What is the record date and share count for CAE (CAE) voting rights in 2026?

The record date is June 15, 2026. As of June 11, 2026, CAE had 321,579,686 common shares issued and outstanding, each carrying one vote. Directors and executive officers collectively controlled 177,706 shares, representing about 0.06% of the class.

Executive pay and board slate set out in CAE (NYSE: CAE) 2026 AGM circular

Filing Impact

(Neutral)

Filing Sentiment

(Neutral)

Form Type

6-K

Rhea-AI Filing Summary

CAE Inc. has filed a Form 6-K furnishing its 2026 Management Proxy Circular and annual report for the year ended March 31, 2026. The documents support the hybrid annual shareholders’ meeting on August 12, 2026 in Montréal and via webcast.

Shareholders of record as of June 15, 2026 can vote on electing 13 directors, reappointing PwC as auditor, and an advisory “say on pay” resolution on executive compensation. The circular highlights CAE’s two core segments, Civil Aviation and Defense & Security, and describes an ongoing transformation plan focused on portfolio sharpening, capital discipline and execution.

Executive pay remains strongly performance-based, with a corporate short‑term incentive factor of 84% for FY2026 and a 26% payout factor for performance share units that vested based on FY2023–FY2025 results. Governance disclosures emphasize an 11‑of‑13 independent board, committee independence, director term and age limits, and director and executive share ownership requirements.

Key Figures

Shares outstanding: 321,579,686 shares Insider holdings: 177,706 shares Auditor fees FY2026: $8.0 million +5 more

8 metrics

Shares outstanding 321,579,686 shares Issued and outstanding as of June 11, 2026; one vote per share

Insider holdings 177,706 shares Directors and executive officers as a group, about 0.06% of shares

Auditor fees FY2026 $8.0 million Paid to PwC for audit, audit‑related, and tax services in FY2026

Short‑term incentive factor 84% Corporate performance factor for executive annual bonuses in FY2026

PSU payout factor 26% Performance Share Units vesting on FY2023–FY2025 performance

Record date June 15, 2026 Determines shareholders entitled to receive notice and vote at AGM

Board size 13 nominees Directors to be elected at the 2026 annual shareholders’ meeting

Auditor tenure Since 1991 PwC has served as CAE’s external auditor from 1991 through FY2026

Key Terms

say on pay, Notice-and-Access, Performance Share Units, Deferred Share Units, +2 more

6 terms

say on pay financial

"Vote, in an advisory, non-binding manner, on CAE’s approach to executive compensation described in this Circular;"

Say on pay is a shareholder vote—typically nonbinding—on a company’s executive compensation package, allowing investors to approve or reject how top managers are paid. Think of it as a public performance review: widespread disapproval can signal poor governance, prompt changes to pay practices, attract activist investors, and influence investor confidence and share value. It matters because it gives owners a direct way to influence compensation that affects company incentives and long-term performance.

Notice-and-Access regulatory

"CAE is opting to use the “Notice-and-Access” provisions of Canadian securities rules."

A notice-and-access delivery model sends shareholders a short notice telling them where to find full proxy materials and other corporate documents online instead of receiving bulky paper copies by mail. For investors it matters because it speeds delivery and cuts costs for companies, but also shifts responsibility onto shareholders to retrieve and read the materials before voting or making decisions—like getting a postcard with a link to the full report rather than the report itself.

Non-IFRS and other financial measures financial

"Appendix B – Non-IFRS and Other Financial Measures"

Enterprise risk management oversight financial

"Enterprise risk management oversight including sustainability matters"

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Form 6-K: How Foreign Companies Report to the SEC →

06/22/2026 - 02:01 PM

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

Form 6-K

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

For the month of: June 2026 Commission File Number: 1-31402

CAE INC.

(Translation of registrant’s name into English)

8585 Cote de Liesse

Saint-Laurent, Quebec

Canada H4T 1G6

(Address of Principal Executive Offices)

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

Form 20-F ___ Form 40-F X

INCORPORATION BY REFERENCE

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

SIGNATURES

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

CAE Inc.

