<DOCUMENT>
<TYPE>F-10
<SEQUENCE>1
<FILENAME>a2081142zf-10.txt
<DESCRIPTION>FORM F-10
<TEXT>
<Page>
      AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 3, 2002

                                                           REGISTRATION NO. 333-

                    U.S. SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                                   FORM F-10
                             REGISTRATION STATEMENT
                                   UNDER THE
                             SECURITIES ACT OF 1933
                                    CAE INC.
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

<Table>
<Caption>
                CANADA                                   3699                               NOT APPLICABLE
<S>                                     <C>                                     <C>
   (PROVINCE OR OTHER JURISDICTION           (PRIMARY STANDARD INDUSTRIAL        (I.R.S. EMPLOYER IDENTIFICATION NO.)
  OF INCORPORATION OR ORGANIZATION)          CLASSIFICATION CODE NUMBER)
</Table>

                          ROYAL BANK PLAZA, SUITE 3060
                            TORONTO, ONTARIO, CANADA
                                    M5J 2J1
                                 (416) 865-0070
   (ADDRESS AND TELEPHONE NUMBER OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)

    CT CORPORATION SYSTEM, 111 EIGHTH AVENUE, 13TH FLOOR, NEW YORK, NY 10011
                                 (212) 894-8700
           (NAME, ADDRESS AND TELEPHONE NUMBER OF AGENT FOR SERVICE)

                                   COPIES TO:

<Table>
 <S>                          <C>                                <C>                          <C>
    Brice T. Voran, Esq.         Christine Desaulniers, Esq.     Christopher W. Morgan, Esq.          Robert Yalden, Esq.
     Shearman & Sterling              Stikeman Elliott              Skadden, Arps, Slate,        Osler, Hoskin & Harcourt LLP
 199 Bay Street, Suite 4405    1155 Rene-Levesque Blvd. West,        Meagher & Flom LLP       1000 de La Gauchetiere Street West,
     Commerce Court West                 Suite 4000                   Royal Bank Plaza,                   Suite 2100
  Toronto, Ontario M5L 1E8        Montreal, Quebec H3B 3V2              North Tower                Montreal, Quebec H3B 4W5
       (416) 360-8484                  (514) 397-3000            Suite 1820, P.O. Box 189               (514) 904-8100
                                                                  Toronto, Ontario M5J 2J4
                                                                       (416) 777-4700
</Table>

     APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
                                    PUBLIC:

  As soon as practicable after this Registration Statement becomes effective.

                          PROVINCE OF ONTARIO, CANADA

               (PRINCIPAL JURISDICTION REGULATING THIS OFFERING)

It is proposed that this filing shall become effective (check appropriate box):

    A. / / Upon filing with the Commission, pursuant to Rule 467(a) (if in
           connection with an offering being made contemporaneously in the
           United States and Canada).

    B. /X/ At some future date (check the appropriate box below):

        1. / / pursuant to Rule 467(b) on (  ) at (  ) (designate a time not
               sooner than 7 calendar days after filing).

        2. / / pursuant to Rule 467(b) on (  ) at (  ) (designate a time 7
               calendar days or sooner after filing) because the securities
               regulatory authority in the review jurisdiction has issued a
               receipt or notification of clearance on (  ).

        3. / / pursuant to Rule 467(b) as soon as practicable after notification
               of the Commission by the Registrant or the Canadian securities
               regulatory authority of the review jurisdiction that a receipt or
               notification of clearance has been issued with respect hereto.

        4. /X/ after the filing of the next amendment to this Form (if
               preliminary material is being filed).

If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to the home jurisdiction's shelf prospectus
offering procedures, check the following box. : / /

                        CALCULATION OF REGISTRATION FEE

<Table>
<Caption>
TITLE OF EACH CLASS OF SECURITIES    PROPOSED MAXIMUM AGGREGATE
        TO BE REGISTERED                OFFERING PRICE (1)(2)       AMOUNT OF REGISTRATION FEE (3)
<S>                                <C>                              <C>
---------------------------------------------------------------------------------------------------
       Common Shares (4)                  U.S.$250,000,000                    U.S.$23,000
---------------------------------------------------------------------------------------------------
</Table>

(1) Includes common shares that the underwriters have the option to purchase to
    cover over-allotments, if any.

(2) Estimated solely for the purpose of calculating the amount of the
    registration fee.

(3) Fee calculated pursuant to Rule 457(o).

(4) Includes associated common share purchase rights pursuant to the
    Registrant's Shareholder Rights Plan. The rights will trade together with
    the common shares. The value attributable to the rights, if any, is
    reflected in the offering price for the common shares.

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE AS PROVIDED IN RULE 467 UNDER THE SECURITIES ACT OF 1933
OR ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SECTION 8(A) OF THE ACT,
MAY DETERMINE.
<Page>
                                     PART I
                           INFORMATION REQUIRED TO BE
                      DELIVERED TO OFFEREES OR PURCHASERS
<Page>
The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.

                   SUBJECT TO COMPLETION, DATED JULY 3, 2002

                               27,000,000 Shares

                                     [LOGO]

                                 Common Shares

                                  -----------

    Our common shares are listed on the Toronto Stock Exchange under the symbol
"CAE" and we have applied to list our common shares on the New York Stock
Exchange under the symbol "CGT". The last reported sale price on The Toronto
Stock Exchange on July 2, 2002 was Cdn$11.92 per share.

    The underwriters have an option to purchase a maximum of 4,050,000
additional common shares to cover over-allotments of common shares.

    WE ARE PERMITTED TO PREPARE THIS PROSPECTUS IN ACCORDANCE WITH CANADIAN
DISCLOSURE REQUIREMENTS, WHICH ARE DIFFERENT FROM THOSE OF THE UNITED STATES. WE
PREPARE OUR FINANCIAL STATEMENTS IN ACCORDANCE WITH CANADIAN GENERALLY ACCEPTED
ACCOUNTING PRINCIPLES, AND THEY ARE SUBJECT TO CANADIAN AUDITING AND AUDITOR
INDEPENDENCE STANDARDS. AS A RESULT, THEY MAY NOT BE COMPARABLE TO FINANCIAL
STATEMENTS OF UNITED STATES COMPANIES.

    OWNING OUR COMMON SHARES MAY SUBJECT YOU TO TAX CONSEQUENCES BOTH IN THE
UNITED STATES AND CANADA. THIS PROSPECTUS MAY NOT DESCRIBE THESE TAX
CONSEQUENCES FULLY. YOU SHOULD READ THE TAX DISCUSSION UNDER "INCOME TAX
CONSIDERATIONS".

    YOUR ABILITY TO ENFORCE CIVIL LIABILITIES UNDER THE UNITED STATES FEDERAL
SECURITIES LAWS MAY BE AFFECTED ADVERSELY BECAUSE WE ARE INCORPORATED IN CANADA,
SOME OF OUR OFFICERS AND DIRECTORS AND SOME OF THE EXPERTS NAMED IN THIS
PROSPECTUS ARE CANADIAN RESIDENTS, AND MANY OF OUR ASSETS ARE LOCATED IN CANADA.

    INVESTING IN OUR COMMON SHARES INVOLVES RISKS. SEE "RISK FACTORS" ON PAGE
11.

<Table>
<Caption>
                                                           PRICE TO       UNDERWRITING     PROCEEDS TO
                                                            PUBLIC        COMMISSIONS        CAE INC.
                                                        --------------   --------------   --------------
<S>                                                     <C>              <C>              <C>
Per Share............................................        US$              US$              US$

Total................................................   US$              US$              US$
</Table>

    For common shares sold in the United States, the price to public is payable
in U.S. dollars. For common shares sold in Canada, the price to public is
payable in Canadian dollars at the Canadian dollar equivalent of the
U.S. dollar price to public based on the prevailing exchange rate on the date of
this prospectus.

    Delivery of the common shares will be made on or about       , 2002.
<Page>
    Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.

<Table>
<S>                                                           <C>
                JOINT BOOK-RUNNING MANAGERS                             JOINT-LEAD MANAGER
         CREDIT SUISSE FIRST BOSTON SCOTIA CAPITAL                     GOLDMAN, SACHS & CO.

                    RBC CAPITAL MARKETS                                      SG COWEN
</Table>

                  The date of this prospectus is       , 2002.
<Page>
[Photograph of visual systems depicting urban landscape.]
<Page>
[Photograph of pilot training in a civil simulator and other small photographs
of the Company's civil aviation facilities and technologies.]
<Page>
[Photograph of pilot training in a military simulator and other small
photographs of the Company's military training facilities and technologies.]
<Page>
                                 --------------

                               TABLE OF CONTENTS

<Table>
<Caption>
                                              PAGE
                                            --------
<S>                                         <C>
PROSPECTUS SUMMARY........................         3
RISK FACTORS..............................        11
SPECIAL NOTE REGARDING FORWARD-LOOKING
  STATEMENTS..............................        19
EXCHANGE RATE INFORMATION.................        19
USE OF PROCEEDS...........................        20
DIVIDENDS.................................        20
CAPITALIZATION............................        21
PRICE RANGE AND TRADING VOLUMES...........        22
SELECTED HISTORICAL CONSOLIDATED FINANCIAL
  DATA....................................        23
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
  FINANCIAL CONDITION AND RESULTS OF
  OPERATIONS..............................        25
BUSINESS..................................        37
</Table>

<Table>
<Caption>
                                              PAGE
                                            --------
<S>                                         <C>
MANAGEMENT................................        64
PRINCIPAL SHAREHOLDERS....................        68
DESCRIPTION OF SHARE CAPITAL..............        68
INDEBTEDNESS..............................        70
INCOME TAX CONSIDERATIONS.................        71
UNDERWRITING..............................        77
LEGAL MATTERS.............................        79
EXPERTS...................................        79
TRANSFER AGENT AND REGISTRAR..............        80
DOCUMENTS INCORPORATED BY REFERENCE.......        80
WHERE YOU CAN FIND MORE INFORMATION.......        81
DOCUMENTS FILED AS PART OF THE
  REGISTRATION STATEMENT..................        81
INDEX TO CONSOLIDATED FINANCIAL
  STATEMENTS..............................       F-1
</Table>

                                 --------------

    YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS DOCUMENT OR TO
WHICH WE HAVE REFERRED YOU. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH
INFORMATION THAT IS DIFFERENT. THIS DOCUMENT MAY ONLY BE USED WHERE IT IS LEGAL
TO SELL THESE SECURITIES. THE INFORMATION IN THIS DOCUMENT MAY ONLY BE ACCURATE
ON THE DATE OF THIS DOCUMENT.

                     DEALER PROSPECTUS DELIVERY OBLIGATION

    Until             , 2002 (25 days after the commencement of this offering),
all dealers that effect transactions in these securities, whether or not
participating in this offering, may be required to deliver a prospectus. This is
in addition to the dealer's obligation to deliver a prospectus when acting as an
underwriter and with respect to unsold allotments or subscriptions.

                                       2
<Page>
                               PROSPECTUS SUMMARY

    YOU SHOULD READ THE FOLLOWING SUMMARY TOGETHER WITH THE MORE DETAILED
INFORMATION REGARDING OUR COMPANY CONTAINED IN THIS PROSPECTUS, INCLUDING THE
RISK FACTORS AND THE CONSOLIDATED FINANCIAL STATEMENTS AND RELATED NOTES AND
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION INCLUDED
ELSEWHERE IN THIS PROSPECTUS. WE INCORPORATE IMPORTANT INFORMATION IN THIS
PROSPECTUS BY REFERENCE. YOU MAY OBTAIN THE INFORMATION INCORPORATED BY
REFERENCE IN THIS PROSPECTUS WITHOUT CHARGE BY FOLLOWING THE INSTRUCTIONS UNDER
"DOCUMENTS INCORPORATED BY REFERENCE".

                                      CAE

    We are a world leading designer and manufacturer of advanced simulation and
control equipment and provider of integrated training solutions for the
military, civil aviation and marine markets. We have delivered simulation
products to the military forces of more than 30 countries, are the world's
leading supplier of civil flight simulators in the competed market, in which
contracts are awarded on the basis of a competitive bidding process, and are the
second largest independent provider of civil aviation training services based on
the number of simulators operated.

    Over the last two years, our company has undergone a significant
transformation from being primarily a manufacturer of simulation and controls
equipment to a provider of fully integrated training solutions through an
expanding network of aviation training centres in strategic locations around the
world. We are leveraging our technology, expertise and customer relationships
acquired in supplying high quality simulation equipment and services to develop
integrated training solutions for military forces, commercial airlines, business
aircraft operators, aircraft manufacturers and marine vessel operators. Our
training solutions are customized to meet our customers' varied needs for a
range of equipment, facilities, training materials, support services and
personnel.

    Headquartered in Canada, we have a global presence with approximately
6,400 employees at our manufacturing operations and training facilities in 16
countries, including approximately 1,200 based in the United States. In fiscal
2002, we generated $1.1 billion in revenue. At March 31, 2002, we had
approximately 460 active contracts representing a total order backlog of
$2.7 billion. We report our results based on two business segments:
(i) Military Simulation and Marine Controls and (ii) Civil Simulation and
Training.

    MILITARY SIMULATION AND MARINE CONTROLS

    We are a premier designer and manufacturer of military flight and land-based
simulation and training systems, and are a world leader in the supply of marine
control systems. We develop simulation equipment and training for a variety of
military aircraft, including fighter jets, helicopters and transports planes. We
also have an extensive product range covering many American and European weapon
systems. We have a substantial portfolio of customers in each of our markets.
Set out below is a list of some of the more significant contracts that we have
in place with customers in the military and marine controls markets:

    - U.S. Army Special Operations Forces Aviation Training and Rehearsal
      Systems

    - U.K. Royal Air Force Medium Support Helicopter Training

    - U.K. Royal Navy Astute Class Submarine Training

    - Eurofighter -- EF 2000 Aircrew Synthetic Training Aids program

    Following our April 2001 acquisition of BAE SYSTEMS Flight Simulation and
Training Inc. in Tampa and the subsequent creation of CAE USA, we were named a
prime contractor for several military contracts for the United States, including
the U.S. Air Force Training Systems Acquisition II and the U.S. Army Simulation
and Training Omnibus Contract.

                                       3
<Page>
    CIVIL SIMULATION AND TRAINING

    We build civil simulators for all major categories of aircraft including
those built by Airbus, Boeing, Bombardier, Cessna, Dassault, Embraer,
Fairchild/Dornier, Gulfstream and Raytheon. We also build simulators for civil
helicopters, including models by Bell Helicopter and Sikorsky. We have sold our
full flight simulators to the leading civil airlines and manufacturers
throughout the world.

    We have developed and are continuing to expand our global network of
strategically located training centres. Our practice is to secure at least one
long-term training agreement with a major or regional airline prior to
establishing a new civil training centre. Our customers at our commercial
aviation training centres include major and regional airlines that elect to
outsource some of the training of their pilots and other crew members using
either our training instructors or their own. Our third party aviation training
centres are used by more than 3,000 customers who tend to use third party
training centres as their primary source for simulation training.

    As part of our strategy of being an integrated supplier of training
solutions, on August 24, 2001, we acquired Schreiner Aviation Training B.V. from
Schreiner Luchvaart Groep B.V. which had four commercial training facilities
located in the Netherlands, Belgium and United States. In addition, on
December 31, 2001, we acquired SimuFlite Training International, Inc. from GE
Capital Commercial Equipment Financing. Headquartered in Dallas, Texas, with
over 370 employees, SimuFlite operated two training facilities in Dallas, Texas
and a C-130 training facility in Marietta, Georgia. As a result of these
acquisitions and our own development of training centres, we have become the
second largest independent provider of third party aviation training in the
world.

INDUSTRY OVERVIEW

    MILITARY SIMULATION AND MARINE CONTROLS

    INCREASING DEFENSE SPENDING -- Following the September 11, 2001 terrorist
attacks, the U.S. government increased its defense spending. Military spending
is also increasing in Asia, while defense expenditures are stable in NATO
countries other than the United States. In addition to spending on defense,
there is an increased emphasis on security in most Western nations in the face
of increased terrorist threats.

    RAPID EVOLUTION OF TECHNOLOGY AND WARFARE -- Technological advances and the
changing nature of warfare have resulted in a rapid evolution of weapons systems
and equipment. In light of these changing circumstances, the key focus of
military forces has evolved towards information dominance linked with networked
weapons systems. These highly technical networked systems lend themselves to
simulation training. In addition, accelerated developments in computer and
visual technologies enable devices of greater fidelity and promote the
proliferation of simulation technologies into new areas.

    EVOLVING ROLE OF SIMULATION TRAINING -- We believe that the military will
continue to make greater use of simulation as an effective solution for more
frequent and sophisticated training requirements. Advances in technology have
enhanced the realism that can be achieved in simulation training. Simulation
training is cost effective and involves less potential for accidents and
resulting injury to personnel and damage to equipment.

    INCREASING INTEREST OF GOVERNMENTS IN PRIVATELY FINANCED LONG-TERM TRAINING
MODELS -- The development, construction and delivery of increasingly
sophisticated training resources requires a high level of specialized technology
and knowledge, and often involves significant expense. The U.K. government has
increasingly turned to private sector companies to build, maintain and deliver
training equipment and services under long-term financed arrangements. The
government of Germany is currently seeking tenders for the NH90 helicopter
training programs under this form of procurement and several other European
nations are also considering this type of procurement approach.

    INCREASING COMPLEXITY OF SHIPS AND REDUCED MANPOWER -- We believe that new
ship designs will continue to steadily increase in complexity and value with the
commensurate demand for more sophisticated control systems and integration
solutions. At the same time, the need for navies and civil ship owners/

                                       4
<Page>
operators to reduce operational costs by reducing manpower on-board ships adds
to the demand for complex automation.

    CIVIL SIMULATION AND TRAINING

    EFFECTIVENESS AND COST ADVANTAGES OF SIMULATOR TRAINING -- Simulator
training is an essential element in civil pilot and crew training. Pilots and
crew can be trained for a variety of aircraft, using visualizations of most of
the civil airports around the world, and in varying environmental conditions.
The cost savings to aircraft operators are substantial as costs such as fuel,
ground crew and maintenance, as well as aircraft wear and tear, are avoided. The
average cost to train in a full flight simulator is US$500 an hour, whereas it
can cost as much as US$5,000 to US$10,000 to fly an actual aircraft for an hour.
In the past, the use of independent training services was limited by the
availability of convenient training centres. With the development of additional
independent training centres around the world, we believe that this historical
deterrent will be addressed.

    PILOT CERTIFICATION AND LICENSE REQUIREMENTS -- Piloting an aircraft is a
regulated activity requiring both initial and recurring training to achieve
defined levels of competence and experience. To keep a license to fly an
aircraft weighing over 12,500 pounds, certain regulations require pilots to
demonstrate proficiency for that aircraft type at least once a year.
Certification and license requirements can be satisfied through simulated flight
and many pilots elect to do so.

    EXPANSION AND DIVERSIFICATION OF AIRCRAFT FLEETS -- The introduction of new
aircraft and expansion and diversification of fleets creates incremental pilot
training requirements. Demand for civil air travel and the timing of delivery of
new aircraft have been adversely affected by the September 11, 2001 terrorist
attacks. As a result, we anticipate a reduction in new third party orders for
full flight simulators in this fiscal year. However, the impact of these events
has been less severe on the demand for flight training services.

    PILOT DEMOGRAPHICS -- As pilots retire, other pilots must be trained to fly
the aircraft. Historically, the major commercial airlines hired a substantial
number of pilots from the military as these pilots retired or otherwise left
military service. In recent years, there have been fewer available military
pilots. The relative lack of available military pilots has caused increased
demand for qualified pilots throughout the industry.

KEY STRENGTHS

    Our key competitive strengths include:

    MARKET LEADERSHIP -- We are a world leading designer and manufacturer of
advanced simulation and control equipment and provider of integrated training
solutions for the military, civil aviation and marine markets. With over
50 years of experience, we have developed an excellent reputation and
long-standing customer relationships with the military forces of over
30 countries, leading defense contractors, and more than 100 leading commercial
airlines and aircraft manufacturers.

    - A PREMIER SUPPLIER TO MILITARIES WORLDWIDE -- We provide simulation
      equipment and training to military forces worldwide, including the United
      States, Canada, Germany and the United Kingdom. Our ability to win
      contracts with the U.S. military has been significantly enhanced with the
      awarding of prime contractor status under several omnibus procurement
      programs.

    - WORLD LEADER IN THE COMPETED CIVIL FULL FLIGHT SIMULATOR MARKET -- In
      fiscal 2002, we won contracts for 85% of the competed civil full flight
      simulators worldwide. Since our inception we have taken orders for
      approximately 440 full flight simulators and flight training devices of
      which about 410 have been delivered to date.

    - WORLD LEADER IN THE CIVIL VISUAL SYSTEMS MARKET -- We are the world leader
      in the design and manufacture of visual systems, which are an integral
      part of any simulator. In fiscal 2002, we won contracts for 59% of the
      competed visual systems worldwide. Our innovative use of commodity
      graphics in Level D certified flight simulators is an industry first that
      has set a new standard in visual scene fidelity.

                                       5
<Page>
    - A LEADING PROVIDER OF TRAINING SERVICES -- We are the second largest
      independent provider of civil aviation training services in the world,
      based on the number of simulators operated. Our ability to supply our
      training centres with our own simulators provides us with a significant
      cost advantage over our non-integrated competitors. We are also a growing
      provider of sophisticated training services to some of the world's leading
      military organizations through our role in the U.K. Medium Support
      Helicopter Training Facility and Astute Class Submarine Training program.

    TECHNOLOGY LEADERSHIP -- We believe that our commitment to the research and
development of new simulation technologies has solidified our position in the
military market as well as with airlines, aircraft manufacturers and training
centres. Our next generation full flight simulator, CAE Sim XXI, our web-based
simulation products, CAE Simfinity, and our new scaleable visual system, CAE
Tropos, are all results of our commitment to leading edge technology.

    DIVERSIFIED REVENUE SOURCES -- We have diversified our revenue sources
between the equipment and training markets, military and civil markets and on a
geographic basis. Our multiple revenue streams help reduce the impact of
material fluctuations in a particular market or geographic region.

    INCREASED BACKLOG -- At March 31, 2002, we had approximately 460 active
contracts representing a total order backlog of $2.7 billion, an increase of 54%
over the previous fiscal year. Over $2.0 billion of this backlog is in our
Military Simulation and Marine Controls business segment with much of it in the
form of long-term contracts which positions us to win upgrade work in the
future. Our backlog provides us with a measure of stability and visibility in
near-to-medium-term operating performance.

BUSINESS STRATEGY

    We intend to be the preferred choice for integrated training solutions for
the global military and civil simulation markets, while continuing to be a
market leader in the provision of simulation and controls equipment. Our
strategies for achieving this objective are:

    MAINTAIN AND BUILD UPON TECHNOLOGY LEADERSHIP -- We intend to maintain our
market leadership in simulator, visual system and controls technology. We intend
to continue to apply the technological advances developed for one product or
market segment to our other products and services.

    CAPITALIZE ON OUR MILITARY AND MARINE EXPERTISE -- We will focus on growing
our business with military customers around the world, and particularly in the
United States. We believe our ability, through CAE USA, to be a prime contractor
in the United States, in addition to strong supplier relationships with leading
U.S. defense contractors, will enable us to further penetrate the U.S. military
simulation and control market.

    GROW CIVIL SIMULATION AND TRAINING BUSINESS -- We intend to grow our civil
simulation and training business by expanding our aviation training centre
operations. We intend to continue to integrate the business training centres we
acquired and to selectively expand our number of simulators and global network
of training centres to better meet our customers' needs.

    INCREASE PROFITABILITY AND EFFECTIVENESS -- We are committed to continuing
to increase profitability by reducing costs, increasing productivity and
enhancing our competitiveness. We are focused on increasing the utilization
rates at our training centres, and improving operating efficiencies by applying
best practices across our network.

                             CORPORATE INFORMATION

    We were incorporated under the laws of Canada in March 1947. Our head and
registered offices are located at Suite 3060, Royal Bank Plaza, Toronto,
Ontario, M5J 2J1. Our telephone number is (416) 865-0070.

                                       6
<Page>
                                  THE OFFERING

<Table>
<S>                                          <C>
COMMON SHARES OFFERED TO THE PUBLIC....      27,000,000 common shares

COMMON SHARES TO BE OUTSTANDING AFTER
  THE OFFERING.........................      246,314,846 common shares

USE OF PROCEEDS........................      We estimate our net proceeds from this offering, after
                                             deducting underwriting commissions and expenses of the
                                             offering, will be approximately $306.7 million, or
                                             $353.0 million if the underwriters' option to purchase
                                             additional common shares is exercised in full
                                             (US$200.9 million or US$231.3 million, respectively, based
                                             on the noon buying rate on July 2, 2002). We intend to use
                                             the net proceeds from this offering to reduce amounts
                                             outstanding under our revolving credit facilities.

DIVIDENDS..............................      We intend to maintain our current dividend of $0.03 per
                                             common share, which is paid quarterly, subject to the
                                             factors set forth under "Dividends".

TSX TRADING SYMBOL.....................      CAE

PROPOSED NYSE TRADING SYMBOL...........      CGT

RISK FACTORS...........................      You should consider all of the information contained or
                                             incorporated by reference in this prospectus before making
                                             an investment in our common shares. In particular, you
                                             should consider the factors described under "Risk Factors".
</Table>

    The number of common shares to be outstanding after this offering is based
on common shares outstanding as of June 15, 2002 and excludes:

    - 12,103,746 common shares reserved for future issuance under our stock
      option plan as of June 15, 2002;

    - of which 6,293,100 common shares are issuable upon exercise of stock
      options outstanding under our stock option plan as of June 15, 2002 at a
      weighted average exercise price of $9.19 per share.

                                 --------------

    Unless otherwise indicated, the information in this prospectus:

    - assumes the underwriters have not exercised the over-allotment option
      granted by us to purchase up to 4,050,000 additional common shares in this
      offering;

    - gives retroactive effect to the 100% stock dividend in respect of our
      common shares declared on June 20, 2001, which effectively achieved a
      two-for-one split of our outstanding common shares; and

    - does not account for common share dividends for the first quarter of
      fiscal 2003 pursuant to our dividend reinvestment program which permits
      our shareholders to elect to receive common share dividends in lieu of
      cash dividends.

                                 --------------

    All references to our common shares in this prospectus shall also refer to
the associated common share purchase rights issued pursuant to our shareholder
rights plan. See "Description of Share Capital -- Shareholder Rights Plan".

                                 --------------

                                       7
<Page>
    Our consolidated financial statements are reported in Canadian dollars and
have been prepared in accordance with generally accepted accounting principles
in Canada, which we refer to in this prospectus as Canadian GAAP. Canadian GAAP,
as applied to us, conforms in all material respects with U.S. generally accepted
accounting principles, which we refer to in this prospectus as U.S. GAAP, except
as otherwise described in note 21 to our consolidated financial statements. We
express all dollar amounts in this prospectus in Canadian dollars, except where
otherwise indicated. References to "$" or "Cdn$" are to Canadian dollars and
references to "US$" are to U.S. dollars.

    In this prospectus, "CAE", the "company", "we", "us" and "our" each refers
to CAE Inc. and, unless the context otherwise requires or as otherwise expressly
stated, our subsidiaries. CAE Atmos, CAE NeTTS, CAE Sim XXI, CAE Simfinity, CAE
Tropos, Maxvue, seLearning, STRIVE and the CAE logo are our registered
trademarks or are the subject of trademark applications. This prospectus also
contains trademarks and trade names of other parties.

                                       8
<Page>
          HISTORICAL AND PRO FORMA SUMMARY CONSOLIDATED FINANCIAL DATA

    You should read the following summary consolidated financial data together
with "Management's Discussion and Analysis of Financial Condition and Results of
Operations" and our consolidated financial statements and related notes and
unaudited pro forma consolidated financial information included elsewhere in
this prospectus. The pro forma statement of earnings data presents information
as though our acquisition of SimuFlite had occurred on April 1, 2001. See
"Unaudited Pro Forma Condensed Consolidated Financial Information". The as
adjusted balance sheet data gives effect to our sale of 27,000,000 common shares
in this offering at an assumed public offering price of $11.92 per share (the
closing price of our common shares on the TSX on July 2, 2002), after deducting
the underwriting commissions and estimated offering expenses payable by us, and
the application of the net proceeds from this offering as described in "Use of
Proceeds". Our consolidated financial statements have been prepared in
accordance with Canadian GAAP. Canadian GAAP, as applied to us, conforms in all
material respects with U.S. GAAP, except as otherwise described below and in
note 21 to our consolidated financial statements.

<Table>
<Caption>
                                                                YEAR ENDED MARCH 31,           PRO FORMA(2)
                                                          ---------------------------------   --------------
                                                                                                MARCH 31,
                                                            2000        2001       2002(1)         2002
                                                          ---------   ---------   ---------   --------------
                                                                                               (unaudited)
                                                          (in millions of Canadian dollars, except per share
                                                                               amounts)
<S>                                                       <C>         <C>         <C>         <C>
STATEMENTS OF EARNINGS DATA:
CANADIAN GAAP
Revenue
  Civil Simulation and Training.........................  $  480.2    $  481.5    $  545.2        $  601.5
  Military Simulation and Marine Controls...............     384.9       409.9       581.3           581.3
                                                          --------    --------    --------        --------
                                                          $  865.1    $  891.4    $1,126.5        $1,182.8
                                                          ========    ========    ========        ========
Operating earnings
  Civil Simulation and Training.........................  $   82.3    $  117.0    $  152.3        $  146.0
  Military Simulation and Marine Controls...............      15.4        34.9        90.0            90.0
                                                          --------    --------    --------        --------
                                                          $   97.7    $  151.9    $  242.3        $  236.0
                                                          ========    ========    ========        ========

Earnings from continuing operations.....................  $   62.3    $  105.2    $  149.3        $  136.0
Earnings and diluted earnings per share from
  continuing operations.................................  $   0.28    $   0.49    $   0.69        $   0.63

Net earnings............................................  $   98.5    $  108.1    $  150.6
                                                          ========    ========    ========
Net earnings per share (basic and diluted)(3)...........  $   0.45    $   0.50    $   0.69
                                                          ========    ========    ========

U.S. GAAP
Earnings from continuing operations.....................              $   90.7    $  127.6        $  114.3
Earnings and diluted earnings per share from
  continuing operations.................................              $   0.42    $   0.59        $   0.53

Net earnings............................................              $   93.6    $  134.2
Net earnings and diluted net earnings per share(3)......              $   0.43    $   0.62

OTHER DATA:
EBITDA (Canadian GAAP)(4)...............................  $  120.0    $  171.0    $  285.4        $  291.5
EBITDA (U.S. GAAP)(4)...................................              $  151.9    $  266.4        $  272.5
</Table>

                                       9
<Page>

<Table>
<Caption>
                                                                    YEAR ENDED MARCH 31,
                                                              ---------------------------------
                                                                2000        2001       2002(1)
                                                              ---------   ---------   ---------
                                                              (in millions of Canadian dollars)
<S>                                                           <C>         <C>         <C>
GENERAL STATISTICS:
Total backlog (at year end).................................  $1,747.1    $1,752.8    $2,695.9
Capital expenditures(5).....................................      21.8        76.3       249.6
Amortization(5).............................................      22.3        19.1        43.1

ADDITIONAL DATA:
CANADIAN GAAP(5)
Research and development expenses...........................              $   87.7    $   74.6
Rental expense..............................................                  38.9        48.2
Selling, general and administrative expenses................                  89.1       125.6
Interest expense (income)...................................                  (6.3)       22.7
</Table>

<Table>
<Caption>
                                                                AS AT MARCH 31, 2002
                                                              -------------------------
                                                                ACTUAL     AS ADJUSTED
                                                              ----------   ------------
                                                                           (unaudited)
                                                              (in millions of Canadian
                                                                      dollars)
<S>                                                           <C>          <C>
BALANCE SHEET DATA:
CANADIAN GAAP
Property, plant and equipment, net..........................   $  838.5      $  838.5
Total assets................................................    2,384.8       2,389.6
Total long-term debt........................................      926.5         619.8
Shareholders' equity........................................      618.5         930.0

U.S. GAAP
Property, plant and equipment, net..........................   $  931.4      $  931.4
Total assets................................................    2,449.2       2,454.0
Total long-term debt........................................    1,047.6         740.9
Shareholders' equity........................................      579.2         890.7
</Table>

------------

(1) Our results for the year ended March 31, 2002 include the results of
    BAE SYSTEMS Flight Simulation and Training Inc. from April 2, 2001,
    Valmarine AS from August 1, 2001, Schreiner Aviation Training B.V. from
    August 24, 2001 and SimuFlite Training International, Inc. from
    December 31, 2001. These acquisitions affect the comparability of the fiscal
    2002 results with fiscal years 2000 and 2001.

(2) The pro forma financial data includes the results of SimuFlite Training
    International, Inc. for the full fiscal year. The SimuFlite results, prior
    to December 31, 2001, include an allocation of overhead charges from its
    then parent (GE Capital), which may not be representative of the costs that
    SimuFlite will incur in the future. We have also adjusted the results to
    eliminate the revenue and earnings recorded by us in the fiscal year from
    the sale of simulators to SimuFlite, which were made prior to the
    acquisition, and to reflect a full year of interest expense on the debt used
    to finance the acquisition. The results were also adjusted to reflect the
    sale and leaseback transaction which took place on the acquisition date. The
    pro forma information does not give effect to any cost savings or synergies
    that could result from the acquisition.

(3) In fiscal 2002, we adopted the new accounting standard for goodwill and
    intangibles. Giving effect to the standard, adjusted net earnings and
    diluted net earnings per share for fiscal 2001 and 2000 were $0.52 and
    $0.48. In fiscal 2001, we adopted the new accounting standard for income
    taxes and employee future benefits. See note 1 to our consolidated financial
    statements for details.

(4) Earnings from continuing operations before interest, tax, depreciation and
    amortization (EBITDA) is not a recognized measure under Canadian GAAP and
    U.S. GAAP. We believe that in addition to earnings, EBITDA is a useful
    supplemental measure as it provides investors with an indication of our
    ability to generate cash flows. EBITDA excludes amortization expense and the
    effects of amortization of goodwill and identifiable intangible assets which
    are non-cash charges. Investors should be cautioned, however, that EBITDA
    should not be construed as an alternative to net earnings determined in
    accordance with GAAP as an indicator of our performance or to cash flows
    from operating, investing and financing activities as a measure of liquidity
    and cash flows. Our method of calculating EBITDA may differ from other
    issuers and, accordingly, EBITDA may not be comparable to measures used by
    other issuers. We calculate EBITDA by adding back amortization as shown on
    our consolidated statements of cash flow to earnings from continuing
    operations before interest and income taxes as shown on our consolidated
    statements of earnings.

(5) These items may differ under U.S. GAAP. See note 21 to our consolidated
    financial statements for details.

                                       10
<Page>
                                  RISK FACTORS

    INVESTING IN OUR COMMON SHARES INVOLVES RISK. YOU SHOULD CAREFULLY CONSIDER
THE FOLLOWING RISKS, AS WELL AS THE OTHER INFORMATION CONTAINED IN, OR
INCORPORATED BY REFERENCE IN, THIS PROSPECTUS, INCLUDING OUR CONSOLIDATED
FINANCIAL STATEMENTS AND RELATED NOTES AND UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED FINANCIAL INFORMATION INCLUDED ELSEWHERE IN THIS PROSPECTUS BEFORE
INVESTING IN OUR COMMON SHARES. THE RISKS AND UNCERTAINTIES DESCRIBED BELOW ARE
NOT THE ONLY ONES WE FACE. ADDITIONAL RISKS AND UNCERTAINTIES, INCLUDING THOSE
OF WHICH WE ARE CURRENTLY UNAWARE OR THAT WE CURRENTLY DEEM IMMATERIAL, MAY ALSO
ADVERSELY AFFECT OUR BUSINESS. IF ANY OF THE FOLLOWING RISKS ACTUALLY OCCURS,
OUR BUSINESS COULD BE HARMED, THE TRADING PRICE OF OUR COMMON SHARES COULD
DECLINE, AND YOU MIGHT LOSE PART OR ALL OF YOUR INVESTMENT.

                RISKS RELATING TO OUR BUSINESS AND OUR INDUSTRY

OUR SALES CYCLE IS OFTEN LENGTHY AND UNPREDICTABLE, WHICH COULD RESULT IN
VOLATILITY IN OUR OPERATING RESULTS AND THE PRICE OF OUR COMMON SHARES.

    The sales cycle of our products and services is often lengthy and
unpredictable, ranging from six months to 18 months for civil aviation and civil
marine applications and from six months to 24 months or longer for military
applications. Our customers, particularly governmental agencies, typically
undergo lengthy internal budgeting approval and competitive evaluation
processes. In addition, potential customers usually prefer to conduct a lengthy
evaluation of our products and services to confirm their benefits before
deciding to purchase. We invest significant amounts of time and resources
educating and providing information to potential customers regarding the use and
benefits of our products and services. While potential customers are evaluating
our products and services, we may incur sales and marketing expenses and expend
significant management effort. The result of making these expenditures, with no
corresponding revenue in any given quarter, could further exacerbate
fluctuations of our quarterly operating results and share price volatility.

OUR SUCCESS DEPENDS ON THE RELIABILITY OF OUR PRODUCTS, THE QUALITY OF OUR
SERVICES AND OUR ABILITY TO ADAPT TO CHANGING CUSTOMER NEEDS IN A TIMELY MANNER.

    The civil aviation, military and marine markets in which we operate are
characterized by changes in customer requirements, introductions of new aircraft
models and marine vessels and evolving industry standards. We need to
continually improve the performance, features, reliability and quality of our
simulators and control systems, expand the scope of our training services, and
develop new products and services which meet our customers' increasingly
sophisticated and varied needs. Our failure to predict accurately the future
needs of our customers and prospective customers and to develop product
enhancements that address evolving standards and technologies may result in the
loss of current customers or negatively affect our ability to secure new
customers.

    If we are unable to upgrade or expand our product offerings in a cost
effective or timely manner, we may experience:

    - customer dissatisfaction;

    - cancellation of orders;

    - damage to our reputation; and

    - loss of revenue.

A REDUCTION IN DEFENSE SPENDING BY THE UNITED STATES OR OTHER COUNTRIES COULD
RESULT IN A DECREASE IN OUR REVENUE.

    We rely on sales to military customers around the world, and particularly in
the United States, to generate a significant portion of our revenue. In fiscal
2002, Military Simulation and Marine Controls sales accounted for approximately
52% of our revenue, and that percentage may increase in the future. A
significant reduction in military expenditures by the United States or other
countries with which we have contracts could materially adversely affect our
sales and earnings. The loss or significant reduction in government funding of a
large program in which we participate could also materially adversely affect our
sales and earnings.

                                       11
<Page>
WE OPERATE IN THE CIVIL SIMULATION EQUIPMENT AND TRAINING SERVICES MARKETS, BOTH
OF WHICH ARE HEAVILY DEPENDENT ON THE AIRLINE INDUSTRY.

    We derive a material portion of our revenues from the supply of equipment
and services to the commercial and business airline industry. Difficult
prevailing economic conditions may have a negative impact on demand for air
transportation. Reduced demand for air transportation will impact the operating
results of airlines and may lead to a reduction or delay of new aircraft
purchases which we would expect to result in reduced simulator orders. A
significant decline in expenditures in the future from these customers could
materially adversely affect our sales and earnings.

RECENT TERRORIST ATTACKS SERIOUSLY HARMED THE BUSINESS OF OUR CUSTOMERS IN THE
CIVIL AIRLINE INDUSTRY.

    The September 11, 2001 terrorist attacks had an immediate and severe adverse
impact on the passenger traffic and yields of our customers in the civil airline
industry. Civil airline operators have continued to experience significantly
lower revenue and have incurred additional costs for increased security and
higher insurance premiums. As a result of the events of September 11, 2001 and
continuing weak domestic and international economic conditions, we expect that
the delivery of new aircraft will be delayed, which will result in delays in the
delivery of civil flight simulators. This will reduce or delay a portion of our
future revenues.

ANTI-TERRORISM MEASURES MAY NEGATIVELY AFFECT OUR U.S. TRAINING BUSINESS.

    The U.S. government is developing regulations that would require any
non-U.S. person to apply for permission to enter the United States for the
purpose of flight training. Depending on the final content of these regulations,
they may delay or prevent the ability of foreign pilots to enter the United
States for flight training, which could have a negative effect on our training
business in the United States.

OUR BUSINESS COULD BE HARMED IF OUR PRODUCTS DO NOT SUCCESSFULLY INTEGRATE WITH
OTHER OPERATING SYSTEMS.

    Our visual systems and proprietary software products are designed to work
on, or interoperate with, a variety of operating systems and hardware provided
by aircraft manufacturers and ship builders. This interaction typically involves
working with sophisticated and continually evolving software, computing and
communications systems. Frequently, we provide products and services as a
sub-contractor, prime contractor or part of a consortium, which requires our
products and services to be successfully integrated with that of other
suppliers. Integration of our hardware and software with that of others may not
always be entirely successful or may take unforeseen time and effort to effect.
If we experience difficulties in achieving this integration or do not meet
project milestones in a timely manner, we could be obligated to devote more
engineering and other resources to a particular project than anticipated.

INTENSE COMPETITION IN OUR TARGET MARKETS COULD LIMIT OUR ABILITY TO ATTRACT AND
RETAIN CUSTOMERS.

    The markets in which we sell our simulation and control equipment and
training services are highly competitive. Our ability to compete for business in
these markets largely depends on:

    - the quality and reliability of our products and training services;

    - prompt and responsive contract performance;

    - accumulated technical knowledge and expertise;

    - our ability to offer our customers better value than our competitors;

    - the effectiveness and innovations of our research and development
      programs;

    - the readiness of our manufacturing and training facilities, equipment and
      personnel to undertake the programs and contracts for which we compete;
      and

    - the breadth of our product line.

    Some of our competitors, particularly in the military market, are larger
than we are and have substantially greater financial, technical, marketing,
manufacturing and distribution resources than we do. In addition, some of our
competitors have well-established relationships with aircraft manufacturers,
airlines and governments which may give them an advantage over us in winning
contracts with these organizations. Increased competition may result in price
reductions, reduced gross margins and loss of market share.

                                       12
<Page>
WE MAY HAVE DIFFICULTY SUCCESSFULLY INTEGRATING OUR RECENT ACQUISITIONS.

    In fiscal 2002, we completed the acquisition of four companies: BAE SYSTEMS
Flight Simulation and Training Inc. (United States), Schreiner Aviation
Training B.V. (Netherlands), Valmarine AS (Norway) and SimuFlite Training
International, Inc. (United States). Achieving the expected returns and
synergies from these acquisitions will depend in part upon our ability to
integrate the products and services, technology, administrative functions and
personnel of these businesses in an efficient and effective manner. We cannot
assure you that we will be able to do so, or that our acquired businesses will
perform at anticipated levels. If we are unable to successfully integrate our
acquired businesses, our operational costs may be higher than expected and we
may not be able to execute our growth strategy.

    In the future we may acquire businesses or technologies that complement our
existing operations. If we make additional acquisitions, we cannot be sure that
any benefits anticipated from the acquisitions will actually be realized. In
addition, we cannot be sure that we will be able to obtain additional financing
for acquisitions on reasonable terms, or at all.

MOST OF OUR CONTRACTS ARE SUBJECT TO COMPETITIVE BIDDING. IF WE ARE UNABLE TO
SUCCESSFULLY COMPETE IN THE BIDDING PROCESS, OUR RESULTS OF OPERATIONS WILL
SUFFER.

    We obtain most of our contracts through a competitive bidding process that
subjects us to the risk that we will expend substantial time and effort on the
design, development and marketing of proposals for contracts that may not be
awarded to us. We are sometimes required to bid on military programs in advance
of the completion of the prime vehicle or system design, which also creates the
risk that we will experience unforeseen technological difficulties and cost
overruns. We cannot assure you that we will continue to win competitively
awarded contracts at the same rate as we have in the past.

OUR USE OF FIXED-PRICE AND LONG-TERM SUPPLY CONTRACTS COULD SUBJECT US TO LOSSES
IF WE HAVE COST OVERRUNS.

    We provide our products and services primarily through fixed-price
contracts. In a fixed-price contract, we must fully absorb cost overruns,
notwithstanding the difficulty of estimating all of the costs we will incur in
performing these contracts and in projecting the ultimate level of sales that we
may achieve. In addition, a number of our contracts to supply simulators to
commercial airlines are long-term agreements, in some cases for 20 years. These
agreements establish in advance the prices for the simulators we are to deliver,
subject to limited adjustments for inflation and cost increases. If these
adjustments do not fully offset inflation or cost increases, our results of
operations could be adversely affected. Our failure to anticipate technical
problems, estimate costs accurately, including the costs of new technological
solutions, or control costs during performance of a fixed-price or long-term
contract may reduce the profitability of a contract or cause a loss and
materially affect our operating results.

    Although we believe that we have recorded adequate provisions in our
financial statements for losses on our fixed-price contracts, we cannot assure
you that our contract loss provisions will be adequate to cover all actual
future losses.

OUR MILITARY AND MARINE BUSINESSES DEPEND HEAVILY ON GOVERNMENT PROGRAMS AND
CONTRACTS, WHICH MAY BE PARTIALLY FUNDED AND CONTAIN PROVISIONS THAT ARE
UNFAVORABLE TO US.

    We act as prime contractor or major subcontractor for various U.S.,
European, Canadian and other foreign government programs. Over its lifetime, a
government program may be implemented by the award of many different individual
contracts and subcontracts. The funding of these programs may be subject to
governmental appropriations. For example, although multi-year contracts may be
authorized in connection with major procurements, some governments, including
the U.S. government, appropriate funds on a fiscal year basis even though a
program may continue for several years. Consequently, military programs are
sometimes partially funded initially, and additional funds are committed only as
the appropriate government makes further appropriations. The termination of
funding for a government program would result in a loss of anticipated future
revenues attributable to that program which could have a negative impact on our
operations. In addition, the termination of a program or failure to commit
additional funds to a program already started could increase our overall costs
of doing business.

    Generally, government contracts contain provisions permitting termination at
the government's convenience, in whole or in part, without prior notice, upon
the payment of compensation in some cases only

                                       13
<Page>
for work done and commitments made at the time of termination. If any of the
programs we are working on are terminated, we may not be able to procure new
government contracts to offset the revenues lost. As our revenues are dependent
on our procurement, performance and payment under our contracts, the loss of one
or more critical contracts could have a negative impact on our financial
condition.

OUR GOVERNMENT-FUNDED MILITARY PROGRAMS ARE HEAVILY REGULATED AND SUBJECT TO
AUDIT.

    Like most suppliers of products and services to governments, we may be
audited and reviewed periodically on some projects. Based on the results of its
audits, a government may adjust our contract-related costs and fees, including
allocated indirect costs. Adjustments arising from government audits and reviews
may have an adverse effect on our results of operations. In addition, under
certain government purchasing regulations, some of our costs, including most
financing costs, amortizing of goodwill and other intangible assets, portions of
our research and development costs, and some marketing expenses may not be
reimbursable or allowed in our negotiation of fixed-price contracts. Further, as
a government contractor, we may be subject to an increased risk of
investigations, criminal prosecution, civil fraud, whistleblower lawsuits and
other legal actions and liabilities which purely private sector companies are
not subject to, the results of which could have a material adverse effect on our
operations.

    Failure to comply with applicable government regulations and requirements
could lead to suspension or being barred from government contracting or
subcontracting for a period of time. Among the causes for debarment are
violations of various statutes, including those related to:

    - procurement integrity;

    - export control;

    - government security regulations;

    - employment practices;

    - protection of the environment;

    - non-compliance with government policies or programs; and

    - accuracy of records and the recording of costs.

    The termination of a government contract or relationship as a result of any
of these acts would have a negative impact on our operations and could have a
negative effect on our reputation and ability to procure other government
contracts in the future.

IN THE FUTURE, WE MAY NOT BE ABLE TO OBTAIN FINANCIAL SUPPORT FOR OUR RESEARCH
AND DEVELOPMENT ACTIVITIES.

    Some of our research and development initiatives have been carried out with
the financial support of governmental agencies including substantial amounts
from the government of Canada through Technology Partnerships Canada. If such
financial assistance is not available to us in the future we may have to find
alternative sources of financing, which may not be available.

WE MAY EXPERIENCE CONTRACT CANCELLATIONS IN CONNECTION WITH OUR EXISTING BACKLOG
OF ORDERS.

    At March 31, 2002, we had approximately 460 active contracts representing a
total order backlog of $2.7 billion. Our ability to complete sales with respect
to all or a portion of the backlog may be adversely affected by the long-term
financial condition of our customers. If certain of our customers become
insolvent or bankrupt or experience other financial difficulties which make them
unable or unwilling to purchase our products, our revenue would be adversely
affected. In addition, approximately 70% of our backlog is comprised of
long-term military contracts which may unilaterally be terminated by the
government agencies that are parties to such contracts. Certain commercial
contracts may also be terminated for convenience. We cannot assure you that our
existing backlog will result in sales or that any such sales will be profitable.

OUR ABILITY TO ADEQUATELY PROTECT OUR INTELLECTUAL PROPERTY IS LIMITED, AND
COMPETITORS MAY BE ABLE TO USE OUR TECHNOLOGY, WHICH COULD WEAKEN OUR
COMPETITIVE POSITION AND INCREASE COSTS.

    We rely on trade secrets and contractual restrictions, such as
confidentiality agreements and licenses, to establish and protect our
proprietary rights. We have not in the past relied on patents, trademarks or
copyright protection to any significant extent to protect our intellectual
property rights and prevent

                                       14
<Page>
competitors from using our technology in their products. Our reliance on trade
secrets and confidentiality agreements may be insufficient to prevent
misappropriation of our technology or deter others from developing similar
technologies. Unauthorized parties may attempt to copy or otherwise obtain and
use our products or technology which could weaken our competitive position.
Enforcement of our intellectual property rights or our ability to acquire them
may be unavailable or limited in some countries. In addition, some of our
government customers have the right to use royalty-free for government purposes
intellectual property that we have developed under government contracts.

RELIANCE ON THE INTELLECTUAL PROPERTY OF OTHERS COULD PREVENT OR DELAY OUR
PERFORMANCE OF CONTRACTS OR NEGATIVELY IMPACT OUR MARGINS.

    Our products contain sophisticated computer systems that run on software and
operating systems supplied to us by third parties. Such computer systems and
software may not always be available to us to license or purchase. The
production of our simulators is often dependent upon our receipt of data,
including confidential or proprietary data, concerning the functions, design and
performance characteristics of a product or system, the performance of which our
simulator is intended to simulate. We cannot assure you that we will be able to
obtain such data on reasonable terms, or at all. Original manufacturers of these
products and systems could object to the simulation by us of components of, or
the totality of their products or systems, or could request high license fees
that could negatively impact our profit margins.

CLAIMS BY OTHER COMPANIES THAT OUR PRODUCTS INFRINGE THEIR PROPRIETARY RIGHTS
COULD ADVERSELY AFFECT OUR ABILITY TO SELL OUR PRODUCTS AND INCREASE OUR COSTS.

    We face the risk that infringement claims may be brought against us or our
customers in the future. If an infringement claim is successfully asserted, we
may be required to spend significant time and money to defend against the claim,
to develop a manufacturing process that does not infringe upon the rights of
such other person or to obtain licenses for the technology, process or
information from the owner. We may not be successful in the defense of such
claims and may not be able to develop processes that do not infringe on the
rights of third parties or obtain licenses on commercially acceptable terms, if
at all. In addition, any litigation related to the defense of our intellectual
property rights could be lengthy and costly and could adversely affect our
operations or financial results, whether or not we are successful.

WE DERIVE A SIGNIFICANT PORTION OF OUR REVENUES FROM INTERNATIONAL SALES AND ARE
SUBJECT TO THE RISKS OF DOING BUSINESS IN FOREIGN COUNTRIES.

