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<SEC-DOCUMENT>0001173382-03-000018.txt : 20030826
<SEC-HEADER>0001173382-03-000018.hdr.sgml : 20030826
<ACCEPTANCE-DATETIME>20030825190836
ACCESSION NUMBER:		0001173382-03-000018
CONFORMED SUBMISSION TYPE:	6-K
PUBLIC DOCUMENT COUNT:		2
CONFORMED PERIOD OF REPORT:	20030630
FILED AS OF DATE:		20030826

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			CAE INC
		CENTRAL INDEX KEY:			0001173382
		STANDARD INDUSTRIAL CLASSIFICATION:	MISCELLANEOUS ELECTRICAL MACHINERY, EQUIPMENT & SUPPLIES [3690]
		IRS NUMBER:				000000000

	FILING VALUES:
		FORM TYPE:		6-K
		SEC ACT:		1934 Act
		SEC FILE NUMBER:	001-31402
		FILM NUMBER:		03865226

	BUSINESS ADDRESS:	
		STREET 1:		ROYAL BANK PLAZA
		STREET 2:		SUITE 3060
		CITY:			TORONTO ONTARIO
		STATE:			A6
		ZIP:			00000
		BUSINESS PHONE:		4168650070

	MAIL ADDRESS:	
		STREET 1:		8585 COTE DE LIESSE, CP 1800
		STREET 2:		DEPT. 04
		CITY:			ST-LAURENT, QUEBEC
		STATE:			A6
		ZIP:			00000
</SEC-HEADER>
<DOCUMENT>
<TYPE>6-K
<SEQUENCE>1
<FILENAME>f6kq1.htm
<DESCRIPTION>FORM 6-K
<TEXT>
<html>

<body leftmargin="30" rightmargin="30">

<b>
<p ALIGN="CENTER" style="word-spacing: 0; margin-top: 0; margin-bottom: 0"><font face="Arial" size="3">SECURITIES AND EXCHANGE COMMISSION</font></p>
<p ALIGN="CENTER" style="word-spacing: 0; margin-top: 0; margin-bottom: 0"><font size="2" face="Arial">Washington, DC 20549</font></p>
<p ALIGN="CENTER" style="word-spacing: 0; margin-top: 0; margin-bottom: 0">&nbsp;</p>
<p ALIGN="CENTER" style="word-spacing: 0; margin-top: 0; margin-bottom: 0"><font face="Arial" size="3">Form 6-K</font></p>
<p ALIGN="CENTER" style="word-spacing: 0; margin-top: 0; margin-bottom: 0">&nbsp;</p>
</b>
<p ALIGN="CENTER" style="word-spacing: 0; margin-top: 0; margin-bottom: 0"><font size="2" face="Arial">Report of Foreign Issuer</font></p>
<p ALIGN="CENTER" style="word-spacing: 0; margin-top: 0; margin-bottom: 0"><font size="2" face="Arial">Pursuant to Rule 13a-16 or 15d-16 of</font></p>
<p ALIGN="CENTER" style="word-spacing: 0; margin-top: 0; margin-bottom: 0"><font size="2" face="Arial">the Securities Exchange Act of 1934</font></p>
<p ALIGN="CENTER" style="word-spacing: 0; margin-top: 0; margin-bottom: 0">&nbsp;</p>
<p ALIGN="left"><font size="2" face="Arial">For the month of: August, 2003&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Commission File Number: 1-31402</font></p>
<b>
<p ALIGN="CENTER" style="word-spacing: 0; margin-top: 0; margin-bottom: 0"><font face="Arial" size="3">CAE Inc.</font></p>
</b>
<p ALIGN="CENTER" style="word-spacing: 0; margin-top: 0; margin-bottom: 0"><font size="2" face="Arial">(Name of Registrant)</font></p>
<p ALIGN="CENTER" style="word-spacing: 0; margin-top: 0; margin-bottom: 0">&nbsp;</p>
<b>
<p ALIGN="CENTER" style="word-spacing: 0; margin-top: 0; margin-bottom: 0"><font size="2" face="Arial">Royal Bank Plaza</font></p>
<p ALIGN="CENTER" style="word-spacing: 0; margin-top: 0; margin-bottom: 0"><font size="2" face="Arial">South Tower, Suite 3060</font></p>
<p ALIGN="CENTER" style="word-spacing: 0; margin-top: 0; margin-bottom: 0"><font size="2" face="Arial">Toronto, Ontario</font></p>
<p ALIGN="CENTER" style="word-spacing: 0; margin-top: 0; margin-bottom: 0"><font size="2" face="Arial">Canada M5J 2J1</font></p>
</b>
<p ALIGN="CENTER" style="word-spacing: 0; margin-top: 0; margin-bottom: 0"><font size="2" face="Arial">(Address of Principal Executive Offices)<br>
Telephone: (416) 866-6967</font></p>
<p ALIGN="CENTER" style="word-spacing: 0; margin-top: 0; margin-bottom: 0">&nbsp;</p>
<p><font size="2" face="Arial">Indicate by check mark whether the registrant files or will file annual
reports under cover of Form 20-F or Form 40-F:</font></p>
<p><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Form 20-F [&nbsp;&nbsp; ]&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Form 40-F [ X ]</font></p>
<p>&nbsp;</p>
<p><font size="2" face="Arial">Indicate by check mark whether the registrant by furnishing the information
contained in this Form is also thereby furnishing the information to the
Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934:</font></p>
<p><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Yes [&nbsp;&nbsp; ]&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
No [ X ]</font></p>
<p>&nbsp;</p>
<p><font size="2" face="Arial">If &quot;Yes&quot; is marked, indicate below the file number assigned to the
registrant in connection with Rule 12g3-2(b): N/A</font></p>
<p><font size="2" face="Arial">&nbsp;</font></p>
<hr>
<b>
<p>&nbsp;</p>
<p ALIGN="CENTER"><font face="Arial" size="3">SIGNATURES</font></p>
</b>
<p><font size="2" face="Arial">Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.</font></p>
<b>
<p><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
CAE Inc.</font></p>
</b>
<p style="word-spacing: 0; margin-top: 0; margin-bottom: 0"><font size="2" face="Arial">&nbsp;Date:
August&nbsp;25, 2003&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
By:<u> /s/ Aline
Belanger&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</u>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></p>
<p style="word-spacing: 0; margin-top: 0; margin-bottom: 0"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></p>
<p style="word-spacing: 0; margin-top: 0; margin-bottom: 0"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Name:
Aline Belanger</font></p>
<p style="word-spacing: 0; margin-top: 0; margin-bottom: 0"><font size="2" face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Title:
Corporate Controller and Assistant Secretary</font></p>

<p style="word-spacing: 0; margin-top: 0; margin-bottom: 0">&nbsp;</p>

<p style="word-spacing: 0; margin-top: 0; margin-bottom: 0">&nbsp;</p>

<p style="word-spacing: 0; margin-top: 0; margin-bottom: 0">&nbsp;</p>

<p style="word-spacing: 0; margin-top: 0; margin-bottom: 0">&nbsp;</p>

<hr>
<p style="word-spacing: 0; margin-top: 0; margin-bottom: 0">&nbsp;</p>
<p style="word-spacing: 0; margin-top: 0; margin-bottom: 0">&nbsp;</p>
<p style="word-spacing: 0; margin-top: 0; margin-bottom: 0">&nbsp;</p>
<p style="word-spacing: 0; margin-top: 0; margin-bottom: 0" align="center"><font face="Arial" size="3"><b>EXHIBIT
INDEX</b></font></p>
<p style="word-spacing: 0; margin-top: 0; margin-bottom: 0" align="center">&nbsp;</p>
<p style="word-spacing: 0; margin-top: 0; margin-bottom: 0" align="center">&nbsp;</p>
<p style="word-spacing: 0; margin-top: 0; margin-bottom: 0" align="left">&nbsp;&nbsp;&nbsp;
<font size="2" face="Arial"><b><u>Exhibit</u>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<u>Description of Exhibit</u></b></font></p>
<p style="word-spacing: 0; margin-top: 0; margin-bottom: 0" align="left">&nbsp;</p>
<blockquote>
  <p style="word-spacing: 0; margin-top: 0; margin-bottom: 0" align="left"><font size="2" face="Arial">99&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
  First Quarter Report</font></p>
</blockquote>

</body>

</html>

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99
<SEQUENCE>3
<FILENAME>q104.htm
<DESCRIPTION>FIRST QUARTER REPORT
<TEXT>
<html>

<head><title>Consolidated Balance Sheets</title></head>

<body leftmargin="75" right margin="75">
<p ALIGN="JUSTIFY">&nbsp;</p>

<p><font size="4" color="#0000ff" face="Arial"><b>First Quarter Report</b></font><br>
<font color="#0000ff" face="Arial" size="2"><b>Interim Financial Report<br>for the
three months ended June 30, 2003</b></font></p>

<p>&nbsp;</p>

<hr>

<p>&nbsp;</p>

<table cellpadding="10" width="514">
<tr><td colspan="2" width="488"><font color="#0000ff" face="Arial"><b>Table of Contents</b></font></td></tr>

<tr><td width="25"><font face="Arial" size="2"><b>01</b></font></td><td width="439"><font face="Arial" size="2">Report to Shareholders</font></td></tr>
<tr><td width="25"><font face="Arial" size="2"><b>03</b></font></td><td width="439"><font face="Arial" size="2">Management's Discussion and Analysis:
    First Quarter ending June 30, 2003</font></td></tr>
<tr><td width="25"><font face="Arial" size="2"><b>04</b></font></td><td align="left" width="356"><font face="Arial" size="2">Summary of Consolidated Results</font></td></tr>
<tr><td width="25"><font face="Arial" size="2"><b>06</b></font></td><td align="left" width="356"><font face="Arial" size="2">Capital
    Resources and Liquidity</font></td></tr>
<tr><td width="25"><font face="Arial" size="2"><b>08</b></font></td><td align="left" width="356"><font face="Arial" size="2">Civil
    Simulation and Training</font></td></tr>
<tr><td width="25"><font face="Arial" size="2"><b>09</b></font></td><td align="left" width="356"><font face="Arial" size="2">Military
    Simulation and Training</font></td></tr>
<tr>
  <td width="25"><font face="Arial" size="2"><b>11</b></font></td><td align="left" width="356"><font face="Arial" size="2">Marine Controls</font></td>
</tr>
<tr><td width="25"><font face="Arial" size="2"><b>13</b></font></td><td width="439"><font face="Arial" size="2">Consolidated Balance Sheets</font></td></tr>

<tr><td width="25"><font face="Arial" size="2"><b>14</b></font></td><td width="439"><font face="Arial" size="2">Consolidated Statements of Earnings</font></td></tr>
<tr><td width="25"><font face="Arial" size="2"><b>14</b></font></td><td width="439"><font face="Arial" size="2">Consolidated Statements of Retained Earnings</font></td></tr>
<tr><td width="25"><font face="Arial" size="2"><b>15</b></font></td><td width="439"><font face="Arial" size="2">Consolidated Statements of Cash Flow</font></td></tr>
<tr><td width="25"><font face="Arial" size="2"><b>16</b></font></td><td width="439"><font face="Arial" size="2">Notes to the Consolidated Financial Statements</font></td></tr>
</table>

<p>&nbsp;</p>

<hr>

<p align="right"><font size="1" face="Arial">CAE&nbsp; First Quarter Report
2004&nbsp; /&nbsp; page.01</font></p>

<p>&nbsp;</p>

<p><font face="Arial" size="4" color="#0000ff"><b>Report to Shareholders</b></font><br><br><br><br>
<font face="Arial" size="3" color="#0000ff"><b>First Quarter Results</b></font></p>

<p align="justify"><font size="2" face="Arial">CAE&#180;s
first-quarter performance reflected the low ebb of market conditions for
commercial simulators as well as adverse foreign exchange adjustments that
affected all business units.<br><br>

Earnings from continuing operations declined to
$15.1 million or 7 cents per share from $37.4 million (or 17 cents per share) in
the prior year, with foreign exchange fluctuations and the disproportionate
effects of percentage of accounting on long-term contracts combining to reduce
earnings by nearly 4 cents per share. &nbsp;  Revenue
for the first quarter decreased 12% to $242.9 million from the $275.8 million
generated in the prior year, while the $2.2 billion backlog remained constant at
June 30 compared to March 31.<br><br>

The decline in first-quarter earnings was
attributable to a $39 million reduction in operating earnings, offset partially
by lower tax and interest expense. &nbsp;  In
addition to foreign exchange impacts, prime factors behind the reduction in
operating earnings were lower volumes and pricing pressures on commercial
simulators. &nbsp;  Lower margins in our
Military Simulation and Training unit due to higher start-up costs on new
projects and higher bid/proposal costs in pursuit of new projects also played a
part along with higher expenses for R&amp;D, pensions and long-term compensation
incentives.<br><br>

While all three business units generated a lower
level of operating earnings in the first quarter, hardest hit was the Civil
Simulation and Training unit, with a 50% year-over-year decline in equipment
revenue being offset only partially by 20% revenue growth in Civil&#180;s pilot
training segment.&nbsp;  In Civil&#180;s case, approximately two-thirds of the reduction
in the unit&#180;s operating earnings stemmed from the severe drop in demand for
simulators since September 2001 (just 16 orders in the 18 months immediately
following the terrorist attacks compared to over 50 in the 18 preceding months). &nbsp;
 The balance of the reduction was attributable to foreign exchange
impacts.<br><br>

We believe the worst is over in commercial
aerospace. &nbsp;  Airline demand for full-flight simulators has strengthened
since the end of the first quarter, with CAE winning nine of the 10 competed FFS
sales in the first four months of this fiscal year, compared to 11 orders over
the entire last fiscal year. &nbsp;  Our
pilot training business is maintaining its growth momentum.
&nbsp;  The US dollar has recovered somewhat from its first-quarter
low against the Canadian currency. &nbsp;  CAE
has signed its first ever five-year agreement with its Montreal union, adding a
welcome element of stability.<br><br>

<br>

<br><br>

</font></p>

<hr>

<p align="justify"><font face="Arial" size="2">Military&#180;s
order book is building and some major military contracts of interest to CAE are
on track to be awarded later in the fiscal year.
&nbsp;  Marine is winning some breakthrough contracts with the US
Navy. &nbsp;  Taken together, we believe
these market developments suggest better days are ahead.</font></p>

<table width="90%" cellpadding="20">
<tr><td width="400" align="right"></td><td align="left" width="300"><font face="Arial" color="#0000ff" size="2">[Graph Signature]</font><br><font face="Arial" size="2">D.H. Burney<br>President and Chief Executive Officer</font></td></tr>
<tr><td width="400" align="right"></td><td align="left"></td></tr>
</table>

<p>&nbsp;</p>

<hr>

<p align="right"><font size="1" face="Arial">CAE&nbsp; First Quarter Report 2004&nbsp; /&nbsp; page.03</font></p>

<p align="JUSTIFY">&nbsp;</p>

<p><b><font face="Arial" size="4" color="#0000ff">Management's Discussion and Analysis</font><font face="Arial" color="#0000ff" size="2"><br>Three
months ending June 30, 2003</font></b></p>

<p align="JUSTIFY">&nbsp;</p>

<p align="JUSTIFY"><font size="2" face="Arial">  Management&#180;s
Discussion and Analysis (MD&amp;A) of the first quarter of fiscal 2004 financial
results focuses on the core businesses of CAE Inc. (CAE): Civil Simulation and
Training (Civil), Military Simulation and Training (Military) and Marine
Controls (Marine). &nbsp;  The
MD&amp;A, which includes a review of the operations  of
each business segment and the financial condition   of
CAE, is intended to assist in the understanding and assessment of significant
trends, risks and uncertainties related to the results of operations for each
business segment   and
should be read in conjunction with the unaudited financial statements contained
on pages 13 to 24, as well as with the MD&amp;A and the Consolidated Financial
Statements and Notes included in CAE's annual report for the year ended March
31, 2003, which is available  at www.cae.com
or from CAE directly. &nbsp;  All
dollar amounts referred to herein are Canadian dollars, unless otherwise
specified.<br><br>

 This
MD&amp;A contains forward-looking statements with respect to CAE and the
operations of each business segment based on assumptions, which CAE considers
reasonable at the time they were prepared. &nbsp;
 These forward-looking statements, by their nature, necessarily involve
risks and uncertainties that could cause actual results to differ materially
from those contemplated by the forward-looking statements. &nbsp;
 CAE cautions the reader that the assumptions regarding future events,
many of which are beyond the control of CAE, may ultimately prove to be
incorrect. <br><br>

 As described in the Business
Risk and Uncertainties section included in CAE&#180;s annual report for the year
ended March 31, 2003, numerous factors could cause our results to differ
materially from those in the forward-looking statements, including, amongst
other factors: the purchase and timing of delivery of new aircraft and vessels
by and to civil, military and marine customers; reduced defense spending by
governments; rising costs, 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; a lack of success in
bidding for competed contracts; changes in regulatory requirements; difficulties
in executing our business strategy; the inability to successfully integrate our
acquired businesses; and general political, economic and financial conditions in
the markets in which we operate.

 </font></p>

<p align="JUSTIFY"> <font size="2" face="Arial">This MD&amp;A
provides comments as to how the impact of the appreciation of the Canadian
dollar against the US dollar affected the Company&#180;s results in the first
quarter of fiscal 2004 as compared to the first quarter of fiscal 2003. &nbsp;
 The Company believes that this is useful supplemental information as it
provides an indication of performance excluding such appreciation. &nbsp;
 Readers should be cautioned however that this information should not be
confused with or used as an alternate for performance determined in accordance
with GAAP as an indicator of performance.</font> </p>

<p align="JUSTIFY"> <font size="2" face="Arial"> Unless
otherwise mentioned in this MD&amp;A, the Outlooks provided in CAE&#180;s annual
MD&amp;A, included in its annual report for the year ended March 31, 2003,
remain unchanged.</font> </p>

<hr>

<p><font face="Arial" size="3" color="#0000ff"><b>Summary of Consolidated
Results</b></font><font face="Arial" size="2" color="#0000FF"><b><br>Continuing Operations<br>
</b>Earnings from Continuing Operations</font><br>
<font face="Arial" size="2">
 Consolidated
earnings from continuing operations for the quarter ended June 30, 2003, were
$15.1 million or 7 cents per share compared to $37.4 million or 17 cents per
share reported in the first quarter of fiscal 2003. This first quarter
performance reflected the challenging environment in which CAE operated, from
the strengthening Canadian dollar against the US dollar, to the US-Iraq
activities, combined with the outbreak of SARS in Asia and general economic
uncertainties, all of which adversely affected demand for the Company&#180;s
integrated training solutions.<br><br>

The decrease in the first quarter&#180;s operating
earnings compared to the same period last year had a contributing factor across
all business segments: the increase in the Canadian dollar&#180;s value against the
US dollar.
&nbsp;  The Company&#180;s earnings per share from continuing operations
was reduced by nearly 4 cents per share given the appreciation of the Canadian
dollar against its US counterpart since the first quarter of fiscal 2003,
providing for the effect of percentage of completion accounting on long term
contracts. &nbsp;  The remainder of the
decrease is mainly attributable to lower operating earnings for the Civil
segment, primarily the carry-over effect of a severe reduction in full flight
simulator (FFS) orders (i.e. volume) from 35 to 11 since September 11, 2001 and
by pricing pressures in that market. &nbsp;  The
results for Civil&#180;s equipment business mask what was a relatively strong
performance from its training business where revenues increased 20%. In
addition, the accounting impact from sale and leaseback financing (whereby the
rental payments, including an interest component, under operating leases are
included in determining operating margins) also influenced Civil&#180;s operating
margins.    The Military segment also
reported a decrease in operating earnings for the quarter compared to last year,
as margins were lower in the start up phase of new contracts. The Marine
segment&#180;s operating earnings were also lower than its results in the first
quarter of fiscal 2003 due to the strength of the Canadian dollar in the first
quarter of fiscal 2004. <br><br>

 Other contributing factors to
CAE&#180;s lower earnings were $1.5 million of higher expenses for pensions and
long-term incentive compensation. The increase in pension expense was caused by
the change to CAE&#180;s pension assumptions for the return on plan assets for its
defined benefit pension plans from 9.0% to 6.5%. Also the Company began
expensing its stock-based compensation using the fair value method on April 1,
2003.<i> </i> &nbsp;

 <br><br>

 Interest expense for the
quarter amounted to $7.2 million compared to $7.8 million last year. This
decrease results from average lower debt levels as compared to last year. Income
tax expense also decreased compared to last year reflecting a lower tax rate, 9%
compared to 32% a year ago, which stems from CAE&#180;s evolving geographical
structure and strategy including the recognition, this quarter, of the benefit
of tax loss carryforwards in Australia. This follows the recent long-term
military service contract signed in that country. When compared to the first
quarter of fiscal 2003, the lower tax rate improved the earnings from continuing
operations in the first quarter of fiscal 2004 by $3.8 million, i.e. less than 2
cents per share. For the year management expects the Company&#180;s tax rate to
approximate 25%.

 <br><br>

</font><font face="Arial" size="2" color="#0000FF">Revenue</font><br>
<font face="Arial" size="2">
 Consolidated
revenue for the first quarter of $242.9 million was 12% lower than the $275.8
million generated in the prior year. Marine revenue is comparable to last year,
while Civil and Military revenue decreased by 19% and 6% respectively.</font> </p>

<p>&nbsp;</p>

<hr>

<p align="right"><font size="1" face="Arial">CAE&nbsp; First Quarter Report 2004&nbsp; /&nbsp; page.05</font></p>

<p>&nbsp;</p>

<p align="justify"><font FACE="Arial" SIZE="2" COLOR="#0000ff">Discontinued Operations</font><br>
<font size="2" face="Arial">  During the
quarter, CAE completed the sale of its remaining Forestry Systems business, CAE
Machinery, of Vancouver, British Columbia and the sale of its German Cleaning
Technologies operations, which were all provided for in fiscal 2003. CAE
reported a loss from discontinued operations of $1.9 million during the quarter
compared to none last year. This first quarter loss relates to post-closing
adjustments
 from
the sale of the German Cleaning Technologies operations. &nbsp;
 In early August, the Company also concluded an agreement to sell
substantially all of the assets of its remaining Cleaning Technology business,
CAE Alpheus Inc., located in Rancho Cucamonga, California.<br><br>

  </font>
<font face="Arial" size="2" color="#0000FF">Net Earnings</font><br>
<font face="Arial" size="2">
 Consolidated
net earnings of $13.2 million for the quarter compared to $37.4 million last
year.</font> </p>

<p align="justify"><font face="Arial" size="2" color="#0000FF">Cash Flow</font><br>
 <font size="2" face="Arial">CAE's
net debt, defined as long-term debt less cash and short-term investments,
decreased by $9.8 million during the first quarter. The reduction in net debt is
attributable to foreign currency fluctuations and the receipt of $28.5 million
from the sale and leaseback of two simulators and $23.1 million from
discontinued operations, offset by increases in non-cash working capital of
$73.9 million and capital expenditures of $25.2 million.</font>

 </p>

<p align="justify"><font face="Arial" size="2" color="#0000FF">Backlog</font><br>
<font face="Arial" size="2">
 CAE's order
backlog at June 30, 2003, was $2.2 billion, a $0.3 billion decrease from last
year&#180;s $2.5 billion level.   The
decline mostly stems from the change in business mix in Civil to more training
and less sales of equipment. The majority of Civil&#180;s training revenue is from
short-term contracts that are not included in backlog.</font> </p>

<p align="justify"><font face="Arial" size="2" color="#0000FF">Other</font><br>
<font face="Arial" size="2">
 During
the quarter, CAE signed a long-term agreement with its Montreal union, which
provides wage and benefit increases of 13 per cent over five years. This
five-year agreement is a first for CAE and is in management&#180;s opinion
represents a fair and a positive step forward, particularly in the aerospace
industry.</font>

 </p>

<p align="justify"><font face="Arial" size="3" color="#0000ff"><b>Capital
Resources and Liquidity</b></font><br>
<font size="2" face="Arial">Committed bank lines at floating
interest rates permit CAE to borrow funds directly for operating and general
corporate purposes. The total available amount of committed bank lines at June
30, 2003 was $626.3 million of which 79% ($496.3 million) was utilized. At March
31, 2003, the total available amount was $872.8 million, of which 52% ($451.9
million) was utilized. The decrease in availability is due to the final
repayment of $51.4 million (US$35.0 million), in June 2003, of a bridge facility
of US$135 million with the net proceeds from sale and leaseback transactions
combined with borrowings under existing credit facilities.</font>

 </p>

<hr>


<p ALIGN="JUSTIFY"><font size="2"> <font face="Arial"> The
Company is in full compliance with all bank covenants at the end of the quarter.
It also has the ability to borrow under non-committed operating lines in various
currencies for up to $28.1 million, of which $6.9 million was drawn as at June
30, 2003. Both of these amounts are lower than the March 31, 2003 figures, which
were $89.0 million and $41.3 million respectively, when $37.0 million of
non-committed overdraft facilities were utilized.</font> <font FACE="Arial" SIZE="2"><br><br>

</font>

</font><font size="2" face="Arial">As at June 30, 2003, CAE had long-term debt
totaling $829.3 million. This compares to long-term debt of $811.4 million at
March 31, 2003. At June 30, 2003, the short-term portion of the long-term debt
was $10.5 million compared to $13.4 million at March 31, 2003.&nbsp;</font>


<p ALIGN="JUSTIFY"><font size="2" face="Arial">CAE employs
foreign exchange forward contracts to manage most of the exposures created when
sales are made in foreign currencies. The amount and timing of the maturity of
these forward contracts varies based on a number of project related factors,
including milestone billings and the use of foreign materials and/or
subcontractors. As at June 30, 2003, CAE had $80.6 million Canadian equivalent
in forward contracts. The 22% reduction in the nominal value of these contracts
since March 31, 2003 reflects both the strengthening of the Canadian dollar and
the change in forecasted foreign currency needs for fiscal year 2004.&nbsp;</font>


<p ALIGN="JUSTIFY"><font size="2"><font face="Arial">CAE also uses
financial instruments to manage its exposure to changing interest rates and to
adjust its mix of fixed and floating interest rate debt. In order to benefit
from a favorable interest rate environment the mix of fixed rate versus floating
rate debt on its long-term debt was 22% - 78% respectively as at June 30, 2003.
Part of the change in that mix since March 31, 2003, where it stood at 38% - 62%
respectively, is due to exchange rate fluctuations, as these facilities are
denominated in foreign currency.</font></font><font face="Arial"><font size="2">
CAE also has an interest rate swap that operates to change
floating rate long-term debt into fixed rate term debt for $35.0 million and a
second one converting fixed rate term debt into floating rate debt for $44.5
million (US$35 million).&nbsp; </font></font>


<p ALIGN="JUSTIFY"><font size="2" face="Arial">In the normal
course of business, CAE has issued letters of credit and performance guarantees
for a total amount of $167.9 million at June 30, 2003, compared to $195.1
million at March 31, 2003.</font>
<p class="MsoNormal"> <font face="Arial" color="#0000FF" size="2">Sale and
Leaseback Transactions </font> <font size="2">
&nbsp;</font> <font size="2"><br>
<font face="Arial">
During the
first quarter of 2004, CAE sold and leased back two simulators for a net proceed
of $28.5 million. The following is a summary at June 30, 2003 of the existing
sale and leaseback transactions for simulators currently in service in Civil&#180;s
training locations, accounted for as operating leases on the Company&#180;s
financial statements:</font> <font face="Arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font>&nbsp;&nbsp;&nbsp;&nbsp;


</font></p>
<table border="0" cellspacing="0" cellpadding="0" style="margin-left:5.75pt;
 border-collapse:collapse;mso-table-layout-alt:fixed;mso-padding-alt:.05in 5.75pt .05in 5.75pt">
  <tr>
    <td width="108" valign="bottom" style="width:81.0pt;border:none;border-bottom:
  solid windowtext .5pt;padding:.05in 5.75pt .05in 5.75pt">
      <p class="MsoNormal"> <font size="1" face="Arial">(amounts
      in millions)

      </font> </p>
    </td>
    <td width="66" valign="bottom" style="width:49.5pt;border:none;border-bottom:
  solid windowtext .5pt;padding:.05in 5.75pt .05in 5.75pt">
      <p class="MsoNormal" align="right" style="text-align:right"> <font size="1" face="Arial">Fiscal
      Year

      </font> </p>
    </td>
    <td width="72" valign="bottom" style="width:.75in;border:none;border-bottom:solid windowtext .5pt;
  padding:.05in 5.75pt .05in 5.75pt">
      <p class="MsoNormal" align="right" style="text-align:right"> <font size="1" face="Arial">Number
      of Simulators

      </font> </p>
    </td>
    <td width="72" valign="bottom" style="width:.75in;border:none;border-bottom:solid windowtext .5pt;
  padding:.05in 5.75pt .05in 5.75pt">
      <p class="MsoNormal" align="right" style="text-align:right"> <font size="1" face="Arial">Lease
      Obligation

      </font> </p>
    </td>
    <td width="66" valign="bottom" style="width:49.5pt;border:none;border-bottom:
  solid windowtext .5pt;padding:.05in 5.75pt .05in 5.75pt">
      <p class="MsoNormal" align="right" style="text-align:right"> <font size="1" face="Arial">Initial
      Term (Years)

      </font> </p>
    </td>
    <td width="96" valign="bottom" style="width:1.0in;border:none;border-bottom:solid windowtext .5pt;
  padding:.05in 5.75pt .05in 5.75pt">
      <p class="MsoNormal" align="right" style="text-align:right"> <font size="1" face="Arial">Imputed
      Interest Rate

      </font> </p>
    </td>
    <td width="60" valign="bottom" style="width:45.0pt;border:none;border-bottom:
  solid windowtext .5pt;padding:.05in 5.75pt .05in 5.75pt">
      <p class="MsoNormal" align="center" style="text-align:center"> <font size="1" face="Arial">Deferred
      Gain

      </font> </p>
    </td>
    <td width="72" valign="bottom" style="width:.75in;border:none;border-bottom:solid windowtext .5pt;
  padding:.05in 5.75pt .05in 5.75pt">
      <p class="MsoNormal" align="right" style="text-align:right"> <font size="1" face="Arial">Residual
      Value Guarantee

      </font> </p>
    </td>
  </tr>
  <tr>
    <td width="108" valign="bottom" style="width:81.0pt;border:none;mso-border-top-alt:
  solid windowtext .5pt;padding:.05in 5.75pt .05in 5.75pt">
      <p class="MsoNormal"> <font size="1" face="Arial">SimuFlite

      </font> </p>
    </td>
    <td width="66" valign="bottom" style="width:49.5pt;border:none;mso-border-top-alt:
  solid windowtext .5pt;padding:.05in 5.75pt .05in 5.75pt">
      <p class="MsoNormal" align="right" style="text-align:right"> <font size="1" face="Arial">2002/03

      </font> </p>
    </td>
    <td width="72" valign="bottom" style="width:.75in;border:none;mso-border-top-alt:
  solid windowtext .5pt;padding:.05in 5.75pt .05in 5.75pt">
      <p class="MsoNormal" align="right" style="text-align:right"> <font size="1" face="Arial">6

      </font> </p>
    </td>
    <td width="72" valign="bottom" style="width:.75in;border:none;mso-border-top-alt:
  solid windowtext .5pt;padding:.05in 5.75pt .05in 5.75pt">
      <p class="MsoNormal" align="right" style="text-align:right"> <font size="1" face="Arial">$82.6

      </font> </p>
    </td>
    <td width="66" valign="bottom" style="width:49.5pt;border:none;mso-border-top-alt:
  solid windowtext .5pt;padding:.05in 5.75pt .05in 5.75pt">
      <p class="MsoNormal" align="right" style="text-align:right"> <font size="1" face="Arial">12

      </font> </p>
    </td>
    <td width="96" valign="bottom" style="width:1.0in;border:none;mso-border-top-alt:
  solid windowtext .5pt;padding:.05in 5.75pt .05in 5.75pt">
      <p class="MsoNormal" align="right" style="text-align:right"> <font size="1" face="Arial">5.6%

      </font> </p>
    </td>
    <td width="60" valign="bottom" style="width:45.0pt;border:none;mso-border-top-alt:
  solid windowtext .5pt;padding:.05in 5.75pt .05in 5.75pt">
      <p class="MsoNormal" align="right" style="text-align:right"> <font size="1" face="Arial">2.4

      </font> </p>
    </td>
    <td width="72" valign="bottom" style="width:.75in;border:none;mso-border-top-alt:
  solid windowtext .5pt;padding:.05in 5.75pt .05in 5.75pt">
      <p class="MsoNormal" align="right" style="text-align:right"> <font size="1" face="Arial">-

      </font> </p>
    </td>
  </tr>
  <tr>
    <td width="108" valign="bottom" style="width:81.0pt;padding:.05in 5.75pt .05in 5.75pt">
      <p class="MsoNormal"> <font size="1" face="Arial">Toronto
      Training Centre

      </font> </p>
    </td>
    <td width="66" valign="bottom" style="width:49.5pt;padding:.05in 5.75pt .05in 5.75pt">
      <p class="MsoNormal" align="right" style="text-align:right"> <font size="1" face="Arial">2002

      </font> </p>
    </td>
    <td width="72" valign="bottom" style="width:.75in;padding:.05in 5.75pt .05in 5.75pt">
      <p class="MsoNormal" align="right" style="text-align:right"> <font size="1" face="Arial">2

      </font> </p>
    </td>
    <td width="72" valign="bottom" style="width:.75in;padding:.05in 5.75pt .05in 5.75pt">
      <p class="MsoNormal" align="right" style="text-align:right"> <font size="1" face="Arial">52.7

      </font> </p>
    </td>
    <td width="66" valign="bottom" style="width:49.5pt;padding:.05in 5.75pt .05in 5.75pt">
      <p class="MsoNormal" align="right" style="text-align:right"> <font size="1" face="Arial">21

      </font> </p>
    </td>
    <td width="96" valign="bottom" style="width:1.0in;padding:.05in 5.75pt .05in 5.75pt">
      <p class="MsoNormal" align="right" style="text-align:right"> <font size="1" face="Arial">6.4%

