless otherwise stated. In a number of instances in this Circular, including with respect to calculation of the in-the-money value of stock options denominated in Canadian dollars, information based on our Share price has been calculated on the basis of the Canadian dollar.<br>

**Non-IFRS and Other Financial Measures**

This document includes non-IFRS financial measures, non-IFRS ratios, capital management measures and supplementary financial measures. These measures are not standardized financial measures prescribed under IFRS and therefore should not be confused with, or used as an alternative for, performance measures calculated according to IFRS. Furthermore, these measures should not be compared with similarly titled measures provided or used by other issuers. Management believes that these measures provide additional insight into our operating performance and trends and facilitate comparisons across reporting periods.<br>Definitions of all non-IFRS and other financial measures are provided in Appendix B of this document to give the reader a better understanding of the indicators used by management. In addition, when applicable, this document may include a quantitative reconciliation of the non-IFRS and other financial measures to the most directly comparable measure under IFRS. Refer to Appendix B of this document for references where these reconciliations are provided.<br>

**<br>Information Currency**

The information in this Circular is current as of June 12, 2025 unless otherwise stated.

xiv \| CAE INC. \| 2025 \| Management Proxy Circular

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**Notice of 2025<br>Annual and Special Shareholders' Meeting**

**What the Meeting is About**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.&nbsp;&nbsp;&nbsp;&nbsp;Receive CAE Consolidated Financial Statements and the auditors' report for the fiscal year ended March 31, 2025;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.&nbsp;&nbsp;&nbsp;&nbsp;Elect Directors who will serve until the end of the next annual Shareholders' meeting;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.&nbsp;&nbsp;&nbsp;&nbsp;Reappoint PricewaterhouseCoopers LLP as our auditors who will serve until the end of the next annual Shareholders' meeting and to authorize the Company's Board to fix the auditors' remuneration;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.&nbsp;&nbsp;&nbsp;&nbsp;Vote, in an advisory, non-binding manner, on CAE's approach to executive compensation described in this Circular;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.&nbsp;&nbsp;&nbsp;&nbsp;Approve certain changes to CAE's General By-law proposed to improve CAE's corporate governance practices; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.&nbsp;&nbsp;&nbsp;&nbsp;Transact any other business that may properly come before the Meeting.

![image_31.jpg](image_31.jpg)

**You have the Right to Vote**

As a holder of record of common shares of CAE ("Shares") at the close of business on June 16, 2025, you are entitled to receive notice of and vote at the Meeting.

You are asked to consider and to vote your Shares on items 2 to 5 and any other items that may properly come before the Meeting or any adjournment or postponement thereof.

If you are unable to attend the Meeting in person or online and want to ensure that your Shares are voted, please submit your votes by proxy as described under "How to Vote Your Shares" in the accompanying Circular. To be valid, our transfer agent, Computershare Trust Company of Canada, must receive your proxy by 11:00 a.m. (Eastern Time) on August 11, 2025. If the Meeting is adjourned or postponed, Computershare must receive your proxy no later than 24 hours (excluding Saturdays, Sundays and holidays) prior to any such adjournment or postponement.

Accompanying this Notice of Annual and Special Meeting is the Circular, which contains more information on the matters to be addressed at the Meeting.

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**Attending and Participating**

Our Meeting will be held in a hybrid format, which will be conducted simultaneously in person and by live webcast. Shareholders may attend either meeting format, as explained below. The hybrid format allows those people who cannot attend in person the opportunity to attend the meeting online, participate, vote and ask questions as if they were physically present at the meeting and regardless of their geographic location. Only registered Shareholders and duly appointed Proxyholders (including non-registered (beneficial) Shareholders who have appointed themselves as a Proxyholder) will be permitted to participate, vote and ask questions during the Meeting.

**To attend the Meeting in person, follow the instructions below:**

If you are a registered Shareholder or a duly appointed Proxyholder (including non-registered (beneficial) Shareholders who have appointed themselves as Proxyholder), you will be able to attend the meeting in person, vote and ask questions after registering at the registration desk. Only registered Shareholders and duly appointed Proxyholders will be granted access to the in-person meeting. However, non-registered (beneficial) Shareholders who have not appointed themselves Proxyholders, non-shareholders and other guests will be able to attend the meeting online.

If you attend the meeting in person, you will only need to check in at the registration desk with our transfer agent, Computershare, when you arrive at **Lumi Experience Montréal, 1250 René-Lévesque Blvd. W., Suite 3610, Montréal, Québec**.

**To access the Meeting online, follow the instructions below**, as applicable to you:

**1.&nbsp;&nbsp;&nbsp;&nbsp;**Log in online at **<u>https://meetings.lumiconnect.com/400-779-914-351</u>**. The platform is compatible with all major browsers except for Internet Explorer.

**2.&nbsp;&nbsp;&nbsp;&nbsp;**Click "I have a Login" and then enter your Control Number (see below) and Password "CAE2025" (note the password is case sensitive); OR

**3.&nbsp;&nbsp;&nbsp;&nbsp;**Click "I am a guest" and then complete the online form.

**In order to find the 15-digit Control Number to access the Meeting:**

—&nbsp;&nbsp;&nbsp;&nbsp;Registered Shareholders: The control number located on the form of proxy or in the email notification you received is your Control Number.

—&nbsp;&nbsp;&nbsp;&nbsp;Proxyholders: Duly appointed Proxyholders, including non-registered (beneficial) Shareholders who have appointed themselves or another person as a Proxyholder, will receive the Control Number from Computershare by e-mail after the proxy voting deadline has passed.

If you attend the Meeting online, it is important that you are connected to the Internet at all times during the Meeting in order to vote when balloting commences. It is your responsibility to ensure connectivity for the duration of the Meeting. You should allow ample time to check into the Meeting online and complete the related procedure. For additional details on accessing and participating in the Meeting online from your tablet, smartphone or computer, please see the Virtual AGM User Guide provided by Computershare and accompanying this proxy circular.

**Notice-and-Access**

As part of an effort to reduce environmental impacts of excessive printing, and to save postage costs, CAE is opting to use the "Notice-and-Access" provisions of Canadian securities rules.

The "Notice-and-Access" provisions allow Canadian companies to post electronic versions of Shareholder meeting materials in lieu of mailing physical copies of such documents to Shareholder. Shareholders will instead only receive a paper notification with information on how they may obtain a copy of the meeting materials electronically or request a paper copy (Notification). Shareholders who have already signed up for electronic delivery of Shareholder materials will continue to receive them by email.

Non-registered Shareholders who have not objected to their intermediary disclosing certain ownership information about themselves to CAE are referred to as "NOBOs". The non-registered Shareholders who have objected to their intermediary disclosing ownership information about themselves to CAE are referred to as "OBOs". CAE has distributed the Notification in connection with the Meeting to intermediaries and clearing agencies for onward distribution to non-registered Shareholders. CAE will not be paying for intermediaries to deliver to OBOs (who have not otherwise waived their right to receive proxy-related materials) copies of proxy related materials and related documents (including the Notification). Accordingly, an OBO will not receive copies of proxy-related materials and related documents unless the OBO's intermediary assumes the costs of delivery.

**How to Access Meeting Materials**

—&nbsp;&nbsp;&nbsp;&nbsp;On Computershare Investor Services Inc.'s ("Computershare") website: **<u>www.envisionreports.com/CAE2025e</u>**

—&nbsp;&nbsp;&nbsp;&nbsp;On SEDAR+: **<u>www.sedarplus.ca</u>**

—&nbsp;&nbsp;&nbsp;&nbsp;On CAE's website: **<u>www.cae.com/investors/financial-reports</u>**

Shareholders are reminded to read the Circular and other Meeting materials carefully before voting their Shares.

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How to Request a Paper Copy of the Meeting Materials

**Before the Meeting**

If your name appears on a Share certificate, you are considered as a "registered Shareholder". You may request paper copies of the Meeting materials at no cost to you by calling Computershare toll-free, within North America at **1-866-962-0498** or direct, from outside of North America, at **1-514-982-8716** and entering your control number as indicated on your form of proxy.

If your Shares are listed in an account statement provided to you by an intermediary, you are considered as a "non-registered Shareholder". You may request paper copies of the Meeting materials from Broadridge at no cost to you up to one year from the date the Circular was filed on SEDAR through the Internet by going to **<u>www.proxyvote.com</u>** or by telephone at **1-877-907-7643** and entering the 16-digit control number provided on the voting instruction form and following the instructions provided.

Please note that you will not receive another form of proxy or voting instruction form; please retain your current one to vote your Shares.

In any case, requests should be received at least five (5) business days prior to the proxy deposit date and time set out in the accompanying proxy or voting instruction form in order to receive the Meeting materials in advance of such date and the Meeting date.

**After the Meeting**

By telephone at **1-866-964-0492** or online at **<u>investor.relations@cae.com</u>**. A copy of the Meeting materials will be sent to you within ten (10) calendar days of receiving your request.

By order of the Board of Directors,<br>June 12, 2025<br>Montréal, Québec

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| ![image_204.jpg](image_204.jpg) | ![image_34.jpg](image_34.jpg) |
| ![image_204.jpg](image_204.jpg) | **Mark Hounsell** <br>**Chief Legal and Compliance Officer, and Corporate Secretary** |

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![section1.jpg](section1.jpg)

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Section 1 – About Voting Your Shares

Record Date

June 16, 2025 is the record date for the Meeting.

**Who can vote**

Only holders of our Shares at the close of business on the Record Date are entitled to receive notice of and to attend, including by proxy, and vote at the Meeting or any adjournment or postponement thereof. The list of Shareholders on the Record Date is available for inspection by appointment during usual business hours at Computershare Trust Company of Canada, 650 de Maisonneuve west 7th floor, Montreal, QC H3A 3T2, and at the Meeting. As of June 12, 2025, 320,559,699 Shares are issued and outstanding. Each Share is entitled to one vote.

**Principal Shareholders**

To the knowledge of the Directors and executive officers of CAE (from records and publicly filed reports), there is no person who beneficially owns or exercises control or direction over more than 10% of the Shares.

All Directors and executive officers as a group (20 persons) beneficially owned or exercised control or direction over 652,117 Shares representing 0.20% of the class as at June 12, 2025.

**Your Vote is Important**

Your vote is important. Please read the information below to ensure your Shares are properly voted.

**How do I participate in the Meeting?**

Our Meeting will be held in a hybrid format, which will be conducted simultaneously in person and by live webcast. Shareholders may attend either meeting format, as explained below. The hybrid format allows those people who cannot attend in person the opportunity to attend the meeting online, participate, vote and ask questions as if they were physically present at the meeting and regardless of their geographic location. Only registered Shareholders and duly appointed Proxyholders (including non-registered (beneficial) Shareholders who have appointed themselves as a Proxyholder) will be permitted to participate, vote and ask questions during the Meeting.

**To attend the Meeting in person, follow the instructions below:**

If you are a registered Shareholder or a duly appointed Proxyholder (including non-registered (beneficial) Shareholders who have appointed themselves as Proxyholder), you will be able to attend the meeting in person, vote and ask questions after registering at the registration desk. Only registered Shareholders and duly appointed Proxyholders will be granted access to the in-person meeting. However, non-registered (beneficial) Shareholders who have not appointed themselves Proxyholders, non-shareholders and other guests will be able to attend the meeting online.

If you attend the meeting in person, you will only need to check in at the registration desk with our transfer agent, Computershare, when you arrive at **Lumi Experience Montréal, 1250 René-Lévesque Blvd. W., Suite 3610, Montréal, Québec**.

**To access the Meeting online, follow the instructions below, as applicable to you:**

&nbsp;&nbsp;&nbsp;&nbsp;**1.&nbsp;&nbsp;&nbsp;&nbsp;**Log in online at **<u>https://meetings.lumiconnect.com/400-779-914-351</u>**. The platform is compatible with all major browsers except for Internet Explorer.

&nbsp;&nbsp;&nbsp;&nbsp;**2.&nbsp;&nbsp;&nbsp;&nbsp;**Click "I have a Login" and then enter your Control Number (see below) and Password "CAE2025" (note the password is case sensitive); OR

&nbsp;&nbsp;&nbsp;&nbsp;**3.&nbsp;&nbsp;&nbsp;&nbsp;**Click "I am a guest" and then complete the online form.

**In order to find the 15-digit Control Number to access the Meeting online:**

—&nbsp;&nbsp;&nbsp;&nbsp;Registered Shareholders: The control number located on the form of proxy or in the email notification you received is your Control Number.

—&nbsp;&nbsp;&nbsp;&nbsp;Proxyholders: Duly appointed Proxyholders, including non-registered (beneficial) Shareholders who have appointed themselves or another person as a Proxyholder, will receive the Control Number from Computershare by e-mail after the proxy voting deadline has passed.

If you attend the Meeting online, we recommend that you log in at least one hour before the start time of the Meeting. It is important to ensure you are connected to the Internet at all times if you participate in the Meeting online in order to vote when balloting commences. You are responsible for ensuring Internet connectivity for the duration of the Meeting. For additional details and instructions on accessing the Meeting online from your tablet, smartphone or computer, voting and asking questions during the Meeting, see the Virtual AGM User Guide provided by Computershare and accompanying this Circular.

For additional information regarding voting by proxy before the meeting, voting online, attending the meeting in person or online, or other general proxy matters, please contact Computershare at 1-800-564-6253 (Canada/U.S.) or 1-514-982-7555 (international/direct dial).

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Section 1 – About Voting Your Shares

How to Vote your Shares

You may vote your Shares in one of the following ways:

**1.**&nbsp;&nbsp;&nbsp;&nbsp;By proxy using all the voting channels that have been available in the past; this has not changed.

![image_45.jpg](image_45.jpg)by mail: sign, date and return your proxy form in the envelope provided.

![image_11.jpg](image_11.jpg)by telephone: call the telephone number on your proxy form.

![image_47.jpg](image_47.jpg)on the Internet: visit the website listed on your proxy form.

![image_13.jpg](image_13.jpg)by appointing another person to attend and vote at the Meeting online on your behalf.

**Refer to the enclosed proxy form for instructions.**

**2.**&nbsp;&nbsp;&nbsp;&nbsp;In person or online by virtual ballot at the Meeting by following the instructions below. The voting process is different for registered or non-registered (beneficial) Shareholders:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(a)**&nbsp;&nbsp;&nbsp;&nbsp;if you are a registered Shareholder, you may vote at the Meeting either in person or by completing a ballot online during the Meeting. Follow the instructions above to access the Meeting and cast your ballot online during the designated time.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(b)**&nbsp;&nbsp;&nbsp;&nbsp;if you are a non-registered Shareholder (including a participant in the employee plan) AND you wish to vote in person or online at the Meeting, you must appoint yourself as Proxyholder in order to vote at the Meeting. You MUST complete and return a voting instruction form no later than 11:00 a.m. (Eastern Time) on August 11, 2025 appointing yourself as Proxyholder. Follow the instructions above to attend and vote in person or to access the Meeting and cast your ballot online during the designated time. You will receive the Control Number for the Meeting from Computershare by e-mail after the proxy voting deadline has passed.

**United States Beneficial holders:** To vote at the Meeting, you must first obtain a valid legal proxy from your broker, bank or other agent and then register in advance of the Meeting. Follow the instructions from your broker or bank included with this Circular, or contact your broker or bank to request a legal proxy form. To register to attend the Meeting in person or online, you must submit a copy of your legal proxy form to Computershare. Requests for registration should be directed to Computershare at 100 University Avenue, 8th Floor, Toronto, Ontario M5J 2Y1, or by e-mail at uslegalproxy@computershare.com. Requests for registration must be labelled as "Legal Proxy" and be received no later than 11:00 a.m. (EDT) on August 11, 2025. You will receive a confirmation of your registration after Computershare receives your registration materials. Please note that you are required to register your appointment as Proxyholder at **<u>https://www.computershare.com/CAE</u>.**

If you have any questions or need assistance voting, you may contact Sodali & Co, CAE's strategic advisor and proxy solicitation agent, by telephone at 1-888-999-2602 (toll-free in North America) or 1-289-695-3075 (outside North America), or by email at assistance@investor.sodali.com.

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Section 1 – About Voting Your Shares

Voting by Proxy

If you choose to vote by proxy, you are giving the person or people named on your proxy form (referred to as a "Proxyholder") the authority to vote your Shares on your behalf in person or online at the Meeting or any adjournment or postponement thereof.

**Proxies are being solicited by management**

Through this Circular, management is soliciting your proxy in connection with the matters to be addressed at the Meeting (or any adjournment(s) or postponements(s) thereof) to be held at the time and place and for the purposes set forth in the accompanying Notice of the Meeting.

The solicitation is being made primarily by mail, but you may also be contacted by telephone or other means. We have engaged Morrow Sodali (Canada) Ltd. ("Sodali & Co") as strategic shareholder advisor and proxy solicitation agent to assist with the solicitation of votes from shareholders and to provide strategic services in the areas of capital markets intelligence, governance and shareholder engagement. The Company will pay fees of up to approximately $45,000 for the proxy solicitation service, in addition to certain out-of-pocket expenses. The Company may also reimburse brokers and other persons holding Shares in their name or in the name of nominees for their costs incurred in sending proxy material to their principals in order to obtain their proxies.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**Proxyholders other than management**<br>Shareholders desiring to appoint some person other than Calin Rovinescu, Marc Parent and Sophie Brochu as their representative at the Meeting may do so either by inserting such other person's name in the blank space provided or by completing another proper proxy form and, in either case, delivering the completed proxy to CAE's Corporate Secretary at 8585 Côte-de-Liesse, Saint-Laurent, Québec, H4T 1G6 or to Computershare Trust Company of Canada, 100 University Avenue, 8th Floor, Toronto, Ontario, M5J 2Y1 no later than 11:00 a.m. (Eastern Time) on August 11, 20254 (or, in the case of an adjournment or postponement, no later than 11:00 a.m. (Eastern Time) on the last business day preceding the day of such adjournment or postponement thereof).<br>

Unless you specify a different Proxyholder, the CAE officers and/or Directors whose names are pre-printed on the enclosed form of proxy (Calin Rovinescu, Marc Parent and Sophie Brochu) will vote your Shares. The Company may utilize the Broadridge QuickVote<sup>TM</sup> system, which involves NOBOs being contacted by Sodali & Co, which is soliciting proxies on behalf of management, to obtain voting instructions over the telephone and relaying them to Broadridge (on behalf of the NOBO's intermediary). While representatives of Sodali & Co are soliciting proxies on behalf of management, Shareholders are not required to vote in the manner recommended by the Board. The QuickVote<sup>TM</sup> system is intended to assist Shareholders in placing their votes, however, there is no obligation for any Shareholders to vote using the QuickVote<sup>TM</sup> system, and Shareholders may vote (or change or revoke their votes) at any other time and in any other applicable manner described in this Circular. Any voting instructions provided by a Shareholder will be recorded and such Shareholder will receive a letter from Broadridge (on behalf of the Shareholder's intermediary) as confirmation that their voting instructions have been accepted.

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Section 1 – About Voting Your Shares

Voting of Proxies

You may indicate on the proxy form how you want your Proxyholder to vote your Shares, in which case the Proxyholder will vote in accordance with your instructions. You can also let your Proxyholder decide for you. If you do not specify on the proxy form how you want your Shares to be voted, your Proxyholder will have the discretion to vote your Shares as they see fit.

The enclosed proxy form gives the Proxyholder discretion with respect to any amendments or variations to matters described in the Notice of Annual Meeting and with respect to any other matters which may properly come before the Meeting (including any adjournment or postponement thereof), in each instance, to the extent permitted by law, whether or not the amendment, variation, or other matter that comes before the Meeting is routine and whether or not the amendment, variation, or other matter that comes before the Meeting is contested.

At the time of printing this Circular, the management of CAE knows of no such amendments, variations or other matters to come before the Meeting. However, if you have not specified how to vote on a particular matter, or if any amendments or variations to matters identified in the Notice of Annual Meeting, or any other matters that are not now known to management of CAE, should properly come before the Meeting or any adjournment or postponement thereof, the Shares represented by properly submitted proxies given in favour of the persons designated by management of CAE in the form of proxy will be voted on such matters pursuant to such discretionary authority.

Unless you specify a different Proxyholder or specify how you want your Shares to be voted, Calin Rovinescu, Marc Parent and Sophie Brochu will vote your Shares:

**(a)**&nbsp;&nbsp;&nbsp;&nbsp;**FOR** electing the nominated Directors who are listed in this Circular;

**(b)**&nbsp;&nbsp;&nbsp;&nbsp;**FOR** appointing PwC as auditors and for the authorization of the Directors to fix their remuneration;

**(c)**&nbsp;&nbsp;&nbsp;&nbsp;**FOR** approving the advisory resolution on executive compensation; and

**(d)**&nbsp;&nbsp;&nbsp;&nbsp;**FOR** approving the By-law amendments.

Registered Shareholders who wish to appoint a third-party Proxyholder to represent them at the Meeting must first use the form of proxy to appoint the Proxyholder and then must register their Proxyholder online. Failure to register the Proxyholder will result in the Proxyholder not receiving a Control Number and therefore being unable to participate in the Meeting. To register a third-party Proxyholder, Shareholders must visit **<u>https://www. computershare.com/CAE</u>** by August 11, 2025 at 11:00 a.m. (Eastern Time) and provide Computershare with the Proxyholder's contact information required. Computershare needs this information so they can confirm their registration and send an email notification with a Control Number. Your Proxyholder needs the Control Number in order to participate in the meeting and vote your Shares. Your third-party Proxyholder should receive the email notification after 11:00 a.m. (Eastern Time) on August 11, 2025.

To be effective, your proxy must be received before 11:00 a.m. (Eastern Time) on August 11, 2025 or not less than 48 hours (excluding Saturdays, Sundays and holidays) prior to the time fixed for holding any adjournment or postponement of the Meeting.

If you have any questions or need assistance voting, please contact Sodali & Co at 1-888-999-2602 (toll-free in North America) or 1-289-695-3075 (outside North America) or by email at assistance@investor.sodali.com. Late proxies may be accepted or rejected by the Chair of the Meeting at his or her discretion and the Chair of the Meeting is under no obligation to accept or reject any particular late proxy. The time limit for deposit of proxies may be waived or extended by the Chair of the Meeting at his or her discretion, without notice.

**Revocation of Proxies**

You have the right to revoke a proxy by any of the following methods:

**(a)&nbsp;&nbsp;&nbsp;&nbsp;**Vote again by phone or Internet no later than 11:00 a.m. (Eastern Time) on August 11, 2025 (or not less than 48 hours (excluding Saturdays, Sundays and holidays) prior to the date of any adjourned or postponed Meeting); or

**(b)&nbsp;&nbsp;&nbsp;&nbsp;**Deliver another completed and signed proxy form, dated later than the first proxy form, by mail or fax such that it is received by CAE's Corporate Secretary at 8585 Côte-de-Liesse, Saint-Laurent, Québec, H4T 1G6 or by Computershare Trust Company of Canada, 100 University

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Section 1 – About Voting Your Shares

Avenue, 8th Floor, Toronto, Ontario, M5J 2Y1 no later than 11:00 a.m. (Eastern Time) on August 11, 2025 (or not less than 48 hours (excluding Saturdays, Sundays and holidays) prior to the date of any adjourned or postponed Meeting.

**Electronic Access to Proxy-Related Materials and Annual and Quarterly Reports**

We offer our Shareholders the opportunity to view management proxy circulars, annual reports and quarterly reports through the Internet instead of receiving paper copies in the mail. You will find more information on this matter in the Notice-and-Access section above.

**Electronic Delivery in Future**

Shareholders are asked to consider signing up for electronic delivery of meeting materials. Electronic delivery is a convenient way to make distribution of materials more efficient and is an environmentally responsible alternative by eliminating the use of printed paper and the carbon footprint of the associated mail delivery process. Signing up is quick and easy, and can be done by visiting **<u>www.proxyvote.com</u>** and signing in with your control number. After voting on the matters to be addressed at the Meeting and following your vote confirmation, you will be able to select the electronic delivery box and provide an email address. Having registered for electronic delivery, going forward you will receive your meeting materials by email and will be able to vote on your device by simply following a link in the email sent by your financial intermediary, provided your intermediary supports this service.

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![image_51.jpg](image_51.jpg)

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Section 2 – Business of the Meeting

**1** Receive CAE's Consolidated Financial Statements

CAE's consolidated financial statements including the auditors' report, for the year ended on March 31, 2025 will be presented to Shareholders at the Meeting. They can also be accessed on CAE's website at **<u>www.cae.com</u>**, on SEDAR+ at **<u>www.sedarplus.ca</u>**, or on EDGAR at **<u>www.sec.gov</u>**. No Shareholder vote is required in connection with the consolidated financial statements.

**2** Elect 13 Directors

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| &nbsp;&nbsp;&nbsp;&nbsp;**13**<br>**Nominees** | &nbsp;&nbsp;&nbsp;**92.3%**<sup>1</sup><br>**Independent** | &nbsp;&nbsp;&nbsp;&nbsp;**58**<br>**Average Age** | &nbsp;&nbsp;**95.4%**<br>**% Votes FOR<br>in 2024** | &nbsp;&nbsp;&nbsp;&nbsp;**96.8%**<br>**Average Board Meeting Attendance** |

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1.&nbsp;&nbsp;&nbsp;&nbsp;The only currently non-Independent Director nominee is CAE's Incoming President and CEO, Mr. Bromberg. However, as previously announced, effective at the conclusion of the Meeting and subject to his election, Mr. Rovinescu will become Executive Chairman of the Board, at which time he will no longer be considered independent. "Independent Directors" refers to the standards of independence established by CAE's Corporate Governance Guidelines, applicable corporate governance rules of the New York Stock Exchange and SEC, and under the Canadian Securities Administrators' National Instrument 58-101 – Disclosure of Corporate Governance Practices and National Policy 58-201.

You will be electing a board of directors ("Board") of 13 members. Each Director is elected annually for a term which expires no later than the next annual meeting of Shareholders.

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| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;All of the following nominees, except Mr. Bromberg, are currently members of the Board of Directors, and all have been recommended by the GC and the Board for election at the Meeting. Mr. Bromberg will become a Director following his election at the Meeting. | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;All of the following nominees, except Mr. Bromberg, are currently members of the Board of Directors, and all have been recommended by the GC and the Board for election at the Meeting. Mr. Bromberg will become a Director following his election at the Meeting. | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;All of the following nominees, except Mr. Bromberg, are currently members of the Board of Directors, and all have been recommended by the GC and the Board for election at the Meeting. Mr. Bromberg will become a Director following his election at the Meeting. |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;—&nbsp;&nbsp;&nbsp;&nbsp;**Ayman Antoun**<br>—&nbsp;&nbsp;&nbsp;&nbsp;**Sophie Brochu**<br>—&nbsp;&nbsp;&nbsp;&nbsp;**Matthew Bromberg**<br>—&nbsp;&nbsp;&nbsp;&nbsp;**Patrick Decostre**<br>—&nbsp;&nbsp;&nbsp;&nbsp;**Elise Eberwein** | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;—&nbsp;&nbsp;&nbsp;&nbsp;**Ian L. Edwards**<br>—&nbsp;&nbsp;&nbsp;&nbsp;**Marianne Harrison**<br>—&nbsp;&nbsp;&nbsp;&nbsp;**Peter Lee**<br>—&nbsp;&nbsp;&nbsp;&nbsp;**Katherine A. Lehman**<br>—&nbsp;&nbsp;&nbsp;&nbsp;**Mary Lou Maher** | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;—&nbsp;&nbsp;&nbsp;&nbsp;**Calin Rovinescu**<br>—&nbsp;&nbsp;&nbsp;&nbsp;**Patrick M. Shanahan**<br>—&nbsp;&nbsp;&nbsp;&nbsp;**Louis Têtu** |

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Section 2 – Business of the Meeting

Eight of the nominees were elected at our 2024 annual Shareholders' meeting held on August 14, 2024, by a majority of the votes cast (average of 95.4% of votes cast in favour). Ms. Lehman and Messrs. Bromberg, Lee, Rovinescu and Têtu are first-time nominees.

As previously announced, effective at the conclusion of the Meeting and subject to their election, Mr. Rovinescu will shift to the role of Executive Chairman of the Board and Ms. Brochu will shift to the role of Lead Independent Director of the Board.

Please refer to **Section 3 – About the Nominated Directors** for further information regarding the experience, the selection process and other relevant information you should consider in casting your vote for each nominee.

Management has been informed that, if elected, each of such nominees would be willing to serve as a Director. However, in the event any proposed nominee advises that he or she is unable or unwilling to act for any reason prior to the Meeting, proxies held by the persons designated as proxyholders on the form of proxy will be voted in favour of the remaining nominees and for such other substitute nominee in their discretion unless the Shareholder has specified in the form of proxy that such Shareholder's Shares are to be withheld from voting in the election of Directors.

**Self-imposed term and age limits ensure CAE benefits from a combination of experience and fresh perspectives**

The Board of Directors has passed a resolution establishing term limits comprising the following:

—up to twelve years maximum;

—no nominee may be proposed past their attaining 75 years of age; and

—the Chair of the Board may be in the role for a full five-year term regardless of his or her age or the number of years the individual has been a Director.

The Board of Directors believes these limits, subject to reasoned exceptions, are appropriate to ensure fresh skill sets and perspectives are periodically brought to the oversight of CAE's business.

**Majority voting requirement**

Each Director of the Company must be elected by a majority (50% +1 vote) of the votes cast with respect to his or her election, other than at contested meetings.

In accordance with our Corporate Governance Guidelines, any nominee who receives a greater number of votes cast "against" him or her than votes "for" will not be elected as a Director. Notwithstanding the foregoing, if the nominee is an incumbent Director, such Director may continue in office until the earlier of (i) the 90th day after the election, or (ii) the day on which his or her successor is appointed or elected. In accordance with the provisions of the *Canada Business Corporations Act* and its regulations, the Board may reappoint an incumbent Director even if he or she does not receive majority support in the following circumstances:

—to satisfy Canadian residency requirements; or

—to satisfy the requirement that at least two Directors are not also officers or employees of the Company or its affiliates.

**Detailed voting results will be disclosed after the Meeting**

Promptly, after the Meeting, we will publicly disclose the number and percentage of votes cast for and withheld in respect of each nominee, as well as those cast for and against each other matter voted on by Shareholders at the Meeting.

&nbsp;&nbsp;&nbsp;&nbsp;The Board of Directors recommends that Shareholders vote **FOR** the election of the 13 nominated members of the Board.<br>

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Section 2 – Business of the Meeting

3 Appoint the Auditors

The Board, on recommendation by the Audit Committee, proposes that PricewaterhouseCoopers LLP (PwC), Chartered Accountants, Montréal, Québec be re-appointed as auditors of CAE to hold office until the close of the next annual meeting of Shareholders and that the Directors of CAE be authorized to fix their remuneration.

**PwC has served as auditors of CAE since 1991.**

**PwC provides three types of services to CAE and its subsidiaries**

&nbsp;&nbsp;&nbsp;&nbsp;**1.&nbsp;&nbsp;&nbsp;&nbsp;**Audit Services: fees billed for professional services for the audit of CAE's annual consolidated financial statements and services that are normally provided by PwC in connection with statutory and regulatory filings, including the audit of the internal controls and financial reporting as required by the Sarbanes-Oxley Act of 2002 ("**SOX**").

&nbsp;&nbsp;&nbsp;&nbsp;**2.&nbsp;&nbsp;&nbsp;&nbsp;**Audit-related Services: fees relating to work performed in connection with CAE's acquisitions/divestitures, financings/prospectuses, translation and other miscellaneous accounting-related services.

&nbsp;&nbsp;&nbsp;&nbsp;**3.&nbsp;&nbsp;&nbsp;&nbsp;**Tax Services: fees relating to tax compliance, tax planning and tax advice.

&nbsp;&nbsp;&nbsp;&nbsp;**4.&nbsp;&nbsp;&nbsp;&nbsp;**All Other Services: fees paid for advisory and consulting services. No such fees were paid in the last two fiscal years.

**Auditors' independence**

The Audit Committee has discussed with PwC its independence from management and CAE, has considered and concluded that the provision of non-audit services is compatible with maintaining such independence.

The Audit Committee annually assesses the independence, qualifications, and performance of the external auditor, and performs a comprehensive review every five years, with the last comprehensive review performed in August 2023. The scope of the annual and comprehensive reviews covers audit quality, including independence, objectivity and professional skepticism, quality of service, candor of communications and PwC's ability to meet CAE's future needs. Assessments are based, among other things, on the audit plan submitted, the risk areas identified, the nature of the audit findings, reports presented to the Audit Committee. The annual and comprehensive assessments also consider audit quality indicators (AQIs), which the external auditor reports on annually. The use of AQIs is recommended by Canadian regulatory and accounting

member bodies, such as CPA Canada, the Canadian Public Accountability Board, the Institute of Corporate Directors and the Canadian Centre for Audit Quality, and provides the Audit Committee with additional useful quantitative and qualitative information for the purpose of evaluating the external auditor.

Furthermore, as per its policy, the Audit Committee reviews and pre-approves all non-audit services provided by the external auditors.

**Fees Paid by CAE to PwC in FY2025**

The following chart shows all fees paid to PwC by CAE and its subsidiaries in the most recent and prior fiscal year.

---

| | | |
|:---|:---|:---|
| Fee Type | 2025<br>($ millions) | 2024<br>($ millions) |
| &nbsp;&nbsp;&nbsp;&nbsp;1. Audit services | 7.5 | 6.7 |
| &nbsp;&nbsp;&nbsp;&nbsp;2. Audit-related services | 0.4 | 0.6 |
| &nbsp;&nbsp;&nbsp;&nbsp;3. Tax services | 0.4 | 0.4 |
| &nbsp;&nbsp;&nbsp;&nbsp;4. All other services | 0.0 | 0.0 |
| &nbsp;&nbsp;**Total** | **8.3** | **7.7** |

---

In order to further support PwC's independence, the Audit Committee has set a policy concerning CAE's hiring of current and former partners and employees of PwC who were engaged on CAE's account in recent years. Pursuant to this policy, CAE will not initiate nor pursue any discussion with any former partner or professional employee(s) of PwC regarding potential or future employment in a reporting oversight role with CAE if they are in a position to influence the audit firm's operations or financial policies, has ownership or partnership interests or financial participation in the audit firm or was a member of the CAE external audit team during the one-year period preceding the date that audit procedures commenced.

&nbsp;&nbsp;&nbsp;&nbsp;The Board of Directors recommends that Shareholders vote **FOR** the appointment of PwC as CAE's auditors.<br>

10 \| CAE INC. \| 2025 \| Management Proxy Circular

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Section 2 – Business of the Meeting

4 Advisory Vote on Executive Compensation

As detailed in **Section 7 – Executive Compensation**, CAE's executive compensation philosophy and programs are based on the fundamental principle of pay-for-performance to align the interests of our executives with those of our Shareholders. This compensation approach allows CAE to attract and retain high-performing executives who are strongly incentivized to create value for CAE's Shareholders on a sustainable basis.

Section 7 of the Circular describes our overall approach to executive compensation, the objectives of our executive compensation program, how compensation decisions are made and the compensation paid to our named executive officers in the last three years. Section 7 also describes the continued Shareholder outreach conducted in FY2025, seeking input on our compensation programs.

At the Meeting, Shareholders will be asked to consider and to cast an advisory, non-binding vote on CAE's approach to executive compensation – this is often referred to as **"say on pay"**.

The text of the **"say on pay"** resolution reads as follows:

**''Resolved that the Shareholders accept the approach to executive compensation disclosed in this Management Proxy Circular.''**

Because your vote is advisory, it will not be binding upon the Board. However, the Human Resources Committee ("HRC") will review and analyze the results of the vote and take into consideration such results when reviewing executive compensation philosophy and programs.

If a significant proportion of the Shares represented, including by proxy, at the Meeting are voted against the above non-binding advisory resolution, the Board Chair or the HRC Chair will oversee a process to engage with Shareholders to give Shareholders the opportunity to express their specific concerns. The Board of Directors and the HRC will consider the results of this process and, if appropriate, review the Company's approach to executive compensation in the context of Shareholders' specific concerns.

Our approach to executive compensation was approved by 94.8% of the votes cast on the resolution during our August 14, 2024 annual meeting of Shareholders. Please refer to **Section 7 – Executive Compensation – Compensation Discussion and Analysis – Shareholder Engagement**, which describes our significant engagement initiatives with investors in FY2025, including with respect to our executive compensation programs.

&nbsp;&nbsp;&nbsp;&nbsp;The Board of Directors recommends that Shareholders vote **FOR** the resolution set out above.<br>

11 \| CAE INC. \| 2025 \| Management Proxy Circular

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Section 2 – Business of the Meeting

5 Approval of the By-law Amendments

CAE's General By-law (the "By-law") was last updated in 2015 and certain provisions no longer reflect current governance practices and shareholder expectations. At the Meeting, Shareholders will be asked to consider and vote to approve certain amendments to the By-law, as set forth in Appendix E hereto (the "Amendments"). The full text of the By-law is available upon request from the Chief Legal and Compliance Officer, and Corporate Secretary of CAE at CAE Inc., 8585 Côte-de-Liesse, Saint-Laurent, Québec, H4T 1G6, and may also be accessed on CAE's website (**<u>www.cae.com</u>**).

Section 4.1 of the By-law sets out the quorum for meetings of Directors and a requirement that a majority of Directors be resident Canadians. The Amendments propose to align residency and quorum requirements with those of the *Canada Business Corporations Act*, while requiring that a majority of Directors be Canadian citizens or permanent residents. This change is expected to allow more flexibility for director nominations by expanding the potential talent pool, while maintaining CAE's status as a Canadian-controlled company.

Section 4.4 of the By-law sets out the possibility for a director to participate in a meeting of directors by technological means. The Amendments aim to clarify that if all Directors consent, meetings of Directors may be held entirely by technological means.

Sections 4.10 and 5.1 of the By-law refer to an executive committee of the Board. As no such committee exists nor is expected to be created given CAE's governance practices, the Amendments aim to remove these unnecessary references in the By-law.

Section 10.11 of the By-law establishes how votes are to be counted at shareholder meetings. The current language does not contemplate the counting of votes at virtual or hybrid meetings of shareholders. The Amendments aim to set out in writing the Company's approach to counting votes at such meetings, clarifying that all votes are counted regardless of the method with which a Shareholder attends.

Section 10.13 of the By-law provides for the Corporation's ability to hold shareholder meetings entirely by technological means. Some governance commentators are concerned that issuers could opt to hold virtual-only meetings without a compelling rationale, to discourage participation. While CAE has always encouraged shareholder participation in past virtual-only meetings and believes it is important to maintain the ability to hold virtual-only meetings if necessary, the Amendments aim to limit the circumstances in which such meetings can be held.

Section 10.14 of the By-law sets out the nomination process for election to the Board. The Amendments aim to align these provisions with shareholder expectations, by (i) removing the requirement that a notice of nomination be received no more than 65 days prior to the meeting, (ii) starting a new notice period in the event of adjournment or postponement, (iii) requiring compliance with all applicable laws, regulations and rules relating to the nomination of directors, (iv) providing the meeting chairman the discretion to accept non-compliant nominations, and (v) detailing the information required to be provided by a nominating shareholder. CAE believes that the information required to be provided is aligned with regulatory standards and best governance practices without overburdening nominating shareholders.

The Amendments will continue in effect only if they are approved by ordinary resolution of the Shareholders at the Meeting. The text of the resolution approving the Amendments (the "By-law Amendment Resolution") is set out in the attached Appendix E.

&nbsp;&nbsp;&nbsp;&nbsp;The Board of Directors recommends that Shareholders vote **FOR** the By-law Amendment Resolution.<br>

6 Other Business

We will also transact any other business that may properly come before the Meeting. At the time of printing of this Circular, the management of CAE knows of no such amendments, variations or other matters to come before the Meeting.

12 \| CAE INC. \| 2025 \| Management Proxy Circular

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![image_58.jpg](image_58.jpg)

13 \| CAE INC. \| 2025 \| Management Proxy Circular

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Section 3 – About the Nominated Directors

This Section presents a profile of each nominated Director, including an explanation of each nominated Director's experience, languages, education, skills, qualifications and core competencies, attendance at Board and Committee meetings from April 1, 2024 to March 31, 2025, total value of compensation received in FY2025, Share ownership information, the extent of fulfillment of the Minimum Ownership requirements, previous voting results, as well as participation on the boards of other public companies. A description of the Director Selection and Nomination Process, Board Attributes and Demographics and a tabular summary of our Directors' Skills and Experiences follows the individual tables. "Market Value" refers to the product of the sum of the Shares and DSUs held by a Director multiplied by the closing price on the TSX of a Share on June 6, 2024 and June 4, 2025.

Non-Canadian resident Directors are paid in U.S. dollars on the basis of a one-for-one exchange rate of Canadian dollars to U.S. dollars, and their share ownership requirements are in U.S. dollars. As such, for these Directors the "Total Value of Compensation Received in FY2025" reflects payments made in U.S. dollars for each quarter of FY2025, which were converted to Canadian dollars using the exchange rate on the last business day of the respective quarter, being, for each U.S. dollar, $1.37 in Q1, $1.35 in Q2, $1.44 in Q3 and 1.44 in Q4. In addition, the "Market Value" of their securities held on June 4, 2025 has been converted to U.S. dollars using the Bank of Canada daily exchange rate on such date, being 0.73 U.S. dollars per Canadian dollar.

Management has been informed that, if elected, each of such nominees would be willing to serve as a Director. However, in the event any proposed nominee advises that he or she is unable or unwilling to act for any reason prior to the Meeting, proxies held by the persons designated as proxyholders on the form of proxy will be voted in favour of the remaining nominees and for such other substitute nominee in their discretion unless the Shareholder has specified in the form of proxy that such Shareholder's Shares are to be withheld from voting in the election of directors.

Footnotes specific to each nominee are presented immediately below their biography.

---

| | | | | |
|:---|:---|:---|:---|:---|
| &nbsp;&nbsp;**95.4%** | **92.3%**<sup>1</sup> | **58** | **1.92** | **96.8%** |
| &nbsp;&nbsp;**Average 2024 Votes FOR** | **Independent Directors** | **Average Age** | **Average Tenure2 (years)** | **Average Board Attendance** |

---

&nbsp;&nbsp;&nbsp;&nbsp;1.&nbsp;&nbsp;&nbsp;&nbsp;The only currently non-Independent Director nominee is CAE's Incoming President and CEO, Mr. Bromberg. However, as previously announced, effective at the conclusion of the Meeting and subject to his election, Mr. Rovinescu will become Executive Chairman of the Board, at which time he will no longer be considered independent.

&nbsp;&nbsp;&nbsp;&nbsp;2.&nbsp;&nbsp;&nbsp;&nbsp;For non-executive Directors.

14 \| CAE INC. \| 2025 \| Management Proxy Circular

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Section 3 – About the Nominated Directors

---

| |
|:---|
| **Ayman Antoun** |
| Age: **59**<br>**Oakville, Ontario, Canada**<br>Independent Director since: **2022**<br>Committees: **Audit**<br>Total Value of Compensation Received in FY2025: **$266,051**<br>Languages: **English, Arabic** |
| Experience<br>**IBM**–President, Americas, which includes Canada, the United States and Latin America, and member of IBM's Performance Team consisting of IBM's top 50 executives globally (2020 – 2023); President, IBM Canada (2018 – 2020); held various senior executive sales leadership roles in Canada and the United States spanning Global Technology Services, Systems & Technology Group, Education Industry, Business Partners, and Global Sales Transformation (1988 – 2018) |
| Skills, Qualifications and Core Competencies<br>**Knowledge of Industry** developed while at IBM where he gained experience in software development, which is essential to CAE<br>**Strategic Leadership and Management skills and experience** obtained during his 35 years at IBM holding executive roles, including running IBM's largest geography (Americas) which covered all twelve major industries across fourteen countries<br>**Information Technology / Cybersecurity / Digital expertise** developed during his time at IBM where his roles had a focus on Infrastructure, Cloud, Cognitive Solutions, Security and Digital Reinvention software and hardware<br>**Government Relations experience** gained by leading IBM's public sector unit for more than eight years, serving as IBM Canada President, where he engaged with local, provincial and federal governments on a regular basis, and while serving as the partnership executive for the Canadian government for over ten years |
| ![aymanantoun.jpg](aymanantoun.jpg) |
| Education<br>BS, Electrical Engineering, University of Waterloo<br>Graduate, Executive program in financial analysis, business management and strategic planning, Harvard Business School |

---

---

| | | |
|:---|:---|:---|
| ![image_65.jpg](image_65.jpg) | ![image_65.jpg](image_65.jpg) | ![image_65.jpg](image_65.jpg) |
| &nbsp;&nbsp;2024 Voting Results | &nbsp;&nbsp;2024 Voting Results | &nbsp;&nbsp;2024 Voting Results |
| &nbsp;&nbsp;&nbsp;Votes For | &nbsp;&nbsp;**98.95%** | &nbsp;&nbsp;&nbsp;240849773 |
| &nbsp;&nbsp;&nbsp;Votes Against | &nbsp;&nbsp;**1.05%** | &nbsp;&nbsp;&nbsp;2560799 |
| &nbsp;&nbsp;Other Public Company Boards | &nbsp;&nbsp;Other Public Company Boards | &nbsp;&nbsp;Other Public Company Boards |
| &nbsp;&nbsp;&nbsp;TD Bank (2024 – present) | &nbsp;&nbsp;&nbsp;TD Bank (2024 – present) | &nbsp;&nbsp;&nbsp;TD Bank (2024 – present) |
| &nbsp;&nbsp;Board and Committee Attendance<sup>1</sup> | &nbsp;&nbsp;Board and Committee Attendance<sup>1</sup> | &nbsp;&nbsp;Board and Committee Attendance<sup>1</sup> |
| &nbsp;&nbsp;&nbsp;Board of Directors | &nbsp;&nbsp;**14 of 14** | 100% |
| &nbsp;&nbsp;&nbsp;Audit Committee | &nbsp;&nbsp;**5 of 6** | 83% |
| &nbsp;&nbsp;&nbsp;Human Resources Committee | &nbsp;&nbsp;**4 of 4** | 100% |
| &nbsp;&nbsp;**Total** | &nbsp;&nbsp;**23 of 24** | **96%** |
| 1.&nbsp;&nbsp;&nbsp;&nbsp;Mr. Antoun left the Human Resources Committee on August 14, 2024. | 1.&nbsp;&nbsp;&nbsp;&nbsp;Mr. Antoun left the Human Resources Committee on August 14, 2024. | 1.&nbsp;&nbsp;&nbsp;&nbsp;Mr. Antoun left the Human Resources Committee on August 14, 2024. |
| &nbsp;&nbsp;Share Ownership | &nbsp;&nbsp;Share Ownership | &nbsp;&nbsp;Share Ownership |
|  | June 4, 2025 | June 6, 2024 |
| Shares | 5775 | 1725 |
| DSUs | 23340 | 14362 |
| **Total** | **25065** | **16087** |
| Market Value | $1039114 | $414723 |
| &nbsp;&nbsp;Minimum Ownership Requirement | $425000 | $425000 |
| % of Achievement | **244%** | **98%** |

---

15 \| CAE INC. \| 2025 \| Management Proxy Circular

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Section 3 – About the Nominated Directors

---

| |
|:---|
| **Sophie Brochu** |
| Age: **62**<br>**Bromont, Québec, Canada**<br>Independent Director<sup>1</sup> since: **2023**<br>Committees: **Governance (Chair), Human Resources**<br>Total Value of Compensation Received in FY2025: **$263,152**<br>Languages: **English, French** |
| Experience<br>**Hydro-Québec**–President and Chief Executive Officer (2020 – 2023)<br>**Énergir (formerly Gaz-Métro)**–President and Chief Executive Officer (2007 – 2019); Vice-President, Business Development and other executive roles (1997 – 2007)<br>Began her career as a financial analyst at Société québécoise d'initiatives pétrolières (SOQUIP) in 1987 |
| Skills, Qualifications and Core Competencies<br>**Strategic Leadership and Management experience** gained while serving as CEO at Energir and Hydro Quebec<br>**Human Resources / Compensation expertise** gained during her service in CEO roles where she had ultimate oversight for succession planning, talent management and retention, and alignment of HR compensation programs with strategic orientations, as well as during her service on HR/Compensation committees of various public boards<br>**Government Relations expertise** gained from her over 35 years of deep experience with energy utilities and regulated entities, both in Canada and the US, which involve various and complex governmental relations, both at the political and administrative levels, which resulted in her extensive strategic understanding of public policies<br>**Sustainability expertise** through her over 25 years of experience in the deployment of health and safety programs, establishment of environmental frameworks, fostering of deep relationships with various stakeholders, and advancing of workplace culture practices at the organizations that she oversaw |
| ![sophiebrochu.jpg](sophiebrochu.jpg) |
| Education<br>BA, Economics, Université Laval<br>1.&nbsp;&nbsp;&nbsp;&nbsp;As previously announced, effective at the conclusion of the Meeting and subject to her election, Ms. Brochu will shift to the role of Lead Independent Director of the Board. |

---

---

| | | |
|:---|:---|:---|
| ![image_74.jpg](image_74.jpg) | ![image_74.jpg](image_74.jpg) | ![image_74.jpg](image_74.jpg) |
| &nbsp;&nbsp;2024 Voting Results | &nbsp;&nbsp;2024 Voting Results | &nbsp;&nbsp;2024 Voting Results |
| &nbsp;&nbsp;&nbsp;Votes For | &nbsp;&nbsp;**99.59%** | &nbsp;&nbsp;&nbsp;242411606 |
| &nbsp;&nbsp;&nbsp;Votes Against | &nbsp;&nbsp;**0.41%** | &nbsp;&nbsp;&nbsp;998799 |
| &nbsp;&nbsp;Other Public Company Boards | &nbsp;&nbsp;Other Public Company Boards | &nbsp;&nbsp;Other Public Company Boards |
| &nbsp;&nbsp;&nbsp;Compagnie de Saint-Gobain S.A. (2024 – present) | &nbsp;&nbsp;&nbsp;Compagnie de Saint-Gobain S.A. (2024 – present) | &nbsp;&nbsp;&nbsp;Compagnie de Saint-Gobain S.A. (2024 – present) |
| &nbsp;&nbsp;&nbsp;CGI Inc. (2019 – 2020; 2023 – present) | &nbsp;&nbsp;&nbsp;CGI Inc. (2019 – 2020; 2023 – present) | &nbsp;&nbsp;&nbsp;CGI Inc. (2019 – 2020; 2023 – present) |
| &nbsp;&nbsp;&nbsp;Bank of Montreal (2011 – 2023) | &nbsp;&nbsp;&nbsp;Bank of Montreal (2011 – 2023) | &nbsp;&nbsp;&nbsp;Bank of Montreal (2011 – 2023) |
| &nbsp;&nbsp;Board and Committee Attendance<sup>2</sup> | &nbsp;&nbsp;Board and Committee Attendance<sup>2</sup> | &nbsp;&nbsp;Board and Committee Attendance<sup>2</sup> |
| &nbsp;&nbsp;&nbsp;Board of Directors | &nbsp;&nbsp;**14 of 14** | &nbsp;&nbsp;&nbsp;100% |
| &nbsp;&nbsp;&nbsp;Audit Committee | &nbsp;&nbsp;**3 of 3** | &nbsp;&nbsp;&nbsp;100% |
| &nbsp;&nbsp;&nbsp;Governance Committee | &nbsp;&nbsp;**2 of 2** | &nbsp;&nbsp;&nbsp;100% |
| &nbsp;&nbsp;&nbsp;Human Resources Committee | &nbsp;&nbsp;**10 of 10** | &nbsp;&nbsp;&nbsp;100% |
| &nbsp;&nbsp;**Total** | &nbsp;&nbsp;**29 of 29** | &nbsp;&nbsp;**100%** |
| 2.&nbsp;&nbsp;&nbsp;&nbsp;Ms. Brochu left the Audit Committee and joined the Governance Committee on August 14, 2024. | 2.&nbsp;&nbsp;&nbsp;&nbsp;Ms. Brochu left the Audit Committee and joined the Governance Committee on August 14, 2024. | 2.&nbsp;&nbsp;&nbsp;&nbsp;Ms. Brochu left the Audit Committee and joined the Governance Committee on August 14, 2024. |
| &nbsp;&nbsp;Share Ownership | &nbsp;&nbsp;Share Ownership | &nbsp;&nbsp;Share Ownership |
|  | June 4, 2025 | June 6, 2024 |
| Shares |  |  |
| DSUs | 14576 | 5667 |
| Total | 14576 | 5667 |
| Market Value | $520253 | $146095 |
| Minimum Ownership Requirement | $425000 | $425000 |
| % of Achievement | **122%** | **34%** |

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16 \| CAE INC. \| 2025 \| Management Proxy Circular

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Section 3 – About the Nominated Directors

---

| |
|:---|
| **Matthew Bromberg**<br> Incoming President and CEO |
| Age: **55**<br>**McLean, Virginia, U.S.**<sup>1</sup><br>Director since: **First time nominee**<sup>2</sup><br>Total Value of Compensation Received in FY2025: **N/A**<br>Languages**: English** |
| Experience<br>**CAE Inc.**–Incoming President and CEO (2025)<br>**Northrop Grumman**–Corporate Vice President, Global Operations (2022 – 2025)<br>**Raytheon Technologies**–President, Pratt & Whitney Military Engines (2017 – 2022); President, Pratt & Whitney Commercial Aftermarket Operations (2013 – 2017); Vice President, United Technologies Corporate Strategy & Development (2011 – 2013); Vice President, Hamilton Sundstrand/Collins Customer Service (2009 – 2011); Vice President, Pratt & Whitney Program Management (2006 – 2009); Vice President, Strategy & Development Corporate/Pratt & Whitney (2002 – 2006)<br>**Goldman Sachs**–Associate Banker, Investment Banking Division, Mergers and Strategic Advisory (2000 – 2002)<br>**U.S. Department of the Navy**–Submarine Officer (1992 – 1997) |
| Skills, Qualifications and Core Competencies<br>**Knowledge of Industry** gained over a career spanning nearly 25 years in leadership roles at leading large multinational aerospace and defense companies<br>**Strategic Leadership and Management experience** developed in executive roles leading large-scale international operations through periods of growth, restructuring, transformation and divestitures<br>**Capital Markets / M&A experience** gained while working in investment banking, where he was directly responsible for corporate portfolio structure and inorganic growth strategy<br>**Manufacturing / Supply Chain expertise** developed while leading global operations for a large defense company and overseeing the transformation of its $20 billion supply chain |
| ![matthewbromberg.jpg](matthewbromberg.jpg) |
| Education<br>BA, Physics, University of California, Berkley<br>MS, Mechanical Engineering, Massachusetts Institute of Technology<br>MBA, Massachusetts Institute of Technology's Sloan School of Management<br>1.&nbsp;&nbsp;&nbsp;&nbsp;As Mr. Bromberg's primary work location will be CAE's headquarters located in Montréal, Québec, Canada, he has committed to relocate to Montréal by September 1, 2025. |

---

---

| | |
|:---|:---|
| ![image_86.jpg](image_86.jpg) | ![image_86.jpg](image_86.jpg) |
| &nbsp;&nbsp;2024 Voting Results | &nbsp;&nbsp;2024 Voting Results |
| &nbsp;&nbsp;&nbsp;Votes For | &nbsp;&nbsp;&nbsp;N/A |
| &nbsp;&nbsp;&nbsp;Votes Against | &nbsp;&nbsp;&nbsp;N/A |
| &nbsp;&nbsp;Other Public Company Boards | &nbsp;&nbsp;Other Public Company Boards |
| &nbsp;&nbsp;Board and Committee Attendance<sup>2</sup> | &nbsp;&nbsp;Board and Committee Attendance<sup>2</sup> |
| &nbsp;&nbsp;&nbsp;Board of Directors | &nbsp;&nbsp;&nbsp;N/A |
| &nbsp;&nbsp;**Total** | &nbsp;&nbsp;**N/A** |
| 2.&nbsp;&nbsp;&nbsp;&nbsp;Mr. Bromberg does not currently serve as a Director and will become a Director following his election at the Meeting. | 2.&nbsp;&nbsp;&nbsp;&nbsp;Mr. Bromberg does not currently serve as a Director and will become a Director following his election at the Meeting. |
| &nbsp;&nbsp;Share Ownership<sup>3</sup> | &nbsp;&nbsp;Share Ownership<sup>3</sup> |
|  | June 4, 2025 |
| Shares |  |
| Total |  |
| Market Value |  |
| 3.&nbsp;&nbsp;&nbsp;&nbsp;As Incoming President and CEO, Mr. Bromberg will have a higher ownership target than an Independent Director, equal to 500% of his annual base salary. He will join CAE on June 16, 2025 and must meet his required holdings over the five-year period from such date. | 3.&nbsp;&nbsp;&nbsp;&nbsp;As Incoming President and CEO, Mr. Bromberg will have a higher ownership target than an Independent Director, equal to 500% of his annual base salary. He will join CAE on June 16, 2025 and must meet his required holdings over the five-year period from such date. |

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17 \| CAE INC. \| 2025 \| Management Proxy Circular

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Section 3 – About the Nominated Directors

---

| |
|:---|
| **Patrick Decostre** |
| Age: **52**<br>**Montréal, Québec, Canada**<br>Independent Director since: **2024**<br>Committees: **Audit**<br>Total Value of Compensation Received in FY2025: **$216,626**<br>Languages: **English, French** |
| Experience<br>Boralex Inc.–President and Chief Executive Officer (2020 – present); Vice President and Chief Operating Officer (2019 – 2020); Vice President and General Manager of Boralex's European subsidiaries (2001 – 2019) |
| Skills, Qualifications and Core Competencies<br>**Strategic Leadership and Management experience** gained in this role as CEO of Boralex since 2020, and during 20+ years in leadership positions in Europe for Boralex while building and growing the company<br>**Human Resources / Compensation expertise** gained while serving as General Manager, COO and CEO of Boralex, dealing with human resources, organizational design, transformation and compensation<br>**Risk Management experience** gained while serving as COO and CEO of Boralex, working with the board to set up new identification and risk management systems, including sustainability risks<br>**Capital Markets / M&A expertise** gained through equity markets investor relations experience, as well as debt financing and refinancing, acquisitions and divestitures, and acquisitions integration throughout his time at Boralex |
| ![patrickdecostre.jpg](patrickdecostre.jpg) |
| Education<br>BSc, Civil Engineering in Physics, Université Libre de Bruxelles – École Polytechnique de Bruxelles<br>Masters in Technological & Industrial Management, Université Libre de Bruxelles – Solvey Brussels School of Economics and Management |

---

---

| | | |
|:---|:---|:---|
| ![image_97.jpg](image_97.jpg) | ![image_97.jpg](image_97.jpg) | ![image_97.jpg](image_97.jpg) |
| &nbsp;&nbsp;2024 Voting Results | &nbsp;&nbsp;2024 Voting Results | &nbsp;&nbsp;2024 Voting Results |
| Votes For | &nbsp;&nbsp;**99.49%** | &nbsp;&nbsp;&nbsp;242166023 |
| Votes Against | &nbsp;&nbsp;**0.51%** | &nbsp;&nbsp;&nbsp;1244549 |
| &nbsp;&nbsp;Other Public Company Boards | &nbsp;&nbsp;Other Public Company Boards | &nbsp;&nbsp;Other Public Company Boards |
| Boralex Inc. (2020 – present) | Boralex Inc. (2020 – present) | Boralex Inc. (2020 – present) |
| &nbsp;&nbsp;Board and Committee Attendance<sup>1</sup> | &nbsp;&nbsp;Board and Committee Attendance<sup>1</sup> | &nbsp;&nbsp;Board and Committee Attendance<sup>1</sup> |
| Board of Directors | &nbsp;&nbsp;**12 of 13** | 92% |
| Audit Committee | &nbsp;&nbsp;**3 of 3** | 100% |
| **Total** | **15 of 16** | **94%** |
| 1.&nbsp;&nbsp;&nbsp;&nbsp;Mr. Decostre joined the Board on May 16, 2024, and the Audit Committee on August 14, 2024. | 1.&nbsp;&nbsp;&nbsp;&nbsp;Mr. Decostre joined the Board on May 16, 2024, and the Audit Committee on August 14, 2024. | 1.&nbsp;&nbsp;&nbsp;&nbsp;Mr. Decostre joined the Board on May 16, 2024, and the Audit Committee on August 14, 2024. |
| &nbsp;&nbsp;Share Ownership<sup>2</sup> | &nbsp;&nbsp;Share Ownership<sup>2</sup> | &nbsp;&nbsp;Share Ownership<sup>2</sup> |
|  | June 4, 2025 | June 6, 2024 |
| Shares | 400 |  |
| DSUs | 7171 |  |
| **Total** | 7571 | **—** |
| Market Value | $270209 |  |
| &nbsp;&nbsp;Minimum Ownership Requirement | $425000 | $425000 |
| % of Achievement | **64%** | **—** |
| 2.&nbsp;&nbsp;&nbsp;&nbsp;Mr. Decostre joined the Board on May 16, 2024 and must meet his required holdings over the five-year period from such date. | 2.&nbsp;&nbsp;&nbsp;&nbsp;Mr. Decostre joined the Board on May 16, 2024 and must meet his required holdings over the five-year period from such date. | 2.&nbsp;&nbsp;&nbsp;&nbsp;Mr. Decostre joined the Board on May 16, 2024 and must meet his required holdings over the five-year period from such date. |

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18 \| CAE INC. \| 2025 \| Management Proxy Circular

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Section 3 – About the Nominated Directors

---

| |
|:---|
| **Elise Eberwein** |
| Age: **60**<br>**Scottsdale, Arizona, U.S.**<br>Independent Director since: **2022**<br>Committees: **Governance, Human Resources**<br>Total Value of Compensation Received in FY2025: **$366,328**<br>Languages: **English** |
| Experience<br>**American Airlines, Inc.**–Executive Vice President, People and Communications (2013 – 2022)<br>**US Airways**–Executive Vice President, People, Communications and Public Affairs (2005 – 2013)<br>**America West Airlines**–Vice President, Corporate Communications (2003 – 2005)<br>Served in key executive roles with Frontier Airlines and Western Pacific Airlines<br>Began her aviation career as a flight attendant |
| Skills, Qualifications and Core Competencies<br>**Knowledge of Industry** gained over her 35 years in the commercial aviation sector while working for six airlines, including several start-up low-cost airlines and three major airlines: America West, US Airways, and American Airlines<br>**Strategic Leadership and Management experience** gained while in leadership roles at US Airways and American Airlines which also included being a member of the executive management team leading two major airline mergers with responsibility for the subsequent integration work<br>**Human Resources / Compensation expertise** gained through her roles leading all HR functions for more than 15 years, including serving as Chief Human Resources Officer for American Airlines, which resulted in her developing extensive executive compensation knowledge, talent development and succession planning experience<br>**Sustainability expertise** obtained while developing and leading the diversity and inclusion initiatives as part of her responsibilities as CHRO of American Airlines |
| ![eliseeberwein.jpg](eliseeberwein.jpg) |
| Education<br>BA, Mass Communications, Lindenwood University<br>Executive MBA, Colorado State University |

---

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| | | |
|:---|:---|:---|
| ![image_98.jpg](image_98.jpg) | ![image_98.jpg](image_98.jpg) | ![image_98.jpg](image_98.jpg) |
| &nbsp;&nbsp;2024 Voting Results | &nbsp;&nbsp;2024 Voting Results | &nbsp;&nbsp;2024 Voting Results |
| &nbsp;&nbsp;&nbsp;Votes For | &nbsp;&nbsp;**98.98%** | &nbsp;&nbsp;&nbsp;240915635 |
| &nbsp;&nbsp;&nbsp;Votes Against | &nbsp;&nbsp;**1.02%** | &nbsp;&nbsp;&nbsp;2494937 |
| &nbsp;&nbsp;Other Public Company Boards | &nbsp;&nbsp;Other Public Company Boards | &nbsp;&nbsp;Other Public Company Boards |
| &nbsp;&nbsp;Board and Committee Attendance<sup>1</sup> | &nbsp;&nbsp;Board and Committee Attendance<sup>1</sup> | &nbsp;&nbsp;Board and Committee Attendance<sup>1</sup> |
| Board of Directors | &nbsp;&nbsp;**13 of 14** | 93% |
| &nbsp;&nbsp;&nbsp;Audit Committee | &nbsp;&nbsp;**3 of 3** | 100% |
| &nbsp;&nbsp;&nbsp;Governance Committee | &nbsp;&nbsp;**5 of 5** | 100% |
| &nbsp;&nbsp;&nbsp;Human Resources Committee | &nbsp;&nbsp;**10 of 10** | 100% |
| **Total** | **28 of 29** | **97%** |
| 1.&nbsp;&nbsp;&nbsp;&nbsp;Ms. Eberwein left the Audit Committee and joined the Governance Committee on August 14, 2024. | 1.&nbsp;&nbsp;&nbsp;&nbsp;Ms. Eberwein left the Audit Committee and joined the Governance Committee on August 14, 2024. | 1.&nbsp;&nbsp;&nbsp;&nbsp;Ms. Eberwein left the Audit Committee and joined the Governance Committee on August 14, 2024. |
| &nbsp;&nbsp;Share Ownership | &nbsp;&nbsp;Share Ownership | &nbsp;&nbsp;Share Ownership |
|  | June 4, 2025 | June 6, 2024 |
| Shares | 14500 | 14500 |
| DSUs | 16483 | 9176 |
| **Total** | **30983** | **23676** |
| Market Value | US$808,549 | US$445,995 |
| &nbsp;&nbsp;Minimum Ownership Requirement | US$425,000 | US$425,000 |
| % of Achievement | **190%** | **105%** |

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19 \| CAE INC. \| 2025 \| Management Proxy Circular

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Section 3 – About the Nominated Directors

---

| |
|:---|
| **Ian L. Edwards** |
| Age: **63**<br>**Montréal, Québec, Canada**<br>Independent Director since: **2024**<br>Committees: **Audit**<br>Total Value of Compensation Received in FY2025: **$158,562**<br>Languages: **English** |
| Experience<br>**AtkinsRéalis**–President and Chief Executive Officer (2019 – present); Chief Operating Officer (2019); President, Infrastructure (2015 – 2019); Executive Vice-President, Infrastructure Construction (2014 – 2015)<br>**Leighton Group**–Managing Director of Leighton Asia, India and Offshore (2012 – 2014); Executive General Manager of Leighton Asia (2008 – 2012)<br>**Gammon Construction Limited**–Divisional Director (2008); Director – Civil Division (2007 – 2008) |
| Skills, Qualifications and Core Competencies<br>**Strategic Management and Leadership experience** gained as President and CEO of AtkinsRéalis, overseeing a repositioning of the company, including simplifying its operations and geographic spread, exiting business lines and evolving the company into a premier engineering services and nuclear company<br>**Human Resources / Compensation expertise** developed as President and CEO of AtkinsRéalis, which role entails oversight of the overall remuneration framework throughout the organization, as well as through his role as Chair of the HR Committee during his tenure on the board of Canada Steamship Lines<br>**Sustainability expertise** gained throughout his tenure at AtkinsRéalis, where sustainable projects drive over 50% of revenues and key pillars of growth are centered around energy transition<br>**Risk Management experience** obtained while President and CEO of AtkinsRéalis, where he oversaw a complete overhaul of the company's risk management system, including implementing an ERM process, regular business and project reviews at the CEO level, and strong board oversight |
| ![ianledwards.jpg](ianledwards.jpg) |
| Education<br>Higher and Ordinary Certificates, Civil Engineering, University of Central Lancashire<br>Fellow – Institution of Civil Engineers<br>Fellow – Hong Kong Institution of Engineers |

---

---

| | | |
|:---|:---|:---|
| ![image_116.jpg](image_116.jpg) | ![image_116.jpg](image_116.jpg) | ![image_116.jpg](image_116.jpg) |
| &nbsp;&nbsp;2024 Voting Results | &nbsp;&nbsp;2024 Voting Results | &nbsp;&nbsp;2024 Voting Results |
| &nbsp;&nbsp;&nbsp;Votes For | &nbsp;&nbsp;**99.47%** | &nbsp;&nbsp;&nbsp;242111993 |
| &nbsp;&nbsp;&nbsp;Votes Against | &nbsp;&nbsp;**0.53%** | &nbsp;&nbsp;&nbsp;1298412 |
| &nbsp;&nbsp;Other Public Company Boards | &nbsp;&nbsp;Other Public Company Boards | &nbsp;&nbsp;Other Public Company Boards |
| &nbsp;&nbsp;&nbsp;AtkinsRéalis Group Inc. (2019 – present) | &nbsp;&nbsp;&nbsp;AtkinsRéalis Group Inc. (2019 – present) | &nbsp;&nbsp;&nbsp;AtkinsRéalis Group Inc. (2019 – present) |
| &nbsp;&nbsp;Board and Committee Attendance<sup>1</sup> | &nbsp;&nbsp;Board and Committee Attendance<sup>1</sup> | &nbsp;&nbsp;Board and Committee Attendance<sup>1</sup> |
| Board of Directors | **9 of 10** | 90% |
| Audit Committee | **3 of 3** | 100% |
| **Total** | **12 of 13** | **92%** |
| 1.&nbsp;&nbsp;&nbsp;&nbsp;Mr. Edwards joined the Board and Audit Committee on August 14, 2024. | 1.&nbsp;&nbsp;&nbsp;&nbsp;Mr. Edwards joined the Board and Audit Committee on August 14, 2024. | 1.&nbsp;&nbsp;&nbsp;&nbsp;Mr. Edwards joined the Board and Audit Committee on August 14, 2024. |
| &nbsp;&nbsp;Share Ownership<sup>2</sup> | &nbsp;&nbsp;Share Ownership<sup>2</sup> | &nbsp;&nbsp;Share Ownership<sup>2</sup> |
|  | June 4, 2025 | June 6, 2024 |
| Shares |  |  |
| DSUs | 4873 |  |
| **Total** | **4873** | **—** |
| Market Value | $173917 |  |
| &nbsp;&nbsp;Minimum Ownership Requirement | $425000 | N/A |
| % of Achievement | **41%** | **N/A** |
| 2.&nbsp;&nbsp;&nbsp;&nbsp;Mr. Edwards joined the Board on August 14, 2024 and must meet his required holdings over the five-year period from such date. | 2.&nbsp;&nbsp;&nbsp;&nbsp;Mr. Edwards joined the Board on August 14, 2024 and must meet his required holdings over the five-year period from such date. | 2.&nbsp;&nbsp;&nbsp;&nbsp;Mr. Edwards joined the Board on August 14, 2024 and must meet his required holdings over the five-year period from such date. |

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20 \| CAE INC. \| 2025 \| Management Proxy Circular

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Section 3 – About the Nominated Directors

---

| |
|:---|
| **Marianne Harrison** |
| Age: **61**<br>**Dover, New Hampshire, U.S.**<br>Independent Director since: **2019**<br>Committees: **Audit (Chair) (financial expert)**<br>Total Value of Compensation Received in FY2025: **$401,940**<br>Languages: **English** |
| Experience<br>**Manulife Financial Corporation**–President and Chief Executive Officer of John Hancock Life Insurance Company, the U.S. division of Manulife Financial Corporation and a member of Manulife's Executive Leadership Team (2017 – 2023); President and Chief Executive Officer of Manulife Canada, Manulife's Canadian Division (2013 – 2017); held several leadership positions across the company, including President and General Manager for John Hancock Long-Term Care Insurance, and Executive Vice President and Controller for Manulife (2003-2017)<br>**TD Bank Group**–Chief Financial Officer of Wealth Management after holding various other positions (1998 – 2003)<br>**PwC**–Senior Manager after holding numerous other positions (1986 – 1998) |
| Skills, Qualifications and Core Competencies<br>**Strategic Leadership and Management experience** gained while running all aspects of the P&L and serving as President and CEO of both John Hancock and Manulife Canada<br>**Finance / Accounting expertise** developed during over 35 years in the financial industry including roles as Auditor for PWC; Corporate Controller Manulife Financial; and CFO Wealth Management TD Bank and was recognized by her election as a Fellow of the Profession, the highest designation for professional achievement conferred by the Chartered Professional Accountants of Ontario<br>**Risk Management experience** gained throughout her career in financial services and as an active member of the Segment Risk Committee while serving as President and CEO John Hancock and Manulife Canada<br>**Capital Markets / M&A experience** gained at Manulife Financial, where she was an active participant during mergers with both John Hancock and Standard Life, and the divestiture of Signature Services by John Hancock, as well as through having responsibility for the use of capital to ensure risk adjusted returns and company hurdle rates are met in both Canada and the US Segment |
| ![marianneharrison.jpg](marianneharrison.jpg) |
| Education<br>BA, English, University of Western Ontario<br>Diploma in Accounting, Wilfrid Laurier University |

---

---

| | | |
|:---|:---|:---|
| ![image_117.jpg](image_117.jpg) | ![image_117.jpg](image_117.jpg) | ![image_117.jpg](image_117.jpg) |
| &nbsp;&nbsp;2024 Voting Results | &nbsp;&nbsp;2024 Voting Results | &nbsp;&nbsp;2024 Voting Results |
| &nbsp;&nbsp;&nbsp;Votes For | &nbsp;&nbsp;**98.65%** | &nbsp;&nbsp;&nbsp;240115411 |
| &nbsp;&nbsp;&nbsp;Votes Against | &nbsp;&nbsp;**1.35%** | &nbsp;&nbsp;&nbsp;3295160 |
| &nbsp;&nbsp;Other Public Company Boards | &nbsp;&nbsp;Other Public Company Boards | &nbsp;&nbsp;Other Public Company Boards |
| &nbsp;&nbsp;Board and Committee Attendance<sup>1</sup> | &nbsp;&nbsp;Board and Committee Attendance<sup>1</sup> | &nbsp;&nbsp;Board and Committee Attendance<sup>1</sup> |
| Board of Directors | &nbsp;&nbsp;**14 of 14** | 100% |
| &nbsp;&nbsp;&nbsp;Audit Committee  | &nbsp;&nbsp;**6 of 6** | 100% |
| &nbsp;&nbsp;&nbsp;Governance Committee | &nbsp;&nbsp;**1 of 1** | 100% |
| **Total** | **21 of 21** | **100%** |
| 1.&nbsp;&nbsp;&nbsp;&nbsp;Ms. Harrison left the Governance Committee on August 14, 2024. | 1.&nbsp;&nbsp;&nbsp;&nbsp;Ms. Harrison left the Governance Committee on August 14, 2024. | 1.&nbsp;&nbsp;&nbsp;&nbsp;Ms. Harrison left the Governance Committee on August 14, 2024. |
| &nbsp;&nbsp;Share Ownership | &nbsp;&nbsp;Share Ownership | &nbsp;&nbsp;Share Ownership |
|  | June 4, 2025 | June 6, 2024 |
| Shares | 20000 | 15600 |
| DSUs | 52200 | 38751 |
| **Total** | **72200** | **54351** |
| Market Value | US$1,884,169 | US$1,023,834 |
| &nbsp;&nbsp;Minimum Ownership Requirement | US$425,000 | US$425,000 |
| % of Achievement | **443%** | **241%** |

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21 \| CAE INC. \| 2025 \| Management Proxy Circular

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Section 3 – About the Nominated Directors

---

| |
|:---|
| **Peter Lee** |
| Age: **39**<br>**Corte Madera, California, U.S.**<br>Independent Director<sup>1</sup> since: **2025**<br>Committees: **Human Resources**<br>Total Value of Compensation Received in FY2025: **None**<sup>3</sup><br>Languages: **English** |
| Experience<br>**Browning West**–Co-Founder and Partner (2019 – present)<br>**Criterion Capital Management**–Investment Associate (2016 – 2019)<br>**Grey Mountain Partners** – Senior Associate (2010 – 2014)<br>Began his career as an Investment Banking Analyst at Lazard Frères. |
| Skills, Qualifications and Core Competencies<br>**Finance / Accounting expertise** developed while working in private equity and public equity investing for 13 years and investment banking for 2 years<br>**Human Resources / Compensation experience** gained while serving as Chair of the Compensation and Human Resources Committee of Gildan Activewear, a NYSE and TSX listed company based in Montréal<br>**Capital Markets / M&A expertise** acquired through various roles over the course of his career in private equity and public equity investing, and investment banking, including 6 years as Co-Founder and Partner of Browning West<br>**Risk Management experience** developed while assessing risks associated with both private and public companies when conducting due diligence for potential investments over his 13-year investing career |
| ![peterlee.jpg](peterlee.jpg) |
| Education<br>BA, Carleton College<br>MBA, Harvard Business School |
| 1.&nbsp;&nbsp;&nbsp;&nbsp;Mr. Lee is a nominee of Browning West, LP, pursuant to a customary cooperation and standstill agreement. The Board has determined that Mr. Lee is independent based on a number of factors, including the fact that as of June 12, 2024, Browning West, LP held less than 5% of our total issued and outstanding Shares. |

---

---

| | | |
|:---|:---|:---|
| ![image_124.jpg](image_124.jpg) | ![image_124.jpg](image_124.jpg) | ![image_124.jpg](image_124.jpg) |
| &nbsp;&nbsp;2024 Voting Results | &nbsp;&nbsp;2024 Voting Results | &nbsp;&nbsp;2024 Voting Results |
| &nbsp;&nbsp;&nbsp;Votes For | &nbsp;&nbsp;**N/A** | &nbsp;&nbsp;&nbsp;N/A |
| &nbsp;&nbsp;&nbsp;Votes Against | &nbsp;&nbsp;**N/A** | &nbsp;&nbsp;&nbsp;N/A |
| &nbsp;&nbsp;Other Public Company Boards | &nbsp;&nbsp;Other Public Company Boards | &nbsp;&nbsp;Other Public Company Boards |
| &nbsp;&nbsp;&nbsp;Gildan Activewear Inc. (2024 – present) | &nbsp;&nbsp;&nbsp;Gildan Activewear Inc. (2024 – present) | &nbsp;&nbsp;&nbsp;Gildan Activewear Inc. (2024 – present) |
| &nbsp;&nbsp;Board and Committee Attendance<sup>2</sup> | &nbsp;&nbsp;Board and Committee Attendance<sup>2</sup> | &nbsp;&nbsp;Board and Committee Attendance<sup>2</sup> |
| &nbsp;&nbsp;&nbsp;Board of Directors | &nbsp;&nbsp;**1 of 1** | 100% |
| &nbsp;&nbsp;&nbsp;Human Resources Committee | &nbsp;&nbsp;**N/A** | N/A |
| **Total** | **1 of 1** | **100%** |
| 2.&nbsp;&nbsp;&nbsp;&nbsp;Mr. Lee joined the Board and Human Resources Committee on February 14, 2025. | 2.&nbsp;&nbsp;&nbsp;&nbsp;Mr. Lee joined the Board and Human Resources Committee on February 14, 2025. | 2.&nbsp;&nbsp;&nbsp;&nbsp;Mr. Lee joined the Board and Human Resources Committee on February 14, 2025. |
| &nbsp;&nbsp;Share Ownership<sup>3</sup> | &nbsp;&nbsp;Share Ownership<sup>3</sup> | &nbsp;&nbsp;Share Ownership<sup>3</sup> |
|  |  | June 4, 2025 |
| Shares |  |  |
| DSUs |  |  |
| **Total** |  | **—** |
| Market Value |  |  |
| &nbsp;&nbsp;Minimum Ownership Requirement |  | N/A |
| % of Achievement |  | **N/A** |
| 3.&nbsp;&nbsp;&nbsp;&nbsp;Mr. Lee has waived all compensation as a Director , in accordance with Browning West's policy requiring its employees sitting on a board of a portfolio company to waive any board compensation. As such, and given Mr. Lee's alignment with CAE Shareholder interests through Browning West's participation in CAE, the Board has exempted him from CAE's director share ownership requirement. | 3.&nbsp;&nbsp;&nbsp;&nbsp;Mr. Lee has waived all compensation as a Director , in accordance with Browning West's policy requiring its employees sitting on a board of a portfolio company to waive any board compensation. As such, and given Mr. Lee's alignment with CAE Shareholder interests through Browning West's participation in CAE, the Board has exempted him from CAE's director share ownership requirement. | 3.&nbsp;&nbsp;&nbsp;&nbsp;Mr. Lee has waived all compensation as a Director , in accordance with Browning West's policy requiring its employees sitting on a board of a portfolio company to waive any board compensation. As such, and given Mr. Lee's alignment with CAE Shareholder interests through Browning West's participation in CAE, the Board has exempted him from CAE's director share ownership requirement. |

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22 \| CAE INC. \| 2025 \| Management Proxy Circular

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Section 3 – About the Nominated Directors

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| |
|:---|
| **Katherine A. Lehman** |
| Age: **50**<br>**New York, New York, U.S.**<br>Independent Director since: **2025**<br>Committees: **Governance**<br>Total Value of Compensation Received in FY2025: **$46,179**<br>Languages: **English** |
| Experience<br>**Palladium Equity Partners, LLC**–Partner, Palladium Heritage (2022 – present), leading a private equity fund focused on investing in lower middle market companies in the industrial and business services industries<br>**Hilltop Private Capital**–Managing Partner and Co-Founder (2016 – 2022), a private equity firm focused on industrial and business services industries<br>**Lincolnshire Management**–Managing Director and prior roles (2001 – 2016) |
| Skills, Qualifications and Core Competencies<br>**Capital Markets / M&A experience** gained through ~25 years in private equity investing at Palladium Equity, Hilltop Private Capital and Lincolnshire Management as well as public and private board roles with acquisitive companies, where she executed or had oversight for acquisitions, divestitures, capital raising and capital allocation activities<br>**Manufacturing / Supply Chain expertise** acquired as a private equity investor and board member, where many of the companies she works with are multi-site and often multi-national manufacturing or distribution companies, where manufacturing processes, supply chain management, product development and logistics are crucial<br>**Finance / Accounting expertise** developed while executing transactions and overseeing companies, including serving on numerous board audit committees<br>**Human Resources / Compensation experience** gained while overseeing succession planning and the implementation of compensation, leadership development and retention programs at the board level, through service on the HR/compensation committees at Navient, Stella-Jones and numerous private companies |
| ![katherinelehman.jpg](katherinelehman.jpg) |
| Education<br>BS, Economics, The Wharton School at the University of Pennsylvania<br>MBA, Columbia Business School |

---

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| | | |
|:---|:---|:---|
| ![image_131.jpg](image_131.jpg) | ![image_131.jpg](image_131.jpg) | ![image_131.jpg](image_131.jpg) |
| &nbsp;&nbsp;2024 Voting Results | &nbsp;&nbsp;2024 Voting Results | &nbsp;&nbsp;2024 Voting Results |
| Votes For | &nbsp;&nbsp;**N/A** | &nbsp;&nbsp;&nbsp;N/A |
| Votes Against | &nbsp;&nbsp;**N/A** | &nbsp;&nbsp;&nbsp;N/A |
| &nbsp;&nbsp;Other Public Company Boards | &nbsp;&nbsp;Other Public Company Boards | &nbsp;&nbsp;Other Public Company Boards |
| Stella-Jones Inc. (2016 – present) | Stella-Jones Inc. (2016 – present) | Stella-Jones Inc. (2016 – present) |
| Navient Corporation (2014 – 2022) | Navient Corporation (2014 – 2022) | Navient Corporation (2014 – 2022) |
| &nbsp;&nbsp;Board and Committee Attendance<sup>1</sup> | &nbsp;&nbsp;Board and Committee Attendance<sup>1</sup> | &nbsp;&nbsp;Board and Committee Attendance<sup>1</sup> |
| Board of Directors | **N/A** | N/A |
| Governance Committee | **N/A** | N/A |
| **Total** | **N/A** | **N/A** |
| 1.&nbsp;&nbsp;&nbsp;&nbsp;Ms. Lehman joined the Board and Governance Committee on February 14, 2025. She was unable to attend the sole Board meeting to which she was invited in FY2025 because of a commitment predating her appointment to the Board and which could not be rescheduled. | 1.&nbsp;&nbsp;&nbsp;&nbsp;Ms. Lehman joined the Board and Governance Committee on February 14, 2025. She was unable to attend the sole Board meeting to which she was invited in FY2025 because of a commitment predating her appointment to the Board and which could not be rescheduled. | 1.&nbsp;&nbsp;&nbsp;&nbsp;Ms. Lehman joined the Board and Governance Committee on February 14, 2025. She was unable to attend the sole Board meeting to which she was invited in FY2025 because of a commitment predating her appointment to the Board and which could not be rescheduled. |
| &nbsp;&nbsp;Share Ownership<sup>2</sup> | &nbsp;&nbsp;Share Ownership<sup>2</sup> | &nbsp;&nbsp;Share Ownership<sup>2</sup> |
|  |  | June 4, 2025 |
| Shares |  |  |
| DSUs |  | 1282 |
| **Total** |  | **1282** |
| Market Value |  | US$33,456 |
| &nbsp;&nbsp;Minimum Ownership Requirement |  | US$425,000 |
| % of Achievement |  | **8%** |
| 2.&nbsp;&nbsp;&nbsp;&nbsp;Ms. Lehman joined the Board on February 14, 2025 and must meet her required holdings over the five-year period from such date | 2.&nbsp;&nbsp;&nbsp;&nbsp;Ms. Lehman joined the Board on February 14, 2025 and must meet her required holdings over the five-year period from such date | 2.&nbsp;&nbsp;&nbsp;&nbsp;Ms. Lehman joined the Board on February 14, 2025 and must meet her required holdings over the five-year period from such date |

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23 \| CAE INC. \| 2025 \| Management Proxy Circular

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Section 3 – About the Nominated Directors

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| |
|:---|
| **Mary Lou Maher** |
| Age: **65**<br>**Toronto, Ontario, Canada**<br>Independent Director since: **2021**<br>Committees: **Human Resources (Chair)**<br>Total Value of Compensation Received in FY2025: **$280,051**<br>Languages: **English** |
| Experience<br>**KPMG Canada**–Canadian Managing Partner, Quality and Risk and Global Head of Inclusion and Diversity KPMG International (2017 – 2021); held various executive and governance roles, including Chief Financial Officer, Chief Inclusion and Diversity Officer and Chief Human Resources Officer (1983 – 2017) |
| Skills, Qualifications and Core Competencies<br>**Finance / Accounting expertise** developed during her many years at KPMG where she gained audit experience in retail, manufacturing, financial services (banking and brokerage), hospitality, healthcare and real estate and was recognized through her election as a Fellow of the Chartered Professional Accountants of Ontario<br>**Human Resources / Compensation expertise** gained while serving as Chief Human Resource Officer, Chief Inclusion and Diversity Officer and Global Head of Inclusion and Diversity at KPMG, where she created KPMG Canada's first ever National Diversity Council and was the executive sponsor of pride@kpmg<br>**Risk Management experience** gained while serving as a member of the KPMG Canadian Executive and Global Risk Management leadership teams, which are responsible for managing risk and legal matters for KPMG Canada including Enterprise Risk Management<br>**Strategic Leadership and Management experience** obtained while working in various positions on the KPMG leadership team and while serving on three public company boards |
| ![maryloumaher.jpg](maryloumaher.jpg) |
| Education<br>BCom, McMaster University<br>Fellow Chartered Professional Accountant |

---

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| | | |
|:---|:---|:---|
| ![image_142.jpg](image_142.jpg) | ![image_142.jpg](image_142.jpg) | ![image_142.jpg](image_142.jpg) |
| &nbsp;&nbsp;2024 Voting Results | &nbsp;&nbsp;2024 Voting Results | &nbsp;&nbsp;2024 Voting Results |
| &nbsp;&nbsp;&nbsp;Votes For | &nbsp;&nbsp;**93.39%** | &nbsp;&nbsp;&nbsp;227331571 |
| &nbsp;&nbsp;&nbsp;Votes Against | &nbsp;&nbsp;**6.61%** | &nbsp;&nbsp;&nbsp;16078834 |
| &nbsp;&nbsp;Other Public Company Boards | &nbsp;&nbsp;Other Public Company Boards | &nbsp;&nbsp;Other Public Company Boards |
| &nbsp;&nbsp;&nbsp;Canadian Imperial Bank of Commerce (2021 – present) | &nbsp;&nbsp;&nbsp;Canadian Imperial Bank of Commerce (2021 – present) | &nbsp;&nbsp;&nbsp;Canadian Imperial Bank of Commerce (2021 – present) |
| &nbsp;&nbsp;&nbsp;Magna International Inc. (2021 – present) | &nbsp;&nbsp;&nbsp;Magna International Inc. (2021 – present) | &nbsp;&nbsp;&nbsp;Magna International Inc. (2021 – present) |
| &nbsp;&nbsp;Board and Committee Attendance<sup>1</sup> | &nbsp;&nbsp;Board and Committee Attendance<sup>1</sup> | &nbsp;&nbsp;Board and Committee Attendance<sup>1</sup> |
| Board of Directors | **14 of 14** | 100% |
| Audit Committee | **3 of 3** | 100% |
| Human Resources Committee | **10 of 10** | 100% |
| **Total** | **27 of 27** | **100%** |
| 1.&nbsp;&nbsp;&nbsp;&nbsp;Ms. Maher left the Audit Committee on August 14, 2024. | 1.&nbsp;&nbsp;&nbsp;&nbsp;Ms. Maher left the Audit Committee on August 14, 2024. | 1.&nbsp;&nbsp;&nbsp;&nbsp;Ms. Maher left the Audit Committee on August 14, 2024. |
| &nbsp;&nbsp;Share Ownership | &nbsp;&nbsp;Share Ownership | &nbsp;&nbsp;Share Ownership |
|  | June 4, 2025 | June 6, 2024 |
| Shares | 6500 | 6500 |
| DSUs | 22923 | 17671 |
| **Total** | **29423** | **24171** |
| Market Value | $1050107 | $623128 |
| &nbsp;&nbsp;Minimum Ownership Requirement | $425000 | $425000 |
| % of Achievement | **247%** | **147%** |

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24 \| CAE INC. \| 2025 \| Management Proxy Circular

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Section 3 – About the Nominated Directors

---

| |
|:---|
| **Calin Rovinescu**<br>Chair of the Board |
| Age: **69**<br>**Toronto, Ontario, Canada**<br>Independent Director<sup>1</sup> since: **2025**<br>Total Value of Compensation Received in FY2025: **$53,750**<br>Languages: **English, French** |
| Experience<br>**Air Canada**–President and Chief Executive Officer (2009 – 2021); Chief Restructuring Officer (2003 – 2004); Executive Vice President, Corporate Development & Strategy (2000 – 2004)<br>**Star Alliance**–Chair of the Chief Executive Board (2012 – 2016); Board Member (2009 – 2021)<br>**International Air Transport Association**–Chair (2014 – 2015); Member of the Board of Governors (2010 – 2020)<br>**Genuity Capital Markets**–Co-Founder and Principal (2005 – 2009)<br>**Stikeman Elliott**–Managing Partner (1996 – 2000); Partner (1984 - 1996); Associate Lawyer (1979 – 1984) |
| Skills, Qualifications and Core Competencies<br>**Knowledge of Industry** gained throughout his multiple leadership roles at Air Canada, as well as in the course of his service on the boards, including as Chair, of Star Alliance and the International Air Transport Association<br>**Strategic Leadership and Management experience** developed while serving in executive roles at Air Canada, where he led Air Canada's transformation into one of the world's leading airlines, expanding its network and producing record financial results and stock market performance<br>**Legal / Governance expertise** gained during his time at Stikeman Elliott, a leading Canadian law firm, where he practiced corporate law for over 20 years, including 4 years as Managing Partner of the firm's Montréal office<br>**Capital Markets / M&A experience** developed in his role as Co-Founder and Principal of Genuity Capital Markets, an independent investment banking and securities brokerage firm |
| ![calinrovinescu.jpg](calinrovinescu.jpg) |
| Education<br>LL.B, University of Ottawa<br>LL.L, Université de Montréal<br>1.&nbsp;&nbsp;&nbsp;&nbsp;As of the date of this Circular, Mr. Rovinescu is considered independent. However, as previously announced, effective at the conclusion of the Meeting and subject to his election, Mr. Rovinescu will shift to the role of Executive Chairman of the Board, at which time he will no longer be considered independent. |

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| | | |
|:---|:---|:---|
| ![image_158.jpg](image_158.jpg) | ![image_158.jpg](image_158.jpg) | ![image_158.jpg](image_158.jpg) |
| &nbsp;&nbsp;2024 Voting Results | &nbsp;&nbsp;2024 Voting Results | &nbsp;&nbsp;2024 Voting Results |
| Votes For | &nbsp;&nbsp;**N/A** | &nbsp;&nbsp;&nbsp;N/A |
| Votes Against | &nbsp;&nbsp;**N/A** | &nbsp;&nbsp;&nbsp;N/A |
| &nbsp;&nbsp;Other Public Company Boards | &nbsp;&nbsp;Other Public Company Boards | &nbsp;&nbsp;Other Public Company Boards |
| BCE Inc. / Bell Canada (2016 – present) | BCE Inc. / Bell Canada (2016 – present) | BCE Inc. / Bell Canada (2016 – present) |
| The Bank of Nova Scotia (2020 – 2025) | The Bank of Nova Scotia (2020 – 2025) | The Bank of Nova Scotia (2020 – 2025) |
| Air Canada (2009 – 2021) | Air Canada (2009 – 2021) | Air Canada (2009 – 2021) |
| &nbsp;&nbsp;Board and Committee Attendance<sup>2</sup> | &nbsp;&nbsp;Board and Committee Attendance<sup>2</sup> | &nbsp;&nbsp;Board and Committee Attendance<sup>2</sup> |
| Board of Directors | &nbsp;&nbsp;**1 of 1** | 100% |
| **Total** | &nbsp;&nbsp;**1 of 1** | **100%** |
| 2.&nbsp;&nbsp;&nbsp;&nbsp;Mr. Rovinescu joined the Board on February 14, 2025. As Chair of the Board, he also attends all Committee meetings. | 2.&nbsp;&nbsp;&nbsp;&nbsp;Mr. Rovinescu joined the Board on February 14, 2025. As Chair of the Board, he also attends all Committee meetings. | 2.&nbsp;&nbsp;&nbsp;&nbsp;Mr. Rovinescu joined the Board on February 14, 2025. As Chair of the Board, he also attends all Committee meetings. |
| &nbsp;&nbsp;Share Ownership<sup>3</sup> | &nbsp;&nbsp;Share Ownership<sup>3</sup> | &nbsp;&nbsp;Share Ownership<sup>3</sup> |
|  |  | June 4, 2025 |
| Shares |  | 15000 |
| DSUs |  | 1492 |
| **Total** |  | **16492** |
| Market Value |  | $588599 |
| &nbsp;&nbsp;Minimum Ownership Requirement |  | $950000 |
| % of Achievement |  | **62%** |
| 3.&nbsp;&nbsp;&nbsp;&nbsp;Mr. Rovinescu joined the Board on February 14, 2025 and must meet his required holdings over the five-year period from such date. | 3.&nbsp;&nbsp;&nbsp;&nbsp;Mr. Rovinescu joined the Board on February 14, 2025 and must meet his required holdings over the five-year period from such date. | 3.&nbsp;&nbsp;&nbsp;&nbsp;Mr. Rovinescu joined the Board on February 14, 2025 and must meet his required holdings over the five-year period from such date. |

---

25 \| CAE INC. \| 2025 \| Management Proxy Circular

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Section 3 – About the Nominated Directors

---

| |
|:---|
| **Patrick M. Shanahan** |
| Age: **62**<br>**Seattle, Washington, U.S.**<br>Independent Director since: **2022**<br>Committees: **Human Resources**<br>Total Value of Compensation Received in FY2025: **$356,465**<br>Languages: **English** |
| Experience<br>**Spirit AeroSystems Inc.**–President and Chief Executive Officer (2023 – present)<br>**U.S. Department of Defense**–U.S. Acting Secretary of Defense (2019); 33rd U.S. Deputy Secretary of Defense, where he helped lead the development of several key Department of Defense policies and strategies (2017 – 2018)<br>**The Boeing Company**–Senior Vice President, Supply Chain & Operations (2016 – 2017); Senior Vice President of Commercial Airplane Programs, managing profit and loss for the 737, 747, 767, 777 and 787 programs and the operations at Boeing's principal manufacturing sites (2008 – 2016); Vice President and General Manager of the 787 Dreamliner, leading the program during a critical development period (2007 – 2008); Vice President and General Manager of Boeing Missile Defense Systems (2004 – 2007); Vice President and General Manager of Boeing Rotorcraft Systems (2002 – 2004); joined in 1986 |
| Skills, Qualifications and Core Competencies<br>**Knowledge of Industry** gained as CEO of Spirit AeroSystems and three decades employed by Boeing overseeing both their civil aviation and defence units and as the "customer" while serving in the U.S. Department of Defense<br>**Strategic Leadership and Management experience** obtained through his service in the U.S. Department of Defense, including as the Acting Secretary of Defense and the 33rd Deputy Secretary of Defense, where he oversaw the management of coordinating and supervising all matters related to the U.S. Armed Forces, as well as during his time in leadership roles at Boeing and Spirit AeroSystems<br>**Risk Management expertise** developed through his roles at Spirit AeroSystems and Boeing overseeing development and execution of numerous complex civil aviation and defence programs<br>**Manufacturing / Supply Chain expertise** gained through his roles at Spirit AeroSystems and Boeing overseeing development and execution of civil aviation and defence programs that included responsibilities for manufacturing operations, and supplier management functions, including implementation of advanced manufacturing technologies and global supply chain strategies |
| ![patrickshanahan.jpg](patrickshanahan.jpg) |
| Education<br>BS, Mechanical Engineering, University of Washington<br>MS, Mechanical Engineering, Massachusetts Institute of Technology<br>MBA, Massachusetts Institute of Technology's Sloan School of Management |

---

---

| | | |
|:---|:---|:---|
| ![image_160.jpg](image_160.jpg) | ![image_160.jpg](image_160.jpg) | ![image_160.jpg](image_160.jpg) |
| &nbsp;&nbsp;2024 Voting Results | &nbsp;&nbsp;2024 Voting Results | &nbsp;&nbsp;2024 Voting Results |
| Votes For | &nbsp;&nbsp;**74.65%** | &nbsp;&nbsp;&nbsp;181714930 |
| Votes Against | &nbsp;&nbsp;**25.35%** | &nbsp;&nbsp;&nbsp;61695641 |
| &nbsp;&nbsp;Other Public Company Boards<sup>1</sup> | &nbsp;&nbsp;Other Public Company Boards<sup>1</sup> | &nbsp;&nbsp;Other Public Company Boards<sup>1</sup> |
| Leidos Holdings, Inc. (2022 – present) | Leidos Holdings, Inc. (2022 – present) | Leidos Holdings, Inc. (2022 – present) |
| Spirit AeroSystems Inc. (2021 – present) | Spirit AeroSystems Inc. (2021 – present) | Spirit AeroSystems Inc. (2021 – present) |
| Eve Holdings, Inc. (2021 – 2022) | Eve Holdings, Inc. (2021 – 2022) | Eve Holdings, Inc. (2021 – 2022) |
| 1.&nbsp;&nbsp;&nbsp;&nbsp;While Mr. Shanahan serves as President and CEO of Spirit AeroSystems and sits on two public company boards other than CAE, he remains deeply committed to his work on the Board. He has an exemplary record of attendance, having missed only one day of meetings since joining the Board in 2022. His extensive operational knowledge and industry experience allow him to offer unique insights and contributions. | 1.&nbsp;&nbsp;&nbsp;&nbsp;While Mr. Shanahan serves as President and CEO of Spirit AeroSystems and sits on two public company boards other than CAE, he remains deeply committed to his work on the Board. He has an exemplary record of attendance, having missed only one day of meetings since joining the Board in 2022. His extensive operational knowledge and industry experience allow him to offer unique insights and contributions. | 1.&nbsp;&nbsp;&nbsp;&nbsp;While Mr. Shanahan serves as President and CEO of Spirit AeroSystems and sits on two public company boards other than CAE, he remains deeply committed to his work on the Board. He has an exemplary record of attendance, having missed only one day of meetings since joining the Board in 2022. His extensive operational knowledge and industry experience allow him to offer unique insights and contributions. |
| &nbsp;&nbsp;Board and Committee Attendance<sup>2</sup> | &nbsp;&nbsp;Board and Committee Attendance<sup>2</sup> | &nbsp;&nbsp;Board and Committee Attendance<sup>2</sup> |
| Board of Directors | &nbsp;&nbsp;**13 of 14** | 93% |
| Audit Committee | &nbsp;&nbsp;**3 of 3** | 100% |
| Governance Committee | &nbsp;&nbsp;**3 of 3** | 100% |
| Human Resources Committee | &nbsp;&nbsp;**5 of 6** | 83% |
| **Total** | **22 of 24** | **92%** |
| 2.&nbsp;&nbsp;&nbsp;&nbsp;Mr. Shanahan left the Audit Committee and Governance Committee and joined the Human Resources Committee on August 14, 2024. | 2.&nbsp;&nbsp;&nbsp;&nbsp;Mr. Shanahan left the Audit Committee and Governance Committee and joined the Human Resources Committee on August 14, 2024. | 2.&nbsp;&nbsp;&nbsp;&nbsp;Mr. Shanahan left the Audit Committee and Governance Committee and joined the Human Resources Committee on August 14, 2024. |
| &nbsp;&nbsp;Share Ownership | &nbsp;&nbsp;Share Ownership | &nbsp;&nbsp;Share Ownership |
|  | June 4, 2025 | June 6, 2024 |
| Shares |  |  |
| DSUs | 18368 | 11062 |
| **Total** | **18368** | **11062** |
| Market Value | US$479,341 | US$208,379 |
| &nbsp;&nbsp;Minimum Ownership Requirement | US$425,000 | US$425,000 |
| % of Achievement | **113%** | **49%** |

---

26 \| CAE INC. \| 2025 \| Management Proxy Circular

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Section 3 – About the Nominated Directors

---

| |
|:---|
| **Louis Têtu** |
| Age: **61**<br>**Québec City, Québec, Canada**<br>Independent Director<sup>1</sup> since: **2025**<br>Committees: **Audit**<br>Total Value of Compensation Received in FY2025: **$32,122**<br>Languages: **English, French** |
| Experience<br>**Coveo Solutions Inc.**–Executive Chairman (2025 – present); Chairman and Chief Executive Officer (2008 – 2025)<br>**Taleo Corporation**–Chief Executive Officer and Chairman (1999 – 2007)<br>**Baan Corporation**–President of Baan Supply-Chain Solutions (1996 – 1998)<br>**Berclain Group**–President (1989 – 1996) |
| Skills, Qualifications and Core Competencies<br>**Strategic Leadership and Management experience** gained throughout his 30-year career as CEO, including 19 years as CEO and Chairman of publicly traded companies<br>**Human Resources / Compensation expertise** developed in his leadership roles at Coveo and Taleo, and as a member of the Human Resources and Corporate Governance Committee at Alimentation Couche-Tard<br>**Research & Development experience** gained through his active involvement in technology R&D and innovation as CEO of two international software companies, one of which he co-founded<br>**Information Technology / Cybersecurity / Digital expertise** developed during his time at Coveo, a global provider of artificial intelligence powered software platforms for e-commerce, customer service and workplace applications, and at Taleo, a leading international provider of cloud software for talent and human capital management |
| ![louistetu.jpg](louistetu.jpg) |
| Education<br>Bachelor of Engineering, Université Laval<br>Commercially licensed helicopter pilot |
| 1.&nbsp;&nbsp;&nbsp;&nbsp;Mr. Têtu is a nominee of Caisse de dépôt et placement du Québec ("CDPQ"), pursuant to a customary nomination right agreement. The Board has determined that Mr. Têtu is independent based on a number of factors, including the fact that as of June 12, 2024, CDPQ held less than 10% of our total issued and outstanding Shares, and that Mr. Têtu is not an executive officer of CDPQ. |

---

---

| | | |
|:---|:---|:---|
| ![image_172.jpg](image_172.jpg) | ![image_172.jpg](image_172.jpg) | ![image_172.jpg](image_172.jpg) |
| &nbsp;&nbsp;2024 Voting Results | &nbsp;&nbsp;2024 Voting Results | &nbsp;&nbsp;2024 Voting Results |
| Votes For | &nbsp;&nbsp;**N/A** | &nbsp;&nbsp;&nbsp;N/A |
| Votes Against | &nbsp;&nbsp;**N/A** | &nbsp;&nbsp;&nbsp;N/A |
| &nbsp;&nbsp;Other Public Company Boards | &nbsp;&nbsp;Other Public Company Boards | &nbsp;&nbsp;Other Public Company Boards |
| Alimentation Couche-Tard Inc. (2019 – present) | Alimentation Couche-Tard Inc. (2019 – present) | Alimentation Couche-Tard Inc. (2019 – present) |
| Coveo Solutions Inc. (2021 – present) | Coveo Solutions Inc. (2021 – present) | Coveo Solutions Inc. (2021 – present) |
| Industrial Alliance Insurance and Financial Services Inc. (2016 – 2022) | Industrial Alliance Insurance and Financial Services Inc. (2016 – 2022) | Industrial Alliance Insurance and Financial Services Inc. (2016 – 2022) |
| &nbsp;&nbsp;Board and Committee Attendance<sup>2</sup> | &nbsp;&nbsp;Board and Committee Attendance<sup>2</sup> | &nbsp;&nbsp;Board and Committee Attendance<sup>2</sup> |
| Board of Directors | &nbsp;&nbsp;**1 of 1** | 100% |
| Audit Committee | &nbsp;&nbsp;**1 of 1** | 100% |
| **Total** | &nbsp;&nbsp;**2 of 2** | **100%** |
| 2.&nbsp;&nbsp;&nbsp;&nbsp;Mr. Têtu joined the Board and Audit Committee on February 14, 2025. | 2.&nbsp;&nbsp;&nbsp;&nbsp;Mr. Têtu joined the Board and Audit Committee on February 14, 2025. | 2.&nbsp;&nbsp;&nbsp;&nbsp;Mr. Têtu joined the Board and Audit Committee on February 14, 2025. |
| &nbsp;&nbsp;Share Ownership | &nbsp;&nbsp;Share Ownership | &nbsp;&nbsp;Share Ownership |
|  |  | June 4, 2025 |
| Shares |  | 14500 |
| DSUs |  | 892 |
| **Total** |  | **15392** |
| Market Value |  | $549340 |
| &nbsp;&nbsp;Minimum Ownership Requirement |  | $425000 |
| % of Achievement |  | **129%** |

---

**&nbsp;&nbsp;&nbsp;&nbsp;**

27 \| CAE INC. \| 2025 \| Management Proxy Circular

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Section 3 – About the Nominated Directors

Director Selection and Nomination Process

Part of the Governance Committee's responsibility is to identify and recruit suitable potential Board members and recommend to the Board nominees for election at annual Shareholders' meetings.

**To fulfill this mandate, the Governance Committee:**

—Identifies desirable skill sets, industry experience, diverse backgrounds, international experience, relationships and other attributes that would assist the Board in the conduct of its responsibilities and also further CAE's interests (refer to "Board Attributes" below), taking into account criteria that promote diversity, including but not limited to gender, age, race, national or ethnic origin, sexual orientation and disability.

—Reviews with the Chair, President and CEO and other Directors possible candidates, including the existing members of the Board, which may meet some or all of such attributes.

—Considers potential conflicts of interest, independence issues and interlocking directorships of potential candidates.

—Approaches with the Chair and other Directors potential candidates not already serving as Directors to determine their availability and interest in serving on CAE's Board, and interviews those interested to determine their suitability for nomination.

—Reviews with other members of the Board the potential nomination of any new Director before a final determination to nominate them is made and assess the effectiveness of the Director nomination process at achieving CAE's diversity objectives.

**Board members must:**

—Demonstrate high ethical standards and integrity, including abiding by CAE's Code of Conduct;

—Act honestly and in good faith regarding CAE's best interests;

—Devote sufficient time to CAE's affairs and exercise prudence and diligence in fulfilling all their Board-related responsibilities;

—Give independent judgment on issues facing CAE;

—Understand and challenge CAE's business plans and strategy;

—Effectively participate in all Board-related deliberations;

—Make reasonable efforts to attend Board and committee meetings; and

—Review the management materials provided in advance of, and otherwise prepare for, all Board meetings.

Under the articles of CAE, the Board may consist of a minimum of three and a maximum of twenty-one Directors. As provided in CAE's by-laws, the Directors are to be elected annually and a majority of the Directors shall be Canadians. Each Director will hold office until the next annual meeting or until his or her successor is duly elected unless his or her office is earlier vacated in accordance with the by-laws. In accordance with the by-laws, the Board has fixed the number of Directors to be elected at the Meeting at thirteen.

28 \| CAE INC. \| 2025 \| Management Proxy Circular

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Section 3 – About the Nominated Directors

Board Attributes

The following matrices identifying the gender, language skills, age, Canadian residency, tenure, professional skills, expertise and qualifications of nominated Directors is reviewed by the Governance Committee annually to ensure CAE benefits from an appropriate combination of skills, experience with CAE's business matters and corporate governance standards, and fresh perspectives:

—All non-employee Director nominees (12 out of a total number of 13 Directors) are currently independent. However, as previously announced, effective at the conclusion of the Meeting and subject to his election, Mr. Rovinescu will shift to the role of Executive Chairman of the Board, at which time he will no longer be considered independent.

—All Board Committee members are independent.

---

| | | | | | | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|
| Board Demographics | &nbsp;&nbsp;Ayman Antoun | &nbsp;&nbsp;Sophie Brochu | Matthew Bromberg | &nbsp;&nbsp;Patrick Decostre | &nbsp;&nbsp;Elise Eberwein | &nbsp;&nbsp;Ian L. Edwards | &nbsp;&nbsp;Marianne Harrison | &nbsp;&nbsp;Peter Lee | &nbsp;&nbsp;Katherine A. Lehman | &nbsp;&nbsp;Mary Lou Maher | &nbsp;&nbsp;Calin Rovinescu | &nbsp;&nbsp;Patrick M. Shanahan | &nbsp;&nbsp;Louis Têtu |
| Gender | M | F | M | M | F | M | F | M | F | F | M | M | M |
| French<sup>1</sup> |  | ● |  | ● |  |  |  |  |  |  | ● |  | ● |
| English<sup>1</sup> | ● | ● | ● | ● | ● | ● | ● | ● | ● | ● | ● | ● | ● |
| Other language(s)<sup>1</sup> | ● |  |  |  |  |  |  |  |  |  |  |  |  |
| Under 60 | ● |  | ● | ● |  |  |  | ● | ● |  |  |  |  |
| 60-69 |  | ● |  |  | ● | ● | ● |  |  | ● | ● | ● | ● |
| 70+ |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Canadian citizen or permanent resident | ● | ● |  | ● |  |  | ● |  |  | ● | ● |  | ● |
| 0-5 years tenure | ● | ● | ● | ● | ● | ● |  | ● | ● | ● | ● | ● | ● |
| 6-10 years tenure |  |  |  |  |  |  | ● |  |  |  |  |  |  |
| More than 10 years tenure |  |  |  |  |  |  |  |  |  |  |  |  |  |

---

1.&nbsp;&nbsp;&nbsp;&nbsp;At a minimum, business proficiency, unless otherwise indicated.