    We have manufacturing operations and training facilities in 16 countries and
sell our products and services to customers around the world. For the fiscal
year ended March 31, 2002, sales to customers outside the United States and
Canada accounted for approximately 60% of our revenues. We expect that sales
outside the United States and Canada will continue to account for a significant
portion of our revenues for the foreseeable future. As a result, we are subject
to risks of doing business internationally, including:

    - changes to regulatory requirements;

    - changes to domestic and foreign government policies, including
      requirements to expend a portion of program funds locally and governmental
      industrial cooperation requirements;

    - the complexity and necessity of using foreign representatives and
      consultants;

    - imposition of tariffs or embargoes, export controls, including U.S.,
      Canadian and foreign arms export controls, currency exchange controls and
      restrictions, and other trade restrictions affecting countries in which we
      sell our products or services;

    - the difficulty of managing and operating an enterprise spread over various
      countries;

    - compliance with a variety of foreign laws; and

    - general economic and geopolitical conditions, including international
      hostilities, inflation, trade relationships and military and political
      alliances.

    The impact of these factors is difficult to predict and any one or more of
these factors could adversely affect our operations in the future.

                                       15
<Page>
SOME OF OUR AGREEMENTS WITH UNIONS REPRESENTING CERTAIN OF OUR EMPLOYEES ARE
SUBJECT TO RENEWAL IN THE NEAR FUTURE.

    We are party to 13 collective bargaining agreements throughout our business
units which are subject to expiration at various times in the future. If we are
unable to renew these agreements, or others as they become subject to
renegotiation from time to time, it could result in work stoppages and other
labor disturbances which could have a material adverse effect on our business.

OUR DEBT AGREEMENTS MAY RESTRICT OUR ABILITY TO FINANCE OUR FUTURE OPERATIONS
AND, IF WE ARE UNABLE TO MEET OUR FINANCIAL COVENANTS, COULD CAUSE OUR DEBT TO
BE ACCELERATED.

    The indenture governing our senior notes and our revolving credit facilities
contain covenants that, among other things, restrict our ability to:

    - sell assets;

    - incur secured indebtedness;

    - engage in mergers or consolidations; and

    - engage in transactions with affiliates.

    These restrictions could hurt our ability to finance our future operations
or our capital needs, or to engage in other business activities that may be in
our interest. In addition, we are also required to comply with specified ratios
and tests, including leverage, interest coverage ratios and a consolidated net
worth test. Our ability to comply with these ratios and tests may be affected by
events beyond our control. A breach of any of these agreements or our inability
to comply with the required financial ratios or limits could result in a
default, which would permit our lenders to declare amounts owed to them due and
immediately payable.

OUR LEVEL OF DEBT MAY ADVERSELY AFFECT OUR FINANCIAL AND OPERATING ACTIVITY.

    We incurred indebtedness in connection with our recent acquisitions,
including BAE SYSTEMS Flight Simulation and Training, Schreiner, SimuFlite and
Valmarine and we expect our capital expenditures to continue at greater than our
historical levels in the short term as we execute our business plan. As of
March 31, 2002, our total debt and capital lease obligations were
$926.5 million. A portion of the proceeds of this offering will be used to
reduce the amounts outstanding under our revolving credit facilities. In the
future, we may borrow more money, subject to the limitations imposed on us by
our senior notes and our credit facilities.

    Our indebtedness may affect the way we conduct our business. For example,
our level of indebtedness may:

    - require us to use a substantial portion of our cash flow from operations
      to pay interest and principal on our debt, thereby reducing the
      availability of that cash flow for other purposes such as capital
      expenditures, research and development, and other investments;

    - limit our ability to obtain additional financing for acquisitions,
      investments, working capital and other expenditures, which may limit our
      ability to carry out our business strategy;

    - result in high interest expenses if interest rates increase on our
      floating rate borrowings; or

    - heighten our vulnerability to downturns in our business or in the general
      economy and restrict us from making acquisitions, introducing new
      technologies and products, or exploiting business opportunities.

FLUCTUATIONS IN THE VALUE OF FOREIGN CURRENCIES COULD RESULT IN CURRENCY
EXCHANGE LOSSES.

    The majority of our revenues are not currently denominated in Canadian
dollars, and we expect that our revenues will continue to be generated in
currencies other than the Canadian dollar. A substantial portion of our
operating expenses are payable in Canadian dollars. Therefore, fluctuations in
the Canadian dollar exchange rate will impact our results of operations and
financial condition from period to period. In addition, such fluctuations affect
the translation of our results for purposes of our consolidated financial

                                       16
<Page>
statements. Our reported results have been affected in recent years by the
marked strengthening of the U.S. dollar compared to the Canadian dollar. Our
currency hedging activities may not be successful.

WE MAY BE SUBJECT TO SIGNIFICANT ENVIRONMENTAL LIABILITIES IMPOSED BY
ENVIRONMENTAL LAWS AND REGULATIONS OR CONTRACTUAL INDEMNITIES.

    Our operations include, and our past operations and those of some past
operators at some of our sites have included, the use, generation, storage,
handling and disposal of hazardous materials which are subject to environmental
laws and regulations in the various countries in which we operate or have
operated. New laws and regulations, stricter enforcement of existing laws and
regulations, the discovery of previously unknown contamination, the imposition
of new clean-up requirements or claims on indemnities we have given may require
us to incur substantial costs in the future which could have a material adverse
effect on our financial condition and results of operations.

WE MAY BE SUBJECT TO LIABILITY CLAIMS ARISING FROM CASUALTY LOSSES.

    Due to the nature of our business, we may be subject to liability claims
arising out of accidents or disasters involving aircraft, marine vessels or
power plants for which we have provided training equipment or services or
control systems used by employees operating or conducting maintenance on such
aircraft, marine vessels or power plants, including claims for serious personal
injury or death. We cannot be certain that our insurance coverage will be
sufficient to cover one or more substantial claims.

THE PRODUCTS WE MANUFACTURE MAY BE SUBJECT TO WARRANTY OR OTHER CLAIMS.

    The simulators and control systems we manufacture are highly complex and
sophisticated and may contain defects that are difficult to detect and correct.
Errors may be found in our products after their delivery to the customer. If
discovered, we may not be able to successfully correct such errors in a timely
manner or at all. The occurrence of errors and failures in our products could
result in warranty claims or the loss of customers. Correcting such defects
could require significant capital investment. When defective products are
integrated in our customers' equipment, we may face product liability claims
based on damages to such equipment. Any claims, errors or failures could have an
adverse effect on our operating results and business. We cannot be certain that
our insurance coverage will be sufficient to cover one or more substantial
claims.

WE ARE SUBJECT TO COMPLIANCE WITH REGULATORY RULES IMPOSED BY AVIATION
AUTHORITIES THAT MAY CHANGE WITHOUT NOTICE, RESULTING IN DISRUPTIONS TO OUR
SALES AND OPERATIONS.

    We are subject to compliance with regulatory rules imposed by aviation
authorities that may change without notice, resulting in disruptions to our
sales and operations. Any changes imposed by a regulatory agency, including
changes imposed by aviation authorities such as the U.S. Federal Aviation
Administration (FAA) to safety standards, could require us to make unplanned
modifications to our products and services, or may result in delays or
cancellations of sales of our products and services. We cannot predict the
future impact of changing law or regulation on our operations and any changes
could have a material adverse effect on our results of operations or financial
condition.

SALES OR LICENSES OF CERTAIN OF OUR PRODUCTS REQUIRE REGULATORY APPROVALS.

    The sale or license of virtually all of our products is subject to
regulatory controls, including the prohibition of sales to certain countries, or
of certain technology such as military-related simulators and nuclear power
plant system simulators, without an export license or other approvals. These
regulations change with some frequency. We cannot assure you that we will be
permitted to sell or license certain products to customers and we may lose
potential revenue as a result of the application of such regulations. Failure to
comply with any of these regulations in the countries in which we operate could
subject us to fines and other material sanctions.

IF WE ARE UNABLE TO RETAIN KEY PERSONNEL, OR HIRE AND RETAIN QUALIFIED
PERSONNEL, IT WOULD HARM OUR ABILITY TO CARRY OUT OUR BUSINESS STRATEGY.

    Our success depends to a significant degree upon the continued contributions
of our key qualified technical personnel. We believe our future success will
also depend in large part upon our ability to attract

                                       17
<Page>
and retain highly skilled managerial, product development, sales and qualified
technical personnel. Competition for such personnel in the industries in which
we operate is intense, and we may not be successful in attracting and retaining
qualified personnel. Our inability to attract and retain qualified personnel in
the future may seriously harm our business and results of operations.

                         RISKS RELATED TO THIS OFFERING

BECAUSE WE ARE A CANADIAN COMPANY, IT MAY BE DIFFICULT FOR INVESTORS IN THE
UNITED STATES TO ENFORCE AGAINST US LIABILITIES BASED SOLELY UPON THE FEDERAL
SECURITIES LAWS OF THE UNITED STATES.

    We are organized under the laws of Canada, and our principal executive
office is located in Canada. Many of our directors and officers, and the
representatives of the experts named in this prospectus, are residents of
Canada, and a substantial portion of their assets and a majority of our assets
are located outside the United States. As a result, it may be difficult for
investors in the United States to effect service of process within the United
States upon such directors, officers and representatives of experts who are not
residents of the United States or to enforce against them judgments of United
States courts based upon civil liability under the federal securities laws of
the United States. There is doubt as to the enforceability in Canada against us
or against any of our directors or officers or experts who are not residents of
the United States, in original actions or in actions for enforcement of
judgments of United States courts of liabilities based solely upon the federal
securities laws of the United States.

FUTURE SALES OF OUR COMMON SHARES IN THE PUBLIC MARKET COULD LOWER OUR SHARE
PRICE.

    We may sell additional common shares in subsequent offerings. We may also
issue additional common shares to finance future acquisitions, including
acquisitions larger than those we have done in the past. We cannot predict the
size of future issuances of our common shares or the effect, if any, that future
issuances and sales of our common shares will have on the market price of our
common shares. Sales of substantial amounts of common shares, or the perception
that such sales could occur, may adversely affect prevailing market prices for
our common shares.

THE PRICE OF OUR COMMON SHARES MAY FLUCTUATE SIGNIFICANTLY, AND YOU COULD LOSE
ALL OR PART OF YOUR INVESTMENT.

    The market price of our common shares could fluctuate significantly as a
result of a variety of factors which are beyond our control. In recent years,
the stock market has experienced extreme price and volume fluctuations. This
volatility has had a significant effect on the market price of securities issued
by many companies, including companies in the industries in which we operate.
The price of our common shares could fluctuate based upon factors that have
little or nothing to do with our company, and these fluctuations could
materially reduce our share price.

OUR ARTICLES OF AMALGAMATION AND SHAREHOLDER RIGHTS PLAN CONTAIN PROVISIONS THAT
MAY DELAY OR PREVENT A CHANGE OF CONTROL.

    Our articles of amalgamation allow the issuance of an unlimited number of
preferred shares in one or more series. There are no preferred shares
outstanding. However, our board of directors may set the rights and preferences
of any series of preferred shares in its sole discretion without the approval of
the holders of common shares. The issuance of preferred shares, or the existence
of our shareholder rights plan, which contains provisions allowing shareholders
to acquire additional common shares at half their then market price in the event
of a person becoming the beneficial owner of 20% or more of our shares other
than pursuant to a permitted bid, could have the effect of delaying or
preventing a change of control of our company.

                                       18
<Page>
               SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

    This prospectus contains forward-looking statements. Forward-looking
statements are necessarily made based on estimates and assumptions made by us in
light of our experience and our perception of historical trends, current
conditions and expected future developments, as well as other factors we believe
are appropriate in the circumstances. These estimates and assumptions are
inherently subject to significant business, economic and competitive
uncertainties, many of which, with respect to future events, are subject to
change. These uncertainties and contingencies can affect actual results and
could cause actual results to differ materially from those expressed or implied
in any forward-looking statements made by us, or on our behalf.

    In particular, the words "expect", "anticipate", "intend", "believe", "feel"
and similar expressions are intended to identify forward-looking statements. In
light of the risks and uncertainties inherent in all future projections, the
inclusion of forward-looking statements included in, or incorporated by
reference in, this prospectus should not be considered as a representation by us
or any other person that our objectives or plans will be achieved. Numerous
factors could cause our actual results to differ materially from those in the
forward-looking statements, including the following:

    - the purchase of new aircraft and vessels by, and timing of delivery of new
      aircraft and vessels to, civil aviation, military aircraft and marine
      fleet operators;

    - a decision by the U.S. government, or other governments, to reduce defense
      spending or alter the regulatory environment of our industries;

    - rising costs to provide products and services, especially in connection
      with fixed-price contracts;

    - the effectiveness of our research and development program and our ability
      to develop new products and features in a timely manner;

    - the continued quality and reliability of our products and services;

    - a lack of success in bidding for competed contracts;

    - reduction or termination of significant government military programs;

    - difficulties in executing our business strategy;

    - the inability to successfully integrate our recent acquisitions; and

    - general political, economic and financial conditions in the markets in
      which we operate.

    The factors listed above should not be construed as exhaustive. These
factors should be considered carefully and readers should not place undue
reliance on our forward-looking statements. See "Risk Factors" for a more
detailed discussion of these and other risks. We undertake no obligation to
release publicly the results of any future revisions we may make to
forward-looking statements to reflect events or circumstances after the date of
this prospectus or to reflect the occurrence of unanticipated events.

                           EXCHANGE RATE INFORMATION

    The following table sets forth, for each period indicated, the high and low
exchange rates, the exchange rate at the end of the period indicated, and the
average of the exchange rates on the last day of each month during such period
indicated, for one Canadian dollar expressed in U.S. dollars, based on the
inverse of the noon buying rate in the City of New York for cable transfers as
published by the Federal Reserve Bank of New York:

<Table>
<Caption>
                                                                   YEAR ENDED MARCH 31,
                                                              ------------------------------
                                                                2000       2001       2002
                                                              --------   --------   --------
<S>                                                           <C>        <C>        <C>
High........................................................   0.6969     0.6900     0.6598
Low.........................................................   0.6410     0.6346     0.6196
Period end..................................................   0.6669     0.6900     0.6268
Average.....................................................   0.6727     0.6648     0.6388
</Table>

On July 2, 2002, the inverse of the noon buying rate was Cdn$1.00 per US$0.6552.

                                       19
<Page>
                                USE OF PROCEEDS

    We estimate that our net proceeds from this offering will be approximately
$306.7 million (US$200.9 million, based on the noon buying rate on July 2,
2002), based on an assumed public offering price of $11.92 per common share (the
closing price of our common shares on the TSX on July 2, 2002), after deducting
the underwriting commissions and estimated offering expenses payable by us. If
the underwriters exercise their over-allotment option in full, we estimate our
net proceeds will be approximately $353.0  million (US$231.3 million, based on
the noon buying rate on July 2, 2002).

    We intend to use the net proceeds from this offering to reduce by
$306.7 million the amounts outstanding under our revolving credit facilities.
See "Indebtedness". Pending this use, we expect to invest the net proceeds in
short-term, interest-bearing investment grade securities.

                                   DIVIDENDS

    We declared quarterly cash dividends of $0.025 per common share during
fiscal 2001 and for the last three-quarters of fiscal 2000. A cash dividend of
$0.02 per common share was declared for the first-quarter of fiscal 2000.

    On June 20, 2001, we declared a 100% stock dividend in respect of our common
shares, which effectively achieved a two-for-one split of our outstanding common
shares. Our common shares commenced trading on a split basis on July 5, 2001 on
the TSX. We ascribed essentially no monetary value to the stock dividend.

    Commencing with the dividend payable on September 28, 2001, we raised the
quarterly dividend to $0.03 per common share. We currently intend to maintain
our quarterly dividend of $0.03 per common share. However, any decision to
declare and pay dividends in the future will be made at the discretion of our
board of directors, after taking into account our financial results, capital
requirements and other factors our directors may deem relevant.

    We permit our shareholders to elect to receive common share dividends in
lieu of cash dividends. During fiscal 2000, fiscal 2001 and fiscal 2002, we
issued 68,032, 34,410 and 17,605 common shares, respectively, as share
dividends.

                                       20
<Page>
                                 CAPITALIZATION

    The following table describes our cash and capitalization as of March 31,
2002:

    - on an actual basis; and

    - on an as adjusted basis to give effect to our sale of 27,000,000 common
      shares in this offering at an assumed public offering price of $11.92 per
      share (the closing price of our common shares on the TSX on July 2, 2002),
      after deduction of estimated underwriting commissions and the estimated
      offering expenses payable by us, and the application of the net proceeds
      from this offering as described in "Use of Proceeds".

<Table>
<Caption>
                                                                AS OF MARCH 31, 2002
                                                              -------------------------
                                                                ACTUAL     AS ADJUSTED
                                                              ----------   ------------
                                                              (in millions of Canadian
                                                                      dollars)
<S>                                                           <C>          <C>
Cash and short term investments.............................   $  110.1      $  110.1
                                                               ========      ========
Long-term debt, including current portion...................   $  926.5      $  619.8
Shareholders' equity
  Common shares (authorized -- unlimited: outstanding
    actual -- 218,955,780; as adjusted -- 245,955,780)......      186.8         498.3
  Retained earnings.........................................      446.8         446.8
  Currency translation adjustment...........................      (15.1)        (15.1)
                                                               --------      --------
  Total shareholders' equity................................      618.5         930.0
                                                               --------      --------
    Total capitalization....................................   $1,545.0      $1,549.8
                                                               ========      ========
</Table>

    The table above excludes:

    - 12,462,822 common shares reserved for future issuance under our stock
      option plan as of March 31, 2002;

    - of which 4,999,078 common shares are issuable upon exercise of stock
      options outstanding under our stock option plan as of March 31, 2002 at a
      weighted average exercise price of $7.70 per share.

                                       21
<Page>
                        PRICE RANGE AND TRADING VOLUMES

    Our common shares are listed and posted for trading on the TSX under the
symbol "CAE". We have applied to list our common shares on the NYSE under the
symbol "CGT". The following table sets forth, for our fiscal periods indicated,
the high and low closing sale prices and trading volume of our common shares on
the TSX:

<Table>
<Caption>
                                                                HIGH       LOW        VOLUME
                                                              --------   --------   ----------
                                                                ($)        ($)
<S>                                                           <C>        <C>        <C>
FISCAL 2000
First Quarter...............................................    4.70       3.98     52,551,806
Second Quarter..............................................    4.83       4.00     48,574,342
Third Quarter...............................................    5.25       3.78     61,370,858
Fourth Quarter..............................................    8.05       4.93     62,770,938

FISCAL 2001
First Quarter...............................................    7.73       6.40     34,137,380
Second Quarter..............................................   10.25       7.58     61,660,124
Third Quarter...............................................   12.50       9.25     61,929,544
Fourth Quarter..............................................   12.83      10.35     46,310,856

FISCAL 2002
First Quarter...............................................   15.05      12.13     41,288,994
Second Quarter..............................................   15.34       8.25     66,402,008
Third Quarter...............................................   11.61       7.35     95,798,110
Fourth Quarter..............................................   11.97       9.70     65,122,133

FISCAL 2003
First Quarter...............................................  14.37      11.30      57,801,859
Second Quarter (through July 2, 2002).......................  11.92      11.92         873,943
</Table>

    On July 2, 2002, the closing sale price of our common shares on the TSX was
$11.92.

                                       22
<Page>
                SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA

    YOU SHOULD READ THE FOLLOWING SELECTED CONSOLIDATED FINANCIAL DATA IN
CONJUNCTION WITH "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS" AND OUR CONSOLIDATED FINANCIAL STATEMENTS AND RELATED
NOTES AND UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION
INCLUDED ELSEWHERE IN THIS PROSPECTUS.

    The following table sets forth selected consolidated statement of earnings
data for each of the years in the three-year period ended March 31, 2002 and
balance sheet data as at March 31, 2001 and 2002 and as at March 31, 2002 as
adjusted to give effect to our sale of 27,000,000 common shares in this offering
at an assumed public offering price of $11.92 per share (the closing price of
our common shares on the TSX on July 2, 2002), after deducting the underwriting
commissions and estimated offering expenses payable by us, and the application
of the net proceeds from this offering as described in "Use of Proceeds". The
selected financial data set forth below are derived from, and are qualified by
reference to, our audited consolidated financial statements and related notes
included elsewhere in this prospectus. PricewaterhouseCoopers LLP, our
independent auditors, audited these financial statements. Our consolidated
financial statements have been prepared in accordance with Canadian GAAP.
Canadian GAAP, as applied to us, conforms in all material respects with
U.S. GAAP, except as otherwise described below and in note 21 to our
consolidated financial statements.

<Table>
<Caption>
                                                                    YEAR ENDED MARCH 31,
                                                              ---------------------------------
                                                                2000        2001       2002(1)
                                                              ---------   ---------   ---------
                                                              (in millions of Canadian dollars,
                                                                  except per share amounts)
<S>                                                           <C>         <C>         <C>
STATEMENTS OF EARNINGS DATA:
CANADIAN GAAP
Revenue
  Civil Simulation and Training.............................  $  480.2    $  481.5    $  545.2
  Military Simulation and Marine Controls...................     384.9       409.9       581.3
                                                              --------    --------    --------
                                                              $  865.1    $  891.4    $1,126.5
                                                              ========    ========    ========
Operating earnings
  Civil Simulation and Training.............................  $   82.3    $  117.0    $  152.3
  Military Simulation and Marine Controls...................      15.4        34.9        90.0
                                                              --------    --------    --------
                                                              $   97.7    $  151.9    $  242.3
                                                              ========    ========    ========

Earnings from continuing operations.........................  $   62.3    $  105.2    $  149.3
Earnings and diluted earnings per share from
  continuing operations.....................................  $   0.28    $   0.49    $   0.69

Net earnings................................................  $   98.5    $  108.1    $  150.6
                                                              ========    ========    ========
Net earnings per share (basic and diluted)(2)...............  $   0.45    $   0.50    $   0.69
                                                              ========    ========    ========

U.S. GAAP
Earnings from continuing operations.........................              $   90.7    $  127.6
Earnings and diluted earnings per share from
  continuing operations.....................................              $   0.42    $   0.59

Net earnings................................................              $   93.6    $  134.2
Net earnings and diluted net earnings per share(2)..........              $   0.43    $   0.62

OTHER DATA:
EBITDA (Canadian GAAP)(3)...................................  $  120.0    $  171.0    $  285.4
EBITDA (U.S. GAAP)(3).......................................              $  151.9    $  266.4
</Table>

                                       23
<Page>

<Table>
<Caption>
                                                                    YEAR ENDED MARCH 31,
                                                              ---------------------------------
                                                                2000        2001       2002(1)
                                                              ---------   ---------   ---------
                                                              (in millions of Canadian dollars)
<S>                                                           <C>         <C>         <C>
GENERAL STATISTICS:
Total backlog (at year end).................................  $1,747.1    $1,752.8    $2,695.9
Capital expenditures(4).....................................      21.8        76.3       249.6
Amortization(4).............................................      22.3        19.1        43.1

ADDITIONAL DATA:
CANADIAN GAAP(4)
Research and development expenses...........................              $   87.7    $   74.6
Rental expense..............................................                  38.9        48.2
Selling, general and administrative expenses................                  89.1       125.6
Interest expense (income)...................................                  (6.3)       22.7
</Table>

<Table>
<Caption>
                                                                        AS AT MARCH 31,
                                                              ------------------------------------
                                                                                          2002
                                                                2001        2002      AS ADJUSTED
                                                              ---------   ---------   ------------
                                                                                      (unaudited)
                                                               (in millions of Canadian dollars)
<S>                                                           <C>         <C>         <C>
BALANCE SHEET DATA:
CANADIAN GAAP
Property, plant and equipment, net..........................  $  227.2    $  838.5       $  838.5
Total assets................................................   1,372.1     2,384.8        2,389.6
Total long-term debt........................................     265.3       926.5          619.8
Shareholders' equity........................................     464.1       618.5          930.0

U.S. GAAP
Property, plant and equipment, net..........................  $  244.7    $  931.4       $  931.4
Total assets................................................   1,369.0     2,449.2        2,454.0
Total long-term debt........................................     296.9     1,047.6          740.9
Shareholders' equity........................................     444.8       579.2          890.7
</Table>

------------

(1) Our results for the year ended March 31, 2002 include the results of
    BAE SYSTEMS Flight Simulation and Training Inc. from April 2, 2001,
    Valmarine AS from August 1, 2001, Schreiner Aviation Training B.V. from
    August 24, 2001 and SimuFlite Training International, Inc. from
    December 31, 2001. These acquisitions affect the comparability of the fiscal
    2002 results with fiscal years 2000 and 2001.

(2) In fiscal 2002, we adopted the new accounting standard for goodwill and
    intangibles. Giving effect to the standard, adjusted net earnings and
    diluted net earnings per share for fiscal 2001 and 2000 were $0.52 and
    $0.48. In fiscal 2001, we adopted the new accounting standard for income
    taxes and employee future benefits. See note 1 to our consolidated financial
    statements for details.

(3) Earnings from continuing operations before interest, tax, depreciation and
    amortization (EBITDA) is not a recognized measure under Canadian GAAP and
    U.S. GAAP. We believe that in addition to earnings, EBITDA is a useful
    supplemental measure as it provides investors with an indication of our
    ability to generate cash flows. EBITDA excludes amortization expense and the
    effects of amortization of goodwill and identifiable intangible assets which
    are non-cash charges. Investors should be cautioned, however, that EBITDA
    should not be construed as an alternative to net earnings determined in
    accordance with GAAP as an indicator of our performance or to cash flows
    from operating, investing and financing activities as a measure of liquidity
    and cash flows. Our method of calculating EBITDA may differ from other
    issuers and, accordingly, EBITDA may not be comparable to measures used by
    other issuers. We calculate EBITDA by adding back amortization as shown on
    our consolidated statements of cash flow to earnings from continuing
    operations before interest and income taxes as shown on our consolidated
    statements of earnings.

(4) These items may differ under U.S. GAAP. See note 21 to our consolidated
    financial statements for details.

                                       24
<Page>
                    MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                 FINANCIAL CONDITION AND RESULTS OF OPERATIONS

    YOU SHOULD READ THE FOLLOWING DISCUSSION IN CONJUNCTION WITH OUR
CONSOLIDATED FINANCIAL STATEMENTS AND UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL INFORMATION INCLUDED ELSEWHERE IN THIS PROSPECTUS.

COMPARISON OF THE FISCAL YEAR ENDED MARCH 31, 2002 TO THE FISCAL YEAR ENDED
  MARCH 31, 2001

OVERVIEW

    Management's discussion and analysis of the fiscal 2002 financial results
focuses on our core businesses, Civil Simulation and Training (formerly
Commercial Simulation and Training) and Military Simulation and Marine Controls
(formerly Military Simulation and Controls). During the year we accelerated our
transformation from a supplier of simulation equipment to a provider of
integrated training solutions in the civil aviation training market with the
December 2001 acquisition of SimuFlite of Dallas, Texas and the August 2001
acquisition of Schreiner of the Netherlands. Our Military Simulation and Marine
Controls segment strengthened our position in the U.S. military market with the
first quarter acquisition of BAE SYSTEMS Flight Simulation and Training in
Tampa, Florida and entered the commercial marine systems market with the second
quarter acquisition of Valmarine in Drammen, Norway. On December 18, 2001, our
board of directors approved the divestiture of our Forestry Systems segment to
further sharpen our focus and to enhance our growth potential. The results of
this segment are reported as discontinued operations and comparative amounts
have been restated.

EARNINGS FROM CONTINUING OPERATIONS

    Consolidated earnings from continuing operations for fiscal 2002 climbed to
$149.3 million, a 42% increase over the fiscal 2001 $105.2 million result.
Earnings per share increased from $0.49 to $0.69, reflecting the effect of the
restatement of Forestry Systems earnings as discontinued operations and the
impact of the 100% stock dividend declared on June 20, 2001, effectively a stock
split. All segments reported significantly improved performances in fiscal 2002
resulting from productivity improvements and cost reductions. Operating margins
reached 21.5% for fiscal 2002 as compared to 17.0% in fiscal 2001. This
improvement stems from the reduction in the manufacturing time to build a civil
simulator, better execution on several military programs and cost containment
initiatives. In addition, the Military Simulation and Marine Controls segment
achieved robust results for the year due mainly to improved performance on its
major programs, the first quarter acquisition of BAE SYSTEMS Flight Simulation
and Training and the August 2001 acquisition of Valmarine. The Civil Simulation
and Training segment's accelerated move into aviation training, through the two
strategic acquisitions, helped to drive a 30% increase in this segment's
operating earnings. In the fourth quarter, the segment absorbed the
$7.0 million provision for workforce reductions announced in February 2002, the
majority of which was expended by March 31, 2002.

    The earnings growth more than offset an increase in interest expense.
Interest expense for the year at $22.7 million is higher than fiscal 2001 due
primarily to the acquisition of four strategic businesses and capital spending
in support of our growth initiatives in pilot training. In addition to cash flow
from operations, this growth has been financed through the use of proceeds from
the disposition of discontinued operations, utilization of our cash balances,
short-term investments and long-term credit facilities.

CONSOLIDATED REVENUE

    Consolidated revenue for fiscal 2002, at $1.13 billion, reflects a 26%
increase over the $891.4 million reported for the prior year. Revenue for
Military Simulation and Marine Controls grew by 42% or $171.4 million, due
primarily to the acquisition of BAE SYSTEMS Flight Simulation and Training which
significantly enhanced our access to the U.S. military market, and Valmarine,
which facilitated entry into the commercial marine control systems market.
Revenue for Civil Simulation and Training rose 13%, driven by the acquisitions
of SimuFlite in December and Schreiner in the second quarter, combined with the
December opening of the Toronto Training Centre, the first quarter opening of
the Sao Paulo Centre and other training centre initiatives.

                                       25
<Page>
DISCONTINUED OPERATIONS

    On December 18, 2001, our board of directors approved the divestiture of our
Forestry Systems segment. Commencing in the third quarter the results of
Forestry Systems were reported in discontinued operations and combined with the
results of the Cleaning Technologies segment. Prior year amounts have been
restated, accordingly. On March 28, 2002 we closed the sale of the Pulp and
Paper Division of Forestry Systems to Advanced Fiber Technologies Income Fund
(AFT), a publicly traded income trust. The proceeds of the AFT offering, net of
commissions, were approximately $123 million. AFT used the proceeds and an
additional $39 million to acquire our business. In February, we completed the
sale of CAE Ransohoff Inc. and CAE Ultrasonics Inc., two of our five Cleaning
Technologies operations, to the former management of these operations, for
US$21.4 million in the form of cash and subordinated notes. The result of these
transactions, combined with an estimate of the net realizable value of the
remaining discontinued operations contributed to a $1.3 million gain from
discontinued operations for the year. Negotiations to sell the remaining
businesses are proceeding and we expect to conclude agreements to dispose of
some or all of the divestitures in the first half of fiscal 2003.

NET EARNINGS

    Consolidated net earnings increased 39% to $150.6 million or $0.69 per share
in fiscal 2002 compared with consolidated net earnings of $108.1 million or
$0.50 per share in fiscal 2001.

CASH FLOW

    Our cash and short-term investments decreased by a combined $169.5 million
to $88.8 million and $21.3 million, respectively, and long-term debt increased
by $560.2 million. These changes are the result of the four strategic
acquisitions totalling $757.6 million and capital expenditures of
$249.6 million primarily related to our expansion into aviation training. Total
proceeds amounting to $187.1 million, received primarily in the fourth quarter
from the disposition of the Pulp and Paper Division of Forestry Systems and the
sale of CAE Ransohoff Inc. and CAE Ultrasonics Inc., were used to pay down debt.
We received $42.6 million in the third quarter on the completion of a tax
efficient sale and leaseback of the first two simulators installed in the
Toronto Training Centre. In addition, on January 15, 2002, we completed a
US$36.4 million project financing transaction with Banco ITAU of Brazil for the
Sao Paulo Aviation Training Centre. This project financing comprises a 7.5-year
term loan issued by the Brazilian bank and enables us to borrow exclusively on
the strength of our Brazilian operations.

BACKLOG

    Order backlog as at March 31, 2002 reached $2.7 billion, up 54% over last
year. The backlog includes two major programs, the Eurofighter visual system
program and the Astute Class Submarine Training program for the U.K. Royal Navy,
secured in the first half of the 2002 fiscal year.

REVIEW OF OPERATIONS

    CIVIL SIMULATION AND TRAINING

    Our Civil Simulation and Training business is a world leader in the design
and production of commercial flight simulators, visual systems and training
systems. The acquisitions of Schreiner in the second quarter and SimuFlite in
December, combined with the December opening of the Toronto Training Centre, the
first quarter opening of the Sao Paulo Training Centre and other training centre
initiatives have accelerated our move into aviation training. These strategic
initiatives have facilitated our transformation from a supplier of simulation
equipment to a provider of integrated training solutions in the civil aviation
training market and positioned us as the world's second largest independent
aviation training company.

                                       26
<Page>
    FINANCIAL RESULTS

<Table>
<Caption>
                                                                           YEAR ENDED MARCH 31,
                                                           ----------------------------------------------------
                                                             2002       2001       2000       1999       1998
                                                           --------   --------   --------   --------   --------
                                                                (amounts in millions of Canadian dollars)
<S>                                                        <C>        <C>        <C>        <C>        <C>
Revenue..................................................   $545.2     $481.5     $480.2     $352.8     $296.8
Operating earnings.......................................   $152.3     $117.0     $ 82.3     $ 55.9     $ 56.7
Operating margins........................................   27.9%      24.3%      17.1%      15.8%      19.1%
Backlog (at year end)....................................   $641.2     $649.5     $527.8     $482.7     $339.9
Capital expenditures.....................................   $216.7     $ 72.9     $ 11.7     $ 23.2     $ 27.4
</Table>

    Revenue for fiscal 2002 reached $545.2 million, $63.7 million or 13% higher
than revenue for fiscal 2001. The increase in revenue from fiscal 2001 primarily
stems from the Schreiner and SimuFlite acquisitions combined with the launch of
the Sao Paulo, Toronto and Madrid training centres. In addition, higher visual
upgrade and support service revenues were realized. Operating earnings of
$152.3 million for the year were $35.3 million or 30% higher than fiscal 2001.
These results reflect the impact of the accelerated move into aviation training
and significant margin improvement achieved through productivity gains and cost
containment initiatives. In addition, these operating earnings reflect a fourth
quarter $7.0 million provision for workforce reductions, the majority of which
was spent by March 31, 2002.

    Capital expenditures increased significantly in the fiscal year, the
majority of which relate to the construction of five new training facilities.

    OPERATIONAL HIGHLIGHTS

    During the first half of the fiscal year, our strategy to expand and grow
through pilot training gained significant momentum. The acquisition of Schreiner
was announced along with plans to open a flight-training centre in Denver and an
agreement to build and operate, with Emirates, the international airline of the
United Arab Emirates (UAE), a new flight-training centre in Dubai. The
acquisition of Schreiner in August 2001, and its four established training
centres (Amsterdam and Maastricht, The Netherlands, Brussels, Belgium, and
Dallas, Texas) added a total of 19 full flight simulators to our network of
training facilities. On July 6, 2001, a long-term training agreement with
Alitalia -- Linee Aeree Italiane was signed for three full flight simulators to
be built, installed and owned by us, to provide training to Alitalia and other
carriers at the Alitalia training centre in Rome. On July 14, 2001 we and
Emirates signed an agreement to build and operate jointly a new aviation
training centre in Dubai. The centre is scheduled to open in the summer of 2002.
We also signed a five-year training service agreement with Qatar Airways, the
new centre's first anchor customer.

    During the second quarter we concluded a contract with Frontier Airlines to
train at our new training centre in Denver, Colorado scheduled to open in the
summer of 2002. On December 13, we officially opened the Toronto Training Centre
near Pearson International Airport and announced an agreement with Air Canada to
train its Boeing 747-400 pilots at the new facility. Air Canada is the fourth
Canadian airline anchor tenant at the Centre, joining Air Canada Jazz (formerly
Air Canada Regional Inc.), Skyservice and Air Transat. The Centre provides
training on three full flight simulators, an Airbus A330/340, an Airbus A320 and
a Boeing 747-400. A fourth simulator for the Bombardier Dash 8-100/300 will be
installed in early 2003. The acquisition of SimuFlite of Dallas, Texas was
completed on December 31, 2001 for US$210.9 million, subject to an adjustment
based on an audit of the closing balance sheet. Up until this strategic move,
our entry into aviation training had concentrated on the wide-bodied and
regional jet markets in the civil sector. The acquisition of SimuFlite positions
us in the business-aircraft training segment -- and in the key U.S. market. Next
year, SimuFlite will have 29 full flight simulators, all but one in Dallas,
serving the business-aircraft market (the largest addressable or out-sourced
aviation training market in the world). We see this market segment as the one
least affected by the events of September 11, 2001 and one with solid growth
potential. It is also a market specifically suited to our new, next generation
simulator -- CAE Sim XXI. By the end of fiscal 2003, we expect to have in
operation an installed base of over 80 full flight simulators. We will continue
to execute our pilot training strategy, with the focus now on integrating the
SimuFlite and Schreiner operations, ramping up utilization in the Toronto,
Madrid and Sao Paulo Training centres, and progressing as planned on the Denver,
Rome and Dubai centres.

                                       27
<Page>
    We achieved one of the most significant milestones on the CAE Sim XXI
simulator program -- its inaugural test flight in January. CAE Sim XXI's modular
design is the result of the latest next-generation technologies used to produce
high quality high fidelity full flight simulators. The CAE Sim XXI simulator is
easier to assemble, test, integrate, evaluate, deliver and maintain. Engineering
activities for the first and second production of CAE Sim XXI simulators are
underway and will be delivered to our training centre in Dubai. CAE Sim XXI
manufacturing techniques will be extended to other of our simulation products.
In addition, during the fourth quarter our full flight simulators at both the
Toronto and Madrid aviation training centres received Level D certification, the
highest level in full flight simulation. These achievements clearly demonstrate
our commitment to maintaining our technological leadership.

    During the fiscal year, we were awarded 22 of 26 full flight simulator
orders or 85% of the competed market (fiscal 2001 -- 35 of 42 full flight
simulator orders). We also captured 16 of 27 competed visual systems, or 59%.
New customers included an approximately $95 million contract for four full
flight simulators all equipped with CAE's Maxvue Plus visual systems, to Khalifa
Airways and an Airbus A330 full flight simulator equipped with our new image
generator CAE Tropos to Taiwan-based EVA Airways Corp.

    OUTLOOK

    We expect to maintain our commanding leadership position in civil simulation
and visual systems due to our focus on customer relationships, our commitment to
innovation and technology, product quality, reliability and efficiency, and our
continuing efforts to shorten delivery cycles through process improvements. We
expect to increase our advantage in lead-time, cost, quality and reputation for
performance through operational improvements and research and development
programs. Last year we launched a large-scale research and development program
to improve our flight simulator products. The next generation full flight
simulator, CAE Sim XXI, is expected to go into full production later this year
and is targeted for the growing regional and business jet training markets. It
will also provide significant spin-off benefits for our entire suite of
simulation and training products. Our capabilities in simulation-based
interactive learning, including our CAE Simfinity system, will also complement
our traditional strength in full flight simulators and flight training devices.
Combined with our growing network of training centres, this complete suite of
simulation-based equipment and training products permits us to offer airlines
and business jet operators a range of training solutions.

    The events of September 11, 2001 had a negative impact on commercial
airlines, on aircraft manufacturers and, by extension, on us, because we are, to
some degree, dependent on the health and success of those industries. We have
experienced some softening of near-term demand for civil simulators and
anticipate a reduction in simulator orders in fiscal 2003. In addition, now that
we have entered the civil aviation training market, the market for new
simulators to third parties has been reduced, as we now manufacture these for
our own use. The building of simulators for our own training centres, as well as
for sale, the introduction of CAE Sim XXI, a continued focus on productivity
savings through cycle time reductions and other cost containment initiatives
should enable us to maintain current operating margins. The growth we expect to
come from training should offset the decline in simulator sales.

    MILITARY SIMULATION AND MARINE CONTROLS

    Our Military Simulation and Marine Controls business is a premier designer
and manufacturer of military flight and land-based simulation and training
systems, and is a world leader in the supply of marine control systems. Three
major events occurred during the first half of fiscal 2002, which served to
accelerate our strategic initiatives in the military and marine markets. First,
the acquisition of BAE SYSTEMS Flight Simulation and Training was completed on
April 2, 2001 reflecting our commitment to strengthen our access to the U.S.
defense market. On August 1, 2001, we announced the acquisition of Valmarine for
approximately $63 million. Valmarine is a leader in the commercial marine
control systems market (namely cruise lines, large passenger ferries and
specialized cargo vessels). This acquisition is the foundation for growth in the
Marine Controls Division and meets a key strategic objective by accelerating our
entry into the commercial marine control systems market. In July, we were
selected as one of several prime contractors under the United States Air Force
(USAF) Training Systems Acquisition II (TSA II) contract. This permits us to
pursue USAF, Air Force Reserve, Air National Guard, and Foreign Military Sale
products and services programs.

                                       28
<Page>
    FINANCIAL RESULTS

<Table>
<Caption>
                                                                   YEAR ENDED MARCH 31,
                                                   ----------------------------------------------------
                                                     2002       2001       2000       1999       1998
                                                   --------   --------   --------   --------   --------
                                                        (amounts in millions of Canadian dollars)
<S>                                                <C>        <C>        <C>        <C>        <C>
Revenue..........................................  $  581.3   $  409.9   $  384.9   $  355.7   $  334.2
Operating earnings...............................  $   90.0   $   34.9   $   15.4   $   25.2   $   20.6
Operating margins................................   15.5%       8.5%       4.0%       7.1%       6.2%
Backlog (at year end)............................  $2,054.7   $1,103.3   $1,219.3   $1,242.6   $1,242.2
Capital expenditures.............................  $   32.9   $    3.4   $   10.1   $   45.7   $   25.4
</Table>

    Revenue of $581.3 million for fiscal 2002 was $171.4 million or 42% above
fiscal 2001, driven by the acquisitions of BAE SYSTEMS Flight Simulation and
Training and Valmarine and activity on major programs awarded earlier in the
year (Astute, Eurofighter). Operating earnings of $90.0 million were
$55.1 million or 158% better than last year. These results reflect the
significant improvement in performance on major programs, including the E-3A
Airborne Warning and Control System, the Astute Class Submarine Training
program, the C-5B Weapon System Trainer, the NATO Flying Training in Canada
program and the Medium Support Helicopter Aircrew Training Facility, in addition
to the BAE SYSTEMS Flight Simulation and Training and Valmarine acquisitions and
the continuing impact of productivity and cost saving initiatives.

    Backlog at a record $2.05 billion, almost doubled last year's amount and
includes the Eurofighter visual system program and the Astute Class Submarine
Training programs.

    OPERATIONAL HIGHLIGHTS

    This segment secured three major contracts in the year, reinforcing our
strategy and accelerating initiatives. During the second quarter, Eurofighter
Simulation Systems GmbH selected us for visual systems for the Eurofighter
EF2000 combat aircraft Aircrew Synthetic Training Aids program. Valued at over
$170 million, the contract extends over several years, with the first deliveries
to take place in calendar year 2002. Also during the second quarter, the FAST
Consortium, owned half by us and half by Alenia Marconi Systems, signed a
contract with the Defence Procurement Agency of the U.K. Ministry of Defence for
the Astute Class Submarine Training program. This Private Finance Initiative
contract is for the provision of comprehensive training services to the Royal
Navy for 30 years, with an option to renew for an additional 10 years, in the
operation and maintenance of the Astute Class submarines. A new training centre
is being built in Scotland to house the simulators and provide
classroom-training facilities. The contract added over $400 million to our
backlog. During the fourth quarter, we signed a contract with the U.S. Army to
be the prime contractor for the Army Special Operations Forces Aviation Training
and Rehearsal Systems (ASTARS). The initial delivery order, valued at
approximately $50 million, is for the design of the world's first AH/MH-6 Light
Assault/Attack Reconfigurable (LASAR) Combat Mission Simulator (CMS) to train
aircrews of both the AH-6 and MH-6 helicopters. The helicopter simulator, which
will feature a 24-foot dome display, will be used by the U.S. Army 160th Special
Operations Aviation Regiment (SOAR), the elite regiment of soldiers known as the
"Night Stalkers", who have played a key role in Afghanistan. As prime contractor
for the ASTARS program, we will also analyze the training and simulation needs
of the U.S. Army 160th SOAR and assist in the development of upgrades to
existing systems and new training systems. This contract enhances our prospects
for securing other U.S. military contracts at a time when military spending is
on the rise.

    OUTLOOK

    The military simulation and training market is driven by the introduction of
new aircraft platforms, upgrades and life extensions to existing aircraft and a
shift to greater use of simulation in pilot training programs due to the high
degree of realism and the significantly lower cost compared to live training. We
expect to increase our advantage in lead-time, cost, quality and reputation for
performance through continued operational improvements and research and
development programs. In particular, we launched a research and development
program to introduce CAE NeTTS Networked Tactical Training Systems, a new
PC-based architecture to address the requirement for scalable, re-configurable,
cost effective training devices. In addition to technology and price, the
customers' -- in most cases, governments -- key purchase criteria

                                       29
<Page>
often include the contractor's local geographic presence. With our leading-edge
technology solution, we are well positioned to capitalize on upcoming
international Military and Marine programs in Canada, the United States, Europe,
the United Kingdom, Asia and Australia, as well as teaming and/or collaboration
arrangements in other countries. Our Military Simulation and Marine Controls
segment has provided an exceptionally strong performance in fiscal 2002.
Following the events of September 11, 2001, there was strong evidence of an
increase in military spending, particularly in the United States. We expect to
benefit from these increases especially now that we have a recognized presence
in the United States to bid as a prime contractor on defense contracts. These
factors coupled with the record backlog, the majority of which is long-term,
provide a solid platform for the future.

LIQUIDITY AND CAPITAL RESOURCES

    Our cash and short-term investments decreased by $169.5 million during the
year. Cash decreased to $88.8 million from the March 31, 2001 level of
$156.8 million. Short-term investments amounting to $21.3 million are comprised
of fixed term deposits maturing within the next year. Long-term debt increased
by $755.8 million primarily on the utilization of new US$200 million and
US$350 million long-term credit facilities and the completion of a
US$36.4 million project financing transaction with Banco ITAU of Brazil for the
Sao Paulo Aviation Training Centre. These changes in cash and long-term debt are
also the result of our strategic acquisitions totalling $757.6 million for the
year and capital expenditures of $249.6 million relating to our expansion into
aviation training. In addition, $195.6 million in long-term debt was repaid from
the proceeds received from the disposition of the Pulp and Paper Division of
Forestry Systems and the sale of CAE Ransohoff Inc. and CAE Ultrasonics Inc.
totalling $187.1 million and from cash flow from operations.

    We employ foreign exchange forward contracts to manage exposures created
when sales are made in foreign currencies. The amount and timing of forward
contracts varies on a number of project related factors, including milestone
billings and the use of foreign materials and/or subcontractors. As at
March 31, 2002, we had $144.1 million Canadian equivalent in forward contracts.
We also entered into cross currency swap-contracts. Currently, three contracts
are in effect and will mature in December 2002. Two of the contracts are in
U.S. dollars and have a total notional value of $21 million; the third is in
Canadian dollars and has a notional value of $30 million. If both forward and
swap-contracts were marked to market at year-end, a foreign exchange gain of
$3.0 million would result. These would be equally offset by future losses of
foreign denominated cash flows over the balance of the contracts.

    We also use financial instruments to manage our exposure to changing
interest rates and to adjust our mix of fixed and floating interest rate debt.
In order to benefit from the low short-term interest rates prevailing in the
Canadian market, we concluded interest rate swap agreements in fiscal 2002 with
three financial institutions for periods of between one and four years.
Following the implementation of our strategy, the mix of fixed rate versus
floating rate debt was 55%-45% respectively. As at March 31, 2002, we had
interest rate swaps converting mostly floating based long-term debt into fixed
term debt totalling $334.1 million, which if marked to market at that date would
result in a loss of $2.2 million. We deal only with sound counter-parties in
executing any of our financial instruments.

    As at March 31, 2002, we had long-term debt and capital lease obligations
totalling $926.5 million. This compares to long-term debt and capital lease
obligations of $265.3 million in the prior year. This increase in long-term debt
is due to the investments made during the year and sale and leaseback
transactions. At March 31, 2002, the short-term portion of the long-term debt
was $37.5 million compared to $2.3 million last year.

    In addition to the term revolving facilities totalling approximately
$1 billion, our liquidity is enhanced through access to $57.8 million in
unsecured lines of credit with various banks, compared with $85.0 million in
2001. In the normal course of business, we issued letters of credit and
performance guarantees for a total amount of $243 million.

    As at March 31, 2002, we had approximately US$147.8 million of accumulated
non-capital tax losses carried forward that can be used to offset tax payable on
future earnings from U.S. operations. We also have accumulated non-capital tax
losses carried forward relating to our operations in other countries of
approximately $64.0 million.

                                       30
<Page>
    SALE AND LEASEBACK TRANSACTIONS

    From time to time we have entered into sale and leaseback transactions to
access low cost capital to support our growth initiatives. In fiscal 2002, we
entered into three such transactions. With the acquisition of Schreiner, we
acquired a lease for three full flight simulators valued at $50 million. As part
of the acquisition of SimuFlite we entered into a 12-year sale and leaseback
arrangement with the seller for five simulators valued at $86 million. In
December 2001 we entered into sale and leaseback arrangements with a financial
institution for two simulators manufactured for our Toronto Training Centre.
Proceeds, at market value, amounted to $42.6 million, $12.2 million over the
carrying value. The guaranteed residual value of $9.2 million will be deferred
as a liability until the lease expiry date and the difference, $3.0 million will
be realized over the term of the 22 year lease. Future minimum lease payments
for all such arrangements amounting to approximately $340 million as at
March 31, 2002 are disclosed in Note 18 "Operating Lease Commitments" to the
consolidated financial statements contained elsewhere in this prospectus.

    This transaction follows sale and leaseback arrangements completed in
December 1999 for two simulators manufactured for Air Canada. Proceeds amounted
to $35.5 million, $17.2 million above their carrying value. The guaranteed
residual value amounted to $8.3 million.

    NON-RECOURSE PROJECT FINANCING

    During 1997, we arranged non-recourse project financing for the Medium
Support Helicopter Aircrew Training (MSHAT) program we entered into with the
U.K. Ministry of Defence. The contract was awarded to a consortium, CAE Aircrew
Training Services plc (Aircrew). The capital value of the assets required to be
supplied by Aircrew is in excess of $200 million. The entity that owns the
assets comprised in the training centre is CVS Leasing Ltd. (in which we have an
11% interest). We manufactured and sold the simulators to CVS Leasing Ltd., and
CVS Leasing Ltd. then leased this equipment to Aircrew for the full term of the
MSH contract. As Aircrew is majority-controlled by us, its financial position
and results of operations are consolidated in our financial statements. Future
minimum lease payments associated with the simulators leased to Aircrew amount
to approximately $278 million as at March 31, 2002 and are disclosed in Note 18
"Operating Lease Commitments" to the consolidated financial statements contained
elsewhere in this prospectus.

    Both the Canadian Institute of Chartered Accountants and the United States
Financial Accounting Standards Board are reviewing the existing accounting
standards relating to transactions such as those described above. While no new
guidance has yet been made public, any change in the standards could affect our
accounting for these transactions.

CRITICAL ACCOUNTING POLICIES

    The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and the
disclosure of the contingent assets and liabilities at the date of the financial
statements and revenue and expenses for the period reported. Estimates are based
upon historical experience and various other assumptions that are believed to be
reasonable under the circumstances. These estimates are evaluated on an ongoing
basis and form the basis for making judgments regarding the carrying values of
assets and liabilities and the reported amount of revenue and expenses. Actual
results may differ from these estimates under different assumptions.