      </font> </p>
    </td>
    <td width="60" valign="bottom" style="width:45.0pt;padding:.05in 5.75pt .05in 5.75pt">
      <p class="MsoNormal" align="right" style="text-align:right"> <font size="1" face="Arial">17.6

      </font> </p>
    </td>
    <td width="72" valign="bottom" style="width:.75in;padding:.05in 5.75pt .05in 5.75pt">
      <p class="MsoNormal" align="right" style="text-align:right"> <font size="1" face="Arial">9.2

      </font> </p>
    </td>
  </tr>
  <tr>
    <td width="108" valign="bottom" style="width:81.0pt;padding:.05in 5.75pt .05in 5.75pt">
      <p class="MsoNormal"> <font size="1" face="Arial">Air
      Canada&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Training Centre

      </font> </p>
    </td>
    <td width="66" valign="bottom" style="width:49.5pt;padding:.05in 5.75pt .05in 5.75pt">
      <p class="MsoNormal" align="right" style="text-align:right"> <font size="1" face="Arial">2000

      </font> </p>
    </td>
    <td width="72" valign="bottom" style="width:.75in;padding:.05in 5.75pt .05in 5.75pt">
      <p class="MsoNormal" align="right" style="text-align:right"> <font size="1" face="Arial">2

      </font> </p>
    </td>
    <td width="72" valign="bottom" style="width:.75in;padding:.05in 5.75pt .05in 5.75pt">
      <p class="MsoNormal" align="right" style="text-align:right"> <font size="1" face="Arial">42.0

      </font> </p>
    </td>
    <td width="66" valign="bottom" style="width:49.5pt;padding:.05in 5.75pt .05in 5.75pt">
      <p class="MsoNormal" align="right" style="text-align:right"> <font size="1" face="Arial">20

      </font> </p>
    </td>
    <td width="96" valign="bottom" style="width:1.0in;padding:.05in 5.75pt .05in 5.75pt">
      <p class="MsoNormal" align="right" style="text-align:right"> <font size="1" face="Arial">7.6%

      </font> </p>
    </td>
    <td width="60" valign="bottom" style="width:45.0pt;padding:.05in 5.75pt .05in 5.75pt">
      <p class="MsoNormal" align="right" style="text-align:right"> <font size="1" face="Arial">15.6

      </font> </p>
    </td>
    <td width="72" valign="bottom" style="width:.75in;padding:.05in 5.75pt .05in 5.75pt">
      <p class="MsoNormal" align="right" style="text-align:right"> <font size="1" face="Arial">8.3

      </font> </p>
    </td>
  </tr>
  <tr>
    <td width="108" valign="bottom" style="width:81.0pt;padding:.05in 5.75pt .05in 5.75pt">
      <p class="MsoNormal"> <font size="1" face="Arial">Denver/Dallas

      Training
      Centers

      </font> </p>
    </td>
    <td width="66" valign="bottom" style="width:49.5pt;padding:.05in 5.75pt .05in 5.75pt">
      <p class="MsoNormal" align="right" style="text-align:right"> <font size="1" face="Arial">2003

      </font> </p>
    </td>
    <td width="72" valign="bottom" style="width:.75in;padding:.05in 5.75pt .05in 5.75pt">
      <p class="MsoNormal" align="right" style="text-align:right"> <font size="1" face="Arial">5

      </font> </p>
    </td>
    <td width="72" valign="bottom" style="width:.75in;padding:.05in 5.75pt .05in 5.75pt">
      <p class="MsoNormal" align="right" style="text-align:right"> <font size="1" face="Arial">108.4

      </font> </p>
    </td>
    <td width="66" valign="bottom" style="width:49.5pt;padding:.05in 5.75pt .05in 5.75pt">
      <p class="MsoNormal" align="right" style="text-align:right"> <font size="1" face="Arial">20

      </font> </p>
    </td>
    <td width="96" valign="bottom" style="width:1.0in;padding:.05in 5.75pt .05in 5.75pt">
      <p class="MsoNormal" align="right" style="text-align:right"> <font size="1" face="Arial">5.0%

      </font> </p>
    </td>
    <td width="60" valign="bottom" style="width:45.0pt;padding:.05in 5.75pt .05in 5.75pt">
      <p class="MsoNormal" align="right" style="text-align:right"> <font size="1" face="Arial">33.6

      </font> </p>
    </td>
    <td width="72" valign="bottom" style="width:.75in;padding:.05in 5.75pt .05in 5.75pt">
      <p class="MsoNormal" align="right" style="text-align:right"> <font size="1" face="Arial">-

      </font> </p>
    </td>
  </tr>
  <tr>
    <td width="108" valign="bottom" style="width:81.0pt;padding:.05in 5.75pt .05in 5.75pt">
      <p class="MsoNormal"><font face="Arial"><font size="1"> Amsterdam

       </font>&nbsp;&nbsp; <font size="1"> Training
      Centre

       </font></font></p>
    </td>
    <td width="66" valign="bottom" style="width:49.5pt;padding:.05in 5.75pt .05in 5.75pt">
      <p class="MsoNormal" align="right" style="text-align:right"> <font size="1" face="Arial">2002

      </font> </p>
    </td>
    <td width="72" valign="bottom" style="width:.75in;padding:.05in 5.75pt .05in 5.75pt">
      <p class="MsoNormal" align="right" style="text-align:right"> <font size="1" face="Arial">3

      </font> </p>
    </td>
    <td width="72" valign="bottom" style="width:.75in;padding:.05in 5.75pt .05in 5.75pt">
      <p class="MsoNormal" align="right" style="text-align:right"> <font size="1" face="Arial">46.4

      </font> </p>
    </td>
    <td width="66" valign="bottom" style="width:49.5pt;padding:.05in 5.75pt .05in 5.75pt">
      <p class="MsoNormal" align="right" style="text-align:right"> <font size="1" face="Arial">8

      </font> </p>
    </td>
    <td width="96" valign="bottom" style="width:1.0in;padding:.05in 5.75pt .05in 5.75pt">
      <p class="MsoNormal" align="right" style="text-align:right"> <font size="1" face="Arial">6.4%/9.8%

      </font> </p>
    </td>
    <td width="60" valign="bottom" style="width:45.0pt;padding:.05in 5.75pt .05in 5.75pt">
      <p class="MsoNormal" align="right" style="text-align:right"> <font size="1" face="Arial">-

      </font> </p>
    </td>
    <td width="72" valign="bottom" style="width:.75in;padding:.05in 5.75pt .05in 5.75pt">
      <p class="MsoNormal" align="right" style="text-align:right"> <font size="1" face="Arial">-

      </font> </p>
    </td>
  </tr>
  <tr>
    <td width="108" valign="bottom" style="width:81.0pt;padding:.05in 5.75pt .05in 5.75pt">
      <p class="MsoNormal"> <font size="1" face="Arial">China
      Southern Joint Venture<sup>1</sup>

      </font> </p>
    </td>
    <td width="66" valign="bottom" style="width:49.5pt;padding:.05in 5.75pt .05in 5.75pt">
      <p class="MsoNormal" align="right" style="text-align:right"> <font size="1" face="Arial">2003

      </font> </p>
    </td>
    <td width="72" valign="bottom" style="width:.75in;padding:.05in 5.75pt .05in 5.75pt">
      <p class="MsoNormal" align="right" style="text-align:right"> <font size="1" face="Arial">5

      </font> </p>
    </td>
    <td width="72" valign="bottom" style="width:.75in;padding:.05in 5.75pt .05in 5.75pt">
      <p class="MsoNormal" align="right" style="text-align:right"> <font size="1" face="Arial">52.9

      </font> </p>
    </td>
    <td width="66" valign="bottom" style="width:49.5pt;padding:.05in 5.75pt .05in 5.75pt">
      <p class="MsoNormal" align="right" style="text-align:right"> <font size="1" face="Arial">15

      </font> </p>
    </td>
    <td width="96" valign="bottom" style="width:1.0in;padding:.05in 5.75pt .05in 5.75pt">
      <p class="MsoNormal" align="right" style="text-align:right"> <font size="1" face="Arial">3.0%

      </font> </p>
    </td>
    <td width="60" valign="bottom" style="width:45.0pt;padding:.05in 5.75pt .05in 5.75pt">
      <p class="MsoNormal" align="right" style="text-align:right"> <font size="1" face="Arial">-

      </font> </p>
    </td>
    <td width="72" valign="bottom" style="width:.75in;padding:.05in 5.75pt .05in 5.75pt">
      <p class="MsoNormal" align="right" style="text-align:right"> <font size="1" face="Arial">-

      </font> </p>
    </td>
  </tr>
  <tr>
    <td width="108" valign="bottom" style="width:81.0pt;border:none;border-bottom:
  solid windowtext .5pt;padding:.05in 5.75pt .05in 5.75pt">
      <p class="MsoNormal"> <font size="1" face="Arial">Others

      </font> </p>
    </td>
    <td width="66" valign="bottom" style="width:49.5pt;border:none;border-bottom:
  solid windowtext .5pt;padding:.05in 5.75pt .05in 5.75pt">
      <p class="MsoNormal" align="right" style="text-align:right"> <font size="1" face="Arial">-

      </font> </p>
    </td>
    <td width="72" valign="bottom" style="width:.75in;border:none;border-bottom:solid windowtext .5pt;
  padding:.05in 5.75pt .05in 5.75pt">
      <p class="MsoNormal" align="right" style="text-align:right"> <font size="1" face="Arial">6

      </font> </p>
    </td>
    <td width="72" valign="bottom" style="width:.75in;border:none;border-bottom:solid windowtext .5pt;
  padding:.05in 5.75pt .05in 5.75pt">
      <p class="MsoNormal" align="right" style="text-align:right"> <font size="1" face="Arial">42.5

      </font> </p>
    </td>
    <td width="66" valign="bottom" style="width:49.5pt;border:none;border-bottom:
  solid windowtext .5pt;padding:.05in 5.75pt .05in 5.75pt">
      <p class="MsoNormal" align="right" style="text-align:right"> <font size="1" face="Arial">10

      </font> </p>
    </td>
    <td width="96" valign="bottom" style="width:1.0in;border:none;border-bottom:solid windowtext .5pt;
  padding:.05in 5.75pt .05in 5.75pt">
      <p class="MsoNormal" align="right" style="text-align:right"> <font size="1" face="Arial">3.2%<sup>2</sup>/7.3%

      </font> </p>
    </td>
    <td width="60" valign="bottom" style="width:45.0pt;border:none;border-bottom:
  solid windowtext .5pt;padding:.05in 5.75pt .05in 5.75pt">
      <p class="MsoNormal" align="right" style="text-align:right"> <font size="1" face="Arial">15.6

      </font> </p>
    </td>
    <td width="72" valign="bottom" style="width:.75in;border:none;border-bottom:solid windowtext .5pt;
  padding:.05in 5.75pt .05in 5.75pt">
      <p class="MsoNormal" align="right" style="text-align:right"> <font size="1" face="Arial">15.6

      </font> </p>
    </td>
  </tr>
  <tr>
    <td width="108" valign="bottom" style="width:81.0pt;border:none;border-bottom:
  solid windowtext .5pt;mso-border-top-alt:solid windowtext .5pt;padding:.05in 5.75pt .05in 5.75pt">
      <p class="MsoNormal"><font size="1" face="Arial">&nbsp;

       </font></p>
    </td>
    <td width="66" valign="bottom" style="width:49.5pt;border:none;border-bottom:
  solid windowtext .5pt;mso-border-top-alt:solid windowtext .5pt;padding:.05in 5.75pt .05in 5.75pt">
      <p class="MsoNormal" align="right" style="text-align:right"><font size="1" face="Arial">&nbsp;

       </font></p>
    </td>
    <td width="72" valign="bottom" style="width:.75in;border:none;border-bottom:solid windowtext .5pt;
  mso-border-top-alt:solid windowtext .5pt;padding:.05in 5.75pt .05in 5.75pt">
      <p class="MsoNormal" align="right" style="text-align:right"> <font size="1" face="Arial">29

      </font> </p>
    </td>
    <td width="72" valign="bottom" style="width:.75in;border:none;border-bottom:solid windowtext .5pt;
  mso-border-top-alt:solid windowtext .5pt;padding:.05in 5.75pt .05in 5.75pt">
      <p class="MsoNormal" align="right" style="text-align:right"> <font size="1" face="Arial">$427.5

      </font> </p>
    </td>
    <td width="66" valign="bottom" style="width:49.5pt;border:none;border-bottom:
  solid windowtext .5pt;mso-border-top-alt:solid windowtext .5pt;padding:.05in 5.75pt .05in 5.75pt">
      <p class="MsoNormal" align="right" style="text-align:right"><font size="1" face="Arial">&nbsp;

       </font></p>
    </td>
    <td width="96" valign="bottom" style="width:1.0in;border:none;border-bottom:solid windowtext .5pt;
  mso-border-top-alt:solid windowtext .5pt;padding:.05in 5.75pt .05in 5.75pt">
      <p class="MsoNormal" align="right" style="text-align:right"><font size="1" face="Arial">&nbsp;

       </font></p>
    </td>
    <td width="60" valign="bottom" style="width:45.0pt;border:none;border-bottom:
  solid windowtext .5pt;mso-border-top-alt:solid windowtext .5pt;padding:.05in 5.75pt .05in 5.75pt">
      <p class="MsoNormal" align="right" style="text-align:right"> <font size="1" face="Arial">84.8

      </font> </p>
    </td>
    <td width="72" valign="bottom" style="width:.75in;border:none;border-bottom:solid windowtext .5pt;
  mso-border-top-alt:solid windowtext .5pt;padding:.05in 5.75pt .05in 5.75pt">
      <p class="MsoNormal" align="right" style="text-align:right"> <font size="1" face="Arial">33.1

      </font> </p>
    </td>
  </tr>
  <tr>
    <td width="174" colspan="2" valign="bottom" style="width:130.5pt;border:none;
  border-bottom:double windowtext 1.5pt;mso-border-top-alt:solid windowtext .5pt;
  padding:.05in 5.75pt .05in 5.75pt">
      <p class="MsoNormal"> <font size="1" face="Arial">Annual
      Lease Payments (upcoming 12 months)</font> </p>
    </td>
    <td width="72" valign="bottom" style="width:.75in;border:none;border-bottom:double windowtext 1.5pt;
  mso-border-top-alt:solid windowtext .5pt;padding:.05in 5.75pt .05in 5.75pt">
      <p class="MsoNormal" align="right" style="text-align:right"><font size="1" face="Arial">&nbsp;

       </font></p>
    </td>
    <td width="72" valign="bottom" style="width:.75in;border:none;border-bottom:double windowtext 1.5pt;
  mso-border-top-alt:solid windowtext .5pt;padding:.05in 5.75pt .05in 5.75pt">
      <p class="MsoNormal" align="right" style="text-align:right"> <font size="1" face="Arial">$37.5

      </font> </p>
    </td>
    <td width="66" valign="bottom" style="width:49.5pt;border:none;border-bottom:
  double windowtext 1.5pt;mso-border-top-alt:solid windowtext .5pt;padding:
  .05in 5.75pt .05in 5.75pt">
      <p class="MsoNormal" align="right" style="text-align:right"><font size="1" face="Arial">&nbsp;

       </font></p>
    </td>
    <td width="96" valign="bottom" style="width:1.0in;border:none;border-bottom:double windowtext 1.5pt;
  mso-border-top-alt:solid windowtext .5pt;padding:.05in 5.75pt .05in 5.75pt">
      <p class="MsoNormal" align="right" style="text-align:right"><font size="1" face="Arial">&nbsp;

       </font></p>
    </td>
    <td width="60" valign="bottom" style="width:45.0pt;border:none;border-bottom:
  double windowtext 1.5pt;mso-border-top-alt:solid windowtext .5pt;padding:
  .05in 5.75pt .05in 5.75pt">
      <p class="MsoNormal" align="right" style="text-align:right"><font size="1" face="Arial">&nbsp;

       </font></p>
    </td>
    <td width="72" valign="bottom" style="width:.75in;border:none;border-bottom:double windowtext 1.5pt;
  mso-border-top-alt:solid windowtext .5pt;padding:.05in 5.75pt .05in 5.75pt">
      <p class="MsoNormal" align="right" style="text-align:right"><font size="1" face="Arial">&nbsp;

       </font></p>
    </td>
  </tr>
</table>
<p class="Preformatted" style="tab-stops:.5in"><font face="Arial" size="1">&nbsp; &nbsp;&nbsp;&nbsp;&nbsp;
  1 &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
   Joint venture in which CAE has a 49% participation level.</font>

 </p>
<p class="MsoNormal" style="margin-left:.75in;text-indent:-.5in;mso-list:l22 level1 lfo122;
tab-stops:list .75in"> <font face="Arial" size="1"> 2 &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
   Floating Rate Basis.</font>

 </p>


<p ALIGN="JUSTIFY">



 <font size="2">

</font> <font size="2">

</font>

<p><font face="Arial" size="3" color="#0000ff"><b>Civil Simulation and Training</b></font> <font size="2"><br>
<font face="Arial">
CAE's Civil
Simulation and Training business is a world leader in the design and production
of commercial flight simulators, visual systems and a world-leading supplier of
integrated aviation training solutions. &nbsp;  As
at June 30, 2003 CAE has an installed base of 91 FFS (89 FFS as at March 31,
2003 and 80 as at June 30, 2002) at 20 locations on four continents, making it
the second largest independent training company in the world in each segment -
business aircraft, regional jets and wide body aircraft. &nbsp;
 CAE also remains the leader in selling FFS.</font></font>

 </p>

<p align="justify"><font face="Arial" size="2" color="#0000FF">Review of Operations</font><br>
<font face="Arial" size="2">
 During
the first quarter,   CAE Tropos  &#153;
was selected by the US Department of Transportation&#180;s Federal Aviation
Administration as the visual system for its CAE-designed Boeing 737-800 FFS. &nbsp;
   CAE Tropos&#153; offers unprecedented image quality and a
fully textured world database, so pilots see realistic visual cues during flight
training.</font>


</p>

<p class="MsoBodyText" style="margin-top:7.0pt;text-align:justify"> <font face="Arial" size="2"> CAE
signed a two-year agreement, with two renewable successive two-year terms, to
provide   CRJ200
full-flight simulator
training to Midway Airlines pilots. The contract, valued between $5 and $6
million,   begins in June
2003 and continues CAE's expanded support of CRJ regional training solutions.
  &nbsp; CAE
has also signed pilot-training contracts with four additional airlines: EUjet
and Gandalf Airlines at the Amsterdam training center, and CCM Airlines of
France and Colombian-based AIRES Colombia at the Madrid centre.</font>

 </p>

<p align="justify">
 <font face="Arial" size="2">
 In
response to growing demand in the Middle East, Europe and Asia for aviation
training services,   CAE
announced at the Paris Air Show that it will add a convertible Hawker 800/800XP
FFS at its Dubai training centre, and that it had signed for $6 million of
multi-year contracts with Arabasco, Middle East Airlines, and Royal Jet for
training at that facility. </font>
&nbsp;
 </p>

<p><b><font face="Arial" COLOR="#0000ff" size="2">Financial Results</font></b></p>

<table border="0" cellpadding="0" cellspacing="0" width="100%">
<tr>
<td width="196" style="border-bottom-style: solid; border-bottom-width: 1"><font face="Arial" color="#0000ff" size="1">(amounts in millions,<br>except operating margins)</font></td>
<td width="24" style="border-bottom-style: solid; border-bottom-width: 1">&nbsp;</td>
<td WIDTH="13%" VALIGN="bottom" HEIGHT="33" style="border-bottom-style: solid; border-bottom-width: 1" align="right"><font face="Arial" size="2" COLOR="#0000ff"><b>Q1-2004</b></font></td>
<td WIDTH="13%" VALIGN="bottom" HEIGHT="33" style="border-bottom-style: solid; border-bottom-width: 1" align="right"><font face="Arial" size="2" COLOR="#0000ff">Q4-2003</font></td>
<td WIDTH="13%" VALIGN="bottom" HEIGHT="33" style="border-bottom-style: solid; border-bottom-width: 1" align="right"><font face="Arial" size="2" COLOR="#0000ff">Q3-2003</font></td>
<td WIDTH="13%" VALIGN="bottom" HEIGHT="33" style="border-bottom-style: solid; border-bottom-width: 1" align="right"><font face="Arial" size="2" COLOR="#0000ff">Q2-2003</font></td>
<td WIDTH="13%" VALIGN="bottom" HEIGHT="33" style="border-bottom-style: solid; border-bottom-width: 1" align="right"><font face="Arial" size="2" COLOR="#0000ff">Q1-2003</font></td>
</tr>
<tr>
<td width="196"><font face="Arial" size="2">Revenue</font></td>
<td WIDTH="4%" VALIGN="MIDDLE" HEIGHT="19" align="right"><b><font face="Arial" size="2">$</font></b></td>
<td WIDTH="13%" VALIGN="MIDDLE" HEIGHT="19" align="right"><b><font face="Arial" size="2">109.1</font></b></td>
<td WIDTH="13%" VALIGN="MIDDLE" HEIGHT="19" align="right"><font face="Arial" size="2">137.7</font></td>
<td WIDTH="13%" VALIGN="MIDDLE" HEIGHT="19" align="right"><font face="Arial" size="2">139.6</font></td>
<td WIDTH="13%" VALIGN="MIDDLE" HEIGHT="19" align="right"><font face="Arial" size="2">104.4</font></td>
<td WIDTH="13%" VALIGN="MIDDLE" HEIGHT="19" align="right"><font face="Arial" size="2">135.5</font></td>
</tr>
<tr>
<td width="196"><font face="Arial" size="2">Operating earnings</font></td>
<td WIDTH="4%" VALIGN="MIDDLE" HEIGHT="18" align="right"><b><font face="Arial" size="2">$</font></b></td>
<td WIDTH="13%" VALIGN="MIDDLE" HEIGHT="19" align="right"><b><font face="Arial" size="2">6.6</font></b></td>
<td WIDTH="13%" VALIGN="MIDDLE" HEIGHT="19" align="right"><font face="Arial" size="2">29.5</font></td>
<td WIDTH="13%" VALIGN="MIDDLE" HEIGHT="19" align="right"><font face="Arial" size="2">29.2</font></td>
<td WIDTH="13%" VALIGN="MIDDLE" HEIGHT="19" align="right"><font face="Arial" size="2">19.9</font></td>
<td WIDTH="13%" VALIGN="MIDDLE" HEIGHT="19" align="right"><font face="Arial" size="2">37.7</font></td>
</tr>
<tr>
<td WIDTH="32%" VALIGN="MIDDLE" HEIGHT="18"><font face="Arial" size="2">Operating margins</font></td>
<td WIDTH="4%" VALIGN="MIDDLE" HEIGHT="18" align="right"><b><font face="Arial" size="2">%</font></b></td>
<td WIDTH="13%" VALIGN="MIDDLE" HEIGHT="19" align="right"><b><font face="Arial" size="2">6.0</font></b></td>
<td WIDTH="13%" VALIGN="MIDDLE" HEIGHT="19" align="right"><font face="Arial" size="2">21.4</font></td>
<td WIDTH="13%" VALIGN="MIDDLE" HEIGHT="19" align="right"><font face="Arial" size="2">20.9</font></td>
<td WIDTH="13%" VALIGN="MIDDLE" HEIGHT="19" align="right"><font face="Arial" size="2">19.1</font></td>
<td WIDTH="13%" VALIGN="MIDDLE" HEIGHT="19" align="right"><font face="Arial" size="2">27.8</font></td>
</tr>
<tr>
<td WIDTH="32%" VALIGN="MIDDLE" HEIGHT="17" style="border-bottom-style: solid; border-bottom-width: 1"><font face="Arial" size="2">Backlog</font></td>
<td WIDTH="4%" VALIGN="MIDDLE" HEIGHT="17" style="border-bottom-style: solid; border-bottom-width: 1" align="right"><b><font face="Arial" size="2">$</font></b></td>
<td WIDTH="13%" VALIGN="MIDDLE" HEIGHT="17" style="border-bottom-style: solid; border-bottom-width: 1" align="right"><b><font face="Arial" size="2">338.7</font></b></td>
<td WIDTH="13%" VALIGN="MIDDLE" HEIGHT="17" style="border-bottom-style: solid; border-bottom-width: 1" align="right"><font face="Arial" size="2">418.0</font></td>
<td WIDTH="13%" VALIGN="MIDDLE" HEIGHT="17" style="border-bottom-style: solid; border-bottom-width: 1" align="right"><font face="Arial" size="2">416.1</font></td>
<td WIDTH="13%" VALIGN="MIDDLE" HEIGHT="17" style="border-bottom-style: solid; border-bottom-width: 1" align="right"><font face="Arial" size="2">424.8</font></td>
<td WIDTH="13%" VALIGN="MIDDLE" HEIGHT="17" style="border-bottom-style: solid; border-bottom-width: 1" align="right"><font face="Arial" size="2">489.3</font></td>
</tr>
</table>

<font FACE="Arial" SIZE="2"><p ALIGN="JUSTIFY"> Revenue for the quarter of
$109.1 million was 19% below last year. This decrease reflects reduced demand
for FFS and the increase in the Canadian dollar&#180;s value against the US dollar,
which more than offset revenue growth in the aviation training resulting from
the significant ramp up of simulators in the training network since last year.
Excluding the effects of currency fluctuations, revenue would have been 13%
below last year.

 </p>

</font>

<p align="justify">
&nbsp;</p>

<hr>

<p align="right"><font size="1" face="Arial">CAE&nbsp; First Quarter Report 2004
/&nbsp; page.07</font></p>

<font FACE="Arial" SIZE="2"><p ALIGN="JUSTIFY"><br>

 Operating
earnings for the quarter of $6.6 million were significantly below last year. The
decrease is split - one third resulting from foreign exchange, one third due
to lower equipment volume offset in part by the growth in training, and
one-third for increased costs. &nbsp;  The
increased cost results from higher corporate cost allocations, operating lease
expense, research and development, integration costs for civil training and bad
debts.

 <br><br>

 The backlog
at the end of June decreased to $338.7 million from $418.0 million in March 2003
and from $489.3 million in June 2002. The lower backlog levels compared to prior
periods reflect the lower levels of FFS orders.

 </p>

<p align="justify"><font FACE="Arial" SIZE="2" COLOR="#0000ff">Outlook</font><br>
CAE expects continuing growth in its Civil
training business, having increased its installed base by 50% during fiscal 2003
from 59 FFS to 89 FFS.   CAE
remains the only integrated provider of a complete training solution including
lower level training devices, courseware and curriculum, web-based training
solutions and the most sophisticated FFS,  as
evidenced by such recent contract awards as the $55 million A380 training
solutions deal with Airbus and the signature with JetBlue of an $85 million
letter of intent for 6 FFS. &nbsp;  These
deals validate CAE&#180;s investment in its new technology offerings such as
Simfinity  &#153; ,
support its approach with regional airlines (which are expected to rebound
faster from the current market trough), and support the market expectation for
an equipment order market recovery expected in 2005/2006.

 </p>

<p align="justify"> In
fiscal 2004, CAE expects to maintain its commanding leadership position for
competed sales of civil simulation and visual systems and anticipates increasing
its advantage in lead-time, cost, quality and reputation for performance through
operational improvements and research and development programs. <br>

</p>

<p>&nbsp;</p>

<hr>

<p>&nbsp;</p>

</font><p><b><font face="Arial" size="3" color="#0000ff">Military Simulation and
Training</font></b><font FACE="Arial" SIZE="2"> <br>
CAE's
Military business is a premier designer and manufacturer of military flight and
land-based simulation and training systems. Simulation equipment and training is
developed for a variety of military aircraft, including helicopters, transport
planes and fighter jets. &nbsp;  CAE has an
extensive product range covering many American and European weapon systems. &nbsp;
 The customer base is extensive as well, CAE having made sales to over 30
countries globally. &nbsp;&nbsp;  </p>

<p ALIGN="JUSTIFY"><font FACE="Arial" SIZE="2" COLOR="#0000ff">Review of operations</font><br>
 During the quarter, CAE announced that Rotorsim, the
consortium owned equally by CAE and Agusta S.p.A., will establish a new
helicopter training facility in Italy to provide integrated training solutions
for Agusta Westland helicopters. The Rotorsim facility will open in 2005 with
the delivery of a CAE-built A109 full mission simulator and is expected to
generate revenues of $125 million over 15 years. The Rotorsim consortium will
bring together two world leaders in their fields of helicopter manufacturing and
flight training and simulation.

 </p>

<p class="MsoNormal" style="margin-top:7.0pt;text-align:justify">CAE
was awarded a ten-year $70 million agreement to provide flight training support
services for all three armed services of the Australian Defence Force.

 </p>
<p class="MsoNormal" style="margin-top:7.0pt;text-align:justify">CAE
also signed a $11 million contract to upgrade the command and staff trainer
(CAST) at the British Army&#180;s Land Warfare training centre. This contract was
awarded by the Raytheon Company as part of the CIS into CAST program, and two
additional upgrades will be contracted over the next year. &nbsp;

 </p>
 CAE
was awarded a US $2.4 million contract to provide the US Army Aviation
Warfighting Simulation Center at Fort Rucker, Alabama, with its first UH-60L
Black Hawk Battlestaff Training Simulator.

<p><font face="Arial" size="2" COLOR="#0000ff">Financial Results</font></p>

</font>

<table border="0" cellpadding="0" cellspacing="0" width="100%">
<tr>
<td width="196" style="border-bottom-style: solid; border-bottom-width: 1"><font face="Arial" color="#0000ff" size="1">(amounts in millions,<br>except operating margins)</font></td>
<font FACE="Arial" SIZE="2">
<td width="24" style="border-bottom-style: solid; border-bottom-width: 1">&nbsp;</td>
<td WIDTH="13%" VALIGN="bottom" HEIGHT="33" style="border-bottom-style: solid; border-bottom-width: 1" align="right"><font face="Arial" size="2" COLOR="#0000ff"><b>Q1-2004</b></font></td>
<td WIDTH="13%" VALIGN="bottom" HEIGHT="33" style="border-bottom-style: solid; border-bottom-width: 1" align="right"><font face="Arial" size="2" COLOR="#0000ff">Q4-2003</font></td>
<td WIDTH="13%" VALIGN="bottom" HEIGHT="33" style="border-bottom-style: solid; border-bottom-width: 1" align="right"><font face="Arial" size="2" COLOR="#0000ff">Q3-2003</font></td>
<td WIDTH="13%" VALIGN="bottom" HEIGHT="33" style="border-bottom-style: solid; border-bottom-width: 1" align="right"><font face="Arial" size="2" COLOR="#0000ff">Q2-2003</font></td>
<td WIDTH="13%" VALIGN="bottom" HEIGHT="33" style="border-bottom-style: solid; border-bottom-width: 1" align="right"><font face="Arial" size="2" COLOR="#0000ff">Q1-2003</font></td>
</tr>
<tr>
<td width="196"><font face="Arial" size="2">Revenue</font></td>
<td WIDTH="4%" VALIGN="MIDDLE" HEIGHT="19" align="right"><b><font face="Arial" size="2">$</font></b></td>
<td WIDTH="13%" VALIGN="MIDDLE" HEIGHT="19" align="right"><b><font face="Arial" size="2">99.6</font></b></td>
<td WIDTH="13%" VALIGN="MIDDLE" HEIGHT="19" align="right"><font face="Arial" size="2">123.8</font></td>
<td WIDTH="13%" VALIGN="MIDDLE" HEIGHT="19" align="right"><font face="Arial" size="2">107.4</font></td>
<td WIDTH="13%" VALIGN="MIDDLE" HEIGHT="19" align="right"><font face="Arial" size="2">108.6</font></td>
<td WIDTH="13%" VALIGN="MIDDLE" HEIGHT="19" align="right"><font face="Arial" size="2">106.0</font></td>
</tr>
<tr>
<td width="196"><font face="Arial" size="2">Operating earnings</font></td>
<td WIDTH="4%" VALIGN="MIDDLE" HEIGHT="18" align="right"><b><font face="Arial" size="2">$</font></b></td>
<td WIDTH="13%" VALIGN="MIDDLE" HEIGHT="19" align="right"><b><font face="Arial" size="2">12.3</font></b></td>
<td WIDTH="13%" VALIGN="MIDDLE" HEIGHT="19" align="right"><font face="Arial" size="2">22.1</font></td>
<td WIDTH="13%" VALIGN="MIDDLE" HEIGHT="19" align="right"><font face="Arial" size="2">16.7</font></td>
<td WIDTH="13%" VALIGN="MIDDLE" HEIGHT="19" align="right"><font face="Arial" size="2">16.2</font></td>
<td WIDTH="13%" VALIGN="MIDDLE" HEIGHT="19" align="right"><font face="Arial" size="2">18.7</font></td>
</tr>
<tr>
<td WIDTH="32%" VALIGN="MIDDLE" HEIGHT="18"><font face="Arial" size="2">Operating margins</font></td>
<td WIDTH="4%" VALIGN="MIDDLE" HEIGHT="18" align="right"><b><font face="Arial" size="2">%</font></b></td>
<td WIDTH="13%" VALIGN="MIDDLE" HEIGHT="19" align="right"><b><font face="Arial" size="2">12.4</font></b></td>
<td WIDTH="13%" VALIGN="MIDDLE" HEIGHT="19" align="right"><font face="Arial" size="2">17.9</font></td>
<td WIDTH="13%" VALIGN="MIDDLE" HEIGHT="19" align="right"><font face="Arial" size="2">15.5</font></td>
<td WIDTH="13%" VALIGN="MIDDLE" HEIGHT="19" align="right"><font face="Arial" size="2">15.0</font></td>
<td WIDTH="13%" VALIGN="MIDDLE" HEIGHT="19" align="right"><font face="Arial" size="2">17.6</font></td>
</tr>
<tr>
<td WIDTH="32%" VALIGN="MIDDLE" HEIGHT="17" style="border-bottom-style: solid; border-bottom-width: 1"><font face="Arial" size="2">Backlog</font></td>
<td WIDTH="4%" VALIGN="MIDDLE" HEIGHT="17" style="border-bottom-style: solid; border-bottom-width: 1" align="right"><b><font face="Arial" size="2">$</font></b></td>
<td WIDTH="13%" VALIGN="MIDDLE" HEIGHT="17" style="border-bottom-style: solid; border-bottom-width: 1" align="right"><b><font face="Arial" size="2">1,225.9</font></b></td>
<td WIDTH="13%" VALIGN="MIDDLE" HEIGHT="17" style="border-bottom-style: solid; border-bottom-width: 1" align="right"><font face="Arial" size="2">1,235.3</font></td>
<td WIDTH="13%" VALIGN="MIDDLE" HEIGHT="17" style="border-bottom-style: solid; border-bottom-width: 1" align="right"><font face="Arial" size="2">1,347.5</font></td>
<td WIDTH="13%" VALIGN="MIDDLE" HEIGHT="17" style="border-bottom-style: solid; border-bottom-width: 1" align="right"><font face="Arial" size="2">1,310.9</font></td>
<td WIDTH="13%" VALIGN="MIDDLE" HEIGHT="17" style="border-bottom-style: solid; border-bottom-width: 1" align="right"><font face="Arial" size="2">1,334.0</font></td>
</tr>
</table>

<p ALIGN="JUSTIFY"> Revenue of
$99.6 million for the quarter was 6% below last year&#180;s level of $106.0
million. Revenue growth during that period has been negatively affected by
continuing delays in the award of several programs and by the strengthening of
the Canadian dollar vs. the US dollar. Excluding foreign exchange effects
revenue would have exceeded last year&#180;s level by 3%.