29 \| CAE INC. \| 2025 \| Management Proxy Circular

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Section 3 – About the Nominated Directors

---

| | | | | | | | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|
|  | Skills and Experiences | &nbsp;&nbsp;Ayman Antoun | &nbsp;&nbsp;Sophie Brochu | Matthew Bromberg | &nbsp;&nbsp;Patrick Decostre | &nbsp;&nbsp;Elise Eberwein | &nbsp;&nbsp;Ian L. Edwards | &nbsp;&nbsp;Marianne Harrison | &nbsp;&nbsp;Pater Lee | &nbsp;&nbsp;Katherine A. Lehman | &nbsp;&nbsp;Mary Lou Maher | &nbsp;&nbsp;Calin Rovinescu | &nbsp;&nbsp;Patrick M. Shanahan | &nbsp;&nbsp;Louis Têtu |
| ![image_183.jpg](image_183.jpg) | &nbsp;&nbsp;**Knowledge of Industry**<br>Experience with, or understanding of, some or all of the markets or industries which are directly relevant to CAE, including civil aviation and defence. | ● |  | ● |  | ● |  |  |  |  |  | ● | ● |  |
| ![image_184.jpg](image_184.jpg) | &nbsp;&nbsp;**Strategic Leadership and Management**<br>Experience as senior executive of a public company or other major organization, and executive or management experience developing, evaluating and implementing a strategic plan. | ● | ● | ● | ● | ● | ● | ● |  | ● | ● | ● | ● | ● |
| ![image_185.jpg](image_185.jpg) | &nbsp;&nbsp;**Finance / Accounting**<br>Experience with, or understanding of, financial accounting and reporting and corporate finance, and familiarity with internal financial and accounting controls and IFRS. |  | ● | ● | ● | ● |  | ● | ● | ● | ● |  |  |  |
| ![image_186.jpg](image_186.jpg) | &nbsp;&nbsp;**Human Resources / Compensation**<br>Experience with, or understanding of, executive compensation and benefits, including benefits and incentive programs, talent management and retention, leadership development, and succession planning. | ● | ● | ● | ● | ● | ● | ● | ● | ● | ● | ● | ● | ● |
| ![image_187.jpg](image_187.jpg) | &nbsp;&nbsp;**Government Relations**<br>Experience with, or understanding of, regulatory, political and public policy in Canada, the United States and/or international jurisdictions. | ● | ● | ● | ● | ● |  |  |  |  |  | ● | ● |  |
| ![image_188.jpg](image_188.jpg) | &nbsp;&nbsp;**R&D**<br>Experience with the oversight of large-scale R&D programs. |  |  | ● |  |  |  |  |  |  |  |  | ● | ● |
| ![image_189.jpg](image_189.jpg) | &nbsp;&nbsp;**Legal / Governance**<br>Experience with, or understanding of, corporate governance issues and practices, including the legal, compliance and regulatory environment applicable to public companies or other major organizations. |  |  |  |  | ● |  |  |  |  |  | ● |  |  |
| ![image_190.jpg](image_190.jpg) | &nbsp;&nbsp;**Information Technology / Cybersecurity / Digital**<br>Experience with, or understanding of, the design and implementation, or oversight of the design and implementation, of enterprise-wide information technology systems, client-based digital infrastructures, data analytics, privacy and cybersecurity strategy and policies. | ● |  |  |  |  |  |  |  |  | ● |  | ● | ● |
| ![image_1911.jpg](image_1911.jpg) | &nbsp;&nbsp;**Sustainability**<br>Experience with, or understanding of, sustainability practices and programs, including climate change and decarbonization, health and safety, inclusion and equal opportunities and social responsibility. | ● | ● |  | ● | ● | ● |  |  | ● | ● |  | ● |  |
| ![image_192.jpg](image_192.jpg) | &nbsp;&nbsp;**Risk Management**<br>Experience with, or understanding of, the identification and assessment of risks and risk management systems. |  | ● | ● | ● | ● | ● | ● | ● | ● | ● | ● | ● |  |
| ![image_193.jpg](image_193.jpg) | &nbsp;&nbsp;**International Markets**<br>Experience with, or understanding of, overseas markets where the Company has operations. |  |  | ● | ● |  | ● |  |  |  |  | ● |  | ● |
| ![image_194.jpg](image_194.jpg) | &nbsp;&nbsp;**Capital Markets / M&A**<br>Experience overseeing the allocation of capital to ensure superior risk-adjusted financial returns and in capital structure strategy and corporate transactions, including mergers, acquisitions, or divestitures of major assets and/or private/public entities. |  | ● | ● | ● |  | ● | ● | ● | ● |  | ● |  | ● |
| ![image_195.jpg](image_195.jpg) | &nbsp;&nbsp;**Manufacturing / Supply Chain**<br>Experience with, or understanding of, sourcing, manufacturing, supply chain, infrastructure, information management, logistics, and product development, distribution and marketing. |  |  | ● |  |  | ● |  | ● | ● |  |  | ● | ● |

---

30 \| CAE INC. \| 2025 \| Management Proxy Circular

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![image_196.jpg](image_196.jpg)

31 \| CAE INC. \| 2025 \| Management Proxy Circular

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Section 4 – Corporate Governance

**Our Commitment to Sound Corporate Governance**

The Board and management team take pride in knowing that CAE has maintained the highest standards in corporate governance. CAE's corporate governance is rooted in the basic principle that proper and ethical practices lead to the creation and preservation of Shareholder value.

Our governance structure enables independent, experienced and accomplished Directors to provide advice, insight and oversight to advance the interests of the Company and our Shareholders.

**Regulatory compliance**

As a Canadian reporting issuer with Shares listed on the TSX and the New York Stock Exchange ("NYSE"), CAE's corporate governance practices are required to meet and exceed applicable rules adopted by the Canadian Securities Administrators ("CSA") and the United States Securities and Exchange Commission ("SEC"), as well as provisions of the rules of the NYSE and of SOX.

Most of the NYSE's corporate governance listing standards are not mandatory for CAE as a non-U.S. company, but CAE is required to disclose the significant differences between its corporate governance practices and the requirements applicable to United States companies listed on the NYSE. Except as summarized on CAE's website (**<u>http://www.cae.com/investors/governance</u>**), CAE is in compliance with the NYSE requirements in all significant respects. CAE also complies with those provisions of SOX and the rules adopted by the SEC pursuant to that Act that are currently applicable to CAE.

**Best practices and continuous improvement**

The Board and its Governance Committee continue to monitor governance practices in Canada and the United States, and to implement changes to CAE's governance policies and practices as necessary to comply with any new rules issued by the CSA and other applicable regulatory authorities. We also monitor recommended best practices of Shareholder representatives and other organizations and will implement any such practice we believe to be in the best interest of the Company.

**Communication and Shareholder engagement**

CAE is committed to ensure open, ongoing dialogue with Shareholders, other investors and the public. Through CAE's Disclosure Policy and procedures, the Board ensures that communication of material information to investors is timely and accurate, and broadly disseminated in accordance with all applicable securities laws and stock exchange rules. CAE recognizes the importance of engaging in constructive and meaningful communications with Shareholders and values their input and insights. To that effect, we have put in place various means to ensure consistent and effective communication with Shareholders and to encourage them to express their views and provide direct feedback to the Board and management.

—We regularly communicate with our stakeholders through various channels, including via our website (www.cae.com). Shareholders, customers and other stakeholders can access comprehensive information about the Company through the investor section of our webpage (www.cae.com/investors) where annual and quarterly reports, news releases, sustainability reports, corporate presentations and governance-related documents are available.

—We host quarterly earnings conference calls with sell-side analysts and institutional investors to review CAE's most recently released financial and operating results. Our earnings calls are webcast live and are followed by a question and answer period. Replays are accessible on our website.

—We also host investor and analyst events intended for capital markets professionals, including sell-side analysts and institutional investors on an ad hoc basis. These events enable CAE to explain our activities and communicate our strategy and vision for the Company in a comprehensive way to our Shareholders. These meetings also provide opportunities to engage with CAE's executive team. These events can be attended in person or via live webcast. The replay of the event and the supporting presentation are available on CAE's website after the event.

The Board encourages Shareholders to attend the Company's annual Shareholders' meetings. These meetings provide valuable opportunities to discuss the Company, its corporate governance and other important matters.

32 \| CAE INC. \| 2025 \| Management Proxy Circular

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Section 4 – Corporate Governance

The Company is committed to effectively engaging with Shareholders and other stakeholders on the topic of executive compensation on an ongoing basis.

Each year, we ask Shareholders at the Meeting to consider and to cast an advisory, non-binding vote on CAE's approach to executive compensation – this is often referred to as "say on pay". Although this is an advisory vote and the results are not binding, the HRC reviews and analyzes the results of the vote and takes into consideration such results when reviewing executive compensation philosophy and programs.

We appreciate the importance of engaging with our Shareholders to better understand their views, concerns, and priorities related to our business operations, performance, and executive compensation programs. In FY2023, we initiated a proactive engagement process with our Shareholders. We have continued this process in FY2025 and have committed to regular annual shareholder engagement with our Shareholders. Please refer to **Section 7 – Executive Compensation – Compensation Discussion and Analysis - Shareholder Engagement**, which describes our significant engagement initiatives with investors in FY2025.

Shareholders are also always invited to submit proposals to be considered at an annual Shareholders' meeting of the Company and included in our management proxy circular. More information is provided under **Section 8 – Other Important Information** of this Circular.

CAE's Global Communications and Investor Relations departments actively engage with investors to address any specific questions or concerns they might have. Shareholders may send comments or questions via email to investor.relations@cae.com. In addition, CAE's transfer agent, Computershare Trust Company of Canada, has a toll-free number (1-800-564-6253) and website (www.computershare.com) to assist Shareholders.

Shareholders may communicate with the Board or management in writing to express their views on matters that are important to them, by addressing their correspondence to the Chair of the Board, either (i) by mail in an envelope marked "confidential" to the attention of the Chair of the Board, CAE Inc., 8585 Ch. de la Côte-de-Liesse, St-Laurent (Québec) Canada H4T 1G6 or (ii) by email at boardchair@cae.com.

Shareholders may ask to meet with the Chair of the Board, the Chair of any Board Committee or an individual Director to discuss compensation and governance-related topics for which the Board is directly responsible. The Chair of the Board will consider such

meeting requests in consultation with the Chair of the Governance Committee and the Corporate Secretary. The Board reserves the right to decline requests for meetings for any reason it deems appropriate, including where the proposed topics for the meeting are not related to compensation and corporate governance matters and are better handled by management.

We are committed to maintaining and continuously enhancing our Shareholders' engagement. We offer various opportunities for our institutional investors and proxy advisory groups to learn about CAE through:

—Investor and analyst events;

—Investor roadshows throughout the year;

—In person or videoconference meetings with our President and Chief Executive Officer, Interim Chief Financial Officer, Chief Operating Officer, Senior Vice President, Investor Relations and Enterprise Risk Management, Chief People and Sustainability Officer, Division Presidents and senior leaders within our global operations;

—Webcasts of our quarterly earnings conference calls with sell-side analysts and institutional investors;

—Executive presentations at sell-side, institutional investor and industry conferences; and

—Quarterly earnings presentations available on our website.

**We also receive feedback through:**

—Our Shareholders' Annual General Meeting;

—Regular discussions with sell-side analysts;

—A dedicated address for email inquiries;

—Our advisory note on our approach to executive compensation; and

—We continuously enhance our messaging to our investors to provide them with the most accurate guidance on our growth perspectives and the future value of their investment.

**Board and management roles**

The purpose of the Board and its committees is to build long-term value for the Company's Shareholders and to ensure the continuity and vitality of the Company's businesses by setting policy for the Company, overseeing strategic planning, monitoring the Company's performance, providing management with appropriate advice and performance feedback. Management is responsible for and the Board is committed to ensuring that CAE operates in a legal and ethically responsible manner. The Board's stewardship role, specific responsibilities, composition requirements and various

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Section 4 – Corporate Governance

other matters are set out in **Appendix A – Board of Directors' Charter** to this Circular.

**President and CEO's role and responsibilities**

The position description for the President and CEO is developed with input from the President and CEO, and is approved by the Governance Committee and the Board. The description (which is available on our website) provides that the President and CEO has the primary responsibility for the leadership, strategic and management direction and business results of CAE to ensure that CAE establishes appropriate goals, and manages its resources to meet these goals. It also provides that the President and CEO is accountable to the Board for, amongst other things, formulating and executing business strategies, overseeing CAE's corporate governance structure and framework, overall responsibility for the management of CAE's business, carrying out a comprehensive budgeting process and monitoring CAE's performance against the budget, ensuring that CAE strategies are effectively implemented with timely progress towards strategic objectives, identifying and communicating risks and opportunities to the Board and dealing with them appropriately, keeping the Board fully informed of all important issues and aspects of the Company's performance, opportunities and market developments, building and maintaining a network of strategic relationships with business leaders, governmental officials and investors, developing and implementing a human resource strategy which develops leadership capabilities, and creating an organizational structure and culture that optimize and sustain high levels of performance. The CEO is responsible for ensuring there is an effective risk management and business continuity framework in place, with appropriate systems to monitor, manage and mitigate such risks (including cybersecurity and artificial intelligence risks). In addition, the CEO is responsible for the implementation and communication of the Company's sustainability and compliance policies, practices and strategy (including creating an inclusive culture and providing equal opportunities; data protection and privacy; artificial intelligence; health &, safety (including aviation safety); environment and climate change; ethics and anti-corruption; security; and human rights (including modern slavery)). The CEO fosters a culture of ethical behaviour for CAE, promotes compliance with CAE's Code of Business Conduct and proactively ensures that CAE complies with all of its legal, accounting, ethical, moral and social responsibility obligations.

**The Board Chair and Lead Independent Director's roles and responsibilities**

Mr. Rovinescu currently serves as the Chair of the Board. Mr. Rovinescu is currently a non-executive Director and, as such, is responsible for ensuring that the Board discharges its responsibilities independently of management.

The current Board Chair position description (which is available on our website) sets out the Chair's responsibilities and duties in guiding the Board in the fulfillment of their stewardship role, namely:

—Represent the Board in discussion with management;

—Represent the Board in discussion with third parties;

—Generally ensure that the Board functions independently of management;

—Chair and encourage free and open discussions at the Board meetings;

—Together with the Governance Committee ("GC"), identify guidelines for the selection of, and evaluation of conduct of the Directors;

—Ensure the effective and transparent interaction of Board members and senior management;

—Act as a resource to the President and CEO on significant strategy and business initiatives and meet with the President and CEO regularly to provide feedback and advice on behalf of the Board and other stakeholders; and

—Report to Shareholders on behalf of the Board and play a role in the Company's external relationships in consultation with the President and CEO.

Following the Meeting and subject to their election, Mr. Rovinescu will shift to the role of Executive Chairman of the Board and Ms. Brochu will be appointed as Lead Independent Director.

The Executive Chairman will work closely with the President and Chief Executive Officer in the development and execution of the Company's strategic initiatives while also being responsible for the effective functioning of the Board. The primary functions of the Lead Independent Director will be to provide independent leadership to the Board and to facilitate the functioning of the Board independently of management. Updates to key governance documents will be approved by the Board upon recommendation of the Governance Committee prior to the Meeting, including a revised position description for our Executive Chairman and a position description for the new role of Lead Independent Director. These governance documents will be available on our website.

Correspondence to the Independent Directors may be sent to the attention of the Chair of the Board or, following Mr. Rovinescu's shift to the role of Executive Chairman, to the attention of the Lead Independent Director of the Board, by email at **<u>board@cae.com</u>** or at CAE's address listed in this Circular.

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Section 4 – Corporate Governance

**Processes in place to ensure the Board may function independently of management**

The Independent Directors met separately from the President and CEO at each of the meetings of the Board during FY2025, and at each meeting of the HRC, GC and Audit Committee. At the Board meetings, the Independent Directors' meetings are currently chaired by the non-executive Chair and will, following Mr. Rovinescu's shift to the role of Executive Chairman, be chaired by the Lead Independent Director. At Committee meetings, such sessions are chaired by the independent Chair of that Committee. The Board, its Committees as well as individual Directors are also able to retain and meet with external advisors and consultants at the expense of CAE in appropriate circumstances. In fact, the Board has regular access to information independent of management through the external and internal auditors, as well as independent compensation consultants and independent legal counsel. The Board believes that sufficient processes are in place to enable it to function independently of management.

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Section 4 – Corporate Governance

**Delegation to standing Board committees composed entirely of Independent Directors**

In order to enable it to effectively fulfill its responsibilities, the Board has established three standing committees currently composed of the following Independent Directors as of the Record Date:

---

| | | | |
|:---|:---|:---|:---|
| | Audit | Governance | Human Resources |
| &nbsp;&nbsp;&nbsp;Ayman Antoun | &nbsp;&nbsp;&nbsp;X |  |  |
| &nbsp;&nbsp;&nbsp;Sophie Brochu |  | &nbsp;&nbsp;&nbsp;Chair | &nbsp;&nbsp;&nbsp;X |
| &nbsp;&nbsp;&nbsp;Patrick Decostre | &nbsp;&nbsp;&nbsp;X |  |  |
| &nbsp;&nbsp;&nbsp;Elise Eberwein |  | &nbsp;&nbsp;&nbsp;X | &nbsp;&nbsp;&nbsp;X |
| &nbsp;&nbsp;&nbsp;Ian L. Edwards | &nbsp;&nbsp;&nbsp;X |  |  |
| &nbsp;&nbsp;&nbsp;Marianne Harrison | &nbsp;&nbsp;&nbsp;Chair |  |  |
| &nbsp;&nbsp;&nbsp;Peter Lee |  |  | &nbsp;&nbsp;&nbsp;X |
| &nbsp;&nbsp;&nbsp;Katherine A. Lehman |  | &nbsp;&nbsp;&nbsp;X |  |
| &nbsp;&nbsp;&nbsp;Mary Lou Maher |  |  | &nbsp;&nbsp;&nbsp;Chair |
| &nbsp;&nbsp;&nbsp;Patrick M. Shanahan |  |  | &nbsp;&nbsp;&nbsp;X |
| &nbsp;&nbsp;&nbsp;Louis Têtu | &nbsp;&nbsp;&nbsp;X |  |  |

---

The nature and scope of authority and responsibility delegated to each standing committee is set forth in the Committee Charters presented in **Section 5 – Board Committee Reports** which can also be found on our website under "Corporate Governance" along with each Committee Chair's position description.

The appointment of specific Directors to each of the standing Board Committees is generally intended to reflect the relevance of Independent Directors' skills and experience to the applicable Committee's Charter (refer to **Section 3 – About the Nominated Directors** for details about the selection process and criteria).

**Other Board commitments and Interlocks Policy**

Some of the Directors serve on the boards of other public companies in Canada or another country or jurisdiction. The following policy applies to all Directors to avoid overboarding:

**(a)**&nbsp;&nbsp;&nbsp;&nbsp;No more than two Directors should serve on the same outside public board or outside board committee, unless otherwise agreed by the Board.

**(b)**&nbsp;&nbsp;&nbsp;&nbsp;Directors who are employed as chief executive officers, or in other senior executive positions on a full-time basis with a public company, should not serve on the boards of more than two public companies in addition to CAE's Board.

**(c)**&nbsp;&nbsp;&nbsp;&nbsp;Directors who: (i) have full time employment with non-public companies, (ii) have full-time employment with public companies but not as CEO, or (iii) do not have full time employment should not serve on the boards of more than four public companies in addition to CAE's Board.

**(d)**&nbsp;&nbsp;&nbsp;&nbsp;The President and Chief Executive Officer of CAE should not serve on the board of more than one other public company and should not serve on the board of any other public company where the chief executive officer of that other company serves on the CAE Board.

**(e)**&nbsp;&nbsp;&nbsp;&nbsp;Prior to accepting any additional public company board of directors' appointment, a Director must first disclose the proposed appointment for review by the Governance Committee and the Chair of the Board.

None of CAE's Directors is considered overboarded.

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Section 4 – Corporate Governance

**Orientation and continuing education**

New Directors meet with CAE executive officers, including the President and CEO and the CFO, to discuss expectations and CAE's business and strategic plans. They review the current business plan and past Board meeting materials. New Directors also receive a comprehensive reference manual containing all key corporate and Board policies, including the Code of Business Conduct and other relevant materials and executive briefing sessions. All Directors have regular access to senior management to discuss Board presentations and other matters of interest. CAE management and the Governance Committee update Directors on governance developments, trends and new legal requirements.

Directors are encouraged to attend conferences, seminars or courses, whether industry-specific or relevant to their role as a Director, at CAE's expense. They have access to an evergreen supply of current research and analysis, news reports, and studies on governance and compensation practices through the Board's website. Directors regularly attend education sessions organized by management, and participate in CAE site visits, industry events and trade shows. Given the rapidly changing technology and competitive environment, management provides regular in-depth reviews of business segment performance, issues relevant to CAE's business and industry developments, as well as updates on governance, competition, fiduciary duties, changes in law, technology and other educational material. The Board also receives quarterly updates on health and safety (including aviation safety), sustainability matters (including climate change) and compliance matters like anti-corruption, corporate policies and procedures, foreign representatives, workplace ethics, export controls, sanctions screening, and data protection and privacy. The table below provides an overview of selected education sessions, presentations and reports attended or received in FY2025.

---

| | | |
|:---|:---|:---|
| Period | Subject | Attendees |
| Q1 FY 2025 | Strategic updates on industry, technology, product, financial, sustainability and enterprise risk management developments | Entire Board |
| Q1 FY 2025 | Quarterly reports on business highlights, strategic priorities and enterprise risk management | Entire Board |
| Q1 FY 2025 | Defense & Security portfolio review | Entire Board |
| Q1 FY 2025 | Review of the control environment | Audit Committee |
| Q1 FY 2025 | International corporate tax law reform | Audit Committee |
| Q1 FY 2025 | Updates on sustainability trends, including climate change and decarbonization targets | Governance Committee |
| Q1 FY 2025 | Quarterly reports on compliance initiatives and programs | Governance Committee |
| Q1 FY 2025 | Developments in executive compensation clawback policies | Human Resources Committee |
| Q1 FY 2025 | Updates on aviation safety trends and developments | Human Resources Committee |
| Q2 FY2025 | Quarterly reports on business highlights, strategic priorities and enterprise risk management | Entire Board |
| Q2 FY2025 | Enterprise risk management framework and policy review | Audit Committee |
| Q2 FY2025 | Annual internal audit plan | Audit Committee |
| Q2 FY2025 | Updates on human resources initiatives and workplace culture efforts | Human Resources Committee |
| Q3 FY 2025 | Quarterly reports on business highlights, strategic priorities and enterprise risk management | Entire Board |
| Q3 FY 2025 | Presentation on sustainability reporting frameworks | Audit Committee |
| Q3 FY 2025 | Global insurance review | Audit Committee |
| Q3 FY 2025 | Review of functional currency and reporting currency processes | Audit Committee |
| Q3 FY 2025 | Annual review of foreign representatives | Governance Committee |
| Q3 FY 2025 | Updates on sustainability trends, including customer and regulatory signals and decarbonization | Governance Committee |
| Q3 FY 2025 | Updates on labour relations and incentive plan design | Human Resources Committee |
| Q3 FY 2025 | Health and safety performance and strategy | Human Resources Committee |
| Q4 FY2025 | Quarterly reports on business highlights, strategic priorities and enterprise risk management | Entire Board |
| Q4 FY2025 | Annual update on cybersecurity management, risks and trends, including artificial intelligence | Entire Board |
| Q4 FY2025 | Developments in capital structure, treasury and credit rating environment | Audit Committee |
| Q4 FY2025 | Market and geopolitical trends relating to sustainability matters | Governance Committee |
| Q4 FY2025 | Geopolitical trends and challenges in creating an inclusive workplace culture | Human Resources Committee |
| Q4 FY2025 | Annual review of aviation safety and governance | Human Resources Committee |
| Q4 FY2025 | Compensation peer group review | Human Resources Committee |

---

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Section 4 – Corporate Governance

**Strategic planning oversight**

The Board maintains a strategic planning process and annually sets a strategic plan that considers, among other things, the opportunities and principal risks of the Company's business. It also reviews the effectiveness of the Board's strategic planning process on a regular basis. The Board supervises management in the implementation of appropriate risk management and other systems. Separately from the strategic plan, the Board also approves an annual budget for financial performance.

The Board holds in-depth strategy sessions every year. In April 2024, the Board reviewed and approved the FY2025 budget and FY2025-FY2029 strategic plan. As part of the review, the Board considered the strategic plans and priorities for each of the two business segments. The Board also focused on the key risks and opportunities facing the business relating to strategic and operational execution, the changing economic and geopolitical environment, the competitive and regulatory environment, maintaining strong financial discipline and a strong capital position, operational resilience (including information security and data management), and stakeholder and regulatory expectations on climate and social actions. The Board also reviewed trends emerging in strategic and financial decision making with a focus on the future of technology, industry and competitive trends, macroeconomic and geopolitical shifts, climate change, sustainability, workplace culture, digital, health and safety, and strategic partnerships. The Executive Management Committee reviewed and discussed the feedback and perspectives provided by the Board and the Board then approved the updated strategic plan.

The Executive Management Committee updates the Board on the execution of the strategy and strategic considerations at every regular Board meeting. The Board must approve any transaction that will have a significant strategic impact on the Company.

**Enterprise risk management oversight**

Enterprise risk management is essential to CAE as the Company operates in several industry segments which present a variety of risks and uncertainties. CAE's Enterprise Risk Management (ERM) Policy sets out its framework to ensure that risks are identified, assessed, managed, and reported proactively and in a manner that is consistent with the expectations of the Board and the interests of CAE's internal and external stakeholders.

This framework relies on the Three Lines Model where the business segments, the risk management functions and the internal audit function work in collaboration to manage critical risks and continuously improve the risk management process:

—The first line is CAE's leaders who are accountable for the risks they assume and for the daily management of their risks and controls. They are responsible for implementing preventive and corrective actions and maintaining and executing effective internal controls on a day-to-day basis;

—The second line involves various risk management, compliance, business continuity and controllership functions. These functions facilitate and monitor the implementation of effective risk management practices and assist risk owners in defining the target risk exposure and reporting adequate risk-related information throughout CAE. The second line also provides risk oversight across the enterprise and advises senior management in connection with ERM. Led by the Senior Vice President, Investor Relations and Enterprise Risk Management, the second line manages the ERM process and is supported as required by experts, risk champions, consultants and any other resources deemed appropriate to achieve the desired level of risk management; and

—At the third line, internal Audit provides to the Audit Committee and management an independent appraisal of CAE's risk management framework, control environment and internal control systems. They advise and recommend to senior management opportunities for improvements in internal controls, risk management systems as well as bring to management's attention organizational and operational benefits to be derived from engagements.

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Section 4 – Corporate Governance

**Pursuant to our ERM policy:**

—The Board is accountable for the oversight of enterprise risk management. As such, the Board will review with management the Company's risk appetite and risk tolerance and assess whether the Company's strategy is consistent with the agreed-upon risk appetite and tolerance for the Company. The Board will also review and discuss with management all key enterprise risk exposures on an aggregate, company-wide basis, and the steps management has taken to monitor and to manage those exposures. This includes the review with management of the Board's expectations as to each committee's respective responsibilities for risk oversight and management of specific risks to ensure a shared understanding as to accountabilities and roles. The Board will work with management to promote and actively cultivate a corporate culture that understands and implements enterprise-wide risk management. The Board delegates the oversight of various aspects of risk management to Board Committees to assist in the fulfillment of its responsibilities. Risk-related roles and responsibilities are defined in the Board Charter and Committee Mandates.

—The Audit Committee and senior management provide an appraisal of CAE's risk management framework, control environment and internal control systems.

—The Chairs of the Governance Committee, Audit Committee and Human Resources Committee each report to the Board after their respective committee meetings.

**Allocation of Enterprise Risks to the Board of Directors and Committees of the Board**

The table below reflects principal oversight responsibilities for each of the FY2025 enterprise risks listed:

![image_197.jpg](image_197.jpg)

You can find a more comprehensive discussion of risk management in **Section 10 – Business Risk and Uncertainty** of our Management Discussion and Analysis for the fourth quarter and year ended March 31, 2025, filed with the Canadian securities commissions and provided to the U.S. Securities and Exchange Commission under Form 6-K, and available on our website (**<u>www.cae.com</u>**), on SEDAR+ (**<u>www.sedarplus.ca</u>**), and on EDGAR (**<u>www.sec.gov</u>**).

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Section 4 – Corporate Governance

**Ethical business conduct**

CAE has a written Code of Business Conduct that governs the conduct of CAE's Directors, officers and employees. The Governance Committee is responsible for reviewing the design and ensuring compliance with CAE's Code of Business Conduct. It also has oversight responsibilities with respect to the implementation of the Code throughout CAE, as well as the handling of issues raised thereunder and the annual attestation of compliance. CAE also has a Supplier and Business Partner Code of Conduct that expresses the minimum ethical standards that suppliers, contractors, consultants and business partners are expected to follow when conducting business with CAE. The Code of Business Conduct and the Supplier and Business Partner Code of Conduct are available on the Company's website (www.cae.com). CAE uses EthicsPoint, a third-party whistleblower reporting service, to facilitate reporting of breaches of the Code of Business Conduct, the Supplier and Business Partner Code of Conduct and any other misconduct. In addition to any individual reports the Board or its Committees may receive from management or the whistleblower service, the Governance Committee receives regular reports on CAE's ethics and compliance programs, including a summary of alleged violations of CAE's Code of Business Conduct, Supplier and Business Partner Code of Conduct and related policies, and the results of the annual certification process for CAE employees under CAE's Code of Business Conduct.

Our objectives, management approach and highlights are outlined in our Global Annual Activity and Sustainability Report, which is available at **<u>www.cae.com/sustainability</u>**.

**Conflicts of interest and related party transactions**

The Company has a number of policies and procedures that govern the disclosure of conflicts of interest, and the review and approval of transactions with Directors, officers and employees.

Under the Company's Code of Business Conduct and Conflicts of Interest Policy, all potential conflicts of interests must be immediately disclosed as they arise. Conflicts of interests refer to a set of circumstances which creates an actual, perceived or potential risk that the professional judgment or actions in relation to a person's responsibilities and duties towards the Company will be influenced by a secondary interest, which usually benefits the person financially, professionally and/or personally (including any interest they may have in an existing or proposed material contract or transaction involving the Company in which they have some influence or perceived interest).

Any disclosure by Directors, officers and members of the Company's Executive Management Committee in relation to potential conflicts of interest must be made to the Company's Corporate Secretary. The Company's Corporate Secretary provides a quarterly report to the Governance Committee of all potential conflicts of interests disclosed by Directors, officers and members of the Company's Executive Management Committee. Further, Directors, officers, employees and individual consultants are required on an annual basis to provide an acknowledgement and certification of compliance with the Code of Business Conduct, which includes a statement confirming that they have declared or disclosed any actual, perceived or potential conflicts of interest.

In accordance with the Company's Audit Committee Charter, the Audit Committee must review and approve all related-party transactions and situations in which a related party has a material interest in a transaction involving the Company. The Audit Committee Charter defines a related party as: (i) Directors and officers of the Company, (ii) persons or organizations with whom a Director or officer of the Company has a potential conflict of interest, real or perceived, in accordance with CAE's Conflicts of Interest Policy, and (iii) any person who beneficially owns more than 10% of the Company's common shares. Any Director or officer who has a material interest in a related-party transaction does not participate in any discussions or votes on the matter. None of the Company's Directors or officers had a material interest in any material transaction or proposed transaction involving the Company in the last year.

**Assessment of Directors by the GC**

The GC has the mandate and responsibility to review, on an annual basis, the performance and effectiveness of the Board as a whole and each individual Director. The Chair of the Governance Committee annually approves a comprehensive questionnaire which is distributed by a third-party supplier to each member of the Board regarding various aspects of Board and individual performance. The questionnaire covers a wide range of issues, including the operation and effectiveness of the Board and its committees, the level of knowledge of the Directors relating to the business of CAE and the risks it faces, and the contribution of individual Directors, and allows for comment and suggestions. A separate questionnaire is distributed to members of CAE's Executive Management Committee. The third-party supplier compiles responses to the questionnaires and prepares a report to the Governance Committee which provides a report to the full Board. The Governance Committee may then recommend changes based upon such feedback to enhance Board performance or refer any areas requiring follow-up to the relevant

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Section 4 – Corporate Governance

committees. In addition to the foregoing, each Director individually meets with the Chair of the Board at least once annually to discuss his or her individual performance and the performance of the Board as a whole. As well, the Chair of the Board's performance is evaluated and assessed through one-on-one meetings between each Director and the Chair of the Governance Committee. Both the Chair of the Board and the Chair of the Governance Committee then report back to the full Board.

**Compensation**

Refer to **Section 5 – Board Committee Reports – The Human Resources Committee**, **Section 6 – Director Compensation** and **Section 7 – Executive Compensation – Compensation Governance – Role of the HRC**.

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Section 4 – Corporate Governance

**Sustainability**

At CAE, sustainability is integral to who we are as a company and how we make a difference in the world. Sustainability is embedded in our culture and built into our business model, our decisions and actions. Our priority is to ensure the safety and well-being of our employees and customers, as well as creating long-term value for all our stakeholders where we are located.

CAE's noble purpose, making the world safer, captures how CAE makes a difference in the world and drives its decisions and actions. Making civil aviation safer, and supporting peace and democracy with allied forces readiness, are both rooted in the principles of sustainability impact.

Over FY2025, many of our initiatives had a significant sustainability impact. Amongst those initiatives:

—We received approval from the Science Based Targets initiative (SBTi) of our near-term (10 years) reduction targets. CAE is committed to reduce Scope 1 and 2 emissions by 85.7% against FY2019 baseline and Scope 3 emissions by 32.5% against FY2022 baseline by the end of FY2033. The Scope 3 target is applicable only to the following categories: purchased goods and services, capital goods and fuel and energy related activities. These ambitious targets will guide our decarbonization journey and help us transition from carbon neutrality to net zero emissions. To that extent, we have implemented a comprehensive decarbonization strategy with four value streams: aviation, sourcing, products and services, and buildings. We have made progress in each of these areas, such as working on developing an electric conversion kit for our ab initio training aircraft, applying circular economy principles, optimizing our products for energy efficiency, integrating low-carbon technologies, and applying sustainable building standards. In addition, this year, our Civil Aviation and Defense & Security business units developed tactical decarbonization plans that will help us progress toward scope 1 and 2 FY2033 targets set against our FY2019 baseline.

—We developed a shadow internal carbon price (ICP) process to build carbon considerations into our future capital allocation decision-making. Our shadow ICP complements the business units' plans as an additional mechanism for them to measure the impact of potential opportunities on CAE's progressive transition to less carbon-intensive growth. The shadow ICP process will equip business leaders with relevant data on carbon emissions associated with growth projects. They will be able to plan future investments needed to reduce or mitigate carbon emissions of projects at the outset.

—We have also strengthened our engagement with our customers, suppliers, partners and industry peers to collaborate on solutions and best practices that support the decarbonization of the aerospace sector. We have made significant progress on engaging with our suppliers through our Resilient together program. The program focuses on our strategic suppliers, providing them with support and identifying incremental objectives to strengthen our supply network and evolve our suppliers' business, operations and sustainability practices. In FY2025, 90% of strategic direct suppliers, representing 98% of CAE's strategic direct spend, were scored or in the process of being scored by our third-party risk monitoring tool, EcoVadis, over a wide range of risks from environment to human rights matters. In addition, as a co-founder of the nonprofit organization Décarbone+, we support suppliers with their own carbon inventory and decarbonization measurement and reduction capabilities. Among the outcomes, these initiatives identify opportunities to leverage decarbonization as a means to strengthen the sector's competitiveness and resilience.

—Our sustainability strategy is also driven by our commitment to create social value and foster a culture where every employee can grow, contribute, and succeed. In FY2025, we received several awards and recognitions for our workplace efforts, which reflect our continuous commitment to attracting, developing and supporting top-talent based on skills and contributions. We progressed on our reconciliation journey to strengthen relations with Indigenous peoples in Canada with closer engagement with our Indigenous Advisory Board and offering training to all Canadian employees on legal frameworks governing practices with regards to private engagement with Indigenous communities.

—We have continued to strengthen our sustainability governance framework, policies and disclosure practices, reporting processes and controls in preparation for external assurance of our extra-financial data and compliance with existing and upcoming frameworks mandating disclosure of sustainability data in financial reporting. We have also expanded our transparency efforts on scope 3 GHG emissions inventory with the disclosure of an additional category, use of sold products, for the first time.

—Our performance and achievements related to sustainability factors are set out in our Global Annual Activity and Sustainability Report. Our objectives, management approach, initiatives and highlights across the Environmental, Social and Governance factors are also outlined in this report, which is available at **<u>www.cae.com/sustainability</u>**.

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Section 4 – Corporate Governance

**Reporting standards**

Our reporting references the GRI Sustainability Standards of the Global Reporting Initiative (GRI). An independent institution, the GRI provides a globally accepted framework for sustainability reporting across companies and industries. CAE also reports to the Sustainability Accounting Standards Board (SASB) according to two industry-specific standards, and to the Carbon Disclosure Project (CDP). As the regulators further advance potential disclosure requirements, we are preparing for climate change risks financial reporting.

CAE abides by the principles of United Nations Global Compact as a signatory. We report on the United Nations' Sustainable Development Goals (SDGs), under five goals to which our corporate strategy and business model are most aligned and by mapping these goals to our material sustainability issues. We intend to continue the process of integrating the SDGs and to report on our progress for the main areas of focus we have identified. Refer to our Global Annual Activity and Sustainability Report for the reasons why CAE prioritizes and pursues the following five goals:

![image_198.jpg](image_198.jpg)

CAE's commitment to the United Nations Global Compact and to the United Nations Women Empowerment Principles, as well as its considerations of sustainability factors are translated in its policies and codes, including the following policies available on CAE's website:

—Anti-Corruption Policy;

—Business Courtesies Policy

—Charitable Donations and Sponsorships Policy;

—Code of Business Conduct;

—Conflict Minerals Policy;

—Global Environment, Health and Safety Policy;

—Human Rights Policy;

—Inclusion and Equal Opportunities Policy;

—Internal Reporting and Whistleblowing Policy;

—Lobbying and Political Contributions Policy; and

—Supplier and Business Partner Code of Conduct.

<br>We monitor the latest developments in sustainability reporting expectations, its future integration to financial disclosure, and continuously adjust our disclosure in line with regulatory requirements and best practices.

**Governance and oversight**

The Board reviews, provides strategic guidance for and endorses major sustainability-related initiatives. Additionally, the Board approves our Global Annual Activity and Sustainability Report.

The Board's Governance Committee receives updates three times a year on sustainability trends, market signals, pulses from all stakeholders and progress on CAE's multi-year sustainability roadmap. These updates, which include progress on corporate disclosure of non-financial performance, are presented by the Chief People and Sustainability Officer (CPSO). The Governance Committee regularly evaluates continuous enhancement of the company's ethical practices and policies that govern our business actions while also overseeing CAE's sustainability strategy, risk management, reporting and operating performance, including climate-related targets and monitoring of progress towards such targets.

The Board's Audit Committee performs a quarterly assessment of IT, cybersecurity and artificial intelligence risks and elements impacting internal control systems. The Committee has specific oversight responsibility for CAE's enterprise risk management policy framework, including sustainability-related risks.

The Board's Human Resources Committee oversees health and safety and aviation safety policies and procedures through a quarterly review to ensure effectiveness of the programs in place. The Human Resources Committee is also responsible for topics related to workplace culture and monitors management's response to all related material issues.

From a management perspective, the EMC leads and oversees sustainability issues. The EMC guides the various teams and ensures that the appropriate resources and targets are in place and executed. Progress on sustainability risk management plan is also reported to the EMC and to the Board through the ERM governance and based on their framework.

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Section 4 – Corporate Governance

**Composition and representation**

Under applicable Canadian securities laws and disclosure requirements under the *Canada Business Corporations Act*, reporting issuers like CAE are required to provide disclosures in their information circular relating to their policies on, and current and target levels of representation of, under-represented groups on their boards of directors and in senior management positions. We provide the following disclosure in compliance therewith.

In May 2015, upon the GC's recommendation, the Board adopted the Board and Executive Management Composition Policy (the "Composition Policy"). The Composition Policy was amended in 2018, and in 2020 its scope was broadened by expressly enumerating women, Indigenous peoples, persons with disabilities and members of visible minorities, as defined in the *Employment Equity Act (Canada)* (collectively, "Designated Groups"), among the diverse groups which are the focus of the Composition Policy.

The Composition Policy confirms the guiding principle that the Board will nominate Directors and appoint executive officers based on merit and the needs of CAE at the relevant time, and, that CAE is strongly committed to finding the best people to serve in such roles.

The Composition Policy also recognizes that having a range of perspectives, experiences and expertise among Directors and executive officers helps to ensure effective stewardship and management of CAE. This variety of perspectives ensures that issues are addressed from multiple angles, increasing the likelihood that proposed solutions will be robust and comprehensive.

The Composition Policy provides that in identifying potential candidates to serve on the Board, the GC will (a) consider only candidates who are highly qualified based on their talents, experience, expertise, character and industry knowledge, (b) take into account criteria that promote diversity, including, but not limited to, gender, age, race, national or ethnic origin, sexual orientation and disability, (c) endeavour to use any available network of organizations and associations that may help identify diverse candidates, and (d) in order to support CAE's commitment to all aspects of diversity, consider the level of representation of women and other Designated Groups on the Board. The Composition Policy further provides that in identifying potential candidates for appointment as President and CEO and for other executive officer positions, the HRC and the President and CEO, respectively, will (a) consider individuals from a variety of backgrounds and perspectives, and (b) consider the level of representation of women and members of other Designated Groups in executive officer positions.

In order to ensure that the Composition Policy is appropriately implemented and to measure its effectiveness, at least annually:

—the GC will assess and report to the Board regarding the efficacy of the Director nomination process at achieving the Company's diversity objectives; and

—the President and CEO will assess and report annually to the HRC regarding the efficacy of the executive officer appointment process at achieving the Company's diversity objectives.

We have committed to and met various representation targets over the years. For example, in August 2022, we met our target, established in May 2018, that women represent at least 30% of Directors by 2022. Our Board seeks gender parity, and as of May 2025, we maintain, in alignment with expectations under Canadian securities laws and the *Canada Business Corporations Act*, standing targets that women represent at least 30% of Directors, and that at least 33% of executive officers and 40% of Directors form part of certain diversity groups (including women, persons with disabilities, Indigenous peoples, members of visible minorities and the LGBTQ2+ community). We do not have a target regarding only the representation of women in executive officer positions, as we have opted for a more fulsome target encompassing numerous diversity groups. This decision was made after the previous target, set in May 2020, that women represent at least 30% of executive officers by 2022, was indeed met in 2022.

Our targets align with CAE's commitment to fostering a culture where every employee has the opportunity to grow, contribute and succeed, and to continuing to attract, develop and support top talent, based on skills and contributions.

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Section 4 – Corporate Governance

For more information on other inclusion and equal opportunities initiatives, please refer to our Global Annual Activity and Sustainability Report available on our website.

Directors

---

| | | | |
|:---|:---|:---|:---|
| Women | Women | Women, Persons with disabilities, Indigenous Peoples, members of visible minorities and the LGBTQ2+ community | Women, Persons with disabilities, Indigenous Peoples, members of visible minorities and the LGBTQ2+ community |
| &nbsp;&nbsp;&nbsp;Target | &nbsp;&nbsp;&nbsp;Status | &nbsp;&nbsp;&nbsp;Target | &nbsp;&nbsp;&nbsp;Status |
| &nbsp;&nbsp;&nbsp;30% | &nbsp;&nbsp;&nbsp;Met in FY2025 | &nbsp;&nbsp;&nbsp;40% | &nbsp;&nbsp;&nbsp;Met in FY2025 |

---

Executive Officers

---

| | |
|:---|:---|
| Women, Persons with disabilities, Indigenous Peoples, members of visible minorities and the LGBTQ2+ community | Women, Persons with disabilities, Indigenous Peoples, members of visible minorities and the LGBTQ2+ community |
| &nbsp;&nbsp;&nbsp;Target | &nbsp;&nbsp;&nbsp;Status |
| &nbsp;&nbsp;&nbsp;33% | &nbsp;&nbsp;&nbsp;Not met in FY2025 |

---

Representation as of June 12, 2025

---

| | | | | | | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|
|  | Women | Women | Persons with disabilities | Persons with disabilities | Indigenous <br>peoples | Indigenous <br>peoples | Members of visible minorities | Members of visible minorities | Members of LGBTQ2+ community | Members of LGBTQ2+ community | Total Number | Number of individuals that are members of more than one group | Number of individuals that are members of more than one group |
|  | Number | % | Number | % | Number | % | Number | % | Number | % |  |  |  |
| &nbsp;&nbsp;&nbsp;Board of Directors | &nbsp;&nbsp;&nbsp;5 | &nbsp;&nbsp;&nbsp;38 | &nbsp;&nbsp;&nbsp;0 | &nbsp;&nbsp;&nbsp;0 | &nbsp;&nbsp;&nbsp;0 | &nbsp;&nbsp;&nbsp;0 | &nbsp;&nbsp;&nbsp;1 | &nbsp;&nbsp;&nbsp;8 | &nbsp;&nbsp;&nbsp;1 | &nbsp;&nbsp;&nbsp;8 | &nbsp;&nbsp;**7** | &nbsp;&nbsp;**7** | &nbsp;&nbsp;**1** |
| &nbsp;&nbsp;&nbsp;Executive Officers | &nbsp;&nbsp;&nbsp;1 | &nbsp;&nbsp;&nbsp;13 | &nbsp;&nbsp;&nbsp;0 | &nbsp;&nbsp;&nbsp;0 | &nbsp;&nbsp;&nbsp;0 | &nbsp;&nbsp;&nbsp;0 | &nbsp;&nbsp;&nbsp;0 | &nbsp;&nbsp;&nbsp;0 | &nbsp;&nbsp;&nbsp;0 | &nbsp;&nbsp;&nbsp;0 | &nbsp;&nbsp;**1** | &nbsp;&nbsp;**1** | &nbsp;&nbsp;**0** |

---

1.&nbsp;&nbsp;&nbsp;&nbsp;The information presented in this table is derived from information provided by our Directors and executive officers. In accordance with privacy legislation, such information was collected on a voluntary basis, and where a particular individual chose not to respond, CAE did not make any assumptions or otherwise assign data to that individual.

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![image_199.jpg](image_199.jpg)

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Section 5 - Board Committee Reports

The Governance Committee

Assists the Board in developing and implementing our corporate governance guidelines, monitoring assessments of CAE's corporate governance by various stakeholders and recommending where necessary possible improvements in CAE's governance, identifying individuals qualified to become members of the Board and determining the composition of the Board and its committees, monitoring the interests of Directors and executive officers, reviewing the role and conduct of the Board, evaluating the performance of the Board and its Committees, reviewing the independence of each member of the Board, preparing the Board's succession plan, determining the Directors' remuneration, developing and overseeing an assessment process for the Board, overseeing CAE's principal compliance programs, and reviewing and recommending for Board approval our corporate policies concerning business conduct, insider trading and anti-hedging, high standards of corporate governance, ethics, sustainability matters, inclusion and equal opportunities, and human rights. The GC is also responsible for reviewing CAE's sustainability strategy, risk management, reporting and operating performance, including climate-related targets and monitoring of progress towards such targets.

The members of the GC are all Independent Directors and the GC's charter is available in the governance section of our website at CAE.com.

**The GC held three meetings in FY2025; <br>aggregate attendance: 100%.**

---

| | | |
|:---|:---|:---|
| ![image_212a.jpg](image_212a.jpg) | ![image_213.jpg](image_213.jpg) | ![image_2031.jpg](image_2031.jpg) |
| S. Brochu (Chair) | E. Eberwein | K. Lehman |

---

The members of the Governance Committee are selected for their experience and knowledge with respect to governance matters generally. Descriptions of the Governance Committee members' credentials and past experience that positions them to be qualified and effective members of the Governance Committee can be found in **Section 3 - About the Nominated Directors.**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**Highlights for FY2025**<br>—The GC discussed Board succession planning and recommended the recruitment of two additional Directors in early FY2025. The GC considered several potential candidates to ensure a diverse skillset and composition of the Board and considered and recommended the candidacies of Patrick Decostre and Ian L. Edwards.<br>—The GC played a key role in organizing the board renewal process that took place in February 2025 and ensuring its success. This process led to the retirement of four previous Directors and the appointment of four new Directors: Calin Rovinescu as Chair of the Board, along with Peter Lee, Katherine A. Lehman and Louis Têtu.<br>—With the assistance of the Board's compensation consultants, the GC recommended for approval by the Board a one-time retainer for members of the ad hoc Audit Subcommittee, based on peer group benchmarking.<br>—The GC reviewed and recommended for approval by the Board CAE's first ever Modern Slavery and Human Trafficking Statement.<br>—The GC reviewed and approved revised Charitable Donations & Sponsorships and Board of Directors Continuing Education policies.<br>—The GC reviewed CAE's sustainability performance, including progress towards the business units' science-based decarbonization action plans to align with CAE's SBTi targets.<br>—The GC agreed to recommend for approval by the Board changes to CAE's Ethical and Business Conduct Policy and an updated version of CAE's Corporate Governance Guidelines.<br>—The GC reviewed and approved amendments to CAE's Board of Directors Charter and Position Descriptions, and the Governance Committee Charter and Annual Workplan.<br>

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Section 5 - Board Committee Reports

The Audit Committee

Assists the Board in its oversight of the integrity of our consolidated financial statements, review of public disclosure documents, compliance with applicable legal and regulatory requirements, the independence, qualifications and appointment of the external auditors, the performance of both the external and internal auditors, oversight of related-party transactions, management's responsibility for assessing and reporting on the effectiveness of internal controls (including review of IT, cybersecurity and artificial intelligence risks and elements impacting controls) and our enterprise risk management processes.

Also see our Annual Information Form for the year ended March 31, 2025 (which you can access on our website at **<u>CAE.com</u>**, on SEDAR+ at **<u>sedarplus.ca</u>** and on EDGAR at **<u>sec.gov</u>**), for information about the Audit Committee, including its mandate and Audit Committee policies and procedures for engaging the external auditors.

All members of the Audit Committee are Independent Directors. Marianne Harrison has been determined by the Board to be the Audit Committee financial expert. In addition, the Board, in its judgment, has determined that each other member of the Audit Committee is financially literate. The Charter of the Audit Committee is available in the governance section of our website at CAE.com and in the Annual Information Form for the year ended March 31, 2025.

**The Audit Committee held six meetings in FY2025; aggregate attendance: 97%.**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;

---

| | | | | |
|:---|:---|:---|:---|:---|
| ![image_205.jpg](image_205.jpg) | ![image_206.jpg](image_206.jpg) | ![image_207.jpg](image_207.jpg) | ![image_208.jpg](image_208.jpg) | ![image_209.jpg](image_209.jpg) |
| M. Harrison <br>(Chair)  | A. Antoun | P. Decostre | I.L. Edwards | L. Têtu |

---

The members of the Audit Committee are selected for their experience and knowledge with respect to financial reporting, internal controls and risk management. Descriptions of the Audit Committee members' credentials and past experience that make them qualified and effective financial decision-makers can be found in **Section 3 – About the Nominated Directors**.

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Section 5 - Board Committee Reports

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**Highlights for FY2025**<br>—The Committee reviewed in detail quarterly interim consolidated financial information and earnings press releases before their public release.<br>—The Committee also reviewed and recommended approval to the Board of the quarterly Management Discussion and Analysis ("MD&A") and the press releases for the quarterly results.<br>—The Committee reviewed the MD&A section of CAE's annual report for the fiscal year ended March 31, 2024 and audited consolidated financial statements of CAE prepared by management for the fiscal year ended March 31, 2024 with management and PwC, and thereafter recommended that they be approved and filed with the Autorité des marchés financiers and the SEC.<br>—The Committee approved the CAE Internal Audit plan and budget for the FY2025/FY2026 cycle and the Internal Audit Director Objectives, and reviewed the Internal Audit plan for Defense and Security USA.<br>—The Committee reviewed PwC's FY2025 work plan and approved PwC audit engagement letter and services fees.<br>—The Committee oversaw the compliance process related to the certification and attestation requirements of SOX and related SEC rules, as well as of the rules relating to audit committees and certification of financial information adopted by the CSA.<br>—The Committee also reviewed fraud review processes, litigation, securities and exchanges compliance, information technology, cybersecurity and artificial intelligence risks, sustainability reporting framework, insurance coverage, related-party fees, capital structure, M&A performance, S&P rating and outlook, financing activities, treasury, tax planning and compliance, and IFRS accounting standard changes.<br>—The Committee assessed and recommended for approval by the Board the re-establishment of a normal course issuer bid program to repurchase for cancellation a portion of CAE's outstanding Shares.<br>—The Committee reviewed in detail several significant contracts, including CAE's contract relating to the Canada Future Aircrew Training ("FAcT") program, and related risks and contingencies.<br>—The Committee reviewed and approved a revised version of the Policy and Procedures for Audit and Non-Audit Services.<br>—The Committee reviewed amendments to the Enterprise Risk Policy, the Hiring Policy Regarding External Auditors, and the Audit Committee Charter and Annual Workplan and recommended these modifications for approval by the Board.<br>—The Committee reviewed audit service performance and any best practices to implement going forward.<br>—In Q4 FY2024, the Board established an ad hoc Audit Subcommittee, which met 7 times in FY2025 and held its final meeting in December 2024, to oversee specific matters, notably accounting for and presentation of non-routine transactions including impairments, detailed reviews of unfavourable contract adjustments in the Defense and Security business (the Legacy Contracts) and internal control and risk management practices related thereto.<br>

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Section 5 - Board Committee Reports

The Human Resources Committee

Assists the Board of Directors in its oversight responsibilities relating to compensation, benefits, incentives, nomination, evaluation and succession of the President and CEO, other officers and management personnel; oversees the Company's environment, global occupational health and safety and aviation safety policies and practices, pension plan administration and pension fund investments, and management development and succession planning.

All members of the HRC are Independent Directors. The charter of the HRC is available in the governance section of our website at CAE.com.

**The HRC held ten meetings in FY2025, <br>aggregate attendance: 98%.**

---

| | | |
|:---|:---|:---|
| &nbsp;&nbsp;![image_167a.jpg](image_167a.jpg) | &nbsp;&nbsp;![image_212a.jpg](image_212a.jpg) | &nbsp;&nbsp;![image_213.jpg](image_213.jpg) |
| &nbsp;&nbsp;&nbsp;&nbsp;M. Maher (Chair)  | &nbsp;&nbsp;&nbsp;&nbsp;S. Brochu | &nbsp;&nbsp;&nbsp;&nbsp;E. Eberwein |
| &nbsp;&nbsp;![image_214.jpg](image_214.jpg) | &nbsp;&nbsp;![image_215.jpg](image_215.jpg) |  |
| &nbsp;&nbsp;&nbsp;&nbsp;P. Lee | &nbsp;&nbsp;P.M. Shanahan |  |

---

The HRC is responsible to oversee the Company's executive compensation programs and succession planning. We ensure that members of the HRC have the experience and knowledge to fulfill this role. Descriptions of the HRC members' credentials and past experience that make them qualified and effective HR decision-makers can be found in **Section 3 – About the Nominated Directors**.

As past or current CEOs, executives, investment professionals and/or government or business leaders, all members of the HRC possess the financial knowledge required in order to assess and determine the applicability of measures and targets utilized in determining variable compensation and assessing executive performance against targets and overall Company performance.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**Highlights for FY2025**<br>—A CEO Search Committee that comprised Mary Lou Maher and Peter Lee as Co-Chairs in addition to CAE's new Chair, Calin Rovinescu, all of whom actively participated in the recruitment process, engaged in a comprehensive global search for the Company's next CEO, working with a third-party executive recruitment and evaluation firm and considering external and internal candidates, which led to the unanimous appointment of Matthew Bromberg as Incoming President and CEO. <br>—The HRC completed an annual review of the Company's long-term (LTIP) and short-term (STIP) incentive plans to ensure market competitiveness, alignment with the Company's strategic ambitions and Shareholders' interests, and reviewed and approved the FY2026 STIP and LTIP design.<br>—The HRC conducted a compensation risk assessment with the assistance of its independent compensation consultant to identify potential risks associated with the Company's compensation programs, practices and policies.<br>—The Chair of the HRC engaged directly with multiple Shareholders to seek input on the Company's executive compensation programs. <br>—The HRC also reviewed and approved the Company's comparator group for executive compensation benchmarking.<br>—The HRC reviewed and approved the executive management's compensation, including the FY2024 STIP payout and FY2025 LTIP awards, as well as the CEO's FY2025 objectives and performance.<br>—The HRC reviewed and approved the succession plan for the Company's executives, conducted talent and leadership reviews as well as other HR and workplace culture initiatives.<br>—The HRC reviewed the Company's retirement savings plans and the Retirement Plans Investment Policy.<br>—The HRC also reviewed the quarterly health and safety reports as well as the aviation safety and labour relations annual reports.<br>

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![image_216.jpg](image_216.jpg)

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Section 6 – Director Compensation

Director Compensation

This Section provides information pertaining to the compensation, actual Share ownership and Share ownership requirements of our non-employee Directors.

Our compensation program for non-employee Directors has the following objectives:

—Attract and retain highly qualified, committed and talented members of the Board with an extensive and relevant breadth of experience; and

—Align the interests of Directors with those of our Shareholders.

The Board sets the compensation of non-employee Directors based on recommendations from the Governance Committee.

The Governance Committee, with the support of its independent compensation consultants Meridian Compensation Partners ("Meridian"), reviews the compensation of non-employee Directors every second year, unless required sooner, and recommends to the Board such adjustments as it considers appropriate and necessary to recognize the workload, time commitment and responsibility of the Board and committee members and to remain competitive with market levels and structure of Director compensation.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**Director compensation benchmarking and comparator group**<br>To benchmark Directors' compensation, the Governance Committee uses the same comparator group of companies as that used to benchmark Named Executive Officers' ("NEOs") compensation. This comparator group comprises a mix of Canadian and U.S. publicly-listed companies that have relevance to CAE in terms of head office location, market segment or business activities, and revenue and market capitalization.<br>—Same comparator group as for NEOs.<br>—Director comparator group last updated in FY2025.<br>—Directors are paid a flat all-inclusive fee to reflect responsibilities, time commitment and risks of being effective Directors.<br>

Any Director who is also an employee of the Company or any of its subsidiaries does not receive any compensation as a Director.

Effective January 1, 2024, Directors' all-inclusive fees were set as follows:

---

| | | |
|:---|:---|:---|
| Position | &nbsp;&nbsp;Annual Fee<sup>1</sup> | &nbsp;&nbsp;Form of Payment<sup>1</sup> |
| Board Chair | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;$420000 | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;$230,000 in DSUs<br>$190,000 in cash or DSUs at Director's election |
| Board Member | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;$240000 | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;$155,000 in DSUs<br>$85,000 in cash or DSUs at Director's election |
| Board Committee Chair<sup>2</sup> | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;$25000 | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Cash or DSUs at Director's election |
| Board Committee Member | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;$11000 | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Cash or DSUs at Director's election |

---

&nbsp;&nbsp;&nbsp;&nbsp;1.&nbsp;&nbsp;&nbsp;&nbsp;Fees for Canadian resident Directors are earned and paid in Canadian dollars. Fees for non-Canadian resident Directors are earned and paid in U.S. dollars on the basis of a one-for-one exchange rate of Canadian dollars to U.S. dollars.

&nbsp;&nbsp;&nbsp;&nbsp;2.&nbsp;&nbsp;&nbsp;&nbsp;The Governance Committee Chair compensation is $20,000. Committee Chairs do not receive additional compensation for Committee membership.

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Section 6 – Director Compensation

Refer to **Section 7 – Executive Compensation** of this Circular for the companies included in CAE's latest comparator group and detailed selection criteria.

**Non-Employee Directors' Deferred Share Unit Plan (Directors' DSU Plan)**

A DSU is equal in value to one Share of CAE and accrues additional units in an amount equal to each dividend paid on Shares. DSUs earned by non-employee Directors vest immediately but are only redeemable after termination of the Director's service with CAE. Payment in cash is then made based on the market value of the equivalent number of Shares, net of tax and any other applicable withholdings.

**Risk mitigation**

As per the terms of the DSU Plan, the rights and interests of a Director in respect of the DSUs held in such participant's account are not transferable or assignable other than for specific cases of legal succession.

CAE maintains directors' and executive officers' liability insurance for its Directors and executive officers, as well as those of its subsidiaries as a group.

---

| |
|:---|
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**Minimum shareholding requirements**<br>Directors are required to own the equivalent of five times the Board annual cash fee in the form of Shares and/or DSUs. The required holding must be achieved over a five-year period from the initial date of election of the Director to the Board.<br>A non-employee Director is not, once the minimum Share and/or DSU ownership target is reached, obligated to acquire more Shares or DSUs if the value of his/her investment in CAE drops due to stock market fluctuations.<br>—Minimum shareholding requirements align Directors' and Shareholders' interests.<br>—Equal to five times the annual Board cash fee.<br>—The required holding must be acquired over a five-year period from the initial date of election of the Director to the Board. |
| **Anti-Hedging Policy**<br>The policy provides that no Director or CAE executive (defined to include senior officers and vice-presidents) may, at any time, purchase or otherwise enter into financial instruments, including prepaid variable forward contracts, instruments for the short sale or purchase or sale of call or put options, equity swaps, collars, or units of exchangeable funds, that are designed to or that may reasonably be expected to have the effect of monetizing equity awards or hedging or offsetting a decrease in the market value of any CAE securities, including but not limited to DSUs. |

---

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Section 6 – Director Compensation

**Directors' compensation table**

The following table summarizes compensation earned by non-employee Directors of CAE during FY2025:

---

| | | | |
|:---|:---|:---|:---|
| Name | Total Fees Earned | Paid in Cash | Paid in DSUs<sup>1</sup> |
| **Ayman Antoun**<sup>10</sup> | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;$266051 |  | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;$266051 |
| **Margaret S. (Peg) Billson**<sup>2,8,10</sup> | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;$338155 | $18869 | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;$319287 |
| **Sophie Brochu** | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;$263152 | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;— | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;$263152 |
| **Patrick Decostre**<sup>3</sup> | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;$216626 |  | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;$216626 |
| **Elise Eberwein**<sup>2</sup> | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;$366328 | $149607 | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;$216721 |
| **Ian L. Edwards**<sup>5</sup> | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;$158562 |  | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;$158562 |
| **Marianne Harrison**<sup>2,10</sup> | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;$401940 |  | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;$401940 |
| **Peter Lee**<sup>7,9</sup> | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;— |  | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;— |
| **Katherine A. Lehman**<sup>2,7</sup> | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;$46179 | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;— | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;$46179 |
| **Alan N. MacGibbon**<sup>8</sup> | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;$367500 |  | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;$367500 |
| **Mary Lou Maher**<sup>10</sup> | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;$280051 | $125051 | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;$155000 |
| **François Olivier**<sup>8,10</sup> | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;$234676 |  | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;$234676 |
| **Gen. David G. Perkins, USA (Ret.)**<sup>2,8</sup> | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;$319247 |  | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;$319247 |
| **Michael E. Roach**<sup>4</sup> | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;$33102 |  | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;$33102 |
| **Calin Rovinescu**<sup>7</sup> | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;$53750 |  | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;$53750 |
| **Patrick M. Shanahan**<sup>2</sup> | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;$356465 | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;$139744 | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;$216721 |
| **Andrew J. Stevens**<sup>2,6</sup> | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;$131411 |  | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;$131411 |
| **Louis Têtu**<sup>7</sup> | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;$32122 |  | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;$32122 |

---

&nbsp;&nbsp;&nbsp;&nbsp;1.&nbsp;&nbsp;&nbsp;&nbsp;Represents the value of DSUs determined based on the grant date fair value of the award in accordance with accounting standards. The value of each unit is set to the volume weighted average price of the Shares on the TSX during the five trading days preceding the dates of each grant.

&nbsp;&nbsp;&nbsp;&nbsp;2.&nbsp;&nbsp;&nbsp;&nbsp;Non-Canadian resident Directors are paid in U.S. dollars on the basis of a one-for-one exchange rate of Canadian dollars to U.S. dollars. The amounts shown include payments made in U.S. dollars for each quarter of FY2025, which were converted to Canadian dollars using the exchange rate on the last business day of the respective quarter, being, for each U.S. dollar, $1.37 in Q1, $1.35 in Q2, $1.44 in Q3 and $1.44 in Q4.

&nbsp;&nbsp;&nbsp;&nbsp;3.&nbsp;&nbsp;&nbsp;&nbsp;Mr. Decostre joined the Board on May 16, 2024.

&nbsp;&nbsp;&nbsp;&nbsp;4.&nbsp;&nbsp;&nbsp;&nbsp;Mr. Roach ceased serving as a Director on May 16, 2024.

&nbsp;&nbsp;&nbsp;&nbsp;5.&nbsp;&nbsp;&nbsp;&nbsp;Mr. Edwards joined the Board on August 14, 2024.

&nbsp;&nbsp;&nbsp;&nbsp;6.&nbsp;&nbsp;&nbsp;&nbsp;Mr. Stevens ceased serving as a Director on August 14, 2024.

&nbsp;&nbsp;&nbsp;&nbsp;7.&nbsp;&nbsp;&nbsp;&nbsp;Ms. Lehman and Messrs. Lee, Rovinescu and Têtu joined the Board on February 14, 2025.

&nbsp;&nbsp;&nbsp;&nbsp;8.&nbsp;&nbsp;&nbsp;&nbsp;Ms. Billson and Messrs. MacGibbon, Olivier and Perkins ceased serving as Directors on February 14, 2025.

&nbsp;&nbsp;&nbsp;&nbsp;9.&nbsp;&nbsp;&nbsp;&nbsp;Mr. Lee has waived all compensation as a Director, in accordance with Browning West's policy requiring its employees sitting on a board of a portfolio company to waive any board compensation.

&nbsp;&nbsp;&nbsp;&nbsp;10.&nbsp;&nbsp;&nbsp;&nbsp;In Q4 FY2024, the Board established an ad hoc Audit Subcommittee (comprised of Ms. Harrison (Chair), Mr. Antoun, Ms. Billson, Ms. Maher and Mr. Olivier) to meet regularly and oversee specific matters, notably accounting for and presentation of non-routine transactions including impairments, detailed reviews of unfavourable contract adjustments in the Defense and Security business and internal control and risk management practices related thereto. The Subcommittee met 7 times in FY2025 and held its final meeting in December 2024. Subcommittee members received a one-time retainer of $11,000 ($18,000 for the Chair) paid in accordance with the Company's residency-based compensation practice.

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Section 6 – Director Compensation

**Directors' share-based awards**

The following table shows for each non-employee Director the number of DSUs outstanding at the beginning of the fiscal year ended March 31, 2025, the number and the value of the DSUs that vested during such year, and the number and the value of all outstanding DSUs as at March 31, 2025. The non-employee Directors are not eligible to receive stock options or other option-based awards.

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
| | Share-based Awards | Share-based Awards | Share-based Awards | Share-based Awards | Share-based Awards |
| &nbsp;&nbsp;Name | Number of DSUs at the Beginning of FY2025 | Number of DSUs Vested During the Year<sup>1</sup>  | Value Vested During the Year<sup>2</sup>  | Number of DSUs at the End of FY2025 | Market Value of DSUs not Paid Out or Distributed<sup>3</sup> |
| Ayman Antoun | 14362 | 8978 | $266051 | 23340 | $825754 |
| Sophie Brochu | 5667 | 8909 | $263152 | 14576 | $515703 |
| Patrick Decostre<sup>4</sup> |  | 7171 | $216626 | 7171 | $253718 |
| Elise Eberwein | 9176 | 7307 | $216721 | 16483 | $583174 |
| Ian L. Edwards<sup>5</sup> |  | 4873 | $158562 | 4873 | $172423 |
| Marianne Harrison | 38751 | 13449 | $401940 | 52200 | $1846834 |
| Peter Lee<sup>6,7</sup> |  |  |  |  |  |
| Katherine A. Lehman<sup>6</sup> |  | 1282 | $46179 | 1282 | $45345 |
| Mary Lou Maher | 17671 | 5252 | $155000 | 22923 | $810999 |
| Calin Rovinescu<sup>6</sup> |  | 1492 | $53750 | 1492 | $52780 |
| Patrick M. Shanahan | 11062 | 7307 | $216721 | 18368 | $649872 |
| Louis Têtu<sup>6</sup> |  | 892 | $32122 | 892 | $31543 |

---

&nbsp;&nbsp;&nbsp;&nbsp;1.&nbsp;&nbsp;&nbsp;&nbsp;Represents the number of DSUs each non-employee Director earned during FY2025. The DSUs vest immediately but are redeemable and paid out only after the non-employee Director ceases to be a Director of CAE in accordance with the terms of the Directors DSU Plan. Numbers containing fractions have been rounded up for calculation purposes.

&nbsp;&nbsp;&nbsp;&nbsp;2.&nbsp;&nbsp;&nbsp;&nbsp;The value was determined by multiplying the number of DSUs, including additional DSUs equivalent in value to the dividends paid on the Shares credited in-year, by the volume weighted average price of the Shares on the TSX during the five trading days preceding the dates of each grant. The DSUs are granted at the end of each quarter.

&nbsp;&nbsp;&nbsp;&nbsp;3.&nbsp;&nbsp;&nbsp;&nbsp;The market value of the DSUs was determined by multiplying the number of all DSUs vested but not paid out or distributed, including additional DSUs equivalent in value to the dividends paid on the Shares credited in-year, as at March 31, 2025 by the closing price of the Shares on the TSX on March 31, 2025, which was $35.38. Numbers containing fractions have been rounded up for calculation purposes.

&nbsp;&nbsp;&nbsp;&nbsp;4.&nbsp;&nbsp;&nbsp;&nbsp;Mr. Decostre joined the Board on May 16, 2024.

&nbsp;&nbsp;&nbsp;&nbsp;5.&nbsp;&nbsp;&nbsp;&nbsp;Mr. Edwards joined the Board on August 14, 2024.

&nbsp;&nbsp;&nbsp;&nbsp;6.&nbsp;&nbsp;&nbsp;&nbsp;Ms. Lehman and Messrs. Lee, Rovinescu and Têtu joined the Board on February 14, 2025.

&nbsp;&nbsp;&nbsp;&nbsp;7.&nbsp;&nbsp;&nbsp;&nbsp;Mr. Lee has waived all compensation as a Director, in accordance with Browning West's policy requiring its employees sitting on a board of a portfolio company to waive any board compensation.

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![image_218.jpg](image_218.jpg)

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Section 7 - Executive Compensation

Letter from the Chair of the Human Resources Committee

Dear Shareholders,

On behalf of the board of directors, the Human Resources Committee (the "HRC"), as part of its mandate, oversees both CAE's CEO succession planning process and the Company's approach to executive compensation. We believe that our compensation framework directly links compensation to CAE's long-term performance and value creation for our Shareholders.

CEO succession was the primary task undertaken by the HRC this past year. The task was carried out by a CEO Search Committee that comprised Mary Lou Maher and Peter Lee as Co-Chairs in addition to CAE's new Chair, Calin Rovinescu, all of whom actively participated in the recruitment process. CAE's Board members, executive management team, and external consultants all supported the recruitment process and with a steadfast commitment to advancing operational excellence. During the search, CAE evaluated a diverse group of candidates, emphasizing the skills and experiences necessary to guide CAE into the future. The new CEO was selected for, among other qualities, transparency, accountability, and alignment with CAE's potential for significant financial growth.

For executive compensation, we believe it is important to provide transparent disclosure of CAE's performance, all aspects of our executive compensation program, the alignment between performance and compensation outcomes and feedback from our ongoing engagement with our Shareholders. In August 2024, the Company's annual "Say on Pay" advisory vote received strong support, with 94.8% of shareholders' votes in favour of CAE's disciplined approach to executive compensation.

**CEO Transition**

In November 2024, after 20 years of dedicated service with CAE, including 15 years as President and Chief Executive Officer, CAE announced Marc Parent's departure, effective at the Annual General Meeting on August 13, 2025. The HRC and Board are deeply grateful for Marc's exemplary leadership and commitment to CAE. We extend our heartfelt thanks, congratulations and best wishes to him for a well-deserved next chapter. To ensure strong continuity in leadership, the Board of Directors, on the advice of the CEO Search Committee, unanimously appointed Matthew Bromberg as CAE's next President and CEO. He will join the company on June 16, 2025, as Incoming President and CEO, working closely with Mr. Parent during the transition period.

**Linking Pay and Performance**

During FY2025, our Named Executive Officers' (NEO) compensation outcomes were closely tied to CAE's performance. The Short-Term Incentive Plan ("STIP") pays out based on performance targets on adjusted earnings per share\* ("EPS") and revenue metrics. In assessing the CEO's compensation outcomes for FY2025, the Board considered the overall performance of the Company and the key strategic achievements during FY2025.

Based on this, the Board assessed the CEO's 25% individual performance component for FY2025 at 178% of target, reflective of: the CEO's leadership and the many achievements in the business; and the CEO's accountability for the overall results of the business. This, combined with the 103% corporate performance factor, resulted in an overall STIP payout for the CEO of 122% of target.

The Long-Term Incentive Plan ("LTIP") is weighted 60% to Performance Share Units ("PSU"s), 20% to Restricted Share Units ("RSU"s) and 20% to Stock Options to provide a balanced focus on performance, long term Share price appreciation and shareholder aligned retention. Our PSUs granted in FY2025 vest contingent on the achievement of adjusted segment operating income margin\*, Cash from operations and adjusted ROCE\* targets. Our PSUs granted in FY2023 whose performance period concluded in FY2025 was tied to two financial metrics, adjusted Earnings per Share\* ("EPS") and free cash flow\*, weighted 75% and 25% respectively, and paid out with a performance factor of 63%.

The majority of each executive's compensation continues to be at risk, contingent on performance and a significant proportion of each executive's compensation is in the form of equity-based compensation which aligns compensation outcomes with our performance and Shareholders experience over the longer term.

\*Non-IFRS and Other Financial Measures (see Appendix B).

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Section 7 - Executive Compensation

**Shareholder Engagement**

In FY2025, we engaged in meaningful discussions with our largest investors, addressing key topics such as our ongoing CEO succession process. We held over 20 director engagement sessions to gather valuable feedback and ensure alignment with shareholder expectations. Our directors and investor relations team actively listened to shareholder input and took thoughtful actions to address them.

Please refer to **Section 7 – Executive Compensation – Compensation Discussion and Analysis – Shareholder Engagement.** 

**Operational and Financial Performance Highlights**

In FY2025, CAE maintained its focus on four strategic pillars:

—Efficient growth

—Technology and market leadership

—Revolutionizing training and critical operations

—Skills and culture

**Looking Ahead**

As we move into FY2026, we will maintain open and frequent dialogue with our shareholders, fostering an exchange of ideas, and ensuring our strategies and governance practices continue to align with our business objectives. This ongoing engagement helps us remain responsive to shareholder feedback and supports our goal of creating substantial value for all stakeholders.

The HRC believes that our compensation programs continue to focus on the alignment between our performance and compensation outcomes as well as the interests of our Shareholders.

Sincerely,

---

| | |
|:---|:---|
| ![image_167a.jpg](image_167a.jpg) |  |
| ![image_167a.jpg](image_167a.jpg) | **Mary Lou Maher <br>Chair of the Human Resources <br>Committee** |

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Section 7 - Executive Compensation

Compensation Discussion and Analysis

This Section describes our compensation philosophy, policies and programs, and provides the details with respect to the compensation awarded to our Named Executive Officers ("NEO") in FY2025.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For FY2025, our NEOs were:<br>—&nbsp;&nbsp;&nbsp;&nbsp;Marc Parent, President and Chief Executive Officer<br>—&nbsp;&nbsp;&nbsp;&nbsp;Constantino Malatesta, Interim Chief Financial Officer<br>—&nbsp;&nbsp;&nbsp;&nbsp;Carter Copeland, Chief Strategy and Performance Officer<br>—&nbsp;&nbsp;&nbsp;&nbsp;Mark Hounsell, Chief Legal and Compliance Officer, and Corporate Secretary<br>—&nbsp;&nbsp;&nbsp;&nbsp;Nick Leontidis, Chief Operating Officer<br>—&nbsp;&nbsp;&nbsp;&nbsp;Sonya Branco, Former Executive Vice President, Finance and Chief Financial Officer<br>

**Where to find it**

---

| | |
|:---|:---|
| Compensation Discussion and Analysis | Page |
| &nbsp;&nbsp;**Executive Summary** | &nbsp;&nbsp;&nbsp;60 |
| &nbsp;&nbsp;**Shareholder Engagement** | &nbsp;&nbsp;&nbsp;63 |
| &nbsp;&nbsp;**Succession Planning** | &nbsp;&nbsp;&nbsp;64 |
| &nbsp;&nbsp;**Compensation Philosophy** | &nbsp;&nbsp;&nbsp;65 |
| &nbsp;&nbsp;**Executive Compensation Programs** | &nbsp;&nbsp;&nbsp;67 |
| **FY2025 Compensation Outcomes** | &nbsp;&nbsp;&nbsp;78 |
| &nbsp;&nbsp;**Determination of NEOs' Individual Performance** | &nbsp;&nbsp;&nbsp;83 |
| &nbsp;&nbsp;**Compensation Governance** | &nbsp;&nbsp;&nbsp;88 |
| &nbsp;&nbsp;**Alignment of Compensation and Performance** | &nbsp;&nbsp;&nbsp;94 |
| Compensation of Our Named Executive Officers | Page |
| &nbsp;&nbsp;**Summary Compensation Table** | &nbsp;&nbsp;&nbsp;97 |
| &nbsp;&nbsp;**Outstanding Share-Based Awards and Option-Based Awards** | &nbsp;&nbsp;&nbsp;99 |
| &nbsp;&nbsp;**Incentive Plan Awards – Value Vested or Earned During the Year** | &nbsp;&nbsp;&nbsp;100 |
| &nbsp;&nbsp;**Pension Arrangements**  | &nbsp;&nbsp;&nbsp;101 |
| &nbsp;&nbsp;**Termination and Change of Control Benefits** | &nbsp;&nbsp;&nbsp;102 |

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Section 7 - Executive Compensation

Executive Summary

**CAE Performance**

In FY2025, CAE realized significant growth with revenue, adjusted backlog\*, and adjusted segment operating income\* increasing across the enterprise. Our Civil business remains the leader in its markets, and our Defense & Security ("D&S") business recovered from prior-year challenges to deliver consistent operational execution, steady growth, and improved performance, as expected.

The long-term growth prospects in our markets remain strong, supported by sustained demand for air travel and a growing global middle class, heightened defence training requirements and expenditures, especially in Europe and Canada, and an increasing customer interest in market-leading software solutions. Additionally, we see continued prospects for further market share expansion resulting from our organic investments in both technology and capacity. In the face of near-term geopolitical and financial uncertainty, our strong market position, sound financial health, and committed leadership team ensure we are well-prepared for future challenges.

This year, our Defense & Security business demonstrated consistent performance, with improving adjusted segment operating income margin\* and revenue growth of over 8%. Refreshed leadership and a new organizational structure have generated recurring cost savings, improved performance, and enhanced synergies across the enterprise. The ongoing recovery of our D&S business, enabled by consistent execution and retirement of Legacy Contracts, serves as a positive development for our company and its multi-year outlook. The growth outlook for D&S continues to be steady and attractive with significant opportunities across the global pipeline. In the near-term, key positions on several generational programs will serve as the backbone of our growth, particularly in Canada. Adjusted order intake\* continues to be a positive indicator with four successive years of our book-to-sales ratio\* exceeding 1x (1.99x this year). Our Civil Aviation segment had another strong year, with book-to-sales\* at 1.35x and double-digit revenue growth despite external market challenges amidst a slower pilot hiring environment in the United States. Our commercial products and training businesses have strong growth prospects, driven by increasing air travel demand and growing customer interest in outsourcing their training operations. In business aviation training, market activity has stabilized after a post-pandemic surge. Nevertheless, our business aviation team has delivered growth in excess of the market. Additionally, the team has further consolidated their position with the increase of our stake in SIMCOM Aviation Training ("SIMCOM") and the subsequent extension of our exclusivity agreement with Flexjet bringing it to 15 years and has deployed multiple simulators and stood up new training centres around the world. These investments are done in lockstep with customer demand and make us more essential and accessible to our customers. FY2025 was an important year in our airline operations digital solutions business, now called Flightscape, with major pursuits and renewals and the completion of the product development effort of our Unified Task Board, representing a streamlined solution that will redefine the way that airlines digitally manage their Operational Control Centres and limit disruption. We are optimistic about the ongoing benefits of CAE's scale and synergy across our enterprise, bolstered by the significant strides we've made in both market expansion and technology investment. For both our Civil and Defense customers, we believe that CAE is the unquestioned standard for safety, efficiency and mission readiness. In FY2025, we maintained our strategic focus on four main strategic pillars. The key accomplishments for each are as follows:

**Efficient Growth:**

—Continued expansion of company adjusted segment operating income margin\* to 15.5%.

—Progressed ahead of plan with the retirement of contractual risks and Legacy Contracts in D&S. D&S delivered strong top-line growth of ~8% and grew adjusted segment operating income\* nearly $150M YoY with operational and financial momentum building throughout the year.

—Continued strong performance in Civil Aviation despite market challenges, including a full year adjusted segment operating income margin\* of 21.5%.

—Saw continued strong growth in both revenues and adjusted order intake\*. For the full year, consolidated revenue growth of 10% was led by 11% growth in Civil. Adjusted order intake\* soared, reaching ~$7.7 billion for a full-year book-to-sales ratio\* of 1.64x.

—Generated strong free cash flow for the year, at a cash conversion rate\* of ~211%+.

—Enhanced discipline and prioritization around capital expenditures, and research & development spending, to focus on customer requirements and the best risk-adjusted return opportunities.

—Removed significant shared costs from corporate structure and streamlined leadership teams through maturation of the COO organization, driving financial savings and efficiency gains.

—Conducted collaborative and proactive risk management analysis to navigate geopolitical and macroeconomic turmoil in core markets.

<br>\*Non-IFRS and Other Financial Measures (see Appendix B).

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Section 7 - Executive Compensation

**Technology and Market Leadership:**

—Signed several new training agreements with airline customers, and sold devices to customers within Commercial Aviation.

—Experienced significant growth in our business aviation business, headlined by our consolidation of SIMCOM and subsequent extension of our long-term training exclusivity agreement with FlexJet and several new training customers.

—Expanded our Civil training centre footprint further in FY2025 with 27 simulators deployed across Commercial and Business Aviation and training centres in Sydney (Qantas), Athens (Aegean), and Savannah (Gulfstream platforms) fully operational.

—Celebrated the opening of our new Air Traffic Services Training Centre in Montreal in partnership with NAV Canada, training air traffic controllers and flight service specialists.

—Secured several long-term airline operations digital solutions deals.

—Named a strategic partner to work with the Royal Canadian Air Force ("RCAF") to develop and refine the Future Fighter Lead-in Training (FFLIT) program, which will prepare and train pilots for the transition to Canada's future fighter jets.

—Won work on key Canadian defence programs, including FAcT and RPAS. FAcT is a 25-year $11B+ opportunity for CAE and its SkyAlyne joint venture to work alongside the Royal Canadian Air Force to transform and reimagine training. This program represents a significant step forward to prepare Canadian Military Pilots, Air Combat Systems Officers, and Airborne Electronic Sensor Operators for tomorrow's challenges. RPAS or Remotely Piloted Aircraft Systems will enable CAE to deliver aircrew and maintenance technician training, supporting training devices and courseware to meet Canada's RPAS requirements and support the MQ-9B SkyGuardian.

—Strengthened relationships with OEM and regulatory partners, including critical EASA/FAA thought leadership and committee participation.

—Continued to deliver significant improvement with all USA legacy programs , in addition to making continued progress on other strategic programs.

—Maintained sustainability as a core part of our strategy and FY2025 included a strategic transition to science-based targets (SBTi).

**Revolutionizing Training and Critical Operations:** 

—Awarded silver in the Aerospace and Flight Technologies category at the prestigious Edison Awards for our eSeries dome technology.

—Developed and demonstrated CAE's groundbreaking immersive trainer using the Apple Vision Pro.

—Continued development on CAE Connect, our unified platform and customer portal for over 5,000 business aviation customers, with positive initial user feedback.

—Deployed over 100 simulators with CAE RISE, including the delivery of critical insights to several business aviation customers.

—Launched the Unified Task Board in Flightscape, enabling automated real-time decision making for airline operations in one integrated solution.

—Expanded internal AI use cases focused on efficiency, productivity and customer satisfaction.

**Skills & Culture:**

—Appointed a Chief People and Sustainability Officer (CPSO), reinforcing CAE's noble mission, values, employee value proposition, and enhancing our safety culture throughout the organization.

—Remained a highly desirable employer and continued to be recognized as such through prestigious awards: Canada's Top 100 employer, Top Employers for Young People, World's best companies by Forbes, and a Top Montreal Employer for the 5th year in a row.

—Successfully rolled out our objective-setting framework (OKRs) to the Director level across the organization, reaching over 600 people-leaders and improving transparency in strategic goals throughout the organization.

—Renewed effort to develop and deliver internal trainings and micro learning, including a special focus on skills of the future and business skills for high-potential employees.

—Enhanced candidate and employee experience through several initiatives like CAEWelcome, our new global onboarding program and CAEAltitude, our development program for High potential employees.

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Section 7 – Executive Compensation

Compensation Decisions

&nbsp;&nbsp;&nbsp;&nbsp;NEW in FY2025

The Committee approved and incorporated the following modifications to its compensation program for FY2025.

**Short-Term Incentive Plan (STIP)**

The following changes were included in the STIP as of April 1<sup>st</sup> of 2024 (FY2025):

—The Corporate Performance Factor is now composed of two financial measures, adjusted EPS\* and revenue, respectively weighted 2/3rd and 1/3rd. These two measures strengthen focus on profitable growth.

—The financial component of our STIP (representing 75% of the payout) is now a mix of Business Unit and CAE financial performance (2/3rd weighting to BU performance and 1/3rd weighting to CAE performance) for our Business Unit Leaders. The President and Chief Executive Officer and his direct reports continue to have financial performance measured 100% on CAE consolidated results.

—The STIP performance grid has been adjusted to pay out at 50% of target for the achievement of threshold performance. As before, payout is 0% if performance is below the threshold level.

**Long-Term Incentive Plan (LTIP)**

—Our FY2025 LTIP remained unchanged from FY2024 design.

—The LTIP performance grid has been adjusted to pay out at 50% of target for the achievement of threshold performance. As before, payout is 0% if performance is below the threshold level.

In FY2026

**Short-Term Incentive Plan (STIP)**

—Our FY2026 STIP will remain unchanged from FY2025 design, with the financial component being a mix of Business Unit and CAE financial performance.

—To assess financial performance under the STIP plan, CAE will continue to focus on two financial measures, adjusted EPS\* and revenue, respectively weighted 2/3rd and 1/3<sup>rd</sup> to promote strong and profitable growth. The STIP performance grid will still pay out at 50% of target for the achievement of threshold performance, and as before, will pay at 0% if performance is below the threshold level.

**Long-Term Incentive Plan (LTIP)**

—Our FY2026 LTIP will remain unchanged from FY2025 design.

—The LTIP performance grid will still pay out at 50% of target for the achievement of threshold performance, and as before, could pay as low as 0% if performance is below the threshold level.

**Comparator Group**

—The Committee decided to revise the peer group to better position CAE among its peers and include more industry competitors (see **Section 7 – Executive Compensation – Compensation Discussion and Analysis – Comparator Group**).

\*Non-IFRS and Other Financial Measures (see Appendix B).

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Section 7 – Executive Compensation

Shareholder Engagement

At CAE, we recognize that active engagement with our shareholders and stakeholders is crucial for fostering transparency, facilitating open dialogue, and sharing our vision. Over the past year, the former Chair of the Board, the Chair of the HRC, CAE Directors and executives, and our investor relations team have engaged extensively with our top shareholders through various initiatives. This period was marked by significant transitions, including the appointment of our new CEO and substantial changes to our Board, with the appointment of a new Board Chair and five additional Board members.

Our shareholders called for change, and we answered with decisive action, building on our ongoing initiatives.

We value the perspectives of our shareholders and actively engage to understand their views, concerns, and priorities related to our business operations, succession planning, performance, and executive compensation programs. In FY2025, we conducted over 20 director engagement sessions to gather valuable feedback and ensure alignment with shareholder expectations. These sessions provided insightful perspectives that reinforced our focus on long-term value creation. Our directors and investor relations team actively listened and responded to shareholder input.

—**Earnings calls**: CAE executives engage with the investment community on a quarterly basis to review CAE's financial and operating results and outlook;

—**Direct outreach to investors**: Our investor relations team is dedicated to maintaining regular communication with shareholders, addressing their questions and concerns promptly. Since FY2023, we have initiated proactive engagement processes, which continued through FY2024 and FY2025. These efforts included meetings to discuss key topics such as CEO succession and Board renewal, ensuring that shareholder perspectives are considered in our decision-making;

—**Annual meeting of Shareholders**: This event, along with quarterly presentations, is webcast and accessible to a broad audience of investors. Presentations, audio recordings, and transcripts of both the presentation and the Q&A section are available on our website for at least 12 months following the events.

In response to the valuable feedback received from our shareholders, we have implemented several key initiatives to address their concerns and drive long-term value creation:

—**Board Renewal:** Over the past two years, we have refreshed our Board, consulting with shareholders to introduce new members with diverse skills and experiences. In FY2025, we appointed six new Board members, including our new Chair of the Board. The Board brings strategic leadership and global operations expertise, governance skills and strategic oversight, extensive experience in governance and strategic leadership, and technological expertise and innovation.

—**Operational Efficiency:** We have implemented cost-saving initiatives led by our newly appointed COO, Nick Leontidis, which are expected to decrease recurring costs and optimize revenue.

—**Financial Strategy:** We have prioritized financial strategies to enhance value creation. Our focus on improving earnings per share, return on capital employed, and free cash flow has strengthened our financial performance, increased shareholder value, and provided a solid foundation for sustainable growth. Optimized capital investment plans and strategic capital allocation have resulted in better investment timing and enhanced execution, particularly in the defence sector, driving overall efficiency and profitability.

As we move into FY2026, we remain committed to maintaining open and frequent dialogue with our shareholders. This ongoing engagement helps us stay responsive to shareholder feedback and supports our goal of creating substantial value for all stakeholders.

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Section 7 – Executive Compensation

Succession Planning

The Board, with the assistance of the Human Resources Committee, provides oversight of succession planning, including the review and approval of the succession plans for the President and Chief Executive Officer and other senior employees of the Company. After announcing Marc Parent's departure and consistent with its ongoing and rigorous succession planning process, the Board of Directors retained a leading executive search firm to conduct a comprehensive global search, evaluating both internal and external candidates to identify a new CEO to lead the Company into the future. Together, the Board and external advisors determined an appropriate transition period, during which Mr. Parent would continue to lead CAE in his role as CEO and as a member of the Board of Directors to advance CAE's strategic objectives and ensure an effective transition.

In fiscal year 2025, CAE undertook pivotal steps in its leadership transformation by appointing six new directors to its Board of Directors. As part of this renewal, a CEO Search Committee was established in February 2025. The committee, co-chaired by Mary Lou Maher, Chair of the Human Resources Committee, and Peter Lee, with support from Mr. Rovinescu, was tasked with advancing the recruitment process previously overseen by the Board's Human Resources Committee.

Building on the ongoing succession planning efforts, the CEO Search Committee advanced the robust process, which included evaluating candidates and consulting with the executive search firm. Throughout this phase, the CEO Search Committee dedicated efforts to:

—Focusing on a CEO profile that outlines the leadership qualities and demonstrable history of driving long-term value creation, strong team leadership and followership and superior performance, within a large public company with international operations;

—Identifying pertinent experience within the aerospace and defence sectors;

—Driving operational excellence that resulted in enhanced margins, free cash flow, and return on invested capital, along with effective capital allocation decisions;

—Regularly reviewing and updating the CEO profile to reflect the evolving internal and external environments, including the necessary capabilities and experiences to lead CAE;

—Overseeing an internal and external review of potential CEO talent which includes a slate of candidates with diverse skills and experience;

—Conducting in-depth assessments of internal and external candidates and their experiences against the CEO profile.

At the conclusion of a rigorous global selection process, the Board of Directors, on the advice of the CEO Search Committee, unanimously appointed Matthew Bromberg as President and Chief Executive Officer of CAE, effective August 13, 2025. Mr. Bromberg will join CAE on June 16, 2025, as Incoming President and CEO, working closely with Marc Parent throughout the transition to ensure continuity and a smooth handover of leadership responsibilities.

Mr. Bromberg is a proven leader with deep experience in both aerospace and defence, involving large-scale international operations. He brings decades of leadership at major global public companies and has a strong track record in driving operational excellence, transformation, and growth. His appointment reflects the Board's confidence in his ability to lead CAE's continued evolution and strategic growth in the years ahead. We are confident that under Mr. Bromberg's leadership, CAE will continue to build on its strong foundation and deliver long-term value for its stakeholders in Quebec, Canada, and around the world. We welcome Mr. Bromberg to his new role and look forward to an exciting future under his leadership.

In addition, the CEO, with the approval of the Board of Directors, retained a leading executive search firm to conduct a comprehensive global search for the CFO position, evaluating both internal and external candidates. This search is underway and is expected to be concluded in the next fiscal year.

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Section 7 – Executive Compensation

Compensation Philosophy

**Compensation Objectives**

Much of CAE's success in developing and growing its worldwide business is attributable to our highly qualified and motivated employees. The executive compensation programs are based on a pay-for-performance philosophy. Executives receive salaries, annual short-term incentive awards contingent upon attaining consolidated business results and individual achievements, and long-term incentive awards that motivate executives to create increasing and sustainable value for Shareholders. In addition, executives receive perquisites and participate in pension and benefits programs.

![image_178.jpg](image_178.jpg)

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Section 7 – Executive Compensation

**Compensation principles**

The principles underlying CAE's executive compensation programs are as follows:

---

| | |
|:---|:---|
| &nbsp;&nbsp;**Pay for performance** | &nbsp;&nbsp;&nbsp;The majority of compensation is variable, contingent on and directly linked to financial and operational performance metrics, and CAE's Share price. |
| &nbsp;&nbsp;**Balance** | &nbsp;&nbsp;&nbsp;The portion of total compensation that is performance-based increases with an executive's level of responsibility and strategic scope of the role. |
| &nbsp;&nbsp;**Long-term focus** | &nbsp;&nbsp;&nbsp;Long-term stock-based compensation opportunities have a greater weight than short-term cash-based opportunities for our executive leaders. |
| &nbsp;&nbsp;**Shareholder alignment** | &nbsp;&nbsp;&nbsp;The financial interests of executives are directly aligned with the interests of our Shareholders through stock-based compensation, and annual and long-term performance metrics that correlate with sustainable Shareholder value growth. |
| &nbsp;&nbsp;**Competitiveness** | &nbsp;&nbsp;&nbsp;Total compensation is market competitive to attract, retain, and motivate CAE's executive team while fostering entrepreneurial spirit. This is achieved by setting target compensation competitively with the median of our comparator group with compensation outcomes above the median when performance is strong and below median when it is not. |
| &nbsp;&nbsp;**Responsibility** | &nbsp;&nbsp;&nbsp;Financial and operational performance must not compromise our ethical, environmental and health and safety objectives, outlined in our Code of Business Conduct. Commitment to ethical and corporate responsibilities fundamentally underlies all aspects of our behavior and compensation plans, which provide for compensation to be reduced if these objectives are not upheld. |

---

The following illustrates the relative weight of each compensation policy element, at target:

---

| | |
|:---|:---|
| &nbsp;&nbsp;**President and CEO** | **Other NEOs** |
| ![presidentandceo2.jpg](presidentandceo2.jpg) | ![otherneosa.jpg](otherneosa.jpg) |

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Section 7 – Executive Compensation

Executive Compensation Programs

CAE's executive compensation program has five main components: base salary, short-term incentive, long-term incentives, pension, and perquisites and benefits. The table below provides highlights of each component and describes the purpose and CAE's policy for each component.

**Overview**

---

| | | | | |
|:---|:---|:---|:---|:---|
| | Form | Plan Highlights | Plan Objectives | Policy |
| **Base Salary** | Cash | Fixed pay annual review | Provide a base of regular income to attract and retain qualified leaders<br>Recognize scope and responsibilities of the position as well as the experience and sustained performance of the individual | Set competitive with the median of the comparator group |
| **Short-term Incentive (STIP)** | Cash | Annual award based on corporate (75%) and individual objectives (KPIs) (25%) <br>Executives can elect to receive some or all STIP payment as Executive Deferred Share Units | Reward the achievement of the Company's financial and operational objectives<br>Reward the achievement of individual objectives aligned with the executive's area of responsibility and role in realizing operational results<br>Drive superior individual and corporate performance | Set competitive with the median of the comparator group<br>Designed to result in above median payouts for superior performance<br>Performance metrics are aligned to the strategic plan and approved annually |
| **Long-term Incentive (LTIP)** | Performance Share Units (60%), Restricted Share Units (20%), Stock Options (20%) | LTIP value is awarded in different medium to long-term compensation vehicles with both time and performance vesting based on achievement of longer-term financial objectives | Align management's interests with Shareholders value growth<br>Reward the achievement of sustained market performance<br>Attract and retain key talent | Set competitive with the median of the comparator group<br>Ability to award LTI within a range and impact of Share price and financial performance designed to provide pay outcomes closely aligned with performance |
| **Pension** | Monthly pension in cash at retirement | Defined Benefit Plan for executives representing 2% of average 5 best years of earnings (salary plus STIP), per year of pensionable service<br>Supplementary Plan offered to the NEOs for pension above the income tax act cap on registered plans | Support retention of key executives | Set consistent with historical approach |
| **Perquisites and Other Benefits** | Employee Stock Purchase Plan ("ESPP")<br>Perquisites | ESPP: Employees and executives may purchase CAE Shares up to 18% of their base salary; CAE matches 50% of the employee contributions, up to a maximum of 3% of the employee's annual base salary<br>Perquisites: Cash allowance to cover certain expenses to support health and well-being | Provide executives with a Share ownership building vehicle | Set to be market competitive |

---

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Section 7 – Executive Compensation

**Base salaries**

The base salaries of the President and CEO and other NEOs are determined in accordance with CAE's compensation philosophy and policies. CAE's executives' salaries are positioned within a competitive range around the market median, based on the individual's performance and level of experience and the scope and responsibilities of the role.

Base salaries are reviewed by the HRC annually considering individual achievements, general performance, benchmark information and market conditions.

**Annual Incentive Program Design**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;—The annual short-term incentive plan motivates the achievement of specific annual financial and operational results<br>—To further strengthen alignment with Shareholders the overall corporate performance factor is capped at 100% if the adjusted EPS\* result does not meet the target<br>

The Short-Term Incentive Plan (STIP) provides for an annual cash incentive for executives and management employees based on CAE's consolidated performance and individual achievements. The STIP motivates the achievement of specific annual financial and operational results, aligned with the corporate goals and strategy.

The table below outlines FY2025 STIP target ranges by NEO, which range from 0% to 250% of target for each executive:

---

| | | | |
|:---|:---|:---|:---|
| STIP Target as a % of Base Salary | STIP Target as a % of Base Salary | STIP Target as a % of Base Salary | STIP Target as a % of Base Salary |
| NEO | Minimum | Target | Maximum |
| &nbsp;&nbsp;**Marc Parent** | &nbsp;&nbsp;&nbsp;0% | &nbsp;&nbsp;&nbsp;125% | &nbsp;&nbsp;&nbsp;250% |
| &nbsp;&nbsp;**Constantino Malatesta** <sup>1</sup> | &nbsp;&nbsp;&nbsp;0% | &nbsp;&nbsp;&nbsp;75% | &nbsp;&nbsp;&nbsp;150% |
| &nbsp;&nbsp;**Carter Copeland** | &nbsp;&nbsp;&nbsp;0% | &nbsp;&nbsp;&nbsp;75% | &nbsp;&nbsp;&nbsp;150% |
| &nbsp;&nbsp;**Mark Hounsell** | &nbsp;&nbsp;&nbsp;0% | &nbsp;&nbsp;&nbsp;55% | &nbsp;&nbsp;&nbsp;110% |
| &nbsp;&nbsp;**Nick Leontidis**<sup>2</sup> | &nbsp;&nbsp;&nbsp;0% | &nbsp;&nbsp;&nbsp;85% | &nbsp;&nbsp;&nbsp;170% |
| &nbsp;&nbsp;**Sonya Branco**<sup>3</sup> | &nbsp;&nbsp;&nbsp;0% | &nbsp;&nbsp;&nbsp;75% | &nbsp;&nbsp;&nbsp;150% |

---

&nbsp;&nbsp;&nbsp;&nbsp;1.&nbsp;&nbsp;&nbsp;&nbsp;This percentage of base salary represents Mr. Malatesta's annual STIP target for his interim role as Chief Financial Officer, effective August 12, 2024. This annual STIP target is in line with the pay practices previously adopted for Sonya Branco, former Chief Financial Officer.

&nbsp;&nbsp;&nbsp;&nbsp;2.&nbsp;&nbsp;&nbsp;&nbsp;STIP target percentage for Mr. Leontidis has been changed following his appointment as Executive Vice President, Chief Operating Officer, effective May 14th, 2024.

&nbsp;&nbsp;&nbsp;&nbsp;3.&nbsp;&nbsp;&nbsp;&nbsp;Ms. Branco's departure was on August 31, 2024.

The STIP is based 75% on CAE performance and 25% on the executive's individual performance. The Company performance factor consists of financial measures of varying weights that total 100%. The year-end result for each measure is assessed against predefined targets that are set and approved by the HRC at the beginning of the year. The individual performance factor is based on the executive's performance against annual objectives and additional predefined quantitative and qualitative goals that reflect the strategic and operational priorities critical to each executive's role.

\*Non-IFRS and Other Financial Measures (see Appendix B).

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Section 7 – Executive Compensation

**The table below illustrates the annual STIP payout calculation for NEOs**

![stipa.jpg](stipa.jpg)

In FY2025, the Company performance factor was based on two financial measures detailed in the table below:

---

| | | |
|:---|:---|:---|
| STIP Measure | STIP Measure | STIP Measure |
| Performance Measure | Why this Measure is important | Weighting |
| &nbsp;&nbsp;**Adjusted EPS\*** | &nbsp;&nbsp;&nbsp;Intended to keep management focused on EPS achievement as a critical metric reflecting the profitability of the Company and directly linked with Shareholders interests | &nbsp;&nbsp;&nbsp;67% |
| &nbsp;&nbsp;**Revenue** | &nbsp;&nbsp;&nbsp;Highlights the importance of revenue growth in the Company strategy | &nbsp;&nbsp;&nbsp;33% |

---

To further strengthen alignment with Shareholders the overall corporate performance factor is capped at 100% if the adjusted EPS\* result does not meet the target approved by the Board of Directors.

&nbsp;&nbsp;&nbsp;&nbsp;**NEW** In FY2025, the financial component of our STIP (representing 75% of the payout) represented a mix of Business Unit and CAE financial performance (2/3rd weighting to BU performance and 1/3rd weighting to CAE performance) for our Business Unit Leaders. The President and CEO and his direct reports continued to be measured 100% on CAE overall financial results. This change aligned our compensation programs with market and reduces compensation risk.

Additionally, adjusted EPS\* and revenue were the two financial performance measures to calculate the Corporate Performance Factor, weighed 2/3rd and 1/3rd, respectively and pay out was set at 50% of target for the achievement of threshold performance. As before, payout is 0% if performance is below the threshold level.

Compensation considers each executive's responsibility to always act in accordance with our values and our ethical, environmental and health and safety objectives, outlined in CAE's Code of Business Conduct. Following a review at year-end that considers overall business and individual performance as well as the performance of the business from a holistic and strategic perspective, the STIP payments for the President and CEO's direct reports are approved by the HRC and, for the President and CEO, by the Board upon the HRC's recommendation. Canadian and US-based executives can elect to defer all or a portion of the STIP payment as Executive Deferred Share Units. The amount deferred is converted into a number of DSUs, (see details under **Section 7 – Executive Compensation – Compensation Discussion and Analysis – Executive Compensation Programs – Long Term Incentive Program Design – Executive Deferred Share Units**).

\*Non-IFRS and Other Financial Measures (see Appendix B).

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Section 7 – Executive Compensation

**Long-Term Incentive Program Design**

<u>CAE's long-term incentive plan aligns management's interests with Share price growth and related Shareholder value creation, and rewards sustained market performance.</u>

The LTIP is designed to reward executives for their contribution to the creation of Shareholder value. For NEOs other than the CEO, the value of the LTIP grants varies by the level of responsibility and scope and is based on each executive's performance as assessed by the HRC and the Board.

The table below outlines FY2025 LTIP target ranges by NEO:

---

| | | | |
|:---|:---|:---|:---|
| LTIP Target as a % of Base Salary | LTIP Target as a % of Base Salary | LTIP Target as a % of Base Salary | LTIP Target as a % of Base Salary |
| NEO | Minimum | Target | Maximum |
| &nbsp;&nbsp;**Marc Parent** | &nbsp;&nbsp;&nbsp;- | &nbsp;&nbsp;&nbsp;585% | &nbsp;&nbsp;&nbsp;- |
| &nbsp;&nbsp;**Constantino Malatesta** <sup>1</sup> | &nbsp;&nbsp;&nbsp;- | &nbsp;&nbsp;&nbsp;50% | &nbsp;&nbsp;&nbsp;- |
| &nbsp;&nbsp;**Carter Copeland**<sup>2</sup> | &nbsp;&nbsp;&nbsp;70% | &nbsp;&nbsp;&nbsp;135% | &nbsp;&nbsp;&nbsp;200% |
| &nbsp;&nbsp;**Mark Hounsell** | &nbsp;&nbsp;&nbsp;40% | &nbsp;&nbsp;&nbsp;95% | &nbsp;&nbsp;&nbsp;150% |
| &nbsp;&nbsp;**Nick Leontidis**<sup>3</sup> | &nbsp;&nbsp;&nbsp;150% | &nbsp;&nbsp;&nbsp;225% | &nbsp;&nbsp;&nbsp;275% |
| &nbsp;&nbsp;**Sonya Branco** | &nbsp;&nbsp;&nbsp;100% | &nbsp;&nbsp;&nbsp;175% | &nbsp;&nbsp;&nbsp;250% |

---

&nbsp;&nbsp;&nbsp;&nbsp;1.&nbsp;&nbsp;&nbsp;&nbsp;LTIP target percentage represents Mr. Malatesta's target for FY2025 as Chief Accounting Officer and Vice-President, Controller Office.

&nbsp;&nbsp;&nbsp;&nbsp;2.&nbsp;&nbsp;&nbsp;&nbsp;LTIP target percentage for Mr. Copeland has been modified, following his appointment as Chief Strategy and Performance Officer, effective May 14<sup>th</sup>, 2024

&nbsp;&nbsp;&nbsp;&nbsp;3.&nbsp;&nbsp;&nbsp;&nbsp;LTIP target percentage for Mr. Leontidis has been modified following his appointment as Chief Operating Officer, effective May 14<sup>th</sup>, 2024.

CAE's LTIP is comprised of PSUs, RSUs and Stock Options. All NEOs were eligible for an annual grant under each of these plans, and awards were allocated as follows:

---

| | | |
|:---|:---|:---|
| LTIP Mix |  |  |
| Components | Weighting | Vesting |
| &nbsp;&nbsp;**PSUs** | &nbsp;&nbsp;&nbsp;60% | &nbsp;&nbsp;&nbsp;3-year cliff vesting |
| &nbsp;&nbsp;**RSUs** | &nbsp;&nbsp;&nbsp;20% | &nbsp;&nbsp;&nbsp;3-year cliff vesting |
| &nbsp;&nbsp;**Stock Options** | &nbsp;&nbsp;&nbsp;20% | &nbsp;&nbsp;&nbsp;4-year ratable vesting (25% per year) |

---

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Section 7 – Executive Compensation

***Performance Share Units***

---

| | |
|:---|:---|
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;—PSUs directly tie CAE executives to the achievement of the CAE strategic plan.<br>—One PSU is equal in value to one Share of CAE.<br>—Vesting: 3-year cliff subject to the achievement of set performance criteria and the participant's continued employment with CAE. | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;—Performance condition: Financial targets as set in the 3-year strategic plan approved by the Board.<br>—Maximum payout multiplier set at 200%. |

---

PSUs are a long-term incentive vehicle that vest based on the achievement of financial performance that is directly tied to the achievement of the CAE strategic plan.

In FY2024, CAE adopted the Omnibus Incentive Plan, pursuant to which the Company may grant PSUs that may be settled in Shares issued from treasury, which was approved by our Shareholders at the annual and special shareholders' meeting held on August 9, 2023, further encouraging CAE ownership by employees. Please refer to **Section 7 – Executive Compensation – Compensation Discussion and Analysis – Executive Compensation Programs – Long Term Incentive Program Design – Omnibus Incentive Plan**

Since FY2024, based on feedback received from our Shareholders, the PSU performance measures used by the Company include three equally weighted financial measures: adjusted segment operating income margin\*, net cash provided by operating activities and adjusted ROCE\*. These measures were used for PSUs granted under the Omnibus Incentive Plan in FY2025 and are further described below:

---

| | | | | |
|:---|:---|:---|:---|:---|
| PSU Performance Measures | PSU Performance Measures | PSU Performance Measures | PSU Performance Measures | PSU Performance Measures |
| Driver | Performance Measure | Weighting | Why this Measure is Important | Performance Assessment |
| &nbsp;&nbsp;**Profitability** | &nbsp;&nbsp;&nbsp;Adjusted segment operating margin\* | &nbsp;&nbsp;&nbsp;33% | &nbsp;&nbsp;&nbsp;Reflects the efficiency and profitability of the Company's core operations after deducting operating expenses (excluding interest and taxes) | &nbsp;&nbsp;&nbsp;Measured yearly and weighted: <br>-&nbsp;&nbsp;&nbsp;&nbsp;1/6<sup>th</sup> year one<br>-&nbsp;&nbsp;&nbsp;&nbsp;1/3<sup>rd</sup> year two<br>-&nbsp;&nbsp;&nbsp;&nbsp;1/2 year three |
| &nbsp;&nbsp;**Growth** | &nbsp;&nbsp;&nbsp;Cash from operations | &nbsp;&nbsp;&nbsp;33% | &nbsp;&nbsp;&nbsp;Focuses on the cash inflows and outflows directly related to the Company's day-to-day business operations, providing a clear picture of the Company's ability to generate cash to meet its obligations | &nbsp;&nbsp;&nbsp;Measured as a cumulative amount over a 3-year period |
| &nbsp;&nbsp;**Return** | &nbsp;&nbsp;&nbsp;Adjusted ROCE\* | &nbsp;&nbsp;&nbsp;33% | &nbsp;&nbsp;&nbsp;Measures the efficiency with which the Company utilizes its capital to generate profits | &nbsp;&nbsp;&nbsp;Measured at the end of year 3 |

---

\*Non-IFRS and Other Financial Measures (see Appendix B).

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Section 7 – Executive Compensation

***Restricted Share Units***

<u>—RSU is equal in value to one Share of CAE.</u> <u>—Vesting: 3-year cliff subject to the participant's continued employment with CAE.</u>

RSUs are awarded to executives and senior management of CAE and its subsidiaries to enhance alignment with Shareholders and increase the resilience of the long term incentive program.