    Our critical accounting policies are those that we believe are the most
important in determining our financial condition and results, and require
significant subjective judgment by management. A summary of our significant
accounting policies, including the critical accounting policies discussed below,
is set out in the notes to our consolidated financial statements.

    REVENUE RECOGNITION

    We generate a significant portion of our revenue from long-term contracts.
The payment terms under our contracts vary with the type of project, typically
taking 15 to 18 months for payment for a civil flight simulator and up to two
years or longer for a military or marine project.

                                       31
<Page>
    Revenue from long-term contracts is recognized using the percentage of
completion method, where revenue, earnings and unbilled accounts receivable are
recorded as related costs are incurred, on the basis of percentage costs
incurred to date on a contract, relative to the estimated total costs.
Significant judgment is involved in estimating the total costs to complete a
project. Revisions in cost and earnings estimates during the term of the
contract are reflected in the period in which the need for revision becomes
known. Losses, if any, are recognized fully when first anticipated. Generally,
the terms of long-term contracts provide for progress billing based on
completion of certain phases of work. Warranty provisions are recorded at the
time revenue is recognized, based on past experience. Where customer support is
billed separately, revenue is recorded ratably over the support period.

    Training service revenues are recognized in the period such services are
provided. All other revenue is recorded and related costs transferred to cost of
sales at the time the benefits and the risks of ownership associated with the
product are transferred to the customer.

    Credit risk also exists but it is considered minimal because our customers
are primarily well-established companies with good credit ratings or government
agencies. Before accepting an order, we make a credit evaluation in order to
properly assess the credit risk. When we identify a collection risk a provision
for doubtful accounts is recorded.

    VALUATION OF INTANGIBLE ASSETS AND GOODWILL

    We account for our business combinations under the purchase method of
accounting. The total cost of an acquisition is allocated to the underlying net
assets based on their respective estimated fair values. Part of this allocation
process requires that we identify and attribute values and estimated lives to
the intangible assets acquired. We may engage experts to assist us in these
matters, however these determinations involve considerable judgment. They often
involve the use of significant estimates and assumptions, including those with
respect to future cash flows, discount rates and asset lives. These
determinations will affect the amount of amortization expense to be recognized
in future periods.

    Effective April 1, 2001, we adopted the CANADIAN INSTITUTE OF CHARTERED
ACCOUNTANTS HANDBOOK Section 3062, "Goodwill and Other Intangible Assets". This
section requires that goodwill and intangible assets with indefinite useful
lives not be amortized. Other intangible assets are amortized over their
estimated useful lives. Their fair value is to be assessed annually and, if
necessary, written down for any impairment. Goodwill represents the cost of
investments in subsidiaries in excess of the fair value of the net identifiable
assets acquired. Goodwill for acquisitions made prior to fiscal 2002 was
amortized up to March 31, 2001 using the straight-line method over 40 years.

    DEFERRED DEVELOPMENT COSTS

    Where we intend to produce or market a product under development that is
clearly defined, has identifiable costs, is technically feasible, and has a
clearly defined market or use, and we expect to have the financial resources to
complete the project, the costs associated with the project are deferred to the
extent that their recovery through future sales or use of the product is
reasonably assured. This requires us to make judgments about the likelihood of
recovery of the costs. If we determine that recovery of the costs through future
sales or use is no longer likely, any deferred costs not likely to be recovered
are charged against earnings in the period. Once the project is complete, we
amortize the deferred costs by reference to sales of the product over a period
not exceeding five years.

NEW ACCOUNTING STANDARDS

    During the year, we implemented certain changes to our accounting policies
in order to conform to new Canadian Institute of Chartered Accountants (CICA)
accounting standards.

    On April 1, 2001, we adopted the new recommendations of the CICA
Section 1581, "Business Combinations" and Section 3062 "Goodwill and Other
Intangible Assets". Accordingly, all business acquisitions performed during
fiscal 2002 were accounted for using the purchase method. In addition, we ceased
amortizing goodwill from April 1, 2001, as we adopted the goodwill impairment
model introduced by the new accounting rules. Goodwill amortization amounted to
$5.1 million for the year ended March 31,

                                       32
<Page>
2001. In addition, no write-down of goodwill arose from the application of the
impairment model upon adoption of these new recommendations.

    In accordance with CICA Section 1650 "Foreign Currency Translation", we will
no longer amortize the exchange gains or losses arising on the translation of
long-term foreign currency debt. Exchange gains or losses arising on translation
will be included in earnings as incurred. Effective April 1, 2002, the
recommendations will be applied retroactively and consequently, prior years'
financial statements will be restated. At March 31, 2002, the unamortized
exchange loss relating to the existing long-term foreign currency debt amounted
to $9.2 million (2001 -- $7.6 million). The impact of this accounting change
will be a charge to fiscal 2002 earnings of $1.1 million, net of $0.5 million in
taxes, and a charge to fiscal 2002 opening retained earnings of $5.3 million,
net of $2.3 million in taxes.

    Effective April 1, 2002, we will prospectively adopt the new recommendations
of CICA Section 3870 "Stock-based Compensation and Other Stock-based Payments".
The standard encourages but does not require that the fair value method of
valuing stock options be used for transactions with employees. We will not
change the method currently used to account for stock options granted to
employees, but we will provide the required pro forma disclosures on the impact
of the fair value method, which produces estimated compensation charges. For the
year ended March 31, 2002, had the new standard been adopted, a reduction of
less than $0.01 on both earnings and diluted earnings per share from continuing
operations and net earnings and diluted net earnings per share would have been
presented.

QUARTERLY FINANCIAL INFORMATION

<Table>
<Caption>
                                                               FIRST      SECOND     THIRD      FOURTH
                                                              QUARTER    QUARTER    QUARTER    QUARTER
                                                              --------   --------   --------   --------
                                                                             (unaudited)
                                                              (amounts in millions of Canadian dollars
                                                                      except per share amounts)
<S>                                                           <C>        <C>        <C>        <C>
2002
Continuing operations
  Revenue...................................................   $242.3     $255.1     $279.9     $349.2
  Earnings..................................................   $ 33.0     $ 34.9     $ 40.4     $ 41.1
  Earnings per share........................................   $ 0.15     $ 0.16     $ 0.19     $ 0.19
Net earnings................................................   $ 34.4     $ 38.3     $ 40.9     $ 37.0
Basic and diluted net earnings per share....................   $ 0.16     $ 0.18     $ 0.19     $ 0.17

2001
Continuing operations
  Revenue...................................................   $202.9     $215.0     $244.4     $229.1
  Earnings..................................................   $ 21.7     $ 27.9     $ 27.8     $ 27.8
  Earnings per share........................................   $ 0.10     $ 0.13     $ 0.13     $ 0.13
Net earnings................................................   $ 13.0     $ 34.6     $ 31.5     $ 29.0
Basic and diluted net earnings per share....................   $ 0.06     $ 0.16     $ 0.15     $ 0.13
</Table>

COMPARISON OF THE FISCAL YEAR ENDED MARCH 31, 2001 TO THE FISCAL YEAR ENDED
  MARCH 31, 2000

EARNINGS FROM CONTINUING OPERATIONS (RECLASSIFIED)

    On December 18, 2001, our board of directors approved a plan to divest the
Forestry business segment. As a result of the planned divestitures, our
consolidated financial statements for 2001 have been reclassified to reflect the
results of operations for the Forestry group as a discontinued operation.

    Consolidated earnings from continuing operations climbed to $105.2 million,
a 69% improvement from last year's level of $62.3 million. Earnings per share
reached $0.49, an increase of 75% over last year's $0.28 per share, reflecting
both the earnings improvement and the per share impact of our common share
purchases under a normal course issuer bid. The growth in earnings is anchored
by margin improvements across both business units arising from a combination of
cost savings from consolidation and integration, tangible productivity
improvements in our core manufacturing and the growth in volume. Operating
earnings

                                       33
<Page>
for Civil Simulation and Training outpaced growth in revenue, as the incremental
volume to meet demand for direct sales as well as the manufacture of simulators
for our own training centres combined with productivity improvements contributed
to a significant increase in margins. Operating earnings for Military Simulation
and Marine Controls increased 127%, due to an improvement in the mix of program
activity and the completion early in the year of certain higher cost programs.

CONSOLIDATED REVENUE

    Consolidated revenue for fiscal 2001, at $891.4 million, reflects an
increase of 3% over the fiscal 2000 level of $865.1 million. Revenue for
Military Simulation and Marine Controls grew by 7% or $25 million due to higher
activity on certain U.S. military simulation programs, in marine controls
applications attributable to the Astute Class Submarine Training program and
from the Medium Support Helicopter Aircrew Training Facility (MSHATF) at Royal
Air Force (RAF) base Benson in Oxfordshire, England. Civil Simulation and
Training revenue increased slightly over fiscal 2000 reflecting the continued
buoyant market and our success in capturing a major share of full flight
simulator orders.

DISCONTINUED OPERATIONS

    In addition to the above restatement to include the Forestry group as a
discontinued operation, in February 2000, we had approved a plan to divest our
Cleaning Technologies and Energy Control Systems businesses. On May 31, 2000,
the sale of substantially all of the assets of the Energy Control Systems
businesses to SNC-Lavalin was completed.

    The results of these operating units along with the results of Railway
Technologies and Services, which was sold in December 1999, have been reported
as discontinued operations. The results of discontinued operations amounted to a
net gain of $2.9 million, as the earnings from the Forestry group more than
offset losses relating primarily to the Cleaning Technologies business. This
compares to a gain from Discontinued Operations of $36.2 million in fiscal 2000,
which included an after-tax gain of $13.6 million from the sale of the Railway
Technologies and Services group.

NET EARNINGS

    Consolidated net earnings increased 10% to $108.1 million or $0.50 per share
compared with consolidated net earnings of $98.5 million or $0.45 per share in
fiscal 2000.

CASH FLOW

    Our cash and short-term investments increased by a combined $45 million
during the year to $156.8 million and $122.8 million, respectively. The increase
reflects the higher earnings and significantly lower working capital, offset by
higher capital expenditures in support of growth in civil flight training.

BACKLOG

    Order backlog as at March 31, 2001 was unchanged at $1.8 billion.

REVIEW OF OPERATIONS

    CIVIL SIMULATION AND TRAINING

    Our Civil Simulation and Training business is the world leader in the design
and production of civil flight simulators, visual systems and training systems.
We officially opened our first independent training centre -- CAE South America
Flight Training centre in Sao Paulo, Brazil, on April 19, 2001.

                                       34
<Page>
    FINANCIAL RESULTS

<Table>
<Caption>
                                                                           YEAR ENDED MARCH 31,
                                                           ----------------------------------------------------
                                                             2001       2000       1999       1998       1997
                                                           --------   --------   --------   --------   --------
                                                                (amounts in millions of Canadian dollars)
<S>                                                        <C>        <C>        <C>        <C>        <C>
Revenue..................................................   $481.5     $480.2     $352.8     $296.8     $186.3
Operating earnings.......................................   $117.0     $ 82.3     $ 55.9     $ 56.7     $ 27.4
Operating margin.........................................   24.3%      17.1%      15.8%      19.1%      14.7%
Backlog (at year end)....................................   $649.5     $527.8     $482.7     $339.9     $154.2
Capital expenditures.....................................   $ 72.9     $ 11.7     $ 23.2     $ 27.4     $  9.0
</Table>

    Operating earnings of Civil Simulation and Training climbed 42% over the
preceding year's level, to a record $117.0 million. Revenue in fiscal 2001 was
up slightly over fiscal 2000. The revenue reflects very little training revenue
as yet for the simulators we are building for our own training centres.
Productivity improvements and the leverage on costs resulting from the high
volume level, from both external orders and training centre requirements, has
driven significant improvement in operating earnings.

    Capital expenditures increased significantly in fiscal 2001, the majority of
which relates to the construction of three training facilities.

    OPERATIONAL HIGHLIGHTS

    Demand for flight training equipment remained strong during fiscal 2001 due
to ongoing fleet renewal, fleet expansion, strong demand in the regional and
business jet markets and pilot attrition. The use of simulators for training
continued to expand due to improved technology and the significant costs savings
as compared with flight training aboard an actual aircraft. Furthermore,
simulation allows for training pilots to cope with high risk situations such as
engine fires and windshear, which cannot safely be attempted on the actual
aircraft.

    In fiscal 2001, we won 35 of 42 competed full flight simulators,
representing a worldwide market share of 83%. CAE's civil Maxvue visual system
captured 28 out of 42 competed orders, or a 67% market share.

    During the year, we obtained full flight simulators orders from five new
customers, Air France, Air New Zealand, Southwest Airlines, Ryan Air and
WestJest. We won all full flight simulators orders for regional jets.

    We made significant progress in our strategic move into the civil flight
training business. The training facility in Sao Paulo, Brazil was completed and
put into operation. During the year, agreements with Varig, Gol Transportes
Aereos of Brazil and LAPA of Argentina were announced for aircraft training.
These agreements are in addition to the long-term agreement, announced last
year, with Sao Paulo-based Transportes Aereos Regionais S.A. (TAM) for Fokker
100 and Airbus A320 training in the new facility. Air Nostrum, the regional
feeder of Iberia, is our anchor customer in our new training centre in
Madrid, Spain.

    MILITARY SIMULATION AND MARINE CONTROLS

    Our Military Simulation and Marine Controls business is a premier designer
and manufacturer of military flight and land-based simulation and training
systems, and is a world leader in the supply of marine control systems.

    FINANCIAL RESULTS

<Table>
<Caption>
                                                                   YEAR ENDED MARCH 31,
                                                   ----------------------------------------------------
                                                     2001       2000       1999       1998       1997
                                                   --------   --------   --------   --------   --------
                                                        (amounts in millions of Canadian dollars)
<S>                                                <C>        <C>        <C>        <C>        <C>
Revenue..........................................  $  409.9   $  384.9   $  355.7   $  334.2   $  370.1
Operating earnings...............................  $   34.9   $   15.4   $   25.2   $   20.6   $   30.9
Operating margin.................................    8.5%       4.0%       7.1%       6.2%       8.3%
Backlog (at year end)............................  $1,103.3   $1,219.3   $1,242.6   $1,242.2   $  489.4
Capital expenditures, net........................  $    3.4   $   10.1   $   45.7   $   25.4   $   16.2
</Table>

                                       35
<Page>
    Revenue increased by $25.0 million or 7% while operating earnings increased
by $19.5 million or 127% in the fiscal year. The revenue increase reflects
higher activity on the U.S. Air Force E-3A Airborne Warning and Control (AWAC)
Flight Crew Training Program and in marine control applications attributable to
the U.K. Royal Navy on the Astute Class Submarine Training program. Higher
revenues were also generated from the Medium Support Helicopter Aircrew Training
Facility (MSHATF) at Royal Air Force (RAF) base Benson in Oxfordshire, England,
which officially opened in July 2000. The increase in operating earnings
reflects the effect of the repositioning strategy whereby four independent
military simulation and training businesses were successfully integrated into
one focused profit centre.

    OPERATIONAL HIGHLIGHTS

    We reached an agreement with BAE Systems North America to buy BAE SYSTEMS
Flight Simulation and Training of Tampa, Florida. This purchase was concluded on
April 2, 2001. The acquisition strengthens our access to the U.S. defense market
and a relationship with BAE Systems PLC, which enhances our global position in
the defense simulation and training sector.

    We continued our efforts to establish ourselves as a significant training
equipment provider. We were awarded contracts for Germany's Tornado Cockpit
Procedure Trainer at Holloman Air Force Base, C-130J upgrade for the
Commonwealth of Australia, upgrade for NATO E-3A, update for U.K. MoD
Maintenance Training System and Lynx Mk8 and Eurofighter 2000. We were also
successful in enhancing our position as a training service provider. We continue
to focus on expanding our relationship with current customers through long-term
service agreements, upgrades of current devices and provision of additional
training equipment.

    On July 17, 2000, His Royal Highness The Duke of York attended the
inauguration of the Medium Support Helicopter Aircrew Training Facility (MSHATF)
at Royal Air Force (RAF) base Benson in Oxfordshire, England. This showcase
facility represents the first turnkey training services program for us, and the
first transfer of a complete military training function to a commercial
contractor under terms of a private financed initiative contract. This
achievement is an important milestone in relation to our entry into the military
and civil training services business. For the inauguration, five of the six
flight simulators that form the core of the Medium Support Helicopter Aircrew
Training Facility in the U.K. were delivered and certified Ready for Training.
The one remaining flight simulator was delivered and certified in April 2001. We
also commenced provision of third party training for Canadian Air Force pilots.

    We won contracts to provide the Integrated Platform Management System for
three of the Korean Navy's new KDX-II class Destroyers. The Korean Navy plans to
build up to six of these 5,000-ton warships in a continuing modernization of its
forces.

    During the year the FAST Consortium, owned 50% by us and 50% by Alenia
Marconi Systems, was selected as the Preferred Bidder by the Defence Procurement
Agency of the U.K. Ministry of Defence for the Astute Class Submarine Training
program. This Private Finance Initiative contract is for the provision of
comprehensive training services to the Royal Navy for up to 40 years in the
operation and maintenance of the Astute Class Submarine Training program. A new
training centre will be built in Scotland to house the simulators and provide
classroom-training facilities. Contract negotiations were completed in the
second quarter of fiscal 2002 and added approximately $420 million to backlog.

                                       36
<Page>
                                    BUSINESS

    We are a world leading designer and manufacturer of advanced simulation and
control equipment and provider of integrated training solutions for the
military, civil aviation and marine markets. With over 50 years of experience,
strong technical capabilities, a highly trained workforce and a global reach, we
have built an excellent reputation and long-standing customer relationships.

    We have delivered simulation products to the military forces of more than
30 countries, are the world's leading supplier of civil flight simulators in the
competed market, in which contracts are awarded on the basis of a competitive
bidding process, and are the second largest independent provider of civil
aviation and training services based on the number of simulators operated. We
are a world leader in the provision of marine automation systems for both naval
and commercial shipping and we supply full scope simulators to support the
training of staff for both nuclear and fossil-fueled power generation plants. We
also provide a range of simulation equipment for sea and land-based activities.

    Over the last two years, our company has undergone a significant
transformation from being primarily a manufacturer of simulation and controls
equipment to a provider of fully integrated training solutions through an
expanding network of aviation training centres in strategic locations around the
world. We are leveraging our technology, expertise and customer relationships
acquired in supplying high quality simulation equipment and services to develop
integrated training solutions for military forces, commercial airlines, business
aircraft operators, aircraft manufacturers and marine vessel operators. Our
training solutions are customized to meet our customers' varied needs for a
range of equipment, facilities, training materials, support services and
personnel.

    Headquartered in Canada, we have a global presence with approximately
6,400 employees at our manufacturing operations and training facilities in 16
countries, including approximately 1,200 based in the United States. In fiscal
2002, we generated $1.1 billion in revenue. At March 31, 2002, we had
approximately 460 active contracts representing a total order backlog of
$2.7 billion.

    We report our results based on two business segments: (i) Military
Simulation and Marine Controls and (ii) Civil Simulation and Training.

    MILITARY SIMULATION AND MARINE CONTROLS

    We are a world leader in the design and production of military flight
simulation equipment. We develop simulation equipment and training for a variety
of military aircraft, including fighter jets, helicopters and transport planes.
We also have an extensive product range covering many American and European
weapon systems. Our military simulators provide full combat environments that
include interactive enemy and friendly players, as well as weapons and military
sensors. These simulators incorporate highly realistic visual scenes covering
areas as large as whole countries that are able to show the effects and
characteristics of a variety of battlefield features, including those seen
through Infra Red and Low Light Level TV Sensors.

    We have moved beyond the supply of simulation equipment into the provision
of military training with our Medium Support Helicopter Aircrew Training
Facility in the United Kingdom and our C-130 transport plane training facilities
in Tampa, Florida and Marietta, Georgia. Following our April 2001 acquisition of
BAE SYSTEMS Flight Simulation and Training in Tampa and the subsequent creation
of CAE USA, we were named a prime contractor for several military contracts for
the United States. We believe we are better able to win military contracts
globally because we operate with a local presence in the United States, the
United Kingdom, Germany, Canada and Australia, and we have teaming arrangements
and local representation in several other countries.

    We are a world leader in the supply of automation and controls systems for
the naval and commercial marine markets, and have been selected for the
provision of controls for more than 100 warships in 13 navies. Our marine
control systems monitor and control propulsion, electrical steering, ancillary,
auxiliary and damage control systems. We have moved beyond the supply of marine
controls into the provision of naval training services through our participation
in the 30-year U.K. Royal Navy Astute Class Submarine Training program. In
August 2001, we entered the commercial marine market by acquiring Valmarine, a
civil

                                       37
<Page>
marine control systems vendor focused on cruise lines, passenger ferries and
cargo vessels. Valmarine has installed automation systems on approximately 450
vessels worldwide.

    CIVIL SIMULATION AND TRAINING

    In fiscal 2002, we had an 85% market share in the worldwide competed civil
full flight simulator market and a 59% market share in the worldwide competed
visual systems market. We build civil simulators for all categories of aircraft
including those built by Airbus, Boeing, Bombardier, Cessna, Dassault, Embraer,
Fairchild/Dornier, Gulfstream and Raytheon. We also build simulators for civil
helicopters, including models by Bell Helicopter and Sikorsky. In 2001, we
entered the civil flight training business by opening our first pilot training
centre in Sao Paulo, Brazil in April and launching our Toronto, Canada facility
in December. During 2001, we also acquired Schreiner and SimuFlite, adding six
new pilot training centres to our operations. We are the world's second largest
independent provider of training services, based on the number of simulators
available for third party training. As at March 31, 2002, we had an installed
base of 59 civil full flight simulators in seven countries, located in nine CAE
training centres and three other locations.

INDUSTRY OVERVIEW

    The military and civil markets we serve are driven by factors particular to
each market. We believe the military market is most influenced by a combination
of defense spending and the nature of military activity. We believe the civil
market is most affected by the nature and composition of aircraft fleets, pilot
demographics, certification requirements and market demand for commercial and
business air travel.

    MILITARY SIMULATION AND MARINE CONTROLS

    Military forces increasingly rely on sophisticated and interrelated weapons
systems and equipment, computer systems, visual systems and other advanced
technologies to operate in a broadening range of conditions and scenarios.
Achieving a high state of operational readiness is a constant goal and challenge
for militaries. Simulators enable military organizations to achieve their
training goals while minimizing the physical use of expensive systems and
equipment. In addition, the use of simulators helps to avoid injuries to
personnel and the loss of equipment due to training accidents. Simulators allow
for the training of tasks and missions that cannot be practiced in the real
world.

    Flight simulators are used to train pilots to operate a variety of military
aircraft including fighter jets, helicopters and transport aircraft. Flight
simulators permit the crews of military aircraft to coordinate and improve their
essential combat skills in a safe, cost-effective and realistic range of
environments. The simulators enable pilots to realistically practice both
offensive and defensive tactics, such as firing aircraft weapons systems and
avoiding attack from enemy surface and air threats. The immersive environment
provided by simulators allows pilots to train for highly demanding maneuvers and
life threatening scenarios, such as rotor failure, missile impact or the effects
of exceptional turbulence.

    Simulators for land systems provide similar advantages. Though land systems
equipment is generally less complex than that found in aircraft and marine
vessels, the systems often operate in conjunction with other equipment in
environments involving many soldiers and various weapons systems.

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

    Integrated shipboard control systems installed on naval and civil ships
enable crews to monitor and control the vital platform machinery and systems
such as propulsion, electrical power generation and distribution, steering,
auxiliaries and damage control. The operational effectiveness of a ship is
greatly enhanced by incorporating on-board control systems training capability.
Operators can be continuously

                                       38
<Page>
trained while at sea using these systems. This facilitates high levels of fleet
readiness to respond to demands of national security for naval ships and
facilitates enhanced passenger comfort and safety in civil applications such as
cruise liners.

    We believe the following trends will continue to drive the development of
the military simulation and marine controls market:

    INCREASING DEFENSE SPENDING

    Following the September 11, 2001 terrorist attacks, the U.S. government
increased its defense spending. The fiscal 2003 defense budget submitted by the
Bush administration to Congress was US$379 billion, a 13.5% increase over the
amended fiscal 2002 defense budget of US$334 billion. The Bush administration's
defense budget also requested an increase in spending of approximately
US$120 billion over the next five years. The United States government's defense
spending has recently represented about one-third of the world's total defense
spending. Military spending is also increasing in Asia, while defense
expenditures are stable in NATO countries other than the United States. Apart
from spending on defense, there is an increased emphasis on security in most
Western nations in the face of increased terrorist threats. It is expected that
some of this spending will address new technologies and training for
counter-terrorism activities.

    RAPID EVOLUTION OF TECHNOLOGY AND WARFARE

    Technological advances and the changing nature of warfare have resulted in a
rapid evolution of weapons systems and equipment. This has been illustrated by
current events in Afghanistan, where the coalition forces are facing asymmetric
threats and where extensive use is being made of unmanned air vehicles (UAV)
such as the Predator and Global Hawk. Military forces face a wide range of
operations which are increasingly likely to be asymmetric or involve operations
in urban terrain. In light of these changing circumstances, the key focus of
military forces has evolved towards information dominance linked with networked
weapons systems. These highly technical networked systems lend themselves to
simulation training.

    Accelerated developments in computer and visual technologies enable devices
of greater fidelity and promote the proliferation of simulation technologies. In
particular, the rapid evolution of commodity graphics technologies of recent
years has substantially redefined the price/performance envelope of visual
equipment. Visual systems provide simulator-correlated, geo-specific
representations of the synthetically-generated environment under a broad range
of weather, illumination and other conditions. Visual database representations
can be rapidly synthesized from Geographical Information System (GIS) data and
applied to military mission rehearsal exercises.

    The introduction of new aircraft and weapons platforms, as well as upgrades
and life extensions to existing aircraft and weapons platforms, will necessitate
new training requirements for military operators. For example, we expect
programs in Europe such as the Eurofighter 2000, the A400M military airlifter,
the NH90 helicopters as well as upgrades for the Tornado tactical aircraft and
Lynx helicopter fleets will create additional flight simulation requirements.
The U.S. Air Force upgrade of its C-130 fleet under the Avionics Modernization
Program will also require corresponding upgrades and new simulators to train
aircrews on upgraded aircraft. The U.S. Air Force's decision to lease KC-767
tankers from Boeing will also produce a need for new training simulators.

    Early in 2002, the U.S. Army announced its next generation training
strategy, Flight School XXI, which calls for extensive integrated simulator
training for aviators before their first combat unit assignments. The U.S. Army
is effecting far-reaching changes to its land forces structure through a program
called the Future Combat System. This program will employ a range of manned and
unmanned vehicles which will generate significant training requirements as the
equipment is deployed. We believe that the Future Combat System will generate
new opportunities to exploit simulation technology in vehicle and system design.
We also expect the advent of new digital communications systems and lighter air
mobile forces to create additional training needs for European land forces.

                                       39
<Page>
    EVOLVING ROLE OF SIMULATION TRAINING

    We believe that the military will continue to make greater use of simulation
as an effective solution for more frequent and sophisticated training
requirements for several reasons. First, advances in technology have enhanced
the realism that can be achieved in simulation training. As a result, militaries
are more receptive to utilizing this technology. The achieved realism combined
with the development of extensive environment databases offer militaries the
ability to train in situations and conditions either difficult or impossible to
consistently replicate in a physical setting. Second, simulation training also
is more cost effective than training personnel on actual equipment. Third,
simulation training involves less potential for accidents and resulting injury
to personnel and damage to equipment. Finally, we believe simulation will
increasingly be used in areas consistent with the Simulation Based Acquisition
initiatives of the U.S. Department of Defense which seek to use simulation to
evaluate competing system designs prior to commitment to full scale design and
development.

    INCREASING INTEREST OF GOVERNMENTS IN PRIVATELY FINANCED LONG-TERM TRAINING
     MODELS

    The increasing sophistication of weapons systems has resulted in the need
for more sophisticated training equipment and services. The development,
construction and delivery of these training resources require a high level of
specialized technology and knowledge, and often involve significant expense. The
U.K. government has increasingly turned to private sector companies to build,
maintain and deliver training equipment and services under long-term financed
arrangements because these companies can deliver an integrated training solution
more quickly and efficiently and at lower cost. We are already in full scale
operation in the U.K.'s first military training privately financed initiative,
the Medium Support Helicopter Aircrew Training Facility, and are under contract
to deliver the Astute Class Submarine Training program under private finance.
The U.K. is currently considering the outsourcing of all undergraduate pilot
training under the Military Flying Training System project. It is reviewing bids
on the Armoured Vehicle Training Service (AVTS) program, which would be a
private financed initiative outsourcing of all training associated with gunnery,
tanks and armored vehicles. The government of Germany is currently seeking
tenders for the NH90 helicopter training programs under this form of procurement
and several other European nations are also considering this type of procurement
approach.

    INCREASING COMPLEXITY OF SHIPS AND REDUCED MANPOWER

    We believe that new ship designs will continue to steadily increase in
complexity and value with the commensurate demand for more sophisticated control
systems and integration solutions. At the same time, the need for navies and
civil ship owners/operators to reduce operational costs by reducing manpower
on-board ships adds to the demand for complex automation. The potential
reduction of engineering manpower is of particular interest to those navies that
face manpower retention problems due to long periods at sea. There is a trend
towards the procurement of larger turnkey packages of ship controls and
associated electronic/electrical systems by navies, owners of high-end merchant
ships and shipbuilders around the world. This should allow companies with the
capability to undertake such larger scale integration tasks to win contracts of
greater value, with the attendant long-term benefits that will accrue due to the
requirement to support these ships typically for over 20 years.

    CIVIL SIMULATION AND TRAINING

    The use of flight simulators in pilot and crew training is well established
within the commercial and business markets. Increased utilization of simulators
has occurred as a result of the growth in commercial and business air travel
which, in turn, has driven fleet expansion and increased demand for pilot
training. Civil simulator usage has also increased due to advances in technology
that enable increased realism and the significant cost savings provided by
flight simulation training compared to actual flight time. The use of
synthetically-generated reproductions of airport configurations and terrain
incorporated into the simulation further enhance the effectiveness of simulation
training. Simulators are also utilized by pilots to supplement actual flying
time to maintain their certification. Today's most sophisticated civil flight
simulators are rated Level D by the FAA or receive similar ratings from
regulatory authorities in other countries, indicating that a pilot can be
certified to fly an aircraft type based solely on simulator training. Flight
simulators also allow

                                       40
<Page>
pilots to experience and learn emergency procedures that cannot be practiced
safely aboard the actual aircraft.

    Flight simulation equipment is purchased by major and regional airlines,
aircraft manufacturers and independent training providers. Simulators are
manufactured by a limited number of companies and are sold based on the criteria
of product quality, service, delivery, supplier reputation, price and life cycle
costs. In fiscal 2002, 26 full flight simulators were sold to third parties in
the global competed market. Prices for civil flight simulation equipment can
range from US$2 to 5 million for a flight training device to US$12 to
14 million for a full flight simulator.

    Within the flight simulation industry, training services is the largest and
fastest growing market segment. The training services market consists of sales
of equipment systems, facilities, tools and programs designed to enable pilots
to obtain and retain the necessary qualifications to pilot a particular
aircraft, and to enable maintenance workers to inspect, maintain and repair
aircraft. Training is carried out by airlines as well as independent training
providers. Currently, approximately 45% of the full flight simulators in use
around the world are owned and operated by commercial airlines to provide
training to their pilots, with the vast majority owned by large commercial
airlines. These large commercial airlines also use independent training
facilities to supplement their training programs. Ownership of simulators by
regional airlines and business aircraft operators is considerably less common.
As a result these companies primarily use independent training providers.

    We believe the following trends and developments will continue to drive the
civil simulation and training industry:

    EFFECTIVENESS AND COST ADVANTAGES OF SIMULATOR TRAINING

    Simulator training is an essential element in civil pilot and crew training.
The realism of the simulated flight experience has made simulators an effective
tool for training pilots and crew. Pilots and crew can be trained for a variety
of aircraft, using visualizations of most of the civil airports around the
world, and in varying environmental conditions. The cost savings to aircraft
operators are substantial as costs such as fuel, ground crew and maintenance, as
well as aircraft wear and tear, are avoided. The average cost to train in a full
flight simulator is US$500 an hour, whereas it can cost as much as US$5,000 to
US$10,000 to fly an actual aircraft for an hour. In addition, simulator training
minimizes the risk of accidents and resulting injury to personnel and damage to
equipment. Full flight simulator training users are also accorded more favorable
liability insurance premiums. Simulator based training also offers considerable
flexibility with respect to the timing and duration of training sessions. In the
past, the use of independent training services was limited by the availability
of convenient training centres. With the development of additional independent
training centres around the world, we believe that this historical deterrent
will be addressed. We believe that the costs of acquiring and maintaining full
flight simulators will encourage additional usage of independent training
providers by commercial airlines.

    PILOT CERTIFICATION AND LICENSE REQUIREMENTS

    Piloting an aircraft is a regulated activity requiring both initial and
recurring training to achieve defined levels of competence and experience. To
keep a license to fly an aircraft weighing over 12,500 pounds, certain
regulations require pilots to demonstrate proficiency for that aircraft type at
least once a year. Certification and license requirements can be satisfied
through simulated flight and many pilots elect to do so.

    EXPANSION AND DIVERSIFICATION OF AIRCRAFT FLEETS

    The introduction of new aircraft and expansion and diversification of fleets
creates incremental pilot training requirements. Simulation training is now
considered an essential element in pilot and crew training for the large
commercial, regional and business segments of the market. An experienced pilot
typically needs between 15 and 40 hours on a simulator to learn the intricacies
of a new aircraft. We estimate that approximately one simulator is required to
support every 20 commercial aircraft in operation.

                                       41
<Page>
    New aircraft deliveries are a major driver for this market. In "The World
Market for Large Commercial Jet Transports", Forecast International/DMS Inc.
projects that 6,895 large commercial jet transports worth some US$550 billion
will be produced from 2002 to 2011.

    Demand for civil air travel and the timing of delivery of new aircraft have
been adversely affected by the September 11, 2001 terrorist attacks. As a
result, we anticipate a reduction in new third party orders for full flight
simulators in this fiscal year. However, the impact of these events has been
less severe on the demand for flight training services.

    Virtually every business aircraft transaction, whether a new or after-market
transaction, triggers the need for pilot training. Business aircraft simulation
training is primarily provided by independent training providers. We believe
that additional demand for business aircraft simulation training will be
attributable to growth in new business aircraft sales; 2,500-3,000 after-market
sales annually of existing aircraft in operation; and the increase in fractional
ownership and unscheduled charter flights. We believe the long-term growth
outlook for civil air travel will drive increased aircraft deliveries across the
spectrum of aviation service providers and, in turn, the demand for simulation
technology and training.

    PILOT DEMOGRAPHICS

    According to AIR Inc., a major pilot recruitment firm, U.S.-established
airlines will retire 50% of their pilots by 2010. AIR Inc. estimates that almost
9,000 American pilots will retire in the next five years. As pilots retire,
other pilots must be trained to fly the aircraft. Historically, the major
commercial airlines hired a substantial number of pilots from the military as
these pilots retired or otherwise left military service. In recent years there
have been fewer available military pilots. The relative lack of available
military pilots has caused increased demand for qualified pilots throughout the
industry. As a result, the major airlines have begun to more actively promote
pilots to larger aircraft from within their existing ranks or from regional
airlines operating smaller aircraft. This increased mobility within a fleet
results in more pilots needing to be certified on different aircraft and a
corresponding increase in training requirements.

KEY STRENGTHS

    Our key competitive strengths include:

    MARKET LEADERSHIP

    We are a world leading designer and manufacturer of advanced simulation and
control equipment and provider of integrated training solutions for the
military, civil aviation and marine markets. With over 50 years of experience,
we have developed an excellent reputation and long-standing customer
relationships with the military forces of over 30 countries, leading defense
contractors, and more than 100 leading commercial airlines and aircraft
manufacturers.

-    A PREMIER SUPPLIER TO MILITARIES WORLDWIDE -- We provide simulation
     equipment and training to the military forces of more than 30 countries,
     including those of the United States. We have provided simulators for a
     wide range of aircraft and have developed the broadest rotary wing
     expertise of any simulator manufacturer. We have established a leading
     position in Europe in the supply of army command team land-based training
     systems, by supplying such systems to the forces of Germany, Austria, Italy
     and Norway. The selection of our visual system for the prestigious
     Eurofighter program solidly establishes our Medallion visual system as a
     premier system for full mission simulation applications.

    We believe that our physical presence in countries such as the United
    States, Germany and the U.K. has enabled us to develop strong relationships
    and a good reputation with governments and other defense contractors who are
    important decision makers regarding defense contracts. In fiscal 2002, we
    were awarded contracts, among others, by the German Army Aviation School,
    the U.S. Coast Guard, the German Armed Forces, the Dutch Army School of
    Artillery, the Norwegian Armed Forces, the Canadian Department of National
    Defence, the Republic of Singapore Air Force, the U.K. Royal Navy, the
    Australian Army and the Royal Netherlands Air Force. Our ability to win
    contracts with the

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    U.S. military has been significantly enhanced with the awarding of prime
    contractor status under several omnibus procurement programs.

    Since introducing our first ship automation and control systems, or
    Integrated Platform Management System, 19 years ago, we have become a
    leading provider of marine control systems, having provided controls for
    over 100 warships in 13 navies. We are also a leading supplier of maritime
    mission training devices. In fiscal 2002, we were awarded contracts, among
    others, by the Royal Malaysian and Indian Navies.

-    WORLD LEADER IN THE COMPETED CIVIL FULL FLIGHT SIMULATOR MARKET -- In
     fiscal 2002 we won contracts for 22 out of 26 competed civil full flight
     simulators, giving us a market share of approximately 85%. Since our
     inception we have taken orders for approximately 440 full flight simulators
     and flight training devices from approximately 100 commercial airlines,
     aircraft manufacturers and training centres in 38 countries, and to date
     have delivered about 410 of them. With half a century of experience in
     designing and manufacturing full flight simulators, we have established
     long-standing relationships with leading commercial airlines throughout the
     world. We believe our ability to maintain our global leadership is
     strengthened by the capital and technology intensive nature of the
     industry, which creates substantial barriers for new entrants.

-    WORLD LEADER IN THE CIVIL VISUAL SYSTEMS MARKET -- We are the world leader
     in the design and manufacture of visual systems, which are an integral part
     of any simulator. In fiscal 2002 we won 16 out of 27 contracts for competed
     visual systems, for a market share of 59%. Our visual systems provide the
     full spectrum of visual solutions for simulated training in both the civil
     and military markets. These systems, including image generators, synthetic
     environments and display systems, generate complex visual scenery that is
     used on full flight simulators and other training devices. Our innovative
     use of commodity graphics in Level D certified flight simulators is an
     industry first that has set a new standard in visual scene fidelity. Our
     ability to quickly migrate commodity graphics advancements into visual
     flight simulation enables us to offer superior solutions at an attractive
     price/performance level.

-    A LEADING PROVIDER OF TRAINING SERVICES -- We are the second largest
     independent provider of civil aviation training services in the world,
     based on the number of simulators operated. Our leadership in flight
     simulation technology and ability to supply our own simulators provides us
     with a significant cost advantage over our non-integrated competitors in
     the civil training market because simulators can represent 80% or more of
     the investment in a typical training centre. We are unique in being the
     only company that manufactures simulators both for the competed market and
     for its own training centres. Furthermore, our expansion into training has
     enabled us to better manage our inventory and meet unscheduled or emergency
     delivery orders, since we can, if necessary, deliver simulators originally
     intended for our training centres to meet unplanned third party purchase
     orders.

    To accelerate our growth in the provision of training services, we have
    invested in greenfield training facilities and acquired existing training
    operations. Our acquisition of Schreiner and SimuFlite, combined with our
    own network of training facilities and teaming arrangements, provided us
    with an installed base of 59 simulators in 12 facilities worldwide as at
    March 31, 2002. We expect to have over 80 simulators in operation by the end
    of fiscal 2003. We have a competitive advantage over major airlines selling
    unused simulator time to third parties in that we offer our customers access
    to simulators during regular business hours. We also have training centres
    located at convenient locations for pilots, mitigating the high costs of
    pilot travel time to go to a training facility.

    In addition, we are a growing provider of sophisticated training services to
    some of the world's leading military organizations through our role in the
    U.K. Medium Support Helicopter Training Facility and Astute Class Submarine
    Training program.

    TECHNOLOGY LEADERSHIP

    Our commitment to research and development has enabled us to be a leading
developer and integrator of simulation and control technology and we believe it
will enable us to continue this leadership in the future. This strength is
enhanced by our ability to apply technological advances across multiple product
lines.

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For example, the customized products or features we develop to meet the specific
requests of customers for our military simulators often employ technology that
can be applied to improve our civil simulators and training devices. We believe
that our commitment to the development of new simulation technologies has
solidified our position in the military market as well as with airlines,
aircraft manufacturers and training centres. In fiscal 2002, we invested
approximately 10% of our consolidated revenue on research and development, with
the majority allocated to full flight simulators and to visual systems. We also
invested in advanced technologies and manufacturing processes that have enabled
us to reduce simulator life cycle costs and shorten production time while
achieving new levels of realism. While the allocations to specific technology
areas will change, we expect to spend at approximately the same relative level
on research and development in fiscal 2003.

    Our next generation full flight simulator, CAE Sim XXI, our web-based
simulation products, CAE Simfinity, and our new scaleable visual system, CAE
Tropos, are all results of our commitment to leading edge technology. In the
defense sector, we are advancing new simulation architectures that improve the
scaleability of our products with our CAE NeTTS product and by creating network
deployable tactical simulations through our STRIVE product. Our Medallion visual
system is capable of meeting the most demanding needs of high performance
military aircraft simulation.

    DIVERSIFIED REVENUE SOURCES

    We have diversified our revenue sources between the equipment and training
markets, military and civil markets and on a geographic basis. Our multiple
revenue streams help reduce the impact of material fluctuations in a particular
market or geographic region. For example, the recent weakness in the civil
equipment market following the September 11, 2001 terrorist attacks has been
offset by stronger military sales and increased civil training services revenue.
We believe both the military and civil markets offer significant long-term
growth opportunities.

    INCREASED BACKLOG

    At March 31, 2002, we had approximately 460 active contracts representing a
total order backlog of $2.7 billion, an increase of 54% over the previous year.
We expect that 40% of our backlog will be fulfilled in the next two years. Over
$2.0 billion of the backlog is in our Military Simulation and Marine Controls
business segment with much of it in the form of long-term contracts which
position us to win upgrade work in the future. Our backlog includes the
Eurofighter visual system, Medium Support Helicopter Training Facility and the
Astute Class Submarine Training program. Our backlog provides us with a measure
of stability and visibility in near-to-medium-term operating performance.

BUSINESS STRATEGY

    We intend to be the preferred choice for integrated training solutions for
the global military and civil simulation markets, while continuing to be a
market leader in the provision of simulation and controls equipment. We are
committed to creating the most advanced and realistic training environment
available by developing next generation simulators and visual systems, training
products and services, and by continuing to build our global network of advanced
training centres. We intend to optimize the productivity and economies of scale
of our manufacturing platform and to use our leading edge technology to expand
the scope of the products and services we provide across our businesses.

    We intend to build on our long-standing relationships with customers, by
maintaining our high quality customer service and by developing our core
simulation and training markets. Key elements of our strategy include the
following:

    MAINTAIN AND BUILD UPON TECHNOLOGY LEADERSHIP

    We intend to maintain our market leadership in simulator, visual system and
controls technology. We have recently introduced new products, including CAE's
STRIVE synthetic and tactical environment software, the CAE Sim XXI
next-generation civil full flight simulator, the CAE Simfinity web-based
simulation learning system, and CAE Tropos, our latest image generator for
visual systems. We believe each

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of these products reflects our commitment to innovation and to meeting the needs
of our customers. Each of these new products is significant and represents a
market differentiator and new platform for further innovation. We intend to
continue to expand our product lines by adapting our core proprietary
technologies to new and different applications. In addition, we intend to
continue to apply the technological advances developed for one product or market
segment to our other products and services. We believe this approach optimizes
the returns we achieve on our technology investments and also serves to focus
expenditures in areas that will provide benefits across our organization. For
example, we are implementing technologies and procedures we developed for our
CAE Sim XXI civil simulator across our other products and services.

    CAPITALIZE ON OUR MILITARY AND MARINE EXPERTISE

    We will focus on growing our business with military customers around the
world, and particularly in the United States. We believe we can capitalize on
the experience, expertise and increased visibility with military customers that
we have gained from winning and performing significant contracts, such as the
U.K. Royal Air Force Medium Support Helicopter program. We will continue our
commitment to customer service by focusing on anticipating and meeting the needs
of our military clients for highly-customized equipment and training. We believe
our ability, through CAE USA, to be a prime contractor in the United States, in
addition to strong supplier relationships with leading U.S. defense contractors,
will enable us to further penetrate the U.S. military simulation and controls
market. We intend to continue to foster partnerships with key original equipment
manufacturers such as Boeing, with whom we are teamed to pursue the U.S. Army's
Flight School XXI program, Agusta Westland (our partner in the Rotorsim
consortium) with whom we are teamed to deliver training equipment and services
in support of Agusta Westland aircraft sales worldwide, and Lockheed Martin,
with whom we are teamed on the C-130 Aircrew Training System for the U.S. Air
Force. We are also leading the Landmark consortium, comprising Westland, Vickers
and others, which is bidding on the AVTS program for the U.K. Ministry of
Defence. We will continue to pursue opportunities to provide long-term training
services to military organizations, including leveraging the naval training
expertise and experience gained in the United Kingdom and Canada into other
markets.

    We intend to grow our naval controls business by expanding the scope of our
products and services and to use our technologies and experience in naval
control systems to enhance CAE Valmarine's position as a world leader in
commercial marine controls. In addition, we expect that we will be able to
exploit our customer-installed base to enhance our naval simulation and controls
equipment and training services.

    GROW CIVIL SIMULATION AND TRAINING BUSINESS

    We intend to grow our civil simulation and training business by expanding
our aviation training centre operations to meet the needs of our customer base.
We are building upon our simulator expertise, technology and relationships to
develop and deliver integrated training solutions. We believe that the training
market represents an opportunity to generate greater revenue that is less
cyclical and less affected by market developments than revenue derived from the
equipment market. We are focused on increasing the utilization rates at our
training centres, and improving operating efficiencies by applying best
practices across our network. We intend to continue to integrate the business
training centres we acquired in the SimuFlite and Schreiner acquisitions and to
selectively expand our number of simulators and global network of training
centres to better meet our customers' needs. In addition, we intend to pursue
opportunities to provide training services to commercial airlines, which
currently perform much of their pilot training in-house.

    Customer service quality is a key market differentiator that we will exploit
by applying best practices between the commercial and business aviation sectors.
We will continue to build on our customer service by further developing
comprehensive training services delivered by highly trained staff in convenient
locations.

    INCREASE PROFITABILITY AND EFFECTIVENESS

    We are committed to continuing to increase profitability by reducing costs,
increasing productivity and enhancing our competitiveness. This commitment is
evidenced by our operating margin performance in fiscal 2002, where we achieved
margins of 21.5% compared to 17.0% for the previous year. In addition, as a
result of improved technology and manufacturing processes, we have reduced
manufacturing cycle times for the

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production of a full flight simulator from 32 weeks to 14 weeks, thereby
shortening the overall time within which to produce a full flight simulator from
18 to 14 months. We intend to continue to improve our productivity through
further reductions in cycle times, improvements in materials and parts
procurement and fabrication processes, additional efficiencies through the full
integration of recently acquired operations and the continuing effects of
recurring cost savings from previous improvements.

PRODUCTS AND SERVICES

    We provide a wide range of simulation and training products and services,
individually and as integrated solutions, to the military and civil markets. Our
products, although based on our core technologies and processes, are customized
to meet the needs of each client. In particular, the products we have produced
for our military customers are often built to respond to their specific detailed
requirements. Our civil products and services are more standardized, although
they may involve some degree of customization.

    Our products and services include full flight simulators, full mission
simulators, visual systems, training devices and systems, flight training
centres, marine automation and controls systems and support services. Full
flight and full mission simulators, as opposed to flight training devices,
incorporate actual physical motion by utilizing hydraulic or other mechanical
technology.

    FULL FLIGHT SIMULATORS

    Our flight simulators replicate aircraft performance in normal and abnormal
operations and in a comprehensive variety of environmental conditions. Our
simulators utilize simulation models, sophisticated visual systems, our
extensive visual databases of airports and terrain, and motion and sound cues to
create fully immersive virtual reality training environments. We develop and
produce full flight simulators for commercial jets, business jets, military
transport planes, fighter jets and both civil and military helicopters.

    A flight simulator is a device that integrates mechanical, electrical,
hydraulic and digital processing systems to realistically represent in
real-time, the operation of a sophisticated piece of equipment in a complex
environment.

              [DIAGRAM OF COMPONENTS OF A FULL FLIGHT SIMULATOR.]

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    A simulator can be broken down into six main components:

    - computer complex;

    - simulated aircraft cockpit;

    - interface system;

    - visual system;

    - motion and control loading system; and

    - instructor station.

    The computer complex consists of a main PC-based server and a variety of
peripheral devices. The simulator operates in real time using sophisticated
proprietary software. As a part of the certification of a simulator, overall
operation of the software is tested. The FAA or other certification authorities
check the results of the test in order to certify the simulator for training
purposes.

    The simulated aircraft cockpit is an exact replica of the specific cockpit
of the aircraft being simulated. Most flight simulators are built to reproduce a
specific tail number, that is, an actual aircraft. This makes the training
environment as realistic as possible, so that the skills learned in the
simulator are readily applied in real life. The cockpit contains all the
equipment of the real aircraft, the instruments and controls, and even the same
air supply, lights, and storage compartments. Many of the cockpit components are
purchased from the original equipment manufacturers.

    The simulated aircraft cockpit requires information in many different
formats. It requires digital data to read and enable lights and switches, analog
information for dials and gauges, and video signals for displays. It is the
function of the interface system to translate the host computer data and produce
the required data type for the cockpit.

    The visual system simulates an exterior image that responds to simulated
aircraft motion. Using sophisticated image generator hardware and software, it
creates simulated scenes during flight including take-off, approach and landing.
The visual system enables a detailed and accurate representation of the airport
and its surroundings, such as runways, taxiways, lighting systems and buildings,
as well as key landmarks and obstructions, that are key to aircrew training. The
generated image is further enhanced through the visual modeling of complex
weather systems and lighting, creating a realistic and immersive environment.

    The motion system is designed to generate the correct motion and
acceleration cues for the cockpit. The system uses six hydrostatic actuators
(motion jacks), configured to allow for six degrees of freedom (pitch, roll,
yaw, heave, forward and lateral movement).

    The purpose of the control loading system is to provide the simulated
loading effects at the manual flight controls during both normal and emergency
operations. The system uses hydraulics to give the controls the same feel as
those in the real aircraft.

    The instructor station is situated in the simulator cockpit and is the major
difference between the simulator and the actual aircraft cockpit. It allows an
instructor to control all the variables and monitor aircrew actions throughout
the training session. It consists of two graphics display units controlled by a
computer through which the instructor can manipulate the training environment
including weather conditions and aircraft malfunctions.

    Our new full flight simulator, CAE Sim XXI, is lightweight and modular in
design. CAE Sim XXI encompasses new manufacturing processes and incorporates
next generation technologies to reduce simulator life cycle costs, shorten
simulator production time and provide an increased level of realism. Our first
CAE Sim XXI units are currently in commercial production for the business jet
market. We intend to apply the technology developed for CAE Sim XXI to our other
civil, military and marine simulation and controls products.