 </p>

<p ALIGN="JUSTIFY">

Operating earnings of $22.1 million this quarter were $1.6 million or 8% above last year. Year-to-date operating earnings, however, at $73.6 million, were 12% or $8.0 million above last year representing further margin improvements through productivity gains, and benefits from integration at the Tampa, U.S. location. Through the integration of the Tampa operation CAE has reduced the cost to complete certain programs from their initial estimates at the time of acquisition by $8.0 million, which favourably impacted operating margins this year and for the quarter where approximately one half of that benefit was realized.<br><br>

 Operating
earnings of $12.3 million this quarter were $6.4 million below last year.
Approximately 20% of the reduction relates to foreign currency fluctuations. &nbsp;
 The balance is attributable to lower margins on the current mix of
programs and higher expenses for bid and proposals in line with the increased
level of opportunities currently being pursued. </p>

<p ALIGN="JUSTIFY"> Backlog
remained in excess of $1.2 billion. </p>

<hr>

<p align="right"><font size="1" face="Arial">CAE&nbsp; First Quarter Report 2004</font><font size="1" face="Arial">&nbsp; /&nbsp; page.09</font></p>

<p>&nbsp;</p>

<p ALIGN="JUSTIFY"><font FACE="Arial" SIZE="2" COLOR="#0000ff">Outlook</font><br>
CAE continues its bidding activities for
significant programs, including the US Army&#180;s $800 million Flight School XXI
project and the Canadian Forces&#180; $225 million CF-18 Advanced Distributed
Combat Training System project. Contract award decisions on both of these
projects are expected before the end of CAE&#180;s current fiscal year. <br><br>

CAE has recently signed a $14 million contract
with the US Air Force to continue training Predator crews. As the use of such
unmanned and remotely operated vehicles plays a more prominent role in US
military actions, this additional offering of military courseware products is
expected to grow.

 <br></p>

</font><p><b><font face="Arial" size="3" color="#0000ff">Marine Controls</font></b><font FACE="Arial" SIZE="2"> <br>
CAE's Marine Controls business
is a world leader in the supply of automation and controls system for the naval
and commercial market, having been selected for the provision of controls for
more than 130 warships in 18 navies. &nbsp;  The
system monitors and controls the propulsion, electrical steering, ancillary,
auxiliary and damage control systems. &nbsp;  The
business has moved beyond the supply of marine controls into the provision of
naval training services through participation in the 30-year U.K. Royal Navy
Astute Class Submarine Training program awarded in fiscal 2002 and submarine
training in Canada. &nbsp;  The business
also designs and manufactures power plant training simulators. &nbsp;


 </p>

<p ALIGN="JUSTIFY"><font FACE="Arial" SIZE="2" COLOR="#0000ff">Review of operations</font><br>
Recently, CAE has been selected to provide its
integrated platform management system for the US Navy&#180;s DD(X) program. The
three contracts, consisting of the engineering control system, the fire
suppression system, and the damage-decision assessment system, are valued at $30
to $40 million.

 </p>

<p class="MsoBodyTextIndent" style="margin-top:7.0pt;text-align:justify;
text-indent:0in">CAE has been selected to
refurbish the Fort Calhoun simulator of the Omaha (Nebraska) Public Power
District for $9 million. With the attribution of this contract, CAE became the
premier supplier of power-plant simulation technology in the US.

 </p>
<p class="MsoBodyTextIndent" style="margin-top:7.0pt;text-align:justify;
text-indent:0in">CAE has won contracts worth
$8.5 million to supply CAE Damatic&#153; automation systems for installation in
five vessels, with one being the world&#180;s largest cruise ferry, owned by
Norway&#180;s Color Line.

 </p>
<p class="MsoBodyTextIndent" style="margin-top:7.0pt;text-align:justify;
text-indent:0in">CAE will perform the largest
single power-plant simulator upgrade in the US since 1992 on Detroit Edison&#180;s
Fermi 2 simulator in Monroe County, Michigan. This contract is valued at $6.5
million.

 </p>
<p class="MsoBodyTextIndent" style="margin-top:7.0pt;text-align:justify;
text-indent:0in">CAE signed a $6 million
contract to supply shipboard control systems for the fourth in a series of KDX-II
class destroyers destined for the Republic of Korea Navy.

 </p>

<hr>

<p>&nbsp;</p>

<p><font face="Arial" size="2" COLOR="#0000ff">Financial Results</font></p>

</font>

<table border="0" cellpadding="0" cellspacing="0" width="100%">
<tr>
<td width="196" style="border-bottom-style: solid; border-bottom-width: 1"><font face="Arial" color="#0000ff" size="1">(amounts in millions,<br>except operating margins)</font></td>
<font FACE="Arial" SIZE="2">
<td width="24" style="border-bottom-style: solid; border-bottom-width: 1">&nbsp;</td>
<td WIDTH="13%" VALIGN="bottom" HEIGHT="33" style="border-bottom-style: solid; border-bottom-width: 1" align="right"><font face="Arial" size="2" COLOR="#0000ff"><b>Q1-2004</b></font></td>
<td WIDTH="13%" VALIGN="bottom" HEIGHT="33" style="border-bottom-style: solid; border-bottom-width: 1" align="right"><font face="Arial" size="2" COLOR="#0000ff">Q4-2003</font></td>
<td WIDTH="13%" VALIGN="bottom" HEIGHT="33" style="border-bottom-style: solid; border-bottom-width: 1" align="right"><font face="Arial" size="2" COLOR="#0000ff">Q3-2003</font></td>
<td WIDTH="13%" VALIGN="bottom" HEIGHT="33" style="border-bottom-style: solid; border-bottom-width: 1" align="right"><font face="Arial" size="2" COLOR="#0000ff">Q2-2003</font></td>
<td WIDTH="13%" VALIGN="bottom" HEIGHT="33" style="border-bottom-style: solid; border-bottom-width: 1" align="right"><font face="Arial" size="2" COLOR="#0000ff">Q1-2003</font></td>
</tr>
<tr>
<td width="196"><font face="Arial" size="2">Revenue</font></td>
<td WIDTH="4%" VALIGN="MIDDLE" HEIGHT="19" align="right"><b><font face="Arial" size="2">$</font></b></td>
<td WIDTH="13%" VALIGN="MIDDLE" HEIGHT="19" align="right"><b><font face="Arial" size="2">34.2</font></b></td>
<td WIDTH="13%" VALIGN="MIDDLE" HEIGHT="19" align="right"><font face="Arial" size="2">50.7</font></td>
<td WIDTH="13%" VALIGN="MIDDLE" HEIGHT="19" align="right"><font face="Arial" size="2">43.3</font></td>
<td WIDTH="13%" VALIGN="MIDDLE" HEIGHT="19" align="right"><font face="Arial" size="2">39.3</font></td>
<td WIDTH="13%" VALIGN="MIDDLE" HEIGHT="19" align="right"><font face="Arial" size="2">34.3</font></td>
</tr>
<tr>
<td width="196"><font face="Arial" size="2">Operating earnings</font></td>
<td WIDTH="4%" VALIGN="MIDDLE" HEIGHT="18" align="right"><b><font face="Arial" size="2">$</font></b></td>
<td WIDTH="13%" VALIGN="MIDDLE" HEIGHT="19" align="right"><b><font face="Arial" size="2">4.9</font></b></td>
<td WIDTH="13%" VALIGN="MIDDLE" HEIGHT="19" align="right"><font face="Arial" size="2">8.9</font></td>
<td WIDTH="13%" VALIGN="MIDDLE" HEIGHT="19" align="right"><font face="Arial" size="2">9.3</font></td>
<td WIDTH="13%" VALIGN="MIDDLE" HEIGHT="19" align="right"><font face="Arial" size="2">7.2</font></td>
<td WIDTH="13%" VALIGN="MIDDLE" HEIGHT="19" align="right"><font face="Arial" size="2">6.4</font></td>
</tr>
<tr>
<td WIDTH="32%" VALIGN="MIDDLE" HEIGHT="18"><font face="Arial" size="2">Operating margins</font></td>
<td WIDTH="4%" VALIGN="MIDDLE" HEIGHT="18" align="right"><b><font face="Arial" size="2">%</font></b></td>
<td WIDTH="13%" VALIGN="MIDDLE" HEIGHT="19" align="right"><b><font face="Arial" size="2">14.3</font></b></td>
<td WIDTH="13%" VALIGN="MIDDLE" HEIGHT="19" align="right"><font face="Arial" size="2">17.6</font></td>
<td WIDTH="13%" VALIGN="MIDDLE" HEIGHT="19" align="right"><font face="Arial" size="2">21.5</font></td>
<td WIDTH="13%" VALIGN="MIDDLE" HEIGHT="19" align="right"><font face="Arial" size="2">18.3</font></td>
<td WIDTH="13%" VALIGN="MIDDLE" HEIGHT="19" align="right"><font face="Arial" size="2">18.7</font></td>
</tr>
<tr>
<td WIDTH="32%" VALIGN="MIDDLE" HEIGHT="17" style="border-bottom-style: solid; border-bottom-width: 1"><font face="Arial" size="2">Backlog</font></td>
<td WIDTH="4%" VALIGN="MIDDLE" HEIGHT="17" style="border-bottom-style: solid; border-bottom-width: 1" align="right"><b><font face="Arial" size="2">$</font></b></td>
<td WIDTH="13%" VALIGN="MIDDLE" HEIGHT="17" style="border-bottom-style: solid; border-bottom-width: 1" align="right"><b><font face="Arial" size="2">612.5</font></b></td>
<td WIDTH="13%" VALIGN="MIDDLE" HEIGHT="17" style="border-bottom-style: solid; border-bottom-width: 1" align="right"><font face="Arial" size="2">628.5</font></td>
<td WIDTH="13%" VALIGN="MIDDLE" HEIGHT="17" style="border-bottom-style: solid; border-bottom-width: 1" align="right"><font face="Arial" size="2">677.0</font></td>
<td WIDTH="13%" VALIGN="MIDDLE" HEIGHT="17" style="border-bottom-style: solid; border-bottom-width: 1" align="right"><font face="Arial" size="2">685.5</font></td>
<td WIDTH="13%" VALIGN="MIDDLE" HEIGHT="17" style="border-bottom-style: solid; border-bottom-width: 1" align="right"><font face="Arial" size="2">694.8</font></td>
</tr>
</table>

<p ALIGN="JUSTIFY"> Revenue for the quarter at
$34.2 million was comparable to last year. Revenue was impacted by foreign
exchange fluctuations, which masked an increasing revenue contribution from the
United Kingdom&#180;s Astute submarine training and the Royal Malaysian Navy patrol
vessel projects. Excluding the above foreign exchange fluctuations, revenue
would have exceeded the prior year&#180;s amount by 6%.

 <br><br>

 Operating
earnings for the quarter of $4.9 million were $1.5 million below last year. This
decrease is attributable to foreign exchange impact, which more than offset good
project performance on the United Kingdom&#180;s Astute submarine training and the
Royal Malaysian Navy patrol vessel projects. &nbsp;  <br><br>

 Backlog remained above $600
million.

 </p>

<p ALIGN="JUSTIFY"><font FACE="Arial" SIZE="2" COLOR="#0000ff">Outlook</font><br>
 With its significant installed base, the long
term training contract for the U.K. Astute Submarine and the possibilities of
further options to build additional ships on several of its programs, the Marine
business continues to be well positioned for growth in its markets. </p>

<p>&nbsp;</p>

<hr>

<p align="right"><font size="1" face="Arial">CAE&nbsp; First Quarter Report 2004</font><font size="1" face="Arial">&nbsp; /&nbsp; page.11</font></p>

<p>&nbsp;</p>

<table border="0" width="625" cellpadding="0" cellspacing="0">
<tr><td colspan="5" width="598" height="21"><b><font color="#0000ff" face="Arial" size="3">Consolidated Balance Sheets</font></b></td></tr>
</font>
<tr>
<td width="368" valign="bottom" align="left" height="66"><font face="Arial" size="1">(amounts in millions of Canadian dollars)</font></td>
<font FACE="Arial" SIZE="2">
<td width="114" colspan="2" valign="bottom" height="66" align="right"><font face="Arial" size="2"><b>as at<br>June
  30<br>2003<br>(Unaudited)</b></font></td>
<td width="108" colspan="2" valign="bottom" height="66" align="right"><font face="Arial" size="2">as at<br>March 31<br>2003<br>(Audited)</font></td>
</tr>
<tr><td width="590" colspan="5" style="border-top-style: solid; border-top-width: 1" height="17"><font face="Arial" size="2"><b>Assets</b></font></td></tr>
<tr>
<td width="590" colspan="5" height="18"><font face="Arial" size="2">Current Assets</font></td></tr>
<tr>
<td width="368" nowrap height="21"><font face="Arial" size="2">&nbsp;&nbsp;&nbsp;&nbsp; Cash and cash equivalents</font></td>
<td width="38" align="right" height="21"><font face="Arial" size="2"><b>$</b></font></td><td width="76" height="21" align="right"><font face="Arial" size="2"><b>41.1</b></font></td>
<td width="42" align="right" height="21"><font face="Arial" size="2">$</font></td><td width="66" align="right" height="21"><font size="2" face="Arial">17.1</font></td>
</tr>
<tr>
<td width="368" nowrap height="21"><font face="Arial" size="2">&nbsp;&nbsp;&nbsp;&nbsp; Short-term investments</font></td>
<td width="38" height="21"></td><td width="76" height="21" align="right"><font face="Arial" size="2"><b>6.3</b></font></td>
<td width="42" height="21"></td><td width="66" align="right" height="21"><font size="2" face="Arial">2.6</font></td>
</tr>
<tr>
<td width="368" height="21"><font face="Arial" size="2">&nbsp;&nbsp;&nbsp;&nbsp; Accounts receivable</font></td>
<td width="38" height="21"></td><td width="76" height="21" align="right"><font face="Arial" size="2"><b>340.0</b></font></td>
<td width="42" height="21"></td><td width="66" align="right" height="21"><font size="2" face="Arial">373.1</font></td>
</tr>
<tr>
<td width="368" height="21"><font face="Arial" size="2">&nbsp;&nbsp;&nbsp;&nbsp; Inventories</font></td>
<td width="38" height="21"></td><td width="76" height="21" align="right"><font face="Arial" size="2"><b>163.5</b></font></td>
<td width="42" height="21"></td><td width="66" align="right" height="21"><font size="2" face="Arial">136.3</font></td>
</tr>
<tr>
<td width="368" height="21"><font face="Arial" size="2">&nbsp;&nbsp;&nbsp;&nbsp; Prepaid expenses</font></td>
<td width="38" height="21"></td><td width="76" height="21" align="right"><font face="Arial" size="2"><b>15.4</b></font></td>
<td width="42" height="21"></td><td width="66" align="right" height="21"><font size="2" face="Arial">14.0</font></td>
</tr>
<tr>
<td width="368" height="21"><font face="Arial" size="2">&nbsp;&nbsp;&nbsp;&nbsp; Income taxes recoverable</font></td>
<td width="38" height="21"></td><td width="76" height="21" align="right"><font face="Arial" size="2"><b>27.3</b></font></td>
<td width="42" height="21"></td><td width="66" align="right" height="21"><font size="2" face="Arial">25.7</font></td>
</tr>
<tr>
<td width="368" height="21" style="border-bottom-style: solid; border-bottom-width: 1"><font face="Arial" size="2">&nbsp;&nbsp;&nbsp;&nbsp; Future income taxes</font></td>
<td width="38" height="21" style="border-bottom-style: solid; border-bottom-width: 1">&nbsp;</td>
<td width="76" height="21" style="border-bottom-style: solid; border-bottom-width: 1" align="right"><font size="2" face="Arial"><b>0.6</b></font></td>
<td width="42" height="21" style="border-bottom-style: solid; border-bottom-width: 1">&nbsp;</td>
<td width="66" align="right" height="21" style="border-bottom-style: solid; border-bottom-width: 1"><font size="2" face="Arial">3.5</font></td>
</tr>
<tr>
<td width="368" height="21"></td><td width="38" height="21"></td>
<td width="76" height="21" align="right"><font face="Arial" size="2"><b>594.2</b></font></td>
<td width="42" height="21"></td><td width="66" height="21" align="right"><font size="2" face="Arial">572.3</font></td>
</tr>
<tr>
<td width="368" height="21"><font face="Arial" size="2">Restricted cash</font></td>
<td width="38" height="21"></td><td width="76" height="21" align="right"><font face="Arial" size="2"><b>13.2</b></font></td>
<td width="42" height="21"></td><td width="66" height="21" align="right"><font size="2" face="Arial">14.4</font></td>
</tr>
<tr>
<td width="368" height="21"><font FACE="Arial" SIZE="2">Assets of discontinued operations (note 3)</font></td>
<td width="38" height="21"></td><td width="76" height="21" align="right"><font face="Arial" size="2"><b>9.4</b></font></td>
<td width="42" height="21"></td><td width="66" height="21" align="right"><font size="2" face="Arial">50.0</font></td>
</tr>
<tr>
<td width="368" height="21"><font FACE="Arial" SIZE="2">Property, plant and equipment, net</font></td>
<td width="38" height="21"></td><td width="76" height="21" align="right"><font face="Arial" size="2"><b>878.3</b></font></td>
<td width="42" height="21"></td><td width="66" height="21" align="right"><font size="2" face="Arial">930.4</font></td>
</tr>
<tr>
<td width="368" height="21"><font FACE="Arial" SIZE="2">Future income taxes</font></td>
<td width="38" height="21"></td><td width="76" height="21" align="right"><font face="Arial" size="2"><b>85.1</b></font></td>
<td width="42" height="21"></td><td width="66" height="21" align="right"><font size="2" face="Arial">85.7</font></td>
</tr>
<tr>
<td width="368" height="21"><font FACE="Arial" SIZE="2">Intangible assets</font></td>
<td width="38" height="21"></td><td width="76" height="21" align="right"><font face="Arial" size="2"><b>158.9</b></font></td>
<td width="42" height="21"></td><td width="66" height="21" align="right"><font size="2" face="Arial">171.7</font></td>
</tr>
<tr>
<td width="368" height="21"><font FACE="Arial" SIZE="2">Goodwill</font></td>
<td width="38" height="21"></td><td width="76" height="21" align="right"><font face="Arial" size="2"><b>341.4</b></font></td>
<td width="42" height="21"></td><td width="66" height="21" align="right"><font size="2" face="Arial">366.8</font></td>
</tr>
<tr>
<td width="368" height="21" style="border-bottom-style: solid; border-bottom-width: 1"><font FACE="Arial" SIZE="2">Other assets</font></td>
<td width="38" height="21" style="border-bottom-style: solid; border-bottom-width: 1">&nbsp;</td>
<td width="76" height="21" style="border-bottom-style: solid; border-bottom-width: 1" align="right"><font size="2" face="Arial"><b>&nbsp;160.6</b></font></td>
<td width="42" height="21" style="border-bottom-style: solid; border-bottom-width: 1">&nbsp;</td>
<td width="66" height="21" align="right" style="border-bottom-style: solid; border-bottom-width: 1"><font size="2" face="Arial">165.2</font></td>
</tr>
<tr>
<td width="368" height="21" style="border-bottom-style: solid; border-bottom-width: 2">&nbsp;</td>
<td width="38" height="21" align="right" style="border-bottom-style: solid; border-bottom-width: 2"><font face="Arial" size="2"><b>$</b></font></td>
<td width="76" height="21" align="right" style="border-bottom-style: solid; border-bottom-width: 2"><font face="Arial" size="2"><b>&nbsp;2,241.1</b></font></td>
<td width="42" height="21" align="right" style="border-bottom-style: solid; border-bottom-width: 2"><font face="Arial" size="2">$&nbsp;</font></td>
<td width="66" height="21" align="right" style="border-bottom-style: solid; border-bottom-width: 2"><font face="Arial" size="2">2,356.5</font></td>
</tr>

<tr><td height="21" colspan="5"></td></tr>

<tr><td width="590" height="21" colspan="5"><font FACE="Arial" SIZE="2"><b>Liabilities and
    Shareholders'
    Equity</b></font></td></tr>

<tr><td width="590" height="21" colspan="5"><font FACE="Arial" SIZE="2">Current liabilities</font></td></tr>

<tr>
<td width="368" height="21" nowrap><font FACE="Arial" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp; Accounts payable and accrued liabilities</font></td>
<td width="38" height="21" align="right"><font size="2" face="Arial"><b>$</b></font></td>
<td width="76" height="21" align="right"><font face="Arial" size="2"><b>329.9</b></font></td>
<td width="42" height="21" align="right"><font size="2" face="Arial">$</font></td>
<td width="66" height="21" align="right"><font size="2" face="Arial">413.3</font></td>
</tr>
<tr>
<td width="368" height="21" nowrap><font FACE="Arial" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp; Deposits on contracts</font></td>
<td width="38" height="21" align="right"></td><td width="76" height="21" align="right"><font face="Arial" size="2"><b>102.8</b></font></td>
<td width="42" height="21" align="right"></td><td width="66" height="21" align="right"><font size="2" face="Arial">101.2</font></td>
</tr>
<tr>
<td width="368" height="21" nowrap><font FACE="Arial" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp; Long-term debt due within one year</font></td>
<td width="38" height="21" align="right"></td><td width="76" height="21" align="right"><font face="Arial" size="2"><b>10.5</b></font></td>
<td width="42" height="21" align="right"></td><td width="66" height="21" align="right"><font size="2" face="Arial">13.4</font></td>
</tr>
<tr>
<td width="368" height="21" nowrap style="border-bottom-style: solid; border-bottom-width: 1"><font face="Arial" size="2">&nbsp;&nbsp;&nbsp;&nbsp; Future income taxes</font></td>
<td width="38" height="21" align="right" style="border-bottom-style: solid; border-bottom-width: 1"><font size="2" face="Arial">&nbsp;</font></td>
<td width="76" height="21" align="right" style="border-bottom-style: solid; border-bottom-width: 1"><font size="2" face="Arial"><b>&nbsp;42.7</b></font></td>
<td width="42" height="21" align="right" style="border-bottom-style: solid; border-bottom-width: 1"><font size="2" face="Arial">&nbsp;</font></td>
<td width="66" height="21" align="right" style="border-bottom-style: solid; border-bottom-width: 1"><font size="2" face="Arial">42.4</font></td>
</tr>
<tr>
<td width="368" height="21" nowrap></td>
<td width="38" height="21" align="right"></td><td width="76" height="21" align="right"><font face="Arial" size="2"><b>485.9</b></font></td>
<td width="42" height="21" align="right"></td><td width="66" height="21" align="right"><font size="2" face="Arial">570.3</font></td>
</tr>
<tr>
<td width="368" height="21" nowrap><font FACE="Arial" SIZE="2">Liabilities of discontinued operations (note 3)</font></td>
<td width="38" height="21" align="right"></td><td width="76" height="21" align="right"><font face="Arial" size="2"><b>1.2</b></font></td>
<td width="42" height="21" align="right"></td><td width="66" height="21" align="right"><font size="2" face="Arial">17.9</font></td>
</tr>
<tr>
<td width="368" height="21" nowrap><font FACE="Arial" SIZE="2">Long-term debt</font></td>
<td width="38" height="21" align="right"></td><td width="76" height="21" align="right"><font face="Arial" size="2"><b>818.8</b></font></td>
<td width="42" height="21" align="right"></td><td width="66" height="21" align="right"><font size="2" face="Arial">798.0</font></td>
</tr>
<tr>
<td width="368" height="21" nowrap><font FACE="Arial" SIZE="2">Long-term liabilities</font></td>
<td width="38" height="21" align="right"></td><td width="76" height="21" align="right"><font face="Arial" size="2"><b>145.7</b></font></td>
<td width="42" height="21" align="right"></td><td width="66" height="21" align="right"><font size="2" face="Arial">139.6</font></td>
</tr>
<tr>
<td width="368" height="21" nowrap><font FACE="Arial" SIZE="2">Future income taxes</font></td>
<td width="38" height="21" align="right"></td><td width="76" height="21" align="right"><font face="Arial" size="2"><b>76.4</b></font></td>
<td width="42" height="21" align="right"></td><td width="66" height="21" align="right"><font size="2" face="Arial">80.5</font></td>
</tr>
<tr>
<td width="368" height="21" nowrap style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 2"><font size="2" face="Arial">&nbsp;</font></td>
<td width="38" height="21" align="right" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 2"><font size="2" face="Arial">&nbsp;</font></td>
<td width="76" height="21" align="right" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 2"><font size="2" face="Arial"><b>&nbsp;1,528.0</b></font></td>
<td width="42" height="21" align="right" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 2"><font size="2" face="Arial">&nbsp;</font></td>
<td width="66" height="21" align="right" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 2"><font size="2" face="Arial">1,606.3</font></td>
</tr>

<tr><td width="590" height="21" nowrap colspan="5"><font FACE="Arial" SIZE="2"><b>Shareholders'
    Equity</b></font></td></tr>

<tr>
<td width="368" height="21" nowrap><font FACE="Arial" SIZE="2">Capital stock</font></td>
<td width="38" height="21" align="right"></td><td width="76" height="21" align="right"><font face="Arial" size="2"><b>190.6</b></font></td>
<td width="42" height="21" align="right"></td><td width="66" height="21" align="right"><font face="Arial" size="2">190.5</font></td>
</tr>
<tr>
<td width="368" height="21" nowrap><font size="2" face="Arial">Contributed
  surplus</font></td>
<td width="38" height="21" align="right"></td><td width="76" height="21" align="right"><font size="2" face="Arial"><b>0.2</b></font></td>
<td width="42" height="21" align="right"></td><td width="66" height="21" align="right">-</td>
</tr>
<tr>
<td width="368" height="21" nowrap>

<font FACE="Arial" SIZE="2">Retained earnings</font></td>
<td width="38" height="21" align="right"></td><td width="76" height="21" align="right"><font face="Arial" size="2"><b>537.8</b></font></td>
<td width="42" height="21" align="right"></td><td width="66" height="21" align="right"><font size="2" face="Arial">531.2</font></td>
</tr>
<tr>
<td width="368" height="21" nowrap><font size="2" face="Arial">Currency
  translation adjustment</font></td>
<td width="38" height="21" align="right"></td>
<td width="76" height="21" align="right"><font size="2" face="Arial"><b>&nbsp;(15.5)</b></font></td>
<td width="42" height="21" align="right"><font size="2" face="Arial">&nbsp;</font></td>
<td width="66" height="21" align="right"><font size="2" face="Arial">28.5</font></td>
</tr>
<tr>
<td width="368" height="21" nowrap style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1"><font size="2" face="Arial">&nbsp;</font></td>
<td width="38" height="21" align="right" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1"><font size="2" face="Arial">&nbsp;</font></td>
<td width="76" height="21" align="right" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1"><font size="2" face="Arial"><b>713.1</b></font></td>
<td width="42" height="21" align="right" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1"><font size="2" face="Arial">&nbsp;</font></td>
<td width="66" height="21" align="right" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1"><font size="2" face="Arial">750.2</font></td>
</tr>
<tr>
<td width="368" height="21" nowrap style="border-bottom-style: solid; border-bottom-width: 2">&nbsp;</td>
<td width="38" height="21" align="right" style="border-bottom-style: solid; border-bottom-width: 2"><font face="Arial" size="2"><b>$</b></font></td>
<td width="76" height="21" align="right" style="border-bottom-style: solid; border-bottom-width: 2"><font face="Arial" size="2"><b>2,241.1</b></font></td>
<td width="42" height="21" align="right" style="border-bottom-style: solid; border-bottom-width: 2"><font face="Arial" size="2">$</font></td>
<td width="66" height="21" align="right" style="border-bottom-style: solid; border-bottom-width: 2"><font face="Arial" size="2">2,356.5</font></td>
</tr>
</table>

<p>&nbsp;</p>

<hr>

<p>&nbsp;</p>

<table border="0" cellpadding="0" cellspacing="0" width="625">
<tr><td colspan="9" width="667" height="41" valign="top"><b><font FACE="Arial" COLOR="#0000ff">Consolidated Statements of Earnings</font></b></td></tr>

</font>

<tr>
<td width="281" style="border-bottom-style: solid; border-bottom-width: 1" nowrap height="17"><font face="Arial" size="1">three
  months ended June 30 (amounts in millions of Canadian dollars, except per share amounts)</font></td>
<font FACE="Arial" SIZE="2">
<td width="16" align="center" style="border-bottom-style: solid; border-bottom-width: 1" height="17"><font size="2" face="Arial">&nbsp;</font></td>
<td width="50" align="right" valign="top" style="border-bottom-style: solid; border-bottom-width: 1" height="17"></td>
<td width="47" align="center" style="border-bottom-style: solid; border-bottom-width: 1" height="17"></td>
<td width="43" align="right" style="border-bottom-style: solid; border-bottom-width: 1" height="17"></td>
<td width="44" align="center" style="border-bottom-style: solid; border-bottom-width: 1" height="17"><font size="2" face="Arial">&nbsp;</font></td>
<td width="49" align="right" valign="top" style="border-bottom-style: solid; border-bottom-width: 1" height="17"><font size="2" face="Arial"><b><br>
  2003<br>(Unaudited)</b></font></td>
<td width="53" align="right" style="border-bottom-style: solid; border-bottom-width: 1" height="17"><font size="2" face="Arial">&nbsp;</font></td>
<td width="48" align="right" style="border-bottom-style: solid; border-bottom-width: 1" height="17"><font size="2" face="Arial"><br>
  2002<br>(Unaudited)</font></td>
</tr>

<tr><td height="21" colspan="9"><font face="Arial" size="2">Revenue</font></td></tr>
<tr>
<td width="281" height="18"><font FACE="Arial" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp; Civil Simulation and Training</font></td>
<td width="16" align="right" height="18"></td><td width="50" align="right" height="18"></td>
<td width="47" align="right" height="18"></td><td width="43" align="right" height="18"></td>
<td width="44" align="right" height="18"><font face="Arial" size="2"><b>$</b></font></td><td width="49" align="right" height="18"><font face="Arial" size="2"><b>109.1</b></font></td>
<td width="53" align="right" height="18"><font face="Arial" size="2">$</font></td><td width="48" align="right" height="18"><font face="Arial" size="2">135.5</font></td>
</tr>
<tr>
<td width="281" height="21"><font FACE="Arial" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp; Military Simulation and Training</font></td>
<td width="16" align="right" height="21"></td><td width="50" align="right" height="21"></td>
<td width="47" align="right" height="21"></td><td width="43" align="right" height="21"></td>
<td width="44" align="right" height="21"></td><td width="49" align="right" height="21"><font face="Arial" size="2"><b>99.6</b></font></td>
<td width="53" align="right" height="21"></td><td width="48" align="right" height="21"><font face="Arial" size="2">106.0</font></td>
</tr>
<tr>
<td width="281" height="21"><font FACE="Arial" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp; Marine Controls</font></td>
<td width="16" align="right" height="21"></td><td width="50" align="right" height="21"></td>
<td width="47" align="right" height="21"></td><td width="43" align="right" height="21"></td>
<td width="44" align="right" height="21"></td><td width="49" align="right" height="21"><font face="Arial" size="2"><b>34.2</b></font></td>
<td width="53" align="right" height="21"></td><td width="48" align="right" height="21"><font face="Arial" size="2">34.3</font></td>
</tr>
<tr>
<td width="281" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 2" height="22">&nbsp;</td>
<td width="16" align="right" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 2" height="22"></td>
<td width="50" align="right" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 2" height="22"></td>
<td width="47" align="right" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 2" height="22"></td>
<td width="43" align="right" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 2" height="22"></td>
<td width="44" align="right" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 2" height="22"><font size="2" face="Arial"><b>$</b></font></td>
<td width="49" align="right" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 2" height="22"><font size="2" face="Arial"><b>242.9</b></font></td>
<td width="53" align="right" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 2" height="22"><font size="2" face="Arial">$</font></td>
<td width="48" align="right" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 2" height="22"><font size="2" face="Arial">275.8</font></td>
</tr>