In FY2024, CAE adopted the Omnibus Incentive Plan, pursuant to which the Company may grant RSUs that may be settled in Shares issued from treasury, which was approved by our Shareholders at the annual and special shareholders' meeting held on August 9, 2023, further encouraging CAE ownership by employees. Please refer to **Section 7 – Executive Compensation – Compensation Discussion and Analysis – Executive Compensation Programs – Long Term Incentive Program Design – Omnibus Incentive Plan**.

***Stock Options***

---

| | |
|:---|:---|
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;—Exercise price equal to the volume weighted average trading price of the Shares on the TSX for the five (5) trading days before the date of the grant  | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;—Option term: 7 years.<br>—Vesting: 25% per year starting on the first anniversary date of the grant. |

---

In FY2024, CAE adopted the Omnibus Incentive Plan, pursuant to which the Company may grant Stock Options settled in shares issued from treasury, which was approved by our Shareholders at the annual and special shareholders' meeting held on August 9, 2023. Awards granted under the ESOP remain outstanding and governed by the terms of the ESOP, but no new award will be granted under the ESOP. Please refer to **Section 7 – Executive Compensation – Compensation Discussion and Analysis – Executive Compensation Programs – Long Term Incentive Program Design – Omnibus Incentive Plan**.

***Omnibus Incentive Plan***

---

| | |
|:---|:---|
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;—Encourage greater Share ownership<br>—Stock Options are settled in Shares issued from treasury<br>—PSUs and RSUs are settled in Shares, in cash or in a combination thereof | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;—Provides flexibility to the Company to grant both whole Share awards, such as PSUs and RSUs as well as Stock Options |

---

In an effort to streamline its equity-based incentive plans, to encourage greater Share ownership by employees and to foster a greater alignment between the long-term interests of the Shareholders and the interests of employees, the Board of CAE adopted on May 31, 2023 the Omnibus Incentive Plan ("**Omnibus Incentive Plan**") which was approved by our Shareholders at the annual and special shareholders' meeting held on August 9, 2023. The Omnibus Incentive Plan is a single plan that allows for different types of equity awards to be granted and to be settled through the issuance of Shares from treasury. The Omnibus Incentive Plan provides flexibility to the Company to grant both whole Share awards, such as PSUs and RSUs as well as Stock Options. The Omnibus Incentive Plan provides that Stock Options will be settled in Shares issued from treasury, while PSUs and RSUs will be settled in Shares (either issued from treasury or purchased on the open market), in cash or in a combination thereof. The Omnibus Incentive Plan does not permit Option grants to non-employee directors. These features of the Omnibus Incentive Plan enhance the ability of the Company to attract, retain and reward key individuals to advance its business strategy, while promoting a greater alignment of interests with the Shareholders of the Company.

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Section 7 – Executive Compensation

The HRC is responsible for administering and interpreting the Omnibus Incentive Plan. Under the terms of the Omnibus Incentive Plan, the HRC will, in its sole discretion, from time to time designate the executive officers and employees to whom awards shall be granted and determine, if applicable, the number of Shares to be covered by such awards and the terms and conditions of such awards.

The Omnibus Incentive Plan provides that the maximum number of Shares that may be issued thereunder cannot exceed 10,000,000 (representing 3.12% of the issued and outstanding Shares as at March 31, 2025).

The terms and conditions relating to the grants of PSUs, RSUs and Stock Options under the Omnibus Incentive Plan include the following:

*Share Units*

The HRC is authorized to grant PSUs and RSUs evidencing the right to receive Shares (issued from treasury or purchased on the open market), cash based on the value of a Share or a combination thereof at some future time to eligible persons under the Omnibus Incentive Plan.

RSUs generally become vested, if at all, following a period of continuous employment. PSUs are similar to RSUs, but their vesting is based on the attainment of specified performance metrics as may be determined by the HRC. The terms and conditions of grants of RSUs and PSUs, including the quantity, type of award, grant date, vesting conditions, vesting periods, settlement date and other terms and conditions with respect to these awards will be set out in the participant's grant agreement. Subject to the achievement of the applicable vesting conditions, the payout value of a PSU or RSU will generally be determined on the settlement date using the volume weighted average price of the Shares on the TSX for the last five (5) trading days (as opposed to the market value of the Shares on the TSX for the past 20 trading days, as it is the case under the legacy PSU Plan and RSU Plan).

*Stock Options*

All Stock Options granted under the Omnibus Incentive Plan have an exercise price equal to the volume weighted average trading price of the Shares on the TSX for the five (5) trading days before the date of the grant. A Stock Option shall be exercisable during a period established by the HRC which shall not be more than ten (10) years from the grant of the Stock Option. The Omnibus Incentive Plan provides that the exercise period shall automatically be extended if the date on which it is scheduled to terminate shall fall during a black-out period or within nine (9) trading days following the end of a black-out period. In such cases, the extended exercise period shall terminate ten (10) trading days after the last day of the black-out period.

For detailed disclosure pertaining to the terms and conditions of the Omnibus Incentive Plan, **see Appendix D titled "Summary of the Omnibus Incentive Plan**". A complete copy of the Omnibus Incentive Plan can be accessed on SEDAR+ at **<u>www.sedarplus.ca</u>** or on EDGAR at **<u>www.sec.gov</u>.**

***Executive Deferred Share Unit Plan***

---

| | |
|:---|:---|
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;—Executive DSU Plan helps our executives build their Share ownership in CAE.<br>—Alows for elective deferral of STIP to DSUs.<br>—One DSU is equal in value to one Share of CAE. | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;—DSUs are only payable when the executive leaves CAE.<br>—Executive DSU plan is non-dilutive as all DSUs are paid out in cash. |

---

In FY2017, CAE adopted an Executive Deferred Share Unit Plan ("Executive DSU Plan"). The purpose of the plan is to attract and retain talented individuals to serve as officers and executives of the Company and to help them build their Share ownership in CAE, and to promote a greater long-term alignment of interests between the executives and the Shareholders of the Company.

Canadian and US-based executives can elect to defer a portion of or their entire short-term incentive payment to Executive DSUs annually.

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Section 7 – Executive Compensation

Each DSU has the same value as a Share of CAE. The DSUs accrue dividend equivalents payable in additional DSUs in an amount equal to dividends paid on Shares. The DSUs are only redeemable when the executive leaves the Company. Upon or within a defined period following the termination of their employment, DSU holders are entitled to receive a lump sum cash payment equal to the number of DSUs credited to their account as of that date multiplied by the Fair Market Value of one (1) Share on the settlement date.

***Inactive Equity-Based Plans with Legacy Participants***

Some NEOs have outstanding participation in the following long-term incentive plans, which are no longer active (no further awards are made under the plans) but have yet to be fully paid out.

*Fiscal 2005 Deferred Share Unit Plan*

In FY2005, CAE adopted a Long-Term Incentive Deferred Share Unit Plan ("LTUP") for executives of CAE and its affiliates that, as amended from time to time, applies to all grants made thereafter. No FY2005 Long-Term Incentive Deferred Share Units ("LTUs") have been granted by CAE since FY2014. All LTUs are fully vested for remaining plan participants, having vested in 20% increments over five (5) years, commencing one (1) year after the grant date. LTUs accrue dividend equivalents payable in additional units in amounts equal to dividends paid on Shares. LTUs are only redeemable in cash following the unit holder's retirement or termination of employment at the market value of Shares on the TSX on the settlement date.

*Fiscal 2004 Deferred Share Unit Plan*

In FY2004, CAE adopted a Long-Term Incentive Deferred Share Unit Plan ("FY2004 LTUP") for executives of CAE and its affiliates to partially replace the grant of options under CAE's ESOP. No FY2004 Long-Term Incentive Deferred Share Units ("FY2004 LTUs") have been granted by CAE since FY2004. All FY2004 LTUs are fully vested for remaining plan participants, having vested in 25% increments over four (4) years, commencing one (1) year after the grant date. FY2004 LTUs accrue dividend equivalents payable in additional units in amounts equal to dividends paid on Shares. FY2004 LTUs are only redeemable in cash following the unit holder's retirement or termination of employment at the market value of Shares on the TSX on the settlement date.

*Fiscal 2015 Performance Share Unit Plan* 

In FY2015, CAE adopted a Performance Share Unit Plan ("PSU Plan") for executives and senior management of CAE and its subsidiaries. Under the PSU Plan, a PSU has the same value as a Share of CAE. PSUs vest three years from the grant date, provided that the participant is employed by the Company on the vesting date and the performance targets are achieved.

PSUs granted under the PSU Plan are redeemed at the average fair market value of the Shares on the TSX for the 20 trading days preceding the final vesting date of the grant, Qualifying Event date or such other date as may be determined by the Human Resource Committee from time to time.

The PSU Plan is an unfunded plan and non-dilutive as all vested PSUs are paid out in cash. Therefore, no disclosure of the annual burn rate is provided. Awards granted under the PSU plan remain outstanding and governed by the terms of the PSU Plan, but no new awards will be granted under the PSU Plan. For details concerning the treatment of PSUs following executive termination, resignation, retirement and Change of Control, please refer to **Section 7 – Executive Compensation - Compensation of our Named Executive Officers – Termination and Change of Control Benefits**.

*Fiscal 2015 time-based Restricted Share Unit Plan* 

In FY2015, CAE adopted a time-based Restricted Share Unit Plan ("RSU Plan") for executives and senior management of CAE and its subsidiaries. Under the RSU Plan, an RSU has the same value as a Share of CAE. RSUs are granted for a three-year period and vest on the third anniversary of the grant if the participant remains employed with CAE until that time. Vested RSUs are redeemed at the average fair market value of the Shares on the TSX for the 20 trading days preceding the final vesting date of the grant, Qualifying Event date or such other date as may be determined by the HRC from time to time.

The RSU Plan is an unfunded plan and non-dilutive as all vested RSUs are paid out in cash. Therefore, no disclosure of the annual burn rate is provided. Awards granted under the RSU Plan remain outstanding and governed by the terms of the RSU Plan, but no new awards will be

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Section 7 – Executive Compensation

granted under the RSU Plan. For details concerning the treatment of RSUs following executive termination, resignation, retirement and Change of Control, please refer to **Section 7 – Executive Compensation – Compensation of our Named Executive Officers – Termination and Change of Control Benefits**.

*Employee Stock Option Plan* 

CAE adopted the Amended and Restated Employee Stock Option Plan ("ESOP"), to provide key employees of CAE with an opportunity to purchase Shares and to benefit from the related Share price appreciation, closely aligning the interests of employees with those of Shareholders. Stock Options increase the ability of CAE to attract, retain and reward individuals with exceptional skills.

Stock Options have value only to the extent the Share price increases, so provide a transparent long-term incentive vehicle that directly aligns executives with Shareholder interests in Share price growth over the long-term. CAE's Stock Options vest 25% per year have a term of seven years, to reward long term Share price growth.

The HRC establishes rules and guidelines for the administration of the ESOP, selects the employees to whom awards are granted and the number of Shares covered by such awards, sets the terms and conditions of awards and cancels, suspends and amends awards. The HRC has the sole discretion to make determinations under, and to interpret, the ESOP.

The ESOP permits, at the discretion of the HRC, the surrender and cancellation without re-issue of an in-the-money Stock Option for cash equal to the fair market value of the Share underlying the Stock option less the Option exercise price, in lieu of the Share itself (the fair market value of a Share is the closing price of a Share on the TSX on the trading day on which the election is made).

For detailed disclosure of the terms and conditions of the ESOP, see Appendix C titled "Summary of the Employee Stock Option Plan". A complete copy of the ESOP can be accessed on SEDAR+ at **<u>www.sedarplus.ca</u>** or on EDGAR at **<u>www.sec.gov</u>**.

***Securities Authorized for Issuance under the Equity Compensation Plans***

The following table provides information as at March 31, 2025 on the Company's compensation plans under which equity securities of the Company are authorized for issuance.

---

| | | | |
|:---|:---|:---|:---|
|  | Number of securities to be issued upon exercise of outstanding options, warrants and rights<br>(#)<br>A | Weighted-average exercise price of outstanding options, warrants and rights ($)<br>B | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column A)<br>(#)<br>C |
| **Equity compensation plans approved by securityholders** | **Equity compensation plans approved by securityholders** | **Equity compensation plans approved by securityholders** | **Equity compensation plans approved by securityholders** |
| Employee Stock Option Plan ("ESOP") | 2780310 | 29.23 | 0 |
| Omnibus Incentive Plan<sup>1</sup> | 3187282 | 26.88 | 6726922 |
| **Equity compensation plans not approved by securityholders** | **Equity compensation plans not approved by securityholders** | **Equity compensation plans not approved by securityholders** | **Equity compensation plans not approved by securityholders** |
|  | - | - | - |
| **Total** | 5967592 | - | 6726922 |

---

&nbsp;&nbsp;&nbsp;&nbsp;1.&nbsp;&nbsp;&nbsp;&nbsp;Under the terms of the Omnibus Incentive Plan, the Company has the option to settle Stock Options in Shares issued from treasury and PSUs and RSUs in Shares (either issued from treasury or purchased on the open market), in cash or in a combination thereof.

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Section 7 – Executive Compensation

The following table details the annual burn rate (i.e., the ratio of securities granted vs CAE's issued and outstanding Shares) for each of the three most recently completed fiscal years

---

| | | | |
|:---|:---|:---|:---|
|  | 2025 | 2024 | 2023 |
| Employee Stock Option Plan ("ESOP") | 0% | 0% | 0.20% |
| Omnibus Incentive Plan<sup>1</sup> | 0.65% | 0.56% | - |

---

&nbsp;&nbsp;&nbsp;&nbsp;1.&nbsp;&nbsp;&nbsp;&nbsp;The burn rate assumes that PSUs will vest based on a performance multiplier of 100%. If we assume that the PSUs will vest based on our maximum performance multiplier of 200%, the burn rate would increase to 0.93%. The burn rate also assumes that all awards will be settled in Shares issued from treasury. However, under the terms of the Omnibus Incentive Plan, CAE has the option to settle PSUs and RSUs through purchases on the open market or in cash.

This burn rate indicates the number of Stock Options, PSUs and RSUs granted in each year as a percentage of the weighted average number of securities outstanding in the applicable fiscal year. CAE has monitored its long-term dilution by limiting the equity compensation to reasonable awards under its equity programs.

As at March 31, 2025, the number of Shares issued under the Omnibus Incentive Plan since its adoption was 85,796 and the total number of outstanding share-settled securities awarded under the Omnibus Incentive Plan was 3,187,282 (representing 1.00% of the issued and outstanding Shares as at such date). This leaves 6,726,922 share-settled securities remaining available for grant (representing 2.10% of the issued and outstanding Shares as at March 31, 2025).

---

| | | | |
|:---|:---|:---|:---|
| Plan  | Plan Maximum<sup>1</sup>  | Outstanding Securities Awarded<sup>2</sup> | Remaining Securities Available for Grant<sup>3</sup> |
| Employee Stock Option Plan ("ESOP")<sup>4</sup> | 0 (0%) | &nbsp;&nbsp;&nbsp;0 (0%) | &nbsp;&nbsp;&nbsp;0 (0%) |
| Omnibus Incentive Plan | 10,000,000 (3.12%) | &nbsp;&nbsp;&nbsp;3,187,282 (1.00%) | &nbsp;&nbsp;&nbsp;6,726,922 (2.10%) |

---

&nbsp;&nbsp;&nbsp;&nbsp;1.&nbsp;&nbsp;&nbsp;&nbsp;The maximum number of securities issuable under each equity compensation plan expressed as a fixed number (together with the percentage this number represents relative to the weighted average number of issued and outstanding Shares as of March 31, 2025).

&nbsp;&nbsp;&nbsp;&nbsp;2.&nbsp;&nbsp;&nbsp;&nbsp;The number of outstanding share-settled securities awarded under each equity compensation plan as of March 31, 2025 (together with the percentage this number represents relative to the weighted average number of issued and outstanding Shares as of the same date).

&nbsp;&nbsp;&nbsp;&nbsp;3.&nbsp;&nbsp;&nbsp;&nbsp;The number of securities under each equity compensation plan that are available for grant as of March 31, 2025 (together with the percentage this number represents relative to the weighted average number of issued and outstanding Shares as of the same date).

&nbsp;&nbsp;&nbsp;&nbsp;4.&nbsp;&nbsp;&nbsp;&nbsp;Following approval of the Omnibus Incentive Plan in 2023, no grants were made under the Employee Stock Options plan.

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Section 7 – Executive Compensation

**Pension, Benefits and Perquisites**

<u>—Promote long-term employment with the Company.—Pensions payable under the Supplementary Pension Plan are conditional upon compliance with non-competition and non-solicitation clauses.—No extra years of service are generally granted under the pension plans.</u>

Eligible employees participate in the Retirement Plan for Employees of CAE Inc. and associated companies. Executives at a vice president level and higher participate in the Pension Plan for Designated Executive Employees of CAE Inc. and associated companies (the "Designated Pension Plan"), and in the Supplementary Pension Plan of CAE Inc. and associated companies (the "Supplementary Pension Plan"). The Designated Pension Plan is a defined benefit plan to which CAE and participants contribute.

Pensions payable under the Supplementary Pension Plan are paid directly by CAE. See **Section 7 – Executive Compensation – Compensation of our Named Executive Officers – Pension Arrangements**" for details about the value of the accrued benefit to each of the NEOs. Except as discussed in "Change in Control Contracts" below, CAE does not grant extra years of credited service under its pension plans. Receipt of pension benefits under the Supplementary Pension Plan is conditional upon compliance with non-competition and non-solicitation clauses.

***Employee Stock Purchase Plan***

<u>Provide employees with a Share ownership building vehicle and a savings vehicle beyond the pension plan.</u>

Under the CAE Employee Stock Purchase Plan, employees may make contributions towards the purchase of Shares of up to 18% of their annual base salary. Under the plan, CAE contributes $1 for every $2 of employee contributions, to a maximum contribution of 3% of the participant's annual base salary.

***Change in Control Contracts***

All NEOs are entitled to termination of employment benefits following a Change of Control of CAE if the executive's employment is terminated without cause within two years following the Change of Control. This is to safeguard the Company's normal course of business in case of Change of Control. See **Section 7 – Executive Compensation - Compensation of our Named Executive Officers – Termination and Change of Control Benefits** for a summary of the impact of various events on the different compensation programs for the NEOs and details about the approximate incremental value that could be realized by a NEO following termination or a Change of Control event.

***Perquisites***

Flexible perquisites provide executives with a cash allowance to cover certain expenses such as vehicle expenses, and health and well-being. Such allowance is typical for senior executive positions and is capped at predetermined levels by position.

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Section 7 – Executive Compensation

FY2025 Compensation Outcomes

Our FY2025 financial performance yielded outcomes that aligned with CAE's established performance metrics. Adjusted EPS\* and Revenue results were key drivers in determining the payout levels for both the FY2025 STIP and LTIP incentive plans. Reflecting CAE's market positioning and strategic efforts, the FY2025 STIP CAE performance multiplier and PSU performance multiplier demonstrated alignment with our performance goals. This indicates a positive connection between our financial achievements and the incentive plan outcomes, while also highlighting areas for continued growth and improvement.

**Base salaries**

The salaries of the President and CEO and other NEOs are determined in accordance with CAE's compensation philosophy and policy, and are reviewed and approved, in the case of the President and CEO, annually by the independent members of the Board of Directors. The HRC reviews benchmark data to ensure that the President and CEO's and his direct reports' total direct compensation (base salary, short-term and long-term incentives) are in line with CAE's compensation philosophy. The changes to base salary are market competitive, based on benchmarking relative to our compensation peer group and reflect individual performance, experience, scope and criticality of the role and internal equity considerations. The salary increases below were determined at the start of FY2025 and were based on benchmarking conducted by the Committee's independent compensation advisor.

The table below outlines base salaries of all NEOs:

---

| | | | |
|:---|:---|:---|:---|
| NEO | FY2024 Base Salary<sup>1</sup> ($) | FY2025 Base Salary<sup>1</sup> ($) | Increase |
| **Marc Parent** | &nbsp;&nbsp;&nbsp;1323000 | &nbsp;&nbsp;&nbsp;1323000 | &nbsp;&nbsp;&nbsp;0% |
| **Constantino Malatesta** <sup>2</sup> | &nbsp;&nbsp;&nbsp;360000 | &nbsp;&nbsp;&nbsp;500000 | &nbsp;&nbsp;&nbsp;39% |
| **Carter Copeland** <sup>3</sup> | &nbsp;&nbsp;&nbsp;729750 | &nbsp;&nbsp;&nbsp;834000 | &nbsp;&nbsp;&nbsp;14% |
| **Mark Hounsell** | &nbsp;&nbsp;&nbsp;507970 | &nbsp;&nbsp;&nbsp;533370 | &nbsp;&nbsp;&nbsp;5% |
| **Nick Leontidis** <sup>4</sup> | &nbsp;&nbsp;&nbsp;595980 | &nbsp;&nbsp;&nbsp;700000 | &nbsp;&nbsp;&nbsp;17% |
| **Sonya Branco** <sup>5</sup> | &nbsp;&nbsp;&nbsp;594250 | &nbsp;&nbsp;&nbsp;594250 | &nbsp;&nbsp;&nbsp;0% |

---

&nbsp;&nbsp;&nbsp;&nbsp;1.&nbsp;&nbsp;&nbsp;&nbsp;Mr. Copeland's base salary was converted to Canadian dollars using the FY2025 average exchange rate of 1.39.

&nbsp;&nbsp;&nbsp;&nbsp;2.&nbsp;&nbsp;&nbsp;&nbsp;As part of CAE's succession plan, Mr. Malatesta, previously the Chief Accounting Officer and Vice-President, Controller Office, became interim CFO following Ms. Branco's departure on August 31, 2024. The increase in his base salary reflects his new responsibilities as interim CFO.

&nbsp;&nbsp;&nbsp;&nbsp;3.&nbsp;&nbsp;&nbsp;&nbsp;Mr. Copeland was appointed Chief Strategy and Performance Officer in May 2024. His FY2025 salary reflects an increase received in May 2024 to recognize his additional responsibilities, including overseeing the Global Procurement and Supply Management function, Structured Finance and M&A function, and leading enterprise-wide special projects for the Office of the CEO.

&nbsp;&nbsp;&nbsp;&nbsp;4.&nbsp;&nbsp;&nbsp;&nbsp;Mr. Leontidis was promoted to Chief Operating Officer (COO) in May 2024. His base salary was increased to recognize his significant new responsibilities.

&nbsp;&nbsp;&nbsp;&nbsp;5.&nbsp;&nbsp;&nbsp;&nbsp;Ms. Branco left the company at the end of August 2024. The compensation disclosed above represents her annualized base salary.

\* Non-IFRS and Other Financial Measures (see Appendix B).

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Section 7 – Executive Compensation

**Short Term Incentive Plan**

***Corporate Performance***

75% of short-term incentive awards for the President and CEO and other NEOs is based on the achievement of CAE performance measures, namely adjusted EPS\* and revenue. Details on these measures are described under **Section 7 – Executive Compensation – Compensation Discussion and Analysis – Executive Compensation Programs – Annual Incentive Program Design**.

The table below illustrates the respective weights for each FY2025 CAE corporate performance measure, as well as the actual results and related payout levels.

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| &nbsp;&nbsp;Performance Measure<sup>1</sup> | Threshold (50%) | Target (100%) | Maximum (200%) | Actual Performance<sup>2</sup> | Weighting | Score |
| **Adjusted EPS\*** | $1.03 | $1.20 | $1.28 | $1.21 | 67% | 113% |
| **Revenue** | $4,919M | $5,519M | $5,599M | $5,345M | 33% | 85% |
| **STIP Payout** |  |  |  |  |  | **103%** |

---

&nbsp;&nbsp;&nbsp;&nbsp;1.&nbsp;&nbsp;&nbsp;&nbsp;If the adjusted EPS\* target is not met, the corporate performance multiplier is capped at 100%.

&nbsp;&nbsp;&nbsp;&nbsp;2.&nbsp;&nbsp;&nbsp;&nbsp;For incentive plans purposes, adjusted EPS\* and revenue are normalized for foreign exchange and adjusted to exclude the additional finance expense on borrowings to finance the SIMCOM transaction and the gain on fair value remeasurement of SIMCOM stemming from the consolidation of SIMCOM. In addition, revenue includes proportionate revenue generated by Joint Ventures. The numbers presented in this column reflect such adjustments. Actual results before these adjustments are as follows: $1.21 for adjusted EPS and $4,708M for revenue.

The remaining 25% of the NEOs' annual incentive is awarded based on pre-determined operational and financial measures specific to each executive. As with other performance measures, individual performance is assessed between 0% to 200%. For FY2025, the individual performance factor for NEOs varied between 160% and 200%. The HRC determined the President and CEO's individual performance factor to be 178% which was recommended to and approved by the Board. The HRC reviewed and approved the President and CEO's recommendations on the individual performance factors for his direct reports following a detailed discussion about corporate and individual performance (see **Section 7 – Executive Compensation – Compensation Discussion and Analysis – Determination of NEOs Individual Performance**).

In assessing the individual performance factor for the CEO, the HRC assesses the CEO's performance relative to specific financial and operational CEO performance goals that are set at the start of the fiscal year. The specific targets for these goals are not disclosed as they include competitively sensitive information. However, the achievements relevant to the HRC's consideration and assessment are listed below in Section 7. There were 7 specific categories of objectives for the CEO for FY2025, including but not limited to: growth, orders, profitability, cash generation & deleveraging, stakeholder engagement, sustainability, and innovation. Mr. Parent's performance relative to the established goals resulted in an individual performance assessment of 178%. This resulted in an overall short-term incentive payout factor of 122% of target for the CEO, which reflects an approximate $1.8M increase in short-term incentive compensation relative to prior year, primarily due to the incentive payout of 16% of target received in FY2024. This increase is aligned with the HRC's assessment of CAE's financial performance.

\* Non-IFRS and Other Financial Measures (see Appendix B).

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Section 7 – Executive Compensation

***Individual Payout***

The table below shows the calculation of the FY2025 STIP payout to each NEO:

---

| | | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|
| &nbsp;&nbsp;NEO | Year-end Base Salary<sup>1</sup> | X | Target STIP<br>(% of base salary) | X | Corporate Performance Factor (75%) | + | Individual Performance Factor (25%) | = | 2025 STIP<br>Payout ($) |
| **Marc Parent** | $1323000 | X | 125% | X | 103% | + | 178% | = | $2013441 |
| **Constantino Malatesta** | $500000 | X | 75% | X | 103% | + | 160% | = | $439688 |
| **Carter Copeland** | $834520 | X | 75% | X | 103% | + | 160% | = | $733399 |
| **Mark Hounsell** | $533370 | X | 55% | X | 103% | + | 200% | = | $373292 |
| **Nick Leontidis** | $700000 | X | 85% | X | 103% | + | 200% | = | $757138 |
| **Sonya Branco** <sup>2</sup> | $594250 | X | 75% | X | 103% | + | 100% | = | $191026 |

---

&nbsp;&nbsp;&nbsp;&nbsp;1.&nbsp;&nbsp;&nbsp;&nbsp;Annual base salary as of March 31, 2025. For Mr. Copeland, the base salary was converted to Canadian dollars using the FY2025 average exchange rate of 1.39.

&nbsp;&nbsp;&nbsp;&nbsp;2.&nbsp;&nbsp;&nbsp;&nbsp;Ms. Branco's base salary reflects her annualized base salary. STIP payout amount reflects the amount for the period between April 1, 2024 and August 31, 2024.

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Section 7 – Executive Compensation

**Long Term Incentive Plan**

***FY2025 LTIP - Awards Granted in June 2024***

The table below sets out the LTIP ranges and actual awards to the NEOs granted in fiscal year 2025:

---

| | | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|
| NEOs | FY2025<br>LTIP award (% of base salary) | Salary at time of grant ($)<sup>5</sup> | FY2025<br>LTIP award Value ($) | Weighting4 | Weighting4 | Weighting4 | Weighting4 | Weighting4 | Weighting4 |
| NEOs | FY2025<br>LTIP award (% of base salary) | Salary at time of grant ($)<sup>5</sup> | FY2025<br>LTIP award Value ($) | PSUs (60%)<sup>1, 4</sup> | PSUs (60%)<sup>1, 4</sup> | RSUs (20%)<sup>2,4</sup>  | RSUs (20%)<sup>2,4</sup>  | Stock Options (20%)<sup>3</sup> | Stock Options (20%)<sup>3</sup> |
| NEOs | FY2025<br>LTIP award (% of base salary) | Salary at time of grant ($)<sup>5</sup> | FY2025<br>LTIP award Value ($) | ($) | (#) | ($) | (#) | ($) | (#) |
| **Marc Parent** | 585% | 1323000 | 7739600 | 4643760 | 182681 | 1547920 | 60894 | 1547920 | 161747 |
| **Constantino Malatesta** | 50% | 360000 | 180000 | 108000 | 4249 | 36000 | 1416 | 36000 | 3762 |
| **Carter Copeland** | 200% | 821160 | 1642320 | 985392 | 38764 | 328464 | 12921 | 328464 | 34322 |
| **Mark Hounsell** | 150% | 533370 | 800055 | 480033 | 18884 | 160011 | 6295 | 160011 | 16720 |
| **Nick Leontidis**<sup>6</sup> | 275% | 700000 | 1925000 | 1155000 | 45437 | 385000 | 15146 | 385000 | 40230 |
| **Sonya Branco** | 100% | 594250 | 594250 | 356550 | 14026 | 118850 | 4675 | 118850 | 12419 |

---

&nbsp;&nbsp;&nbsp;&nbsp;1.&nbsp;&nbsp;&nbsp;&nbsp;PSU awards under the Omnibus Plan (see Section 7 – Executive Compensation – Compensation Discussion and Analysis – Omnibus Incentive Plan for details). Under this plan, the granted units may vest in June 2027, subject to CAE's performance compared to payout grids approved by the HRC and the participant's continued employment with CAE. Depending on the overall performance each year during the performance period, the target rate of granted units will be multiplied by a factor ranging from 0% to 200%. Vested PSUs will be settled in Shares (either issued from treasury or purchased on the open market), in cash or in a combination thereof.

&nbsp;&nbsp;&nbsp;&nbsp;2.&nbsp;&nbsp;&nbsp;&nbsp;RSU awards under the Omnibus Plan (see Section 7 – Executive Compensation – Compensation Discussion and Analysis – Omnibus Incentive Plan for details). Under this plan, 100% of the granted units will vest in June 2027, subject to the participant's continued employment with CAE. Vested RSUs will be settled in Shares (either issued from treasury or purchased on the open market), in cash or in a combination thereof.

&nbsp;&nbsp;&nbsp;&nbsp;3.&nbsp;&nbsp;&nbsp;&nbsp;Stock options awards under the Omnibus Plan (see Section 7 – Executive Compensation – Compensation Discussion and Analysis – Omnibus Incentive Plan for details). Under this plan options are granted with an exercise price equal to the weighted average price per Share on the TSX on the five trading days immediately preceding the grant date. At each of the first four anniversaries of the grant, 25% of the award vests and becomes exercisable. Strike price for FY2025 stock options is $25.42.

&nbsp;&nbsp;&nbsp;&nbsp;4.&nbsp;&nbsp;&nbsp;&nbsp;The grant price on grant date is $25.42, representing the weighted average price of the Shares on the TSX on the five trading days immediately preceding the grant date.

&nbsp;&nbsp;&nbsp;&nbsp;5.&nbsp;&nbsp;&nbsp;&nbsp;Annual base salary at time of grant (June 2024). For Mr. Copeland, the base salary was converted to Canadian dollars using a conversion exchange rate of 1.37 on grant date.

&nbsp;&nbsp;&nbsp;&nbsp;6.&nbsp;&nbsp;&nbsp;&nbsp;In light of the organizational changes announced in fall of 2024, a special one-time LTIP award was offered to Nick Leontidis in addition to his annual grant to recognize the pivotal role he has to play in our continued success. The value of this one-time grant represents $1,295,000, equivalent to 185% of his base salary and was awarded in the form RSUs on November 29, 2024. 100% of the granted units will vest on June 30, 2026, and would not be payable should Mr. Leontidis' employment with CAE end prior to the vesting of these units. Vested RSUs will be settled in Shares (either issued from treasury or purchased on the open market), in cash or in a combination thereof.

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Section 7 – Executive Compensation

***FY2023 PSU (Performance Period Ending on March 31, 2025)***

The below table presents the PSU performance and related payout details of the fiscal year covered in this disclosure. The vesting of the PSUs granted in FY2023 was tied to the performance of two financial metrics, adjusted EPS and free cash flow\*, weighted 75% and 25%, respectively. Three-year financial targets were determined on the basis of the strategic plan approved by the Board of Directors and payout grids were set for each metric and approved by the HRC. For each metric, the target rate of granted units is multiplied by a factor ranging from 0% to 250%. The overall payout multiplier continues to range from 0% to 200%. In accordance with the terms of the FY2023 PSU Plan, the HRC reviewed CAE's adjusted EPS\* and free cash flow\* performance for the fiscal year ended March 31, 2025, and approved the following results for PSUs granted in FY2023:

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
|  | Threshold<br>(0%) | Target<br>(100%) | Maximum (250%) | Actual Performance | Weighting | Score |
| **Adjusted EPS\* - FY2023** | $0.94 | $1.09 | $1.34 | $0.84 | 1/6 | 0% |
| **Adjusted EPS\* - FY2024** | $1.17 | $1.32 | $1.57 | $0.89 | 1/3 | 0% |
| **Adjusted EPS\* - FY2025** | $1.36 | $1.51 | $1.76 | $1.21 | 1/2 | 0% |
| **FY2023 Adjusted EPS\* Multiplier** |  |  |  |  |  | **0%** |

---

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
|  | Threshold<br>(0%) | Target<br>(100%) | Maximum (250%) | Actual Performance<sup>1</sup> | Weighting | Payout Level |
| **Free Cash Flow – Cumulative FY2023 to FY2025** | $999 | $1149 | $1374 | $1576  | 100% | 250% |
| **FY2025 PSU Multiplier** |  |  |  |  |  | **63%** |

---

1.&nbsp;&nbsp;&nbsp;&nbsp;For incentive plan purposes, the cumulative FY2023 to FY2025 free cash flow has been adjusted following the Healthcare divestiture. The actual result before this adjustment is $1,568M.

The Committee considered that the overall performance multiplier of 63% of target for FY2023 PSU with the resulting 3-year performance period ending on March 31, 2025 appropriately linked compensation outcomes with CAE's performance.

The below table shows for each eligible NEO the payout value of FY2023 PSU grants with the resulting 3-year performance period ending March 31, 2025. The actual amounts paid out to each eligible NEO in June 2025 for PSUs granted in FY2023 are as follow:

---

| | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|
| &nbsp;&nbsp;NEO | FY2023<br>PSUs award<br>(# of units) | X | FY2023 PSUs<br>Performance Factor (%) | X | Market Share Price ($) | = | PSU Value<sup>3</sup> ($) |
| **Marc Parent** | 109550 | X | 63% | X | $35.52 | = | $2451466 |
| **Constantino Malatesta** | 2380 | X | 63% | X | $35.52 | = | $53259 |
| **Carter Copeland** | 15660 | X | 63% | X | $35.52 | = | $350433 |
| **Mark Hounsell** | 13010 | X | 63% | X | $35.52 | = | $291133 |
| **Nick Leontidis** | 25440 | X | 63% | X | $35.52 | = | $569286 |
| **Sonya Branco** | 24350 | X | 63% | X | $35.52 | = | $544895 |

---

&nbsp;&nbsp;&nbsp;&nbsp;1.&nbsp;&nbsp;&nbsp;&nbsp;Mr. Malatesta was appointed interim CFO during FY2025, therefore, his FY2023 award reflects his previous role as Chief Accounting Officer and Vice-President, Controller Office.

&nbsp;&nbsp;&nbsp;&nbsp;2.&nbsp;&nbsp;&nbsp;&nbsp;PSUs were redeemed using the average fair market value of the Shares on the TSX for the 20 trading days preceding the final vesting date of the grant ($35.52). <br>\* Non-IFRS and Other Financial Measures (see Appendix B).

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Section 7 – Executive Compensation

Determination of NEOs' Individual Performance

As previously discussed, this section paints a portrait of the major achievements of each NEO for FY2025. These were the main key performance indicators (KPIs) in determining the individual performance multiplier applicable to their annual incentive awards.

---

| | |
|:---|:---|
| ![image_32.jpg](image_32.jpg)<br>**Marc Parent**<br>President and Chief Executive Officer  | &nbsp;&nbsp;&nbsp;Mr. Parent has been President and CEO of CAE Inc. since 2009. Prior to that, he held several leadership positions since joining CAE in 2005, including Group President, Simulation Products and Military Training & Services, and Executive Vice President and Chief Operating Officer. He has 40 years of experience in the aerospace industry, having previously held positions with Canadair and Bombardier Aerospace in Canada and the United States.<br>Mr. Parent has been honoured with many awards. In 1999, he was named one of Canada's Top 40 under 40 Leaders. In 2011, he was named Canadian Defence Review's Defence Executive of the year (which he won again in 2020). He was named CEO of the Year by Les Affaires newspaper in 2018. In 2019, he received the Aerospace Industries Association of Canada's James C. Floyd Award. In 2020, Mr. Parent was granted the Order of Canada. In 2021, he was awarded the Prix Prospère by the Conseil du patronat du Québec. In 2022, Mr. Parent was inducted into Canada's Aviation Hall of Fame, named Industry Leader of the Year by the Living Legends of Aviation , inducted into Québec's Air and Space Hall of Fame, named a Knight of the Ordre national du Québec, and awarded Aviation Week's Philip J. Klass Award for Lifetime Achievement. And in January 2024, he was inducted as a Living Legend of Aviation, a group of 100 remarkable people of extraordinary accomplishment in aviation.<br>Mr. Parent is a graduate of mechanical engineering from Montreal's École Polytechnique and of the Harvard Business School's Advanced Management Program. He was awarded an Honourary Doctorate by École Polytechnique and is an active pilot holding an Airline Transport Pilot Licence from Transport Canada. |
| &nbsp;&nbsp;FY2025 Goals <br>**Growth**: Continue to drive attractive growth vis-à-vis market rates by leveraging recent investments in capacity and the introduction of innovative, customer-focused product offerings.<br>**Orders:** Continue to build backlog in growing markets, leveraging market leadership positions to further expand market share.<br>**Expand profitability and retire program risk**: Close out legacy program risks post the re-baselining of D&S in FY2024 and further expand margins across the company through strong operational execution. <br>**Cash generation and deleveraging:** Generate strong free cash flow\* through consistent operational performance, improvements in working capital management, and disciplined capital investment. Continue to drive de-leveraging efforts toward the achievement of long-term targets.<br>**Stakeholder engagement**: Expand CAE's prominence with key stakeholders, including regulators, governments and OEM partners.<br>**Sustainability**: Continue to grow CAE's competitive advantage through sustainability, with a particular focus on decarbonization and workforce efforts. <br>**Innovation**: Develop and deploy industry-leading technology solutions to expand customer success, drive mission-focused capabilities, and widen CAE's competitive moats. | &nbsp;&nbsp;&nbsp;Mr. Parent has been President and CEO of CAE Inc. since 2009. Prior to that, he held several leadership positions since joining CAE in 2005, including Group President, Simulation Products and Military Training & Services, and Executive Vice President and Chief Operating Officer. He has 40 years of experience in the aerospace industry, having previously held positions with Canadair and Bombardier Aerospace in Canada and the United States.<br>Mr. Parent has been honoured with many awards. In 1999, he was named one of Canada's Top 40 under 40 Leaders. In 2011, he was named Canadian Defence Review's Defence Executive of the year (which he won again in 2020). He was named CEO of the Year by Les Affaires newspaper in 2018. In 2019, he received the Aerospace Industries Association of Canada's James C. Floyd Award. In 2020, Mr. Parent was granted the Order of Canada. In 2021, he was awarded the Prix Prospère by the Conseil du patronat du Québec. In 2022, Mr. Parent was inducted into Canada's Aviation Hall of Fame, named Industry Leader of the Year by the Living Legends of Aviation , inducted into Québec's Air and Space Hall of Fame, named a Knight of the Ordre national du Québec, and awarded Aviation Week's Philip J. Klass Award for Lifetime Achievement. And in January 2024, he was inducted as a Living Legend of Aviation, a group of 100 remarkable people of extraordinary accomplishment in aviation.<br>Mr. Parent is a graduate of mechanical engineering from Montreal's École Polytechnique and of the Harvard Business School's Advanced Management Program. He was awarded an Honourary Doctorate by École Polytechnique and is an active pilot holding an Airline Transport Pilot Licence from Transport Canada. |
| FY2025 Achievements |  |
| **Growth**: Generated revenues of ~$4.7 billion, totaling 10% growth year-over-year while surpassing NPS targets in over 80% of our divisions. Also, successfully consolidated our ownership in the SIMCOM joint venture as part of a further expansion of CAE's growing market share in business aviation training.<br>**Orders**: Secured generational wins across the business, resulting in a 1.64x book-to-sales ratio\* for the year and a record year-end adjusted backlog of $20.1 billion.<br>**Expand profitability and retire program risk**: Successfully closed out three of the D&S legacy contracts during the year and positioned the business to continue closing out remaining contracts as planned in FY2026 and beyond. Additionally, oversaw a dramatic improvement in D&S operational performance and margins, highlighted by increasing guidance and by a 9.2% adjusted segment operating income margin\* in Q4, after several quarters of sequential improvement. Achieved consolidated adjusted segment operating income margin\* of 15.5% for the year. Restored investor confidence in the business, as reflected by strong stock price performance.<br>**Cash generation and deleveraging**: Generated full year free cash flow conversion\* of 211% through strong working capital performance and rigorous management of cash reinvestment throughout the course of FY2025. On the back of strong free cash flow\* performance, finished the year comfortably ahead of full-year net debt-to-adjusted EBITDA\* objectives, at 2.77x. Also, re-initiated cash returns to shareholders through effective normal course issuer bid share repurchases during the year. | **Stakeholder engagement**: CAE was named as a strategic partner to work with the Royal Canadian Air Force (RCAF) to develop and refine the Future Fighter Lead-in Training (FFLIT) program. CAE has also been named Canada's Top Defence Company by Canadian Defence Review for the third time in 2025.<br>**Sustainability**: Successfully transitioned CAE to an SBTi-focused decarbonization strategy aimed at steady reduction in overall carbon emissions through the use of rigorous longer-term targets and associated reduction strategies. CAE was also, once again, named as one of Canada's top 100 employers. <br>**Innovation**: Continued the successful rollout of CAE Connect in business aviation training and saw the initial certification of CAE's industry-leading Prodigy visual system. Also introduced new innovations in CAE Flightscape, including the launch of CAE's Unified Task Board. Additionally, successfully rolled out AI initiatives targeted at driving internal productivity enhancements as well as an improved customer experience in aviation training. Maintained a strong technology investment profile despite broader efforts to tighten and focus overall cash reinvestment for return optimization.  |

---

<br>\* Non-IFRS and Other Financial Measures (see Appendix B).

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Section 7 – Executive Compensation

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| | |
|:---|:---|
| ![cm.jpg](cm.jpg)<br>**Constantino Malatesta**<br>Interim Chief Financial Officer | &nbsp;&nbsp;&nbsp;Mr. Malatesta was appointed Interim Chief Financial Officer (CFO) of CAE in August 2024, assuming global responsibility for the Company's financial strategy and operations.<br>He leads a team of approximately 400 finance professionals across treasury; financial planning and budgeting; accounting; reporting; tax and enterprise performance. Mr. Malatesta acts as a strategic partner to the CEO, providing leadership to both the finance team and executive team to optimize CAE's financial resources while ensuring compliance with corporate statutory and regulatory requirements. Additionally, Mr. Malatesta collaborates with the Board of Directors and external stakeholders to effectively communicate CAE's strategy and results, building trust with internal and external stakeholders.<br>Transitioning seamlessly into the Interim CFO role in August of 2024 as part of CAE's succession plan, Mr. Malatesta aimed to make an immediate impact, deliver proven results, and lay a solid foundation to well position CAE for the future. He has prioritized deleveraging and balance sheet resiliency, enhanced cost controls, and leveraging technology to support data and insights informed decision making. <br>Mr. Malatesta has nearly two decades of financial leadership experience at CAE, having joined the Company in 2006. He most recently served as Chief Accounting Officer and Vice-President, Controller Office for eight years. In this capacity, Mr. Malatesta significantly contributed to the financial integrity, strategic growth and operational efficiency of the organization.<br>His responsibilities included overseeing statutory and regulatory external reporting requirements, treasury and debt management, managing global shared services and accounting tasks, implementing ERP systems, driving finance transformation initiatives, managing financial reporting and external audit engagements, participating in M&A projects, preparing strategic financial plans, and managing development of business partnerships and structures to grow the business.<br>Prior to joining CAE in 2006, Mr. Malatesta held various financial roles at Resolute Forest Products, and PricewaterhouseCoopers LLP. He holds a Chartered Professional Accountant designation in Canada and a Certified Public Accountant designation in the US (Illinois), along with a Bachelor of Commerce degree and a Graduate Diploma in Accountancy from Concordia University in Montreal, Quebec. |
| &nbsp;&nbsp;FY2025 Goals <br>**Execute on Deleveraging Strategy:** Focus on deleveraging to reinforce balance sheet resilience. <br>**Enhance Cash Generation:** Achieve increased cash flow generation and attain cash flow efficiency.<br>**Meet or Exceed Growth and Profitability Commitments:** Meet or exceed company financial targets and work with Business Unit leaders to deliver on growth objectives.<br>**Build a Capital Efficient Model:** Build a cohesive capital efficient model and process to help make decisions for immediate and accretive return on capital, and implement an effective system for tracking performance.<br>**Strengthen Internal Processes:** Enhance rigor and modernize key processes to improve net forecasting, cash management, and cost efficiencies.<br>**Optimize Organization Structure:** Optimize organization structure through Centre of Excellence and co-sourcing. <br>**Support Sustainability Commitments:** Expand leadership in carbon reduction efforts through focused initiatives, and contribute to enhancing culture and talent. | &nbsp;&nbsp;&nbsp;Mr. Malatesta was appointed Interim Chief Financial Officer (CFO) of CAE in August 2024, assuming global responsibility for the Company's financial strategy and operations.<br>He leads a team of approximately 400 finance professionals across treasury; financial planning and budgeting; accounting; reporting; tax and enterprise performance. Mr. Malatesta acts as a strategic partner to the CEO, providing leadership to both the finance team and executive team to optimize CAE's financial resources while ensuring compliance with corporate statutory and regulatory requirements. Additionally, Mr. Malatesta collaborates with the Board of Directors and external stakeholders to effectively communicate CAE's strategy and results, building trust with internal and external stakeholders.<br>Transitioning seamlessly into the Interim CFO role in August of 2024 as part of CAE's succession plan, Mr. Malatesta aimed to make an immediate impact, deliver proven results, and lay a solid foundation to well position CAE for the future. He has prioritized deleveraging and balance sheet resiliency, enhanced cost controls, and leveraging technology to support data and insights informed decision making. <br>Mr. Malatesta has nearly two decades of financial leadership experience at CAE, having joined the Company in 2006. He most recently served as Chief Accounting Officer and Vice-President, Controller Office for eight years. In this capacity, Mr. Malatesta significantly contributed to the financial integrity, strategic growth and operational efficiency of the organization.<br>His responsibilities included overseeing statutory and regulatory external reporting requirements, treasury and debt management, managing global shared services and accounting tasks, implementing ERP systems, driving finance transformation initiatives, managing financial reporting and external audit engagements, participating in M&A projects, preparing strategic financial plans, and managing development of business partnerships and structures to grow the business.<br>Prior to joining CAE in 2006, Mr. Malatesta held various financial roles at Resolute Forest Products, and PricewaterhouseCoopers LLP. He holds a Chartered Professional Accountant designation in Canada and a Certified Public Accountant designation in the US (Illinois), along with a Bachelor of Commerce degree and a Graduate Diploma in Accountancy from Concordia University in Montreal, Quebec. |

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| | |
|:---|:---|
| FY2025 Achievements |  |
| Under Mr. Malatesta's leadership in 2025, CAE has significantly strengthened its financial position, optimized operations and supported sustainable growth and governance. In less than a year, he achieved milestones across several areas of CAE's strategic focus for FY2025.<br>Successfully executed a deleveraging strategy that focused on reducing debt and reducing finance expenses through disciplined organic investments, achieving a net debt-to-adjusted EBITDA\* leverage ratio of 2.77x.<br>Enhanced cash generation and attained cash flow efficiency and rigorous financial capital expenditures processes, including redesigned controls and reduced investments in non-cash working capital maximizing cash generation through small non-core asset divestitures. These efforts helped drive record free cash flow\* of $813.9 million, and a cash conversion rate\* of 211%, significantly exceeding management's previously stated cash conversion initial target of 100%.<br>Achieved growth and profitability commitments by collaborating with the executive team to implement strategies focused on helping the business meet its targets, optimizing CAE's insurance portfolio, consolidate CAE's ownership in its SIMCOM Aviation Training joint venture, and reducing corporate costs. This led to strong year-over-year adjusted EPS\* growth of 39%, EBITDA\* margin accretion, and improved adjusted segment operating income\* of 33% year-over-year. | Adopted a disciplined capital allocation approach by making prudent, balanced and incrementally accretive growth investments to capture key market opportunities and bolster CAE's global network of aviation-related training centres, optimizing the use of its resources and backing investment decisions with multi-year customer contracts.<br>Optimized the organization structure by clarifying responsibilities and expectations and ensuring consistency in roles across the finance function where necessary to enhance information flow, collaboration and overall decision making. Additionally, optimized people, technology and processes to drive cost efficiency and efficacy.<br>Strengthened internal process by leveraging data analytics to enhance financial processes and manage cost, including a refreshed financial planning approach to improve net forecasting accuracy, and enhanced rigor by redesigning and standardizing controls.<br>Supported sustainability commitments by contributing to CAE's sustainability goals, reinforcing stakeholder relations, supporting governance through the onboarding of new board members, and aiding in the development of a carbon pricing strategy. |

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\* Non-IFRS and Other Financial Measures (see Appendix B).

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Section 7 – Executive Compensation

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| | |
|:---|:---|
| ![image_191.jpg](image_191.jpg)<br>**Carter Copeland**<br>Chief Strategy and Performance Officer | &nbsp;&nbsp;&nbsp;Mr. Copeland was named CAE's Chief Strategy and Performance Officer in July 2024. In his role, he is responsible for cultivating strategic plans aimed at driving growth in key areas, as well as optimizing organizational performance. He works in partnership with CAE's Executive Management Committee, with a particular focus on the Company's growth agenda, as well as areas of resource allocation and organizational design. Additionally, he has responsibility for the ongoing evaluation of CAE's business portfolio and leads enterprise-wide special projects for the Office of the CEO. He also oversees CAE's Global Procurement and Supply Management organization, as well as the Structured Finance and M&A function. <br>Prior to joining CAE, Mr. Copeland served as the President and co- founder of Melius Research, an independent research, consulting, and data analytics firm. <br>Before co-founding Melius, Mr. Copeland was Managing Director and Senior Analyst covering the Global Aerospace and Defense sector for Barclays PLC. Prior to Barclays, he held various roles of increasing responsibility in the aerospace and defense research practice at Lehman Brothers. <br>Before beginning his career on Wall Street, Mr. Copeland served on the staff of the Federal Reserve Board of Governors in Washington, D.C., aiding in monetary policy work and conducting corporate finance research. <br>Mr. Copeland graduated with honours from the University of Alabama, with a degree in Economics. He also holds an MBA from Washington University in St. Louis, where he was a recipient of the prestigious Wood Fellowship. He is a Chartered Financial Analyst and formerly served as a member of the Corporate Leaders program on the Council of Foreign Relations. Additionally, he currently serves on the CIMG advisory board at the University of Alabama.<br>Mr. Copeland is a co-author of the book Lessons from the Titans. |
| &nbsp;&nbsp;FY2025 Goals <br>Set corporate strategic plans and oversee associated tracking/governance through application of a OneCAE framework. <br>Expand leadership responsibilities to encompass more functions and staff, including Global Procurement and Supply Management function, Mergers & Acquisition and Structured Finance function. <br>Continue to execute on special projects as needed/requested by the CEO and Board of Directors.<br>Partner with business units and functions across CAE to enhance operational and financial performance. <br>Co-lead CAE's technology incubation effort with the Chief Technology Officer.  | &nbsp;&nbsp;&nbsp;Mr. Copeland was named CAE's Chief Strategy and Performance Officer in July 2024. In his role, he is responsible for cultivating strategic plans aimed at driving growth in key areas, as well as optimizing organizational performance. He works in partnership with CAE's Executive Management Committee, with a particular focus on the Company's growth agenda, as well as areas of resource allocation and organizational design. Additionally, he has responsibility for the ongoing evaluation of CAE's business portfolio and leads enterprise-wide special projects for the Office of the CEO. He also oversees CAE's Global Procurement and Supply Management organization, as well as the Structured Finance and M&A function. <br>Prior to joining CAE, Mr. Copeland served as the President and co- founder of Melius Research, an independent research, consulting, and data analytics firm. <br>Before co-founding Melius, Mr. Copeland was Managing Director and Senior Analyst covering the Global Aerospace and Defense sector for Barclays PLC. Prior to Barclays, he held various roles of increasing responsibility in the aerospace and defense research practice at Lehman Brothers. <br>Before beginning his career on Wall Street, Mr. Copeland served on the staff of the Federal Reserve Board of Governors in Washington, D.C., aiding in monetary policy work and conducting corporate finance research. <br>Mr. Copeland graduated with honours from the University of Alabama, with a degree in Economics. He also holds an MBA from Washington University in St. Louis, where he was a recipient of the prestigious Wood Fellowship. He is a Chartered Financial Analyst and formerly served as a member of the Corporate Leaders program on the Council of Foreign Relations. Additionally, he currently serves on the CIMG advisory board at the University of Alabama.<br>Mr. Copeland is a co-author of the book Lessons from the Titans. |

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| | |
|:---|:---|
| FY2025 Achievements |  |
| Leadership of CAE's strategic vision and associated processes, along with the ongoing review of CAE's portfolio with a focus on long-term value creation. During the year, successfully oversaw the rollout of CAE's strategic framework and associated tracking tools to over 450 employees and led the company's annual strategic cycle. Additionally, conducted and led numerous reviews and detailed analyses on key issues, including macroeconomic and geopolitical risks, market-related demand dynamics, and financial reporting. <br>In partnership with the executive leadership team, spearheaded cost reduction efforts intended to streamline allocated costs and organizational structure, following the sale of CAE Healthcare and the re-baselining of CAE's Defense & Security segment.<br>Assumed responsibility for leadership of CAE's Global Procurement and Supply Management function. As a part of this role, explored several areas of efficiency, including inventory and strategic planning.  | Took on leadership of CAE's M&A and Structured Finance function, overseeing organic and inorganic investment across the enterprise. In this capacity, initiated a holistic analysis of CAE's capital deployment strategy, with the aim of maturing processes and enhancing returns on capital. Additionally, oversaw CAE's consolidation of its ownership in SIMCOM, along with other small non-core asset divestitures.<br>Co-leadership of CAE's incubation effort, in partnership with Chief technology Officer. During the year, successfully graduated incubation investments into commercial opportunities, including the introduction of CAE's use of the Apple Vision Pro for supplementary pilot training applications. |

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Section 7 – Executive Compensation

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| | |
|:---|:---|
| ![mh.jpg](mh.jpg)<br>**Mark Hounsell**<br>Chief Legal and Compliance Officer, and Corporate Secretary  | &nbsp;&nbsp;&nbsp;Mr. Hounsell joined CAE in February 2016 as General Counsel, Chief Compliance Officer and Corporate Secretary. Mr. Hounsell is responsible for the development and management of the legal framework for CAE's business worldwide, as well as leadership of the Company's compliance and corporate secretariat portfolios. He is a member of the company's Executive Management Committee. <br>Mr. Hounsell brings more than 30 years of legal and general counsel experience to CAE. <br>Prior to joining CAE, he was Chief Legal Officer and Corporate Secretary of Aimia (Aeroplan) for nine years. Mr. Hounsell also held various senior leadership positions within the BCE group of companies from 1997 to 2006, including Assistant General Counsel for BCE and Bell Canada and Vice President, Law and Corporate Secretary at Bell Canada International. <br>Within these various roles, he has gained a wide variety of experience in a global context in relation to commercial transactions, mergers & acquisitions, corporate governance and disclosure, along with ethics and overall compliance management.<br>Mr. Hounsell obtained his law degree from the Université de Montréal and has been a member of the Québec Bar since 1992. |
| &nbsp;&nbsp;FY2025 Goals <br>Advise and support the Board of Directors to ensure it completes its mandated responsibilities.<br>Partner with the Civil and D&S business units to drive results on key projects.<br>Support pursuit and execution of M&A opportunities.<br>Oversee significant legal disputes.<br>Manage public disclosure, including annual and quarterly continuous disclosure activities and documentation.<br>Assist treasury team with financing initiatives and reinstatement of shareholder returns.<br>Continue to enhance the overall CAE Compliance Program` - Implement artificial intelligence governance and risk mitigation framework. | &nbsp;&nbsp;&nbsp;Mr. Hounsell joined CAE in February 2016 as General Counsel, Chief Compliance Officer and Corporate Secretary. Mr. Hounsell is responsible for the development and management of the legal framework for CAE's business worldwide, as well as leadership of the Company's compliance and corporate secretariat portfolios. He is a member of the company's Executive Management Committee. <br>Mr. Hounsell brings more than 30 years of legal and general counsel experience to CAE. <br>Prior to joining CAE, he was Chief Legal Officer and Corporate Secretary of Aimia (Aeroplan) for nine years. Mr. Hounsell also held various senior leadership positions within the BCE group of companies from 1997 to 2006, including Assistant General Counsel for BCE and Bell Canada and Vice President, Law and Corporate Secretary at Bell Canada International. <br>Within these various roles, he has gained a wide variety of experience in a global context in relation to commercial transactions, mergers & acquisitions, corporate governance and disclosure, along with ethics and overall compliance management.<br>Mr. Hounsell obtained his law degree from the Université de Montréal and has been a member of the Québec Bar since 1992. |

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| | |
|:---|:---|
| FY2025 Achievements |  |
| Provided strategic counsel and managed significant interactions with the Board of Directors and shareholders, leading to the negotiation and execution of a cooperation and standstill agreement with Browing West, LP and a nomination rights agreement with Caisse de dépôt et placement du Québec. Coordinated the Board changes with the appointment of the new Chair and three directors on February 14, 2025, along with two directors named at the start of FY2025.<br>Oversaw legal support to the Human Resources Committee and Board for the CEO succession process and related announcements.<br>Successfully supported and helped close CAE's increased ownership stake in the SIMCOM Aviation Training joint venture, and to extend its exclusive business aviation training services agreement with Flexjet and its affiliates.<br>Partnered closely with the Civill aviation business unit to drive results on key projects, including: a range of long-term Commercial and business aviation training agreements, airline operations digital solutions contracts, and Full Flight Simulators sales.<br>Assisted the D&S team in connection with multiple strategic partnerships and growth campaigns, including the SkyAlyne Future Aircrew Training (FAcT) program and related 25-year CAE subcontract valued at approximately $1.7B<br>Supported the advancement of D&S Legacy Contracts, including the closing out of three programs. <br>Managed enhanced public disclosure for accelerated risk recognition on Legacy Contracts and goodwill impairment.<br>Vigorously defended CAE on legal matters, including: (i) in a dispute against Madison Industries which is claiming significant final price adjustments relating to the Healthcare sale; and (ii) in a shareholder-instituted securities class action proceeding. | Assisted the CAE treasury team in: (i) reinitiating shareholder returns through the implementation of a Normal Course Issuer Bid; and (ii) securing an unsecured US$200M term loan with proceeds principally used to repay borrowings under CAE's revolving credit facility that were used to finance the SIMCOM transaction.<br>Advanced the professionalization of the security function by producing a new Global Security Policy, completing site security assessments of critical CAE assets, and initiating mitigation measures. Developed new emergency response manuals and processes and launched Global Security Intranet site.<br>Further advanced the implementation of a fulsome Business Continuity Program (BCP). Completed roll-out of business continuity plans and associated training modules. Launched a new BCP Intranet site and held multiple info and Q&A sessions with business units. Developed methodology, process and templates for tabletop exercises.<br>Improved export controls screening processes with the launch of an enhanced *Know Your Customer* procedure and associated training.<br>Developed new Responsible Artificial Intelligence Policy, and Guidelines for the Acceptable Use of Generative Artificial Intelligence. Formed a Data and Artificial Intelligence Committee.<br>Established a risk framework to further accelerate the deployment of CAE Rise and completed data protection impact assessments for critical solutions developed in FY2025.<br>Enhanced the CAE Code of Business Conduct and worked with business unit leaders to significantly reduce the number of foreign representatives.<br>Contributed to the publication of CAE's first Modern Slavery Statement under Canada's *Modern Slavery Act*. |

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86 \| CAE INC. \| 2025 \| Management Proxy Circular

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Section 7 – Executive Compensation

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| | |
|:---|:---|
| ![nl.jpg](nl.jpg)<br>**Nick Leontidis**<br>Chief Operating Officer | &nbsp;&nbsp;&nbsp;Mr. Leontidis was appointed Chief Operating Officer on May 1, 2024, and now leads the Civil Aviation, Defense and Security, and Global Technology and Product divisions. Prior to this nomination, in 2013, he became CAE's Group President, Civil Aviation. In this position, he was responsible for CAE's Civil business, which includes the world's largest civil aviation training network and provides comprehensive training solutions for pilots, cabin crew, maintenance technicians, and ground personnel in commercial, business aviation, helicopter, and emerging eVTOL markets.<br>Prior to these appointments, Mr. Leontidis served as CAE's Executive Vice President, Strategy and Business Development for more than four years. During this time, he played an important leadership role, responsible for CAE's overall corporate strategy, overseeing all mergers and acquisitions activities and the creation of the New Core Markets segment businesses.<br>Mr. Leontidis joined CAE as a software engineer in 1988 and was promoted to Vice President of the Visuals Systems group in 1999. From 2001 to 2009 he held a series of executive positions of increasing responsibility in the Civil business unit, where he was instrumental in the creation and growth of the training and services business. His positions included Vice President, Sales and Marketing; Executive Vice President, Simulation Products; Executive Vice President, Civil Aviation Training and Equipment; and finally Executive Vice President, Customers, where he was responsible for sales, marketing, business development, strategic planning, program management and customer services functions across the Civil Simulation and Training business unit.<br>Mr. Leontidis holds Bachelor's and Master's degrees in Engineering from Concordia University. |
| &nbsp;&nbsp;FY2025 Goals <br>Achieve the financial targets set for the Civil Aviation and Defense & Security businesses<br>Improve Flight Services' new customer win rates by 36% (3% over FY2024)<br>Further expand the Civil Training business' global footprint to enhance customer experience<br>Capture growth through commercial airline outsourcing<br>Win transformational deals for Defense & Security (FAcT & F16 – Taiwan)<br>Close out three legacy programs for Defense & Security <br>Continue to advance our technology and innovation objectives in current and future markets<br>Enhance sustainability metrics, including increasing the number of diverse leaders by a minimum of 10% and ensuring no less than 30% of identified high-potential candidates are diverse | &nbsp;&nbsp;&nbsp;Mr. Leontidis was appointed Chief Operating Officer on May 1, 2024, and now leads the Civil Aviation, Defense and Security, and Global Technology and Product divisions. Prior to this nomination, in 2013, he became CAE's Group President, Civil Aviation. In this position, he was responsible for CAE's Civil business, which includes the world's largest civil aviation training network and provides comprehensive training solutions for pilots, cabin crew, maintenance technicians, and ground personnel in commercial, business aviation, helicopter, and emerging eVTOL markets.<br>Prior to these appointments, Mr. Leontidis served as CAE's Executive Vice President, Strategy and Business Development for more than four years. During this time, he played an important leadership role, responsible for CAE's overall corporate strategy, overseeing all mergers and acquisitions activities and the creation of the New Core Markets segment businesses.<br>Mr. Leontidis joined CAE as a software engineer in 1988 and was promoted to Vice President of the Visuals Systems group in 1999. From 2001 to 2009 he held a series of executive positions of increasing responsibility in the Civil business unit, where he was instrumental in the creation and growth of the training and services business. His positions included Vice President, Sales and Marketing; Executive Vice President, Simulation Products; Executive Vice President, Civil Aviation Training and Equipment; and finally Executive Vice President, Customers, where he was responsible for sales, marketing, business development, strategic planning, program management and customer services functions across the Civil Simulation and Training business unit.<br>Mr. Leontidis holds Bachelor's and Master's degrees in Engineering from Concordia University. |

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&nbsp;&nbsp;&nbsp;&nbsp;

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| | |
|:---|:---|
| FY2025 Achievements |  |
| Achieved significant growth in most financial metrics for both D&S and Civil segments (adjusted order intake\*, adjusted segment operating income\* and free cash flow\*.), while exceeding all expectations in D&S performance by delivering record profits. Exceptional FY2025 cash conversion rate\* calculated at 211% with $813.9M of free cash flow\* (FY2024 cash conversion rate\* was 148% with $418M of free cash flow\*).<br>Aligned the 6 divisions to drive for a more collaborative culture in Civil and D&S, maximizing synergies and benefits, while maintaining focus and accountability for each division. Built strong governance across all divisions and Global Technology and Product (GTP) to bring enhanced transparency and management of risks. Maintained strong employee engagement despite significant changes in both GTP and D&S organizations.<br>Civil Aviation had strong year-over-year growth of 11% in revenue and 6% in adjusted segment operating income\*. Delivered on-time start of training and fulfilled all training requirements in ATS. <br>Commercial Aviation deployed 24 new Full Flight Simulators, opened Sydney, Athens, Bogota #2 and sold 56 Full Flight Simulators, with significant wins in China.<br>Business Aviation (BAT) had a record year for most financial metrics, and completed the consolidation of CAE's ownership in SIMCOM, alongside the 5-year extension of Flexjet's training contract.<br>Flightscape had a record order intake and backlog, and delivered financial metrics on plan, positioning the team well for growth in the coming years. | Achieved excellent performance for D&S, including a transformation to achieve over $20M in run rate savings and bring more focus and accountability to our three markets (US, Canada, International). Reorganized D&S Canada to position CAE as the strategic partner for Canada. Achieved FY2025 revenue of $1,999M, $151M above previous year and SOI of $151M, $150M above previous year. Notable wins include signing FAcT subcontracts and F-16 STP VSM Added Funding. Profitability increased following the successful transformation of the organization.<br>Drove GTP leadership changes, including a new Chief Technology Officer to reflect strategic priorities and culture shift. Developed governance to better manage our R&D and Intangible budgets that prioritizes accountability and outcomes. GTP had meaningful technological advancements with the deployment of CAE Prodigy's ultra-realistic simulation visuals for customers, as well as the soft-launched the Immersive Trainer , in partnership with Apple. |

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*<br>Not all details of the NEO targets have been disclosed due to the potential competitive prejudice to CAE in doing so. The NEOs' performance against their objectives was reviewed by the HRC, in addition to having been reviewed by the President and CEO during the fiscal year.*<br>\* Non-IFRS and Other Financial Measures (see Appendix B)

87 \| CAE INC. \| 2025 \| Management Proxy Circular

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Section 7 – Executive Compensation

Compensation Governance

**Role of the HRC in setting executive compensation**

The HRC acts as an advisory committee to the Board of Directors. The Board assigns responsibilities to the HRC to review, approve, and administer CAE's compensation programs. The key components of the HRC's compensation mandate as well as the decision-making process are outlined in the table:

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| | | | | | |
|:---|:---|:---|:---|:---|:---|
| Performance Measure | Management | CEO | Independent Compensation Consultant | HRC | Board |
| **Executive compensation and benefits programs design** | Develop | Review | Review | Recommend | Approve |
| **Annual NEO compensation** | Develop | Recommend | Review | Approve | - |
| **Annual CEO compensation** | - | - | Develop | Recommend | Approve |
| **Annual and long-term incentive plan measures, targets and performance results** | Develop | Review | Review | Recommend | Approve |
| **Comparator group for executive compensation benchmarking purposes** | Review | Review | Develop | Approve | - |

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**Role of the independent compensation consultants**

The HRC retains executive compensation experts to prepare and review executive compensation materials and to provide advice on compensation programs. Meridian has been acting as the HRC's independent compensation consulting firm since October 2020.

Meridian's mandate during FY2025 was to prepare and review materials presented to the HRC including updates to CAE's comparator group for benchmarking executive and Board of Directors compensation and on the design of the Company's executive compensation programs. No CAE Director or officer has any affiliation with Meridian and Meridian meets the independence standards applied to executive compensation consultants.

CAE's management also retain the services of experts in the field of executive compensation. In the past two years it has used the services of Gallagher, who acquired in March of 2022 PCI Compensation Consulting ("PCI") to assist with several analyses related to executive compensation.

The following table shows the fees related to executive compensation work paid by CAE to Meridian and Gallagher in FY2024 and FY2025.

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| | | | | |
|:---|:---|:---|:---|:---|
|  | Meridian | Meridian | Gallagher | Gallagher |
|  | FY2025 | FY2024 | FY2025 | FY2024 |
| Executive Compensation | $296399 | $212668 | $16081 | $10000 |
| All Other Fees<sup>1</sup> | $6673 | 43342 | - | - |
| **Total** | $303072 | $256010 | $16081 | $10000 |

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&nbsp;&nbsp;&nbsp;&nbsp;1.&nbsp;&nbsp;&nbsp;&nbsp;Fees related to work for the Governance Committee, in connection with director compensation.

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Section 7 – Executive Compensation

**Risk Mitigation**

The HRC and the Board of CAE believe that (i) executive compensation should be contingent on performance relative to pre-established targets and objectives and (ii) management must achieve targets and objectives in a manner consistent with CAE's ethical standards, internal policies and key values. The HRC and the Board regularly review the Company's compensation policies and practices to ensure that they do not encourage inappropriate risk-taking.

There are numerous risk management practices in place to ensure CAE compensation programs do not encourage inappropriate risk-taking behaviors but focus on long-term Shareholders value creation.

The following characteristics of our compensation program in FY2025 were identified as having risk-mitigating effects:

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| | |
|:---|:---|
| | What we do |
| &nbsp;&nbsp;✔ | Provide a balanced pay mix of short, medium and longer-term compensation |
| &nbsp;&nbsp;✔ | Balance of fixed and at-risk compensation |
| &nbsp;&nbsp;✔ | No overlap of metrics between annual and long-term incentives  |
| &nbsp;&nbsp;✔ | 60% of long-term incentives vest contingent on performance |
| &nbsp;&nbsp;✔ | Most performance metrics focused on a three-year period |
| &nbsp;&nbsp;✔ | Provide for overlapping performance periods and vesting of equity, to ensure executives are exposed to long term risks of their decision making |
| &nbsp;&nbsp;✔ | Caps on annual bonuses and PSU payout factors |
| &nbsp;&nbsp;✔ | Robust clawback policy, including a market-leading ability to clawback incentive-based compensation in circumstances of misconduct without the need for a financial restatement |
| &nbsp;&nbsp;✔ | Prohibit executives from hedging CAE securities |
| &nbsp;&nbsp;✔ | Robust and market aligned Share ownership guidelines and requirement to retain 25% of the net proceeds of option exercises while employed by CAE |
| &nbsp;&nbsp;✔ | CEO required to maintain Share ownership requirement for one-year post-retirement |
| &nbsp;&nbsp;✔ | The HR Committee retains an independent compensation consultant |
| &nbsp;&nbsp;✔ | Annual Say on Pay vote and engagement with Shareholders on executive pay |

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| | |
|:---|:---|
| | What we don't do |
| × | Offer excessive perquisites |
| × | Guarantee annual base salary increases or bonus payments |
| × | Guarantee a minimum level of vesting for performance-based awards |
| × | Single-trigger vesting of equity upon a Change of Control |
| × | Offer loans to executives or directors |
| × | Re-price, backdate or exchange underwater stock options |
| × | Count PSUs or options toward Share ownership guidelines |
| × | Offer excessive severance arrangements to executives |
| × | Overemphasize any single performance metric |

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89 \| CAE INC. \| 2025 \| Management Proxy Circular

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Section 7 – Executive Compensation

The HRC conducts an annual compensation risk assessment with the assistance of its independent compensation consulting firm Meridian to identify potential risks associated with CAE's compensation programs, practices and policies. In FY2025, the assessment concluded that the risks associated with the compensation programs are not reasonably likely to have a material adverse effect on the Company.

After considering the overall compensation program and taking into account both its knowledge of the past performance of the CAE management team and the nature of CAE's various businesses, the HRC is not aware of any risks arising from the CAE's compensation policies and practices that would be reasonably likely to have a material adverse effect on CAE.

**FY2025 Comparator Group**

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| | |
|:---|:---|
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The CAE comparator group was reviewed in FY2025 to ensure the companies in the group and underlying selection criteria are still relevant. Following this review, several changes were made to the peer group in light of current business conditions and to better reflect CAE's strategy. The revised peer group inclusive of these adjustments will be used to benchmark executive and director compensation for FY2026. | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The comparator group includes size appropriate companies operating in at least one of CAE's market segments, with a similar financial and operational footprint, or with which CAE competes for talent. |

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CAE's comparator group comprises a mix of size appropriate and business relevant Canadian and US companies. The primary criteria for selecting the comparator group companies are:

—Principal place of business

—Company size based on revenue and market capitalization generally 1/3x to 3x CAE on revenue and market capitalization

—Companies with business operations outside of Canada (approximately 90% of CAE's revenues are generated outside of Canada)

—Companies that compete with CAE for talent (CAE recruits executive talent from the U.S. and internationally and three of the CEO's direct reports are based in the U.S.)

When CAE benchmarks executive compensation relative to the comparator companies, compensation values in USD for peer U.S. resident executives are converted at par (1:1), to manage foreign exchange and avoid inflating compensation at U.S. companies for purposes of benchmarking compensation.

&nbsp;&nbsp;&nbsp;&nbsp;NEW in FY2026

The Committee determined to make the following adjustments, to position CAE more closely in the middle of the peer group and to enhance the representation of industry competitors in the peer group:

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| | |
|:---|:---|
| **Removals** | **Additions** |
| (-) Autodesk, Inc. | (+) AtkinsRéalis Group Inc. |
| (-) Cadence Design Systems, Inc. | (+) ATS Corporation |
| (-) Gartner, Inc. | (+) Bombardier Inc. |
| (-) Spirit AeroSystems Holdings, Inc. | (+) Howmet Aerospace Inc. |
| (-) Synopsys, Inc. | (+) Leonardo DRS, Inc. |
|  | (+) Science Applications International Corporation |

---

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Section 7 – Executive Compensation

***Comparator Group Financials***<sup>1</sup>

---

| | | |
|:---|:---|:---|
|  | Revenue (C$M) | Market Cap (C$M) |
| North American Group |  |  |
| Air Canada | 22255  | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 4573  |
| Booz Allen Hamilton Holding Corporation | 16945  | &nbsp;&nbsp;&nbsp;&nbsp; 19037  |
| WSP Global Inc. | 16167  | &nbsp;&nbsp;&nbsp;&nbsp; 31869  |
| CGI Inc. | 14858  | &nbsp;&nbsp;&nbsp;&nbsp; 32229  |
| CACI International Inc | 11701  | &nbsp;&nbsp;&nbsp;&nbsp; 11824  |
| AMETEK, Inc. | 9987  | &nbsp;&nbsp;&nbsp;&nbsp; 57093  |
| Spirit AeroSystems Holdings, Inc. | 9089  | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 5808  |
| Gartner, Inc. | 9018  | &nbsp;&nbsp;&nbsp;&nbsp; 46345  |
| Autodesk, Inc. | 8873  | &nbsp;&nbsp;&nbsp;&nbsp; 80152  |
| Synopsys, Inc. | 8788  | &nbsp;&nbsp;&nbsp;&nbsp; 95309  |
| Teledyne Technologies Incorporated | 8172  | &nbsp;&nbsp;&nbsp;&nbsp; 33507  |
| BRP Inc. | 7830  | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 3549  |
| Open Text Corporation | 7788  | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 9432  |
| Cadence Design Systems, Inc. | 6678  | &nbsp;&nbsp;&nbsp;&nbsp; 100203  |
| Woodward, Inc. | 4763  | &nbsp;&nbsp;&nbsp;&nbsp; 15570  |
| IDEX Corporation | 4703  | &nbsp;&nbsp;&nbsp;&nbsp; 19650  |
| NFI Group Inc. | 4500  | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 1408  |
| Curtiss-Wright Corporation | 4491  | &nbsp;&nbsp;&nbsp;&nbsp; 17188  |
| Hexcel Corporation | 2738  | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 6327  |
| CAE Inc. | $4708 | $11314 |
| % Rank | P20 | P32 |
| 1.&nbsp;&nbsp;&nbsp;&nbsp;Revenue is based on the most recent annual reports and Market Cap is taken as of March 31, 2025. | 1.&nbsp;&nbsp;&nbsp;&nbsp;Revenue is based on the most recent annual reports and Market Cap is taken as of March 31, 2025. | 1.&nbsp;&nbsp;&nbsp;&nbsp;Revenue is based on the most recent annual reports and Market Cap is taken as of March 31, 2025. |

---

<br>![comparatorgroupfinancials.jpg](comparatorgroupfinancials.jpg)

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Section 7 – Executive Compensation

**Executive Share Ownership Requirements**

---

| | |
|:---|:---|
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;—Share ownership requirements must be achieved within 5 years from hire or promotion to executive position.<br>—Only Shares, DSUs and 50% of RSUs are included. | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;—Majority of NEOs retain 25% of the net profit realized from option exercise in CAE Shares for the duration of their employment at CAE. |

---

Under CAE's Share Ownership Guidelines Policy, each executive is expected to meet a minimum equity ownership in the Company. Shares, DSUs and 50% of RSUs are counted towards Share ownership:

---

| | |
|:---|:---|
| &nbsp;&nbsp;Share Ownership Targets (as a % of base salary) | &nbsp;&nbsp;Share Ownership Targets (as a % of base salary) |
| &nbsp;&nbsp;NEO | % of Base Salary |
| **Marc Parent** | 500% |
| **Constantino Malatesta**<sup>1</sup> | 100% |
| **Carter Copeland** | 200% |
| **Mark Hounsell** | 200% |
| **Nick Leontidis** | 250% |
| **Sonya Branco** | 250% |

---

&nbsp;&nbsp;&nbsp;&nbsp;1.&nbsp;&nbsp;&nbsp;&nbsp;As Constantino Malatesta is currently serving in the capacity of interim CFO, his SOG target reflects the requirement for his role as Chief Accounting Officer and Vice-President, Controller Office. Mr. Malatesta met his SOG requirements for this role.

The Share ownership guidelines must be met within five years from the date of hire or promotion to the executive position. The Share ownership requirements are tested monthly until the requirement is met. Once the required Share ownership value is reached, the minimum number of Shares/units to be held by the executive is locked-in and the executive is required to hold at least this number of Shares/units until retirement or termination of employment.

In addition, for each option exercise, the CEO, CFO and COO retain CAE Shares equivalent in value to 25% of the net profit realized on such option exercise for the duration of their employment with CAE. This policy further aligns executive interests with those of our Shareholders and ensures that executives do not take advantage of short-term Share price movement. This policy is not applicable to Mr. Malatesta since he is currently serving in the capacity of interim CFO.

In FY2023, the Share ownership guidelines were changed to require the CEO to retain his Share ownership requirement for one year after retirement.

As of March 31, 2025, five NEOs met the ownership guidelines. The table below sets forth the minimum number of Shares/units to be held by the NEOs who have already met the requirement, the required value in dollars to meet the ownership guidelines and the actual value held as a percent of the annual base salary.

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Section 7 – Executive Compensation

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| | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|
| NEO | Share Ownership Requirement as Percent of Salary (%) | Ownership Status | Target Date | Number of Shares/ Units to be Held Once Requirement Met (#) | Value Required to Meet Guidelines<sup>1</sup> ($) | Completion to Meet Share Ownership Guidelines (%) | Value Held in Shares/ Units<sup>2</sup> ($) | Value of Shares/Units Held as Percent of Salary<sup>3</sup> (%) |
| **Marc Parent** | 500 | Already Met | N/A | 286858 | N/A | 100 | 28175730 <sup>4</sup> | 2130 |
| **Constantino Malatesta** <sup>5</sup> | 100 | Already Met | N/A | 6867 | N/A | 100 | 432281 | 120 |
| **Carter Copeland** | 200 | Time to meet | August 2026 | 46365 | 1669040 | 30 | 497479 | 60 |
| **Mark Hounsell** | 200 | Already Met | N/A | 28092 | N/A | 100 | 1737115 | 342 |
| **Nick Leontidis** | 250 | Already Met | N/A | 65044 | N/A | 100 | 11715954 | 1966 |
| **Sonya Branco** | 250 | Already Met | N/A | 36553 | N/A | 100 | N/A | N/A |

---

&nbsp;&nbsp;&nbsp;&nbsp;1.&nbsp;&nbsp;&nbsp;&nbsp;Not applicable if the Share ownership requirement is already met.

&nbsp;&nbsp;&nbsp;&nbsp;2.&nbsp;&nbsp;&nbsp;&nbsp;Calculated based on the number of Shares, DSUs, LTUs, and 50% of RSUs held as of March 31, 2025 and the average closing Share price during the five trading days preceding March 31, 2025 ($36.00) in accordance with the Share Ownership Guidelines Policy.

&nbsp;&nbsp;&nbsp;&nbsp;3.&nbsp;&nbsp;&nbsp;&nbsp;Calculated based on the annual base salary as of March 31, 2025. For Mr. Copeland, the base salary was converted to Canadian dollars using the FY2025 average exchange rate of 1.39.

&nbsp;&nbsp;&nbsp;&nbsp;4.&nbsp;&nbsp;&nbsp;&nbsp;Includes 435,802 Shares, 42,985 FY2004 LTUs, 232,111 LTUs and 71,103 RSUs, which respectively represent a value of $15,688,000, $1,547,374, $8,355,532 and $2,559,566, for a total value of $28,150,472 as of March 31, 2025 using the average closing Share price during the five trading days preceding March 31, 2025 ($36.00). Numbers containing fractions have been rounded up for calculation purposes.

&nbsp;&nbsp;&nbsp;&nbsp;5.&nbsp;&nbsp;&nbsp;&nbsp;Mr. Malatesta's share ownership requirement reflects his target in his role of Chief Accounting Officer and Vice-President, Controller Office.

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Section 7 – Executive Compensation

Alignment of Compensation and Performance

**Shareholders Return Performance Graph**

The following graph compares the cumulative Shareholders return of the Shares with the cumulative returns of each of the S&P/TSX Composite Index and the S&P Aerospace & Defense Select Industry Index for a five-year period commencing March 31, 2020<sup>1</sup>, along with a discussion of the trend in executive officer compensation over the same period (in the paragraph that follows the table).

***Comparison of Five-year Cumulative Total Return of CAE Inc. vs. S&P/TSX Composite Index and S&P Aerospace & Defense Select Industry Index***

![sp-tsx3.jpg](sp-tsx3.jpg)

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
|  | 2020 | 2021 | 2022 | 2023 | 2024 | 2025 |
| CAE Inc. | $100 | $201 | $183 | $172 | $157 | $199 |
| S&P/TSX Composite Index | $100 | $144 | $173 | $164 | $187 | $217 |
| S&P Aerospace & Defense Index | $100 | $167 | $167 | $158 | $192 | $222 |

---

&nbsp;&nbsp;&nbsp;&nbsp;1.&nbsp;&nbsp;&nbsp;&nbsp;$100 invested in Shares traded on the TSX on March 31, 2020. Values are as at the last trading date during the month of March in the specified years and from the S&P/TSX Composite Total Return Index and S&P Aerospace & Defense Select Industry Total Return Index, which assume dividend reinvestment.

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Section 7 – Executive Compensation

***Discussion of trend in executive officer compensation over the same period***

The CEO realizable pay and performance table shown below in this section reflects annual incentive payouts, which are generally well aligned with Share price and financial performance. Additionally, all of our long-term incentive awards are in the form of CAE equity, the value of which aligns with our financial performance and directly tracks the value of our equity over the lifetime of the award, it is the realized and realizable value of these awards, rather than their grant date value, which is tied directly to our Share price. The components of our executive compensation that align with performance are:

—Annual incentive: Results on the annual scorecard have directionally aligned with Share price performance over the five-year period. Payouts have ranged from 16% to 166% of target over the last five years.

—PSUs: Our PSUs, which are linked to key financial objectives, have paid out in relation to our financial, operating and Share price performance over the five-year timeframe, with well below target payouts in the last two completed cycles (43% of target for FY2022 PSUs, and 63% of target for FY2023 PSUs). PSUs precisely track the underlying value of CAE's Share price, so there is 100% alignment with Share price performance over the 5-year period.

—RSUs: RSUs precisely track the underlying value of CAE's Share price, so upon redemption there is 100% alignment with Share price performance over the 5-year period.

—Stock options: Stock options are only valuable to recipients to the extent that Share price appreciates. As of March 31, 2025, based on a closing stock price of $35.38, FY2021, FY2023, FY2024 and FY2025 stock options grants are in-the-money. Only FY2022 stock options grants are out-of-the-money and have no value.

**CEO Realizable Pay and Performance**

A significant portion (72%) of Mr. Parent's President and CEO compensation consists of fully at-risk long-term incentives (the FY2025 LTIP mix is 60% PSUs, 20% RSUs, 20% stock options), which are designed to focus the CEO on CAE's long-term success. LTIP is directly affected by the performance of CAE's Share price:

—Stock options only have value to the extent the Share price increases;

—RSUs are directly impacted by Share price;

—PSUs are directly impacted by Share price and financial performance.

The table below is a look back comparing grant date total target direct compensation for Mr. Parent to the realizable value of this compensation during the last three years to Shareholder returns. The analysis is based on the return of a $100 investment by a Shareholder at the start of a period, compared to $100 of total direct compensation for the CEO for each year. In all cases, Shareholder returns are closely aligned with CEO realizable compensation value, which suggests our compensation programs are strongly aligned with Shareholder value creation.

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Section 7 – Executive Compensation

---

| | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|
| Total Target Direct Pay<sup>1</sup> | Total Target Direct Pay<sup>1</sup> | Realizable Pay<sup>2</sup> | % Change in CEO Pay | % Change in TSR | From | To | Change in CEO relative Pay to $100 of CEO Pay | Change in TSR Relative to $100 Invested in CAE Shares |
| **Fiscal 2023** | $8946974 | $6570372 | -27% | +9% | March 31, 2022 | March 31, 2025 | $73  | $109  |
| **Fiscal 2024** | $9382819 | $8763015 | -7% | +16% | March 31, 2023 | March 31, 2025 | $93  | $116  |
| **Fiscal 2025** | $10716352 | $13565124 | +27% | +26% | March 31, 2024 | March 31, 2025 | $127  | $126  |
| **Average** | $9682048 | $9632837 | -2% | 17% |  |  | $98  | $117  |

---

&nbsp;&nbsp;&nbsp;&nbsp;1.&nbsp;&nbsp;&nbsp;&nbsp;Includes salary, target bonus, long-term incentive grant of PSUs, RSUs and stock options as reported in the Summary Compensation Table. Excludes pension and all other compensation value .

&nbsp;&nbsp;&nbsp;&nbsp;2.&nbsp;&nbsp;&nbsp;&nbsp;Includes salary, actual bonus paid, value of stock options that are in-the-money and the market value of unvested PSUs and RSUs (assuming PSUs vest at target for FY 2024 and FY2025 grants, actual performance multiplier of 63% for FY2023 cycle). Equity valued as at March 31, 2025 close stock price ($35.38). Excludes pension and all other compensation value.

***The table below compares target and realizable CEO compensation values***.

![trgtgraph.jpg](trgtgraph.jpg)

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Section 7 – Executive Compensation

Compensation of Our Named Executive Officers

**Summary Compensation Table**

The first of the following tables provides a summary of compensation earned during the last three fiscal years ended March 31 by the President and Chief Executive Officer, the Interim Chief Financial Officer, the former Executive Vice President, Finance and Chief Financial Officer, and by the three most highly compensated policy-making executives who served as executive officers of CAE or its subsidiaries as at March 31, 2025 (collectively, "Named Executive Officers" or "NEOs").

---

| | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|
| Name and Principal Position | Year | Salary | Share-Based Awards<sup>1</sup> | Option-Based Awards<sup>2</sup> | Non-Equity Incentive Plan Compensation - Annual Incentive Plan<sup>3</sup> | Pension Value<sup>4</sup> | All Other Compensation<sup>5</sup> | Total<br>Compensation |
| &nbsp;&nbsp;**Marc Parent** <br>President and Chief Executive Officer | &nbsp;&nbsp;2025 | &nbsp;&nbsp;$1323000 | &nbsp;&nbsp;$6191677 | &nbsp;&nbsp;$1547919 | &nbsp;&nbsp;$2013441 | &nbsp;&nbsp;$2916000 | &nbsp;&nbsp;$153124 | &nbsp;&nbsp;$14145161 |
| &nbsp;&nbsp;**Marc Parent** <br>President and Chief Executive Officer | &nbsp;&nbsp;2024 | &nbsp;&nbsp;$1312500 | &nbsp;&nbsp;$5133249 | &nbsp;&nbsp;$1283306 | &nbsp;&nbsp;$256331 | &nbsp;&nbsp;$1851000 | &nbsp;&nbsp;$100235 | &nbsp;&nbsp;$9936621 |
| &nbsp;&nbsp;**Marc Parent** <br>President and Chief Executive Officer | &nbsp;&nbsp;2023 | &nbsp;&nbsp;$1250000 | &nbsp;&nbsp;$4888963 | &nbsp;&nbsp;$1223011 | &nbsp;&nbsp;$1362380 | &nbsp;&nbsp;$1890000 | &nbsp;&nbsp;$91270 | &nbsp;&nbsp;$10705624 |
| &nbsp;&nbsp;**Constantino Malatesta**<sup>6</sup>****<br> Interim Chief Financial Officer | &nbsp;&nbsp;2025 | &nbsp;&nbsp;$440455 | &nbsp;&nbsp;$144004 | &nbsp;&nbsp;$36002 | &nbsp;&nbsp;$619688 | &nbsp;&nbsp;$921000 | &nbsp;&nbsp;$51648 | &nbsp;&nbsp;$2212797 |
| &nbsp;&nbsp;**Constantino Malatesta**<sup>6</sup>****<br> Interim Chief Financial Officer | &nbsp;&nbsp;2024 | &nbsp;&nbsp;$300983 | &nbsp;&nbsp;$122020 | &nbsp;&nbsp;$30502 | &nbsp;&nbsp;$84652 | &nbsp;&nbsp;$174000 | &nbsp;&nbsp;$49769 | &nbsp;&nbsp;$761926 |
| &nbsp;&nbsp;**Constantino Malatesta**<sup>6</sup>****<br> Interim Chief Financial Officer | &nbsp;&nbsp;2023 | &nbsp;&nbsp;$278250 | &nbsp;&nbsp;$106100 | &nbsp;&nbsp;$26184 | &nbsp;&nbsp;$61457 | &nbsp;&nbsp;$172000 | &nbsp;&nbsp;$48798 | &nbsp;&nbsp;$692789 |
| &nbsp;&nbsp;**Carter Copeland**<sup>7, 8</sup><sup></sup>Chief Strategy and Performance Officer | &nbsp;&nbsp;2025 | &nbsp;&nbsp;$824641 | &nbsp;&nbsp;$1313833 | &nbsp;&nbsp;$328462 | &nbsp;&nbsp;$733399 | &nbsp;&nbsp;$453000 | &nbsp;&nbsp;$59990 | &nbsp;&nbsp;$3713325 |
| &nbsp;&nbsp;**Carter Copeland**<sup>7, 8</sup><sup></sup>Chief Strategy and Performance Officer | &nbsp;&nbsp;2024 | &nbsp;&nbsp;$706145 | &nbsp;&nbsp;$840476 | &nbsp;&nbsp;$210120 | &nbsp;&nbsp;$281729 | &nbsp;&nbsp;$307000 | &nbsp;&nbsp;$50786 | &nbsp;&nbsp;$2396256 |
| &nbsp;&nbsp;**Carter Copeland**<sup>7, 8</sup><sup></sup>Chief Strategy and Performance Officer | &nbsp;&nbsp;2023 | &nbsp;&nbsp;$649157 | &nbsp;&nbsp;$776661 | &nbsp;&nbsp;$195814 | &nbsp;&nbsp;$551925 | &nbsp;&nbsp;$400000 | &nbsp;&nbsp;$49495 | &nbsp;&nbsp;$2623052 |
| &nbsp;&nbsp;**Mark Hounsell**<br>Chief Legal and Compliance Officer, and Corporate Secretary | &nbsp;&nbsp;2025 | &nbsp;&nbsp;$529137 | &nbsp;&nbsp;$640050 | &nbsp;&nbsp;$160010 | &nbsp;&nbsp;$373292 | &nbsp;&nbsp;$234000 | &nbsp;&nbsp;$65567 | &nbsp;&nbsp;$2002056 |
| &nbsp;&nbsp;**Mark Hounsell**<br>Chief Legal and Compliance Officer, and Corporate Secretary | &nbsp;&nbsp;2024 | &nbsp;&nbsp;$503938 | &nbsp;&nbsp;$548590 | &nbsp;&nbsp;$137148 | &nbsp;&nbsp;$148073 | &nbsp;&nbsp;$217000 | &nbsp;&nbsp;$63608 | &nbsp;&nbsp;$1618357 |
| &nbsp;&nbsp;**Mark Hounsell**<br>Chief Legal and Compliance Officer, and Corporate Secretary | &nbsp;&nbsp;2023 | &nbsp;&nbsp;$479940 | &nbsp;&nbsp;$580705 | &nbsp;&nbsp;$146194 | &nbsp;&nbsp;$216854 | &nbsp;&nbsp;$245000 | &nbsp;&nbsp;$62327 | &nbsp;&nbsp;$1731020 |
| &nbsp;&nbsp;**Nick Leontidis**<sup>9</sup><br>Chief Operating Officer | &nbsp;&nbsp;2025 | &nbsp;&nbsp;$687786 | &nbsp;&nbsp;$2835030 | &nbsp;&nbsp;$385001 | &nbsp;&nbsp;$757138 | &nbsp;&nbsp;$363000 | &nbsp;&nbsp;$85327 | &nbsp;&nbsp;$5113282 |
| &nbsp;&nbsp;**Nick Leontidis**<sup>9</sup><br>Chief Operating Officer | &nbsp;&nbsp;2024 | &nbsp;&nbsp;$591250 | &nbsp;&nbsp;$1191955 | &nbsp;&nbsp;$297990 | &nbsp;&nbsp;$214553 | &nbsp;&nbsp;$372000 | &nbsp;&nbsp;$71886 | &nbsp;&nbsp;$2739634 |
| &nbsp;&nbsp;**Nick Leontidis**<sup>9</sup><br>Chief Operating Officer | &nbsp;&nbsp;2023 | &nbsp;&nbsp;$563095 | &nbsp;&nbsp;$1135302 | &nbsp;&nbsp;$284751 | &nbsp;&nbsp;$410801 | &nbsp;&nbsp;$788000 | &nbsp;&nbsp;$69713 | &nbsp;&nbsp;$3251662 |
| &nbsp;&nbsp;**Sonya Branco**<sup>10</sup>****<br> Former Executive Vice President, Finance and Chief Financial Officer | &nbsp;&nbsp;2025 | &nbsp;&nbsp;$247604 | &nbsp;&nbsp;$475379 | &nbsp;&nbsp;$118850 | &nbsp;&nbsp;$191026 | &nbsp;&nbsp;$160000 | &nbsp;&nbsp;$2059074 | &nbsp;&nbsp;$3251933 |
| &nbsp;&nbsp;**Sonya Branco**<sup>10</sup>****<br> Former Executive Vice President, Finance and Chief Financial Officer | &nbsp;&nbsp;2024 | &nbsp;&nbsp;$589533 | &nbsp;&nbsp;$831967 | &nbsp;&nbsp;$207989 | &nbsp;&nbsp;$69082 | &nbsp;&nbsp;$283000 | &nbsp;&nbsp;$74276 | &nbsp;&nbsp;$2055847 |
| &nbsp;&nbsp;**Sonya Branco**<sup>10</sup>****<br> Former Executive Vice President, Finance and Chief Financial Officer | &nbsp;&nbsp;2023 | &nbsp;&nbsp;$556016 | &nbsp;&nbsp;$1086771 | &nbsp;&nbsp;$271659 | &nbsp;&nbsp;$292879 | &nbsp;&nbsp;$332000 | &nbsp;&nbsp;$73189 | &nbsp;&nbsp;$2612514 |

---

&nbsp;&nbsp;&nbsp;&nbsp;1.&nbsp;&nbsp;&nbsp;&nbsp;Represents the value of Share-based awards granted under the RSU Plan and the PSU Plan in year FY2023 and under the Omnibus Incentive Plan in years FY2024 and FY2025. The value disclosed for the RSUs and PSUs represents the award date value calculated by multiplying the number of RSUs and PSUs awarded at target (100%) by CAE's weighted average Share price during the five trading days immediately preceding the grant date ($33.47 for units granted in June of FY2023, $26.83 for units granted in August of FY2023, $28.65 for units granted in June of FY2024, $25.42 for units granted in June of FY2025 and $32.48 for units granted in November of FY2025). Such value differs from the accounting grant date fair value determined in accordance with IFRS2, Share-based Payments, as the accounting fair value is assessed with the Share price on the date of the award (rather than on a weighted average price). The accounting grant date fair value would be as follows if using the Share closing price on the TSX on the respective grant <br>

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Section 7 – Executive Compensation

<br>date($31.23 on June 10, 2022 , $25.49 on August 22, 2022, $27.83 on June 9, 2023, $25.78 on June 6, 2024 and $32.91 on November 29, 2024): Mr. Parent: $4,561,766 in FY2023 (a negative difference of $327,197), $4,986,329 in FY2024 (a negative difference of $146,920) and $6,279,364 in FY2025 (a difference of $87,687); Mr. Malatesta: $98,999 in FY2023 (a negative difference of $7,101), $118,528 in FY2024 (a negative difference of $3,492) and $146,044 in FY 2025 (a difference of $2,040); Ms. Branco $1,014,038 in FY2023 (a negative difference of $72,733), $808,155 in FY2024 (a negative difference of $23,812) and $482,112 in FY2025 (a difference of $6,732); Mr. Leontidis: $1,059,322, in FY2023 (a negative difference of $75,981), $1,157,839 in FY2024 (a negative difference of $34,116) and $2,873,984 in FY2025 (a difference of $38,954); Mr. Copeland: $726,003 in FY2023 (a negative difference of $50,657), $816,421 in FY2024 (a negative difference of $24,056) and $1,332,439 in FY2025 (a difference of $18,607); Mr. Hounsell: $541,841 in FY2023 (a negative difference of $38,864), $532,889 in FY2024 (a negative difference of $15,701) and $649,115 in FY2025 (a difference of $9,064). Note that the actual value paid, if any, will differ.

&nbsp;&nbsp;&nbsp;&nbsp;2.&nbsp;&nbsp;&nbsp;&nbsp;Represents the value of option-based awards granted under the ESOP in year FY2023 and under the Omnibus Incentive Plan in years FY2024 and FY2025 determined based on the grant date fair value of the award in accordance with IFRS2. Note that actual value received, if any, will differ. The value of each option is determined using the Black-Scholes model with the following assumptions:

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | &nbsp;&nbsp;**FY2025<br>June** | &nbsp;&nbsp;**FY2024<br>June** | &nbsp;&nbsp;**FY2023<br>August** | &nbsp;&nbsp;**FY2023<br>June** |
| &nbsp;&nbsp;**Dividend yield** | &nbsp;&nbsp;&nbsp;&nbsp;0.58% | &nbsp;&nbsp;&nbsp;&nbsp;0.72% | &nbsp;&nbsp;&nbsp;&nbsp;0.78% | &nbsp;&nbsp;&nbsp;&nbsp;0.64% |
| &nbsp;&nbsp;**Expected volatility** | &nbsp;&nbsp;&nbsp;&nbsp;39.32% | &nbsp;&nbsp;&nbsp;&nbsp;41.86% | &nbsp;&nbsp;&nbsp;&nbsp;43.40% | &nbsp;&nbsp;&nbsp;&nbsp;42.00% |
| &nbsp;&nbsp;**Risk-free interest rate** | &nbsp;&nbsp;&nbsp;&nbsp;3.53% | &nbsp;&nbsp;&nbsp;&nbsp;3.72% | &nbsp;&nbsp;&nbsp;&nbsp;3.24% | &nbsp;&nbsp;&nbsp;&nbsp;3.30% |
| &nbsp;&nbsp;**Expected option term** | &nbsp;&nbsp;&nbsp;&nbsp;5.01 | &nbsp;&nbsp;&nbsp;&nbsp;4.52 | &nbsp;&nbsp;&nbsp;&nbsp;4.5 | &nbsp;&nbsp;&nbsp;&nbsp;4.5 |
| &nbsp;&nbsp;**Black-Scholes Value** | &nbsp;&nbsp;&nbsp;&nbsp;37.65% | &nbsp;&nbsp;&nbsp;&nbsp;36.29% | &nbsp;&nbsp;&nbsp;&nbsp;35.95% | &nbsp;&nbsp;&nbsp;&nbsp;34.92% |

---

&nbsp;&nbsp;&nbsp;&nbsp;3.&nbsp;&nbsp;&nbsp;&nbsp;Represents the STIP payout earned in each fiscal year and paid in the first quarter of the following year (see **Section 7 – Executive Compensation – Compensation Discussion and Analysis – FY2025 Compensation Decision - Short-Term Incentive Plan** for details).

&nbsp;&nbsp;&nbsp;&nbsp;4.&nbsp;&nbsp;&nbsp;&nbsp;The pension value shown corresponds to the compensatory value reported in the Defined Benefit Plan Table and includes the service cost and the impact of the increase in earnings in excess of actuarial assumptions.

&nbsp;&nbsp;&nbsp;&nbsp;5.&nbsp;&nbsp;&nbsp;&nbsp;All other compensation in FY2025 comprises other benefit expenses and allowances paid by CAE as follows:

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
|  | &nbsp;&nbsp;**Automobile Expenses ($)** | &nbsp;&nbsp;**Health & Insurance Benefits ($)** | &nbsp;&nbsp;**Additional Perquisites ($)** | &nbsp;&nbsp;**Employer ESPP Contributions ($)** | &nbsp;&nbsp;**Other** <sup>(A)</sup> | &nbsp;&nbsp;**Total ($)** |
| &nbsp;&nbsp;**Marc Parent** | &nbsp;&nbsp;&nbsp;&nbsp;35483 | &nbsp;&nbsp;&nbsp;&nbsp;14693 | &nbsp;&nbsp;&nbsp;&nbsp;63258 | &nbsp;&nbsp;&nbsp;&nbsp;39690 | &nbsp;&nbsp;&nbsp;&nbsp;- | &nbsp;&nbsp;&nbsp;&nbsp;153124 |
| &nbsp;&nbsp;**Constantino Malatesta** | &nbsp;&nbsp;&nbsp;&nbsp;- | &nbsp;&nbsp;&nbsp;&nbsp;23885 | &nbsp;&nbsp;&nbsp;&nbsp;22500 | &nbsp;&nbsp;&nbsp;&nbsp;5263 | &nbsp;&nbsp;&nbsp;&nbsp;- | &nbsp;&nbsp;&nbsp;&nbsp;51648 |
| &nbsp;&nbsp;**Carter Copeland** | &nbsp;&nbsp;&nbsp;&nbsp;- | &nbsp;&nbsp;&nbsp;&nbsp;3641 | &nbsp;&nbsp;&nbsp;&nbsp;48650 | &nbsp;&nbsp;&nbsp;&nbsp;7699 | &nbsp;&nbsp;&nbsp;&nbsp;- | &nbsp;&nbsp;&nbsp;&nbsp;59990 |
| &nbsp;&nbsp;**Mark Hounsell** | &nbsp;&nbsp;&nbsp;&nbsp;- | &nbsp;&nbsp;&nbsp;&nbsp;16693 | &nbsp;&nbsp;&nbsp;&nbsp;33000 | &nbsp;&nbsp;&nbsp;&nbsp;15874 | &nbsp;&nbsp;&nbsp;&nbsp;- | &nbsp;&nbsp;&nbsp;&nbsp;65567 |
| &nbsp;&nbsp;**Nick Leontidis** | &nbsp;&nbsp;&nbsp;&nbsp;- | &nbsp;&nbsp;&nbsp;&nbsp;14693 | &nbsp;&nbsp;&nbsp;&nbsp;50000 | &nbsp;&nbsp;&nbsp;&nbsp;20634 | &nbsp;&nbsp;&nbsp;&nbsp;- | &nbsp;&nbsp;&nbsp;&nbsp;85327 |
| &nbsp;&nbsp;**Sonya Branco** | &nbsp;&nbsp;&nbsp;&nbsp;- | &nbsp;&nbsp;&nbsp;&nbsp;15177 | &nbsp;&nbsp;&nbsp;&nbsp;16250 | &nbsp;&nbsp;&nbsp;&nbsp;7428 | &nbsp;&nbsp;&nbsp;&nbsp;2020219 | &nbsp;&nbsp;&nbsp;&nbsp;2059074 |

---

Note (A): Represent Ms. Branco's Termination severance that is detailed in **Section 7 – Executive Compensation – Compensation Discussion and Analysis – Termination and Change of Control Benefits.**

&nbsp;&nbsp;&nbsp;&nbsp;6.&nbsp;&nbsp;&nbsp;&nbsp;Mr. Malatesta was appointed Interim Chief Financial Officer of CAE on August 12, 2024. In connection with his appointment, Mr. Malatesta's received a temporary allowance of $89,000 and a retention cash bonus of $180,000.

&nbsp;&nbsp;&nbsp;&nbsp;7.&nbsp;&nbsp;&nbsp;&nbsp;Amounts paid in US dollars have been converted to Canadian dollars using an average exchange rate of $1.39 in FY2025, same rate as used in the MD&A and financial statements.

&nbsp;&nbsp;&nbsp;&nbsp;8.&nbsp;&nbsp;&nbsp;&nbsp;Mr. Copeland assumed the responsibility for the Healthcare division as a temporary assignment from June 20, 2022 to December 31, 2022 and permanently as of January 1, 2023 until the sale of the division. In recognition for assuming these additional responsibilities, he received: a temporary assignment salary premium of $35,539, a one-time special LTIP grant of 730 Restrictive Share Units, 2,170 Performance Share Units and 2,200 stock options on August 22, 2022 and a special completion bonus of $99,000. Mr. Copeland was appointed Chief Strategy and Performance Officer in May 2024. His FY2025 salary reflects an increase received to recognize his additional responsibilities.

&nbsp;&nbsp;&nbsp;&nbsp;9.&nbsp;&nbsp;&nbsp;&nbsp;Mr. Leontidis was appointed Chief Operating Officer on May 21, 2024 and considering the organizational changes announced in the fall of 2024, a special one-time LTIP award of 39,871 Restrictive Share Units was offered to Mr. Leontidis on November 29, 2024 in addition to his annual grant to recognize the pivotal role he plays in CAE's continued success.

&nbsp;&nbsp;&nbsp;&nbsp;10.&nbsp;&nbsp;&nbsp;&nbsp;Ms. Branco served as Executive Vice President, Finance and Chief Financial Officer of CAE until August 31, 2024 and received a prorated annual bonus for FY25 based on the time worked.

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Section 7 – Executive Compensation

**Outstanding Share-Based Awards and Option-Based Awards**

The following table details the outstanding awards under CAE's Share and option-based plans for the NEOs.