Date: June 22, 2026 By: /s/ Mark Hounsell

Name: Mark Hounsell

Title: Chief Legal Officer

EXHIBIT INDEX

99.1 Notice and Management Proxy Circular dated June 11, 2026

99.2 Annual Report for the year ended March 31, 2026

| CAE INC. | 2026 | Management Proxy Circular

Table of Contents

Letter to Shareholders from the Executive Chairman i

Company Overview iv

Proxy Circular Summary vii

About CAE ix

Useful Information xiv

Notice of 2026 Annual Shareholders’ Meeting xv

Section 1 About Voting Your Shares 1

Section 2 Business of the Meeting 7

Section 3 About the Nominated Directors 12

Section 4 Corporate Governance 30

Section 5 Board Committee Reports 43

Section 6 Director Compensation 48

Section 7 Executive Compensation 53

Compensation Discussion and Analysis 56

Executive Summary 57

Compensation Decisions 60

Shareholder Engagement 62

Talent Development and Succession Planning 63

Compensation Philosophy 64

Executive Compensation Programs 66

FY2026 Compensation Outcomes 77

Determination of NEOs’ Individual Performance 84

Compensation Governance 89

Alignment of Compensation and Performance 94

Compensation of our Named Executive Officers 98

Summary Compensation Table 98

Outstanding Share-Based Awards and Option-Based Awards 101

Incentive Plan Awards – Value Vested or Earned During the Year 102

Pension Arrangements 103

Termination and Change of Control Benefits 105

Section 8 Other Important Information 109

Appendix A – Board of Directors’ Charter 111

Appendix B – Non-IFRS and Other Financial Measures 115

Appendix C – Summary of the Employee Stock Option Plan 124

Appendix D – Summary of the Omnibus Incentive Plan 128

| CAE INC. | 2026 | Management Proxy Circular

Letter to Shareholders from the Executive Chairman

June 11, 2026

Dear fellow Shareholders,

On behalf of the Board of Directors, it is my pleasure to invite you to CAE’s 2026 Annual Meeting of Shareholders (the “Meeting”).

Year in review

Fiscal 2026 was a year that demanded discipline, clarity of purpose, and steady governance. Our environment was and continues to be affected by evolving market realities, geopolitical uncertainties, and significant changes across the Company. In particular, the situation in the Middle East has created disruption for our business and for the broader aviation industry, including a significant impact on fuel prices and the resulting pressure on commercial aviation.

Against this backdrop, the Board remained firmly focused on its responsibility to oversee CAE with rigour, sound judgment, and a clear view to long-term value creation for Shareholders.

Fiscal 2026 also marked Matthew Bromberg’s first year as President and Chief Executive Officer. Matthew has brought focus, discipline and decisive action to the organization, together with a clear understanding of CAE’s business, operating context and opportunities ahead. He is supported by a strong leadership team and by an organization grounded in safety, readiness and trust, qualities that continue to shape how CAE serves its customers, supports its employees, and delivers value to Shareholders. The Board believes that Matthew’s experience and leadership is well aligned with what this moment requires: a clear strategic direction, disciplined execution, and a steadfast commitment to the core strengths that define CAE.

Performance during the year was solid, despite softer conditions in Civil Aviation and continued geopolitical volatility. With two strong businesses operating in attractive markets, CAE continues to benefit from a resilient and balanced portfolio. Our results underscore the importance of disciplined capital allocation and a relentless focus on execution.

Our Defense & Security (“D&S”) business delivered stronger performance and further underscored its strategic importance at a time of sustained defence investment across key geographies. This strength reinforces the value of CAE’s balanced portfolio and the advantages of operating in markets with compelling long-term fundamentals.

Transformation

During the year, CAE embarked on the initial phases of the transformation plan we announced shortly after Matthew’s appointment. This work is centered on sharpening our portfolio, strengthening capital discipline and performance improvement, with a clear objective: to strengthen resilience, improve execution and support sustainable long-term profitability and value creation.