<tr><td height="21" colspan="9"><font FACE="Arial" SIZE="2">Operating earnings</font></td></tr>
<tr>
<td width="281" height="18"><font FACE="Arial" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp; Civil Simulation and Training</font></td>
<td width="16" align="right" height="18"></td><td width="50" align="right" height="18"></td>
<td width="47" align="right" height="18"></td><td width="43" align="right" height="18"></td>
<td width="44" align="right" height="18"><font face="Arial" size="2"><b>$</b></font></td><td width="49" align="right" height="18"><font face="Arial" size="2"><b>6.6</b></font></td>
<td width="53" align="right" height="18"><font face="Arial" size="2">$</font></td><td width="48" align="right" height="18"><font face="Arial" size="2">37.7</font></td>
</tr>
<tr>
<td width="281" height="21"><font FACE="Arial" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp; Military Simulation and Training</font></td>
<td width="16" align="right" height="21"></td><td width="50" align="right" height="21"></td>
<td width="47" align="right" height="21"></td><td width="43" align="right" height="21"></td>
<td width="44" align="right" height="21"></td><td width="49" align="right" height="21"><font face="Arial" size="2"><b>12.3</b></font></td>
<td width="53" align="right" height="21"></td><td width="48" align="right" height="21"><font face="Arial" size="2">18.7</font></td>
</tr>
<tr>
<td width="281" style="border-bottom-style: solid; border-bottom-width: 1" height="20"><font FACE="Arial" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp; Marine Controls</font></td>
<td width="16" align="right" style="border-bottom-style: solid; border-bottom-width: 1" height="20"></td>
<td width="50" align="right" style="border-bottom-style: solid; border-bottom-width: 1" height="20"></td>
<td width="47" align="right" style="border-bottom-style: solid; border-bottom-width: 1" height="20"></td>
<td width="43" align="right" style="border-bottom-style: solid; border-bottom-width: 1" height="20"></td>
<td width="44" align="right" style="border-bottom-style: solid; border-bottom-width: 1" height="20">&nbsp;</td>
<td width="49" align="right" style="border-bottom-style: solid; border-bottom-width: 1" height="20"><font face="Arial" size="2"><b>4.9</b></font></td>
<td width="53" align="right" style="border-bottom-style: solid; border-bottom-width: 1" height="20">&nbsp;</td>
<td width="48" align="right" style="border-bottom-style: solid; border-bottom-width: 1" height="20"><font face="Arial" size="2">6.4</font></td>
</tr>

<tr>
<td width="281" height="34"><font face="Arial" size="2">Earnings from continuing operations<br>&nbsp;&nbsp; before interest and
  income taxes</font></td>
<td width="16" align="right" valign="bottom" height="34"></td>
<td width="50" align="right" valign="bottom" height="34"></td>
<td width="47" align="right" valign="bottom" height="34"></td>
<td width="43" align="right" valign="bottom" height="34"></td>
<td width="44" align="right" valign="bottom" height="34"></td>
<td width="49" align="right" valign="bottom" height="34"><font face="Arial" size="2"><b>23.8</b></font></td>
<td width="53" align="right" valign="bottom" height="34"></td>
<td width="48" align="right" valign="bottom" height="34"><font face="Arial" size="2">62.8</font></td>
</tr>
<tr>
<td width="281" style="border-bottom-style: solid; border-bottom-width: 1" height="20"><font face="Arial" size="2">Interest expense, net</font></td>
<td width="16" align="right" style="border-bottom-style: solid; border-bottom-width: 1" height="20">&nbsp;</td>
<td width="50" align="right" style="border-bottom-style: solid; border-bottom-width: 1" height="20"></td>
<td width="47" align="right" style="border-bottom-style: solid; border-bottom-width: 1" height="20"><b>&nbsp;</b></td>
<td width="43" align="right" style="border-bottom-style: solid; border-bottom-width: 1" height="20"></td>
<td width="44" align="right" style="border-bottom-style: solid; border-bottom-width: 1" height="20">&nbsp;</td>
<td width="49" align="right" style="border-bottom-style: solid; border-bottom-width: 1" height="20"><font face="Arial" size="2"><b>7.2</b></font></td>
<td width="53" align="right" style="border-bottom-style: solid; border-bottom-width: 1" height="20">&nbsp;</td>
<td width="48" align="right" style="border-bottom-style: solid; border-bottom-width: 1" height="20"><font face="Arial" size="2">7.8</font></td>
</tr>
<tr>
<td width="281" height="34"><font FACE="Arial" SIZE="2">Earnings from continuing operations<br>&nbsp;&nbsp; before income taxes</font></td>
<td width="16" align="right" valign="bottom" height="34"></td>
<td width="50" align="right" valign="bottom" height="34"></td>
<td width="47" align="right" valign="bottom" height="34"></td>
<td width="43" align="right" valign="bottom" height="34"></td>
<td width="44" align="right" valign="bottom" height="34"></td>
<td width="49" align="right" valign="bottom" height="34"><font face="Arial" size="2"><b>16.6</b></font></td>
<td width="53" align="right" valign="bottom" height="34"></td>
<td width="48" align="right" valign="bottom" height="34"><font face="Arial" size="2">55.0</font></td>
</tr>
<tr>
<td width="281" style="border-bottom-style: solid; border-bottom-width: 1" valign="bottom" height="19"><font face="Arial" size="2">Income taxes</font></td>
<td width="16" align="right" style="border-bottom-style: solid; border-bottom-width: 1" height="19">&nbsp;</td>
<td width="50" align="right" style="border-bottom-style: solid; border-bottom-width: 1" valign="bottom" height="19"></td>
<td width="47" align="right" style="border-bottom-style: solid; border-bottom-width: 1" height="19"><b>&nbsp;</b></td>
<td width="43" align="right" style="border-bottom-style: solid; border-bottom-width: 1" valign="bottom" height="19"></td>
<td width="44" align="right" style="border-bottom-style: solid; border-bottom-width: 1" valign="bottom" height="19">&nbsp;</td>
<td width="49" align="right" style="border-bottom-style: solid; border-bottom-width: 1" valign="bottom" height="19"><font face="Arial" size="2"><b>1.5</b></font></td>
<td width="53" align="right" style="border-bottom-style: solid; border-bottom-width: 1" valign="bottom" height="19">&nbsp;</td>
<td width="48" align="right" style="border-bottom-style: solid; border-bottom-width: 1" valign="bottom" height="19"><font face="Arial" size="2">17.6</font></td>
</tr>
<tr>
<td width="281" height="18"><font FACE="Arial" SIZE="2">Earnings from continuing operations</font></td>
<td width="16" align="right" height="18"></td>
<td width="50" align="right" height="18"></td>
<td width="47" align="right" height="18"></td>
<td width="43" align="right" height="18"></td>
<td width="44" align="right" height="18"><font face="Arial" size="2"><b>$</b></font></td>
<td width="49" align="right" height="18"><font face="Arial" size="2"><b>15.1</b></font></td>
<td width="53" align="right" height="18"><font face="Arial" size="2">$</font></td>
<td width="48" align="right" height="18"><font face="Arial" size="2">37.4</font></td>
</tr>
<tr>
<td width="281" style="border-bottom-style: solid; border-bottom-width: 1" height="20"><font FACE="Arial" SIZE="2">Results of discontinued operations
  (note 3)</font></td>
<td width="16" align="right" style="border-bottom-style: solid; border-bottom-width: 1" height="20"></td>
<td width="50" align="right" style="border-bottom-style: solid; border-bottom-width: 1" height="20"></td>
<td width="47" align="right" style="border-bottom-style: solid; border-bottom-width: 1" height="20"></td>
<td width="43" align="right" style="border-bottom-style: solid; border-bottom-width: 1" height="20"></td>
<td width="44" align="right" style="border-bottom-style: solid; border-bottom-width: 1" height="20">&nbsp;</td>
<td width="49" align="right" style="border-bottom-style: solid; border-bottom-width: 1" height="20"><font face="Arial" size="2"><b>(1.9)</b></font></td>
<td width="53" align="right" style="border-bottom-style: solid; border-bottom-width: 1" height="20">&nbsp;</td>
<td width="48" align="right" style="border-bottom-style: solid; border-bottom-width: 1" height="20">-</td>
</tr>
<tr>
<td width="281" style="border-bottom-style: solid; border-bottom-width: 2" height="18"><font FACE="Arial" SIZE="2">Net earnings</font></td>
<td width="16" align="right" style="border-bottom-style: solid; border-bottom-width: 2" height="18"></td>
<td width="50" align="right" style="border-bottom-style: solid; border-bottom-width: 2" height="18"></td>
<td width="47" align="right" style="border-bottom-style: solid; border-bottom-width: 2" height="18"></td>
<td width="43" align="right" style="border-bottom-style: solid; border-bottom-width: 2" height="18"></td>
<td width="44" align="right" style="border-bottom-style: solid; border-bottom-width: 2" height="18"><font face="Arial" size="2"><b>$</b></font></td>
<td width="49" align="right" style="border-bottom-style: solid; border-bottom-width: 2" height="18"><font size="2" face="Arial"><b>13.2</b></font></td>
<td width="53" align="right" style="border-bottom-style: solid; border-bottom-width: 2" height="18"><font face="Arial" size="2">$</font></td>
<td width="48" align="right" style="border-bottom-style: solid; border-bottom-width: 2" height="18"><font face="Arial" size="2">37.4</font></td>
</tr>
<tr>
<td width="281" style="border-bottom-style: solid; border-bottom-width: 2" height="34"><font FACE="Arial" SIZE="2">Basic and diluted earnings per share<br>&nbsp;&nbsp; from continuing operations</font></td>
<td width="16" align="right" valign="bottom" style="border-bottom-style: solid; border-bottom-width: 2" height="34"></td>
<td width="50" align="right" valign="bottom" style="border-bottom-style: solid; border-bottom-width: 2" height="34"></td>
<td width="47" align="right" valign="bottom" style="border-bottom-style: solid; border-bottom-width: 2" height="34"></td>
<td width="43" align="right" valign="bottom" style="border-bottom-style: solid; border-bottom-width: 2" height="34"></td>
<td width="44" align="right" valign="bottom" style="border-bottom-style: solid; border-bottom-width: 2" height="34"><font face="Arial" size="2"><b>$</b></font></td>
<td width="49" align="right" valign="bottom" style="border-bottom-style: solid; border-bottom-width: 2" height="34"><font face="Arial" size="2"><b>0.07</b></font></td>
<td width="53" align="right" valign="bottom" style="border-bottom-style: solid; border-bottom-width: 2" height="34"><font face="Arial" size="2">$</font></td>
<td width="48" align="right" valign="bottom" style="border-bottom-style: solid; border-bottom-width: 2" height="34"><font face="Arial" size="2">0.17</font></td>
</tr>
<tr>
<td width="281" style="border-bottom-style: solid; border-bottom-width: 2" height="18"><font FACE="Arial" SIZE="2">Basic and diluted net earnings per share</font></td>
<td width="16" valign="bottom" align="right" style="border-bottom-style: solid; border-bottom-width: 2" height="18"></td>
<td width="50" valign="bottom" align="right" style="border-bottom-style: solid; border-bottom-width: 2" height="18"></td>
<td width="47" valign="bottom" align="right" style="border-bottom-style: solid; border-bottom-width: 2" height="18"></td>
<td width="43" valign="bottom" align="right" style="border-bottom-style: solid; border-bottom-width: 2" height="18"></td>
<td width="44" valign="bottom" align="right" style="border-bottom-style: solid; border-bottom-width: 2" height="18"><font face="Arial" size="2"><b>$</b></font></td>
<td width="49" valign="bottom" align="right" style="border-bottom-style: solid; border-bottom-width: 2" height="18"><font face="Arial" size="2"><b>0.06</b></font></td>
<td width="53" valign="bottom" align="right" style="border-bottom-style: solid; border-bottom-width: 2" height="18"><font face="Arial" size="2">$</font></td>
<td width="48" valign="bottom" align="right" style="border-bottom-style: solid; border-bottom-width: 2" height="18"><font face="Arial" size="2">0.17</font></td>
</tr>
<tr>
<td width="281" style="border-bottom-style: solid; border-bottom-width: 2" height="18"><font FACE="Arial" SIZE="2">Weighted
  average number of common shares outstanding</font></td>
<td width="16" style="border-bottom-style: solid; border-bottom-width: 2" align="right" height="18"></td>
<td width="50" style="border-bottom-style: solid; border-bottom-width: 2" align="right" height="18"></td>
<td width="47" style="border-bottom-style: solid; border-bottom-width: 2" align="right" height="18"></td>
<td width="43" style="border-bottom-style: solid; border-bottom-width: 2" align="right" height="18"></td>
<td width="44" style="border-bottom-style: solid; border-bottom-width: 2" align="right" height="18">&nbsp;</td>
<td width="49" style="border-bottom-style: solid; border-bottom-width: 2" align="right" height="18"><font face="Arial" size="2"><b>219.7</b></font></td>
<td width="53" style="border-bottom-style: solid; border-bottom-width: 2" align="right" height="18">&nbsp;</td>
<td width="48" style="border-bottom-style: solid; border-bottom-width: 2" align="right" height="18"><font face="Arial" size="2">219.3</font></td>
</tr>
</table>

<p>&nbsp;</p>

<table border="0" cellpadding="0" cellspacing="0" width="625">
<tr><td colspan="9" width="667" height="41" valign="top"><b><font FACE="Arial" COLOR="#0000ff">Consolidated Statements of Retained Earnings</font></b></td></tr>

</font>

<tr>
<td width="281" style="border-bottom-style: solid; border-bottom-width: 1" nowrap height="17" valign="bottom"><font face="Arial" size="1">three
  months ended June 30 (amounts in millions of Canadian dollars)</font></td>
<font FACE="Arial" SIZE="2">
<td width="16" align="center" style="border-bottom-style: solid; border-bottom-width: 1" height="17"></td>
<td width="50" align="right" valign="top" style="border-bottom-style: solid; border-bottom-width: 1" height="17"></td>
<td width="47" align="center" style="border-bottom-style: solid; border-bottom-width: 1" height="17"><font size="2" face="Arial">&nbsp;</font></td>
<td width="43" align="right" style="border-bottom-style: solid; border-bottom-width: 1" height="17"></td>
<td width="44" align="center" style="border-bottom-style: solid; border-bottom-width: 1" height="17"><font size="2" face="Arial">&nbsp;</font></td>
<td width="49" align="right" valign="top" style="border-bottom-style: solid; border-bottom-width: 1" height="17"><font size="2" face="Arial"><b>2003<br>(Unaudited)</b></font></td>
<td width="53" align="right" style="border-bottom-style: solid; border-bottom-width: 1" height="17"><font size="2" face="Arial">&nbsp;</font></td>
<td width="48" align="right" style="border-bottom-style: solid; border-bottom-width: 1" height="17"><font size="2" face="Arial">2002<br>(Unaudited)</font></td>
</tr>
<tr>
<td width="281" height="21"><font face="Arial" size="2">Retained earnings at beginning of period</font></td>
<td width="16" align="right" height="21"></td>
<td width="50" align="right" height="21"></td>
<td width="47" align="right" height="21"></td>
<td width="43" align="right" height="21"></td>
<td width="45" align="right" height="21"><font size="2" face="Arial"><b>$</b></font></td>
<td width="48" align="right" height="21"><font size="2" face="Arial"><b>531.2</b></font></td>
<td width="53" align="right" height="21"><font size="2" face="Arial">$</font></td>
<td width="48" align="right" height="21"><font size="2" face="Arial">446.8</font></td>
</tr>
<tr>
<td width="281" height="18"><font size="2" FACE="Arial">Adjustment for change in<br>&nbsp;&nbsp; accounting policies (note 1)</font></td>
<td width="16" align="right" height="18" valign="bottom"></td>
<td width="50" align="right" height="18" valign="bottom"></td>
<td width="47" align="right" height="18" valign="bottom"></td>
<td width="43" align="right" height="18" valign="bottom"></td>
<td width="45" align="right" height="18" valign="bottom"></td>
<td width="48" align="right" height="18" valign="bottom"><b>-</b></td>
<td width="53" align="right" height="18" valign="bottom"></td>
<td width="48" align="right" height="18" valign="bottom"><font size="2" FACE="Arial">(6.4)</font></td>
</tr>
<tr>
<td width="281" height="21"><font FACE="Arial" SIZE="2">Net Earnings</font></td>
<td width="16" align="right" height="21"></td>
<td width="50" align="right" height="21"></td>
<td width="47" align="right" height="21"></td>
<td width="43" align="right" height="21"></td>
<td width="45" align="right" height="21"></td>
<td width="48" align="right" height="21"><font size="2" FACE="Arial"><b>13.2</b></font></td>
<td width="53" align="right" height="21"></td>
<td width="48" align="right" height="21"><font size="2" FACE="Arial">37.4</font></td>
</tr>
<tr>
<td width="281" height="21"><font size="2" FACE="Arial">Dividends</font></td>
<td width="16" align="right" height="21"></td>
<td width="50" align="right" height="21"></td>
<td width="47" align="right" height="21"></td>
<td width="43" align="right" height="21"></td>
<td width="45" align="right" height="21"></td>
<td width="48" align="right" height="21"><font face="Arial" size="2"><b>(6.6)</b></font></td>
<td width="53" align="right" height="21"></td>
<td width="48" align="right" height="21"><font size="2" FACE="Arial">(6.6)</font></td>
</tr>
<tr>
<td width="281" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 2" height="22"><font face="Arial" size="2">Retained earnings at end of period</font></td>
<td width="16" align="right" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 2" height="22"></td>
<td width="50" align="right" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 2" height="22"></td>
<td width="47" align="right" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 2" height="22"></td>
<td width="43" align="right" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 2" height="22"></td>
<td width="45" align="right" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 2" height="22"><font size="2" face="Arial"><b>$</b></font></td>
<td width="48" align="right" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 2" height="22"><font size="2" face="Arial"><b>537.8</b></font></td>
<td width="53" align="right" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 2" height="22"><font size="2" face="Arial">$</font></td>
<td width="48" align="right" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 2" height="22"><font size="2" face="Arial">471.2</font></td>
</tr>
</table>

<p>&nbsp;</p>

<hr>

<p align="right"><font size="1" face="Arial">CAE&nbsp; First Quarter Report 2004</font></font><font size="1" face="Arial">
/&nbsp; page.13</font></p>

<font FACE="Arial" SIZE="2">

<p>&nbsp;</p>

<table border="0" cellpadding="0" cellspacing="0" width="625" height="832">
<tr><td colspan="9" width="667" height="41" valign="top"><b><font FACE="Arial" COLOR="#0000ff">Consolidated Statements of Cash Flow</font></b></td></tr>

</font>

<tr>
<td width="281" style="border-bottom-style: solid; border-bottom-width: 1" nowrap height="49" valign="bottom"><font face="Arial" size="1">three
  months ended June 30 (amounts in millions of Canadian dollars, except per share amounts)</font></td>

<font FACE="Arial" SIZE="2">

<td width="16" align="center" style="border-bottom-style: solid; border-bottom-width: 1" height="49"></td>
<td width="50" align="right" valign="top" style="border-bottom-style: solid; border-bottom-width: 1" height="49"></td>
<td width="47" align="center" style="border-bottom-style: solid; border-bottom-width: 1" height="49"></td>
<td width="43" align="right" style="border-bottom-style: solid; border-bottom-width: 1" height="49"></td>
<td width="44" align="center" style="border-bottom-style: solid; border-bottom-width: 1" height="49"><font size="2" face="Arial">&nbsp;</font></td>
<td width="49" align="right" valign="top" style="border-bottom-style: solid; border-bottom-width: 1" height="49"><font size="2" face="Arial"><b><br>
  2003<br>(Unaudited)</b></font></td>
<td width="53" align="right" style="border-bottom-style: solid; border-bottom-width: 1" height="49"><font size="2" face="Arial"><b>&nbsp;</b></font></td>
<td width="48" align="right" style="border-bottom-style: solid; border-bottom-width: 1" height="49"><font size="2" face="Arial"><br>
  2002<br>(Unaudited)</font></td>
</tr>

<tr><td height="21" colspan="9"><font face="Arial" size="2"><b>Operating activities</b></font></td></tr>
<tr>
<td width="299" height="20"><font face="Arial" size="2">&nbsp;&nbsp; Earnings from continuing operations</font></td>
<td width="7" align="right" height="20"></td>
<td width="50" align="right" height="20"></td>
<td width="47" align="right" height="20"></td>
<td width="45" align="right" height="20"></td>
<td width="42" align="right" height="20"><font face="Arial" size="2"><b>$</b></font></td>
<td width="49" align="right" height="20"><font face="Arial" size="2"><b>15.1</b></font></td>
<td width="53" align="right" height="20"><font face="Arial" size="2">$</font></td>
<td width="48" align="right" height="20"><font face="Arial" size="2">37.4</font></td>
</tr>

<tr>
<td height="34" colspan="9"><font face="Arial" size="2">&nbsp;&nbsp; Adjustments to reconcile earnings to<br>&nbsp;&nbsp;&nbsp;&nbsp; cash flow from operating activities:</font></td>
</tr>
<tr><td width="299" height="21"><font face="Arial" size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Amortization</font></td>
<td width="7" align="right" height="21"></td><td width="50" align="right" height="21"></td>
<td width="47" align="right" height="21"></td><td width="45" align="right" height="21"></td>
<td width="42" align="right" height="21"></td><td width="49" align="right" height="21"><font face="Arial" size="2"><b>18.2</b></font></td>
<td width="53" align="right" height="21"></td><td width="48" align="right" height="21"><font face="Arial" size="2">18.3</font></td>
</tr>
<tr>
<td width="299" height="21"><font face="Arial" size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Future income taxes</font></td>
<td width="7" align="right" height="21"></td><td width="50" align="right" height="21"></td>
<td width="47" align="right" height="21"></td><td width="45" align="right" height="21"></td>
<td width="42" align="right" height="21"></td><td width="49" align="right" height="21"><font face="Arial" size="2"><b>(3.7)</b></font></td>
<td width="53" align="right" height="21"></td><td width="48" align="right" height="21"><font face="Arial" size="2">4.6</font></td>
</tr>
<tr>
<td width="299" height="21"><font face="Arial" size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Investment tax credit</font></td>
<td width="7" align="right" height="21"></td><td width="50" align="right" height="21"></td>
<td width="47" align="right" height="21"></td><td width="45" align="right" height="21"></td>
<td width="42" align="right" height="21"></td><td width="49" align="right" height="21"><font face="Arial" size="2"><b>(4.2)</b></font></td>
<td width="53" align="right" height="21"></td><td width="48" align="right" height="21"><font face="Arial" size="2">(3.9)</font></td>
</tr>
<tr>
<td width="299" height="21"><font face="Arial" size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Other</font></td>
<td width="7" align="right" height="21"></td><td width="50" align="right" height="21"></td>
<td width="47" align="right" height="21"></td><td width="45" align="right" height="21"></td>
<td width="42" align="right" height="21"></td><td width="49" align="right" height="21"><font face="Arial" size="2"><b>(9.9)</b></font></td>
<td width="53" align="right" height="21"></td><td width="48" align="right" height="21"><font face="Arial" size="2">(8.1)</font></td>
</tr>
<tr>
<td width="299" height="34"><font face="Arial" size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Increase
  in non-cash<br>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; working capital (note
  5)</font></td>
<td width="7" align="right" height="34"></td><td width="50" align="right" height="34" valign="bottom"></td>
<td width="47" align="right" height="34" valign="bottom"></td><td width="45" align="right" height="34" valign="bottom"></td>
<td width="42" align="right" height="34" valign="bottom"></td><td width="49" align="right" height="34" valign="bottom"><font face="Arial" size="2"><b>(73.9)</b></font></td>
<td width="53" align="right" height="34" valign="bottom"></td><td width="48" align="right" height="34" valign="bottom"><font face="Arial" size="2">(80.2)</font></td>
</tr>
<tr>
<td width="299" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 2" height="35"><font face="Arial" size="2"><b>Net cash provided by continuing<br>&nbsp;&nbsp; operating activities</b></font></td>
<td width="7" align="right" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 2" height="35" valign="bottom">&nbsp;</td>
<td width="50" align="right" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 2" height="35" valign="bottom"></td>
<td width="47" align="right" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 2" height="35" valign="bottom"></td>
<td width="45" align="right" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 2" height="35" valign="bottom"></td>
<td width="42" align="right" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 2" height="35" valign="bottom">&nbsp;</td>
<td width="49" align="right" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 2" height="35" valign="bottom"><font face="Arial" size="2"><b>(58.4)</b></font></td>
<td width="53" align="right" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 2" height="35" valign="bottom">&nbsp;</td>
<td width="48" align="right" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 2" height="35" valign="bottom"><font face="Arial" size="2">(31.9)</font></td>
</tr>

<tr><td height="8" colspan="9"></td></tr>

<tr><td height="18" colspan="9"><font face="Arial" size="2"><b>Investing activities</b></font></td></tr>
<tr>
<td width="299" height="20"><font face="Arial" size="2">&nbsp;&nbsp; Proceeds from
  disposal of businesses (note 3)</font></td>
<td width="7" align="right" height="20"></td><td width="50" align="right" height="20"></td>
<td width="47" align="right" height="20"></td><td width="45" align="right" height="20"></td>
<td width="42" align="right" height="20"></td><td width="49" align="right" height="20"><font face="Arial" size="2"><b>19.8</b></font></td>
<td width="53" align="right" height="20"></td><td width="48" align="right" height="20">-</td>
</tr>
<tr>
<td width="299" height="21"><font face="Arial" size="2">&nbsp;&nbsp; Short-term investments,
  net</font></td>
<td width="7" align="right" height="21"></td><td width="50" align="right" height="21"></td>
<td width="47" align="right" height="21"></td><td width="45" align="right" height="21"></td>
<td width="42" align="right" height="21"></td><td width="49" align="right" height="21"><font face="Arial" size="2"><b>(3.7)</b></font></td>
<td width="53" align="right" height="21"></td><td width="48" align="right" height="21"><font face="Arial" size="2">7.0</font></td>
</tr>
<tr>
<td width="299" height="21"><font face="Arial" size="2">&nbsp;&nbsp; Capital expenditures</font></td>
<td width="7" align="right" height="21"></td><td width="50" align="right" height="21"></td>
<td width="47" align="right" height="21"></td><td width="45" align="right" height="21"></td>
<td width="42" align="right" height="21"></td><td width="49" align="right" height="21"><font face="Arial" size="2"><b>(25.2)</b></font></td>
<td width="53" align="right" height="21"></td><td width="48" align="right" height="21"><font face="Arial" size="2">(73.1)</font></td>
</tr>
<tr><td width="299" height="21"><font face="Arial" size="2">&nbsp;&nbsp; Proceeds from sale and leaseback of assets</font></td>
<td width="7" align="right" height="21"></td><td width="50" align="right" height="21"></td>
<td width="47" align="right" height="21"></td><td width="45" align="right" height="21"></td>
<td width="42" align="right" height="21"></td><td width="49" align="right" height="21"><font face="Arial" size="2"><b>28.5</b></font></td>
<td width="53" align="right" height="21"></td><td width="48" align="right" height="21">-</td>
</tr>
<tr><td width="299" height="21"><font face="Arial" size="2">&nbsp;&nbsp;
    Deferred development costs</font></td>
<td width="7" align="right" height="21"></td><td width="50" align="right" height="21"></td>
<td width="47" align="right" height="21"></td><td width="45" align="right" height="21"></td>
<td width="42" align="right" height="21"></td><td width="49" align="right" height="21"><font face="Arial" size="2"><b>(2.8)</b></font></td>
<td width="53" align="right" height="21"></td><td width="48" align="right" height="21"><font face="Arial" size="2">(4.7)</font></td>
</tr>
<tr><td width="299" height="21"><font face="Arial" size="2">&nbsp;&nbsp; Deferred pre-operating costs</font></td>
<td width="7" align="right" height="21"></td><td width="50" align="right" height="21"></td>
<td width="47" align="right" height="21"></td><td width="45" align="right" height="21"></td>
<td width="42" align="right" height="21"></td><td width="49" align="right" height="21"><font face="Arial" size="2"><b>(0.7)</b></font></td>
<td width="53" align="right" height="21"></td><td width="48" align="right" height="21"><font face="Arial" size="2">(2.1)</font></td>
</tr>
<tr><td width="299" style="border-bottom-style: solid; border-bottom-width: 1" height="20"><font face="Arial" size="2">&nbsp;&nbsp; Other assets</font></td>
<td width="7" align="right" style="border-bottom-style: solid; border-bottom-width: 1" height="20">&nbsp;</td>
<td width="50" align="right" style="border-bottom-style: solid; border-bottom-width: 1" height="20"></td>
<td width="47" align="right" style="border-bottom-style: solid; border-bottom-width: 1" height="20"></td>
<td width="45" align="right" style="border-bottom-style: solid; border-bottom-width: 1" height="20"></td>
<td width="42" align="right" style="border-bottom-style: solid; border-bottom-width: 1" height="20">&nbsp;</td>
<td width="49" align="right" style="border-bottom-style: solid; border-bottom-width: 1" height="20"><font face="Arial" size="2"><b>(2.0)</b></font></td>
<td width="53" align="right" style="border-bottom-style: solid; border-bottom-width: 1" height="20">&nbsp;</td>
<td width="48" align="right" style="border-bottom-style: solid; border-bottom-width: 1" height="20"><font face="Arial" size="2">(1.6)</font></td>
</tr>
<tr>
<td width="299" height="34" style="border-bottom-style: solid; border-bottom-width: 1"><font face="Arial" size="2"><b>Net cash provided by (used in)<br>&nbsp;&nbsp;    continuing investing activities</b></font></td>
<td width="7" align="right" valign="bottom" height="34" style="border-bottom-style: solid; border-bottom-width: 1">&nbsp;</td>
<td width="50" align="right" valign="bottom" height="34" style="border-bottom-style: solid; border-bottom-width: 1"></td>
<td width="47" align="right" valign="bottom" height="34" style="border-bottom-style: solid; border-bottom-width: 1"></td>
<td width="45" align="right" valign="bottom" height="34" style="border-bottom-style: solid; border-bottom-width: 1"></td>
<td width="42" align="right" valign="bottom" height="34" style="border-bottom-style: solid; border-bottom-width: 1">&nbsp;</td>
<td width="49" align="right" valign="bottom" height="34" style="border-bottom-style: solid; border-bottom-width: 1"><font face="Arial" size="2"><b>13.9</b></font></td>
<td width="53" align="right" valign="bottom" height="34" style="border-bottom-style: solid; border-bottom-width: 1">&nbsp;</td>
<td width="48" align="right" valign="bottom" height="34" style="border-bottom-style: solid; border-bottom-width: 1"><font face="Arial" size="2">(74.5)</font></td>
</tr>