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| | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|
|  | &nbsp;&nbsp;Option-Based Awards | &nbsp;&nbsp;Option-Based Awards | &nbsp;&nbsp;Option-Based Awards | &nbsp;&nbsp;Option-Based Awards | &nbsp;&nbsp;Share-Based Awards Market or Payout | &nbsp;&nbsp;Share-Based Awards Market or Payout | &nbsp;&nbsp;Share-Based Awards Market or Payout |
| &nbsp;&nbsp;Name | Number of Securities Underlying Unexercised Options (#) | Option Exercise Price<sup>1</sup> ($) | Option Expiration Date | Value of Unexercised In-the-Money Options<sup>2</sup> ($) | Number of Shares or Units of Shares that have not Vested<sup>3</sup> (#) | Market or Payout value of Share- based Awards that have not Vested<sup>4</sup> ($) | Value of Vested Share-Based Awards not Paid Out or Distributed<sup>5</sup> ($) |
| &nbsp;&nbsp;**Marc Parent** | &nbsp;&nbsp;&nbsp;&nbsp;161747 | &nbsp;&nbsp;&nbsp;&nbsp;25.42 | &nbsp;&nbsp;&nbsp;&nbsp;06/06/2031 | &nbsp;&nbsp;&nbsp;&nbsp;1611000 |  |  |  |
|  | &nbsp;&nbsp;&nbsp;&nbsp;127060 | &nbsp;&nbsp;&nbsp;&nbsp;28.65 | &nbsp;&nbsp;&nbsp;&nbsp;06/09/2030 | &nbsp;&nbsp;&nbsp;&nbsp;855114 |  |  |  |
|  | &nbsp;&nbsp;&nbsp;&nbsp;112100 | &nbsp;&nbsp;&nbsp;&nbsp;33.47 | &nbsp;&nbsp;&nbsp;&nbsp;06/10/2029 | &nbsp;&nbsp;&nbsp;&nbsp;214111 |  |  |  |
|  | &nbsp;&nbsp;&nbsp;&nbsp;125200 | &nbsp;&nbsp;&nbsp;&nbsp;36.82 | &nbsp;&nbsp;&nbsp;&nbsp;06/01/2028 | &nbsp;&nbsp;&nbsp;&nbsp;– |  |  |  |
|  | &nbsp;&nbsp;&nbsp;&nbsp;482300 | &nbsp;&nbsp;&nbsp;&nbsp;20.57 | &nbsp;&nbsp;&nbsp;&nbsp;06/01/2027 | &nbsp;&nbsp;&nbsp;&nbsp;7142863 |  |  |  |
|  | &nbsp;&nbsp;&nbsp;&nbsp;253500 | &nbsp;&nbsp;&nbsp;&nbsp;34.17 | &nbsp;&nbsp;&nbsp;&nbsp;05/29/2026 | &nbsp;&nbsp;&nbsp;&nbsp;306735 |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Total |  |  |  | &nbsp;&nbsp;&nbsp;&nbsp;10129823 | &nbsp;&nbsp;&nbsp;&nbsp;528283 | &nbsp;&nbsp;&nbsp;&nbsp;18690653 | &nbsp;&nbsp;&nbsp;&nbsp;9732898 |
| &nbsp;&nbsp;**Constantino Malatesta** | &nbsp;&nbsp;&nbsp;&nbsp;3762 | &nbsp;&nbsp;&nbsp;&nbsp;25.42 | &nbsp;&nbsp;&nbsp;&nbsp;06/06/2031 | &nbsp;&nbsp;&nbsp;&nbsp;37470 |  |  |  |
|  | &nbsp;&nbsp;&nbsp;&nbsp;3020 | &nbsp;&nbsp;&nbsp;&nbsp;28.65 | &nbsp;&nbsp;&nbsp;&nbsp;06/09/2030 | &nbsp;&nbsp;&nbsp;&nbsp;20325 |  |  |  |
|  | &nbsp;&nbsp;&nbsp;&nbsp;1200 | &nbsp;&nbsp;&nbsp;&nbsp;33.47 | &nbsp;&nbsp;&nbsp;&nbsp;06/10/2029 | &nbsp;&nbsp;&nbsp;&nbsp;2292 |  |  |  |
|  | &nbsp;&nbsp;&nbsp;&nbsp;3200 | &nbsp;&nbsp;&nbsp;&nbsp;36.82 | &nbsp;&nbsp;&nbsp;&nbsp;06/01/2028 | &nbsp;&nbsp;&nbsp;&nbsp;– |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Total |  |  |  | &nbsp;&nbsp;&nbsp;&nbsp;60087 | &nbsp;&nbsp;&nbsp;&nbsp;12213 | &nbsp;&nbsp;&nbsp;&nbsp;432096 | &nbsp;&nbsp;&nbsp;&nbsp;132372 |
| &nbsp;&nbsp;**Carter Copeland** | &nbsp;&nbsp;&nbsp;&nbsp;34322 | &nbsp;&nbsp;&nbsp;&nbsp;25.42 | &nbsp;&nbsp;&nbsp;&nbsp;06/06/2031 | &nbsp;&nbsp;&nbsp;&nbsp;341847 |  |  |  |
|  | &nbsp;&nbsp;&nbsp;&nbsp;20804 | &nbsp;&nbsp;&nbsp;&nbsp;28.65 | &nbsp;&nbsp;&nbsp;&nbsp;06/09/2030 | &nbsp;&nbsp;&nbsp;&nbsp;140011 |  |  |  |
|  | &nbsp;&nbsp;&nbsp;&nbsp;2200 | &nbsp;&nbsp;&nbsp;&nbsp;26.83 | &nbsp;&nbsp;&nbsp;&nbsp;08/22/2029 | &nbsp;&nbsp;&nbsp;&nbsp;18810 |  |  |  |
|  | &nbsp;&nbsp;&nbsp;&nbsp;16100 | &nbsp;&nbsp;&nbsp;&nbsp;33.47 | &nbsp;&nbsp;&nbsp;&nbsp;06/10/2029 | &nbsp;&nbsp;&nbsp;&nbsp;30751 |  |  |  |
|  | &nbsp;&nbsp;&nbsp;&nbsp;13000 | &nbsp;&nbsp;&nbsp;&nbsp;35.71 | &nbsp;&nbsp;&nbsp;&nbsp;09/01/2028 | &nbsp;&nbsp;&nbsp;&nbsp;– |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Total |  |  |  | &nbsp;&nbsp;&nbsp;&nbsp;531419 | &nbsp;&nbsp;&nbsp;&nbsp;98204 | &nbsp;&nbsp;&nbsp;&nbsp;3474458 | &nbsp;&nbsp;&nbsp;&nbsp;- |
| &nbsp;&nbsp;**Mark Hounsell** | &nbsp;&nbsp;&nbsp;&nbsp;16720 | &nbsp;&nbsp;&nbsp;&nbsp;25.42 | &nbsp;&nbsp;&nbsp;&nbsp;06/06/2031 | &nbsp;&nbsp;&nbsp;&nbsp;166531 |  |  |  |
|  | &nbsp;&nbsp;&nbsp;&nbsp;13579 | &nbsp;&nbsp;&nbsp;&nbsp;28.65 | &nbsp;&nbsp;&nbsp;&nbsp;06/09/2030 | &nbsp;&nbsp;&nbsp;&nbsp;91387 |  |  |  |
|  | &nbsp;&nbsp;&nbsp;&nbsp;13400 | &nbsp;&nbsp;&nbsp;&nbsp;33.47 | &nbsp;&nbsp;&nbsp;&nbsp;06/10/2029 | &nbsp;&nbsp;&nbsp;&nbsp;25594 |  |  |  |
|  | &nbsp;&nbsp;&nbsp;&nbsp;18100 | &nbsp;&nbsp;&nbsp;&nbsp;36.82 | &nbsp;&nbsp;&nbsp;&nbsp;06/01/2028 | &nbsp;&nbsp;&nbsp;&nbsp;- |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Total |  |  |  | &nbsp;&nbsp;&nbsp;&nbsp;283512 | &nbsp;&nbsp;&nbsp;&nbsp;56863 | &nbsp;&nbsp;&nbsp;&nbsp;2011813 | &nbsp;&nbsp;&nbsp;&nbsp;340103 |
| &nbsp;&nbsp;**Nick Leontidis** | &nbsp;&nbsp;&nbsp;&nbsp;40230 | &nbsp;&nbsp;&nbsp;&nbsp;25.42 | &nbsp;&nbsp;&nbsp;&nbsp;06/06/2031 | &nbsp;&nbsp;&nbsp;&nbsp;400691 |  |  |  |
|  | &nbsp;&nbsp;&nbsp;&nbsp;29504 | &nbsp;&nbsp;&nbsp;&nbsp;28.65 | &nbsp;&nbsp;&nbsp;&nbsp;06/09/2030 | &nbsp;&nbsp;&nbsp;&nbsp;198562 |  |  |  |
|  | &nbsp;&nbsp;&nbsp;&nbsp;26100 | &nbsp;&nbsp;&nbsp;&nbsp;33.47 | &nbsp;&nbsp;&nbsp;&nbsp;06/10/2029 | &nbsp;&nbsp;&nbsp;&nbsp;49851 |  |  |  |
|  | &nbsp;&nbsp;&nbsp;&nbsp;35300 | &nbsp;&nbsp;&nbsp;&nbsp;36.82 | &nbsp;&nbsp;&nbsp;&nbsp;06/01/2028 | &nbsp;&nbsp;&nbsp;&nbsp;– |  |  |  |
|  | &nbsp;&nbsp;&nbsp;&nbsp;75800 | &nbsp;&nbsp;&nbsp;&nbsp;34.17 | &nbsp;&nbsp;&nbsp;&nbsp;05/29/2026 | &nbsp;&nbsp;&nbsp;&nbsp;91718 |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Total |  |  |  | &nbsp;&nbsp;&nbsp;&nbsp;740822 | &nbsp;&nbsp;&nbsp;&nbsp;166565 | &nbsp;&nbsp;&nbsp;&nbsp;5893070 | &nbsp;&nbsp;&nbsp;&nbsp;7936821 |
| &nbsp;&nbsp;**Sonya Branco** | &nbsp;&nbsp;&nbsp;&nbsp;6210 | &nbsp;&nbsp;&nbsp;&nbsp;25.42 | &nbsp;&nbsp;&nbsp;&nbsp;09/28/2026 | &nbsp;&nbsp;&nbsp;&nbsp;61852 |  |  |  |
|  | &nbsp;&nbsp;&nbsp;&nbsp;10297 | &nbsp;&nbsp;&nbsp;&nbsp;28.65 | &nbsp;&nbsp;&nbsp;&nbsp;09/28/2026 | &nbsp;&nbsp;&nbsp;&nbsp;69299 |  |  |  |
|  | &nbsp;&nbsp;&nbsp;&nbsp;12450 | &nbsp;&nbsp;&nbsp;&nbsp;33.47 | &nbsp;&nbsp;&nbsp;&nbsp;09/28/2026 | &nbsp;&nbsp;&nbsp;&nbsp;23780 |  |  |  |
|  | &nbsp;&nbsp;&nbsp;&nbsp;35200 | &nbsp;&nbsp;&nbsp;&nbsp;36.82 | &nbsp;&nbsp;&nbsp;&nbsp;09/28/2026 | &nbsp;&nbsp;&nbsp;&nbsp;– |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Total |  |  |  | &nbsp;&nbsp;&nbsp;&nbsp;154931 | &nbsp;&nbsp;&nbsp;&nbsp;62629 | &nbsp;&nbsp;&nbsp;&nbsp;2215814 | &nbsp;&nbsp;&nbsp;&nbsp;656877 |

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&nbsp;&nbsp;&nbsp;&nbsp;1.&nbsp;&nbsp;&nbsp;&nbsp;Pursuant to the terms of the plan, options under the ESOP and the Omnibus Incentive Plan were granted with an exercise price equal to the weighted average price of the Shares on the TSX on the five trading days immediately preceding the grant date (if the grant date falls within a blackout period or within five trading days following the end of a blackout period, the date of grant shall be presumed to be the sixth trading day following the end of such blackout period).

&nbsp;&nbsp;&nbsp;&nbsp;2.&nbsp;&nbsp;&nbsp;&nbsp;Options are in-the-money if the market value of the Shares covered by the options is greater than the option exercise price. The value shown is equal to the excess, if any, of the Share closing price on the TSX on March 31, 2025 ($35.38) over the option's exercise price. The actual value realized will be based on the actual in-the-money value upon exercise of the options, if any. The options vest at 25% per year commencing one year after the grant date.

&nbsp;&nbsp;&nbsp;&nbsp;3.&nbsp;&nbsp;&nbsp;&nbsp;Represents the aggregate number of units that have not met all performance or employment conditions for payment as of March 31, 2025.

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Section 7 – Executive Compensation

&nbsp;&nbsp;&nbsp;&nbsp;4.&nbsp;&nbsp;&nbsp;&nbsp;Payout value is established based on the expected payout as per the performance targets achieved as of March 31, 2025 for PSUs and based on the Share closing price on March 31, 2025 ($35.38) for LTUs, and for RSUs and PSUs payable in June 2025 and August 2025, June 2026 and June 2027 and November 2027.

&nbsp;&nbsp;&nbsp;&nbsp;5.&nbsp;&nbsp;&nbsp;&nbsp;Represents the portion of units under the LTUP that are vested at the end of the fiscal year and the units under the Executive DSUP and for which payment is deferred to the termination of employment.

**Incentive Plan Awards – Value Vested or Earned During the Year**

The following table shows the value that was vested or earned, as well as the gain earned from options exercised, by the Named Executive Officers during FY2025 in respect of incentive plans.

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| | | | | | |
|:---|:---|:---|:---|:---|:---|
|  | Option-Based Awards-Value Vested During the Year<sup>1</sup> ($) | Number of Options Exercised During the Year (#) | Gain on Exercise During the Year ($) | Share-based Awards-Value Vested During the Year<sup>2</sup> ($) | Non-Equity Incentive Plan Compensation- Value Earned During the Year<sup>3</sup> ($) |
| &nbsp;&nbsp;&nbsp;Marc Parent | &nbsp;&nbsp;&nbsp;605287 | &nbsp;&nbsp;&nbsp;751000 | &nbsp;&nbsp;&nbsp;3208494 | &nbsp;&nbsp;&nbsp;1472379 | &nbsp;&nbsp;&nbsp;2013441 |
| &nbsp;&nbsp;&nbsp;Constantino Malatesta | &nbsp;&nbsp;&nbsp;17696 | &nbsp;&nbsp;&nbsp;17500 | &nbsp;&nbsp;&nbsp;66959 | &nbsp;&nbsp;&nbsp;37653 | &nbsp;&nbsp;&nbsp;619688 |
| &nbsp;&nbsp;&nbsp;Carter Copeland | &nbsp;&nbsp;&nbsp;- | &nbsp;&nbsp;&nbsp;- | &nbsp;&nbsp;&nbsp;- | &nbsp;&nbsp;&nbsp;141832 | &nbsp;&nbsp;&nbsp;733399 |
| &nbsp;&nbsp;&nbsp;Mark Hounsell | &nbsp;&nbsp;&nbsp;85717 | &nbsp;&nbsp;&nbsp;174950 | &nbsp;&nbsp;&nbsp;1247124 | &nbsp;&nbsp;&nbsp;212175 | &nbsp;&nbsp;&nbsp;373292 |
| &nbsp;&nbsp;&nbsp;Nick Leontidis | &nbsp;&nbsp;&nbsp;180971 | &nbsp;&nbsp;&nbsp;293400 | &nbsp;&nbsp;&nbsp;2650897 | &nbsp;&nbsp;&nbsp;414811 | &nbsp;&nbsp;&nbsp;757138 |
| &nbsp;&nbsp;&nbsp;Sonya Branco | &nbsp;&nbsp;&nbsp;177206 | &nbsp;&nbsp;&nbsp;219948 | &nbsp;&nbsp;&nbsp;1635304 | &nbsp;&nbsp;&nbsp;413293 | &nbsp;&nbsp;&nbsp;191026 |

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&nbsp;&nbsp;&nbsp;&nbsp;1.&nbsp;&nbsp;&nbsp;&nbsp;This represents the value of potential gains from options that vested during FY2025. These generally include the portion of the options that were awarded in the last four fiscal years that vested in the year. The potential gains are calculated as the excess, if any, of the closing price of Shares on the TSX on each of the option vesting dates in FY2025 over the exercise price. The actual value realized, if any, will differ and will be based on the Share price on the actual exercise date

&nbsp;&nbsp;&nbsp;&nbsp;2.&nbsp;&nbsp;&nbsp;&nbsp;The value of Share units that vested during FY2025 include: (i) the PSUs that vested on June 1, 2024 based on the average closing price of Shares on the 20 trading days preceding June 1, 2024, specifically $762,743 for Mr. Parent, $19,422 for Mr. Malatesta, $73,455 for Mr. Copeland, $109,866, Mr. Hounsell, $214,818 for Mr. Leontidis and $214,115 for Branco; (ii) the RSUs that vested on June 1, 2024 based on the average closing price of Shares on the 20 trading days preceding June 1, 2024, specifically $709,637 for Mr. Parent, $18,231 for Mr. Malatesta, $68,377 for Mr. Copeland, $102,310 for Mr. Hounsell, $199,994 for Mr. Leontidis and $199, 177 for Ms. Branco. None of the other PSUs or RSUs have vested as of March 31, 2025.

&nbsp;&nbsp;&nbsp;&nbsp;3.&nbsp;&nbsp;&nbsp;&nbsp;This represents the value paid to the NEOs under the short-term incentive plan for FY2025 year (see **Section 7 – Executive Compensation – Compensation Discussion and Analysis – FY2025 Compensation Decision - Short-Term Incentive Plan** for details).

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Section 7 – Executive Compensation

**Pension Arrangements**

<u>—Pensions payable under the Supplementary Pension Plan are conditional upon compliance with non- competition and non-solicitation clauses.</u> <u>—No extra years of service are generally granted under the pension plans.</u>

Canadian based NEOs and key executives are members of the contributory Designated Pension Plan registered in Canada, whereas the US based NEOs and key executives are members of the CAE 401K plan for US employees. All NEOs and Key executives are also members of the non-contributory Supplementary Pension Plan. The amounts payable under these arrangements are based on "average annual earnings" which are calculated on the basis of the 60 highest-paid consecutive months of base salary and STIP payouts.

The Supplementary Pension Plan provides a pension benefit upon normal retirement at age 65 so that the pensions payable under CAE's pension arrangements will result in an annual pension equal to 2% of average annual earnings (being the five-year top average salary and actual short-term incentive compensation for NEOs other than the President and CEO for each year of pensionable service). Prior to FY2025, the President and CEO's short-term incentive compensation used for the purpose of determining his average pensionable annual earnings was the target bonus. His maximum annual pension benefit was limited to $1,050,000. As part of Mr. Parent's departure agreement, the Board decided that Mr. Parent's Supplemental pension entitlement should be the same as other NEOs and executives. Accordingly, the actual bonus is used for determining pensionable earnings for the CEO and for the other NEOs and executives, to better align pension benefits with Company performance, and the pension benefit cap was removed. Executives may retire from the Company from age 60 with full pension entitlement. An executive is considered as having retired for the purposes of the Supplementary Pension Plan if, at the time of termination of employment with CAE, he/she is at least age 55 with a minimum of 5 years of participation in the Supplementary Pension Plan. The annual pension benefit will be reduced by between 0.5% and 0.25% per month prior to NEO's normal retirement age depending on the age of the NEO at time of retirement.

Pensions payable under the Supplementary Pension Plan are paid directly by CAE. In Canada, CAE is obligated to fund or provide security to ensure payments under the Supplementary Pension Plan upon retirement of the executive. CAE has elected to provide security by obtaining letters of credit for a trust fund established for those executives who have retired. CAE has secured certain NEO's and key executives' pension benefits by a letter of credit for a trust fund established for the executives.

CAE does not generally grant extra years of credited service under its pension plans. Receipt of pension benefits under the Supplementary Pension Plan is conditional upon the compliance with non-competition and non-solicitation clauses.

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Section 7 – Executive Compensation

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| | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|
|  | Annual Benefits Payable | Annual Benefits Payable | Annual Benefits Payable | Annual Benefits Payable | Annual Benefits Payable | Annual Benefits Payable | Annual Benefits Payable |
|  | Number of years of credited service (#) | At March 31, 2025 ($) | At age 65 ($) | Accrued obligation at start of the year ($) | Compensatory change<sup>1</sup> ($) | Non- compensatory change<sup>2</sup> ($) | Accrued obligation at year-end<sup>3</sup> ($) |
| **Marc Parent** | &nbsp;&nbsp;&nbsp;&nbsp;20.17 | &nbsp;&nbsp;&nbsp;1161000 | &nbsp;&nbsp;&nbsp;1209000 | &nbsp;&nbsp;&nbsp;14115000 | &nbsp;&nbsp;&nbsp;2916000 | &nbsp;&nbsp;&nbsp;(1176000) | &nbsp;&nbsp;&nbsp;15855000 <sup>(5)</sup> |
| **Constantino Malatesta** | &nbsp;&nbsp;&nbsp;&nbsp;11.17 | &nbsp;&nbsp;&nbsp;80000 | &nbsp;&nbsp;&nbsp;451000 | &nbsp;&nbsp;&nbsp;1254000 | &nbsp;&nbsp;&nbsp;921000 | &nbsp;&nbsp;&nbsp;189000 | &nbsp;&nbsp;&nbsp;2364000 |
| **Carter Copeland**<sup>4</sup> | &nbsp;&nbsp;&nbsp;&nbsp;3.60 | &nbsp;&nbsp;&nbsp;72300 | &nbsp;&nbsp;&nbsp;653000 | &nbsp;&nbsp;&nbsp;870000 | &nbsp;&nbsp;&nbsp;453000 | &nbsp;&nbsp;&nbsp;178000 | &nbsp;&nbsp;&nbsp;1501000 |
| **Mark Hounsell** | &nbsp;&nbsp;&nbsp;&nbsp;9.17 | &nbsp;&nbsp;&nbsp;136000 | &nbsp;&nbsp;&nbsp;311000 | &nbsp;&nbsp;&nbsp;1828000 | &nbsp;&nbsp;&nbsp;234000 | &nbsp;&nbsp;&nbsp;225000 | &nbsp;&nbsp;&nbsp;2287000 |
| **Nick Leontidis** | &nbsp;&nbsp;&nbsp;&nbsp;25.00 | &nbsp;&nbsp;&nbsp;551000 | &nbsp;&nbsp;&nbsp;584000 | &nbsp;&nbsp;&nbsp;7944000 | &nbsp;&nbsp;&nbsp;363000 | &nbsp;&nbsp;&nbsp;283000 | &nbsp;&nbsp;&nbsp;8590000 |
| **Sonya Branco** | &nbsp;&nbsp;&nbsp;&nbsp;15.67 | &nbsp;&nbsp;&nbsp;282000 | &nbsp;&nbsp;&nbsp;282000 | &nbsp;&nbsp;&nbsp;3679000 | &nbsp;&nbsp;&nbsp;160000 | &nbsp;&nbsp;&nbsp;(1622000) | &nbsp;&nbsp;&nbsp;2126000 |

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&nbsp;&nbsp;&nbsp;&nbsp;1.&nbsp;&nbsp;&nbsp;&nbsp;The change in benefit obligation that is compensatory includes the service cost and the increase in earnings in excess or below what was assumed. The service cost is the estimated value of the benefits accrued during the calendar year.

&nbsp;&nbsp;&nbsp;&nbsp;2.&nbsp;&nbsp;&nbsp;&nbsp;The change in benefit obligation that is not compensatory includes interest cost, change in assumptions, and gains and losses other than for a difference in earnings and the decrease in the discount rate used to value the pension plans which increases the accrued obligation.

&nbsp;&nbsp;&nbsp;&nbsp;3.&nbsp;&nbsp;&nbsp;&nbsp;The present values of the accumulated benefits reported in the above table are calculated in accordance with the assumptions used for financial reporting purposes. See Note 19 to CAE's consolidated financial statements for the fiscal year ended March 31, 2025. The total present value of accumulated benefits in our financial statements is calculated in accordance with IFRS.

&nbsp;&nbsp;&nbsp;&nbsp;4.&nbsp;&nbsp;&nbsp;&nbsp;Mr. Copeland's pension is payable in US dollars converted to Canadian dollars using the FY2025 average exchange rate of 1.39.

&nbsp;&nbsp;&nbsp;&nbsp;5.&nbsp;&nbsp;&nbsp;&nbsp;This includes the net present value of the increase in annual benefits payable for service rendered up to March 31, 2025. For more details, refer to the Chief Executive Officer Departure Arrangement below - **Section 7 – Executive Compensation – Termination and Change of Control Benefits**.

**Termination and Change of Control Benefits**

***Payment entitlements upon termination***

The compensation plans applicable to the NEOs also contain provisions that apply upon termination of employment or Change of Control of CAE. CAE does not have a formal policy for providing severance payment in the case of termination of employment but may provide severance payments and benefits as required by law or pursuant to employment agreements with its NEOs.

In 2009, CAE signed an employment agreement with Mr. Parent that stipulates that his severance payments and benefits in the event of termination of employment without cause are two years' salary plus target bonus and continuation of benefits. Pursuant to this agreement, Mr. Parent is also entitled to two years of service credit to the Designated Pension Plan and the Supplemental Pension Plan.

CAE's employment agreements with Mr. Copeland, Mr. Leontidis and Mr. Hounsell provide for the equivalent of two years' salary plus target bonus payment in case of termination of employment without cause. No similar agreement has yet been entered into with Mr. Malatesta due to his interim position.

Moreover, CAE's agreements with all NEOs, with the exception of Mr. Malatesta, entitle them to termination of employment benefits following a Change of Control of CAE where the executive's employment is expressly or constructively terminated without cause within two years following a Change of Control. In such event, the executive is entitled to two years of annual compensation (salary, short-term incentive and employee benefits, payable as a lump sum), two years of credited service and the immediate vesting of supplementary credited service for the purposes of any pension or retirement income plans, payment of long-term incentive DSUs, and vesting of all unvested stock options, RSUs and PSUs, as per plan provisions.

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Section 7 – Executive Compensation

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| | | | | |
|:---|:---|:---|:---|:---|
| &nbsp;&nbsp;Compensation Program | &nbsp;&nbsp;Resignation and Termination for Cause | &nbsp;&nbsp;Involuntary Termination | &nbsp;&nbsp;Retirement | &nbsp;&nbsp;Change of Control<sup>1</sup> |
| &nbsp;&nbsp;**Annual Short-Term Incentive** | &nbsp;&nbsp;&nbsp;&nbsp;Forfeit | &nbsp;&nbsp;&nbsp;&nbsp;Partial payment based on performance and time in position | &nbsp;&nbsp;&nbsp;&nbsp;Partial payment based on Company performance and time in position | &nbsp;&nbsp;&nbsp;&nbsp;Two times the greater of average three-year bonus or target bonus in case of termination2 |
| &nbsp;&nbsp;**Stock Options** | &nbsp;&nbsp;&nbsp;&nbsp;**Resignation**: Vested options remain exercisable until the earlier of 30 days following the termination or the expiry date; unvested options are forfeited<br>**Termination for cause**: All options, whether vested or unvested, are forfeited | &nbsp;&nbsp;&nbsp;&nbsp;**Stock Options granted prior to FY2024**: Vested options remain exercisable until the earlier of 30 days following the termination or the expiry date; unvested options are forfeited<br>**Stock Options granted as of FY2024**: Vested options remain exercisable until the earlier of 90 days following the termination or the expiry date; unvested options are forfeited | &nbsp;&nbsp;&nbsp;&nbsp;**Stock Options granted prior to FY2024**: Vested options remain exercisable until the expiry date; unvested options continue to vest and must be exercised within 30 days following vesting date<br>**Stock Options granted as of FY2024**: Vested options remain exercisable until the expiry date; unvested options continue to vest and must be exercised up to the earlier of 90 days following the vesting date or the expiry date | &nbsp;&nbsp;&nbsp;&nbsp;**Stock Options granted prior to FY2024**: All options become vested, as per plan provisions.<br>**Stock Options granted as of FY2024**: Options will vest in full and become exercisable if they are not converted into or substituted by an alternative award; if converted, they will vest in full if a termination not for cause or a resignation for good reason occurs within two years of a Change of Control and will remain exercisable until the earlier of one year following the termination or resignation, or the expiry date |
| &nbsp;&nbsp;**Performance Share Units** | &nbsp;&nbsp;&nbsp;&nbsp;**Resignation**: Vested PSUs granted as of FY2024 will be settled as soon as possible; unvested PSUs are forfeited <br>**Termination for cause**: All PSUs are forfeited | &nbsp;&nbsp;&nbsp;&nbsp;**PSUs granted prior to FY2024**: PSUs partially vest at a rate of 1/6, 1/3 and 1/2 for each full year of employment completed since the grant date<br>**PSUs granted as of FY2024**: Vested PSUs will be settled as soon as possible; the Human Resources Committee may determine, in its sole discretion, that a pro-rated portion of the unvested PSUs (based on the number of fiscal years completed since the grant date) will immediately vest | &nbsp;&nbsp;&nbsp;&nbsp;Vested PSUs granted as of FY2024 will be settled as soon as possible; unvested PSUs will continue to vest and be paid out as scheduled, based on their vesting terms, including the achievement of performance criteria | &nbsp;&nbsp;&nbsp;&nbsp;**PSUs granted prior to FY2024**: Unvested PSUs vest as of the Change of Control date; all vested PSUs become payable at the closing price of CAE Shares on the TSX on such date, as per plan provisions<br>**PSUs granted as of FY2024**: PSUs will vest in full if they are not converted into or substituted by an alternative award; if converted, they will vest in full and be settled as soon as possible after vesting if a termination not for cause or a resignation for good reason occurs within two years of a Change of Control |
| &nbsp;&nbsp;**Restricted Share Units** | &nbsp;&nbsp;&nbsp;&nbsp;**Resignation**: Vested RSUs granted as of FY2024 will be settled as soon as possible; unvested PSUs are forfeited <br>**Termination for cause**: All RSUs are forfeited | &nbsp;&nbsp;&nbsp;&nbsp;**RSUs granted prior to FY2024**: RSUs partially vest at a rate of 1/3 for each full year of employment completed since the grant date<br>**RSUs granted as of FY2024**: Vested RSUs will be settled as soon as possible; the Human Resources Committee may determine, in its sole discretion, that a pro-rated portion of the unvested RSUs (based on the number of fiscal years completed since the grant date) will immediately vest | &nbsp;&nbsp;&nbsp;&nbsp;Vested RSUs granted as of FY2024 will be settled as soon as possible; unvested RSUs will continue to vest and be paid out as scheduled, based on their vesting terms | &nbsp;&nbsp;&nbsp;&nbsp;**RSUs granted prior to FY2024**: Unvested RSUs vest as of the Change of Control date; all vested RSUs become payable at the closing price of CAE Shares on the TSX on such date, as per plan provisions<br>**RSUs granted as of FY2024**: RSUs will vest in full if they are not converted into or substituted by an alternative award; if converted, they will vest in full and be settled as soon as possible after vesting if a termination not for cause or a resignation for good reason occurs within two years of a Change of Control |
| &nbsp;&nbsp;**Deferred Share Units Grants from 04/2004** | &nbsp;&nbsp;&nbsp;&nbsp;Vested units are paid out | &nbsp;&nbsp;&nbsp;&nbsp;Vested units are paid out | &nbsp;&nbsp;&nbsp;&nbsp;All units become vested | &nbsp;&nbsp;&nbsp;&nbsp;All units become vested |
| &nbsp;&nbsp;**Supplemental Pension Plan (SPP)** | &nbsp;&nbsp;&nbsp;&nbsp;Resignation: If five or more years of participation in the SPP, accrued deferred pension at age 65 termination for cause: No benefits payable from the SPP | &nbsp;&nbsp;&nbsp;&nbsp;If five or more years of participation in the SPP, accrued deferred pension benefits at age 65 | &nbsp;&nbsp;&nbsp;&nbsp;If age 55 or older with a minimum of five years of participation in SPP, immediate monthly pension payable | &nbsp;&nbsp;&nbsp;&nbsp;Immediate vesting and two years of additional service in case of termination<sup>2</sup> |
| &nbsp;&nbsp;**Severance payments** | &nbsp;&nbsp;&nbsp;&nbsp;- | &nbsp;&nbsp;&nbsp;&nbsp;Severance amount<sup>3</sup> in case of termination | &nbsp;&nbsp;&nbsp;&nbsp;- | &nbsp;&nbsp;&nbsp;&nbsp;Severance amount<sup>4</sup> in case of termination<sup>2</sup> |

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Section 7 – Executive Compensation

&nbsp;&nbsp;&nbsp;&nbsp;1.&nbsp;&nbsp;&nbsp;&nbsp;Change of Control is defined in the Change of Control Agreements between CAE and each NEO, with the exception of Mr. Malatesta. A Change of Control may be triggered by a number of events, notably an acquisition by a person of 20% of CAE's voting rights which is accompanied by a change in the composition of the Board, an acquisition by a person of 35% of CAE's voting rights or an acquisition of Shares representing half the equity of CAE. Compensation programs have various definitions of Change of Control events with different impacts on compensation. The provisions illustrated in the above table are for specific events that would provide the maximum benefits to the executives.

&nbsp;&nbsp;&nbsp;&nbsp;2.&nbsp;&nbsp;&nbsp;&nbsp;Pursuant to the Change of Control Agreements between CAE and each NEO, with the exception of Mr. Malatesta, termination is defined as termination without cause that occurs within the first two years following the Change of Control.

&nbsp;&nbsp;&nbsp;&nbsp;3.&nbsp;&nbsp;&nbsp;&nbsp;In the event of termination without cause, severance payable will be determined at the time of termination, taking into consideration the appropriate factors and current state of legislation and jurisprudence.

&nbsp;&nbsp;&nbsp;&nbsp;4.&nbsp;&nbsp;&nbsp;&nbsp;The severance amount is equal to two times the sum of base salary, target bonus (or actual bonus averaged over the last three years, if greater) and the sum of the value of employee benefits and perquisites provided to the executive.

In the event of death during active employment with CAE, the executive is deemed to have retired the day before his/her death if he/she was at least age 55, otherwise, he/she is deemed to have terminated his/her employment the day before his/her death.

***Incremental amounts payable to NEOs upon specified termination events***

The following table sets forth estimates of the incremental amounts payable to each active NEO upon specified events, assuming that each such event took place on March 31, 2025.

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| | | | | | |
|:---|:---|:---|:---|:---|:---|
|  | &nbsp;&nbsp;Marc Parent  | &nbsp;&nbsp;Constantino Malatesta | &nbsp;&nbsp;Carter Copeland | &nbsp;&nbsp;Mark Hounsell | &nbsp;&nbsp;Nick Leontidis |
| **Involuntary Termination** | **Involuntary Termination** | **Involuntary Termination** | **Involuntary Termination** | **Involuntary Termination** | **Involuntary Termination** |
| Salary/Severance | 6153500 | Undetermined | 2919000<sup>1</sup> | 1653447 | 2590000  |
| LTUs | - | - | - | - | - |
| Options | - | - | - | - | - |
| RSUs<sup>2</sup> | 1383242 | 31050 | 225788 | 158089 | 321191 |
| PSUs<sup>2</sup> | 1389983 | 30574 | 226409 | 162881 | 322782 |
| Supplementary Plan | 1861000 | - | - | - | - |
| Total | 10787724 | 61624 | 3371197 | 1974417 | 3233973 |
| **Retirement** | **Retirement** | **Retirement** | **Retirement** | **Retirement** | **Retirement** |
| LTUs | – | – | - | - | - |
| RSUs | – | – | - | - | - |
| PSUs | – | – | - | - | - |
| Options | – | – | - | - | - |
| Supplementary Plan | - | – | - | - | - |
| Total | - | - | - | - | - |

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Section 7 – Executive Compensation

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| | | | | | |
|:---|:---|:---|:---|:---|:---|
| **Termination Following Change in Control** | **Termination Following Change in Control** | **Termination Following Change in Control** | **Termination Following Change in Control** | **Termination Following Change in Control** | **Termination Following Change in Control** |
| Salary/Severance<sup>3</sup> | 6153500 | - | 3016300 | 1723447 | 2690000 |
| LTUs<sup>4</sup> | - | - | - | - | - |
| Options<sup>5</sup> | 2359391 | 55005 | 471636 | 247868 | 574538 |
| RSUs<sup>6</sup> | 5031284 | 115728 | 927133 | 545630 | 2614511 |
| PSUs<sup>6</sup> | 13759521 | 317318 | 2563032 | 1485308 | 3301839 |
| Supplementary Plan<sup>7</sup> | 1861000 | - | 716000 | 427000 | 708000 |
| Total | 29164696 | 488051 | 7694101 | 4429253 | 9888888 |

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&nbsp;&nbsp;&nbsp;&nbsp;1.&nbsp;&nbsp;&nbsp;&nbsp;Mr. Copeland's severance was converted into Canadian dollars using the FY2025 average exchange rate of 1.39.

&nbsp;&nbsp;&nbsp;&nbsp;2.&nbsp;&nbsp;&nbsp;&nbsp;The RSU and the PSU values have been established by multiplying the number of units that would have vested upon termination without cause as of March 31, 2025, based on performance during completed years, where applicable, and using the average fair market value of Shares on the TSX during the 20 trading days preceding the vesting date of March 31, 2025 which would be $35.22. Note that actual value would differ.

&nbsp;&nbsp;&nbsp;&nbsp;3.&nbsp;&nbsp;&nbsp;&nbsp;Severance as per the Change of Control Agreements for each NEO.

&nbsp;&nbsp;&nbsp;&nbsp;4.&nbsp;&nbsp;&nbsp;&nbsp;The LTU value has been calculated by multiplying the number of units that would have vested upon a Change of Control as of March 31, 2025, and which will be redeemable within the year following the year the executive's employment is terminated. As of March 31, 2025, all LTUs had already vested.

&nbsp;&nbsp;&nbsp;&nbsp;5.&nbsp;&nbsp;&nbsp;&nbsp;Option value has been calculated by multiplying the number of options that would have vested upon a Change of Control as of March 31, 2025 using a closing price of Shares of $35.38 on March 31, 2025, less the applicable option exercise price. Note that actual value will differ.

&nbsp;&nbsp;&nbsp;&nbsp;6.&nbsp;&nbsp;&nbsp;&nbsp;RSU and PSU values have been established by multiplying the number of units that would have vested upon a Change of Control as of March 31, 2025 using a closing price of Shares on the TSX of $35.38 on March 31, 2025. Note that actual value would differ.

&nbsp;&nbsp;&nbsp;&nbsp;7.&nbsp;&nbsp;&nbsp;&nbsp;The Supplementary Pension Plan benefits set forth for each NEO reflect the incremental value of benefits for each termination event that exceeds the present value of benefits set forth in the "Pension Benefits" tables above.

***Chief Executive Officer Departure Agreement***

In November 2024, we announced our CEO succession plan whereby Marc Parent will leave the Company at the Annual General Meeting in August 2025. The terms of departure of the CEO were finalized during the fourth quarter of fiscal 2025 pursuant to a Departure Agreement and are generally consistent with the CEO's current employment agreement (including a determination by the Board of Directors that the CEO's departure technically qualified as a termination without cause under the terms of such employment agreement). As part of the Departure Agreement and in consideration of the payments and benefits outlined below, the CEO has agreed to comply with new non-solicitation and non-compete provisions for a period of 24 months following his departure. The receipt of payments and benefits under the Departure Agreement requires continued compliance by the CEO with such new non-solicitation and non-compete provisions, as well as with the confidentiality provisions contained in his employment agreement. In addition, in consideration for these payments and benefits, he also agreed to assist the Company to ensure a smooth transition to his successor and remain in office until the Annual General Meeting.

According to the Departure Agreement, the CEO's amounts and benefits include:

—24 months of base salary (including certain benefits and perquisites) in the form of salary continuance, representing $3,104,541;

—24 months of target bonus, which is 125% of his base salary, representing $3,307,500;

—24 months of additional service credited to the Designated Pension Plan and the Supplemental Pension Plan, representing an incremental value of $116,500 to his pension benefits on an annual basis; and

—an amendment to his Supplemental Pension Plan entitlements to bring him into line with the terms provided to other senior executives of the Company. This resulted in a prior pension benefits cap being removed and the actual (as opposed to target) STIP earned being used for future pension calculation purposes. This adjustment is estimated to provide an additional annual pension value of $270,600. See also **Section 7 – Executive Compensation – Compensation of our Named Executive Officers – Pension Arrangements**.

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Section 7 – Executive Compensation

***Former Chief Financial Officer Departure Agreement***

In July 2024, we announced our CFO transition whereby Sonya Branco left the Company at the end of August 2024. The terms of departure of the CFO were finalized during August 2024 pursuant to a Departure Agreement and were generally consistent with Ms. Branco's employment agreement (including a determination by the Board of Directors that Ms. Branco's departure technically qualified as a termination without cause under the terms of such employment agreement). In connection with the Departure Agreement, the Board agreed to permit the participation of Ms. Branco under the LTIP plans under the terms of each relevant plan up until the last day of pay continuance (i.e., June 2026) as opposed to the departure date, with no new grants during the pay continuance period. In consideration thereof, Ms. Branco agreed to assist the Company on certain transition matters.

According to the Departure Agreement, the CFO's amounts and benefits included 22 months of base salary (including certain benefits and perquisites) in the form of salary continuance, representing $1,225,688, target bonus, representing $817,094, and additional service credited to the Designated Pension Plan and the Supplemental Pension Plan, representing an incremental value of $38,800 to her pension benefits on an annual basis.

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Section 8 – Other Important Information

Other Important Information

The management of CAE is aware of no business to be presented for action by the Shareholders at the Meeting other than that mentioned herein or in the Notice of Meeting.

Interest of informed persons in material transactions

No informed person (including any Director or executive officer) of CAE, any proposed Director of CAE, or any associate or affiliate of any informed person or proposed Director, had any material interest, direct or indirect, in any transaction since the commencement of CAE's most recently completed financial year or in any proposed transaction which has materially affected or would materially affect CAE or any of its subsidiaries.

Indebtedness of Directors and executive officers

CAE does not offer its Directors or executive officers loans. CAE and its subsidiaries have not given any guarantee, support agreement, letter of credit or similar arrangement or understanding to any other entity in connection with indebtedness of CAE's Directors or executive officers.

Shareholders proposals

To propose any matter for a vote by the Shareholders at an annual meeting of CAE, a Shareholder must send a proposal to the Chief Legal and Compliance Officer, and Corporate Secretary at CAE's office at 8585 Côte-de-Liesse, Saint-Laurent, Québec H4T 1G6 ninety (90) to one hundred fifty (150) days before the anniversary of CAE's previous annual meeting, or within such other timeframe as prescribed by the applicable legislation. Shareholders will be required to submit notice of matters that they wish to raise at CAE's 2026 annual meeting between March 16, 2026 and May 15, 2026. CAE may omit any proposal from its Circular and annual meeting for a number of reasons under applicable Canadian corporate law, including receipt of the proposal by CAE subsequent to the timeline noted above.

Request additional information

CAE shall provide to any person or company, upon written request to the Chief Legal and Compliance Officer, and Corporate Secretary of CAE at CAE Inc., 8585 Côte-de-Liesse, Saint-Laurent, Québec, H4T 1G6, telephone number 514-734-5779 and facsimile number 514-340-5530:

1. one copy of the latest Annual Information Form of CAE together with one copy of any document or the pertinent pages of any document incorporated by reference therein;

2. one copy of the 2025 Annual Financial Report containing comparative financial statements of CAE for FY2025, together with the Auditors' Report thereon and Management's Discussion and Analysis; and

3. one copy of this Circular.

All such documents may also be accessed on CAE's website (www.cae.com). Additional financial information is provided in CAE's comparative financial statements and Management's Discussion and Analysis available on SEDAR+ at **<u>www.sedarplus.ca</u>** for the most recently completed financial year.

The contents of this Circular have been approved by the Board of Directors of CAE.

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| | |
|:---|:---|
| ![image_204.jpg](image_204.jpg) | ![image_203.jpg](image_203.jpg) |
| ![image_204.jpg](image_204.jpg) | **Mark Hounsell,<br>Chief Legal and Compliance Officer, and Corporate Secretary** |
| June 12, 2025<br>Montréal, Québec | June 12, 2025<br>Montréal, Québec |

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Appendix A – Board of Directors' Charter

Appendix A – Board of Directors' Charter

CAE INC. <br>("**CAE**" or the "**Company**")

Responsibilities

CAE's President and Chief Executive Officer and the Company's other executive officers are responsible for the management of the Company. The Board of Directors (the "**Board**") is responsible for the stewardship of the Company and for monitoring the actions of, and providing overall guidance and direction to management. The Board shall act in the best interest of the Company.

Committees

The Board may establish committees, as it deems necessary or desirable, to assist it in the fulfillment of its duties and responsibilities, with such terms of reference as the Board may determine and may delegate from time to time to such committees or other persons any of the Board's responsibilities that may be lawfully delegated. As such, the Board currently maintains an Audit Committee, a Human Resources Committee and a Governance Committee. Each committee is comprised entirely of independent directors, as determined by the Board in light of securities laws and applicable exchange rules, and each member of a committee is appointed by the Board after thorough review of the requirements for membership on each such committee. The independent directors will periodically, as they see fit, hold meetings without management.

Strategy

The Board will maintain a strategic planning process and annually approve a strategic plan. Separately from the strategic plan, the Board also approves an annual budget for financial performance.

Enterprise Risk Management

The Board is accountable for the oversight of enterprise risk management. As such, the Board will review with management the Company's risk appetite and risk tolerance and assess whether the Company's strategy is consistent with the agreed-upon risk appetite and tolerance for the Company. The Board will also review and discuss with management all key enterprise risk exposures on an aggregate, company-wide basis, and the steps management has taken to monitor and to manage those exposures. This includes the review with management of the Board's expectations as to each committee's respective responsibilities for risk oversight and management of specific risks to ensure a shared understanding as to accountabilities and roles.

The Board will work with management to promote and actively cultivate a corporate culture that understands and implements enterprise-wide risk management.

Corporate Governance

Corporate governance issues are the responsibility of the full Board. This includes the disclosure thereof, including in the Company's Annual Activity and Sustainability Report and Management Proxy Circular.

The Board periodically reviews a Disclosure Policy for the Company that, inter alia, addresses how the Company shall interact with shareholders, analysts and other stakeholders and covers the accurate and timely communication of all important information. The Company communicates with its stakeholders through a number of channels including its website, and they in turn can provide feedback to the Company in a number of ways, including e-mail.

The Board, through its Governance Committee, regularly reviews reports on compliance with the Company's Code of Business Conduct and ethical practices. It periodically reviews Company policies with respect to decisions and other matters requiring Board approval.

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Appendix A – Board of Directors' Charter

Audit, Finance and Risk Management

The Board, directly and through the Audit Committee, oversees:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)&nbsp;&nbsp;&nbsp;&nbsp;the integrity and quality of the Company's financial reporting and the effectiveness of internal controls;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii)&nbsp;&nbsp;&nbsp;&nbsp;the risk management framework, including the identification of the principal risks of the Company's business, and ensures that there are systems in place to effectively monitor, manage and mitigate these risks;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii)&nbsp;&nbsp;&nbsp;&nbsp;cybersecurity and artificial intelligence governance, risk management, incident reporting and cyber risk disclosure;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iv)&nbsp;&nbsp;&nbsp;&nbsp;the Company's compliance with legal and regulatory requirements;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(v)&nbsp;&nbsp;&nbsp;&nbsp;the qualifications and independence of the Company's external auditors;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(vi)&nbsp;&nbsp;&nbsp;&nbsp;the performance of the Company's internal accounting function and external auditors; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(vii)&nbsp;&nbsp;&nbsp;&nbsp;the adequacy of the Company's material public documents prior to their release.

Succession Planning

The Board, with the help of the Human Resources Committee, ensures a succession plan is in place for the President and Chief Executive Officer and for other senior employees of the Company and monitors such plan.

Oversight and Compensation of Management

The Board considers recommendations of the Human Resources Committee with respect to:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)&nbsp;&nbsp;&nbsp;&nbsp;the appointment and compensation of senior officers of the Company at the level of Senior Vice President and above;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii)&nbsp;&nbsp;&nbsp;&nbsp;the implementation of processes for the recruitment, training, development and retention of senior employees who exhibit the highest standards of integrity and competence and any recommendation for improvement of the processes in place to develop high potential individuals, such as the Annual Leadership Development Process;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii)&nbsp;&nbsp;&nbsp;&nbsp;the compensation philosophy for the Company generally;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iv)&nbsp;&nbsp;&nbsp;&nbsp;the adoption of any incentive compensation and equity-based plans, including stock option, stock purchase, deferred share unit, performance share unit, restricted share unit or other similar plans, in which employees are or may be eligible to participate; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(v)&nbsp;&nbsp;&nbsp;&nbsp;the Company's retirement policies and special cases.

The Board communicates to the President and Chief Executive Officer and periodically reviews the Board's expectations regarding management's performance and conduct of the affairs of the Company. The Board also periodically reviews the President and Chief Executive Officer's position description and objectives and his performance against these objectives. Each year, after a performance evaluation, the Board approves, with the recommendation of the Human Resources Committee, the President and Chief Executive Officer's compensation.

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Appendix A – Board of Directors' Charter

Sustainability Matters

The Board, through the Governance and Human Resources committees, oversees and reviews the Company's sustainability policies, practices, strategy and reporting (including Inclusion and Equal Opportunities; Data Protection and Privacy; Artificial Intelligence; Health & Safety (including Aviation Safety); Environment and Climate Change; Ethics and Anti-Corruption; Security; and Human Rights (including Modern Slavery)).

The Board, through the Audit Committee, reviews trends in corporate disclosure of non-financial performance (including sustainability related disclosure) and oversees the establishment and maintenance of a system of processes and controls to ensure the integrity, accuracy, and reliability of sustainability disclosures to be included in financial reporting.

Directors' Qualifications, Compensation, Education and Orientation

The Board, through the Governance Committee, develops a process to determine, in light of the opportunities and risks facing the Company, what competencies, skills and personal qualities are required for new directors in order to add value to the Company while ensuring that the Board is constituted of a majority of individuals who are independent. With regards to Board composition, the Board ensures adherence to the term limits imposed on all directors and considers criteria that promote diversity, including but not limited to gender, international background, nationality, age and industry knowledge, in light of the Company's Board and Executive Management Composition Policy.

The Board, through the Governance Committee, develops a program for the orientation and education of new directors, and ensures that prospective candidates for Board membership understand the role of the Board and its committees, the nature and operation of the Company's business, and the contributions that individual directors are expected to make, and develops a program of continuing education if needed for directors.

The Board considers recommendations of the Governance Committee with respect to the level and forms of compensation for directors, which compensation shall reflect the responsibilities and risks involved in being a director of the Company.

Assessment of Board and Committee Effectiveness

The Board considers recommendations of the Governance Committee for the development and monitoring of processes for assessing the effectiveness of the Board, the committees of the Board, the committees' chairs, the Chair of the Board and the contribution of individual directors, which assessments shall be made annually. These results are assessed by the Chair of the Board and/or the Chair of the Governance Committee and are reported to the full Board, which decides on actions deemed necessary, if any. The Board ensures that the number of directors and the composition of the Board permit the Board to operate in a prudent and efficient manner.

Retirement Plans

The Board is responsible for overseeing the management of the Company's retirement plans and does this through its Human Resources Committee and Audit Committee.

Outside Advisors

Directors may hire outside advisors at the Company's expense, subject to the approval of the Chair of the Board and have access to the advice and services of the Company's Corporate Secretary, who is also the Chief Legal and Compliance Officer.

*Last updated – June 12, 2025*

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Appendix B – Non-IFRS and Other Financial Measures

Appendix B – Non-IFRS and Other Financial Measures

This Circular includes non-IFRS financial measures, non-IFRS ratios, capital management measures and supplementary financial measures. These measures are not standardized financial measures prescribed under IFRS and therefore should not be confused with, or used as an alternative for, performance measures calculated according to IFRS. Furthermore, these measures should not be compared with similarly titled measures provided or used by other issuers. Management believes that these measures provide additional insight into our operating performance and trends and facilitate comparisons across reporting periods.

DEFINITIONS

A non-IFRS financial measure is a financial measure that depicts our financial performance, financial position, or cash flow and either excludes an amount that is included in or includes an amount that is excluded from the composition of the most directly comparable financial measures disclosed in our financial statements.

A non-IFRS ratio is a financial measure disclosed in the form of a ratio, fraction, percentage, or similar representation, that has a non-IFRS financial measure as one or more of its components.

A total of segments measure is a financial measure that is a subtotal or total of two or more reportable segments and is disclosed within the notes to our consolidated financial statements, but not in our primary financial statements.

A capital management measure is a financial measure intended to enable an individual to evaluate our objectives, policies and processes for managing our capital and is disclosed within the notes to our consolidated financial statements, but not in our primary financial statements.

A supplementary financial measure is a financial measure that depicts our historical or expected future financial performance, financial position or cash flow and is not disclosed within our primary financial statements, nor does it meet the definition of any of the above measures.

Certain non-IFRS and other financial measures are provided on a consolidated basis and separately for each of our segments (Civil Aviation and Defense and Security) since we analyze their results and performance separately.

PERFORMANCE MEASURES

**Gross profit margin (or gross profit as a % of revenue)** 

Gross profit margin is a supplementary financial measure calculated by dividing our gross profit by revenue for a given period. We track it because we believe it provides an enhanced understanding of our operating performance and facilitates the comparison across reporting periods.

**Operating income margin (or operating income as a % of revenue)** 

Operating income margin is a supplementary financial measure calculated by dividing our operating income by revenue for a given period. We track it because we believe it provides an enhanced understanding of our operating performance and facilitates the comparison across reporting periods.

**Adjusted segment operating income or loss**

Adjusted segment operating income or loss is a non-IFRS financial measure that gives us an indication of the profitability of each segment because it does not include the impact of any items not specifically related to the segment's performance. We calculate adjusted segment operating income by taking operating income and adjusting for restructuring, integration and acquisition costs, and impairments and other gains and losses arising from significant strategic transactions or specific events. Impairments and other gains and losses arising from significant strategic transactions or specific events consist of the gain on fair value remeasurement of SIMCOM (as described in Note 7 of our consolidated financial statements for the year ended March 31, 2025), the shareholder matters (as described in Section 5.5 of the

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Appendix B – Non-IFRS and Other Financial Measures

FY2025 MD&A), the executive management transition costs (as described in Section 5.6 of the FY2025 MD&A), the impairment of goodwill (as described in Note 14 of our consolidated financial statements for the year ended March 31, 2024), the impairment of technology and other non-financial assets (as described in Note 5 of our consolidated financial statements for the year ended March 31, 2024) and the impairment reversal of non-financial assets following their repurposing and optimization (as described in Note 5 of our consolidated financial statements for the year ended March 31, 2023). We track adjusted segment operating income because we believe it provides an enhanced understanding of our operating performance and facilitates the comparison across reporting periods. Adjusted segment operating income on a consolidated basis is a total of segments measure since it is the profitability measure employed by management for making decisions about allocating resources to segments and assessing segment performance. Refer to **Section 13.3 - Non**-**IFRS measure reconciliations** of the FY2025 MD&A for a reconciliation of this measure to the most directly comparable measure under IFRS, which reconciliation is incorporated by reference into this Circular.

**Adjusted segment operating income margin (or adjusted segment operating income as a % of revenue)** 

Adjusted segment operating income margin is a non-IFRS ratio calculated by dividing our adjusted segment operating income by revenue for a given period. We track it because we believe it provides an enhanced understanding of our operating performance and facilitates the comparison across reporting periods.

**Adjusted effective tax rate**

Adjusted effective tax rate is a supplementary financial measure that represents the effective tax rate on adjusted net income or loss. It is calculated by dividing our income tax expense by our earnings before income taxes, adjusting for the same items used to determine adjusted net income or loss. We track it because we believe it provides an enhanced understanding of the impact of changes in income tax rates and the mix of income on our operating performance and facilitates the comparison across reporting periods. Refer to **Section 13.3 - Non-IFRS measure reconciliations** of the FY2025 MD&A for a calculation of this measure, which calculation is incorporated by reference into this Circular.

**Adjusted net income or loss**

Adjusted net income or loss is a non-IFRS financial measure we use as an alternate view of our operating results. We calculate it by taking our net income attributable to equity holders of the Company from continuing operations and adjusting for restructuring, integration and acquisition costs, and impairments and other gains and losses arising from significant strategic transactions or specific events, after tax, as well as significant one-time tax items. Impairments and other gains and losses arising from significant strategic transactions or specific events consist of the gain on fair value remeasurement of SIMCOM (as described in Note 7 of our consolidated financial statements for the year ended March 31, 2025), the shareholder matters (as described in Section 5.5 of the FY2025 MD&A), the executive management transition costs (as described in Section 5.6 of the FY2025 MD&A), the impairment of goodwill (as described in Note 14 of our consolidated financial statements for the year ended March 31, 2024), the impairment of technology and other non-financial assets (as described in Note 5 of our consolidated financial statements for the year ended March 31, 2024) and the impairment reversal of non-financial assets following their repurposing and optimization (as described in Note 5 of our consolidated financial statements for the year ended March 31, 2023). We track adjusted net income because we believe it provides an enhanced understanding of our operating performance and facilitates the comparison across reporting periods. Refer to **Section 13.3 - Non-IFRS measure reconciliations** of the FY2025 MD&A for a reconciliation of this measure to the most directly comparable measure under IFRS, which reconciliation is incorporated by reference into this Circular.

**Adjusted earnings or loss per share (EPS)** 

Adjusted earnings or loss per share is a non-IFRS ratio calculated by dividing adjusted net income or loss by the weighted average number of diluted shares. We track it because we believe it provides an enhanced understanding of our operating performance on a per share basis and facilitates the comparison across reporting periods. Refer to **Section 13.3 - Non-IFRS measure reconciliations** of the FY2025 MD&A for a calculation of this measure, which calculation is incorporated by reference into this Circular.

For incentive plans purposes, this measure is further adjusted for currency fluctuations.

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Appendix B – Non-IFRS and Other Financial Measures

**EBITDA and Adjusted EBITDA**

EBITDA is a non-IFRS financial measure which comprises net income or loss from continuing operations before income taxes, finance expense – net, depreciation and amortization. Adjusted EBITDA further adjusts for restructuring, integration and acquisition costs, and impairments and other gains and losses arising from significant strategic transactions or specific events. Impairments and other gains and losses arising from significant strategic transactions or specific events consist of the gain on fair value remeasurement of SIMCOM (as described in Note 7 of our consolidated financial statements for the year ended March 31, 2025), the shareholder matters (as described in Section 5.5 of the FY2025 MD&A), the executive management transition costs (as described in Section 5.6 of the FY2025 MD&A), the impairment of goodwill (as described in Note 14 of our consolidated financial statements for the year ended March 31, 2024), the impairment of technology and other non-financial assets (as described in Note 5 of our consolidated financial statements for the year ended March 31, 2024) and the impairment reversal of non-financial assets following their repurposing and optimization (as described in Note 5 of our consolidated financial statements for the year ended March 31, 2023). We use EBITDA and adjusted EBITDA to evaluate our operating performance, by eliminating the impact of non-operational or non-cash items. Refer to **Section 13.3 - Non-IFRS measure reconciliations** of the FY2025 MD&A for a reconciliation of these measures to the most directly comparable measure under IFRS, which reconciliation is incorporated by reference into this Circular.

**Free cash flow**

Free cash flow is a non-IFRS financial measure that shows us how much cash we have available to invest in growth opportunities, repay debt and meet ongoing financial obligations. We use it as an indicator of our financial strength and liquidity. We calculate it by taking the net cash generated by our continuing operating activities, subtracting maintenance capital expenditures, intangible assets expenditures excluding capitalized development costs, other investing activities not related to growth and dividends paid and adding proceeds from the disposal of property, plant and equipment, dividends received from equity accounted investees and proceeds, net of payments, from equity accounted investees. Refer to **Section 7.1 - Consolidated cash movements** of the FY2025 MD&A for a reconciliation of this measure to the most directly comparable measure under IFRS, which reconciliation is incorporated by reference into this Circular.

**Cash conversion rate**

Cash conversion rate is a non-IFRS ratio calculated by dividing free cash flow by adjusted net income. We use it to assess our performance in cash flow generation and as a basis for evaluating our capitalization structure.

LIQUIDITY AND CAPITAL STRUCTURE MEASURES

**Non-cash working capital**

Non-cash working capital is a non-IFRS financial measure we use to monitor how much money we have committed in the day-to-day operation of our business. We calculate it by taking current assets (not including cash and cash equivalents and assets held for sale) and subtracting current liabilities (not including the current portion of long-term debt and liabilities held for sale). Refer to **Section 8.1 - Consolidated capital employed** of the FY2025 MD&A for a reconciliation of this measure to the most directly comparable measure under IFRS, which reconciliation is incorporated by reference into this Circular.

**Capital employed**

Capital employed is a non-IFRS financial measure we use to evaluate and monitor how much we are investing in our business. We measure it from two perspectives:

*Use of capital:*

—For the Company as a whole, we take total assets (not including cash and cash equivalents), and subtract total liabilities (not including long-term debt and the current portion of long-term debt);

—For each segment, we take the total assets (not including cash and cash equivalents, tax accounts, employee benefits assets and other non-operating assets), and subtract total liabilities (not including tax accounts, long-term debt and the current portion of long-term debt, royalty obligations, employee benefit obligations and other non-operating liabilities).

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Appendix B – Non-IFRS and Other Financial Measures

*Source of capital:*

—In order to understand our source of capital, we add net debt to total equity.

Refer to **Section 8.1 - Consolidated capital employed** of the FY2025 MD&A for a reconciliation of this measure to the most directly comparable measure under IFRS, which reconciliation is incorporated by reference into this Circular.

**Adjusted return on capital employed (ROCE)**

Adjusted ROCE is a non-IFRS ratio calculated over a rolling four-quarter period by taking net income attributable to equity holders of the Company from continuing operations adjusting for net finance expense, after tax, restructuring, integration and acquisition costs, and impairments and other gains and losses arising from significant strategic transactions or specific events divided by the average capital employed from continuing operations. Impairments and other gains and losses arising from significant strategic transactions or specific events consist of the gain on fair value remeasurement of SIMCOM (as described in Note 7 of our consolidated financial statements for the year ended March 31, 2025), the shareholder matters (as described in Section 5.5 of the FY2025 MD&A), the executive management transition costs (as described in Section 5.6 of the FY2025 MD&A), the impairment of goodwill (as described in Note 14 of our consolidated financial statements for the year ended March 31, 2024), the impairment of technology and other non-financial assets (as described in Note 5 of our consolidated financial statements for the year ended March 31, 2024) and the impairment reversal of non-financial assets following their repurposing and optimization (as described in Note 5 of our consolidated financial statements for the year ended March 31, 2023). We use adjusted ROCE to evaluate the profitability of our invested capital.

**Net debt**

Net debt is a capital management measure we use to monitor how much debt we have after taking into account cash and cash equivalents. We use it as an indicator of our overall financial position, and calculate it by taking our total long-term debt, including the current portion of long-term debt, and subtracting cash and cash equivalents. Refer to **Section 8.1 - Consolidated capital employed** of the FY2025 MD&A for a reconciliation of this measure to the most directly comparable measure under IFRS, which reconciliation is incorporated by reference into this Circular.

**Net debt-to-capital**

Net debt-to-capital is a capital management measure calculated as net debt divided by the sum of total equity plus net debt. We use this to manage our capital structure and monitor our capital allocation priorities.

**Net debt-to-EBITDA and net debt-to-adjusted EBITDA**

Net debt-to-EBITDA and net debt-to-adjusted EBITDA are non-IFRS ratios calculated as net debt divided by the last twelve months EBITDA (or adjusted EBITDA). We use net debt-to-EBITDA and net debt-to-adjusted EBITDA because they reflect our ability to service our debt obligations. Refer to **Section 13.3 - Non-IFRS measure reconciliations** of the FY2025 MD&A for a calculation of these measures, which calculation is incorporated by reference into this Circular.

**Maintenance and growth capital expenditures**

Maintenance capital expenditure is a supplementary financial measure we use to calculate the investment needed to sustain the current level of economic activity.

Growth capital expenditure is a supplementary financial measure we use to calculate the investment needed to increase the current level of economic activity.

The sum of maintenance capital expenditures and growth capital expenditures represents our total property, plant and equipment expenditures.

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Appendix B – Non-IFRS and Other Financial Measures

GROWTH MEASURES

**Adjusted order intake** 

Adjusted order intake is a supplementary financial measure that represents the expected value of orders we have received:

—For the Civil Aviation segment, we consider an item part of our adjusted order intake when we have a legally binding commercial agreement with a client that includes enough detail about each party's obligations to form the basis for a contract. Additionally, expected future revenues from customers under short-term and long-term training contracts are included when these customers commit to pay us training fees, or when we reasonably expect the revenue to be generated;

—For the Defense and Security segment, we consider an item part of our adjusted order intake when we have a legally binding commercial agreement with a client that includes enough detail about each party's obligations to form the basis for a contract. Defense and Security contracts are usually executed over a long-term period but some of them must be renewed each year. For this segment, we only include a contract item in adjusted order intake when the customer has authorized the contract item and has received funding for it.

For incentive plans purposes, this measure is further adjusted for currency fluctuations.

**Adjusted backlog**

Adjusted backlog is a supplementary financial measure that represents expected future revenues and includes obligated backlog, joint venture backlog and unfunded backlog and options:

—Obligated backlog represents the value of our adjusted order intake not yet executed and is calculated by adding the adjusted order intake of the current period to the balance of the obligated backlog at the end of the previous fiscal year, subtracting the revenue recognized in the current period and adding or subtracting backlog adjustments. If the amount of an order already recognized in a previous fiscal year is modified, the backlog is revised through adjustments;

—Joint venture backlog is obligated backlog that represents the expected value of our share of orders that our joint ventures have received but have not yet executed. Joint venture backlog is determined on the same basis as obligated backlog described above, but excludes any portion of orders that have been directly subcontracted to a CAE subsidiary, which are already reflected in the determination of obligated backlog;

—Unfunded backlog represents legally binding Defense and Security orders with the U.S. government that we have received but have not yet executed and for which funding authorization has not yet been obtained. The uncertainty relates to the timing of the funding authorization, which is influenced by the government's budget cycle, based on a September year-end. Options are included in adjusted backlog when there is a high probability of being exercised, which we define as at least 80% probable, but multi-award indefinite-delivery/indefinite-quantity (ID/IQ) contracts are excluded. When an option is exercised, it is considered adjusted order intake in that period, and it is removed from unfunded backlog and options.

**Book-to-sales ratio**

The book-to-sales ratio is a supplementary financial measure calculated by dividing adjusted order intake by revenue in a given period. We use it to monitor the level of future growth of the business over time.

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Appendix B – Non-IFRS and Other Financial Measures

SUPPLEMENTARY NON-FINANCIAL INFORMATION DEFINITIONS

**Full-flight simulators (FFSs) in CAE's network** 

A FFS is a full-size replica of a specific make, model and series of an aircraft cockpit, including a motion system. In our count of FFSs in the network, we generally only include FFSs that are of the highest fidelity and do not include any fixed based training devices, or other lower-level devices, as these are typically used in addition to FFSs in the same approved training programs.

**Simulator equivalent unit (SEU)**

SEU is a measure we use to show the total average number of FFSs available to generate earnings during the period. For example, in the case of a 50/50 flight training joint venture, we will report only 50% of the FFSs under this joint venture as a SEU. If a FFS is being powered down and relocated, it will not be included as a SEU until the FFS is re-installed and available to generate earnings.

**Utilization rate**

Utilization rate is a measure we use to assess the performance of our Civil simulator training network. While utilization rate does not perfectly correlate to revenue recognized, we track it, together with other measures, because we believe it is an indicator of our operating performance. We calculate it by taking the number of training hours sold on our simulators during the period divided by the practical training capacity available for the same period.

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Appendix C – Summary of the Employee Stock Option Plan

Appendix C – Summary of the Employee Stock Option Plan

***The ESOP includes the following provisions:***

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|:---|:---|
| Eligibility | Any salaried employee of CAE or its subsidiaries is eligible to participate in the ESOP. The ESOP does not permit grants to non-employee Directors. Subject to ESOP provisions related to employee death, retirement, or termination without cause, no option granted under ESOP may be exercised unless that employee wishing to exercise such option is currently employed by CAE or one of CAE's subsidiaries and has served continuously in such capacity since the date of the grant of such option. |
| Limitations on Grants | An ESOP participant (which may include an employee management insider of CAE) may not hold options on more than 5% (on an undiluted basis) of the issued and outstanding Shares. The number of Shares issuable to insiders of CAE at any time under all security-based compensation arrangements cannot exceed 10% of the issued and outstanding Shares. The number of Shares issued to insiders of the Company within any one-year period under all security-based compensation arrangements cannot exceed 10% of the Company's issued and outstanding Shares. |
| Exercise Price | The weighted average price of the Shares on the TSX on the five trading days immediately preceding the grant date (if the grant date falls within a blackout period or within five trading days following the end of a blackout period, the grant date shall be presumed to be the sixth trading day following the end of such blackout period). |
| Termination of Employment | **Death:** options may be exercised to the extent that the optionee was entitled to do so at the time of death. The options can be exercised only during the period expiring on the day that is earlier of six months following the date of death and the option termination date.<br>**Retirement:** all unvested options shall continue to vest following the retirement date. Such retired optionee shall be entitled, (a) to exercise any vested options held as of the retirement date until the termination date for each such option; and (b) to exercise any options vesting after the retirement date only during the 30-day period following the vesting date of the post retirement vesting options, after which any such options which remain unexercised shall expire.<br>**Involuntary termination for cause:** each unvested option shall terminate and become null, void and of no effect on the date on which the optionee ceases to serve the Company.<br>**Involuntary termination without cause and resignation:** the optionee has the right for a period of 30 days (or until the normal expiry date of the option if earlier) from the date of ceasing to be an employee to exercise his or her option to the extent that he/she was entitled to exercise it on the date of ceasing to be an employee. Upon the expiration of such 30-day period (subject to extension if the end of the period falls within a blackout period), each option shall terminate and become null, void and of no effect on the date on which such optionee ceases to serve the Company. |
| Transferability/ Assignment of Options | Options are not transferable or assignable otherwise than by will or by operation of estate law. |
| Financial Assistance | The ESOP does not contain any financial assistance provisions to facilitate employees' participation in the program. |
| Amendments | The ESOP provides that its terms, as well as those of any option, may be amended, terminated or waived in certain stated circumstances. The ESOP specifies in what situations Shareholders approval is required. |

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Appendix C – Summary of the Employee Stock Option Plan

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|:---|:---|
| Amendments not Requiring Shareholders Approval | The HRC has the authority, in accordance with and subject to the terms of the ESOP, to amend, suspend or terminate the ESOP or any option granted under the ESOP without obtaining Shareholders approval to:<br>&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;&nbsp;&nbsp;&nbsp;(i) amend any terms relating to the granting or exercise of options, including the terms relating to the eligibility for (other than for non-executive Directors) and limitations or conditions on participation in the ESOP, the amount and payment of the exercise price (other than a reduction thereof) or the vesting, exercise, expiry (other than an extension of the termination date except as contemplated in the ESOP), assignment (other than for financing or derivative-type transaction purposes) and adjustment of options, or (ii) add or amend any terms relating to any cashless exercise features;<br>&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;&nbsp;&nbsp;&nbsp;amend the ESOP to permit the granting of Deferred or Restricted Share Units under the ESOP or to add or amend any other provisions which result in participants receiving securities of the Company while no cash consideration is received by the Company;<br>&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;&nbsp;&nbsp;&nbsp;make changes that are necessary or desirable to comply with applicable laws, rules or regulations of any regulatory authorities having jurisdiction or any applicable stock exchange;<br>&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;&nbsp;&nbsp;&nbsp;correct or rectify any ambiguity, defective provision, error or omission in the ESOP or in any option or make amendments of a "housekeeping" nature; <br>&nbsp;&nbsp;&nbsp;&nbsp;(e)&nbsp;&nbsp;&nbsp;&nbsp;amend any terms relating to the administration of the ESOP; and<br>&nbsp;&nbsp;&nbsp;&nbsp;(f)&nbsp;&nbsp;&nbsp;&nbsp;make any other amendment that does not require Shareholders approval by virtue of the ESOP, applicable laws or relevant stock exchange or regulatory requirements;<br>provided such amendment, suspension or termination (i) does not adversely alter or impair any previously granted option without the optionee's consent and (ii) is made in compliance with applicable laws, rules, regulations, by-laws and policies of, and receipt of any required approvals from, any applicable stock exchange or regulatory authorities having jurisdiction. |
| Amendments Requiring Shareholders Approval | The ESOP provides that Shareholders approval is required to make the following amendments:<br>&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;&nbsp;&nbsp;&nbsp;increase the maximum number of Shares issuable under the ESOP, except in the case of an adjustment pursuant to Article VIII thereof (subdivisions, consolidations or reclassifications of Shares or other such events);<br>&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;&nbsp;&nbsp;&nbsp;increase the number of Shares that may be issued to insiders or to any one optionee under the ESOP, in both cases except in the case of an adjustment pursuant to Article VIII thereof (subdivisions, consolidations or reclassifications of Shares or other such events);<br>&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;&nbsp;&nbsp;&nbsp;allow non-employee Directors to be eligible for awards of options;<br>&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;&nbsp;&nbsp;&nbsp;permit any option granted under the ESOP to be transferable or assignable other than by will or pursuant to succession laws (estate settlements);<br>&nbsp;&nbsp;&nbsp;&nbsp;(e)&nbsp;&nbsp;&nbsp;&nbsp;reduce the exercise price of an option after the option has been granted or cancel any option and substitute such option by a new option with a reduced exercise price granted to the same optionee, except in the case of an adjustment pursuant to Article VIII of the ESOP;<br>&nbsp;&nbsp;&nbsp;&nbsp;(f)&nbsp;&nbsp;&nbsp;&nbsp;extend the term of an option beyond the original expiry date, except in case of an extension due to a blackout period;<br>&nbsp;&nbsp;&nbsp;&nbsp;(g)&nbsp;&nbsp;&nbsp;&nbsp;add a cashless exercise feature payable in cash or Shares, which does not provide for a full deduction of the number of underlying Shares from the ESOP reserve;<br>&nbsp;&nbsp;&nbsp;&nbsp;(h)&nbsp;&nbsp;&nbsp;&nbsp;add any form of or amendment to financial assistance provisions in the ESOP which is more favourable to optionees; and<br>&nbsp;&nbsp;&nbsp;&nbsp;(i)&nbsp;&nbsp;&nbsp;&nbsp;amend any provisions to the amendment provisions of the ESOP. |

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Appendix C – Summary of the Employee Stock Option Plan

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|:---|:---|
| Change of Control | In the circumstances of a change in the beneficial ownership or control over the majority of the Shares of CAE or the sale of all or substantially all of CAE's assets, the vesting of all options issued would be accelerated. <br>A change of control is defined as (i) any event or circumstance where any person, any joint actor thereof or any person acting jointly or in concert therewith, or any combination thereof, acquires beneficial ownership or exercises control or direction, directly or indirectly (whether through a purchase, issuance or exchange of Shares or other voting securities, reorganization, amalgamation, merger, business combination, consolidation or other transaction or series of transactions having similar effect (or a plan of arrangement in connection with any of the foregoing)), other than solely involving the Company and any one or more of its subsidiaries, of a majority of the Shares or other voting securities of the Company or of any successor or resulting corporation or other person; or (ii) the sale or other disposition to a person other than a subsidiary of the Company of all or substantially all of the Company's assets. |
| Adjustments | If certain corporate events affect the number or type of outstanding Shares, including, for example, a dividend in stock, stock split, stock consolidation or rights offering, adjustments will be made to the terms of the outstanding option grants as appropriate in such circumstances. |

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Appendix D – Summary of the Omnibus Incentive Plan

Appendix D – Summary of the Omnibus Incentive Plan

The Omnibus Incentive Plan includes the following provisions:

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|:---|:---|
| Eligibility | The HRC, in its sole discretion, from time to time designates the executive officers, employees and consultants of the Company or any of its subsidiaries to whom awards of PSUs, RUSs and/or Stock Options shall be granted and determine, if applicable, the number of Shares to be covered by such awards and the terms and conditions of such awards. The Omnibus Incentive Plan does not permit Stock Option grants to non-employee directors. |
| Limitations on Grants | The number of Shares issuable from treasury to any one participant shall not exceed more than 5% (on an undiluted basis) of the issued and outstanding Shares. The number of Shares issuable from treasury to insiders of CAE at any time under all security-based compensation arrangements cannot exceed 10% of the issued and outstanding Shares. The number of Shares issued from treasury to insiders of the Company within any one-year period under all security-based compensation arrangements cannot exceed 10% of the Company's issued and outstanding Shares. The total number of Shares available for issuance under the Omnibus Incentive Plan shall be 10,000,000. |
| Exercise Price of Stock Options | All Stock Options granted under the Omnibus Incentive Plan have an exercise price which shall not be less than the market price of the Shares on the date of the grant. <br>For purposes of the Omnibus Incentive Plan, the "market price "of the Shares as at a given date shall be the volume weighted average trading price of the Shares on the TSX for the five (5) trading days before such date. The HRC may, in its discretion, provide for procedures whereby Shares are sold, at the request of the participant, to cover the exercise price and the applicable withholding taxes, otherwise known as a "cashless exercise", or to provide cash payments representing the value of the remaining Shares underlying the Stock Options.<br>In the event of a "cashless exercise", as permitted by the HRC, a participant may authorize a third-party broker to (i) pay on his or her behalf the Exercise Price for the number of Shares in respect of which the Stock Option is exercised, (ii) sell such portion of the Shares received upon exercise of the Stock Option which is sufficient to cover such Exercise Price and the amount necessary to satisfy any withholding tax obligations of the Company or any subsidiary, and (iii) remit to the Company or such subsidiary, as applicable, the portion of the proceeds sufficient to cover such withholding tax obligations. |
| Stock Option Term | The HRC shall determine, at the time of granting a Stock Option, the period during which the Stock Option is exercisable, which shall not be more than ten (10) years from the date of grant. Unless otherwise determined by the HRC, all unexercised Stock Options shall be cancelled at the expiry of such term. Should the expiration date for a Stock Option fall within a black-out period or within nine (9) trading days following the end of a black-out period, such expiration date shall be automatically extended to that date which is the tenth (10<sup>th</sup>) trading day after the end of the black-out period. |
| Share Unit Grant Date  | Unless otherwise determined by the HRC, the date of grant of PSUs and RSUs shall not be before the sixth (6th) trading day following the day on which the HRC approves the grant of PSUs and RSUs. Should the date of grant fall within a black-out period or within five (5) trading days after the end of a black-out period, then the date of grant shall be deemed to be the later of the sixth (6th) trading day following the end of such black-out period or the sixth (6th) trading day following the day on which the HRC approved the grant. |

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Appendix D – Summary of the Omnibus Incentive Plan

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|:---|:---|
| Vesting | Each PSU, RSU or Stock Option awarded to a participant shall be exercisable at such time or times and/or pursuant to the achievement of such performance criteria and/or other vesting conditions as the HRC may determine in its sole discretion at the time of granting the particular award.<br>Unless otherwise determined by the HRC, PSUs credited to a participant's account in respect of which the performance criteria have not been achieved, shall automatically be forfeited and be cancelled effective the last day of the applicable performance period. |
| Settlement of Share Units | All vested PSUs and RSUs shall be settled as soon as practicable following the applicable "share unit vesting determination date" but in all cases prior to the last day of the restriction period. The applicable settlement date shall be determined by the HRC but shall not fall within a black-out period or within five (5) trading days after the end of a black-out period, unless the last day of the "restriction period" falls within this period.<br>For the purposes of the Omnibus Incentive Plan, the "share unit vesting determination date" shall be the date on which the HRC determines if the vesting conditions with respect to PSUs or RSUs (including any applicable performance criteria) have been met, and as a result, establishes the number of PSUs or RSUs, as applicable, that become vested, if any. <br>For the purposes of the Omnibus Incentive Plan, the "restriction period" shall be the applicable restriction period in respect of a particular PSU or RSU, which period, unless otherwise determined by the HRC at the time the PSU or RSU is granted, shall end on the trading day preceding December 31 of the calendar year which is three (3) years after the calendar year in which the PSU or RSU was granted.<br>The Company, in its sole discretion, may settle (or cause a subsidiary to settle), vested PSUs or RSUs, by providing a participant (or the liquidator, executor or administrator, as the case may be, of the estate of the participant) with: (i) in the case of settlement of PSUs or RSUs for their cash equivalent, delivery of cash to the participant representing the cash equivalent, through wire transfer, cheque or any other form of payment deemed acceptable by the HRC; (ii) in the case of settlement of PSUs or RSUs for Shares, delivery of Shares issued from treasury and/or purchased on the participant's behalf on the open market; or (iii) in the case of settlement of the PSUs or RSUs for a combination of Shares and the cash equivalent, a combination of (i) and (ii) above. |
| Determination of Amounts  | For purposes of determining the cash equivalent of PSUs or RSUs to be paid, such calculation will be made as of the settlement date based on the market value on such date multiplied by the number of vested PSUs or RSUs in the participant's account, net of any applicable taxes. <br>For the purposes of determining the number of Shares to be issued or delivered to a participant upon settlement of PSUs or RSUs, such calculation will be made as of the settlement date based on the whole number of Shares corresponding to the vested PSUs or RSUs recorded in the participant's account, net of the whole number of Shares to be sold to satisfy any applicable taxes.  |
| Termination of Employment | **Termination for Cause:** all awards granted to such participant, whether vested or unvested on the termination date, shall be forfeited. For the purposes of the Omnibus Incentive Plan, the determination by the HRC that the participant was discharged for cause shall be binding on the participant. "Cause" shall include a breach of the Company's Code of Business Conduct or other CAE policy, failure to perform specified and required duties after a written warning, serious misconduct or negligence of, among other things, a professional, ethical or legal nature, or moral turpitude.<br>**Resignation:** <br>(i) all unvested PSUs, RSUs and/or Stock Options granted to such participant will be forfeited on the termination date;  |

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Appendix D – Summary of the Omnibus Incentive Plan

(ii) all PSUs and RSUs granted to such participant and vested pursuant to the Omnibus Incentive Plan on the termination date will be settled (based on the vesting terms, including, if applicable, achievement of performance criteria, as determined in the final and sole discretion of the HRC) as soon as possible; and<br>(iii) all vested Stock Options granted to such participant will remain exercisable until the earlier of: (A) thirty (30) days after the termination date; and (B) the expiry date of the options, after which time all such Stock Options will expire. For greater certainty, if, following a participant's resignation, the end of the thirty (30) day period during which Stock Options may be exercised should fall within a black-out period or within nine (9) trading days following the end of a black-out period, such period shall be extended to the tenth (10<sup>th</sup>) trading day following the end of such black-out period.<br>**Retirement:** <br>(i) all unvested PSUs and/or RSUs granted to such participant will continue to vest as determined by the HRC and will be settled, as applicable, based on their vesting terms, including, if applicable, achievement of performance criteria, as determined in the final and sole discretion of the HRC; <br>(ii) all unvested Stock Options granted to such participant will continue to vest in accordance with the terms of the Omnibus Incentive Plan and the participant's grant agreement. Once vested, such Stock Options may only be exercised until the earlier of: (A) ninety (90) days following their vesting and (B) the expiry date of the Stock Options, after which time all unvested Stock Options will automatically expire. For greater certainty, if, following a participant's retirement, the end of the ninety (90) day period during which Stock Options may be exercised should fall within a black-out period or within nine (9) trading days following the end of a black-out period, such period shall be extended to the tenth (10<sup>th</sup>) trading day following the end of such black-out period; <br>(iii) all PSUs and RSUs granted to such participant and vested pursuant to the Omnibus Incentive Plan on the termination date will be settled (based on the vesting terms, including, if applicable, achievement of performance criteria, as determined in the final and sole discretion of the HRC) as soon as possible; and<br>(iv) all vested Stock Options granted to such participant will remain exercisable until their expiry date after which time all such Stock Options will automatically expire. <br>**Death or Long-Term Disability:** <br>(i) all unvested PSUs and/or RSUs granted to such participant will fully vest at target on the termination date and be settled as soon as possible (regardless of vesting terms including, if applicable, achievement of performance criteria); <br>(ii) all unvested Stock Options granted to such participant will vest on the termination date and may only be exercised until the earlier of: (A) six (6) months following the termination date; and (B) the expiry date of the Stock Options, after which time all unvested Stock Options will automatically expire; <br>(iii) all PSUs and RSUs granted to such participant and vested pursuant to the Omnibus Incentive Plan on the termination date will be settled (based on the vesting terms, including, if applicable, achievement of performance criteria, as determined in the final and sole discretion of the HRC) as soon as possible; and<br>(iv) all vested Stock Options granted to such participant will remain exercisable until the earlier: of (A) six (6) months after the termination date; and (B) the expiry date of the Stock Options, after which time all such options will automatically expire. <br>For greater certainty, if, following a participant's death or long-term disability, the end of the six (6) month period during which Stock Options may be exercised should fall within a black-out period or within nine (9) trading days following the end of a black-out period, such period shall be extended to the tenth (10<sup>th</sup>) trading day following the end of such black-out period.<br>

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Appendix D – Summary of the Omnibus Incentive Plan

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| | **Termination without cause:** <br>(i) the HRC may, in its sole discretion, determine that a portion of the PSUs and/or RSUs granted to such participant, pro-rated to the number of fiscal years completed since their grant, will immediately vest on the termination date and be settled (based on their vesting terms, including, if applicable, achievement of performance criteria, up to the termination date, as determined in the final and sole discretion of the HRC); <br> (ii) all unvested Stock Options granted to such participant will be forfeited on the termination date; <br>(iii) all PSUs and RSUs granted to such participant and vested pursuant to the Omnibus Incentive Plan on the termination date will be settled (based on the vesting terms, including, if applicable, achievement of performance criteria, as determined in the final and sole discretion of the HRC) as soon as possible; and<br>(iv) all vested Stock Options granted to such participant will remain exercisable until the earlier of: (A) ninety (90) days after the termination date; and (B) the expiry date of the Stock Options, after which time all such Stock Options will automatically expire. <br>For greater certainty, if, following a participant's termination without cause, the end of the ninety (90) day period during which Stock Options may be exercised should fall within a black-out period or within nine (9) trading days following the end of a black-out period, such period shall be extended to the tenth (10<sup>th</sup>) trading day following the end of such black-out period. |
| Transferability/ Assignment of Awards | Except as specifically provided in a grant agreement approved by the HRC, each award granted under the Omnibus Incentive Plan shall not be transferable or assignable otherwise than by will or by the laws of succession. |
| Financial Assistance | Unless otherwise determined by the HRC, the Company shall not offer financial assistance to any participant in regards to the exercise, vesting or payment of any award granted under the Omnibus Incentive Plan. |
| Amendments | The Omnibus Incentive Plan provides that its terms, as well as those of any grants, may be suspended, terminated, amended or revised in certain stated circumstances. The Omnibus Incentive Plan specifies in what situations Shareholders approval is required. |
| Amendments not Requiring Shareholders Approval | The Board may suspend or terminate the Omnibus Incentive Plan at any time, or from time to time amend or revise the terms of the Omnibus Incentive Plan or any granted awards without the consent of the participants, provided that such suspension, termination, amendment or revision shall:<br>(i) not materially adversely alter or impair the rights of any participant, without the consent of such participant, except as permitted by the provisions of the Omnibus Incentive Plan;<br>(ii) be in compliance with applicable law and with the prior approval, if required, of the Shareholders, a stock exchange or any other regulatory body having authority over the Company; and<br>(iii) be subject to Shareholders approval, where required by law or the requirements of a stock exchange, provided that the Board may, from time to time, in its absolute discretion and without approval of the Shareholders of the Company make the following amendments:<br>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**a.&nbsp;&nbsp;&nbsp;&nbsp;**amend any terms and conditions relating to the granting of awards, including the terms relating to the eligibility for and limitations or conditions on participation in the Omnibus Incentive Plan (other than to allow non-employee directors of the Company to be eligible for awards of Stock Options under the Omnibus Incentive Plan), the amount and payment of the exercise price (other than a reduction thereof) or the vesting, exercise, expiry (other  |

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Appendix D – Summary of the Omnibus Incentive Plan

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| | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;than an extension of the expiry date except if due to a black-out period) and adjustment of awards as provided hereunder; <br>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**b.&nbsp;&nbsp;&nbsp;&nbsp;**make changes that are necessary or desirable to comply with applicable laws, rules or regulations of any regulatory authorities having jurisdiction or any relevant stock exchange; <br>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**c.&nbsp;&nbsp;&nbsp;&nbsp;**correct or rectify any ambiguity, defective provision, error or omission in the Omnibus Incentive Plan or make amendments of a "housekeeping" nature;<br>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**d.&nbsp;&nbsp;&nbsp;&nbsp;**amend any terms relating to the administration of the Omnibus Incentive Plan; and <br>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**e.&nbsp;&nbsp;&nbsp;&nbsp;**make any other amendment that does not require Shareholders approval by virtue of the Omnibus Incentive Plan, applicable laws, rules or regulations of any regulatory authorities having jurisdiction or any relevant stock exchange. <br>The Board may also, by resolution, advance the date on which any award may be exercised or payable or, subject to applicable regulatory provisions, including any rules of a stock exchange, extend the expiration date of any award, in the manner to be set forth in such resolution, provided that the period during which a Stock Option is exercisable or a PSU or RSU remains outstanding does not exceed: (i) in the case of Stock Options, ten (10) years from the Stock Option grant date subject to an extension due to a black-out period; and (ii) in the case of PSUs and RSUs, the last day of the restriction period in respect of such PSUs and RSUs, and further provided that any such advancement or extension does not result in a violation of Section 409A of the United States Internal Revenue Code of 1986 (the "US Code"). <br>. The Board shall not, in the event of any such advancement or extension, be under any obligation to advance or extend the date on or by which any Stock Option may be exercised or any PSU or RSU may remain outstanding with respect to any other participant. |
| Amendments Requiring Shareholders Approval | The Omnibus Incentive Plan provides that the Board shall be required to obtain Shareholders approval to make the following amendments:<br>(i) increase the maximum number of Shares issuable under the Omnibus Incentive Plan, except in the case of an adjustment as provided under the Omnibus Incentive Plan; <br>(ii) increase the number of Shares that are issuable or that may be issued to insiders or to any one participant under the Omnibus Incentive Plan, except in the case of an adjustment as provided under the Omnibus Incentive Plan; <br>(iii) allow non-employee directors of the Company to be eligible for awards of Stock Options under the Omnibus Incentive Plan; <br>(iv) permit any award granted under the Omnibus Incentive Plan to be transferable or assignable other than by will or pursuant to succession laws; <br>(v) reduce the exercise price of a Stock Options after the Stock Option has been granted to a participant or cancel any Stock Option and substitute such Stock Option by a new Stock Option with a reduced exercise price granted to the same participant, except in the case of an adjustment provided under the Omnibus Incentive Plan; <br>(vi) extend the term of a Stock Option beyond the original expiry date, except in case of an extension due to a black-out period; <br>(vii) add any form of financial assistance and any amendment to a financial assistance provision in the Omnibus Incentive Plan which is more favourable to participants; and <br>(viii) amend any provisions to the amendment provisions of the Omnibus Incentive Plan.  |
| Change of Control | In the context of a change of control, all awards granted to a participant will be converted into or substituted by alternative awards, to the extent possible, and Stock Options, PSUs and RSUs which are not converted into or substituted by an alternative award shall vest (but, with respect to a U.S. |

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Appendix D – Summary of the Omnibus Incentive Plan

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|:---|:---|
| | taxpayer, shall not be settled or paid at such time unless doing so would not result in a violation of Section 409A of the U.S. Code) and, in the case of Stock Options, become exercisable in full immediately prior to the consummation of the transaction constituting the change of control. <br>If alternative awards are available and a participant is terminated without cause or submits a resignation for good reason within twenty-four (24) calendar months after a change of control, all outstanding alternative awards which are not then exercisable shall vest and alternative awards in which Stock Options were converted will become exercisable in full upon such termination or resignation. Alternative awards in which PSUs and RSUs were converted will be settled as soon as possible after vesting. Alternative awards in which Stock Options were converted will remain exercisable until the earlier of: (i) one (1) year after the termination or resignation; and (ii) the original expiry date of the Stock Options, after which time all such alternative awards will expire.<br>The provisions relating to a change of control may be varied in grant agreements for U.S. taxpayers in order to comply with Section 409A of the U.S. Code and, to the extent that the provisions relating to a change of control would case an award to a U.S. taxpayer to violate Section 409A of the U.S. Code, such provision will not apply to such U.S. taxpayer.<br>A change of control is defined as (i) any event or circumstance where any person, any joint actor thereof or any person acting jointly or in concert therewith, or any combination thereof, acquires beneficial ownership or exercises control or direction, directly or indirectly (whether through a purchase, issuance or exchange of Shares or other voting securities, reorganization, amalgamation, merger, business combination, consolidation or other transaction or series of transactions having similar effect (or a plan of arrangement in connection with any of the foregoing)), other than solely involving the Company and any one or more of its subsidiaries, of a majority of the Shares or other voting securities of the Company or of any successor or resulting Company or other person; (ii) the sale or other disposition to a person other than a subsidiary of the Company of all or substantially all of the Company's assets; (iii) the Company undergoing a liquidation or dissolution; or (iv) as a result of or in connection with: (A) a contested election of directors; or (B) a reorganization, amalgamation, merger, business combination, consolidation or other transaction or series of transactions involving the Company or any of its subsidiaries and another corporation or other entity, the nominees named in the most recent management information circular of the Company for election to the Board of directors no longer constitute a majority of the members of the Board of Director. |
| Adjustments | In the event of any subdivision, consolidation, reclassification, reorganization or any other change affecting the Shares, or any merger, amalgamation or consolidation of the Company with or into another corporation, or any distribution to all security holders of cash, evidences of indebtedness or other assets not in the ordinary course, or any transaction or change having a similar effect, the Board shall in its sole discretion, subject to the required approval of any stock exchange, determine the appropriate adjustments or substitutions to be made in such circumstances in order to maintain the economic rights of the participants in respect of awards under the Omnibus Incentive Plan, including, without limitation, adjustments to the exercise price, adjustments to the number of Shares to which a participant is entitled upon exercise or settlement, adjustments permitting the immediate exercise of any outstanding awards that are not otherwise exercisable or adjustments to the number or kind of Shares reserved for issuance. |

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Appendix E – Amendments to the General By-law

Appendix E – Amendments to the General By-law

**BY-LAW AMENDMENT RESOLUTION:**

THAT the amendments to Sections 1.1, 4.1, 4.4, 4.10, 5.1, 10.11 and 10.13 of the General By-law of CAE Inc. (the "**Corporation**"), draft of which is set forth in Appendix E to CAE's Management Proxy Circular dated June 12, 2025, be and are hereby approved and confirmed as of August 13, 2025.

THAT any officer of the Corporation be, and is hereby authorized and directed, for and on behalf of the Corporation, to finalize, sign or deliver all documents, to enter into any agreements and to do and perform all acts and things as such individual, in his or her discretion, deems necessary or advisable in order to give effect to the intent of this resolution and the matters authorized hereby, such determination to be conclusively evidenced by the finalizing, signing or delivery of such document or agreement or the performing of such act or thing.

**DRAFT AMENDMENTS:**

The following are the proposed amendments to the General By-law of CAE Inc. Capitalized terms used in this Appendix E without express definition have the meanings attributed thereto in the By-law:

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| Section 1.1 – Definitions. | The following definitions are added:<br><u>"</u>**<u>Canadian</u>**<u>" means an individual who is (a) a Canadian citizen, or (b) a permanent resident within the meaning of subsection 2(1) of the</u> *<u>Immigration and Refugee Protection Act</u>* <u>(Canada).</u><br><u>"</u>**<u>resident Canadian</u>**<u>" has the meaning ascribed to it in the Act.</u> |
| Section 4.1 – Number of Directors and Quorum. | Until changed in accordance with the Act, the board shall consist of not fewer than the minimum number and not more than the maximum number of directors provided for in the articles. <u>A majority of the directors shall be Canadians. In addition, subject to the provisions of the Act, at least twenty-five per cent (25%) of the directors must be resident Canadians, provided however that if the board consists of less than four (4) directors, at least one (1) director must be a resident Canadian.</u><br>Subject to the provisions of the Act, the quorum for the transaction of business at any meeting of the board shall consist of a majority of the directors, and at any meeting of a committee of the board shall consist of a majority of the directors forming the committee. A majority of the directors shall be resident Canadians. The board shall not transact business at a meeting, other than filling a vacancy in the board, unless a majority <u>at least twenty-five percent (25%)</u> of the directors present are <u>resident</u> Canadians, <u>or, if the board consists of less than four (4) directors, at least one (1) of the directors present is a resident Canadian,</u> except where:<br>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;&nbsp;&nbsp;&nbsp;a <u>resident</u> Canadian director who is unable to be present approves in writing, or by telephone <u>telephonic, electronic</u> or other communications facilities <u>communication facility</u>, the business transacted at the meeting; and<br>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;&nbsp;&nbsp;&nbsp;a majority of Canadians <u>the required number of resident Canadian directors</u> would have been present had that director been present at the meeting. |
| Section 4.4 – Meeting By Telephonic, Electronic or Other Communication Facility. | If all the directors of the Corporation consent, a director may participate in a meeting of the board or of a committee of the board by such telephonic, electronic or other communication facility as <u>that</u> permits all persons participating in the meeting to communicate <u>adequately</u> with each other, and a director participating in such a meeting by such means is deemed to be present at the meeting. <u>If all the directors of the Corporation consent, meetings of directors may be held entirely by means of a telephonic, electronic or other communication facility that permits all persons participating in the meeting to communicate adequately with</u> |

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Appendix E – Amendments to the General By-law

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| | <u>each other</u>. Any such consent shall be effective whether given before or after the meeting to which it relates and may be given with respect to all meetings of the board and of committees of the board. |
| Section 4.10 – Chairperson. | The board, shall, from time to time, elect from among its members a chairperson of the board who shall, if present, preside as chairperson at all meetings of the board and of shareholders. The chairperson of the board shall not be an officer of the Corporation unless specifically so designated by the board. The chairperson of the board shall be a member of the Executive Committee of the board (if one has been created). |
| Section 5.1 – Committees of the Board. | The board may appoint one or more committees of the board and delegate to any such committee any of the powers of the board except those which pertain to items which, under the Act, a committee of the board has no authority to exercise. A majority of the members of an executive committee (if appointed) shall be resident Canadians. |
| Section 10.11 – Show of Hands. | Subject to the provisions of the Act, any question at a meeting of shareholders may be decided by a show of hands unless a ballot thereon is required or demanded as hereinafter provided. Upon a show of hands every person who is present and entitled to vote shall have one vote. Whenever a vote by show of hands shall have been taken upon a question, unless a ballot thereon is so required or demanded, a declaration by the chairperson of the meeting that the vote upon the question has been carried or carried by a particular majority or not carried, and an entry to that effect in the minutes of the meeting shall be prima facie evidence of the fact without proof of the number or proportion of the votes recorded in favour of or against any resolution or other proceeding in respect of the said question, and the result of the vote so taken shall be the decision of the shareholders upon the said question. <u>For greater certainty, if a meeting is held entirely by telephonic, electronic or other communication facility, voting at that meeting shall be by online ballot. If a meeting is held both in person and by telephonic, electronic or other communication facility, the votes of shareholders participating by telephonic, electronic or other communication facility will be counted as if they were present in person at the meeting.</u> |
| Section 10.13 – Meetings by Telephonic, Electronic or Other Communication Facility. | <u>In the event of</u> *<u>force majeure</u>* <u>stemming from public health restrictions, governmental or regulatory prohibitions, or comparable circumstances that would make meeting in person impossible or deeply impractical,</u> meetings of shareholders may be held entirely by means of a telephonic, electronic or other communication facility that permits all participants to communicate adequately with each other. Any person entitled to attend a meeting of shareholders may participate in such meeting by means of a telephonic, electronic or other communication facility that permits all participants to communicate adequately with each other if the Corporation makes available such a communication facility and any person participating in a meeting by such means is deemed to be present at the meeting. Any vote at such a meeting may be held entirely by means of a telephonic, electronic or other communication facility. |
| Section 10.14 – Nominations of Directors. | 1.Subject only to the *Canada Business Corporations* Act (the "Act") and the articles, only persons <u>individuals</u> who are nominated in accordance with the following procedures shall be eligible for election as directors of the Corporation. Nominations of persons for election to the board of directors of the Corporation (the "Board") may be made at any annual meeting of shareholders, or at any special meeting of shareholders if one of the purposes for which the special meeting was called was the election of directors. Such nominations may be made in the following manner:<br>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a.by or at the direction of the Board <u>board</u>, including pursuant to a notice of meeting;<br>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b.by or at the direction or request of one or more shareholders of the Corporation pursuant to a proposal made in accordance with the provisions of the Act, or a requisition of meeting of the shareholders of the Corporation made in accordance with the provisions of the Act; or |

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Appendix E – Amendments to the General By-law

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;c.&nbsp;&nbsp;&nbsp;&nbsp;by any person (a "Nominating Shareholder"): (A) who, at the close of business on the date of the giving of the notice provided below in this section 10.14 and on the record date for notice of such meeting, is entered in the securities register of the Corporation as a holder of one or more shares carrying the right to vote at such meeting or who beneficially owns shares that are entitled to be voted at such meeting; and (B) who complies with the notice procedures set forth below in this section 10.14.<br>2.In addition to any other applicable requirements, for a nomination to be made by a Nominating Shareholder, the Nominating Shareholder must have given timely notice thereof in proper written form to the Corporate Secretary of the Corporation at the principal executive offices of the Corporation.<br>3.To be timely, a Nominating Shareholder's notice to the Corporate Secretary of the Corporation must be made:<br>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a.in the case of an annual meeting of shareholders <u>(and including an annual and special meeting)</u>, not less than 30 nor more than 65 days prior to the date of the annual meeting of shareholders; provided, however, that in the event that the annual meeting of shareholders is to be held on a date that is less than 50 days after the date on which the first public announcement (the "Notice Date") of the date of the annual meeting was made, notice by the Nominating Shareholder may <u>must</u> be made not later than the close of business on the tenth (10th) day following the Notice Date; and<br>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b.in the case of a special meeting (which is not also an annual meeting) of shareholders called for the purpose of electing directors (whether or not called for other purposes), not later than the close of business on the fifteenth (15th) day following the day on which the first public announcement of the date of the special meeting of shareholders was made.<br>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;c.In no event shall any adjournment or postponement of a meeting of shareholders or the announcement thereof commence a new time period for the giving of a Nominating Shareholder's notice as described above.<br><u>In the event of an adjournment or postponement of an annual meeting or special meeting of shareholders or any announcement thereof, a new time period shall commence for the giving of a timely notice under this paragraph 3 of section 10.14.</u><br>4.To be in proper written form, a Nominating Shareholders' notice to the Corporate Secretary of the Corporation must set forth:<br>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a.as to each person <u>individual</u> whom the Nominating Shareholder proposes to nominate for election as a director <u>(each a "Proposed Nominee")</u>: (A) the name, age, business address and residential address of the person <u>Proposed Nominee; (B) a statement indicating whether the Proposed Nominee is a "resident Canadian" as defined in the Act</u>; (B<u>C</u>) the principal occupation<u>, business</u> or employment of the person <u>Proposed Nominee</u>; (C<u>D</u>) the class or series and number of shares in the capital of the Corporation which are controlled <u>or directed, directly or indirectly,</u> or which are owned beneficially or of record<u>,</u> by the person <u>Proposed Nominee</u> as of the record date for the meeting of shareholders (if such date shall then have been made publicly available and shall have occurred) and as of the date of such notice; and (D<u>E</u>) any other information relating to the person <u>Proposed Nominee</u> that would be required to be disclosed in a dissident's proxy circular in connection with solicitations of proxies for election of directors pursuant to the Act and Applicable Securities Laws (as defined below); and<br>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b.as to the Nominating Shareholder giving the notice: <u>(A) the name, business address and residential address of such Nominating Shareholder; (B) the class or series and number of shares in the capital of the Corporation which are controlled, directed or owned, beneficially or of record, by the Nominating Shareholder, or by any other person with whom the Nominating Shareholder is acting jointly or in concert with respect to the Corporation or its securities, as of the record date for the meeting of shareholders (if such date shall then have been made publicly available and shall have occurred) and as of the date of such notice; (C) to the extent not already disclosed in the notice</u>, any proxy, contract <u>agreement, commitment</u>, arrangement, understanding or relationship pursuant to which such Nominating Shareholder<u>, or any affiliate or associate (within the meaning of Applicable Securities Laws) of such Nominating Shareholder,</u> has a right to vote<u>, or to direct the voting of,</u> any <br>

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Appendix E – Amendments to the General By-law

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares in the capital of the Corporation<u>;</u> and <u>(D)</u> any other information relating to such Nominating Shareholder that would be required to be made in a dissident's proxy circular in connection with solicitations of proxies for election of directors pursuant to the Act and Applicable Securities Laws (as defined below).<br>The Corporation may require any proposed director nominee to furnish such other information as may reasonably be required by the Corporation to determine the eligibility of such proposed director nominee to serve as an independent director of the Corporation or that could be material to a reasonable shareholder of the Corporation's understanding of the independence, or lack thereof, of such proposed director nominee.<br>5.<u>In addition to the provisions of this section 10.14, a Nominating Shareholder and any Proposed Nominee shall also comply with all of the applicable requirements of the Act, Applicable Securities Laws and applicable stock exchange rules regarding the matters set forth in this section 10.14.</u><br>6.No person shall be eligible for election as a director of the Corporation unless nominated in accordance with the provisions of this section 10.14; provided, however, that nothing in this section 10.14 shall be deemed to preclude discussion by a shareholder (as distinct from the nomination of directors) at a meeting of shareholders of the Corporation of any matter in respect of which it would have been entitled to submit a proposal pursuant to the provisions of the Act. The chairman of the meeting shall have the power and duty to determine whether a nomination was made in accordance with the procedures set forth in the foregoing provisions and, if any proposed nomination is not in compliance with such foregoing provisions, to declare that such defective nomination shall <u>or shall not</u> be disregarded.<br>7.For purposes of this section 10.14:<br>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a."**public announcement**" shall mean disclosure in a press release reported by a national news service in Canada, or in a document publicly filed by the Corporation under its profile on the System of <u>for</u> Electronic Document Analysis and Retrieval<u>+</u> at www. sedar.com <u>www. sedarplus.ca</u>; and<br>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b."**Applicable Securities Laws**" means the applicable securities legislation of each relevant province of Canada, as amended from time to time, the rules, regulations and forms made or promulgated under any such statute and the published national instruments, multilateral instruments, policies, bulletins and notices of the securities commission and similar regulatory authority of each province of Canada.<br>8.Notwithstanding any other provision of this section 10.14, notice given to the Corporate Secretary of the Corporation may only be given by personal delivery, facsimile transmission or by email (at such email address as stipulated from time to time by the Corporate Secretary of the Corporation for purposes of this notice), and shall be deemed to have been given and made only at the time it is served by personal delivery, email (at the aforesaid address) or sent by facsimile transmission (provided that receipt of confirmation of such transmission has been received) to the Corporate Secretary of the Corporation at the address of the principal executive offices of the Corporation; provided that if such delivery or electronic communication is made on a day which is a not a business day or later than 5:00 p.m. (Montreal time) on a day which is a business day, then such delivery or electronic communication shall be deemed to have been made on the subsequent day that is a business day.<br>9.Notwithstanding the foregoing, the Board <u>board</u> may, in its sole discretion, waive any requirement in this section 10.14.<br>

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## Exhibit 99.2

![](ar2025e-front001.jpg)

Financial Report FISCAL YEAR ENDED MARCH 31, 2025

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At CAE, we exist to make the world safer. We deliver cutting-edge training, simulation, and critical operations solutions to prepare aviation professionals and defence forces for the moments that matter. Every day, we empower pilots, cabin crew, maintenance technicians, airlines, business aviation operators, and defence and security personnel to perform at their best and when the stakes are the highest. Around the globe, we're everywhere customers need us to be with approximately 13,000 employees at around 240 sites and training locations in over 40 countries. For nearly 80 years, CAE has been at the forefront of innovation, consistently seeking to set the standard by delivering excellence in high-fidelity flight simulators and training solutions, while embedding sustainability at the heart of everything we do. By harnessing technology and enhancing human performance, we strive to be the trusted partner in advancing safety and mission readiness—today and tomorrow. Read our Global Annual Activity and Sustainability report. Our Global Annual Activity and Sustainability Report for fiscal year 2025 is available online. This report is a testament to CAE's commitment to transparency and sustainable growth, encapsulating our strategic vision, performance highlights, sustainability practices and achievements. It serves as a single source of information for our stakeholders, emphasizing that sustainability is built in CAE's core business strategy and activities at the outset. Learn more about how we take care of our impact our solutions generate benefits across the key pillars of sustainability: environment, social and governance cae.com/sustainability/ cae.com Follow us on : @CAE_Inc. linkedin.com/company/cae

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![](ar2025e-front003.jpg)

A message from our Chief Executive Officer Reflecting on our remarkable journey After serving as CAE's Chief Executive Officer for more than 15 years, I look at the company we have built with immense pride, especially after another year of strong performance across multiple fronts. Fiscal year 2025 (FY25) was a year in which we faced challenges head-on, delivered for our customers and expanded our market-leading position in several key areas. Over the past decade and a half, we have grown significantly in both scale and importance to all our stakeholders. While this growth has been financially rewarding, it is even more meaningful in terms of our standing with customers, OEMs, regulators, employees and the communities where we operate. As the challenges of the COVID-19 pandemic demonstrated, the journey has not always been easy — but we persevered with a focus on long-term success. We have transformed CAE from a relatively small, regionally focused manufacturer of flight simulators into a global leader in flight training and related services. Today, approximately 60% of our annual revenue comes from recurring training services. More importantly, our remarkable impact on global flight safety reflects our noble mission — one that drives who we are, what we do and inspires our employees to bring it to life every day. CAE's revenue has more than tripled over the past 15 years, from $1.5 billion in FY10 to $4.7 billion in FY25. During that same period, our stock price has risen from approximately $8 per share to $35 per share . Including dividends, this represents a total shareholder return of over 460%, a meaningful reflection of our financial performance. But our success runs deeper than financial results alone. It is most powerfully demonstrated by the leading positions we have earned in our markets and the enduring trust we have built with our customers. Today, the scale we bring to the global aviation ecosystem is unmatched. Each year, CAE trains more than 155,000 civil and military pilots across 240 locations in over 40 countries. In recent years, our training business has grown through approximately 50 acquisitions , including joint ventures and organically, through sustained investment in our global training network. Our customers around the world rely on us daily as their training partner of choice — a responsibility we embrace with great pride. The company we are today has transformed from the one I joined 20 years ago. We have evolved and grown in meaningful ways. Our culture of creativity and passion for our customers' missions positions us for continued growth, innovation and relevance in the years ahead. Moreover, the industry's ongoing recognition of our leadership in sustainability underscores our forward-thinking vision. For all these reasons, I believe CAE's future is brighter than ever. Marc Parent, C.M. President and Chief Executive Officer

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![](ar2025e-front004.jpg)

Positioning CAE for long-term success On behalf of the leadership team, I am very pleased with CAE's strong FY25 performance across all key financial and operational metrics. This year was marked by significant revenue growth, strong margins and further improvements in our cash position and leverage ratios, driven by robust cash generation and efficient capital allocation. On the strength of this performance, we are well positioned to achieve our long-term leverage and cash conversion targets in FY26 and to pursue accretive reinvestment opportunities and shareholder returns in the medium term. Just a year ago, our primary focus was on re-baselining our Defense & Security (D&S) business to set the stage for steady, consistent performance improvements. This year, through discipline and determination, our team delivered on the ambitious goals we set, resulting in the financial recovery we anticipated in D&S. This progress has helped restore stakeholder confidence in the business and reaffirmed its vital contribution to CAE's overall success. With a very strong year for D&S adjusted order intake1, we look forward to continued growth in revenue, profit and cash flow. These achievements, combined with the continued strong performance of our Civil Aviation business, give me confidence that, despite current global macroeconomic uncertainty, we are well positioned to continue creating value for all our stakeholders. We have the right strategy, an exceptional leadership team, an unmatched competitive position and a wealth of opportunities ahead.

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![](ar2025e-front005.jpg)

Civil Aviation Continuing to soar as industry leader and trustworthy partner Our Civil Aviation segment continues to benefit from long-term secular growth trends — most notably, the ongoing rise in global passenger traffic and associated aircraft delivery rates. Combined with the expected wave of mandatory pilot retirements, these trends point to a global demand for nearly 1.5 million aviation professionals by 2034. This includes not only pilots, but also maintenance technicians, cabin crew and air traffic control officers, as outlined in CAE's recently published Aviation Talent Forecast. In FY25, despite headwinds including limited aircraft availability, slower-than-expected aircraft delivery ramp-ups and a related slowdown in U.S. pilot hiring, our Civil Aviation business delivered strong results. We believe this clearly demonstrates the resilience of our business model and the strength of CAE's global franchise. Even in the face of these challenges, we made significant progress in expanding our global market share and reinforcing our role as the trusted partner for customers worldwide. This year, we proudly opened state-of-the-art CAE training centres in Athens, Greece; Sydney, Australia; and Savannah, Georgia, in the U.S. We also continued to grow our market share organically by expanding our commercial aviation training centre capacity and consolidating our ownership in SIMCOM. This move supports our customer Flexjet, one of the world's leading business aviation fleet operators, and gives CAE greater exposure to the rapidly growing fractional jet and charter market. It also strengthens our position in the large-cabin segment of the business jet market, where both growth and returns have historically been higher. Additionally, we expanded our presence in adjacent markets, most notably through Flightscape, our airline operations digital solutions business. This year, we secured several long-term customer contracts and positioned the business for future growth through continued investment in new products and features. We also inaugurated our first Air Traffic Services Training Centre on CAE's Montreal campus, broadening our training portfolio. Under this first-of-its-kind partnership in Canada, CAE instructors deliver initial training for Flight Service Specialists and Air Traffic Controllers using NAV CANADA's curriculum and courseware. This collaboration is a natural extension of our business and aligns with our core mission to make the world safer.