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    FULL MISSION SIMULATORS

    Full mission simulators go beyond the capabilities of full flight simulation
to include a full model of the battlefield environment or tactical environment,
which may include a representation of the actions of other players and weapon
systems. As a result, military simulators are more expensive to produce. These
devices support the training of the full mission of the aircraft in a
representative scenario, often providing the capability to represent situations
which are impossible to create in the real world at reasonable expense. In
addition, full mission simulators often incorporate simulated training for more
than the cockpit crew, such as the tactical crew of a maritime patrol aircraft.

    We have built an expertise in the development and production of military
helicopter simulation equipment and training. The development of helicopter
simulators involves different challenges than developing simulators for fixed
wing aircraft. Helicopters are increasingly used in a variety of roles by the
military including for attack, reconnaissance, troop transport, tactical
support, search and rescue, anti-submarine warfare and other missions. To be an
effective training tool, a helicopter simulator must be able to recreate a
number of these activities. Helicopters differ from fixed wing aircraft in many
ways, such as flight controls, aerodynamics and vibration. In addition, the
cockpits of many helicopters are more open and include larger windows than those
of fixed wing aircraft, which creates additional challenges when creating the
visual systems. Our Medallion visual display systems have large fields of view
which are capable of meeting these demands, such as the 240 degree by 90 degree
system we are providing for the U.S. Army ASTARS program. We have developed a
number of technical solutions that have improved the realism of helicopter
simulators, including:

    - advanced simulation models such as complex tactical simulations, advanced
      ground handling models, blade aerodynamics models and air wake models for
      realistic wind effects;

    - integrated modeling of specific sensor suites including forward looking
      infrared systems;

    - a 3-DOF (degree of freedom) helicopter vibration platform augments our
      6-DOF motion system, providing high fidelity vibration cues to the pilot;

    - modular simulator packaging such as roll-on/roll-off cockpits and
      reconfigurable trainers; and

    - specialized visual databases such as our 3D ocean visual models for high
      fidelity ship landing dynamics.

    VISUAL SYSTEMS

    Our visual systems, which are an integral part of any simulator, provide a
full spectrum of visual solutions for simulated training in both the civil and
military markets. They include image generators, synthetic environments and
display systems to generate complex visual scenery used on full flight
simulators and other training devices. Our visual systems are sold either with
our simulators or separately.

    CIVIL VISUAL SYSTEMS

    Our first Maxvue visual system was sold in 1992 and set the standard for
civil visual systems by achieving fidelity and precision previously found only
in military visual systems. Two follow-on generations of Maxvue were introduced
in 1994 and 1997. Each of these products was developed using input from the
flight training community as well as technology advancements, enhancing the
visual realism required for training. Over the past 12 years, we have also
developed one of the most extensive visual database libraries, with over
250 accurate representations of airports around the world. This comprehensive
library, combined with our advancements in image generator capabilities,
provides a compelling visual solution for our customer base.

    We have recently completed an extensive two-year engineering effort that
combines our know-how in high image generation with commodity 3D graphics
technology developed by ATI Technologies Inc. (ATI). This development approach,
which provides a significant performance and cost advantage over our
competitors, couples state-of-the-art graphic chips with our proven modeling and
databases capabilities. We have a long-term agreement with ATI under which we
collaborate to integrate its 3D graphics Radeon chips into our future visual
system products.

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    In May 2002, we launched the CAE Tropos visual system, the first member in a
new family of image generator products, and have sold it to both EVA Airways and
Airbus. The Tropos architecture enables a new level of scene density, clarity
and realism, thereby defining a new standard in high-end civil image generation.
The open architecture of the software modeling and databases enable high-quality
image generation within our CAE Simfinity product, as well as other training
tools.

    MILITARY VISUAL SYSTEMS

    Our military Medallion line of visual systems operates with our high-density
visual and tactical databases to recreate a realistic and interactive training
environment. For example, our low altitude training area database combines a
variety of environments, including mountains, forests and plains. Friendly and
enemy forces can be introduced by the operator into the training environment
through our Interactive Tactical Environmental Management System (ITEMS)
software tool. We have also developed a forward-looking infrared sensor system
(FLIR) that simulates the infrared sensor systems used on military airplanes and
helicopters. Our FLIR processes surface characteristics and ambient thermal
characteristics to calculate the infrared intensity of all virtual objects. We
offer our FLIR system as a stand-alone product or for integration into all types
of visual systems.

    For military training, our visual systems can create the images of a wide
variety of locations and terrain, often based on information from satellite
photography. We produce visuals representing mission-specific parameters as
requested by our customers, including location and conditions. We have also
developed numerous high-end visual systems for helicopter simulation, requiring
real-time imagery over a much larger field of view than fixed wing aircraft. The
image presented to the aircrew must be fully recreated within only one-tenth of
a second after receiving inputs from the pilot.

    In fiscal 1999, we formed a visual system simulation alliance with Sogitec
Industries S.A. The alliance aims to create products that will address the full
scope of training and research application needs for the very high visual scene
complexity and resolution demands of the military full mission simulator. The
first product arising out of the alliance, Medallion, was introduced during
1999. Medallion complements and extends the Maxvue family of visual system
products and delivers the level of performance needed to support very high
visual complexity for defense training. The quality and performance of Medallion
enabled us to win the Eurofighter EF2000 Visual System contract in 2001, one of
the largest visual programs in military simulation. In 2001, we were also
awarded the Apache attack helicopter CMS update program through TRW for the
U.S. Army.

    Our engineering efforts are now focused on developing a more powerful and
scaleable derivative of our unique civil CAE Tropos visual system which would
broaden our spectrum of military visual system products and enables us to
compete in new market segments. This underscores our strategy of leveraging
technological advancements from one market segment to develop differentiating
products in other markets.

    TRAINING DEVICES AND SYSTEMS

    Our training devices and systems are based on the same real time and highly
realistic software and visual systems as our full flight simulators but without
the complex motion systems (and in some cases without a visual system). We build
full size stationary simulators and create software for personal computer-based
simulation for air, marine and land applications. We also manufacture and design
training devices which allow the user to simulate the maintenance of aircraft.

    Our CAE NeTTs simulation-based military training system permits customers to
meet a range of training requirements -- from initial classroom to full
operational mission readiness training. Its multi-site capability and
scalability for multiple weapon systems and different engagement environments
permits customers to engage in global exercises of multi-national forces in a
broad variety of combat situations.

    Another training system, CAE Simfinity, was introduced in May 2001. CAE
Simfinity combines our proprietary software with complete courseware enabling
students, pilots and maintenance technicians to learn and practice on their own
personal computer whenever they wish. In November 2001, we first licensed a
CAE Simfinity training system. We entered into a five year agreement with Boeing
which will allow Boeing's

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customer support engineers and field service representatives to have access, via
the Internet, to this sophisticated troubleshooting and training tool.

    Our simulation-based e-learning (seLearning) courseware is intended as a
complement to our traditional training devices, while also serving as a training
market differentiator. The concept behind seLearning courseware is to make full
fidelity simulations (currently available only on high-end training devices)
accessible to a much broader audience via desktop or laptop computers over a
network or the Internet.

    FLIGHT TRAINING CENTRES

    We offer civil aviation training on our simulators and training devices as
well as flight training instruction at training centres located around the
world. Our acquisitions of Schreiner and SimuFlite, combined with our own
network of training facilities, provided us with an installed base, as at
March 31, 2002, of 59 civil aircraft simulators in nine company-operated
facilities worldwide and in three other training centres. We expect to have over
80 simulators in operation by the end of fiscal 2003. For commercial aviation
training, we had 36 full flight simulators in operation in fiscal 2002. We plan
to add about 18 more simulators for the commercial market in fiscal 2003. For
business aviation training, we had 23 simulators in operation at March 31, 2002.
We plan to add five more business aircraft simulators in fiscal 2003.

    We regard 5,500 - 6,000 hours annually as practical capacity for a
commercial airline simulator. For business jet simulators, we regard
4,000 - 4,500 hours annually as practical capacity even though the service is
usually provided on a "per course" as opposed to a "per hour" basis. The
utilization and the pricing varies depending on the location and the type and
age of our simulators. Our objective is to achieve 75-80% utilization of
practical capacity at our facilities through a combination of short and
long-term contracts.

    In the military market, we have also moved successfully beyond the provision
of simulation equipment and into training. Currently, we operate our Medium
Support Helicopter Aircrew Training Facility (MSHATF) in the United Kingdom and
three C-130 training facilities in Tampa (Florida), Marietta (Georgia) and
Brussels (Belgium). They are the only C-130 training centres in the world. The
MSHATF is training crews from the U.K. Royal Air Force, the Canadian Forces and
the Royal Netherlands Air Force, while the C-130 facilities are training the
U.S. Marines Coast Guard and the Air National Guard, the Belgian Air Force and
others.

    MARINE AUTOMATION AND CONTROL SYSTEMS

    Our marine automation and control systems business is a world leader in the
supply of marine control systems.

    Marine automation and control systems, or Integrated Platform Management
Systems (IPMS), are used to monitor and control a ship's propulsion, electrical
steering, ancillary, auxiliary and damage control systems (DCS). Our IPMS have
accumulated over 2.5 million hours of operational experience and have been or
are in the process of being installed on 100 warships (including submarines) of
13 navies around the world, including those of the United States, the United
Kingdom and Germany.

    Our systems can be provided for new ship classes as well as retrofitted for
existing vessels. We also provide full scope IPMS trainers and software support
facilities. We were the first company in the world to provide an integrated
On-Board Training System (OBTS) that enables sailors to train whether at sea or
in port. Our DCS provides significant improvement to the traditional plotting of
damage assessment information and repair actions with advanced Human-Machine
Interface hardware (consoles) at every DCS station. The OBTS and DCS along with
other advanced features of our IPMS greatly improve the operational
effectiveness of naval vessels.

    The Damatic XD ship automation system sold by CAE Valmarine under license is
installed in approximately 440 vessels worldwide. We supply many of the world's
cruise lines, passenger ferry companies and shipbuilders. The advanced
functionality that we pioneered in the naval automation sector, such as our DCS,
is now being introduced to CAE Valmarine's customers.

                                       50
<Page>
    Within our marine controls segment, we also design and manufacture power
plant simulators and provide power plant simulator software upgrades. Power
plant training simulators are used by electric utilities to train operators of
power plant control rooms. We have supplied power plant training simulators to
utilities around the world. We are the sole supplier of CANDU simulators and
control systems to utilities worldwide. In addition, we supply power plant
simulators for pressurized water reactors, boiling water reactors, and fossil
and process simulators.

    SUPPORT SERVICES

    We provide a range of technical support services to civil and military
simulator operators, including parts replacement and repairs, installations,
relocations, upgrades and technical training. To better serve our customers
around the world, we operate from six regional offices in North America, Europe
and Asia. Customers use our technical services to answer questions,
trouble-shoot and receive advice. This extends to service visits by our
engineers to assist our customer maintenance and repair activities. Our Civil
Upgrade services are not restricted to CAE products; we can upgrade most other
manufacturers' simulators. Our services are offered either in conjunction with a
sale of a simulator, through maintenance contracts or individual purchase
orders.

    Military support services include the provision of contractor logistic
support, maintenance services and simulator instruction at over 60 sites
worldwide. We provide maintenance support for all of the Canadian Forces flight
simulators at six bases and all but one of the installed flight simulators of
the German Army, Air Force and Navy. In the United States, we provide a range of
services across a wide number of bases, including the instruction of UAV
Predator operators. We also provide a range of support services to facilities in
Australia, the United Kingdom, the Netherlands and Italy, as well as mission
software support for Canada's CF-18 fighter aircraft.

    We believe that our service business provides opportunities to influence the
upgrade of installed simulators while providing us with valuable insights into
customer training needs.

    A recent third party survey of more than 150 of our customers indicates that
we have generated the highest level of customer service and civil simulator
equipment satisfaction in our industry.

CUSTOMERS AND PROGRAMS

    We have a global and geographically diversified business, and in fiscal 2002
derived 30.8%, 11.4%, 9.1% and 8.1% of our revenues from customers located in
the United States, Great Britain, Canada and Germany, respectively, while 15.4%
was derived from other European countries and 25.2% from the rest of the world.
We have a substantial portfolio of customers in each of our core markets. Set
out below is a description of some of the more significant contracts that we
have in place with customers in the military and civil markets.

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<Page>
    MILITARY SIMULATION AND MARINE CONTROLS

    Our military simulation and controls business segment has been awarded
contracts by the military forces of more than 30 countries. The following table
illustrates some of our principal contracts and associated product/services
which demonstrate our ability to apply our technology to, and develop
sophisticated integrated training solutions for, a wide range of military
equipment:

<Table>
<Caption>
         CUSTOMER               TYPE OF EQUIPMENT                           DESCRIPTION
--------------------------  --------------------------  ---------------------------------------------------
<S>                         <C>                         <C>
U.S. Air Force and Army     Various training devices,   One of several prime contractors under the
                            device upgrades and         U.S. Air Force Training Systems Acquisition II
                            training services           (TSA II) and U.S. Army Simulation and Training
                                                        Omnibus Contract (STOC) procurement programs

U.S. Army                   AH-6 and MH-6 Helicopter    Prime contractor for U.S. Army Special Operations
                            simulators                  Forces Aviation Training and Rehearsal Systems
                                                        (ASTARS)

U.S. Air Force              C-130J Maintenance and      Multiple simulators and training devices and
                            Aircrew Training System     support services for new C-130J aircraft

U.K. Royal Air Force        AgustaWestland EH-101       Build, equip, finance and operate the Medium
                            Merlin, Boeing CH-47,       Support Helicopter Programme (MSH)
                            Chinook, Eurocopter Puma
                            Helicopter simulators

U.K. Royal Navy             Submarine simulators and    Training services for Astute Class Submarine
                            training services           Training Service

Canadian Navy               Submarine training devices  Relocation, operation and maintenance contract for
                                                        eight Victoria Class Submarine Trainers

German Army                 CH-53G,UH-1D,EC-135         Night flying and ab-initio pilot training
                            Simulators

Eurofighter Simulation      Eurofighter Typhoon         Preferred supplier for Eurofighter visual system
Systems GmbH                fighter jet simulator       (EF2000) Visual systems for 27 training devices
                            visual systems

Republic of Singapore Air   Chinook Helicopter full     Chinook Full Mission Simulator (FMS)
Force                       flight simulator

Royal Air Force of Oman     Super Lynx 300 Helicopters  2 Super Lynx 300 Helicopter Mission simulators
                            mission simulators

Norwegian Army              Brigade Command Team        Combat Simulation System
                            Trainer
</Table>

    The products and services we provide our military customers are highly
customized to fit the particular training needs or mission objectives of the
customer.

    U.S. AIR FORCE TSA II AND U.S. ARMY STOC OMNIBUS PROGRAMS

    We have been selected as a qualified prime contractor to pursue orders under
the U.S. Air Force (USAF) Training Systems Acquisition II (TSA II) program. The
USAF TSA II is a 15-year program, valued at up to US$3 billion. It allows the
USAF Air Force Reserve, Air National Guard and the Foreign Military Sale
customers to acquire a range of training products and services by issuing task
orders to qualified prime contractors. We expect the USAF will use the TSA II to
procure a variety of aircrew, maintenance and other training systems, including
training devices, courseware, software, visual/sensor systems and contractor
logistic support. We are also pre-qualified to pursue task orders issued by the
U.S. Army Simulation Training and Instrumentation Command (STRICOM) through our
status as a prime contractor under the U.S. Army Simulation Training Omnibus
Contract procurement program (STOC).

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<Page>
    U.S. ARMY -- ASTARS

    In April 2002, we signed a contract pursuant to STOC to be the prime
contractor for the U.S. Army Special Operations Forces Aviation Training and
Rehearsal Systems (ASTARS). The systems and training devices we develop will
interface with existing mission preview and planning systems and after-action
review training systems. We also will provide services such as rapid prototyping
of potential new weapons and other systems. Our first delivery order under this
program, initially valued at $50 million, requires us to design the world's
first AH/MH-6 Assault/Attack Reconfigurable Combat Mission Simulator to train
aircrews of both the AH-6 and MH-6 helicopters. The AH-6 and MH-6 helicopters,
known as Little Birds, are used for a range of missions, including close-air
fire support, resupply operations in hostile areas and personnel recovery. This
simulator will provide aircrew training and mission rehearsal capabilities to
the U.S. Army's special forces aviation organization known as the Night
Stalkers. It will interface with existing U.S. Special Operations Command
mission rehearsal and database generation systems to ensure that joint
operations and missions can be practiced and validated. As prime contractor for
ASTARS, we will analyze the U.S. Army's training and simulation needs and will
provide upgrades and new training systems as ordered by the U.S. Army.

    U.S. AIR FORCE -- C-130J

    We are providing simulators and training devices to the U.S. Air Force for
the new C-130J Hercules transport aircraft. In addition to designing and
manufacturing simulators, we will also provide training support services such as
maintenance and logistics support. This is done in conjunction with a 1994
teaming agreement we have with Lockheed Martin Aeronautical Corporation (LMAC)
that made us the exclusive supplier of C-130J training systems procured through
LMAC.

    U.K. ROYAL AIR FORCE -- MSH

    We moved beyond simulation into training with our October 1997 contract for
the U.K.'s Medium Support Helicopter (MSH) program, the largest program in our
history. This is a turnkey contract in which we built, equipped, financed and
continue to operate a training centre for MSH. The contract is for an initial
20-year period with a possible extension for an additional 20 years. We
developed the facility under the U.K. Ministry of Defence's Private Finance
Initiative (PFI). It was the first application of PFI to a simulator-based
flight training program.

    On July 17, 2000, the MSH Aircrew Training Facility (MSHATF) officially
opened at Royal Air Force (RAF) Base Benson in Oxfordshire. The facility
provides training to the RAF and third party customers on the Eurocopter Puma,
Boeing CH-47 Chinook, and EHI EH-101 Merlin helicopters. The MSHATF is equipped
with six CAE-built full mission simulators, four computer-based training
classrooms, and a state-of-the-art tactical control centre to plan and monitor
training missions. It is staffed with a team of highly experienced former
military instructors. Of the total initial contract, valued at L399 million,
L274 million ($633 million) is still included in our backlog, being the "take or
pay" training commitment of the U.K. Ministry of Defence. The balance of the
contract consists of subcontract work and third party financing.

    In July 2001, we signed a 15-year contract with the Royal Netherlands Air
Force (RNLAF), worth over $30 million, to train its CH-47D Chinook helicopter
aircrews at MSHATF. The RNLAF will begin training at our facility in early 2003,
following our upgrade of the CH-47D simulators to ensure concurrency with their
helicopters. The contract represented the second third-party customer for our
facility at MSHATF following our commencement of training in 2000 for Canadian
Air Force pilots.

    U.K. ROYAL NAVY -- ASTUTE CLASS SUBMARINES

    In September 2001, FAST Training Services Ltd. (FAST), the joint venture we
own equally with Alenia Marconi Systems, signed a contract with the
U.K. Ministry of Defence valued at approximately $740 million. The value of the
contract to us is approximately $420 million, including the value of
sub-contracts received by us from FAST. FAST will provide comprehensive training
services to the Royal Navy for 30 years to operate and maintain the first three
new-generation Astute class nuclear submarines. We will also provide

                                       53
<Page>
several simulators for the submarine's platform and propulsion systems. The
contract includes an option for increasing the training service capacity to
accommodate up to three additional submarines and for the extension of training
service for up to an additional 10 years. This contract builds upon our success
in 1999 in winning the control system contract for the Astute class submarines.

    CANADIAN NAVY -- VICTORIA CLASS SUBMARINES

    We were selected by the Government of Canada to relocate, operate and
maintain eight Victoria class submarine trainers, currently located in the
United Kingdom, to a new navy training facility in Halifax, Canada. We will
operate and maintain the trainers for three years and the Government of Canada
has an option to renew for up to two more years. The value of the contract is
approximately $24 million.

    GERMAN ARMY -- NIGHT FLYING AND AB-INITIO TRAINING CENTRE

    We are providing 12 full flight simulators to the German Army's helicopter
training school in Bueckeburg. These simulators are designed to support flying
at night with night vision goggles and to provide initial pilot training and
conversion training. Three simulator types are being provided -- two of which
support current aircraft in service and one to support the training of novice
pilots. These simulators include new technology to permit the interchange of
helicopter cockpits within the simulator superstructure (known as roll-on,
roll-off design). This gives the customer a cost effective diversified training
platform -- cockpits not in use as a full flight simulator can instead be used
as flight training devices.

    EUROFIGHTER -- EF 2000

    In July 2001, we signed a contract with Eurofighter Simulation Systems GmbH
(ESSG) for the Aircrew Synthetic Training Aids program (ASTA) to develop and
deliver synthetic environment simulation for the initial 16 of an expected total
of 36 training devices, including full mission simulators, cockpit trainer/
interactive pilot stations and other ancillary devices. These devices will be
electronically linked to provide multi-aircraft mission training.

    In November 2001, we signed a contract with ESSG as the preferred supplier
of visual systems for the Eurofighter EF2000 combat aircraft ASTA. Valued at
over $170 million for the eventual 27 training devices, it represents the
largest single program to date for our visual systems business. We are teamed
with Sogitec on this program and the visual systems will include a new
state-of-the-art Medallion-X image generator which we developed jointly with
Sogitec. For the display devices, we will supply front projection domes and rear
projected mosaic displays to create a completely immersive environment.
Specialized projectors will provide an enhanced display of airborne targets. In
addition, database tools will allow users to create new virtual environments to
meet future training requirements.

    The aggregate value to us at present of these two ASTA contracts is
$210 million.

    SINGAPORE AIR FORCE -- CHINOOK HELICOPTERS

    In December 2001 we signed a contract with the Republic of Singapore Air
Force valued at more than $47 million for a Chinook Full Mission Simulator
(FMS). The Chinook FMS will feature our Medallion visual system, which will
include visual channels for the Chinook's chin windows and databases that will
be optimized for low-level helicopter training, and our ITEMS system. Other
features include a high fidelity vibration platform integrated with the motion
system, state-of-the-art mission planning, instructor/operator station and a
powerful software support facility that includes a visual database modeling
station. We also will provide maintenance support for 15 years.

    ROYAL AIR FORCE OF OMAN -- SUPER LYNX HELICOPTERS

    In May 2002, we signed a contract with the Sultanate of Oman to design and
manufacture two Super Lynx 300 helicopter mission simulators for the Royal Air
Force of Oman for delivery in 2004. The two fixed base mission simulators will
feature our Medallion visual system which will support both night mission

                                       54
<Page>
goggles and FLIR training for helicopter aircrews. Advanced simulations for the
defensive aids suite, radar systems and weapon systems of the Super Lynx
helicopter will also be included as part of the program.

    NORWEGIAN ARMY -- COMBAT SIMULATION SYSTEM

    In October 2001 we were selected by the Norwegian Armed Forces to deliver a
combat simulation system to train commanders and their staff in traditional
combat situations and operations other than war. The system includes a virtual
battlefield scenario, including weapons, vehicles, aircraft, ground forces and
logistics. The multi-party capacity of the system is of special value for
preparing forces for peace support operations. The armed forces of Germany,
Austria and Italy are already using our combat simulation system.

    CIVIL SIMULATION AND TRAINING

    We offer a full range of flight simulation and training systems including:

    FULL FLIGHT SIMULATORS

    We have taken orders for approximately 440 full flight simulators and flight
training devices from more than 100 airline customers, aircraft manufacturers
and training centres worldwide of which about 410 have been delivered to date.
We build civil simulators for all major aircraft and manufacturers' types,
including the following:

<Table>
<Caption>
           LARGE TRANSPORT AIRCRAFT                REGIONAL AIRCRAFT        BUSINESS AIRCRAFT
----------------------------------------------  -----------------------  -----------------------
<S>                                             <C>                      <C>
Airbus A300, A310, A319, A320, A321, A330,      ATR 42, 72               Bombardier
  A340                                                                     Challenger 601, 604

Boeing B717, 727, 737 Classic, 737 NG, 747,     Bombardier CRJ-200, 700  Bombardier Global
  757, 767, 777                                                            Express

Boeing DC-6, 8, 9, 10                           Bombardier Dash 8        Bombardier Learjet 31,
                                                                           45, 60

Boeing MD-10, 11, 80, 81, 82, 88, 90            Dornier 328 Turboprop,   Cessna Citation 550,
                                                  328 Jet                  Excel,
                                                                           Ultra/Bravo, II

L-1011                                          Embraer ERJ 145, 170     Gulfstream IV, V

                                                Fokker 28, 50, 100       Piper Cheyenne III

                                                SAAB 340B                Raytheon Hawker 800 XP

                                                                         Sikorsky S-76
</Table>

    In June 2001, we were awarded a contract from Airbus to develop an Airbus
380 simulator to support the development of the new Airbus A380 super-jumbo
aircraft. The system includes a moveable Maxvue visual system that can be used
with roll-in/roll-out cockpits. The contract also includes options for
additional equipment such as a cabin motion system and our next generation
visual system.

                                       55
<Page>
    We have sold our civil full flight simulators to the leading commercial
airlines and manufacturers in the world, including:

<Table>
<Caption>
     NORTH AMERICA               EUROPE                REST OF WORLD       AIRCRAFT MANUFACTURERS
-----------------------  -----------------------  -----------------------  -----------------------
<S>                      <C>                      <C>                      <C>
Air Canada               Aer Lingus               Air China                Airbus
American Airlines        Air France               Air India                Boeing
America West Airlines    Alitalia                 Air New Zealand          Bombardier
Continental Airlines     British Airways          All Nippon Airlines      Embraer
Delta Airlines           Finnair                  Asiana Airlines          Fairchild/Dornier
Mexicana                 Iberia                   Cathay Pacific
Northwest Airlines       KLM                      China Airlines
Southwest Airlines       Lufthansa                China Southern
United Airlines          Olympic Airways          Dragonair
U.S. Airways             Ryanair                  Emirates Airline
WestJet                  Scandinavian Airlines    EVA Airways
                         Turkish Airlines         Indian Airlines
                                                  Japan Airlines
                                                  Jet Airways
                                                  Khalifa Airways
                                                  Korean Airlines
                                                  Kuwait Airways
                                                  Malaysia Airlines
                                                  Quantas Airways
                                                  Royal Air Maroc
                                                  Singapore Airlines
</Table>

    FLIGHT TRAINING CENTRES

    We have developed and are continuing to expand our global network of
strategically located training centres. We build our training centres in
locations that are close to our significant customers to minimize the costs
associated with a pilot's travel to and from training. Our training centres
typically host four to eight simulators. However, our largest facility located
at Dallas/Fort Worth, currently hosts 23 simulators. Our practice is to secure
at least one long-term training agreement with a commercial or regional airline
prior to establishing a new civil training centre.

    Our customers at our commercial aviation training centres include major
commercial and regional airlines that elect to outsource some of the training of
their pilots and other crew members using either our training instructors or
their own. Our business aviation training centres are used by more than 3,000
customers.

    As part of our strategy of being an integrated supplier of training
solutions, on August 24, 2001, we acquired Schreiner from Schreiner Luchvaart
Groep B.V. which had four commercial training facilities located in The
Netherlands, Belgium and United States. On December 31, 2001, we acquired
SimuFlite from GE Capital Commercial Equipment Financing. Headquartered in
Dallas, Texas, with over 370 employees, SimuFlite operated two training
facilities in Dallas, Texas and a C-130 training facility in Marietta, Georgia.
As a result of these acquisitions and our own development of training centres,
we have become the second largest independent provider of business third party
aviation training in the world.

                                       56
<Page>
    Our civil training centre network consists of the following facilities:

<Table>
<Caption>
                                                                        NUMBER OF FULL               NUMBER OF
                                                  ANCHOR(S) OR       FLIGHT SIMULATORS AT     FULL FLIGHT SIMULATORS
FACILITY TYPE AND LOCATION                     PRIMARY CUSTOMER(S)     THE END OF FY02      EXPECTED AT THE END OF FY03
--------------------------                     -------------------   --------------------   ---------------------------
<S>                                            <C>                   <C>                    <C>
CAE TRAINING CENTRES

Brussels, Belgium(1)                                      Various                  7                         7
Sao Paulo, Brazil                                      TAM Linhas                  5                         5
                                                 Aereos SA, LAPA,
                                                  Gol Transportes
                                                Aereos, Aerolinas
                                                       Argentinas
Toronto, Canada                                   Air Canada, Air                  6                         7
                                               Transat, Skyservice
Amsterdam, The Netherlands(1)                      KLM Cityhopper                  7                         7
Maastricht, The Netherlands(1)                     KLM Cityhopper                  4                         5
Madrid, Spain                                         Air Nostrum                  1                         4
Dubai, United Arab Emirates                         Qatar Airways                 --                         2
Dallas, United States(1)                                  Various                  2                         4
Dallas/Fort Worth, United States(2)                                               23                        28
Denver, United States                          Frontier Airlines,                 --                         5
                                                    Air Wisconsin
Grapevine/Dallas, United States(2)                                   1 level A (with 4      1 level A (with 4 FTDs)
                                                                               FTDs)

FLIGHT SCHOOLS(3)

3 flight schools (Evora, Portugal(4),                                            N/A                       N/A
  Maastricht and Amsterdam, The Netherlands)

SIMULATORS GENERATING TRAINING REVENUES BUT
  NOT LOCATED IN A CAE CENTRE

Rome, Italy (Alitalia)                                   Alitalia                 --                         3
Miami, United States (Airbus)                             Various                  2                         2
Singapore (Singapore Airlines)                            SilkAir                  1                         1
Dulles, United States (PAIFA)                                 ACA                  1                         1
Seattle, United States (Horizon Air)                  Horizon Air                 --                         1
</Table>

-------------

(1) Acquired with the purchase of Schreiner Aviation Training B.V.

(2) Acquired with the purchase of SimuFlite Training International, Inc. (not
    included in total of full flight simulators).

(3) Basic training on small aircraft for future commercial pilots.

(4) We have a 45% interest in this training facility.

                                       57
<Page>
    We expect to commence operations at our commercial training centre in
Denver, Colorado in the summer of 2002. This facility will start with several
full flight simulators, with Air Wisconsin and Frontier Airlines as its anchor
clients. We have entered into an agreement with Emirates, the international
airline of the United Arab Emirates, to jointly build and operate a commercial
and business training centre in Dubai. Our anchor client is Qatar Airways. The
centre is scheduled to commence operations in the summer of 2002 and will
eventually house six full flight simulators, including our first delivery of a
CAE Sim XXI simulator.

    In January 2002, all of our full flight simulators at both our Toronto and
Madrid aviation training centres received Level D certification, the highest
level in full flight simulation. Our Sao Paulo aviation training centre recently
received the prestigious "Brazil 500 Years" award for its contribution to South
American aviation training.

SALES AND MARKETING

    Each of our business segments has its own team of sales and marketing
professionals. As of March 31, 2002, our sales and marketing team consisted of
121 persons, with 37 dedicated to military simulation and training, 16 dedicated
to marine controls and 68 dedicated to civil simulation and training.

    Our sales and marketing strategy for our military simulation and marine
controls business segment is to achieve broad market penetration by ensuring
that we effectively monitor the needs of customers well before they request
tenders for particular project opportunities. Project cycle times in the
military market are long and our marketing activities track program status up to
three years ahead of an actual tender to ensure we are well positioned. We
maintain a group of representatives in key locations around the world to extend
the reach of internal sales and marketing teams. We employ an advertising and
promotion campaign targeted at the trade publications that addresses the defense
training sector and targets readers in our customer community. Our sales and
marketing professionals work closely with prospective clients to evaluate
customer needs and ensure that our technology is considered as requirements are
developed. We believe that our knowledge of our customers and their needs is
instrumental to our success in winning contracts.

    Our civil aviation and training sales and marketing force is comprised of
two groups: Commercial Aviation and Training and Business Aviation Training.
Commercial Aviation and Training comprises our equipment sales and support
services business and the aviation training services targeted at the regional,
major and second tier-major airlines market segments.

    In the equipment and support services segment, sales and marketing
initiatives are pursued by a dedicated group of eight personnel who are
geographically organized to cover the world. This group is supported by local,
in-country contract representatives in areas where this is tactically important.
The group remains in continuous communication with clients, actively soliciting
business for equipment sales and upgrade services and responding to
client-initiated requests for proposals.

    The commercial aviation group is organized into two regions -- Americas/Asia
and Europe/Middle East/ Africa. Supporting business development in these regions
is a team of seven personnel, four in Americas/ Asia and three in Europe/Middle
East. Supporting the sales of existing capacity in the training centres is a
team of regional sales staff. In both business development activities and
capacity sales, each group pursues opportunities through direct contact with
airline clients and market research driven prospecting techniques.

    Business Aviation Training is structured to accommodate the higher
transaction-oriented nature of the corporate aircraft training market. We have a
sales force of approximately 45 staff covering our global markets. Local area
representation is also used in South America. This segment is much more
transaction based and requires direct contact and prospecting approaches to both
seek out and retain new client prospects. The segment also requires a high
degree of personalized service and customer care, which is provided at our
principal training centre in Dallas, Texas.

RESEARCH AND DEVELOPMENT

    We differentiate ourselves by providing superior products and services that
rely on the latest, most advanced technology available. As a result, we have a
long-standing commitment to research and development. Each business segment is
encouraged to apply research and development across the whole spectrum of its
operations, from product development to production processes and techniques.

                                       58
<Page>
    An additional part of our research and development strategy is to
participate with several universities and government agencies in North America
and in Europe in specific research projects. While development is the first
priority, applied research is also vitally important to our future. In addition
to our basic internal research and development, research and development may
also be carried out within customer contracts. This involves the development of
technology which is necessary to complete a contract requirement but is also
useful and may be reapplied by us in a broader sense. Certain of our initiatives
also receive the support of the Canadian government through Technology
Partnerships Canada.

    Total research and development expenditures include our basic research and
development costs as well as program related development costs. Basic internal
research and development expenditures were in excess of $50 million for fiscal
2002, the product portion of which was largely associated with the development
of the CAE Sim XXI simulator, CAE Simfinity training system and CAE Tropos
visual system. In addition to these development activities, basic internal
research and development funds a variety of product enhancement and process
improvement initiatives. Basic research and development expenditure is expected
to be at the same level in fiscal 2003 and will be primarily focussed on
applying our CAE Sim XXI design and manufacturing techniques to additional
simulator platforms, extending the CAE Simfinity and CAE Tropos product
capabilities, and developing the next generation open and distributed simulation
environment.

MANUFACTURING

    Our manufacturing facilities are located in Montreal, Canada; Tampa,
United States; Burgess Hill, United Kingdom; and Stolberg, Germany.

    The manufacturing process for our simulators is complex, involving the
coordination of approximately 250,000 parts and millions of lines of software
code. The manufacture of a civil simulator includes five major stages: design,
manufacture and assembly, testing, pack and ship and final test on-site. This
entire process has historically taken up to 18 months. As a result of recent
process improvements in the manufacture and assembly stage, the time has been
reduced to approximately 14 months. Military simulators are much more complex
and unique than civil simulators, and therefore take more time to design,
manufacture and test.

    Manufacturing is organized into 12 manufacturing cells comprised of the
following three major disciplines: electronics (printed circuit board assembly),
electrical (cables and harnesses, cabinets and chassis, aircraft instruments and
avionics), and mechanical (welding, sheet metal and machine shop, precision
assembly and hydraulics, structural assembly and final assembly).

    Most of the raw materials used in manufacturing (such as sheet metal, wires,
cables and electronic integrated circuits) are available off-the-shelf from
multiple commercial sources. The unique parts are the aircraft parts. These are
usually available from aircraft manufacturers, the resale market, as well as
through simulated part manufacturers.

    The availability of most parts in a timely manner facilitates a relatively
smooth production flow. Aircraft parts, in some instances, may be an exception,
especially on new aircraft types or those out of production. The timely delivery
of these parts is often the responsibility of our customers. Our contracts
normally link in these aircraft parts delivery dates to the simulator delivery
schedules. In cases where such aircraft parts cannot be made available, our
customers rely on our ability to make simulated parts.

COMPETITION

    The markets in which we sell our products are highly competitive. Certain
competitors are also our customers and suppliers on specific programs. The
extent of competition for any single project generally varies according to the
complexity of the product and the dollar volume of the anticipated award. We
believe that we compete on the basis of:

    - the performance and flexibility of our products;

    - reputation for prompt and responsive contract performance;

    - accumulated technical knowledge and expertise;

    - breadth of our product line; and

    - price.

                                       59
<Page>
    Our future success will depend in large part upon our ability to improve
existing product lines and to develop new products and technologies in the same
or related fields.

    Our major competitors in the military simulation and training market include
Lockheed Martin Corporation, L-3 Communications Corporation, Boeing, NLX
Corporation, Indra Systemas, Alenia Marconi Systems, Thales Training Simulation,
Flight Safety International, Inc. and STN ATLAS Elektronik GmbH. Some of these
competitors are predominantly local (one country or region) competitors. We
sometimes partner with these and other competitors to cooperate on program
contracts.

    Our major competitors in the marine controls market include Lockheed Martin
Corporation, Northrop Grumman Corporation (Sperry Marine Systems), Siemens AG,
ABB Asea Brown Boveri Ltd., Vosper Thornycroft Holdings plc, L-3 Communications
Corporation and MTU Elekronik GmbH.

    Our major competitors in the civil simulation equipment market include
Thales Training Simulation and NLX Corporation. Evans & Sutherland Computer
Corporation also competes for visual systems. Our major competitors in civil
pilot training include FlightSafety Boeing Training International L.L.C,
FlightSafety International, Inc., GE CAT and PanAm International Flight
Academy Inc.

REGULATORY MATTERS

    Each of the markets in which we operate is subject to extensive regulations.
We strive to operate in a manner that exceeds minimum regulatory requirements.
To achieve higher standards of behavior, we make business decisions that are
aligned with our ethical principles of integrity, respect, teamwork, quality,
innovation and citizenship.

    The flight simulators, flight training devices and many of the other
products we offer must be certified by the government regulatory agencies
responsible for air travel in the countries in which we operate. For example,
the FAA must certify every flight simulator in the United States before it
becomes operational, and also certify periodically during each year as to the
continued compliance of the simulator. The regulatory agencies of other
countries have similar approval processes for simulators that are used in that
country. The regulatory regimes of these agencies have created much of the
training market by establishing and enforcing certification requirements for
pilots and crew. These regulatory agencies also must approve the curriculum we
use at our training centres, and in some cases the centre itself.

    A large portion of our business is controlled, including our military,
marine and nuclear simulation and controls businesses. Requirements under
Canada's Defence Production Act, Export and Import Permits Act, the United
Nations Act, the U.S. Arms Export Control Act, and multilateral export control
regimes and arrangements contribute to a multi-faceted control regime in which
we must operate. Although civil simulators do not require an export permit from
Canada in order to be exported to most countries, a permit would be required if
the simulator was to be exported to a country on Canada's Area Control List. In
addition, UN embargoes from time to time restrict to whom we may sell,
irrespective of the nature of the product. U.S. regulation may impact exports to
Cuba and other destinations of U.S.-origin parts, as well as sales to a company
or individual that is listed in one of the U.S. banned lists. The regulations
and other arrangements associated with these laws, often amended, include:

    - Export Permits Regulations (Canada);

    - Controlled Goods Regulations (Canada);

    - Export Administration Regulations (United States);

    - International Traffic in Arms Regulations (United States);

    - Missile Technology Control Regime (International);

    - Nuclear Suppliers Group (International);

    - Wassenaar Arrangement for Export Controls (International);

    - United Nations Arms Embargoes (International);

    - Import and Export Control Act (United Kingdom);

    - Act Implementing Article 26(2) of the Basic Law (Germany); and

    - Customs (Prohibited Exports) Regulations (Australia).

                                       60
<Page>
    Our import/export control program is a system established to ensure that
imports, exports and transfers to foreign parties are consistent with defense
and import/export regulations and other international rules. Our import/export
control program is based on a corporate philosophy that we want to maximize the
benefits of our international efforts while ensuring that we comply with all
applicable import/export control laws and regulations. The import/export control
program is an important part of our operation to ensure compliance with import
and export control requirements. An essential part of the import/export control
program is the establishment of mechanisms that provide checks and safeguards at
key steps in program development and implementation, helping to better manage
international program initiatives. Such oversight helps to ensure that the right
questions are being asked to preclude us from effecting transfers that may be
contrary to import/export controls or inconsistent with the various regimes.

GOVERNMENT CONTRACTS

    The majority of our contract revenue in our military simulations and marine
controls business segment result from contracts with militaries or government
bodies performed under predominantly fixed-price contracts with only a small
number of cost-plus contracts.

    In most instances, under government regulations, certain costs, including
certain financial costs, portions of research and development costs, lobbying
expenses, certain types of legal expenses and certain marketing expenses related
to the preparation of bids and proposals, are not allowed for pricing purposes
and calculation of contract reimbursement rates under flexibly-priced contracts.
Governments also routinely regulate the methods under which costs are allocated
to government contracts. We are subject to a variety of audits performed by
government agencies. These include pre-award audits that are performed at the
submission of a proposal to the government. The purpose of the pre-award audit
is to determine the basis of the bid and provide the information required for
the relevant government to effectively negotiate the contract. During the
performance of a contract the government has the right to request and to examine
any labor charges, any material purchase, and any overhead changes to any
contract that is active. Upon a contract's completion, the government may
perform a post award audit of all aspects of contract performance to insure that
we have performed in accordance with the terms of the contract.

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

    - the contractor may be paid an amount agreed upon for completed and
      partially completed products and services accepted by the government;

    - the government may not be liable for the contractor's costs with respect
      to unacceptable items, and may be entitled to repayment of advance
      payments and progress payments, if any, related to the termination portion
      of the contract; and

    - the contractor may be liable for excess costs incurred by the government
      in procuring undelivered items from another source.

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

INTELLECTUAL PROPERTY

    We own certain patents and have filed applications in respect of additional
patents. We enter into agreements containing non-disclosure and confidentiality
clauses with third parties and have similar

                                       61
<Page>
provisions in place with our employees to protect our proprietary information
and trade secrets. We also have internal policies concerning both ethics and
intellectual property which guide our employees in their dealings with our
intellectual property and that of third parties. Our Intellectual Property
Committee, comprising some of our most senior technology-oriented officers, is
mandated to oversee the protection, management and exploitation of our
inventions, trade secrets and other intellectual property.

    Given the lengthy delay in obtaining patents (during which some technology
has evolved into newer generations), the required detailed patent application
disclosure which may permit competitors to reverse-engineer an invention, and
the cost of maintaining and defending patents, we believe that certain
intellectual property is adequately protected by either maintaining it as a
trade secret or selectively disclosing enough of it to forestall anyone else
from subsequently claiming it as their own original innovation.

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

ENVIRONMENT

    Our operations include, and our past operations and those of some past
operators at some of our sites have included, the use, generation, storage,
handling and disposal of hazardous materials which are subject to environmental
laws and regulations in the various countries in which we operate or have
operated. We believe our exposure to environmental risk to be relatively limited
and that our operations are in compliance in all material respects with such
environmental laws and regulations.

    In March 2002, as part of our announced plan to divest our Forestry
businesses we completed the sale of our fiber screening business to the Advanced
Fibre Technologies Income Fund (AFT). We provided AFT with a conditional
indemnity that addresses any environmental matters that relate to the business
before it was sold. Accordingly, should any environmental issues arise with
respect to (i) our fiber screening business prior to its sale, or (ii) any other
business that we have or will divest where we have provided or may provide
environmental indemnities, we may face claims that we are responsible for the
expenditures necessary to resolve those issues. At this time, no such claims
have been made to us.

EMPLOYEES

    A key component of our success is our highly trained workforce. As of
March 31, 2002, we had approximately 6,400 employees. We invest approximately 3%
of our annual payroll budget in training and development activities to help our
staff keep pace with constant technology evolution and to ensure succession
planning.

    Approximately 825 of our employees are unionized, covered by 13 collective
agreements. Six labor contracts were ratified in fiscal 2002. Over the next 15
months we will enter into negotiations for the renewal of six collective
agreements including the collective agreement for 700 employees in Montreal
which will expire in June 2003. There are no indications that negotiations on
new contracts will include work stoppages. We consider employee relations to be
satisfactory.

LEGAL PROCEEDINGS

    From time to time, we are involved in legal proceedings arising in the
ordinary course of our business. We believe that we have made adequate reserves
for these proceedings and that there is no litigation pending against us that
could have a material adverse effect on our results of operations and financial
condition.

SIGNIFICANT ACQUISITION

    On December 31, 2001, we completed the acquisition of all of the shares of
SimuFlite Training International, Inc. from GE Capital Commercial Equipment
Financing for US$210.9 million, subject to adjustment based on an audit of the
closing balance sheet. US$54 million of this was financed by a sale and
leaseback of certain long-term assets of SimuFlite provided by the seller and
the remaining portion was financed through a newly established long-term credit
facility. The acquisition was accounted for using the purchase method. The
allocation of the purchase price was to net non-cash working capital for
$14.8 million,

                                       62
<Page>
tangible assets for $175.8 million, intangible assets for $76.9 million,
goodwill $106.3 million, future income tax for $15.1 million and long-term debt
for $52.4 million.

SIGNIFICANT SUBSIDIARIES

    Our activities are conducted directly by CAE Inc. and through a number of
subsidiaries incorporated in various jurisdictions. Our significant subsidiaries
include CAE Machinery Ltd. (Canada), CAE International Holdings Limited
(Canada), CAE (US) Inc. (U.S.), CAE SimuFlite Inc. (U.S.), CAE Investments B.V.
(Netherlands), CAE International Capital Management Hungary Limited Liability
Company (Hungary), Civil Aviation Training Solutions Inc. (U.S.) and CAE
Training B.V. (Netherlands), all of which are, directly or indirectly,
wholly-owned.

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<Page>
                                   MANAGEMENT

DIRECTORS AND SENIOR EXECUTIVE OFFICERS

    The following table sets forth information about our directors and senior
executive officers, and their respective positions as of the date of this
prospectus:

<Table>
<Caption>
NAME                                      TITLE
----                                      -----
<S>                                       <C>
LYNTON R. WILSON, O.C...................  Chairman of the Board of Directors
DEREK H. BURNEY.........................  President and Chief Executive Officer and Director
DONALD W. CAMPBELL......................  Group President, Military Simulation and Training
PAUL G. RENAUD..........................  Executive Vice President, Chief Financial Officer and
                                          Secretary
RASHID A. KHAN..........................  Executive Vice President, Marine Controls
RIZK (HANI) MACRAMALLAH.................  Executive Vice President, Operations
HARTLAND J. A. PATERSON.................  Vice President, Legal and General Counsel
JEAN-FRANCOIS THIBODEAU.................  Vice President and Treasurer
ROBERT C. HEDGES........................  Controller and Assistant Secretary
JOHN A. (IAN) CRAIG.....................  Director
RICHARD (DICK) J. CURRIE, C.M...........  Director
R. FRASER ELLIOTT, C.M., Q.C............  Director
H. GARFIELD EMERSON, Q.C................  Director
ANTHONY S. FELL.........................  Director
THE HONOURABLE JAMES A. GRANT, P.C.,      Director
  Q.C...................................
JAMES F. HANKINSON......................  Director
E. RANDOLPH (RANDY) JAYNE II............  Director
JAMES W. MCCUTCHEON, Q.C................  Director
GEORGE K. PETTY.........................  Director
LAWRENCE N. STEVENSON...................  Director
</Table>

    On May 24, 2002 we announced the appointment of Gary Scott as Group
President, Civil Simulation and Training, effective July 8, 2002. Prior to this
appointment, Mr. Scott was President of FlightSafety Boeing Training
International from 2000 to 2002, Vice President Finance and Business Strategy
for Boeing Commercial Airplanes' Commercial Aviation Services from 1999 to 2000,
Vice President Business Strategy for Boeing Commercial Airplanes during 1999,
Vice President and Chief Operating Officer, Boeing Enterprises during 1998, and
Vice President and General Manager of Boeing Commercial Airplanes Group's
737/757 Programmes from 1996 to 1998.

    LYNTON R. WILSON, O.C. is Chairman of our board of directors. Mr. Wilson is
the Chairman of Nortel Networks Corporation and is also a director of
DaimlerChrysler AG. Mr. Wilson has been a director since 1997.

    DEREK H. BURNEY has been our President and Chief Executive Officer and a
director since 1999. Mr. Burney also serves as a director of Shell Canada
Limited. From 1993 to October 1999, Mr. Burney was Chairman and Chief Executive
Officer of Bell Canada International Inc. From 1989 to 1993, he was Canada's
Ambassador to the United States.

    DONALD W. CAMPBELL has been our Group President, Military Simulation and
Training since 2002 and was formerly our Executive Vice President, Military
Simulation and Training from 2000 to 2002. Prior to this, Mr. Campbell was
Deputy Minister of Foreign Affairs and Prime Minister's Personal Representative
for Economic Summit from 1997 to 2000 and Canada's Ambassador to Japan from 1993
to 1997.

    PAUL G. RENAUD has been our Executive Vice President, Chief Financial
Officer and Secretary since 2000 and was formerly our Vice President Finance,
Chief Financial Officer and Secretary from 1996 to 2000.

    RASHID A. KHAN has been our Executive Vice President, Marine Controls since
2000, and was formerly our Vice President and General Manager, Marine Systems
from 1998 to 2000, and our Director Marine Control Systems and Power Plant
Simulation from 1996 to 1998.

    RIZK (HANI) MACRAMALLAH has been our Executive Vice President, Operations
since 2000 and was formerly our Vice President Operations from 1996 to 2000.

                                       64
<Page>
    HARTLAND J. A. PATERSON has been our Vice President, Legal and General
Counsel since 2001 and was formerly Vice President, Legal and Regulatory of
Cable & Wireless PLC (Japan) from 1999 to 2001, Director, Legal Affairs of
Cable & Wireless PLC (Caribbean) from 1997 to 1999 and Senior Legal Consultant
of Northern Telecom (Asia) Ltd. (Greater China business unit) from 1996 to 1997.

    JEAN-FRANCOIS THIBODEAU has been our Vice President and Treasurer since
2001. From 1999 to 2001, he was Treasurer of G.T.C. Transcontinental Group Ltd.
From 1994 to 1999, he held the title of Director of Finance and Treasury of
Provigo and held various operational positions within Provigo from 1988 to 1994.

    ROBERT C. HEDGES has been our Controller and Assistant Secretary since 1998
and was formerly Financial Planning Consultant of Financial Concept Corporation
in 1998 and Vice President, Finance and Chief Financial Officer of Holliday &
Scandrett International Inc. from 1996 to 1998.

    JOHN A. (IAN) CRAIG is a business consultant and was formerly Chief
Marketing Officer of Nortel Networks Corporation. Mr. Craig is also a director
of Bell Canada International Inc., Arris Group Inc. and Williams Communications
Group, Inc. Mr. Craig has been a director since 2000.

    RICHARD (DICK) J. CURRIE, C.M. is non-executive Chairman of BCE Inc. He was
formerly President and a director of George Weston Limited and was President and
a director of Loblaw Companies Limited for almost 25 years until December 2000.
Mr. Currie has served as a member of RJR Nabisco's Advisory Board and on the
Advisory Board of Jacob Suchard (Zurich) and is presently on the Advisory Board
of Barry Callebaut (Zurich). Mr. Currie is Past Chairman of the Richard Ivey
School of Business Administration of The University of Western Ontario and has
served on the Visiting Committee to the Harvard Business School. Mr. Currie has
been a director since 2001.

    R. FRASER ELLIOTT, C.M., Q.C. is a senior partner in the law firm of
Stikeman Elliott. Mr. Elliott is also a director of the Toronto General &
Western Hospital Foundation. Mr. Elliott has been a director since 1951.