The Board views this transformation as both timely and necessary. It is a deliberate response to the opportunities and challenges facing the Company, and early progress reinforces our conviction in that direction. This is not change for its own sake, but purposeful action to ensure CAE is better positioned to perform, compete and lead over the long term, especially given the speed of technological developments and market dynamics in both Civil and D&S.

This work also matters beyond CAE. With deep roots in Quebec and a significant role in the global aerospace ecosystem, CAE is well positioned to make an important contribution both domestically and internationally. We are proud to be a Canadian company that works closely with the government to help strengthen the country’s economic resilience and security. In turn, a stronger CAE helps reinforce Canada’s sovereign defence capabilities while enhancing our ability to serve global customers with the technology, expertise and training solutions they require.

i | CAE INC. | 2026 | Management Proxy Circular

This effort has been supported by several senior leadership changes and targeted additions designed to strengthen the organization, streamline decision-making and reinforce accountability. The Board believes these actions will help the Company operate with greater speed, discipline and focus. I look forward to continuing to support Matthew and the leadership team with this next phase of CAE’s evolution.

Sustainability

CAE continued to advance sustainability on an enterprise-wide basis, through the execution of a decarbonization strategy anchored in science-based targets and translated into business unit-level plans. This is increasingly integrated into our operating model, investment decision-making and governance, including through the use of an internal carbon shadow price.

Detailed information on our sustainability efforts can be found at www.cae.com/sustainability.

Stakeholder outreach

Constructive engagement with our stakeholders remains an important priority for the Board and for me as Chairman. During the year, we continued to engage with current and prospective investors, as well as with equity analysts, to hear their perspectives on CAE’s performance, strategy, governance, and long-term opportunities.

This dialogue is important. It helps inform the Board’s oversight and supports our shared objective of ensuring that CAE’s performance remains aligned with the interests of Shareholders. We will continue to listen carefully, communicate transparently, and focus on actions that support sustainable long-term value creation.

Governance

On behalf of the Board, I want to express sincere appreciation to Ayman Antoun for his valued service as a director and as Chair of our recently constituted Technology Committee. Ayman brought thoughtful judgment, relevant expertise and a strong commitment to CAE throughout his tenure, and we are grateful for his contribution to the Board’s work. We thank him warmly and wish him every success in the future. We look forward to welcoming Bruce Ross to the Board, subject to Shareholders’ approval, and his profile is included in this Circular.

After we completed the CEO succession process and Board renewal last year, I assumed the expanded role of Executive Chairman to assist with the transition of our new CEO, meet with investors, government and other stakeholders and help to evolve the transformation plan and long-term strategy for the next chapter of growth and value creation at CAE. As that process is now well underway, I will revert to the role of non-executive Chair of the Board effective January 1st, 2027.

Looking ahead

As we progress, the Board is confident in CAE’s direction and in the leadership team guiding the Company forward. D&S is a critical pillar of CAE and represents a meaningful long-term opportunity for growth. At this important moment, CAE is positioned to play a meaningful role alongside its partners in supporting defence investment, accelerating innovation and strengthening capabilities in support of Canada and its allies.

At the same time, we see a path to renewed growth in Civil Aviation, supported by CAE’s strong market position, deep customer relationships, and enduring role in aviation safety and training.

In fiscal 2027, we will be accelerating our transformation plan with a continued focus on execution, efficiency, discipline and returns. The Board is fully aligned with this direction.

Closing words

To our Shareholders, thank you for your continued support and confidence in CAE. We value your engagement and look forward to continuing our dialogue with you.

ii | CAE INC. | 2026 | Management Proxy Circular

To CAE employees, thank you for your dedication and commitment to our mission, values and strategy. Your work is central to CAE’s success and to the trust our customers place in you around the world.

We also encourage you to participate in this year’s Meeting and to exercise your right to vote.