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![](ar2025e-front006.jpg)

Defense & Security Exceeding financial targets through solid execution Just one year ago, our company was intensely focused on the actions needed to re-baseline the D&S business and address lingering challenges from the COVID-19 pandemic, particularly those affecting several previously disclosed legacy contracts ("Legacy Contracts"). These changes were comprehensive, involving talent, processes and organizational structure. Following the bold decisions required to implement these changes, our D&S segment delivered the expected performance improvements in FY25, with steady margin gains throughout the year and overall profitability exceeding our initial plans and outlook. During the year, we completed work on three of the eight previously disclosed Legacy Contracts and made significant progress toward closing the remaining five. This progress reflects the effectiveness of our actions and the focus of our revitalized leadership team. We expect continued strong performance in the quarters ahead. In addition to improved execution and steady performance, D&S secured significant new contracts globally, resulting in a 1.99x book-to-sales ratio1 for the year. Notably, we were selected to support Canada's Future Aircrew Training program — a 25-year contract and the largest in CAE's history — and awarded a major contract with General Atomics Aeronautical Systems for the Remotely Piloted Aircraft Systems program. Later in the year, we were named a strategic partner by the Government of Canada to collaborate with the Royal Canadian Air Force on the design and co-development of the Future Fighter Lead-in Training program, which will prepare pilots to operate Canada's next-generation fighter aircraft. Outside of Canada, other key wins included a successful re- compete for the U.S. Army's Advanced Helicopter Flight Training Support program through 2030 and the deployment of our integrated training solution for the U.S. Army's High Accuracy Detection and Exploitation Systems program. This solution leverages technology from our Civil segment in a commercial- style training model tailored for the U.S. Army. Across NATO and allied nations, rising defence spending signals strong growth prospects and continued demand for the training and support solutions we provide. This growth, combined with our commitment to operational excellence and financial discipline, supports our confidence in sustained financial strength and market leadership.

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![](ar2025e-front007.jpg)

Leveraging sustainability as a key business driver and differentiator Our purpose is to make the world safer and that includes safeguarding a sustainable future through all our actions as an enterprise. As such, sustainability remains central to CAE's commitment to responsible operations and long-term value creation. During the year, we made important progress on our decarbonization strategy. Approval received from the Science Based Targets initiative (SBTi) on our decarbonization targets will generate value for the business through better energy and cost efficiency and will also support our customers' decarbonization efforts. As a part of this strategy, during FY25 we drove enhanced supplier engagement and supported the sustainability journey of our key supply chain partners through multiple initiatives, including, most notably, the CAE Resilient Together program. With safety at the core of what we do and people as our most important asset, the new role of Chief People and Sustainability Officer is evolving to maximize our impact by achieving greater synergies across human resources; environment, health and safety; and sustainability. This includes leveraging sustainability as a key driver for attracting and retaining top talent. Today, more than ever, people are motivated by purpose. Purpose drives passion, passion drives growth and growth drives success. At CAE, our employees are passionate about what they do. Their dedication and innovative spirit help make us the partners of choice for our customers. CAE's unique, inclusive culture fuels our success and consistently positions us as a preferred employer, with recognition from multiple leading global and regional organizations — many of these being consecutive honours. In FY25, CAE was listed as Forbes World's Top Companies for Women, Forbes' Canada Best Employers and Canada's Top 100 Employers, among other notable recognition. Advancing performance and customer experience through technology Once again, this year, we continued to relentlessly pursue advancing technologies that delight our customers, distinguish CAE's capabilities in the marketplace, create new revenue streams and enhance internal performance. As a company, we seek not only to perform exceptionally for our customers each and every day, but more importantly, to set the standard for our industry and all its stakeholders. This year, we introduced the Unified Task Board, a new and exciting addition to our portfolio of solutions in the Flightscape airline operations software business. This solution integrates data from multiple airline operations control centre systems to streamline critical decision-making and boost operational efficiency during time-critical situations. Additionally, to enhance customer experience, we successfully deployed our CAE Connect solution to over 5,000 business aviation users, which was met with overwhelmingly positive feedback. This award-winning training platform serves as a one-stop shop for customers, where they can reserve their training sessions, access training records and much more. With our Prodigy visual system, originally launched in D&S, we were the first aviation simulation and training organization in the world to seamlessly integrate a gaming engine into our full-flight simulator ("FFS") image generation. This year, the deployment of this system stretched beyond D&S, with Air Canada becoming the first airline to deploy an FFS with CAE Prodigy enhanced visuals. Furthermore, through our incubation organization, we developed an immersive pilot training application using the Apple Vision Pro. This development effort aims to further enhance the effectiveness and speed of safe pilot training, and will also enable pilots to conduct important training activities from anywhere, at any time.

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Leading CAE into the future CEO succession During this fiscal year, we announced my departure from CAE after more than a decade and a half of service as CEO. Alongside this announcement, CAE initiated a rigorous global selection process overseen by the Board. With the conclusion of this process, I am very pleased to welcome Matthew Bromberg as CAE's Incoming President and CEO. As of the Annual and Special Meeting of Shareholders ("Meeting") on August 13, 2025, I will officially pass the leadership torch to him. I have known Matthew for many years and can personally attest to the reputation he has earned across our industry. While his experience is undoubtedly impressive, what truly stood out to me was how his strengths and values align with the principles that have guided CAE's success. Matthew has deep knowledge of what it means to prepare individuals for the moments that matter and brings with him valuable insights from both the civil aviation and defence sectors. He not only understands our industry, but also the people behind the scenes who help shape it. I will work alongside Matthew through the summer to ensure a seamless transition. I have no doubt that he will build on what we have accomplished and carry it forward with purpose. Board renewal and appointments Impactful changes in our Board composition occurred in FY25. We welcomed incoming directors Patrick Decostre, Ian L. Edwards, Peter Lee, Katherine A. Lehman, Louis Têtu and Calin Rovinescu, the new Board Chairman. Calin offers a wealth of executive leadership experience and a proven track record of value creation. As the former CEO of longstanding client Air Canada and a steadfast champion of our work, he offers sharp industry acumen and firsthand understanding of the challenges and opportunities ahead. His guidance will be instrumental as we advance our strategy. Following the upcoming Meeting, two governance roles will be introduced. Subject to their election to the Board, Calin Rovinescu will become Executive Chairman of the Board and Sophie Brochu, an independent Director since 2023, will serve as Lead Independent Director. As Executive Chairman, Calin will work closely with Matthew in the development and execution of the CAE's strategic initiatives and will be responsible for the effective functioning of the Board. In her new role, Sophie will ensure CAE retains strong Board governance. She will also preside over executive sessions of the independent Directors. These appointments reflect CAE's dedication to strengthening its leadership team to meet the evolving needs of its customers and stakeholders. Together, they will help guide CAE's strategic priorities, expand its global reach and drive sustainable growth, while following best governance practices. On behalf of the Board and executive leadership, I extend our thanks to Alan N. MacGibbon for his service and leadership as a director then Board Chair. Also, I share our appreciation to outgoing Directors Michael E. Roach, Andrew J. Stevens, Margaret S. (Peg) Billson, François Olivier and David G. Perkins, for the valuable contributions made during their tenure.

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![](ar2025e-front009.jpg)

Entering CAE's next chapter In taking stock of how CAE has progressed over the last several years, whether from a scale, capability, or customer perspective, I am encouraged by the possibilities that our future holds. And now more than ever, our corporate strategy is aligned to bring these possibilities to fruition. Our strategic focus on technology, operational excellence, customer centricity and culture will be the key pillars that guide our actions as CAE enters its next chapter. I have never been more assured of the strength of this company and the potential of its next generation of leaders. I am fully confident that those entrusted with taking CAE to the next level are well positioned for success and I am excited about the lasting impact this company will have on the world for years to come. In closing, I offer my sincere thanks to CAE shareholders, employees, leadership, the Board of Directors and to the many partners who put their trust in CAE — and in me. It has been a memorable and rewarding experience, and I am grateful for the extraordinary contributions of everyone who has been part of this journey. Be it as a citizen, airline passenger, industry advocate, or pilot, I will continue to champion CAE's mission to make the world safer — a noble purpose that will forever remain close to my heart. 1 This report includes non-IFRS financial measures, non-IFRS ratios, capital management measures and supplementary financial measures. These measures are not standardized financial measures prescribed under IFRS and therefore should not be confused with, or used as an alternative for, performance measures calculated according to IFRS. Furthermore, these measures should not be compared with similarly titled measures provided or used by other issuers. Refer to Section 13.1 "Non-IFRS and other financial measure definitions" and Section 13.3 "Non-IFRS measure reconciliations" of CAE's MD&A for the year ended March 31, 2025 (which sections are incorporated by reference into this report) for the definitions and reconciliations of these measures to the most directly comparable measure under IFRS. \* This report includes forward-looking statements about our activities, events and developments that we expect to or anticipate may occur in the future including, for example, statements about our vision, strategies, market trends and outlook, future revenues, earnings, cash flow growth, profit trends, growth capital spending, expansions and new initiatives, including initiatives that pertain to sustainability matters, financial obligations, available liquidities, expected sales, general economic and political outlook, inflation trends, prospects and trends of an industry, expected annual recurring cost savings from operational excellence programs, our management of the supply chain, estimated addressable markets, demands for CAE's products and services, our access to capital resources, our financial position, the expected accretion in various financial metrics, the expected capital returns to shareholders, our business outlook, business opportunities, objectives, development, plans, growth strategies and other strategic priorities, our competitive and leadership position in our markets, the expansion of our market shares, CAE's Security" of CAE's MD&A for the year ended March 31, 2025) as expected and to manage and mitigate the risks associated therewith, the impact of the retirement of the Legacy Contracts and other statements that are not historical facts. By their nature, forward-looking statements require us to make assumptions and are subject to inherent risks and uncertainties associated with our business which may cause actual results in future periods to differ materially from results indicated in forward-looking statements. While these statements are based on management's expectations and assumptions regarding historical trends, current conditions and expected future developments, as well as other factors that we believe are reasonable and appropriate in the circumstances, readers are cautioned not to place undue reliance on these forward-looking statements as there is a risk that they may not be accurate. For more information, readers should refer to the sections "Caution regarding forward-looking statements" and "Material assumptions" under Section 2 of CAE's MD&A for the year ended March 31, 2025, which sections are incorporated by reference into this report.

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| | | | |
|:---|:---|:---|:---|
| **Table of Contents** | **Table of Contents** | **Table of Contents** | |
| **Management's Discussion and Analysis** | **Management's Discussion and Analysis** | **Management's Discussion and Analysis** | |
| 1. | HIGHLIGHTS | HIGHLIGHTS | [1](#i5b890f5e6ab646959c0442098fbdc44f_4) |
| 2. | INTRODUCTION | INTRODUCTION | [2](#i5b890f5e6ab646959c0442098fbdc44f_7) |
| 3. | ABOUT CAE | ABOUT CAE | [5](#i5b890f5e6ab646959c0442098fbdc44f_10) |
|  | 3.1 | Who we are | [5](#i5b890f5e6ab646959c0442098fbdc44f_13) |
|  | 3.2 | Our purpose, mission and vision | [5](#i5b890f5e6ab646959c0442098fbdc44f_13) |
|  | 3.3 | Our strategy | [5](#i5b890f5e6ab646959c0442098fbdc44f_19) |
|  | 3.4 | Our operations | [6](#i5b890f5e6ab646959c0442098fbdc44f_22) |
| 4. | FOREIGN EXCHANGE | FOREIGN EXCHANGE | [10](#i5b890f5e6ab646959c0442098fbdc44f_34) |
| 5. | CONSOLIDATED RESULTS | CONSOLIDATED RESULTS | [11](#i5b890f5e6ab646959c0442098fbdc44f_37) |
|  | 5.1 | Results from operations – fourth quarter of fiscal 2025 | [11](#i5b890f5e6ab646959c0442098fbdc44f_40) |
|  | 5.2 | Results from operations – fiscal 2025 | [13](#i5b890f5e6ab646959c0442098fbdc44f_43) |
|  | 5.3 | Restructuring, integration and acquisition costs | [15](#i5b890f5e6ab646959c0442098fbdc44f_46) |
|  | 5.4 | Gain on remeasurement of previously held equity interest | [15](#i5b890f5e6ab646959c0442098fbdc44f_46) |
|  | 5.5 | Shareholder matters | [15](#i5b890f5e6ab646959c0442098fbdc44f_46) |
|  | 5.6 | Executive management transition costs | [15](#i5b890f5e6ab646959c0442098fbdc44f_46) |
|  | 5.7 | Consolidated adjusted order intake and adjusted backlog | [16](#i5b890f5e6ab646959c0442098fbdc44f_58) |
| 6. | RESULTS BY SEGMENT | RESULTS BY SEGMENT | [17](#i5b890f5e6ab646959c0442098fbdc44f_61) |
|  | 6.1 | Civil Aviation | [17](#i5b890f5e6ab646959c0442098fbdc44f_64) |
|  | 6.2 | Defense and Security | [19](#i5b890f5e6ab646959c0442098fbdc44f_67) |
| 7. | CONSOLIDATED CASH MOVEMENTS AND LIQUIDITY | CONSOLIDATED CASH MOVEMENTS AND LIQUIDITY | [21](#i5b890f5e6ab646959c0442098fbdc44f_73) |
|  | 7.1 | Consolidated cash movements | [21](#i5b890f5e6ab646959c0442098fbdc44f_76) |
|  | 7.2 | Sources of liquidity | [22](#i5b890f5e6ab646959c0442098fbdc44f_79) |
|  | 7.3 | Government participation | [22](#i5b890f5e6ab646959c0442098fbdc44f_82) |
|  | 7.4 | Contingencies and commitments | [23](#i5b890f5e6ab646959c0442098fbdc44f_85) |
| 8. | CONSOLIDATED FINANCIAL POSITION | CONSOLIDATED FINANCIAL POSITION | [24](#i5b890f5e6ab646959c0442098fbdc44f_91) |
|  | 8.1 | Consolidated capital employed | [24](#i5b890f5e6ab646959c0442098fbdc44f_94) |
|  | 8.2 | Off balance sheet arrangements | [25](#i5b890f5e6ab646959c0442098fbdc44f_97) |
|  | 8.3 | Financial instruments | [26](#i5b890f5e6ab646959c0442098fbdc44f_100) |
| 9. | BUSINESS COMBINATIONS | BUSINESS COMBINATIONS | [29](#i5b890f5e6ab646959c0442098fbdc44f_103) |
| 10. | DISCONTINUED OPERATIONS | DISCONTINUED OPERATIONS | [30](#i5b890f5e6ab646959c0442098fbdc44f_112) |
| 11. | BUSINESS RISK AND UNCERTAINTY | BUSINESS RISK AND UNCERTAINTY | [32](#i5b890f5e6ab646959c0442098fbdc44f_118) |
|  | 11.1 | Strategic risks | [33](#i5b890f5e6ab646959c0442098fbdc44f_121) |
|  | 11.2 | Operational risks | [37](#i5b890f5e6ab646959c0442098fbdc44f_124) |
|  | 11.3 | Cybersecurity risks | [39](#i5b890f5e6ab646959c0442098fbdc44f_127) |
|  | 11.4 | Talent risks | [40](#i5b890f5e6ab646959c0442098fbdc44f_130) |
|  | 11.5 | Financial risks | [40](#i5b890f5e6ab646959c0442098fbdc44f_133) |
|  | 11.6 | Legal and regulatory risks | [44](#i5b890f5e6ab646959c0442098fbdc44f_136) |
|  | 11.7 | Sustainability risks | [47](#i5b890f5e6ab646959c0442098fbdc44f_139) |
|  | 11.8 | Reputational risks | [47](#i5b890f5e6ab646959c0442098fbdc44f_142) |
|  | 11.9 | Technological risks | [48](#i5b890f5e6ab646959c0442098fbdc44f_145) |
| 12. | COMPENSATION OF KEY MANAGEMENT PERSONNEL | COMPENSATION OF KEY MANAGEMENT PERSONNEL | [48](#i5b890f5e6ab646959c0442098fbdc44f_148) |
| 13. | NON-IFRS AND OTHER FINANCIAL MEASURES AND SUPPLEMENTARY NON-FINANCIAL INFORMATION | NON-IFRS AND OTHER FINANCIAL MEASURES AND SUPPLEMENTARY NON-FINANCIAL INFORMATION | [49](#i5b890f5e6ab646959c0442098fbdc44f_151) |
|  | 13.1 | Non-IFRS and other financial measure definitions | [49](#i5b890f5e6ab646959c0442098fbdc44f_154) |
|  | 13.2 | Supplementary non-financial information definitions | [52](#i5b890f5e6ab646959c0442098fbdc44f_157) |
|  | 13.3 | Non-IFRS measure reconciliations | [53](#i5b890f5e6ab646959c0442098fbdc44f_160) |
| 14. | CHANGES IN ACCOUNTING POLICIES | CHANGES IN ACCOUNTING POLICIES | [55](#i5b890f5e6ab646959c0442098fbdc44f_163) |
|  | 14.1 | New and amended standards adopted | [55](#i5b890f5e6ab646959c0442098fbdc44f_166) |
|  | 14.2 | New and amended standards not yet adopted | [55](#i5b890f5e6ab646959c0442098fbdc44f_169) |
|  | 14.3 | Use of judgements, estimates and assumptions | [56](#i5b890f5e6ab646959c0442098fbdc44f_172) |
| 15. | INTERNAL CONTROL OVER FINANCIAL REPORTING | INTERNAL CONTROL OVER FINANCIAL REPORTING | [57](#i5b890f5e6ab646959c0442098fbdc44f_175) |
| 16. | OVERSIGHT ROLE OF AUDIT COMMITTEE AND BOARD OF DIRECTORS | OVERSIGHT ROLE OF AUDIT COMMITTEE AND BOARD OF DIRECTORS | [58](#i5b890f5e6ab646959c0442098fbdc44f_178) |
| 17. | ADDITIONAL INFORMATION | ADDITIONAL INFORMATION | [58](#i5b890f5e6ab646959c0442098fbdc44f_181) |
| 18. | SELECTED FINANCIAL INFORMATION | SELECTED FINANCIAL INFORMATION | [59](#i5b890f5e6ab646959c0442098fbdc44f_184) |
| **Consolidated Financial Statements** | **Consolidated Financial Statements** | **Consolidated Financial Statements** | 60 |
| **Board of Directors and Officers** | **Board of Directors and Officers** | **Board of Directors and Officers** | 119 |
| **Shareholder and Investor Information** | **Shareholder and Investor Information** | **Shareholder and Investor Information** | 120 |

---

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Management's Discussion and Analysis

*for the fourth quarter and year ended March 31, 2025* 

**1.&nbsp;&nbsp;&nbsp;&nbsp; HIGHLIGHTS**

**FINANCIAL**

FOURTH QUARTER OF FISCAL 2025

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| | | | | |
|:---|:---|:---|:---|:---|
| *(amounts in millions, except per share amounts, adjusted ROCE and book-to-sales ratio)* | **Q4-2025** | Q4-2024 | *Variance $* | *Variance %* |
| **Performance** |  |  |  |  |
| Revenue | $**1275.4** | $1126.3 | $*149.1* | *13 %* |
| Operating income (loss) | $**239.9** | $(533.0) | $*772.9* |  |
| Adjusted segment operating income<sup>1</sup> | $**258.8** | $125.7 | $*133.1* | *106 %* |
| Net income (loss) attributable to equity holders of the Company | $**135.9** | $(504.7) | $*640.6* |  |
| Basic and diluted earnings per share (EPS) – continuing operations | $**0.42** | $(1.58) | $*2.00* |  |
| Adjusted EPS<sup>1</sup> | $**0.47** | $0.12 | $*0.35* | *292 %* |
| Net cash provided by operating activities | $**322.7** | $215.2 | $*107.5* | *50 %* |
| Free cash flow<sup>1</sup> | $**289.4** | $191.1 | $*98.3* | *51 %* |
| **Liquidity and Capital Structure** |  |  |  |  |
| Capital employed<sup>1</sup> | $**8152.7** | $7216.8 | $*935.9* | *13 %* |
| Adjusted return on capital employed (ROCE)<sup>1</sup> | **7.2** | 5.9 |  |  |
| Total debt | $**3470.4** | $3074.3 | $*396.1* | *13 %* |
| Net debt<sup>1</sup> | $**3176.7** | $2914.2 | $*262.5* | *9 %* |
| **Growth** |  |  |  |  |
| Adjusted order intake<sup>1</sup> | $**1337.5** | $1550.5 | $*(213.0)* | *(14 %)* |
| Adjusted backlog<sup>1</sup> | $**20142.2** | $12183.9 | $*7958.3* | *65 %* |
| Book-to-sales ratio<sup>1</sup> | **1.05** | 1.38 |  |  |
| Book-to-sales ratio for the last 12 months | **1.64** | 1.15 |  |  |

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FISCAL 2025

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| | | | | |
|:---|:---|:---|:---|:---|
| *(amounts in millions, except per share amounts)* | **FY2025** | FY2024 | *Variance $* | *Variance %* |
| **Performance** |  |  |  |  |
| Revenue | $**4707.9** | $4282.8 | $*425.1* | *10 %* |
| Operating income (loss) | $**729.2** | $(185.4) | $*914.6* |  |
| Adjusted segment operating income | $**732.0** | $549.7 | $*182.3* | *33 %* |
| Net income (loss) attributable to equity holders of the Company | $**405.3** | $(325.3) | $*730.6* |  |
| Basic and diluted EPS – continuing operations | $**1.27** | $(1.02) | $*2.29* |  |
| Adjusted EPS | $**1.21** | $0.87 | $*0.34* | *39 %* |
| Net cash provided by operating activities | $**896.5** | $566.9 | $*329.6* | *58 %* |
| Free cash flow | $**813.9** | $418.2 | $*395.7* | *95 %* |

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<sup>1</sup> Non-IFRS financial measure, non-IFRS ratio, capital management measure, or supplementary financial measure. Refer to Section 13.1 "*Non-IFRS and other financial measure definitions"* and Section 13.3 *"Non-IFRS measure reconciliations*" of this MD&A for the definitions and reconciliations of these measures to the most directly comparable measure under IFRS.

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Management's Discussion and Analysis

**2.&nbsp;&nbsp;&nbsp;&nbsp; INTRODUCTION**

In this management's discussion and analysis (MD&A), *we*, *us*, *our*, *CAE* and *Company* refer to CAE Inc. and its subsidiaries. Unless we have indicated otherwise:

*–This year* and *2025* mean the fiscal year ending March 31, 2025;

*–Last year, prior year* and *a year ago* mean the fiscal year ended March 31, 2024;

–Dollar amounts are in Canadian dollars.

This MD&A was prepared as of May 13, 2025. It is intended to enhance the understanding of our annual consolidated financial statements and notes for the year ended March 31, 2025 and should therefore be read in conjunction with this document. We have prepared it to help you understand our business, performance and financial condition for the year ended March 31, 2025. Except as otherwise indicated, all financial information has been reported in accordance with IFRS Accounting Standards (IFRS), as issued by the International Accounting Standards Board (IASB). All quarterly information disclosed in the MD&A is based on unaudited figures.

The MD&A provides you with a view of CAE as seen through the eyes of management and helps you understand the Company from a variety of perspectives:

–Our purpose, mission and vision;

–Our strategy;

–Our operations;

–Foreign exchange;

–Consolidated results;

–Results by segment;

–Consolidated cash movements and liquidity;

–Consolidated financial position;

–Business combinations;

–Discontinued operations;

–Business risk and uncertainty;

–Compensation of key management personnel;

–Non-IFRS and other financial measures and supplementary non-financial information;

–Changes in accounting policies;

–Internal control over financial reporting;

–Oversight role of Audit Committee and Board of Directors (the Board).

You will find our most recent financial report and Annual Information Form (AIF) on our website (www.cae.com), SEDAR+ (www.sedarplus.ca) and EDGAR (www.sec.gov). Holders of CAE's securities may also request a printed copy of the Company's consolidated financial statements and MD&A free of charge by contacting Investor Relations (investor.relations@cae.com).

**NON-IFRS AND OTHER FINANCIAL MEASURES**

This MD&A includes non-IFRS financial measures, non-IFRS ratios, capital management measures and supplementary financial measures. These measures are not standardized financial measures prescribed under IFRS and therefore should not be confused with, or used as an alternative for, performance measures calculated according to IFRS. Furthermore, these measures should not be compared with similarly titled measures provided or used by other issuers. Management believes that these measures provide additional insight into our operating performance and trends and facilitate comparisons across reporting periods.

**Performance Measures**

–Gross profit margin (or gross profit as a % of revenue);

–Operating income margin (or operating income as a % of revenue);

–Adjusted segment operating income or loss;

–Adjusted segment operating income margin (or adjusted segment operating income as a % of revenue);

–Adjusted effective tax rate;

–Adjusted net income or loss;

–Adjusted earnings or loss per share (EPS);

–EBITDA and Adjusted EBITDA;

–Free cash flow.

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Management's Discussion and Analysis

**Liquidity and Capital Structure Measures**

–Non-cash working capital;

–Capital employed;

–Adjusted return on capital employed (ROCE);

–Net debt;

–Net debt-to-capital;

–Net debt-to-EBITDA and net debt-to-adjusted EBITDA;

–Maintenance and growth capital expenditures.

**Growth Measures**

–Adjusted order intake;

–Adjusted backlog;

–Book-to-sales ratio.

Definitions of all non-IFRS and other financial measures are provided in Section 13.1 *"Non-IFRS and other financial measure definitions*" of this MD&A to give the reader a better understanding of the indicators used by management. In addition, when applicable, we provide a quantitative reconciliation of the non-IFRS and other financial measures to the most directly comparable measure under IFRS. Refer to Section 13.1 "*Non-IFRS and other financial measure definitions*" for references to where these reconciliations are provided.

**ABOUT MATERIAL INFORMATION**

This MD&A includes the information we believe is material to investors after considering all circumstances, including potential market sensitivity. We consider something to be material if:

–It results in, or would reasonably be expected to result in, a significant change in the market price or value of our shares; or

–It is likely that a reasonable investor would consider the information to be important in making an investment decision.

**CAUTION REGARDING FORWARD-LOOKING STATEMENTS**

This MD&A includes forward-looking statements about our activities, events and developments that we expect to or anticipate may occur in the future including, for example, statements about our vision, strategies, market trends and outlook, future revenues, earnings, cash flow growth, profit trends, growth capital spending, expansions and new initiatives, including initiatives that pertain to sustainability matters, financial obligations, available liquidities, expected sales, general economic and political outlook, inflation trends, prospects and trends of an industry, expected annual recurring cost savings from operational excellence programs, our management of the supply chain, estimated addressable markets, demands for CAE's products and services, our access to capital resources, our financial position, the expected accretion in various financial metrics, the expected capital returns to shareholders, our business outlook, business opportunities, objectives, development, plans, growth strategies and other strategic priorities, our competitive and leadership position in our markets, the expansion of our market shares, CAE's ability and preparedness to respond to demand for new technologies, the sustainability of our operations, our ability to retire the Legacy Contracts (as defined in Section 6.2 *"Defense and Security"* of this MD&A) as expected and to manage and mitigate the risks associated therewith, the impact of the retirement of the Legacy Contracts and other statements that are not historical facts. Since forward-looking statements and information relate to future events or future performance and reflect current expectations or beliefs regarding future events, they are typically identified by words such as "anticipate", "believe", "could", "estimate", "expect", "intend", "likely", "may", "plan", "seek", "should", "will", "strategy", "future" or the negative thereof or other variations thereon suggesting future outcomes or statements regarding an outlook. All such statements constitute "forward-looking statements" within the meaning of applicable Canadian securities legislation and "forward-looking statements" within the meaning of the "safe harbor" provisions of the United States Private Securities Litigation Reform Act of 1995. By their nature, forward-looking statements require us to make assumptions and are subject to inherent risks and uncertainties associated with our business which may cause actual results in future periods to differ materially from results indicated in forward-looking statements. While these statements are based on management's expectations and assumptions regarding historical trends, current conditions and expected future developments, as well as other factors that we believe are reasonable and appropriate in the circumstances, readers are cautioned not to place undue reliance on these forward-looking statements as there is a risk that they may not be accurate.

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Management's Discussion and Analysis

Important risks that could cause such differences include, but are not limited to, strategic risks, such as geopolitical uncertainty, global economic conditions, competitive business environment, original equipment manufacturer (OEM) encroachment, inflation, international scope of our business, changes in U.S. trade policies or regulations, level and timing of defence spending, constraints within the civil aviation industry, our ability to penetrate new markets, research and development (R&D) activities, evolving standards and technology innovation and disruption, length of sales cycle, business development and awarding of new contracts, strategic partnerships and long-term contracts, our ability to effectively manage our growth, estimates of market opportunity and competing priorities; operational risks, such as supply chain disruptions, program management and execution, mergers and acquisitions, business continuity, subcontractors, fixed price and long-term supply contracts, our continued reliance on certain parties and information, and health and safety; cybersecurity risks; talent risks, such as recruitment, development and retention, ability to attract, recruit and retain key personnel and management, corporate culture and labour relations; financial risks, such as shareholder activism, availability of capital, customer credit risk, foreign exchange, effectiveness of internal controls over financial reporting, liquidity risk, interest rate volatility, returns to shareholders, estimates used in accounting, impairment risk, pension plan funding, indebtedness, acquisition and integration costs, sales of additional common shares, market price and volatility of our common shares, seasonality, taxation matters and adjusted backlog; legal and regulatory risks, such as data rights and governance, U.S. foreign ownership, control or influence mitigation measures, compliance with laws and regulations, insurance coverage potential gaps, product-related liabilities, environmental laws and regulations, government audits and investigations, protection of our intellectual property and brand, third-party intellectual property, foreign private issuer status, and enforceability of civil liabilities against our directors and officers; sustainability risks, such as extreme climate events and the impact of natural or other disasters (including effects of climate change) and sustainability commitments and expectations; reputational risks; and technological risks, such as information technology (IT) and reliance on third-party providers for information technology systems and infrastructure management.

The foregoing list is not exhaustive and other unknown or unpredictable factors could also have a material adverse effect on the performance or results of CAE. Additionally, differences could arise because of events announced or completed after the date of this MD&A. You will find more information about the risks and uncertainties affecting our business in Section 11 "*Business risk and uncertainty*" of this MD&A. Readers are cautioned that any of the disclosed risks could have a material adverse effect on CAE's forward-looking statements. Readers are also cautioned that the risks described above and elsewhere in this MD&A are not necessarily the only ones we face; additional risks and uncertainties that are presently unknown to us or that we may currently deem immaterial may adversely affect our business.

Except as required by law, we disclaim any intention or obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise. The forward-looking information and statements contained in this MD&A are expressly qualified by this cautionary statement.

In addition, statements that "we believe" and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based on information available to us as of the date of this MD&A. While we believe that information provides a reasonable basis for these statements, that information may be limited or incomplete. Our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all relevant information. These statements are inherently uncertain, and investors are cautioned not to unduly rely on these statements.

**MATERIAL ASSUMPTIONS**

The forward-looking statements set out in this MD&A are based on certain assumptions including, without limitation: the prevailing market conditions, geopolitical instability including the rapidly evolving trade and tariff environment, the customer receptivity to our training and operational support solutions, the accuracy of our estimates of addressable markets and market opportunity, the realization of anticipated annual recurring cost savings and other intended benefits from restructuring initiatives and operational excellence programs, the ability to respond to anticipated inflationary pressures and our ability to pass along rising costs through increased prices, the actual impact to supply, production levels, and costs from global supply chain logistics challenges, the stability of foreign exchange rates, the ability to hedge exposures to fluctuations in interest rates and foreign exchange rates, the availability of borrowings to be drawn down under, and the utilization, of one or more of our senior credit agreements, our available liquidity from cash and cash equivalents, undrawn amounts on our revolving credit facility, the balance available under our receivable purchase facility, the assumption that our cash flows from operations and continued access to debt funding will be sufficient to meet financial requirements in the foreseeable future, access to expected capital resources within anticipated timeframes, no material financial, operational or competitive consequences from changes in regulations affecting our business, our ability to retain and attract new business, our ability to effectively execute and retire the remaining Legacy Contracts while managing the risks associated therewith, our ability to defend our position in the dispute with the buyer of the CAE Healthcare business, and the realization of the expected strategic, financial and other benefits of the increase of our ownership stake in SIMCOM Aviation Training in the timeframe anticipated. Air travel is a major driver for CAE's business and management relies on analysis from the International Air Transport Association (IATA) to inform its assumptions about the rate and profile of growth in its key civil aviation market. Accordingly, the assumptions outlined in this MD&A and, consequently, the forward-looking statements based on such assumptions, may turn out to be inaccurate. For additional information, including with respect to other assumptions underlying the forward-looking statements made in this MD&A, refer to Section 11 "*Business risk and uncertainty*" of this MD&A.

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Management's Discussion and Analysis

**3.&nbsp;&nbsp;&nbsp;&nbsp; ABOUT CAE**

**3.1&nbsp;&nbsp;&nbsp;&nbsp; Who we are**

At CAE, we exist to make the world safer. We deliver cutting-edge training, simulation, and critical operations solutions to prepare aviation professionals and defence forces for the moments that matter. Every day, we empower pilots, cabin crew, maintenance technicians, airlines, business aviation operators, and defence and security personnel to perform at their best and when the stakes are the highest. Around the globe, we're everywhere customers need us to be with approximately 13,000 employees at around 240 sites and training locations in over 40 countries. For nearly 80 years, CAE has been at the forefront of innovation, consistently seeking to set the standard by delivering excellence in high-fidelity flight simulators and training solutions, while embedding sustainability at the heart of everything we do. By harnessing technology and enhancing human performance, we strive to be the trusted partner in advancing safety and mission readiness—today and tomorrow.

CAE's common shares are listed on the Toronto and New York stock exchanges (TSX / NYSE) under the symbol CAE.

**3.2&nbsp;&nbsp;&nbsp;&nbsp; Our purpose, mission and vision**

Our purpose is to make the world safer.

Our mission is to deliver cutting-edge training, simulation and critical operations solutions to prepare aviation professionals and defence forces for the moments that matter.

Our vision is to be the trusted partner in advancing safety and mission readiness, defining the standard of excellence in training and critical operations by harnessing technology and enhancing human performance.

**3.3&nbsp;&nbsp;&nbsp;&nbsp; Our strategy**

**CAE's four strategic pillars**

There are four fundamental pillars that underpin our strategy and investment thesis:

–Efficient growth;

–Technology and market leadership;

–Revolutionizing training and critical operations;

–Skills and culture.

***Efficient growth***

Our business features a high degree of recurring revenues due to the underlying characteristics of our technology-enabled solutions and regulatory requirements across our markets. We seek to maximize the benefits of our strong competitive position to deliver premium growth and profitability through a focus on operational rigour, cost optimization, capital efficiency, and a disciplined approach to pursuing organic and inorganic growth.

***Technology and market leadership***

We have a rich and long-dated history of customer centricity, innovation and delivering state-of-the-art technology solutions that define the forefront of the industries in which we operate. As a result, we constantly seek new ways to enhance the performance of our customers by fostering a culture of continuous improvement and innovation. This drives technology leadership, deeper customer partnerships, and new customer development, enabling us to capitalize on the ample headroom in our large, growing addressable markets. Furthermore, our solutions are deployed with a focus on integrated sustainability.

***Revolutionizing training and critical operations***

We are a global leader in the application of training, digital immersion, critical operations, and modelling and simulation technologies. We seek to use data-driven applications and advanced analytics to produce measurable and demonstrated outcomes in our markets. The efficacy of our technology solutions enables customized, collaborative, and multi-domain offerings.

***Skills and culture***

Our core values are innovation, integrity, empowerment, excellence and One CAE. We employ these values across a diverse global team to drive a unique social impact. We seek to create an employee experience and environment that values teamwork, professional growth, and engagement. As a result, our employees across the globe share a passion to prepare our customers for the moments that matter.

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Management's Discussion and Analysis

**3.4&nbsp;&nbsp;&nbsp;&nbsp; Our operations**

Our operations are managed through two segments:

–Civil Aviation – We provide comprehensive training solutions for flight, cabin, maintenance, ground personnel and air traffic controllers in commercial, business and helicopter aviation, a complete range of flight simulation training devices, ab initio pilot training and crew sourcing services, as well as airline operations digital solutions. The civil aviation market includes major commercial airlines, regional airlines, business aircraft operators, civil helicopter operators, aircraft manufacturers, third-party training centres, flight training organizations, air navigation service providers, maintenance, repair and overhaul organizations and aircraft finance leasing companies;

–Defense and Security – We are a global training and simulation provider delivering scalable, platform-independent solutions that enable and enhance force readiness and security. The defence and security market includes defence forces, OEMs, government agencies and public safety organizations worldwide.

**CIVIL AVIATION MARKET**

We have the unique capability and global scale to address the total lifecycle needs of the professional pilot, from cadet to captain, with our comprehensive aviation training solutions. We are the world's largest provider of civil aviation training services. Our deep industry experience and thought leadership, large installed base, strong relationships and reputation as a trusted partner enable us to access a broader share of the market than any other company in our industry. We provide aviation services in more than 35 countries and through our broad global network of more than 85 sites, we serve all sectors of civil aviation including airlines and other commercial, business and helicopter aviation operators.

Among our thousands of customers, we have long-term training centre operations, training services agreements and joint ventures with over 50 major airlines and aircraft operators around the world. Our range of training solutions includes product and service offerings for pilots, cabin crew and aircraft maintenance technicians, training centre operations, curriculum development, courseware solutions and consulting services. We currently manage 363 full-flight simulators (FFSs), including those operating in our joint ventures. We offer industry-leading technology, and we are shaping the future of training through innovations such as our next generation training systems, including CAE Real-time Insights and Standardized Evaluations (CAE Rise), which improves training quality, objectivity and efficiency through the integration of untapped flight and simulator data-driven insights into training. In the development of new pilots, we operate the largest ab initio flight training network in the world and have approximately 20 cadet training programs globally. With our CAE airline operations digital solutions, we have further strengthened our position as a technology leader, complementing our flight simulator and training solutions while increasing our total addressable market.

Quality, fidelity, reliability and innovation are hallmarks of the CAE brand in flight simulation and we are the world leader in the development of civil flight simulators. We continuously innovate our processes and lead the market in the design, manufacture and integration of civil FFSs for major and regional commercial airlines, business aircraft operators, third-party training centres and OEMs.

We have established a wealth of experience in developing first-to-market simulators for more than 30 types of aircraft models. Our flight simulation equipment, including FFSs, are designed to meet the rigorous demands of their long and active service lives, often spanning several decades of continuous use. Our global reach enables us to provide best-in-class support services such as real-time, remote monitoring and enables us to leverage our extensive worldwide network of spare parts and service teams.

We believe the Civil Aviation segment is positioned as a gateway in a highly regulated, secular growth market, with an addressable market estimated at more than $7 billion, and headroom for growth.

**Market drivers**

Demand for training and airline operations digital solutions in the civil aviation market is driven by the following:

–Pilot and maintenance training and industry regulations;

–Safety and efficiency imperatives of commercial airlines and business aircraft operators;

–Expected long-term secular global growth in air travel;

–Expected long-term growth, including new aircraft deliveries and renewal of the active fleet of commercial and business aircraft;

–Demand for trained aviation professionals;

–Complexity of airline operations digital solutions;

–Air traffic services.

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Management's Discussion and Analysis

***Pilot and maintenance training and industry regulations***

Civil aviation training is a largely recurring business driven by a highly-regulated environment through global and domestic standards for pilot licensing and certification, amongst other regulatory requirements. These recurring training requirements are mandatory and are regulated by national and international aviation regulatory authorities such as the International Civil Aviation Organization (ICAO), European Aviation Safety Agency (EASA) and the U.S. Federal Aviation Administration (FAA).

In recent years, pilot certification processes and regulatory requirements have become increasingly stringent. Simulation-based pilot certification training is taking on a greater role internationally with the Multi-Crew Pilot License, with the Airline Transport Pilot certification requirements in the U.S. and with Upset Prevention and Recovery Training requirements mandated by both EASA and the FAA.

***Safety and efficiency imperatives of commercial airlines and business aircraft operators***

The commercial airline industry is competitive, requiring operators to continuously pursue operational excellence and efficiency initiatives to achieve satisfactory returns while continuing to maintain the highest safety standards and the confidence of air travelers. Airlines are finding it increasingly more effective to seek expertise in training from trusted partners such as CAE to address growing efficiency gaps, pilot capability gaps, evolving regulatory and training environments, and on-going aircraft programs. Additionally, CAE offers business jet pilots one of the most advanced, respected and accessible training programs in the industry, covering a wide spectrum of business aircraft. Partnering with CAE gives immediate access to a world-wide fleet of simulators, courses, programs and instruction capabilities, and allows them flexibility in pursuing fleet training options that suit their business.

Our pilot training system, CAE Rise, is well positioned to elevate the pilot training experience. This system enables instructors to deliver training in accordance with airlines' Standard Operating Procedures and enables instructors to objectively assess pilot competencies using live data during training sessions. Furthermore, CAE Rise augments instructors' capability to identify pilot proficiency gaps and evolve airline training programs to the most advanced aviation safety standards, including Advanced Qualification Program and Evidence Based Training methodologies.

***Expected long-term secular global growth in air travel***

The secular growth in air travel results in long-term demand for flight, cabin, maintenance and ground personnel, which in turn drives demand for training and airline operations digital solutions.

In commercial aviation, as per the International Air Transport Association (IATA), global air passenger demand, measured by revenue passenger-kilometers (RPKs), has shown an increase of 10% for calendar 2024 compared to calendar 2023. In calendar 2024, international traffic experienced a 14% increase compared to the previous year, with capacity rising by 13%. Domestic traffic for calendar 2024 grew by 6% compared to calendar 2023, while capacity rose by 3%. For the first three months of calendar 2025, worldwide passenger traffic increased by 3% compared to the first three months of calendar 2024. Looking ahead to the full calendar 2025, IATA estimates the demand for travel will continue to grow, although at a more moderate pace of 8%, aligning more closely with historical averages.

For calendar 2024, full-year air cargo demand rose, with cargo tonne-kilometers increasing 11%. Record full-year volumes set in 2021 were exceeded in calendar 2024. For the first three months of calendar 2025, cargo tonne-kilometers increased by 4% compared to the first three months of calendar 2024.

In business aviation, the recovery post-COVID has been very strong, reaching a historical peak in calendar 2021. Flight activity is stabilizing at above calendar 2019 levels, with both FAA and EASA reporting calendar 2024 business aviation flight activity to be similar to calendar 2023 levels. Fractional and managed aircraft segments have realized flight activity increases of 57% and 32%, respectively, since calendar 2019. For the first three months of calendar 2025, business aviation flight activity increased 3% compared to the first three months of calendar 2024.

Additionally, high inflation, geopolitical tensions, the continuing military hostilities in various regions in the world, and industry supply chain issues are causing disruptions to our Civil operations.

***Expected long-term growth, including new aircraft deliveries and renewal of the active fleet of commercial and business aircraft***

As an integrated training solutions provider, our long-term growth is closely tied to the active commercial and business aircraft fleet. Both commercial and business aviation fleets are expected to grow over the next decade, with significant backlogs reported by all OEMs. Short and medium-term growth in aircraft fleets may experience pressure as OEMs face supply, capacity, and certification challenges in delivering aircraft.

Major business jet OEMs are continuing to deliver new aircraft with a record backlog and are also introducing a variety of new aircraft models in the upcoming years including Dassault's Falcon 10X and the Bombardier Global 8000.

Our business aviation training network, comprehensive suite of training programs, key long-term OEM partnerships and ongoing network investments, position us well to effectively address the training demand arising from continued fleet growth and the entry-into-service of new aircraft programs.

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Management's Discussion and Analysis

Our strong competitive moat in the aviation market, as defined by our extensive global training network, best-in-class instructors, comprehensive training programs and strength in training partnerships with airlines and business aircraft operators, allows us to effectively address training needs that arise from a growing active fleet of aircraft.

We are well positioned to leverage our technology leadership and expertise, including CAE 7000XR Series FFSs, CAE 400XR, 500XR, and 600XR Series Flight Training Devices and CAE Simfinity™ ground school solutions, in delivering training equipment solutions that address the growing training needs of airlines, business jet operators, helicopter operators and now AAM.

***Demand for trained aviation professionals***

Demand for trained aviation professionals is driven by air traffic growth, pilot retirements and by the number of aircraft deliveries. The expansion of global economies and operator aircraft fleets have resulted in demand for qualified aviation professionals to support the expected growth of the commercial and business aviation markets. We are well positioned in the training products and services market to address operators' training requirements.

In June 2023, we released our 2023 Aviation Talent Forecast in which we estimated a global requirement of 1.3 million new aviation professionals over the next ten years to sustain growth in the civil aviation industry and support mandatory retirements. In the commercial aviation domain, the projections show demand for 1.2 million new aviation professionals, including 252,000 pilots, 328,000 maintenance technicians and 599,000 cabin crew professionals. The business aviation segment anticipates 106,000 professionals comprising 32,000 pilots and 74,000 maintenance technicians. Furthermore, we expect additional demand for new professionals in the emerging AAM sector.

***Complexity of airline operations digital solutions***

Airlines need to closely manage their operations which come with daily challenges. To help optimize these operations, we offer a suite of airline operations digital products. This suite of products provides solutions for airline operations including training management, crew management, flight management, airport management, in-flight services management and operations control. With our integrated platform, the operations control desk now has a single environment to communicate, providing insights and predictions on possible disruption and delays hence allowing airlines to reduce operating costs and enhancing customer satisfaction.

The benefits for our airline management solution include reduced fuel and carbon emissions for both regular and irregular operations. Our crew and airport management solution decreases disruption related crew costs and improves staff utilization. Finally, our movement management solution decreases delay and cancellation costs for airlines.

***Air traffic services***

CAE inaugurated its first air traffic services training centre in collaboration with NAV CANADA in Montreal, Canada. The start of training was delivered on time and fulfilled all training requirements. This represents a new revenue stream for CAE.

**DEFENSE AND SECURITY MARKET**

Defense and Security addresses the critical needs of its customers operating in complex environments. The ever-changing global landscape requires the U.S. and its allies to prepare for the possibility of peer threats across multi-domain operations in air, land, sea, space and cyber. Aligned with the priorities of U.S. and allied national defence strategies, we leverage our core training and simulation expertise with advanced technologies to deliver innovative and scalable solutions that address military training modernization and enhanced mission support requirements.

Our customers depend on synthetic environments and next-generation situational awareness to ensure mission success through planning, preparation, and analysis in complex, multi-domain environments. Leveraging our global training system, we work with the military, government, and industry to deliver tailored solutions at the pace and point of need. From mixed-reality training devices to high-fidelity full-mission simulators, we support critical personnel from aircrews to maintenance technicians on more than 85 different platforms across more than 140 sites and in multiple domains. Our extensive suite of simulation-based technologies, coupled with advanced capabilities like biometrics, real-time feedback, artificial intelligence (AI) and adaptive rehearsal scenarios enhances training to deliver scalable and integrated solutions to critical personnel.

Utilizing the strength and expertise that spans our global business, our solutions range from turnkey training centres to tailored live, virtual, and constructive solutions at government-owned locations. We are everywhere our customers need us to be with a global network and local expertise to deliver training efficacy at all proficiency levels. At the CAE Dothan Training Center in Alabama, U.S. Army fixed-wing candidates enter initial training, while the U.S. Air Force (USAF) initial entry training is maintained at CAE's Pueblo Training Center in Colorado. Outside of the U.S., we provide basic and advanced flight training at NATO Flight Training Centres across multiple sites in Canada. Leveraging our expertise and strategic partnerships, we also support training in Europe with the International Flight Training School in Italy, a joint venture with Leonardo, along with providing ab initio training for the German Air Force at CAE's Bremen Training Centre in Germany and a site in Montpellier, France.

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Management's Discussion and Analysis

As a collaborative partner of industry and government, we enhance customer readiness and mitigate challenges to enable rapid modernization. New generational platforms and programs are rapidly transforming global training and require adaptive approaches to advance defence force readiness. We are essential partners for generational programs like Canada's Future Aircrew Training (FAcT) through SkyAlyne our joint venture with KF Aerospace, the MQ-9B SkyGuardian<sup>®</sup> Remotely Piloted Aircraft Systems (RPAS) with General Atomics Aeronautical Systems, Inc. as well as the Bell Textron's tiltrotor aircraft for the U.S. Army Future Long Range Assault Aircraft. This year, CAE has been identified as a strategic partner to the Government of Canada to work with the Royal Canadian Air Force to design and co-develop the Future Fighter Lead-in Training program. We continue to create opportunities through partnerships with Lockheed Martin on global C-130 training solutions, Boeing to support mission-critical platforms like the P-8 and CH-47 and our role as the Authorized Training Provider for Bombardier's Global 6500 supporting the High Accuracy Detection and Exploitation System. The increasing complexities of contracts and systems drive the industry toward collaboration as we continue to leverage our strategic relationships and culture of innovation to meet the ever-changing market landscape.

The mission readiness of defence and security forces requires connecting customers, platforms and locations in a secured multi-domain environment for training and rehearsal. A real-time enterprise network, like the USAF Simulators Common Architecture Requirements and Standards (SCARS), is critical in enhancing operational test and training infrastructure and supporting distributed mission training and multi-domain operations. We lead the integration and standardization of aircraft simulators on SCARS to operate and train together in a strict cyber secure environment. Leveraging our expertise on SCARS and other programs like Flight School Training Support Services for the U.S. Army and the Platforms and Systems Training Contract for the Royal Australian Navy, we address the vast complexity and scale of digital environments, empower decision-makers at every level and advance the rigor of data-driven capabilities and assessments so that our customers stay ahead of the evolving security landscape.

We believe the Defense and Security segment is positioned as a strategic partner to achieve transformational digital training solutions, next-generation situational awareness, and multi-domain operations. We estimate our addressable defence market across all five domains to be more than $15 billion.

**Market drivers**

Demand for training and operational support solutions in the defence and security markets is driven by the following;

–Accelerated defence spending as a reflection of heightened geopolitical tensions;

–Expected stable demand on enduring platforms and increased opportunities on next-generation systems;

–Maximization of efficiencies through outsourced training and support services;

–Increased industry competition straining military aviation recruitment, training and retention;

–Demand for integrated network training systems to support multi-domain conflict;

–Expanded utilization of synthetic environments to support efficacy, reduce costs and lower environmental impact.

***Accelerated defence spending as a reflection of heightened geopolitical tensions***

According to the International Institute for Strategic Studies, global military expenditures increased by 7% in 2024, reaching US$2.5 trillion. European defence expenditure grew by 12% reaching US$457 billion in 2024, the 10th year of consecutive growth following the conflict in Ukraine. Projected increases in European defence spending for 2025 and beyond are driven by several new initiatives. The European Commission, the European Union's executive body based in Brussels, is planning to offer loans amounting to approximately €150 billion to support military expenditures by member states. These loans are anticipated to facilitate around €800 billion in new military investments. Similarly, in Canada, defence expenditure grew by 12% in 2024, reaching US$27 billion. This growth may accelerate further as Canadian officials have signaled an increase in defence expenditure as a percentage of GDP to reach 2% by 2027, ahead of the current timeline of 2032. The U.S. experienced a 5% increase from 2023 to 2024. In the Middle East and North African regions, annual defence spending increased by 10%. Defence spending increased in Asia by 4%.

***Expected stable demand on enduring platforms and increased opportunities on next-generation systems***

We maintain a robust recurring business from our strong presence in enduring platforms, including long-term service contracts. Defence forces in mature markets are maximizing the potential of their existing platforms through upgrades, updates, and life extension programs of existing assets, which presents opportunities for simulator upgrades and training support services. Additionally, there is significant demand for enduring platforms such as the C-130, P-8, F-16, C295, MH-60R, NH90 and MQ-9 in global defence markets, necessitating new training systems and services. As defence forces gear up for next-generation platforms and increasingly engage in collaborative operations between manned and unmanned systems, opportunities continue to expand. Our global footprint with key defence customers and strategic partnerships with OEM providers such as Boeing, Lockheed Martin and Bell Textron uniquely position us to support next-generation platforms, and facilitate a smooth transition from current to future training frameworks.

***Maximization of efficiencies through outsourced training and support services***

Defence forces and governments are continually exploring ways to improve efficiency and bolster readiness, enabling active-duty personnel to concentrate on operational needs. A notable trend among defence forces is the outsourcing of various training and operational support services, including military training through flight training organizations. This strategy enhances throughput, making training programs more effective and scalable to accommodate a greater number of trainees. We expect this trend to persist, aligning with our long-term strategy to expand recurring service offerings. We believe governments will increasingly turn to industry partners for training and operational support solutions, seeking faster delivery, reduced capital investment requirements, and improved readiness levels.

CAE Financial Report 2025 I 9

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Management's Discussion and Analysis

***Increased industry competition straining military aviation recruitment, training and retention***

The strong demand from the civil commercial and business aviation sectors have affected the recruitment, training and retention of military pilots. This challenge has prompted defence forces to explore various initiatives aimed at mitigating the pilot shortage, including modernization efforts focused on innovative training methods. Consequently, defence forces are evaluating the possibility of outsourcing instructor pilot roles and incorporating new technologies that improve the effectiveness and efficiency of pilot training. This approach not only increases training capacity but also opens new opportunities for our products, services and solutions.

***Demand for integrated network training systems to support multi-domain conflict***

The changing geopolitical landscape and the need to prepare for a peer adversary, coupled with constraints in personnel and budget, have led defence forces worldwide to consider outsourcing the development, management and delivery of the training systems necessary for today's complex operational environments. Increasingly, defence forces are considering a more integrated and holistic training approach across all domains. Defence forces seek to enhance efficiency, achieve cost savings, and foster integration and immersive training across multi-domain operations. As a training systems integrator, we utilize our leadership expertise to enhance enterprise training networks and provide comprehensive solutions that improve operational test and training infrastructure and supporting distributed mission training and multi-domain operations.

***Expanded utilization of synthetic environments to support efficacy, reduce costs and lower environmental impact***

A key factor driving our expertise and capabilities is the growing adoption of synthetic environments across the defence community. More defence forces and governments are integrating synthetic environments into their training strategies to improve training effectiveness, reduce operational demands on platforms, mitigate risks associated with training and substantially lower costs. Additionally, synthetic training solutions help decrease our customers' environmental impact by offering a safer alternative for multi-domain training, significantly reducing the carbon footprint compared to traditional live training. Furthermore, when combined with AI and cloud computing, these digitally immersive synthetic environments serve as valuable tools for planning, course of action analysis, and mission support.

**4.&nbsp;&nbsp;&nbsp;&nbsp; FOREIGN EXCHANGE**

We report all dollar amounts in Canadian dollars. We value assets, liabilities and transactions that are measured in foreign currencies using various exchange rates as required by IFRS.

The tables below show the variations of the closing and average exchange rates for the two main currencies in which we operate.

We used the closing foreign exchange rates below to value our assets, liabilities and adjusted backlog in Canadian dollars at the end of each of the following periods:

---

| | | | |
|:---|:---|:---|:---|
| | | | Increase / |
| *As at March 31* | **2025** | 2024 | (decrease) |
| U.S. dollar (US$ or USD) | **1.44** | 1.35 | *7 %* |
| Euro (€ or EUR) | **1.55** | 1.46 | *6 %* |

---

We used the average quarterly and yearly foreign exchange rates below to value our revenues and expenses throughout the following periods:

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| |<br>**Q4-2025** |<br>Q4-2024 | Increase /<br>(decrease) |<br>**FY2025** |<br>FY2024 | Increase /<br>(decrease) |
| U.S. dollar (US$ or USD) | **1.43** | 1.35 | *6 %* | **1.39** | 1.35 | *3 %* |
| Euro (€ or EUR) | **1.51** | 1.46 | *3 %* | **1.49** | 1.46 | *2 %* |

---

For the three months ended March 31, 2025, the effect of translating the results of our foreign operations into Canadian dollars resulted in an increase in revenue of $50.0 million and an increase in adjusted segment operating income of $9.5 million, when compared to fiscal 2024. For fiscal 2025, the effect of translating the results of our foreign operations into Canadian dollars resulted in an increase in revenue of $97.4 million and an increase in adjusted segment operating income of $14.7 million, when compared to fiscal 2024. We calculated this by translating the current year's foreign currency revenue and net income of our foreign operations using the average monthly exchange rates from the previous year and comparing these adjusted amounts to our current year reported results. You will find more details about our foreign exchange exposure and hedging strategies in Section 11 "*Business risk and uncertainty"* of this MD&A*.* A sensitivity analysis for foreign currency risk is included in Note 32 of our consolidated financial statements.

10 I CAE Financial Report 2025

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Management's Discussion and Analysis

**5.&nbsp;&nbsp;&nbsp;&nbsp; CONSOLIDATED RESULTS**

**5.1&nbsp;&nbsp;&nbsp;&nbsp; Results from operations – fourth quarter of fiscal 2025**

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
| *(amounts in millions, except per share amounts)* | **Q4-2025** | Q3-2025 | Q2-2025 | Q1-2025 | Q4-2024 |
| **Continuing operations** |  |  |  |  |  |
| Revenue | $**1275.4** | 1223.4 | 1136.6 | 1072.5 | 1126.3 |
| Cost of sales | $**884.7** | 883.8 | 845.5 | 793.8 | 844.8 |
| Gross profit | $**390.7** | 339.6 | 291.1 | 278.7 | 281.5 |
| &nbsp;&nbsp;&nbsp;*As a % of revenue*<sup>2</sup> | ***30.6*** | *27.8* | *25.6* | *26.0* | *25.0* |
| Research and development expenses | $**21.4** | 28.7 | 37.2 | 35.9 | 41.7 |
| Selling, general and administrative expenses | $**164.1** | 140.2 | 127.6 | 133.5 | 138.1 |
| Other (gains) and losses | $**(9.6)** | (0.1) | (2.7) | (0.9) | 36.3 |
| After-tax share in profit of equity accounted investees | $**(25.1)** | (19.2) | (20.0) | (24.0) | (24.6) |
| Restructuring, integration and acquisition costs | $**—** |  | 30.9 | 25.6 | 55.0 |
| Gain on remeasurement of previously held equity interest | $**—** | (72.6) |  |  |  |
| Impairment of goodwill | $**—** |  |  |  | 568.0 |
| Operating income (loss) | $**239.9** | 262.6 | 118.1 | 108.6 | (533.0) |
| &nbsp;&nbsp;&nbsp;*As a % of revenue*<sup>2</sup> | ***18.8*** | *21.5* | *10.4* | *10.1* | *—* |
| Finance expense – net | $**56.5** | 56.6 | 52.9 | 49.5 | 52.4 |
| Earnings (loss) before income taxes | $**183.4** | 206.0 | 65.2 | 59.1 | (585.4) |
| Income tax expense (recovery) | $**45.2** | 34.8 | 10.4 | 8.3 | (80.6) |
| &nbsp;&nbsp;&nbsp;*As a % of earnings before income taxes* |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;*(effective tax rate)* | ***25*** | *17* | *16* | *14* | *14* |
| Net income (loss) from continuing operations | $**138.2** | 171.2 | 54.8 | 50.8 | (504.8) |
| Net income from discontinued operations | $**—** |  |  |  | 20.5 |
| Net income (loss) | $**138.2** | 171.2 | 54.8 | 50.8 | (484.3) |
| Attributable to: |  |  |  |  |  |
| Equity holders of the Company | $**135.9** | 168.6 | 52.5 | 48.3 | (484.2) |
| Non-controlling interests | $**2.3** | 2.6 | 2.3 | 2.5 | (0.1) |
|  | $**138.2** | 171.2 | 54.8 | 50.8 | (484.3) |
| EPS attributable to equity holders of the Company | EPS attributable to equity holders of the Company |  |  |  |  |
| Basic and diluted – continuing operations | $**0.42** | 0.53 | 0.16 | 0.15 | (1.58) |
| Basic and diluted – discontinued operations | $**—** |  |  |  | 0.06 |
| Adjusted segment operating income<sup>2</sup> | $**258.8** | 190.0 | 149.0 | 134.2 | 125.7 |
| Adjusted net income<sup>2</sup> | $**149.6** | 91.9 | 76.2 | 67.8 | 38.7 |
| Adjusted EPS<sup>2</sup> | $**0.47** | 0.29 | 0.24 | 0.21 | 0.12 |

---

**Revenue was $1,275.4 million this quarter, $149.1 million or 13% higher compared to the fourth quarter of fiscal 2024**

Revenue variances by segment were as follows:

---

| | | | | |
|:---|:---|:---|:---|:---|
| *(amounts in millions)* |  |  |  |  |
| *Three months ended March 31* | **2025** | 2024 | *Variance $* | *Variance %* |
| Civil Aviation | $**728.4** | $700.8 | $*27.6* | *4 %* |
| Defense and Security | **547.0** | 425.5 | *121.5* | *29 %* |
| Revenue | $**1275.4** | $1126.3 | $*149.1* | *13 %* |

---

You will find more details in Section 6 "*Results by segment"* of this MD&A.

<sup>2</sup> Non-IFRS financial measure, non-IFRS ratio, capital management measure, or supplementary financial measure. Refer to Section 13.1 "*Non-IFRS and other financial measure definitions"* and Section 13.3 *"Non-IFRS measure reconciliations*" of this MD&A for the definitions and reconciliations of these measures to the most directly comparable measure under IFRS.

CAE Financial Report 2025 I 11

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Management's Discussion and Analysis

**Gross profit was $390.7 million this quarter, $109.2 million or 39% higher compared to the fourth quarter of fiscal 2024**

Gross profit was $390.7 million this quarter (30.6% of revenue) compared to $281.5 million (25.0% of revenue) in the fourth quarter of fiscal 2024. Gross profit variances by segment were as follows:

---

| | | | | |
|:---|:---|:---|:---|:---|
| *(amounts in millions)* |  |  |  |  |
| *Three months ended March 31* | **2025** | 2024 | *Variance $* | *Variance %* |
| Civil Aviation | $**272.4** | $270.8 | $*1.6* | *1 %* |
| Defense and Security | **118.3** | 10.7 | *107.6* | *1006 %* |
| Gross profit | $**390.7** | $281.5 | $*109.2* | *39 %* |

---

You will find more details in Section 6 "*Results by segment"* of this MD&A.

**Operating income was $239.9 million this quarter, $772.9 million higher compared to the fourth quarter of fiscal 2024**

Operating income was $239.9 million (18.8% of revenue) this quarter compared to an operating loss of $533.0 million in the fourth quarter of fiscal 2024. This period's operating income included costs related to shareholder matters of $10.6 million and executive management transition costs of $8.3 million. Last year's operating loss included the impairment of goodwill of $568.0 million, the impairment of technology and other non-financial assets of $35.7 million and restructuring, integration and acquisition costs of $55.0 million. Operating income (loss) variances by segment were as follows:

---

| | | | | |
|:---|:---|:---|:---|:---|
| *(amounts in millions)* |  |  |  |  |
| *Three months ended March 31* | **2025** | 2024 | *Variance $* | *Variance %* |
| Civil Aviation | $**197.4** | $147.0 | $*50.4* | *34 %* |
| Defense and Security | **42.5** | (680.0) | *722.5* |  |
| Operating income (loss) | $**239.9** | $(533.0) | $*772.9* |  |

---

**Adjusted segment operating income was $258.8 million this quarter, $133.1 million or 106% higher compared to the fourth quarter of fiscal 2024**

Adjusted segment operating income was $258.8 million this quarter (20.3% of revenue) compared to $125.7 million (11.2% of revenue) in the fourth quarter of fiscal 2024. Adjusted segment operating income (loss) variances by segment were as follows:

---

| | | | | |
|:---|:---|:---|:---|:---|
| *(amounts in millions)* |  |  |  |  |
| *Three months ended March 31* | **2025** | 2024 | *Variance $* | *Variance %* |
| Civil Aviation | $**208.4** | $191.4 | $*17.0* | *9 %* |
| Defense and Security | **50.4** | (65.7) | *116.1* |  |
| Adjusted segment operating income | $**258.8** | $125.7 | $*133.1* | *106 %* |

---

You will find more details in Section 6 "*Results by segment"* of this MD&A.

**Finance expense - net was $56.5 million this quarter, $4.1 million or 8% higher compared to the fourth quarter of fiscal 2024**

Finance expense - net was $56.5 million this quarter, compared to $52.4 million in the fourth quarter of fiscal 2024. The increase was mainly due to higher finance expense on lease liabilities in support of training network expansions and additional finance expense on borrowings to finance the SIMCOM transaction last quarter. The increase was partially offset by lower finance expense on long-term debt due to a decreased level of borrowings during the period aligned with our ongoing deleveraging objectives.

**Effective tax rate was 25% this quarter**

Income tax expense this quarter amounted to $45.2 million, representing an effective tax rate of 25%, compared to an income tax recovery of $80.6 million for the fourth quarter of fiscal 2024, representing an effective tax rate of 14% last year. The adjusted effective tax rate<sup>3</sup> on our adjusted net income was 25% this quarter compared to 47% in the fourth quarter of fiscal 2024. The decrease in the adjusted effective tax rate was mainly attributable to last year's derecognition of tax assets previously recorded in Europe and the change in the mix of income from various jurisdictions.

<sup>3</sup> Non-IFRS financial measure, non-IFRS ratio, capital management measure, or supplementary financial measure. Refer to Section 13.1 "*Non-IFRS and other financial measure definitions"* and Section 13.3 *"Non-IFRS measure reconciliations*" of this MD&A for the definitions and reconciliations of these measures to the most directly comparable measure under IFRS.

12 I CAE Financial Report 2025

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Management's Discussion and Analysis

**5.2&nbsp;&nbsp;&nbsp;&nbsp; Results from operations – fiscal 2025** 

---

| | | |
|:---|:---|:---|
| *(amounts in millions, except per share amounts)* | **FY2025** | FY2024 |
| **Continuing operations** |  |  |
| Revenue | $**4707.9** | 4282.8 |
| Cost of sales | $**3407.8** | 3128.3 |
| Gross profit | $**1300.1** | 1154.5 |
| &nbsp;&nbsp;&nbsp;&nbsp;*As a % of revenue* | ***27.6*** | *27.0* |
| Research and development expenses | $**123.2** | 149.8 |
| Selling, general and administrative expenses | $**565.4** | 535.0 |
| Other (gains) and losses | $**(13.3)** | 27.9 |
| After-tax share in profit of equity accounted investees | $**(88.3)** | (72.2) |
| Restructuring, integration and acquisition costs | $**56.5** | 131.4 |
| Gain on remeasurement of previously held equity interest | $**(72.6)** |  |
| Impairment of goodwill | $**—** | 568.0 |
| Operating income (loss) | $**729.2** | (185.4) |
| &nbsp;&nbsp;&nbsp;&nbsp;*As a % of revenue* | ***15.5*** | *—* |
| Finance expense – net | $**215.5** | 205.0 |
| Earnings (loss) before income taxes | $**513.7** | (390.4) |
| Income tax expense (recovery) | $**98.7** | (72.8) |
| &nbsp;&nbsp;&nbsp;&nbsp;*As a % of earnings before income taxes (effective tax rate)* | ***19*** | *19* |
| Net income (loss) from continuing operations | $**415.0** | (317.6) |
| Net income from discontinued operations | $**—** | 21.3 |
| Net income (loss) | $**415.0** | (296.3) |
| Attributable to: |  |  |
| Equity holders of the Company | $**405.3** | (304.0) |
| Non-controlling interests | $**9.7** | 7.7 |
|  | $**415.0** | (296.3) |
| EPS attributable to equity holders of the Company | EPS attributable to equity holders of the Company |  |
| Basic and diluted – continuing operations | $**1.27** | (1.02) |
| Basic and diluted – discontinued operations | $**—** | 0.07 |
| Adjusted segment operating income | $**732.0** | 549.7 |
| Adjusted net income | $**385.5** | 276.8 |
| Adjusted EPS | $**1.21** | 0.87 |

---

**Revenue was $4,707.9 million this year, $425.1 million or 10% higher compared to last year**

Revenue variances by segment were as follows:

---

| | | | | |
|:---|:---|:---|:---|:---|
| *(amounts in millions)* |  |  |  |  |
| *Years ended March 31* | **2025** | 2024 | *Variance $* | *Variance %* |
| Civil Aviation | $**2709.3** | $2435.8 | $*273.5* | *11 %* |
| Defense and Security | **1998.6** | 1847.0 | *151.6* | *8 %* |
| Revenue | $**4707.9** | $4282.8 | $*425.1* | *10 %* |

---

You will find more details in Section 6 "*Results by segment"* of this MD&A.

CAE Financial Report 2025 I 13

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Management's Discussion and Analysis

**Gross profit was $1,300.1 million this year, $145.6 million or 13% higher compared to last year**

Gross profit was $1,300.1 million this year (27.6% of revenue) compared to $1,154.5 million (27.0% of revenue) last year. Gross profit variances by segment were as follows:

---

| | | | | |
|:---|:---|:---|:---|:---|
| *(amounts in millions)* |  |  |  |  |
| *Years ended March 31* | **2025** | 2024 | *Variance $* | *Variance %* |
| Civil Aviation | $**883.6** | $867.8 | $*15.8* | *2 %* |
| Defense and Security | **416.5** | 286.7 | *129.8* | *45 %* |
| Gross profit | $**1300.1** | $1154.5 | $*145.6* | *13 %* |

---

You will find more details in Section 6 "*Results by segment"* of this MD&A.

**Operating income was $729.2 million this year, $914.6 million higher compared to last year**

Operating income was $729.2 million this year compared to an operating loss of $185.4 million last year. This period's operating income included the gain on fair value remeasurement of SIMCOM of $72.6 million, costs related to shareholder matters of $10.6 million, executive management transition costs of $8.3 million and restructuring, integration and acquisition costs of $56.5 million. Last year's operating loss included the impairment of goodwill of $568.0 million, the impairment of technology and other non-financial assets of $35.7 million and restructuring, integration and acquisition costs of $131.4 million. Operating income (loss) variances by segment were as follows:

---

| | | | | |
|:---|:---|:---|:---|:---|
| *(amounts in millions)* |  |  |  |  |
| *Years ended March 31* | **2025** | 2024 | *Variance $* | *Variance %* |
| Civil Aviation | $**605.3** | $442.0 | $*163.3* | *37 %* |
| Defense and Security | **123.9** | (627.4) | *751.3* |  |
| Operating income (loss) | $**729.2** | $(185.4) | $*914.6* |  |

---

You will find more details on the reconciliation between operating income and adjustment segmented operating income in Section 13.3 "*Non-IFRS measure reconciliations"* of this MD&A.

**Adjusted segment operating income was $732.0 million this year, $182.3 million or 33% higher compared to last year**

Adjusted segment operating income was $732.0 million this year (15.5% of revenue) compared to $549.7 million (12.8% of revenue) last year. Adjusted segment operating income variances by segment were as follows:

---

| | | | | |
|:---|:---|:---|:---|:---|
| *(amounts in millions)* |  |  |  |  |
| *Years ended March 31* | **2025** | 2024 | *Variance $* | *Variance %* |
| Civil Aviation | $**581.5** | $548.9 | $*32.6* | *6 %* |
| Defense and Security | **150.5** | 0.8 | *149.7* | *18713 %* |
| Adjusted segment operating income | $**732.0** | $549.7 | $*182.3* | *33 %* |

---

You will find more details in Section 6 "*Results by segment"* of this MD&A.

**Finance expense - net was $215.5 million this year, $10.5 million or 5% higher compared to last year**

Finance expense - net was $215.5 million, $10.5 million higher compared to the same period last year. The increase was mainly due to higher finance expense on lease liabilities in support of training network expansions and additional finance expense on borrowings to finance the SIMCOM transaction last quarter, partially offset by lower finance expense on long-term debt due to a decreased level of borrowings during the period aligned with our ongoing deleveraging objectives.

**Effective tax rate was 19% this year**

Income tax expense this year amounted to $98.7 million, representing an effective tax rate of 19% compared to an income tax recovery of $72.8 million for the same period last year, representing an effective tax rate of 19%. The adjusted effective tax rate on our adjusted net income was 23% this year compared to 17% last year. The increase in the adjusted effective tax rate was mainly attributable to the change in the mix of income from various jurisdictions, last year's recognition of previously unrecognized deferred tax assets in relation to the statutory combination of certain foreign operations and the income tax benefit resulting from the tax court decision in the in the first quarter of fiscal 2024, partially offset by the last year's derecognition of tax assets previously recorded in Europe.

As at March 31, 2025, various countries where CAE operates have enacted the global minimum top-up income tax under Pillar Two tax legislation into domestic tax legislation. This enactment had no material impact on our overall income tax expense nor on the effective tax rate.

14 I CAE Financial Report 2025

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Management's Discussion and Analysis

**5.3&nbsp;&nbsp;&nbsp;&nbsp; Restructuring, integration and acquisition costs**

---

| | | | | |
|:---|:---|:---|:---|:---|
| | **FY2025** | FY2024 | **Q4-2025** | Q4-2024 |
| Integration and acquisition costs | $**11.5** | $79.9 | $**—** | $15.0 |
| Severances and other employee related costs | **33.9** | 31.2 | **—** | 19.7 |
| Impairment of non-financial assets - net | **5.2** | 19.2 | **—** | 19.2 |
| Other costs | **5.9** | 1.1 |  | 1.1 |
| Total restructuring, integration and acquisition costs | $**56.5** | $131.4 | $**—** | $55.0 |

---

During the fourth quarter of fiscal 2024, we announced that we would streamline our operating model and portfolio, optimize our cost structure and create efficiencies. This restructuring program was completed in the second quarter of fiscal 2025. In fiscal 2025, costs related to this restructuring program totalled $40.6 million and included $29.4 million of severances and other employee related costs and $5.2 million of impairment of non-financial assets. Impairment of non-financial assets primarily included the impairment of property, plant and equipment, intangible assets and right-of-use assets related to the termination of certain product offerings within the Civil Aviation segment.

In the second quarter of fiscal 2025, the integration activities associated with the fiscal 2022 acquisition of Sabre's AirCentre airline operations portfolio (AirCentre) were completed. For the year ended March 31, 2025, restructuring, integration and acquisition costs associated with AirCentre amounted to $15.9 million (2024 – $76.8 million).

**5.4&nbsp;&nbsp;&nbsp;&nbsp; Gain on remeasurement of previously held equity interest**

**Gain on fair value remeasurement of SIMCOM**

On November 5, 2024, we increased our ownership stake in our existing SIMCOM joint venture, obtaining control of the entity. Prior to acquiring control, our 50% ownership in SIMCOM was accounted for using the equity method. The change in control provided for the remeasurement of the previously held equity interest in SIMCOM to its fair value with any difference compared to the carrying value to be recognized as a gain or loss in our income statement, as well as the derecognition of a portion of Civil Aviation's goodwill, based on the relative fair value of the previously held equity interest in SIMCOM compared to the cash generating unit included in the Civil Aviation segment. As a result, we recorded a net remeasurement gain of $72.6 million, including the derecognition of goodwill and associated cumulative foreign exchange differences of $29.4 million and $7.7 million, respectively, and other costs of $5.3 million.

You will find more details in Section 9 "*Business combinations"* of this MD&A.

**5.5&nbsp;&nbsp;&nbsp;&nbsp; Shareholder matters**

In December 2024, we received a public letter from shareholder Browning West, LP requesting that CAE's Board of Directors (Board) engage with them on the recruitment process to identify our next Chief Executive Officer (CEO). In February 2025, we announced changes to our Board that included the appointment of four new directors and the concurrent retirement of four directors, including the Chair of the Board. In connection with these changes, we entered into a customary nomination rights agreement with the Caisse de dépôt et placement du Québec, one of our largest shareholders, and a customary cooperation and standstill agreement with Browning West, LP.

During fiscal 2025, we incurred one-time costs of approximately $10.6 million related to the above shareholder matters, consisting primarily of external advisory fees. These costs are recorded in selling, general and administrative expenses.

**5.6&nbsp;&nbsp;&nbsp;&nbsp; Executive management transition costs**

In November 2024, the Company announced its CEO succession plan whereby the current CEO will be leaving the Company at the Annual General Meeting in August 2025. The CEO's terms of departure were finalized during the fourth quarter of fiscal 2025 and include non-compete and non-solicitation covenants, as well as other terms that are generally consistent with the previously agreed-upon employment arrangement which will remain in force until the departure date.

During fiscal 2025, the Company incurred approximately $8.3 million of executive management transition costs, including $6.3 million related to the CEO's terms of departure, representing accrued expenses not yet paid to the current CEO, and $2.0 million of other costs consisting primarily of external advisor fees. These costs are recorded in selling, general and administrative expenses.

CAE Financial Report 2025 I 15

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Management's Discussion and Analysis

**5.7&nbsp;&nbsp;&nbsp;&nbsp; Consolidated adjusted order intake and adjusted backlog**

**Adjusted backlog**<sup>4</sup> **65% higher compared to last year**

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| | Civil Aviation | Civil Aviation | Defense <br>and Security | Defense <br>and Security | Total | Total |
| *(amounts in millions)* | **FY2025** | FY2024 | **FY2025** | FY2024 | **FY2025** | FY2024 |
| Obligated backlog<sup>4</sup>, beginning of period | $**6107.5** | $5555.2 | $**3407.8** | $3406.7 | $**9515.3** | $8961.9 |
| + adjusted order intake | **3717.4** | 3025.5 | **3986.1** | 1911.9 | **7703.5** | 4937.4 |
| - revenue | **(2709.3)** | (2435.8) | **(1998.6)** | (1847.0) | **(4707.9)** | (4282.8) |
| + / - adjustments | **1049.4** | (37.4) | **168.2** | (63.8) | **1217.6** | (101.2) |
| Obligated backlog, end of period | $**8165.0** | $6107.5 | $**5563.5** | $3407.8 | $**13728.5** | $9515.3 |
| Joint venture backlog<sup>4</sup> (all obligated) | **681.6** | 332.9 | **3681.7** | 131.2 | **4363.3** | 464.1 |
| Unfunded backlog and options<sup>4</sup> | **—** |  | **2050.4** | 2204.5 | **2050.4** | 2204.5 |
| Adjusted backlog | $**8846.6** | $6440.4 | $**11295.6** | $5743.5 | $**20142.2** | $12183.9 |

---

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| | Civil Aviation | Civil Aviation | Defense <br>and Security | Defense <br>and Security | Total | Total |
| *(amounts in millions)* | **Q4-2025** | Q4-2024 | **Q4-2025** | Q4-2024 | **Q4-2025** | Q4-2024 |
| Obligated backlog, beginning of period | $**8089.4** | $5871.9 | $**5436.3** | $3128.2 | $**13525.7** | $9000.1 |
| + adjusted order intake | **741.8** | 832.1 | **595.7** | 718.4 | **1337.5** | 1550.5 |
| - revenue | **(728.4)** | (700.8) | **(547.0)** | (425.5) | **(1275.4)** | (1126.3) |
| + / - adjustments | **62.2** | 104.3 | **78.5** | (13.3) | **140.7** | 91.0 |
| Obligated backlog, end of period | $**8165.0** | $6107.5 | $**5563.5** | $3407.8 | $**13728.5** | $9515.3 |
| Joint venture backlog (all obligated) | **681.6** | 332.9 | **3681.7** | 131.2 | **4363.3** | 464.1 |
| Unfunded backlog and options | **—** |  | **2050.4** | 2204.5 | **2050.4** | 2204.5 |
| Adjusted backlog | $**8846.6** | $6440.4 | $**11295.6** | $5743.5 | $**20142.2** | $12183.9 |

---

The book-to-sales ratio for the quarter was 1.05x. The ratio for the last 12 months was 1.64x.

You will find more details in Section 6 "*Results by segment"* of this MD&A.

<sup>4</sup> Non-IFRS financial measure, non-IFRS ratio, capital management measure, or supplementary financial measure. Refer to Section 13.1 "*Non-IFRS and other financial measure definitions"* and Section 13.3 *"Non-IFRS measure reconciliations*" of this MD&A for the definitions and reconciliations of these measures to the most directly comparable measure under IFRS.

16 I CAE Financial Report 2025

------

Management's Discussion and Analysis

**6.&nbsp;&nbsp;&nbsp;&nbsp; RESULTS BY SEGMENT**

We manage our business and report our results in two segments:

–Civil Aviation;

–Defense and Security.

The method used for the allocation of assets jointly used by the operating segments and costs and liabilities jointly incurred (mostly corporate costs) between operating segments is based on the level of utilization when determinable and measurable, otherwise the allocation is based on a proportion of each segment's cost of sales and revenue.

Unless otherwise indicated, elements within our segment revenue and adjusted segment operating income analysis are presented in order of magnitude.

**6.1&nbsp;&nbsp;&nbsp;&nbsp; Civil Aviation**

**FINANCIAL RESULTS**

---

| | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|
| *(amounts in millions)* | **FY2025** | FY2024 | **Q4-2025** | Q3-2025 | Q2-2025 | Q1-2025 | Q4-2024 |
| Revenue | $**2709.3** | 2435.8 | **728.4** | 752.6 | 640.7 | 587.6 | 700.8 |
| Gross profit | $**883.6** | 867.8 | **272.4** | 234.2 | 189.3 | 187.7 | 270.8 |
| &nbsp;&nbsp;&nbsp;*As a % of revenue* | ***32.6*** | *35.6* | ***37.4*** | *31.1* | *29.5* | *31.9* | *38.6* |
| Operating income | $**605.3** | 442.0 | **197.4** | 223.4 | 94.7 | 89.8 | 147.0 |
| Adjusted segment operating income | $**581.5** | 548.9 | **208.4** | 150.8 | 115.9 | 106.4 | 191.4 |
| &nbsp;&nbsp;&nbsp;*As a % of revenue<sup>5</sup>* | ***21.5*** | *22.5* | ***28.6*** | *20.0* | *18.1* | *18.1* | *27.3* |
| Depreciation and amortization | $**312.4** | 272.0 | **84.3** | 80.1 | 74.7 | 73.3 | 69.9 |
| Property, plant and equipment  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;expenditures | $**229.7** | 225.8 | **62.6** | 58.4 | 37.0 | 71.7 | 58.0 |
| Intangible asset expenditures | $**66.6** | 109.5 | **13.9** | 12.8 | 17.2 | 22.7 | 33.1 |
| Capital employed<sup>5</sup> | $**5894.3** | 4871.7 | **5894.3** | 5774.3 | 5143.0 | 5086.0 | 4871.7 |
| Adjusted backlog | $**8846.6** | 6440.4 | **8846.6** | 8798.7 | 6663.1 | 6585.3 | 6440.4 |
| **Supplementary non-financial information** | **Supplementary non-financial information** |  |  |  |  |  |  |
| Simulator equivalent unit | **286** | 272 | **298** | 292 | 276 | 279 | 279 |
| FFSs in CAE's network | **363** | 343 | **363** | 362 | 355 | 349 | 343 |
| Utilization rate | **74** | 76 | **75** | 76 | 70 | 76 | 78 |
| FFS deliveries | **61** | 47 | **15** | 20 | 18 | 8 | 17 |

---

**Revenue was $728.4 million this quarter, $27.6 million or 4% higher compared to the fourth quarter of fiscal 2024** 

The increase compared to the fourth quarter of fiscal 2024 was mainly due to the consolidation into our results of SIMCOM following the increase of our ownership stake last quarter, higher revenue from airline operations digital solutions and the foreign exchange impact on the translation of our foreign operations. The increase was partially offset by lower revenue recognized from simulator sales, lower revenue from simulator lifecycle support services and lower revenue from commercial aviation training driven by lower utilization on reduced initial training demand.

**Revenue was $2,709.3 million this year, $273.5 million or 11% higher compared to last year**

The increase compared to last year was mainly due to higher revenue recognized from simulator sales, driven by higher deliveries, the consolidation into our results of SIMCOM following the increase of our ownership stake last quarter, higher revenue from business training services driven by higher business utilization from increased volume from recently deployed simulators and a more favourable sales mix, and the foreign exchange impact on the translation of our foreign operations. The increase was partially offset by lower revenue from commercial aviation training driven by lower utilization on reduced initial training demand.

**Gross profit was $272.4 million this quarter, stable compared to the fourth quarter of fiscal 2024**

Gross profit was $272.4 million (37.4% of revenue) this quarter, compared to $270.8 million (38.6% of revenue) in the fourth quarter of fiscal 2024. Increases arising from the consolidation into our results of SIMCOM following the increase of our ownership stake last quarter and the foreign exchange impact on the translation of our foreign operations were offset by a lower contribution from simulator sales and a lower contribution from commercial aviation training driven by lower commercial utilization on reduced initial training demand.

<sup>5</sup> Non-IFRS financial measure, non-IFRS ratio, capital management measure, or supplementary financial measure. Refer to Section 13.1 "*Non-IFRS and other financial measure definitions"* and Section 13.3 *"Non-IFRS measure reconciliations*" of this MD&A for the definitions and reconciliations of these measures to the most directly comparable measure under IFRS.

CAE Financial Report 2025 I 17

------

Management's Discussion and Analysis

**Gross profit was $883.6 million this year, $15.8 million or 2% higher compared to last year**

Gross profit was $883.6 million (32.6% of revenue) this year, compared to $867.8 million (35.6% of revenue) last year. The increase compared to last year was mainly due to the consolidation into our results of SIMCOM following the increase of our ownership stake last quarter, a higher contribution from business training services, driven by higher business utilization from increased volume from recently deployed simulators and a more favorable sales mix, and the foreign exchange impact on the translation of our foreign operations. The increase was partially offset by a lower contribution from commercial training services, driven by a less favorable sales mix and lower commercial utilization on reduced initial training demand and a lower contribution from airline operations digital solutions.

**Adjusted segment operating income was $208.4 million this quarter, $17.0 million or 9% higher compared to the fourth quarter of fiscal 2024**

Adjusted segment operating income was $208.4 million (28.6% of revenue) this quarter, compared to $191.4 million (27.3% of revenue) in the fourth quarter of fiscal 2024. The increase compared to the fourth quarter of fiscal 2024 was mainly due to the consolidation into our results of SIMCOM following the increase of our ownership stake last quarter, lower net research and development costs, a gain on disposal of property, plant and equipment recognized this quarter, and the foreign exchange impact on the translation of our foreign operations. The increase was partially offset by a lower contribution from simulator sales and a lower contribution from commercial aviation training driven by lower commercial utilization on reduced initial training demand.

**Adjusted segment operating income was $581.5 million this year, $32.6 million or 6% higher compared to last year**

Adjusted segment operating income was $581.5 million (21.5% of revenue) this year, compared to $548.9 million (22.5% of revenue) last year. The increase compared to last year was mainly due to the consolidation into our results of SIMCOM following the increase of our ownership stake last quarter, a higher contribution from business training services, driven by higher business utilization from increased volume from recently deployed simulators and a more favorable sales mix, higher profitability in our joint ventures, a gain on disposal of property, plant and equipment recognized this quarter, and the foreign exchange impact on the translation of our foreign operations. The increase was partially offset by a lower contribution from commercial training services, driven by a less favorable sales mix and lower commercial utilization on reduced initial training demand and a lower contribution from airline operations digital solutions.

You will find more details on the reconciliation between operating income and adjustment segmented operating income in Section 13.3 *"Non-IFRS measure reconciliations"* of this MD&A.

**Property, plant and equipment expenditures were $62.6 million this quarter and $229.7 million for the year**

Growth capital expenditures were $46.3 million for the quarter and $164.6 million for the year. Maintenance capital expenditures were $16.3 million for the quarter and $65.1 million for the year.

**Capital employed increased by $120.0 million compared to last quarter and by $1,022.6 million compared to last year**

The increase compared to last quarter was mainly due to movements in foreign exchange rates, a higher investment in equity accounted for investees, and higher property plant and equipment.

The increase compared to last year was mainly due to the consolidation of SIMCOM following the increase of our ownership stake last quarter, resulting in an increase in intangible assets, property, plant and equipment and right-of-use assets, and a decrease in investment in equity accounted investees. The increase was further due to movements in foreign exchange rates, property plant and equipment and a higher investment in equity accounted investees, partially offset by a lower investment in non-cash working capital.

**Adjusted backlog up 37% compared to last year**

---

| | | | | |
|:---|:---|:---|:---|:---|
| *(amounts in millions)* | **Q4-2025** | Q4-2024 | **FY2025** | FY2024 |
| Obligated backlog, beginning of period | $**8089.4** | $5871.9 | $**6107.5** | $5555.2 |
| + adjusted order intake | **741.8** | 832.1 | **3717.4** | 3025.5 |
| - revenue | **(728.4)** | (700.8) | **(2709.3)** | (2435.8) |
| + / - adjustments | **62.2** | 104.3 | **1049.4** | (37.4) |
| Obligated backlog, end of period | $**8165.0** | $6107.5 | $**8165.0** | $6107.5 |
| Joint venture backlog (all obligated) | **681.6** | 332.9 | **681.6** | 332.9 |
| Adjusted backlog | $**8846.6** | $6440.4 | $**8846.6** | $6440.4 |

---

Adjusted order intake included contracts for 14 full-flight simulators (FFSs) sold in the quarter, bringing the FFS order intake for the year of the fiscal year to 56 FFSs.

Fiscal 2025 adjustments were mainly due to the inclusion of SIMCOM's backlog into obligated backlog following the increase of our ownership stake last quarter and foreign exchange movements, partially offset by the revaluation of prior year contracts and contract cancellations.

This quarter's book-to-sales ratio was 1.02x. The ratio for the last 12 months was 1.37x.

18 I CAE Financial Report 2025

------

Management's Discussion and Analysis

**6.2&nbsp;&nbsp;&nbsp;&nbsp; Defense and Security**

**FINANCIAL RESULTS**

---

| | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|
| *(amounts in millions)* | **FY2025** | FY2024 | **Q4-2025** | Q3-2025 | Q2-2025 | Q1-2025 | Q4-2024 |
| Revenue | $**1998.6** | 1847.0 | **547.0** | 470.8 | 495.9 | 484.9 | 425.5 |
| Gross profit | $**416.5** | 286.7 | **118.3** | 105.4 | 101.8 | 91.0 | 10.7 |
| &nbsp;&nbsp;&nbsp;*As a % of revenue* | ***20.8*** | *15.5* | ***21.6*** | *22.4* | *20.5* | *18.8* | *2.5* |
| Operating income (loss) | $**123.9** | (627.4) | **42.5** | 39.2 | 23.4 | 18.8 | (680.0) |
| Adjusted segment operating |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;income (loss) | $**150.5** | 0.8 | **50.4** | 39.2 | 33.1 | 27.8 | (65.7) |
| &nbsp;&nbsp;&nbsp;*As a % of revenue* | ***7.5*** | *—* | ***9.2*** | *8.3* | *6.7* | *5.7* | *—* |
| Depreciation and amortization | $**102.3** | 96.7 | **26.2** | 26.2 | 25.4 | 24.5 | 26.3 |
| Property, plant and equipment |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;expenditures | $**126.5** | 102.3 | **46.4** | 39.2 | 20.0 | 20.9 | 33.3 |
| Intangible asset expenditures | $**21.3** | 26.4 | **3.7** | 4.5 | 7.2 | 5.9 | 8.0 |
| Capital employed | $**1991.3** | 2041.2 | **1991.3** | 2041.8 | 2035.1 | 2110.0 | 2041.2 |
| Adjusted backlog | $**11295.6** | 5743.5 | **11295.6** | 11481.0 | 11378.1 | 10392.6 | 5743.5 |

---

**Revenue was $547.0 million this quarter, $121.5 million or 29% higher compared to the fourth quarter of fiscal 2024**

The increase compared to the fourth quarter of fiscal 2024 was mainly due to last year's impact on revenue of unfavourable profit adjustments on the Legacy Contracts (defined in *Additional information pertaining to Defense and Security contracts)*. The increase was also due to higher revenue on our North American programs and the foreign exchange impact on the translation of our foreign operations.

**Revenue was $1,998.6 million this year, $151.6 million or 8% higher compared to last year**

The increase compared to last year was mainly due to higher revenue on our North American and European programs, last year's impact on revenue of unfavourable profit adjustments on the Legacy Contracts, and the foreign exchange impact on the translation of our foreign operations.

**Gross profit was $118.3 million this quarter, $107.6 million or 1,006% higher compared to the fourth quarter of fiscal 2024**

Gross profit was $118.3 million (21.6% of revenue) this quarter, compared to $10.7 million (2.5% of revenue) in the fourth quarter of fiscal 2024. The increase compared to the fourth quarter of fiscal 2024 was mainly due to last year's impact of unfavourable profit adjustments on the Legacy Contracts of $90.3 million, higher activity on our North American programs and the foreign exchange impact on the translation of our foreign operations.

**Gross profit was $416.5 million this year, $129.8 million or 45% higher compared to last year**

Gross profit was $416.5 million (20.8% of revenue) this year, compared to $286.7 million (15.5% of revenue) last year. The increase compared to last year was mainly due to last year's impact of unfavourable profit adjustments on the Legacy Contracts of $90.3 million, higher activity and profitability on our North American and European programs and the foreign exchange impact on the translation of our foreign operations.

**Adjusted segment operating income was $50.4 million this quarter, $116.1 million higher compared to the fourth quarter of fiscal 2024**

Adjusted segment operating income was $50.4 million (9.2% of revenue) this quarter, compared to an adjusted segment operating loss of $65.7 million in the fourth quarter of fiscal 2024. The increase of $116.1 million compared to the fourth quarter of fiscal 2024 was mainly due to last year's impact of unfavourable profit adjustments on the Legacy Contracts of $90.3 million, lower net research and development expenses, including accelerated government contributions received, higher profitability and activity on our North American programs, higher profitability in our joint ventures, and the foreign exchange impact on the translation of our foreign operations. The increase was partially offset by higher selling, general and administrative expense.

**Adjusted segment operating income was $150.5 million this year, $149.7 million or 18,713% higher compared to last year**

Adjusted segment operating income was $150.5 million (7.5% of revenue) this year, compared to $0.8 million last year. The increase of $149.7 million compared to last year was mainly due to last year's impact of unfavourable profit adjustments on the Legacy Contracts of $90.3 million, higher profitability and activity on our North American and European programs, lower net research and development expenses, including accelerated government contributions received and the recognition of previously unrecognized investment tax credits last quarter, and higher profitability in our joint ventures.

You will find more details on the reconciliation between operating income and adjusted segmented operating income in Section 13.3 *"Non-IFRS measure reconciliations"* of this MD&A.

CAE Financial Report 2025 I 19

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Management's Discussion and Analysis

**Property, plant and equipment expenditures were $46.4 million this quarter and $126.5 million for the year**

Growth capital expenditures were $35.1 million for the quarter and $107.4 million for the year. Maintenance capital expenditures were $11.3 million for the quarter and $19.1 million for the year.

**Capital employed decreased by $50.5 million compared to last quarter and decreased by $49.9 million compared to last year**

The decrease compared to last quarter was mainly due to a lower investment in non-cash working capital, partially offset by higher property, plant and equipment. The lower investment in non-cash working capital primarily resulted from higher accounts payable and accrued liabilities and lower contract assets, partially offset by higher accounts receivable.

The decrease compared to last year was mainly due to a lower investment in non-cash working capital, partially offset by movements in foreign exchange rates and higher property, plant and equipment. The lower investment in non-cash working capital primarily resulted from higher contract liabilities, lower contract assets, higher accounts payable and accrued liabilities and lower accounts receivable.

**Additional information pertaining to Defense and Security contracts**

Within the Defense and Security segment, we have a number of fixed-price contracts which offer certain potential advantages and efficiencies but can also be negatively impacted by adverse changes to general economic conditions, including unforeseen supply chain disruptions, inflationary pressures, availability of labour and execution difficulties. These risks can result in cost overruns and reduced profit margins or losses. For further details, refer to Section 11 *"Business risk and uncertainty"* of this MD&A. While these risks can often be managed or mitigated, there were eight distinct legacy contracts entered into prior to the COVID-19 pandemic that are fixed-price in structure, with little to no provision for cost escalation, and that have been more significantly impacted by these risks (the Legacy Contracts). Although only a small fraction of the current business, they have disproportionately impacted overall Defense and Security profitability. During the year, we completed three of the Legacy Contracts.

For the fourth quarter of fiscal 2025, the ongoing execution of the Legacy Contracts had a dilutive impact of approximately 0.7% on the Defense and Security adjusted segment operating income margin and 0.5% for fiscal 2025. Management is continuing to monitor the remaining Legacy Contracts as a separate group and will take appropriate measures as may be necessary in the future to mitigate the cost pressures associated with them.

**Adjusted backlog up 97% compared to last year**

---

| | | | | |
|:---|:---|:---|:---|:---|
| *(amounts in millions)* | **Q4-2025** | Q4-2024 | **FY2025** | FY2024 |
| Obligated backlog, beginning of period | $**5436.3** | $3128.2 | $**3407.8** | $3406.7 |
| + adjusted order intake | **595.7** | 718.4 | **3986.1** | 1911.9 |
| - revenue | **(547.0)** | (425.5) | **(1998.6)** | (1847.0) |
| + / - adjustments | **78.5** | (13.3) | **168.2** | (63.8) |
| Obligated backlog, end of period | $**5563.5** | $3407.8 | $**5563.5** | $3407.8 |
| Joint venture backlog (all obligated) | **3681.7** | 131.2 | **3681.7** | 131.2 |
| Unfunded backlog and options | **2050.4** | 2204.5 | **2050.4** | 2204.5 |
| Adjusted backlog | $**11295.6** | $5743.5 | $**11295.6** | $5743.5 |

---

Fiscal 2025 adjustments were mainly due to foreign exchange movements and the revaluation of prior year contracts, partially offset by contract cancellations.

This quarter's book-to-sales ratio was 1.09x. The ratio for the last 12 months was 1.99x.

In fiscal 2025, $480.0 million was added to the unfunded backlog and $607.9 million was transferred to obligated backlog.

**Canada's Future Aircrew Training (FAcT) Program**

During the first quarter of fiscal 2025, $4.7 billion was added to joint venture backlog in relation to CAE's share of the award of a 25-year contract for the FAcT program to SkyAlyne, a joint venture between CAE and KF Aerospace, to design, develop, and deliver a comprehensive training and support system, including live flying, simulation, ground school training, and a suite of in-service support functions.

During the second quarter of fiscal 2025, $1.7 billion was added to adjusted order intake following CAE's award of a 25-year subcontract from SkyAlyne to support the FAcT program. As part of this subcontract, CAE will initially develop and deliver a range of simulators and training devices for the various aircraft fleets being procured under the FAcT program. These training devices are expected to be delivered over the next 5 years.

Joint venture backlog is adjusted to exclude any portion of orders that have been directly subcontracted to a CAE subsidiary, which are already reflected in the determination of obligated backlog. Therefore, approximately $850 million was removed from joint venture backlog as a result of the $1.7 billion subcontract awarded to CAE by its joint venture, SkyAlyne, in the second quarter of fiscal 2025.

20 I CAE Financial Report 2025

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Management's Discussion and Analysis

**7.&nbsp;&nbsp;&nbsp;&nbsp; CONSOLIDATED CASH MOVEMENTS AND LIQUIDITY**

We manage liquidity and regularly monitor the factors that could affect it, including:

–Cash generated from operations, including timing of milestone payments and management of working capital;

–Capital expenditure requirements;

–Scheduled repayments of long-term debt obligations, our credit capacity and expected future debt market conditions.

**7.1&nbsp;&nbsp;&nbsp;&nbsp; Consolidated cash movements**

---

| | | | | |
|:---|:---|:---|:---|:---|
| *(amounts in millions)* | **FY2025** | FY2024 | **Q4-2025** | Q4-2024 |
| Cash provided by operating activities\* | $**699.4** | $438.8 | $**233.8** | $46.7 |
| Changes in non-cash working capital | **197.1** | 128.1 | **88.9** | 168.5 |
| Net cash provided by operating activities | $**896.5** | $566.9 | $**322.7** | $215.2 |
| Maintenance capital expenditures<sup>6</sup> | **(84.2)** | (102.5) | **(27.6)** | (23.2) |
| Intangible assets expenditures excluding capitalized development costs | **(20.9)** | (33.4) | **(3.8)** | (7.6) |
| Proceeds from the disposal of property, plant and equipment | **19.4** | 4.0 | **16.1** | 0.3 |
| Net payments to equity accounted investees | **(19.0)** | (43.9) | **(14.0)** | (3.4) |
| Dividends received from equity accounted investees | **28.7** | 37.1 | **—** | 6.8 |
| Other investing activities | **(6.6)** | (10.2) | **(4.0)** | (0.8) |
| Impact of discontinued operations | **—** | 0.2 | **—** | 3.8 |
| Free cash flow<sup>6</sup> | $**813.9** | $418.2 | $**289.4** | $191.1 |
| Growth capital expenditures<sup>6</sup>  | **(272.0)** | (227.3) | **(81.4)** | (68.5) |
| Capitalized development costs | **(67.0)** | (114.5) | **(13.8)** | (34.5) |
| Net proceeds from the issuance of common shares | **67.1** | 7.8 | **16.9** | 0.2 |
| Repurchase and cancellation of common shares | **(21.3)** |  | **—** |  |
| Business combinations, net of cash acquired | **(308.0)** |  | **—** |  |
| Other cash movements, net | **(3.6)** |  | **(0.1)** | (2.2) |
| Proceeds from disposal of discontinued operations | **—** | 275.3 | **—** | 275.3 |
| Effect of foreign exchange rate changes on cash and cash equivalents | **19.2** | (13.7) | **6.7** | 1.3 |
| Impact of discontinued operations | **—** | (0.2) | **—** | (3.8) |
| Net change in cash before proceeds and repayment of long-term debt | $**228.3** | $345.6 | $**217.7** | $358.9 |
| \* before changes in non-cash working capital |  |  |  |  |

---

**Net cash from operating activities of $322.7 million this quarter**

Net cash from operating activities was $107.5 million higher compared to the fourth quarter of fiscal 2024. The increase was mainly due to higher net income adjusted for non-cash items, including last year's impairment of goodwill and other non-financial assets and deferred income taxes, partially offset by a lower contribution from non-cash working capital.

**Net cash from operating activities of $896.5 million this year**

Net cash from operating activities was $329.6 million higher than last year. The increase was mainly due to higher net income adjusted for non-cash items, including last year's impairment of goodwill and other non-financial assets and deferred income taxes, and a higher contribution from non-cash working capital.

**Free cash flow of $289.4 million this quarter**

Free cash flow was $98.3 million higher compared to the fourth quarter of fiscal 2024. The increase was mainly due to higher net cash from operating activities.

**Free cash flow of $813.9 million this year**

Free cash flow was $395.7 million higher compared to last year. The increase was mainly due to higher net cash from operating activities, lower payments to equity accounted investees and lower maintenance capital expenditures.

<sup>6</sup> Non-IFRS financial measure, non-IFRS ratio, capital management measure, or supplementary financial measure. Refer to Section 13.1 "*Non-IFRS and other financial measure definitions"* and Section 13.3 *"Non-IFRS measure reconciliations*" of this MD&A for the definitions and reconciliations of these measures to the most directly comparable measure under IFRS.

CAE Financial Report 2025 I 21

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Management's Discussion and Analysis

**7.2&nbsp;&nbsp;&nbsp;&nbsp; Sources of liquidity**

We have a committed unsecured revolving credit facility at floating rates, provided by a syndicate of lenders. In September 2024, we extended the maturity date of this facility until September 2028. We and some of our subsidiaries can borrow funds directly from this credit facility to cover operating and general corporate expenses and to issue letters of credit up to a maximum of US$400.0 million (2024 – US$200.0 million).

The total amount available through this revolving credit facility as at March 31, 2025 was US$1.0 billion (2024 – US$1.0 billion). There was no amount drawn under the facility as at March 31, 2025 (2024 – US$22.1 million), and US$14.1 million used for letters of credit (2024 – US$18.2 million). The applicable interest rate on this revolving credit facility is variable, based on the bank's prime rate, bankers' acceptance rates or SOFR plus a margin based on CAE's credit rating.

We manage several bilateral facilities for the issuance of performance bonds, advance payment guarantees or similar instruments. Some of these facilities are covered by an unsecured Export Development Canada Performance Security Guarantee (PSG) for up to US$225.0 million (2024 – US$225.0 million). As at March 31, 2025, the total outstanding for these instruments under the PSG was $211.8 million (2024 – $194.4 million).

We manage an uncommitted receivable purchase facility of up to US$400.0 million (2024 – US$400.0 million), in which we sell interests in certain of our accounts receivable to third parties for cash consideration. As at March 31, 2025, the carrying amount of the original accounts receivable sold to financial institutions pursuant to the receivable purchase facility totalled $453.6 million (2024 – $303.7 million) of which $39.9 million (2024 – $44.9 million), corresponding to the extent of our continuing involvement, remains in accounts receivable with a corresponding liability included in accounts payable and accrued liabilities.

We have established supplier finance arrangements offered by some of our subsidiaries to certain key suppliers. Under these arrangements, we have the ability to submit supplier invoices, at our own discretion, to our financial institution who pays the supplier and allows us to extend our payment terms by 55 to 85 days. We pay the invoice amount and a service fee to the financial institution in accordance with the extended due dates. As at March 31, 2025, the carrying amount of accounts payable trade for this arrangement totalled $73.3 million.

We have certain debt agreements which require the maintenance of standard financial covenants. As at March 31, 2025, we are compliant with all our financial covenants.

The following table summarizes the long-term debt:

---

| | | |
|:---|:---|:---|
| | **As at March 31** | As at March 31 |
| *(amounts in millions)* | **2025** | 2024 |
| Total long-term debt | $**3470.4** | $3074.3 |
| Less: |  |  |
| Current portion of long-term debt | **277.9** | 253.7 |
| Current portion of lease liabilities | **121.1** | 55.2 |
| Long-term portion of long-term debt | $**3071.4** | $2765.4 |

---

**Credit rating**

On November 5, 2024, S&P Global Ratings affirmed CAE's BBB- credit rating but adjusted the outlook from 'stable' to 'negative'.

**Term loans**

In December 2024, we entered into an unsecured term loan agreement with a syndicated group of banks amounting to US$200.0 million maturing in June 2026, bearing interest at a variable rate. Proceeds from this term loan have been principally used to repay borrowings on our revolving credit facility that were used to finance the SIMCOM transaction.

**Unsecured senior notes**

In December 2024, we repaid unsecured senior notes of US$127.0 million.

**Pension obligations**

We maintain defined benefit and defined contribution pension plans. Our defined benefit pension plans are considered sufficiently funded. We expect to pay employer contributions and benefits of $24.6 million in fiscal 2026.

**7.3&nbsp;&nbsp;&nbsp;&nbsp; Government participation**

We have agreements with various governments whereby the latter contribute a portion of the cost, based on expenditures incurred by CAE, of certain R&D programs for modeling, simulation and training services technology.

You will find more details in Note 28 of our consolidated financial statements.

22 I CAE Financial Report 2025

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Management's Discussion and Analysis

**7.4&nbsp;&nbsp;&nbsp;&nbsp; Contingencies and commitments**

**Contingencies**

From time to time, CAE is involved in legal proceedings, audits, litigations and claims arising in the ordinary course of our business. We operate in a highly regulated environment across many jurisdictions and is subject to, without limitation, laws and regulations relating to import-export controls, trade sanctions, anti-corruption, national security and aviation safety of each country. In addition, contracts with government agencies are subject to procurement regulations and other specific legal requirements. We are also required to comply with tax laws and regulations of any country in which we operate.

We are subject to investigations and audits from various government and regulatory agencies. In addition, CAE may identify, investigate, remediate and voluntarily disclose potential non-compliance with those laws and regulations. As a result, we can be subject to potential liabilities associated with those matters. Although it is possible that liabilities may be incurred in instances for which no accruals have been made, we do not believe that the ultimate outcome of these matters will have a material impact on our consolidated financial statements.

**Dispute relating to final price adjustments for the sale of CAE's Healthcare business**

During the fourth quarter of fiscal 2024, we closed the sale of our Healthcare business to Madison Industries. The total consideration is subject to post-closing price adjustments, including on account of working capital. At the time of issuance of the consolidated financial statements, we are engaged in a dispute with Madison Industries, which is claiming up to approximately $60 million in final price adjustments.

While there can be no assurance whether any amount will be payable as a result of the dispute, no amount has been recognized in our financial statements for any potential losses arising from this dispute as at March 31, 2025, as we believe that there are strong grounds for defence and will vigorously defend our position.

**Class action proceeding**

On July 16, 2024, the Company was served with an Application for authorization to bring an action pursuant to Section 225.4 of the *Securities Act* (Québec) and application for authorization to institute a class action before the Superior Court of Québec in the district of Montréal against the Company and certain of the Company's officers. The class action, if authorized, would be brought on behalf of purchasers of the Company's common shares and is based upon allegations that the defendants made false and/or misleading statements to the public and seeks unspecified damages.

The class action requires authorization from the Court before it can move forward. Until it is authorized, there are no monetary claims pending against the defendants in the context of this Court proceeding. The defendants have strong legal defences to this Court proceeding and intend to defend the case vigorously. Based on the preliminary nature of the proceeding and the inherent uncertainty of litigation, it is not possible to predict the final outcome or the timing of this Court proceeding or to determine the amount of any potential losses resulting therefrom, if any. As such, no amounts have been provisioned in the Company's financial statements with respect to the proceeding.

**Commitments**

We enter into contractual obligations and commercial commitments in the normal course of our business. The table below represents our contractual obligations and commitments for the next five fiscal years and thereafter:

---

| | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|
| *(amounts in millions)* | **2026** | **2027** | **2028** | **2029** | **2030** | **Thereafter** | **Total** |
| Long-term debt (excluding interest) | $277.9 | $469.3 | $140.6 | $654.5 | $121.7 | $1014.3 | $2678.3 |
| Lease liabilities | 170.7 | 98.9 | 90.3 | 101.8 | 69.9 | 705.6 | 1237.2 |
| Purchase commitments | 411.8 | 149.7 | 67.3 | 32.5 | 12.6 | 23.6 | 697.5 |
|  | $**860.4** | $**717.9** | $**298.2** | $**788.8** | $**204.2** | $**1743.5** | $**4613.0** |

---

We have purchase commitments related to agreements that are enforceable and legally binding. Most are agreements with subcontractors to provide services for long-term contracts that we have with our clients. The terms of the agreements are significant because they set out obligations to buy goods or services in fixed or minimum amounts, at fixed, minimum or variable prices and at various points in time.

As at March 31, 2025, we had other long-term liabilities that are not included in the table above such as employee benefits obligations and deferred tax liabilities. CAE's cash obligation in respect of the employee benefits obligations depends on various elements including market returns, actuarial gains and losses and interest rates. We did not include deferred tax liabilities since future payments of income taxes depend on the amount of taxable earnings and on whether there are tax loss carry-forwards available.

CAE Financial Report 2025 I 23

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Management's Discussion and Analysis

**8.&nbsp;&nbsp;&nbsp;&nbsp; CONSOLIDATED FINANCIAL POSITION**

**8.1&nbsp;&nbsp;&nbsp;&nbsp; Consolidated capital employed**

---

| | | |
|:---|:---|:---|
|  | **As at March 31** | As at March 31 |
| *(amounts in millions)* | **2025** | 2024 |
| **Use of capital**<sup>7</sup>**:** |  |  |
| Current assets | $**2143.6** | $2006.5 |
| Less: cash and cash equivalents | **(293.7)** | (160.1) |
| Current liabilities | **(2686.5)** | (2358.4) |
| Less: current portion of long-term debt | **399.0** | 308.9 |
| Non-cash working capital<sup>7</sup> | $**(437.6)** | $(203.1) |
| Property, plant and equipment | **2989.5** | 2515.6 |
| Intangible assets | **3871.0** | 3271.9 |
| Other long-term assets | **2209.7** | 2040.1 |
| Other long-term liabilities | **(479.9)** | (407.7) |
| Capital employed | $**8152.7** | $7216.8 |
| **Source of capital**<sup>7</sup>**:** |  |  |
| Current portion of long-term debt | $**399.0** | $308.9 |
| Long-term debt | **3071.4** | 2765.4 |
| Less: cash and cash equivalents | **(293.7)** | (160.1) |
| Net debt<sup>7</sup> | $**3176.7** | $2914.2 |
| Equity attributable to equity holders of the Company | **4891.5** | 4224.9 |
| Non-controlling interests | **84.5** | 77.7 |
| Capital employed | $**8152.7** | $7216.8 |

---

**Adjusted return on capital employed (ROCE)**<sup>7</sup>

Adjusted ROCE was 7.2% this quarter, which compares to 5.9% in the fourth quarter of last year and 5.7% last quarter.