    H. GARFIELD EMERSON, Q.C. is National Chairman and a senior partner of the
law firm of Fasken Martineau DuMoulin. Mr. Emerson is also the Chairman of
Rogers Communications Inc., Vice-Chairman of Rogers Wireless
Communications Inc. and a director of Canada Deposit Insurance Corporation,
University of Toronto Asset Management Corporation and Sunnybrook & Women's
Health Sciences Centre. He was formerly President and Chief Executive Officer of
NM Rothschild & Sons Canada Limited, investment bankers. Mr. Emerson has been a
director since 1992.

    ANTHONY S. FELL is Chairman of RBC Dominion Securities Inc. Mr. Fell is also
a director of BCE Inc., a director of Munich Reinsurance Company of Canada, a
director of Loblaw Companies Limited, Chairman of the Board of Trustees of
University Health Network and a Governor of the Duke of Edinburgh's Award
Program in Canada. Mr. Fell has been a director since 2000.

    THE HONOURABLE JAMES A. GRANT, P.C., Q.C. is a partner in the law firm of
Stikeman Elliott. Mr. Grant is a director of Canadian Imperial Bank of Commerce,
Shire Pharmaceuticals Group plc and various charitable and social organizations.
Mr. Grant has been a director since 1991.

    JAMES F. HANKINSON is a business consultant and was formerly President and
Chief Executive Officer of New Brunswick Power Corporation. He is also a
director of Maple Leaf Foods Inc. Mr. Hankinson has been a director since 1995.

    E. RANDOLPH (RANDY) JAYNE II is a Senior Partner in Heidrick & Struggles
International, Inc., an executive search firm (1996-present) and is a Founder
and the Global Managing Partner of that firm's Semiconductor, Hardware and
Systems Specialty Practice. Prior to this, he served as a senior executive in
McDonnell Douglas Corporation and an officer in the U.S. Air National Guard
(1987-1996). Mr. Jayne has been a director since 2001.

    JAMES W. MCCUTCHEON, Q.C. is Counsel to the law firm of McCarthy Tetrault.
Mr. McCutcheon is a director of Dominion of Canada General Insurance Company,
E-L Financial Corporation, Empire Life Insurance Company (Chairman 1991-1997),
Guardian Capital Group Limited and Noranda Inc. Mr. McCutcheon has been a
director since 1979.

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<Page>
    GEORGE K. PETTY is a business consultant and was formerly President and
Chief Executive Officer of BCT.Telus Corporation, a Canadian telecommunication
and information services company. Mr. Petty has been a director since 1996.

    LAWRENCE N. STEVENSON is President & Chief Executive Officer of Pathfinder
Capital Inc., an investment and venture capital firm. Mr. Stevenson was formerly
Chief Executive Officer of Chapters and Chapters Online Inc. Mr. Stevenson is
also a director of SNC-Lavalin Group Inc. and Sobeys Inc. Mr. Stevenson has been
a director since 1998.

BOARD OF DIRECTORS

    Our board of directors is currently comprised of 13 persons, 12 of whom are
outside and unrelated directors. In accordance with the provisions of the Canada
Business Corporations Act, the size of the board of directors may be increased
to a maximum of 21 persons. Our directors are elected at each annual meeting of
shareholders and hold office until the next annual meeting of shareholders or
until their successors are elected or appointed. In addition to fulfilling all
statutory requirements, the board of directors oversees and reviews:

    - our strategic and operating plans and financial budgets and the
      performance against these objectives;

    - our principal risks and the adequacy of our systems and procedures to
      manage these risks;

    - our compensation and benefit policies;

    - management development and succession planning;

    - business development initiatives;

    - our communications policies and activities, including shareholder
      communications;

    - the integrity of our internal controls and management information systems;

    - the monitoring of our corporate governance system; and

    - the performance of the President and Chief Executive Officer.

COMMITTEES OF THE BOARD OF DIRECTORS

    The committees of our board of directors are the Audit Committee, the
Governance Committee, the Compensation Committee and the Executive Committee.

    AUDIT COMMITTEE

    The Audit Committee reviews, reports, and where appropriate, makes
recommendations to the board of directors on:

    - the internal audit plan and the adequacy of our system of internal
      controls;

    - the external audit plan and the terms of engagement and fees of our
      external auditors;

    - financial risk management;

    - the integrity of our financial reporting process; and

    - our material public financial documents, including our annual and interim
      consolidated financial statements, our annual information form and
      management's discussion and analysis contained in our interim and annual
      reports.

    The Audit Committee consists of James F. Hankinson (Chairman), John A.
Craig, Richard J. Currie and James W. McCutcheon, all of whom are outside and
unrelated directors.

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<Page>
    GOVERNANCE COMMITTEE

    The Governance Committee is responsible for reviewing the effectiveness of
the company's corporate governance system. As part of this broad mandate,
specific duties of the Governance Committee include:

    - reviewing with the Chairman of the Board on an annual basis the
      performance of the board of directors and its committees;

    - monitoring conflicts of interests, real or perceived, of both the board of
      directors and management and ensuring that our Code of Conduct is
      implemented throughout the company;

    - reviewing methods and processes by which the board of directors fulfills
      its duties, including the number and content of meetings and the annual
      schedule of issues for the consideration of the board of directors and its
      committees;

    - monitoring the communication process between the board of directors and
      management;

    - recommending criteria to the board of directors for the evaluation of the
      President and Chief Executive Officer;

    - reviewing the size and composition of the board of directors;

    - establishing selection criteria for board members;

    - evaluating the contribution of each director, and recommending annually to
      the board of directors the slate of directors (including new nominees) for
      shareholder approval;

    - assessing the adequacy and form of compensation of directors; and

    - reviewing and approving the company's donation policy.

    The Governance Committee is also responsible for providing the board of
directors with an appropriate succession plan for board members and an
orientation program for new members to the board of directors and oversees a
system that enables an individual director to engage an outside adviser at our
expense in appropriate circumstances. The Governance Committee consists of
Anthony S. Fell (Chairman), H. Garfield Emerson, Lawrence N. Stevenson and
Lynton R. Wilson, all of whom are outside and unrelated directors.

    COMPENSATION COMMITTEE

    The Compensation Committee reviews and approves the design and
administration of our compensation and benefit plans and policies other than in
respect of the President and Chief Executive Officer, whose compensation
arrangements are reviewed and approved by the board of directors based on
recommendations from the Compensation Committee. The Compensation Committee is
also responsible for the administration of our executive pension plans, the
monitoring of our pension fund investments and for management development and
succession planning. The Compensation Committee consists of George K. Petty
(Chairman), James A. Grant, E. Randolph Jayne II and Lynton R. Wilson, all of
whom are outside and unrelated directors.

    EXECUTIVE COMMITTEE

    During the interval between meetings of the board of directors, the
Executive Committee may, subject to any regulations that the board of directors
may from time to time impose and limitations provided by statute and our
by-laws, exercise all of the powers of the board in the management and direction
of our operations. The Executive Committee consists of Derek H. Burney, R.
Fraser Elliott, James A. Grant, and in accordance with the by-laws of the
company, the Chairman of the Board, Lynton R. Wilson. Three of the Executive
Committee's four members are outside and unrelated directors.

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<Page>
                             PRINCIPAL SHAREHOLDERS

    The following table sets forth information regarding the beneficial
ownership of our common shares as of June 15, 2002 and as adjusted to reflect
the sale of our common shares in this offering, by:

    - each of our directors;

    - each of our senior executive officers; and

    - all directors and senior executive officers as a group.

    We are not aware of any person or entity who beneficially owns 10% or more
of our outstanding common shares. Unless otherwise indicated in the table, each
of the individuals named below has sole voting and investment power with respect
to the common shares beneficially owned by them. Beneficial ownership is
determined in accordance with the rules of the Securities and Exchange
Commission. Under these rules, beneficial ownership includes any shares as to
which the individual or entity has sole or shared voting power or investment
power and includes any shares as to which the individual or entity has the right
to acquire beneficial ownership within 60 days after June 15, 2002 through the
exercise of any warrant, stock option or other right. The applicable percentage
of "beneficial ownership" is based upon 219,314,846 common shares outstanding as
of June 15, 2002. Unless otherwise indicated, the business address of the
persons included in the table is CAE Inc., Suite 3060, Royal Bank Plaza,
P.O. Box 30, Toronto, Ontario, Canada, M5J 2J1.

<Table>
<Caption>
                                                                                          PERCENTAGE OF SHARES
                                                 NUMBER OF SHARES BENEFICIALLY OWNED       BENEFICIALLY OWNED
                                                -------------------------------------   ------------------------
                                                OUTSTANDING   RIGHT TO       TOTAL      BEFORE THIS   AFTER THIS
BENEFICIAL OWNER                                  SHARES       ACQUIRE      NUMBER       OFFERING      OFFERING
----------------                                -----------   ---------   -----------   -----------   ----------
<S>                                             <C>           <C>         <C>           <C>           <C>
DIRECTORS AND SENIOR EXECUTIVE OFFICERS
  Lynton R. Wilson, O.C.......................   2,276,176       --        2,276,176        1.04%        *
  Derek H. Burney.............................     142,439     308,000       450,439       *             *
  Donald W. Campbell..........................       8,219      45,000        53,219       *             *
  Paul G. Renaud..............................      90,929     280,000       370,929       *             *
  Rashid A. Khan..............................       1,896      80,500        82,396       *             *
  Rizk (Hani) Macramallah.....................      80,255     107,500       187,755       *             *
  Hartland J. A. Paterson.....................         734       --              734       *             *
  Jean-Francois Thibodeau.....................         284       --              284       *             *
  Robert C. Hedges............................       9,320      16,500        25,820       *             *
  John A. (Ian) Craig.........................      10,000       --           10,000       *             *
  Richard (Dick) J. Currie, C.M...............      --           --           --           *             *
  R. Fraser Elliott, C.M., Q.C................   6,532,072       --        6,532,072        2.98%        2.65%
  H. Garfield Emerson, Q.C....................      16,600       --           16,600       *             *
  Anthony S. Fell.............................     200,000       --          200,000       *             *
  The Honourable James A. Grant, P.C., Q.C....      10,000       --           10,000       *             *
  James F. Hankinson..........................       4,018       --            4,018       *             *
  E. Randolph (Randy) Jayne II................      --           --           --           *             *
  James W. McCutcheon, Q.C....................     100,292       --          100,292       *             *
  George K. Petty.............................       4,011       --            4,011       *             *
  Lawrence N. Stevenson.......................       4,038       --            4,038       *             *
  All directors and senior executive officers
    as a group (20 persons)...................   9,491,283     837,500    10,328,783        4.69%        4.18%
</Table>

------------

*   Less than 1% of the outstanding common shares.

                          DESCRIPTION OF SHARE CAPITAL

    Our authorized capital consists of an unlimited number of common shares,
without par value and an unlimited number of preferred shares, without par
value, issuable in series. As of June 15, 2002, there were 219,314,846 common
shares issued and outstanding. There are no preferred shares issued and
outstanding.

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<Page>
    The holders of our common shares are entitled to one vote per share with
respect to each matter presented to our shareholders on which the holders of
common shares are entitled to vote. The holders of common shares are entitled to
receive rateably any dividends declared by our board of directors out of funds
legally available for that purpose. In the event of our liquidation, dissolution
or winding up, the holders of common shares are entitled to share rateably in
all assets remaining after payment of liabilities. The holders of our common
shares have no preemptive, subscription or conversion rights.

    Our preferred shares may be issued in one or more series as determined by
our board of directors. Our board of directors is authorized to fix the number,
the consideration per share and the rights and restrictions of the preferred
shares of each series. The preferred shares of each series rank on a parity with
the preferred shares of each other series with respect to the payment of
dividends and the return of capital on our liquidation, dissolution or
winding-up. The preferred shares are entitled to preference over the common
shares and any other shares ranking junior to the preferred shares with respect
to the payment of dividends and the return of capital. The special rights and
restrictions attaching to the preferred shares as a class may not be amended
without approval of at least two-thirds of the votes cast at a meeting of the
holders of preferred shares. The holders of preferred shares are not entitled to
any voting rights except as provided by our board of directors when authorizing
a series or as provided by law.

STOCK OPTION PLAN

    Options to purchase common shares may be granted under our stock option plan
to our officers and other key employees and those of certain of our
subsidiaries. The term of an option is normally six years from the date of the
grant except in the case of retirement, cessation of employment, debt or an
optionee's employer ceasing to be us or one of our subsidiaries. The right to
exercise an option in its entirety accrues by 25% annual increments over a
period of four years from the date of grant. The exercise price payable for each
common share covered by an option is based on the market value of common shares
on the day prior to the effective date of the grant of the option. As of
June 15, 2002, 12,103,746 common shares are reserved for grant under our stock
option plan.

SHAREHOLDER RIGHTS PLAN

    We are party to an amended and restated shareholder protection rights plan
with Montreal Trust Company of Canada, dated June 14, 2000. We have issued one
right in respect of each common share outstanding at the close of business on
March 7, 1990. We will issue rights on the same basis for each common share
issued after March 7, 1990 but prior to the earlier of:

    - the time at which the rights become exercisable upon the occurrence of
      specified events;

    - the time at which the right to exercise rights is terminated under the
      terms of the plan; or

    - the date immediately after our annual meeting of shareholders to be held
      in 2003.

    If a person becomes the beneficial owner of 20% or more of our outstanding
common shares other than pursuant to a permitted bid, each right may be
exercised to purchase that number of common shares which have an aggregate
market price equal to twice the exercise price of the rights (which is fixed at
$100) for a price equal to the exercise price. Effectively, this means that,
under certain circumstances, a shareholder can acquire additional common shares
from us at half their then market price.

OWNERSHIP RESTRICTIONS

    There is no law or government decree or regulation in Canada that restricts
the export or import of capital, or affects the remittance of dividends,
interest or other payments to non-resident holders of common shares, other than
withholding tax requirements. See "Income Tax Considerations -- Canadian Federal
Income Tax Considerations".

    There is no limitation imposed by Canadian law or our articles of
incorporation or other charter documents on the right of a non-resident to hold
or vote our common shares, other than as provided by the Investment Canada Act,
which requires notification and, in certain cases, advance review and approval
by the

                                       69
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Government of Canada of the acquisition by a "non-resident" of "control" of a
"Canadian business", all as defined in the Investment Canada Act.

                                  INDEBTEDNESS

    As at March 31, 2002, our total debt was $926.5 million. We will use the net
proceeds of this offering to reduce the amounts outstanding under our revolving
unsecured term credit facilities. One of these credit facilities of
US$200 million, of which, as at July 2, 2002, an amount of $265.6 million
(US$174.0 million) was outstanding, was drawn down to pay for the purchase price
in connection with the acquisition of SimuFlite and expires in June 2003. The
interest rate payable is based on LIBOR plus 0.50%. The second credit facility
of US$350 million and Euro 100 million, of which, as at July 2, 2002, an amount
of $294.7 million (US$193.1 million) was outstanding, expires in April 2006. The
interest rate payable is based on LIBOR (bankers acceptances) or EURIBOR plus
0.50% and we have entered into interest rate swap agreements to fix the interest
rate under a portion of such facility. These facilities are subject to covenants
restricting mainly our ability to sell assets, incur secured indebtedness,
engage in mergers or consolidations and to engage in certain types of
transactions with affiliates. Certain underwriters are lenders or affiliates of
lenders to us under such credit facilities. You should read note 10 to our
consolidated financial statements for a description of other outstanding
indebtedness not being reduced from the net proceeds of this offering.

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<Page>
                           INCOME TAX CONSIDERATIONS

CANADIAN FEDERAL INCOME TAX CONSIDERATIONS

    The following summarizes the principal Canadian federal income tax
considerations under the Income Tax Act (Canada) (the "Tax Act") generally
applicable to the holding and disposition of common shares by a holder who, at
all relevant times for purposes of the Tax Act, is resident in Canada, deals at
arm's length with the company, acquires and holds the common shares as capital
property (a "Resident Holder"), and by a holder who, for purposes of the
Tax Act, is not resident in Canada, deals at arm's length with the company,
acquires and holds the common shares as capital property and does not use or
hold the common shares in the course of carrying on, or otherwise in connection
with, a business in Canada and who, for purposes of the Canada-United States
Income Tax Convention (the "Treaty"), is a resident of the United States, has
never been a resident of Canada, and has not held or used (and does not hold or
use) common shares in connection with a permanent establishment or fixed base in
Canada (a "U.S. Holder"). Generally, common shares will be considered to be
capital property to a holder thereof provided that the holder does not use the
common shares in the course of carrying on a business and such holder has not
acquired them in one or more transactions considered to be an adventure or
concern in the nature of trade. Certain Resident Holders may, in certain
circumstances, treat common shares, and every "Canadian security" (as defined in
the Tax Act) owned by such Resident Holder, as capital property by making an
irrevocable election permitted by subsection 39(4) of the Tax Act. Resident
Holders should consult their own tax advisors for advice as to whether an
election under subsection 39(4) is available and/or advisable in their
particular circumstances.

    This summary does not deal with special situations, such as particular
circumstances of traders or dealers in securities, limited liability companies,
tax-exempt entities, insurers, financial institutions (including those to which
the mark-to-market provisions of the Tax Act apply), nor is it applicable to any
holder of common shares, an interest in which is a "tax shelter investment" for
the purposes of the Tax Act or to U.S. Holders who are non-resident insurers
carrying on an insurance business in Canada and elsewhere.

    This summary is based on the current provisions of the Tax Act and the
regulations thereunder, all specific proposals (the "Tax Proposals") to amend
the Tax Act and regulations publicly announced by or on behalf of the Minister
of Finance (Canada) prior to the date hereof, the provisions of the Treaty, as
amended, and Counsel's understanding of the current published administrative
practice of the Canada Customs and Revenue Agency ("CCRA"). While this summary
assumes that the Tax Proposals will be enacted as currently proposed, no
assurance can be given in this respect.

    This summary is not exhaustive of all possible Canadian federal income tax
considerations and, except for any Tax Proposals, does not take into account or
anticipate any changes in law, whether by legislative, governmental or judicial
decision or action, or any changes in the Treaty or administrative practices of
the CCRA. This summary does not take into account provincial, territorial, U.S.
or other foreign income tax considerations, which may differ significantly from
those discussed herein. Provisions of provincial income tax legislation vary
from province to province in Canada and may differ from federal income tax
legislation. This summary is not intended as legal or tax advice to any
particular holder of common shares and should not be so construed. The tax
consequences to any particular holder of common shares will vary according to
that holder's particular circumstances. Each holder should consult the holder's
own tax advisor with respect to the income tax consequences applicable to the
holder's own particular circumstances.

    TAXATION OF RESIDENT HOLDERS

    DIVIDENDS

    In the case of a Resident Holder who is an individual, any dividends
received or deemed to be received on the common shares will be required to be
included in computing the Resident Holder's income and will be subject to the
gross-up and dividend tax credit rules normally applicable to taxable dividends
received from Canadian resident corporations. A Resident Holder that is a
"private corporation" (or a "subject corporation" as such terms are defined in
the Tax Act) may be liable under Part IV of the Tax Act to pay a refundable tax
of 33 1/3% on dividends received or deemed to be received on the common shares
to the

                                       71
<Page>
extent that such dividends are deductible in computing the Resident Holder's
taxable income. A Resident Holder that is a "Canadian-controlled private
corporation" (as defined in the Tax Act) may be liable to pay an additional
refundable tax of 6 2/3% on dividends or deemed dividends that are not
deductible in computing taxable income.

    DISPOSITIONS

    A disposition, or a deemed disposition, of a common share by a Resident
Holder will generally give rise to a capital gain (or a capital loss) equal to
the amount by which the proceeds of disposition of the common share, net of any
reasonable costs of disposition, exceed (or are less than) the adjusted cost
base of the common share to the Resident Holder. For this purpose, the adjusted
cost base to a Resident Holder of a common share at any particular time will be
determined by averaging the cost of that common share with the adjusted cost
base of all common shares of the company held at that time by the Resident
Holder.

    One-half of any capital gain realized by a Resident Holder will be included
in computing the Resident Holder's income as a taxable capital gain. One-half of
any capital loss realized by a Resident Holder may generally be deducted against
taxable capital gains realized in that year, in the three preceding taxation
years or in any subsequent taxation year, subject to detailed rules contained in
the Tax Act in this regard. A capital loss realized by certain Resident Holders
may be reduced in certain circumstances by the amount of any dividends,
including deemed dividends, which have been received by such holders on the
common shares to the extent and in the manner provided for in the Tax Act. A
Resident Holder that is a "Canadian-controlled private corporation", as defined
in the Tax Act, may be liable to pay an additional refundable tax of 6 2/3% on
certain investment income, including taxable capital gains. Capital gains
realized by a Resident Holder that is an individual may give rise to a liability
for alternative minimum tax. Resident Holders should consult their own tax
advisors with respect to alternative minimum tax.

    TAXATION OF U.S. HOLDERS

    DIVIDENDS

    Dividends paid or credited or deemed to be paid or credited to a
U.S. Holder by the company are subject to Canadian withholding tax. Under the
Treaty, the rate of withholding tax on dividends paid or credited to a
U.S. Holder is generally limited to 15% of the gross amount of the dividend (or
5% in the case of a U.S. Holder that is a corporation beneficially owning at
least 10% of the company's voting shares).

    DISPOSITIONS

    A U.S. Holder is not subject to tax under the Tax Act in respect of a
capital gain realized on the disposition or deemed disposition of a common share
in the open market, nor will capital losses arising therefrom be recognized
under the Tax Act unless the share constitutes "taxable Canadian property" that
is not "treaty-protected property" to the holder thereof for purposes of the
Tax Act.

    A common share will be taxable Canadian property to a U.S. Holder if, at any
time during the 60 month period ending at the time of disposition, the
U.S. Holder or persons with whom the U.S. Holder did not deal at arm's length
(or the U.S. Holder together with such persons) owned, or had options, warrants,
other rights to acquire or an interest in, 25% or more of the company's issued
shares of any class or series. In the case of a U.S. Holder to whom common
shares represent taxable Canadian property, such shares will be considered
treaty-protected property by reason of the Treaty (and no Canadian income tax
will be payable under the Tax Act on any capital gain realized on a disposition
of such shares in the open market) unless the value of such shares is derived
principally from real property situated in Canada. We believe that the value of
our common shares is not derived principally from real property situated in
Canada.

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<Page>
UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS

    Subject to the limitations described in the next paragraph, the following
summary describes the material United States federal income tax consequences to
a holder of the common shares, referred to for purposes of this discussion as a
United States holder, that is:

    - a citizen or resident of the United States;

    - a corporation (or other entity taxable as a corporation) created or
      organized in the United States or under the laws of the United States or
      of any state thereof, including the District of Columbia;

    - an estate, the income of which is includable in gross income for United
      States federal income tax purposes regardless of its source; or

    - a trust, (i) if a court within the United States is able to exercise
      primary supervision over the administration of the trust and one or more
      United States persons have the authority to control all substantial
      decisions of the trust or (ii) if it has elected to be treated as a United
      States person under applicable United States Treasury regulations.

    This summary does not purport to be a comprehensive description of all of
the tax considerations that may be relevant to owning our common shares. This
summary considers only United States holders that will own common shares as
capital assets within the meaning of Section 1221 of the Internal Revenue Code
of 1986, as amended (the "Code").

    This summary is based on current provisions of the Code, current and
proposed Treasury regulations promulgated thereunder, and administrative and
judicial decisions as of the date hereof, all of which are subject to change,
possibly on a retroactive basis. This summary does not address all aspects of
United States federal income taxation that may be relevant to any particular
shareholder based on such shareholder's individual circumstances. In particular,
this summary does not address the potential application of the alternative
minimum tax or United States federal income tax consequences to shareholders
that are subject to special treatment, including:

    - taxpayers who are broker-dealers or insurance companies;

    - taxpayers who have elected mark-to-market accounting;

    - tax-exempt organizations;

    - financial institutions or "financial service entities";

    - taxpayers who hold common shares as part of a straddle, "hedge" or
      "conversion transaction" with other investments;

    - dealers in foreign currency;

    - holders who received common shares as compensation;

    - holders who own, directly or indirectly (including through attribution),
      more than 10 percent of our common shares;

    - insurance companies;

    - partnerships or other pass through entities; and

    - taxpayers whose functional currency is not the United States dollar.

    In addition, this summary does not address any aspect of state, local or
non-United States tax laws.

    Material aspects of United States federal income tax relevant to a holder
other than a United States holder, referred to for purposes of this discussion
as a non-United States holder, are also discussed below.

    Each holder of common shares is advised to consult such holder's own tax
advisor with respect to the specific tax consequences to such holder of
purchasing, holding or disposing of the common shares.

                                       73
<Page>
    TAXATION OF THE DISPOSITION OF COMMON SHARES

    Upon the sale, exchange or other disposition of common shares, a United
States holder generally will recognize capital gain or loss in an amount equal
to the difference between such United States holder's tax basis in the common
shares, which is usually the cost of such shares, and the amount realized on the
disposition. Capital gain from the sale, exchange or other disposition of common
shares held more than one year is long-term capital gain which, in the case of
noncorporate holders, is subject, in general, to lower tax rates than ordinary
income. Gains recognized by a United States holder on a sale, exchange or other
disposition of common shares will be treated as United States source income for
United States foreign tax credit purposes. A loss recognized by a United States
holder on the sale, exchange or other disposition of common shares is allocated
to United States source income. The deductibility of a capital loss recognized
on the sale, exchange or other disposition of common shares is subject to
limitations.

    If a United States holder sells common shares and receives Canadian Dollars,
changes in the value of the United States dollar and the Canadian dollar between
the date of sale and the date of settlement can create income tax consequences
to the United States holder. A United States holder that receives foreign
currency, including Canadian dollars, upon disposition of common shares and
converts the foreign currency into United States dollars subsequent to receipt
will have foreign exchange gain or loss based on any appreciation or
depreciation in the value of the foreign currency against the United States
dollar, which will generally be United States source gain or loss.

    TAXATION OF DIVIDENDS PAID ON COMMON SHARES

    In the event we pay a dividend, a United States holder will be required to
include in gross income as ordinary income the amount of any distribution paid
on common shares, including any Canadian taxes withheld from the amount paid, on
the date the distribution is received to the extent the distribution is paid out
of our current or accumulated earnings and profits as determined for United
States federal income tax purposes. Distributions in excess of such earnings and
profits will be applied against and will reduce the United States holder's
income tax basis in the common shares and, to the extent in excess of such
basis, will be treated as gain from the sale or exchange of common shares.
Distributions of current or accumulated earnings and profits will be foreign
source passive income, or, if received by certain financial institutions,
financial services income, for United States foreign tax credit purposes and
will not qualify for the dividends received deduction available to corporations.

    Distributions of current or accumulated earnings and profits paid in
Canadian dollars to a United States holder will be includable in the income of a
United States holder in a United States dollar amount calculated by reference to
the exchange rate on the date the distribution is received. A United States
holder that receives a Canadian dollars distribution and converts the Canadian
dollars into United States dollars subsequent to receipt will have foreign
exchange gain or loss based on any appreciation or depreciation in the value of
the Canadian dollars against the United States dollar, which will generally be
United States source ordinary income or loss.

    The rules relating to foreign tax credits are extremely complex and the
availability of a foreign tax credit depends on numerous factors. Prospective
purchasers of our common shares should consult their own tax advisors concerning
the application of the United States foreign tax credit rules to their
particular situation.

    We have not calculated, nor would we expect to calculate in the future, our
earnings and profits under United States tax rules. Therefore, we cannot provide
United States holders with such information.

    PASSIVE FOREIGN INVESTMENT COMPANY RULES

    We believe that we are not a passive foreign investment company (a "PFIC")
for United States federal income tax purposes and do not believe we will become
a PFIC in the foreseeable future. However, we cannot assure you that we will not
become a PFIC because this conclusion is a factual determination made annually
and thus is subject to change and the principles and methodology used in
determining whether a company is a PFIC are not completely clear.

                                       74
<Page>
    In general, we will be a PFIC with respect to a United States holder if, for
any taxable year in which the United States holder held common shares, either:

    - at least 75% of our gross income for the taxable year is passive income
      (the "income test");

    - at least 50% of the value, determined on the basis of a quarterly average,
      of the assets we own is attributable to assets that produce or are held
      for the production of passive income (the "asset test").

    If we own, directly or indirectly, at least 25% by value of the stock of
another corporation, we will be treated for purposes of the PFIC tests as owning
our proportionate share of the assets of the other corporation, and as receiving
directly our proportionate share of the other corporation's income.

    If we are classified as a PFIC in any year with respect to which a United
States person is a shareholder, we generally will continue to be treated as a
PFIC with respect to such shareholder in all succeeding years, regardless of
whether we continue to meet the income or asset test described above.

    If we are treated as a passive foreign investment company, unless a United
States holder elects to have us treated as a "qualified electing fund" under
applicable United States tax laws, or makes a "mark to market election," each of
which are described below, the following income tax consequences will result to
such United States holder:

    1.  Distributions with respect to our common shares made by us during a
       taxable year to a United States holder that are "excess distributions"
       must be allocated rateably to each day of the United States holder's
       holding period. The amounts allocated to the current taxable year and to
       taxable years prior to the first year in which we were classified as a
       passive foreign investment company are included as ordinary income in a
       United States holder's gross income for that year. The amount allocated
       to each other prior taxable year is taxed as ordinary income at the
       highest rate in effect for the United States holder in that prior year
       and the tax is subject to an interest charge at the rate applicable to
       deficiencies in income taxes.

    2.  The entire amount of any gain realized upon the sale or other
       disposition of our common shares will be treated as an excess
       distribution made in the year of sale or other disposition and as a
       consequence will be treated as ordinary income and, to the extent
       allocated to years prior to the year of sale or disposition, will be
       subject to the interest charge described above.

    The foregoing rules with respect to distributions and dispositions may be
avoided if a United States holder is eligible for and timely makes either a
valid "qualifying electing fund" election, in which case the United States
holder generally would be required to include in income on a current basis its
pro rate share of our ordinary income and net capital gain or a valid
"mark-to-market" election. We do not currently intend to complete the actions
necessary, including providing the information necessary, for United States
holders to make a qualifying electing fund election in the event that we were
considered a passive foreign investment company for any taxable year.

    Assuming our common shares are regularly traded on a qualified exchange for
purposes of the passive foreign investment company rules, the "mark-to-market"
election would be available with respect to our common shares. If a United
States holder makes a "mark-to-market" election, such holder will include in
each year as ordinary income the excess, if any, of the fair market value of its
common shares at the end of the taxable year over their adjusted tax basis. In
addition, such United States holder will be permitted an ordinary loss in
respect of the excess, if any, of the adjusted tax basis of its common shares
over their fair market value at the end of the taxable year, but only to the
extent of the net amount previously included in income as a result of the
"mark-to-market" election. The electing United States holders' basis in our
common shares will be adjusted to reflect any such income or loss amounts. Any
gain or loss on the sale of the our common shares will be ordinary income or
loss, except that such loss will be ordinary loss only to the extent of the
previously included net "mark-to-market" gain.

    United States holders are urged to consult their tax advisors concerning
United States federal income tax consequences of holding our common shares if we
were a passive foreign investment company.

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<Page>
    TAX CONSEQUENCES FOR NON-UNITED STATES HOLDERS OF COMMON SHARES

    Except as described in "information reporting and back up withholding"
below, a non-United States holder of common shares will not be subject to United
States federal income or withholding tax on the payment of dividends on, and the
proceeds from the disposition of, common shares, unless:

    - such item is effectively connected with the conduct by the non-United
      States holder of a trade or business in the United States and, in the case
      of a resident of a country which has a treaty with the United States, such
      item is attributable to a permanent establishment or, in the case of an
      individual, a fixed place of business maintained by the non-United States
      holder, in the United States;

    - the non-United States holder is an individual who holds the common shares
      as a capital asset and is present in the United States for 183 days or
      more in the taxable year of the disposition and certain other conditions
      are met; or

    - the non-United States holder is subject to tax pursuant to the provisions
      of United States tax law applicable to United States expatriates.

    INFORMATION REPORTING AND BACKUP WITHHOLDING

    United States holders generally are subject to information reporting
requirements and back up withholding at a rate of 30% (subject to reduction in
future years) with respect to proceeds paid from the disposition of common
shares and dividends paid in the United States on common shares. Backup
withholding will not apply if a United States holder provides an IRS Form W-9
or otherwise establishes an exemption from such withholding.

    Non-United States holders generally are not subject to information reporting
or backup withholding with respect to dividends paid on, or the proceeds from
the disposition of, common shares, provided that such non-United States holder
provides a taxpayer identification number, certifies to its foreign status, or
otherwise establishes an exemption from such requirements.

    The amount of any backup withholding generally will be allowed as a credit
against a United States or non-United States holder's United States federal
income tax liability and may entitle such holder to a refund, provided that
certain required information is furnished to the IRS.

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                                  UNDERWRITING

    Under the terms and subject to the conditions contained in an underwriting
agreement dated       , 2002, we have agreed to sell to the underwriters named
below, for whom Credit Suisse First Boston Corporation, Scotia Capital Inc. and
Goldman, Sachs & Co. are acting as representatives, the following respective
numbers of common shares:

<Table>
<Caption>
                                                                 Number
                        Underwriter                             of Shares
                        -----------                           -------------
<S>                                                           <C>
Credit Suisse First Boston Corporation......................
Scotia Capital Inc..........................................
Goldman, Sachs & Co.........................................
RBC Dominion Securities Inc.................................
SG Cowen Securities Corporation.............................
Dundee Securities Corporation...............................
Raymond James Ltd...........................................
                                                               ----------
  Total.....................................................   27,000,000
                                                               ==========
</Table>

    The underwriting agreement provides that the underwriters are obligated to
purchase all of the common shares in the offering if any are purchased, other
than those shares covered by the over-allotment option described below. The
underwriting agreement also provides that if an underwriter defaults, the
purchase commitments of non-defaulting underwriters may be increased or the
offering may be terminated. The obligations of the underwriters under the
underwriting agreement may be terminated at their discretion on the basis of
their assessment of the state of the financial markets and also upon the
occurrence of certain stated events.

    This offering is being made concurrently in the United States and in all of
the provinces of Canada pursuant to the multi-jurisdictional disclosure system
implemented by the securities regulatory authorities in the United States and
Canada. The common shares will be offered in the United States and Canada
through the underwriters either directly or through their respective U.S. or
Canadian registered broker-dealer affiliates. Subject to applicable law, the
underwriters may offer the common shares outside of the United States
and Canada.

    We have granted to the underwriters a 30-day option to purchase on a
pro rata basis up to 4,050,000 additional shares at the initial public offering
price less the underwriting commissions. The option may be exercised only to
cover any over-allotments of common shares.

    The underwriters propose to offer common shares initially at the public
offering price on the cover page of this prospectus and to selling group members
at that price less a selling concession of US$       per share. The underwriters
and selling group members may allow a discount of US$       per share on sales
to other broker/dealers. After the public offering the representative may change
the public offering price and concession and discount to broker/dealers.

    The following table summarizes the compensation and estimated expenses we
will pay:

<Table>
<Caption>
                                                        Per Share                           Total
                                             -------------------------------   -------------------------------
                                                Without            With           Without            With
                                             Over-Allotment   Over-Allotment   Over-Allotment   Over-Allotment
                                             --------------   --------------   --------------   --------------
<S>                                          <C>              <C>              <C>              <C>
Underwriting commissions paid by us........     $                $                $                $
Expenses payable by us.....................     $                $                $                $
</Table>

    The underwriters will not confirm sales to any accounts over which they
exercise discretionary authority without first receiving a written consent from
those accounts.

    Some of the underwriters or their affiliates have engaged in, and may in the
future engage in, commercial dealings in the ordinary course of business with
us. They have received or will receive customary

                                       77
<Page>
fees and commissions for these transactions. In addition, Credit Suisse First
Boston Corporation, Scotia Capital Inc., RBC Dominion Securities Inc. and SG
Cowen Securities Corporation are, or are affiliates of, lenders to us under our
revolving credit facilities. A portion of the proceeds from the sale of our
common shares offered hereby will be used to reduce the indebtedness which
amounted to approximately $281.4 million as at July 2, 2002 under our revolving
credit facilities provided by such lenders. Consequently, we may be considered
to be a connected issuer of these underwriters under securities regulations in
certain provinces in Canada. We are currently in compliance with the covenants
and other obligations established pursuant to the revolving credit facilities.
Neither the lenders under the credit facilities nor the underwriters were
involved in our initial decision to distribute the common shares. The
underwriters negotiated the terms and conditions of the offering and will not
benefit in any manner from the offering other than the payment of their
commission as described above. We intend to use more than 10% of the net
proceeds from the sale of the common shares to repay indebtedness owed by us to
such lenders. The offering is being made in compliance with the requirements of
Rule 2710(c)(8) of the National Association of Securities Dealers, Inc.
Conduct Rules.

    We have agreed that we will not offer, sell, contract to sell, pledge or
otherwise dispose of, directly or indirectly, or file with the Securities and
Exchange Commission a registration statement under the U.S. Securities Act of
1933 or a prospectus under applicable Canadian securities legislation relating
to, any of our common shares or securities convertible into or exchangeable or
exercisable for any of our common shares, or publicly disclose the intention to
make any offer, sale, pledge, disposition or filing, without the prior written
consent of Credit Suisse First Boston Corporation and Scotia Capital Inc. for a
period of 90 days after the date of this prospectus, except grants of options or
issuances pursuant to the exercise of employee stock options outstanding on the
date hereof or pursuant to our dividend reinvestment plan.

    Our officers and directors have agreed that they will not offer, sell,
contract to sell, pledge or otherwise dispose of, directly or indirectly, any of
our common shares or securities convertible into or exchangeable or exercisable
for any of our common shares, enter into a transaction that would have the same
effect, or enter into any swap, hedge or other arrangement that transfers, in
whole or in part, any of the economic consequences of ownership of our common
shares, whether any of these transactions are to be settled by delivery of our
common shares or other securities, in cash or otherwise, or publicly disclose
the intention to make any offer, sale, pledge or disposition, or to enter into
any transaction, swap, hedge or other arrangement, without, in each case, the
prior written consent of Credit Suisse First Boston Corporation and Scotia
Capital Inc. for a period of 90 days after the date of this prospectus.

    We have agreed to indemnify the underwriters against liabilities under the
U.S. Securities Act and the securities legislation of each Canadian province, or
contribute to payments that the underwriters may be required to make in
that respect.

    Our common shares are listed and posted for trading on the TSX under the
symbol "CAE". We have applied to list our common shares on the NYSE under the
symbol "CGT".

    In connection with the offering the underwriters may engage in stabilizing
transactions, over-allotment transactions, syndicate covering transactions and
penalty bids in accordance with Regulation M under the U.S. Securities Exchange
Act of 1934.

    - Stabilizing transactions permit bids to purchase the underlying security
      so long as the stabilizing bids do not exceed a specified maximum.

    - Over-allotment transactions involve sales by the underwriters of shares in
      excess of the number of shares the underwriters are obligated to purchase,
      which creates a syndicate short position. The short position may be either
      a covered short position or a naked short position. In a covered short
      position, the number of shares over-allotted by the underwriters is not
      greater than the number of shares that they may purchase in the
      over-allotment option. In a naked short position, the number of shares
      involved is greater than the number of shares in the over-allotment
      option. The underwriters may close out any covered short position by
      either exercising their over-allotment option and/or purchasing shares in
      the open market.

                                       78
<Page>
    - Syndicate covering transactions involve purchases of the common shares in
      the open market after the distribution has been completed in order to
      cover syndicate short positions. In determining the source of shares to
      close out the short position, the underwriters will consider, among other
      things, the price of shares available for purchase in the open market as
      compared to the price at which they may purchase shares through the
      over-allotment option. If the underwriters sell more shares than could be
      covered by the over-allotment option, a naked short position, the position
      can only be closed out by buying shares in the open market. A naked short
      position is more likely to be created if the underwriters are concerned
      that there could be downward pressure on the price of the shares in the
      open market after pricing that could adversely affect investors who
      purchase in the offering.

    - Penalty bids permit the representatives to reclaim a selling concession
      from a syndicate member when the common shares originally sold by the
      syndicate member is purchased in a stabilizing or syndicate covering
      transaction to cover syndicate short positions.

    These stabilizing transactions, over-allotment transactions, syndicate
covering transactions and penalty bids may have the effect of raising or
maintaining the market price of our common shares or preventing or retarding a
decline in the market price of the common shares. As a result the price of our
common shares may be higher than the price that might otherwise exist in the
open market. These transactions may be effected on the TSX, the NYSE or
otherwise and, if commenced, may be discontinued at any time.

    In accordance with the applicable policies of several Canadian provinces,
the underwriters may not, throughout the period of distribution, bid for or
purchase common shares. Exceptions, however, exist where the bid or purchase is
not made to create the appearance of active trading in, or rising prices of, the
common shares. These exceptions include a bid or purchase permitted under the
by-laws and rules of the TSX relating to market stabilization and passive market
making activities and a bid or purchase made for and on behalf of a customer
where the order was not solicited during the period of distribution. We have
been advised that in connection with the offering and pursuant to the first
exception mentioned above, the underwriters may over-allot or effect
transactions which stabilize or maintain the market price of the common shares
at levels other than those which might otherwise prevail on the open market.

    A prospectus in electronic format may be made available on the web sites
maintained by one or more of the underwriters, or selling group members, if any,
participating in this offering. The representatives may agree to allocate a
number of shares to underwriters and selling group members for sale to their
online brokerage account holders. Internet distributions will be allocated by
the underwriters and selling group members that will make internet distribution
on the same basis as other allocations.

                                 LEGAL MATTERS

    Certain legal matters relating to the sale of the common shares offered by
this prospectus will be passed upon on our behalf by Stikeman Elliott with
respect to matters of Canadian law and Shearman & Sterling, Toronto, Ontario,
with respect to matters of U.S. law. R. Fraser Elliott and The Honourable James
A. Grant, each of whom are senior partners of Stikeman Elliott, are both members
of our Board of Directors and Executive Committee. Mr. Elliott owns
6,532,072 common shares which represent 2.98% of our outstanding common shares
as at June 15, 2002. Mr. Grant is also a member of our Compensation Committee.
Certain legal matters relating to the sale of the common shares offered by this
prospectus will be passed upon on behalf of the Underwriters by Osler, Hoskin &
Harcourt LLP, Montreal, Quebec and Toronto, Ontario with respect to matters of
Canadian law and Skadden, Arps, Slate, Meagher & Flom LLP, Toronto, Ontario with
respect to matters of U.S. law. Except for shares held by Mr. Elliott, partners
and associates of Stikeman Elliott and Osler, Hoskin & Harcourt LLP own, as a
group, less than 1% of our common shares.

                                    EXPERTS

    Our auditors are PricewaterhouseCoopers LLP, Montreal, Quebec. Our
consolidated financial statements as at March 31, 2002 and 2001 and for each of
the three years in the period ended March 31, 2002 included in this prospectus
have been so included in reliance on the report of PricewaterhouseCoopers LLP,
independent auditors, given on the authority of such firm as experts in
accounting and auditing.

                                       79
<Page>
    The combined financial statements of SimuFlite as at December 31, 2001 and
for the year ended December 31, 2001 included in this prospectus have been so
included in reliance on the report of PricewaterhouseCoopers LLP, independent
auditors, given on the authority of such firm as experts in accounting
and auditing.

                          TRANSFER AGENT AND REGISTRAR

    The transfer agent and registrar for our common shares in Canada is
Computershare Trust Company of Canada, at its principal offices in Toronto. The
transfer agent and registrar for our common shares in the United States is
Computershare Trust Company, Inc., at its principal offices in
Denver, Colorado.

                      DOCUMENTS INCORPORATED BY REFERENCE

    The following documents, filed with the various securities commissions or
similar authorities in each of the provinces of Canada, are specifically
incorporated by reference into and form an integral part of this prospectus:

    (a) Annual Information Form of CAE dated August 8, 2001 other than the
       sections entitled "Selected Consolidated Financial Information" and
       "Review of Operations and MD&A", which are superseded by the information
       contained in this prospectus;

    (b) Management Information Circular dated June 10, 2002 in connection with
       the annual meeting of shareholders of CAE to be held on August 7, 2002
       other than the sections entitled "Report on Executive Compensation",
       "Determination of the President and Chief Executive Officer's
       Compensation" and "Statement of Corporate Governance Practices";

    (c) Audited Consolidated Financial Statements of CAE for the year ended
       March 31, 2002 and the Auditors' Report thereon; and

    (d) Management's Discussion and Analysis for the year ended March 31, 2002.

    All documents and any material change report (excluding confidential
material change reports) of the type referred to in the preceding paragraphs
filed by us with a securities commission or any similar authority in any of the
provinces of Canada, after the date of this prospectus and prior to the
termination of the offering, shall be deemed to be incorporated by reference in
this prospectus.

    The information permitted to be omitted from this prospectus will be
contained in a supplemented prospectus and will be incorporated by reference in
this prospectus as of the date of the supplemented prospectus.

    ANY STATEMENT CONTAINED IN A DOCUMENT INCORPORATED OR DEEMED TO BE
INCORPORATED BY REFERENCE HEREIN SHALL BE DEEMED TO BE MODIFIED OR SUPERSEDED
FOR THE PURPOSES OF THIS PROSPECTUS TO THE EXTENT THAT A STATEMENT CONTAINED
HEREIN, OR IN ANY OTHER SUBSEQUENTLY FILED DOCUMENT WHICH ALSO IS INCORPORATED
OR IS DEEMED TO BE INCORPORATED BY REFERENCE HEREIN, MODIFIES OR SUPERSEDES SUCH
STATEMENT. THE MODIFYING OR SUPERSEDING STATEMENT NEED NOT STATE THAT IT HAS
MODIFIED OR SUPERSEDED A PRIOR STATEMENT OR INCLUDE ANY OTHER INFORMATION SET
FORTH IN THE DOCUMENT THAT IT MODIFIES OR SUPERSEDES. THE MAKING OF A MODIFYING
OR SUPERSEDING STATEMENT WILL NOT BE DEEMED AN ADMISSION FOR ANY PURPOSES THAT
THE MODIFIED OR SUPERSEDED STATEMENT, WHEN MADE, CONSTITUTED A
MISREPRESENTATION, AN UNTRUE STATEMENT OF A MATERIAL FACT OR AN OMISSION TO
STATE A MATERIAL FACT THAT IS REQUIRED TO BE STATED OR THAT IS NECESSARY TO MAKE
A STATEMENT NOT MISLEADING IN LIGHT OF THE CIRCUMSTANCES IN WHICH IT WAS MADE.
ANY STATEMENT SO MODIFIED OR SUPERSEDED SHALL NOT BE DEEMED, EXCEPT AS SO
MODIFIED OR SUPERSEDED, TO CONSTITUTE A PART OF THIS PROSPECTUS.

    Copies of documents incorporated by reference herein and not delivered with
this prospectus may be obtained upon request without charge from our Secretary
at our head office: Suite 3060, Royal Bank Plaza, P.O. Box 30, Toronto, Ontario,
Canada M5J 2J1, telephone: (416) 865-0070. Copies of these documents are
available on the System for Electronic Document Analysis and Retrieval of the
Canadian Securities Administrators at www.sedar.com.

                                       80
<Page>
                      WHERE YOU CAN FIND MORE INFORMATION

    We have filed with the Securities and Exchange Commission a registration
statement on Form F-10 with respect to the common shares being sold in this
offering. This prospectus does not contain all the information set forth in the
registration statement. For further information about us and the common shares
to be sold in this offering, please refer to the registration statement.

    You may review a copy of the registration statement, including exhibits and
schedules filed with it, at the SEC's public reference facilities in Room 1024,
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C., 20549. You may also
obtain copies of such materials from the Public Reference Section of the SEC,
Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C., 20549, at
prescribed rates. The registration statement and other information filed by us
with the SEC is also available on the SEC's world wide website on the Internet
at http://www.sec.gov. You may call the SEC at 1-800-SEC-0330 for further
information on the public reference rooms. These SEC filings are also available
to the public from commercial document retrieval services.

    Prior to this offering, we have not been required to file reports with the
SEC. Following consummation of the offering, we will be required to file reports
and other information with the SEC under the U.S. Securities Exchange Act of
1934 and with the securities regulators in each of the provinces of Canada under
the applicable provincial securities legislation. Under a multi-jurisdictional
disclosure system adopted by the United States, such reports and other
information may be prepared in accordance with the disclosure requirements of
Canada, which requirements are different from those of the United States. As a
foreign private issuer, we are exempt from the rules under the
U.S. Securities Exchange Act of 1934 prescribing 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. Securities Exchange Act of 1934. In addition, we are
not required to publish financial statements as frequently or as promptly as
U.S. companies.

    You are invited to read and copy any reports, statements or other
information that we file with the SEC at its public reference room. Our public
filings in Canada can also be inspected on the System for Electronic Document
Analysis and Retrieval of the Canadian Securities Administrators at
www.sedar.com.

             DOCUMENTS FILED AS PART OF THE REGISTRATION STATEMENT

    The following documents have been filed with the SEC as part of the
Registration Statement of which this prospectus forms a part: (i) the documents
listed above under "Documents Incorporated by Reference"; (ii) the consents of
PricewaterhouseCoopers LLP, Montreal and Dallas; (iii) powers of attorney from
certain of our directors and officers and from our authorized representative in
the United States; and (iv) the underwriting agreement between CAE and the
underwriters.

                                       81
<Page>
                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<Table>
<Caption>
                                                                PAGE
                                                              --------
<S>                                                           <C>
CAE INC.

Report of PricewaterhouseCoopers LLP........................       F-2

Consolidated Balance Sheets as at March 31, 2001 and 2002...       F-3

Consolidated Statements of Earnings for the years ended
  March 31, 2000, 2001 and 2002.............................       F-4

Consolidated Statements of Retained Earnings for the years
  ended March 31, 2000, 2001 and 2002.......................       F-5

Consolidated Statements of Cash Flow for the years ended
  March 31, 2000, 2001 and 2002.............................       F-6

Notes to Consolidated Financial Statements..................       F-7

Unaudited Pro Forma Condensed Consolidated Financial
  Information...............................................      F-35

Unaudited Pro Forma Condensed Consolidated Statement of
  Earnings from Continuing Operations.......................      F-36

Notes to Unaudited Pro Forma Condensed Consolidated
  Statement of Earnings.....................................      F-37

SIMUFLITE TRAINING INTERNATIONAL, INC.

Report of PricewaterhouseCoopers LLP........................      F-39

Combined Balance Sheet as at December 31, 2001..............      F-40

Combined Statement of Operations for the year ended
  December 31, 2001.........................................      F-41

Combined Statement of Stockholder's Equity for the year
  ended December 31, 2001...................................      F-42

Combined Statement of Cash Flows for the year ended
  December 31, 2001.........................................      F-43

Notes to Financial Statements...............................      F-44
</Table>

                                      F-1
<Page>
                                AUDITORS' REPORT

TO THE BOARD OF DIRECTORS OF CAE INC.

We have audited the consolidated balance sheets of CAE Inc. as at March 31, 2002
and 2001 and the consolidated statements of earnings and retained earnings and
cash flows for each of the years in the three-year period ended March 31, 2002.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.

We conducted our audits in accordance with Canadian generally accepted auditing
standards. Those standards require that we plan and perform an audit to obtain
reasonable assurance whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.

In our opinion, these consolidated financial statements present fairly, in all
material respects, the financial position of the Company as at March 31, 2002
and 2001 and the results of its operations and its cash flows for each of the
years in the three-year period ended March 31, 2002 in accordance with Canadian
generally accepted accounting principles.