We will hold the Meeting in a hybrid format, both virtually via live webcast at https://meetings.lumiconnect.com/400-470-759-284 and in person for Shareholders only at Lumi Experience Montréal, 1250 René-Lévesque Boulevard West, Suite 3610, Montréal, Québec, H3B 4X4, on August 12, 2026, at 3:00 p.m. (EDT). As a Shareholder, you have the right to vote your Shares on all items that come before the Meeting. Your vote is important to us, and we encourage you to exercise your right either in person or online at the Meeting, or by proxy.

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

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

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

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

Sincerely,



			Calin Rovinescu Executive Chairman

iii | CAE INC. | 2026 | Management Proxy Circular

iv | CAE INC. | 2026 | Management Proxy Circular

v | CAE INC. | 2026 | Management Proxy Circular

vi | CAE INC. | 2026 | Management Proxy Circular

Proxy Circular Summary

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

Shareholder Voting Matters


Voting Matter	Board Vote Recommendation	Page Reference for More Information
Election of 13 Directors	FOR each nominee	8
Appointing PricewaterhouseCoopers LLP (PwC) as Auditor	FOR	10
Advisory Vote on Executive Compensation	FOR	11

vii | CAE INC. | 2026 | Management Proxy Circular

Review this Proxy Circular and Vote in One
of the Following Ways

Voting by Proxy is the Easiest Way

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

by mail: sign, date and return your proxy form in the envelope provided.

by telephone: call the telephone number on your proxy form.

on the Internet: visit the website listed on your proxy form.

by appointing another person to attend and vote at the Meeting in person or online on your behalf.

Voting In Person at the Meeting

Attend in person at Lumi Experience Montréal, 1250 René-Lévesque Blvd. W., Suite 3610, Montréal, Québec, H3B 4X4 and follow the steps listed in the Section “Attending and Participating.”

Voting Online at the Meeting

Log in online at https://meetings.lumiconnect.com/400-470-759-284 and follow the steps listed in the Section “Attending and Participating.”

viii | CAE INC. | 2026 | Management Proxy Circular

About CAE

Who we are

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

Our purpose, mission and vision

Our purpose is to make the world safer.

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

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

Our operations

Our operations are managed through two segments:

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

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

ix | CAE INC. | 2026 | Management Proxy Circular

Our strategy

CAE’s four strategic pillars


			Market leadership We have established ourselves as a leader across our markets by being a trusted partner for our stakeholders and by embracing customer centricity. Looking forward, there remains significant headroom for continued growth in our large addressable markets. As a result, we are constantly seeking out ways to focus our portfolio around our core capabilities and enhance the performance of our customers. These actions will enable us to continue to win in our markets and extend our leadership positions. Furthermore, our products are deployed with a focus on integrated sustainability.
			Revolutionizing training We have a history of nearly 80 years of applying innovation and technology to create novel, world-class solutions and generate long-term competitive differentiation. We are established as one of the global leaders in training, digital immersion, and modelling and simulation technologies. We use focused technology development to improve the performance of our businesses and generate value for our customers.
			Efficient growth We aim to maximize the benefits of our strong competitive positions and our ongoing transformation efforts to deliver profitable growth, higher returns on invested capital and improved free cash flow conversion. As we work to transform the business by continuing to focus on improved performance and capital discipline, we will drive operational excellence, cost optimization and apply a more prudent approach to pursuing both organic and inorganic growth.
			Skills and culture Our core values are innovation, integrity, empowerment, excellence and One CAE. We employ these values across a diverse global team to drive a unique social impact. We look to create a high-performing culture that values teamwork, professional growth, engagement and ownership. As a result, our employees across the globe share a passion to enhance safety and prepare our customers for the moments that matter.

x | CAE INC. | 2026 | Management Proxy Circular

Executive Compensation Highlights

—Executive short-term incentive payout based on a corporate performance factor of 84%, reflective of CAE’s performance against its strategic plan and financial objectives in FY2026

—26% payout factor for Performance Share Units that vested in FY2026 (with a performance measurement period from FY2023 to FY2025), aligned with shareholder experience over the period