<tr><td height="20" colspan="9"><font face="Arial" size="2"><b>Financing activities</b></font></td></tr>
<tr>
<td width="299" height="20"><font face="Arial" size="2">&nbsp;&nbsp; Proceeds
  from long term debt</font></td>
<td width="7" align="right" height="20"></td><td width="50" align="right" height="20"></td>
<td width="47" align="right" height="20"></td><td width="45" align="right" height="20"></td>
<td width="42" align="right" height="20"></td><td width="49" align="right" height="20"><font face="Arial" size="2"><b>138.9</b></font></td>
<td width="53" align="right" height="20"></td><td width="48" align="right" height="20"><font face="Arial" size="2">79.0</font></td>
</tr>
<tr>
<td width="299" height="20"><font face="Arial" size="2">&nbsp;&nbsp; Repayments of long term debt</font></td>
<td width="7" align="right" height="20"></td><td width="50" align="right" height="20"></td>
<td width="47" align="right" height="20"></td><td width="45" align="right" height="20"></td>
<td width="42" align="right" height="20"></td><td width="49" align="right" height="20"><font face="Arial" size="2"><b>(65.8)</b></font></td>
<td width="53" align="right" height="20"></td><td width="48" align="right" height="20"><font face="Arial" size="2">(5.9)</font></td>
</tr>
<tr>
<td width="299" height="20"><font face="Arial" size="2">&nbsp;&nbsp; Dividends paid</font></td>
<td width="7" align="right" height="20"></td><td width="50" align="right" height="20"></td>
<td width="47" align="right" height="20"></td><td width="45" align="right" height="20"></td>
<td width="42" align="right" height="20"></td><td width="49" align="right" height="20"><font face="Arial" size="2"><b>(6.5)</b></font></td>
<td width="53" align="right" height="20"></td><td width="48" align="right" height="20"><font face="Arial" size="2">(6.5)</font></td>
</tr>
<tr>
<td width="299" height="21"><font face="Arial" size="2">&nbsp;&nbsp; Capital stock issuance</font></td>
<td width="7" align="right" height="21"></td><td width="50" align="right" height="21"></td>
<td width="47" align="right" height="21"></td><td width="45" align="right" height="21"></td>
<td width="42" align="right" height="21"></td><td width="49" align="right" height="21"><b>-</b></td>
<td width="53" align="right" height="21"></td><td width="48" align="right" height="21"><font face="Arial" size="2">2.0</font></td>
</tr>
<tr>
<td width="299" style="border-bottom-style: solid; border-bottom-width: 1" height="20"><font face="Arial" size="2">&nbsp;&nbsp; Other</font></td>
<td width="7" align="right" style="border-bottom-style: solid; border-bottom-width: 1" height="20">&nbsp;</td>
<td width="50" align="right" style="border-bottom-style: solid; border-bottom-width: 1" height="20"></td>
<td width="47" align="right" style="border-bottom-style: solid; border-bottom-width: 1" height="20"></td>
<td width="45" align="right" style="border-bottom-style: solid; border-bottom-width: 1" height="20"></td>
<td width="42" align="right" style="border-bottom-style: solid; border-bottom-width: 1" height="20">&nbsp;</td>
<td width="49" align="right" style="border-bottom-style: solid; border-bottom-width: 1" height="20"><font face="Arial" size="2"><b>(0.1)</b></font></td>
<td width="53" align="right" style="border-bottom-style: solid; border-bottom-width: 1" height="20">&nbsp;</td>
<td width="48" align="right" style="border-bottom-style: solid; border-bottom-width: 1" height="20"><font face="Arial" size="2">(0.9)</font></td>
</tr>
<tr>
<td width="299" height="34"><font face="Arial" size="2"><b>Net cash provided by
  continuing<br>&nbsp;&nbsp; financing activities</b></font></td>
<td width="7" align="right" valign="bottom" height="34"></td><td width="50" align="right" valign="bottom" height="34"></td>
<td width="47" align="right" valign="bottom" height="34"></td><td width="45" align="right" valign="bottom" height="34"></td>
<td width="42" align="right" valign="bottom" height="34"></td><td width="49" align="right" valign="bottom" height="34"><font face="Arial" size="2"><b>66.5</b></font></td>
<td width="53" align="right" valign="bottom" height="34"></td><td width="48" align="right" valign="bottom" height="34"><font face="Arial" size="2">67.7</font></td>
</tr>
<tr>
<td width="299" valign="bottom" height="34"><font face="Arial" size="2"><b>Net cash
  provided by discontinued<br>&nbsp;&nbsp;activities&nbsp;</b></font></td>
<td width="7" align="right" height="34"></td><td width="50" align="right" valign="bottom" height="34"></td>
<td width="47" align="right" height="34"></td><td width="45" align="right" valign="bottom" height="34"></td>
<td width="42" align="right" valign="bottom" height="34"></td><td width="49" align="right" valign="bottom" height="34"><font face="Arial" size="2"><b>3.3</b></font></td>
<td width="53" align="right" valign="bottom" height="34"></td><td width="48" align="right" valign="bottom" height="34"><font face="Arial" size="2">0.3</font></td>
</tr>
<tr>
<td width="299" height="33" style="border-bottom-style: solid; border-bottom-width: 1"><font face="Arial" size="2"><b>Effect of foreign exchange rate changes<br>&nbsp;&nbsp;
on cash and cash equivalents</b></font></td>
<td width="7" align="right" height="33" style="border-bottom-style: solid; border-bottom-width: 1">&nbsp;</td>
<td width="50" align="right" height="33" style="border-bottom-style: solid; border-bottom-width: 1" valign="bottom"></td>
<td width="47" align="right" height="33" style="border-bottom-style: solid; border-bottom-width: 1" valign="bottom"></td>
<td width="45" align="right" height="33" style="border-bottom-style: solid; border-bottom-width: 1" valign="bottom"></td>
<td width="42" align="right" height="33" style="border-bottom-style: solid; border-bottom-width: 1" valign="bottom">&nbsp;</td>
<td width="49" align="right" height="33" style="border-bottom-style: solid; border-bottom-width: 1" valign="bottom"><font face="Arial" size="2"><b>(1.3)</b></font></td>
<td width="53" align="right" height="33" style="border-bottom-style: solid; border-bottom-width: 1" valign="bottom">&nbsp;</td>
<td width="48" align="right" height="33" style="border-bottom-style: solid; border-bottom-width: 1" valign="bottom"><font face="Arial" size="2">2.5</font></td>
</tr>
<tr>
<td width="299" height="34"><font face="Arial" size="2"><b>Net increase (decrease) in cash<br>&nbsp;&nbsp; and cash equivalents</b></font></td>
<td width="7" align="right" height="34"></td><td width="50" align="right" height="34" valign="bottom"></td>
<td width="47" align="right" height="34" valign="bottom"></td><td width="45" align="right" height="34" valign="bottom"></td>
<td width="42" align="right" height="34" valign="bottom"></td><td width="49" align="right" height="34" valign="bottom"><font face="Arial" size="2"><b>24.0</b></font></td>
<td width="53" align="right" height="34" valign="bottom"></td><td width="48" align="right" height="34" valign="bottom"><font face="Arial" size="2">(35.9)</font></td>
</tr>
<tr>
<td width="299" style="border-bottom-style: solid; border-bottom-width: 1" height="33"><font face="Arial" size="2"><b>Cash and cash equivalents<br>&nbsp;&nbsp; at beginning of period</b></font></td>
<td width="7" align="right" style="border-bottom-style: solid; border-bottom-width: 1" height="33">&nbsp;</td>
<td width="50" align="right" style="border-bottom-style: solid; border-bottom-width: 1" height="33" valign="bottom"></td>
<td width="47" align="right" style="border-bottom-style: solid; border-bottom-width: 1" height="33" valign="bottom"></td>
<td width="45" align="right" style="border-bottom-style: solid; border-bottom-width: 1" height="33" valign="bottom"></td>
<td width="42" align="right" style="border-bottom-style: solid; border-bottom-width: 1" height="33" valign="bottom">&nbsp;</td>
<td width="49" align="right" style="border-bottom-style: solid; border-bottom-width: 1" height="33" valign="bottom"><font face="Arial" size="2"><b>17.1</b></font></td>
<td width="53" align="right" style="border-bottom-style: solid; border-bottom-width: 1" height="33" valign="bottom">&nbsp;</td>
<td width="48" align="right" style="border-bottom-style: solid; border-bottom-width: 1" height="33" valign="bottom"><font face="Arial" size="2">88.8</font></td>
</tr>
<tr>
<td width="299" style="border-bottom-style: solid; border-bottom-width: 2" height="20"><font face="Arial" size="2"><b>Cash and cash equivalents at end period</b></font></td>
<td width="7" style="border-bottom-style: solid; border-bottom-width: 2" align="right" height="20"></td>
<td width="50" style="border-bottom-style: solid; border-bottom-width: 2" align="right" height="20"></td>
<td width="47" style="border-bottom-style: solid; border-bottom-width: 2" align="right" height="20"></td>
<td width="45" style="border-bottom-style: solid; border-bottom-width: 2" align="right" height="20"></td>
<td width="42" style="border-bottom-style: solid; border-bottom-width: 2" align="right" height="20"><font face="Arial" size="2"><b>$</b></font></td>
<td width="49" style="border-bottom-style: solid; border-bottom-width: 2" align="right" height="20"><font face="Arial" size="2"><b>41.1</b></font></td>
<td width="53" style="border-bottom-style: solid; border-bottom-width: 2" align="right" height="20"><font face="Arial" size="2">$</font></td>
<td width="48" style="border-bottom-style: solid; border-bottom-width: 2" align="right" height="20"><font face="Arial" size="2">52.9</font></td>
</tr>
</table>

<p>Supplementary Cash Flow information (note 5)</p>

<hr>


<p><b><font FACE="Arial" COLOR="#0000ff" size="3">Notes to the Consolidated Financial Statements</font></b></p>

<p>&nbsp;</p>

</font>
<p><b><font face="Arial" color="#0000ff" size="2">Note 1: Significant Accounting
Policies</font></b><font FACE="Arial" SIZE="2"> <br>
These interim consolidated
statements have been prepared in accordance with Canadian generally accepted
accounting principles on a consistent basis with the Company&#180;s annual
consolidated financial statements for the year ended March 31, 2003, except as
noted below. &nbsp;  For a full description
of accounting policies, refer to the CAE Annual Report for the year ended March
31, 2003. &nbsp;  Certain comparative
figures have been reclassified to conform to the current presentation. &nbsp;
 These financial statements do not include all of the disclosures required
by generally accepted accounting principles applicable to annual financial
statements.

 <br><br>

 Effective
April 1, 2002, CAE retroactively adopted the amendments to CICA Handbook Section
1650 <i style="mso-bidi-font-style:normal">Foreign Currency Translation</i>. &nbsp;
Accordingly, the Company no longer defers and amortizes the exchange
gains or losses arising on translation of long-term foreign currency denominated
items. &nbsp;  Exchange gains or losses
arising on translation of such items are now included in earnings as incurred. &nbsp;
 Consequently, prior years&#180; financial statements were restated through a
charge to fiscal 2003 opening retained earnings of $6.4 million, net of $2.8
million of taxes. <br><br>

 Effective April 1, 2003, CAE
changed its accounting method pursuant to CICA Section 3870 <i>Stock-based
Compensation and Other Stock-based Payments</i> and began expensing
prospectively its stock-based compensation. During the three months ended June
30, 2003, compensation cost for CAE&#180;s stock options was recognized in net
earnings with a corresponding credit to contributed surplus using the fair value
based method of accounting for awards that were granted in May 2003. For the
three months ended June 30, 2002, no stock based employee compensation expense
for stock options was reflected in net earnings as all stock options granted had
an exercise price equal to the fair market value of the underlying common stock.
In addition, for the same period last year, CAE adopted the pro forma disclosure
based on the recommendations of CICA Section 3870 as if the fair value based
accounting method had been used to account for stock based compensation cost.

 </p>

<p ALIGN="JUSTIFY"> The
Black-Scholes valuation model was used to determine the fair value of options
granted in May 2003. The following outlines the assumptions used in the
calculation: &nbsp;&nbsp;  </p>

</font>
<table border="0" cellspacing="0" cellpadding="0" style="border-collapse:collapse;
 mso-table-layout-alt:fixed;mso-padding-alt:0in 1.5pt 0in 1.5pt">
  <tr style="height:15.6pt">
    <td width="470" valign="bottom" style="width:352.5pt;border:none;border-bottom:
  solid windowtext .75pt;background:white;mso-shading:windowtext;mso-pattern:
  solid white;padding:0in 1.5pt 0in 1.5pt;height:15.6pt">
      <p class="MsoNormal" align="left"><font face="Arial" size="1">three months
      ended June 30</font></td>
    <td width="156" colspan="3" valign="bottom" style="width:117.0pt;border:none;
  border-bottom:solid windowtext .75pt;background:white;mso-shading:windowtext;
  mso-pattern:solid white;padding:0in 1.5pt 0in 1.5pt;height:15.6pt">
      <p class="MsoNormal" align="center" style="text-align:center"> <font face="Arial" size="1"><b style="mso-bidi-font-weight: normal; mso-bidi-font-family: Times New Roman">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
      </b><b style="mso-bidi-font-weight:normal">2003

      </b></font> </p>
    </td>
  </tr>
  <tr style="height:15.6pt">
    <td width="470" valign="bottom" style="width:352.5pt;background:white;mso-shading:
  windowtext;mso-pattern:solid white;padding:0in 1.5pt 0in 1.5pt;height:15.6pt">
      <p class="MsoNormal" style="margin-left:13.5pt"> <font face="Arial" size="1">Dividend
      yield

      </font> </p>
    </td>
    <td width="18" valign="bottom" style="width:13.5pt;background:white;mso-shading:
  windowtext;mso-pattern:solid white;padding:0in 1.5pt 0in 1.5pt;height:15.6pt">
      <p class="MsoNormal" align="right" style="text-align:right"><font face="Arial" size="1">&nbsp;

       </font></p>
    </td>
    <td width="114" valign="bottom" style="width:85.5pt;background:white;mso-shading:
  windowtext;mso-pattern:solid white;padding:0in 1.5pt 0in 1.5pt;height:15.6pt">
      <p class="MsoNormal" align="right" style="margin-right:25.5pt;text-align:right"> <font face="Arial" size="1">1.29%

      </font> </p>
    </td>
  </tr>
  <tr style="height:15.6pt">
    <td width="470" valign="bottom" style="width:352.5pt;background:white;mso-shading:
  windowtext;mso-pattern:solid white;padding:0in 1.5pt 0in 1.5pt;height:15.6pt">
      <p class="MsoNormal" style="margin-left:13.5pt"> <font face="Arial" size="1">Expected
      volatility

      </font> </p>
    </td>
    <td width="18" valign="bottom" style="width:13.5pt;background:white;mso-shading:
  windowtext;mso-pattern:solid white;padding:0in 1.5pt 0in 1.5pt;height:15.6pt">
      <p class="MsoNormal" align="right" style="text-align:right"><font face="Arial" size="1">&nbsp;

       </font></p>
    </td>
    <td width="114" valign="bottom" style="width:85.5pt;background:white;mso-shading:
  windowtext;mso-pattern:solid white;padding:0in 1.5pt 0in 1.5pt;height:15.6pt">
      <p class="MsoNormal" align="right" style="margin-right:25.5pt;text-align:right"> <font face="Arial" size="1">41.5%

      </font> </p>
    </td>
  </tr>
  <tr style="height:15.6pt">
    <td width="470" valign="bottom" style="width:352.5pt;background:white;mso-shading:
  windowtext;mso-pattern:solid white;padding:0in 1.5pt 0in 1.5pt;height:15.6pt">
      <p class="MsoNormal" style="margin-left:13.5pt"> <font face="Arial" size="1">Risk-free
      interest rate

      </font> </p>
    </td>
    <td width="18" valign="bottom" style="width:13.5pt;background:white;mso-shading:
  windowtext;mso-pattern:solid white;padding:0in 1.5pt 0in 1.5pt;height:15.6pt">
      <p class="MsoNormal" align="right" style="text-align:right"><font face="Arial" size="1">&nbsp;

       </font></p>
    </td>
    <td width="114" valign="bottom" style="width:85.5pt;background:white;mso-shading:
  windowtext;mso-pattern:solid white;padding:0in 1.5pt 0in 1.5pt;height:15.6pt">
      <p class="MsoNormal" align="right" style="margin-right:25.5pt;text-align:right"> <font face="Arial" size="1">5.75%

      </font> </p>
    </td>
  </tr>
  <tr style="height:15.6pt">
    <td width="470" valign="bottom" style="width:352.5pt;background:white;mso-shading:
  windowtext;mso-pattern:solid white;padding:0in 1.5pt 0in 1.5pt;height:15.6pt">
      <p class="MsoNormal" style="margin-left:13.5pt"> <font face="Arial" size="1">Expected
      life (years)

      </font> </p>
    </td>
    <td width="18" valign="bottom" style="width:13.5pt;background:white;mso-shading:
  windowtext;mso-pattern:solid white;padding:0in 1.5pt 0in 1.5pt;height:15.6pt">
      <p class="MsoNormal" align="right" style="text-align:right"><font face="Arial" size="1">&nbsp;

       </font></p>
    </td>
    <td width="114" valign="bottom" style="width:85.5pt;background:white;mso-shading:
  windowtext;mso-pattern:solid white;padding:0in 1.5pt 0in 1.5pt;height:15.6pt">
      <p class="MsoNormal" align="right" style="margin-right:25.5pt;text-align:right">  <font face="Arial" size="1">&nbsp;&nbsp;&nbsp;&nbsp;
      </font> <font face="Arial" size="1">6

      </font> </p>
    </td>
  </tr>
  <tr style="height:15.6pt">
    <td width="470" valign="bottom" style="width:352.5pt;background:white;mso-shading:
  windowtext;mso-pattern:solid white;padding:0in 1.5pt 0in 1.5pt;height:15.6pt">
      <p class="MsoNormal" style="margin-left:13.5pt"> <font face="Arial" size="1">Number
      of options granted

      </font> </p>
    </td>
    <td width="18" valign="bottom" style="width:13.5pt;background:white;mso-shading:
  windowtext;mso-pattern:solid white;padding:0in 1.5pt 0in 1.5pt;height:15.6pt">
      <p class="MsoNormal" align="right" style="text-align:right"><font face="Arial" size="1">&nbsp;

       </font></p>
    </td>
    <td width="114" valign="bottom" style="width:85.5pt;background:white;mso-shading:
  windowtext;mso-pattern:solid white;padding:0in 1.5pt 0in 1.5pt;height:15.6pt">
      <p class="MsoNormal" align="right" style="margin-right:25.5pt;text-align:right"> <font face="Arial" size="1">3,516,220

      </font> </p>
    </td>
  </tr>
  <tr style="height:15.6pt">
    <td width="470" valign="bottom" style="width:352.5pt;background:white;mso-shading:
  windowtext;mso-pattern:solid white;padding:0in 1.5pt 0in 1.5pt;height:15.6pt"> <font face="Arial" size="1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
      Weighted average fair value of options granted</font> </td>
    <td width="18" valign="bottom" style="width:13.5pt;background:white;mso-shading:
  windowtext;mso-pattern:solid white;padding:0in 1.5pt 0in 1.5pt;height:15.6pt">
      <p align="right"> <font face="Arial" size="1">$</font> </td>
    <td width="114" valign="bottom" style="width:85.5pt;background:white;mso-shading:
  windowtext;mso-pattern:solid white;padding:0in 1.5pt 0in 1.5pt;height:15.6pt">
      <p class="MsoNormal" align="right" style="margin-right:25.5pt;text-align:right"> <font face="Arial" size="1">1.65</font> </p>
    </td>
  </tr>
  <tr style="height:15.6pt">
    <td width="470" valign="bottom" style="width:352.5pt;border:none;border-bottom:
  solid windowtext 1.5pt;background:white;mso-shading:windowtext;mso-pattern:
  solid white;padding:0in 1.5pt 0in 1.5pt;height:15.6pt">
      <p class="MsoNormal" style="margin-left:13.5pt"> <font face="Arial" size="1">

      </font> </p>
    </td>
    <td width="18" valign="bottom" style="width:13.5pt;border:none;border-bottom:
  solid windowtext 1.5pt;background:white;mso-shading:windowtext;mso-pattern:
  solid white;padding:0in 1.5pt 0in 1.5pt;height:15.6pt">
      <p class="MsoNormal" align="right" style="text-align:right"><font face="Arial" size="1">&nbsp;

       </font></p>
    </td>
    <td width="24" valign="bottom" style="width:.25in;border:none;border-bottom:solid windowtext 1.5pt;
  background:white;mso-shading:windowtext;mso-pattern:solid white;padding:0in 1.5pt 0in 1.5pt;
  height:15.6pt">
      <p class="MsoNormal" align="right" style="margin-right:39.0pt;text-align:right"> <font face="Arial" size="1">

      </font> </p>
    </td>
    <td width="114" valign="bottom" style="width:85.5pt;border:none;border-bottom:
  solid windowtext 1.5pt;background:white;mso-shading:windowtext;mso-pattern:
  solid white;padding:0in 1.5pt 0in 1.5pt;height:15.6pt"></td>
  </tr>
</table>
<font FACE="Arial" SIZE="2">

<p>&nbsp;</p>

<hr>

<p align="right"><font size="1" face="Arial">CAE&nbsp; First Quarter Report 2004</font></font><font face="Arial" size="1">&nbsp; /&nbsp; page.15</font></p>

<font FACE="Arial" SIZE="2">

<p>&nbsp;</p>

<p ALIGN="JUSTIFY"> On
April 1, 2003, the Company prospectively adopted the Canadian Institute of
Chartered Accountants (CICA) section 3063, <i>Impairment of Long-lived Assets</i>. &nbsp;
   The new section
requires the recognition of an impairment loss for a long-lived asset to be held
and used when events or changes in circumstances cause its carrying value to
exceed the total undiscounted cash flows expected from its use and eventual
disposition.&nbsp; An impairment loss, if
any, is determined as the excess of the carrying value of the asset over its
fair value. &nbsp;  No impairment losses
for long-lived assets were recorded in the first quarter of 2004. </p>


<p class="MsoNormal" style="text-align:justify;tab-stops:3.5in right 4.5in left 5.0in right 6.0in">On
April 1, 2003, the Company prospectively adopted the CICA section 3475 <i>Disposal
of Long-lived</i> <i>Assets and Discontinued Operations</i> which requires that
assets classified as held for sale be measured at the lower of carrying value
and fair value less disposal costs. Assets classified as held for sale are not
to be amortized while classified as such. It also requires that the results of
operations of a component of an enterprise that has been disposed of by either
sale or abandonment be reported as discontinued operations. A component of an
enterprise comprises operations and cash flows that can be clearly distinguish,
operationally and for financial reporting purposes, from the rest of the
enterprise.

 </p>
<p class="MsoNormal">In the first quarter of
fiscal 2004, the Company sold two businesses already classified as discontinued
operations (see note 3). There were no other disposal activities relating to
long-lived assets by the Company during the quarter. &nbsp;


 </p>


<p ALIGN="JUSTIFY"><b><font face="Arial" color="#0000ff" size="2">Note 2:
Business Acquisitions</font></b> <br>
On
March 31, 2003, the Company completed a technology investment in the marine
navigation business by acquiring all of the issued and outstanding shares of the
Norway-based Hitec Marine Automation AS (Hitec).
&nbsp;  No cash consideration for the purchase of the shares was
needed. &nbsp;  NOK 13.7 million will be
expensed for acquisition and integration costs.
&nbsp;  The business provides marine navigation products and
capabilities for both naval and commercial marine markets. &nbsp;
 This technology investment complements the Company&#180;s existing marine
products and capabilities. <br><br>

 The
allocation of the purchase price of Hitec is based on management&#180;s estimate of
the fair value of assets acquired and liabilities assumed.
&nbsp;  Allocation of the purchase price involves a number of
estimates as well as gathering of information over a number of months. &nbsp;
 This estimation process will be completed in the next three months and,
accordingly, there may be changes to the goodwill and intangible asset values
presented below for this acquisition.

 <br><br>

 During
fiscal 2002, the Company completed four strategic acquisitions, two of which
accelerated the Company&#180;s move into aviation training, one which significantly
improved the Company&#180;s access to the US defence market and one which provided
immediate entry into the commercial marine control systems market. &nbsp;
 A summary description of each acquisition follows:

 <br><br>

 On
April 2, 2001, the Company acquired all of the issued and outstanding shares of
BAE Systems Flight Simulation and Training Inc. &nbsp;
 (BAE Systems) located in Tampa, Florida, for a total cash consideration
of US$76 million. &nbsp;  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.

 <br><br>

 On
August 1, 2001, the Company acquired all of the issued and outstanding shares on
Valmarine AS of Norway (Valmarine), 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&#180;s shares for the 10 days prior to August 1<sup>st</sup>. &nbsp;
 Valmarine is the global leader for marine control systems for the
commercial market.

 </p>

<p class="MsoNormal" style="text-align:justify;tab-stops:49.5pt 3.5in right 4.5in left 5.0in right 6.0in"> On
August 24, 2001, the Company acquired all of the issued and outstanding shares
of the Netherland-based Schreiner Aviation Training B.V. (Schreiner) for total
cash consideration of Euro 193.4 million. &nbsp;  The
business provides simulator and ground-school civil aviation training.

 </p>
<p class="MsoNormal" style="text-align:justify;tab-stops:49.5pt 3.5in right 4.5in left 5.0in right 6.0in"> 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, equipment in
the amount of US$54 million was sold and leased back.
yes">&nbsp;  SimuFlite is the world&#180;s second largest provider of
business aviation training.

 </p>
<p class="MsoNormal" style="text-align:justify;tab-stops:49.5pt 3.5in right 4.5in left 5.0in right 6.0in">  These
acquisitions were accounted for under the purchase method and their operating
results have been included from the respective acquisition dates. &nbsp;
&nbsp;
 </p>

<hr>

<p>&nbsp;</p>


<p><font face="Arial" size="2">The net assets acquired are summarized as follows:</font></p>

<table border="0" cellpadding="0" cellspacing="0" width="656" height="380">
<tr>
<td width="132" height="20" valign="bottom" style="border-bottom-style: solid; border-bottom-width: 1"><font face="Arial" size="1">(amounts in
  millions</font></font><font face="Arial" size="1"> of Canadian dollars</font><font FACE="Arial" SIZE="2">)</font><font face="Arial" size="1">&nbsp;</font></td>
<font FACE="Arial" SIZE="2">
<td width="7" height="20" style="border-bottom-style: solid; border-bottom-width: 1">&nbsp;</td>
<td width="55" height="20" valign="bottom" align="center" style="border-bottom-style: solid; border-bottom-width: 1"><font face="Arial" size="1">BAE<br>Systems</font></td>
<td width="20" height="20" valign="bottom" align="right" style="border-bottom-style: solid; border-bottom-width: 1">&nbsp;</td>
<td width="61" height="20" valign="bottom" align="center" style="border-bottom-style: solid; border-bottom-width: 1"><font face="Arial" size="1"><br></font></font><font face="Arial" size="1">Valmarine</font></td>
<font FACE="Arial" SIZE="2">
<td width="23" height="20" valign="bottom" align="right" style="border-bottom-style: solid; border-bottom-width: 1">&nbsp;</td>
<td width="57" height="20" valign="bottom" align="center" style="border-bottom-style: solid; border-bottom-width: 1"><font face="Arial" size="1">Schreiner</font></td>
<td width="22" height="20" valign="bottom" align="right" style="border-bottom-style: solid; border-bottom-width: 1">&nbsp;</td>
<td width="54" height="20" valign="bottom" align="center" style="border-bottom-style: solid; border-bottom-width: 1"><font face="Arial" size="1">Simuflite</font></td>
<td width="23" height="20" valign="bottom" align="right" style="border-bottom-style: solid; border-bottom-width: 1">&nbsp;</td>
<td width="54" height="20" valign="bottom" align="center" style="border-bottom-style: solid; border-bottom-width: 1"><font face="Arial" size="1">S</font></font><font face="Arial" size="1">ub<font face="Arial">total</font></font></td>
<font FACE="Arial" SIZE="2">
<td width="35" height="20" valign="bottom" align="right" style="border-bottom-style: solid; border-bottom-width: 1"></td>
<td width="73" height="20" valign="bottom" align="center" style="border-bottom-style: solid; border-bottom-width: 1"><font face="Arial" size="1">HiTec<br>Marine<br>Automation</font></td>
<td width="12" height="20" valign="bottom" align="right" style="border-bottom-style: solid; border-bottom-width: 1">&nbsp;</td>
<td width="51" height="20" valign="bottom" align="center" style="border-bottom-style: solid; border-bottom-width: 1"><font face="Arial" size="1">Total</font></td>
</tr>