**Non-cash working capital decreased by $234.5 million compared to last year**

The decrease was mainly due to higher accounts payable and accrued liabilities, higher contract liabilities and lower contract assets.

**Property, plant and equipment increased by $473.9 million compared to last year**

The increase was mainly due to movements in foreign exchange rates, capital expenditures in excess of depreciation and the consolidation of SIMCOM following the increase of our ownership stake last quarter.

**Intangible assets increased by $599.1 million compared to last year**

The increase was mainly due to the consolidation of SIMCOM following the increase of our ownership stake last quarter and movements in foreign exchange rates.

**Other long-term assets increased by $169.6 million compared to last year** 

The increase was mainly due to higher right-of-use assets in support of training network expansions, movements in foreign exchange rates and the consolidation of SIMCOM following the increase of our ownership stake last quarter, resulting in an increase in right-of-use assets and a decrease in investment in equity accounted investees. The increase was partially offset by lower employee benefits assets.

**Other long-term liabilities increased by $72.2 million compared to last year**

The increase was mainly due to higher employee benefits obligations, resulting primarily from revised actuarial experience assumptions and a decrease in the discount rate used to determine our defined benefit pension plan obligations, and higher contract liabilities.

**Total debt increased by $396.1 million compared to last year**

The increase in total debt was mainly due to the incremental borrowings from the SIMCOM transaction, including the consolidation of SIMCOM's total debt, following the increase of our ownership stake last quarter, additions and remeasurements of lease liabilities and movements in foreign exchange rates, partially offset by reduced level of borrowing aligned with our ongoing deleveraging objectives.

<sup>7</sup> Non-IFRS financial measure, non-IFRS ratio, capital management measure, or supplementary financial measure. Refer to Section 13.1 "*Non-IFRS and other financial measure definitions"* and Section 13.3 *"Non-IFRS measure reconciliations*" of this MD&A for the definitions and reconciliations of these measures to the most directly comparable measure under IFRS.

24 I CAE Financial Report 2025

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Management's Discussion and Analysis

**Net debt**<sup>8</sup> **increased by $262.5 million compared to last year**

---

| | | |
|:---|:---|:---|
| *(amounts in millions)* | **FY2025** | FY2024 |
| Net debt, beginning of period | $**2914.2** | $3032.5 |
| Impact of cash movements on net debt |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;(see table in the consolidated cash movements section 7.1) | **(228.3)** | (345.6) |
| Effect of foreign exchange rate changes on long-term debt | **146.1** | (6.3) |
| Impact from business combinations | **158.5** |  |
| Additions and remeasurements of lease liabilities | **153.4** | 177.0 |
| Other | **32.8** | 68.7 |
| Impact of discontinued operations | **—** | (12.1) |
| Change in net debt during the period | $**262.5** | $(118.3) |
| Net debt, end of period | $**3176.7** | $2914.2 |
|  | **As at March 31** | As at March 31 |
| **Liquidity measures** | **2025** | 2024 |
| Net debt-to-capital<sup>8</sup>  | **39.0** | 40.4 |
| Net debt-to-EBITDA<sup>8</sup> | **2.78** | 15.90 |
| Net debt-to-adjusted EBITDA<sup>8</sup> | **2.77** | 3.17 |

---

**Total equity increased by $673.4 million this year**

The increase compared to last year was mainly due to net income realized this year, changes in other comprehensive income, driven by foreign currency translation adjustments, and higher stock options exercised.

*Outstanding share data*

Our articles of incorporation authorize the issue of an unlimited number of common shares and an unlimited number of preferred shares issued in series. We had a total of 320,265,108 common shares issued and outstanding as at March 31, 2025 with total share capital of $2,327.1 million. In addition, we had 3,984,148 options outstanding. As at April 30, 2025, we had a total of 320,267,770 common shares issued and outstanding and 3,975,488 options outstanding.

*Repurchase and cancellation of common shares*

On May 27, 2024, we received regulatory approval for a normal course issuer bid program (NCIB) to purchase, for cancellation, up to 15,932,187 of our common shares. The NCIB began on May 30, 2024 and will end on May 29, 2025 or on such earlier date when the Company completes its purchases or elects to terminate the NCIB. These purchases may be made through the facilities of the TSX or the NYSE, or in such other manner as may be permitted under applicable stock exchange rules and securities laws, at the prevailing market price at the time of acquisition, plus brokerage fees. All common shares purchased pursuant to the NCIB will be cancelled.

During the three months ended March 31, 2025, no common shares were repurchased under the NCIB. During the year, we repurchased and cancelled a total of 856,230 common shares under the NCIB, at a weighted average price of $24.85 per common share, for a total consideration of $21.3 million.

**8.2&nbsp;&nbsp;&nbsp;&nbsp; Off balance sheet arrangements**

In the normal course of business, we manage an uncommitted receivable purchase facility in which we sell interests in certain of our accounts receivable to third parties for cash consideration with limited recourse to CAE.

You will find more details about our financial assets program in Section 7.2 *"Sources of liquidity".*

<sup>8</sup> Non-IFRS financial measure, non-IFRS ratio, capital management measure, or supplementary financial measure. Refer to Section 13.1 "*Non-IFRS and other financial measure definitions"* and Section 13.3 *"Non-IFRS measure reconciliations*" of this MD&A for the definitions and reconciliations of these measures to the most directly comparable measure under IFRS.

CAE Financial Report 2025 I 25

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Management's Discussion and Analysis

**8.3&nbsp;&nbsp;&nbsp;&nbsp; Financial instruments**

We are exposed to various financial risks in the normal course of business. We enter into forward contracts and swap agreements to manage our exposure to fluctuations in foreign exchange rates, interest rates and share price which have an effect on our share-based payments costs. We formally assess, both at inception of the hedge relationship and on an ongoing basis, whether the derivatives we use in hedging transactions are highly effective in offsetting changes in cash flows of hedged items in relation to the hedged risk. We enter into these transactions to reduce our exposure to risk and volatility, and not for trading or speculative purposes. We only enter into contracts with counterparties that are of high credit quality.

**Classification of financial instruments**

We have made the following classifications for our financial instruments:

*Financial assets:*

–Cash and cash equivalents, restricted cash and derivative instruments not designated as hedging instrument in a hedge relationship, are classified at fair value through profit and loss (FVTPL);

–Accounts receivable, non-current receivables, net investment in finance leases and advances are classified at amortized cost, except for those that are acquired for the purpose of selling or repurchasing in the near term and classified as held for trading which are measured at FVTPL;

–Equity investments are classified at fair value through OCI (FVOCI).

*Financial liabilities:*

–Accounts payable and accrued liabilities, long-term debt, including interest payable, as well as lease liabilities and royalty obligations are classified at amortized cost;

–Contingent consideration arising on business combinations and derivative instruments not designated as hedging instruments in a hedge relationship are classified at FVTPL.

**Fair value of financial instruments**

The fair value of a financial instrument is determined by reference to the available market information at the reporting date. When no active market exists for a financial instrument, we determine the fair value of that instrument based on valuation methodologies as discussed below. In determining assumptions required under a valuation model, we primarily use external, readily observable market data inputs. Assumptions or inputs that are not based on observable market data incorporate our best estimates of market participant assumptions. Counterparty credit risk and our own credit risk are taken into account in estimating the fair value of financial assets and financial liabilities.

The following assumptions and valuation methodologies have been used to measure the fair value of financial instruments:

–The fair value of cash and cash equivalents, accounts receivable and accounts payable and accrued liabilities approximate their carrying values due to their short-term maturities;

–The fair value of derivative instruments, which include forward contracts, swap agreements and embedded derivatives accounted for separately and is calculated as the present value of the estimated future cash flows using an appropriate interest rate yield curve and forward foreign exchange rate. Assumptions are based on market conditions prevailing at each reporting date. The fair value of derivative instruments reflect the estimated amounts that we would receive or pay to settle the contracts at the reporting date;

–The fair value of the equity investments, which does not have a readily available market value, is estimated using a discounted cash flow model, which includes some assumptions that are not based on observable market prices or rates;

–The fair value of non-current receivables is estimated based on discounted cash flows using current interest rates for instruments with similar risks and remaining maturities;

–The fair value of long-term debts, royalties obligations and other non-current liabilities are estimated based on discounted cash flows using current interest rates for instruments with similar risks and remaining maturities.

A description of the fair value hierarchy is discussed in Note 30 of our consolidated financial statements.

**Financial risk management**

Due to the nature of the activities that we carry out and as a result of holding financial instruments, we are exposed to credit risk, liquidity risk and market risk, including foreign currency risk and interest rate risk. Our exposure to credit risk, liquidity risk and market risk is managed within risk management parameters documented in corporate policies. These risk management parameters remain unchanged since the previous period, unless otherwise indicated.

***Credit risk***

Credit risk is defined as our exposure to a financial loss if a debtor fails to meet its obligations in accordance with the terms and conditions of its arrangements with CAE. We are exposed to credit risk on our accounts receivable and certain other assets through our normal commercial activities. We are also exposed to credit risk through our normal treasury activities on our cash and cash equivalents and derivative financial assets. Credit risks arising from our normal commercial activities are managed with regards to customer credit risk.

26 I CAE Financial Report 2025

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Management's Discussion and Analysis

Our customers are mainly established companies, some of which have publicly available credit ratings, as well as government agencies, which facilitates risk assessment and monitoring. In addition, we typically receive substantial non-refundable advance payments for contracts with customers. We closely monitor our exposure to major airline companies in order to mitigate our risk to the extent possible. Furthermore, our trade receivables are held with a wide range of commercial and government organizations and agencies. As well, our credit exposure is further reduced by the sale of certain of our accounts receivable to third-party financial institutions for cash consideration on a limited recourse basis (receivable purchase facility). We do not hold any collateral as security. The credit risk on cash and cash equivalents is mitigated by the fact that they are mainly in place with a diverse group of major North American and European financial institutions.

We are exposed to credit risk in the event of non-performance by counterparties to our derivative financial instruments. We use several measures to minimize this exposure. First, we enter into contracts with counterparties that are of high credit quality. We signed *International Swaps & Derivatives Association, Inc*. *(ISDA)* Master Agreements with all the counterparties with whom we trade derivative financial instruments. These agreements make it possible to offset when a contracting party defaults on the agreement, for each of the transactions covered by the agreement and in force at the time of default. Also, collateral or other security to support derivative financial instruments subject to credit risk can be requested by CAE or our counterparties (or both parties, if need be) when the net balance of gains and losses on each transaction exceeds a threshold defined in the ISDA Master Agreement. Finally, we monitor the credit standing of counterparties on a regular basis to help minimize credit risk exposure.

The carrying amounts presented in Note 11 and Note 30 of our consolidated financial statements represent the maximum exposure to credit risk for each respective financial asset as at the relevant dates. A summary of our exposure to credit risk and credit loss allowances for accounts receivable and contract assets by segments is included in Note 32 of our consolidated financial statements.

***Client concentration risk***

For the year ended March 31, 2025, contracts with the U.S. federal government and its various agencies included in the Defense and Security segment accounted for 21% (2024 – 21%) of consolidated revenue.

***Liquidity risk***

Liquidity risk is defined as the potential risk that we cannot meet our cash obligations as they become due. We manage this risk by establishing cash forecasts, as well as long-term operating and strategic plans. The management of consolidated liquidity requires a regular monitoring of expected cash inflows and outflows which is achieved through a forecast of our consolidated liquidity position, for efficient use of cash resources. Liquidity adequacy is assessed in view of seasonal needs, stress-test results, growth requirements and capital expenditures, and the maturity profile of indebtedness, including availability of credit facilities, working capital requirements, compliance with financial covenants and the funding of financial commitments. We manage our liquidity risk to maintain sufficient liquid financial resources to fund our operations and meet our commitments and obligations. We also regularly monitor any financing opportunities to optimize our capital structure and maintain appropriate financial flexibility.

***Market risk***

Market risk is defined as our exposure to a gain or a loss in the value of our financial instruments as a result of changes in market prices, whether those changes are caused by factors specific to the individual financial instruments or its issuer, or factors affecting all similar financial instruments traded in the market. We are mainly exposed to foreign currency risk and interest rate risk.

We use derivative instruments to manage market risk against the volatility in foreign exchange rates, interest rates and share-based payments in order to minimize their impact on our results and financial position. Our policy is not to utilize any derivative financial instruments for trading or speculative purposes.

*Foreign currency risk*

Foreign currency risk is defined as our exposure to a gain or a loss in the value of our financial instruments as a result of fluctuations in foreign exchange rates. We are exposed to foreign exchange rate variability primarily in relation to certain sale commitments, expected purchase transactions and debt denominated in a foreign currency, as well as on our net investment from our foreign operations which have functional currencies other than the Canadian dollar (in particular the U.S. dollar and Euro). In addition, these operations have exposures to foreign exchange rates primarily through cash and cash equivalents and other working capital accounts denominated in currencies other than their functional currencies.

We mitigate foreign currency risks by having our foreign operations transact in their functional currency for material procurement, sale contracts and financing activities.

We use forward foreign currency contracts and foreign currency swap agreements to manage our exposure from transactions in foreign currencies and to hedge our net investment in U.S. entities. These transactions include forecasted transactions and firm commitments denominated in foreign currencies. Our foreign currency hedging programs are typically unaffected by changes in market conditions, as related derivative financial instruments are generally held until their maturity, consistent with the objective to fix currency rates on the hedged item.

*Hedge of net investments in foreign operations*

As at March 31, 2025, we have designated a portion of our unsecured senior notes, term loans, revolving credit facility, fixed to fixed cross currency principal and interest rate swap agreements and foreign currency contracts as a hedge of our net investments in U.S. entities. Gains or losses on the translation of the designated portion of these USD denominated long-term debts are recognized in OCI to offset any foreign exchange gains or losses on translation of the financial statements of those U.S. entities.

CAE Financial Report 2025 I 27

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Management's Discussion and Analysis

*Interest rate risk*

Interest rate risk is defined as our exposure to a gain or a loss to the value of our financial instruments as a result of fluctuations in interest rates. We bear some interest rate fluctuation risk on our floating rate long-term debt and some fair value risk on our fixed interest long-term debt. We mainly manage interest rate risk by fixing project-specific floating rate debt in order to reduce cash flow variability. We have floating rate debts through our revolving credit facility and other specific floating rate debts. A mix of fixed and floating interest rate debt is sought to reduce the net impact of fluctuating interest rates. Derivative financial instruments used to manage interest rate exposures are mainly interest rate swap agreements. As at March 31, 2025, 86% (2024 – 93%) of the long-term debt bears fixed interest rates.

Our interest rate hedging programs are typically unaffected by changes in market conditions, as related derivative financial instruments are generally held until their maturity to establish asset and liability management matching, consistent with the objective to reduce risks arising from interest rate movements.

*Hedge of share-based payments expense*

We have entered into equity swap agreements with major Canadian financial institutions to reduce our exposure to fluctuations in our share price relating to the cash-settled share-based payments plans. Pursuant to the agreement, we receive the economic benefit of dividends and share price appreciation while providing payments to the financial institutions for the institution's cost of funds and any share price depreciation. The net effect of the equity swap agreements partly offset movements in our share price impacting the cost of the cash-settled share-based payments plans.

A sensitivity analysis for foreign currency risk and interest rate risk is included in Note 32 of our consolidated financial statements.

***Indemnifications***

In certain transactions involving business dispositions or sales of assets, we may provide indemnification to the counterparties with respect to future claims for certain unknown liabilities that exist, or arise from events occurring, prior to the transaction date, including liabilities for taxes, legal matters, environmental exposures, product liability, and other obligations. The terms of the indemnifications vary in duration and scope. While some of the indemnifications specify a maximum potential exposure and/or a termination date, many do not.

We believe that, other than liabilities already accrued, the maximum potential future payments that we could be required to make under these indemnifications are not determinable at this time, as any future payments would be dependent on the type and extent of the related claims, and all available defences, including insurance, which cannot be estimated. However, historically, costs incurred to settle claims related to these indemnifications have not been material our consolidated financial position, net income or cash flows.

28 I CAE Financial Report 2025

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Management's Discussion and Analysis

**9.&nbsp;&nbsp;&nbsp;&nbsp; BUSINESS COMBINATIONS**

**SIMCOM Aviation Training**

On November 5, 2024, we increased our ownership stake in our existing SIMCOM Aviation Training (SIMCOM) joint venture by purchasing an additional interest from Volo Sicuro for a cash consideration of $322.8 million (US$232.3 million), subject to customary adjustments.

As a result, we obtained control over SIMCOM's four training centres located in the U.S. providing pilot training across multiple business aviation aircraft platforms. Additionally, CAE and SIMCOM have extended their current exclusive business aviation training services agreement with Flexjet, LLC, a related party of Volo Sicuro, and its affiliates by five years, bringing the remaining exclusivity period to 15 years.

Prior to acquiring control, our 50% ownership in SIMCOM was accounted for using the equity method. The change in control provided for the remeasurement of the previously held equity interest in SIMCOM to its fair value. The fair value of our previously held equity interest in SIMCOM was determined by applying a non-controlling discount to the consideration paid on the acquisition date and was valued at $230.6 million. As a result, we recorded a net remeasurement gain of $72.6 million.

As at March 31, 2025, the determination of the fair value of the net assets acquired and liabilities assumed arising from the SIMCOM acquisition are as follows:

---

| | |
|:---|:---|
| | **SIMCOM** |
| Current assets, excluding cash on hand | $**20.4** |
| Current liabilities | **(29.4)** |
| Property, plant and equipment | **135.5** |
| Right-of-use assets | **128.4** |
| Intangible assets | **504.8** |
| Deferred tax | **(23.7)** |
| Long-term debt, including current portion | **(158.5)** |
| Non-current liabilities | **(16.5)** |
| **Fair value of net assets acquired, excluding cash acquired** | $**561.0** |
| Cash acquired | **14.8** |
| **Total purchase consideration** | $**575.8** |
| Settlement of pre-existing balances with SIMCOM | **(22.4)** |
| Fair value of the Company's previously held equity interest in SIMCOM | **(230.6)** |
| **Total cash consideration paid on acquisition date** | $**322.8** |

---

The fair value of the acquired intangible assets amounts to $504.8 million and consists of goodwill of $379.6 million (non-deductible for tax purposes), customer relationships of $124.5 million and other intangibles of $0.7 million. The goodwill arising from this acquisition is attributable to the expansion of CAE's customer installed base of business aviation flight simulators, market capacity and expected synergies from combining operations.

The net assets acquired, including intangible assets, of SIMCOM are included in the Civil Aviation segment.

The purchase price allocation is final as at March 31, 2025.

CAE Financial Report 2025 I 29

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Management's Discussion and Analysis

**10.&nbsp;&nbsp;&nbsp;&nbsp; DISCONTINUED OPERATIONS**

During the fourth quarter of fiscal 2024, we closed the sale of our Healthcare business to Madison Industries. At the time of issuance of the consolidated financial statements, we are engaged in a dispute with Madison Industries, which is claiming up to approximately $60 million in final price adjustments. For additional information, refer to Section 7.4 "*Contingencies and commitments"* of this MD&A.

For the year ended March 31, 2024, the after-tax gain on disposal of the Healthcare business is as follows:

---

| | |
|:---|:---|
| Consideration received in cash | $275.3 |
| Short-term holdback receivable | 8.0 |
| Long-term non-contingent receivable | 10.1 |
| **Total consideration** | $**293.4** |
| Net assets disposed | $269.6 |
| Impairment of non-financial assets of the disposal group excluded from the sale | 7.8 |
| Reclassification to income of gains on foreign currency exchange differences from OCI | (2.5) |
| Transaction fees and other costs | 12.2 |
| Gain on disposal of discontinued operations before income taxes | $6.3 |
| Income tax recovery | (10.2) |
| **After-tax gain on disposal of discontinued operations** | $**16.5** |

---

The net income and other comprehensive loss from discontinued operations are as follows:

---

| | | | | |
|:---|:---|:---|:---|:---|
| | **FY2025** | FY2024 | **Q4-2025** | Q4-2024 |
| Revenue | $**—** | $131.7 | $**—** | $14.8 |
| Expenses | **—** | 132.7 | **—** | 20.0 |
| Operating loss | $**—** | $(1.0) | $**—** | $(5.2) |
| Finance expense | **—** | 3.6 | **—** | 0.6 |
| Loss before income taxes | $**—** | $(4.6) | $**—** | $(5.8) |
| Income tax recovery | **—** | (9.4) | **—** | (9.8) |
| **Net income from discontinued operations before after-tax** |  |  |  |  |
| &nbsp;&nbsp;&nbsp;**gain on disposal** | $**—** | $4.8 | $**—** | $4.0 |
| After-tax gain on disposal of discontinued operations | **—** | 16.5 | **—** | 16.5 |
| **Net income from discontinued operations** | $**—** | $21.3 | $**—** | $20.5 |

---

For the year ended March 31, 2024, depreciation and amortization of $6.1 million is included in the net income from discontinued operations.

---

| | | | | |
|:---|:---|:---|:---|:---|
| | **FY2025** | FY2024 | **Q4-2025** | Q4-2024 |
| Foreign currency exchange differences on translation of foreign operations | $**—** | $0.9 | $**—** | $2.6 |
| Reclassification to income of gains on foreign currency |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;exchange differences | **—** | (2.5) | **—** | (2.5) |
| Income taxes | **—** | (5.4) | **—** | (5.4) |
| **Other comprehensive loss from discontinued operations** | $**—** | $(7.0) | $**—** | $(5.3) |

---

No amount of net income and other comprehensive loss from discontinued operations are attributable to non-controlling interest.

30 I CAE Financial Report 2025

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Management's Discussion and Analysis

The major classes of assets and liabilities disposed of were as follows:

---

| | |
|:---|:---|
| Current assets | $112.3 |
| Property, plant and equipment | 6.9 |
| Right-of-use assets | 9.8 |
| Intangible assets, including goodwill of $120.4 million | 168.0 |
| Deferred tax assets | 26.5 |
| Other non-current assets | 14.5 |
| **Assets disposed** | $**338.0** |
| Current liabilities | $37.1 |
| Long-term debt (lease liabilities), including current portion | 12.2 |
| Deferred tax liabilities | 1.4 |
| Other non-current liabilities | 17.7 |
| **Liabilities disposed** | $**68.4** |
| **Net assets disposed** | $**269.6** |

---

As a result of the closing of the sale, royalty obligations related to the discontinued operations of $36.9 million previously presented as liabilities held for sale were converted into R&D obligations as shown in Note 21 of our consolidated financial statements.

The net cash flows from discontinued operations are as follows:

---

| | | |
|:---|:---|:---|
| | **FY2025** | FY2024 |
| Operating activities | $**—** | $0.4 |
| Investing activities | **—** | 261.6 |
| Financing activities | **—** | (1.3) |
| **Net cash flows provided by discontinued operations** | $**—** | $260.7 |

---

CAE Financial Report 2025 I 31

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Management's Discussion and Analysis

**11.&nbsp;&nbsp;&nbsp;&nbsp; BUSINESS RISK AND UNCERTAINTY**

**Risk strategy and philosophy**

We operate in several industry segments which present a variety of risks and uncertainties. Our risk management strategy is forward-looking and aligned with our business strategy. CAE's risk-taking activities are undertaken with the understanding that risk-taking and effective management of risks are necessary and integral to achieving strategic objectives and managing business operations.

When making decisions about risk-taking and risk management, we place the highest priority on the following objectives:

–To protect the health and safety of our employees, customers, stakeholders and the general public;

–To protect our reputation and brand;

–To maintain financial strength;

–To effectively and prudently deploy capital invested by our shareholders; and

–To safeguard the expectations we have established with our shareholders, customers and creditors.

The risks and uncertainties described below are risks that we currently believe could materially and adversely affect our business, financial condition and results of operation. These are not necessarily the only risks we face; additional risks and uncertainties that are presently unknown to us or that we may currently deem immaterial may adversely affect our business. One should carefully consider the following risk factors, in addition to the other information contained herein, before deciding to purchase CAE securities.

**Risk governance**

We maintain strong risk governance practices. Management and the Board discuss the critical risks facing our business quarterly, annually during the strategic planning and budgeting processes, and on an ad hoc basis, as deemed necessary. To mitigate the risks that may impact our business or future performance, management has established an enterprise risk management (ERM) policy and a framework that provides a structured approach to identify, assess, manage, monitor and report on risks.

This framework relies on the Three Lines Model where the business segments, the risk management function and our internal audit function work in collaboration to manage critical risks and continuously improve the risk management process, as presented below.

**CAE's ERM Framework**

![ermframework.jpg](ermframework.jpg)

Management develops and deploys risk strategies that align with our strategic objectives and business processes. Management continuously reviews the evolution of the critical risks facing our business and the Board oversees the risk management process and validates it through procedures performed by our internal auditors, when it deems necessary.

**Risk approach and implementation**

CAE promotes a strong risk culture that allows individuals and groups to make better risk-informed decisions aligned with our strategic objectives and risk appetite. A strong risk culture also allows us to maximize opportunities. Early identification of risks also helps CAE be more proactive and prevent major incidents. A strong risk culture and common approach to risk management are integral to our risk management practices.

32 I CAE Financial Report 2025

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Management's Discussion and Analysis

Each business unit and functional group identifies and assesses critical and emerging risks on an ongoing basis. Emerging risks are defined as risks that are not fully understood at the current time because they are developing quickly or unexpectedly, and for which the impacts on CAE are difficult to assess or are in the process of being assessed. Risk owners are responsible for managing risks they own, and for reporting, via the chain of command, the evolution of their risk profile. All risks are either measured quantitatively or assessed qualitatively and aggregated at an enterprise level. Risk assessment criteria provide a consistent risk assessment process and risk ratings.

CAE's comprehensive enterprise risk profile is updated on a regular basis as well as when a major shift occurs, such as for significant merger and acquisition activity. It is prepared considering CAE's strategic and business plans and identifies an owner for each risk. It is presented to the Executive Management Committee, and a summary thereof to the Board together with risk management activities to address such risks. All risks or weaknesses are reported to the Executive Management Committee or the Senior Vice President, Investor Relations and Enterprise Risk Management, who assess their potential impact. Depending on the severity, a risk strategy is selected (risk acceptance, transference, avoidance or reduction), implemented, monitored and reported in accordance with the risk management process.

**Risk Categories**

We have grouped the risks that our business faces in the following categories and investors should read this *Business Risk and Uncertainty* section in full:

–**Strategic:** risks arising from inability to implement appropriate business plans or strategies, from inappropriate decision-making processes or inappropriate utilization or allocation of resources and the inability to adapt to competition and changes in the market or financial environment;

–**Operational:** risks of loss arising from inadequate or failed internal processes, people, and systems or from external events;

–**Cybersecurity:** risks arising from potential threats or vulnerabilities that can lead to unauthorized access to, damage to or loss of CAE digital assets, systems or data;

–**Talent:** risks arising from failure to effectively manage talent recruitment, development, retention, key person reliance, wellbeing, health and safety, and resource allocation;

–**Financial:** risks arising from ineffective management of financial tools leading to a loss in revenue/profit, shareholder value and/or CAE's overall stability;

–**Legal and Regulatory:** risks arising from failure to comply with local and international laws or to identify proper legal protection (e.g., patents) or to implement appropriate corporate governance practices to shield CAE from unfavourable consequences;

–**Sustainability:** risks arising from climate events, social conditions, or ineffective practices that may lead to a tarnished reputation, loss of confidence, legal sanctions, or financial impact;

–**Reputational:** risks of a tarnished reputation and/or loss of confidence and trust with customers and key stakeholders caused by reputational impacting events; and

–**Technological:** risks arising from ineffective practices related to IT infrastructure, technology investment and privacy and records retention.

**11.1&nbsp;&nbsp;&nbsp;&nbsp; Strategic risks**

**Geopolitical uncertainty**

Geopolitical developments (e.g., political tensions, changes in government commitment, direction and regulatory requirements) can disrupt CAE's operations and have a significant impact on CAE's financial position. Throughout fiscal 2025, global uncertainty continued to intensify, including escalating trade and tariff uncertainty, continued military hostilities in Ukraine and war between Hamas and Israel, and, in some parts of the world, political instability has become more pronounced, protracted and unpredictable. Such rising or persisting geopolitical tensions, policy changes and prolonged political instability in various countries where we have a presence could lead to delays or cancellation of orders, deliveries or projects, difficulties or increased costs related to repatriating capital or the expropriation of assets in which we have invested significant resources, particularly when the customers are state-owned or state-controlled entities. Additionally, geopolitical developments can have potentially wide-ranging consequences for global market volatility and economic conditions, and the resulting impacts to the economy, financial markets, inflation, interest rates and unemployment, among others, could adversely affect CAE's performance. It is also possible that in the markets we serve, unanticipated political instability and political developments impacting international trade, including trade disputes, increased tariffs and sanctions, may negatively impact markets and cause weaker macroeconomic conditions or drive political or national sentiment, impacting CAE's operating environment, results and financial position.

**Global economic conditions** 

CAE's results from operations are sensitive to and may be significantly impacted by changes in the economic conditions of the industries and geographic areas in which we operate. CAE may fail to anticipate and/or react in an agile manner to known and unanticipated global economic conditions (e.g., business cycles, tariffs, trends, inflation, unemployment, financial soundness, and supplier and consumer confidence). Also, any prolonged or significant impact arising from difficult economic conditions may have an adverse effect on our business, results from operations and financial condition.

**Competitive business environment** 

We sell our simulation products, training services and software solutions in highly competitive international markets and we expect such competition to intensify in the future. CAE may lose its competitive advantage by failing to anticipate and/or react in an agile manner to known and unexpected moves by existing or new competitors. New participants have emerged in recent years and the competitive environment is intense, with aerospace and defence companies positioning themselves to try to take greater market share by consolidating through mergers and acquisitions and vertical integration strategies and by developing their own internal capabilities.

CAE Financial Report 2025 I 33

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Management's Discussion and Analysis

Some of our competitors in the simulation and training markets are also involved in other major segments of the aerospace and defence industry beyond simulation and training. As such, some of them are larger than we are, and may have greater financial, technical, marketing, manufacturing and distribution resources and market share which could adversely affect CAE's ability to compete successfully. In addition, our main competitors are either aircraft manufacturers, or have well-established relationships with aircraft manufacturers, airlines and governments, which may give them an advantage when competing for projects.

Moreover, as we expand our product portfolio to software solutions, we face new competitors who are able to leverage a larger installed customer base and their involvement beyond software solutions to adopt more aggressive pricing policies and offer more attractive sales terms, which could cause us to lose potential sales or to sell our software at lower prices. We also face competition from niche companies that offer particular software solutions that attempt to address certain problems that our software solves or certain customer needs. We expect to continue to invest resources in research and development to continue to enhance our software solutions and leverage a high level of customer satisfaction, but there is no assurance that we can satisfy customer demands as they evolve.

Finally, economic growth and pressure underlie the demand for all of our products and services. Periods of economic recession, constrained credit, government austerity and/or international commercial sanctions generally lead to heightened competition for demand of our services and products. This in turn, typically leads to a reduction in profit on sales won during such a period. Should such conditions occur, we could experience price and margin erosion.

**OEM encroachment**

We secure data, parts, equipment and many other inputs from a wide variety of OEMs, subcontractors and other sources. CAE may lose its competitive advantage by failing to anticipate and/or react in an agile manner to known and unanticipated changes from existing and/or new OEMs. Also, we are not always able to find two or more sources for inputs that we require, and, in the case of specific aircraft simulators and other training equipment, significant inputs can only be sole-sourced. We may therefore be vulnerable to delivery schedule delays, the financial condition of the sole-source suppliers and their willingness to deal with us. Within their corporate groups, some sole-source suppliers include businesses that compete with parts of our business and reap certain critical advantages; an OEM controls the pricing for the data, parts and equipment packages that are often required to manufacture a simulator specific to that OEM's aircraft, which in turn, is a critical capital cost for any simulation-based training service provider. This could lead to onerous licencing terms, high licence fees or even refusal to licence to us the data, parts and equipment packages that are often required to manufacture and operate a simulator based on an OEM's aircraft.

CAE, as an independent training provider and simulator manufacturer, has the ability to replicate certain aircraft platforms without data, parts and equipment from the OEM. Where we use an internally produced simulation model for an aircraft or develop courseware without using OEM-sourced and licenced data, parts and equipment, the OEM in question may attempt retaliatory or obstructive actions against us to block the provision of training services or manufacturing, sale and/or deployment for training of a simulator for such aircraft, claiming breach of intellectual property rights or other legal basis. Such actions may cause us to incur material legal fees and/or may delay or prevent completion of the simulator development project or provision of training services, which may negatively impact our financial results.

Similarly, where we use open-source software, freeware or commercial off-the-shelf software from a third party, the third party in question or other persons may attempt retaliatory or obstructive actions against us to block the use of such software or freeware, claiming breach of licence rights or other legal basis. Such actions may cause us to incur material legal fees and/or may delay or prevent completion of the simulator development project or provision of training services, which may negatively impact our financial results.

**Inflation**

Our operations are vulnerable to increases in costs of significant inputs, such as energy, components, raw materials, and transportation. Ongoing inflation would further drive up our overall operational costs. We may not be able to pass unplanned increases in costs to our customers in full or at all in a timely manner, successfully negotiate requests for equitable adjustment from our government customers, or otherwise offset such unforeseen cost increases through efficiencies and the like, and as a result any significant increases in our costs and/or the failure of our measures to limit their impact could have a material adverse effect on our business, financial condition, prospects and/or results of operations.

34 I CAE Financial Report 2025

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Management's Discussion and Analysis

**International scope of our business**

We have operations in over 40 countries including our joint venture operations. We also sell and deliver products and services to customers around the world. Sales to customers outside Canada made up approximately 90% of revenue in fiscal 2025. We expect sales outside Canada to continue to represent a significant portion of revenue in the foreseeable future. As a result, we are subject to the risks inherent in conducting business abroad, including, among other things:

–Change in Canadian and foreign government policies, laws, regulations and regulatory requirements, or the interpretation, application, and/or enforcement thereof, including with regards to sourcing restrictions, requirements to expend a portion of program funds locally and governmental industrial cooperation or participation requirements (also known as offset arrangements);

–Adoption of new, and the expansion of existing tariffs, embargoes, controls, sanctions, trade, work or travel restrictions and other restrictions;

–Recessions and other economic crises in other regions or specific foreign economies and the impact on our cost of doing business in those regions;

–Acts of war, civil unrest, force majeure and terrorism;

–Social and economic instability;

–Risk that inter-governmental relationships may deteriorate such that CAE's operations in a given country may be negatively impacted;

–Limitations on the CAE's ability to repatriate cash, funds or capital invested or held in jurisdictions outside Canada;

–Difficulties, delays and expenditures that may be experienced or incurred in connection with the movement and clearance of personnel and goods through the customs and immigration authorities of multiple jurisdictions; and

–Complexity and corruption risks of using foreign representatives, consultants and other business partners.

While the impact of these risks is difficult to predict, any one of them could adversely affect our financial position, results of operations, reputation and/or cash flows.

**Changes in U.S. trade policies or regulations**

Recent policy decisions by the U.S. presidential administration have introduced greater uncertainty with respect to trade policies, tariffs and government regulations affecting trade between the U.S. and other countries. Major developments in trade relations, such as the potential renegotiation or termination of the Canada-United States-Mexico Agreement, or the imposition of unilateral tariffs or other trade barriers on products imported into the U.S. as well as retaliatory tariffs or other trade barriers imposed by the U.S.'s trading partners, could impact the availability and cost of materials, resources and services, and the availability and cost of our products to U.S. customers, which in turn may affect our competitiveness and results of operations. The implementation of previously-announced, postponed, or new tariffs, or the escalation of trade disputes which interfere with our supply chain and our sales in affected markets, could have an adverse effect on our operations and profitability. In addition, rising protectionism and anti-globalization sentiment in the United States and other countries may adversely impact long-term economic growth in the countries in which we operate, which in turn may affect our business, results of operations and financial condition.

**Level and timing of defence spending**

A significant portion of our revenue is generated by sales to defence and security customers around the world. We provide products and services for numerous programs to Australian, Canadian, European, UAE, U.K., U.S., and other foreign governments as both the prime and/or subcontractor. As defence spending comes from public funds and is always competing with other public interests for funding, there is a risk associated with the level of spending a particular country may devote to defence as well as the timing of defence contract awards, which can be very difficult to predict and may be impacted by numerous factors such as the political environment, foreign policy, macroeconomic conditions, the nature of the international threat environment and the risk of availability of funding influenced by customers' budget cycles. Fluctuations in defence spending in the markets in which we operate or a significant delay in the timing of defence procurement could have a material negative impact on our future revenue, earnings and operations.

**Civil aviation industry**

A significant portion of our revenue comes from supplying equipment and training services to the commercial and business airline industries. The civil aviation market is predominantly driven by long-term trends in airline passenger and cargo traffic. The principal factors underlying long-term traffic growth are sustained economic growth and political stability both in developed and emerging markets. Potential impediments to steady growth include acts of terrorism, health crises, natural disasters, the interruption of global mobility, oil price volatility, increased global environmental regulations or other major world events.

Demand for training solutions in the civil aviation market is further influenced by airline profitability, availability of aircraft financing, OEMs ability to supply aircraft, world trade policies, technological advances, government-to-government relations, national aviation authority regulations, price and other competitive factors, fuel prices and geopolitical environment.

Constraints in the credit market may reduce the ability of airlines and others to purchase new aircraft, negatively affecting the demand for our training equipment and services, and the purchase of our products. In addition, airline consolidations, fleet decisions or financial challenges involving airline customers could impact our revenues and limit our opportunity to generate profits from those customers.

CAE Financial Report 2025 I 35

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Management's Discussion and Analysis

**Our ability to penetrate new markets**

Penetration of new markets, including as a result of new technologies, represents both a risk and an opportunity for CAE. Success in these markets is by no means assured. As we operate in new markets, unforeseen difficulties, major investments and additional expenditures could arise, which may have an adverse effect on our operations, financial position, profitability and reputation. Penetrating a new market is inherently more difficult than managing within our already established markets. New products and technologies introduced in new markets could also generate unanticipated safety or other concerns resulting in expanded product liability risks, potential product recalls and other regulatory issues that could have an adverse impact on us.

**Research and development activities**

We carry out some of our R&D initiatives with the financial participation of governments, including the Government of Quebec and the Government of Canada. We also receive investment tax credits from federal and provincial governments in Canada and from the federal government in the U.S., the U.K. and Poland on eligible R&D activities that we undertake. The level of government financial participation and investment tax credits we receive reflects government policy, fiscal policy and other political and economic factors. We may not, in the future, be able to replace these existing programs with programs of comparable benefit to us, which could have a negative impact on our financial performance and R&D activities. Moreover, the investment tax credits available to us can be reduced by changes to the respective governments' legislation which could have a negative impact on our financial performance and R&D activities. In addition, these credits and programs are routinely subject to review and audit, which may result in challenges and disputes and could result in reductions or reversals of grants, credits or contributions previously received.

Furthermore, our R&D investments in new products or technologies may or may not be successful. Our results may be impacted if we invest in products that are not accepted on the market, if customer demand or preferences change, if new products are not brought to market in a timely manner, if we lack commercial or procurement experience, if we experience delays in obtaining regulatory approvals, or if our products become obsolete. We may also incur cost overruns in developing and bringing to market new products.

**Evolving standards and technology innovation and disruption** 

The civil aviation and defense and security markets in which we operate are characterized by changes in customer requirements, new aircraft models, evolving industry standards, increased power to analyze data and evolving customer expectations influenced by global trends such as climate change, pandemics, the growth of developing markets, population growth and demographic factors. CAE may fail to catch the next wave of market disruption and/or be displaced by disruptive technologies or services due to inadequate resourcing, organization and management of transformation. If we do not accurately predict the needs of our existing and prospective customers, develop new products, enhance existing products and services and invest in and develop new technologies that address those evolving standards and technologies, we may lose current customers and be unable to attract new customers or penetrate new markets successfully. This could reduce our revenue and market share.

The evolution of technology could also have a negative impact on the value of our fleet of FFSs or require significant investments to update our fleet to the evolving technology. The adoption of disruptive technologies, such as AI, advanced computing platforms and autonomous aircraft, presents opportunities for us, but may result in new and complex risks. Also, our business could be negatively affected if our products do not successfully integrate or operate with other sophisticated software, hardware, computing and communications systems that are also continually evolving.

**Length of sales cycle**

The sales cycle for our products and services can be long and unpredictable, ranging from 6 to 18 months for Civil Aviation applications and from 6 to 24 months or longer for Defense and Security applications. During the time when customers are evaluating our products and services, we may incur expenses and management time. Incurring these expenditures in a period that has no corresponding revenue will affect our operating results and financial position. We may pre-build certain products in anticipation of orders to come and to facilitate a faster delivery schedule to gain competitive advantage; if orders for those products do not materialize when expected, we have to carry the pre-built product in inventory for a period of time until a sale is realized.

**Business development and awarding of new contracts**

We obtain most of our contracts through competitive bidding processes. As the competitive environment intensifies, the number of bid protests may increase. Significant costs and managerial time are required to prepare bids and proposals for contracts that may not ultimately be awarded to CAE, may be split with competitors, or may be delayed beyond the timeframe we had planned. A significant portion of our revenue is dependent on obtaining new orders and continued replenishment of our adjusted backlog. We cannot be certain that we will continue to win contracts through competitive bidding processes at the same rate as we have in the past. Moreover, certain foreign governments increasingly rely on certain types of contracts that are subject to multiple competitive bidding processes, including multi-vendor indefinite delivery/indefinite quantity (ID/IQ), General Services Administration Pricing Schedule and other supply chain leveraging strategies, which may result in greater competition and increased pricing pressure. Furthermore, our competitive environment is also affected by a significant number of bid protests from unsuccessful bidders on new program awards. Bid protests can result in contract modifications or the award decision being reversed and loss of the contract award. Even where a bid protest does not result in the loss of an award, the resolution can extend the time until the contract activity can begin, which can reduce our earnings in the period in which the contract would otherwise be performed.

36 I CAE Financial Report 2025

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Management's Discussion and Analysis

**Strategic partnerships and long-term contracts**

We have long-term strategic partnerships and contracts with major airlines, aircraft operators and defence forces around the world, including Authorized Training Provider agreements. These long-term contracts are included in our backlog at the awarded amount but could be subject to unexpected adjustments or cancellations and therefore do not represent a guarantee of our future revenues. We cannot be certain that these partnerships and contracts will be renewed on similar terms, or at all, when they expire, and our financial results could be adversely affected by our partners' level of operations, revenue, financial health, contribution and indemnifications. We can make no assurance that customers will fulfill existing purchase commitments, exercise purchase options or purchase additional products or services from CAE.

**Our ability to effectively manage our growth**

Our growth has placed and may continue to place significant demands on our management and operational and financial infrastructure. As our operations grow in size, scope and complexity, and as we identify and pursue new opportunities, we may be subject to both transition and growth-related risks, including capacity constraints and pressure on our internal systems and controls, and may need to increase the scale of our infrastructure (financial, management, informational, personnel and otherwise). There can be no assurance we will be able to respond adequately or quickly enough to the changing demands that material expansion will impose on management, team members and existing infrastructure, and changes to our operating structure may result in increased costs or inefficiencies that we cannot anticipate. Our ability to manage future growth effectively requires us to continue to implement and improve financial, management and operational processes and systems and to expand, train and manage our employee base. As our organization continues to grow and we are required to implement more complex organizational management structures, we may find it increasingly difficult to maintain the benefits of our corporate culture and efficiencies, including our ability to quickly develop and launch new and innovative products. Any of these difficulties could adversely impact our business performance and results of operations.

**Estimates of market opportunity** 

The estimates of market opportunity included in this MD&A, including those we have generated ourselves, are subject to significant uncertainty and are based on assumptions and estimates. While our estimates of the addressable markets included in this report were made in good faith and are based on assumptions and estimates we believe to be reasonable, these estimates may not prove to be accurately indicative of our future growth. Further, even if the estimates of our market opportunity do prove to be accurate, we could fail to capture a significant portion, or any portion, of the available markets.

**Competing priorities**

Responding to competing priorities as well as critical and time-sensitive matters as they emerge throughout the organization may divert management's attention from our key strategic priorities, and cause us to reduce, delay, or alter initiatives that could otherwise increase our long-term value.

**11.2&nbsp;&nbsp;&nbsp;&nbsp; Operational risks**

**Supply chain disruptions**

Unpredictable shifts in supply and demand patterns on a global scale may cause delays in project delivery, increase price pressure from single sourced items and overall project costs and result in declining bid performance. The widening geopolitical fractures and tensions intensify global supply chain imbalances. Further, conservative and protective behaviours from businesses and governments, such as increasing demand, hoarding, and tariffs, as well as increased competition for critical raw materials or components may hinder our ability to secure such commodities in a timely fashion or at budgeted costs or both, thus impacting our operational and financial performance. In this context, supply chain disruptions may hinder our ability to execute projects in a timely manner, support aftermarket needs, finish projects or leave us with unsold materials or products, all of which could result in penalties or impacts on contract profitability and could have a material adverse effect on our business, financial condition and results of operations. Delays and volatility specific to our supply chain requirements could ultimately have an overall negative impact on our ability to compete on the market, our client relationships, our growth, reputation, financial performance and cash flows.

**Program management and execution** 

CAE may fail to accurately estimate the resources and costs required to fulfill increasingly large and complex contract commitments, as well as to effectively manage and control our costs, which may impact our profitability.

When making proposals, we rely heavily on our estimates of costs and timing for completing the associated projects, as well as assumptions regarding technical issues. We may bid on programs for which the work activities, deliverables, and timelines are vague or for which the solicitation incompletely describes the actual work, which may result in inaccurate pricing assumptions. Furthermore, we may realize the lost opportunity cost of not bidding on and winning other contracts that we may have pursued otherwise.

Contracts are often long-term and may involve new technologies, unforeseen events, such as technological difficulties, cost fluctuations, significant inflation, problems with suppliers, and cost overruns. These factors affect the cost estimates of the contracts we bid on, which can result in the contractual price becoming less favourable or even unprofitable for us. Our profitability could also be negatively affected if we continue to experience increased labour/material inflationary pressures, economic headwinds and global supply chain disruptions.

If we experience difficulties or do not meet program milestones, we may be unable to achieve program milestones as currently scheduled and may have to devote more resources than originally anticipated, which may impact timely execution and profitability.

CAE Financial Report 2025 I 37

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Management's Discussion and Analysis

**Mergers and acquisitions** 

CAE may fail to achieve the expected strategy, synergies and outcomes associated with the integration of acquired entities. The realization of anticipated benefits from mergers, acquisitions and related activities depends, in part, upon our ability to integrate the acquired business, the realization of synergies both in terms of successfully marketing our broadened product and service portfolio, efficient consolidation of the operations of the acquired businesses into our existing operations, cost management to avoid duplication, information systems integration, technology investments, staff reorganization, establishment of controls, procedures, and policies, performance of the management team and other personnel of the acquired operations as well as cultural alignment. There can be no assurance that we will realize anticipated synergies, or that we will meet any financial and performance targets provided. In addition, our inability to adequately integrate an acquired business in a timely manner might result in departures of qualified personnel or lost business opportunities which would negatively impact operations and financial results. There are also risks associated with the acquisition of a business where certain legacy liabilities could arise and where there is strong reliance and dependency on certain key suppliers.

**Business continuity** 

CAE may be unable to recover from business interruptions, including pandemics, natural disasters, political/social unrest, terrorism, and IT disruptions including those at third-party suppliers and service providers, in an efficient and timely manner. Such disruptions may cause delays in the execution of certain programs which require us to incur additional non-compensable costs, including overtime work, that are necessary to meet clients' schedules to avoid penalties or sanctions under contracts or even the cancellation of some contracts. These business interruptions can also have a detrimental effect on our customers' operations and may lead to aircraft being grounded and flights delayed. Our vulnerability and that of our partners and service providers to security breaches, denial of service attacks or other hacking or phishing attacks has also increased since the COVID-19 pandemic, the increased geopolitical tensions and our recent acquisitions.

**Subcontractors** 

We engage subcontractors for many of our contracts with whom we may have disputes, including with regard to the quality and timeliness of their work, customer concerns, or their failure to comply with applicable laws. Subcontractors may not be able to acquire or maintain the quality of the materials, components, subsystems and services they supply, which might result in greater product returns, service problems and warranty claims. In connection with our government contracts, we may be required to procure certain materials, components and parts from local suppliers or supply sources approved by government authorities and CAE relies on subcontractors and other suppliers to comply with applicable laws, regulations and other requirements regarding procurement of counterfeit, unauthorized or otherwise non-compliant parts or materials. Each of these subcontractor risks could have a material adverse effect on our business, financial condition, results of operations and cash flows.

**Fixed price and long-term supply contracts**

We provide a number of our products and services through fixed-price contracts that enable us, contrary to cost-reimbursable contracts, to benefit from performance improvements, cost reductions and efficiencies, but also require us to absorb cost overruns reducing profit margins or incurring losses if we are unable to achieve estimated costs and revenues. It can be difficult to estimate all of the costs associated with these contracts, including assumptions on future rates of inflation, or to accurately project the level of sales we may ultimately achieve. In addition, a number of contracts to supply equipment and services to commercial airlines and defence organizations are long-term agreements that can run up to 25 years. While some of these contracts can be adjusted for increases in inflation and costs, the adjustments may not fully offset the increases, or we may not be able to successfully negotiate requests for equitable adjustment from our government customers, which could negatively affect the results of our operations. Other contracts involve new technologies and applications and unforeseen events, such as technological challenges, fluctuations in the price of raw materials, a significant increase in inflation, tariffs, problems with our suppliers and cost overruns, can result in the contractual price becoming less favourable or even unprofitable to us over time. Some of our programs rely on the supply of OEM systems as specified by our customers and over which we may have limited control over pricing and against which our customer contracts may not sufficiently provision to cover unplanned price increases from such OEMs.

In particular, within the Defense and Security segment, we have a number of fixed-price contracts which offer certain potential advantages and efficiencies but can also be negatively impacted by adverse changes to general economic conditions, including unforeseen supply chain disruptions, inflationary pressures, availability of labour and execution difficulties. These risks can result in cost overruns and reduced profit margins or losses. While these risks can often be managed or mitigated, there were eight distinct legacy contracts identified in fiscal 2024, that were entered into prior to the COVID-19 pandemic that are fixed-price in structure, with little to no provision for cost escalation, and that have been more significantly impacted by these risks (the Legacy Contracts).

The recognition of risks associated with the Legacy Contracts was accelerated in the fourth quarter of fiscal 2024 following revised agreements on scope and timing with customers, suppliers and other stakeholders, which resulted in profit adjustments associated with the reassessment of estimated costs. The extent to which the ongoing risk retirement on these programs might impact Defense and Security margins in the coming quarters will depend on the actual timing of program close outs, customer acceptance, and the ability to mitigate associated risks and costs as we continue to execute them. During fiscal 2025, we completed three of the Legacy Contracts.

If our efforts to execute and retire the Legacy Contracts within expected timeframes and within projected costs are not as anticipated, whether individually or in the aggregate, it could result in continuing material impacts on the overall Defense and Security segment financial position and results, the severity of which cannot be predicted at this time.

38 I CAE Financial Report 2025

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Management's Discussion and Analysis

**Continued reliance on certain parties and information** 

Following an acquisition closing date, CAE may continue to depend on the acquired company's personnel, good faith, expertise, historical performance, technical resources and information systems, timely support, proprietary information and judgment to provide services to customers under a transitional services agreement. Consequently, we may remain vulnerable to adverse developments in the business and affairs of parties with whom we contract.

Despite our efforts to conduct thorough investigations in connection with any acquisition or related transaction, there is an inherent risk regarding the accuracy, quality and completeness of the information provided to CAE. Additionally, there may also be liabilities, deficiencies or other claims associated with companies or assets we acquire that were not discovered or accurately quantified during our due diligence, potentially resulting in unanticipated costs. CAE may not always be able to independently verify the accuracy or completeness of such information, and there may be unknown events or circumstances relating to acquisition targets that could affect the completeness or accuracy of the information provided to us.

**Health and safety**

We strive to maintain a safe working environment for all our employees and subcontractors, as well as for customers undergoing training at our facilities, and to control risks and hazards in the workplace. In the course of our activities, employees may be exposed to hazardous situations, including working in the presence of electricity, working at heights and using specialized tools. Despite the application of our rigorous safety protocols and training programs, there remains an inherent risk of accidents or illness in the workplace. Any significant incident could result in operational disruptions, legal liabilities, increased insurance costs and reputational damage. In addition, failure to comply with health and safety regulations could result in fines and affect our ability to win new contracts.

**11.3&nbsp;&nbsp;&nbsp;&nbsp; Cybersecurity risks** 

**Cybersecurity**

CAE's operational continuity and business performance is dependent on the reliability and trust of our digital value chains. These value chains support our critical business, operational and sales functions. CAE could be negatively impacted by threats to the security of its digital, IT and other related electronic systems. CAE could be faced with the risk of disruption, loss, theft, misuse, or unauthorized access to pertinent sensitive data (e.g., intellectual property) and confidential information (e.g., customer, partner and employee information) stored on CAE's systems and technologies and/or those of its partners, suppliers, and vendors and non-compliance with regulatory, legislative and commercial security requirements.

Cybersecurity incidents related to our information technology systems, digital platforms and software supply chain are a threat to the integrity, reliability, and availability of technology and data. Cybersecurity incidents may take the form of system failures and non-availability, software bugs or defects, cyber-attacks, cyber extortion (including ransomware), breaches of systems security, electronic crime, malware, unauthorized attempts to gain access to our proprietary and sensitive information, hacking, phishing, identity theft, theft of intellectual property and confidential information, denial-of-service attacks aimed at causing network failures and services interruption and other cybersecurity threats to our information technology infrastructure and systems.

Continued use of remote work and use of video conferencing and collaborative platforms (initially implemented by CAE in response to the pandemic) has increased the pressure on our information technology infrastructure which, in turn, may increase CAE's vulnerability to these risks. In addition, subcontractors may, based on the requirements of their participation in our processes, be granted access to our IT platform and software solutions, thereby exposing us to heightened IT and cybersecurity risks.

A successful breach of security of our information systems could lead to theft or misuse of our customers', employees', suppliers', shareholders', or business contacts' proprietary, confidential, or personal data information and result in third-party claims against us, reputational harm, regulatory fines or financial loss.

IT, digital and cybersecurity risks could disrupt our operations and cause our airline customers' operations to be significantly disrupted by having to ground their fleet or delay flights.

Cybersecurity risks include the risk of loss of, corruption of, or unauthorized disclosure or access to business information and data, confidential, classified or restricted information. This may include unauthorized access to information belonging to CAE, our employees, or our business partners, including aircraft OEMs, fixed based operations and customers. These risks expose us to client attrition, non-compliance with privacy legislation or any other laws in effect, litigation, regulatory fines, penalties or regulatory action, compliance costs, corrective measures, investigative or restoration costs, cost hikes to maintain and upgrade technological infrastructures and systems or reputational harm, all of which could have a negative effect on CAE's operating results, reporting capabilities, profitability and reputation.

Given the highly evolving nature of cyber or other security threats or disruptions and their increased frequency, the impact of any future incident cannot be easily predicted, and the costs related to such threats or disruptions may not be fully insured or indemnified by other means. This is accentuated by the increasing geopolitical stressors. In addition, the digital transformation, and the adoption of emerging technologies, such as AI, deep fakes, quantum threats, use of automated techniques by adversaries and the increasing use of "frontier" cyber offensive techniques, call for continued focus and investment to manage our risks effectively.

CAE Financial Report 2025 I 39

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Management's Discussion and Analysis

Furthermore, we may experience similar security threats at customer sites that we operate or manage or to which we gain access to deliver services. CAE may be impacted by cybersecurity risks and similar incidents at our customers, suppliers and partners. These parties have varying levels of cybersecurity maturity, expertise and safeguards. In addition, some of these parties may have an elevated threat condition due their involvement in government and defense contracts, which can similarly elevate the risk to CAE and the likelihood of the threats we face.

**11.4&nbsp;&nbsp;&nbsp;&nbsp; Talent risks**

**Recruitment, development and retention** 

CAE may be unable to attract, develop and retain top talent, key people and critical roles to achieve CAE's global strategic objectives. To support our growth strategies, objectives and normal business operations, CAE needs to maintain a sufficient, qualified and engaged workforce. Our financial position, global brand reputation and ability to achieve strategic objectives may be negatively affected by a failure to manage attrition, to retain and integrate key personnel, to maintain an appropriately sized workforce to meet contract needs and to transition employees from completed projects to new projects or between internal business groups. The identification and the development of our future leaders are becoming a necessity to secure a solid succession planning for critical roles. Failure to plan the succession for critical positions could lead to leadership instability and loss of key talent. Since the pandemic and as broadly reflected in the industry, CAE has been faced with new talent-related challenges and risks, including the necessity to adapt our workforce to AI advancements, evolving roles for line managers which necessitate upskilling leaders, and changing needs of the new generation of employees. These factors may make it more difficult to recruit, attract and retain skilled personnel, reducing the availability of our workforce and potentially negatively impacting our business.

**Key personnel and management**

Our continued success will depend in part on our ability to attract, recruit and retain key personnel and management with relevant skills, expertise and experience, including technology developers of our intellectual property and leaders capable of being ambassadors of our corporate culture. CAE is dependent on the industry experience, qualifications and knowledge of a variety of employees, including our executive officers, managers and other key employees to execute our business plan and operate our business. There is no guarantee that any member of our leadership or other key employees will continue to serve in any capacity for any particular period of time, or that any leadership transitions will be successful. In particular, CAE is currently conducting searches for a new Chief Executive Officer and a permanent Chief Financial Officer. This transitional period may introduce uncertainties and disruptions to CAE's operations as well as its strategic planning and financial reporting processes. Additionally, the recruitment and integration of new members of the management team can be time-consuming and may divert management's attention from other aspects of CAE's business. There can also be no assurance that CAE will be able to attract and retain a permanent replacement for any of its executives, including the Chief Executive Officer and the Chief Financial Officer, in a timely manner. Moreover, if we were to experience a shortfall, illness or a substantial turnover in our leadership or other key employees or teams, our business, results from operations and financial condition could be materially adversely affected. The emergency succession plan put in place to deal with any situation which requires immediate replacement of our key personnel and management presents logistical challenges in its application and incremental costs to CAE. Failure to successfully implement such a succession plan, where relevant, for key roles, could impair our business until qualified replacements are found.

**Corporate culture**

We believe that a critical contributor to our success has been our corporate culture, which is based on our core values of One CAE, Innovation, Empowerment, Excellence and Integrity. As we continue to grow and develop, we must effectively integrate, develop and motivate a growing number of new employees, based in various countries around the world, some of whom come to us via acquisitions. In addition, we must preserve our ability to execute quickly in further developing our products and services and implementing new features and initiatives. Preserving our corporate culture is crucial as it affects employee engagement, innovation, and operational effectiveness. Failing to adapt could hinder recruitment, retention, and our overall business strategy execution.

**Labour relations**

Approximately 2,300 employees are represented by unions and are covered by 54 collective agreements as of March 31, 2025. These collective bargaining agreements have varying terms and expiration dates. If we experience difficulties with renewals and renegotiations of existing collective agreements or if our employees pursue new collective representation, we could incur additional expenses and may be subject to work stoppages, slow-downs or other labour-related disruptions. Any such expenses or delays could adversely affect our programs served by employees who are covered by such agreements or representation.

**11.5&nbsp;&nbsp;&nbsp;&nbsp; Financial risks** 

**Shareholder activism**

We may be subject to legal and business challenges in the operation of our business due to actions instituted by activist shareholders or others who may from time to time engage in proxy solicitations, advance shareholder proposals, attempt to acquire control via a hostile take-over bid or otherwise or attempt to involve themselves in the governance, strategic direction, and operations of CAE. Responding to such challenges can be costly and time-consuming, disrupting operations, requiring us to incur increased advisory fees and related costs, and diverting the attention of CAE's board, senior management and employees from the pursuit of our business strategies. Perceived uncertainties as to CAE's future direction resulting from such challenges could result in the loss of potential business opportunities, cause concern to current or potential investors, make it more difficult to attract and retain qualified personnel and business partners, and affect our relationships with vendors, customers and other third parties. Actions of activist shareholders may cause significant fluctuations in the market price for CAE's securities based on temporary or speculative market perceptions or other factors that do not necessarily reflect the underlying fundamentals and prospects of CAE's business.

40 I CAE Financial Report 2025

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Management's Discussion and Analysis

**Availability of capital** 

We depend, in part, upon our debt funding and access to capital markets. We have various debt facilities, including lease liabilities, with maturities ranging between calendar 2025 and 2071, and we cannot provide assurance that these facilities will be refinanced at the same cost, for the same duration and on similar terms as were previously available. If we require additional debt funding, our market liquidity may not be sufficient considering multiple factors including significant instability or disruptions of the capital markets, a deterioration in or weakening of our financial position due to internal or external factors, restrictions or prohibitions on CAE's access to these facilities, or significant increase in the cost of one or more of these facilities, including credit facilities or the issuance of medium- and long-term debt, which may adversely affect our ability to fund our operations and contractual or financing commitments.

Our unsecured senior notes, term loans and revolving credit facility include standard events of default and covenant provisions whereby accelerated repayment and/or termination of the agreements may result if we were to default on payment or violate certain covenants. In the event that we are unable to maintain compliance with such covenants, we may have restricted access to capital, and we would be required to obtain amendments or waivers from our lenders, refinance the indebtedness subject to covenants or take other mitigating actions prior to a potential breach.

Availability of capital could also be negatively impacted should a deterioration of CAE's financial position result in a reduction or downgrade of its credit rating. This could limit CAE's access to sources of short-term and long-term debt financing. In addition, this could significantly increase the costs associated with utilizing short-term or long-term debt facilities or future refinancing of such facilities, which would in turn have a material adverse effect on CAE's business, financial profile and results of operations.

**Customer credit risk** 

We are exposed to credit risk on our accounts receivable and certain other assets through our normal commercial activities. Adverse changes in a customer's financial condition could cause us to limit or discontinue business with that customer, require us to assume more credit risk relating to that customer's future business, or result in uncollectible trade accounts receivable from that customer. Future credit losses relating to any one of our major customers could be material and could result in a material charge to our financial results.

**Foreign exchange**

Our operations are global with approximately 90% of our revenue generated from worldwide exports and international activities generally denominated in foreign currencies, mainly the U.S. dollar and the Euro. Our revenue is generated approximately 50% in the U.S., and the balance in Europe and the rest of the world.

Three areas of our business are exposed to fluctuations of foreign exchange rates; our global network of training, software and services operations, our production operations abroad (mainly in Germany, and the U.S.) and our production operations in Canada as a significant portion of the revenue generated in Canada is in foreign currencies, while a large portion of our operating costs is in Canadian dollars.

For our Canadian operations, when the Canadian dollar increases in value, it negatively affects the translation of our foreign currency denominated revenue and hence our financial results because our results are consolidated in Canadian dollars for financial reporting purposes. However, when the Canadian dollar decreases in value, it negatively affects our foreign currency-denominated costs. Since not all of our revenue is hedged, it is not possible to completely offset the effects of changing foreign currency values, which leaves some residual exposure that may impact our financial results. This residual exposure may be higher when currencies experience significant short-term volatility.

Business conducted through our foreign operations are substantially based in local currencies which are translated to Canadian dollars for financial reporting purposes. Appreciation of foreign currencies against the Canadian dollar would have a positive translation impact and a devaluation of foreign currencies against the Canadian dollar would have the opposite effect.

**Effectiveness of internal controls over financial reporting** 

Our disclosure controls and procedures and internal controls over financial reporting may fail to prevent certain material errors and fraud. A control system can provide only reasonable, not absolute, assurance that the control system's objectives will be met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Due to the inherent limitations in control systems, no evaluation of controls can provide absolute assurance that all control issues within an organization are detected. The inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple errors or mistakes. Controls can also be circumvented by individual acts of certain persons, by collusion of two or more people or by management override of the controls. Due to these inherent limitations, misstatements due to error or fraud may occur and may not be detected in a timely manner or at all.

Any failure of our internal controls could have an adverse effect on our results of operations, harm our reputation and limit our ability to produce timely and accurate financial statements or comply with applicable regulations, causing investors to lose confidence in our reported financial information. If we are unable to implement any of the required changes to our internal control over financial reporting effectively or efficiently or are required to do so earlier than anticipated, it could adversely affect our operations, financial reporting and results of operations.

CAE Financial Report 2025 I 41

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Management's Discussion and Analysis

**Liquidity risk**

Liquidity risk is defined as the potential risk that we cannot meet our cash obligations as they become due. The increased geopolitical uncertainty and general economic conditions have amplified the unpredictability of business and transaction cycles, thereby bringing uncertainty as to the cash we expect to generate from our operations and our ability to meet financial requirements in the foreseeable future.

**Interest rates**

We are exposed to risk on the interest rate of our debt. If interest rates increase, our floating rate long-term debt would increase even though the amount borrowed remained the same, and net income and cash flows would decrease, which could materially and adversely affect CAE's financial condition and operating results. Increasing interest rates may also restrict our ability to expand into new markets if we do not have access to debt or equity capital on acceptable terms, which in turn may negatively affect our competitiveness and results of operations. Similarly, changes in interest rates may negatively affect the ability of our customers to deploy capital or to obtain credit to finance their businesses on acceptable terms, which will impact their demand and ability to pay for our products and services.

**Returns to shareholders**

Payment of dividends and other cash or capital returns (such as a normal course issuer bid for the repurchase of our outstanding shares) to our shareholders are at the discretion of the Board of Directors and depend on various factors, including our operating cash flows, sources of capital, the satisfaction of solvency tests and other financial requirements, our operations and financial results, our ability to repatriate cash from our subsidiaries, as well as our dividend and other policies which may be reviewed from time to time.

No assurance can be given as to whether or when CAE will declare and pay dividends in the future, or the frequency or amount of any such dividend. In addition, there is no assurance that shareholders who have their common shares enrolled in CAE's Dividend Reinvestment Plan (DRIP) will continue to have their common shares participate in the DRIP, which may have an impact on our cash flows.

Cash disbursements used for the repurchase of our outstanding shares may have an impact on available cash to use to respond to unforeseen challenges or other capital allocation priorities that might have generated higher returns or contributed to CAE's long-term growth.

**Estimates used in accounting**

Accounting for our contracts, notably contracts for the design, engineering, and manufacturing of training devices, requires judgment associated with estimating contract revenue and costs and assumptions for schedule and technical issues. Because of the significance of the judgments and estimation processes involved in accounting for our contracts, materially different amounts could be recorded if we used different assumptions or if the underlying circumstances were to change. Changes in underlying assumptions, circumstances or estimates may have an impact on our financial statements including but not limited to impairment testing and fair value determination, and may adversely affect our future results of operations and financial condition.

**Impairment risk**

The carrying amounts of our non-financial assets subject to amortization are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Goodwill and assets that are not yet available for use are tested for impairment annually or at any time if an indicator of impairment exists. Factors that may result in a change in circumstances, indicating that the carrying value of our goodwill or non-financial assets may not be recoverable include reduced future estimated cash flows, slower growth rates than forecasted and a decline in our share price and market capitalization. Change in key assumptions, such as a failure to meet our five-year strategic plan or other unanticipated circumstances, including market conditions, may affect the accuracy or validity of our estimates. Because of the significance of our goodwill and other non-financial assets, any future impairment of these assets could require material non-cash charges to our operating results, which also could have a material adverse effect on our financial condition.

**Pension plans**

Economic and capital market fluctuations can negatively affect the investment performance, funding and expense associated with our defined benefit pension plans. Pension funding for these plans is based on actuarial estimates and is subject to limitations under applicable regulations. Actuarial estimates prepared during the year were based on, amongst others, assumptions regarding the performance of financial markets, discount rates, inflation rates, future salary increases, estimated retirement ages and mortality rates. The actuarial funding valuation reports determine the amount of cash contributions that we are required to make into registered retirement plans. There can be no assurance that our pension expense and the funding of these plans will not increase in the future, thereby negatively impacting our earnings, cash flow and shareholders' equity.

42 I CAE Financial Report 2025

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Management's Discussion and Analysis

**Indebtedness** 

CAE may achieve strategic growth objectives by financing costs of investments out of available liquidities, including cash on hand and/or advances or drawdowns under one or more of our revolving credit facility or other debt financing. Such borrowings could have material adverse consequences for CAE, including: limiting our ability to obtain additional financing for working capital, capital expenditures, product development, debt service requirements, acquisitions and general corporate or other purposes; restricting our flexibility and discretion to operate our business; negatively impacting the credit rating of our long-term debt; limiting our ability to declare dividends on our common shares or buy back our outstanding shares; having to dedicate a portion of our cash flows from operations to the payment of interest on our existing indebtedness and not having such cash flows available for other purposes, exposing us to increased interest expense on borrowings at variable rates; limiting our ability to adjust to changing market conditions; placing CAE at a competitive disadvantage compared to our competitors that have incurred less debt; making CAE more vulnerable in a downturn in general economic conditions; and making it more difficult for us to satisfy our covenants with respect to our indebtedness. There is no guarantee that we will be able to obtain additional indebtedness or other financing on terms favourable to us or at all to repay the principal on such indebtedness when it becomes due.

If we are unable to generate sufficient funds to meet our obligations under our outstanding indebtedness, we may be required to refinance, restructure or otherwise amend or waive some or all of such obligations, sell assets or raise additional cash through additional issuances of our equity. In such case, we cannot make any assurances that we would be able to obtain such refinancing on terms as favourable as our current financing or that amendments or waivers would be obtained, that such restructuring, sales of assets or issuances of equity can be accomplished or, if accomplished, would raise sufficient funds to meet these obligations.

**Acquisition and integration costs**

We incur several costs associated with completing acquisitions and integrating the operations of CAE and acquired companies. The substantial majority of these costs are non-recurring expenses resulting from an acquisition and will consist of transaction costs related to the acquisition, including financial, legal and accounting costs, facilities and information technology systems costs and employment-related costs. Such expenses are difficult to estimate accurately and may exceed estimates. We may also fail to accurately forecast the financial impact of an acquisition or other strategic transaction, including tax and accounting charges. Accordingly, the benefits from an acquisition may be offset by unexpected costs incurred in integrating the businesses, which could cause our revenue assumptions to be inaccurate.

**Sales of additional common shares**

Any future issuance of common shares, or other securities convertible into common shares, may result in dilution to present and prospective common shareholders as well as dilution in earnings per share. CAE cannot predict the size of future issuances of common shares or the effect that future issuances and sales of common shares will have on the market price of the common shares. Issuances of a substantial number of additional common shares (or securities convertible into common shares), or the perception that such issuances could occur, may adversely affect the prevailing market price for the common shares.

**Market price and volatility of our common shares**

The market price of our common shares may be volatile and subject to wide fluctuations in response to numerous factors, many of which are beyond our control and are unrelated to our performance. There can be no assurance that the market price of the common shares will not experience significant fluctuations in the future, including fluctuations that are unrelated to our performance.

Following a significant decline in the market price of a company's securities, there may be instances of securities class action litigation being instituted against such company. The Company is currently a defendant in a shareholder-instituted class action proceeding, alleging such a decline in the market price of our common shares during the first quarter of fiscal 2025. We cannot provide any assurance that similar litigation will not occur in the future. The existing proceeding and any future similar proceedings could result in substantial costs and a diversion of management's attention and resources, which could have a material adverse effect on our business, operating results, and financial condition. Due to the inherent uncertainties of litigation, it is not possible to (a) predict the final outcome of the existing proceeding and other related proceedings generally or (b) determine the amount of potential losses, if any, that may be incurred in connection with any final judgment on these matters.

We maintain insurance coverage for various aspects of our business and operations, including for litigation. Our insurance programs have varying coverage limits and maximums, and insurance companies may deny claims we might make. Please refer to *"Insurance coverage potential gaps"* under Section 11.6 *"Legal and regulatory risks"* of CAE's MD&A for the year ended March 31, 2025 for more detail regarding the risks associated with our insurance coverage.

**Seasonality**

Our business, revenues and cash flows are affected by certain seasonal trends. In the Civil Aviation segment, the level of training delivered is driven by the availability of pilots to train, which tends to be lower in the second quarter as pilots are flying more and training less, thus, driving lower revenues. In the Defense and Security segment, revenue and cash collection is not as consistent across quarters throughout the year as contract awards and availability of funding are influenced by customers' budget cycles. We expect these trends to continue, but may be disturbed by the volatile geopolitical environment, supply chain and/or labour disruptions.

CAE Financial Report 2025 I 43

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Management's Discussion and Analysis

**Taxation matters**

We collect and pay significant amounts of taxes to various tax authorities. As our operations are complex and the related tax interpretations, regulations, legislation and jurisprudence that pertain to our activities are subject to continual change and evolving interpretation, the final outcome of the taxation of many transactions is uncertain. Also, a substantial portion of our business is conducted in foreign countries and is thereby subject to numerous countries' tax laws and fiscal policies. A change in applicable tax laws, treaties or regulations or their interpretation, such as the introduction of Pillar Two Model Rules designed to ensure large multinational enterprises pay a minimum level of tax on income arising in each jurisdiction they operate, could result in a higher effective tax rate on our earnings which could significantly impact our financial results.

**Adjusted backlog**

Adjusted backlog represents management's estimate of the aggregate amount of the revenues expected to be realized in the future. The termination, modification, delay, or suspension of multiple contracts may have a material and adverse effect on future revenues and profitability. We cannot guarantee that the revenues initially anticipated in our adjusted order intake will be realized in full, in a timely manner, or at all, or that, even if realized, such revenues will result in profits or cash generation as expected, and any shortfall may be significant.

**11.6&nbsp;&nbsp;&nbsp;&nbsp; Legal and regulatory risks**

**Data rights and governance** 

In providing services and solutions to clients, we collect, utilize, store and communicate confidential, personal, classified and proprietary information that may be highly sensitive. Any security breach, improper use and other types of unauthorized access or misappropriation of such information could not only lead to regulatory penalties, audits or investigations by various government agencies relating to our compliance with applicable laws, but also damage to our reputation or loss of confidence in our products and services.

Further, the management, use and protection of personal information (or personal data) are becoming increasingly important, particularly given the high value attributed to such information and the potential exposure to operational risks, reputational risks, and regulatory compliance risks, including compliance with the European Union's General Data Protection Regulation, the U.K.'s General Data Protection Regulation, Canada's federal Personal Information Protection and Electronic Documents Act and substantially similar equivalents at the provincial level, the California Consumer Privacy Act, and the proliferation of similar regulatory frameworks in other regions. Compliance with these requirements may prove to be complex and may add to our compliance costs. Further, our use of AI poses evolving risks as we continue to incorporate AI systems into our operations.

**U.S. foreign ownership, control or influence mitigation measures**

CAE and certain of our subsidiaries are parties to agreements with various departments and agencies of the U.S. government, including the U.S. Department of Defense, which require that these subsidiaries be issued facility security clearances under the U.S. Government National Industrial Security Program. This program requires that any corporation that maintains a facility security clearance be insulated from foreign ownership, control or influence (FOCI) via a mitigation agreement. As a Canadian company, we have entered into a FOCI mitigation agreement with the U.S. Department of Defense that enables these U.S. subsidiaries to obtain and maintain the requisite facility security clearances to enter into and perform on classified contracts with the U.S. government. Specifically, the mitigation agreement is a Special Security Agreement (SSA) for CAE USA Inc. If CAE fails to maintain compliance with the SSA, the facility security clearances for CAE USA Inc. could be terminated. If this occurred, our U.S. subsidiaries would no longer be eligible to enter into new contracts requiring a facility security clearance and could lose the right to perform certain existing contracts with the U.S. government to completion.

**Compliance with laws and regulations**

CAE operates in a highly regulated environment across many jurisdictions and is subject to, without limitation, laws and regulations relating to import-export controls, trade sanctions, anti-corruption, national security and aviation safety of each country. These laws and regulations may change without notice, which could impact our sales and operations in ways which we cannot predict. Any change could present opportunities or, to the contrary, have a materially negative effect on our results of operations or financial condition. For instance, changes imposed by a regulatory agency, including changes to safety standards imposed by aviation authorities, could mean that we will not be permitted to sell or licence certain products to customers, which could cause a potential loss of revenue. We could also be required to make unplanned modifications to our products and services, causing delays, higher inventory levels or resulting in postponed or cancelled sales or changes to sales predictions. Our compliance with government import-export regulations (e.g., International Traffic in Arms Regulations) may also be investigated or audited and we can be subject to potential liabilities associated with those matters.

Export control restrictions could also negatively impact our operations. For example, CAE's technology and services may be subject to export permit approvals and regulatory requirements which could take several months to obtain, thereby resulting in potential delays in obtaining export permits or even preventing us from exporting to certain countries, entities or people in or from a country. Also, failure to comply with export control requirements could lead to fines and/or being excluded from government contracts or subcontracts and reputational damages, which would negatively affect our revenue from operations and profitability and could have a negative effect on our ability to procure other government contracts in the future.

44 I CAE Financial Report 2025

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Management's Discussion and Analysis

As a contractor to various governments, CAE must comply with procurement regulations and other specific legal requirements, such as sourcing restrictions, requirements to expend a portion of program funds locally and governmental industrial cooperation or participation requirements (also known as offset arrangements). These regulations and other requirements, although often customary in government contracting, increase our contract performance risks and compliance costs and are regularly evolving. Failure to comply with these regulations and other requirements could negatively impact our revenue from operations and profitability, and could have a negative effect on our ability to procure other government contracts in the future. In various jurisdictions, governments have been pursuing and may continue to pursue policies that could negatively impact our profitability, including seeking to shift additional responsibility and performance risks to the contractor.

In addition, CAE's global operations are subject to Canadian and foreign laws and regulations, including, without limitation, the *Corruption of Foreign Public Officials Act* (Canada), the *Foreign Corrupt Practices Act* (United States), the *U.K. Bribery Act* and other anti-corruption laws. Failure by CAE and its employees or by any business partner or supplier working on our behalf to comply with anti-corruption requirements could result in administrative, civil, or criminal liabilities, including suspension and debarment from bidding for or performing government contracts

**Insurance coverage potential gaps**

CAE products, services and/or operations can result in injury or damage to customers and other third parties, exposing CAE to substantial claims and litigation. Such claims could relate to, among other things, personal injury, loss of life, property damage and financial loss.

As part of its business operations, CAE maintains a certain level of insurance coverage, subject to varying limits, deductibles or retentions. There can be no assurance that the available insurance will be sufficient in limits and comprehensive in scope to respond to potential claims. Our insurance is purchased from a number of third-party insurers, often in layered insurance arrangements. In the event that limits purchased or coverage may be inadequate, CAE may be forced to bear substantial costs, resulting in an adverse impact on our financial condition, cash flows, or operating results. Moreover, any accident, failure of, or defect in our products or services, even if fully indemnified or insured, could significantly impact the cost and availability of adequate insurance in the future.

**Product-related liabilities**

Simulators, software solutions and other products sold by CAE may contain defects or may be subject to human error which may present a safety risk. Said defects, or human error due to manual input, could result in warranty claims, potential product liability and personal injury claims and/or major disruption in the operations of our customers. CAE may incur significant costs to issue a product recall or to modify or retrofit these products to ensure their safety, whether these are mandated by aviation authorities or otherwise. In addition to litigation and settlement costs related to liability claims, an adverse judgment against CAE or customers' fleet being grounded due to potential safety risks in our software solutions may cause reputational damage and have a significant adverse effect on our business and operating results.

CAE may also be subject to product liability claims relating to equipment and services of discontinued operations or businesses sold, whereby CAE has retained past liabilities.

**Environmental laws and regulations**

CAE is exposed to various environmental risks and is subject to complying with environmental laws and regulations which vary from country to country and are subject to change. CAE's inability to comply with environmental laws and regulations could result in penalties, lawsuits and potential harm to our reputation.

New laws and regulations, stricter enforcement of existing laws and regulations, the discovery of previously unknown contamination, new clean-up requirements or claims on environmental indemnities we committed to may result in us having to incur substantial costs. This could have a materially negative effect on our financial condition and results of operations.

**Government audits and investigations**

Government agencies routinely audit and investigate government contractors, as well as recipients of government grants and contributions, thereby increasing performance and compliance costs. These agencies may review our performance under our contracts, business processes, cost structure, and compliance with applicable laws, regulations and standards. Our incurred costs for each year are subject to audit by government agencies, which can result in payment demands related to costs they believe should be disallowed or a reduction or reversal of government grants and contributions to R&D programs. Although we work with governments to assess the merits of claims and, where appropriate, reserve for amounts disputed, we could be required to provide repayments to governments which could have a negative effect on our results of operations. We may continue to experience an increased number of audits and challenges to government accounting matters and business systems for current and past years, as well as a lengthened period of time required to close open audits, an increased number of broad requests for information and an increased risk of withholding of payments. If an audit or investigation were to uncover improper or illegal activities, we could be subject to further fines, administrative actions, termination of contracts, forfeiture of profits, suspension of payments or debarment from business with the government. The government could impose additional payment withholds or seek consideration for material not in compliance with associated sourcing standards.

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Management's Discussion and Analysis

**Protection of our intellectual property and brand**

We rely, in part, on trade secrets, copyrights, patents, industrial designs, trademarks and contractual restrictions, such as confidentiality agreements and licences, to establish and protect our proprietary rights. These may not be effective in preventing a misuse of our technology or in deterring others from developing similar technologies. We may be limited in our ability to acquire or enforce our intellectual property rights in some countries. Litigation related to our intellectual property rights could be lengthy and costly and could negatively affect our operations or financial results, whether or not we are successful in defending a claim. As the partner of choice elevating safety, efficiency and readiness, our brand is a significant asset. From time to time, we may authorize the use of our brand, under third party licence agreements. Additionally, in certain of our flight training organizations, we outsource some flying to third-party providers, but ultimately remain accountable for their performance operating for our brand. Adverse publicity related to incidents or litigation involving us, our partners or suppliers may impact the value of our brand.

**Third-party intellectual property**

Our products may contain sophisticated software and hardware, including computer systems, optical systems and electronics, that are supplied to us by third parties. Moreover, our production of simulators often depends on receiving confidential or proprietary data on the functions, design and performance of a product or system that our simulators are intended to simulate. Our training systems may also involve the collection and analysis of customer performance data in connection with the use of our training systems. We may not be able to obtain access to such software, systems and data sets on reasonable terms, or at all. Infringement claims could be brought against us or against our customers. We may not be successful in defending these claims and we may not be able to develop certain functionalities, designs, and processes that do not infringe on the rights of third parties, or obtain licences on terms that are commercially acceptable, if at all. The markets in which we operate are subject to extensive patenting by third parties. Our ability to modify existing products or to develop new products and services may be constrained by third-party patents such that we incur incremental costs to licence the use of the patent or design around the claims made therein.

**Foreign private issuer status**

As a "foreign private issuer," as such term is defined in Rule 405 under the U.S. Securities Act, we are permitted, under a multijurisdictional disclosure system adopted by the securities regulatory authorities in Canada and the U.S., to prepare our disclosure documents filed under the U.S. Securities Exchange Act of 1934, as amended (U.S. Exchange Act), in accordance with Canadian disclosure requirements. Under the U.S. Exchange Act, we are subject to reporting obligations that, in certain respects, are less detailed and less frequent than those of U.S. domestic reporting companies. As a result, we do not file the same reports that a U.S. domestic issuer would file with the U.S. Securities and Exchange Commission (SEC), although we are required to file or furnish to the SEC the continuous disclosure documents that we are required to file in Canada under Canadian securities laws.

In relying on NYSE rules that permit a foreign private issuer to follow the corporate governance practices of its home country, CAE is permitted to follow certain Canadian corporate governance practices instead of those otherwise required under the corporate governance standards for U.S. domestic issuers, except to the extent that such laws would be contrary to U.S. securities laws and provided that we disclose the significant differences between our corporate governance practices and the applicable corporate governance standards applicable to U.S. domestic issuers.

Further, as a foreign private issuer, we are exempt from a number of requirements under U.S. securities laws that apply to public companies that are not foreign private issuers. In particular, we are exempt from the rules and regulations under the Exchange Act related to the furnishing and content of proxy statements, and our officers, directors and principal shareholders are exempt from the reporting and short-swing profit recovery provisions contained in Section 16 of the U.S. Exchange Act. CAE is exempt from the provisions of Regulation FD, which prohibits the selective disclosure of material non-public information to, among others, broker-dealers and holders of a company's securities under circumstances in which it is reasonably foreseeable that the holder will trade in our securities on the basis of the information.

Even though Canadian securities law requirements regarding the disclosure of material and non-public information by public companies are similar to U.S. securities law requirements and we voluntarily comply with Regulation FD, these exemptions and leniencies will reduce the frequency and scope of information and protections to which purchasers are entitled as investors. Shareholders should not expect to receive the same information at the same time as such information is provided by U.S. domestic companies. In addition, we have four months after the end of each fiscal year to file our Annual Information Form with the SEC and are not required under the U.S. Exchange Act to file quarterly reports with the SEC as promptly as U.S. domestic companies whose securities are registered under the U.S. Exchange Act would do.

**Enforceability of civil liabilities against our directors and officers**

CAE is governed by the *Canada Business Corporations Act* with our principal place of business in Canada. Most of our directors and officers reside in Canada or elsewhere outside the U.S. The majority of our assets and all or a substantial portion of the assets of these directors and officers may be located outside the U.S. Consequently, it may be difficult for investors who reside in the U.S. to effect service of process in the U.S. upon CAE or upon such persons who are not residents of the U.S., or to realize upon judgments of courts of the U.S. predicated upon the civil liability provisions of the U.S. federal securities laws. Similarly, some of CAE's directors and officers may be residents of countries other than Canada and all or a substantial portion of the assets of such persons may be located outside Canada. As a result, it may be difficult for Canadian investors to initiate a lawsuit within Canada against these persons.

46 I CAE Financial Report 2025

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Management's Discussion and Analysis

**11.7&nbsp;&nbsp;&nbsp;&nbsp; Sustainability risks**

**Extreme climate events and the impact of natural or other disasters (including effects of climate change)** 

Climate change, reflected in an increase in extreme events such as extreme heat, heavy rainfall, drought and cyclones, can disrupt our operations, damage our infrastructure, endanger the health and safety of our employees, affect the availability and cost of materials, resources and services, reduce air traffic, increase insurance costs, and even compromise our ability to obtain adequate insurance coverage for all the major risks to which we are exposed. These disruptions may have a significant impact on our operating results, financial position and liquidity. In addition, evolving regulatory frameworks related to climate change add additional responsibilities specific to the products and services we provide.

**Sustainability commitments and expectations**

Evolving stakeholder expectations with respect to sustainability matters may pose risks to CAE's competitive advantage, brand and reputation, ability to attract and retain talent, financial outlook, cost of capital, global supply chain and business continuity, which may impact our ability to achieve long-term business objectives. Increased public awareness and growing concerns about climate change (including the "anti-flying" movement and tendencies towards sustainable travel initiatives) and the global transition to a low carbon economy result in a broad range of impacts, including potential risks for CAE and its business partners' market outlook.

CAE may fail to adequately monitor the emerging risks in a rapidly changing ecosystem and to sufficiently address evolving expectations related to corporate culture, business conduct and ethics, responsible management of its supply chain, transparency, respect for human rights, working and safety conditions, as well as equal opportunities, among other factors, which could affect corporate profitability and reputation.

Additional sustainability-related regulations, changes in reporting frameworks and guidance, emergence of ''greenwashing'' legal actions by activist groups, increasing regulatory expectations as well as continuing reforms pertaining to mandatory disclosure create a new uncertain and evolving set of compliance risks. Gaps in perception and acceptability of how sustainability factors in shareholder value also call for increased vigilance when it comes to sustainability reporting and communication.

More acute generalized scrutiny also adds pressure to secure reliable and precise sustainability data with clear accountability across the organization and to deploy robust data collection processes with effective controls that will allow external verification in the near future. A lack of precise, auditable and complete data accurately reflecting the progress on CAE's multi-year roadmap could hinder our credibility as a sustainability catalyst in the industry.

As CAE's sustainability performance is assessed by proxy advisory agencies, we could also face governance issues if we do not meet their expectations.

**11.8&nbsp;&nbsp;&nbsp;&nbsp; Reputational risks**

**Reputational risk**

Reputational risk may arise under many situations including, among other things:

–Quality or performance issues of our products or services and new technologies we launch;

–Inability to penetrate new markets or to meet expectations or demand for newly developed products and technologies;

–Failure to maintain ethically and socially responsible operations;

–Relationships or dealings with customers and other counterparties that could expose CAE to ethics, compliance and reputational risks;

–Negative perceptions regarding the defence and security industry and related product and service offerings;

–Injuries or death arising from health and safety incidents during the operation process or training activities; and

–Alleged or proven non-compliance with laws or regulations by our employees, agents, subcontractors, suppliers and/or business partners.

Any negative publicity about CAE or damage to our image and reputation could have a negative adverse impact on customers' and other key stakeholders' perception and trust, may prevent CAE to recruit necessary talent and may cause the cancellation of current work or negatively influence our ability to obtain contracts. Many of CAE's other risks intersect with reputational risk and may therefore amplify this risk.

CAE Financial Report 2025 I 47

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Management's Discussion and Analysis

**11.9&nbsp;&nbsp;&nbsp;&nbsp; Technological risks** 

**Information technology** 

CAE's operations rely heavily on information technology infrastructure, software as a service and other software applications, whether hosted internally or outsourced. As we expand our product portfolio to include software solutions and place greater emphasis on digital strategy and AI, this reliance on information technology infrastructure and systems has become even more critical. Our business also requires the appropriate and secure handling of sensitive and confidential information from third parties such as aircraft OEMs, national defence forces and customers. Any material disruption in our technology systems could have a material adverse effect on our business, financial condition, prospects and/or results of operations. Similarly, any material technological issue with our software solutions or with data feeds, infrastructure or systems provided by third parties could result in financial losses and/or impairments in our customers' operations.

System modernization, updates and system replacements can temporarily disrupt our business activities. Conversely, failure to maintain, upgrade, replace or properly implement such new information technology systems could result in increased risk of a cybersecurity incident and have an adverse effect on operational efficiency, revenue or reputation. In addition, the digital transformation and the adoption of emerging technologies, such as AI and machine learning, require continued focus and investment to manage those risks effectively.

**Reliance on third-party providers for information technology systems and infrastructure management**

Operations for some information technology systems maintenance and support services and infrastructure management functions are outsourced to third-party service providers. If these service providers are disrupted or do not perform effectively, it may have a material adverse impact on CAE's operations and customers.

Third-party providers' services are often subscription-based, subjecting us to various subscription pricing models based on market trends. Strategic renegotiation of such agreements can be lengthy, and it is important to manage and review performance of our third-party providers on a continuous basis.

**12. COMPENSATION OF KEY MANAGEMENT PERSONNEL**

Key management personnel have the ability and responsibility to make major operational, financial and strategic decisions for CAE. In fiscal 2025, we determined that key management personnel consist of the Board of Directors and its Management Team, which is comprised of the President and Chief Executive Officer (CEO) and executive officers who report directly to him. In fiscal 2024, prior to the senior leadership reorganization announced in May 2024, we determined that key management personnel consisted of the Board of Directors, the President and Chief Executive Officer, the Chief Financial Officer, and the Group Presidents. As at March 31, 2025, key management personnel consist of 12 non-employee Directors and 8 executive officers (2024 – 12 non-employee Directors and 5 executive officers).

The compensation expense of key management for employee services recognized in income are as follows:

---

| | | |
|:---|:---|:---|
| *(amounts in millions)* | **2025** | 2024 |
| Salaries and other short-term employee benefits | $**12.5** | $6.6 |
| Post-employment benefits – defined benefit plans | **2.0** | 3.8 |
| Costs related to the CEO's terms of departure | **6.3** |  |
| Termination benefits | **5.0** | 2.1 |
| Share-based payments expense | **22.2** | 4.4 |
|  | $**48.0** | $16.9 |

---

In November 2024, the Company announced its CEO succession plan whereby the current CEO will be leaving the Company at the Annual General Meeting in August 2025. The CEO's terms of departure were finalized during the fourth quarter of fiscal 2025 and include non-compete and non-solicitation covenants, as well as other terms that are generally consistent with the previously agreed-upon employment arrangement which will remain in force until the departure date.

During fiscal 2025, the Company incurred approximately $8.3 million of executive management transition costs, including $6.3 million related to the CEO's terms of departure, representing accrued expenses not yet paid to the current CEO, and $2.0 million of other costs consisting primarily of external advisor fees. These costs are recorded in selling, general and administrative expenses.

For the year ended March 31, 2025, the compensation earned by non-employee Directors amounted to $3.9 million (2024 – $3.3 million), which include the grant date fair value of deferred share units (DSUs) as well as cash payments.

48 I CAE Financial Report 2025

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Management's Discussion and Analysis

**13. NON-IFRS AND OTHER FINANCIAL MEASURES AND SUPPLEMENTARY NON-FINANCIAL INFORMATION**

**13.1&nbsp;&nbsp;&nbsp;&nbsp; Non-IFRS and other financial measure definitions**

This MD&A includes non-IFRS financial measures, non-IFRS ratios, capital management measures and supplementary financial measures. These measures are not standardized financial measures prescribed under IFRS and therefore should not be confused with, or used as an alternative for, performance measures calculated according to IFRS. Furthermore, these measures should not be compared with similarly titled measures provided or used by other issuers. Management believes that these measures provide additional insight into our operating performance and trends and facilitate comparisons across reporting periods.

A non-IFRS financial measure is a financial measure that depicts our financial performance, financial position, or cash flow and either excludes an amount that is included in or includes an amount that is excluded from the composition of the most directly comparable financial measures disclosed in our financial statements.

A non-IFRS ratio is a financial measure disclosed in the form of a ratio, fraction, percentage, or similar representation, that has a non-IFRS financial measure as one or more of its components.

A total of segments measure is a financial measure that is a subtotal or total of two or more reportable segments and is disclosed within the notes to our consolidated financial statements, but not in our primary financial statements.

A capital management measure is a financial measure intended to enable an individual to evaluate our objectives, policies and processes for managing our capital and is disclosed within the notes to our consolidated financial statements, but not in our primary financial statements.

A supplementary financial measure is a financial measure that depicts our historical or expected future financial performance, financial position or cash flow and is not disclosed within our primary financial statements, nor does it meet the definition of any of the above measures.

Certain non-IFRS and other financial measures are provided on a consolidated basis and separately for each of our segments (Civil Aviation and Defense and Security) since we analyze their results and performance separately.

**PERFORMANCE MEASURES**

**Gross profit margin (or gross profit as a % of revenue)**

Gross profit margin is a supplementary financial measure calculated by dividing our gross profit by revenue for a given period. We track it because we believe it provides an enhanced understanding of our operating performance and facilitates the comparison across reporting periods.

**Operating income margin (or operating income as a % of revenue)**

Operating income margin is a supplementary financial measure calculated by dividing our operating income by revenue for a given period. We track it because we believe it provides an enhanced understanding of our operating performance and facilitates the comparison across reporting periods.

**Adjusted segment operating income or loss**

Adjusted segment operating income or loss is a non-IFRS financial measure that gives us an indication of the profitability of each segment because it does not include the impact of any items not specifically related to the segment's performance. We calculate adjusted segment operating income by taking operating income and adjusting for restructuring, integration and acquisition costs, and impairments and other gains and losses arising from significant strategic transactions or specific events. Impairments and other gains and losses arising from significant strategic transactions or specific events consist of the gain on fair value remeasurement of SIMCOM (as described in Note 7 of our consolidated financial statements for the year ended March 31, 2025), the shareholder matters (as described in Section 5.5 of this MD&A), the executive management transition costs (as described in Section 5.6 of this MD&A), the impairment of goodwill (as described in Note 14 of our consolidated financial statements for the year ended March 31, 2024), the impairment of technology and other non-financial assets (as described in Note 5 of our consolidated financial statements for the year ended March 31, 2024) and the impairment reversal of non-financial assets following their repurposing and optimization (as described in Note 5 of our consolidated financial statements for the year ended March 31, 2023). We track adjusted segment operating income because we believe it provides an enhanced understanding of our operating performance and facilitates the comparison across reporting periods. Adjusted segment operating income on a consolidated basis is a total of segments measure since it is the profitability measure employed by management for making decisions about allocating resources to segments and assessing segment performance. Refer to Section 13.3 "*Non-IFRS measure reconciliations*" of this MD&A for a reconciliation of this measure to the most directly comparable measure under IFRS.

**Adjusted segment operating income margin (or adjusted segment operating income as a % of revenue)**

Adjusted segment operating income margin is a non-IFRS ratio calculated by dividing our adjusted segment operating income by revenue for a given period. We track it because we believe it provides an enhanced understanding of our operating performance and facilitates the comparison across reporting periods.

CAE Financial Report 2025 I 49

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Management's Discussion and Analysis

**Adjusted effective tax rate**

Adjusted effective tax rate is a supplementary financial measure that represents the effective tax rate on adjusted net income or loss. It is calculated by dividing our income tax expense by our earnings before income taxes, adjusting for the same items used to determine adjusted net income or loss. We track it because we believe it provides an enhanced understanding of the impact of changes in income tax rates and the mix of income on our operating performance and facilitates the comparison across reporting periods. Refer to Section 13.3 *"Non-IFRS measure reconciliations"* of this MD&A for a calculation of this measure.

**Adjusted net income or loss**

Adjusted net income or loss is a non-IFRS financial measure we use as an alternate view of our operating results. We calculate it by taking our net income attributable to equity holders of the Company from continuing operations and adjusting for restructuring, integration and acquisition costs, and impairments and other gains and losses arising from significant strategic transactions or specific events, after tax, as well as significant one-time tax items. Impairments and other gains and losses arising from significant strategic transactions or specific events consist of the gain on fair value remeasurement of SIMCOM (as described in Note 7 of our consolidated financial statements for the year ended March 31, 2025), the shareholder matters (as described in Section 5.5 of this MD&A), the executive management transition costs (as described in Section 5.6 of this MD&A), the impairment of goodwill (as described in Note 14 of our consolidated financial statements for the year ended March 31, 2024), the impairment of technology and other non-financial assets (as described in Note 5 of our consolidated financial statements for the year ended March 31, 2024) and the impairment reversal of non-financial assets following their repurposing and optimization (as described in Note 5 of our consolidated financial statements for the year ended March 31, 2023). We track adjusted net income because we believe it provides an enhanced understanding of our operating performance and facilitates the comparison across reporting periods. Refer to Section 13.3 "*Non-IFRS measure reconciliations*" of this MD&A for a reconciliation of this measure to the most directly comparable measure under IFRS.

**Adjusted earnings or loss per share (EPS)** 

Adjusted earnings or loss per share is a non-IFRS ratio calculated by dividing adjusted net income or loss by the weighted average number of diluted shares. We track it because we believe it provides an enhanced understanding of our operating performance on a per share basis and facilitates the comparison across reporting periods. Refer to Section 13.3 "*Non-IFRS measure reconciliations*" of this MD&A for a calculation of this measure.

**EBITDA and Adjusted EBITDA**

EBITDA is a non-IFRS financial measure which comprises net income or loss from continuing operations before income taxes, finance expense – net, depreciation and amortization. Adjusted EBITDA further adjusts for restructuring, integration and acquisition costs, and impairments and other gains and losses arising from significant strategic transactions or specific events. Impairments and other gains and losses arising from significant strategic transactions or specific events consist of the gain on fair value remeasurement of SIMCOM (as described in Note 7 of our consolidated financial statements for the year ended March 31, 2025), the shareholder matters (as described in Section 5.5 of this MD&A), the executive management transition costs (as described in Section 5.6 of this MD&A), the impairment of goodwill (as described in Note 14 of our consolidated financial statements for the year ended March 31, 2024), the impairment of technology and other non-financial assets (as described in Note 5 of our consolidated financial statements for the year ended March 31, 2024) and the impairment reversal of non-financial assets following their repurposing and optimization (as described in Note 5 of our consolidated financial statements for the year ended March 31, 2023). We use EBITDA and adjusted EBITDA to evaluate our operating performance, by eliminating the impact of non-operational or non-cash items. Refer to Section 13.3 "*Non-IFRS measure reconciliations*" of this MD&A for a reconciliation of these measures to the most directly comparable measure under IFRS.

**Free cash flow**

Free cash flow is a non-IFRS financial measure that shows us how much cash we have available to invest in growth opportunities, repay debt and meet ongoing financial obligations. We use it as an indicator of our financial strength and liquidity. We calculate it by taking the net cash generated by our continuing operating activities, subtracting maintenance capital expenditures, intangible assets expenditures excluding capitalized development costs, other investing activities not related to growth and dividends paid and adding proceeds from the disposal of property, plant and equipment, dividends received from equity accounted investees and proceeds, net of payments, from equity accounted investees. Refer to Section 7.1 "*Consolidated cash movements*" of this MD&A for a reconciliation of this measure to the most directly comparable measure under IFRS.

**LIQUIDITY AND CAPITAL STRUCTURE MEASURES**

**Non-cash working capital**

Non-cash working capital is a non-IFRS financial measure we use to monitor how much money we have committed in the day-to-day operation of our business. We calculate it by taking current assets (not including cash and cash equivalents and assets held for sale) and subtracting current liabilities (not including the current portion of long-term debt and liabilities held for sale). Refer to Section 8.1 "*Consolidated capital employed*" of this MD&A for a reconciliation of this measure to the most directly comparable measure under IFRS.

50 I CAE Financial Report 2025

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Management's Discussion and Analysis

**Capital employed**

Capital employed is a non-IFRS financial measure we use to evaluate and monitor how much we are investing in our business. We measure it from two perspectives:

Use of capital:

–For the Company as a whole, we take total assets (not including cash and cash equivalents), and subtract total liabilities (not including long-term debt and the current portion of long-term debt);

–For each segment, we take the total assets (not including cash and cash equivalents, tax accounts, employee benefits assets and other non-operating assets), and subtract total liabilities (not including tax accounts, long-term debt and the current portion of long-term debt, royalty obligations, employee benefit obligations and other non-operating liabilities).

Source of capital:

–In order to understand our source of capital, we add net debt to total equity.

Refer to Section 8.1 "*Consolidated capital employed*" of this MD&A for a reconciliation of this measure to the most directly comparable measure under IFRS.

**Adjusted return on capital employed (ROCE)**

Adjusted ROCE is a non-IFRS ratio calculated over a rolling four-quarter period by taking net income attributable to equity holders of the Company from continuing operations adjusting for net finance expense, after tax, restructuring, integration and acquisition costs, and impairments and other gains and losses arising from significant strategic transactions or specific events divided by the average capital employed from continuing operations. Impairments and other gains and losses arising from significant strategic transactions or specific events consist of the gain on fair value remeasurement of SIMCOM (as described in Note 7 of our consolidated financial statements for the year ended March 31, 2025), the shareholder matters (as described in Section 5.5 of this MD&A), the executive management transition costs (as described in Section 5.6 of this MD&A), the impairment of goodwill (as described in Note 14 of our consolidated financial statements for the year ended March 31, 2024), the impairment of technology and other non-financial assets (as described in Note 5 of our consolidated financial statements for the year ended March 31, 2024) and the impairment reversal of non-financial assets following their repurposing and optimization (as described in Note 5 of our consolidated financial statements for the year ended March 31, 2023). We use adjusted ROCE to evaluate the profitability of our invested capital.

**Net debt**

Net debt is a capital management measure we use to monitor how much debt we have after taking into account cash and cash equivalents. We use it as an indicator of our overall financial position, and calculate it by taking our total long-term debt, including the current portion of long-term debt, and subtracting cash and cash equivalents. Refer to Section 8.1 "*Consolidated capital employed*" of this MD&A for a reconciliation of this measure to the most directly comparable measure under IFRS.

**Net debt-to-capital**

Net debt-to-capital is a capital management measure calculated as net debt divided by the sum of total equity plus net debt. We use this to manage our capital structure and monitor our capital allocation priorities.

**Net debt-to-EBITDA and net debt-to-adjusted EBITDA**

Net debt-to-EBITDA and net debt-to-adjusted EBITDA are non-IFRS ratios calculated as net debt divided by the last twelve months EBITDA (or adjusted EBITDA). We use net debt-to-EBITDA and net debt-to-adjusted EBITDA because they reflect our ability to service our debt obligations. Refer to Section 13.3 "*Non-IFRS measure reconciliations*" of this MD&A for a calculation of these measures.

**Maintenance and growth capital expenditures** 

Maintenance capital expenditure is a supplementary financial measure we use to calculate the investment needed to sustain the current level of economic activity.

Growth capital expenditure is a supplementary financial measure we use to calculate the investment needed to increase the current level of economic activity.

The sum of maintenance capital expenditures and growth capital expenditures represents our total property, plant and equipment expenditures.

CAE Financial Report 2025 I 51

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Management's Discussion and Analysis

**GROWTH MEASURES**

**Adjusted order intake**

Adjusted order intake is a supplementary financial measure that represents the expected value of orders we have received:

–For the Civil Aviation segment, we consider an item part of our adjusted order intake when we have a legally binding commercial agreement with a client that includes enough detail about each party's obligations to form the basis for a contract. Additionally, expected future revenues from customers under short-term and long-term training contracts are included when these customers commit to pay us training fees, or when we reasonably expect the revenue to be generated;

–For the Defense and Security segment, we consider an item part of our adjusted order intake when we have a legally binding commercial agreement with a client that includes enough detail about each party's obligations to form the basis for a contract. Defense and Security contracts are usually executed over a long-term period but some of them must be renewed each year. For this segment, we only include a contract item in adjusted order intake when the customer has authorized the contract item and has received funding for it.

**Adjusted backlog**

Adjusted backlog is a supplementary financial measure that represents expected future revenues and includes obligated backlog, joint venture backlog and unfunded backlog and options:

–Obligated backlog represents the value of our adjusted order intake not yet executed and is calculated by adding the adjusted order intake of the current period to the balance of the obligated backlog at the end of the previous fiscal year, subtracting the revenue recognized in the current period and adding or subtracting backlog adjustments. If the amount of an order already recognized in a previous fiscal year is modified, the backlog is revised through adjustments;

–Joint venture backlog is obligated backlog that represents the expected value of our share of orders that our joint ventures have received but have not yet executed. Joint venture backlog is determined on the same basis as obligated backlog described above, but excludes any portion of orders that have been directly subcontracted to a CAE subsidiary, which are already reflected in the determination of obligated backlog;

–Unfunded backlog represents legally binding Defense and Security orders with the U.S. government that we have received but have not yet executed and for which funding authorization has not yet been obtained. The uncertainty relates to the timing of the funding authorization, which is influenced by the government's budget cycle, based on a September year-end. Options are included in adjusted backlog when there is a high probability of being exercised, which we define as at least 80% probable, but multi-award indefinite-delivery/indefinite-quantity (ID/IQ) contracts are excluded. When an option is exercised, it is considered adjusted order intake in that period, and it is removed from unfunded backlog and options.

**Book-to-sales ratio**

The book-to-sales ratio is a supplementary financial measure calculated by dividing adjusted order intake by revenue in a given period. We use it to monitor the level of future growth of the business over time.

**13.2&nbsp;&nbsp;&nbsp;&nbsp; Supplementary non-financial information definitions**

**Full-flight simulators (FFSs) in CAE's network**

A FFS is a full-size replica of a specific make, model and series of an aircraft cockpit, including a motion system. In our count of FFSs in the network, we generally only include FFSs that are of the highest fidelity and do not include any fixed based training devices, or other lower-level devices, as these are typically used in addition to FFSs in the same approved training programs.

**Simulator equivalent unit (SEU)**

SEU is a measure we use to show the total average number of FFSs available to generate earnings during the period. For example, in the case of a 50/50 flight training joint venture, we will report only 50% of the FFSs under this joint venture as a SEU. If a FFS is being powered down and relocated, it will not be included as a SEU until the FFS is re-installed and available to generate earnings.

**Utilization rate**

Utilization rate is a measure we use to assess the performance of our Civil simulator training network. While utilization rate does not perfectly correlate to revenue recognized, we track it, together with other measures, because we believe it is an indicator of our operating performance. We calculate it by taking the number of training hours sold on our simulators during the period divided by the practical training capacity available for the same period.