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

xi | CAE INC. | 2026 | Management Proxy Circular

Governance Highlights

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


Our Corporate Governance Best Practices
Number of Director nominees			13
Number of non-employee Independent Director nominees			11/13
Board Committee members (including the Governance Committee, which is responsible for recommending new Directors to join the Board) are all independent.
Average age of Director nominees			60
Annual election of Directors
Other Board commitments and interlocks policy
Separate Chair and CEO roles
Director tenure and age term limits
Share ownership requirements for Directors and executives
Board orientation/education program
Number of Board meetings held during FY2026			9
Number of financial experts on the Audit Committee			2
Code of Business Conduct
Annual advisory vote on executive compensation
Formal Board and Committee evaluation processes
No dual-class shares
Enterprise risk management oversight including sustainability matters

xii | CAE INC. | 2026 | Management Proxy Circular

Our Director Nominees


Name	Age	Director Since	Position	Independent	Committee Memberships	Board and Committee Attendance FY2026	Other Public Boards
Sophie Brochu1	63	2023	Corporate Director	YES	GC (Chair)	100%	2
Matthew Bromberg	56	2025	President and CEO, CAE	NO	N/A	100%	N/A
Patrick Decostre	53	2024	President and CEO, Boralex Inc.	YES	Audit	77%	1
Elise Eberwein	61	2022	Corporate Director	YES	GC, HRC (Chair)	94%	N/A
Ian L. Edwards	63	2024	President and CEO, AtkinsRéalis	YES	Audit	92%	1
Marianne Harrison	62	2019	Corporate Director	YES	Audit (Chair), TC	93%	1
Peter Lee	40	2025	Co-Founder and Partner, Browning West, LP	YES	HRC	93%	1
Katherine A. Lehman	51	2025	Partner, Palladium Equity Partners, LLC	YES	GC	100%	1
Mary Lou Maher	66	2021	Corporate Director	YES	Audit, HRC	100%	2
Bruce Ross2	64	N/A	Group Head, AI, Royal Bank of Canada	YES	N/A	N/A	N/A
Calin Rovinescu3	70	2025	Executive Chairman, CAE	NO	N/A	100%	1
Patrick M. Shanahan	63	2022	Corporate Director	YES	HRC	100%	1
Louis Têtu	62	2025	Executive Chairman, Coveo Solutions Inc.	YES	Audit, TC	100%	2

1.Ms. Brochu was appointed Lead Independent Director on August 13, 2025.

2.Mr. Ross does not currently serve as a Director on the Board of CAE and will become a Director following his election at the Meeting.

3.Mr. Rovinescu served as non-executive Chair of the Board from February 14, 2025 to August 13, 2025. He assumed the expanded role of Executive Chairman on August 13, 2025 to assist with the transition of the incoming CEO, meet with investors, government representatives and other stakeholders and help to develop the transformation plan and long term strategy for the next chapter of growth and value creation at CAE. As that process is now well underway, Mr. Rovinescu will revert to the role of non-executive Chair of the Board effective January 1, 2027.

xiii | CAE INC. | 2026 | Management Proxy Circular

Useful Information

Certain defined terms


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

Currency, exchange rates and share prices


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

Non-IFRS and other financial measures


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

Information currency


The information in this Circular is current as of June 11, 2026 unless otherwise stated.

xiv | CAE INC. | 2026 | Management Proxy Circular

Notice of 2026
Annual Shareholders’ Meeting

What the Meeting is About

1.Receive CAE Consolidated Financial Statements and the auditor’s report for the fiscal year ended March 31, 2026;

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

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

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

5.Transact any other business that may properly come before the Meeting.

You have the Right to Vote

As a holder of record of common shares of CAE (“Shares”) at the close of business on June 15, 2026, you are entitled to receive notice of and vote at the Meeting.

You are asked to consider and to vote your Shares on items 2 to 4 and any other items that may properly come before the Meeting or any adjournment or postponement thereof.