</font>

<tr>
<td width="179" VALIGN="BOTTOM"  HEIGHT="18" nowrap><font FACE="Arial" size="1">Current assets</font></td>
<td width="7" height="20" align="right"><font color="#000000" size="1" FACE="Arial">$</font></td><td width="55" height="20" align="center"><font face="Arial" size="1">36.2</font></td>
<td width="20" height="20" align="right"><font face="Arial" size="1">$</font></td><td width="61" height="20" align="center"><font face="Arial" size="1">16.3</font></td>
<td width="23" height="20" align="right"><font face="Arial" size="1">$</font></td><td width="57" height="20" align="center"><font face="Arial" size="1">15.3</font></td>
<td width="22" height="20" align="right"><font face="Arial" size="1">$</font></td><td width="54" height="20" align="center"><font face="Arial" size="1">23.0</font></td>
<td width="23" height="20" align="right"><font face="Arial" size="1">$</font></td><td width="54" height="20" align="center"><font face="Arial" size="1">90.8</font></td>
<td width="35" height="20" align="right"><font face="Arial" size="1">$</font></td><td width="73" height="20" align="center"><font face="Arial" size="1">5.6</font></td>
<td width="12" height="20" style="border-left-style: solid; border-left-width: 1" align="right"><font face="Arial" size="1">$</font></td><td width="51" height="20" align="center"><font face="Arial" size="1">96.4</font></td>
</tr>
<tr>
<td width="179" VALIGN="BOTTOM"  HEIGHT="18" nowrap><font FACE="Arial" size="1">Current liabilities</font></td>
<font FACE="Arial" SIZE="2">
<td width="7" height="20"></td></font><td width="55" height="20" align="center"><font face="Arial" size="1">(65.8)</font></td>
<font FACE="Arial" SIZE="2">
<td width="20" height="20"></td></font><td width="61" height="20" align="center"><font face="Arial" size="1">(8.7)</font></td>
<font FACE="Arial" SIZE="2">
<td width="23" height="20"></td></font><td width="57" height="20" align="center"><font face="Arial" size="1">(37.0)</font></td>
<font FACE="Arial" SIZE="2">
<td width="22" height="20"></td></font><td width="54" height="20" align="center"><font face="Arial" size="1">(8.2)</font></td>
<font FACE="Arial" SIZE="2">
<td width="23" height="20"></td></font><td width="54" height="20" align="center"><font face="Arial" size="1">(119.7)</font></td>
<font FACE="Arial" SIZE="2">
<td width="35" height="20"></td></font><td width="73" height="20" align="center"><font face="Arial" size="1">(13.3)</font></td>
<td width="12" height="20" style="border-left-style: solid; border-left-width: 1">
<font FACE="Arial" size="1">
&nbsp;</font></td><td width="51" height="20" align="center"><font face="Arial" size="1">(133.0)</font></td>
</tr>
<tr>
<td width="179" VALIGN="BOTTOM" HEIGHT="18"><font FACE="Arial" size="1">Property, plant and equipment</font></td>
<font FACE="Arial" SIZE="2">
<td width="7" height="20"></td></font><td width="55" height="20" align="center"><font face="Arial" size="1">59.0</font></td>
<font FACE="Arial" SIZE="2">
<td width="20" height="20"></td></font><td width="61" height="20" align="center"><font face="Arial" size="1">0.5</font></td>
<font FACE="Arial" SIZE="2">
<td width="23" height="20"></td></font><td width="57" height="20" align="center"><font face="Arial" size="1">167.9</font></td>
<font FACE="Arial" SIZE="2">
<td width="22" height="20"></td></font><td width="54" height="20" align="center"><font face="Arial" size="1">262.0</font></td>
<font FACE="Arial" SIZE="2">
<td width="23" height="20"></td></font><td width="54" height="20" align="center"><font face="Arial" size="1">489.4</font></td>
<font FACE="Arial" SIZE="2">
<td width="35" height="20"></td></font><td width="73" height="20" align="center"><font face="Arial" size="1">0.1</font></td>
<td width="12" height="20" style="border-left-style: solid; border-left-width: 1">
<font FACE="Arial" size="1">
&nbsp;</font></td><td width="51" height="20" align="center"><font face="Arial" size="1">489.5</font></td>
</tr>
<tr>
<td width="179" VALIGN="BOTTOM"  HEIGHT="18" nowrap><font FACE="Arial" size="1">Intangible assets</font></td>
<font FACE="Arial" SIZE="2">
<td width="7" height="20"></td><td width="55" height="20" align="center"></td>
<td width="20" height="20"></td><td width="61" height="20" align="center"></td>
<td width="23" height="20"></td><td width="57" height="20" align="center"></td>
<td width="22" height="20"></td><td width="54" height="20" align="center"></td>
<td width="23" height="20"></td><td width="54" height="20" align="center"></td>
<td width="35" height="20"></td><td width="73" height="20" align="center"></td>
</font>
<td width="12" height="20" style="border-left-style: solid; border-left-width: 1">
<font FACE="Arial" size="1">
&nbsp;</font></td>
<font FACE="Arial" SIZE="2">
<td width="51" height="20" align="center"></td>
</tr>
</font>
<tr>
<td width="179" VALIGN="bottom"  HEIGHT="14"><font FACE="Arial" size="1">&nbsp;&nbsp; Trade names</font></td>
<font FACE="Arial" SIZE="2">
<td width="7" height="20"></td></font><td width="55" height="20" align="center"><font face="Arial" size="1">-</font></td>
<font FACE="Arial" SIZE="2">
<td width="20" height="20"></td></font><td width="61" height="20" align="center"><font face="Arial" size="1">3.2</font></td>
<font FACE="Arial" SIZE="2">
<td width="23" height="20"></td></font><td width="57" height="20" align="center"><font face="Arial" size="1">-</font></td>
<font FACE="Arial" SIZE="2">
<td width="22" height="20"></td></font><td width="54" height="20" align="center"><font face="Arial" size="1">37.1</font></td>
<font FACE="Arial" SIZE="2">
<td width="23" height="20"></td></font><td width="54" height="20" align="center"><font face="Arial" size="1">40.3</font></td>
<font FACE="Arial" SIZE="2">
<td width="35" height="20"></td></font><td width="73" height="20" align="center"><font face="Arial" size="1">-</font></td>
<td width="12" height="20" style="border-left-style: solid; border-left-width: 1">
<font FACE="Arial" size="1">
&nbsp;</font></td><td width="51" height="20" align="center"><font face="Arial" size="1">40.3</font></td>
</tr>
<tr>
<td width="179" VALIGN="bottom"  HEIGHT="14"><font face="Arial" size="1">&nbsp;&nbsp; Customer Relations</font></td>
<font FACE="Arial" SIZE="2">
<td width="7" height="20"></td></font><td width="55" height="20" align="center"><font face="Arial" size="1">-</font></td>
<font FACE="Arial" SIZE="2">
<td width="20" height="20"></td></font><td width="61" height="20" align="center"><font face="Arial" size="1">9.8</font></td>
<font FACE="Arial" SIZE="2">
<td width="23" height="20"></td></font><td width="57" height="20" align="center"><font face="Arial" size="1">66.0</font></td>
<font FACE="Arial" SIZE="2">
<td width="22" height="20"></td></font><td width="54" height="20" align="center"><font face="Arial" size="1">29.2</font></td>
<font FACE="Arial" SIZE="2">
<td width="23" height="20"></td></font><td width="54" height="20" align="center"><font face="Arial" size="1">105.0</font></td>
<font FACE="Arial" SIZE="2">
<td width="35" height="20"></td></font><td width="73" height="20" align="center"><font face="Arial" size="1">-</font></td>
<td width="12" height="20" style="border-left-style: solid; border-left-width: 1">
<font FACE="Arial" size="1">
&nbsp;</font></td><td width="51" height="20" align="center"><font face="Arial" size="1">105.0</font></td>
</tr>
<tr>
<td width="179" VALIGN="bottom"  HEIGHT="18"><font face="Arial" size="1">&nbsp;&nbsp; Customer contractual<br>&nbsp;&nbsp;&nbsp;&nbsp; agreements</font></td>
<font FACE="Arial" SIZE="2">
<td width="7" height="20"></td></font><td width="55" height="20" align="center" valign="bottom"><font face="Arial" size="1">-</font></td>
<font FACE="Arial" SIZE="2">
<td width="20" height="20" valign="bottom"></td></font><td width="61" height="20" align="center" valign="bottom"><font face="Arial" size="1">2.3</font></td>
<font FACE="Arial" SIZE="2">
<td width="23" height="20" valign="bottom"></td>  </font>  <td width="57" height="20" align="center" valign="bottom"><font face="Arial" size="1">2.2</font></td>
<font FACE="Arial" SIZE="2">
<td width="22" height="20" valign="bottom"></td></font><td width="54" height="20" align="center" valign="bottom"><font face="Arial" size="1">3.6</font></td>
<font FACE="Arial" SIZE="2">
<td width="23" height="20" valign="bottom"></td></font><td width="54" height="20" align="center" valign="bottom"><font face="Arial" size="1">8.1</font></td>
<font FACE="Arial" SIZE="2">
<td width="35" height="20" valign="bottom"></td></font><td width="73" height="20" align="center" valign="bottom"><font face="Arial" size="1">-</font></td>
<td width="12" height="20" valign="bottom" style="border-left-style: solid; border-left-width: 1">
<font FACE="Arial" size="1">
&nbsp;</font></td><td width="51" height="20" align="center" valign="bottom"><font face="Arial" size="1">8.1</font></td>
</tr>
<tr>
<td width="179" VALIGN="bottom"  HEIGHT="14"><font FACE="Arial" size="1">&nbsp;&nbsp; Other intangibles</font></td>
<font FACE="Arial" SIZE="2">
<td width="7" height="20"></td></font><td width="55" height="20" align="center"><font face="Arial" size="1">2.5</font></td>
<font FACE="Arial" SIZE="2">
<td width="20" height="20"></td></font><td width="61" height="20" align="center"><font face="Arial" size="1">3.1</font></td>
<font FACE="Arial" SIZE="2">
<td width="23" height="20"></td></font><td width="57" height="20" align="center"><font face="Arial" size="1">-</font></td>
<font FACE="Arial" SIZE="2">
<td width="22" height="20"></td></font><td width="54" height="20" align="center"><font face="Arial" size="1">7.0</font></td>
<font FACE="Arial" SIZE="2">
<td width="23" height="20"></td></font><td width="54" height="20" align="center"><font face="Arial" size="1">12.6</font></td>
<font FACE="Arial" SIZE="2">
<td width="35" height="20"></td></font><td width="73" height="20" align="center"><font face="Arial" size="1">1.2</font></td>
<td width="12" height="20" style="border-left-style: solid; border-left-width: 1">
<font FACE="Arial" size="1">
&nbsp;</font></td><td width="51" height="20" align="center"><font face="Arial" size="1">13.8</font></td>
</tr>
<tr>
<td width="179" VALIGN="BOTTOM"  HEIGHT="18"><font FACE="Arial" size="1">Goodwill</font></td>
<font FACE="Arial" SIZE="2">
<td width="7" height="20"></td></font><td width="55" height="20" align="center"><font face="Arial" size="1">104.2</font></td>
<font FACE="Arial" SIZE="2">
<td width="20" height="20"></td></font><td width="61" height="20" align="center"><font face="Arial" size="1">40.4</font></td>
<font FACE="Arial" SIZE="2">
<td width="23" height="20"></td></font><td width="57" height="20" align="center"><font face="Arial" size="1">102.8</font></td>
<font FACE="Arial" SIZE="2">
<td width="22" height="20"></td></font><td width="54" height="20" align="center"><font face="Arial" size="1">106.3</font></td>
<font FACE="Arial" SIZE="2">
<td width="23" height="20"></td></font><td width="54" height="20" align="center"><font face="Arial" size="1">353.7</font></td>
<font FACE="Arial" SIZE="2">
<td width="35" height="20"></td></font><td width="73" height="20" align="center"><font face="Arial" size="1">1.6</font></td>
<td width="12" height="20" style="border-left-style: solid; border-left-width: 1">
<font FACE="Arial" size="1">
&nbsp;</font></td><td width="51" height="20" align="center"><font face="Arial" size="1">355.3</font></td>
</tr>
<tr>
<td width="179" VALIGN="BOTTOM"  HEIGHT="18"><font FACE="Arial" size="1">Future income taxes</font></td>
<font FACE="Arial" SIZE="2">
<td width="7" height="20"></td></font><td width="55" height="20" align="center"><font face="Arial" size="1">36.6</font></td>
<font FACE="Arial" SIZE="2">
<td width="20" height="20"></td></font><td width="61" height="20" align="center"><font face="Arial" size="1">(3.9)</font></td>
<font FACE="Arial" SIZE="2">
<td width="23" height="20"></td></font><td width="57" height="20" align="center"><font face="Arial" size="1">(34.2)</font></td>
<font FACE="Arial" SIZE="2">
<td width="22" height="20"></td></font><td width="54" height="20" align="center"><font face="Arial" size="1">15.1</font></td>
<font FACE="Arial" SIZE="2">
<td width="23" height="20"></td></font><td width="54" height="20" align="center"><font face="Arial" size="1">13.6</font></td>
<font FACE="Arial" SIZE="2">
<td width="35" height="20"></td></font><td width="73" height="20" align="center"><font face="Arial" size="1">4.8</font></td>
<td width="12" height="20" style="border-left-style: solid; border-left-width: 1">
<font FACE="Arial" size="1">
&nbsp;</font></td><td width="51" height="20" align="center"><font face="Arial" size="1">18.4</font></td>
</tr>
<tr>
<td width="179" VALIGN="BOTTOM"  HEIGHT="18"><font FACE="Arial" size="1">Long-term debt</font></td>
<font FACE="Arial" SIZE="2">
<td width="7" height="20"></td></font><td width="55" height="20" align="center"><font face="Arial" size="1">(17.3)</font></td>
<font FACE="Arial" SIZE="2">
<td width="20" height="20"></td></font><td width="61" height="20" align="center"><font face="Arial" size="1">-</font></td>
<font FACE="Arial" SIZE="2">
<td width="23" height="20"></td></font><td width="57" height="20" align="center"><font face="Arial" size="1">(23.1)</font></td>
<font FACE="Arial" SIZE="2">
<td width="22" height="20"></td></font><td width="54" height="20" align="center"><font face="Arial" size="1">(52.4)</font></td>
<font FACE="Arial" SIZE="2">
<td width="23" height="20"></td></font><td width="54" height="20" align="center"><font face="Arial" size="1">(92.8)</font></td>
<font FACE="Arial" SIZE="2">
<td width="35" height="20"></td></font><td width="73" height="20" align="center"><font face="Arial" size="1">-</font></td>
<td width="12" height="20" style="border-left-style: solid; border-left-width: 1">
<font FACE="Arial" size="1">
&nbsp;</font></td><td width="51" height="20" align="center"><font face="Arial" size="1">(92.8)</font></td>
</tr>
<tr>
<td width="179" VALIGN="middle"  HEIGHT="19" style="border-bottom-style: solid; border-bottom-width: 1" nowrap><font face="Arial" size="1">Long-term liabilities</font></td>
<td width="7" height="20" style="border-bottom-style: solid; border-bottom-width: 1">
<font FACE="Arial" size="1">
&nbsp;</font></td>
<td width="55" height="20" align="center" style="border-bottom-style: solid; border-bottom-width: 1"><font face="Arial" size="1">(36.1)</font></td>
<td width="20" height="20" style="border-bottom-style: solid; border-bottom-width: 1">
<font FACE="Arial" size="1">
&nbsp;</font></td>
<td width="61" height="20" align="center" style="border-bottom-style: solid; border-bottom-width: 1"><font face="Arial" size="1">-</font></td>
<td width="23" height="20" style="border-bottom-style: solid; border-bottom-width: 1">
<font FACE="Arial" size="1">
&nbsp;</font></td>
<td width="57" height="20" align="center" style="border-bottom-style: solid; border-bottom-width: 1"><font face="Arial" size="1">-</font></td>
<td width="22" height="20" style="border-bottom-style: solid; border-bottom-width: 1">
<font FACE="Arial" size="1">
&nbsp;</font></td>
<td width="54" height="20" align="center" style="border-bottom-style: solid; border-bottom-width: 1"><font face="Arial" size="1">-</font></td>
<td width="23" height="20" style="border-bottom-style: solid; border-bottom-width: 1">
<font FACE="Arial" size="1">
&nbsp;</font></td>
<td width="54" height="20" align="center" style="border-bottom-style: solid; border-bottom-width: 1">
<font FACE="Arial" size="1">
(36.1)</font></td>
<font FACE="Arial" SIZE="2">
<td width="35" height="20" style="border-bottom-style: solid; border-bottom-width: 1"></td>
</font>
<td width="73" height="20" align="center" style="border-bottom-style: solid; border-bottom-width: 1"><font face="Arial" size="1">-</font></td>
<td width="12" height="20" style="border-left-style: solid; border-left-width: 1; border-bottom-style: solid; border-bottom-width: 1">
<font FACE="Arial" size="1">
&nbsp;</font></td>
<td width="51" height="20" align="center" style="border-bottom-style: solid; border-bottom-width: 1"><font face="Arial" size="1">(36.1)</font></td>
</tr>
<font FACE="Arial" SIZE="2">
<tr>
<td width="179"></td>
<td width="7" height="20"></td></font><td width="55" height="20" align="center"><font face="Arial" size="1">119.3</font></td>
<font FACE="Arial" SIZE="2">
<td width="20" height="20"></td></font><td width="61" height="20" align="center"><font face="Arial" size="1">63.0</font></td>
<font FACE="Arial" SIZE="2">
<td width="23" height="20"></td></font><td width="57" height="20" align="center"><font face="Arial" size="1">259.9</font></td>
<font FACE="Arial" SIZE="2">
<td width="22" height="20"></td></font><td width="54" height="20" align="center"><font face="Arial" size="1">422.7</font></td>
<font FACE="Arial" SIZE="2">
<td width="23" height="20"></td></font><td width="54" height="20" align="center"><font face="Arial" size="1">864.9</font></td>
<font FACE="Arial" SIZE="2">
<td width="35" height="20"></td></font><td width="73" height="20" align="center">
<font FACE="Arial" size="1">
- -</font></td>
<td width="12" height="20" style="border-left-style: solid; border-left-width: 1">
<font FACE="Arial" size="1">
&nbsp;</font></td><td width="51" height="20" align="center"><font face="Arial" size="1">864.9</font></td>
</tr>
<tr>
<td width="179" VALIGN="BOTTOM"  HEIGHT="18"><font FACE="Arial" size="1">Less: Sale and leaseback<br>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; of assets</font></td>
<font FACE="Arial" SIZE="2">
<td width="7" height="20"></td></font><td width="55" height="20" align="center" valign="bottom"><font face="Arial" size="1">-</font></td>
<font FACE="Arial" SIZE="2">
<td width="20" height="20" valign="bottom"></td></font><td width="61" height="20" align="center" valign="bottom"><font face="Arial" size="1">-</font></td>
<font FACE="Arial" SIZE="2">
<td width="23" height="20" valign="bottom"></td></font><td width="57" height="20" align="center" valign="bottom"><font face="Arial" size="1">-</font></td>
<font FACE="Arial" SIZE="2">
<td width="22" height="20" valign="bottom"></td></font><td width="54" height="20" align="center" valign="bottom"><font face="Arial" size="1">(86.2)</font></td>
<font FACE="Arial" SIZE="2">
<td width="23" height="20" valign="bottom"></td></font><td width="54" height="20" align="center" valign="bottom"><font face="Arial" size="1">(86.2)</font></td>
<font FACE="Arial" SIZE="2">
<td width="35" height="20" valign="bottom"></td></font><td width="73" height="20" align="center" valign="bottom"><font face="Arial" size="1">-</font></td>
<td width="12" height="20" valign="bottom" style="border-left-style: solid; border-left-width: 1">
<font FACE="Arial" size="1">
&nbsp;</font></td><td width="51" height="20" align="center" valign="bottom"><font face="Arial" size="1">(86.2)</font></td>
</tr>
<tr>
<td width="179" VALIGN="BOTTOM"  HEIGHT="18" nowrap style="border-bottom-style: solid; border-bottom-width: 1"><font FACE="Arial" size="1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
  Shares issued</font></td>
<td width="7" height="20" style="border-bottom-style: solid; border-bottom-width: 1">
<font FACE="Arial" size="1">
&nbsp;</font></td>
<td width="55" height="20" align="center" style="border-bottom-style: solid; border-bottom-width: 1"><font face="Arial" size="1">-</font></td>
<td width="20" height="20" style="border-bottom-style: solid; border-bottom-width: 1">
<font FACE="Arial" size="1">
&nbsp;</font></td>
<td width="61" height="20" align="center" style="border-bottom-style: solid; border-bottom-width: 1"><font face="Arial" size="1">(21.1)</font></td>
<td width="23" height="20" style="border-bottom-style: solid; border-bottom-width: 1">
<font FACE="Arial" size="1">
&nbsp;</font></td>
<td width="57" height="20" align="center" style="border-bottom-style: solid; border-bottom-width: 1"><font face="Arial" size="1">-</font></td>
<td width="22" height="20" style="border-bottom-style: solid; border-bottom-width: 1">
<font FACE="Arial" size="1">
&nbsp;</font></td>
<td width="54" height="20" align="center" style="border-bottom-style: solid; border-bottom-width: 1"><font face="Arial" size="1">-</font></td>
<td width="23" height="20" style="border-bottom-style: solid; border-bottom-width: 1">
<font FACE="Arial" size="1">
&nbsp;</font></td>
<td width="54" height="20" align="center" style="border-bottom-style: solid; border-bottom-width: 1">
<font FACE="Arial" size="1">
(21.1)</font></td>
<font FACE="Arial" SIZE="2">
<td width="35" height="20" style="border-bottom-style: solid; border-bottom-width: 1"></td>
</font>
<td width="73" height="20" align="center" style="border-bottom-style: solid; border-bottom-width: 1"><font face="Arial" size="1">-</font></td>
<td width="12" height="20" style="border-left-style: solid; border-left-width: 1; border-bottom-style: solid; border-bottom-width: 1">
<font FACE="Arial" size="1">
&nbsp;</font></td>
  <td width="51" height="20" align="center" style="border-bottom-style: solid; border-bottom-width: 1"><font face="Arial" size="1">(21.1)</font></td>
</tr>
<tr>
<td width="179" VALIGN="middle"  HEIGHT="18" style="border-bottom-style: solid; border-bottom-width: 2" nowrap><font face="Arial" size="1">Total cash consideration:</font></td>
<td width="7" height="20" style="border-bottom-style: solid; border-bottom-width: 2" align="right"><font FACE="Arial" size="1">$</font></td>
<td width="55" height="20" align="center" style="border-bottom-style: solid; border-bottom-width: 2"><font face="Arial" size="1">119.3</font></td>
<td width="20" height="20" style="border-bottom-style: solid; border-bottom-width: 2" align="right"><font face="Arial" size="1">$</font></td>
<td width="61" height="20" align="center" style="border-bottom-style: solid; border-bottom-width: 2"><font face="Arial" size="1">41.9</font></td>
<td width="23" height="20" style="border-bottom-style: solid; border-bottom-width: 2" align="right"><font face="Arial" size="1">$</font></td>
<td width="57" height="20" align="center" style="border-bottom-style: solid; border-bottom-width: 2"><font face="Arial" size="1">259.9</font></td>
<td width="22" height="20" style="border-bottom-style: solid; border-bottom-width: 2" align="right"><font face="Arial" size="1">$</font></td>
<td width="54" height="20" align="center" style="border-bottom-style: solid; border-bottom-width: 2"><font face="Arial" size="1">336.5</font></td>
<td width="23" height="20" style="border-bottom-style: solid; border-bottom-width: 2" align="right"><font face="Arial" size="1">$</font></td>
<td width="54" height="20" align="center" style="border-bottom-style: solid; border-bottom-width: 2"><font face="Arial" size="1">757.6</font></td>
<td width="35" height="20" style="border-bottom-style: solid; border-bottom-width: 2" align="right"><font face="Arial" size="1">$</font></td>
<td width="73" height="20" align="center" style="border-bottom-style: solid; border-bottom-width: 2">
<font FACE="Arial" size="1">
- -</font></td>
<td width="12" height="20" style="border-left-style: solid; border-left-width: 1; border-bottom-style: solid; border-bottom-width: 2" align="right"><font face="Arial" size="1">$</font></td>
<td width="51" height="20" align="center" style="border-bottom-style: solid; border-bottom-width: 2"><font face="Arial" size="1">757.6</font></td>
</tr>
</table>

<font FACE="Arial" SIZE="2">

<p align="justify"> The
net assets of Schreiner, SimuFlite and approximately 10% of the net assets of
BAE Systems (including goodwill of $209.8 million) are included in the Civil
Simulation and Training segment. &nbsp;  The
balance of the net assets of BAE Systems (including goodwill of $93.8 million)
is included in the Military Simulation and Training segment. &nbsp;
 Net assets of Valmarine and Hitec (including goodwill of $38.9 million)
are included in the Marine Controls segment.

 </p>


<p align="justify"> The
goodwill on the SimuFlite acquisition is the sole deductible goodwill for tax
purposes.

 </p>


<p align="justify"> There
were certain adjustments to the assets and liabilities recorded in fiscal 2003
for three of the businesses acquired. For Valmarine, the adjustment related to
the final evaluation of other intangible assets. &nbsp;
 With Schreiner, the adjustment pertained to the accounting for simulators
that were being built at the time the acquisition was completed. &nbsp;
 For SimuFlite, the adjustment resulted from a purchase price arbitration
settlement which occurred in 2003. Hitec Marine Automation was adjusted in the
first quarter of 2004, with the final evaluation of the tax liabilities.

 </p>


<p ALIGN="JUSTIFY"><b><font face="Arial" color="#0000ff" size="2">Note 3:
Discontinued Operations</font></b> <br>
On February 2, 2000, the Board
of Directors approved a plan to divest the Cleaning Technologies and Energy
Control Systems businesses. On December 18, 2001, the Board also approved a plan
to divest the Forestry Systems business segment.
&nbsp;  As a result, the results of operations and the financial
position of these business segments have been reported separately in the
consolidated statements of earnings and the consolidated balance sheets
(together the "Discontinued Operations").

 </p>

<p>&nbsp;</p>

<hr>

<p align="right"><font size="1" face="Arial">CAE&nbsp; First Quarter Report 2004&nbsp; /&nbsp; page.17</font></p>

<p>&nbsp;</p>

<p align="justify"> On May 31, 2000, the Company
completed the sale of substantially all the assets of the Energy Control Systems
business to SNC-Lavalin Inc.

 <br><br>

 On February 28, 2002, the
Company completed the sale of two of CAE&#180;s five Cleaning Technologies
operations. &nbsp;  The Company sold the
shares of CAE Ransohoff Inc., of Cincinnati, Ohio and CAE Ultrasonics Inc., of
Jamestown, New York to the management of these operations. &nbsp;
 The total consideration was initially US$21.4 million, comprised of
US$9.2 million cash and a holdback of US$1.6 million payable 120 days from
closing with the balance in the form of a long term subordinated note
receivable. &nbsp;  The total consideration
was subject to adjustment based on an audit of the closing statement of
financial position. &nbsp;  In fiscal 2003,
the audit was completed and certain issues remain in dispute. Adjustment to
reduce the previously recorded consideration by US$2.2 million with a
corresponding reduction in the holdback and a reduction in the long-term
subordinated note has been recorded based on management&#180;s best estimate.&nbsp; </p>

<p align="justify"> On March 28, 2002, CAE
completed the sale of its fibre screening business to the Advanced Fiber Income
Fund (AFT) for cash proceeds of $162.0 million. &nbsp;
 Following the closing of this transaction, certain issues arose in
connection with the income tax planning with respect to the foreign operations
of AFT, and the partial termination of its defined benefit pension plan for the
transferred employees. &nbsp;  CAE recorded
in its loss from Discontinued Operations in fiscal 2003 an additional after tax
cost of $3.2 million (tax amount - $1.1 million) for these adjustments.



 </p>

<p align="justify"> On
June 28, 2002, CAE sold the shares of CAE Cleaning Technologies Plc to the
management of these operations for a note receivable of $1.2 million. <br><br>

 On
August 16, 2002, CAE sold substantially all the assets of the sawmill division
of its Forestry Systems segment for a cash consideration of $25.0 million and a
further estimated payment at $10.0 million based on the operating performance of
the company in the three year period from closing. <br><br>

 On April 30, 2003, CAE
completed the sale of certain assets of its German Cleaning Technologies
operations for a cash consideration of Euro 25,000, approximating book value. &nbsp;
 Subsequent to completing the sale, CAE incurred post acquisition costs
with respect to the transfer of employees resulting in an after-tax charge
recorded in its results of Discontinued Operations of $1.9 million (tax amount -
$1.0 million).

 <br><br>

 On May 2, 2003, CAE completed
the sale of its remaining Forestry Systems business to Carmanah Design and
Manufacturing Inc. A cash consideration of $19.8 million was received on
closing. &nbsp;  The consideration was
increased by a further $0.5 million post closing based on the final amount of
working capital, which is still to be received as of the date of these financial
statements. &nbsp;  In addition, the
Company is entitled to receive further consideration based on the performance of
the business over the 30 month period following the closing. &nbsp;
 No value has been ascribed to this additional consideration in these
financial statements.

 </p>

<p align="justify"> On
July 31, 2003, CAE completed an agreement to sell substantially all the assets
of its last remaining Cleaning Technology business, Alpheus Inc. to Cold Jet
Inc. of Cincinnati, Ohio. </p>

<hr>

<p align="justify"> Summarized financial
information for the discontinued operations is as follows:

 </p>

</font>

<table border="0" cellpadding="0" cellspacing="0" width="640" height="211">
<tr>
<td width="299" style="border-bottom-style: solid; border-bottom-width: 1" nowrap height="17" valign="bottom"><font face="Arial" size="1">(amounts in millions)</font></td>
<font FACE="Arial" SIZE="2">
<td width="7" align="center" style="border-bottom-style: solid; border-bottom-width: 1" height="17" valign="bottom">&nbsp;</td>
<td width="50" style="border-bottom-style: solid; border-bottom-width: 1" height="17" valign="bottom" align="right"></td>
<td width="47" align="center" style="border-bottom-style: solid; border-bottom-width: 1" height="17" valign="bottom"></td>
<td width="45" style="border-bottom-style: solid; border-bottom-width: 1" height="17" valign="bottom" align="right"></td>
<td width="42" align="center" style="border-bottom-style: solid; border-bottom-width: 1" height="17" valign="bottom">&nbsp;</td>
<td width="49" style="border-bottom-style: solid; border-bottom-width: 1" height="17" valign="bottom" align="right">
  <p align="right"><font face="Arial" size="2"><b>2003<br>(Unaudited)</b></font></p>
  </td>
<td width="53" align="right" style="border-bottom-style: solid; border-bottom-width: 1" height="17"><b>&nbsp;</b></td>
<td width="48" align="right" style="border-bottom-style: solid; border-bottom-width: 1" height="17"><font face="Arial" size="2">2002<br>(Unaudited)</font></td>
</tr>
<tr>
  <td width="299" height="21" colspan="9"><font face="Arial" size="2">Revenue</font></td>
</tr>
<tr>
<td width="299" height="18"><font face="Arial" size="2">&nbsp;&nbsp; Cleaning Technologies</font></td>
<td width="7" align="right" height="18"></td><td width="50" align="right" height="18"></td>
<td width="47" align="right" height="18"></td><td width="45" align="right" height="18"></td>
<td width="42" align="right" height="18"><font face="Arial" size="2"><b>$</b></font></td><td width="49" align="right" height="18"><font face="Arial" size="2"><b>1.7</b></font></td>
<td width="53" align="right" height="18"><font face="Arial" size="2">$</font></td><td width="48" align="right" height="18"><font face="Arial" size="2">7.0</font></td>
</tr>
<tr>
<td width="299" height="21" style="border-bottom-style: solid; border-bottom-width: 1"><font face="Arial" size="2">&nbsp;&nbsp; Forestry Systems</font></td>
<td width="7" align="right" height="21" valign="bottom" style="border-bottom-style: solid; border-bottom-width: 1"></td>
<td width="50" align="right" height="21" valign="bottom" style="border-bottom-style: solid; border-bottom-width: 1"></td>
<td width="47" align="right" height="21" valign="bottom" style="border-bottom-style: solid; border-bottom-width: 1"></td>
<td width="45" align="right" height="21" valign="bottom" style="border-bottom-style: solid; border-bottom-width: 1"></td>
<td width="42" align="right" height="21" valign="bottom" style="border-bottom-style: solid; border-bottom-width: 1">&nbsp;</td>
<td width="49" align="right" height="21" valign="bottom" style="border-bottom-style: solid; border-bottom-width: 1"><font face="Arial" size="2"><b>2.3</b></font></td>
<td width="53" align="right" height="21" valign="bottom" style="border-bottom-style: solid; border-bottom-width: 1">&nbsp;</td>
<td width="48" align="right" height="21" valign="bottom" style="border-bottom-style: solid; border-bottom-width: 1"><font face="Arial" size="2">29.9</font></td>
</tr>
<tr>
<td width="299" height="11"></td>
<td width="7" align="right" height="11"></td>    <td width="50" align="right" height="11" valign="bottom"></td>
<td width="47" align="right" height="11" valign="bottom"></td><td width="45" align="right" height="11" valign="bottom"></td>
<td width="42" align="right" height="8"><font face="Arial" size="2"><b>$</b></font></td><td width="49" align="right" height="8"><font face="Arial" size="2"><b>4.0</b></font></td>
<td width="53" align="right" height="8"><font face="Arial" size="2">$</font></td><td width="48" align="right" height="8"><font face="Arial" size="2">36.9</font></td>
</tr>
<tr>
<td width="356" height="21" colspan="3"><font face="Arial" size="2">Net loss from Cleaning technologies
  after&nbsp; measurement date, net of tax recovery (2003 - $1.0; 2002 - Nil)</font></td>
<td width="47" align="right" height="21" valign="bottom"></td><td width="45" align="right" height="21" valign="bottom"></td>
<td width="42" align="right" height="21" valign="bottom"></td><td width="49" align="right" height="21" valign="bottom"><font face="Arial" size="2"><b>(1.9)</b></font></td>
<td width="53" align="right" height="21" valign="bottom"></td><td width="48" align="right" height="21" valign="bottom">-</td>
</tr>
<tr>
<td width="299" height="21" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 2"><font face="Arial" size="2">Net
  loss from discontinued operations</font></td>
<td width="7" align="right" height="21" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 2"></td>
<td width="50" align="right" height="21" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 2"></td>
<td width="47" align="right" height="21" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 2"></td>
<td width="45" align="right" height="21" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 2"></td>
<td width="42" align="right" height="21" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 2"><font face="Arial" size="2"><b>$</b></font></td>
<td width="49" align="right" height="21" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 2"><font face="Arial" size="2"><b>(1.9)</b></font></td>
<td width="53" align="right" height="21" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 2"><font face="Arial" size="2">$</font></td>
<td width="48" align="right" height="21" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 2">-</td>
</tr>
</table>