/s/ PricewaterhouseCoopers LLP
Chartered Accountants
Montreal, Canada
May 8, 2002 except for Note 21 D and Note 23 which are as at July 3, 2002

COMMENTS BY AUDITOR FOR U.S. READERS ON CANADA-U.S. REPORTING DIFFERENCE

In the United States, reporting standards for auditors require the addition of
an explanatory paragraph (following the opinion paragraph) when there is a
change in accounting principles that has a material effect on the comparability
of the company's financial statements, such as the changes described in Note 1
to the consolidated financial statements. Our report to the shareholders dated
May 8, 2002 except for Note 21 D and Note 23 which are as at July 3, 2002 is
expressed in accordance with Canadian reporting standards which do not require a
reference to such a change in accounting principles in the auditors' report when
the change is properly accounted for and adequately disclosed in the financial
statements.

/s/ PricewaterhouseCoopers LLP
Chartered Accountants
Montreal, Canada
May 8, 2002 except for Note 21 D and Note 23 which are as at July 3, 2002

                                      F-2
<Page>
                                    CAE INC.

                          CONSOLIDATED BALANCE SHEETS

<Table>
<Caption>
                                                                  AS AT MARCH 31
                                                              -----------------------
                                                                 2002         2001
                                                              ----------   ----------
                                                              (amounts in millions of
                                                                   Cdn dollars)
<S>                                                           <C>          <C>
ASSETS
Current assets
  Cash......................................................   $   88.8     $  156.8
  Short-term investments....................................       21.3        122.8
  Accounts receivable (note 4)..............................      378.2        245.6
  Inventories (note 5)......................................      130.9         99.4
  Prepaid expenses..........................................        9.9          8.6
  Income taxes recoverable..................................       15.8          8.2
  Future income taxes (note 14).............................       28.9         15.4
                                                               --------     --------
                                                                  673.8        656.8
                                                               --------     --------
Assets of discontinued operations (note 3)..................      123.8        370.9
Property, plant and equipment, net (note 6).................      838.5        227.2
Future income taxes (note 14)...............................       71.3         15.9
Intangible assets (note 7)..................................      163.4       --
Goodwill (note 8)...........................................      375.5         18.5
Other assets (note 9).......................................      138.5         82.8
                                                               --------     --------
                                                               $2,384.8     $1,372.1
                                                               ========     ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
  Accounts payable and accrued liabilities..................   $  420.5     $  315.0
  Deposits on contracts.....................................      189.1        175.9
  Long-term debt due within one year........................       37.5          2.3
  Future income taxes (note 14).............................       50.4         14.5
                                                               --------     --------
                                                                  697.5        507.7
                                                               --------     --------
Liabilities of discontinued operations (note 3).............       40.5        106.6
Long-term debt (note 10)....................................      889.0        263.0
Long-term liabilities.......................................       73.7         20.7
Future income taxes (note 14)...............................       65.6         10.0
                                                               --------     --------
                                                                1,766.3        908.0
                                                               --------     --------
SHAREHOLDERS' EQUITY
Capital stock (note 11).....................................      186.8        159.4
Retained earnings...........................................      446.8        321.2
Currency translation adjustment.............................      (15.1)       (16.5)
                                                               --------     --------
                                                                  618.5        464.1
                                                               --------     --------
                                                               $2,384.8     $1,372.1
                                                               ========     ========
</Table>

Contingencies (note 16)

Approved by the Board:

<Table>
<S>                                              <C>
              (Signed) D.H. BURNEY                             (Signed) L.R. WILSON
                    Director                                         Director
</Table>

                                      F-3
<Page>
                                    CAE INC.

                      CONSOLIDATED STATEMENTS OF EARNINGS

<Table>
<Caption>
                                                                   YEARS ENDED MARCH 31
                                                              ------------------------------
                                                                2002       2001       2000
                                                              --------   --------   --------
                                                                 (amounts in millions of
                                                              Cdn dollars, except per share
                                                                         amounts)
<S>                                                           <C>        <C>        <C>
Revenue
  Civil Simulation and Training.............................  $  545.2    $481.5     $480.2
  Military Simulation and Marine Controls...................     581.3     409.9      384.9
                                                              --------    ------     ------
                                                              $1,126.5    $891.4     $865.1
                                                              --------    ------     ------
Operating earnings
  Civil Simulation and Training.............................  $  152.3    $117.0     $ 82.3
  Military Simulation and Marine Controls...................      90.0      34.9       15.4
                                                              --------    ------     ------
Earnings from continuing operations before interest and
  income taxes..............................................     242.3     151.9       97.7
Interest expense (income), net (note 10A (xi))..............      22.7      (6.3)       7.3
                                                              --------    ------     ------
Earnings from continuing operations before income taxes.....     219.6     158.2       90.4
Income taxes (note 14)......................................      70.3      53.0       28.1
                                                              --------    ------     ------
Earnings from continuing operations.........................  $  149.3    $105.2     $ 62.3
Results of discontinued operations (note 3).................       1.3       2.9       36.2
                                                              --------    ------     ------
Net earnings................................................  $  150.6    $108.1     $ 98.5
                                                              ========    ======     ======
Earnings and diluted earnings per share from continuing
  operations................................................  $   0.69    $ 0.49     $ 0.28
                                                              ========    ======     ======
Net earnings and diluted net earnings per share.............  $   0.69    $ 0.50     $ 0.45
                                                              ========    ======     ======
Average number of shares outstanding........................     217.6     215.7      219.0
                                                              ========    ======     ======
</Table>

                                      F-4
<Page>
                                    CAE INC.

                  CONSOLIDATED STATEMENTS OF RETAINED EARNINGS

<Table>
<Caption>
                                                                   YEARS ENDED MARCH 31
                                                              ------------------------------
                                                                2002       2001       2000
                                                              --------   --------   --------
                                                                 (amounts in millions of
                                                                       Cdn dollars)
<S>                                                           <C>        <C>        <C>
Retained earnings at beginning of year......................   $321.2     $241.9     $194.2
Adjustment for changes in accounting policies (note 1)......    --          (6.0)     --
Excess of common share purchase price over amount charged to
  capital stock.............................................    --          (1.2)     (30.2)
Net earnings................................................    150.6      108.1       98.5
Dividends...................................................    (25.0)     (21.6)     (20.6)
                                                               ------     ------     ------
Retained earnings at end of year............................   $446.8     $321.2     $241.9
                                                               ======     ======     ======
</Table>

                                      F-5
<Page>
                                    CAE INC.

                      CONSOLIDATED STATEMENTS OF CASH FLOW

<Table>
<Caption>
                                                                   YEARS ENDED MARCH 31
                                                              ------------------------------
                                                                2002       2001       2000
                                                              --------   --------   --------
                                                                 (amounts in millions of
                                                                       Cdn dollars)
<S>                                                           <C>        <C>        <C>
OPERATING ACTIVITIES
Earnings from continuing operations.........................  $ 149.3    $ 105.2    $  62.3
Adjustments to reconcile earnings to cash flows from
  operating activities:
  Amortization..............................................     43.1       19.1       22.3
  Future income taxes.......................................      7.5       (7.7)      (9.1)
  Investment tax credit.....................................    (19.0)     (22.5)     (18.3)
  Other.....................................................     (0.2)     (13.5)      (1.9)
  Decrease (increase) in non-cash working capital
    (note 15)...............................................     (7.6)      79.1      144.1
                                                              -------    -------    -------
NET CASH PROVIDED BY CONTINUING OPERATING ACTIVITIES........    173.1      159.7      199.4
                                                              -------    -------    -------
INVESTING ACTIVITIES
Purchase of businesses (note 2).............................   (757.6)     --         --
Proceeds from disposal of businesses (note 3)...............    187.1        5.7       52.5
Short-term investments......................................    101.5      (51.7)     (71.1)
Capital expenditures........................................   (249.6)     (76.3)     (21.8)
Proceeds from sale and leaseback of assets..................     42.6      --          35.5
Deferred development costs..................................    (31.1)     (13.7)     --
Deferred pre-operating costs................................    (15.1)      (4.2)      (1.9)
Other assets................................................    (33.0)      (7.8)     (10.1)
                                                              -------    -------    -------
NET CASH USED IN CONTINUING INVESTING ACTIVITIES............   (755.2)    (148.0)     (16.9)
                                                              -------    -------    -------
FINANCING ACTIVITIES
Proceeds from long-term debt................................    755.8      --         --
Repayments of long-term debt................................   (195.6)     (16.2)      (5.5)
Dividends paid..............................................    (24.8)     (21.2)     (20.4)
Purchase of capital stock...................................    --          (1.3)     (36.3)
Common stock issuance.......................................      6.1        6.9        3.9
Other.......................................................     (2.3)      (3.0)      (3.3)
                                                              -------    -------    -------
NET CASH PROVIDED BY (USED IN) CONTINUING FINANCING
  ACTIVITIES................................................    539.2      (34.8)     (61.6)
NET CASH (USED IN) PROVIDED BY DISCONTINUED ACTIVITIES
  (NOTE 3)..................................................    (24.5)      10.4       20.1
EFFECT OF FOREIGN EXCHANGE RATE CHANGES ON CASH.............     (0.6)       6.0       (3.1)
                                                              -------    -------    -------
NET (DECREASE) INCREASE IN CASH.............................    (68.0)      (6.7)     137.9
CASH AT BEGINNING OF YEAR...................................    156.8      163.5       25.6
                                                              -------    -------    -------
CASH AT END OF YEAR.........................................  $  88.8    $ 156.8    $ 163.5
                                                              =======    =======    =======
</Table>

                                      F-6
<Page>
                                    CAE INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                      YEARS ENDED MARCH 31, 2002 AND 2001
                      (AMOUNTS IN MILLIONS OF CDN DOLLARS)

1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

    The accounting policies of CAE Inc. ("CAE" or "the Company") and its
    subsidiaries conform with Canadian generally accepted accounting principles
    ("GAAP").

    NATURE OF OPERATIONS

    CAE designs and provides simulation equipment and services and develops
    integrated training solutions for the military, commercial airlines,
    business aircraft operators, aircraft manufacturers and marine vessel
    operators.

    CAE's flight simulators replicate aircraft performance in normal and
    abnormal operations and a comprehensive set of environmental conditions,
    utilizing visual systems with an extensive database of airports, other
    landing areas and flying environments and motion and sound cues to create a
    fully immersive training environment. The Company offers a full range of
    flight training devices based on the same software used in its simulators.
    CAE is developing a global network of training centres in locations around
    the world.

    The Company also provides simulators and training services for sea and
    land-based activities and supplies marine automation systems for military
    and civil applications. CAE's marine control systems monitor and control
    propulsion, electrical steering, ancillary, auxiliary and damage control
    systems.

    CONSOLIDATION

    The consolidated financial statements include the accounts of the Company
    and all subsidiaries. All inter-corporate accounts and transactions have
    been eliminated. Acquisitions are accounted for by the purchase method and,
    accordingly, the results of operations of subsidiaries are included from the
    dates of acquisition. Entities jointly controlled, referred to as joint
    ventures, are proportionately consolidated. Portfolio investments are
    accounted for using the cost method.

    REVENUE RECOGNITION

    Revenue from long-term contracts for building simulators and training and
    control systems is recognized using the percentage-of-completion method
    where revenue, earnings and unbilled accounts receivable are recorded as
    related costs are incurred, on the basis of percentage costs incurred to
    date on a contract, relative to the estimated total costs. Revisions in cost
    and earnings estimates during the term of the contract are reflected in the
    period in which the need for revision becomes known. Losses, if any, are
    recognized fully when first anticipated. Generally, the terms of long-term
    contracts provide for progress billing based on completion of certain phases
    of work. Warranty provisions are recorded at the time revenue is recognized,
    based on past experience. No right of return or complimentary upgrades are
    provided to customers. Post-delivery customer support is billed separately
    and revenue is recorded ratably over the support period.

    Training service revenues are recognized in the period such services are
    provided. All other revenue is recorded and related costs transferred to
    cost of sales at the time the product is delivered and the benefits and the
    risks of ownership associated with the product are transferred to the
    customer.

    CASH AND SHORT-TERM INVESTMENTS

    Cash consists of cash and cash equivalents which are short-term, highly
    liquid investments with maturities of 90 days and less. Short-term
    investments include money market instruments and commercial paper carried at
    the lower of cost or market value.

    INVENTORIES

    Inventories are stated at the lower of average cost and net realizable
    value. Cost includes material, labour and an allocation of manufacturing
    overhead.

    PROPERTY, PLANT AND EQUIPMENT

    Property, plant and equipment are stated at cost. The declining balance and
    straight-line methods are used in computing amortization over the estimated
    useful lives of the assets. Useful lives are estimated as follows:

<Table>
    <S>                                                           <C>
    Building and improvements...................................  20 to 40 years
    Machinery and equipment.....................................  3 to 10 years
    Simulators..................................................  15 to 30 years
</Table>

    The Company regularly reviews the carrying value of its property, plant and
    equipment. If their carrying value exceeds the amount recoverable, a
    write-down is charged to earnings.

                                      F-7
<Page>
                                    CAE INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                      YEARS ENDED MARCH 31, 2002 AND 2001
                      (AMOUNTS IN MILLIONS OF CDN DOLLARS)

1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
    LEASES

    Leases entered into by the Company in which substantially all the benefits
    and risks of ownership are transferred to the Company are recorded as
    capital leases and classified as property, plant and equipment and long-term
    borrowings. All other leases are classified as operating leases under which
    leasing costs are expensed in the period in which they are incurred. Gains
    and losses on the sale and leaseback of assets are deferred and amortized
    over the term of the lease.

    BUSINESS COMBINATIONS, GOODWILL AND INTANGIBLE ASSETS

    During the first quarter of 2002, the Company adopted the CANADIAN INSTITUTE
    OF CHARTERED ACCOUNTANTS ("CICA") HANDBOOK Section 1581, "Business
    Combinations", which requires all business combinations to be accounted for
    using the purchase method. In addition, any goodwill and intangible assets
    with indefinite useful lives acquired in a business combination are to be
    accounted for under CICA HANDBOOK Section 3062, "Goodwill and Other
    Intangible Assets". This section requires that goodwill and intangible
    assets with indefinite useful lives not be amortized. Their fair value is to
    be assessed annually and, if necessary, written down for any
    impairment. (See note 8 for the impact of the adoption of the new standard).

    Goodwill represents the cost of investments in subsidiaries in excess of the
    fair value of the net identifiable assets acquired. Goodwill for
    acquisitions made prior to fiscal 2002 was amortized up to March 31, 2001
    using the straight-line method over 40 years.

    Intangible assets are recorded at their allocated cost at the date of
    acquisition of the related operating companies. Amortization is provided for
    all intangible assets on a straight-line basis over their estimated useful
    lives. Useful lives are estimated as follows:

<Table>
<Caption>
                                                                                     WEIGHTED
                                                                                     AVERAGE
                                                                   AMORTIZATION    AMORTIZATION
                                                                      PERIOD          PERIOD
                                                                  --------------   ------------
    <S>                                                           <C>              <C>
                                                                           20 to
    Trade names.................................................       25 years         20
    Backlog and contractual agreements..........................  1 to 10 years          6
                                                                           20 to
    Customer relationships......................................       25 years         24
                                                                           10 to
    Other.......................................................       20 years         11
</Table>

    INTEREST CAPITALIZATION

    Interest costs relating to the construction of training centres are
    capitalized as part of the cost of property, plant and equipment.
    Capitalization of interest ceases when the training centre is completed and
    ready for productive use.

    FOREIGN CURRENCY TRANSLATION

    Assets and liabilities denominated in currencies other than Canadian dollars
    are translated at exchange rates in effect at the balance sheet date.
    Revenue and expense items are translated at average rates of exchange for
    the year. Translation gains or losses are included in the determination of
    earnings, except for gains or losses arising on translation of accounts of
    foreign subsidiaries considered self-sustaining and gains or losses arising
    from the translation of foreign currency debt that has been designated as a
    hedge of the net investment in subsidiaries, which are deferred as a
    separate component of shareholders' equity.

    Gains or losses arising from the translation of foreign currency debt not
    designated as a hedge of the net investment in subsidiaries are deferred,
    included in other assets and amortized on a straight-line basis over the
    term of the debt.

    Effective April 1, 2002, the Company will no longer amortize the exchange
    gains or losses arising on the translation of long-term foreign currency
    denominated items, in accordance with a recent amendment to CICA HANDBOOK
    Section 1650 on Foreign Currency Translation. The exchange gains or losses
    arising on translation will be included in earnings as incurred. At
    March 31, 2002, the unamortized exchange loss relating to the existing
    long-term foreign currency items amounted to $9.2 million
    (2001 -- $7.6 million; 2000 -- $4.6 million; 1999 -- $6.0 million). This
    standard will be applied retroactively and consequently, prior years'
    financial statements will be restated through a charge to fiscal 2002
    earnings of $1.1 million (2001 -- $2.0; 2000 -- ($1.0)), net of
    $0.5 million (2001 -- $1.0; 2000 -- ($0.4)) in taxes, and a charge to fiscal
    2000 opening retained earnings of $4.3 million, net of $1.7 million of
    taxes.

    RESEARCH AND DEVELOPMENT COSTS

    Research costs are charged to earnings in the periods in which they are
    incurred. Development costs are also charged in the period incurred unless
    they meet the criteria for deferral. Government assistance arising from
    research and development costs is deducted from the related cost.
    Amortization of development costs deferred to future periods commences with
    the commercial production of the product and is charged to earnings based on
    anticipated sales of the product, over a period not exceeding 5 years.

                                      F-8
<Page>
                                    CAE INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                      YEARS ENDED MARCH 31, 2002 AND 2001
                      (AMOUNTS IN MILLIONS OF CDN DOLLARS)

1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
    PRE-OPERATING COSTS

    The Company defers expenditures related to the operation of all new training
    centres until the opening of the centre. Expenditures directly related to
    placing a new training centre into commercial service are incremental in
    nature and are considered by management to be recoverable from the future
    operations of the new training centre. Capitalization ceases at the opening
    of the training centre. Amortization of the deferred costs is taken over 5
    to 20 years based on the expected period and pattern of benefit of the
    deferred expenditures.

    DEFERRED FINANCING COSTS

    Costs incurred relating to the issuance of long-term debt are deferred and
    amortized over the term of the related debt.

    INCOME TAXES

    Future income taxes relate to the expected future tax consequences of
    differences between the carrying amount of balance sheet items and their
    corresponding tax values. Future tax assets are recognized only to the
    extent that, in the opinion of management, it is more likely than not that
    the future income tax assets will be realized. Future income tax assets and
    liabilities are adjusted for the effects of changes in tax laws and rates on
    the date of enactment or substantive enactment.

    Investment tax credits arising from research and development are deducted
    from the related costs and are accordingly included in the determination of
    earnings in the same year as the related costs. Investment tax credits
    arising from the acquisition of property, plant and equipment and deferred
    development costs are deducted from the cost of those assets with
    amortization calculated on the net amount.

    On April 1, 2000, CAE adopted the recommendations of the CICA HANDBOOK
    section 3465, "Income Taxes", which replaces the deferral method with the
    liability method of tax allocation. CAE applied the new recommendations
    retroactively without restating prior years. The cumulative effect of
    adopting the new recommendations as at April 1, 2000, was to increase net
    future income tax assets by $12.8 million, increase net future income tax
    liabilities by $27.0 million, increase other assets by $30.8 million, reduce
    income taxes recoverable by $18.3 million, reduce net assets of discontinued
    operations by $2.8 million and reduce retained earnings by $4.3 million.

    PENSIONS

    The Company accrues its obligations under employee pension plans and the
    related costs, net of plan assets. The cost of pensions is actuarially
    determined using the projected benefits method pro rated on service,
    expected plan investment performance, salary escalation and retirement ages
    of employees. For the purpose of calculating the expected return on plan
    assets, those assets are valued at fair market value.

    The excess of the net actuarial gain (loss) over 10% of the greater of the
    benefit obligation and the fair value of plan assets is amortized over the
    remaining service period of active employees.

    On April 1, 2000, CAE adopted the recommendations of the CICA Handbook
    section 3461, Employee Future Benefits, which changes the accounting for
    pensions and other types of employee future benefits. The new recommendation
    was adopted retroactively through an adjustment to retained earnings and
    prior year results have not been restated. As a result, a liability for
    employee future benefits of $1.7 million was recorded and a corresponding
    charge to retained earnings was taken.

    STOCK-BASED COMPENSATION PLANS

    The Company's stock-based compensation plans consist of an Employee Stock
    Option Plan ("ESOP"), an Employee Stock Purchase Plan ("ESPP") and Deferred
    Share Unit ("DSU") plans for directors and key executives which are
    described in note 12. No compensation expense is recognized for the ESOP
    when stock options are issued to employees. Consideration paid by employees
    on the exercise of stock options is credited to capital stock. A
    compensation expense is recognized for the Company's portion of the
    contributions made under the ESPP and for amounts due under the DSU plans.

    The CICA has issued a new standard on the measurement of stock options and
    other stock-based compensation for fiscal years beginning on or after
    January 1, 2002. This standard applies to awards granted after January 1,
    2002, and is to be applied prospectively. The Company will not change the
    method currently used to account for stock options granted to employees, but
    will provide the required pro forma disclosures on the impact of the fair
    value method, which produces estimated compensation charges. Stock
    compensation arrangements that can be settled in cash will continue to be
    recognized as compensation expense.

    DERIVATIVE FINANCIAL INSTRUMENTS

    The Company enters into forward, swap and option contracts to manage its
    exposure to fluctuations in interest rates and foreign exchange rates. These
    derivative financial instruments are effective in meeting the risk reduction
    objectives of the Company by

                                      F-9
<Page>
                                    CAE INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                      YEARS ENDED MARCH 31, 2002 AND 2001
                      (AMOUNTS IN MILLIONS OF CDN DOLLARS)

1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
    generating offsetting cash flows related to the underlying position in
    respect of amount and timing. CAE does not hold or issue derivative
    financial instruments for trading purposes.

    The foreign currency risk associated with purchase and sale commitments
    denominated in a foreign currency is hedged through a combination of forward
    contracts and options. The foreign currency gains and losses on these
    contracts are not recognized in the consolidated financial statements until
    the underlying firm commitment is recorded in earnings. At that time, the
    gains or the losses on such derivatives are recorded in earnings as an
    adjustment to the underlying transaction. Premiums paid with respect to
    options are deferred and charged to net earnings over the contract period.

    Interest rate swap contracts are designated as hedges of the interest rate
    of certain financial instruments. The interest payments relating to swap
    contracts are recorded in net earnings over the life of the underlying
    transaction on an accrual basis as an adjustment to interest income or
    interest expense.

    Beginning in fiscal 2004, the Company will adopt the new CICA accounting
    guideline, which establishes certain conditions for when hedge accounting
    may be applied. The Company is studying the new guideline but has not yet
    determined its impact.

    EARNINGS PER SHARE

    The calculation of earnings per share is based on the weighted average
    number of shares issued and outstanding. Diluted earnings per share is
    calculated by dividing net earnings available to common shareholders by the
    weighted average shares used in the basic earnings per share calculation
    plus the number of common shares that would be issued assuming conversion of
    all potentially dilutive common shares outstanding using the treasury stock
    method.

    USE OF ESTIMATES

    The preparation of financial statements in conformity with GAAP requires
    management to make estimates and assumptions that affect the reported
    amounts of assets and liabilities and the disclosure of the contingent
    assets and liabilities at the date of the financial statements and revenue
    and expenses for the period reported. Actual results could differ from those
    estimates.

2.  BUSINESS ACQUISITIONS

    During the fiscal year, CAE completed four strategic acquisitions, two of
    which accelerated CAE's move into aviation training, one which significantly
    improved the Company's access to the US defence market and one which
    provided immediate entry into the commercial marine control systems market.

    On April 2, 2001, the Company acquired all of the issued and outstanding
    shares of BAE Systems Flight Simulation and Training Inc. located in Tampa,
    Florida, for a total cash consideration of US$76 million. The business has a
    well-established position in the US defence market for the manufacture of
    transport and helicopter simulation equipment and has significant training
    and support service activities for both civil and military markets.

    On August 1, 2001, the Company acquired all of the issued and outstanding
    shares of Valmarine AS of Norway, for a cash consideration of
    NOK238.6 million and a CAE share issuance of NOK125.4 million, based on the
    average closing price of CAE's shares for the 10 days prior to August 1st.
    Valmarine is the global leader for marine control systems for the commercial
    market. The purchase price is subject to adjustment based on the future
    performance of the business. Contingent consideration up to a maximum of
    NOK58 million will be recognized as an additional cost of the purchase when
    the contingency is resolved.

    On August 24, 2001, the Company acquired all of the issued and outstanding
    shares of the Netherland-based Schreiner Aviation Training B.V. for a total
    cash consideration of E193.4 million. The business provides simulator and
    ground-school civil aviation training.

    On December 31, 2001, the Company acquired all of the issued and outstanding
    shares of SimuFlite Training International Inc. ("SimuFlite"), based in
    Dallas, Texas, for a total cash consideration of US$210.9 million. In
    addition, property, plant and equipment in the amount of US$54 million were
    sold to the vendor and leased back. SimuFlite is the world's second largest
    provider of business aviation training.

    These acquisitions were accounted for under the purchase method and their
    operating results have been included from the respective acquisition dates.

                                      F-10
<Page>
                                    CAE INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                      YEARS ENDED MARCH 31, 2002 AND 2001
                      (AMOUNTS IN MILLIONS OF CDN DOLLARS)

2.  BUSINESS ACQUISITIONS (CONTINUED)
    The net assets acquired are summarized as follows:

<Table>
<Caption>
                                                             BAE SYSTEMS    VALMARINE AS    SCHREINER   SIMUFLITE    TOTAL
                                                             ------------   -------------   ---------   ---------   --------
    <S>                                                      <C>            <C>             <C>         <C>         <C>
    Current assets.........................................     $ 36.2          $16.3        $ 15.3      $ 23.0     $  90.8
    Current liabilities....................................      (65.8)          (8.7)        (37.0)       (8.2)     (119.7)
    Property, plant and equipment..........................       59.0            0.5         167.9       262.0       489.4
    Intangible assets
      Trade names..........................................     --                3.2         --           37.1        40.3
      Customer relations...................................     --                9.8          66.0        29.2       105.0
      Customer contractual agreements......................     --                2.3           2.2         3.6         8.1
      Other intangible.....................................        2.5            3.1         --            7.0        12.6
    Goodwill...............................................      104.2           40.4         102.8       106.3       353.7
    Future income taxes....................................       36.6           (3.9)        (34.2)       15.1        13.6
    Long-term debt.........................................      (17.3)        --             (23.1)      (52.4)      (92.8)
    Long-term liabilities..................................      (36.1)        --             --          --          (36.1)
                                                                ------          -----        ------      ------     -------
                                                                 119.3           63.0         259.9       422.7       864.9
    Less: Sale and leaseback of assets.....................     --             --             --          (86.2)      (86.2)
         Shares issued (note 11)...........................     --              (21.1)        --          --          (21.1)
                                                                ------          -----        ------      ------     -------
    Total cash consideration:..............................     $119.3          $41.9        $259.9      $336.5     $ 757.6
                                                                ======          =====        ======      ======     =======
</Table>

    The net assets of Schreiner, SimuFlite and approximately 10% of the net
    assets of BAE Systems are included in the Civil Simulation and Training
    segment. The balance of the net assets of BAE Systems and Valmarine are
    included in the Military Simulation and Marine Controls segment.

    The goodwill on the SimuFlite acquisition is the sole deductible goodwill
    for tax purposes.

    The allocation of the purchase price is based on management's estimate of
    the fair value of assets acquired and liabilities assumed. Allocation of the
    purchase price involves a number of estimates as well as gathering of
    information over a number of months. This estimation process will be
    completed in the next six months and accordingly there may be some changes
    to the goodwill and intangibles values presented above for Valmarine as well
    as adjustments to Simuflite arising from the finalization of amounts with
    the seller.

3.  DISCONTINUED OPERATIONS

    On December 3, 1999, the Corporation completed the sale of substantially all
    of the assets of its Railway Technologies and Services business segment for
    an amount of $65.6 million, resulting in an after-tax gain on disposition of
    $13.6 million.

    On February 2, 2000, the Board of Directors approved a plan to divest its
    Cleaning Technologies and Energy Control Systems businesses. On May 31, 2000
    the Company completed the sale of substantially all of the assets of the
    Energy Control Systems businesses to SNC-Lavalin. The net assets of the
    Cleaning Technologies operations were written down to their estimated
    realizable values as at March 31, 2001.

    On December 18, 2001, the Board of Directors approved a plan to divest its
    Forestry Systems. As a result of the planned divestiture, the results of
    operations for the Forestry Systems have been reported separately in the
    consolidated statements of earnings together with its Cleaning Technologies
    businesses and Railway Technologies and Services (together the "Discontinued
    Operations"). Previously reported financial statements have been restated
    and interest expense has been allocated to the Discontinued Operations based
    on their share of the Company's net assets.

    On February 28, 2002, the Company completed the sale of two of CAE's
    Cleaning Technologies operations. The Company sold CAE Ransohoff Inc., of
    Cincinnati, Ohio and CAE Ultrasonics Inc., of Jamestown, New York, to the
    former management of these operations for a total consideration of
    US$21.4 million, comprised of US$9.2 million cash, a holdback of
    US$1.6 million payable within 120 days of closing subject to completing an
    audit of the closing date financial position and the balance in long-term
    subordinated notes, with senior debt financing. The remaining net assets of
    the Cleaning Technologies operations were written down to their estimated
    realizable values as at March 31, 2002.

                                      F-11
<Page>
                                    CAE INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                      YEARS ENDED MARCH 31, 2002 AND 2001
                      (AMOUNTS IN MILLIONS OF CDN DOLLARS)

3.  DISCONTINUED OPERATIONS (CONTINUED)
    On March 28, 2002, CAE completed the sale of its fiber screening business to
    the Advanced Fiber Technologies Income Fund ("AFT") for cash proceeds of
    $162 million.

    The remaining Discontinued Operations are expected to be sold within the
    next six months.

    Summarized financial information for the discontinued operations is as
    follows:

<Table>
<Caption>
                                                                    2002       2001       2000
                                                                  --------   --------   --------
    <S>                                                           <C>        <C>        <C>
    Revenue
      Railway Technologies and Services.........................   $--        $--        $ 46.4
      Cleaning Technologies.....................................     86.5      119.5      127.3
      Forestry systems..........................................    193.5      300.0      299.2
                                                                   ------     ------     ------
                                                                   $280.0     $419.5     $472.9
                                                                   ------     ------     ------
    Net earnings from Forestry Systems prior to measurement
      date, net of tax
      (2002 -- $4.0; 2001 -- $14.9; 2000 -- $12.7)..............   $  8.5     $ 29.5     $ 28.4
    Net gain from Forestry Systems after measurement date net of
      tax  -- $15.2.............................................     17.9      --         --
    Net loss from Cleaning Technologies, prior to measurement
      date net of tax recovery
      (2000 -- $3.1)............................................    --         --          (6.0)
    Net gain from Railway Technologies and Services, net of tax
      of $2.7...................................................    --         --          13.8
    Net (loss) from Cleaning Technologies after measurement
      date, net of tax recovery
      (2002 -- $7.3; 2001 -- $18.9).............................    (25.1)     (26.6)     --
                                                                   ------     ------     ------
    Net earnings from discontinued operations...................   $  1.3     $  2.9     $ 36.2
                                                                   ======     ======     ======
</Table>

<Table>
<Caption>
                                                                    2002       2001       2000
                                                                  --------   --------   --------
    <S>                                                           <C>        <C>        <C>
    Net cash (used in) provided by operating activities.........   $(15.9)    $ 23.6     $ 40.1
    Net cash used in investing activities.......................     (4.7)     (11.1)     (19.5)
    Net cash used in financing activities.......................     (3.9)      (2.1)      (1.0)
                                                                   ------     ------     ------
    Net cash (used in) provided by discontinued operations......   $(24.5)    $ 10.4     $ 19.6
                                                                   ======     ======     ======
</Table>

<Table>
<Caption>
                                                                           2002                      2001
                                                                  -----------------------   -----------------------
                                                                  FORESTRY     CLEANING     FORESTRY     CLEANING
                                                                  SYSTEMS    TECHNOLOGIES   SYSTEMS    TECHNOLOGIES
                                                                  --------   ------------   --------   ------------
    <S>                                                           <C>        <C>            <C>        <C>
    Current assets..............................................   $40.8        $ 20.8       $ 79.6       $ 82.7
    Property, plant and equipment, net..........................    15.7           5.4         50.5         16.6
    Goodwill....................................................    30.2           9.2        122.5         17.4
    Other assets................................................     0.6           1.1          0.7          0.9
                                                                   -----        ------       ------       ------
                                                                    87.3          36.5        253.3        117.6
                                                                   -----        ------       ------       ------
    Assets of discontinued operations...........................                $123.8                    $370.9
                                                                                ======                    ======
    Current liabilities.........................................    26.4          13.7         71.1         26.1
    Other liabilities...........................................     0.4        --              9.2          0.2
                                                                   -----        ------       ------       ------
                                                                   $26.8        $ 13.7       $ 80.3       $ 26.3
                                                                   -----        ------       ------       ------
    Liabilities of discontinued operations......................                $ 40.5                    $106.6
                                                                                ======                    ======
</Table>

                                      F-12
<Page>
                                    CAE INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                      YEARS ENDED MARCH 31, 2002 AND 2001
                      (AMOUNTS IN MILLIONS OF CDN DOLLARS)

4.  ACCOUNTS RECEIVABLE

<Table>
<Caption>
                                                                    2002       2001
                                                                  --------   --------
    <S>                                                           <C>        <C>
    Trade.......................................................   $107.8     $ 69.7
    Allowance for doubtful accounts.............................     (6.8)      (5.6)
    Unbilled receivables........................................    223.8      156.3
    Other receivables...........................................     53.4       25.2
                                                                   ------     ------
                                                                   $378.2     $245.6
                                                                   ======     ======
</Table>

    Approximately $10 million of the March 31, 2002 unbilled receivables are not
    expected to be recovered within one year.

5.  INVENTORIES

<Table>
<Caption>
                                                                    2002       2001
                                                                  --------   --------
    <S>                                                           <C>        <C>
    Work-in-progress............................................   $105.9     $ 81.1
    Raw materials, supplies and manufactured products...........     25.0       18.3
                                                                   ------     ------
                                                                   $130.9     $ 99.4
                                                                   ======     ======
</Table>

6.  PROPERTY, PLANT AND EQUIPMENT

<Table>
<Caption>
                                                                    2002                                  2001
                                                     -----------------------------------   -----------------------------------
                                                                ACCUMULATED    NET BOOK               ACCUMULATED    NET BOOK
                                                       COST     AMORTIZATION     VALUE       COST     AMORTIZATION     VALUE
                                                     --------   ------------   ---------   --------   ------------   ---------
    <S>                                              <C>        <C>            <C>         <C>        <C>            <C>
    Land...........................................   $ 19.2       $--          $ 19.2      $ 10.1       $--          $ 10.1
    Buildings and improvements.....................    229.6         40.4        189.2       121.4         32.6         88.8
    Machinery and equipment........................    229.7        105.8        123.9        99.8         83.4         16.4
    Simulators.....................................    369.5         13.8        355.7        45.1          7.1         38.0
    Assets under construction
      Buildings....................................      4.5       --              4.5         5.8       --              5.8
      Equipment....................................    146.0       --            146.0        68.1       --             68.1
                                                      ------       ------       ------      ------       ------       ------
                                                      $998.5       $160.0       $838.5      $350.3       $123.1       $227.2
                                                      ======       ======       ======      ======       ======       ======
</Table>

7.  INTANGIBLE ASSETS

<Table>
<Caption>
                                                                                 2002
                                                                  -----------------------------------
                                                                             ACCUMULATED    NET BOOK
                                                                    COST     AMORTIZATION     VALUE
                                                                  --------   ------------   ---------
    <S>                                                           <C>        <C>            <C>
    Trade names.................................................   $ 40.5        $0.5        $ 40.0
    Customer relations..........................................    104.9         1.8         103.1
    Customer contractual agreements.............................      7.9         0.1           7.8
    Other intangible assets.....................................     13.1         0.6          12.5
                                                                   ------        ----        ------
                                                                   $166.4        $3.0        $163.4
                                                                   ======        ====        ======
</Table>

    Civil Aviation and Training intangible assets include $37.3 million in trade
    names, $95.1 million in customer relations, $5.6 million in customer
    contractual agreements and $7.5 million in other intangibles. Military
    Simulation and Marine Controls intangibles include $3.2 million in trade
    names, $9.8 million in customer relations, $2.3 million in customer
    contractual agreements and $5.6 million in other intangibles. The yearly
    estimated amortization expense for the five following years will be
    approximately $9.0 million.

                                      F-13
<Page>
                                    CAE INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                      YEARS ENDED MARCH 31, 2002 AND 2001
                      (AMOUNTS IN MILLIONS OF CDN DOLLARS)

7.  INTANGIBLE ASSETS (CONTINUED)
    The continuity of intangible assets by business segment is as follows:

<Table>
<Caption>
                                                                                        2002
                                                                  -------------------------------------------------
                                                                  CIVIL SIMULATION   MILITARY SIMULATION
                                                                    AND TRAINING     AND MARINE CONTROLS    TOTAL
                                                                  ----------------   -------------------   --------
    <S>                                                           <C>                <C>                   <C>
    Beginning balance...........................................      -$-                 --$               $--
    Additions...................................................        145.1                20.9            166.0
    Amortization................................................         (2.7)               (0.3)            (3.0)
    Foreign exchange............................................         (0.9)                1.3              0.4
                                                                       ------               -----           ------
    Ending balance..............................................       $141.5               $21.9           $163.4
                                                                       ======               =====           ======
</Table>

8.  GOODWILL

    The following table summarizes the impact of the adoption of the new
    standard:

<Table>
<Caption>
                                                                    2002       2001       2000
                                                                  --------   --------   --------
                                                                       (amounts in millions
                                                                     except per share amount)
    <S>                                                           <C>        <C>        <C>
    Reported net earnings.......................................   $150.6     $108.1     $ 98.5
    Add back goodwill amortization..............................    --           5.1        6.3
                                                                   ------     ------     ------
    Adjusted net earnings.......................................   $150.6     $113.2     $104.8
                                                                   ======     ======     ======
    Reported net earnings and diluted net earnings per share....   $ 0.69     $ 0.50     $ 0.45
    Add back goodwill amortization..............................    --          0.02       0.03
                                                                   ------     ------     ------
    Adjusted net earnings and diluted net earnings per share....   $ 0.69     $ 0.52     $ 0.48
                                                                   ======     ======     ======
</Table>

    The continuity of goodwill by business segment is as follows:

<Table>
<Caption>
                                                              2002                                     2001
                                             --------------------------------------   --------------------------------------
                                             CIVIL SIMULATION   MILITARY SIMULATION   CIVIL SIMULATION   MILITARY SIMULATION
                                               AND TRAINING     AND MARINE CONTROLS     AND TRAINING     AND MARINE CONTROLS
                                             ----------------   -------------------   ----------------   -------------------
    <S>                                      <C>                <C>                   <C>                <C>
    Beginning balance......................      -$-                  $ 18.5              -$-                   $22.2
    Additions..............................        219.0               134.7              --                  --
    Amortization...........................      --                  --                   --                     (0.6)
    Foreign exchange.......................         (1.2)                4.5              --                     (3.1)
                                                  ------              ------               ------               -----
    Ending balance.........................       $217.8              $157.7              -$-                   $18.5
                                                  ------              ------               ------               -----
    Total goodwill.........................                           $375.5                                    $18.5
                                                                      ======                                    =====
</Table>

                                      F-14
<Page>
                                    CAE INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                      YEARS ENDED MARCH 31, 2002 AND 2001
                      (AMOUNTS IN MILLIONS OF CDN DOLLARS)

9.  OTHER ASSETS

<Table>
<Caption>
                                                                    2002       2001
                                                                  --------   --------
    <S>                                                           <C>        <C>
    Investment tax credits (i)..................................   $  0.7     $25.4
    Investment in and advances to CVS Leasing Ltd. (ii).........     24.0      21.0
    Deferred pre-operating costs................................     26.6      13.7
    Deferred development costs (iii)............................     30.1      13.7
    Deferred financing costs....................................     16.3      --
    Restricted cash (note 10A (iv)).............................     15.6      --
    Other.......................................................     25.2       9.0
                                                                   ------     -----
                                                                   $138.5     $82.8
                                                                   ======     =====
</Table>

    (i) Investment tax credits are available to reduce future federal income
        taxes payable in Canada.

    (ii) The Company led a consortium which was contracted by the U.K. Ministry
         of Defence ("MoD") to design, construct, manage, finance and operate an
         integrated simulator based aircrew training facility for the Medium
         Support Helicopter fleet of the Royal Air Force. The contract covers a
         40-year period, which can be terminated by the MoD after 20 years, in
         2018.

       In connection with the contract, the Company has established a
       subsidiary, CAE Aircrew Training Plc ("Aircrew"), of which it owns 74%
       with the balance held by the other consortium partners. This subsidiary
       has leased the land from the MoD, has built the facility and operates the
       training centre, and has been consolidated with the accounts of the
       Company.

       In addition, the Company has a minority shareholding of 11% in, and has
       advanced funds to, CVS Leasing Ltd. (CVS), a company established to
       acquire the simulators and other equipment that are leased to Aircrew.
       CVS obtained project financing which amounts to L79 million at March 31,
       2002 and expires in October 2015. This financing is secured solely by the
       assets of CVS with no recourse to CAE.

   (iii) Research and development expenditures aggregated $104.7 million during
         the year (2001 -- $104.9 million; 2000 -- $108.3 million). The Company
         has received government assistance of $15.8 during the year
         (2001 -- $3.5 million; 2000 -- $8.0 million), of which $9.5 million
         (2001 -- nil; 2000 -- nil) was recorded against deferred costs incurred
         to develop new products.

10. DEBT FACILITIES

    A. LONG-TERM DEBT

<Table>
<Caption>
                                                                    2002       2001
                                                                  --------   --------
    <S>                                                           <C>        <C>
    Senior notes (i)............................................   $192.1     $190.4
    Revolving unsecured term credit facilities,
      5 years maturing April 2006, US$350.0 (ii) (outstanding
        March 31, 2002 -- $25.0 and US$139.0)...................    246.4      --
      5 years maturing April 2006, Euro100.0 (2001 -- DM65.0)
        (ii)....................................................    --          46.1
      18 months, maturing June 2003, (US$200.0) (iii)
        (outstanding March 31, 2002 -- US$174.0)................    277.3      --
    Term loan of US$36.4, secured, maturing in 2009 (iv)........     58.0      --
    Term loan of L12.7, secured, maturing in 2015 (v)...........     25.9       26.8
    Grapevine Industrial Development Corporation bonds, secured,
      (US$8.0 and US$19.0), maturing in 2010 and 2013 (vi)......     43.1      --
    Secured loans, (US$5.8 and RMB29.0) (vii)...................     14.3      --
    Unsecured loans, (US$8.6 and L9.2) (viii)...................     34.4      --
    Obligations under capital lease commitments (ix)............     35.0        2.0
                                                                   ------     ------
                                                                    926.5      265.3
    Less: Long-term debt due within one year....................     37.5        2.3
                                                                   ------     ------
                                                                   $889.0     $263.0
                                                                   ======     ======
</Table>

                                      F-15
<Page>
                                    CAE INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                      YEARS ENDED MARCH 31, 2002 AND 2001
                      (AMOUNTS IN MILLIONS OF CDN DOLLARS)

10. DEBT FACILITIES (CONTINUED)
    (i) Pursuant to a private placement with certain investors, the Company
        borrowed US$108 million and $20 million. These unsecured senior notes
        rank equally with the term bank financing with fixed repayment amounts
        in 2005, 2007, 2009 and 2012. Fixed interest at an average rate of 7.5%
        is payable semi-annually in June and December. The Company has entered
        into interest rate swap agreements converting the initial fixed interest
        rate into a 3-month BA borrowing plus 1.05% on $52.5 million of the
        senior notes.

    (ii) These facilities are unsecured and the interest rate payable is based
         on LIBOR (BAs) or EURIBOR plus 0.50%. The Company has entered into
         interest rate swap agreements to fix the rate. Of this amount,
         $205 million is fixed until February 2003 with an average rate of
         2.72%, and $35 million has been fixed until April 2006 at a rate of
         4.97%. The average interest rate for the period ended March 31, 2002 is
         5.2% (2001 -- 4.6%; 2000 -- 3.4%).

   (iii) The revolving credit facility of US$200 million expires in June 2003.
         The facility is unsecured and the interest rate payable is based on
         LIBOR plus 0.50%.

    (iv) The Company arranged project financing for its training centre in Sao
         Paulo, Brazil. This term loan is secured by the assets of the training
         centre and $15.6 million in restricted cash and is repayable
         semi-annually until April 30, 2009. Interest on the loan is charged at
         a rate approximating 7.7%.

    (v) The Company arranged project financing for one of its subsidiaries to
        finance the Company's Medium Support Helicopter Programme for the MoD in
        the United Kingdom. The credit facility includes a term loan that is
        secured by the project assets of the subsidiary and is repayable over
        18 years to October 1, 2015. The facility also includes a standby loan
        of L4.0 million and a working capital loan of L1.0 million, both
        maturing in October 2015. Interest on the loans is charged at a rate
        approximating LIBOR plus 1.00%. The Company has entered into interest
        rate swaps totaling L10.3 million fixing the interest rate at
        approximately 6.82% (note 9(ii)).

    (vi) Airport Improvement Revenue Bonds issued by the Grapevine Industrial
         Development Corporation, Grapevine, Texas for amounts of
         US$8.0 million and US$19.0 million and maturing respectively in 2010
         and 2013. The Bonds are secured by real property improvements, fixtures
         and specified simulation equipment. The rate is the lesser of the
         lawful rate and 80% of the 91-day T-Bill rate, which approximates 2.83%
         for the period ended March 31, 2002.

   (vii) Secured loans consist of a US$5.8 million loan secured by property,
         plant and equipment expiring in June 2002 with interest payable based
         on commercial paper (USA) plus 1% and a loan of RMB29 million expiring
         in December 2011 with interest at 6.83%.

  (viii) Unsecured loans consist of a US$8.6 million loan expiring in 2002 with
         interest rate payable based on LIBOR plus 0.90% and a loan of
         L9.2 million expiring from September 2004 to March 2030 with interest
         at an average rate of 5.6%.

    (ix) The effective interest rate on obligations under capital leases was
         approximately 5.3% (2001 -- 5.2%; 2000 -- 7%).

    (x) Payments required in each of the next five years to meet the retirement
        provisions of the long-term debt are as follows:

<Table>
    <S>                                                           <C>
    Years ending March 31,
      2003......................................................   $ 37.5
      2004......................................................    289.4
      2005......................................................     14.0
      2006......................................................     31.9
      2007......................................................    258.4
      Thereafter................................................    295.3
                                                                   ------
                                                                   $926.5
                                                                   ======
</Table>

                                      F-16
<Page>
                                    CAE INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                      YEARS ENDED MARCH 31, 2002 AND 2001
                      (AMOUNTS IN MILLIONS OF CDN DOLLARS)

10. DEBT FACILITIES (CONTINUED)
    (xi) Details of net interest expense (income) are as follows:

<Table>
<Caption>
                                                                    2002       2001       2000
                                                                  --------   --------   --------
    <S>                                                           <C>        <C>        <C>
    Interest expense (income)...................................   $30.2      $(2.3)     $13.8
    Allocation of interest expense to discontinued operations...    (3.6)      (4.0)      (6.5)
    Interest capitalized........................................    (3.9)      --         --
                                                                   -----      -----      -----
    Interest expense (income) as reported.......................   $22.7      $(6.3)     $ 7.3
                                                                   =====      =====      =====
</Table>

    B. SHORT-TERM DEBT

    The Company has unused unsecured bank lines of credit available in various
    currencies totaling $57.8 million (2001 -- $85 million). The effective rate
    on the short-term borrowings was 5.6% (2001 -- 8.4%; 2000 -- 7.6%).

    Certain of the Company's debt instruments include customary positive and
    negative covenants which include interest coverage, leverage ratios, and
    restrictions on the sale of assets. The Company is in compliance with its
    debt covenants.

11. CAPITAL STOCK

    (i) The Company's articles of incorporation authorize the issuance of an
        unlimited number of preferred shares, issuable in series, and an
        unlimited number of common shares. To date, the Company has not issued
        any preferred shares.

    (ii) A reconciliation of the issued and outstanding common shares of the
         Company is as follows:

<Table>
<Caption>
                                                                           2002                     2001
                                                                  ----------------------   ----------------------
                                                                   NUMBER OF     STATED     NUMBER OF     STATED
                                                                   SHARES(D)     VALUE      SHARES(D)     VALUE
                                                                  -----------   --------   -----------   --------
    <S>                                                           <C>           <C>        <C>           <C>
    Balance at beginning of year................................  216,399,856    $159.4    215,158,370    $152.3
    Stock options exercised.....................................   1,118,400        6.1     1,413,076        6.9
    Stock dividends (a).........................................      17,605        0.2        34,410        0.3
    Purchase of capital stock (b)...............................      --          --         (206,000)      (0.1)
    Treasury issue (note 2).....................................   1,419,919       21.1        --          --
                                                                  -----------    ------    -----------    ------
    Balance at end of year......................................  218,955,780    $186.8    216,399,856    $159.4
                                                                  ===========    ======    ===========    ======
</Table>

    (a) The Company provides that its shareholders may elect to receive common
       stock dividends in lieu of cash dividends.

    (b) During the first quarter of fiscal 2001 the Company purchased 206,000
       common shares on the Toronto Stock Exchange under its normal course
       issuer bid. The Company has purchased 8,877,000 common shares since the
       inception of the program on June 21, 1999. Shares purchased by the
       Company were cancelled. The bid expired on June 20, 2000.

    (c) The Company has an amended and restated shareholder protection rights
       plan agreement whereby one right has been issued for each outstanding
       common share of the Company. The rights remain attached to the shares and
       are not exercisable until the occurrence of certain designated events.
       Upon the occurrence of such an event, the right entitles a shareholder of
       the Company to acquire additional common shares from treasury at half
       their market value. The rights expire on the date immediately after the
       Company's Annual Meeting of Shareholders to be held in 2003, unless
       terminated at an earlier date by the Board of Directors.

    (d) On June 20, 2001, the Board of Directors declared a 100% stock dividend
       in respect of the common shares in the capital of the Company,
       effectively achieving a two-for-one split of CAE's outstanding common
       shares. The stock dividend was payable to shareholders of record at the
       close of business on July 9, 2001 ("Record Date"), on the basis of one
       additional share for each common share held as of the Record Date. CAE's
       common shares commenced trading on a split basis on July 5, 2001 on the
       Toronto Stock Exchange. The Company ascribed no monetary value to the
       stock dividend. The number of shares and options, the option exercise
       prices and the net earnings and diluted net earnings per share have been
       restated retroactively to reflect the stock dividend.

                                      F-17
<Page>
                                    CAE INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                      YEARS ENDED MARCH 31, 2002 AND 2001
                      (AMOUNTS IN MILLIONS OF CDN DOLLARS)

11. CAPITAL STOCK (CONTINUED)
    (e) The following is a reconciliation of the denominators for the basic and
       diluted earnings per share computations:

<Table>
<Caption>
                                                                     2002          2001          2000
                                                                  -----------   -----------   -----------
    <S>                                                           <C>           <C>           <C>
    Weighted average number of common shares outstanding
      -- Basic..................................................  217,592,039   215,666,346   218,986,692
    Effect of dilutive stock options............................    2,544,722     2,570,454     2,818,074
                                                                  -----------   -----------   -----------
    Weighted average number of common shares outstanding
      -- Diluted................................................  220,136,761   218,236,800   221,804,766
                                                                  ===========   ===========   ===========
</Table>

    The effect of the conversion of the outstanding stock options would not
    materially dilute earnings per share.