If you are unable to attend the Meeting in person or online and want to ensure that your Shares are voted, please submit your votes by proxy as described under “How to Vote Your Shares” in the accompanying Circular. To be valid, our transfer agent, Computershare Trust Company of Canada, must receive your proxy by 3:00 p.m. (Eastern Time) on August 10, 2026. If the Meeting is adjourned or postponed, Computershare must receive your proxy no later than 24 hours (excluding Saturdays, Sundays and holidays) prior to any such adjournment or postponement.

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

xv | CAE INC. | 2026 | Management Proxy Circular

Attending and Participating

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

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

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

If you attend the meeting in person, you will only need to check in at the registration desk with our transfer agent, Computershare, when you arrive at Lumi Experience Montréal, 1250 René-Lévesque Blvd. W., Suite 3610, Montréal, Québec, H3B 4X4.

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

1.Log in online at https://meetings.lumiconnect.com/400-470-759-284. The platform is compatible with all major browsers except for Internet Explorer.

2.Click “I have a Login” and then enter your Control Number (see below) and Password “cae2026” (note the password is case sensitive); OR

3.Click “I am a guest” and then complete the online form.

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

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

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

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

Notice-and-Access

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

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

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

How to Access Meeting Materials

—On Computershare Investor Services Inc.’s (“Computershare”) website: www.envisionreports.com/CAE2026e

—On SEDAR+: www.sedarplus.ca

—On CAE’s website: www.cae.com/investors/financial-reports

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

xvi | CAE INC. | 2026 | Management Proxy Circular

How to Request a Paper Copy of the Meeting Materials

Before the Meeting

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

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

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

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

After the Meeting

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

By order of the Board of Directors,
June 11, 2026
Montréal, Québec



			Mark Hounsell Chief Legal Officer

xvii | CAE INC. | 2026 | Management Proxy Circular

1 | CAE INC. | 2026 | Management Proxy Circular

Section 1 – About Voting Your Shares

Record Date

June 15, 2026 is the record date for the Meeting.

Who can vote

Only holders of our Shares at the close of business on the Record Date are entitled to receive notice of and to attend, including by proxy, and vote at the Meeting or any adjournment or postponement thereof. The list of Shareholders on the Record Date is available for inspection by appointment during usual business hours at Computershare Trust Company of Canada, 650 de Maisonneuve west 7th floor, Montreal, QC H3A 3T2, and at the Meeting. As of June 11, 2026, 321,579,686 Shares are issued and outstanding. Each Share is entitled to one vote.

Principal Shareholders

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

As at June 11, 2026, Directors and executive officers as a group (23 persons) beneficially owned or exercised control or direction over 177,706 Shares representing 0.06% of the class.

Your vote is important

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

How do I participate in the Meeting?

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

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

1.Log in online at https://meetings.lumiconnect.com/400-470-759-284. The platform is compatible with all major browsers except for Internet Explorer.

2.Click “I have a Login” and then enter your Control Number (see below) and Password “cae2026” (note the password is case sensitive); OR

3.Click “I am a guest” and then complete the online form.

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

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

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

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

2 | CAE INC. | 2026 | Management Proxy Circular

Section 1 – About Voting Your Shares

How to Vote your Shares

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

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

by mail: sign, date and return your proxy form in the envelope provided.

by telephone: call the telephone number on your proxy form.

on the Internet: visit the website listed on your proxy form.

by appointing another person to attend and vote at the Meeting online on your behalf.

Refer to the enclosed proxy form for instructions.

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

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

(b) if you are a non-registered Shareholder (including a participant in the employee plan) AND you wish to vote in person or online at the Meeting, you must appoint yourself as Proxyholder in order to vote at the Meeting. You MUST complete and return a voting instruction form no later than 3:00 p.m. (Eastern Time) on August 10, 2026 appointing yourself as Proxyholder. Follow the instructions above to attend and vote in person or to access the Meeting and cast your ballot online during the designated time. You will receive the Control Number for the Meeting from Computershare by e-mail after the proxy voting deadline has passed.