<p>&nbsp;</p>

<hr>

<p>&nbsp;</p>

<table BORDER="0" CELLSPACING="0" CELLPADDING="0" WIDTH="634">
<tr>
<td WIDTH="241" VALIGN="BOTTOM" HEIGHT="20"></td>
<td WIDTH="181" VALIGN="BOTTOM" COLSPAN="5" HEIGHT="20" ALIGN="RIGHT"><font FACE="Arial" SIZE="2"><b>as at
  June 30, 2003<br>(Unaudited)</b></font></td>
<td WIDTH="6" VALIGN="BOTTOM" HEIGHT="20"></td>
<td WIDTH="189" VALIGN="BOTTOM" COLSPAN="5" HEIGHT="20" ALIGN="RIGHT"><font face="Arial" size="2">as at March
  31, 2003<br>(Audited)</font></td>
</tr>
</font>
<tr>
<td WIDTH="243" VALIGN="BOTTOM"  HEIGHT="20" style="border-bottom-style: solid; border-bottom-width: 1"><font face="Arial" size="1">(amounts in
  millions of Canadian dollars)</font></td>
<font FACE="Arial" SIZE="2">
<td WIDTH="25" VALIGN="middle"  HEIGHT="20" style="border-bottom-style: solid; border-bottom-width: 1" align="right">&nbsp;</td>
<td WIDTH="52" VALIGN="BOTTOM"  HEIGHT="20" style="border-bottom-style: solid; border-bottom-width: 1" align="right"><font FACE="Arial" SIZE="2"><b>Forestry<br>Systems</b></font></td>
<td WIDTH="12" VALIGN="middle"  HEIGHT="20" style="border-bottom-style: solid; border-bottom-width: 1" align="right">&nbsp;</td>
<td WIDTH="96" VALIGN="BOTTOM" COLSPAN="2"  HEIGHT="20" style="border-bottom-style: solid; border-bottom-width: 1" align="right"><font FACE="Arial" SIZE="2"><b>Cleaning<br>Technologies</b></font></td>
<td WIDTH="8" VALIGN="middle"  HEIGHT="20" style="border-bottom-style: solid; border-bottom-width: 1" align="right">&nbsp;</td>
<td WIDTH="44" VALIGN="middle"  HEIGHT="20" style="border-bottom-style: solid; border-bottom-width: 1" align="right">&nbsp;</td>
<td WIDTH="52" VALIGN="BOTTOM"  HEIGHT="20" style="border-bottom-style: solid; border-bottom-width: 1" align="right"><font FACE="Arial" SIZE="2">Forestry<br>Systems</font></td>
<td WIDTH="19" VALIGN="middle"  HEIGHT="20" style="border-bottom-style: solid; border-bottom-width: 1" align="right">&nbsp;</td>
<td WIDTH="83" VALIGN="BOTTOM" COLSPAN="2"  HEIGHT="20" style="border-bottom-style: solid; border-bottom-width: 1" align="right"><font face="Arial" size="2">Cleaning<br>Technologies</font></td>
</tr>
<tr>
<td WIDTH="241" VALIGN="BOTTOM"  HEIGHT="20"><font FACE="Arial" SIZE="2">Current assets</font></td>
<td WIDTH="23" VALIGN="BOTTOM"  HEIGHT="20" ALIGN="RIGHT"><font FACE="Arial" SIZE="2"><b>$</b></font></td>
<td WIDTH="50" VALIGN="BOTTOM"  HEIGHT="20" ALIGN="RIGHT"><b>-</b></td>
<td WIDTH="10" VALIGN="BOTTOM"  HEIGHT="20" ALIGN="RIGHT"></td>
<td WIDTH="42" VALIGN="BOTTOM"  HEIGHT="20" ALIGN="RIGHT"><font FACE="Arial" SIZE="2"><b>$</b></font></td>
<td WIDTH="50" VALIGN="BOTTOM"  HEIGHT="20" ALIGN="RIGHT"><font FACE="Arial" SIZE="2"><b>4.9</b></font></td>
<td WIDTH="6" VALIGN="BOTTOM"  HEIGHT="20"></td>
<td WIDTH="42" VALIGN="BOTTOM"  HEIGHT="20" ALIGN="RIGHT"><font FACE="Arial" SIZE="2">$</font></td>
<td WIDTH="50" VALIGN="BOTTOM"  HEIGHT="20" ALIGN="RIGHT"><font FACE="Arial" SIZE="2">11.5</font></td>
<td WIDTH="17" VALIGN="BOTTOM"  HEIGHT="20"></td>
<td WIDTH="31" VALIGN="BOTTOM"  HEIGHT="20" ALIGN="RIGHT"><font FACE="Arial" SIZE="2">$</font></td>
<td WIDTH="48" VALIGN="BOTTOM"  HEIGHT="20" ALIGN="RIGHT"><font FACE="Arial" SIZE="2">7.9</font></td>
</tr>
<tr>
<td WIDTH="241" VALIGN="BOTTOM"  HEIGHT="20"><font FACE="Arial" SIZE="2">Property, plant and equipment, net</font></td>
<td WIDTH="23" VALIGN="BOTTOM"  HEIGHT="20"></td>
<td WIDTH="50" VALIGN="BOTTOM"  HEIGHT="20" ALIGN="RIGHT"><b>-</b></td>
<td WIDTH="10" VALIGN="BOTTOM"  HEIGHT="20" ALIGN="RIGHT"></td>
<td WIDTH="42" VALIGN="BOTTOM"  HEIGHT="20" ALIGN="RIGHT"></td>
<td WIDTH="50" VALIGN="BOTTOM"  HEIGHT="20" ALIGN="RIGHT"><font FACE="Arial" SIZE="2"><b>0.6</b></font></td>
<td WIDTH="6" VALIGN="BOTTOM"  HEIGHT="20" ALIGN="RIGHT"></td>
<td WIDTH="42" VALIGN="BOTTOM"  HEIGHT="20" ALIGN="RIGHT"></td>
<td WIDTH="50" VALIGN="BOTTOM"  HEIGHT="20" ALIGN="RIGHT"><font FACE="Arial" SIZE="2">2.7</font></td>
<td WIDTH="17" VALIGN="BOTTOM"  HEIGHT="20" ALIGN="RIGHT"></td>
<td WIDTH="31" VALIGN="BOTTOM"  HEIGHT="20" ALIGN="RIGHT"></td>
<td WIDTH="48" VALIGN="BOTTOM"  HEIGHT="20" ALIGN="RIGHT"><font FACE="Arial" SIZE="2">3.7</font></td>
</tr>
<tr>
<td WIDTH="241" VALIGN="BOTTOM"  HEIGHT="20"><font FACE="Arial" SIZE="2">Goodwill</font></td>
<td WIDTH="23" VALIGN="BOTTOM"  HEIGHT="20" ALIGN="RIGHT"></td>
<td WIDTH="50" VALIGN="BOTTOM"  HEIGHT="20" ALIGN="RIGHT"><b>-</b></td>
<td WIDTH="10" VALIGN="BOTTOM"  HEIGHT="20" ALIGN="RIGHT"></td>
<td WIDTH="42" VALIGN="BOTTOM"  HEIGHT="20" ALIGN="RIGHT"></td>
<td WIDTH="50" VALIGN="BOTTOM"  HEIGHT="20" ALIGN="RIGHT"><font FACE="Arial" SIZE="2"><b>3.7</b></font></td>
<td WIDTH="6" VALIGN="BOTTOM"  HEIGHT="20" ALIGN="RIGHT"></td>
<td WIDTH="42" VALIGN="BOTTOM"  HEIGHT="20" ALIGN="RIGHT"></td>
<td WIDTH="50" VALIGN="BOTTOM"  HEIGHT="20" ALIGN="RIGHT"><font FACE="Arial" SIZE="2">16.0</font></td>
<td WIDTH="17" VALIGN="BOTTOM"  HEIGHT="20" ALIGN="RIGHT"></td>
<td WIDTH="31" VALIGN="BOTTOM"  HEIGHT="20" ALIGN="RIGHT"></td>
<td WIDTH="48" VALIGN="BOTTOM"  HEIGHT="20" ALIGN="RIGHT"><font FACE="Arial" SIZE="2">4.8</font></td>
</tr>
<tr>
<td WIDTH="243" VALIGN="middle"  HEIGHT="20" style="border-bottom-style: solid; border-bottom-width: 1"><font FACE="Arial" SIZE="2">Other assets</font></td>
<td WIDTH="25" VALIGN="middle"  HEIGHT="20" style="border-bottom-style: solid; border-bottom-width: 1">&nbsp;</td>
<td WIDTH="52" VALIGN="middle"  HEIGHT="20" style="border-bottom-style: solid; border-bottom-width: 1" align="right"><b>-</b></td>
<td WIDTH="12" VALIGN="middle"  HEIGHT="20" style="border-bottom-style: solid; border-bottom-width: 1">&nbsp;</td>
<td WIDTH="44" VALIGN="middle"  HEIGHT="20" style="border-bottom-style: solid; border-bottom-width: 1" align="right">&nbsp;</td>
<td WIDTH="52" VALIGN="middle"  HEIGHT="20" style="border-bottom-style: solid; border-bottom-width: 1" align="right"><font FACE="Arial" SIZE="2"><b>0.2</b></font></td>
<td WIDTH="8" VALIGN="middle"  HEIGHT="20" style="border-bottom-style: solid; border-bottom-width: 1">&nbsp;</td>
<td WIDTH="44" VALIGN="middle"  HEIGHT="20" style="border-bottom-style: solid; border-bottom-width: 1">&nbsp;</td>
<td WIDTH="52" VALIGN="middle"  HEIGHT="20" style="border-bottom-style: solid; border-bottom-width: 1" align="right"><font size="2" face="Arial">0.8</font></td>
<td WIDTH="19" VALIGN="middle"  HEIGHT="20" style="border-bottom-style: solid; border-bottom-width: 1" align="right">&nbsp;</td>
<td WIDTH="33" VALIGN="middle"  HEIGHT="20" style="border-bottom-style: solid; border-bottom-width: 1" align="right">&nbsp;</td>
<td WIDTH="50" VALIGN="middle"  HEIGHT="20" style="border-bottom-style: solid; border-bottom-width: 1" align="right"><font size="2" face="Arial">2.6</font></td>
</tr>
<tr>
<td WIDTH="243" VALIGN="middle"  HEIGHT="20" style="border-bottom-style: solid; border-bottom-width: 1">&nbsp;</td>
<td WIDTH="25" VALIGN="middle"  HEIGHT="20" style="border-bottom-style: solid; border-bottom-width: 1">&nbsp;</td>
<td WIDTH="52" VALIGN="middle"  HEIGHT="20" align="right" style="border-bottom-style: solid; border-bottom-width: 1"><b>-</b></td>
<td WIDTH="12" VALIGN="middle"  HEIGHT="20" align="right" style="border-bottom-style: solid; border-bottom-width: 1">&nbsp;</td>
<td WIDTH="44" VALIGN="middle"  HEIGHT="20" align="right" style="border-bottom-style: solid; border-bottom-width: 1">&nbsp;</td>
<td WIDTH="52" VALIGN="middle"  HEIGHT="20" align="right" style="border-bottom-style: solid; border-bottom-width: 1"><font size="2" face="Arial"><b>9.4</b></font></td>
<td WIDTH="8" VALIGN="middle"  HEIGHT="20" align="right" style="border-bottom-style: solid; border-bottom-width: 1">&nbsp;</td>
<td WIDTH="44" VALIGN="middle"  HEIGHT="20" align="right" style="border-bottom-style: solid; border-bottom-width: 1">&nbsp;</td>
<td WIDTH="52" VALIGN="middle"  HEIGHT="20" align="right" style="border-bottom-style: solid; border-bottom-width: 1"><font size="2" face="Arial">31.0</font></td>
<td WIDTH="19" VALIGN="middle"  HEIGHT="20" align="right" style="border-bottom-style: solid; border-bottom-width: 1">&nbsp;</td>
<td WIDTH="33" VALIGN="middle"  HEIGHT="20" align="right" style="border-bottom-style: solid; border-bottom-width: 1">&nbsp;</td>
<td WIDTH="50" VALIGN="middle"  HEIGHT="20" align="right" style="border-bottom-style: solid; border-bottom-width: 1"><font size="2" face="Arial">19.0</font></td>
</tr>
<tr>
<td WIDTH="243" VALIGN="BOTTOM"  HEIGHT="20" style="border-bottom-style: solid; border-bottom-width: 2"><font FACE="Arial" SIZE="2">Assets of discontinued operations</font></td>
<td WIDTH="25" VALIGN="BOTTOM"  HEIGHT="20" style="border-bottom-style: solid; border-bottom-width: 2">
  <p align="right">&nbsp;<font FACE="Arial" SIZE="2"><b>$</b></font></p>
</td>
<td WIDTH="52" VALIGN="BOTTOM"  HEIGHT="20" style="border-bottom-style: solid; border-bottom-width: 2">&nbsp;</td>
<td WIDTH="12" VALIGN="BOTTOM"  HEIGHT="20" style="border-bottom-style: solid; border-bottom-width: 2">&nbsp;</td>
<td WIDTH="44" VALIGN="BOTTOM"  HEIGHT="20" style="border-bottom-style: solid; border-bottom-width: 2" align="right"><font FACE="Arial" SIZE="2"><b>$</b></font></td>
<td WIDTH="52" VALIGN="BOTTOM"  HEIGHT="20" style="border-bottom-style: solid; border-bottom-width: 2" align="right"><font size="2" face="Arial"><b>9.4</b></font></td>
<td WIDTH="8" VALIGN="BOTTOM"  HEIGHT="20" style="border-bottom-style: solid; border-bottom-width: 2" align="right">&nbsp;</td>
<td WIDTH="44" VALIGN="BOTTOM"  HEIGHT="20" style="border-bottom-style: solid; border-bottom-width: 2" align="right"><font FACE="Arial" SIZE="2">$</font>&nbsp;</td>
<td WIDTH="52" VALIGN="BOTTOM"  HEIGHT="20" style="border-bottom-style: solid; border-bottom-width: 2" align="right">&nbsp;-</td>
<td WIDTH="19" VALIGN="BOTTOM"  HEIGHT="20" style="border-bottom-style: solid; border-bottom-width: 2" align="right">&nbsp;</td>
<td WIDTH="33" VALIGN="BOTTOM"  HEIGHT="20" style="border-bottom-style: solid; border-bottom-width: 2" align="right"><font FACE="Arial" SIZE="2">$</font></td>
<td WIDTH="50" VALIGN="BOTTOM"  HEIGHT="20" style="border-bottom-style: solid; border-bottom-width: 2" align="right"><font size="2" face="Arial">50.0</font></td>
</tr>
<tr>
<td WIDTH="241" VALIGN="BOTTOM"  HEIGHT="20"><font FACE="Arial" SIZE="2">Current liabilities</font></td>
<td WIDTH="23" VALIGN="BOTTOM"  HEIGHT="20" ALIGN="RIGHT"></td>
<td WIDTH="50" VALIGN="BOTTOM"  HEIGHT="20" ALIGN="RIGHT"><b>-</b></td>
<td WIDTH="10" VALIGN="BOTTOM"  HEIGHT="20" ALIGN="RIGHT"></td>
<td WIDTH="42" VALIGN="BOTTOM"  HEIGHT="20" ALIGN="RIGHT"></td>
<td WIDTH="50" VALIGN="BOTTOM"  HEIGHT="20" ALIGN="RIGHT"><font FACE="Arial" SIZE="2"><b>1.2</b></font></td>
<td WIDTH="6" VALIGN="BOTTOM"  HEIGHT="20" ALIGN="RIGHT"></td>
<td WIDTH="42" VALIGN="BOTTOM"  HEIGHT="20" ALIGN="RIGHT"></td>
<td WIDTH="50" VALIGN="BOTTOM"  HEIGHT="20" ALIGN="RIGHT"><font FACE="Arial" SIZE="2">12.8</font></td>
<td WIDTH="17" VALIGN="BOTTOM"  HEIGHT="20" ALIGN="RIGHT"></td>
<td WIDTH="31" VALIGN="BOTTOM"  HEIGHT="20" ALIGN="RIGHT"></td>
<td WIDTH="48" VALIGN="BOTTOM"  HEIGHT="20" ALIGN="RIGHT"><font FACE="Arial" SIZE="2">0.1</font></td>
</tr>
<tr>
<td WIDTH="241" VALIGN="BOTTOM"  HEIGHT="20"><font FACE="Arial" SIZE="2">Other liabilities</font></td>
<td WIDTH="23" VALIGN="BOTTOM"  HEIGHT="20"ALIGN="RIGHT"></td>
<td WIDTH="50" VALIGN="BOTTOM"  HEIGHT="20" ALIGN="RIGHT"><b>-</b></td>
<td WIDTH="10" VALIGN="BOTTOM"  HEIGHT="20" ALIGN="RIGHT"></td>
<td WIDTH="42" VALIGN="BOTTOM"  HEIGHT="20" ALIGN="RIGHT"></td>
<td WIDTH="50" VALIGN="BOTTOM"  HEIGHT="20" ALIGN="RIGHT"><b>-</b></td>
<td WIDTH="6" VALIGN="BOTTOM"  HEIGHT="20" ALIGN="RIGHT"></td>
<td WIDTH="42" VALIGN="BOTTOM"  HEIGHT="20" ALIGN="RIGHT"></td>
<td WIDTH="50" VALIGN="BOTTOM"  HEIGHT="20" ALIGN="RIGHT"><font FACE="Arial" SIZE="2">0.9</font></td>
<td WIDTH="17" VALIGN="BOTTOM"  HEIGHT="20" ALIGN="RIGHT"></td>
<td WIDTH="31" VALIGN="BOTTOM"  HEIGHT="20" ALIGN="RIGHT"></td>
<td WIDTH="48" VALIGN="BOTTOM"  HEIGHT="20" ALIGN="RIGHT"><font FACE="Arial" SIZE="2">4.1</font></td>
</tr>
<tr>
<td WIDTH="243" VALIGN="BOTTOM"  HEIGHT="20" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1">&nbsp;</td>
<td WIDTH="25" VALIGN="BOTTOM"  HEIGHT="20" align="right" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1"><font face="Arial" size="2"><b>$</b></font></td>
<td WIDTH="52" VALIGN="BOTTOM"  HEIGHT="20" align="right" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1"><b>-</b></td>
<td WIDTH="12" VALIGN="BOTTOM"  HEIGHT="20" align="right" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1">&nbsp;</td>
<td WIDTH="44" VALIGN="BOTTOM"  HEIGHT="20" align="right" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1"><font face="Arial" size="2"><b>$</b></font></td>
<td WIDTH="52" VALIGN="BOTTOM"  HEIGHT="20" align="right" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1"><font size="2" face="Arial"><b>1.2</b></font></td>
<td WIDTH="8" VALIGN="BOTTOM"  HEIGHT="20" align="right" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1">&nbsp;</td>
<td WIDTH="44" VALIGN="BOTTOM"  HEIGHT="20" align="right" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1"><font face="Arial" size="2">$</font></td>
<td WIDTH="52" VALIGN="BOTTOM"  HEIGHT="20" align="right" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1"><font size="2" face="Arial">13.7</font></td>
<td WIDTH="19" VALIGN="BOTTOM"  HEIGHT="20" align="right" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1">&nbsp;</td>
<td WIDTH="33" VALIGN="BOTTOM"  HEIGHT="20" align="right" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1"><font face="Arial" size="2">$</font></td>
<td WIDTH="50" VALIGN="BOTTOM"  HEIGHT="20" align="right" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1"><font size="2" face="Arial">4.2</font></td>
</tr>
<tr>
<td WIDTH="243" VALIGN="BOTTOM"  HEIGHT="20" style="border-bottom-style: solid; border-bottom-width: 2"><font FACE="Arial" SIZE="2">Liabilities of discontinued operations</font></td>
<td WIDTH="25" VALIGN="BOTTOM"  HEIGHT="20" style="border-bottom-style: solid; border-bottom-width: 2">
  <p align="right">&nbsp;<font FACE="Arial" SIZE="2"><b>$</b></font></p>
</td>
<td WIDTH="52" VALIGN="BOTTOM"  HEIGHT="20" style="border-bottom-style: solid; border-bottom-width: 2">
  <p align="right">&nbsp;-</p>
</td>
<td WIDTH="12" VALIGN="BOTTOM"  HEIGHT="20" style="border-bottom-style: solid; border-bottom-width: 2">&nbsp;</td>
<td WIDTH="44" VALIGN="BOTTOM"  HEIGHT="20" style="border-bottom-style: solid; border-bottom-width: 2" align="right"><font face="Arial" size="2"><b>$</b></font></td>
<td WIDTH="52" VALIGN="BOTTOM"  HEIGHT="20" style="border-bottom-style: solid; border-bottom-width: 2" align="right"><font size="2" face="Arial"><b>1.2</b></font></td>
<td WIDTH="8" VALIGN="BOTTOM"  HEIGHT="20" style="border-bottom-style: solid; border-bottom-width: 2" align="right">&nbsp;</td>
<td WIDTH="44" VALIGN="BOTTOM"  HEIGHT="20" style="border-bottom-style: solid; border-bottom-width: 2" align="right"><font FACE="Arial" SIZE="2">$</font>&nbsp;</td>
<td WIDTH="52" VALIGN="BOTTOM"  HEIGHT="20" style="border-bottom-style: solid; border-bottom-width: 2" align="right">-</td>
<td WIDTH="19" VALIGN="BOTTOM"  HEIGHT="20" style="border-bottom-style: solid; border-bottom-width: 2" align="right">&nbsp;</td>
<td WIDTH="33" VALIGN="BOTTOM"  HEIGHT="20" style="border-bottom-style: solid; border-bottom-width: 2" align="right"><font face="Arial" size="2">$</font></td>
<td WIDTH="50" VALIGN="BOTTOM"  HEIGHT="20" style="border-bottom-style: solid; border-bottom-width: 2" align="right"><font size="2" face="Arial">17.9</font></td>
</tr>
</table>

<p>&nbsp;</p>

<p><b><font face="Arial" color="#0000ff" size="2">Note 4: Letters for Credit and
Guarantees</font></b> <br>
As at June 30, 2003, CAE had outstanding letters of credit and performance
guarantees in the amount of $167.9 million (2003 - $195.1 million) issued in the
normal course of business. &nbsp;  These
guarantees are issued under standby facilities available to the Company through
various financial institutions.

 </p>
<p class="MsoNormal" style="text-align:justify"> The advance payment guarantees
are related to progress/milestone payments made by our customers and are reduced
or eliminated upon delivery of the product. The contract performance guarantees
are linked to the completion of the intended product or service rendered by CAE
and at the satisfaction of the customer. &nbsp;  It
represents 10% to 20% of the overall contract amount. &nbsp;
 The customer releases the Company from these guarantees at the signature
of a certificate of completion.

 </p>

</font>

<table BORDER="0" CELLSPACING="0" CELLPADDING="0" WIDTH="634">
<tr>
<td WIDTH="241" VALIGN="BOTTOM" HEIGHT="20"><font face="Arial" size="1">(amounts in
  millions of Canadian dollars)</font></td>
<font FACE="Arial" SIZE="2">
<td WIDTH="181" VALIGN="BOTTOM" COLSPAN="5" HEIGHT="20" ALIGN="RIGHT"><font FACE="Arial" SIZE="2"><b>as at
  June 30, 2003<br>(Unaudited)</b></font></td>
<td WIDTH="6" VALIGN="BOTTOM" HEIGHT="20"></td>
<td WIDTH="189" VALIGN="BOTTOM" COLSPAN="5" HEIGHT="20" ALIGN="RIGHT"><font face="Arial" size="2">as at March
  31, 2003<br>(Audited)</font></td>
</tr>
<tr>
<td WIDTH="243" VALIGN="BOTTOM"  HEIGHT="20" style="border-bottom-style: solid; border-bottom-width: 1"></td>
<td WIDTH="25" VALIGN="middle"  HEIGHT="20" style="border-bottom-style: solid; border-bottom-width: 1" align="right"></td>
<td WIDTH="52" VALIGN="BOTTOM"  HEIGHT="20" style="border-bottom-style: solid; border-bottom-width: 1" align="right"></td>
<td WIDTH="12" VALIGN="middle"  HEIGHT="20" style="border-bottom-style: solid; border-bottom-width: 1" align="right"></td>
<td WIDTH="96" VALIGN="BOTTOM" COLSPAN="2"  HEIGHT="20" style="border-bottom-style: solid; border-bottom-width: 1" align="right"></td>
<td WIDTH="8" VALIGN="middle"  HEIGHT="20" style="border-bottom-style: solid; border-bottom-width: 1" align="right"></td>
<td WIDTH="44" VALIGN="middle"  HEIGHT="20" style="border-bottom-style: solid; border-bottom-width: 1" align="right"></td>
<td WIDTH="52" VALIGN="BOTTOM"  HEIGHT="20" style="border-bottom-style: solid; border-bottom-width: 1" align="right"></td>
<td WIDTH="19" VALIGN="middle"  HEIGHT="20" style="border-bottom-style: solid; border-bottom-width: 1" align="right"></td>
<td WIDTH="83" VALIGN="BOTTOM" COLSPAN="2"  HEIGHT="20" style="border-bottom-style: solid; border-bottom-width: 1" align="right"></td>
</tr>
<tr>
<td WIDTH="241" VALIGN="BOTTOM"  HEIGHT="20"></td>
<td WIDTH="23" VALIGN="BOTTOM"  HEIGHT="20" ALIGN="RIGHT"></td>
<td WIDTH="50" VALIGN="BOTTOM"  HEIGHT="20" ALIGN="RIGHT"></td>
<td WIDTH="10" VALIGN="BOTTOM"  HEIGHT="20" ALIGN="RIGHT"></td>
<td WIDTH="42" VALIGN="BOTTOM"  HEIGHT="20" ALIGN="RIGHT"></td>
<td WIDTH="50" VALIGN="BOTTOM"  HEIGHT="20" ALIGN="RIGHT"></td>
<td WIDTH="6" VALIGN="BOTTOM"  HEIGHT="20"></td>
<td WIDTH="42" VALIGN="BOTTOM"  HEIGHT="20" ALIGN="RIGHT"></td>
<td WIDTH="50" VALIGN="BOTTOM"  HEIGHT="20" ALIGN="RIGHT"></td>
<td WIDTH="17" VALIGN="BOTTOM"  HEIGHT="20"></td>
<td WIDTH="31" VALIGN="BOTTOM"  HEIGHT="20" ALIGN="RIGHT"></td>
<td WIDTH="48" VALIGN="BOTTOM"  HEIGHT="20" ALIGN="RIGHT"></td>
</tr>
<tr>
<td WIDTH="241" VALIGN="BOTTOM"  HEIGHT="20"><font FACE="Arial" SIZE="2">Advance
  payment</font></td>
<td WIDTH="23" VALIGN="BOTTOM"  HEIGHT="20" ALIGN="RIGHT"></td>
<td WIDTH="50" VALIGN="BOTTOM"  HEIGHT="20" ALIGN="RIGHT"></td>
<td WIDTH="10" VALIGN="BOTTOM"  HEIGHT="20" ALIGN="RIGHT"></td>
<td WIDTH="42" VALIGN="BOTTOM"  HEIGHT="20" ALIGN="RIGHT"><font FACE="Arial" SIZE="2"><b>$</b></font></td>
<td WIDTH="50" VALIGN="BOTTOM"  HEIGHT="20" ALIGN="RIGHT"><font FACE="Arial" SIZE="2"><b>139.7</b></font></td>
<td WIDTH="6" VALIGN="BOTTOM"  HEIGHT="20"></td>
<td WIDTH="42" VALIGN="BOTTOM"  HEIGHT="20" ALIGN="RIGHT"></td>
<td WIDTH="50" VALIGN="BOTTOM"  HEIGHT="20" ALIGN="RIGHT"></td>
<td WIDTH="17" VALIGN="BOTTOM"  HEIGHT="20"></td>
<td WIDTH="31" VALIGN="BOTTOM"  HEIGHT="20" ALIGN="RIGHT"><font FACE="Arial" SIZE="2">$</font></td>
<td WIDTH="48" VALIGN="BOTTOM"  HEIGHT="20" ALIGN="RIGHT"><font FACE="Arial" SIZE="2">159.9</font></td>
</tr>
<tr>
<td WIDTH="241" VALIGN="BOTTOM"  HEIGHT="20"><font FACE="Arial" SIZE="2">Contract
  performance</font></td>
<td WIDTH="23" VALIGN="BOTTOM"  HEIGHT="20"></td>
<td WIDTH="50" VALIGN="BOTTOM"  HEIGHT="20" ALIGN="RIGHT"></td>
<td WIDTH="10" VALIGN="BOTTOM"  HEIGHT="20" ALIGN="RIGHT"></td>
<td WIDTH="42" VALIGN="BOTTOM"  HEIGHT="20" ALIGN="RIGHT"></td>
<td WIDTH="50" VALIGN="BOTTOM"  HEIGHT="20" ALIGN="RIGHT"><font FACE="Arial" SIZE="2"><b>25.6</b></font></td>
<td WIDTH="6" VALIGN="BOTTOM"  HEIGHT="20" ALIGN="RIGHT"></td>
<td WIDTH="42" VALIGN="BOTTOM"  HEIGHT="20" ALIGN="RIGHT"></td>
<td WIDTH="50" VALIGN="BOTTOM"  HEIGHT="20" ALIGN="RIGHT"></td>
<td WIDTH="17" VALIGN="BOTTOM"  HEIGHT="20" ALIGN="RIGHT"></td>
<td WIDTH="31" VALIGN="BOTTOM"  HEIGHT="20" ALIGN="RIGHT"></td>
<td WIDTH="48" VALIGN="BOTTOM"  HEIGHT="20" ALIGN="RIGHT"><font FACE="Arial" SIZE="2">32.4</font></td>
</tr>
<tr>
<td WIDTH="243" VALIGN="middle"  HEIGHT="20" style="border-bottom-style: solid; border-bottom-width: 1"><font FACE="Arial" SIZE="2">Others</font></td>
<td WIDTH="25" VALIGN="middle"  HEIGHT="20" style="border-bottom-style: solid; border-bottom-width: 1"></td>
<td WIDTH="52" VALIGN="middle"  HEIGHT="20" style="border-bottom-style: solid; border-bottom-width: 1" align="right"></td>
<td WIDTH="12" VALIGN="middle"  HEIGHT="20" style="border-bottom-style: solid; border-bottom-width: 1">&nbsp;</td>
<td WIDTH="44" VALIGN="middle"  HEIGHT="20" style="border-bottom-style: solid; border-bottom-width: 1" align="right">&nbsp;</td>
<td WIDTH="52" VALIGN="middle"  HEIGHT="20" style="border-bottom-style: solid; border-bottom-width: 1" align="right"><font FACE="Arial" SIZE="2"><b>2.6</b></font></td>
<td WIDTH="8" VALIGN="middle"  HEIGHT="20" style="border-bottom-style: solid; border-bottom-width: 1">&nbsp;</td>
<td WIDTH="44" VALIGN="middle"  HEIGHT="20" style="border-bottom-style: solid; border-bottom-width: 1"></td>
<td WIDTH="52" VALIGN="middle"  HEIGHT="20" style="border-bottom-style: solid; border-bottom-width: 1" align="right"></td>
<td WIDTH="19" VALIGN="middle"  HEIGHT="20" style="border-bottom-style: solid; border-bottom-width: 1" align="right">&nbsp;</td>
<td WIDTH="33" VALIGN="middle"  HEIGHT="20" style="border-bottom-style: solid; border-bottom-width: 1" align="right">&nbsp;</td>
<td WIDTH="50" VALIGN="middle"  HEIGHT="20" style="border-bottom-style: solid; border-bottom-width: 1" align="right"><font size="2" face="Arial">2.8</font></td>
</tr>
<tr>
<td WIDTH="243" VALIGN="middle"  HEIGHT="20" style="border-bottom-style: solid; border-bottom-width: 1"><font FACE="Arial" SIZE="2">TOTAL</font></td>
<td WIDTH="25" VALIGN="middle"  HEIGHT="20" style="border-bottom-style: solid; border-bottom-width: 1"></td>
<td WIDTH="52" VALIGN="middle"  HEIGHT="20" align="right" style="border-bottom-style: solid; border-bottom-width: 1"></td>
<td WIDTH="12" VALIGN="middle"  HEIGHT="20" align="right" style="border-bottom-style: solid; border-bottom-width: 1">&nbsp;</td>
<td WIDTH="44" VALIGN="middle"  HEIGHT="20" style="border-bottom-style: solid; border-bottom-width: 1" align="right"><font FACE="Arial" SIZE="2"><b>$</b></font>&nbsp;</td>
<td WIDTH="52" VALIGN="middle"  HEIGHT="20" style="border-bottom-style: solid; border-bottom-width: 1" align="right"><font FACE="Arial" SIZE="2"><b>167.9</b></font></td>
<td WIDTH="12" VALIGN="middle"  HEIGHT="20" align="right" style="border-bottom-style: solid; border-bottom-width: 1">&nbsp;</td>
<td WIDTH="44" VALIGN="middle"  HEIGHT="20" align="right" style="border-bottom-style: solid; border-bottom-width: 1"></td>
<td WIDTH="52" VALIGN="middle"  HEIGHT="20" align="right" style="border-bottom-style: solid; border-bottom-width: 1"></td>
<td WIDTH="19" VALIGN="middle"  HEIGHT="20" align="right" style="border-bottom-style: solid; border-bottom-width: 1">&nbsp;</td>
<td WIDTH="33" VALIGN="middle"  HEIGHT="20" align="right" style="border-bottom-style: solid; border-bottom-width: 1">&nbsp;<font FACE="Arial" SIZE="2">$</font></td>
<td WIDTH="50" VALIGN="middle"  HEIGHT="20" align="right" style="border-bottom-style: solid; border-bottom-width: 1"><font size="2" face="Arial">195.1</font></td>
</tr>
</table>

<p><b><br>
<font face="Arial" color="#0000ff" size="2">Note 5: Supplementary Information<br>
</font></b>Cash provided by (used in) non-cash working capital:</p>

<table border="0" cellpadding="0" cellspacing="0" width="598" height="250">
<tr>
<td width="279" height="50"><font face="Arial" size="2"><br>
  </font></font><font face="Arial" size="1">three months ended June
  30 (amounts in millions of Canadian dollars)</font></td>
<font FACE="Arial" SIZE="2">
<td width="153" colspan="4" height="50" align="center">
  <p align="right"><font face="Arial" size="2"><b>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
  2003 (Unaudited)</b></font></p>
</td>
<td width="39" height="50"></td>
<td width="118" colspan="3" height="50" align="center">
<font FACE="Arial" SIZE="2">
<p align="right"><b>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp; </b>2002 <b>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </b>(Unaudited)</p>
  </font></td>
</tr>
<tr>
<td width="281" style="border-bottom-style: solid; border-bottom-width: 1" height="17" valign="bottom"></td>
<td width="11" align="center" style="border-bottom-style: solid; border-bottom-width: 1" height="17" valign="bottom">&nbsp;</td>
<td width="50" align="right" style="border-bottom-style: solid; border-bottom-width: 1" height="17" valign="bottom"></td>
<td width="48" align="center" style="border-bottom-style: solid; border-bottom-width: 1" height="17" valign="bottom">&nbsp;</td>
<td width="47" align="right" style="border-bottom-style: solid; border-bottom-width: 1" height="17" valign="bottom">
  <p align="center"></p>
</td>
<td width="41" align="center" style="border-bottom-style: solid; border-bottom-width: 1" height="17" valign="bottom">&nbsp;</td>
<td width="19" align="right" style="border-bottom-style: solid; border-bottom-width: 1" height="17" valign="bottom"></td>
<td width="48" align="right" style="border-bottom-style: solid; border-bottom-width: 1" height="17"></td>
<td width="53" align="right" style="border-bottom-style: solid; border-bottom-width: 1" height="17"></td>
</tr>
<tr>
<td width="279" height="21"><font face="Arial" size="2">Accounts receivable</font></td>
<td width="9" align="right" height="21"></td>
<td width="48" align="right" height="21"></td>
<td width="46" align="right" height="21"><font face="Arial" size="2"><b>$</b></font></td>
<td width="45" align="right" height="21"><font face="Arial" size="2"><b>23.2</b></font></td>
<td width="39" align="right" height="21"></td>
<td width="17" align="right" height="21"></td>
<td width="46" align="right" height="21"><font face="Arial" size="2">$</font></td>
<td width="51" align="right" height="21"><font face="Arial" size="2">(5.1)</font></td>
</tr>
<tr>
<td width="279" height="18"><font face="Arial" size="2">Inventories</font></td>
<td width="9" align="right" height="18"></td><td width="48" align="right" height="18"></td>
<td width="46" align="right" height="18"></td><td width="45" align="right" height="18"><font face="Arial" size="2"><b>(28.1)</b></font></td>
<td width="39" align="right" height="18"></td><td width="17" align="right" height="18"></td>
<td width="46" align="right" height="18"></td><td width="51" align="right" height="18"><font face="Arial" size="2">(5.3)</font></td>
</tr>
<tr>
<td width="279" height="18"><font face="Arial" size="2">Prepaid expenses</font></td>
<td width="9" align="right" height="18"></td><td width="48" align="right" height="18"></td>
<td width="46" align="right" height="18"></td><td width="45" align="right" height="18"><font face="Arial" size="2"><b>2.0</b></font></td>
<td width="39" align="right" height="18"></td><td width="17" align="right" height="18"></td>
<td width="46" align="right" height="18"></td><td width="51" align="right" height="18"><font face="Arial" size="2">(3.1)</font></td>
</tr>
<tr>
<td width="279" height="18"><font face="Arial" size="2">Accounts payable and accrued liabilities</font></td>
<td width="9" align="right" height="18"></td><td width="48" align="right" height="18"></td>
<td width="46" align="right" height="18"></td><td width="45" align="right" height="18"><font face="Arial" size="2"><b>(76.3)</b></font></td>
<td width="39" align="right" height="18"></td><td width="17" align="right" height="18"></td>
<td width="46" align="right" height="18"></td><td width="51" align="right" height="18"><font face="Arial" size="2">(62.3)</font></td>
</tr>
<tr>
<td width="279" height="18"><font face="Arial" size="2">Deposits on contracts</font></td>
<td width="9" align="right" height="18"></td><td width="48" align="right" height="18"></td>
<td width="46" align="right" height="18"></td><td width="45" align="right" height="18"><font face="Arial" size="2"><b>2.9</b></font></td>
<td width="39" align="right" height="18"></td><td width="17" align="right" height="18"></td>
<td width="46" align="right" height="18"></td><td width="51" align="right" height="18"><font face="Arial" size="2">(11.7))</font></td>
</tr>
<tr>
<td width="281" height="21" style="border-bottom-style: solid; border-bottom-width: 1"><font face="Arial" size="2">Income taxes recoverable</font></td>
<td width="11" align="right" height="21" valign="bottom" style="border-bottom-style: solid; border-bottom-width: 1">&nbsp;</td>
<td width="50" align="right" height="21" valign="bottom" style="border-bottom-style: solid; border-bottom-width: 1"></td>
<td width="48" align="right" height="21" valign="bottom" style="border-bottom-style: solid; border-bottom-width: 1"><b>&nbsp;</b></td>
<td width="47" align="right" height="21" valign="bottom" style="border-bottom-style: solid; border-bottom-width: 1"><font face="Arial" size="2"><b>2.4</b></font></td>
<td width="41" align="right" height="21" valign="bottom" style="border-bottom-style: solid; border-bottom-width: 1"></td>
<td width="19" align="right" height="21" valign="bottom" style="border-bottom-style: solid; border-bottom-width: 1"></td>
<td width="48" align="right" height="21" valign="bottom" style="border-bottom-style: solid; border-bottom-width: 1">&nbsp;</td>
<td width="53" align="right" height="21" valign="bottom" style="border-bottom-style: solid; border-bottom-width: 1"><font face="Arial" size="2">7.3</font></td>
</tr>
<tr>
<td width="281" height="21" style="border-bottom-style: solid; border-bottom-width: 2"><font face="Arial" size="2">Increase
  in non cash working capital</font></td>
<td width="11" align="right" height="21" style="border-bottom-style: solid; border-bottom-width: 2"></td>
<td width="50" align="right" height="21" style="border-bottom-style: solid; border-bottom-width: 2"></td>
<td width="48" align="right" height="21" style="border-bottom-style: solid; border-bottom-width: 2"><font face="Arial" size="2"><b>$</b></font></td>
<td width="47" align="right" height="21" style="border-bottom-style: solid; border-bottom-width: 2"><font face="Arial" size="2"><b>(73.9)</b></font></td>
<td width="41" align="right" height="21" style="border-bottom-style: solid; border-bottom-width: 2"></td>
<td width="19" align="right" height="21" style="border-bottom-style: solid; border-bottom-width: 2"></td>
<td width="48" align="right" height="21" style="border-bottom-style: solid; border-bottom-width: 2"><font face="Arial" size="2">$</font></td>
<td width="53" align="right" height="21" style="border-bottom-style: solid; border-bottom-width: 2"><font face="Arial" size="2">(80.2)</font></td>
</tr>

<tr><td height="21" style="border-bottom-style: solid; border-bottom-width: 2" colspan="9" width="597">&nbsp;</td></tr>

<tr><td width="281" height="21" style="border-bottom-style: solid; border-bottom-width: 2"><font face="Arial" size="2">Interest Paid</font></td>
<td width="11" align="right" height="21" style="border-bottom-style: solid; border-bottom-width: 2"></td>
<td width="50" align="right" height="21" style="border-bottom-style: solid; border-bottom-width: 2"></td>
<td width="48" align="right" height="21" style="border-bottom-style: solid; border-bottom-width: 2"><font face="Arial" size="2"><b>$</b></font></td>
<td width="47" align="right" height="21" style="border-bottom-style: solid; border-bottom-width: 2"><font face="Arial" size="2"><b>14.6</b></font></td>
<td width="41" align="right" height="21" style="border-bottom-style: solid; border-bottom-width: 2"></td>
<td width="19" align="right" height="21" style="border-bottom-style: solid; border-bottom-width: 2"></td>
<td width="48" align="right" height="21" style="border-bottom-style: solid; border-bottom-width: 2"><font face="Arial" size="2">$</font></td>
<td width="53" align="right" height="21" style="border-bottom-style: solid; border-bottom-width: 2"><font face="Arial" size="2">11.0</font></td>
</tr>
<tr>
<td width="279" height="21"><font face="Arial" size="2">Income taxes paid</font></td>
<td width="9" align="right" height="21"></td>
<td width="48" align="right" height="21"></td>
<td width="46" align="right" height="21"><font face="Arial" size="2"><b>$</b></font></td>
<td width="45" align="right" height="21"><font face="Arial" size="2"><b>2.9</b></font></td>
<td width="39" align="right" height="21"></td>
<td width="17" align="right" height="21"></td>
<td width="46" align="right" height="21"><font face="Arial" size="2">$</font></td>
<td width="51" align="right" height="21"><font face="Arial" size="2">2.8</font></td>
</tr>

<tr><td height="21" style="border-bottom-style: solid; border-bottom-width: 2" colspan="9" width="597">&nbsp;</td></tr>

<tr>
<td width="281" height="21" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 2"><font face="Arial" size="2">Foreign exchange gain</font></td>
<td width="11" align="right" height="21" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 2"></td>
<td width="50" align="right" height="21" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 2"></td>
<td width="48" align="right" height="21" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 2"><font face="Arial" size="2"><b>$</b></font></td>
<td width="47" align="right" height="21" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 2"><font face="Arial" size="2"><b>6.7</b></font></td>
<td width="41" align="right" height="21" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 2"></td>
<td width="19" align="right" height="21" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 2"></td>
<td width="48" align="right" height="21" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 2"><font face="Arial" size="2">
$</font></td>
<td width="53" align="right" height="21" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 2"><font face="Arial" size="2">6.6</font></td>
</tr>
</table>

<p>&nbsp;</p>

<p><b><font face="Arial" color="#0000ff" size="2">Note 6: Business and
Geographic Segments</font></b></p>

<table>
<tr>
<td colspan="2"><font FACE="Arial" SIZE="2">The Company's significant business
  segments include:</font></td>
</tr>
<tr>
<td width="20" valign="top"><font FACE="Arial" SIZE="2">(i)</font></td><td align="justify"><font FACE="Arial" SIZE="2">Civil Simulation and Training - a world-leading supplier of civil flight simulators and visual systems, and provider of business and civil aviation training.</font></td>
</tr>
<tr>
<td width="20" valign="top"><font FACE="Arial" SIZE="2">(ii)</font></td><td align="justify"><font FACE="Arial" SIZE="2">Military Simulation
  and Training - a premier supplier of military flight and land-based simulators, visual
  and training systems.</font></td>
</tr>
<tr>
<td width="20" valign="top"><font FACE="Arial" SIZE="2">(iii)</font></td><td align="justify"><font FACE="Arial" SIZE="2">Marine Controls - a world leader in the supply of automation and control systems for the naval and commercial markets. The business also provides naval training systems and designs and manufactures power plant training simulators and systems.</font></td>
</tr>
</table>

<p ALIGN="JUSTIFY"> Each operating segment is led
by a senior executive, offers different products and uses different technology
and marketing strategies. &nbsp;  The
Company evaluates performance based on operating earnings before interest and
income taxes and uses capital employed to assess resources allocated to each
segment. &nbsp;  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.