52 I CAE Financial Report 2025

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Management's Discussion and Analysis

**13.3&nbsp;&nbsp;&nbsp;&nbsp; Non-IFRS measure reconciliations**

**Reconciliation of adjusted segment operating income**

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| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| | | | Defense | Defense | | |
| *(amounts in millions)* | Civil Aviation | Civil Aviation | and Security | and Security |  | Total |
| *Three months ended March 31* | **2025** | 2024 | **2025** | 2024 | **2025** | 2024 |
| Operating income (loss) | $**197.4** | $147.0 | $**42.5** | $(680.0) | $**239.9** | $(533.0) |
| Restructuring, integration and acquisition costs | **—** | 44.4 | **—** | 10.6 | **—** | 55.0 |
| Impairments and other gains and losses arising from |  |  |  |  |  |  |
| &nbsp;&nbsp;significant strategic transactions or specific events: |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Shareholder matters | **6.3** |  | **4.3** |  | **10.6** |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Executive management transition costs | **4.7** |  | **3.6** |  | **8.3** |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Impairment of goodwill | **—** |  | **—** | 568.0 | **—** | 568.0 |
| &nbsp;&nbsp;&nbsp;&nbsp;Impairment of technology and other non-financial assets | **—** |  | **—** | 35.7 | **—** | 35.7 |
| Adjusted segment operating income (loss) | $**208.4** | $191.4 | $**50.4** | $(65.7) | $**258.8** | $125.7 |

---

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| | | | Defense | Defense | | |
| *(amounts in millions)* | Civil Aviation | Civil Aviation | and Security | and Security |  | Total |
| *Years ended March 31* | **2025** | 2024 | **2025** | 2024 | **2025** | 2024 |
| Operating income (loss) | $**605.3** | $442.0 | $**123.9** | $(627.4) | $**729.2** | $(185.4) |
| Restructuring, integration and acquisition costs | **37.8** | 106.9 | **18.7** | 24.5 | **56.5** | 131.4 |
| Impairments and other gains and losses arising from |  |  |  |  |  |  |
| &nbsp;&nbsp;significant strategic transactions or specific events: |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Gain on fair value remeasurement of SIMCOM | **(72.6)** |  | **—** |  | **(72.6)** |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Shareholder matters | **6.3** |  | **4.3** |  | **10.6** |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Executive management transition costs | **4.7** |  | **3.6** |  | **8.3** |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Impairment of goodwill | **—** |  | **—** | 568.0 | **—** | 568.0 |
| &nbsp;&nbsp;&nbsp;&nbsp;Impairment of technology and other non-financial assets | **—** |  | **—** | 35.7 | **—** | 35.7 |
| Adjusted segment operating income | $**581.5** | $548.9 | $**150.5** | $0.8 | $**732.0** | $549.7 |

---

**Reconciliation of adjusted net income and adjusted EPS**

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
| | | **Three months ended** | **Three months ended** | **Years ended** | **Years ended** |
| | **March 31** | **March 31** | **March 31** | **March 31** | **March 31** |
| *(amounts in millions, except per share amounts)* |  | **2025** | 2024 | **2025** | 2024 |
| Net income attributable to equity holders of the Company | Net income attributable to equity holders of the Company | $**135.9** | $(484.2) | $**405.3** | $(304.0) |
| Net loss (income) from discontinued operations |  | **—** | (20.5) | **—** | (21.3) |
| Restructuring, integration and acquisition costs, after tax |  | **—** | 42.3 | **43.2** | 101.0 |
| Impairments and other gains and losses arising from |  |  |  |  |  |
| &nbsp;&nbsp;significant strategic transactions or specific events: |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Gain on fair value remeasurement of SIMCOM, after tax |  | **—** |  | **(76.7)** |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Shareholder matters, after tax |  | **7.6** |  | **7.6** |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Executive management transition costs, after tax |  | **6.1** |  | **6.1** |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Impairment of goodwill, after tax |  | **—** | 473.7 | **—** | 473.7 |
| &nbsp;&nbsp;&nbsp;&nbsp;Impairment of technology and other non-financial assets, after tax | &nbsp;&nbsp;&nbsp;&nbsp;Impairment of technology and other non-financial assets, after tax | **—** | 27.4 | **—** | 27.4 |
| Adjusted net income |  | $**149.6** | $38.7 | $**385.5** | $276.8 |
| Average number of shares outstanding (diluted) |  | **321.1** | 318.3 | **319.7** | 318.2 |
| Adjusted EPS |  | $**0.47** | $0.12 | $**1.21** | $0.87 |

---

CAE Financial Report 2025 I 53

------

Management's Discussion and Analysis

**Calculation of adjusted effective tax rate**

---

| | | | | |
|:---|:---|:---|:---|:---|
| | **Three months ended** | **Three months ended** | **Years ended** | **Years ended** |
| | **March 31** | **March 31** | **March 31** | **March 31** |
| *(amounts in millions, except effective tax rates)* | **2025** | 2024 | **2025** | 2024 |
| Earnings (loss) before income taxes | $**183.4** | $(585.4) | $**513.7** | $(390.4) |
| Restructuring, integration and acquisition costs | **—** | 55.0 | **56.5** | 131.4 |
| Impairments and other gains and losses arising from |  |  |  |  |
| &nbsp;&nbsp;significant strategic transactions or specific events: |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Gain on fair value remeasurement of SIMCOM | **—** |  | **(72.6)** |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Shareholder matters | **10.6** |  | **10.6** |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Executive management transition costs | **8.3** |  | **8.3** |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Impairment of goodwill | **—** | 568.0 | **—** | 568.0 |
| &nbsp;&nbsp;&nbsp;&nbsp;Impairment of technology and other non-financial assets | **—** | 35.7 | **—** | 35.7 |
| Adjusted earnings before income taxes | $**202.3** | $73.3 | $**516.5** | $344.7 |
| Income tax expense (recovery) | $**45.2** | $(80.6) | $**98.7** | $(72.8) |
| Tax impact on restructuring, integration and acquisition costs | **—** | 12.7 | **13.3** | 30.4 |
| Tax impact on impairments and other gains and losses arising |  |  |  |  |
| &nbsp;&nbsp;from significant strategic transactions or specific events: |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Tax impact on gain on fair value remeasurement of SIMCOM | **—** |  | **4.1** |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Tax impact on shareholder matters | **3.0** |  | **3.0** |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Tax impact on executive management transition costs | **2.2** |  | **2.2** |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Tax impact on impairment of goodwill | **—** | 94.3 | **—** | 94.3 |
| &nbsp;&nbsp;&nbsp;&nbsp;Tax impact on impairment of technology and other non-financial assets | **—** | 8.3 | **—** | 8.3 |
| Adjusted income tax expense | $**50.4** | $34.7 | $**121.3** | $60.2 |
| Effective tax rate | **25** | 14 | **19** | 19 |
| Adjusted effective tax rate | **25** | 47 | **23** | 17 |

---

**Reconciliation of EBITDA, adjusted EBITDA, net debt-to-EBITDA and net debt-to-adjusted EBITDA**

---

| | | |
|:---|:---|:---|
| | **Last twelve months ended** | **Last twelve months ended** |
| | **March 31** | **March 31** |
| *(amounts in millions, except net debt-to-EBITDA ratios)* | **2025** | 2024 |
| Operating income (loss) | $**729.2** | $(185.4) |
| Depreciation and amortization | **414.7** | 368.7 |
| EBITDA | $**1143.9** | $183.3 |
| Restructuring, integration and acquisition costs | **56.5** | 131.4 |
| Impairments and other gains and losses arising from |  |  |
| &nbsp;&nbsp;significant strategic transactions or specific events: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Gain on fair value remeasurement of SIMCOM | **(72.6)** |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Shareholder matters | **10.6** |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Executive management transition costs | **8.3** |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Impairment of goodwill | **—** | 568.0 |
| &nbsp;&nbsp;&nbsp;&nbsp;Impairment of technology and other non-financial assets | **—** | 35.7 |
| Adjusted EBITDA | $**1146.7** | $918.4 |
| Net debt | $**3176.7** | $2914.2 |
| Net debt-to-EBITDA | **2.78** | 15.90 |
| Net debt-to-adjusted EBITDA | **2.77** | 3.17 |

---

54 I CAE Financial Report 2025

------

Management's Discussion and Analysis

**14. CHANGES IN ACCOUNTING POLICIES**

**14.1&nbsp;&nbsp;&nbsp;&nbsp; New and amended standards adopted**

***Amendments to IAS 1 – Presentation of Financial Statements***

In January 2020, the IASB issued a narrow-scope amendment to IAS 1 – *Presentation of Financial Statements*, which clarifies that the classification of liabilities as current or non-current is based on rights that are in existence at the end of the reporting period. Classification is unaffected by expectations about whether an entity will exercise its right to defer settlement of a liability or events after the reporting date. The amendment also clarifies what IAS 1 means when it refers to the 'settlement' of a liability.

In October 2022, the IASB issued amendments to IAS 1 – *Presentation of Financial Statements*, which specify that for long-term debt with covenants to be complied with after the reporting date, such covenants do not affect the classification of debt as current or non-current at the reporting date, but do require disclosures in the notes to the financial statements.

These amendments to accounting standards were applied for the first time on April 1, 2024, but did not have a significant impact on our consolidated financial statements.

***Amendments to IFRS 16 – Leases***

In September 2022, the IASB issued amendments to IFRS 16 – *Leases*, which requires a seller-lessee to subsequently measure lease liabilities arising from a leaseback in a way that it does not recognize any amount of the gain or loss that relates to the right of use it retains. The new requirements do not prevent a seller-lessee from recognizing in profit or loss any gain or loss relating to the partial or full termination of a lease. This amendment was applied for the first time on April 1, 2024, but did not have a significant impact on our consolidated financial statements.

***Amendments to IAS 7 – Statement of Cash Flows, and IFRS 7 – Financial Instruments: disclosures***

In May 2023, the IASB issued amendments to IAS 7 – *Statement of Cash Flows* and IFRS 7 – *Financial Instruments: disclosure*, which introduces disclosure requirements to enhance the transparency of supplier finance arrangements and their effects on an entity's liabilities, cash flows and exposure to liquidity risk. The amendments provide a transition relief whereby an entity is not required to provide the disclosures, otherwise required by the amendments, for any comparative period in the year of initial application of the amendments. This amendment was applied for the first time on April 1, 2024, and we have elected to apply the transition relief to our consolidated financial statements.

***Disclosure of revenues and expenses for reportable segments – IFRS 8 – Operating Segments***

In July 2024, the IFRS Interpretations Committee issued an agenda decision which clarifies certain disclosure requirements under IFRS 8 – *Operating Segments*. The decision highlights the need to disclose certain specified income and expense items if these are included in the measure of segment profit or loss reviewed by the Chief Operating Decision Maker (CODM) or are otherwise regularly provided to the CODM, even if not included in that measure of segment profit or loss. The required disclosures have been made in Note 4 – *Operating segments and geographic information* of our consolidated financial statements.

**14.2&nbsp;&nbsp;&nbsp;&nbsp; New and amended standards not yet adopted**

***Amendments to IFRS 7 – Financial Statements Disclosures and IFRS 9 – Financial Instruments***

In May 2024, the IASB issued amendments to IFRS 7 - *Financial Statements Disclosures* and IFRS 9 - *Financial Instruments* to clarify the date of recognition and derecognition of some financial assets and liabilities, with a new exception for some financial liabilities settled through an electronic cash transfer system, to clarify and add further guidance for assessing whether a financial asset meets the solely payments of principal and interest (SPPI) criterion, add new disclosures for certain instruments with contractual terms that can change cash flows (such as some instruments with features linked to the achievement of ESG targets), and update the disclosures for equity instruments designated at FVOCI.

These amendments to IFRS 7 and IFRS 9 will be effective for our fiscal period beginning on April 1, 2026, with earlier adoption permitted. We continue to evaluate the impact of these amendments on our consolidated financial statements.

***IFRS 18 – Presentation and Disclosure in Financial Statements***

In April 2024, the IASB issued IFRS 18 *- Presentation and Disclosure in Financial Statements* which sets out requirements for the presentation and disclosure of information in the financial statements. IFRS 18 will replace IAS 1 - Presentation of Financial Statements but carries forward many of the requirements from IAS 1. IFRS 18 introduces a defined structure for the income statement, composed of required categories and subtotals, and disclosure requirements for management-defined performance measures.

IFRS 18 will be effective for our fiscal period beginning on April 1, 2027. We continue to evaluate the impact of the new standard on our consolidated financial statements.

CAE Financial Report 2025 I 55

------

Management's Discussion and Analysis

**14.3&nbsp;&nbsp;&nbsp;&nbsp; Use of judgements, estimates and assumptions**

The preparation of the consolidated financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies, the reported amounts of assets and liabilities and disclosures at the date of the consolidated financial statements, as well as the reported amounts of revenues and expenses for the period reported. It also requires management to exercise its judgement in applying accounting policies. The areas involving a high degree of judgement or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements are disclosed below. Actual results could differ from those estimates. Changes will be reported in the period in which they are identified.

**Business combinations**

Business combinations are accounted for in accordance with the acquisition method as of the date control is transferred. The consideration transferred and the acquiree's identifiable assets, liabilities and contingent liabilities are measured at their fair value at the date of acquisition, which may be estimated using an income, market or cost valuation method. Depending on the complexity of determining these valuations, we either consult with independent experts or develop the fair value internally by using appropriate valuation techniques which are generally based on a forecast of the total expected future net discounted cash flows. These evaluations are linked closely to the assumptions made by management regarding the future performance of the related assets and the discount rate. Contingent consideration is measured at fair value using a discounted cash flow model.

The judgments made in determining the estimated fair value assigned to the net identifiable assets acquired, as well as the estimated useful life of non-financial assets, could impact the net income of subsequent periods through depreciation and amortization, and in certain instances through impairment charges. We believe that the estimated fair values assigned to the net identifiable assets acquired are based on reasonable assumptions that a marketplace participant would use. While we use our best estimates and assumptions to accurately value the net identifiable assets acquired at the acquisition date, estimates are inherently uncertain and subject to refinement.

During the measurement period, for up to 12 months following the acquisition, we recorded adjustments to the initial estimate of the net identifiable assets acquired based on new information obtained that would have existed as of the date of the acquisition. Any adjustment that arises from information obtained that did not exist as of the date of the acquisition will be recorded in the period the adjustment arises.

**Development costs**

Development costs are recognized as intangible assets and are amortized over their useful lives when they meet the criteria for capitalization. Forecasted revenue and profitability for the relevant projects are used to assess compliance with the capitalization criteria and to assess the recoverable amount of the assets.

**Impairment of non-financial assets** 

Our impairment test for goodwill is based on estimates of the recoverable amount of the CGU or group of CGUs to which goodwill has been allocated and uses valuation models such as the discounted cash flows model (level 3). Management applies significant judgement in developing the cash flow model, which includes the use of key assumptions including expected revenue growth, margin projections and the discount rates. Management also applies judgement when reflecting the impact surrounding current market view of risk and uncertainty and macroeconomic conditions. These estimates, including the methodology used, can have a material impact on the respective values and ultimately the amount of any goodwill impairment.

Likewise, whenever property, plant and equipment and intangible assets are tested for impairment, the determination of the assets' recoverable amount involves the use of estimates by management and can have a material impact on the respective values and ultimately the amount of any impairment.

**Revenue recognition**

*Transaction price allocated to performance obligations*

In allocating the transaction price for contracts with multiple performance obligations, we estimate the stand-alone selling price using the expected cost plus a margin approach if they are not directly observable.

*Determining the measure of progress of performance obligations satisfied over time* 

For contracts where revenue is recognized over time using the cost input method, we apply judgement in estimating the total costs to complete the contract.

The determination of the total costs to complete a contract is based on estimates that can be affected by several factors, including program management and execution difficulties, technological challenges, cost of materials, supply chain disruptions, inflationary pressures, availability of labour and problems with suppliers or subcontractors.

Management conducts monthly reviews of our estimated costs to complete as well as our revenue and margins recognized, on a contract-by-contract basis. The impact of any revisions in cost and revenue estimates is reflected in the period in which the need for a revision becomes known.

56 I CAE Financial Report 2025

------

Management's Discussion and Analysis

**Defined benefit pension plans**

The cost of defined benefit pension plans and the present value of the employee benefit obligations are determined using actuarial valuations. Actuarial valuations involve, amongst others, making assumptions about discount rates, future salary increases and mortality rates. All assumptions are reviewed at each reporting date. Any changes in these assumptions will impact the carrying amount of the employee benefit obligations and the cost of the defined benefit pension plans. In determining the appropriate discount rate, management considers the interest rates of high quality corporate bonds that are denominated in the currency in which the benefits will be paid, and that have terms to maturity approximating the terms of the related pension liability. The mortality rate is based on publicly available mortality tables for the specific country. Future salary increases and pension increases are based on expected future inflation rates for the specific country. Individual discount rates are derived from the yield curve and are used to determine the service cost and interest cost of the Canadian defined benefit pension plans at the beginning of the year. The present value of the employee benefit obligations for these Canadian plans is determined based on the individual discount rates derived from the yield curve at the end of the year. Other key assumptions for pension obligations are based, in part, on current market conditions. See Note 22 of our consolidated financial statements for further details regarding assumptions used.

**Income taxes**

We are subject to income tax laws in numerous jurisdictions. Judgement is required in determining the worldwide provision for income taxes. The determination of tax liabilities and assets involves uncertainties in the interpretation of complex tax regulations. We provide for potential tax liabilities based on the weighted average probability of the possible outcomes. Differences between actual results and those estimates could influence the income tax liabilities and deferred tax liabilities in the period in which such determinations are made.

Deferred tax assets are recognized to the extent that it is probable that taxable profit will be available against the losses that can be utilized. Significant management judgement is required to determine the amount of deferred tax assets that can be recognized, based upon the likely timing and the level of future taxable profits together with future tax planning strategies. The recorded amount of total deferred tax assets could be altered if estimates of projected future taxable income and benefits from available tax strategies are lowered, or if changes in current tax regulations are enacted that impose restrictions on the timing or extent of our ability to utilize future tax benefits.

**15. INTERNAL CONTROL OVER FINANCIAL REPORTING**

The Company has established and maintains disclosure controls and procedures designed to provide reasonable assurance that material information relating to the Company is communicated to the President and Chief Executive Officer and the Interim Chief Financial Officer by others, particularly during the period in which annual and interim filings are prepared, and that information required to be disclosed by the Company in its annual filings, interim filings or other reports filed or submitted by the Company under Canadian and U.S. securities laws is recorded, processed, summarized and reported within the time periods specified under those laws and the related rules.

As of March 31, 2025, management evaluated, under the supervision of and with the participation of the President and Chief Executive Officer and the Interim Chief Financial Officer, the effectiveness of the Company's disclosure controls and procedures as defined under National Instrument 52-109 adopted by the Canadian Securities Administrators and in Rule 13(a)-15(e) under the U.S. Securities Exchange Act of 1934, as amended, and have concluded that the Company's disclosure controls and procedures were effective.

The Company has also established and maintains internal control over financial reporting, as defined under National Instrument 52-109 and in Rule 13(a)-15(f) under the U.S. Securities Exchange Act of 1934, as amended. The Company's internal control over financial reporting is a process designed, under the supervision of the President and Chief Executive Officer as well as the Interim Chief Financial Officer, and effected by management and other key CAE personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the Company's consolidated financial statements for external reporting purposes in accordance with IFRS as issued by the IASB. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Management has assessed the effectiveness of the Company's internal control over financial reporting as of March 31, 2025 using the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control – Integrated Framework (2013). Based on this assessment, management has determined that the Company's internal control over financial reporting was effective as of March 31, 2025.

There were no changes in the Company's internal control over financial reporting that occurred during the fourth quarter and fiscal year 2025 that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.

CAE Financial Report 2025 I 57

------

Management's Discussion and Analysis

**16. OVERSIGHT ROLE OF AUDIT COMMITTEE AND BOARD OF DIRECTORS**

The Audit Committee reviews our annual MD&A and related consolidated financial statements with management and the external auditor and recommends them to the Board for their approval. Management and our internal auditor also provide the Audit Committee with regular reports assessing our internal controls and procedures for financial reporting. The external auditor reports regularly to management on any weaknesses it finds in our internal control, and these reports are reviewed by the Audit Committee.

**17. ADDITIONAL INFORMATION**

You will find additional information about CAE, including our most recent AIF, on our website at www.cae.com, or on SEDAR+ at www.sedarplus.ca or on EDGAR at www.sec.gov.

58 I CAE Financial Report 2025

------

Management's Discussion and Analysis

**18. SELECTED FINANCIAL INFORMATION**

The following table provides selected quarterly financial information for the past three fiscal years.

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
| *(amounts in millions, except per share amounts)* | Q1 | Q2 | Q3 | Q4 | Total |
| **Fiscal 2025** |  |  |  |  |  |
| Revenue | $**1072.5** | **1136.6** | **1223.4** | **1275.4** | **4707.9** |
| Net income | $**50.8** | **54.8** | **171.2** | **138.2** | **415.0** |
| &nbsp;&nbsp;&nbsp;&nbsp; Equity holders of the Company | $**48.3** | **52.5** | **168.6** | **135.9** | **405.3** |
| &nbsp;&nbsp;&nbsp;&nbsp; Non-controlling interests | $**2.5** | **2.3** | **2.6** | **2.3** | **9.7** |
| Basic and diluted EPS attributable to equity holders of the Company | $**0.15** | **0.16** | **0.53** | **0.42** | **1.27** |
| Adjusted EPS | $**0.21** | **0.24** | **0.29** | **0.47** | **1.21** |
| Average number of shares outstanding (basic) | **318.6** | **318.7** | **319.0** | **320.0** | **319.1** |
| Average number of shares outstanding (diluted) | **318.8** | **319.1** | **319.8** | **321.1** | **319.7** |
| **Fiscal 2024** |  |  |  |  |  |
| Revenue | $1012.0 | 1050.0 | 1094.5 | 1126.3 | 4282.8 |
| Net income | $67.8 | 61.1 | 59.1 | (484.3) | (296.3) |
| &nbsp;&nbsp;&nbsp;&nbsp; Equity holders of the Company |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Continuing operations | $64.8 | 56.2 | 58.4 | (504.7) | (325.3) |
| &nbsp;&nbsp;&nbsp;&nbsp; Discontinued operations | $0.5 | 2.2 | (1.9) | 20.5 | 21.3 |
| &nbsp;&nbsp;&nbsp;&nbsp; Non-controlling interests | $2.5 | 2.7 | 2.6 | (0.1) | 7.7 |
| Basic and diluted EPS attributable to equity holders of the Company | $0.20 | 0.18 | 0.17 | (1.52) | (0.95) |
| &nbsp;&nbsp;&nbsp;&nbsp; Continuing operations | $0.20 | 0.17 | 0.18 | (1.58) | (1.02) |
| &nbsp;&nbsp;&nbsp;&nbsp; Discontinued operations | $— | 0.01 | (0.01) | 0.06 | 0.07 |
| Adjusted EPS | $0.24 | 0.26 | 0.24 | 0.12 | 0.87 |
| Average number of shares outstanding (basic) | 318.0 | 318.2 | 318.3 | 318.3 | 318.2 |
| Average number of shares outstanding (diluted) | 318.8 | 319.2 | 319.1 | 318.3 | 318.2 |
| **Fiscal 2023** |  |  |  |  |  |
| Revenue | $893.7 | 949.6 | 969.9 | 1197.4 | 4010.6 |
| Net income | $3.7 | 46.3 | 80.0 | 101.9 | 231.9 |
| &nbsp;&nbsp;&nbsp;&nbsp; Equity holders of the Company |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Continuing operations | $6.8 | 44.2 | 76.0 | 93.6 | 220.6 |
| &nbsp;&nbsp;&nbsp;&nbsp; Discontinued operations | $(5.1) | 0.3 | 2.1 | 4.8 | 2.1 |
| &nbsp;&nbsp;&nbsp;&nbsp; Non-controlling interests | $2.0 | 1.8 | 1.9 | 3.5 | 9.2 |
| Basic and diluted EPS attributable to equity holders of the Company | $— | 0.14 | 0.25 | 0.31 | 0.70 |
| &nbsp;&nbsp;&nbsp;&nbsp; Continuing operations | $0.02 | 0.14 | 0.24 | 0.29 | 0.69 |
| &nbsp;&nbsp;&nbsp;&nbsp; Discontinued operations | $(0.02) |  | 0.01 | 0.02 | 0.01 |
| Adjusted EPS | $0.07 | 0.19 | 0.27 | 0.33 | 0.87 |
| Average number of shares outstanding (basic) | 317.1 | 317.8 | 317.9 | 317.9 | 317.7 |
| Average number of shares outstanding (diluted) | 318.2 | 318.4 | 318.3 | 318.7 | 318.4 |

---

The following table provides selected annual financial information for the past three fiscal years.

---

| | | | |
|:---|:---|:---|:---|
| *(amounts in millions)* | **2025** | **2024** | **2023** |
| Financial position: |  |  |  |
| Total assets | $**11213.8** | $9834.1 | $10436.5 |
| Total non-current financial liabilities<sup>(1)</sup> | **3185.2** | 2855.4 | 3179.6 |
| Total net debt | **3176.7** | 2914.2 | 3032.5 |

---

<sup>(1)</sup> Includes long-term debt, long-term derivative liabilities and other long-term liabilities meeting the definition of a financial liability.

CAE Financial Report 2025 I 59

CAE INC.

CONSOLIDATED FINANCIAL STATEMENTS

---

| | |
|:---|:---|
| **[Management's Report on Internal Control Over Financial Reporting](#i9a224e60797d4506b8e15d9e276511cc_4)** | [61](#i9a224e60797d4506b8e15d9e276511cc_4) |
| **[Report of Independent Registered Public Accounting Firm](#i9a224e60797d4506b8e15d9e276511cc_10)** | [62](#i9a224e60797d4506b8e15d9e276511cc_10) |
| **[Consolidated Financial Statements](#i9a224e60797d4506b8e15d9e276511cc_13)** |  |
| Consolidated income statement | [64](#i9a224e60797d4506b8e15d9e276511cc_19) |
| Consolidated statement of comprehensive income | [65](#i9a224e60797d4506b8e15d9e276511cc_22) |
| Consolidated statement of financial position | [66](#i9a224e60797d4506b8e15d9e276511cc_25) |
| Consolidated statement of changes in equity | [67](#i9a224e60797d4506b8e15d9e276511cc_28) |
| Consolidated statement of cash flows | [68](#i9a224e60797d4506b8e15d9e276511cc_31) |
| **[Notes to the Consolidated Financial Statements](#i9a224e60797d4506b8e15d9e276511cc_34)** |  |
| Note 1 - Nature of operations and summary of material accounting policies | [69](#i9a224e60797d4506b8e15d9e276511cc_37) |
| Note 2 - Business combinations | [85](#i9a224e60797d4506b8e15d9e276511cc_46) |
| Note 3 - Discontinued operations | [86](#i9a224e60797d4506b8e15d9e276511cc_52) |
| Note 4 - Operating segments and geographic information | [87](#i9a224e60797d4506b8e15d9e276511cc_55) |
| Note 5 - Other (gains) and losses | [89](#i9a224e60797d4506b8e15d9e276511cc_58) |
| Note 6 - Restructuring, integration and acquisition costs | [90](#i9a224e60797d4506b8e15d9e276511cc_61) |
| Note 7 - Gain on remeasurement of previously held equity interest | [90](#i9a224e60797d4506b8e15d9e276511cc_61) |
| Note 8 - Finance expense - net | [90](#i9a224e60797d4506b8e15d9e276511cc_67) |
| Note 9 - Income taxes | [91](#i9a224e60797d4506b8e15d9e276511cc_70) |
| Note 10 - Share capital and earnings per share | [93](#i9a224e60797d4506b8e15d9e276511cc_73) |
| Note 11 - Accounts receivable | [93](#i9a224e60797d4506b8e15d9e276511cc_79) |
| Note 12 - Balance from contracts with customers | [94](#i9a224e60797d4506b8e15d9e276511cc_82) |
| Note 13 - Inventories | [94](#i9a224e60797d4506b8e15d9e276511cc_85) |
| Note 14 - Property, plant and equipment | [94](#i9a224e60797d4506b8e15d9e276511cc_88) |
| Note 15 - Intangible assets | [95](#i9a224e60797d4506b8e15d9e276511cc_91) |
| Note 16 - Leases | [97](#i9a224e60797d4506b8e15d9e276511cc_97) |
| Note 17 - Investment in equity accounted investees | [98](#i9a224e60797d4506b8e15d9e276511cc_100) |
| Note 18 - Other non-current assets | [99](#i9a224e60797d4506b8e15d9e276511cc_103) |
| Note 19 - Accounts payable and accrued liabilities | [99](#i9a224e60797d4506b8e15d9e276511cc_106) |
| Note 20 - Provisions | [99](#i9a224e60797d4506b8e15d9e276511cc_109) |
| Note 21 - Debt facilities | [100](#i9a224e60797d4506b8e15d9e276511cc_112) |
| Note 22 - Employee benefits obligations | [102](#i9a224e60797d4506b8e15d9e276511cc_115) |
| Note 23 - Other non-current liabilities | [105](#i9a224e60797d4506b8e15d9e276511cc_118) |
| Note 24 - Supplementary cash flows information | [105](#i9a224e60797d4506b8e15d9e276511cc_121) |
| Note 25 - Accumulated other comprehensive income | [106](#i9a224e60797d4506b8e15d9e276511cc_124) |
| Note 26 - Share-based payments | [106](#i9a224e60797d4506b8e15d9e276511cc_127) |
| Note 27 - Employee compensation | [109](#i9a224e60797d4506b8e15d9e276511cc_133) |
| Note 28 - Government participation | [109](#i9a224e60797d4506b8e15d9e276511cc_136) |
| Note 29 - Contingencies and commitments | [110](#i9a224e60797d4506b8e15d9e276511cc_139) |
| Note 30 - Fair value of financial instruments | [111](#i9a224e60797d4506b8e15d9e276511cc_142) |
| Note 31 - Capital risk management | [112](#i9a224e60797d4506b8e15d9e276511cc_148) |
| Note 32 - Financial risk management | [113](#i9a224e60797d4506b8e15d9e276511cc_151) |
| Note 33 - Compensation of key management personnel | [118](#i9a224e60797d4506b8e15d9e276511cc_157) |

---

60 \| CAE Financial Report 2025

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Management's Report on Internal Control Over Financial Reporting

The management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting. The Company's internal control over financial reporting is a process designed, under the supervision of and with the participation of the President and Chief Executive Officer and the Interim Chief Financial Officer, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the Company's consolidated financial statements for external reporting purposes in accordance with IFRS Accounting Standards (IFRS), as issued by the International Accounting Standards Board (IASB).

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Management has assessed the effectiveness of the Company's internal control over financial reporting as of March 31, 2025 using the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control – Integrated Framework (2013). Based on this assessment, management has determined that the Company's internal control over financial reporting was effective as of March 31, 2025.

The effectiveness of the Company's internal control over financial reporting as of March 31, 2025 has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report included herein.

**&nbsp;&nbsp;&nbsp;&nbsp;**

**/s/ Marc Parent&nbsp;&nbsp;&nbsp;&nbsp;** &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; **/s/ Constantino Malatesta**

President and Chief Executive Officer&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Interim Chief Financial Officer

May 13, 2025

CAE Financial Report 2025 \| 61

------

Report of Independent Registered Public Accounting Firm

**To the Board of Directors and Shareholders of CAE Inc.** 

**Opinions on the Financial Statements and Internal Control over Financial Reporting**

We have audited the accompanying consolidated statements of financial position of CAE Inc. and its subsidiaries (the Company) as of March 31, 2025 and 2024, and the related consolidated statements of income, of comprehensive income, of changes in equity and of cash flows for the years then ended, including the related notes (collectively referred to as the consolidated financial statements). We also have audited the Company's internal control over financial reporting as of March 31, 2025, based on criteria established in *Internal Control – Integrated Framework* (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of March 31, 2025 and 2024, and its financial performance and its cash flows for the years then ended in conformity with IFRS Accounting Standards as issued by the International Accounting Standards Board. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of March 31, 2025, based on criteria established in *Internal Control – Integrated Framework* (2013) issued by the COSO.

**Basis for Opinions**

The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management's Report on Internal Control over Financial Reporting. Our responsibility is to express opinions on the Company's consolidated financial statements and on the Company's internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

**Definition and Limitations of Internal Control over Financial Reporting**

A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

62 \| CAE Financial Report 2025

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**Critical Audit Matters** 

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

*Revenue recognition – Estimated costs to complete certain contracts*

As described in Note 1 to the consolidated financial statements, the Company recognizes revenue from contracts with customers for the design, engineering, and manufacturing of training devices over time using the cost input method when management determines that these devices have a sufficient level of customization such that they have no alternative use and the Company has enforceable rights to payment for work completed to date. For the year ended March 31, 2025, a portion of total consolidated revenue of $4.7 billion related to revenue recognized from contracts with customers over time using the cost input method. For contracts where revenue is recognized over time using the cost input method, management applies judgment in estimating the total costs to complete the contract. The determination of the total costs to complete a contract is based on estimates that can be affected by several factors, including program management and execution difficulties, technological challenges, cost of materials, supply chain disruptions, inflationary pressures, availability of labour and problems with suppliers or subcontractors. The impact of any revisions in cost and revenue estimates is reflected in the period in which the need for a revision becomes known.

The principal considerations for our determination that performing procedures relating to revenue recognition for estimated costs to complete certain contracts is a critical audit matter are that there was judgment applied by management in estimating the total costs to complete the contracts. This in turn led to a high degree of auditor judgment, subjectivity and effort in performing procedures and evaluating audit evidence related to the total costs to complete the contracts estimated by management.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to the revenue recognition process including controls over the estimation of the total costs to complete the contracts. These procedures also included, among others, testing management's process for estimating the total costs to complete the contracts for a sample of contracts, which included testing the completeness, accuracy and relevance of the data used in the estimate of the work performed to date as a proportion of the total work to be performed; and evaluating the reasonableness of total costs to complete the contracts by considering the factors identified by management as impacting those costs. Evaluating the reasonableness of total costs to complete the contracts involved assessing, on a sample basis, management's ability to reasonably estimate total costs to complete the contracts by comparing changes in estimated costs with the prior year estimate or estimated costs to complete the contracts for new contracts; performing a lookback analysis to assess variances between actual and estimated costs for completed contracts; and performing procedures to evaluate the timely identification of factors which may warrant a modification to a previous cost estimate.

**/s/PricewaterhouseCoopers**

Montréal, Canada

May 13, 2025

We have served as the Company's auditor since 1991.

CAE Financial Report 2025 \| 63

------

Consolidated Financial Statements

Consolidated Income Statement

---

| | | | |
|:---|:---|:---|:---|
| *Years ended March 31* |  |  |  |
| *(amounts in millions of Canadian dollars, except per share amounts)* | Notes | **2025** | 2024 |
| **Continuing operations** |  |  |  |
| Revenue | 4 | $**4707.9** | $4282.8 |
| Cost of sales |  | **3407.8** | 3128.3 |
| **Gross profit** |  | $**1300.1** | $1154.5 |
| Research and development expenses |  | **123.2** | 149.8 |
| Selling, general and administrative expenses |  | **565.4** | 535.0 |
| Other (gains) and losses | 5 | **(13.3)** | 27.9 |
| Share of after-tax profit of equity accounted investees | 4 | **(88.3)** | (72.2) |
| Restructuring, integration and acquisition costs | 6 | **56.5** | 131.4 |
| Impairment of goodwill | 15 | **—** | 568.0 |
| Gain on remeasurement of previously held equity interest | 7 | **(72.6)** |  |
| **Operating income (loss)** |  | $**729.2** | $(185.4) |
| Finance expense – net | 8 | **215.5** | 205.0 |
| **Earnings (loss) before income taxes** |  | $**513.7** | $(390.4) |
| Income tax expense (recovery) | 9 | **98.7** | (72.8) |
| **Net income (loss) from continuing operations** |  | $**415.0** | $(317.6) |
| Net income from discontinued operations | 3 | **—** | 21.3 |
| **Net income (loss)** |  | $**415.0** | $(296.3) |
| Attributable to: |  |  |  |
| Equity holders of the Company |  | $**405.3** | $(304.0) |
| Non-controlling interests |  | **9.7** | 7.7 |
| **Earnings (loss) per share attributable to equity holders of the Company** |  |  |  |
| Basic and diluted – continuing operations | 10 | $**1.27** | $(1.02) |
| Basic and diluted – discontinued operations | 10 | **—** | 0.07 |

---

The accompanying notes form an integral part of these Consolidated Financial Statements.

64 \| CAE Financial Report 2025

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Consolidated Financial Statements

Consolidated Statement of Comprehensive Income

---

| | | | |
|:---|:---|:---|:---|
| *Years ended March 31* |  |  |  |
| *(amounts in millions of Canadian dollars)*  | Notes | **2025** | 2024 |
| **Net income (loss) from continuing operations** |  | $**415.0** | $(317.6) |
| **Items that may be reclassified to net income (loss)** |  |  |  |
| &nbsp;&nbsp;&nbsp;Foreign currency exchange differences on translation of foreign operations |  | $**381.9** | $(4.7) |
| &nbsp;&nbsp;&nbsp;Net (loss) gain on hedges of net investment in foreign operations |  | **(125.2)** | 8.0 |
| &nbsp;&nbsp;&nbsp;Reclassification to income of gains on foreign currency exchange differences |  | **(10.1)** | (1.6) |
| &nbsp;&nbsp;&nbsp;Net loss on cash flow hedges |  | **(41.4)** | (11.9) |
| &nbsp;&nbsp;&nbsp;Reclassification to income of losses on cash flow hedges |  | **20.6** | 5.0 |
| &nbsp;&nbsp;&nbsp;Income taxes | 9 | **5.9** | (1.0) |
|  |  | $**231.7** | $(6.2) |
| **Items that will never be reclassified to net income (loss)** |  |  |  |
| &nbsp;&nbsp;&nbsp;Remeasurement of defined benefit pension plan obligations | 22 | $**(54.3)** | $16.0 |
| &nbsp;&nbsp;&nbsp;Income taxes | 9 | **14.4** | (4.2) |
|  |  | $**(39.9)** | $11.8 |
| **Other comprehensive income from continuing operations** |  | $**191.8** | $5.6 |
| Net income from discontinued operations | 3 | $**—** | 21.3 |
| Other comprehensive loss from discontinued operations | 3 | **—** | (7.0) |
| **Total comprehensive income (loss)** |  | $**606.8** | $(297.7) |
| Attributable to: |  |  |  |
| Equity holders of the Company |  | $**593.2** | $(305.4) |
| Non-controlling interests |  | **13.6** | 7.7 |

---

The accompanying notes form an integral part of these Consolidated Financial Statements.

CAE Financial Report 2025 \| 65

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Consolidated Financial Statements

Consolidated Statement of Financial Position

---

| | | | |
|:---|:---|:---|:---|
| *As at March 31* |  |  |  |
| *(amounts in millions of Canadian dollars)* | Notes | **2025** | 2024 |
| **Assets** |  |  |  |
| Cash and cash equivalents |  | $**293.7** | $160.1 |
| Accounts receivable | 11 | **612.0** | 624.7 |
| Contract assets | 12 | **482.2** | 537.6 |
| Inventories | 13 | **595.0** | 573.6 |
| Prepayments |  | **78.2** | 68.0 |
| Income taxes recoverable |  | **59.0** | 35.3 |
| Derivative financial assets |  | **23.5** | 7.2 |
| **Total current assets** |  | $**2143.6** | $2006.5 |
| Property, plant and equipment | 14 | **2989.5** | 2515.6 |
| Right-of-use assets | 16 | **788.0** | 545.8 |
| Intangible assets | 15 | **3871.0** | 3271.9 |
| Investment in equity accounted investees | 17 | **559.1** | 588.8 |
| Employee benefits assets | 22 | **11.6** | 65.7 |
| Deferred tax assets | 9 | **191.8** | 233.3 |
| Derivative financial assets |  | **1.4** | 4.2 |
| Other non-current assets | 18 | **657.8** | 602.3 |
| **Total assets** |  | $**11213.8** | $9834.1 |
| **Liabilities and equity** |  |  |  |
| Accounts payable and accrued liabilities | 19 | $**1190.8** | $1035.3 |
| Provisions | 20 | **34.5** | 42.6 |
| Income taxes payable |  | **18.4** | 31.1 |
| Contract liabilities | 12 | **1001.6** | 911.7 |
| Current portion of long-term debt | 21 | **399.0** | 308.9 |
| Derivative financial liabilities |  | **42.2** | 28.8 |
| **Total current liabilities** |  | $**2686.5** | $2358.4 |
| Provisions | 20 | **14.3** | 14.0 |
| Long-term debt | 21 | **3071.4** | 2765.4 |
| Employee benefits obligations | 22 | **134.1** | 98.7 |
| Deferred tax liabilities | 9 | **40.7** | 36.6 |
| Derivative financial liabilities |  | **22.4** | 2.9 |
| Other non-current liabilities | 23 | **268.4** | 255.5 |
| **Total liabilities** |  | $**6237.8** | $5531.5 |
| **Equity** |  |  |  |
| Share capital | 10 | $**2327.1** | $2252.9 |
| Contributed surplus |  | **69.8** | 55.4 |
| Accumulated other comprehensive income | 25 | **381.8** | 154.0 |
| Retained earnings |  | **2112.8** | 1762.6 |
| Equity attributable to equity holders of the Company |  | $**4891.5** | $4224.9 |
| Non-controlling interests |  | **84.5** | 77.7 |
| **Total equity** |  | $**4976.0** | $4302.6 |
| **Total liabilities and equity** |  | $**11213.8** | $9834.1 |

---

The accompanying notes form an integral part of these Consolidated Financial Statements.

66 \| CAE Financial Report 2025

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Consolidated Financial Statements

Consolidated Statement of Changes in Equity

---

| | | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|
| | | Attributable to equity holders of the Company | Attributable to equity holders of the Company | Attributable to equity holders of the Company | Attributable to equity holders of the Company | Attributable to equity holders of the Company | Attributable to equity holders of the Company | | |
| | | Common shares | Common shares | | Accumulated other | | | Non- | |
| *(amounts in millions of Canadian dollars,* |  | Number of | Stated | Contributed | comprehensive | Retained |  | controlling | Total |
| *except number of shares)* | Notes | shares | value | surplus | income | earnings | Total | interests | equity |
| Balances as at March 31, 2023 |  | 317906290 | $2243.6 | $42.1 | $167.2 | $2054.8 | $4507.7 | $81.2 | $4588.9 |
| Net (loss) income |  |  | $— | $— | $— | $(304.0) | $(304.0) | $7.7 | $(296.3) |
| Other comprehensive (loss) income |  |  |  |  | (13.2) | 11.8 | (1.4) |  | (1.4) |
| Total comprehensive (loss) income |  |  | $— | $— | $(13.2) | $(292.2) | $(305.4) | $7.7 | $(297.7) |
| Exercise of stock options | 26 | 405943 | 9.3 | (1.5) |  |  | 7.8 |  | 7.8 |
| Equity-settled share-based payments expense | 26 |  |  | 14.8 |  |  | 14.8 |  | 14.8 |
| Transactions with non-controlling interests |  |  |  |  |  |  |  | (11.2) | (11.2) |
| Balances as at March 31, 2024 |  | 318312233 | $2252.9 | $55.4 | $154.0 | $1762.6 | $4224.9 | $77.7 | $4302.6 |
| Net income |  |  | $— | $— | $— | $405.3 | $405.3 | $9.7 | $415.0 |
| Other comprehensive income (loss) |  |  |  |  | 227.8 | (39.9) | 187.9 | 3.9 | 191.8 |
| Total comprehensive income |  |  | $— | $— | $227.8 | $365.4 | $593.2 | $13.6 | $606.8 |
| Exercise of stock options | 26 | 2763675 | 79.0 | (11.9) |  |  | 67.1 |  | 67.1 |
| Settlement of equity-settled awards | 26 | 45430 | 1.3 | (1.3) |  |  |  |  |  |
| Repurchase and cancellation of common shares | 10 | (856230) | (6.1) |  |  | (15.2) | (21.3) |  | (21.3) |
| Equity-settled share-based payments expense, after tax | 26 |  |  | 27.6 |  |  | 27.6 |  | 27.6 |
| Transactions with non-controlling interests |  |  |  |  |  |  |  | (6.8) | (6.8) |
| **Balances as at March 31, 2025** |  | **320265108** | $**2327.1** | $**69.8** | $**381.8** | $**2112.8** | $**4891.5** | $**84.5** | $**4976.0** |

---

The accompanying notes form an integral part of these Consolidated Financial Statements.

CAE Financial Report 2025 \| 67

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Consolidated Financial Statements

Consolidated Statement of Cash Flows

---

| | | | |
|:---|:---|:---|:---|
| *Years ended March 31* |  |  |  |
| *(amounts in millions of Canadian dollars)* | Notes | **2025** | 2024 |
| **Operating activities** |  |  |  |
| Net income (loss) |  | $**415.0** | $(296.3) |
| Adjustments for: |  |  |  |
| &nbsp;&nbsp;&nbsp;Depreciation and amortization | 4 | **414.7** | 374.8 |
| &nbsp;&nbsp;&nbsp;Impairment of goodwill | 15 | **—** | 568.0 |
| &nbsp;&nbsp;&nbsp;Impairment of non-financial assets – net |  | **7.1** | 57.3 |
| &nbsp;&nbsp;&nbsp;Share of after-tax profit of equity accounted investees |  | **(88.3)** | (72.2) |
| &nbsp;&nbsp;&nbsp;Deferred income taxes |  | **44.9** | (166.5) |
| &nbsp;&nbsp;&nbsp;Investment tax credits |  | **(10.1)** | (14.8) |
| &nbsp;&nbsp;&nbsp;Equity-settled share-based payments expense |  | **25.2** | 14.8 |
| &nbsp;&nbsp;&nbsp;Defined benefit pension plans |  | **34.6** | 8.3 |
| &nbsp;&nbsp;&nbsp;Other non-current liabilities |  | **(5.3)** | (9.7) |
| &nbsp;&nbsp;&nbsp;Derivative financial assets and liabilities – net |  | **(39.8)** | (12.7) |
| &nbsp;&nbsp;&nbsp;After-tax gain on disposal of discontinued operations | 3 | **—** | (16.5) |
| &nbsp;&nbsp;&nbsp;Gain on remeasurement of previously held equity interest | 7 | **(72.6)** |  |
| &nbsp;&nbsp;&nbsp;Other |  | **(26.0)** | 4.3 |
| Changes in non-cash working capital | 24 | **197.1** | 128.1 |
| **Net cash provided by operating activities** |  | $**896.5** | $566.9 |
| **Investing activities** |  |  |  |
| Business combinations, net of cash acquired | 2 | $**(308.0)** | $— |
| Proceeds from disposal of discontinued operations | 3 | **—** | 275.3 |
| Property, plant and equipment expenditures | 14 | **(356.2)** | (329.8) |
| Proceeds from disposal of property, plant and equipment |  | **19.4** | 4.0 |
| Intangible assets expenditures | 15 | **(87.9)** | (147.9) |
| Net payments to equity accounted investees |  | **(19.0)** | (43.9) |
| Dividends received from equity accounted investees |  | **28.7** | 37.1 |
| Other |  | **(9.3)** | (10.2) |
| **Net cash used in investing activities** |  | $**(732.3)** | $(215.4) |
| **Financing activities** |  |  |  |
| Net repayment of borrowing under revolving credit facilities | 21 | $**(45.0)** | $(396.7) |
| Proceeds from long-term debt | 21 | **331.5** | 433.5 |
| Repayment of long-term debt | 21 | **(321.3)** | (370.4) |
| Repayment of lease liabilities | 21 | **(59.9)** | (69.5) |
| Net proceeds from the issuance of common shares |  | **67.1** | 7.8 |
| Repurchase and cancellation of common shares | 10 | **(21.3)** |  |
| Other |  | **(0.9)** |  |
| **Net cash used in financing activities** |  | $**(49.8)** | $(395.3) |
| **Effect of foreign currency exchange differences on cash and cash equivalents** |  | $**19.2** | $(13.7) |
| **Net increase (decrease) in cash and cash equivalents** |  | $**133.6** | $(57.5) |
| **Cash and cash equivalents, beginning of year** |  | **160.1** | 217.6 |
| **Cash and cash equivalents, end of year** |  | $**293.7** | $160.1 |

---

The Company has elected to present a consolidated statement of cash flows that includes both continuing and discontinued operations. Amounts related to discontinued operations by operating, investing and financing activities are disclosed in Note 3.

The accompanying notes form an integral part of these Consolidated Financial Statements.

68 \| CAE Financial Report 2025

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Notes to the Consolidated Financial Statements

Notes to the Consolidated Financial Statements

*(Unless otherwise stated, all tabular amounts are in millions of Canadian dollars)*

The consolidated financial statements were authorized for issue by the board of directors on May 13, 2025.

**NOTE 1 – NATURE OF OPERATIONS AND SUMMARY OF MATERIAL ACCOUNTING POLICIES**

**Nature of operations**

CAE exists to make the world safer. CAE delivers cutting-edge training, simulation, and critical operations solutions to prepare aviation professionals and defence forces for the moments that matter.

CAE Inc. and its subsidiaries' (CAE or the Company) operations are managed through two segments:

(i)Civil Aviation – Provides comprehensive training solutions for flight, cabin, maintenance, ground personnel and air traffic controllers in commercial, business and helicopter aviation, a complete range of flight simulation training devices, ab initio pilot training and crew sourcing services, as well as airline operations digital solutions;

(ii)Defense and Security – A global training and simulation provider delivering scalable, platform-independent solutions that enable and enhance force readiness and security.

CAE Inc. is incorporated and domiciled in Canada with its registered and main office located at 8585 Côte-de-Liesse, Saint-Laurent, Québec, Canada, H4T 1G6. CAE common shares are traded on the Toronto Stock Exchange (TSX) and on the New York Stock Exchange (NYSE).

**Basis of preparation**

The material accounting policies applied in the preparation of these consolidated financial statements are described below. These policies have been consistently applied to all years presented, unless otherwise stated.

The consolidated financial statements have been prepared in accordance with Part I of the CPA Canada Handbook – Accounting and IFRS Accounting Standards (IFRS), as issued by the International Accounting Standards Board (IASB).

The consolidated financial statements have been prepared under the historical cost convention, except for the following items measured at fair value: contingent consideration, derivative financial instruments, financial instruments at fair value through profit and loss, financial instruments at fair value through other comprehensive income (OCI) and liabilities for cash-settled share-based arrangements.

**Basis of consolidation**

***Subsidiaries***

Subsidiaries are all entities over which the Company has control. Control exists when the Company is exposed to, or has the right to, variable returns from its involvement with the entity and has the ability to affect those returns through the power over the entity. Subsidiaries are fully consolidated from the date control is obtained and they are no longer consolidated on the date control ceases. All intercompany accounts and transactions have been eliminated.

As at March 31, 2025, the Company's principal subsidiaries, including all subsidiaries representing individually more than 5% of total consolidated assets and 5% of consolidated revenue, are as follows:

---

| | | |
|:---|:---|:---|
| | | % equity |
| Subsidiary | Country of incorporation | interest |
| CAE USA Inc. | United States | 100% |
| CAE SimuFlite Inc. | United States | 100% |

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***Joint arrangements***

Joint arrangements are arrangements in which the Company exercises joint control as established by contracts requiring unanimous consent for decisions about the activities that significantly affect the arrangement's returns. When the Company has the rights to the net assets of the arrangement, the arrangement is classified as a joint venture and is accounted for using the equity method. When the Company has rights to the assets and obligations for the liabilities relating to an arrangement, the arrangement is classified as a joint operation and the Company accounts for each of its assets, liabilities and transactions, including its share of those held or incurred jointly, in relation to the joint operation.

Under the equity method of accounting, interests in joint ventures are initially recognized at cost and adjusted thereafter to recognize the Company's share of the profits or losses and movements in OCI of the investee. When the Company's share of losses in a joint venture equals or exceeds its interests in the joint ventures, the Company does not recognize further losses, unless it will incur obligations or make payments on behalf of the joint ventures.

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Notes to the Consolidated Financial Statements

Unrealized gains resulting from transactions with joint ventures are eliminated, to the extent of the Company's share in the joint venture. For sales of products or services from the Company to its joint ventures, the elimination of unrealized profits is considered in the carrying value of the investment in equity accounted investees in the consolidated statement of financial position and in the share in profit or loss of equity accounted investees in the consolidated income statement.

As at March 31, 2025, the Company does not have any investment in equity accounted investees representing individually more than 5% of total consolidated assets.

**Business combinations**

Business combinations are accounted for under the acquisition method. The consideration transferred for the acquisition of a subsidiary is the fair value of the assets transferred, the liabilities incurred and the equity interests issued by the Company, if any, at the date control is obtained. The consideration transferred includes the fair value of any liability resulting from a contingent consideration arrangement. Acquisition-related costs, other than share and debt issue costs incurred to issue financial instruments that form part of the consideration transferred, are expensed as incurred. Identifiable assets acquired and liabilities assumed in a business combination are measured initially at their fair value at the acquisition date. If a business combination is achieved in stages, the Company remeasures its previously held interest in the acquiree at its acquisition-date fair value and recognizes the resulting gain or loss, if any, in income.

Contingent consideration classified as a liability is measured at fair value, with subsequent changes recognized in income. If the contingent consideration is classified as equity, it is not remeasured and its subsequent settlement is recorded within equity.

New information obtained during the measurement period, up to 12 months following the acquisition date, about facts and circumstances existing at the acquisition date affect the acquisition accounting.

**Non-controlling interests**

Non-controlling interests (NCI) represent equity interests in subsidiaries owned by outside parties. The share of net assets of subsidiaries attributable to non-controlling interests is presented as a component of equity. Changes in the Company's ownership interest in subsidiaries that do not result in a loss of control are accounted for as equity transactions.

The Company treats transactions with non-controlling interests as transactions with equity owners of the Company. For interests purchased from non-controlling interests, the difference between any consideration paid and the relevant share acquired of the carrying value of net assets of the subsidiary is recorded in equity. Gains or losses on disposals of non-controlling interests are also recorded in equity.

**Financial instruments and hedging relationships**

***Recognition, classification and measurement***

A financial instrument is any contract that gives rise to a financial asset in one entity and a financial liability or equity instrument in another entity. Financial assets and financial liabilities, including derivatives, are recognized in the consolidated statement of financial position when the Company becomes a party to the contractual provisions of the financial instrument. On initial recognition, all financial instruments are measured at fair value.

Financial instruments are subsequently measured based on their classification, which are:

–Financial instruments measured at amortized cost;

–Financial instruments measured at fair value through profit or loss (FVTPL);

–Financial instruments measured at fair value through other comprehensive income (FVOCI).

*Financial assets*

A financial asset is measured at amortized cost if it meets both of the following conditions:

–&nbsp;&nbsp;&nbsp;&nbsp; The asset is held within a business model whose objective is to hold assets to collect contractual cash flows; and

– The contractual terms of the financial asset give rise, on specific dates, to cash flows that are solely payments of principal and interest (SPPI) on the principal amount outstanding.

Financial assets at amortized cost are subsequently measured using the effective interest rate (EIR) method and are subject to impairment. Gains and losses are recognized in income when the asset is derecognized, modified or impaired. The Company's financial assets at amortized cost include accounts receivable and advances to a portfolio investment.

Financial assets at FVTPL include financial assets held for trading, financial assets designated upon initial recognition at fair value through profit or loss, and financial assets mandatorily required to be measured at fair value. Financial assets are classified as held for trading if they are acquired for the purpose of selling or repurchasing in the near term. Derivatives, including separated embedded derivatives, are also classified as held for trading unless they are designated as effective hedging instruments. Financial assets with cash flows that are not SPPI are classified and measured at FVTPL, irrespective of the business model. Financial assets at FVTPL are carried in the statement of financial position at fair value with net changes in fair value recognized in the income statement. The Company's financial assets at FVTPL include cash and cash equivalents, and derivative instruments not designated as hedging instruments in a hedge relationship.

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Notes to the Consolidated Financial Statements

Financial assets at FVOCI are equity investments the Company has irrevocably elected to classify at FVOCI. This classification is determined on an instrument-by-instrument basis. Gains and losses on these financial assets are never transferred to income. Dividends are recognized in the income statement when the right of payment has been established, except when the Company benefits from such proceeds as a recovery of part of the cost of the financial asset, in which case, such gains are recorded in OCI.

Financial assets are not reclassified subsequent to their initial recognition, unless the Company changes its business model for managing a specific financial asset.

*Financial liabilities*

Financial liabilities at FVTPL include financial liabilities held for trading and financial liabilities designated upon initial recognition at FVTPL. Financial liabilities are classified as held for trading if they are incurred for the purpose of repurchasing in the near term. This category also includes derivative financial instruments that are not designated as hedging instruments in a hedge relationship. Separated embedded derivatives are also classified as held for trading unless they are designated as effective hedging instruments.

Financial liabilities at FVTPL are carried in the statement of financial position at fair value with net changes in fair value recognized in the income statement. The Company's financial liabilities measured at FVTPL include contingent liabilities arising on business combinations and also derivative instruments not designated as hedging instruments in a hedge relationship.

Financial liabilities at amortized cost are subsequently measured using the EIR method. Gains and losses are recognized in income when the liabilities are derecognized as well as through the EIR amortization process. The Company's financial liabilities at amortized cost include accounts payables, accrued liabilities, long-term debt, including interest payable, and royalty obligations.

*Transaction costs*

Transaction costs that are directly related to the acquisition or issuance of financial assets and financial liabilities (other than those classified as FVTPL and FVOCI) are included in the fair value initially recognized for those financial instruments. These costs are amortized to income using the EIR method.

*Offsetting of financial assets and financial liabilities*

Financial assets and financial liabilities are offset and the net amount is presented in the consolidated statement of financial position when the Company has an unconditional and legally enforceable right to set off the recognized amounts and intends to settle on a net basis or to realize the assets and settle the liabilities simultaneously.

***Hedge accounting***

The Company uses derivative financial instruments, such as forward currency contracts, cross currency swaps and interest rate swaps to hedge its foreign currency risks and interest rate risks, respectively. A hedging relationship qualifies for hedge accounting when it meets all of the following effectiveness requirements:

–There is 'an economic relationship' between the hedged item and the hedging instrument;

–The effect of credit risk does not 'dominate the value changes' that result from that economic relationship;

–The hedge ratio of the hedging relationship is the same as that resulting from the quantities of:

–The hedged item that the Company actually hedges; and

–The hedging instrument that the Company actually uses to hedge that quantity of hedged item.

For the purpose of hedge accounting, hedges are classified as:

–Cash flow hedges when hedging the exposure to variability in cash flows that is either attributable to a particular risk associated with a recognized asset or liability or a highly probable forecast transaction or the foreign currency risk in an unrecognized firm commitment;

–Hedges of a net investment in a foreign operation;

–Fair value hedges when hedging the exposure to changes in the fair value of a recognized asset or liability or an unrecognized firm commitment.

*Documentation*

At the inception of a hedge relationship, the Company formally documents the designation of the hedge, the risk management objectives and strategy, the hedging relationship between the hedged item and hedging item and the method for testing the effectiveness of the hedge, which must be reasonably assured over the term of the hedging relationship and can be reliably measured. The Company formally assesses, both at inception of the hedge relationship and on an ongoing basis, whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in fair values or cash flows of hedged items in relation to the hedged risk.

*Cash flow hedge*

The effective portion of changes in the fair value of derivative instruments that are designated and qualify as cash flow hedges is recognized in OCI, while the ineffective portion is recognized immediately in income. Amounts accumulated in OCI are reclassified to income in the period in which the hedged item affects income. However, when the forecasted transactions that are hedged items result in recognition of non-financial items, gains and losses previously recognized in OCI are included in the initial carrying value of the related non-financial assets acquired or liabilities incurred. The deferred amounts are ultimately recognized in income as the related non-financial items are derecognized or amortized.

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Notes to the Consolidated Financial Statements

Hedge accounting is discontinued prospectively when the hedging relationship no longer meets the criteria for hedge accounting, when the designation is revoked, or when the hedging instrument expires or is sold. Any cumulative gain or loss directly recognized in OCI at that time remains in OCI until the hedged item is recognized in income. When it is probable that a hedged transaction will not occur, the cumulative gain or loss that was recognized in OCI is recognized in income immediately.

*Hedge of net investments in foreign operations*

The Company has designated certain long-term debts, fixed to fixed cross currency principal and interest rate swap agreements and forward currency contracts as a hedging item of the Company's overall net investments in foreign operations whose activities are denominated in a currency other than the Company's functional currency. The portion of gains or losses on the hedging item that is determined to be an effective hedge is recognized in OCI and is limited to the translation gain or loss on the net investment.

***Derecognition***

*Financial assets*

A financial asset is derecognized when:

–The rights to receive cash flows from the asset have expired; or

–The Company has transferred its rights to receive cash flows from the asset and either has transferred substantially all the risks and rewards of the asset or has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.

The Company is involved in a program in which it sells interests in certain of its accounts receivable. The Company continues to act as a collection agent. Under the program, the Company transfers some significant risks and rewards of the accounts receivable it sells and retains others. The accounts receivable are derecognized up to an amount corresponding to the extent of the Company's continuing involvement, which represents its maximum retained exposure.

*Impairment of financial assets*

The Company uses the expected credit loss (ECL) model for calculating impairment of financial assets and recognizes expected credit losses as loss allowances for assets measured at amortized cost. ECLs are based on the difference between the contractual cash flows due in accordance with the contract and all the cash flows that the Company expects to receive, discounted at the original or credit adjusted effective interest rate. ECLs are recognized in two stages. For credit exposures for which there has not been a significant increase in credit risk since initial recognition, ECLs are provided for credit losses that result from default events that are possible within the next 12-months (a 12-month ECL). For those credit exposures for which there has been a significant increase in credit risk since initial recognition, a loss allowance is required for credit losses expected over the remaining life of the exposure, irrespective of the timing of the default (a lifetime ECL).

For trade receivables and contract assets, the Company applies the simplified approach permitted by IFRS 9 - *Financial Instruments*, which requires expected lifetime losses to be recognized from initial recognition of the assets.

*Financial liabilities*

A financial liability is derecognized when the obligation under the liability is discharged, cancelled or expired.

When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and the recognition of a new liability, and the difference in the respective carrying amounts is recognized in the income statement.

**Foreign currency translation**

***Foreign operations***

CAE Inc.'s consolidated financial statements are presented in Canadian dollars, which is also the parent company's functional currency. The functional currency of each of the Company's subsidiaries is the currency of the primary economic environment in which they operate. Determination of the functional currency may involve certain judgements to determine the primary economic environment in which the subsidiary operates. Assets and liabilities of subsidiaries that have a functional currency other than the Canadian dollar are translated from their functional currency to Canadian dollars at exchange rates in effect at the reporting date. Revenue and expenses are translated at the average exchange rates. The resulting translation adjustments are included in OCI.

When CAE Inc. and its subsidiaries have a long-term intercompany balance receivable from or payable to a foreign operation for which settlement is not planned in the foreseeable future, such item is considered, in substance, a part of the Company's net investment in that foreign operation. Gains or losses arising from the translation of those intercompany balances denominated in foreign currencies are also included in OCI.

***Transactions and balances***

Monetary assets and liabilities denominated in foreign currencies are translated at the prevailing exchange rate at the reporting date. Non-monetary assets and liabilities, and revenue and expense items denominated in foreign currencies are translated into the functional currency using the exchange rate prevailing at the dates of the respective transactions. Foreign exchange gains and losses resulting from the settlement of such transactions are recognized in income, except when deferred in OCI as qualifying cash flow hedges and qualifying net investment hedges.

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Notes to the Consolidated Financial Statements

**Cash and cash equivalents**

Cash and cash equivalents consist of cash and highly-liquid investments with original terms to maturity of 90 days or less at the date of purchase.

**Accounts receivable**

Receivables are initially recognized at fair value and are subsequently carried at amortized cost, net of credit loss allowances, based on expected recoverability. The amount of the allowance is the difference between the asset's carrying amount and the present value of the estimated future cash flows, discounted at the original effective interest rate. The loss is recognized in income. Subsequent recoveries of amounts previously provided for or written-off are recognized in income.

**Inventories**

Raw materials are valued at the lower of average cost and net realizable value. Spare parts to be used in the normal course of business are valued at the lower of cost, determined on a specific identification basis, and net realizable value. Work in progress is stated at the lower of cost, determined on a specific identification basis, and net realizable value. The cost of work in progress includes material, labour and an allocation of manufacturing overhead, which is based on normal operating capacity.

Net realizable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and the estimated costs necessary to generate revenue. In the case of raw materials and spare parts, the replacement cost is the best measure of net realizable value.

**Property, plant and equipment**

Property, plant and equipment are recorded at cost less any accumulated depreciation and impairment losses. Costs include expenditures that are directly attributable to the acquisition or manufacturing of the item. The cost of an item of property, plant and equipment that is initially recognized includes, when applicable, the initial present value estimate of the costs required to dismantle and remove the asset and restore the site on which it is located at the end of its useful life. Purchased software that is integral to the functionality of the related equipment is capitalized as part of that equipment. Subsequent costs, such as updates on training devices, are included in the asset's carrying amount or recognized as a separate asset only when it is probable that future economic benefits will flow to the Company and the cost of the item can be reliably measured; otherwise, they are expensed.

A loss on disposal is recognized in income when the carrying value of a replaced item is derecognized, unless the item is transferred to inventories. If it is not practicable to determine the carrying value, the cost of the replacement and the accumulated depreciation calculated by reference to that cost will be used to derecognize the replaced part. The costs of day-to-day servicing of property, plant and equipment are recognized in income as incurred. Gains and losses on disposal of property, plant and equipment are determined by comparing the proceeds from disposal with its carrying amount, and are recognized within other gains and losses.

The different components of property, plant and equipment are recognized separately when their useful lives are materially different and such components are depreciated separately in income.

Land is not depreciated. The estimated useful lives, residual values and depreciation methods are as follows:

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| | | |
|:---|:---|:---|
| | Method | Depreciation rate / period |
| Buildings and improvements | Declining balance/Straight-line | 2.5% to 10% / 3 to 40 years |
| Simulators | Straight-line (10% residual) | Not exceeding 25 years |
| Machinery and equipment | Declining balance/Straight-line | 20% to 35% / 2 to 15 years |
| Aircraft | Straight-line (residual not exceeding 15%) | Not exceeding 25 years |
| Aircraft engines | Based on utilization | Not exceeding 3500 hours |

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As at March 31, 2025, the average remaining depreciation period for full-flight simulators is 11.1 years (2024 – 11.2 years).&nbsp;&nbsp;&nbsp;&nbsp;

Depreciation methods, useful lives and residual values are reviewed and adjusted, if appropriate, on a prospective basis at each reporting date.

**Leases** 

At inception of a contract, the Company assesses whether a contract is, or contains, a lease. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration.

***The Company as a lessee***

The Company recognizes a right-of-use asset and liability at the lease commencement date. The right-of-use asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date, plus any initial direct costs incurred and an estimate of costs to dismantle and remove the underlying asset or to restore the underlying asset or the site on which it is located, less any lease incentives received.

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Notes to the Consolidated Financial Statements

The right-of-use asset is subsequently depreciated from the commencement date to the earlier of the end of the useful life of the right-of-use asset or the end of the lease term. If it is reasonably certain that the Company will obtain ownership by the end of the lease term through a purchase option, the leased asset is depreciated over its useful life. The depreciation periods, residual values (only applicable when it is reasonably certain that the Company will obtain ownership by the end of the lease term) and depreciation methods are as follows:

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| | | |
|:---|:---|:---|
| | Method | Depreciation period |
| Buildings and land | Straight-line | Not exceeding 50 years  |
| Simulators | Straight-line (10% residual) | Not exceeding 25 years |
| Machinery and equipment | Straight-line | Not exceeding 7 years |
| Aircraft | Straight-line (residual not exceeding 15%) | Not exceeding 25 years |
| Aircraft engines | Based on utilization | Not exceeding 3500 hours |

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In addition, the right-of-use asset is reduced by impairment losses, if any, and adjusted for certain remeasurements of the lease liability.

The lease liability is initially measured at the present value of the lease payments at the commencement date, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the lessee's incremental borrowing rate. Lease payments comprise of fixed payments, including in-substance fixed payments, variable lease payments that depend on an index or a rate, amounts expected to be payable under a residual value guarantee, the exercise price under a purchase option that the Company is reasonably certain to exercise, lease payments in an optional renewal period that the Company is reasonably certain to exercise and penalties for early termination of a lease if the Company is reasonably certain to terminate.

The lease liability is subsequently measured at amortized cost using the effective interest method and is remeasured when there is a change in future lease payments arising from a change in an index or rate, the estimate of the amount expected to be payable under a residual value guarantee or the Company's assessment of whether it will exercise a purchase, renewal or termination option. When the lease liability is remeasured in this way, a corresponding adjustment is made to the carrying amount of the right-of-use asset or is recorded in profit or loss if the carrying amount of the right-of-use asset has been reduced to zero.

*Lease modifications*

A lease modification is a change in the scope of a lease, or the consideration for a lease, that was not part of its original terms and conditions. A lease modification is accounted for as a separate lease if the modification increases the scope of the lease by adding the right to use one or more underlying assets and the consideration for the lease increases by an amount commensurate with the stand-alone price that reflects the circumstances of the contract. Any other modification is not accounted for as a separate lease.

For a lease modification resulting in a decrease in the scope of the lease, the lease liability is remeasured, using a revised discount rate, to reflect the modified lease payments and the carrying amount of the right-of-use asset is reduced to reflect the partial or full termination of the lease. The difference between the reduction in the lease liability and the reduction in the corresponding right-of-use asset's carrying value is recognized in profit or loss.

For all other lease modifications, the lease liability is remeasured, using a revised discount rate, to reflect the modified lease payments, with a corresponding adjustment to the right-of-use asset.

*Short-term leases and leases of low-value assets*

The Company recognizes the payments associated with short-term leases and leases of low-value assets as an expense on a straight-line basis over the lease term.

*Sale and leaseback transaction*

In a sale and leaseback transaction, the transfer of an asset is recognized as a sale when the customer has obtained control of the underlying asset which is aligned with the Company's revenue recognition policy, otherwise the Company continues to recognize the transferred asset on the balance sheet and record a financial liability equal to the proceeds transferred. When the transfer of an asset satisfies the Company's revenue recognition policy to be accounted for as revenue, a partial recognition of the profit from the sale is recorded immediately after the sale, which is equivalent to the proportion of the asset not retained by the Company through the lease. The proportion of the asset retained by the Company through the lease is recognized as a right-of-use asset and the lease liability is measured as the present value of future lease payments.

***The Company as a lessor***

The Company determines, at lease commencement, whether each lease is a finance or an operating lease. Leases in which substantially all the risks and rewards of ownership are transferred are classified as finance leases. All other leases are accounted for as operating leases.

With regards to finance leases, the asset is derecognized at the commencement of the lease. The net present value of the minimum lease payments and any discounted unguaranteed residual values of leased assets are presented as investment in finance leases. Finance income is recognized over the term of the lease based on the effective interest method. Revenue from operating leases is recognized on a straight-line basis over the term of the corresponding lease.

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Notes to the Consolidated Financial Statements

When the Company subleases one of its leases, it accounts for its interests in the head lease and the sub-lease separately. It assesses the lease classification of a sub-lease with reference to the right-of-use asset arising from the head lease, not with reference to the underlying asset.

**Intangible assets**

***Goodwill***

Goodwill is measured at cost less accumulated impairment losses, if any.

Goodwill arises on the acquisition of subsidiaries. Goodwill represents the excess of the aggregate of the cost of an acquisition, including the Company's best estimate of the fair value of contingent consideration and the acquisition-date fair value of any previously held equity interest in the acquiree, over the fair value of the net identifiable assets of the acquiree at the acquisition date.

Gains and losses on the disposal of an entity include the carrying amount of goodwill allocated to the entity sold.

***Research and development (R&D)***

Research costs are expensed as incurred. Development costs are also charged to income in the period incurred unless they meet all the specific capitalization criteria established in IAS 38, *Intangible Assets*. Capitalized development costs are stated at cost and net of accumulated amortization and accumulated impairment losses, if any. Amortization of the capitalized development costs commences when the asset is available for use as intended by management and is included in research and development expenses.

***Other intangible assets***

Intangible assets acquired separately are measured at cost upon initial recognition. The cost of intangible assets acquired in a business combination is the fair value as at the acquisition date. Following initial recognition, intangible assets are carried at cost, net of accumulated amortization and accumulated impairment losses, if any.

The cost of an internally generated intangible asset comprises all directly attributable costs necessary to create, produce, and prepare the asset to be capable of operating in the manner intended by management.

Gains and losses on disposal of intangible assets are determined by comparing the proceeds from disposal with its carrying amount and are recognized within other gains and losses.

Configuration or customization costs in a cloud computing arrangement are also included when they meet the specific capitalization criteria.

***Amortization***

Amortization is calculated using the straight-line method for all intangible assets over their estimated useful lives as follows:

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| | |
|:---|:---|
| | Amortization period |
| Capitalized development costs | 3 to 10 years |
| Customer relationships | 3 to 20 years |
| Licenses | 3 to 20 years |
| Technology, software and ERP | 3 to 12 years |
| Other intangible assets | 2 to 40 years |

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As at March 31, 2025, the average remaining amortization period for the capitalized development costs is 6.7 years (2024 - 6.8 years). Amortization methods and useful lives are reviewed and adjusted, if appropriate, on a prospective basis at each reporting date.

**Impairment of non-financial assets**

The carrying amounts of the Company's non-financial assets subject to amortization are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Goodwill and assets that are not yet available for use are tested for impairment annually or at any time if an indicator of impairment exists.

The recoverable amount of an asset or a cash-generating unit (CGU) is the greater of its value in use and its fair value less costs of disposal. The recoverable amount is determined for an individual asset; unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. In such cases, the CGU that the asset belongs to is used to determine the recoverable amount.

For the purposes of impairment testing, the goodwill acquired in a business combination is allocated to CGUs or groups of CGUs, which generally corresponds to its operating segments or one level below, that are expected to benefit from the synergies of the combination, irrespective of whether other assets or liabilities of the acquiree are assigned to those units.

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Notes to the Consolidated Financial Statements

An impairment loss is recognized if the carrying amount of an asset or CGU exceeds its estimated recoverable amount. Where the recoverable amount of a CGU to which goodwill has been allocated is lower than the CGU's carrying amount, the related goodwill is impaired. Any remaining amount of impairment exceeding the impaired goodwill is recognized on a pro rata basis of the carrying amount of the other assets in the respective CGU. Impairment losses are recognized in income.

The Company evaluates impairment losses, other than goodwill impairment, for potential reversals at each reporting date. An impairment loss is reversed if there is any indication that the loss has decreased or no longer exists due to changes in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset's carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortization, if no impairment loss had been recognized. Such reversal is recognized in income.

**Borrowing costs**

Borrowing costs that are directly attributable to the acquisition or construction of a qualifying asset are capitalized as part of the cost of the asset. A qualifying asset is one that takes a substantial period of time to get ready for its intended use. Capitalization of borrowing costs ceases when the asset is completed and ready for use as intended by management. All other borrowing costs are recognized as finance expense in income, as incurred.

**Other assets**

***Restricted cash***

The Company is required to hold a defined amount of cash as collateral under the terms of certain subsidiaries' external bank financing, government-related sales contracts and business combination arrangements.

***Deferred financing costs***

Deferred financing costs related to the revolving credit facilities, when it is probable that some or all of the facilities will be drawn down, and deferred financing costs related to sale and leaseback agreements are included in other assets at cost and are amortized on a straight-line basis over the term of the related financing agreements.

**Accounts payable and accrued liabilities**

Accounts payable and accrued liabilities are recognized initially at fair value and subsequently measured at amortized cost using the effective interest method.

**Provisions**

Provisions are recognized when the Company has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources will be required to settle the obligation and the amount can be reliably estimated. Provisions are measured at the present value of the expenditures expected to be required to settle the obligation using a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the obligation. The increase in the provision due to passage of time is recognized as a finance expense. When there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by considering the class of obligations as a whole.

***Estimated contract losses***

Provisions for estimated contract losses are recognized as an onerous contract provision in the period in which it is determined that the unavoidable costs of meeting the obligations under the contract exceed the economic benefits expected to be received under it. The unavoidable costs under a contract reflect the least net cost of exiting from the contract, which is the lower of the cost of fulfilling it and any compensation or penalties arising from failure to fulfil it.

***Restoration and simulator removal***

In certain situations, simulators are installed at locations that are not owned by the Company. In some of these cases, the Company has an obligation to dismantle and remove the simulators from these sites and to restore the location to its original condition. A provision is recognized for the present value of estimated costs to be incurred to dismantle and remove the simulators from these sites and restore the location. The provision also includes amounts relating to leased land and buildings where restoration costs are contractually required at the end of the lease. Where such costs arise as a result of capital expenditure, these restoration costs are also capitalized.

***Restructuring***

Restructuring costs consist mainly of severances and other related costs.

***Legal claims***

The amount represents a provision for certain legal claims brought against the Company. The corresponding charge is recognized in income. Management's best estimate is that the outcome of these legal claims will not give rise to any significant loss beyond the amounts provided at March 31, 2025.

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Notes to the Consolidated Financial Statements

***Warranties***

A provision is recognized for expected warranty claims on products sold based on historical experience of the level of repairs and returns. It is expected that most of these costs will be incurred in a period ranging from 1 to 3 years. Assumptions used to calculate the provision for warranties were based on current sales levels and current information available about returns based on the warranty period of products sold.

**Long-term debt**

Long-term debt is recognized initially at fair value, net of transaction costs incurred. They are subsequently stated at amortized cost. Any difference between the proceeds, net of transaction costs, and the redemption value is recognized in income over the period of borrowings using the effective interest method.

Fees paid on the establishment of loan facilities are recognized as transaction costs of the loan to the extent that it is probable that some or all of the facility will be drawn down. In these cases, the fee is deferred until the drawdown occurs. To the extent that there is no evidence that it is probable that some or all of the facility will be drawn down, the fee is capitalized as a prepayment for liquidity services and amortized over the period of the facility to which it relates.

**Share capital**

Common shares are classified as equity. Incremental costs directly attributable to the issue of new shares or stock options are shown in equity as a deduction, net of tax, from the proceeds.

When share capital recognized as equity is repurchased, the amount of the consideration paid, which includes directly attributable costs, net of tax, is recognized as a deduction from equity.

**Revenue recognition**

The Company recognizes revenue when it transfers the control of the promised goods or services to the customer. The transaction price is the amount of consideration to which the Company is expected to be entitled to in exchange for transferring promised goods or services. Variable consideration is included in the transaction price when it is highly probable that there will be no significant reversal of revenue in the future. Variable consideration is usually derived from sales incentives, in the form of discounts or volume rebates, and penalties. The Company identifies the various performance obligations of the contract and allocates the transaction price based on the estimated relative stand-alone selling prices of the promised goods or services underlying each performance obligation.

The Company's performance obligations are satisfied over time or at a point in time depending on the transfer of control to the customer.

***Sales of goods and services***

*Customized training devices*

Revenue from contracts with customers for the design, engineering, and manufacturing of training devices are recognized over time using the cost input method when the Company determines that these devices have a sufficient level of customization such that they have no alternative use and the Company has enforceable rights to payment for work completed to date. The measure of progress toward complete satisfaction of the performance obligation is generally determined by comparing the actual direct costs incurred to date to the total estimated direct costs for the entire contract. When the Company determines that there is an alternative use for these devices, revenue is recognized at a point in time, when the customer obtains control of the device.

*Standardized training devices*

Revenue from contracts with customers for the manufacturing of standardized training devices is recognized at a point in time, when the customer obtains control of the device.

*Training services*

Revenue from the sale of training hours or training courses are recognized at a point in time, when services are rendered. For flight schools, cadet training courses are offered mainly by way of ground school and live aircraft flight. For both phases, revenue is recognized over time, using the time elapsed input method.

*Product maintenance, support and updates*

Revenue from the sale of product maintenance services and post-delivery customer support are recognized over time, using the time elapsed output method or costs incurred method. Revenue from update services, to enhance a training device currently owned by a customer, are recognized over time, using the cost input method.

*Spare parts*

Revenue from the sale of spare parts is recognized at a point in time, which is generally on delivery to the customer.

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Notes to the Consolidated Financial Statements

*Software arrangements* 

Revenue from software arrangements that provide the Company's customers with the right to use the software without any significant development or integration work is recognized at a point in time, on delivery or, in case of a renewed arrangement, at renewal date. Revenue from fixed-price software arrangements and software customization contracts that require significant production, modification, or customization of software is recognized over time using the cost input method. Revenue from Software as a service (SaaS) arrangements provide the Company's customers with the right to access a cloud-based environment that the Company provides and manages, the right to receive support and to use the software, however the customer does not have the right to control the software. Revenue from SaaS arrangements is recognized over time, using the time elapsed output method.

***Other***

*Significant financing component*

The Company accounts for a significant financing component on contracts of more than 12 months where timing of cash receipts and revenue recognition differ substantially. The transaction price for such contracts is adjusted for the time value of money, using the rate that would be reflected in a separate financing transaction between the Company and its customers at contract inception, to take into consideration the significant financing component.

*Non-monetary transactions*

The Company may also enter into sales arrangements where little or no monetary consideration is involved. The non-monetary transactions are measured at the most reliable measure of the fair value of the asset or service given up or fair value of the asset or service received.

*Contract modifications*

Contract modifications, which consist of an increase in the scope or price of a contract, are accounted for as a separate contract when the additional goods or services to be delivered are distinct from those delivered prior to the contract modification and when the price increases by an amount of consideration that reflects its stand-alone selling price. Contract modifications are treated prospectively when the additional goods or services are distinct, but the price increase does not reflect the stand-alone selling price. When the remaining goods or services are not distinct, the Company recognizes an adjustment to revenue of the initial contract on a cumulative catch-up basis at the date of the contract modification.

*Costs to obtain and to fulfill a contract*

The Company recognizes incremental costs of obtaining a contract as an asset when they are expected to be recovered over a period of more than one year. The Company recognizes costs directly related to fulfilling a contract with a customer as an asset when they generate or enhance resources that will be used to satisfy the performance obligation in the future, and they are expected to be recovered. These assets are amortized on a systematic basis that is consistent with the Company's transfer of the related goods or services to the customer.

*Right to invoice*

If the Company has the right to invoice a customer in an amount that directly corresponds with the value of the Company's performance to date, then revenue can be recognized at the invoice amount.

***Contract balances***

The timing of revenue recognition, billing and cash collections results in accounts receivable, contract assets and contract liabilities on the consolidated financial position.

Contract assets are recognized when revenue is recognized in excess of billings or when the Company has a right to consideration and that right is conditional to something other than the passage of time. Contract assets are subsequently transferred to accounts receivable when the right to payment becomes unconditional. Contract liabilities are recognized when payments received from customers are in excess of revenue recognized. Contract liabilities are subsequently recognized in revenue when the Company satisfies its performance obligations.

Contract assets and contract liabilities are reported in a net position on a contract-by-contract basis at the end of each reporting period and are classified as current based on the Company's normal operating cycle.

**Employee benefits**

***Defined benefit pension plans***

The Company maintains defined benefit pension plans that provide benefits based on length of service and final average earnings.

The defined benefit asset or liability comprises the present value of the defined benefit obligation at the reporting date less the fair value of plan assets out of which the obligations are to be settled. The defined benefit obligations are actuarially determined for each plan using the projected unit credit method. The present value of the defined benefit obligation is determined by discounting the estimated future cash flows using the interest rate of high-quality corporate bonds that are denominated in the currency in which the benefit will be paid and that have terms to maturity approximating the terms of the related pension obligation. In countries where there is no deep market in such bonds, the market rates on government bonds are used.

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Notes to the Consolidated Financial Statements

The value of any employee benefit asset recognized is restricted to the present value of any economic benefits available in the form of refunds from the plan or reductions in the future contributions to the plan (asset ceiling test). Minimum funding requirements may give rise to an additional liability to the extent that they require paying contributions to cover an existing shortfall. Plan assets can only be used to fund employee benefits, are not available to the creditors of the Company, nor can they be paid directly to the Company. Fair value of plan assets is based on market price information.

The Company determines the net pension cost of its Canadian defined benefit plans utilizing individual discount rates derived from the yield curve.

Actuarial gains and losses arising from experience adjustments, changes in actuarial assumptions and the effect of any asset ceiling and minimum liability are recognized to OCI in the period in which they arise. Past service costs are recognized as an expense as incurred at the earlier of when the plan amendment or curtailment occurs and when the entity recognizes related termination benefits.

***Defined contribution pension plans***

The Company also maintains defined contribution plans for which the Company pays fixed contributions to publicly or privately administered pension insurance plans on a mandatory, contractual or voluntary basis. The Company has no legal or constructive obligation to pay further amounts if the fund does not hold sufficient assets to pay the benefits to all employees. Obligations for contributions to defined contribution pension plans are recognized as an employee benefit expense in income as the services are provided.

***Termination benefits***

Termination benefits are recognized as an expense when the Company is demonstrably committed, without realistic possibility of withdrawal, to a formal detailed plan to either terminate employment before the normal retirement date, or to provide termination benefits as a result of an offer made to encourage voluntary redundancy. Termination benefits for voluntary redundancies are recognized as an expense, if the Company has made an offer of voluntary redundancy, based on the number of employees expected to accept the offer. Benefits falling due more than 12 months after the reporting date are discounted to their present value.

**Share-based payment transactions**

The Company's share-based payment plans consist of two categories: equity-settled share-based payment plans comprised of the stock option plan, a restricted share units (RSU) plan and a performance share units (PSU) plan; and cash-settled share-based payments plans that include the stock purchase plan, deferred share units (DSU) plans, a restricted share units (RSU) plan and a performance share units (PSU) plan.

For both categories, the fair value of the employee services received in exchange is recognized as an expense in income. Service and non-market performance conditions attached to the transactions are not taken into account in determining fair value.

***Stock options***

The cost of stock option transactions is measured at fair value using the Black-Scholes option pricing model. The compensation expense is measured at the grant date and recognized over the service period with a corresponding increase to contributed surplus. The cumulative expenses recognized for stock option transactions at each reporting date represents the extent to which the vesting period has expired and management's best estimate of the number of equity instruments that will ultimately vest. For options with graded vesting, each tranche is considered a separate grant with a different vesting date and fair value, and each tranche is accounted for separately. When the stock options are exercised, the Company issues new common shares and the proceeds received net of any directly attributable transaction costs are credited to share capital.

***Equity-settled RSU and PSU plans***

The cost of RSU and PSU transactions is measured at fair value using the Company's share price on the date of the grant. The number of units expected to vest are estimated at the grant date and subsequently re-measured at the end of each reporting period. The resulting compensation expense, adjusted for expectations related to attainment of performance criteria, if any, and cancellations, is recognized over the vesting period, with a corresponding increase to contributed surplus, on a straight-line basis.

***Cash-settled plans***

For cash-settled plans, a corresponding liability is recognized. The fair value of employee services received is calculated by multiplying the number of units expected to vest with the fair value of one unit as of grant date based on the market price of the Company's common shares. The fair value of the stock purchase plan is a function of the Company's contributions. Until the liability is settled, the Company re-measures the fair value of the liability at the end of each reporting period and at the date of settlement, with any changes in fair value recognized in income for the period. The Company has entered into equity swap agreements in order to reduce its earnings exposure related to the fluctuation in the Company's share price relating to the DSU plans, RSU plan and PSU plan.

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Notes to the Consolidated Financial Statements

**Restructuring, integration and acquisition costs** 

***Restructuring costs***

Restructuring costs are part of a program that is planned and controlled by management, and materially changes either the scope of a business undertaken by the Company or the manner in which that business is conducted. Restructuring costs include costs directly related to significant exit activities, such as the sale or termination of a line of business, the closure of business locations or the relocation of business activities, significant changes in management structure, or fundamental reorganizations that have a material effect on the nature and focus of the Company's operations.

For the Company, restructuring costs include severances and other employee related costs, cost associated with the impairment (or reversal of impairment) of non-financial assets, including property, plant and equipment, right-of-use assets, intangible assets and inventory, and other direct costs associated with the closing or relocation of facilities, the closing of a product line or activity, or the downsizing of operations.

Restructuring costs are expensed when incurred, or when a legal or constructive obligation exists. A restructuring provision is only recognized when an obligating event has arisen.

***Integration costs***

Integration costs represent incremental costs directly related to the integration of acquired businesses in the Company's ongoing activities. This primarily includes expenditures related to regulatory and process standardization, systems integration and other activities.

***Acquisition costs***

Acquisition costs represent costs directly related to business combinations, successful or not. These costs include expenses, fees, commissions and other costs associated with the collection of information, negotiation of contracts, risk assessments, and the services of lawyers, advisors and specialists.

**Current and deferred income tax**

Income tax expense comprises current and deferred tax. An income tax expense is recognized in income except to the extent that it relates to items recognized in OCI or directly in equity, in which case it is recognized in OCI or directly in equity, respectively.

Current tax is the amount expected to be paid or recovered from taxation authorities on the taxable income or loss for the year, using tax rates enacted or substantively enacted at the reporting date in the countries where the Company and its subsidiaries operate and generate taxable income, and any adjustment to tax payable or receivable in respect of previous years.

Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. It establishes provisions, where appropriate, on the basis of amounts expected to be paid to the tax authorities.

Deferred tax is recognized using the financial position liability method, providing for temporary differences between the tax bases of assets or liabilities and their carrying amounts in the consolidated financial statements, except for temporary differences on the initial recognition of assets and liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable income.

Deferred income tax is provided on temporary differences arising on investments in subsidiaries, and jointly controlled entities, except where the timing of the reversal of the temporary difference is controlled by the Company and it is probable that the temporary difference will not reverse in the foreseeable future.

Deferred tax is measured on an undiscounted basis at the tax rates that are expected to be applied to temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the reporting date.

Deferred tax assets are recognized for all deductible temporary differences and carry forward of unused tax losses. The recognition of deferred tax assets are limited to the amount which is probable to be realized.

Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that a recognized deferred tax asset will be realized. Unrecognized deferred tax assets are reassessed at each reporting date and are recognized to the extent that it has become probable that an unrecognized deferred tax asset will be realized.

Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and they relate to income taxes levied by the same tax authority on the same taxable entity, or on different taxable entities which intend to settle current tax liabilities and assets on a net basis or if their tax assets and liabilities will be realized simultaneously.

Taxes on income in the interim periods are accrued by jurisdiction using the effective tax rate that would be applicable to expected total annual profit or loss of the jurisdiction.

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Notes to the Consolidated Financial Statements

The Company has determined that income taxes arising from the global minimum top-up income tax under Pillar Two tax legislation are income taxes within the scope of IAS 12. The Company accounts for such income taxes as a current tax when it is incurred. The Company has applied a temporary mandatory exception to recognize and disclose information about deferred income tax assets and liabilities arising from jurisdictions implementing the global minimum tax rules.

**Discontinued operations and assets and liabilities held for sale**

Non-current assets and disposal groups are classified as held for sale if their carrying amount will be recovered principally through a sale transaction rather than through continuing use and a sale is considered highly probable. Non-current assets and disposal groups classified as held for sale are measured at the lower of their carrying amount and fair value less costs to sell, except for assets such as deferred tax assets, assets arising from employee benefits and financial assets which are specifically exempt from this measurement requirement.

A disposal group qualifies as discontinued operations if it is a component of the entity that has been disposed of or is classified as held for sale and represents a separate major line of business or geographical area of operations, is part of a single coordinated plan to dispose of such a line of business or area of operations, or is a subsidiary acquired exclusively with a view to resale. Classification as a discontinued operation occurs at the earlier of disposal and when the operation meets the criteria to be classified as held for sale.

Non-current assets classified as held for sale and the assets of a disposal group classified as held for sale are presented separately from the other assets in the consolidated statement of financial position. The liabilities of a disposal group classified as held for sale are presented separately from other liabilities in the consolidated statement of financial position.

Non-current assets, including those that are part of a disposal group, are not depreciated or amortized while they are classified as held for sale. Interest and other expenses attributable to the liabilities of a disposal group classified as held for sale continue to be recognized.

Discontinued operations are excluded from the results of continuing operations and are presented as a single amount of net income from discontinued operations in the consolidated income statement and a single amount of other comprehensive income from discontinued operations in the consolidated statement of comprehensive income.

When an operation is classified as a discontinued operation, the comparative consolidated income statement and consolidated statement of comprehensive income are reclassified as if the operation had been discontinued from the beginning of the comparative year.

**Earnings per share**

Earnings per share is calculated by dividing the net income for the period attributable to the equity holders of the Company by the weighted average number of common shares outstanding during the period. The diluted weighted average number of common shares outstanding is calculated by taking into account the dilution that would occur if the securities or other agreements for the issuance of common shares were exercised or converted into common shares at the later of the beginning of the period or the issuance date unless it is anti-dilutive. The treasury stock method is used to determine the dilutive effect of stock options and other equity-settled share-based payments. The treasury stock method is a method of recognizing the use of proceeds that could be obtained upon the exercise of stock options in computing diluted earnings per share. It assumes that any proceeds would be used to purchase common shares at the average market price during the period. The Company's stock options, equity-settled restricted share units (RSU) and equity-settled performance share units (PSU) have a dilutive potential on common shares.

**Government participation**

Government contributions are recognized when there is reasonable assurance that the contributions will be received, and all attached conditions will be complied with by the Company. Government contributions related to the acquisition of non-financial assets are recorded as a reduction of the cost of the related asset while government contributions related to current expenses are recorded as a reduction of the related expenses.

***Royalty obligations***

The Company receives partial funding from government entities for eligible spending related to specified R&D projects. In exchange, the Company repays a percentage of certain revenue during specified years. The initial measurement of the royalty obligation is discounted using the prevailing market rates of interest, at that time, for a similar instrument (similar as to currency, term, type of interest rate, guarantees or other factors) with a similar credit rating and range from 7.5% to 8.5%. The difference between the funding received and the discounted value of the royalty obligation is accounted for as a government contribution. The current portion of the royalty obligation is included as part of accrued liabilities.

***R&D obligations***

The Company enters into loans with below market interest rates with government entities to fund a portion of eligible spending related to specified R&D projects. The initial measurement of the R&D obligation is discounted using the prevailing market rates of interest, at that time, for a similar instrument (similar as to currency, term, type of interest rate, guarantees or other factors) with a similar credit rating. The difference between the funding received and the discounted value of the R&D obligation is accounted for as a government contribution. R&D obligations are presented as part of the long-term debt.

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Notes to the Consolidated Financial Statements

***Investment tax credits***

Investment tax credits are deemed to be equivalent to government contributions. These government contributions are received for costs incurred in R&D projects. Investment tax credits expected to be recovered beyond 12 months are classified in Other non-current assets.

**Comparative figures**

Certain comparative figures in the notes to the consolidated financial statements have been reclassified to conform to the presentation

adopted in the current year.

**New and amended standards adopted by the Company**

***Amendments to IAS 1 – Presentation of Financial Statements***

In January 2020, the IASB issued a narrow-scope amendment to IAS 1 – *Presentation of Financial Statements*, which clarifies that the classification of liabilities as current or non-current is based on rights that are in existence at the end of the reporting period. Classification is unaffected by expectations about whether an entity will exercise its right to defer settlement of a liability or events after the reporting date. The amendment also clarifies what IAS 1 means when it refers to the 'settlement' of a liability.

In October 2022, the IASB issued amendments to IAS 1 – *Presentation of Financial Statements*, which specify that for long-term debt with covenants to be complied with after the reporting date, such covenants do not affect the classification of debt as current or non-current at the reporting date but do require disclosures in the notes to the financial statements.

These amendments to accounting standards were applied for the first time on April 1, 2024, but did not have a significant impact on the Company's consolidated financial statements.

***Amendments to IFRS 16 – Leases***

In September 2022, the IASB issued amendments to IFRS 16 – *Leases*, which requires a seller-lessee to subsequently measure lease liabilities arising from a leaseback in a way that it does not recognize any amount of the gain or loss that relates to the right of use it retains. The new requirements do not prevent a seller-lessee from recognizing in profit or loss any gain or loss relating to the partial or full termination of a lease. This amendment was applied for the first time on April 1, 2024, but did not have a significant impact on the Company's consolidated financial statements.

***Amendments to IAS 7 – Statement of Cash Flows, and IFRS 7 – Financial Instruments: disclosures***

In May 2023, the IASB issued amendments to IAS 7 – *Statement of Cash Flows* and IFRS 7 – *Financial Instruments: disclosure*, which introduces disclosure requirements to enhance the transparency of supplier finance arrangements and their effects on an entity's liabilities, cash flows and exposure to liquidity risk. The amendments provide a transition relief whereby an entity is not required to provide the disclosures, otherwise required by the amendments, for any comparative period in the year of initial application of the amendments. This amendment was applied for the first time on April 1, 2024, and the Company has elected to apply the transition relief to its consolidated financial statements.

***Disclosure of revenues and expenses for reportable segments – IFRS 8 – Operating Segments***

In July 2024, the IFRS Interpretations Committee issued an agenda decision which clarifies certain disclosure requirements under IFRS 8 – *Operating Segments*. The decision highlights the need to disclose certain specified income and expense items if these are included in the measure of segment profit or loss reviewed by the Chief Operating Decision Maker (CODM) or are otherwise regularly provided to the CODM, even if not included in that measure of segment profit or loss. The required disclosures have been made in Note 4 – *Operating segments and geographic information*.

**New and amended standards not yet adopted by the Company**

***Amendments to IFRS 7 – Financial Statements Disclosures and IFRS 9 – Financial Instruments***

In May 2024, the IASB issued amendments to IFRS 7 - *Financial Statements Disclosures* and IFRS 9 - *Financial Instruments* to clarify the date of recognition and derecognition of some financial assets and liabilities, with a new exception for some financial liabilities settled through an electronic cash transfer system, to clarify and add further guidance for assessing whether a financial asset meets the SPPI criterion, add new disclosures for certain instruments with contractual terms that can change cash flows (such as some instruments with features linked to the achievement of environment, social and governance (ESG) targets), and update the disclosures for equity instruments designated at FVOCI.

These amendments to IFRS 7 and IFRS 9 will be effective for the Company's fiscal period beginning on April 1, 2026, with earlier adoption permitted. The Company continues to evaluate the impact of these amendments on its consolidated financial statements.

***IFRS 18 – Presentation and Disclosure in Financial Statements***

In April 2024, the IASB issued IFRS 18 *- Presentation and Disclosure in Financial Statements* which sets out requirements for the presentation and disclosure of information in the financial statements. IFRS 18 will replace IAS 1 – *Presentation of Financial Statements* but carries forward many of the requirements from IAS 1. IFRS 18 introduces a defined structure for the income statement, composed of required categories and subtotals, and disclosure requirements for management-defined performance measures.

IFRS 18 will be effective for the Company's fiscal period beginning on April 1, 2027. The Company continues to evaluate the impact of the new standard on its consolidated financial statements.

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Notes to the Consolidated Financial Statements

**Use of judgements, estimates and assumptions**

The preparation of the consolidated financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies, the reported amounts of assets and liabilities and disclosures at the date of the consolidated financial statements, as well as the reported amounts of revenues and expenses for the period reported. It also requires management to exercise its judgement in applying the Company's accounting policies. The areas involving a high degree of judgement or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements are disclosed below. Actual results could differ from those estimates. Changes will be reported in the period in which they are identified.

***Business combinations***

Business combinations are accounted for in accordance with the acquisition method as of the date control is transferred. The consideration transferred and the acquiree's identifiable assets, liabilities and contingent liabilities are measured at their fair value at the date of acquisition, which may be estimated using an income, market or cost valuation method. Depending on the complexity of determining these valuations, the Company either consults with independent experts or develops the fair value internally by using appropriate valuation techniques which are generally based on a forecast of the total expected future net discounted cash flows. These evaluations are linked closely to the assumptions made by management regarding the future performance of the related assets and the discount rate. Contingent consideration is measured at fair value using a discounted cash flow model.

The judgments made in determining the estimated fair value assigned to the net identifiable assets acquired, as well as the estimated useful life of non-financial assets, could impact the net income of subsequent periods through depreciation and amortization, and in certain instances through impairment charges. The Company believes that the estimated fair values assigned to the net identifiable assets acquired are based on reasonable assumptions that a marketplace participant would use. While the Company uses its best estimates and assumptions to accurately value the net identifiable assets acquired at the acquisition date, estimates are inherently uncertain and subject to refinement.

During the measurement period, for up to 12 months following the acquisition, the Company records adjustments to the initial estimate of the net identifiable assets acquired based on new information obtained that would have existed as of the date of the acquisition. Any adjustment that arises from information obtained that did not exist as of the date of the acquisition will be recorded in the period the adjustment arises.

***Development costs***

Development costs are recognized as intangible assets and are amortized over their useful lives when they meet the criteria for capitalization. Forecasted revenue and profitability for the relevant projects are used to assess compliance with the capitalization criteria and to assess the recoverable amount of the assets.

***Impairment of non-financial assets***

The Company's impairment test for goodwill is based on estimates of the recoverable amount of the CGU or group of CGUs to which goodwill has been allocated and uses valuation models such as the discounted cash flows model (level 3). Management applies significant judgement in developing the cash flow model, which includes the use of key assumptions including expected revenue growth, margin projections and the discount rates. Management also applies judgement when reflecting the impact surrounding current market view of risk and uncertainty and macroeconomic conditions. These estimates, including the methodology used, can have a material impact on the respective values and ultimately the amount of any goodwill impairment.

Likewise, whenever property, plant and equipment and intangible assets are tested for impairment, the determination of the assets' recoverable amount involves the use of estimates by management and can have a material impact on the respective values and ultimately the amount of any impairment.

***Revenue recognition***

*Transaction price allocated to performance obligations*

In allocating the transaction price for contracts with multiple performance obligations, the Company estimates the stand-alone selling price using the expected cost plus a margin approach if they are not directly observable.

*Determining the measure of progress of performance obligations satisfied over time*

For contracts where revenue is recognized over time using the cost input method, the Company applies judgement in estimating the total costs to complete the contract.

The determination of the total costs to complete a contract is based on estimates that can be affected by several factors, including program management and execution difficulties, technological challenges, cost of materials, supply chain disruptions, inflationary pressures, availability of labour and problems with suppliers or subcontractors.

Management conducts monthly reviews of its estimated costs to complete as well as its revenue and margins recognized, on a contract-by-contract basis. The impact of any revisions in cost and revenue estimates is reflected in the period in which the need for a revision becomes known.

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Notes to the Consolidated Financial Statements

***Defined benefit pension plans***

The cost of defined benefit pension plans and the present value of the employee benefit obligations are determined using actuarial valuations. Actuarial valuations involve, amongst others, making assumptions about discount rates, future salary increases and mortality rates. All assumptions are reviewed at each reporting date. Any changes in these assumptions will impact the carrying amount of the employee benefit obligations and the cost of the defined benefit pension plans. In determining the appropriate discount rate, management considers the interest rates of high-quality corporate bonds that are denominated in the currency in which the benefits will be paid, and that have terms to maturity approximating the terms of the related pension liability. The mortality rate is based on publicly available mortality tables for the specific country. Future salary increases and pension increases are based on expected future inflation rates for the specific country. Individual discount rates are derived from the yield curve and are used to determine the service cost and interest cost of the Canadian defined benefit pension plans at the beginning of the year. The present value of the employee benefit obligations for these Canadian plans is determined based on the individual discount rates derived from the yield curve at the end of the year. Other key assumptions for pension obligations are based, in part, on current market conditions. See Note 22 for further details regarding assumptions used.

***Income taxes***

The Company is subject to income tax laws in numerous jurisdictions. Judgement is required in determining the worldwide provision for income taxes. The determination of tax liabilities and assets involves uncertainties in the interpretation of complex tax regulations. The Company provides for potential tax liabilities based on the weighted average probability of the possible outcomes. Differences between actual results and those estimates could influence the income tax liabilities and deferred tax liabilities in the period in which such determinations are made.

Deferred tax assets are recognized to the extent that it is probable that taxable profit will be available against the losses that can be utilized. Significant management judgement is required to determine the amount of deferred tax assets that can be recognized, based upon the likely timing and the level of future taxable profits together with future tax planning strategies. The recorded amount of total deferred tax assets could be altered if estimates of projected future taxable income and benefits from available tax strategies are lowered, or if changes in current tax regulations are enacted that impose restrictions on the timing or extent of the Company's ability to utilize future tax benefits.

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Notes to the Consolidated Financial Statements

**NOTE 2 – BUSINESS COMBINATIONS**

**SIMCOM Aviation Training**

On November 5, 2024, the Company increased its ownership stake in its existing SIMCOM Aviation Training (SIMCOM) joint venture by purchasing an additional interest from Volo Sicuro for a cash consideration of $322.8 million (US$232.3 million), subject to customary adjustments.

As a result, the Company obtained control over SIMCOM's four training centres located in the U.S. providing pilot training across multiple business aviation aircraft platforms. Additionally, CAE and SIMCOM have extended their current exclusive business aviation training services agreement with Flexjet, LLC, a related party of Volo Sicuro, and its affiliates by 5 years, bringing the remaining exclusivity period to 15 years.

Prior to acquiring control, the Company's 50% ownership in SIMCOM was accounted for using the equity method. The change in control provided for the remeasurement of the previously held equity interest in SIMCOM to its fair value. The fair value of the Company's previously held equity interest in SIMCOM was determined by applying a non-controlling discount to the consideration paid on the acquisition date and was valued at $230.6 million. As a result, the Company recorded a net remeasurement gain of $72.6 million (Note 7).

As at March 31, 2025, the determination of the fair value of the net assets acquired and liabilities assumed arising from the SIMCOM acquisition are as follows:

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| | |
|:---|:---|
| | **SIMCOM** |
| Current assets, excluding cash on hand | $**20.4** |
| Current liabilities | **(29.4)** |
| Property, plant and equipment | **135.5** |
| Right-of-use assets | **128.4** |
| Intangible assets | **504.8** |
| Deferred tax | **(23.7)** |
| Long-term debt, including current portion | **(158.5)** |
| Non-current liabilities | **(16.5)** |
| **Fair value of net assets acquired, excluding cash acquired** | $**561.0** |
| Cash acquired | **14.8** |
| **Total purchase consideration** | $**575.8** |
| Settlement of pre-existing balances with SIMCOM | **(22.4)** |
| Fair value of the Company's previously held equity interest in SIMCOM | **(230.6)** |
| **Total cash consideration paid on acquisition date** | $**322.8** |

---

The fair value of the acquired intangible assets amounts to $504.8 million and consists of goodwill of $379.6 million (non-deductible for tax purposes), customer relationships of $124.5 million and other intangibles of $0.7 million. The goodwill arising from this acquisition is attributable to the expansion of CAE's customer installed base of business aviation flight simulators, market capacity and expected synergies from combining operations.

The net assets acquired, including intangible assets, of SIMCOM are included in the Civil Aviation segment.

The purchase price allocation is final as at March 31, 2025.

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Notes to the Consolidated Financial Statements

**NOTE 3 – DISCONTINUED OPERATIONS** 

During the fourth quarter of fiscal 2024, the Company closed the sale of its Healthcare business to Madison Industries. At the time of issuance of the consolidated financial statements, the Company is engaged in a dispute with Madison Industries, which is claiming up to approximately $60 million in final price adjustments. For additional information, refer to Note 29.

For the year ended March 31, 2024, the after-tax gain on disposal of the Healthcare business is as follows:

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| | |
|:---|:---|
| Consideration received in cash | $275.3 |
| Short-term holdback receivable | 8.0 |
| Long-term non-contingent receivable | 10.1 |
| **Total consideration** | $**293.4** |
| Net assets disposed | $269.6 |
| Impairment of non-financial assets of the disposal group excluded from the sale | 7.8 |
| Reclassification to income of gains on foreign currency exchange differences from OCI | (2.5) |
| Transaction fees and other costs | 12.2 |
| Gain on disposal of discontinued operations before income taxes | $6.3 |
| Income tax recovery | (10.2) |
| **After-tax gain on disposal of discontinued operations** | $**16.5** |

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The net income and other comprehensive loss from discontinued operations are as follows:

---

| | | |
|:---|:---|:---|
| | **2025** | 2024 |
| Revenue | $**—** | $131.7 |
| Expenses | **—** | 132.7 |
| Operating loss | $**—** | $(1.0) |
| Finance expense | **—** | 3.6 |
| Loss before income taxes | $**—** | $(4.6) |
| Income tax recovery | **—** | (9.4) |
| **Net income from discontinued operations before after-tax gain on disposal** | $**—** | $4.8 |
| After-tax gain on disposal of discontinued operations | **—** | 16.5 |
| **Net income from discontinued operations** | $**—** | $21.3 |

---

For the year ended March 31, 2024, depreciation and amortization of $6.1 million is included in net income from discontinued operations.

---

| | | |
|:---|:---|:---|
| | **2025** | 2024 |
| Foreign currency exchange differences on translation of foreign operations | $**—** | $0.9 |
| Reclassification to income of gains on foreign currency exchange differences | **—** | (2.5) |
| Income taxes | **—** | (5.4) |
| **Other comprehensive loss from discontinued operations** | $**—** | $(7.0) |

---

No amount of net income and other comprehensive loss from discontinued operations are attributable to non-controlling interest.

86 \| CAE Financial Report 2025

------

Notes to the Consolidated Financial Statements

The major classes of assets and liabilities disposed were as follows:

---

| | |
|:---|:---|
| Current assets | $**112.3** |
| Property, plant and equipment | **6.9** |
| Right-of-use assets | **9.8** |
| Intangible assets, including goodwill of $120.4 million | **168.0** |
| Deferred tax assets | **26.5** |
| Other non-current assets | **14.5** |
| **Assets disposed** | $**338.0** |
| Current liabilities | **37.1** |
| Long-term debt (lease liabilities), including current portion | **12.2** |
| Deferred tax liabilities | **1.4** |
| Other non-current liabilities | **17.7** |
| **Liabilities disposed** | $**68.4** |
| **Net assets disposed** | $**269.6** |

---

As a result of the closing of the sale, royalty obligations related to the discontinued operations of $36.9 million previously presented as liabilities held for sale were converted into R&D obligations (Note 21).

The net cash flows from discontinued operations are as follows:

---

| | | |
|:---|:---|:---|
| | **2025** | 2024 |
| Operating activities | $**—** | $0.4 |
| Investing activities | **—** | 261.6 |
| Financing activities | **—** | (1.3) |
| **Net cash flows provided by discontinued operations** | $**—** | $260.7 |

---

**NOTE 4 – OPERATING SEGMENTS AND GEOGRAPHIC INFORMATION**

The Company elected to organize its operating segments principally on the basis of its customer markets. The Company manages its operations through its two segments: Civil Aviation and Defense and Security. Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker.

The Company has decided to disaggregate revenue from contracts with customers by segment, by products and services and by geographic regions as the Company believes it best depicts how the nature, amount, timing and uncertainty of its revenue and cash flows are affected by economic factors.

**Results by segment**

The profitability measure employed by the Company for making decisions about allocating resources to segments and assessing segment performance is adjusted segment operating income. Adjusted segment operating income is calculated by taking operating income and adjusting for restructuring, integration and acquisition costs, and impairments and other gains and losses arising from significant strategic transactions or specific events, which gives an indication of the profitability of each segment because it does not include the impact of items not specifically related to the segment's performance. For the years ended March 31, 2025 and 2024, impairments and other gains and losses arising from significant strategic transactions or specific events consist of the gain on fair value remeasurement of SIMCOM (Note 7), the shareholder matters (recorded in selling, general and administrative expenses), the executive management transition costs (recorded in selling, general and administrative expenses), the impairment of goodwill (Note 15) and the impairment of technology and other non-financial assets (Note 5).

The accounting principles used to prepare the information by operating segments are the same as those used to prepare the Company's consolidated financial statements. The method used for the allocation of assets jointly used by operating segments and costs and liabilities jointly incurred (mostly corporate costs) between operating segments is based on the level of utilization when determinable and measurable, otherwise the allocation is based on a proportion of each segment's cost of sales and revenue.

CAE Financial Report 2025 \| 87

------

Notes to the Consolidated Financial Statements

Specified items included in the segment profitability measure are as follows:

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| | | | Defense | Defense | | |
| | Civil Aviation | Civil Aviation | and Security | and Security | | |
| | **2025** | 2024 | **2025** | 2024 | **2025** |<br>Total<br>2024 |
| External revenue | $**2709.3** | $2435.8 | $**1998.6** | $1847.0 | $**4707.9** | $4282.8 |
| Depreciation and amortization | **312.4** | 272.0 | **102.3** | 96.7 | **414.7** | 368.7 |
| Share of after-tax profit of equity accounted investees | **68.3** | 60.8 | **20.0** | 11.4 | **88.3** | 72.2 |
| Gross profit | **883.6** | 867.8 | **416.5** | 286.7 | **1300.1** | 1154.5 |
| Operating income (loss) | **605.3** | 442.0 | **123.9** | (627.4) | **729.2** | (185.4) |
| Adjusted segment operating income | **581.5** | 548.9 | **150.5** | 0.8 | **732.0** | 549.7 |

---

Reconciliation of adjusted segment operating income is as follows:

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| | | | Defense | Defense | | |
| | Civil Aviation | Civil Aviation | and Security | and Security | | |
| | **2025** | 2024 | **2025** | 2024 | **2025** |<br>Total<br>2024 |
| Operating income (loss) | $**605.3** | $442.0 | $**123.9** | $(627.4) | $**729.2** | $(185.4) |
| Restructuring, integration and acquisition costs (Note 6) | **37.8** | 106.9 | **18.7** | 24.5 | **56.5** | 131.4 |
| Impairments and other gains and losses arising from |  |  |  |  |  |  |
| &nbsp;&nbsp;significant strategic transactions or specific events: |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Gain on fair value remeasurement of SIMCOM (Note 7) | **(72.6)** |  | **—** |  | **(72.6)** |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Shareholder matters | **6.3** |  | **4.3** |  | **10.6** |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Executive management transition costs | **4.7** |  | **3.6** |  | **8.3** |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Impairment of goodwill (Note 15) | **—** |  | **—** | 568.0 | **—** | 568.0 |
| &nbsp;&nbsp;&nbsp;&nbsp;Impairment of technology and other non-financial assets (Note 5) | **—** |  | **—** | 35.7 | **—** | 35.7 |
| Adjusted segment operating income | $**581.5** | $548.9 | $**150.5** | $0.8 | $**732.0** | $549.7 |

---

Capital expenditures by segment, which consist of property, plant and equipment expenditures and intangible assets expenditures (excluding those acquired in business combinations), are as follows:

---

| | | |
|:---|:---|:---|
| | **2025** | 2024 |
| Civil Aviation | $**296.3** | $335.3 |
| Defense and Security | **147.8** | 128.7 |
| Discontinued operations (Note 3) | **—** | 13.7 |
| Total capital expenditures | $**444.1** | $477.7 |

---

**Assets and liabilities employed by segment**

The Company uses assets employed and liabilities employed to assess resources allocated to each segment. Assets employed include accounts receivable, contract assets, inventories, prepayments, property, plant and equipment, right-of-use assets, intangible assets, investment in equity accounted investees, derivative financial assets and other non-current assets. Liabilities employed include accounts payable and accrued liabilities, provisions, contract liabilities, derivative financial liabilities and other non-current liabilities.