12. STOCK-BASED COMPENSATION PLANS

    EMPLOYEE STOCK OPTION PLAN

    Under the long-term incentive program of the Company, options may be granted
    to officers and other key employees of the Company and its subsidiaries to
    purchase common shares of the Company at a subscription price of 100% of
    market value. Market value is determined as the closing price of the common
    shares on the Toronto Stock Exchange on the last day of trading prior to the
    effective date of the grant.

    At March 31, 2002, a total of 12,462,822 common shares remained authorized
    for issuance under the Plan. The options are exercisable during a period not
    to exceed six years and are not exercisable during the first 12 months after
    the date of the grant. The right to exercise all of the options accrues over
    a period of four years of continuous employment. However, if there is a
    change of control of the Company, the options become immediately
    exercisable. Options are adjusted proportionately for any stock dividends or
    stock splits attributed to the common shares of the Company.

    A reconciliation of the outstanding options is as follows:

<Table>
<Caption>
                                                                                 AS AT MARCH 31(NOTE 11(D))
                                                                  ---------------------------------------------------------
                                                                             2002                          2001
                                                                  ---------------------------   ---------------------------
                                                                                  WEIGHTED                      WEIGHTED
                                                                    NUMBER        AVERAGE         NUMBER        AVERAGE
                                                                  OF OPTIONS   EXERCISE PRICE   OF OPTIONS   EXERCISE PRICE
                                                                  ----------   --------------   ----------   --------------
    <S>                                                           <C>          <C>              <C>          <C>
    Options outstanding at beginning of year....................  5,114,350        $ 5.70       5,479,326        $ 4.96
    Granted.....................................................  1,698,012        $12.19       2,018,400        $ 6.84
    Exercised...................................................  (1,118,400)      $ 5.41       (1,413,076)      $ 4.90
    Forfeited/expired...........................................   (694,884)       $ 7.63        (970,300)       $ 5.06
                                                                  ----------       ------       ----------       ------
    Options outstanding at end of year..........................  4,999,078        $ 7.70       5,114,350        $ 5.70
                                                                  ==========       ======       ==========       ======
    Options exercisable at end of year..........................  1,417,878        $ 5.70       1,268,500        $ 5.34
                                                                  ==========       ======       ==========       ======
</Table>

    The following table summarizes information about the Company's ESOP as at
    March 31, 2002 (note 11(d)):

<Table>
<Caption>
                                                                       OPTIONS OUTSTANDING           OPTIONS EXERCISABLE
                                                                ---------------------------------   ----------------------
                                                                                         WEIGHTED                 WEIGHTED
                                                                   WEIGHTED AVERAGE      AVERAGE                  AVERAGE
                                                    NUMBER      REMAINING CONTRACTUAL    EXERCISE     NUMBER      EXERCISE
    RANGE OF EXERCISE PRICES                      OUTSTANDING        LIFE (YEARS)         PRICE     EXERCISABLE    PRICE
    ------------------------                      -----------   ----------------------   --------   -----------   --------
    <S>                                           <C>           <C>                      <C>        <C>           <C>
    $4.10 to $5.70..............................   1,596,000              2.8             $ 4.54       805,000     $4.88
    $6.425 to $9.60.............................   1,928,450              3.8             $ 6.83       604,750     $6.70
    $12.225 to $14.60...........................   1,474,628              5.2             $12.26         8,128     $0.17
                                                   ---------             ----             ------     ---------     -----
    Total.......................................   4,999,078             3.86             $ 7.70     1,417,878     $5.70
                                                   =========             ====             ======     =========     =====
</Table>

                                      F-18
<Page>
                                    CAE INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                      YEARS ENDED MARCH 31, 2002 AND 2001
                      (AMOUNTS IN MILLIONS OF CDN DOLLARS)

12. STOCK-BASED COMPENSATION PLANS (CONTINUED)
    EMPLOYEE STOCK PURCHASE PLAN

    The Company maintains an ESPP to enable employees of the Company and its
    participating subsidiaries to acquire CAE common shares through regular
    payroll deductions plus employer contributions. The Plan allows employees to
    contribute up to 10% of their annual base salary. The Company and its
    participating subsidiaries match the first $500 employee contribution and
    contribute $1 for every $3 of additional employee contributions, to a
    maximum of 2% of the employee's base salary. Common shares of the Company
    are purchased by the ESPP trustee on behalf of the participants on the open
    market, through the facilities of the Toronto Stock Exchange. Participation
    at March 31, 2002 was 3,077 employees or 41.1% of CAE's employees
    (2001 -- 2,639 or 41.8%). The Company recorded compensation expense in the
    amount of $1.9 million (2001 -- $2.1 million) in respect of employer
    contributions under the Plan.

    DEFERRED SHARE UNIT PLAN

    Effective May 1, 2000, the Company adopted a Deferred Share Unit ("DSU")
    Plan for key executives whereby an executive may elect to receive any cash
    incentive compensation in the form of deferred share units. The Plan is
    intended to enhance the Company's ability to promote a greater alignment of
    interests between such key executives and the shareholders of the Company. A
    deferred share unit is equal in value to one common share of the Company.
    The units are issued on the basis of the average closing board lot sale
    price per share of CAE common shares on the Toronto Stock Exchange during
    the last 10 days on which such shares traded prior to the date of issue. The
    units also accrue dividend equivalents payable in additional units in an
    amount equal to dividends paid on CAE common shares. Deferred share units
    mature upon termination of employment, whereupon a key executive is entitled
    to receive the fair market value of the equivalent number of common shares,
    net of withholdings, in cash.

    In fiscal 2000, the Company adopted a DSU Plan for Non-Employee Directors. A
    non-employee director holding less than 10,000 common shares of the Company
    receives the Board retainer and attendance fees in the form of deferred
    share units. A non-employee director holding at least 10,000 common shares
    may elect to participate in the Plan in respect of part or all of his or her
    retainer and attendance fees. The terms of the Plan are essentially
    identical to the key executive DSU Plan except that the share price used to
    value the deferred share unit is based on the closing price per share of CAE
    common shares on the Toronto Stock Exchange on the day preceding the last
    business day of March, June, September and December.

    The Company records the cost of the DSU plans as compensation expense. As at
    March 31, 2002, 194,581 units were outstanding at a value of $2.3 million
    (2001 -- 53,220 units at a value of $1.3 million; 2000 -- 3,929 units at a
    value of $0.1 million).

13. FINANCIAL INSTRUMENTS

    FOREIGN CURRENCY RISK

    The fair value of the forward foreign exchange contracts is represented by
    the estimated amounts that the Company would receive or pay to settle the
    contracts at the balance sheet date, taking into account the unrealized gain
    or loss. The Company entered into forward foreign exchange contracts
    totaling $144.1 million (buy contracts $42.3 million and sell contracts
    $101.8). The total unrealized loss as of March 31, 2002, is $0.9 million (on
    buy contracts $0.5 million and on sell contracts $0.4 million). Unrealized
    gains or losses on outstanding forward contracts are not recognized in the
    statements of earnings until maturity of the contracts.

    The Company entered into cross currency rate swap contracts maturing on
    December 13, 2002 in respect of certain inter-company loan transactions. The
    Company receives interest, calculated semi-annually on a notional balance of
    US$21 million and $30 million, at a weighted average interest rate of LIBOR
    plus 3.6% (effective rate of 5.5%) and BA plus 0.4% (effective rate of
    2.6%). The Company pays interest calculated semi-annually on notional
    balances of E16.5 million, SEK27.4 million, and US$20.7 million at weighted
    average interest rates of EURIBOR plus 3.4% (effective rate of 6.65%),
    STIBOR plus 2.9% (effective rate of 6.82%) and LIBOR plus 0.5% (effective
    rate of 2.4%).

    CREDIT RISK

    The Company is exposed to credit risk on billed and unbilled accounts
    receivable. However, its customers are primarily established companies with
    good credit ratings or government agencies, factors that minimize the risk.
    In addition, the Company typically receives substantial non-refundable
    deposits on contracts.

    The Company is exposed to credit risk in the event of non-performance by
    counterparties to its derivative financial instruments, but does not expect
    non-performance by any of the counterparties. The counterparties for
    financial instruments are major, highly rated financial institutions.

                                      F-19
<Page>
                                    CAE INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                      YEARS ENDED MARCH 31, 2002 AND 2001
                      (AMOUNTS IN MILLIONS OF CDN DOLLARS)

13. FINANCIAL INSTRUMENTS (CONTINUED)
    INTEREST RATE EXPOSURE

    The Company is exposed to the volatility of interest rates on its long-term
    debt. As at March 31, 2002, the Company has entered into seven interest rate
    swap agreements with three different financial institutions to mitigate
    these risks for a total notional value of $334.1 million. One agreement,
    with a notional value of $52.6 million (US$33 million), has converted fixed
    interest rate debt into floating whereby the Company pays the BA rate plus
    1.05% quarterly and receives a fixed interest rate of 7.76% up to
    June 2012. The remaining six contracts are converting floating interest rate
    debt into fixed for a notional value of $281.5 million whereby the Company
    will receive quarterly LIBOR and pay fixed interest payments as follows:

    - Until February 2003 on two contracts totaling $205.6 million
      (US$129 million), the Company will pay annually a fixed interest rate of
      2.72%;

    - Until April 2006 on $35 million, the Company will pay quarterly a fixed
      interest rate of 4.97%;

    - Until September 2005 on $17.5 million (US$11 million), the Company will
      pay monthly a fixed annual interest rate of 4.95%;

    - Until October 2011 on two contracts totaling $23.4 million
      (L10.3 million), the Company will pay quarterly a fixed annual interest
      rate of 6.82%.

    After taking into consideration these swap agreements, as at March 31, 2002,
    55% of the long-term debt bears fixed interest rates.

    FAIR VALUE OF FINANCIAL INSTRUMENTS

    The following methods and assumptions have been used to estimate the fair
    value of the financial instruments:

    - Cash and short-term investments, accounts receivable, accounts payable and
      accrued liabilities are valued at their carrying amounts on the balance
      sheet, which represent an appropriate estimate of their fair values due to
      their near-term maturities.

    - Capital leases are valued using the discounted cash flow method.

    - Long-term debt value is estimated based on discounted cash flows using
      current interest rates for debt with similar terms and remaining
      maturities.

    - Interest rate and currency swap contracts reflect the present value of the
      potential gain or loss if settlement were to take place on March 31, 2002.

    The fair value and the carrying amount of the financial instruments as at
    March 31 is as follows:

<Table>
<Caption>
                                                                          2002                    2001
                                                                  ---------------------   ---------------------
                                                                               CARRYING                CARRYING
                                                                  FAIR VALUE    AMOUNT    FAIR VALUE    AMOUNT
                                                                  ----------   --------   ----------   --------
    <S>                                                           <C>          <C>        <C>          <C>
    Long-term debt..............................................    $898.1      $889.0      $276.7      $263.3
    Capital lease obligations...................................      35.0        35.0         3.7         3.7
    Net forward foreign exchange contracts......................      (0.9)      --           (5.5)      --
    Interest rate swap contracts................................      (2.2)      --            2.6       --
    Currency swap contracts.....................................       3.9       --            4.5       --
</Table>

    GUARANTEES

    As at March 31, 2002, CAE had outstanding letters of credit and performance
    guarantees in the amount of $243 million (2001 -- $68 million) issued in the
    normal course of business. These guarantees are issued under standby
    facilities available to the Company through various financial institutions.

                                      F-20
<Page>
                                    CAE INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                      YEARS ENDED MARCH 31, 2002 AND 2001
                      (AMOUNTS IN MILLIONS OF CDN DOLLARS)

14. INCOME TAXES

    A reconciliation of income taxes at Canadian statutory rates with the
    reported income taxes is as follows:

<Table>
<Caption>
                                                                       LIABILITY        DEFERRAL
                                                                        METHOD           METHOD
                                                                  -------------------   --------
                                                                    2002       2001       2000
                                                                  --------   --------   --------
    <S>                                                           <C>        <C>        <C>
    Earnings from continuing operations before income taxes.....   $219.6     $158.2     $90.4
                                                                   ------     ------     -----
    Statutory income tax rates in Canada........................     40.9%      44.6%     44.6%
    Income taxes at Canadian statutory rates....................   $ 89.9     $ 70.6     $40.3
    Difference between Canadian statutory rates and those
      applicable to foreign subsidiaries........................     (2.3)     (10.7)     (5.2)
    Manufacturing and processing allowance......................    (13.1)      (8.3)     (7.1)
    Losses not tax effected.....................................     11.0        3.6      --
    Tax benefit of losses not previously recognized.............     (6.7)      (0.2)      0.7
    Research and development investment tax credit..............     (3.0)      (1.1)     (0.8)
    Other.......................................................     (5.5)      (0.9)      0.2
                                                                   ------     ------     -----
    Total income tax expense....................................   $ 70.3     $ 53.0     $28.1
                                                                   ======     ======     =====
</Table>

    Significant components of the provision for income tax expense attributable
    to continuing operations are as follows:

<Table>
<Caption>
                                                                    2002       2001
                                                                  --------   --------
    <S>                                                           <C>        <C>
    Current tax expense.........................................   $ 62.8     $ 60.7
                                                                   ------     ------
    Change in temporary differences.............................      9.4       (9.5)
    Recognition of loss carryforwards...........................     (2.3)       2.4
    Tax rate changes............................................      0.4       (0.6)
                                                                   ------     ------
    Future income tax expense (benefit).........................      7.5       (7.7)
                                                                   ------     ------
    Total income tax expense....................................   $ 70.3     $ 53.0
                                                                   ======     ======
</Table>

    The tax effects of temporary differences that gave rise to future tax
    liabilities and assets are as follows:

<Table>
<Caption>
                                                                      AT MARCH 31
                                                                  -------------------
                                                                    2002       2001
                                                                  --------   --------
    <S>                                                           <C>        <C>
    Non-capital tax loss carryforwards..........................   $101.3     $120.0
    Capital tax loss carryforwards..............................      4.8        5.3
    Investment tax credits......................................    (22.6)     (31.5)
    Capital assets..............................................    (40.8)     (12.8)
    Employee pension plans......................................      3.2       (3.1)
    Amounts not currently deductible............................     20.5       20.9
    Percentage of completion versus completed contract..........    (30.0)     (18.6)
    Other.......................................................     (5.6)       2.8
                                                                   ------     ------
                                                                   $ 30.8     $ 83.0
                                                                   ------     ------
    Valuation allowance.........................................    (46.6)     (76.2)
                                                                   ------     ------
    Total future income taxes...................................   $(15.8)    $  6.8
                                                                   ======     ======
</Table>

    As of March 31, 2002, the Company has accumulated non-capital tax losses
    carried forward relating to operations in the United States for an amount of
    approximately US$147.8 million. The losses for income tax purposes expire in
    the year 2005 through 2013. For financial reporting purposes, a future tax
    asset of US$26.9 million has been recognized in respect of these loss
    carryforwards.

                                      F-21
<Page>
                                    CAE INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                      YEARS ENDED MARCH 31, 2002 AND 2001
                      (AMOUNTS IN MILLIONS OF CDN DOLLARS)

14. INCOME TAXES (CONTINUED)
    The Company has accumulated non-capital tax losses carried forward relating
    to its operations in other countries of approximately $64.0 million. These
    losses can be carried forward without time limitation. For financial
    reporting purposes, a future tax asset of $9.2 million has been recognized.

    The valuation allowance relates principally to loss carryforward benefits
    where realization is not likely due to a history of loss carryforwards and
    to the uncertainty of sufficient taxable earnings in the future, together
    with time limitations in the tax legislation giving rise to the potential
    benefit. In 2002, $21.8 million (2001: $13.7 million) of the valuation
    allowance balance was reversed when it became more likely than not that
    benefits would be realized.

15. SUPPLEMENTARY CASH FLOW INFORMATION

    Cash provided by (used in) non-cash working capital:

<Table>
<Caption>
                                                                    2002       2001       2000
                                                                  --------   --------   --------
    <S>                                                           <C>        <C>        <C>
    Accounts receivable.........................................   $(50.4)    $ 21.8     $(41.5)
    Inventories.................................................    (23.8)     (45.7)      18.8
    Prepaid expenses............................................      1.9        5.9       (0.1)
    Income taxes recoverable....................................     36.9       49.7       27.7
    Accounts payable and accrued liabilities....................     27.9       71.0       71.7
    Deposits on contracts.......................................     (0.1)     (23.6)      67.5
                                                                   ------     ------     ------
                                                                   $ (7.6)    $ 79.1     $144.1
                                                                   ======     ======     ======
    Interest paid (received)....................................   $ 25.3     $ 20.6     $(10.8)
    Income taxes paid (received)................................   $ 14.3     $  8.8     $ (1.3)
    Amortization of other assets................................   $  3.2     $--        $--
</Table>

16. CONTINGENCIES

    Through the normal course of operations, the Company is party to a number of
    lawsuits, claims and contingencies. Accruals are made in instances where it
    is probable that liabilities will be incurred and where such liabilities can
    be reasonably estimated. Although it is possible that liabilities may be
    incurred in instances for which no accruals have been made, the Company has
    no reason to believe that the ultimate outcome of these matters will have a
    material impact on its financial position.

17. GOVERNMENT COST SHARING

    The Company has signed agreements with the Government of Canada whereby the
    Government shares in the cost of certain visual research and development
    programs as well as advanced flight simulation technology for civil
    applications. Funding in the amount of $31.2 million related to the visual
    research and development programs was completed during 2001. Funding for
    flight simulation, which is ongoing, amounts to $41.4 million. These
    programs are repayable in the form of royalties based on future sales
    levels. The royalty payments on one of the programs have already started and
    will continue until March 31, 2012, up to an amount not to exceed
    $41.9 million for the visual research and development programs and
    $66 million for the flight simulation program.

                                      F-22
<Page>
                                    CAE INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                      YEARS ENDED MARCH 31, 2002 AND 2001
                      (AMOUNTS IN MILLIONS OF CDN DOLLARS)

18. OPERATING LEASE COMMITMENTS

    Future minimum lease payments under operating leases, the most significant
    of which relate to the Medium Support Helicopter contract with the UK MoD as
    described in Note 9(ii), are as follows:

<Table>
    <S>                                                           <C>
    Year ending March 31,
      2003......................................................   $ 64.4
      2004......................................................     67.1
      2005......................................................     63.2
      2006......................................................     56.6
      2007......................................................     42.4
      Thereafter................................................    307.8
                                                                   ------
                                                                   $601.5
                                                                   ======
</Table>

19. PENSIONS

    The Company has defined benefit plans that provide benefits based on length
    of service and final average earnings. The Company has an obligation to
    ensure that there are sufficient funds in the plans to pay the benefits
    earned.

    Contributions reflect actuarial assumptions concerning future investment
    returns, salary projections and future service benefits. Plan assets are
    represented primarily by Canadian and foreign equities and government and
    corporate bonds.

    The changes in the pension obligations and in the fair value of assets and
    the funded status of the defined benefit plans were as follows:

<Table>
<Caption>
                                                                      AT MARCH 31
                                                                  -------------------
                                                                    2002       2001
                                                                  --------   --------
    <S>                                                           <C>        <C>
    Change in pension obligations
      Pension obligation, beginning of year.....................   $126.0     $111.5
      Current service cost......................................      4.2        3.3
      Interest cost.............................................      8.1        7.8
      Settlement gain on discontinued operations................     (2.5)     --
      Employee contributions....................................      2.2        2.3
      Loss on plan amendments...................................      1.1        1.6
      Pension benefits paid.....................................     (8.8)      (8.4)
      Actuarial loss............................................      1.1        7.9
                                                                   ------     ------
    Pension obligation, end of year.............................   $131.4     $126.0
                                                                   ------     ------
    Change in fair value of plan assets
      Fair value of plan assets, beginning of year..............   $121.5     $120.8
      Return on plan assets.....................................     10.6       10.7
      Pension benefits paid.....................................     (8.8)      (8.4)
      Settlement loss on discontinued operations................     (2.5)     --
      Employee contributions....................................      2.2        2.3
      Employer contributions....................................      0.6        0.7
      Actuarial loss............................................    (11.9)      (4.6)
                                                                   ------     ------
    Fair value of plan assets, end of year......................   $111.7     $121.5
                                                                   ------     ------
      Funded status-plan deficit................................   $(19.7)    $ (4.5)
      Unrecognized net actuarial loss...........................     24.9       12.5
      Unamortized past service cost.............................      2.6        1.6
                                                                   ------     ------
    Accrued pension asset.......................................   $  7.8     $  9.6
                                                                   ======     ======
</Table>

                                      F-23
<Page>
                                    CAE INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                      YEARS ENDED MARCH 31, 2002 AND 2001
                      (AMOUNTS IN MILLIONS OF CDN DOLLARS)

19. PENSIONS (CONTINUED)
    The actuarial present value of accrued pension benefits has been estimated
    taking into consideration economic and demographic factors over an extended
    future period. Significant assumptions used in the calculation are as
    follows:

<Table>
<Caption>
                                                                       2002             2001
                                                                  --------------   --------------
    <S>                                                           <C>              <C>
    Return on plan assets.......................................            9.0%             9.0%
    Discount rate for pension benefit obligations...............            6.5%             6.5%
    Compensation rate increases.................................  2.75% to 5.25%   2.75% to 5.25%
                                                                  --------------   --------------
</Table>

    The net pension expense for the year ended March 31, 2002 included the
    following components:

<Table>
<Caption>
                                                                    2002       2001
                                                                  --------   --------
    <S>                                                           <C>        <C>
    Current service cost........................................   $  4.2     $  3.3
    Interest cost on projected pension obligations..............      8.1        7.8
    Expected return on plan assets..............................    (10.6)     (10.7)
    Amortization of past service costs..........................      0.1      --
                                                                   ------     ------
    Net pension expense.........................................   $  1.8     $  0.4
                                                                   ======     ======
</Table>

20. BUSINESS SEGMENTS

    The Company's significant business segments include:

    (i) Civil Simulation and Training -- a world-leading supplier of civil
        flight simulators and visual systems, and a provider of business and
        civil aviation training.

    (ii) Military Simulation and Marine Controls -- a premier supplier of
         military flight and land-based simulators, visual and training systems.
         The segment also supplies marine controls and training systems.

    Each operating segment is led by a senior executive and offers different
    products and uses different technology and marketing strategies. The Company
    evaluates performance based on operating earnings before interest and income
    taxes and uses capital employed to assess resources allocated to each
    segment. Capital employed includes accounts receivable, inventories, prepaid
    expenses, property, plant and equipment, goodwill, intangible assets and
    other assets less accounts payable and accrued liabilities, deposits on
    contracts and contingent consideration due to acquisitions included in other
    long-term liabilities.

                                      F-24
<Page>
                                    CAE INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                      YEARS ENDED MARCH 31, 2002 AND 2001
                      (AMOUNTS IN MILLIONS OF CDN DOLLARS)

20. BUSINESS SEGMENTS (CONTINUED)
    Financial information on the Company's operating segments is shown in the
    following table:

    BUSINESS SEGMENTS

<Table>
<Caption>
                                                                    2002       2001       2000
                                                                  --------   --------   --------
    <S>                                                           <C>        <C>        <C>
    Capital employed
      Civil Simulation and Training.............................  $1,057.3   $   74.5
      Military Simulation and Marine Controls...................     273.3       79.0
      Other.....................................................      21.0       17.0
                                                                  --------   --------
    Total capital employed......................................  $1,351.6   $  170.5
      Cash......................................................      88.8      156.8
      Short-term investments....................................      21.3      122.8
      Income taxes recoverable..................................      15.8        8.2
      Accounts payable and accrued liabilities..................     420.5      315.0
      Deposits on contract......................................     189.1      175.9
      Future income taxes -- short-term.........................      28.9       15.4
      Future income taxes -- long-term..........................      71.3       15.9
      Long-term liabilities.....................................      73.7       20.7
      Assets of discontinued operations.........................     123.8      370.9
                                                                  --------   --------
    Total assets................................................  $2,384.8   $1,372.1
                                                                  ========   ========
    Total assets by segment
      Civil Simulation and Training.............................  $1,380.9   $  348.5
      Military Simulation and Marine Controls...................     609.7      319.0

    Capital expenditures
      Civil Simulation and Training.............................  $  216.7   $   72.9   $   11.7
      Military Simulation and Marine Controls...................      32.9        3.4       10.1
                                                                  --------   --------   --------
                                                                  $  249.6   $   76.3   $   21.8
                                                                  ========   ========   ========
    Amortization of property, plant and equipment
      Civil Simulation and Training.............................  $   24.4   $    9.3   $   11.3
      Military Simulation and Marine Controls...................      12.5        9.2       10.6
                                                                  --------   --------   --------
                                                                  $   36.9   $   18.5   $   21.9
                                                                  ========   ========   ========
    Amortization of goodwill
      Civil Simulation and Training.............................  $  --      $  --      $  --
      Military Simulation and Marine Controls...................     --           0.6        0.4
                                                                  --------   --------   --------
                                                                  $  --      $    0.6   $    0.4
                                                                  ========   ========   ========
</Table>

                                      F-25
<Page>
                                    CAE INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                      YEARS ENDED MARCH 31, 2002 AND 2001
                      (AMOUNTS IN MILLIONS OF CDN DOLLARS)

20. BUSINESS SEGMENTS (CONTINUED)
    GEOGRAPHIC SEGMENTS

<Table>
<Caption>
                                                                    2002       2001       2000
                                                                  --------   --------   --------
    <S>                                                           <C>        <C>        <C>
    Revenue from external customers based on their location
      Canada....................................................  $  102.7   $  109.8   $   95.2
      US........................................................     347.0      268.7      292.6
      Great Britain.............................................     127.4      141.9      144.1
      Germany...................................................      91.2      101.2      113.1
      Other European countries..................................     173.8      128.1       79.3
      Other countries...........................................     284.4      141.7      140.8
                                                                  --------   --------   --------
                                                                  $1,126.5   $  891.4   $  865.1
                                                                  ========   ========   ========
    Property, plant and equipment and goodwill
      Canada....................................................  $  126.6   $   95.7
      US........................................................     500.7        6.2
      Europe....................................................     435.5       79.6
      Other countries...........................................     151.2       64.2
                                                                  --------   --------
                                                                  $1,214.0   $  245.7
                                                                  ========   ========
</Table>

                                      F-26
<Page>
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                      YEARS ENDED MARCH 31, 2002 AND 2001
                      (AMOUNTS IN MILLIONS OF CDN DOLLARS)

21. DIFFERENCES BETWEEN CANADIAN AND UNITED STATES ACCOUNTING PRINCIPLES
    AND PRACTICES

    The consolidated financial statements have been prepared in accordance with
    Canadian generally accepted accounting principles and practices (Canadian
    GAAP), which differ in certain respects from those principles and practices
    that the Company would have followed had its financial statements been
    prepared in accordance with accounting principles and practices generally
    accepted in the United States (US GAAP).

    Additional disclosures required under US GAAP have been provided in the
    accompanying financial statements and notes. In accordance with the
    accommodation provided by the Securities and Exchange Commission for initial
    registrations by foreign registrants, the US GAAP information is only
    provided for the two years ended March 31, 2002.

    The reconciliation of net earnings in accordance with Canadian GAAP to
    conform to US GAAP is as follows:

<Table>
<Caption>
                                                                   FOR THE YEAR      FOR THE YEAR
                                                                       ENDED             ENDED
                                                                  MARCH 31, 2002    MARCH 31, 2001
                                                                  ---------------   ---------------
    <S>                                                           <C>               <C>
    Earnings from continuing operations for the period in
      accordance with Canadian GAAP.............................      $149.3            $105.2
    Deferred development costs, net of tax of $8.0
      (2001 -- $4.5) (A)........................................       (17.1)             (9.0)
    Deferred pre-operating costs, net of tax of $4.1
      (2001 -- $1.0) (B)........................................        (8.8)             (2.1)
    Derivative adjustments, net of tax of $0.2 (D)..............        (0.5)           --
    Amortization of deferred foreign exchange, net of tax of
      $0.5
      (2001 -- $1.0) (E)........................................        (0.7)             (1.9)
    Leases net of tax of $0.8 (2001 -- $0.8) (J)................        (1.8)             (1.5)
    Foreign exchange gain on purchase of subsidiary net of tax
      recovery of $3.4 (H)......................................         7.2            --
                                                                      ------            ------
    Earnings from continuing operations before cumulative effect
      of accounting change --
      US GAAP...................................................       127.6              90.7
    Discontinued operations.....................................         1.3               2.9
                                                                      ------            ------
    Net earnings before cumulative effect of accounting
      change -- US GAAP.........................................       128.9              93.6
    Cumulative effect on prior years of accounting
      change (D) (G)............................................         5.3            --
                                                                      ------            ------
    Net earnings for the period in accordance with US GAAP......      $134.2            $ 93.6
                                                                      ======            ======

    Earnings per share from continuing operations in accordance
      with US GAAP -- basic and diluted.........................      $ 0.59            $ 0.42
    Results per share from discontinued operations in accordance
      with US GAAP -- basic and diluted.........................      --                  0.01
                                                                      ------            ------
    Net earnings per share before cumulative effect of
      accounting change in accordance with US GAAP -- basic and
      diluted...................................................        0.59              0.43
                                                                      ======            ======
    Net earnings per share in accordance with US GAAP -- basic
      and diluted...............................................        0.62              0.43
                                                                      ======            ======
    Net earnings per share adjusted for goodwill
      amortization -- basic and diluted.........................        0.62              0.43
                                                                      ======            ======
    Weighted average number of shares outstanding used in
      calculating net earnings per share -- basic and diluted
      (in millions).............................................       217.6             215.7
                                                                      ======            ======
</Table>

                                      F-27
<Page>
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                      YEARS ENDED MARCH 31, 2002 AND 2001
                      (AMOUNTS IN MILLIONS OF CDN DOLLARS)

21. DIFFERENCES BETWEEN CANADIAN AND UNITED STATES ACCOUNTING PRINCIPLES
    AND PRACTICES (CONTINUED)

<Table>
<Caption>
                                                                   FOR THE YEAR      FOR THE YEAR
                                                                       ENDED             ENDED
                                                                  MARCH 31, 2002    MARCH 31, 2001
                                                                  ---------------   ---------------
    <S>                                                           <C>               <C>
    COMPREHENSIVE INCOME
    Net earnings in accordance with US GAAP.....................      $134.2            $ 93.6
    Foreign currency translation adjustments....................        (2.2)              1.0
                                                                      ------            ------
    Comprehensive income........................................      $132.0            $ 94.6
                                                                      ======            ======
</Table>

<Table>
<Caption>
                                                                     CURRENCY
                                                                   TRANSLATION
                                                                    ADJUSTMENT
                                                                  --------------
    <S>                                                           <C>
    ACCUMULATED OTHER COMPREHENSIVE INCOME
    At April 1, 2001............................................      $(14.6)
    Change during the year......................................         1.0
                                                                      ------
    As at March 31, 2001........................................       (13.6)
    Change during the year......................................        (2.2)
                                                                      ------
    As at March 31, 2002........................................      $(15.8)
                                                                      ======
</Table>

    The effect of these adjustments on the shareholders' equity of the Company
    is as follows:

<Table>
<Caption>
                                                                   FOR THE YEAR      FOR THE YEAR
                                                                       ENDED             ENDED
                                                                  MARCH 31, 2002    MARCH 31, 2001
                                                                  ---------------   ---------------
    <S>                                                           <C>               <C>
    Shareholders' equity in accordance with Canadian GAAP.......      $618.5            $464.1
    Deferred development costs, net of tax of $12.5
      (2001 -- $4.5) (A)........................................       (26.1)             (9.0)
    Deferred pre-operating costs, net of tax of $8.7
      (2001 -- $4.6) (B)........................................       (17.9)             (9.1)
    Derivative adjustments, net of tax of $2.2 (D)..............         4.8            --
    Amortization of deferred foreign exchange, net of tax of
      $3.3 (E)
      (2001 -- $0.8)............................................        (6.4)             (2.1)
    Leases net of tax of $0.4 (2001 -- $(0.4))..................        (0.9)              0.9
    Foreign exchange gain on purchase of subsidiary net of tax
      of $3.4 (H)...............................................         7.2            --
                                                                      ------            ------
    Shareholders' equity in accordance with US GAAP.............      $579.2            $444.8
                                                                      ======            ======
</Table>

                                      F-28
<Page>
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                      YEARS ENDED MARCH 31, 2002 AND 2001
                      (AMOUNTS IN MILLIONS OF CDN DOLLARS)

21. DIFFERENCES BETWEEN CANADIAN AND UNITED STATES ACCOUNTING PRINCIPLES
    AND PRACTICES (CONTINUED)
    The balance sheets in accordance with US GAAP as at March 31, 2002 and
    March 31, 2001 are as follows:

<Table>
<Caption>
                                                                                MARCH 31, 2002          MARCH 31, 2001
                                                                             ---------------------   ---------------------
                                                                             CANADIAN                CANADIAN
                                                                NOTES          GAAP       US GAAP      GAAP       US GAAP
                                                           ---------------   ---------   ---------   ---------   ---------
    <S>                                                    <C>               <C>         <C>         <C>         <C>
    ASSETS
    Cash.................................................                    $   88.8    $   88.8    $  156.8    $  156.8
    Short-term investments...............................         C              21.3        21.3       122.8       122.8
    Accounts receivable..................................                       378.2       378.2       245.6       245.6
    Derivative instruments...............................         D             --            6.9       --          --
    Inventories..........................................                       130.9       130.9        99.4        99.4
    Prepaid expenses.....................................                         9.9         9.9         8.6         8.6
    Income taxes recoverable.............................                        15.8        15.8         8.2         8.2
    Future income taxes..................................                        28.9        28.9        15.4        15.4
                                                                             --------    --------    --------    --------
                                                                             $  673.8    $  680.7    $  656.8    $  656.8
                                                                             --------    --------    --------    --------
    Assets of discontinued operations....................                       123.8       123.8       370.9       370.9
    Property, plant and equipment, net...................         J             838.5       931.4       227.2       244.7
    Future income taxes..................................    A,B,D,E,H,J         71.3        90.3        15.9        27.1
    Intangible assets....................................                       163.4       163.4       --          --
    Goodwill.............................................         H             375.5       386.1        18.5        18.5
    Other assets.........................................       A,B,E           138.5        73.5        82.8        51.0
                                                                             --------    --------    --------    --------
                                                                             $2,384.8    $2,449.2    $1,372.1    $1,369.0
                                                                             ========    ========    ========    ========
    LIABILITIES AND SHAREHOLDERS' EQUITY

    CURRENT LIABILITIES
    Accounts payable and accrued liabilities.............                    $  420.5    $  420.5    $  315.0    $  315.0
    Deposits on contracts................................                       189.1       189.1       175.9       175.9
    Long term debt due within one year...................         J              37.5        50.6         2.3         5.9
    Future income taxes..................................                        50.4        50.4        14.5        14.5
                                                                             --------    --------    --------    --------
                                                                             $  697.5    $  710.6    $  507.7    $  511.3

    Liabilities of discontinued operations...............                    $   40.5    $   40.5    $  106.6    $  106.6
    Long-term debt.......................................         J             889.0       997.0       263.0       291.0
    Long-term liabilities................................         J              73.7        56.3        20.7         5.3
    Future income taxes..................................                        65.6        65.6        10.0        10.0
                                                                             --------    --------    --------    --------
                                                                             $1,766.3    $1,870.0    $  908.0    $  924.2
                                                                             --------    --------    --------    --------
    SHAREHOLDERS' EQUITY
    Capital stock........................................         I          $  186.8    $  436.1    $  159.4    $  408.7
    Retained earnings....................................  A,B,D,E,G,H,I,J      446.8       158.9       321.2        49.7
    Currency translation adjustment......................                       (15.1)      --          (16.5)      --
    Accumulated other comprehensive income...............         C             --          (15.8)      --          (13.6)
                                                                             --------    --------    --------    --------
                                                                             $  618.5    $  579.2    $  464.1    $  444.8
                                                                             --------    --------    --------    --------
                                                                             $2,384.8    $2,449.2    $1,372.1    $1,369.0
                                                                             ========    ========    ========    ========
</Table>

    RECONCILIATION ITEMS

    A) DEFERRED DEVELOPMENT COSTS

       For US GAAP reporting purposes, development costs are charged to expense
       in the period incurred. For Canadian GAAP purposes, certain development
       costs are capitalized and amortized over their estimated useful lives if
       they meet the criteria for deferral. The difference between US GAAP and
       Canadian GAAP represents the gross development costs capitalized in the
       respective year, net of the reversal of amortization expense recorded for
       Canadian GAAP relating to amounts previously capitalized.

                                      F-29
<Page>
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                      YEARS ENDED MARCH 31, 2002 AND 2001
                      (AMOUNTS IN MILLIONS OF CDN DOLLARS)

21. DIFFERENCES BETWEEN CANADIAN AND UNITED STATES ACCOUNTING PRINCIPLES
    AND PRACTICES (CONTINUED)
    B) DEFERRED PRE-OPERATING COSTS

       For US GAAP reporting purposes, pre-operating costs are charged to
       expense in the period incurred. For Canadian GAAP purposes, the amounts
       are deferred and amortized over 5 to 20 years based on the expected
       period and pattern of benefit of the deferred expenditures.

    C) PORTFOLIO INVESTMENTS

       Under Canadian GAAP, portfolio investments (short-term investments) are
       accounted for using the cost method and gains or losses are recognized in
       the period in which the investment is sold. Under US GAAP, these
       portfolio investments are classified as held to maturity and thus are
       recorded at amortized cost. There is no material difference for US GAAP
       purposes. The investments held at March 31, 2002 and 2001 had maturity
       dates of within one month of March 31, 2002 and 2001 respectively.

    D) DERIVATIVE FINANCIAL INSTRUMENTS

       Under Canadian GAAP, the nature and fair values of derivative financial
       instruments are disclosed. The Company continues to recognize the gains
       and losses on forward contracts in income concurrently with the
       recognition of the firm commitments being hedged. The interest payments
       relating to swap contracts are recorded in net earnings over the life of
       the underlying transaction on an accrual basis as an adjustment to
       interest income or interest expense. Effective April 1, 2001 under
       US GAAP, all derivatives are recorded on the balance sheet at fair value.
       The Company has elected not to adopt the FASB's optional hedge accounting
       provisions. Accordingly, for US GAAP reporting purposes only, beginning
       in 2001, unrealized gains and losses resulting from the valuation of
       derivatives (including embedded derivatives in purchase and sale
       contracts) at market value are recognized in net earnings as the gains
       and losses arise and not concurrently with the recognition of the
       transactions being hedged.

       Upon the initial adoption of the FASB standards on April 1, 2001, the
       cumulative effect of the accounting change resulted in an increase in net
       earnings of $5.8 million net of taxes.

    E) AMORTIZATION OF DEFERRED FOREIGN EXCHANGE LOSS

       For US GAAP purposes, all unrealized gains and losses arising on the
       translation of long term monetary items, except those related to hedges
       of net investments in self-sustaining foreign subsidiaries, are
       recognized in income immediately. For Canadian GAAP purposes, these
       unrealized exchange losses are deferred on the balance sheet and
       amortized over the remaining life of the related items. As noted in
       note 1, effective April 1, 2002, the Company will adopt, under Canadian
       GAAP, the amendments to Canadian Institute of Chartered Accountants
       (CICA) standard # 1650 -- Foreign Currency Translation, which no longer
       permits the deferral and amortization of long-term foreign currency
       denominated assets and liabilities.

    F) JOINT VENTURES

       Under Canadian GAAP, joint ventures are accounted for using the
       proportionate consolidation method, while under US GAAP, joint ventures
       are accounted for under the equity method. Under an accommodation of the
       US Securities and Exchange Commission, accounting for joint ventures need
       not be reconciled from Canadian to US GAAP. The different accounting
       treatment affects only the display and classification of financial
       statement items and not net earnings or shareholders' equity. CAE's joint
       ventures are not material for separate disclosure.

    G) ADJUSTMENTS FOR CHANGES IN ACCOUNTING POLICIES

       Under US GAAP, the cumulative effect of certain accounting changes must
       be included in earnings in the year of the change. Under Canadian GAAP,
       the impact is included in opening retained earnings.

    H) FOREIGN EXCHANGE GAIN ON PURCHASE OF SUBSIDIARY

       Under Canadian GAAP, upon the purchase of Schreiner, a foreign exchange
       gain was recorded as a reduction of goodwill on the forward contract
       hedge of the foreign currency denominated purchase price. Under US GAAP,
       this gain is recorded in earnings.

    I)  REDUCTION OF STATED CAPITAL

       On July 7, 1994, the Company applied a portion of its deficit as a
       reduction of its stated capital in the amount of $249.3 million. Under
       US GAAP, the reduction of stated capital would not be permitted.

                                      F-30
<Page>
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                      YEARS ENDED MARCH 31, 2002 AND 2001
                      (AMOUNTS IN MILLIONS OF CDN DOLLARS)

21. DIFFERENCES BETWEEN CANADIAN AND UNITED STATES ACCOUNTING PRINCIPLES
    AND PRACTICES (CONTINUED)
    J)  LEASES

       Under Canadian GAAP, certain of the Company's leases of simulators, with
       aggregate minimum future lease payments of $175.2 million are accounted
       for as operating leases.

       Under these agreements, the lessors hold the simulators under lease and
       the related liabilities through Special Purpose Entities (SPE's). Under
       US GAAP, since the legal stated capital of these SPE's represent less
       than 3% of the assets of the SPE's, the assets, liabilities, results of
       operations and cash flows of the SPE must be consolidated into those of
       the Company. Amortization expense related to these leases amounts to
       $2.0 million in 2002 (2001 -- $0.6 million)

    K) COMPREHENSIVE INCOME

       US GAAP requires disclosure of comprehensive income, which comprises
       income and other components of comprehensive income. Other comprehensive
       income includes items that cause changes in shareholders' equity but are
       not related to share capital or net earnings which, for the Company,
       comprises only currency translation adjustments. Under Canadian GAAP,
       there is no requirement to report comprehensive income.

    CONSOLIDATED STATEMENT OF CASH FLOWS

    Under US GAAP reporting, separate subtotals within operating, financing and
    investment activities would not be presented.

    The reconciliation of cash flows under Canadian GAAP to conform to US GAAP
    is as follows:

<Table>
<Caption>
                                                                              FOR THE YEAR      FOR THE YEAR
                                                                                  ENDED             ENDED
                                                                    NOTE     MARCH 31, 2002    MARCH 31, 2001
                                                                  --------   ---------------   ---------------
    <S>                                                           <C>        <C>               <C>
    Cash flows from operating activities in accordance with
      Canadian GAAP.............................................                 $ 173.1           $ 159.7
    Deferred development costs..................................    A              (30.1)            (13.5)
    Deferred pre-operating costs................................    B              (13.4)             (4.0)
    Discontinued operations.....................................                   (15.9)             23.6
    Foreign exchange gain on purchase of a subsidiary...........    H               10.6
    Leases......................................................    J                3.8               0.7
                                                                                 -------           -------
    Cash flows from operating activities in accordance with
      US GAAP...................................................                 $ 128.1           $ 166.5
                                                                                 =======           =======
    Cash flows from investing activities in accordance with
      Canadian GAAP.............................................                 $(755.2)          $(148.0)
    Deferred development costs..................................    A               30.1              13.5
    Deferred pre-operating costs................................    B               13.4               4.0
    Discontinued operations.....................................                    (4.7)            (11.1)
    Foreign exchange gain on purchase of a subsidiary...........    H              (10.6)          --
                                                                                 -------           -------
    Cash flows from investing activities in accordance with
      US GAAP...................................................                 $(727.0)          $(141.6)
                                                                                 =======           =======
    Cash flows from financing activities in accordance with
      Canadian GAAP.............................................                 $ 539.2           $ (34.8)
    Discontinued operations.....................................                    (3.9)             (2.1)
    Leases......................................................    J               (3.8)             (0.7)
                                                                                 -------           -------
    Cash flows from financing activities in accordance with
      US GAAP...................................................                 $ 531.5           $ (37.6)
                                                                                 =======           =======
</Table>

    STOCK-BASED COMPENSATION COST

    Under Canadian GAAP, no compensation expense is recognised at the time of
    issuance of employee stock options. For U.S. GAAP reporting, the Company
    follows the provisions of FASB Statement No. 123 "Accounting for Stock-based
    Compensation" ("FAS 123") which allow companies to either expense the
    estimated fair value of stock options, or to continue to follow the
    intrinsic value method set forth in APB Opinion No. 25, "Accounting for
    Stock Issued to Employees" ("APB 25") but disclose the pro forma effects on
    the net earnings had the fair value of the options been expensed. CAE has
    elected to continue to apply APB 25 in accounting for its stock incentive
    plans. At March 31, 2002 no compensation cost has been recorded in the
    accounts. Had compensation cost for the Company's stock option plans been
    determined based upon the fair value method as prescribed in FAS 123, CAE's
    net earnings in the years ended March 31, 2002 and 2001 would have been
    approximately $131.2 million and $85.6 million, or $0.60 per share and $0.40
    per share respectively, on a diluted basis. The fair value of the options
    granted during the years ended March 31, 2002 and 2001 are estimated at
    $4.87 per share and $2.46 per share respectively.

                                      F-31
<Page>
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                      YEARS ENDED MARCH 31, 2002 AND 2001
                      (AMOUNTS IN MILLIONS OF CDN DOLLARS)

21. DIFFERENCES BETWEEN CANADIAN AND UNITED STATES ACCOUNTING PRINCIPLES
    AND PRACTICES (CONTINUED)
    The fair value of each option grant is estimated on the date of grant using
    the Black-Scholes option pricing model with the following weighted-average
    assumptions:

<Table>
<Caption>
                                                                   FOR THE YEAR      FOR THE YEAR
                                                                       ENDED             ENDED
                                                                  MARCH 31, 2002    MARCH 31, 2001
                                                                  ---------------   ---------------
    <S>                                                           <C>               <C>
    Expected option life (years)................................           6                 6
    Expected volatility.........................................        36.3%             31.7%
    Risk-free interest rate.....................................        5.17%             6.15%
    Dividend yield..............................................       1.040%            1.691%
</Table>

    NEW ACCOUNTING STANDARDS

    On July 20, 2001, the Financial Accounting Standards Board issued SFAS 141,
    "Business Combinations", and SFAS 142, "Goodwill and Other Intangible
    Assets". These standards are essentially the same as the recently issued
    Canadian accounting standards. See note 1 for a description of the impact on
    the Company.

    On June 15, 2001, the Financial Accounting Standards Board issued SFAS 143,
    "Accounting for Asset Retirement Obligation", which is effective for fiscal
    years beginning on or after June 15, 2002. This standard requires that the
    fair value of a liability for an asset retirement obligation be recognized
    in the period in which it is incurred if a reasonable estimate of fair value
    can be made. The Company is studying the new standard but has not yet
    determined its impact.

    In October 2001, the FASB issued SFAS 144, "Accounting for Impairment or
    Disposal of Long-Lived Assets", which supersedes SFAS 121 and the provisions
    of APB 30, "Reporting the Results of Operations -- Reporting the Effects of
    Disposal of a Segment of a Business, and Extraordinary, Unusual and
    Infrequently Occurring Events and Transactions", with regard to reporting
    the effects of a disposal of a segment of a business. SFAS 144 retains many
    of the provisions of SFAS 121, but significantly changes the criteria that
    would have to be met to classify an asset as held for disposal such that
    long-lived assets to be disposed of other than by sale are considered held
    and used until disposed of. In addition, SFAS 144 retains the basic
    provisions of APB 30 for presentation of discontinued operations in the
    statement of earnings but broadens that presentation to a component of an
    entity. This new standard is effective for fiscal years beginning after
    December 15, 2001. The Company is studying this new standard but has not yet
    determined its impact.

    In December 2001, the CICA issued AcG 13-"Hedging Relationships" ("AcG 13").
    The guideline presents the views of the Canadian Accounting Standards Board
    on the identification, designation, documentation and effectiveness of
    hedging relationships, for the purpose of applying hedge accounting. The
    guideline is effective for all fiscal years beginning on or after July 1,
    2002, which is the fiscal year beginning April 1, 2003 for the Company.

    In April 2002, the FASB issued SFAS 145, "Rescission of FASB Statements
    No. 4, 44, and 64. Amendment of FASB Statement No. 13, and Technical
    Corrections as of April 2002", which is effective for fiscal years beginning
    after May 15, 2002 and transactions occurring after May 15, 2002. The
    Company is studying this new standard but has not yet determined its impact.

    ADDITIONAL DISCLOSURES

    Additional disclosures required under US GAAP are as follows:

    i)  STATEMENTS OF EARNINGS

<Table>
<Caption>
                                                                       FOR THE YEAR ENDED      FOR THE YEAR ENDED
                                                                         MARCH 31, 2002          MARCH 31, 2001
                                                                      ---------------------   ---------------------
                                                                      CANADIAN                CANADIAN
                                                                        GAAP       US GAAP      GAAP       US GAAP
                                                                      ---------   ---------   ---------   ---------
        <S>                                                           <C>         <C>         <C>         <C>
        Revenues from sales of simulators and training and controls
          systems...................................................   $842.5       846.6       772.1       772.1
        Revenues from sales of services.............................   $284.0       284.0       119.3       119.3
        Cost of sales from simulators...............................   $468.2       469.8       463.5       462.9
        Cost of sales from services.................................   $167.6       169.2        60.3        66.4
        Research and development expenses...........................   $ 74.6       104.7        87.7       104.9
        Rental expense..............................................   $ 48.2        39.8        38.9        36.0
        Selling, general and administrative expenses................   $125.6       125.9        89.1        89.0
        Interest expense (income)...................................   $ 22.8        33.5        (6.3)       (4.2)
</Table>

                                      F-32
<Page>
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                      YEARS ENDED MARCH 31, 2002 AND 2001
                      (AMOUNTS IN MILLIONS OF CDN DOLLARS)

21. DIFFERENCES BETWEEN CANADIAN AND UNITED STATES ACCOUNTING PRINCIPLES
    AND PRACTICES (CONTINUED)
    ii)  BALANCE SHEET

<Table>
<Caption>
                                                                       FOR THE YEAR      FOR THE YEAR
                                                                           ENDED             ENDED
                                                                      MARCH 31, 2002    MARCH 31, 2001
                                                                      ---------------   ---------------
        <S>                                                           <C>               <C>
        Accounts payable trade......................................      $ 97.6            $ 63.0
        Contract liabilities........................................      $188.6            $167.4
        Other accrued liabilities...................................      $134.3            $ 84.6
                                                                          ------            ------
        Accounts payable and accrued liabilities....................      $420.5            $315.0
                                                                          ======            ======
        Accounts receivable from government amounted to $56.0 as of
          March 31, 2002 (2001 -- $16.1)............................
</Table>

    iii) For US GAAP purposes, property, plant and equipment are reviewed for
       impairment whenever events or changes in circumstances indicate that the
       carrying amount of an asset may not be recoverable. Recoverability of
       assets to be held and used is measured by a comparison of the carrying
       amount of an asset to undiscounted future net cash flows (before interest
       expense) expected to be generated by the asset. If such assets are
       considered to be impaired, the impairment to be recognized is measured by
       the amount by which the carrying amount of the assets exceeds the fair
       value of the assets. Assets to be disposed of are reported at the lower
       of the carrying amount or fair value less costs to sell.

    iv) INCOME TAXES

       The components of earnings from continuing operations and income taxes on
       a Canadian GAAP basis are as follows:

<Table>
<Caption>
                                                                      FOR THE YEAR ENDED   FOR THE YEAR ENDED
                                                                        MARCH 31, 2002       MARCH 31, 2001
                                                                      ------------------   ------------------
        <S>                                                           <C>                  <C>
        EARNINGS BEFORE INCOME TAXES AND OTHER ITEMS
        Canada......................................................        $180.7               $153.7
        Other countries.............................................          38.9                  4.5
                                                                            ------               ------
                                                                             219.6                158.2
                                                                            ------               ------
        CURRENT INCOME TAXES
        Canada......................................................          59.3                 54.7
        Other countries.............................................           3.5                  6.0
                                                                            ------               ------
                                                                              62.8                 60.7
                                                                            ------               ------
        FUTURE TAXES
        Canada......................................................          (1.5)                (3.1)
        Other countries.............................................           9.0                 (4.6)
                                                                            ------               ------
                                                                               7.5                 (7.7)
                                                                            ------               ------
        Income tax provision........................................          70.3                 53.0
                                                                            ------               ------
</Table>

    v)  BUSINESS COMBINATIONS

       The following pro forma information for the fiscal years ended March 31,
       2002 and 2001 presents a summary of the pro forma consolidated statement
       of earnings of the Company as if all four acquisitions referred to in
       note 2 had occurred on April 1, 2001. This pro forma information is based
       on available information and includes certain assumptions and
       adjustments, which the management of CAE believes to be reasonable. The
       pro forma information does not give effect to any cost savings or
       synergies that CAE may enjoy as a result of these acquisitions.
       Accordingly, the pro forma information is not necessarily indicative of
       the results that might have been achieved, if the transactions reflected
       therein had been effective as at the

                                      F-33
<Page>
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                      YEARS ENDED MARCH 31, 2002 AND 2001
                      (AMOUNTS IN MILLIONS OF CDN DOLLARS)

21. DIFFERENCES BETWEEN CANADIAN AND UNITED STATES ACCOUNTING PRINCIPLES
    AND PRACTICES (CONTINUED)
       beginning of the period presented, or of the results which may be
       obtained in the future. This pro forma financial information has been
       prepared for comparative purposes only.