 </p>

<p>&nbsp;</p>

<hr>

<p align="right"><font size="1" face="Arial">CAE&nbsp; First Quarter Report 2004&nbsp; /&nbsp; page.19</font></p>

<p>&nbsp;</p>

<p><font size="2" face="Arial">Financial information on the Company's operating segments is shown in the following table:</font></p>

<table border="0" width="625" cellpadding="0" cellspacing="0" height="514">
<tr>
<td width="368" valign="baseline" align="left" height="66"><font face="Arial" size="2"><b>Business Segments</b></font>
</font>
  <p><font face="Arial" size="1">(amounts in millions of Canadian dollars)</font></p>
</td>
<font FACE="Arial" SIZE="2">
<td width="114" colspan="2" valign="bottom" align="right" height="66"><font face="Arial" size="2"><b>as at<br>June
  30, 2003<br>(Unaudited)</b></font></td>
<td width="108" colspan="2" valign="bottom" align="right" height="66"><font face="Arial" size="2">as at<br>March 31,
  2003<br>(Audited)</font></td>
</tr>
<tr>
<td width="590" colspan="5" height="18"><font face="Arial" size="2">Capital employed</font></td>
</tr>
<tr>
<td width="368" height="21"><font face="Arial" size="2">&nbsp;&nbsp; Civil Simulation and Training</font></td>
<td width="38" align="right" height="21"><font face="Arial" size="2"><b>$</b></font></td><td width="76" height="21" align="right"><font face="Arial" size="2"><b>1,091.3</b></font></td>
<td width="42" align="right" height="21"><font face="Arial" size="2">$</font></td><td width="66" align="right" height="21"><font face="Arial" size="2">1,156.9</font></td>
</tr>
<tr>
<td width="368" height="21"><font face="Arial" size="2">&nbsp;&nbsp; Military Simulation and Training</font></td>
<td width="38" height="21"></td><td width="76" height="21" align="right"><font face="Arial" size="2"><b>278.0</b></font></td>
<td width="42" height="21"></td><td width="66" align="right" height="21"><font face="Arial" size="2">247.7</font></td>
</tr>
<tr>
<td width="368" height="21"><font face="Arial" size="2">&nbsp;&nbsp; Marine Controls</font></td>
<td width="38" height="21"></td><td width="76" height="21" align="right"><font face="Arial" size="2"><b>128.4</b></font></td>
<td width="42" height="21"></td><td width="66" align="right" height="21"><font face="Arial" size="2">122.9</font></td>
</tr>
<tr>
<td width="368" height="21" style="border-bottom-style: solid; border-bottom-width: 1"><font face="Arial" size="2">&nbsp;&nbsp; Other</font></td>
<td width="38" height="21" style="border-bottom-style: solid; border-bottom-width: 1">&nbsp;</td>
<td width="76" height="21" align="right" style="border-bottom-style: solid; border-bottom-width: 1"><font face="Arial" size="2"><b>(4.8)</b></font></td>
<td width="42" height="21" style="border-bottom-style: solid; border-bottom-width: 1">&nbsp;</td>
<td width="66" align="right" height="21" style="border-bottom-style: solid; border-bottom-width: 1"><font face="Arial" size="2">(9.7)</font></td>
</tr>
<tr>
<td width="368" height="21"><font face="Arial" size="2">Total capital employed</font></td>
<td width="38" height="21" align="right"><font face="Arial" size="2"><b>$</b></font></td><td width="76" height="21" align="right"><font face="Arial" size="2"><b>1,492.9</b></font></td>
<td width="42" height="21" align="right"><font face="Arial" size="2">$</font></td><td width="66" align="right" height="21"><font face="Arial" size="2">1,517.8</font></td>
</tr>
<tr>
<td width="368" height="21"><font face="Arial" size="2">&nbsp;&nbsp; Cash</font></td>
<td width="38" height="21"></td><td width="76" height="21" align="right"><font face="Arial" size="2"><b>41.1</b></font></td>
<td width="42" height="21"></td><td width="66" align="right" height="21"><font face="Arial" size="2">17.1</font></td>
</tr>
<tr>
<td width="368" height="21"><font face="Arial" size="2">&nbsp;&nbsp; Short-term investments</font></td>
<td width="38" height="21"></td><td width="76" height="21" align="right"><font face="Arial" size="2"><b>6.3</b></font></td>
<td width="42" height="21"></td><td width="66" align="right" height="21"><font face="Arial" size="2">2.6</font></td>
</tr>
<tr>
<td width="368" height="21"><font face="Arial" size="2">&nbsp;&nbsp; Income taxes recoverable</font></td>
<td width="38" height="21"></td><td width="76" height="21" align="right"><font face="Arial" size="2"><b>27.3</b></font></td>
<td width="42" height="21"></td><td width="66" height="21" align="right"><font face="Arial" size="2">25.7</font></td>
</tr>
<tr>
<td width="368" height="21"><font size="2" face="Arial">&nbsp;&nbsp; Accounts payable and accrued liabilities</font></td>
<td width="38" height="21"></td><td width="76" height="21" align="right"><font face="Arial" size="2"><b>329.9</b></font></td>
<td width="42" height="21"></td><td width="66" height="21" align="right"><font face="Arial" size="2">413.3</font></td>
</tr>
<tr>
<td width="368" height="21"><font face="Arial" size="2">&nbsp;&nbsp; Deposits on contract</font></td>
<td width="38" height="21"></td><td width="76" height="21" align="right"><font face="Arial" size="2"><b>102.8</b></font></td>
<td width="42" height="21"></td><td width="66" height="21" align="right"><font face="Arial" size="2">101.2</font></td>
</tr>
<tr>
<td width="368" height="21"><font face="Arial" size="2">&nbsp;&nbsp; Future income taxes - short term</font></td>
<td width="38" height="21"></td><td width="76" height="21" align="right"><font face="Arial" size="2"><b>0.6</b></font></td>
<td width="42" height="21"></td><td width="66" height="21" align="right"><font face="Arial" size="2">3.5</font></td>
</tr>
<tr>
<td width="368" height="21"><font face="Arial" size="2">&nbsp;&nbsp; Future income taxes - long term</font></td>
<td width="38" height="21"></td><td width="76" height="21" align="right"><font face="Arial" size="2"><b>85.1</b></font></td>
<td width="42" height="21"></td><td width="66" height="21" align="right"><font face="Arial" size="2">85.7</font></td>
</tr>
<tr>
<td width="368" height="21"><font face="Arial" size="2">&nbsp;&nbsp; Long-term liabilities</font></td>
<td width="38" height="21"></td><td width="76" height="21" align="right"><font face="Arial" size="2"><b>145.7</b></font></td>
<td width="42" height="21"></td><td width="66" height="21" align="right"><font face="Arial" size="2">139.6</font>
</td>
</tr>
<tr>
<td width="368" height="21" style="border-bottom-style: solid; border-bottom-width: 1"><font face="Arial" size="2">&nbsp;&nbsp; Assets of discontinued operations</font></td>
<td width="38" height="21" style="border-bottom-style: solid; border-bottom-width: 1">&nbsp;</td>
<td width="76" height="21" align="right" style="border-bottom-style: solid; border-bottom-width: 1"><font face="Arial" size="2"><b>9.4</b></font></td>
<td width="42" height="21" style="border-bottom-style: solid; border-bottom-width: 1">&nbsp;</td>
<td width="66" height="21" align="right" style="border-bottom-style: solid; border-bottom-width: 1"><font face="Arial" size="2">50.0</font></td>
</tr>
<tr>
<td width="368" height="21" style="border-bottom-style: solid; border-bottom-width: 2"><font face="Arial" size="2">Total assets</font></td>
<td width="38" height="21" align="right" style="border-bottom-style: solid; border-bottom-width: 2"><font face="Arial" size="2"><b>$</b></font></td>
<td width="76" height="21" align="right" style="border-bottom-style: solid; border-bottom-width: 2"><font face="Arial" size="2"><b>2,241.1</b></font></td>
<td width="42" height="21" align="right" style="border-bottom-style: solid; border-bottom-width: 2"><font face="Arial" size="2">$</font></td>
<td width="66" height="21" align="right" style="border-bottom-style: solid; border-bottom-width: 2"><font face="Arial" size="2">2,356.5</font></td>
</tr>

<tr><td height="21" colspan="5"></td></tr>

<tr><td width="590" height="21" colspan="5"><font face="Arial" size="2">Total assets by segment</font></td></tr>
<tr>
<td width="368" nowrap height="21"><font face="Arial" size="2">&nbsp;&nbsp; Civil Simulation and Training</font></td>
<td width="38" height="21" align="right"><font face="Arial" size="2"><b>$</b></font></td><td width="76" height="21" align="right"><font face="Arial" size="2"><b>1,379.4</b></font></td>
<td width="42" height="21" align="right"><font face="Arial" size="2">$</font></td><td width="66" height="21" align="right"><font face="Arial" size="2">1,474.3</font></td>
</tr>
<tr>
<td width="368" height="21"><font face="Arial" size="2">&nbsp;&nbsp;&nbsp;Military Simulation and Training</font></td>
<td width="38" height="21" align="right"></td><td width="76" height="21" align="right"><font face="Arial" size="2"><b>447.8</b></font></td>
<td width="42" height="21" align="right"></td><td width="66" height="21" align="right"><font face="Arial" size="2">442.6</font></td>
</tr>
<tr>
<td width="368" height="21">&nbsp;&nbsp;<font face="Arial" size="2"> Marine Controls</font></td>
<td width="38" height="21" align="right"></td><td width="76" height="21" align="right"><font face="Arial" size="2"><b>196.2</b></font></td>
<td width="42" height="21" align="right"></td><td width="66" height="21" align="right"><font face="Arial" size="2">214.8</font></td>
</tr>
<tr>
<td width="368" height="21"><font face="Arial" size="2">&nbsp;&nbsp; Assets of
  discontinued operations</font></td>
<td width="38" height="21" align="right"></td><td width="76" height="21" align="right"><font face="Arial" size="2"><b>9.4</b></font></td>
<td width="42" height="21" align="right"></td><td width="66" height="21" align="right"><font face="Arial" size="2">50.0</font></td>
</tr>
<tr>
<td width="368" height="21" style="border-bottom-style: solid; border-bottom-width: 2"><font face="Arial" size="2">&nbsp;&nbsp; Other</font></td>
<td width="38" height="21" align="right" style="border-bottom-style: solid; border-bottom-width: 2">&nbsp;</td>
<td width="76" height="21" align="right" style="border-bottom-style: solid; border-bottom-width: 2"><font face="Arial" size="2"><b>208.3</b></font></td>
<td width="42" height="21" align="right" style="border-bottom-style: solid; border-bottom-width: 2">&nbsp;</td>
<td width="66" height="21" align="right" style="border-bottom-style: solid; border-bottom-width: 2"><font face="Arial" size="2">174.8</font></td>
</tr>
<tr>
<td width="368" height="21" style="border-bottom-style: solid; border-bottom-width: 2">&nbsp;</td>
<td width="38" height="21" align="right" style="border-bottom-style: solid; border-bottom-width: 2">&nbsp;</td>
<td width="76" height="21" align="right" style="border-bottom-style: solid; border-bottom-width: 2"><font face="Arial" size="2"><b>2,241.1</b></font></td>
<td width="42" height="21" align="right" style="border-bottom-style: solid; border-bottom-width: 2">&nbsp;</td>
<td width="66" height="21" align="right" style="border-bottom-style: solid; border-bottom-width: 2"><font face="Arial" size="2">2,356.5</font></td>
</tr>

<tr><td height="21" colspan="5"></td></tr>

<tr><td height="21" colspan="5"><font face="Arial" size="2">Additions and adjustments to goodwill</font></td></tr>
<tr>
<td width="368" height="21"><font face="Arial" size="2">&nbsp;&nbsp; Civil Simulation and Training</font></td>
<td width="38" height="21" align="right"><font face="Arial" size="2"><b>$</b></font></td><td width="76" height="21" align="right"><font face="Arial" size="2"><b>(13.4)</b></font></td>
<td width="42" height="21" align="right"><font face="Arial" size="2">$</font></td><td width="66" height="21" align="right"><font face="Arial" size="2">(4.9)</font></td>
</tr>
<tr>
<td width="368" nowrap height="21"><font face="Arial" size="2">&nbsp;&nbsp; Military Simulation and Training</font></td>
<td width="38" height="21" align="right"></td><td width="76" height="21" align="right"><font face="Arial" size="2"><b>(7.1)</b></font></td>
<td width="42" height="21" align="right"></td><td width="66" height="21" align="right"><font face="Arial" size="2">(7.1)</font></td>
</tr>
<tr>
<td width="368" height="21"><font face="Arial" size="2">&nbsp;&nbsp; Marine
  Controls</font></td>
<td width="38" height="21" align="right"></td><td width="76" height="21" align="right"><font face="Arial" size="2"><b>(3.4)</b></font></td>
<td width="42" height="21" align="right"></td><td width="66" height="21" align="right"><font face="Arial" size="2">3.3</font></td>
</tr>
<tr>
<td width="368" height="21"><font face="Arial" size="2">&nbsp;&nbsp; Other</font></td>
<td width="38" height="21" align="right"></td><td width="76" height="21" align="right"><font face="Arial" size="2"><b>(1.5)</b></font></td>
<td width="42" height="21" align="right"></td><td width="66" height="21" align="right"></td>
</tr>
<tr>
<td width="368" height="21" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 2"></td>
<td width="38" height="21" align="right" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 2"></td>
<td width="76" height="21" align="right" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 2"></td>
<td width="42" height="21" align="right" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 2"></td>
<td width="66" height="21" align="right" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 2"></td>
</tr>
<tr>
<td width="368" height="21" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 2">&nbsp;</td>
<td width="38" height="21" align="right" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 2"><font face="Arial" size="2"><b>$</b></font></td>
<td width="76" height="21" align="right" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 2"><font face="Arial" size="2"><b>(25.4)</b></font></td>
<td width="42" height="21" align="right" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 2"><font face="Arial" size="2">$</font></td>
<td width="66" height="21" align="right" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 2"><font face="Arial" size="2">(8.7)</font></td>
</tr>
<tr>
<td width="590" height="21" colspan="5"><font face="Arial" size="2">Additions and adjustments to intangible assets</font></td></tr>
<tr>
<td width="368" height="21"><font face="Arial" size="2">&nbsp;&nbsp; Civil Simulation and Training</font></td>
<td width="38" height="21" align="right"><font face="Arial" size="2"><b>$</b></font></td><td width="76" height="21" align="right"><font face="Arial" size="2"><b>(8.1)</b></font></td>
<td width="42" height="21" align="right"><font color="#000000">$</font></td><td width="66" height="21" align="right"><font face="Arial" size="2">6.1</font></td>
</tr>
<tr>
<td width="368" nowrap height="21"><font face="Arial" size="2">&nbsp;&nbsp; Military Simulation and Training</font></td>
<td width="38" height="21" align="right"></td><td width="76" height="21" align="right"><font face="Arial" size="2"><b>(0.2)</b></font></td>
<td width="42" height="21" align="right"></td><td width="66" height="21" align="right"><font face="Arial" size="2">(0.2)</font></td>
</tr>
<tr>
<td width="368" height="21" style="border-bottom-style: solid; border-bottom-width: 1"><font face="Arial" size="2">&nbsp;&nbsp; Marine Controls</font></td>
<td width="38" height="21" align="right" style="border-bottom-style: solid; border-bottom-width: 1">&nbsp;</td>
<td width="76" height="21" align="right" style="border-bottom-style: solid; border-bottom-width: 1"><font face="Arial" size="2"><b>(2.3)</b></font></td>
<td width="42" height="21" align="right" style="border-bottom-style: solid; border-bottom-width: 1">&nbsp;</td>
<td width="66" height="21" align="right" style="border-bottom-style: solid; border-bottom-width: 1"><font face="Arial" size="2">12.1</font></td>
</tr>
<tr>
<td width="368" height="21" style="border-bottom-style: solid; border-bottom-width: 2">&nbsp;</td>
<td width="38" height="21" align="right" style="border-bottom-style: solid; border-bottom-width: 2"><font face="Arial" size="2"><b>$</b></font></td>
<td width="76" height="21" align="right" style="border-bottom-style: solid; border-bottom-width: 2"><b><font face="Arial" size="2">(10.6)</font></b></td>
<td width="42" height="21" align="right" style="border-bottom-style: solid; border-bottom-width: 2"><font face="Arial" size="2">$</font></td>
<td width="66" height="21" align="right" style="border-bottom-style: solid; border-bottom-width: 2"><font face="Arial" size="2">18.0</font></td>
</tr>
</table>

<p>&nbsp;</p>

<hr>

<p>&nbsp;</p>

<table border="0" cellpadding="0" cellspacing="0" width="628" height="524">
<tr>
<td width="265" height="50" valign="bottom" colspan="2"><font face="Arial" size="2"><b>Business Segments
  (continued)</b></font>
</font>
  <p><font face="Arial" size="1">three months ended June 30 (amounts in millions
  of Canadian dollars)</font></p>
</td>
<font FACE="Arial" SIZE="2">
<td colspan="3" valign="bottom" align="center" height="66" width="239">
  <p align="right"><font face="Arial" size="2"><b><br><br>2003</b></font></p>
</td>
<td colspan="3" valign="bottom" align="center" height="66" width="114">
  <p align="right"><font face="Arial" size="2"><b><br><br></b>2002</font></p>
</td>
</tr>
<tr>
<td width="251" style="border-bottom-style: solid; border-bottom-width: 1" height="17">&nbsp;</td>
<td width="16" align="center" style="border-bottom-style: solid; border-bottom-width: 1" height="17">&nbsp;</td>
<td width="45" align="right" style="border-bottom-style: solid; border-bottom-width: 1" height="17"></td>
<td width="115" align="center" style="border-bottom-style: solid; border-bottom-width: 1" height="17"><b>&nbsp;</b></td>
<td width="81" align="right" style="border-bottom-style: solid; border-bottom-width: 1" height="17"><font face="Arial" size="2"><b>(Unaudited)</b></font></td>
<td width="6" align="right" style="border-bottom-style: solid; border-bottom-width: 1" height="17"></td>
<td width="44" align="right" style="border-bottom-style: solid; border-bottom-width: 1" height="17">&nbsp;</td>
<td width="66" align="right" style="border-bottom-style: solid; border-bottom-width: 1" height="17"><font face="Arial" size="2">(Unaudited)</font></td>
</tr>

<tr><td height="21" colspan="8" width="623"><font face="Arial" size="2">Capital expenditures</font></td></tr>
<tr>
<td width="249" height="18"><font face="Arial" size="2">&nbsp;&nbsp; Civil Simulation and Training</font></td>
<td width="14" align="right" height="18"></td><td width="43" align="right" height="18"></td>
<td width="113" align="right" height="18"><font face="Arial" size="2"><b>$</b></font></td><td width="79" align="right" height="18"><font face="Arial" size="2"><b>25.2</b></font></td>
<td width="5" align="right" height="18"></td>
<td width="42" align="right" height="18"><font face="Arial" size="2">$</font></td><td width="64" align="right" height="18"><font face="Arial" size="2">60.2</font></td>
</tr>
<tr>
<td width="249" height="21"><font face="Arial" size="2">&nbsp;&nbsp; Military Simulation and Training</font></td>
<td width="14" align="right" height="21"></td><td width="43" align="right" height="21"></td>
<td width="113" align="right" height="21"></td><td width="79" align="right" height="21"><font face="Arial" size="2"><b>(1.2)</b></font></td>
<td width="5" align="right" height="21"></td>
<td width="42" align="right" height="21"></td><td width="64" align="right" height="21"><font face="Arial" size="2">2.2</font></td>
</tr>
<tr>
<td width="249" height="21"><font face="Arial" size="2">&nbsp;&nbsp; Marine Controls</font></td>
<td width="14" align="right" height="21"></td><td width="43" align="right" height="21"></td>
<td width="113" align="right" height="21"></td><td width="79" align="right" height="21"><font face="Arial" size="2"><b>1.2</b></font></td>
<td width="5" align="right" height="21"></td>
<td width="42" align="right" height="21"></td><td width="64" align="right" height="21"><font face="Arial" size="2">10.7</font></td>
</tr>
<tr>
<td width="251" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 2" height="22"><font face="Arial" color="#000000" size="2">&nbsp;</font></td>
<td width="16" align="right" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 2" height="22"></td>
<td width="45" align="right" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 2" height="22"></td>
<td width="115" align="right" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 2" height="22"><font face="Arial" size="2"><b>$</b></font></td>
<td width="81" align="right" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 2" height="22"><font face="Arial" size="2"><b>25.2</b></font></td>
<td width="6" align="right" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 2" height="22"></td>
<td width="44" align="right" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 2" height="22"><font face="Arial" size="2">$</font></td>
<td width="66" align="right" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 2" height="22"><font face="Arial" size="2">73.1</font></td>
</tr>

<tr><td height="21" colspan="8" width="623"><font face="Arial" size="2">Amortization of property, plant and equipment</font></td></tr>
<tr>
<td width="249" height="18"><font face="Arial" size="2">&nbsp;&nbsp; Civil Simulation and Training</font></td>
<td width="14" align="right" height="18"></td><td width="43" align="right" height="18"></td>
<td width="113" align="right" height="18"><font face="Arial" size="2"><b>$</b></font></td><td width="79" align="right" height="18"><font face="Arial" size="2"><b>10.1</b></font></td>
<td width="5" align="right" height="18"></td>
<td width="42" align="right" height="18"><font face="Arial" size="2">$</font></td><td width="64" align="right" height="18"><font face="Arial" size="2">11.1</font></td>
</tr>
<tr>
<td width="249" height="21"><font face="Arial" size="2">&nbsp;&nbsp; Military Simulation and Training</font></td>
<td width="14" align="right" height="21"></td><td width="43" align="right" height="21"></td>
<td width="113" align="right" height="21"></td><td width="79" align="right" height="21"><font face="Arial" size="2"><b>3.6</b></font></td>
<td width="5" align="right" height="21"></td>
<td width="42" align="right" height="21"></td><td width="64" align="right" height="21"><font face="Arial" size="2">2.8</font></td>
</tr>
<tr>
<td width="249" height="21"><font face="Arial" size="2">&nbsp;&nbsp; Marine
  Controls</font></td>
<td width="14" align="right" height="21"></td><td width="43" align="right" height="21"></td>
<td width="113" align="right" height="21"></td><td width="79" align="right" height="21"><font face="Arial" size="2"><b>0.4</b></font></td>
<td width="5" align="right" height="21"></td>
<td width="42" align="right" height="21"></td><td width="64" align="right" height="21"><font face="Arial" size="2">0.8</font></td>
</tr>
<tr>
<td width="251" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 2" height="22"><font face="Arial" color="#000000" size="2">&nbsp;</font></td>
<td width="16" align="right" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 2" height="22"></td>
<td width="45" align="right" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 2" height="22"></td>
<td width="115" align="right" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 2" height="22"><font face="Arial" size="2"><b>$</b></font></td>
<td width="81" align="right" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 2" height="22"><font face="Arial" size="2"><b>14.1</b></font></td>
<td width="6" align="right" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 2" height="22"></td>
<td width="44" align="right" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 2" height="22"><font face="Arial" size="2">$</font></td>
<td width="66" align="right" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 2" height="22"><font face="Arial" size="2">14.7</font></td>
</tr>

<tr><td height="21" colspan="8" width="623"><font face="Arial" size="2">Amortization of intangible assets</font></td></tr>
<tr>
<td width="249" height="18"><font face="Arial" size="2">&nbsp;&nbsp; Civil Simulation and Training</font></td>
<td width="14" align="right" height="18"></td><td width="43" align="right" height="18"></td>
<td width="113" align="right" height="18"><font face="Arial" size="2"><b>$</b></font></td><td width="79" align="right" height="18"><font face="Arial" size="2"><b>1.8</b></font></td>
<td width="5" align="right" height="18"></td>
<td width="42" align="right" height="18"><font face="Arial" size="2">$</font></td><td width="64" align="right" height="18"><font face="Arial" size="2">1.8</font></td>
</tr>
<tr>
<td width="249" height="21"><font face="Arial" size="2">&nbsp;&nbsp; Military Simulation and Training</font></td>
<td width="14" align="right" height="21"></td><td width="43" align="right" height="21"></td>
<td width="113" align="right" height="21"></td><td width="79" align="right" height="21"><font face="Arial" size="2"><b>0.1</b></font></td>
<td width="5" align="right" height="21"></td>
<td width="42" align="right" height="21"></td><td width="64" align="right" height="21">-</td>
</tr>
<tr>
<td width="249" height="21"><font face="Arial" size="2">&nbsp;&nbsp; Marine Controls</font></td>
<td width="14" align="right" height="21"></td><td width="43" align="right" height="21"></td>
<td width="113" align="right" height="21"></td><td width="79" align="right" height="21"><font face="Arial" size="2"><b>0.5</b></font></td>
<td width="5" align="right" height="21"></td>
<td width="42" align="right" height="21"></td><td width="64" align="right" height="21"><font face="Arial" size="2">0.5</font></td>
</tr>
<tr>
<td width="251" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 2" height="22"><font face="Arial" color="#000000" size="2">&nbsp;</font></td>
<td width="16" align="right" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 2" height="22"></td>
<td width="45" align="right" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 2" height="22"></td>
<td width="115" align="right" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 2" height="22"><font face="Arial" size="2"><b>$</b></font></td>
<td width="81" align="right" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 2" height="22"><font face="Arial" size="2"><b>2.4</b></font></td>
<td width="6" align="right" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 2" height="22"></td>
<td width="44" align="right" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 2" height="22"><font face="Arial" size="2">$</font></td>
<td width="66" align="right" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 2" height="22"><font face="Arial" size="2">2.3</font></td>
</tr>

<tr><td height="21" colspan="8" width="623"><font face="Arial" size="2">Amortization of other assets</font></td></tr>
<tr>
<td width="249" height="18"><font face="Arial" size="2">&nbsp;&nbsp; Civil Simulation and Training</font></td>
<td width="14" align="right" height="18"></td><td width="43" align="right" height="18"></td>
<td width="113" align="right" height="18"><font face="Arial" size="2"><b>$</b></font></td><td width="79" align="right" height="18"><font face="Arial" size="2"><b>1.7</b></font></td>
<td width="5" align="right" height="18"></td>
<td width="42" align="right" height="18"><font face="Arial" size="2">$</font></td><td width="64" align="right" height="18"><font face="Arial" size="2">1.2</font></td>
</tr>
<tr>
<td width="249" height="21"><font face="Arial" size="2">&nbsp;&nbsp; Military Simulation and Training</font></td>
<td width="14" align="right" height="21"></td><td width="43" align="right" height="21"></td>
<td width="113" align="right" height="21"></td><td width="79" align="right" height="21"><b>-</b></td>
<td width="5" align="right" height="21"></td>
<td width="42" align="right" height="21"></td><td width="64" align="right" height="21"><font face="Arial" size="2">0.1</font></td>
</tr>
<tr>
<td width="249" height="21"><font face="Arial" size="2">&nbsp;&nbsp; Marine
  Controls</font></td>
<td width="14" align="right" height="21"></td><td width="43" align="right" height="21"></td>
<td width="113" align="right" height="21"></td><td width="79" align="right" height="21"><b>-</b></td>
<td width="5" align="right" height="21"></td>
<td width="42" align="right" height="21"></td><td width="64" align="right" height="21">-</td>
</tr>
<tr>
<td width="251" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 2" height="22"><font face="Arial" color="#000000" size="2">&nbsp;</font></td>
<td width="16" align="right" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 2" height="22"></td>
<td width="45" align="right" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 2" height="22"></td>
<td width="115" align="right" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 2" height="22"><font face="Arial" size="2"><b>$</b></font></td>
<td width="81" align="right" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 2" height="22"><font face="Arial" size="2"><b>1.7</b></font></td>
<td width="6" align="right" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 2" height="22"></td>
<td width="44" align="right" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 2" height="22"><font face="Arial" size="2">$</font></td>
<td width="66" align="right" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 2" height="22"><font face="Arial" size="2">1.3</font></td>
</tr>

<tr><td height="21" colspan="8" width="623"><font face="Arial" size="2">Revenue
    from external customers based on their location</font></td></tr>
<tr>
<td width="249" height="18"><font face="Arial" size="2">&nbsp;&nbsp; Canada</font></td>
<td width="14" align="right" height="18"></td><td width="43" align="right" height="18"></td>
<td width="113" align="right" height="18"><font face="Arial" size="2"><b>$</b></font></td><td width="79" align="right" height="18"><font face="Arial" size="2"><b>29.7</b></font></td>
<td width="5" align="right" height="18"></td>
<td width="42" align="right" height="18"><font face="Arial" size="2">$</font></td><td width="64" align="right" height="18"><font face="Arial" size="2">22.5</font></td>
</tr>
<tr>
<td width="249" height="21"><font face="Arial" size="2">&nbsp;&nbsp; United States</font></td>
<td width="14" align="right" height="21"></td><td width="43" align="right" height="21"></td>
<td width="113" align="right" height="21"></td><td width="79" align="right" height="21"><font face="Arial" size="2"><b>70.1</b></font></td>
<td width="5" align="right" height="21"></td>
<td width="42" align="right" height="21"></td><td width="64" align="right" height="21"><font face="Arial" size="2">82.6</font></td>
</tr>
<tr>
<td width="249" height="21"><font face="Arial" size="2">&nbsp;&nbsp; United Kingdom</font></td>
<td width="14" align="right" height="21"></td><td width="43" align="right" height="21"></td>
<td width="113" align="right" height="21"></td><td width="79" align="right" height="21"><font face="Arial" size="2"><b>30.3</b></font></td>
<td width="5" align="right" height="21"></td>
<td width="42" align="right" height="21"></td><td width="64" align="right" height="21"><font face="Arial" size="2">42.0</font></td>
</tr>
<tr>
<td width="249" height="21"><font face="Arial" size="2">&nbsp;&nbsp; Germany</font></td>
<td width="14" align="right" height="21"></td><td width="43" align="right" height="21"></td>
<td width="113" align="right" height="21"></td><td width="79" align="right" height="21"><font face="Arial" size="2"><b>21.7</b></font></td>
<td width="5" align="right" height="21"></td>
<td width="42" align="right" height="21"></td><td width="64" align="right" height="21"><font face="Arial" size="2">20.5</font></td>
</tr>
<tr>
<td width="249" height="21"><font face="Arial" size="2">&nbsp;&nbsp; Other European countries</font></td>
<td width="14" align="right" height="21"></td><td width="43" align="right" height="21"></td>
<td width="113" align="right" height="21"></td><td width="79" align="right" height="21"><font face="Arial" size="2"><b>43.7</b></font></td>
<td width="5" align="right" height="21"></td>
<td width="42" align="right" height="21"></td><td width="64" align="right" height="21"><font face="Arial" size="2">29.4</font></td>
</tr>
<tr>
<td width="249" height="21"><font face="Arial" size="2">&nbsp;&nbsp; Other countries</font></td>
<td width="14" align="right" height="21"></td><td width="43" align="right" height="21"></td>
<td width="113" align="right" height="21"></td><td width="79" align="right" height="21"><font face="Arial" size="2"><b>47.4</b></font></td>
<td width="5" align="right" height="21"></td>
<td width="42" align="right" height="21"></td><td width="64" align="right" height="21"><font face="Arial" size="2">78.8</font></td>
</tr>
<tr>
<td width="251" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 2" height="22"><font face="Arial" color="#000000" size="2">&nbsp;</font></td>
<td width="16" align="right" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 2" height="22"></td>
<td width="45" align="right" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 2" height="22"></td>
<td width="115" align="right" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 2" height="22"><font face="Arial" size="2"><b>$</b></font></td>
<td width="81" align="right" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 2" height="22"><font face="Arial" size="2"><b>242.9</b></font></td>
<td width="6" align="right" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 2" height="22"></td>
<td width="44" align="right" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 2" height="22"><font face="Arial" size="2">$</font></td>
<td width="66" align="right" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 2" height="22"><font face="Arial" size="2">275.8</font></td>
</tr>
</table>

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<hr>

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