Assets and liabilities employed by segment are reconciled to total assets and liabilities as follows:

---

| | | |
|:---|:---|:---|
| | **2025** | 2024 |
| **Assets employed**  |  |  |
| Civil Aviation | $**7263.4** | $6131.8 |
| Defense and Security | **3000.6** | 2869.3 |
| Assets not included in assets employed by segment | **949.8** | 833.0 |
| Total assets | $**11213.8** | $9834.1 |
| **Liabilities employed**  |  |  |
| Civil Aviation | $**1369.1** | $1260.1 |
| Defense and Security | **1009.3** | 828.1 |
| Liabilities not included in liabilities employed by segment | **3859.4** | 3443.3 |
| Total liabilities | $**6237.8** | $5531.5 |

---

88 \| CAE Financial Report 2025

------

Notes to the Consolidated Financial Statements

**Products and services information**

The Company's revenue from external customers for its products and services are as follows:

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| | | | Defense | Defense | | |
| | Civil Aviation | Civil Aviation | and Security | and Security | | |
| | **2025** | 2024 | **2025** | 2024 | **2025** |<br>Total<br>2024 |
| Products | $**963.7** | $786.6 | $**907.7** | $708.7 | $**1871.4** | $1495.3 |
| Training, software and services | **1745.6** | 1649.2 | **1090.9** | 1138.3 | **2836.5** | 2787.5 |
| Total external revenue | $**2709.3** | $2435.8 | $**1998.6** | $1847.0 | $**4707.9** | $4282.8 |

---

**Geographic information**

The Company markets its products and services globally. Revenues are attributed to geographical regions based on the location of customers. Non-current assets other than financial instruments and deferred tax assets are attributed to geographical regions based on the location of the assets, excluding goodwill. Goodwill is presented by geographical regions based on the Company's allocation of the related purchase price.

---

| | | |
|:---|:---|:---|
| | **2025** | 2024 |
| External revenue |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Canada | $**474.2** | $460.7 |
| &nbsp;&nbsp;&nbsp;&nbsp;United States | **2241.8** | 2076.3 |
| &nbsp;&nbsp;&nbsp;&nbsp;United Kingdom | **281.6** | 271.1 |
| &nbsp;&nbsp;&nbsp;&nbsp;Rest of Americas | **133.0** | 98.8 |
| &nbsp;&nbsp;&nbsp;&nbsp;Europe | **663.6** | 645.1 |
| &nbsp;&nbsp;&nbsp;&nbsp;Asia | **759.9** | 566.1 |
| &nbsp;&nbsp;&nbsp;&nbsp;Oceania and Africa | **153.8** | 164.7 |
|  | $**4707.9** | $4282.8 |
|  | **2025** | 2024 |
| Non-current assets other than financial instruments, deferred tax assets and employee benefits assets |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Canada | $**1541.7** | $1527.7 |
| &nbsp;&nbsp;&nbsp;&nbsp;United States | **4534.7** | 3623.5 |
| &nbsp;&nbsp;&nbsp;&nbsp;United Kingdom | **399.0** | 360.5 |
| &nbsp;&nbsp;&nbsp;&nbsp;Rest of Americas | **221.8** | 201.9 |
| &nbsp;&nbsp;&nbsp;&nbsp;Europe | **1162.3** | 985.5 |
| &nbsp;&nbsp;&nbsp;&nbsp;Asia | **610.8** | 532.0 |
| &nbsp;&nbsp;&nbsp;&nbsp;Oceania and Africa | **188.2** | 108.9 |
|  | $**8658.5** | $7340.0 |

---

**NOTE 5 – OTHER (GAINS) AND LOSSES**

---

| | | |
|:---|:---|:---|
| | **2025** | 2024 |
| Impairment of technology and other non-financial assets | $**—** | $35.7 |
| Net gain on foreign currency exchange differences | **(1.4)** | (2.4) |
| Remeasurement of royalty obligations | **(2.9)** | (6.1) |
| Settlement gain on annuity purchase transaction (Note 22) | **—** | (5.2) |
| Gain on disposal of property, plant and equipment | **(6.4)** |  |
| Other | **(2.6)** | 5.9 |
| Other (gains) and losses | $**(13.3)** | $27.9 |

---

**Impairment of technology and other non-financial assets**

During the fourth quarter of fiscal 2024, the Company considered the impact of general economic headwinds, the re-baselining of its Defense and Security business and the reduced pursuit of certain types of opportunities as part of its review of impairment indicators for non-financial assets. As a result of this review, the Company recorded impairment charges totaling $35.7 million in the Defense and Security segment, consisting of $31.4 million of internally developed intangible assets and $4.3 million of simulators included in property, plant and equipment.

CAE Financial Report 2025 \| 89

------

Notes to the Consolidated Financial Statements

**NOTE 6 – RESTRUCTURING, INTEGRATION AND ACQUISITION COSTS**

---

| | | |
|:---|:---|:---|
| | **2025** | 2024 |
| Integration and acquisition costs | $**11.5** | $79.9 |
| Severances and other employee related costs | **33.9** | 31.2 |
| Impairment of non-financial assets – net | **5.2** | 19.2 |
| Other costs | **5.9** | 1.1 |
| Total restructuring, integration and acquisition costs | $**56.5** | $131.4 |

---

During the fourth quarter of fiscal 2024, the Company announced that it would streamline its operating model and portfolio, optimize its cost structure and create efficiencies. This restructuring program was completed in the second quarter of fiscal 2025. In fiscal 2025, costs related to this restructuring program totalled $40.6 million and included $29.4 million of severances and other employee related costs and $5.2 million of impairment of non-financial assets. Impairment of non-financial assets primarily included the impairment of property, plant and equipment, intangible assets and right-of-use assets related to the termination of certain product offerings within the Civil Aviation segment.

In the second quarter of fiscal 2025, the integration activities associated with the fiscal 2022 acquisition of Sabre's AirCentre airline operations portfolio (AirCentre) were completed. For the year ended March 31, 2025, restructuring, integration and acquisition costs associated with AirCentre amounted to $15.9 million (2024 – $76.8 million).

**NOTE 7 - GAIN ON REMEASUREMENT OF PREVIOUSLY HELD EQUITY INTEREST**

**Gain on fair value remeasurement of SIMCOM**

On November 5, 2024, the Company increased its ownership stake in its existing SIMCOM joint venture, obtaining control of the entity. Prior to acquiring control, the Company's 50% ownership in SIMCOM was accounted for using the equity method. The change in control provided for the remeasurement of the previously held equity interest in SIMCOM to its fair value with any difference compared to the carrying value to be recognized as a gain or loss in the income statement, as well as the derecognition of a portion of Civil Aviation's goodwill, based on the relative fair value of the previously held equity interest in SIMCOM compared to the cash generating unit included in the Civil Aviation segment. As a result, the Company recorded a net remeasurement gain of $72.6 million, including the derecognition of goodwill and associated cumulative foreign exchange differences of $29.4 million and $7.7 million, respectively, and other costs of $5.3 million.

**NOTE 8 – FINANCE EXPENSE – NET**

---

| | | |
|:---|:---|:---|
| | **2025** | 2024 |
| Finance expense: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Long-term debt (other than lease liabilities) | $**156.0** | $160.4 |
| &nbsp;&nbsp;&nbsp;&nbsp;Lease liabilities | **43.1** | 26.8 |
| &nbsp;&nbsp;&nbsp;&nbsp;Other | **42.8** | 42.3 |
| Borrowing costs capitalized | **(5.2)** | (7.0) |
| Finance expense | $**236.7** | 222.5 |
| Finance income: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Loans and investment in finance leases | $**(13.8)** | $(11.0) |
| &nbsp;&nbsp;&nbsp;&nbsp;Other | **(7.4)** | (6.5) |
| Finance income | $**(21.2)** | $(17.5) |
| Finance expense – net | $**215.5** | $205.0 |

---

90 \| CAE Financial Report 2025

------

Notes to the Consolidated Financial Statements

**NOTE 9 – INCOME TAXES**

**Income tax expense**

The reconciliation of income taxes at Canadian statutory rates with the income tax expense (recovery) is as follows:

---

| | | |
|:---|:---|:---|
| | **2025** | 2024 |
| Earnings (loss) before income taxes | $**513.7** | $(390.4) |
| Canadian statutory income tax rates | **26.5%** | 26.5% |
| Income taxes at Canadian statutory rates | $**136.2** | $(103.5) |
| Effect of differences in tax rates in other jurisdictions | **1.8** | 7.4 |
| Non-deductible impairment of goodwill | **—** | 41.6 |
| Tax benefits not previously recognized and unrecognized tax benefits | **(6.8)** | 18.3 |
| Non-taxable gain on fair value remeasurement of SIMCOM | **(21.9)** |  |
| Non-taxable revenues | **—** | (4.1) |
| Tax impact on after tax profit of equity accounted investees | **(18.5)** | (18.8) |
| Prior years' tax adjustments | **2.8** | (14.4) |
| Other | **5.1** | 0.7 |
| Income tax expense (recovery) | $**98.7** | $(72.8) |
| Effective tax rate | **19%** | 19% |

---

The Company's applicable tax rate corresponds to the combined Canadian tax rates applicable in the provinces where the Company operates.

Significant components of the provision for the income tax expense (recovery) are as follows:

---

| | | |
|:---|:---|:---|
| | **2025** | 2024 |
| Current income tax expense : |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Current year | $**56.7** | $74.0 |
| &nbsp;&nbsp;&nbsp;&nbsp;Prior years' tax adjustments | **(2.7)** | 68.2 |
| Deferred income tax expense (recovery): |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Tax benefit not previously recognized used to reduce the deferred tax expense | **(6.8)** | 18.3 |
| &nbsp;&nbsp;&nbsp;&nbsp;Origination and reversal of temporary differences | **51.5** | (233.3) |
| Income tax expense (recovery) | $**98.7** | $(72.8) |

---

**Tax court decision related to the Strategic Aerospace and Defence Initiative (SADI) program**

During the year ended March 31, 2024, a tax court decision rendered in May 2023 related to the SADI program resulted in a current income tax expense of $57.4 million and a deferred income tax recovery of $61.9 million.

**Deferred tax assets and liabilities**

During the year ended March 31, 2025, movements in temporary differences are as follows:

---

| | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|
| |<br>Balance<br>beginning<br>of year |<br>Recognized<br>in income |<br>Recognized<br>in OCI |<br>Recognized<br>in equity |<br>Business<br>combinations<br>(Note 2) | Foreign<br>currency<br>exchange<br>differences |<br>**Balance**<br>**end of year** |
| Non-capital loss carryforwards | $142.5 | $(61.3) | $— | $— | $3.3 | $5.2 | $**89.7** |
| Unclaimed research & development expenditures | 162.1 | 59.0 |  |  |  | 6.7 | **227.8** |
| Investment tax credits | (73.8) | (3.0) |  |  |  |  | **(76.8)** |
| Property, plant and equipment and right-of-use of assets | (154.1) | 9.3 |  |  | (11.1) | (12.1) | **(168.0)** |
| Intangible assets | (39.0) | (59.7) |  |  | (26.3) | (1.8) | **(126.8)** |
| Amounts not currently deductible including interest limitation | 76.9 | 22.7 |  | 2.4 | 6.5 | 2.2 | **110.7** |
| Government participation | 86.4 | 7.2 |  |  |  |  | **93.6** |
| Other | (4.3) | (18.9) | 20.3 |  | 3.9 | (0.1) | **0.9** |
| Net deferred tax assets | $196.7 | $(44.7) | $20.3 | $2.4 | $(23.7) | $0.1 | $**151.1** |

---

CAE Financial Report 2025 \| 91

------

Notes to the Consolidated Financial Statements

During the year ended March 31, 2024, movements in temporary differences are as follows:

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| |<br>Balance<br>beginning<br>of year |<br>Recognized<br>in income |<br>Recognized<br>in OCI |<br>Disposal of<br>discontinued<br>operations | Foreign<br>currency<br>exchange<br>differences |<br>Balance<br>end of year |
| Non-capital loss carryforwards | $98.2 | $59.4 | $— | (14.6) | $(0.5) | $142.5 |
| Unclaimed research & development expenditures | 162.3 | 13.5 |  | (13.7) |  | 162.1 |
| Investment tax credits | (82.1) | 5.8 |  | 2.1 | 0.4 | (73.8) |
| Property, plant and equipment and right-of-use of assets | (114.8) | (41.0) |  | 1.1 | 0.6 | (154.1) |
| Intangible assets | (114.7) | 64.6 |  | 10.5 | 0.6 | (39.0) |
| Amounts not currently deductible including interest limitation | 80.3 | 3.0 |  | (6.9) | 0.5 | 76.9 |
| Government participation | (32.6) | 118.7 |  | 0.3 |  | 86.4 |
| Other | (0.8) | 9.7 | (10.6) | (3.9) | 1.3 | (4.3) |
| Net deferred tax assets (liabilities) | $(4.2) | $233.7 | $(10.6) | $(25.1) | $2.9 | $196.7 |

---

For the year ended March 31, 2024, deferred tax recovery of $18.7 million has been recorded in net income from discontinued operations.

As at March 31, 2025, net deferred tax assets of $148.7 million (2024 – $199.4 million) were recognized in jurisdictions that incurred losses this fiscal year or the preceding fiscal year. Based upon the level of historical taxable income or projections for future taxable income, management believes it is probable that the Company will realize the benefits of these net deferred tax assets.

As at March 31, 2025, a deferred income tax liability on taxable temporary differences of $3,456.4 million (2024 – $3,065.5 million) related to investments in subsidiaries and interests in joint ventures has not been recognized, because the Company controls the timing of the reversal of the temporary differences and believes it is probable that the temporary differences will not be reversed in the foreseeable future.

The non-capital losses incurred in various jurisdictions expire as follows:

---

| | | |
|:---|:---|:---|
| Expiry date | Unrecognized | Recognized |
| 2026-2030 | $23.2 | $8.4 |
| 2031-2045 | 23.4 | 86.9 |
| No expiry date | 167.4 | 265.6 |
|  | $214.0 | $360.9 |

---

As at March 31, 2025, the Company has $130.4 million (2024 – $139.6 million) of deductible temporary differences for which deferred tax assets have not been recognized. The Company also has $156.2 million (2024 – $180.2 million) of capital losses for which deferred tax assets have not been recognized with no expiry date.

**Global minimum tax (Pillar Two)**

As at March 31, 2025, various countries where the Company operates have enacted the global minimum top-up income tax under Pillar Two tax legislation into domestic tax legislation. The top-up income tax relates to the Company's operations in the United Arab Emirates and Hungary where the statutory income tax rates are below the 15% determined by the Pillar Two rules. For the year ended March 31, 2025, the Company recognized a current income tax expense related to the Pillar Two tax of $2.6 million.

92 \| CAE Financial Report 2025

------

Notes to the Consolidated Financial Statements

**NOTE 10 – SHARE CAPITAL AND EARNINGS PER SHARE**

**Share capital**

***Authorized and issued shares***

The Company is authorized to issue an unlimited number of common shares without par value and an unlimited number of preferred shares without par value, issuable in series.

The preferred shares may be issued with rights and conditions to be determined by the Board of Directors, prior to their issue. To date, the Company has not issued any preferred shares.

As at March 31, 2025, the number of common shares issued and fully paid was 320,265,108 (2024 – 318,312,233).

***Repurchase and cancellation of common shares***

On May 27, 2024, the Company received regulatory approval for a normal course issuer bid program (NCIB) to purchase, for cancellation, up to 15,932,187 of its common shares. The NCIB began on May 30, 2024 and will end on May 29, 2025 or on such earlier date when the Company completes its purchases or elects to terminate the NCIB. These purchases may be made through the facilities of the TSX or the NYSE, or in such other manner as may be permitted under applicable stock exchange rules and securities laws, at the prevailing market price at the time of acquisition, plus brokerage fees. All common shares purchased pursuant to the NCIB will be cancelled.

During the year ended March 31, 2025, the Company repurchased and cancelled a total of 856,230 common shares under the NCIB, at a weighted average price of $24.85 per common share, for a total consideration of $21.3 million.

**Earnings per share computation**

The denominators for the basic and diluted earnings per share computations are as follows:

---

| | | |
|:---|:---|:---|
| | **2025** | 2024 |
| Weighted average number of common shares outstanding | **319072751** | 318191697 |
| Effect of dilutive stock options and equity-settled share-based payments | **645501** |  |
| Weighted average number of common shares outstanding for diluted earnings per share calculation | **319718252** | 318191697 |

---

As at March 31, 2025, stock options to acquire 1,637,584 common shares (2024 – 6,459,922) have been excluded from the above calculation since their inclusion would have had an anti-dilutive effect.

**NOTE 11 – ACCOUNTS RECEIVABLE**

Details of accounts receivable are as follows:

---

| | | |
|:---|:---|:---|
| | **2025** | 2024 |
| Current trade receivables | $**256.3** | $232.3 |
| Past due trade receivables |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;1-30 days | **68.9** | 132.1 |
| &nbsp;&nbsp;&nbsp;&nbsp;31-60 days | **18.1** | 33.7 |
| &nbsp;&nbsp;&nbsp;&nbsp;61-90 days | **15.1** | 16.0 |
| &nbsp;&nbsp;&nbsp;&nbsp;Greater than 90 days | **83.6** | 59.7 |
| Total trade receivables | $**442.0** | $473.8 |
| Investment in finance leases (Note 16) | **16.0** | 11.9 |
| Receivables from related parties (Note 17) | **61.2** | 58.2 |
| Other receivables | **114.1** | 101.7 |
| Credit loss allowances | **(21.3)** | (20.9) |
| Total accounts receivable | $**612.0** | $624.7 |

---

Changes in credit loss allowances are as follows:

---

| | | |
|:---|:---|:---|
| | **2025** | 2024 |
| Credit loss allowances, beginning of year | $**(20.9)** | $(25.5) |
| Additions | **(3.4)** | (8.3) |
| Amounts charged off | **3.7** | 9.4 |
| Unused amounts reversed | **0.3** | 2.2 |
| Disposal of discontinued operations (Note 3) | **—** | 0.9 |
| Foreign currency exchange differences | **(1.0)** | 0.4 |
| Credit loss allowances, end of year | $**(21.3)** | $(20.9) |

---

CAE Financial Report 2025 \| 93

------

Notes to the Consolidated Financial Statements

**NOTE 12 – BALANCE FROM CONTRACTS WITH CUSTOMERS**

Net contract liabilities are as follows:

---

| | | |
|:---|:---|:---|
| | **2025** | 2024 |
| Contract assets - current | $**482.2** | $537.6 |
| Contract assets - non-current (Note 18) | **38.8** | 41.6 |
| Contract liabilities - current | **(1001.6)** | (911.7) |
| Contract liabilities - non-current (Note 23) | **(126.8)** | (99.8) |
| Net contract liabilities | $**(607.4)** | $(432.3) |

---

During the year ended March 31, 2025, the Company recognized revenue of $740.0 million (2024 – $712.6 million) that was included in the contract liability balance at the beginning of the year.

During the year ended March 31, 2025, the Company recognized an increase in revenue of $45.7 million (2024 – reduction of $86.6 million) related to performance obligations partially satisfied in previous years. This primarily related to revisions to estimated costs to complete certain contracts that impacted revenue and measures of completion and changes in transaction price.

**Remaining performance obligations**

As at March 31, 2025, the amount of the revenues expected to be realized in future years from performance obligations that are unsatisfied, or partially unsatisfied, was $8,529.5 million. The Company expects to recognize approximately 33% of these remaining performance obligations as revenue by March 31, 2026, an additional 20% by March 31, 2027 and the balance thereafter.

**NOTE 13 – INVENTORIES**

---

| | | |
|:---|:---|:---|
| | **2025** | 2024 |
| Work in progress | $**348.4** | $356.5 |
| Raw materials, supplies and manufactured products | **246.6** | 217.1 |
| Total inventories | $**595.0** | $573.6 |

---

During the year ended March 31, 2025, the use of inventory recognized in cost of sales amounted to $557.2 million (2024 - $485.1 million), the impairment of inventories to net realizable value amounted to $2.1 million (2024 – $2.5 million) and inventory recognized in discontinued operations amounted to nil (2024 – $55.8 million).

**NOTE 14 – PROPERTY, PLANT AND EQUIPMENT**

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| | | | Machinery | | Assets | |
|  | Buildings | | and | | under | |
| *(amounts in millions)* | and land | Simulators | equipment | Aircraft | construction | Total |
| Net book value as at March 31, 2023 | $369.1 | $1652.9 | $59.1 | $76.5 | $229.5 | $2387.1 |
| Additions | 22.0 | 33.5 | 19.1 | 14.0 | 241.2 | 329.8 |
| Disposals | (0.2) | (3.6) | (0.2) | (0.3) |  | (4.3) |
| Disposal of discontinued operations (Note 3) | (0.4) | (2.3) | (3.9) |  | (0.3) | (6.9) |
| Depreciation | (27.1) | (127.3) | (22.6) | (5.8) |  | (182.8) |
| Impairment |  | (4.4) | (0.2) | (0.6) |  | (5.2) |
| Transfers and others | 22.3 | 170.5 | 10.1 | (4.4) | (211.1) | (12.6) |
| Foreign currency exchange differences | 1.3 | 8.5 | 0.2 | 0.2 | 0.3 | 10.5 |
| Net book value as at March 31, 2024 | $387.0 | $1727.8 | $61.6 | $79.6 | $259.6 | $2515.6 |
| Additions | 18.8 | 4.7 | 9.9 | 17.5 | 305.3 | 356.2 |
| Business combinations (Note 2)  | 72.1 | 22.4 | 4.3 |  | 36.7 | 135.5 |
| Disposals | (0.2) |  | (0.2) | (12.1) | (0.1) | (12.6) |
| Depreciation | (30.1) | (148.2) | (20.2) | (6.3) |  | (204.8) |
| Impairment | (0.8) | (0.4) | (0.2) | (0.8) |  | (2.2) |
| Purchase of assets under lease (Note 16) |  |  |  | 9.1 |  | 9.1 |
| Transfers and others | 52.9 | 262.6 | 6.6 | (3.8) | (294.4) | 23.9 |
| Foreign currency exchange differences | 23.7 | 128.2 | 2.4 | 5.1 | 9.4 | 168.8 |
| **Net book value as at March 31, 2025** | $**523.4** | $**1997.1** | $**64.2** | $**88.3** | $**316.5** | $**2989.5** |

---

94 \| CAE Financial Report 2025

------

Notes to the Consolidated Financial Statements

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| | | | Machinery | | Assets | |
| | Buildings | | and | | under | |
| *(amounts in millions)* | and land | Simulators | equipment | Aircraft | construction | Total |
| Cost | $666.9 | $2694.0 | $223.5 | $108.6 | $259.6 | $3952.6 |
| Accumulated depreciation and impairment | (279.9) | (966.2) | (161.9) | (29.0) |  | (1437.0) |
| Net book value as at March 31, 2024 | $387.0 | $1727.8 | $61.6 | $79.6 | $259.6 | $2515.6 |
| Cost | $842.5 | $3158.7 | $241.6 | $129.4 | $316.5 | $4688.7 |
| Accumulated depreciation and impairment | (319.1) | (1161.6) | (177.4) | (41.1) |  | (1699.2) |
| **Net book value as at March 31, 2025** | $**523.4** | $**1997.1** | $**64.2** | $**88.3** | $**316.5** | $**2989.5** |

---

During the year ended March 31, 2025, depreciation of $204.0 million (2024 – $180.9 million) has been recorded in cost of sales, $0.8 million (2024 – $0.5 million) in selling, general and administrative expenses and nil (2024 – $1.4 million) in net income from discontinued operations.

**NOTE 15 – INTANGIBLE ASSETS** 

---

| | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|
| | | Capitalized | | | Technology, | Other | |
| *(amounts in millions)*  |  | development | Customer |  | software | intangible |  |
|  | Goodwill | costs | relationships | Licenses | and ERP | assets | Total |
| Net book value as at March 31, 2023 | $2663.3 | $294.7 | $554.3 | $253.4 | $269.6 | $15.5 | $4050.8 |
| Additions – internal development |  | 114.5 |  |  | 24.6 |  | 139.1 |
| Additions – acquired separately |  |  |  | 8.8 |  |  | 8.8 |
| Disposal of discontinued operations (Note 3) | (120.4) | (39.1) | (1.5) |  | (5.2) | (1.8) | (168.0) |
| Amortization |  | (37.7) | (42.9) | (15.8) | (30.5) | (2.5) | (129.4) |
| Impairment | (568.0) | (38.8) | (2.6) |  | (4.2) | (2.7) | (616.3) |
| Transfers and others |  | (6.5) |  | (0.3) | (0.9) |  | (7.7) |
| Foreign currency exchange differences | (3.6) | 0.1 | (2.1) | 0.2 |  |  | (5.4) |
| Net book value as at March 31, 2024 | $1971.3 | $287.2 | $505.2 | $246.3 | $253.4 | $8.5 | $3271.9 |
| Additions – internal development |  | 67.0 |  |  | 19.6 |  | 86.6 |
| Additions – acquired separately |  |  |  | 1.2 |  | 0.1 | 1.3 |
| Additions – non cash |  |  |  |  |  | 6.4 | 6.4 |
| Business combinations (Note 2 and 7)  | 350.2 | 0.7 | 124.5 |  |  |  | 475.4 |
| Amortization |  | (35.8) | (44.5) | (17.2) | (33.8) | (1.2) | (132.5) |
| Impairment |  | (2.1) |  |  |  |  | (2.1) |
| Transfers and others |  | (0.5) |  |  | (4.8) | 0.1 | (5.2) |
| Foreign currency exchange differences | 118.2 | 3.8 | 32.5 | 5.1 | 9.1 | 0.5 | 169.2 |
| **Net book value as at March 31, 2025** | $**2439.7** | $**320.3** | $**617.7** | $**235.4** | $**243.5** | $**14.4** | $**3871.0** |

---

---

| | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|
| |<br>Goodwill | Capitalized<br>development<br>costs |<br>Customer<br>relationships |<br>Licenses | Technology,<br>software<br>and ERP | Other<br>intangible<br>assets |<br>Total |
| Cost | $2539.3 | $535.5 | $781.8 | $329.2 | $499.8 | $37.3 | $4722.9 |
| Accumulated amortization and impairment | (568.0) | (248.3) | (276.6) | (82.9) | (246.4) | (28.8) | (1451.0) |
| Net book value as at March 31, 2024 | $1971.3 | $287.2 | $505.2 | $246.3 | $253.4 | $8.5 | $3271.9 |
| Cost | $3040.3 | $599.1 | $955.6 | $337.4 | $528.6 | $45.2 | $5506.2 |
| Accumulated amortization and impairment | (600.6) | (278.8) | (337.9) | (102.0) | (285.1) | (30.8) | (1635.2) |
| **Net book value as at March 31, 2025** | $**2439.7** | $**320.3** | $**617.7** | $**235.4** | $**243.5** | $**14.4** | $**3871.0** |

---

During the year ended March 31, 2025, amortization of $97.7 million (2024 – $92.3 million) has been recorded in cost of sales, $34.8 million (2024 – $32.8 million) in research and development expenses, nil (2024 – $0.2 million) in selling, general and administrative expenses and nil (2024 – $4.1 million) in net income from discontinued operations.

CAE Financial Report 2025 \| 95

------

Notes to the Consolidated Financial Statements

**Goodwill**

The carrying amount of goodwill allocated to the Company's CGUs per operating segment is as follows:

---

| | | | | |
|:---|:---|:---|:---|:---|
| | Civil Aviation | Defense<br>and Security | Discontinued<br>operations |<br>Total |
| Net book value as at March 31, 2023 | $1125.6 | $1417.3 | $120.4 | $2663.3 |
| Disposal of discontinued operations (Note 3) |  |  | (120.4) | (120.4) |
| Impairment |  | (568.0) |  | (568.0) |
| Foreign currency exchange differences | (4.8) | 1.2 |  | (3.6) |
| Net book value as at March 31, 2024 | $1120.8 | $850.5 | $— | $1971.3 |
| Business combinations (Note 2 and 7) | 350.2 |  |  | 350.2 |
| Foreign currency exchange differences | 69.8 | 48.4 |  | 118.2 |
| **Net book value as at March 31, 2025** | $**1540.8** | $**898.9** | $**—** | $**2439.7** |

---

Goodwill is allocated to CGUs or a group of CGUs, which generally corresponds to the Company's operating segments or one level below.

The Company performed its annual impairment test for goodwill during the fourth quarter of fiscal 2025. The Company determined the recoverable amount of each of its CGUs based on fair value less costs of disposal calculations using a discounted cash flow model. The recoverable amount of each CGU is calculated using estimated cash flows derived from the Company's five-year strategic plan as approved by the Board of Directors. The cash flows are based on expectations of market growth, industry reports and trends, and past performance. Cash flows subsequent to the five-year period were extrapolated using a constant terminal value growth rate of 2%, which is consistent with forecasts included in industry reports specific to the industry in which each CGU operates. The discount rates used to calculate the recoverable amounts reflect each CGUs' specific risks and market conditions, including the market view of risk for each CGU, and range from 8.4% to 9.7%.

During the year ended March 31, 2025, the estimated recoverable amount of each CGU exceeded their carrying amount. As a result, there was no impairment identified.

Variations in the Company assumptions and estimates, particularly in the expected revenue growth, margin projections and the discount rate could have a significant impact on fair value. For the year ended March 31, 2025, a decrease of 1% in expected revenue growth, a decrease of 1% in margin projections, or an increase of 1% in the discount rate would not have resulted in an impairment charge in any of our CGUs or group of CGUs.

In fiscal 2024, the assumptions used in determining the recoverable amount of the Defense and Security CGU using the discounted cash flow model, including expected revenue growth, margin projections and the discount rate, were impacted by the general economic headwinds and the re-baselining of the Defense and Security business resulting in the delayed recovery and growth of the CGU. As a result of the impairment test performed, the Company recorded a goodwill impairment charge of $568.0 million.

96 \| CAE Financial Report 2025

------

Notes to the Consolidated Financial Statements

**NOTE 16 – LEASES**

**Leases as lessee**

***Right-of-use assets***

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
| |<br>Buildings<br>and land |<br>Simulators | Machinery<br>and<br>equipment |<br>Aircraft |<br>Total |
| Net book value as at March 31, 2023 | $346.7 | $56.9 | $12.4 | $10.9 | $426.9 |
| Additions and remeasurements | 168.0 | 8.7 | 0.5 |  | 177.2 |
| Disposal of discontinued operations (Note 3) | (9.8) |  |  |  | (9.8) |
| Depreciation | (39.9) | (9.8) | (3.0) | (0.8) | (53.5) |
| Impairment | (1.3) |  |  |  | (1.3) |
| Transfers and others | 9.3 | (3.8) |  |  | 5.5 |
| Foreign currency exchange differences | 0.9 | (0.1) |  |  | 0.8 |
| Net book value as at March 31, 2024 | $473.9 | $51.9 | $9.9 | $10.1 | $545.8 |
| Additions and remeasurements | 135.4 |  | 18.0 |  | 153.4 |
| Business combinations (Note 2)  | 22.4 | 106.0 |  |  | 128.4 |
| Depreciation | (45.8) | (13.3) | (5.2) | (1.0) | (65.3) |
| Impairment | (0.7) |  |  |  | (0.7) |
| Purchase of assets under lease (Note 14) |  |  |  | (9.1) | (9.1) |
| Transfers and others | (0.9) |  | 0.7 |  | (0.2) |
| Foreign currency exchange differences | 29.0 | 6.5 | 0.2 |  | 35.7 |
| **Net book value as at March 31, 2025** | $**613.3** | $**151.1** | $**23.6** | $**—** | $**788.0** |

---

During the year ended March 31, 2025, depreciation of $64.0 million (2024 – $51.4 million) has been recorded in cost of sales, $1.3 million (2024 – $1.5 million) in selling, general and administrative expenses and nil (2024 – $0.6 million) in net income from discontinued operations.

***Short-term leases, leases of low-value assets and variable lease payments***

During the year ended March 31, 2025, expenses of $21.0 million (2024 – $16.4 million) have been recognized in net income relating to short-term leases, leases of low-value assets and variable lease payments not included in the measurement of lease liabilities.

**Leases as lessor**

***Operating Leases***

As at March 31, 2025, the net book value of simulators leased under operating leases to third parties was $115.9 million (2024 – $130.4 million).

Undiscounted lease payments to be received under operating leases are as follows:

---

| | | |
|:---|:---|:---|
| | **2025** | 2024 |
| Less than 1 year | $**49.1** | $63.0 |
| Between 1 and 2 years | **39.3** | 51.7 |
| Between 2 and 3 years | **30.7** | 43.3 |
| Between 3 and 4 years | **17.0** | 35.0 |
| Between 4 and 5 years | **13.4** | 21.4 |
| More than 5 years | **14.0** | 33.4 |
| Total undiscounted lease payments receivable | $**163.5** | $247.8 |

---

CAE Financial Report 2025 \| 97

------

Notes to the Consolidated Financial Statements

***Finance Leases***

Undiscounted lease payments to be received under finance leases are as follows:

---

| | | |
|:---|:---|:---|
| | **2025** | 2024 |
| Less than 1 year | $**23.9** | $16.4 |
| Between 1 and 2 years | **21.3** | 22.8 |
| Between 2 and 3 years | **18.2** | 17.4 |
| Between 3 and 4 years | **15.9** | 16.0 |
| Between 4 and 5 years | **16.4** | 16.0 |
| More than 5 years | **118.4** | 128.9 |
| Total undiscounted lease payments receivable | $**214.1** | $217.5 |
| Unearned finance income | **(56.3)** | (56.9) |
| Discounted unguaranteed residual values of leased assets | **(15.8)** | (12.8) |
| **Total investment in finance leases** | $**142.0** | $147.8 |
| **Current portion (Note 11)** | **16.0** | 11.9 |
| **Non-current portion (Note 18)** | $**126.0** | $135.9 |

---

**NOTE 17 – INVESTMENT IN EQUITY ACCOUNTED INVESTEES**

---

| | |
|:---|:---|
| Net book value as at March 31, 2023 | $530.7 |
| Cash contributions to equity accounted investees | 19.9 |
| Non-cash contributions to equity accounted investees | 6.0 |
| Share of after-tax profit before elimination of unrealized profits | 80.7 |
| Elimination of unrealized profits on transactions with equity accounted investees – net | (8.5) |
| Dividends received from equity accounted investees | (37.1) |
| Transfers and others | 1.1 |
| Foreign currency exchange differences | (4.0) |
| Net book value as at March 31, 2024 | $588.8 |
| Non-cash contributions to equity accounted investees | 13.0 |
| Acquisition of control of SIMCOM (Note 2)  | (131.0) |
| Share of after-tax profit before elimination of unrealized profits | 96.2 |
| Elimination of unrealized profits on transactions with equity accounted investees – net | (7.8) |
| Dividends received from equity accounted investees | (28.7) |
| Dividends declared but not yet received from equity accounted investees | (7.2) |
| Transfers and others | 0.7 |
| Foreign currency exchange differences | 35.1 |
| **Net book value as at March 31, 2025** | $**559.1** |

---

When the Company's share of losses in a joint venture equals or exceeds its interests in the joint ventures, the Company does not recognize further losses, unless it will incur obligations or make payments on behalf of the joint ventures. During the year ended March 31, 2025, the Company's unrecognized share of profit in joint ventures was $1.8 million (2024 – $2.0 million). As at March 31, 2025, the cumulative unrecognized share of losses for these joint ventures was $8.5 million (2024 – $10.3 million) and the cumulative unrecognized share of comprehensive loss of these joint ventures was $7.6 million (2024 –$9.3 million).

The Company's outstanding balances with its equity accounted investees are as follows:

---

| | | |
|:---|:---|:---|
| | **2025** | 2024 |
| Accounts receivable (Note 11) | $**63.2** | $58.8 |
| Contract assets | **22.3** | 34.2 |
| Other non-current assets | **39.5** | 22.9 |
| Accounts payable and accrued liabilities (Note 19) | **14.9** | 4.7 |
| Contract liabilities | **57.5** | 64.9 |

---

The Company's transactions with its equity accounted investees are as follows:

---

| | | |
|:---|:---|:---|
| | **2025** | 2024 |
| Revenue | $**278.7** | $258.7 |
| Purchases | **1.4** | 6.0 |
| Other income | **2.4** | 0.6 |

---

98 \| CAE Financial Report 2025

------

Notes to the Consolidated Financial Statements

**NOTE 18 – OTHER NON-CURRENT ASSETS**

---

| | | |
|:---|:---|:---|
| | **2025** | 2024 |
| Contract assets (Note 12) | $**38.8** | $41.6 |
| Advance payments for property, plant and equipment | **3.3** | 30.0 |
| Investment in finance leases (Note 16) | **126.0** | 135.9 |
| Non-current receivables | **94.7** | 61.5 |
| Investment tax credits | **303.4** | 268.6 |
| Other | **91.6** | 64.7 |
|  | $**657.8** | $602.3 |

---

**NOTE 19 – ACCOUNTS PAYABLE AND ACCRUED LIABILITIES**

---

| | | |
|:---|:---|:---|
| | **2025** | 2024 |
| Accounts payable trade | $**701.0** | $561.7 |
| Accrued and other liabilities | **463.6** | 458.0 |
| Amount due to related parties (Note 17) | **14.9** | 4.7 |
| Current portion of royalty obligations | **11.3** | 10.9 |
|  | $**1190.8** | $1035.3 |

---

**NOTE 20 – PROVISIONS**

Changes in provisions are as follows:

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| | Restoration<br>and simulator<br>removal |<br>Restructuring |<br>Legal |<br>Warranties | Onerous<br>contracts<br>and other |<br>Total |
| Provisions, as at March 31, 2024 | $9.7 | $15.3 | $0.3 | $14.6 | $16.7 | $56.6 |
| Additions |  | 37.7 | 4.6 | 16.2 | 5.2 | 63.7 |
| Business combinations (Note 2) | 0.6 |  |  |  |  | 0.6 |
| Amount used |  | (40.4) |  | (15.4) | (10.6) | (66.4) |
| Reversal of unused amounts | (0.1) | (4.6) |  |  | (2.0) | (6.7) |
| Foreign currency exchange differences | 0.7 | (0.1) | 0.1 |  | 0.6 | 1.3 |
| Transfers and others | 0.1 | (0.3) | (0.4) |  | 0.3 | (0.3) |
| **Provisions, as at March 31, 2025** | $**11.0** | $**7.6** | $**4.6** | $**15.4** | $**10.2** | $**48.8** |
| **Current portion** | $**—** | $**7.6** | $**4.6** | $**12.6** | $**9.7** | $**34.5** |
| **Non-current portion** | $**11.0** | $**—** | $**—** | $**2.8** | $**0.5** | $**14.3** |

---

CAE Financial Report 2025 \| 99

------

Notes to the Consolidated Financial Statements

**NOTE 21 – DEBT FACILITIES**

Long-term debt, net of transaction costs is as follows:

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| | | **Repayment** | | **2025** | | 2024 |
| **Notional amount** | **Notional amount** | **period** | **Current** | **Non-current** | Current | Non-current |
| **Unsecured senior notes** |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;U.S. dollar, fixed rate - 3.60% to 4.90% | **792.0** | **2025-2034** | $**20.0** | $**1114.7** | $190.5 | $1068.8 |
| &nbsp;&nbsp;&nbsp;&nbsp;Canadian dollar, Series 1, fixed rate - 5.54% | $**400.0** | **2028** | **—** | **398.1** |  | 397.5 |
| &nbsp;&nbsp;&nbsp;&nbsp;Canadian dollar, fixed rate - 4.15% | $**8.6** | **2025-2027** | **2.9** | **5.7** | 12.9 | 8.6 |
| **Term loans** |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;U.S. dollar, variable rate | **325.0** | **2025-2026** | **178.7** | **288.3** |  | 168.9 |
| &nbsp;&nbsp;&nbsp;&nbsp;Canadian dollar, variable rate | $**18.3** | **2025-2028** | **5.6** | **12.6** | 5.6 | 18.3 |
| &nbsp;&nbsp;&nbsp;&nbsp;Other |  | **2025-2026** | **33.5** | **—** | 14.3 | 32.8 |
| **Lease liabilities** |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;U.S. dollar |  | **2025-2071** | **92.0** | **432.0** | 30.2 | 368.2 |
| &nbsp;&nbsp;&nbsp;&nbsp;Other |  | **2025-2054** | **29.1** | **239.0** | 25.0 | 128.5 |
| **R&D obligations** |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Canadian dollar |  | **2025-2048** | **37.2** | **581.0** | 30.4 | 543.8 |
| **Revolving credit facilities** |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;U.S. dollar, variable rate |  |  | **—** | **—** |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Canadian dollar, variable rate |  |  | **—** | **—** |  | 30.0 |
| **Total long-term debt** |  |  | $**399.0** | $**3071.4** | $308.9 | $2765.4 |

---

**Revolving credit facility extension**

In September 2024, the Company extended the maturity date of its US$1.0 billion unsecured revolving credit facility until September 2028.

**Term loan**

In December 2024, the Company entered into an unsecured term loan agreement with a syndicated group of banks amounting to US$200.0 million maturing in June 2026, bearing interest at a variable rate.

**Unsecured senior notes**

In December 2024, the Company repaid unsecured senior notes of US$127.0 million.

100 \| CAE Financial Report 2025

------

Notes to the Consolidated Financial Statements

Information on the change in long-term debt for which cash flows have been classified as financing activities in the statement of cash flows are as follows:

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| | Unsecured<br>senior<br>notes |<br>Term<br>loans |<br>Lease<br>liabilities |<br>R&D<br>obligations | Revolving<br>credit<br>facility |<br>Total |
| Net book value as at March 31, 2023 | $1300.7 | $564.4 | $455.9 | $496.1 | $433.0 | $3250.1 |
| Changes from financing cash flows |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Net repayment from borrowing under |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;revolving credit facilities |  |  |  |  | (396.7) | (396.7) |
| &nbsp;&nbsp;&nbsp;Proceeds from long-term debt | 397.1 |  |  | 36.4 |  | 433.5 |
| &nbsp;&nbsp;&nbsp;Repayment of long-term debt | (21.7) | (324.0) |  | (24.7) |  | (370.4) |
| &nbsp;&nbsp;&nbsp;Repayment of lease liabilities |  |  | (69.5) |  |  | (69.5) |
| Total changes from financing cash flows | $375.4 | $(324.0) | $(69.5) | $11.7 | $(396.7) | $(403.1) |
| Non-cash changes |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Foreign currency exchange differences | 1.2 | (1.3) | 0.5 |  | (6.3) | (5.9) |
| &nbsp;&nbsp;&nbsp;Additions and remeasurements of lease liabilities |  |  | 177.2 |  |  | 177.2 |
| &nbsp;&nbsp;&nbsp;Disposal of discontinued operations (Note 3) |  |  | (12.2) |  |  | (12.2) |
| &nbsp;&nbsp;&nbsp;Accretion |  |  |  | 27.9 |  | 27.9 |
| &nbsp;&nbsp;&nbsp;Transfer from royalty obligations (Note 3) |  |  |  | 36.9 |  | 36.9 |
| &nbsp;&nbsp;&nbsp;Other | 1.0 | 0.8 |  | 1.6 |  | 3.4 |
| Total non-cash changes | $2.2 | $(0.5) | $165.5 | $66.4 | $(6.3) | $227.3 |
| Net book value as at March 31, 2024 | $1678.3 | $239.9 | $551.9 | $574.2 | $30.0 | $3074.3 |
| Changes from financing cash flows |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Net repayment from borrowing under |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;revolving credit facilities |  |  |  |  | (45.0) | (45.0) |
| &nbsp;&nbsp;&nbsp;Proceeds from long-term debt |  | 285.8 |  | 45.7 |  | 331.5 |
| &nbsp;&nbsp;&nbsp;Repayment of long-term debt | (216.1) | (72.6) |  | (32.6) |  | (321.3) |
| &nbsp;&nbsp;&nbsp;Repayment of lease liabilities |  |  | (59.9) |  |  | (59.9) |
| Total changes from financing cash flows | $(216.1) | $213.2 | $(59.9) | $13.1 | $(45.0) | $(94.7) |
| Non-cash changes |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Business combinations (Note 2) |  | 48.5 | 110.0 |  |  | 158.5 |
| &nbsp;&nbsp;&nbsp;Foreign currency exchange differences | 78.1 | 16.3 | 36.7 |  | 15.0 | 146.1 |
| &nbsp;&nbsp;&nbsp;Additions and remeasurements of lease liabilities |  |  | 153.4 |  |  | 153.4 |
| &nbsp;&nbsp;&nbsp;Accretion |  |  |  | 32.5 |  | 32.5 |
| &nbsp;&nbsp;&nbsp;Other | 1.1 | 0.8 |  | (1.6) |  | 0.3 |
| Total non-cash changes | $79.2 | $65.6 | $300.1 | $30.9 | $15.0 | $490.8 |
| **Net book value as at March 31, 2025** | $**1541.4** | $**518.7** | $**792.1** | $**618.2** | $**—** | $**3470.4** |

---

The Company's unsecured senior notes, term loans and revolving credit facility include standard events of default and covenant provisions whereby accelerated repayment and/or termination of the agreements may result if the Company were to default on payment or violate certain covenants. As at March 31, 2025, the Company is in compliance with all of its financial covenants, as amended from time to time.

CAE Financial Report 2025 \| 101

------

Notes to the Consolidated Financial Statements

**NOTE 22 – EMPLOYEE BENEFITS OBLIGATIONS**

**Defined benefit pension plans**

The Company has three registered funded defined benefit pension plans in Canada (two for employees and one for designated executives) that provide benefits based on length of service and final average earnings. The Company also maintains a funded pension plan for employees in the United Kingdom that provides benefits based on similar provisions.

The Company's annual contributions, to fund both benefits accruing in the year and deficits accumulated over prior years, and the plans' financial position are determined based on actuarial valuations. Applicable pension legislations prescribe minimum funding requirements.

In addition, the Company maintains unfunded plans in Canada, United States and Germany that provide defined benefits based on length of service and final average earnings. These unfunded plans are the sole obligation of the Company, and there is no requirement to fund them. However, the Company is obligated to pay the benefits when they become due. As at March 31, 2025, the Company has issued letters of credit totalling $63.9 million (2024 – $54.3 million) to collateralize the obligations under the Canadian plans.

The funded plans are trustee administered funds. Plan assets held in trusts are governed by local regulations and practices in each country, as is the nature of the relationship between the Company and the trustees and their composition. Responsibility for governance of the plans, including investment decisions and contribution schedules, lies jointly with the Company and the board of trustees.

The employee benefits obligations are as follows:

---

| | | |
|:---|:---|:---|
| | **2025** | 2024 |
| Funded defined benefit pension obligations | $**599.2** | $476.3 |
| Fair value of plan assets | **585.9** | 542.0 |
| Funded defined benefit pension obligations (surplus) – net | $**13.3** | $(65.7) |
| Unfunded defined benefit pension obligations | **109.2** | 98.7 |
| **Employee benefits obligations - net** | $**122.5** | $33.0 |
| **Employee benefit assets** | $**(11.6)** | $(65.7) |
| **Employee benefit obligations** | $**134.1** | $98.7 |

---

Changes in funded defined benefit pension obligations and fair value of plan assets are as follows:

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| | | | **2025** | | | 2024 |
| **Canadian** | **Canadian** | **Foreign** | **Total** | Canadian | Foreign | Total |
| Pension obligations, beginning of year | $**471.3** | $**5.0** | $**476.3** | $585.5 | $5.2 | $590.7 |
| &nbsp;&nbsp;&nbsp;&nbsp;Current service cost | **32.9** | **—** | **32.9** | 31.9 |  | 31.9 |
| &nbsp;&nbsp;&nbsp;&nbsp;Interest cost | **22.4** | **0.3** | **22.7** | 22.5 | 0.3 | 22.8 |
| &nbsp;&nbsp;&nbsp;&nbsp;Past service cost | **—** | **—** | **—** | 2.9 |  | 2.9 |
| &nbsp;&nbsp;&nbsp;&nbsp;Actuarial loss (gain) arising from: |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Experience adjustments | **43.3** | **0.1** | **43.4** | (3.0) |  | (3.0) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Economic assumptions | **23.3** | **(0.1)** | **23.2** | 4.6 |  | 4.6 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Demographic assumptions | **—** | **—** | **—** |  | (0.1) | (0.1) |
| &nbsp;&nbsp;&nbsp;&nbsp;Employee contributions | **12.9** | **—** | **12.9** | 9.5 |  | 9.5 |
| &nbsp;&nbsp;&nbsp;&nbsp;Pension benefits paid | **(12.3)** | **(0.3)** | **(12.6)** | (14.0) | (0.4) | (14.4) |
| &nbsp;&nbsp;&nbsp;&nbsp;Settlements | **—** | **—** | **—** | (168.9) |  | (168.9) |
| &nbsp;&nbsp;&nbsp;&nbsp;Net transfers | **—** |  | **—** | 0.3 |  | 0.3 |
| &nbsp;&nbsp;&nbsp;&nbsp;Foreign currency exchange differences | **—** | **0.4** | **0.4** |  |  |  |
| Pension obligations, end of year | $**593.8** | $**5.4** | $**599.2** | $471.3 | $5.0 | $476.3 |
| Fair value of plan assets, beginning of year | $**535.0** | $**7.0** | $**542.0** | $635.3 | $6.4 | $641.7 |
| &nbsp;&nbsp;&nbsp;&nbsp;Interest income | **26.0** | **0.4** | **26.4** | 25.1 | 0.3 | 25.4 |
| &nbsp;&nbsp;&nbsp;&nbsp;Return on plan assets, excluding amounts |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;included in interest income | **14.3** | **(0.1)** | **14.2** | 18.2 | 0.3 | 18.5 |
| &nbsp;&nbsp;&nbsp;&nbsp;Employer contributions | **1.8** | **—** | **1.8** | 24.9 | 0.3 | 25.2 |
| &nbsp;&nbsp;&nbsp;&nbsp;Employee contributions | **12.9** | **—** | **12.9** | 9.5 |  | 9.5 |
| &nbsp;&nbsp;&nbsp;&nbsp;Pension benefits paid | **(12.3)** | **(0.3)** | **(12.6)** | (14.0) | (0.4) | (14.4) |
| &nbsp;&nbsp;&nbsp;&nbsp;Settlements | **1.4** | **—** | **1.4** | (163.5) |  | (163.5) |
| &nbsp;&nbsp;&nbsp;&nbsp;Net transfers | **—** |  | **—** | 0.3 |  | 0.3 |
| &nbsp;&nbsp;&nbsp;&nbsp;Administrative costs | **(0.8)** | **—** | **(0.8)** | (0.8) |  | (0.8) |
| &nbsp;&nbsp;&nbsp;&nbsp;Foreign currency exchange differences | **—** | **0.6** | **0.6** |  | 0.1 | 0.1 |
| Fair value of plan assets, end of year | $**578.3** | $**7.6** | $**585.9** | $535.0 | $7.0 | $542.0 |

---

102 \| CAE Financial Report 2025

------

Notes to the Consolidated Financial Statements

During the year ended March 31, 2025, an actuarial funding valuation report was completed by an independent actuary for a funded defined benefit pension plan in Canada. As the plan funding had reached the limit prescribed by the Canadian Income Tax Act, the Company was prohibited from making employer contributions to the plan from January 1, 2024 to December 31, 2024.

In June 2023, the Company entered into an annuity purchase transaction in which the pension obligations of $168.9 million associated with certain retired members of Canadian defined benefit pension plans were transferred to a third-party insurer, in exchange for a payment of $163.5 million from the pension plan assets.

Changes in unfunded defined benefit pension obligations are as follows:

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| | | | **2025** | | | 2024 |
| **Canadian** | **Canadian** | **Foreign** | **Total** | Canadian | Foreign | Total |
| Pension obligations, beginning of year | $**86.2** | $**12.5** | $**98.7** | $81.3 | $10.5 | $91.8 |
| &nbsp;&nbsp;&nbsp;&nbsp;Current service cost | **4.1** | **0.7** | **4.8** | 3.9 | 1.3 | 5.2 |
| &nbsp;&nbsp;&nbsp;&nbsp;Interest cost | **4.0** | **0.4** | **4.4** | 3.9 | 0.5 | 4.4 |
| &nbsp;&nbsp;&nbsp;&nbsp;Past service cost | **3.6** | **(1.2)** | **2.4** |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Actuarial loss (gain) arising from: |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Experience adjustments | **(0.2)** | **(1.0)** | **(1.2)** | (0.4) | 0.4 |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Economic assumptions | **2.8** | **0.3** | **3.1** | 0.5 | 0.5 | 1.0 |
| &nbsp;&nbsp;&nbsp;&nbsp;Pension benefits paid | **(3.1)** | **(0.7)** | **(3.8)** | (3.0) | (0.7) | (3.7) |
| &nbsp;&nbsp;&nbsp;&nbsp;Foreign currency exchange differences | **—** | **0.8** | **0.8** |  |  |  |
| Pension obligations, end of year | $**97.4** | $**11.8** | $**109.2** | $86.2 | $12.5 | $98.7 |

---

Net pension cost is as follows:

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| | | | **2025** | | | 2024 |
| **Canadian** | **Canadian** | **Foreign** | **Total** | Canadian | Foreign | Total |
| Funded plans |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Current service cost | $**32.9** | $**—** | $**32.9** | $31.9 | $— | $31.9 |
| &nbsp;&nbsp;&nbsp;&nbsp;Interest cost | **22.4** | **0.3** | **22.7** | 22.5 | 0.3 | 22.8 |
| &nbsp;&nbsp;&nbsp;&nbsp;Interest income | **(26.0)** | **(0.4)** | **(26.4)** | (25.1) | (0.3) | (25.4) |
| &nbsp;&nbsp;&nbsp;&nbsp;Past service cost | **—** | **—** | **—** | 2.9 |  | 2.9 |
| &nbsp;&nbsp;&nbsp;&nbsp;Settlement gain | **(1.4)** |  | **(1.4)** | (5.4) |  | (5.4) |
| &nbsp;&nbsp;&nbsp;&nbsp;Administrative cost | **0.8** | **—** | **0.8** | 0.8 |  | 0.8 |
| Net pension cost of funded plans | $**28.7** | $**(0.1)** | $**28.6** | $27.6 | $— | $27.6 |
| Unfunded plans |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Current service cost | $**4.1** | $**0.7** | $**4.8** | $3.9 | $1.3 | $5.2 |
| &nbsp;&nbsp;&nbsp;&nbsp;Interest cost | **4.0** | **0.4** | **4.4** | 3.9 | 0.5 | 4.4 |
| &nbsp;&nbsp;&nbsp;&nbsp;Past service cost | **3.6** | **(1.2)** | **2.4** |  |  |  |
| Net pension cost of unfunded plans | $**11.7** | $**(0.1)** | $**11.6** | $7.8 | $1.8 | $9.6 |
| Total net pension cost | $**40.4** | $**(0.2)** | $**40.2** | $35.4 | $1.8 | $37.2 |

---

During the year ended March 31, 2025, pension costs of $21.7 million (2024 – $18.1 million) have been charged in cost of sales, $5.1 million (2024 – $4.5 million) in research and development expenses, $10.3 million (2024 – $12.8 million) in selling, general and administrative expenses, a gain of $0.4 million (2024 – costs of $3.2 million) in restructuring, integration and acquisition costs, $0.7 million (2024 – $1.8 million) in finance expense and $2.8 million (2024 – $2.6 million) were capitalized. During the year ended March 31, 2024, a gain of $0.4 million has been recognized in net income from discontinued operations.

As a result of an annuity purchase transaction, the Company recognized a settlement gain of $5.4 million during the year ended March 31, 2024, of which $5.2 million has been presented in other gains and losses and $0.2 million in net income from discontinued operations.

CAE Financial Report 2025 \| 103

------

Notes to the Consolidated Financial Statements

Fair value of the plan assets, by major categories, are as follows:

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| *(amounts in millions)*  |  |  | **2025** |  |  | 2024 |
|  | **Quoted** | **Unquoted** | **Total** | Quoted | Unquoted | Total |
| Canadian plans |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Equity funds |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Canadian | $**—** | $**43.5** | $**43.5** | $— | $35.0 | $35.0 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Foreign | **—** | **157.8** | **157.8** |  | 130.8 | 130.8 |
| &nbsp;&nbsp;&nbsp;Bond funds |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Government | **—** | **135.3** | **135.3** |  | 117.4 | 117.4 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Corporate | **—** | **63.4** | **63.4** |  | 58.7 | 58.7 |
| &nbsp;&nbsp;&nbsp;Private and property investments | **—** | **151.6** | **151.6** |  | 180.9 | 180.9 |
| &nbsp;&nbsp;&nbsp;Cash and cash equivalents | **—** | **14.6** | **14.6** |  | 9.9 | 9.9 |
| &nbsp;&nbsp;&nbsp;Other | **—** | **12.1** | **12.1** |  | 2.3 | 2.3 |
| Total Canadian plans | $**—** | $**578.3** | $**578.3** | $— | $535.0 | $535.0 |
| Foreign plans |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Equity instruments | $**0.4** | $**—** | $**0.4** | $2.5 | $— | $2.5 |
| &nbsp;&nbsp;&nbsp;Debt instruments |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Corporate | **6.9** | **—** | **6.9** | 3.4 |  | 3.4 |
| &nbsp;&nbsp;&nbsp;Other | **—** | **0.3** | **0.3** |  | 1.1 | 1.1 |
| Total Foreign plans | $**7.3** | $**0.3** | $**7.6** | $5.9 | $1.1 | $7.0 |
| Total plans | $**7.3** | $**578.6** | $**585.9** | $5.9 | $536.1 | $542.0 |

---

As at March 31, 2025 and March 31, 2024, there were no common shares of the Company in the pension plan assets.

Significant assumptions (weighted average) used are as follows:

---

| | | | | |
|:---|:---|:---|:---|:---|
| | **2025** | Canadian<br>2024 | **2025** | Foreign<br>2024 |
| Pension obligations as at March 31: |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Discount rate | **4.71%** | 5.00% | **4.25%** | 4.43% |
| &nbsp;&nbsp;&nbsp;Compensation rate increases | **3.67%** | 3.69% | **2.48%** | 2.68% |
| Net pension cost for years ended March 31: |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Discount rate | **5.00%** | 5.05% | **4.43%** | 4.70% |
| &nbsp;&nbsp;&nbsp;Compensation rate increases | **3.69%** | 3.66% | **2.68%** | 2.54% |

---

Assumptions regarding future mortality are based on actuarial advice in accordance with published statistics and mortality tables and experience in each territory. The mortality tables and the average life expectancy in years for a member age 45 and 65 are as follows:

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
| As at March 31, 2025 |  | Life expectancy over 65 for a member | Life expectancy over 65 for a member | Life expectancy over 65 for a member | Life expectancy over 65 for a member |
| *(in years)* |  |  | Male |  | Female |
| Country | Mortality table | at age 45 | at age 65 | at age 45 | at age 65 |
| Canada | CPM private tables | **23.9** | **22.5** | **26.3** | **25.0** |
| Germany | Heubeck RT2018G | **23.8** | **21.0** | **26.6** | **24.4** |
| United Kingdom | S4PFA M CMI 2023 | **22.6** | **21.2** | **24.9** | **23.4** |
| United States | CPM private tables | **25.1** | **23.7** | **26.5** | **25.2** |

---

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
| As at March 31, 2024 |  | Life expectancy over 65 for a member | Life expectancy over 65 for a member | Life expectancy over 65 for a member | Life expectancy over 65 for a member |
| *(in years)* |  |  | Male |  | Female |
| Country | Mortality table | at age 45 | at age 65 | at age 45 | at age 65 |
| Canada | CPM private tables | 23.8 | 22.4 | 26.3 | 25.0 |
| Germany | Heubeck RT2018G | 23.5 | 20.8 | 26.4 | 24.2 |
| United Kingdom | S3PFA M CMI 2022 | 22.7 | 21.4 | 24.8 | 23.3 |
| United States | CPM private tables | 25.0 | 23.6 | 26.5 | 25.5 |

---

As at March 31, 2025, the weighted average duration of the defined benefit obligation is 18.9 years.

104 \| CAE Financial Report 2025

------

Notes to the Consolidated Financial Statements

The impact on the defined benefit obligation as a result of a 0.25% change in the significant assumptions as at March 31, 2025 are as follows:

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
| | | | **Unfunded plans** | **Unfunded plans** | |
| **Canadian** | **Canadian** | **Funded plans**<br>**Foreign** | **Canadian** | **Foreign** |<br>**Total** |
| Discount rate: |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Increase | $**(27.9)** | $**(0.1)** | $**(2.5)** | $**(0.3)** | $**(30.8)** |
| &nbsp;&nbsp;&nbsp;&nbsp;Decrease | **30.2** | **0.1** | **2.7** | **0.4** | **33.4** |
| Compensation rate: |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Increase | **11.1** | **—** | **0.5** | **—** | **11.6** |
| &nbsp;&nbsp;&nbsp;&nbsp;Decrease | **(10.6)** | **—** | **(0.5)** | **—** | **(11.1)** |

---

Through its defined benefit plans, the Company is exposed to a number of risks, the most significant being the exposure to asset volatility, to changes in bond yields and to changes in life expectancy. The plan liabilities are calculated using a discount rate set with reference to corporate bond yields, if plan assets underperform against this yield, this will create a deficit. A decrease in corporate bond yields will increase plan liabilities, although this will be partially offset by an increase in the value of the plans' bond holdings. The plans' obligations are to provide benefits for the duration of the life of its members, therefore, increases in life expectancy will result in an increase in the plans' liabilities.

Contributions reflect actuarial assumptions of future investment returns, salary projections and future service benefits. The expected employer contributions and expected benefits paid for the next fiscal year are as follows:

---

| | | | |
|:---|:---|:---|:---|
| | **Canadian** | **Foreign** | **Total** |
| Expected employer contributions in funded plans  | $**20.8** | $**—** | $**20.8** |
| Expected benefits paid in unfunded plans | **3.0** | **0.8** | **3.8** |

---

**NOTE 23 – OTHER NON-CURRENT LIABILITIES**

---

| | | |
|:---|:---|:---|
| | **2025** | 2024 |
| Contract liabilities (Note 12) | $**126.8** | $99.8 |
| Share-based payments liabilities (Note 26) | **40.3** | 51.3 |
| Royalty obligations | **66.1** | 74.4 |
| Other | **35.2** | 30.0 |
|  | $**268.4** | $255.5 |

---

**NOTE 24 – SUPPLEMENTARY CASH FLOWS INFORMATION**

Changes in non-cash working capital are as follows:

---

| | | |
|:---|:---|:---|
| | **2025** | 2024 |
| Accounts receivable | $**76.4** | $(10.7) |
| Contract assets | **77.1** | 153.0 |
| Inventories | **(11.0)** | (76.3) |
| Prepayments | **(10.2)** | (11.2) |
| Income taxes | **(53.8)** | 30.2 |
| Accounts payable and accrued liabilities | **54.1** | 11.0 |
| Provisions | **(9.7)** | 14.2 |
| Contract liabilities | **74.2** | 17.9 |
|  | $**197.1** | $128.1 |

---

Supplemental information:

---

| | | |
|:---|:---|:---|
| | **2025** | 2024 |
| Interest paid | $**201.7** | $189.7 |
| Interest received | **20.9** | 17.1 |
| Income taxes paid | **101.4** | 69.7 |

---

CAE Financial Report 2025 \| 105

------

Notes to the Consolidated Financial Statements

**NOTE 25 – ACCUMULATED OTHER COMPREHENSIVE INCOME**

---

| | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|
| | Foreign currency | Foreign currency | | | | | | |
| | exchange differences | exchange differences | | | Net changes in | Net changes in | | |
| | on translation of  | on translation of  | Net changes in | Net changes in | financial assets | financial assets | | |
| | foreign operations | foreign operations | cash flow hedges | cash flow hedges | carried at FVOCI | carried at FVOCI | | |
| | **2025** | 2024 | **2025** | 2024 | **2025** | 2024 | **2025** |<br><br>Total<br>2024 |
| Balances, beginning of year | $**174.5** | $182.8 | $**(19.2)** | $(14.3) | $**(1.3)** | $(1.3) | $**154.0** | $167.2 |
| Other comprehensive income (loss) | **243.2** | (8.3) | **(15.4)** | (4.9) | **—** |  | **227.8** | (13.2) |
| Balances, end of year | $**417.7** | $174.5 | $**(34.6)** | $(19.2) | $**(1.3)** | $(1.3) | $**381.8** | $154.0 |

---

**NOTE 26 – SHARE-BASED PAYMENTS**

In August 2023, the shareholders of the Company approved the Omnibus Incentive Plan, which allows equity awards to be granted to eligible participants in the form of stock options, restricted share units (RSUs) and performance share units (PSUs).

The Omnibus Incentive Plan supplements the existing cash-settled RSU and PSU plans and stock option plan (collectively, the "Existing Plans"). Awards granted under the Existing Plans will remain outstanding and governed by the respective terms of such plans, but no new awards will be granted under any of the Existing Plans. All awards made under the Omnibus Incentive Plan are considered equity-settled arrangements.

The Company's share-based payment plans consist of two categories: equity-settled share-based payment plans comprised of the stock option plan, a RSU plan and a PSU plan; and cash-settled share-based payments plans that include the stock purchase plan, deferred share units (DSU) plans, a RSU plan and a PSU plan.

Share-based payments expense are as follows:

---

| | | |
|:---|:---|:---|
| | **2025** | 2024 |
| **Equity-settled plans** |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Stock option plan | $**5.9** | $7.0 |
| &nbsp;&nbsp;&nbsp;&nbsp;RSU plan | **6.6** | 4.7 |
| &nbsp;&nbsp;&nbsp;&nbsp;PSU plan | **12.7** | 3.6 |
| **Cash-settled plans** |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Stock purchase plan | **16.2** | 15.7 |
| &nbsp;&nbsp;&nbsp;&nbsp;DSU plans | **14.9** | (1.1) |
| &nbsp;&nbsp;&nbsp;&nbsp;RSU plan | **1.9** | 2.2 |
| &nbsp;&nbsp;&nbsp;&nbsp;PSU plan | **3.3** | 2.4 |
| **Total share-based payments expense** | $**61.5** | $34.5 |
| Impact of equity swap agreements (Note 32) | **(14.6)** | 6.6 |
| Amount capitalized | **(1.0)** | (1.0) |
| **Share-based payments expense, net of equity swap (Note 27)** | $**45.9** | $40.1 |

---

During the year ended March 31, 2024, $2.8 million of share-based payments expense have been recorded in net income from discontinued operations.

Carrying amount of share-based payments liabilities are as follows:

---

| | | |
|:---|:---|:---|
| | **2025** | 2024 |
| **Cash-settled plans** |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;DSU plans | $**48.7** | $41.6 |
| &nbsp;&nbsp;&nbsp;&nbsp;RSU plan | **6.5** | 9.1 |
| &nbsp;&nbsp;&nbsp;&nbsp;PSU plan | **10.4** | 10.5 |
| **Total carrying amount of share-based payments liabilities** | $**65.6** | $61.2 |
| **Current portion** | **25.3** | 9.9 |
| **Non-current portion (Note 23)** | $**40.3** | $51.3 |

---

**Stock option plan**

Stock options to purchase common shares of the Company are granted to certain employees, officers and executives of the Company. The stock option exercise price is equal to the common shares weighted average price on the TSX of the five days of trading prior to the grant date. Stock options vest over four years of continuous employment from the grant date. The stock options must be exercised within a seven-year period, but are not exercisable during the first year after the grant date.

106 \| CAE Financial Report 2025

------

Notes to the Consolidated Financial Statements

Changes in outstanding stock options are as follows:

---

| | | | | |
|:---|:---|:---|:---|:---|
| | | **2025** | | 2024 |
| | | **Weighted** | | Weighted |
| | **Number of** | **average exercise** | Number of | average exercise |
| **stock options** | **stock options** | **price** | stock options | price |
| Stock options outstanding, beginning of year | **6459922** | $**27.19** | 6323537 | $26.63 |
| Granted | **779288** | **25.45** | 735274 | 28.66 |
| Exercised | **(2763675)** | **24.29** | (405943) | 19.34 |
| Forfeited | **(491387)** | **29.96** | (192946) | 31.04 |
| Stock options outstanding, end of year | **3984148** | $**28.52** | 6459922 | $27.19 |
| Stock options exercisable, end of year | **2525692** | $**28.44** | 4533751 | $26.57 |

---

During the year ended March 31, 2025, the weighted average market share price for stock options exercised was $30.57 (2024 ⁃ $30.33).

As at March 31, 2025, summarized information about the stock options issued and outstanding is as follows:

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
| | | Options Outstanding | Options Outstanding | Options Exercisable | Options Exercisable |
| | | Weighted | | | |
| | Number of | average remaining | Weighted | Number of | Weighted |
| Range of | stock options | contractual life | average exercise | stock options | average exercise |
| exercise prices | outstanding | (years) | price | exercisable | price |
| $20.57 to $26.78  | 1663993 | 3.79 | $22.52 | 995113 | $20.57 |
| $26.83 to $30.13 | 698777 | 4.09 | 28.33 | 272161 | 27.80 |
| $33.47 to $38.01 | 1621378 | 2.57 | 34.76 | 1258418 | 34.79 |
| Total | 3984148 | 3.34 | $28.52 | 2525692 | $28.44 |

---

During the year ended March 31, 2025, the weighted average fair value of stock options granted was $9.58 (2024 – $10.12).

The assumptions used in the calculation of the fair value of the stock options on the grant date using the Black-Scholes option pricing model are as follows:

---

| | | |
|:---|:---|:---|
| | **2025** | 2024 |
| Common share price | $**25.45** | $27.85 |
| Exercise price | $**25.45** | $28.66 |
| Dividend yield | **0.58%** | 0.72% |
| Expected volatility | **39.32%** | 41.88% |
| Risk-free interest rate | **3.53%** | 3.73% |
| Expected stock option life | **5 years** | 4.5 years |

---

Expected volatility is estimated by considering historical average common share price volatility over the expected life of the stock options.

**Equity-settled restricted share unit (RSU) plan**

RSUs are granted to certain employees, officers and executives of the Company. RSUs are settled in shares, either issued from treasury or purchased on the open market, in cash or in a combination thereof, at the discretion of the Company. Restriction criteria include continuing employment for a period of up to three years. RSUs are settled three years after the grant date.

Changes in outstanding equity-settled RSUs are as follows:

---

| | | |
|:---|:---|:---|
| | **2025** | 2024 |
| Equity-settled RSUs outstanding, beginning of year | **292634** |  |
| Granted | **393805** | 304142 |
| Cancelled | **(94872)** | (11104) |
| Settled in shares | **(15370)** |  |
| Settled in cash | **(1471)** | (404) |
| Equity-settled RSUs outstanding, end of year | **574726** | 292634 |
| Equity-settled RSUs vested, end of year | **404144** | 168681 |

---

CAE Financial Report 2025 \| 107

------

Notes to the Consolidated Financial Statements

**Equity-settled performance share unit (PSU) plan**

PSUs are granted to certain employees, officers and executives of the Company. PSUs are settled in shares, either issued from treasury or purchased on the open market, in cash or in a combination thereof, at the discretion of the Company. The target rate of granted units is multiplied by a factor which ranges from 0% to 200% based on the attainment of performance criteria set out pursuant to the plan, if restriction criteria are met. Restriction criteria include continuing employment for a period of up to three years. PSUs are settled three years after the grant date.

Changes in outstanding equity-settled PSUs are as follows:

---

| | | |
|:---|:---|:---|
| | **2025** | 2024 |
| Equity-settled PSUs outstanding, beginning of year | **780786** |  |
| Granted | **903341** | 812603 |
| Cancelled | **(242151)** | (30604) |
| Settled in shares | **(30060)** |  |
| Settled in cash | **(2444)** | (1213) |
| Equity-settled PSUs outstanding, end of year | **1409472** | 780786 |
| Equity-settled PSUs vested, end of year | **1037878** | 489134 |

---

**Cash-settled stock purchase plan** 

Employees of the Company and its participating subsidiaries can acquire common shares through regular payroll deductions. The Company contributes $1 for every $2 of employee contributions, up to a maximum of 3% of the employee's base salary. The employee and Company's contributions are remitted to an independent plan administrator who purchases common shares on the market on behalf of the employee.

**Cash-settled deferred share unit (DSU) plans**

Non-employee directors holding less than the minimum required holdings of common shares of the Company receive their Board retainer compensation in the form of deferred share units (DSUs). A non-employee director holding no less than the minimum required holdings of common shares may also elect to participate in the DSU plan in respect of part or all of his or her retainer. Such retainer amount is converted to DSUs based on the common shares price on the TSX on the date such retainer becomes payable to the non-employee director.

Certain executives can elect to defer a portion or entire short-term incentive payment to the DSU plan on an annual basis. Such deferred short-term incentive amount is converted to DSUs based on the common shares weighted average price on the TSX of the five days of trading prior to the date such incentive becomes payable to the executives.

DSUs entitle the holders to receive a cash payment equal to the common shares closing price on the TSX on the payment date, or, in certain cases, the weighted average price of the five days prior to the payment date. Holders are also entitled to dividend equivalents payable in additional DSUs in an amount equal to the dividends paid on the common shares from the date of issuance to the payment date.

DSUs vest immediately and are paid upon any termination of employment or when a non-employee director ceases to act as a director.

Changes in outstanding DSUs are as follows:

---

| | | |
|:---|:---|:---|
| | **2025** | 2024 |
| DSUs outstanding, beginning of year | **1487414** | 1586384 |
| Granted | **139677** | 118667 |
| Redeemed | **(249780)** | (217637) |
| DSUs vested and outstanding, end of year | **1377311** | 1487414 |

---

As at March 31, 2025, vested and outstanding DSUs includes 742,157 DSUs (2024 – 833,090) granted to certain employees, officers and executives of the Company under previous plans, which are paid upon any termination of employment of the holder. Under the previous plans, holders are also entitled to dividend equivalents payable in additional DSUs in an amount equal to the dividends paid on the common shares from the date of issuance to the payment date.

**Cash-settled restricted share unit (RSU) plan**

Restricted share units (RSUs) are granted to certain employees, officers and executives of the Company. RSUs entitle the holders to receive a cash payment based on the average closing price on the TSX for the 20 trading days preceding the vesting date, if restriction criteria are met. Restriction criteria include continuing employment for a period of up to three years. RSUs are paid three years after the grant date. Following the adoption of the Omnibus Incentive Plan, no new awards will be granted under this plan.

108 \| CAE Financial Report 2025

------

Notes to the Consolidated Financial Statements

Changes in outstanding cash-settled RSUs are as follows:

---

| | | |
|:---|:---|:---|
| | **2025** | 2024 |
| Cash-settled RSUs outstanding, beginning of year | **404037** | 646231 |
| Cancelled | **(43833)** | (12369) |
| Redeemed | **(167065)** | (229825) |
| Cash-settled RSUs outstanding, end of year | **193139** | 404037 |
| Cash-settled RSUs vested, end of year | **184725** | 332420 |

---

**Cash-settled performance share unit (PSU) plan**

Performance share units (PSUs) are granted to certain employees, officers and executives of the Company. PSUs entitle the holders to receive a cash payment equal to the average closing price on the TSX of the common shares for the 20 trading days preceding the vesting date multiplied by a factor which ranges from 0% to 200% based on the attainment of performance criteria set out pursuant to the plan, if restriction criteria are met. Restriction criteria include continuing employment for a period of up to three years. PSUs are paid three years after the grant date. Following the adoption of the Omnibus Incentive Plan, no new awards will be granted under this plan.

Changes in outstanding cash-settled PSUs are as follows:

---

| | | |
|:---|:---|:---|
| | **2025** | 2024 |
| Cash-settled PSUs outstanding, beginning of year | **912281** | 1148302 |
| Cancelled | **(283840)** | (83204) |
| Redeemed | **(136545)** | (152817) |
| Cash-settled PSUs outstanding, end of year | **491896** | 912281 |
| Cash-settled PSUs vested, end of year | **467991** | 711745 |

---

**NOTE 27 – EMPLOYEE COMPENSATION**

Total employee compensation expense recognized in income is as follows:

---

| | | |
|:---|:---|:---|
| *(amounts in millions)*  | **2025** | 2024 |
| Salaries and other short-term employee benefits | $**1697.0** | $1682.7 |
| Share-based payments expense, net of equity swap (Note 26) | **45.9** | 40.1 |
| Post-employment benefits – defined benefit plans (Note 22) | **37.4** | 34.6 |
| Post-employment benefits – defined contribution plans | **39.8** | 38.5 |
| Termination benefits | **35.0** | 28.5 |
| Total employee compensation | $**1855.1** | $1824.4 |

---

During the year ended March 31, 2024, $48.5 million of total employee compensation have been recorded in net income from discontinued operations.

**NOTE 28 – GOVERNMENT PARTICIPATION**

Government contributions were recognized as follows:

---

| | | |
|:---|:---|:---|
| | **2025** | 2024 |
| Credited to non-financial assets | $**21.4** | $20.4 |
| Credited to income | **34.3** | 27.9 |
|  | $**55.7** | $48.3 |

---

CAE Financial Report 2025 \| 109

------

Notes to the Consolidated Financial Statements

**NOTE 29 – CONTINGENCIES AND COMMITMENTS**

**Contingencies**

From time to time, the Company is involved in legal proceedings, audits, litigations and claims arising in the ordinary course of its business. The Company operates in a highly regulated environment across many jurisdictions and is subject to, without limitation, laws and regulations relating to import-export controls, trade sanctions, anti-corruption, national security and aviation safety of each country. In addition, contracts with government agencies are subject to procurement regulations and other specific legal requirements. The Company is also required to comply with tax laws and regulations of any country in which it operates.

The Company is subject to investigations and audits from various government and regulatory agencies. In addition, the Company may identify, investigate, remediate and voluntarily disclose potential non-compliance with those laws and regulations. As a result, the Company can be subject to potential liabilities associated with those matters. Although it is possible that liabilities may be incurred in instances for which no accruals have been made, the Company does not believe that the ultimate outcome of these matters will have a material impact on its consolidated financial statements.

**Dispute relating to final price adjustments for the sale of CAE's Healthcare business**

During the fourth quarter of fiscal 2024, the Company closed the sale of its Healthcare business to Madison Industries. The total consideration is subject to post-closing price adjustments, including on account of working capital. At the time of issuance of the consolidated financial statements, the Company is engaged in a dispute with Madison Industries, which is claiming up to approximately $60 million in final price adjustments.

While there can be no assurance whether any amount will be payable by the Company as a result of the dispute, no amount has been recognized in the Company's financial statements for any potential losses arising from this dispute as at March 31, 2025, as the Company believes that there are strong grounds for defence and will vigorously defend its position.

**Class action proceeding**

On July 16, 2024, the Company was served with an Application for authorization to bring an action pursuant to Section 225.4 of the *Securities Act* (Québec) and application for authorization to institute a class action before the Superior Court of Québec in the district of Montréal against the Company and certain of the Company's officers. The class action, if authorized, would be brought on behalf of purchasers of the Company's common shares and is based upon allegations that the defendants made false and/or misleading statements to the public and seeks unspecified damages.

The class action requires authorization from the Court before it can move forward. Until it is authorized, there are no monetary claims pending against the defendants in the context of this Court proceeding. The defendants have strong legal defences to this Court proceeding and intend to defend the case vigorously. Based on the preliminary nature of the proceeding and the inherent uncertainty of litigation, it is not possible to predict the final outcome or the timing of this Court proceeding or to determine the amount of any potential losses resulting therefrom, if any. As such, no amounts have been provisioned in the Company's financial statements with respect to the proceeding.

**Commitments**

Contractual purchase commitments that are not recognized as liabilities are as follows:

---

| | | |
|:---|:---|:---|
| | **2025** | 2024 |
| Less than 1 year | $**411.8** | $329.3 |
| Between 1 and 5 years | **262.1** | 245.5 |
| Later than 5 years | **23.6** | 3.2 |
| Total contractual purchase commitments | $**697.5** | $578.0 |

---

110 \| CAE Financial Report 2025

------

Notes to the Consolidated Financial Statements

**NOTE 30 – FAIR VALUE OF FINANCIAL INSTRUMENTS**

The fair value of a financial instrument is determined by reference to the available market information at the reporting date. When no active market exists for a financial instrument, the Company determines the fair value of that instrument based on valuation methodologies as discussed below. In determining assumptions required under a valuation model, the Company primarily uses external, readily observable market data inputs. Assumptions or inputs that are not based on observable market data incorporate the Company's best estimates of market participant assumptions. Counterparty credit risk and the Company's own credit risk are taken into account in estimating the fair value of financial assets and financial liabilities.

The following assumptions and valuation methodologies have been used to measure the fair value of financial instruments:

(i)The fair value of cash and cash equivalents, accounts receivable and accounts payable and accrued liabilities approximate their carrying values due to their short-term maturities;

(ii)The fair value of derivative instruments, which include forward contracts, swap agreements and embedded derivatives accounted for separately and is calculated as the present value of the estimated future cash flows using an appropriate interest rate yield curve and forward foreign exchange rate. Assumptions are based on market conditions prevailing at each reporting date. The fair value of derivative instruments reflect the estimated amounts that the Company would receive or pay to settle the contracts at the reporting date;

(iii)The fair value of the equity investments, which does not have a readily available market value, is estimated using a discounted cash flow model, which includes some assumptions that are not based on observable market prices or rates;

(iv)The fair value of non-current receivables is estimated based on discounted cash flows using current interest rates for instruments with similar risks and remaining maturities;

(v)The fair value of long-term debts, royalties obligations and other non-current liabilities are estimated based on discounted cash flows using current interest rates for instruments with similar risks and remaining maturities.

**Fair value hierarchy**

The fair value hierarchy reflects the significance of the inputs used in making the measurements and has the following levels:

Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities;

Level 2: Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (i.e. as prices in markets that are not active) or indirectly (i.e. quoted prices for similar assets or liabilities);

Level 3: Inputs for the asset or liability that are not based on observable market data (unobservable inputs).

Each type of fair value is categorized based on the lowest level input that is significant to the fair value measurement in its entirety.

CAE Financial Report 2025 \| 111

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Notes to the Consolidated Financial Statements

The carrying values and fair values of financial instruments, by category, are as follows:

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
| |<br>Level |<br>**Carrying value** | **2025**<br>**Fair value** |<br>Carrying value | 2024<br>Fair value |
| | | **Total** | **Total** | Total | Total |
| **Financial assets (liabilities) measured at FVTPL** |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Cash and cash equivalents | Level 1 | $**293.7** | $**293.7** | $160.1 | $160.1 |
| &nbsp;&nbsp;&nbsp;&nbsp;Equity swap agreements | Level 2 | **13.0** | **13.0** | (15.8) | (15.8) |
| &nbsp;&nbsp;&nbsp;&nbsp;Forward foreign currency contracts | Level 2 | **(6.4)** | **(6.4)** | (0.6) | (0.6) |
| **Derivatives assets (liabilities) designated in a hedge relationship** | **Derivatives assets (liabilities) designated in a hedge relationship** |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Foreign currency and interest rate swap agreements | Level 2 | **(14.4)** | **(14.4)** | 4.8 | 4.8 |
| &nbsp;&nbsp;&nbsp;&nbsp;Forward foreign currency contracts | Level 2 | **(31.9)** | **(31.9)** | (8.7) | (8.7) |
| **Financial assets (liabilities) measured at amortized cost** |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Accounts receivable<sup>(1)</sup> | Level 2 | **567.7** | **567.7** | 570.8 | 570.8 |
| &nbsp;&nbsp;&nbsp;&nbsp;Investment in finance leases | Level 2 | **142.0** | **135.8** | 147.9 | 140.3 |
| &nbsp;&nbsp;&nbsp;&nbsp;Other non-current assets<sup>(2)</sup> | Level 2 | **79.5** | **79.5** | 47.0 | 47.0 |
| &nbsp;&nbsp;&nbsp;&nbsp;Accounts payable and accrued liabilities<sup>(3)</sup>  | Level 2 | **(914.4)** | **(914.4)** | (775.8) | (775.8) |
| &nbsp;&nbsp;&nbsp;&nbsp;Total long-term debt<sup>(4)</sup> | Level 2 | **(2684.7)** | **(2700.6)** | (2529.9) | (2524.4) |
| &nbsp;&nbsp;&nbsp;&nbsp;Other non-current liabilities<sup>(5)</sup> | Level 2 | **(91.4)** | **(84.8)** | (87.1) | (78.0) |
| **Financial assets measured at FVOCI** |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Equity investments | Level 3 | **1.4** | **1.4** | 1.4 | 1.4 |
|  |  | $**(2645.9)** | $**(2661.4)** | $(2485.9) | $(2478.9) |

---

<sup>(1)</sup> Includes trade receivables, accrued receivables and certain other receivables.

<sup>(2)</sup> Includes non-current receivables and certain other non-current assets.

<sup>(3)</sup> Includes trade accounts payable, accrued liabilities, interest payable and current royalty obligations.

<sup>(4)</sup> Excludes lease liabilities. The carrying value of long-term debt excludes transaction costs.

<sup>(5)</sup> Includes non-current royalty obligations and other non-current liabilities.

During the year ended March 31, 2025, there were no significant changes in level 3 financial instruments.

**NOTE 31 – CAPITAL RISK MANAGEMENT**

The Company's capital allocation priorities are focused on:

(i)&nbsp;&nbsp;&nbsp;&nbsp; Organic investments for sustainable and accretive growth;

(ii) Maintaining a strong balance sheet for optimal resiliency and financial flexibility;

(iii) Balancing returns to shareholders with leverage targets and growth investment opportunities.

The Company manages its capital structure and makes corresponding adjustments based on changes in economic conditions and the risk characteristics of the underlying assets. In order to maintain or adjust the capital structure, the Company may adjust the amount of dividends paid to shareholders, issue new shares or debt, use cash to reduce debt or repurchase shares.

To accomplish its objectives stated above, the Company monitors its capital on the basis of the net debt to capital. This ratio is calculated as net debt divided by the sum of total equity plus net debt. Net debt is calculated as total long-term debt, including the current portion of long-term debt less cash and cash equivalents. Total equity comprises share capital, contributed surplus, accumulated other comprehensive income, retained earnings and non-controlling interests.

The level of debt versus equity in the capital structure is monitored, and the ratios are as follows:

---

| | | |
|:---|:---|:---|
| | **2025** | 2024 |
| Total long-term debt (Note 21) | $**3470.4** | $3074.3 |
| Less: cash and cash equivalents | **(293.7)** | (160.1) |
| Net debt | $**3176.7** | $2914.2 |
| Equity | **4976.0** | 4302.6 |
| Total net debt plus equity | $**8152.7** | $7216.8 |
| Net debt-to-capital | **39.0** | 40.4 |

---

112 \| CAE Financial Report 2025

------

Notes to the Consolidated Financial Statements

**NOTE 32 – FINANCIAL RISK MANAGEMENT**

Due to the nature of the activities that the Company carries out and as a result of holding financial instruments, the Company is exposed to credit risk, liquidity risk and market risk, including foreign currency risk and interest rate risk. The Company's exposure to credit risk, liquidity risk and market risk is managed within risk management parameters documented in corporate policies. These risk management parameters remain unchanged since the previous period, unless otherwise indicated.

**Credit risk**

Credit risk is defined as the Company's exposure to a financial loss if a debtor fails to meet its obligations in accordance with the terms and conditions of its arrangements with the Company. The Company is exposed to credit risk on its accounts receivable and certain other assets through its normal commercial activities. The Company is also exposed to credit risk through its normal treasury activities on its cash and cash equivalents and derivative financial assets. Credit risks arising from the Company's normal commercial activities are managed with regards to customer credit risk.

The Company's customers are mainly established companies, some of which have publicly available credit ratings, as well as government agencies, which facilitates risk assessment and monitoring. In addition, the Company typically receives substantial non-refundable advance payments for contracts with customers. The Company closely monitors its exposure to major airline companies in order to mitigate its risk to the extent possible. Furthermore, the Company's trade receivables are held with a wide range of commercial and government organizations and agencies. As well, the Company's credit exposure is further reduced by the sale of certain of its accounts receivable to third-party financial institutions for cash consideration on a limited recourse basis (receivable purchase facility). The Company does not hold any collateral as security. The credit risk on cash and cash equivalents is mitigated by the fact that they are mainly in place with a diverse group of major North American and European financial institutions.

The Company is exposed to credit risk in the event of non-performance by counterparties to its derivative financial instruments. The Company uses several measures to minimize this exposure. First, the Company enters into contracts with counterparties that are of high credit quality. The Company signed *International Swaps & Derivatives Association, Inc. (ISDA)* Master Agreements with all the counterparties with whom it trades derivative financial instruments. These agreements make it possible to offset when a contracting party defaults on the agreement, for each of the transactions covered by the agreement and in force at the time of default. Also, collateral or other security to support derivative financial instruments subject to credit risk can be requested by the Company or its counterparties (or both parties, if need be) when the net balance of gains and losses on each transaction exceeds a threshold defined in the ISDA Master Agreement. Finally, the Company monitors the credit standing of counterparties on a regular basis to help minimize credit risk exposure.

The carrying amounts presented in Note 11 and Note 30 represent the maximum exposure to credit risk for each respective financial asset as at the relevant dates.

Exposure to credit risk and credit loss allowances for accounts receivable and contract assets by segment are as follows:

---

| | | | | |
|:---|:---|:---|:---|:---|
| **As at March 31, 2025** | **Civil Aviation** | **Defense and<br>Security** | **Amounts not allocated to a segment** | **Total** |
| Gross accounts receivable | $384.8 | $211.8 | $36.7 | $633.3 |
| Gross contract assets | 163.2 | 357.8 |  | 521.0 |
| **Total** | $**548.0** | $**569.6** | $**36.7** | $**1154.3** |
| Credit loss allowances | $(19.3) | $(2.0) | $— | $(21.3) |
| As a % | 3.5% | 0.4% | —% | 1.8% |

---

---

| | | | | |
|:---|:---|:---|:---|:---|
| As at March 31, 2024 | Civil Aviation | Defense and<br>Security | Amounts not allocated to a segment | Total |
| Gross accounts receivable | $347.1 | $258.2 | $40.1 | $645.4 |
| Gross contract assets | 177.3 | 401.9 |  | 579.2 |
| Total | $524.4 | $660.1 | $40.1 | $1224.6 |
| Credit loss allowances | $(19.9) | $(1.0) | $— | $(20.9) |
| As a % | 3.8% | 0.2% | —% | 1.7% |

---

***Client concentration risk***

For the year ended March 31, 2025, contracts with the U.S. federal government and its various agencies included in the Defense and Security segment accounted for 21% (2024 – 21%) of consolidated revenue.

CAE Financial Report 2025 \| 113

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Notes to the Consolidated Financial Statements

**Liquidity risk**

Liquidity risk is defined as the potential risk that the Company cannot meet its cash obligations as they become due. The Company manages this risk by establishing cash forecasts, as well as long-term operating and strategic plans. The management of consolidated liquidity requires a regular monitoring of expected cash inflows and outflows which is achieved through a forecast of the Company's consolidated liquidity position, for efficient use of cash resources. Liquidity adequacy is assessed in view of seasonal needs, stress-test results, growth requirements and capital expenditures, and the maturity profile of indebtedness, including availability of credit facilities, working capital requirements, compliance with financial covenants and the funding of financial commitments. The Company manages its liquidity risk to maintain sufficient liquid financial resources to fund its operations and meet its commitments and obligations. The Company also regularly monitors any financing opportunities to optimize its capital structure and maintain appropriate financial flexibility.

In managing its liquidity risk, the Company has access to a committed unsecured revolving credit facility of US$1.0 billion (2024 - US$1.0 billion). As well, the Company has agreements to sell interests in certain of its accounts receivable (receivable purchase facility) for an amount of up to US$400.0 million (2024 – US$400.0 million). As at March 31, 2025, the carrying amount of the original accounts receivable sold to a financial institution pursuant to the receivable purchase facility totaled $453.6 million (2024 - $303.7 million) of which $39.9 million (2024 – $44.9 million), corresponding to the extent of the Company's continuing involvement, remains in accounts receivable with a corresponding liability included in accounts payable and accrued liabilities.

The Company has established supplier finance arrangements offered by some of its subsidiaries to certain key suppliers. Under these arrangements, the Company has the ability to submit supplier invoices, at its own discretion, to its financial institution who pays the supplier and allows the Company to extend its payment terms by 55 to 85 days. The Company pays the invoice amount and a service fee to the financial institution in accordance with the extended due dates. As at March 31, 2025, the carrying amount of accounts payable trade for this arrangement totalled $73.3 million.

The following tables present a maturity analysis based on the contractual maturity date of the Company's financial liabilities based on expected cash flows. Cash flows from derivatives presented either as derivative assets or liabilities have been included, as the Company manages its derivative contracts on a gross basis. The amounts are the contractual undiscounted cash flows. All amounts contractually denominated in foreign currency are presented in Canadian dollar equivalent amounts using the period-end spot rate except as otherwise stated:

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| | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|
|<br>**As at March 31, 2025** |<br>**Carrying**<br>**amount** |<br>**Contractual**<br>**cash flows** |<br>**Less than**<br>**1 year** | **Between**<br>**1 and**<br>**2 years** | **Between**<br>**2 and**<br>**3 years** | **Between**<br>**3 and**<br>**4 years** | **Between**<br>**4 and**<br> **5 years** |<br>**More than**<br>**5 years** |
| **Non-derivative financial liabilities** | | | | | | | | |
| Accounts payable and accrued liabilities <sup>(1)</sup> | $**914.4** | $**914.4** | $**914.4** | $**—** | $**—** | $**—** | $**—** | $**—** |
| Total long-term debt <sup>(2)</sup> |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;Long-term debt (other than lease liabilities) | **2678.3** | **2678.3** | **277.9** | **469.3** | **140.6** | **654.5** | **121.7** | **1014.3** |
| &nbsp;&nbsp;Interest and accretion | **—** | **686.2** | **93.2** | **74.6** | **67.5** | **50.0** | **34.7** | **366.2** |
| &nbsp;&nbsp;Lease liabilities | **792.1** | **1237.2** | **170.7** | **98.9** | **90.3** | **101.8** | **69.9** | **705.6** |
| Other non-current liabilities <sup>(3)</sup> | **91.4** | **155.2** | **—** | **25.0** | **31.4** | **28.1** | **23.9** | **46.8** |
|  | $**4476.2** | $**5671.3** | $**1456.2** | $**667.8** | $**329.8** | $**834.4** | $**250.2** | $**2132.9** |
| **Net derivative financial liabilities (assets)** |  |  |  |  |  |  |  |  |
| Forward foreign currency contracts <sup>(4)</sup> | $**38.3** |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Outflow |  | $**2829.3** | $**2481.4** | $**305.6** | $**39.4** | $**2.9** | $**—** | $**—** |
| &nbsp;&nbsp;&nbsp;Inflow |  | **(2780.2)** | **(2443.3)** | **(295.4)** | **(38.5)** | **(3.0)** | **—** | **—** |
| Foreign currency and |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; interest rate swap agreements | **14.4** | **36.2** | **1.0** | **1.7** | **1.9** | **31.6** | **—** | **—** |
| Equity swap agreements | **(13.0)** | **(13.0)** | **(13.0)** | **—** | **—** | **—** | **—** | **—** |
|  | $**39.7** | $**72.3** | $**26.1** | $**11.9** | $**2.8** | $**31.5** | $**—** | $**—** |
|  | $**4515.9** | $**5743.6** | $**1482.3** | $**679.7** | $**332.6** | $**865.9** | $**250.2** | $**2132.9** |

---

114 \| CAE Financial Report 2025

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Notes to the Consolidated Financial Statements

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| | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|
| | | | | Between | Between | Between | Between | |
|  | Carrying | Contractual | Less than | 1 and | 2 and | 3 and | 4 and | More than |
| As at March 31, 2024 | amount | cash flows | 1 year | 2 years | 3 years | 4 years | 5 years | 5 years |
| **Non-derivative financial liabilities** |  |  |  |  |  |  |  |  |
| Accounts payable and accrued liabilities <sup>(1)</sup> | $775.8 | $775.8 | $775.8 | $— | $— | $— | $— | $— |
| Total long-term debt <sup>(2)</sup> |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;Long-term debt (other than lease liabilities) | 2522.4 | 2522.4 | 253.7 | 265.0 | 174.1 | 164.1 | 644.1 | 1021.4 |
| &nbsp;&nbsp;Interest and accretion |  | 743.2 | 94.1 | 78.7 | 70.5 | 66.2 | 44.3 | 389.4 |
| &nbsp;&nbsp;Lease liabilities | 551.9 | 922.0 | 88.2 | 75.9 | 72.1 | 62.5 | 53.0 | 570.3 |
| Other non-current liabilities <sup>(3)</sup> | 87.1 | 164.7 |  | 24.8 | 22.7 | 28.5 | 21.9 | 66.8 |
|  | $3937.2 | $5128.1 | $1211.8 | $444.4 | $339.4 | $321.3 | $763.3 | $2047.9 |
| **Net derivative financial liabilities (assets)** |  |  |  |  |  |  |  |  |
| Forward foreign currency contracts <sup>(4)</sup> | $9.3 |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Outflow |  | $2916.5 | $2522.6 | $302.0 | $69.3 | $20.4 | $2.2 | $— |
| &nbsp;&nbsp;&nbsp;Inflow |  | (2905.7) | (2514.3) | (299.2) | (68.7) | (21.1) | (2.4) |  |
| Foreign currency and |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; interest rate swap agreements | (4.8) | 3.9 | (2.6) | (0.4) | 0.3 | 0.6 | 6.0 |  |
| Equity swap agreements | 15.8 | 15.8 | 15.8 |  |  |  |  |  |
|  | $20.3 | $30.5 | $21.5 | $2.4 | $0.9 | $(0.1) | $5.8 | $— |
|  | $3957.5 | $5158.6 | $1233.3 | $446.8 | $340.3 | $321.2 | $769.1 | $2047.9 |

---

<sup>(1)</sup> Includes trade accounts payable, accrued liabilities, interest payable, current portion of royalty obligations and certain payroll-related liabilities.

<sup>(2)</sup> Contractual cash flows include contractual interest and principal payments related to debt obligations. Contractual interests on debt obligations with variable interest rate are presented using the period-end rate.

<sup>(3)</sup> Includes non-current royalty obligations and other non-current liabilities.

<sup>(4)</sup> Outflows and inflows are presented in Canadian dollar equivalent using the contractual forward foreign currency rate.

The Company is party to an agreement that includes a put option, that if exercised, requires CAE to purchase the remaining equity interest in a joint venture. Under the terms of the agreement, the counterparty has the option to sell its shares in the joint venture at fair value. As at March 31, 2025, no value has been ascribed to the put option as the purchase price for the shares corresponds to their fair value.

**Market risk**

Market risk is defined as the Company's exposure to a gain or a loss in the value of its financial instruments as a result of changes in market prices, whether those changes are caused by factors specific to the individual financial instruments or its issuer, or factors affecting all similar financial instruments traded in the market. The Company is mainly exposed to foreign currency risk and interest rate risk.

Derivative instruments are utilized by the Company to manage market risk against the volatility in foreign exchange rates, interest rates and share-based payments in order to minimize their impact on the Company's results and financial position. The Company's policy is not to utilize any derivative financial instruments for trading or speculative purposes.

***Foreign currency risk***

Foreign currency risk is defined as the Company's exposure to a gain or a loss in the value of its financial instruments as a result of fluctuations in foreign exchange rates. The Company is exposed to foreign exchange rate variability primarily in relation to certain sale commitments, expected purchase transactions and debt denominated in a foreign currency, as well as on the net investment from its foreign operations which have functional currencies other than the Canadian dollar (in particular the U.S. dollar (USD) and Euro (€ or EUR). In addition, these operations have exposures to foreign exchange rates primarily through cash and cash equivalents and other working capital accounts denominated in currencies other than their functional currencies.

The Company mitigates foreign currency risks by having its foreign operations transact in their functional currency for material procurement, sale contracts and financing activities.

The Company uses forward foreign currency contracts and foreign currency swap agreements to manage the Company's exposure from transactions in foreign currencies and to hedge its net investment in U.S. entities. These transactions include forecasted transactions and firm commitments denominated in foreign currencies.

CAE Financial Report 2025 \| 115

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Notes to the Consolidated Financial Statements

The forward foreign currency contracts outstanding are as follows:

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| | | | | | |
|:---|:---|:---|:---|:---|:---|
| *(amounts in millions, except average rate)* |  |  | **2025** |  | 2024 |
|  | **Notional** |  | **Average** | Notional | Average |
| Currencies (sold/bought) | **amount** | **(1)** | **rate** | amount | rate |
| *USD/CDN* |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Less than 1 year | $**1257.8** |  | **0.72** | $1280.2 | 0.74 |
| &nbsp;&nbsp;&nbsp;&nbsp;Between 1 and 3 years | **250.8** |  | **0.73** | 268.9 | 0.75 |
| &nbsp;&nbsp;&nbsp;&nbsp;Between 3 and 5 years | **0.4** |  | **0.75** | 2.6 | 0.75 |
| *EUR/CDN* |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Less than 1 year | **308.1** |  | **0.66** | 340.1 | 0.68 |
| &nbsp;&nbsp;&nbsp;&nbsp;Between 1 and 3 years | **60.7** |  | **0.66** | 71.0 | 0.67 |
| &nbsp;&nbsp;&nbsp;&nbsp;Between 3 and 5 years | **2.4** |  | **0.65** | 19.4 | 0.65 |
| *CDN/USD* |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Less than 1 year | **489.6** |  | **1.42** | 467.9 | 1.35 |
| &nbsp;&nbsp;&nbsp;&nbsp;Between 1 and 3 years | **31.3** |  | **1.39** | 22.5 | 1.34 |
| &nbsp;&nbsp;&nbsp;&nbsp;Between 3 and 5 years | **0.2** |  | **1.37** |  |  |
| *Other currencies* |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Less than 1 year | **426.4** |  | **n.a.** | 435.1 | n.a. |
| &nbsp;&nbsp;&nbsp;&nbsp;Between 1 and 3 years | **1.6** |  | **n.a.** | 8.8 | n.a. |
| Total | $**2829.3** |  |  | $2916.5 |  |

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<sup>(1)</sup> Exchange rates as at the end of the respective periods were used to translate amounts in foreign currencies.

As March 31, 2025, the Company uses fixed to fixed cross currency principal and interest rate swap agreements to effectively convert the $400.0 million unsecured senior notes into U.S. dollars. The Company has designated the swap agreements as a hedge of its net investments in U.S. entities against foreign currency fluctuations.

The Company's foreign currency hedging programs are typically unaffected by changes in market conditions, as related derivative financial instruments are generally held until their maturity, consistent with the objective to fix currency rates on the hedged item.

*Foreign currency risk sensitivity analysis*

The sensitivity analysis on pre-tax net income presents the impact of foreign currency denominated financial instruments and adjusts their translation for a 5% strengthening in the relevant foreign currency as at the end of the respective periods. The sensitivity analysis on other comprehensive income (loss) presents the impact of a 5% strengthening in foreign currency rates on the fair value of foreign currency forward contracts designated as cash flow hedges as at the end of the respective periods. This analysis assumes all other variables remain constant.

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| | | | | |
|:---|:---|:---|:---|:---|
| | USD | USD | EUR | EUR |
| | Net income | OCI | Net income | OCI |
| **As at March 31, 2025** | **2.1** | **(10.5)** | **0.6** | **(1.1)** |
| As at March 31, 2024 | 0.6 | (15.7) | (1.3) | (1.9) |

---

A weakening of 5% in the relevant foreign currency against the Canadian dollar would have an opposite impact on pre-tax net income and OCI.

*Hedge of net investments in foreign operations*

As at March 31, 2025, the Company has designated a portion of its unsecured senior notes, term loans, fixed to fixed cross currency principal and interest rate swap agreements and foreign currency contracts totaling US$1,660.9 million (2024 - US$1,638.6 million) as a hedge of its net investments in U.S. entities. Gains or losses on the translation of the designated portion of these USD denominated long-term debts are recognized in OCI to offset any foreign exchange gains or losses on translation of the financial statements of those U.S. entities.

***Interest rate risk***

Interest rate risk is defined as the Company's exposure to a gain or a loss to the value of its financial instruments as a result of fluctuations in interest rates. The Company bears some interest rate fluctuation risk on its floating rate long-term debt and some fair value risk on its fixed interest long-term debt. The Company mainly manages interest rate risk by fixing project-specific floating rate debt in order to reduce cash flow variability. The Company has floating rate debts through its revolving credit facility and other specific floating rate debts. A mix of fixed and floating interest rate debt is sought to reduce the net impact of fluctuating interest rates. Derivative financial instruments used to manage interest rate exposures are mainly interest rate swap agreements. As at March 31, 2025, 86% (2024 – 93%) of the long-term debt bears fixed interest rates.

The Company's interest rate hedging programs are typically unaffected by changes in market conditions, as related derivative financial instruments are generally held until their maturity to establish asset and liability management matching, consistent with the objective to reduce risks arising from interest rate movements.

116 \| CAE Financial Report 2025

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Notes to the Consolidated Financial Statements

*Interest rate risk sensitivity analysis*

During the year ended March 31, 2025, a 1% increase in interest rates would decrease net income by $5.2 million (2024 - $7.2 million) and would not have a significant impact on OCI (2024 – not significant) assuming all other variables remained constant. A 1% decrease in interest rates would have an opposite impact on net income.

**Hedge of share-based payments expense**

The Company has entered into equity swap agreements with major Canadian financial institutions to reduce its exposure to fluctuations in its share price relating to the cash-settled share-based payments plans. Pursuant to the agreement, the Company receives the economic benefit of dividends and share price appreciation while providing payments to the financial institutions for the institution's cost of funds and any share price depreciation. The net effect of the equity swap agreements partly offset movements in the Company's share price impacting the cost of the cash-settled share-based payments plans. As at March 31, 2025, the equity swap agreements covered 2,100,000 common shares (2024 – 2,400,000) of the Company.

**Letters of credit and guarantees**

As at March 31, 2025, the Company had outstanding letters of credit and performance guarantees in the amount of $406.2 million (2024 – $244.5 million) issued in the normal course of business. These guarantees are issued under the revolving credit facility and bilateral facilities which are in most instances supported by the Performance Securities Guarantee (PSG).

The advance payment guarantees are related to progress/milestone payments made by the Company's customers and are reduced or eliminated upon delivery of the product. The contract performance guarantees are linked to the completion of the intended product or service rendered by the Company and to the customer's requirements. The customer releases the Company from these guarantees at the signing of a certificate of completion. The letter of credit for the lease obligation provides credit support for the benefit of the owner participant on a sale and leaseback transaction and varies according to the payment schedule of the lease agreement.

---

| | | |
|:---|:---|:---|
| | **2025** | 2024 |
| Advance payments | $**207.2** | $63.6 |
| Contract performance | **110.7** | 100.2 |
| Lease obligations | **17.3** | 19.8 |
| Financial obligations | **69.5** | 58.9 |
| Other | **1.5** | 2.0 |
|  | $**406.2** | $244.5 |

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**Indemnifications**

In certain transactions involving business dispositions or sales of assets, the Company may provide indemnification to the counterparties with respect to future claims for certain unknown liabilities that exist, or arise from events occurring, prior to the transaction date, including liabilities for taxes, legal matters, environmental exposures, product liability, and other obligations. The terms of the indemnifications vary in duration and scope. While some of the indemnifications specify a maximum potential exposure and/or a termination date, many do not.

The Company believes that, other than liabilities already accrued, the maximum potential future payments that it could be required to make under these indemnifications are not determinable at this time, as any future payments would be dependent on the type and extent of the related claims, and all available defences, including insurance, which cannot be estimated. However, historically, costs incurred to settle claims related to these indemnifications have not been material to the Company's consolidated financial position, net income or cash flows.

CAE Financial Report 2025 \| 117

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Notes to the Consolidated Financial Statements

**NOTE 33 – COMPENSATION OF KEY MANAGEMENT PERSONNEL**

Key management personnel have the ability and responsibility to make major operational, financial and strategic decisions for the Company. In fiscal 2025, the Company determined that key management personnel consist of the Board of Directors and its Management Team, which is comprised of the President and Chief Executive Officer (CEO) and executive officers who report directly to him. In fiscal 2024, prior to the senior leadership reorganization announced in May 2024, the Company determined that key management personnel consisted of the Board of Directors, the President and Chief Executive Officer, the Chief Financial Officer, and the Group Presidents. As at March 31, 2025, key management personnel consist of 12 non-employee Directors and 8 executive officers (2024 – 12 non-employee Directors and 5 executive officers).

The compensation expense of key management for employee services recognized in income are as follows:

---

| | | |
|:---|:---|:---|
| | **2025** | 2024 |
| Salaries and other short-term employee benefits | $**12.5** | $6.6 |
| Post-employment benefits – defined benefit plans | **2.0** | 3.8 |
| Costs related to the CEO's terms of departure | **6.3** |  |
| Termination benefits | **5.0** | 2.1 |
| Share-based payments expense | **22.2** | 4.4 |
|  | $**48.0** | $16.9 |

---

In November 2024, the Company announced its CEO succession plan whereby the current CEO will be leaving the Company at the Annual General Meeting in August 2025. The CEO's terms of departure were finalized during the fourth quarter of fiscal 2025 and include non-compete and non-solicitation covenants, as well as other terms that are generally consistent with the previously agreed-upon employment arrangement which will remain in force until the departure date.

During fiscal 2025, the Company incurred approximately $8.3 million of executive management transition costs, including $6.3 million related to the CEO's terms of departure, representing accrued expenses not yet paid to the current CEO, and $2.0 million of other costs consisting primarily of external advisor fees. These costs are recorded in selling, general and administrative expenses.

For the year ended March 31, 2025, the compensation earned by non-employee Directors of the Company amounted to $3.9 million (2024 – $3.3 million), which included the grant date fair value of deferred share units (DSUs) as well as cash payments.

118 \| CAE Financial Report 2025

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CAE.COM Financial Report FISCAL YEAR ENDED MARCH 31, 2025

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