<Table>
<Caption>
                                                                      FOR THE YEAR ENDED   FOR THE YEAR ENDED
                                                                        MARCH 31, 2002       MARCH 31, 2001
                                                                      ------------------   ------------------
                                                                          Unaudited            Unaudited
                                                                       (AMOUNTS IN MILLIONS OF CDN DOLLARS,
                                                                             EXCEPT PER SHARE AMOUNTS)
        <S>                                                           <C>                  <C>
        Revenue
          Civil Simulation and Training.............................       $  618.6             $  570.2
          Military Simulation and Marine Controls...................          593.8                576.4
                                                                           --------             --------
                                                                           $1,212.4             $1,146.6
                                                                           ========             ========
        Operating earnings
          Civil Simulation and Training.............................       $  148.9             $  136.0
          Military Simulation and Marine Controls...................           91.7                 46.0
                                                                           --------             --------
        Earnings from continuing operations before interest and
          income taxes..............................................          240.6                182.0
        Interest expense (income) net (note 10 (xi))................           44.6                 29.1
                                                                           --------             --------
        Earnings from continuing operations before income taxes.....          196.0                152.9
        Income taxes (note 14)......................................           61.4                 51.8
                                                                           --------             --------
        Earnings from continuing operations.........................       $  134.6                101.1
        Results of discontinued operations (note 3).................            1.3                  2.9
                                                                           --------             --------
        Net earnings................................................       $  135.9             $  104.0
                                                                           ========             ========
        Earnings and diluted earnings per share from continuing
          operations................................................       $   0.62             $   0.47
                                                                           ========             ========
        Net earnings and diluted net earnings per share.............       $   0.62             $   0.48
                                                                           ========             ========
        Average number of shares outstanding........................          218.2                217.1
                                                                           ========             ========
</Table>

22. COMPARATIVE FINANCIAL STATEMENTS

    Certain comparative figures for 2001 have been reclassified to conform to
    the presentation adopted in 2002.

23. SUBSEQUENT EVENT

    On July 3, 2002 the company filed a preliminary prospectus with securities
    regulatory authorities in Canada, and, pursuant to the Canada/United States
    multi-jurisdictional disclosure system, a registration statement with the
    U.S. Securities and Exchange Commission, in connection with a proposed
    public offering of common shares in Canada and the United States. Proceeds
    received by the company will be used to repay existing indebtedness. The
    company expects this offering to be completed by the end of the second
    quarter of fiscal year 2003 and, in connection with the offering, has
    applied to list its common shares on the New York Stock Exchange.

                                      F-34
<Page>
        UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION

                               COMPILATION REPORT

To the Directors of CAE INC.

    We have reviewed, as to compilation only, the pro forma condensed
consolidated statement of earnings from continuing operations of CAE and
SimuFlite for the year ended March 31, 2002 included on page F-36, which has
been prepared for inclusion in the CAE short form prospectus dated July 3, 2002.
In our opinion, the pro forma condensed consolidated statement of earnings from
continuing operations has been properly compiled to give effect to the
transaction and the assumptions described in the accompanying notes.

/s/ PricewaterhouseCoopers LLP
Chartered Accountants
Montreal, Canada
July 3, 2002

                 COMMENTS FOR UNITED STATES READERS ON CANADIAN
                     AND UNITED STATES REPORTING DIFFERENCE

    The above report, provided solely pursuant to Canadian requirements, is
expressed in accordance with standards of reporting generally accepted in
Canada. Such standards contemplate the expression of an opinion with respect to
the compilation of pro forma financial statements. United States standards do
not provide for the expression of an opinion on the compilation of pro forma
financial statements. To report in conformity with the United States standards
on the reasonableness of the pro forma adjustments and their application to
pro forma financial statements requires an examination or review substantially
greater in scope than the review we have conducted. Consequently, we are unable
to express any opinion in accordance with standards of reporting generally
accepted in the United States with respect to the compilation of the
accompanying unaudited pro forma statement of earnings.

/s/ PricewaterhouseCoopers LLP
Chartered Accountants
Montreal, Canada
July 3, 2002

                                      F-35
<Page>
                                    CAE INC.

              UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT
                     OF EARNINGS FROM CONTINUING OPERATIONS

                       FOR THE YEAR ENDED MARCH 31, 2002

<Table>
<Caption>
                                               TRANSLATED HISTORICAL
                                                     SIMUFLITE
                                             --------------------------
                                               12 MONTHS
                                                 ENDED        3 MONTHS
                                             DECEMBER 31,      ENDED       PRO FORMA
                                HISTORICAL       2001        MARCH 31,    ADJUSTMENTS                  PRO FORMA
                                   CAE         (NOTE 2)         2001       (NOTE 3)      (NOTE 3)     CONSOLIDATED
                                ----------   -------------   ----------   -----------   -----------   ------------
                                    (in millions of Canadian dollars, except per share amounts)
<S>                             <C>          <C>             <C>          <C>           <C>           <C>
Revenue
  Civil Simulation and
    Training..................   $  545.2        106.5           28.1         (22.1)         d          $  601.5
  Military Simulation and
    Marine Controls...........      581.3       --              --           --                            581.3
                                 --------       ------         ------        ------                     --------
                                  1,126.5        106.5           28.1         (22.1)                     1,182.8
                                 ========       ======         ======        ======                     ========
Operating earnings
  Civil Simulation and
    Training..................      152.3          6.3            5.8          (6.8)    a, b, d, e         146.0
  Military Simulation and
    Marine Controls...........       90.0       --              --           --                             90.0
                                 --------       ------         ------        ------                     --------
Earnings from continuing
  operations before interest
  and income taxes............      242.3          6.3            5.8          (6.8)                       236.0
Interest expense, net.........       22.7         13.6            3.9           5.3        b, c             37.7
                                 --------       ------         ------        ------                     --------
Earnings from continuing
  operations before income
  taxes.......................      219.6         (7.3)           1.9         (12.1)                       198.3
Income taxes..................       70.3         (2.6)           1.0          (4.4)         f              62.3
                                 --------       ------         ------        ------                     --------
Earnings from continuing
  operations..................   $  149.3         (4.7)           0.9          (7.7)                    $  136.0
                                 ========       ======         ======        ======                     ========
Earnings and diluted earnings
  per share from continuing
  operations..................   $   0.69        (0.02)          0.00         (0.04)                    $   0.63
                                 ========       ======         ======        ======                     ========
</Table>

                                      F-36
<Page>
                                    CAE INC.

                     NOTES TO UNAUDITED PRO FORMA CONDENSED
                       CONSOLIDATED STATEMENT OF EARNINGS

           (IN MILLIONS OF CANADIAN DOLLARS EXCEPT PER SHARE AMOUNTS)

BASIS OF PRESENTATION

The unaudited pro forma condensed consolidated statement of earnings gives
effect to the acquisition of SimuFlite Training International, Inc.
("SimuFlite") by CAE Inc. ("CAE") as described in note 2 to the consolidated
financial statements of CAE for the year ended March 31, 2002. The unaudited pro
forma condensed consolidated statement of earnings has been prepared using the
accounting policies of CAE as contained in the consolidated financial statements
which are prepared in accordance with Canadian GAAP. Disclosure of pro forma net
earnings under US GAAP is provided in note 4 of these unaudited pro forma
consolidated financial statements. The unaudited pro forma consolidated
statement of earnings is based on the consolidated statement of earnings of CAE
for the year ended March 31, 2002 which includes the results of operations of
SimuFlite for the three months ended March 31, 2002. No pro forma consolidated
balance sheet is required for the year ended March 31, 2002, as the business
combination is included in CAE's March 31, 2002 consolidated balance sheet.

The accompanying unaudited pro forma consolidated statement of earnings is based
on, and should be read in conjunction with, the historical consolidated
financial statements of CAE for the year ended March 31, 2002 and the historical
financial statements of SimuFlite for the year ended December 31, 2001,
including the notes thereto which are included in this prospectus, adjusted to
give effect to the below mentioned assumptions and adjustments. Certain
reclassifications have been made to the SimuFlite historical statement of
earnings to conform to the CAE presentation.

The pro forma adjustments are based on available information and include certain
assumptions and adjustments, which the management of CAE believes to be
reasonable. These adjustments are directly related to the acquisition and are
expected to have a continuing impact on CAE's business and results of
operations. The unaudited pro forma consolidated statement of earnings does not
give effect to any cost savings or other synergies that could result from the
acquisition.

The unaudited pro forma consolidated statement of earnings is not necessarily
indicative either of the results that actually would have been achieved if the
transactions reflected therein had been effective during the period presented or
of the results which may be obtained in the future.

1.  SIMUFLITE CONSOLIDATED STATEMENT OF EARNINGS FROM CONTINUING OPERATIONS FOR
    THE 12 MONTHS ENDED DECEMBER 31, 2001

    The SimuFlite historical statement of earnings information for the year
    ended December 31, 2001 has been translated from US dollars to Canadian
    dollars at the average exchange rate for the year of 1.55. For an
    explanation of the differences between Canadian and US GAAP as they apply to
    SimuFlite, refer to Note 2 to the SimuFlite financial statements included in
    this document.

2.  SIMUFLITE CONSOLIDATED STATEMENT OF EARNINGS FROM CONTINUING OPERATIONS FOR
    THE 3 MONTHS ENDED MARCH 31, 2001

    The SimuFlite historical statement of earnings information for the
    three month period ended March 31, 2001 has been translated from US dollars
    to Canadian dollars at the average exchange rate for the period of 1.53. For
    an explanation of the differences between Canadian and US GAAP as they apply
    to SimuFlite; refer to Note 2 to the SimuFlite financial statements included
    in this document. US dollar pro forma adjustments for the nine-months period
    ended December 31, 2001, have been translated at the average exchange rate
    for the period of 1.55.

3.  PRO FORMA ADJUSTMENTS

    The following adjustments have been made to prepare the pro forma statement
    of earnings.

       a)  The pro forma amortization charge on the intangible assets acquired
        for the period between April 1, 2001 and December 31, 2001 in the amount
        of $3.2. The remaining amortization charge for the year ended March 31,
        2002 is already included in CAE's consolidated statement of earnings for
        the period.

       b)  Had the sale/leaseback transaction occurred on April 1, 2001, it
        would have generated an additional operating expense of $1.7 and the
        reversal of an interest expense, related to the financing of these
        simulators for an amount of $0.5 for the period from April 1, 2001 to
        December 31, 2001.

       c)  The pro forma imputed interest charge in the amount of $11.0 relating
        to the line of credit obtained to finance the US$210.9 purchase price,
        at a rate of 4.5%, incurred for the period from April 1, 2001 to
        December 31, 2001, as if the line of credit was outstanding on April 1,
        2001. This charge replaces a portion of the interest expense of $5.2
        charged by the former parent to SimuFlite.

                                      F-37
<Page>
                                    CAE INC.

                     NOTES TO UNAUDITED PRO FORMA CONDENSED
                 CONSOLIDATED STATEMENT OF EARNINGS (CONTINUED)

           (IN MILLIONS OF CANADIAN DOLLARS EXCEPT PER SHARE AMOUNTS)

3.  PRO FORMA ADJUSTMENTS (CONTINUED)
       d)  Elimination of inter-company sales for an amount of $22.1 and the
        related cost of goods sold for an amount of $15.8 for the period from
        April 1, 2001 to December 31, 2001.

       e)  The amortization of predecessor goodwill in the accounts of SimuFlite
        in the amount of $4.4 has been reversed.

       f)  The tax effect of the foregoing adjustments, where applicable, using
        an assumed effective tax rate of 36.2%.

4.  US GAAP RECONCILIATION

    There are no US GAAP reconciling items related to the aforementioned
    pro forma adjustments.

    Refer to Note 21 to CAE's consolidated financial statements included in this
    document for a description of the differences between Canadian and US GAAP
    or they apply to CAE Inc., and to Note 1 to the SimuFlite financial
    statements included in this document for a description of such differences
    as they apply to SimuFlite.

    Pro forma US GAAP information related to CAE is as follows:

<Table>
<Caption>
                                                                              YEAR ENDED
                                                                            MARCH 31, 2002
                                                                  ----------------------------------
                                                                  (in millions of Canadian dollars,
                                                                       except per share amount)
    <S>                                                           <C>
    Pro forma earnings from continuing operations...............                $114.3
    Pro forma earnings per share from continuing operations.....                $ 0.53
</Table>

5.  SENSITIVITY ANALYSIS

    If the interest rate used to calculate the imputed interest charge on the
    line of credit varied by 0.125%, the impact on net earnings would be
    $0.2 million.

                                      F-38
<Page>
                       REPORT OF INDEPENDENT ACCOUNTANTS

TO THE BOARD OF DIRECTORS AND STOCKHOLDER OF
SIMUFLITE TRAINING INTERNATIONAL, INC.

    In our opinion, the accompanying combined balance sheet and the related
combined statement of operations, of stockholder's equity and of cash flows
present fairly, in all material respects, the financial position of SimuFlite
Training International, Inc. (a wholly-owned subsidiary of General Electric
Capital Corporation) at December 31, 2001, and the results of its operations and
its cash flows for the year then ended, in conformity with accounting principles
generally accepted in the United States of America. These financial statements
are the responsibility of the Company's management; our responsibility is to
express an opinion on these financial statements based on our audit. We
conducted our audit of these statements in accordance with auditing standards
generally accepted in the United States of America, which require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.

/s/ PricewaterhouseCoopers LLP
Dallas, United States
May 25, 2002

                                      F-39
<Page>
                     SIMUFLITE TRAINING INTERNATIONAL, INC.

      (A WHOLLY-OWNED SUBSIDIARY OF GENERAL ELECTRIC CAPITAL CORPORATION)

                             COMBINED BALANCE SHEET
                               DECEMBER 31, 2001
                         (IN THOUSANDS OF U.S. DOLLARS)

<Table>
<S>                                                           <C>
ASSETS
Current assets:
  Cash and cash equivalents.................................  $  1,689
  Trade accounts receivable, net of allowance for doubtful
    accounts of $645........................................    12,448
Accounts receivable -- other................................       346
Prepaid expenses and other current assets...................       329
                                                              --------
    Total current assets....................................    14,812

Property and equipment, net.................................   112,735
Goodwill, net...............................................    79,617
Other assets................................................       742
                                                              --------
    Total assets............................................  $207,906
                                                              ========
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
  Accounts payable..........................................  $  1,189
  Deferred revenue..........................................     4,194
  Accrued compensation and benefits.........................     1,307
  Accrued expenses and other liabilities....................     2,187
  Interim financing agreement with parent...................     5,834
                                                              --------
    Total current liabilities...............................    14,711

Long-term debt..............................................    27,000
Deferred tax liability......................................     8,588
Deferred gain on sale-leaseback transaction with parent.....     2,070
Due to parent...............................................   140,615
                                                              --------
    Total liabilities.......................................   192,984
                                                              --------
Commitments and contingencies (Notes 3, 5, 7 and 8)
Stockholder's equity
  Common stock $1.00 par value, authorized 1,000 shares, one
    share issued and outstanding............................     --
  Contributed capital by parent.............................    12,255
  Retained earnings.........................................     2,667
                                                              --------
    Total stockholder's equity..............................    14,922
                                                              --------
    Total liabilities and stockholder's equity..............  $207,906
                                                              ========
</Table>

    THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE COMBINED FINANCIAL
                                  STATEMENTS.

                                      F-40
<Page>
                     SIMUFLITE TRAINING INTERNATIONAL, INC.

      (A WHOLLY-OWNED SUBSIDIARY OF GENERAL ELECTRIC CAPITAL CORPORATION)

                        COMBINED STATEMENT OF OPERATIONS
                      FOR THE YEAR ENDED DECEMBER 31, 2001
                         (IN THOUSANDS OF U.S. DOLLARS)

<Table>
<S>                                                           <C>
Revenues:
  Service revenue...........................................  $62,546
  Other revenue.............................................    6,235
                                                              -------
    Total revenues..........................................   68,781
                                                              -------
Operating expense:
  Direct operating costs....................................   32,831
  Selling, general and administrative.......................   17,173
  Depreciation and amortization.............................   10,251
  Overhead allocated from parent............................    4,847
                                                              -------
    Total operating expenses................................   65,102
                                                              -------
    Income from operations..................................    3,679
Interest expense, principally to parent.....................    8,395
                                                              -------
    Loss before income tax benefit..........................   (4,716)
Income tax benefit..........................................   (1,708)
                                                              -------
    Net loss................................................  $(3,008)
                                                              =======
</Table>

    THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE COMBINED FINANCIAL
                                  STATEMENTS.

                                      F-41
<Page>
                     SIMUFLITE TRAINING INTERNATIONAL, INC.

      (A WHOLLY-OWNED SUBSIDIARY OF GENERAL ELECTRIC CAPITAL CORPORATION)

                   COMBINED STATEMENT OF STOCKHOLDER'S EQUITY
                      FOR THE YEAR ENDED DECEMBER 31, 2001
                         (IN THOUSANDS OF U.S. DOLLARS)

<Table>
<Caption>
                                                      COMMON STOCK       CONTRIBUTED                  TOTAL
                                                   -------------------     CAPITAL     RETAINED   STOCKHOLDER'S
                                                    SHARES     AMOUNT     BY PARENT    EARNINGS      EQUITY
                                                   --------   --------   -----------   --------   -------------
<S>                                                <C>        <C>        <C>           <C>        <C>
Balance at December 31, 2000.....................      1      $ --         $12,255     $ 5,675       $17,930

Net loss.........................................   --          --          --          (3,008)       (3,008)
                                                     ---      -------      -------     -------       -------

Balance at December 31, 2001.....................      1      $ --         $12,255     $ 2,667       $14,922
                                                     ===      =======      =======     =======       =======
</Table>

    THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE COMBINED FINANCIAL
                                  STATEMENTS.

                                      F-42
<Page>
                     SIMUFLITE TRAINING INTERNATIONAL, INC.

      (A WHOLLY-OWNED SUBSIDIARY OF GENERAL ELECTRIC CAPITAL CORPORATION)

                        COMBINED STATEMENT OF CASH FLOWS
                      FOR THE YEAR ENDED DECEMBER 31, 2001
                         (IN THOUSANDS OF U.S. DOLLARS)

<Table>
<S>                                                           <C>
Cash flows from operating activities:
  Net loss..................................................  $ (3,008)
  Adjustments to reconcile net loss to net cash provided by
    operating activities
    Depreciation and amortization...........................    10,252
    Loss on disposal of fixed assets........................       430
    Bad debt expense........................................       980
    Deferred income taxes...................................       774
    Changes in net assets and liabilities:
      Receivables...........................................    (5,407)
      Prepaid expenses and other assets.....................     1,062
      Accounts payable......................................    (1,506)
      Accrued expenses......................................      (291)
      Deferred revenue......................................      (299)
                                                              --------
        Net cash provided by operating activities...........     2,987
                                                              --------
Cash flows from investing activities:
  Capital expenditures......................................   (48,904)
  Proceeds from sale of equipment...........................    55,170
                                                              --------
        Net cash provided by investing activities...........     6,266
                                                              --------
Cash flows from financing activities:
  Decrease in due to parent.................................   (16,395)
  Proceeds from borrowings..................................     5,834
                                                              --------
        Net cash used in financing activities...............   (10,561)
                                                              --------
        Net decrease in cash................................    (1,308)
Cash at beginning of year...................................     2,997
                                                              --------
Cash at end of year.........................................  $  1,689
                                                              ========
Supplemental cash flow information:
  Cash paid for interest....................................  $  8,397
                                                              ========
</Table>

    THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE COMBINED FINANCIAL
                                  STATEMENTS.

                                      F-43
<Page>
                     SIMUFLITE TRAINING INTERNATIONAL, INC.

                         NOTES TO FINANCIAL STATEMENTS

1.  DESCRIPTION AND FORMATION OF THE COMPANY:

    SimuFlite Training International, Inc. (the "Company") is primarily engaged
    in the business of providing training to flight crews and maintenance
    personnel that operate corporate and military aircraft.

    Prior to February 13, 1998, the Company was a wholly-owned subsidiary of SAT
    Group, Inc., a Nevada Corporation. On February 13, 1998, SAT Group, Inc. and
    the Company signed an Agreement and Plan of Merger with CEF XIII, Inc. (a
    wholly-owned subsidiary of GE Capital), pursuant to which CEF XIII, Inc.
    purchased the assets of the Company and subsequently changed its name to
    SimuFlite Training International, Inc. The acquisition was accounted for
    under the purchase method of accounting and, accordingly, the purchase price
    was allocated to the assets acquired and the liabilities assumed based upon
    their estimated fair values at the date of acquisition.

2.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

    BASIS OF PRESENTATION AND PRINCIPLES OF COMBINATION

    The financial statements include the accounts of five legal entities which
    comprise the Company, each of which was, prior to CAE's acquisition of
    SimuFlite discussed in note 9, wholly-owned by General Electric Capital
    Corporation ("GE Capital" or "Parent"), which in turn is wholly-owned by the
    General Electric Company ("GE"). Unless otherwise indicated, all amounts are
    presented in U.S. dollars. The financial statements have been prepared in
    accordance with accounting principles generally accepted in the
    United States. Management has not identified any material differences
    between Canadian and U.S. GAAP.

    The accompanying combined financial statements are presented on a standalone
    basis and reflect the historical results of operations, financial position
    and cash flows of the Company. Certain expenses reflected in the combined
    financial statements include allocation of corporate expenses from GE
    Capital (see notes 5 and 6). All such costs and expenses have been deemed to
    have been paid by the Company to GE Capital in the period in which such
    costs were recorded. Allocations of current income taxes receivable or
    payable are deemed to have been remitted, in cash, by or to GE Capital in
    the period the related income taxes were recorded. Management believes the
    foregoing allocations were made on a reasonable basis; however, the
    allocation of costs and expenses do not necessarily indicate the costs that
    would have been incurred by the Company on a standalone basis. Also, the
    combined financial statements may not necessarily reflect the financial
    position, results of operations and cash flows of the Company in the future
    or what the financial position, results of operations or cash flows would
    have been if the Company had been a separate standalone company during the
    period presented.

    USE OF ESTIMATES

    The preparation of financial statements in conformity with accounting
    principles generally accepted in the United States of America requires
    management to make estimates regarding revenue recognition, collectibility
    of receivables, accrued expenses, useful lives of assets and other
    assumptions that affect reported amounts and related disclosures. Actual
    results could differ from those estimates.

    REVENUE RECOGNITION

    The Company enters into contracts to provide training to flight crews and
    maintenance personnel that operate corporate and military aircraft. All
    contracts stipulate payment terms in U.S. dollars.

    Training service revenues are recognized in the period such services are
    provided. The Company enters into certain service agreements with its
    customers under which they make prepayments for services to be rendered over
    a specific period. Prepayments received are deferred and recognized as the
    related service is performed.

    Other revenue includes payments received for sales of instruction manuals
    and non-simulator based classes. In addition, in July 1999, the Company
    entered into an agreement to lease a portion of its building and provide
    billing, reservation, simulator maintenance and marketing services for the
    simulators owned by a lessor. The Company recognizes monthly rental income
    and services fees pursuant to a written sublease and service agreement.

    CONCENTRATION OF CREDIT RISK

    The Company provides training services and extends credit to a large number
    of customers which operate in a wide range of industries. Management
    periodically reviews its exposure to credit losses and maintains allowances
    for anticipated losses that are charged to general and administrative
    expense. No customers accounted for more than 10% of sales in 2001.

                                      F-44
<Page>
                     SIMUFLITE TRAINING INTERNATIONAL, INC.

                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)

2.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
    CASH AND CASH EQUIVALENTS

    GE Capital funds the working capital requirements of the Company based on a
    centralized cash management system. The Company's cash deposits are
    transferred to GE Capital on a daily basis through the Due To Parent
    account. Cash equivalents are defined as short-term (original maturities of
    three months or less), highly liquid investments.

    ACCOUNTS RECEIVABLE

    Accounts receivable include amounts earned under service contracts as well
    as unearned service revenues. Trade accounts receivable are reported net of
    the related allowance for doubtful accounts. The allowance for doubtful
    accounts is calculated based on management's assessment of the
    collectibility of accounts receivable based on a review of each account,
    considering current information and events regarding the customer's ability
    to repay their obligations.

    PROPERTY AND EQUIPMENT

    Property and equipment are stated at historical cost. The capitalized cost
    of simulators includes all construction costs, setup costs and capitalized
    interest. Depreciation is provided principally by using the straight-line
    method over the estimated useful lives of the respective assets. The Company
    reviews the estimated useful lives of simulators and other assets
    periodically using current data provided by various internal sources. If a
    significant change in the estimated useful lives is identified, the Company
    accounts for such changes on a prospective basis. Upon the sale or
    retirement of assets, the related cost and accumulated depreciation are
    removed from the accounts and any gain or loss is recognized in income.

    CAPITALIZATION OF INTERNALLY DEVELOPED SOFTWARE

    The Company capitalizes certain costs for the development of internal-use
    software including the costs of coding, software configuration, upgrades and
    enhancements. Capitalization of costs for internal-use software begins after
    the preliminary project stage and ends when the software is substantially
    complete and ready for its intended use. Capitalized software development
    costs are amortized on a straight-line basis over the estimated economic
    life of the software (generally three to five years).

    GOODWILL

    Goodwill, solely related to the acquisition of the Company by GE Capital in
    1998, and pushed down to the Company, is amortized over 25 years. At
    December 31, 2001, goodwill totaled approximately $93.2 million with
    accumulated amortization of approximately $14.3 million. Amortization
    expense was approximately $3.7 million for the year ended December 31, 2001.

    IMPAIRMENT OF LONG-LIVED ASSETS AND LONG-LIVED ASSETS TO BE DISPOSED OF

    Long-lived assets, including goodwill, are reviewed for impairment whenever
    events or changes in circumstances indicate that the carrying amount of an
    asset may not be recoverable. Recoverability of assets to be held and used
    is measured by a comparison of the carrying amount of an asset to
    undiscounted future net cash flows (before interest expense) expected to be
    generated by the asset. If such assets are considered to be impaired, the
    impairment to be recognized is measured by the amount by which the carrying
    amount of the assets exceeds the fair value of the assets. Assets to be
    disposed of are reported at the lower of the carrying amount or fair value
    less costs to sell.

    INCOME TAXES

    Income taxes are provided based on the liability method of accounting
    pursuant to SFAS no. 109, ACCOUNTING FOR INCOME TAXES. Deferred income tax
    assets and liabilities reflect the impact of temporary differences between
    the amounts of assets and liabilities recognized for financial reporting
    purposes and such amounts recognized for tax purposes, as measured by
    applying currently enacted tax rates.

    FINANCIAL INSTRUMENTS

    The carrying values of accounts receivable, lease receivable, accounts
    payable, accrued liabilities and deferred revenue approximated their fair
    values due to the short-term nature of these instruments. The Company's
    long-term debt instruments have market floating interest rates and, as such,
    the carrying amounts approximate fair values. The fair value of the amount
    due to Parent is not readily determinable due to the related party nature of
    the instrument.

                                      F-45
<Page>
                     SIMUFLITE TRAINING INTERNATIONAL, INC.

                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)

2.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
    NEW ACCOUNTING PRONOUNCEMENTS

    In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
    ACCOUNTING FOR DERIVATIVES INSTRUMENTS AND HEDGING ACTIVITIES. SFAS No. 133
    requires all derivatives to be recorded as either assets or liabilities and
    the instruments to be measured at fair value. Gains or losses resulting from
    changes in the values of those derivatives are to be recognized immediately
    or deferred, depending on the use of the derivative and whether or not it
    qualifies as a hedge. The Company adopted SFAS No. 133 on January 1, 2001,
    as required, and the effect was not significant.

    In July 2001, the FASB issued Statement No. 141, BUSINESS COMBINATIONS, and
    Statement No. 142, GOODWILL AND OTHER INTANGIBLE ASSETS. Statement 141
    requires that the purchase method of accounting be used for all business
    combinations initiated or completed after June 30, 2001. Statement 141 also
    specifies criteria intangible assets acquired in a purchase method business
    combination must meet to be recognized and reported apart from goodwill.
    Statement 142 requires that goodwill and intangible assets with indefinite
    useful lives no longer be amortized but instead be tested for impairment at
    least annually in accordance with the provisions of Statement 142. Statement
    142 will also require that intangible assets with estimable useful lives be
    amortized over their respective estimated useful lives to their estimated
    residual values and reviewed for impairment in accordance with Statement
    No. 121, ACCOUNTING FOR THE IMPAIRMENT OF LONG-LIVED ASSETS AND FOR
    LONG-LIVED ASSETS TO BE DISPOSED OF. The impact of this standard on the
    Company is that goodwill will no longer be amortized and there is no
    transitional impairment.

    In August 2001, the FASB issued SFAS 144, ACCOUNTING FOR THE IMPAIRMENT OR
    DISPOSAL OF LONG-LIVED ASSETS ("SFAS 144"), effective for fiscal years
    beginning after December 15, 2001 and replaces SFAS 121, ACCOUNTING FOR THE
    IMPAIRMENT OF LONG-LIVED ASSETS AND FOR LONG-LIVED ASSETS TO BE DISPOSED OF.
    SFAS 144 establishes an accounting model for long-lived assets to be
    disposed of by sale, including discontinued operations, and replaces the
    provisions of APB 30, REPORTING THE RESULTS OF OPERATIONS -- REPORTING THE
    EFFECTS OF DISPOSAL OF A SEGMENT OF A BUSINESS, AND EXTRAORDINARY, UNUSUAL
    AND INFREQUENTLY OCCURING EVENTS AND TRANSACTIONS for the disposal of
    segments of a business. SFAS 144 retains the fundamental provisions of
    SFAS 121 concerning the recognition and measurement of long-lived assets to
    be held and used and the measurement of long-lived assets to be disposed of
    by sale. However, SFAS 144 provides additional guidance with regard to
    discontinued operations and assets to be disposed of. In addition, SFAS 144
    excludes goodwill from its scope. The Company adopted SFAS 144 on
    January 1, 2002 and does not expect the impact of the application of
    SFAS 144 to have a material effect on its financial statements.

3.  SIMULATORS AND OTHER PROPERTY AND EQUIPMENT:

    The Company's principal operating assets consist of simulators and related
    group equipment, summarized as follows (in thousands of U.S. dollars):

<Table>
<Caption>
                                                                   ESTIMATED
                                                                  USEFUL LIVES              ACCUMULATED    NET BOOK
                                                                    (YEARS)        COST     DEPRECIATION     VALUE
                                                                  ------------   --------   ------------   ---------
    <S>                                                           <C>            <C>        <C>            <C>
    Simulators and building under construction..................                 $ 44,403     $ --         $ 44,403
    Simulators in service.......................................  10-20 years      40,045      (12,298)      27,747
    Buildings...................................................  22-40 years      30,487       (1,647)      28,840
    Software....................................................    3-5 years       5,580         (175)       5,405
    Other training assets.......................................   4-6 years        4,384         (227)       4,157
    Furniture and equipment.....................................  5-10 years        2,346         (964)       1,382
    Land........................................................                      800       --              800
                                                                                 --------     --------     --------
                                                                                 $128,045     $(15,311)    $112,734
                                                                                 ========     ========     ========
</Table>

    At December 31, 2001, the Company had contracts for construction of six
    simulators. Future commitments under such contracts, net of advance
    payments, total $35.5 million as of December 31, 2001. Simulator contracts
    typically require the Company to make progress payments during the period of
    construction. The simulator construction contracts contain provisions that
    would enable the Company to terminate the contract with or without cause. If
    terminated without cause, the Company would forfeit its progress payments
    and be subject to termination payments up to 15% of the total contract value
    that escalate with the passage of time. In the event of termination, the
    Company would hold legal title to the parts, data and the in-process
    constructed device. If terminated for cause, the Company would be entitled
    to recover any payments it made under the contracts and certain liquidated
    damages as specified in the contracts.

    Interest capitalized related to simulators under construction was
    approximately $2.6 million for the year ended December 31, 2001.

    Depreciation expense was approximately $6.5 million for the year ended
    December 31, 2001.

                                      F-46
<Page>
                     SIMUFLITE TRAINING INTERNATIONAL, INC.

                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)

4.  INCOME TAXES:

    The Company has been included in the consolidated federal, state and local
    returns filed by GE Capital. However, the tax benefit reflected in the
    accompanying Combined Statement of Operations and the deferred tax assets
    and liabilities reflected in the accompanying Combined Balance Sheet has
    been prepared as if such benefits were computed on a separate return basis.
    Any tax benefits generated by the Company have been utilized by GE Capital
    to reduce its consolidated taxable income. These amounts have been reflected
    in Due to Parent in the accompanying Combined Balance Sheet.

    The income tax provision for the year ended December 31, 2001 consists of
    the following:

<Table>
    <S>                                                           <C>
    Current benefit
      Federal...................................................  $ (2,128)
      State.....................................................      (354)
                                                                  --------
                                                                    (2,482)
                                                                  --------
    Deferred expense
      Federal...................................................       656
      State.....................................................       118
                                                                  --------
                                                                       774
                                                                  --------
    Income tax benefit..........................................  $ (1,708)
                                                                  ========
</Table>

    For the year ended December 31, 2001, the income tax provision differed from
    the amount computed by applying the U.S. federal income tax rate of 35% to
    loss before income taxes as a result of the following:

<Table>
    <S>                                                           <C>
    Statutory tax benefit.......................................  $ (1,651)
    State tax, net of federal benefit...........................      (135)
    Other, net..................................................        78
                                                                  --------
                                                                  $ (1,708)
                                                                  ========
</Table>

    At December 31, 2001, temporary differences that give rise to deferred tax
    assets and liabilities are as follows:

<Table>
    <S>                                                           <C>
    Deferred tax assets:
      Bad debt reserve..........................................  $    245
      Incentive compensation....................................        59
      Other.....................................................       108
                                                                  --------
        Gross deferred tax assets...............................       412
                                                                  --------
    Deferred tax liabilities:
      Depreciation..............................................     5,242
      Goodwill..................................................     3,758
                                                                  --------
        Gross deferred tax liabilities..........................     9,000
                                                                  --------
        Net deferred tax liabilities............................  $  8,588
                                                                  ========
</Table>

5.  DEBT:

    GE Capital entered into an interim financing agreement with the Company for
    a simulator currently under construction. This loan will expire on or before
    June 30, 2002. There is also an additional funding commitment of $1,534,770.
    The loan bears interest at the GE Commercial Paper rate +1% (2.75% at
    December 31, 2001). The agreement allows the Company to either repay the
    term loan and retain the simulator or, upon meeting certain requirements as
    outlined in the agreement, require GE to take possession of the simulator as
    payment for the debt and lease the simulator to the Company. The simulator
    being constructed is pledged as collateral on this note.

                                      F-47
<Page>
                     SIMUFLITE TRAINING INTERNATIONAL, INC.

                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)

5.  DEBT: (CONTINUED)
    At December 31, 2001, indebtedness consists of the following (in thousands
    of U.S. dollars):

<Table>
    <S>                                                           <C>
    Grapevine Industrial Development
      Corporation bonds, Series 1993, with interest payments at
        an adjustable interest rate (1.6% at December 31, 2001)
        determined by the remarketing agent. The bonds mature on
        March 31, 2010..........................................  $  8,000
    Grapevine Industrial Development
      Corporate bonds, Series 1983A, with interest payments at
        an adjustable interest rate (3.3% at December 31, 2001)
        determined by the remarketing agent. The bonds mature on
        April 1, 2013...........................................    19,000
                                                                  --------
    Long-term debt..............................................  $ 27,000
                                                                  ========
</Table>

    As of December 31, 2001, the Company had an outstanding letter of credit,
    guaranteed by GE Capital, totaling approximately $27.7 million to secure
    payments of interest and principal for the Grapevine Industrial Development
    Corporation bonds. The letter of credit was renewed for a one-year period in
    April 2002 and is subject to annual fees. The letter of credit agreement
    includes certain financial covenants and restricts certain actions.

6.  TRANSACTIONS WITH PARENT:

    The financial statements include allocations of certain GE Capital corporate
    headquarters overhead expenses relating to the Company's business, based on
    the Company's net assets or estimated usage. General corporate overhead
    primarily includes cash management, payroll, tax, insurance and data
    services and amounted to approximately $4.8 million for the year ended
    December 31, 2001. The allocation is based on activity based costing and the
    Parent's estimate of transactional usage by the Company.

    GE Capital also assesses the Company quarterly interest charges based on the
    amount due to Parent. On an annual basis, the due to Parent balance is
    adjusted to maintain a defined debt to equity ratio, at which time any
    amount in excess of this ratio is recorded as a contribution to
    stockholder's equity. No such adjustment was recorded in 2001. For the year
    ended December 31, 2001, interest expense related to the balance due to
    Parent totaled $5.5 million (5.7% weighted average rate). The amount due to
    Parent has no set repayment terms and is unsecured. Repayments are made only
    to the extent of excess operating cash flows (as defined) and no payments
    are required for 2001. Accordingly, amounts due to Parent are reflected as a
    noncurrent liability in the accompanying balance sheet.

    Substantially all of the employees of the Company are covered under health,
    workers compensation, savings and life insurance plans of the Parent. The
    costs of such plans are paid for by the Parent on behalf of the Company, and
    costs are allocated through an intercompany charge. Such charge totaled
    $4.1 million for the year ended December 31, 2001. GE Capital offers
    eligible employees the opportunity to participate in a 401k savings plan and
    charged the Company approximately $400,000 during 2001 relating to this
    plan.

    Management believes that the methodologies used to allocate these charges
    are reasonable, however, these allocations of costs and expenses do not
    necessarily indicate the costs and expenses that would have been incurred by
    the Company on a standalone basis.

    During 2001, the Company sold and leased back five simulators in a
    transaction with GE Capital for approximately $55.1 million and recorded a
    deferred gain of approximately $2.0 million on three of the simulators and a
    loss of approximately $170,000 on two of the simulators. The deferred gain
    is recorded in the accompanying combined balance sheet and will be amortized
    over the life of lease as an adjustment to lease expense. The loss incurred
    was recognized in the year ended December 31, 2001 and is included in the
    accompanying combined statement of operations as a portion of the loss on
    disposal of fixed assets.

    The Company also leases its facilities, including a simulator located in
    Marietta, Georgia, to GE, Capital for $55,000 per month. The operating lease
    was entered into in October 2001 and expires in October 2004.

7.  LEASES:

    The Company uses eight simulators under operating leases which expire at
    various times between 2006 and 2013. The Company also leases the land
    underlying their headquarters. This lease expires in 2022.

                                      F-48
<Page>
                     SIMUFLITE TRAINING INTERNATIONAL, INC.

                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)

7.  LEASES: (CONTINUED)
    At December 31, 2001, minimum lease payments on operating leases were as
    follows (in thousands of U.S. dollars):

<Table>
<Caption>
                                                                  OPERATING
    YEAR ENDING DECEMBER 31,                                       LEASES
    ------------------------                                      ---------
    <S>                                                           <C>
    2002........................................................   $ 9,759
    2003........................................................     9,759
    2004........................................................     9,759
    2005........................................................     9,759
    2006........................................................     6,961
    2007 and thereafter.........................................    40,582
                                                                   -------
                                                                   $86,579
                                                                   =======
</Table>

    Total rental expense was approximately $5.1 million for the year ended
    December 31, 2001.

8.  LITIGATION:

    The Company is a defendant from time to time in lawsuits incidental to its
    business. Based upon currently available information, the Company believes
    that resolution of the known contingencies would not have a material impact
    on the Company's financial statements. However, there can be no assurance
    that future costs would not be material to results of operations or
    liquidity of the Company for a particular future period. In addition, the
    Company's estimates of future costs are subject to change as circumstances
    change and additional information becomes available during the course of
    litigation.

9.  SUBSEQUENT EVENT:

    On December 31, 2001, the Company was purchased by CAE Inc. for
    approximately $210.9 million in cash.

                                      F-49
<Page>
                                     [LOGO]
<Page>
                                    PART II
                         INFORMATION NOT REQUIRED TO BE
                      DELIVERED TO OFFEREES OR PURCHASERS

INDEMNIFICATION.

    Under the CANADA BUSINESS CORPORATIONS ACT (the "CBCA"), a corporation may
indemnify a present or former director or officer of the corporation or another
individual who acts or acted as the corporation's request as a director or
officer, or an individual acting in a similar capacity, or another entity,
against all costs, charges and expenses, including an amount paid to settle an
action or satisfy a judgment, reasonably incurred by the individual in respect
of any civil, criminal, administrative, investigative or other proceeding in
which the individual is involved because of that association with the
corporation or other entity. A corporation may advance moneys to a director,
officer or other individual for the costs, charges and expenses of a proceeding
referred to above. A corporation may not indemnify an individual as aforesaid
unless the individual acted honestly and in good faith with a view to the best
interests of the corporation, or, as the case may be, to the best interests of
the other entity for which the individual acted as a director or officer or in a
similar capacity at the corporation's request and, in the case of a criminal or
administrative action or proceeding that is enforced by a monetary penalty, the
individual had reasonable grounds for believing that the individual's conduct
was lawful. If the individual does not fulfill the aforesaid conditions, the
individual shall repay the moneys advanced by the corporation. A corporation
may, with the approval of a court, indemnify or advance moneys as aforesaid in
connection with a derivative action. A present or former director or officer of
the corporation or another individual who acts or acted at the corporation's
request as a director or officer, or an individual acting in a similar capacity,
of another entity, is not entitled to indemnity from the corporation in respect
of all costs, charges and expenses reasonably incurred by the individual in
connection with the defense of any civil, criminal, administrative,
investigative or other proceeding to which the individual is subject, because of
the individual's association with the corporation or other entity if the
individual seeking indemnity was not judged by the court or other competent
authorities to have committed any fault or admitted to do anything that the
individual ought to have done and fulfill the conditions referred to above.

    In accordance with the CBCA, the by-laws of the Registrant indemnify a
director or officer of the Registrant, a former director or officer of the
Registrant or any person who acts or acted at the Registrant's request as a
director or officer of a body corporate of which the Registrant is or was a
shareholder or creditor and his heirs and legal representatives against all
costs, charges and expenses including an amount paid to settle an action or
satisfy a judgment reasonably incurred by him in respect of any civil, criminal
or administrative action or proceeding to which he has been made a party by
reason of being or having been a director or officer of the Registrant or such
body corporate if (i) he acted honestly and in good faith with a view to the
best interests of the Registrant, and (ii) in the case of a criminal or
administrative action or proceeding that is enforced by a monetary penalty, he
had reasonable grounds for believing that his conduct was lawful.

    The underwriting agreement contains provisions by which the underwriters
agree to indemnify the Registrant, each of the directors and officers of the
Registrant and each person who controls the Registrant within the meaning of the
Securities Act of 1933, as amended (the "Securities Act") with respect to
information furnished by the underwriters for use in the registration statement.

    A policy of directors' and officers' liability insurance is maintained by
the Registrant which insures its directors and officers for losses as a result
of claims based upon their acts or omissions as directors and officers of the
Registrant, and also reimburses the Registrant for amounts paid by the
Registrant to indemnify its directors and officers as a result of such claims.

    Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers or persons controlling the Registrant
pursuant to the foregoing provisions, the Registrant has been informed that, in
the opinion of the U.S. Securities and Exchange Commission, such indemnification
is against public policy as expressed in the Securities Act and is therefore
unenforceable.

                                      II-1
<Page>
EXHIBITS.

    The following exhibits have been filed as part of the Registration
Statement:

<Table>
<Caption>
EXHIBIT NUMBER  DESCRIPTION
--------------  -----------
<C>             <S>
     4.1        Annual Information Form of the Registrant for the year ended
                March 31, 2001 dated August 8, 2001 other than the sections
                entitled "Selected Consolidated Financial Information" and
                "Review of Operations and Management's Discussion &
                Analysis"

     4.2        Management Information Circular dated June 10, 2002 in
                connection with the annual meeting of shareholders of the
                Registrant to be held on August 7, 2002 other than the
                sections entitled "Report on Executive Compensation",
                "Determination of the President and Chief Executive
                Officer's Compensation" and "Statement of Corporate
                Governance Practices"

     4.3        Audited Consolidated Financial Statements of the Registrant
                for the year ended March 31, 2002 and the Auditor's Report
                thereon

     4.4        Management's Discussion and Analysis for the year ended
                March 31, 2002

     4.5        Form of Underwriting Agreement*

     5.1        Consent of PricewaterhouseCoopers LLP, Montreal, Quebec

     5.2        Consent of PricewaterhouseCoopers LLP, Dallas, Texas

     6.1        Powers of Attorney (included on page III-3 of this
                Registration Statement)
</Table>

------------

* To be filed by Amendment.

                                      II-2
<Page>
                                    PART III
                 UNDERTAKING AND CONSENT TO SERVICE OF PROCESS

ITEM 1. UNDERTAKING.

    The Registrant undertakes to make available, in person or by telephone,
representatives to respond to inquiries made by the Commission staff, and to
furnish promptly, when requested to do so by the Commission staff, information
relating to the securities registered pursuant to Form F-10 or to transactions
in such securities.

ITEM 2. CONSENT TO SERVICE OF PROCESS.

    Concurrently with the filing of this Registration Statement on Form F-10,
the Registrant is filing with the Commission a written irrevocable consent and
power of attorney on Form F-X.

                                     III-1
<Page>
                                   SIGNATURES

    Pursuant to the requirements of the Securities Act, the Registrant certifies
that it has reasonable grounds to believe that it meets all of the requirements
for filing on Form F-10 and has duly caused this Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in the City
of Toronto, Province of Ontario, Canada on July 3, 2002.

                                          CAE INC.

                                          By: /s/ D.H. BURNEY
                                          --------------------------------------
                                            D.H. Burney
                                            President and Chief Executive
                                          Officer

                                     III-2
<Page>
                               POWER OF ATTORNEY

    Each person whose signature appears below constitutes and appoints each of
D.H. Burney and Paul G. Renaud with full power to act without the other, his
true and lawful attorneys-in-fact and agents, with full and several power of
substitution, for him and in his name, place and stead, in any and all
capacities, to sign any or all amendments, including post-effective amendments,
and supplements to this Registration Statement on Form F-10 (or to any other
registration statement for the same offering which may be filed pursuant to
Rule 429 under the U.S. Securities Act of 1933, as amended), and to file the
same, with all exhibits thereto, and other documents in connection therewith,
with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as they or he might or could do
in person, hereby ratifying and confirming all that said attorneys-in-fact and
agents or his or their substitute or substitutes, may lawfully do or cause to be
done by virtue hereof.

    Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed below by or on behalf of the following persons in the
capacities indicated on July 3, 2002.

<Table>
<S>                                              <C>
/s/ D.H. BURNEY                                  President and Chief Executive Officer and
----------------------------------------------   Director
D.H. Burney                                      (Principal Executive Officer)

/s/ JOHN A. (IAN) CRAIG                          Director
----------------------------------------------
John A. (Ian) Craig

/s/ RICHARD (DICK) J. CURRIE                     Director
----------------------------------------------
Richard (Dick) J. Currie, C.M.

/s/ R. FRASER ELLIOTT                            Director
----------------------------------------------
R. Fraser Elliott, C.M., Q.C.

/s/ H. GARFIELD EMERSON                          Director
----------------------------------------------
H. Garfield Emerson, Q.C.

/s/ ANTHONY S. FELL                              Director
----------------------------------------------
Anthony S. Fell

/s/ JAMES A. GRANT                               Director
----------------------------------------------
The Honourable James A. Grant, P.C., Q.C.

/s/ JAMES F. HANKINSON                           Director
----------------------------------------------
James F. Hankinson

/s/ E. RANDOLPH (RANDY) JAYNE II                 Director
----------------------------------------------
E. Randolph (Randy) Jayne II

/s/ JAMES W. MCCUTCHEON                          Director
----------------------------------------------
James W. McCutcheon, Q.C.

/s/ GEORGE K. PETTY                              Director
----------------------------------------------
George K. Petty
</Table>

                                     III-3
<Page>
<Table>
<S>                                              <C>
/s/ PAUL G. RENAUD                               Executive Vice President, Chief Financial
----------------------------------------------   Officer and Secretary
Paul G. Renaud                                   (Principal Financial Officer and
                                                 Principal Accounting Officer)

/s/ LAWRENCE N. STEVENSON                        Director
----------------------------------------------
Lawrence N. Stevenson

/s/ LYNTON R. WILSON                             Chairman of the Board of Directors
----------------------------------------------
Lynton R. Wilson, O.C.
</Table>

                                     III-4
<Page>
                           AUTHORIZED REPRESENTATIVE

    Pursuant to the requirements of Section 6(a) of the Securities Act, the
Authorized Representative certifies that it is the duly authorized United States
representative of CAE Inc. and has duly caused this Registration Statement to be
signed on its behalf by the undersigned, solely in its capacity as the duly
authorized representative of CAE Inc. in the United States, in the City of
Toronto, Province of Ontario, Canada on the 3rd day of July, 2002.

                                          CAE (US) INC.
                                          (Authorized U.S. Representative)

                                          By: /s/ PAUL G. RENAUD
                                          --------------------------------------
                                            Name: Paul G. Renaud
                                            Title: Director

                                     III-5
<Page>
                                 EXHIBIT INDEX

<Table>
<Caption>
EXHIBIT NUMBER  DESCRIPTION
--------------  -----------
<C>             <S>
     4.1        Annual Information Form of the Registrant for the year ended
                March 31, 2001 dated August 8, 2001 other than the sections
                entitled "Selected Consolidated Financial Information" and
                "Review of Operations and Management's Discussion &
                Analysis"

     4.2        Management Information Circular dated June 10, 2002 in
                connection with the annual meeting of shareholders of the
                Registrant to be held on August 7, 2002 other than the
                sections entitled "Report on Executive Compensation",
                "Determination of the President and Chief Executive
                Officer's Compensation" and "Statement of Corporate
                Governance Practices"

     4.3        Audited Consolidated Financial Statements of the Registrant
                for the year ended March 31, 2002 and the Auditor's Report
                thereon

     4.4        Management's Discussion and Analysis for the year ended
                March 31, 2002

     4.5        Form of Underwriting Agreement*

     5.1        Consent of PricewaterhouseCoopers LLP, Montreal, Quebec

     5.2        Consent of PricewaterhouseCoopers LLP, Dallas, Texas

     6.1        Powers of Attorney (included on page III-3 of this
                Registration Statement)
</Table>

------------

*   To be filed by Amendment.

                                     III-6

</TEXT>
</DOCUMENT>