United States Beneficial holders: To vote at the Meeting, you must first obtain a valid legal proxy from your broker, bank or other agent and then register in advance of the Meeting. Follow the instructions from your broker or bank included with this Circular, or contact your broker or bank to request a legal proxy form. To register to attend the Meeting in person or online, you must submit a copy of your legal proxy form to Computershare. Requests for registration should be directed to Computershare at 320 Bay Street, 14th Floor, Toronto, Ontario, M5H 4A6, or by e-mail at uslegalproxy@computershare.com. Requests for registration must be labelled as “Legal Proxy” and be received no later than 3:00 p.m. (EDT) on August 10, 2026. You will receive a confirmation of your registration after Computershare receives your registration materials. Please note that you are required to register your appointment as Proxyholder at www.computershare.com/CAE.

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

3 | CAE INC. | 2026 | Management Proxy Circular

Section 1 – About Voting Your Shares

Voting by Proxy

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

Proxies are being solicited by management

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

The solicitation is being made primarily by mail, but you may also be contacted by telephone or other means. We have engaged Morrow Sodali (Canada) Ltd. (“Sodali & Co”) as strategic shareholder advisor and proxy solicitation agent to assist with the solicitation of votes from shareholders and to provide strategic services in the areas of capital markets intelligence, governance and shareholder engagement. The Company will pay fees of up to approximately $40,000 for the proxy solicitation service, in addition to certain out-of-pocket expenses. The Company may also reimburse brokers and other persons holding Shares in their name or in the name of nominees for their costs incurred in sending proxy material to their principals in order to obtain their proxies.


Proxyholders other than management Shareholders desiring to appoint some person other than Calin Rovinescu, Matthew Bromberg and Sophie Brochu as their representative at the Meeting may do so either by inserting such other person’s name in the blank space provided or by completing another proper proxy form and, in either case, delivering the completed proxy to CAE’s Chief Legal Officer at 8585 Côte-de-Liesse, Saint-Laurent, Québec, H4T 1G6 or to Computershare Trust Company of Canada, 320 Bay Street, 14th Floor, Toronto, Ontario, M5H 4A6 no later than 3:00 p.m. (Eastern Time) on August 10, 2026 (or, in the case of an adjournment or postponement, not less than 48 hours (excluding Saturdays, Sundays and holidays) prior to the time fixed for holding such adjournment or postponement).

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

4 | CAE INC. | 2026 | Management Proxy Circular

Section 1 – About Voting Your Shares

Voting of Proxies

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

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

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

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

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

(b) FOR appointing PwC as auditor and for the authorization of the Directors to fix the auditor’s remuneration; and

Registered Shareholders who wish to appoint a third-party Proxyholder to represent them at the Meeting must first use the form of proxy to appoint the Proxyholder and then must register their Proxyholder online. Failure to register the Proxyholder will result in the Proxyholder not receiving a Control Number and therefore being unable to participate in the Meeting. To register a third-party Proxyholder, Shareholders must visit www.computershare.com/CAE by August 10, 2026 at 3:00 p.m. (Eastern Time) and provide Computershare with the Proxyholder’s contact information required. Computershare needs this information so they can confirm their registration and send an email notification with a Control Number. Your Proxyholder needs the Control Number in order to participate in the meeting and vote your Shares. Your third-party Proxyholder should receive the email notification after 3:00 p.m. (Eastern Time) on August 10, 2026.

To be effective, your proxy must be received before 3:00 p.m. (Eastern Time) on August 10, 2026 or not less than 48 hours (excluding Saturdays, Sundays and holidays) prior to the time fixed for holding any adjournment or postponement of the Meeting.

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

Revocation of proxies

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

(a) Vote again by phone or Internet no later than 3:00 p.m. (Eastern Time) on August 10, 2026 (or not less than 48 hours (excluding Saturdays, Sundays and holidays) prior to the date of any adjourned or postponed Meeting); or

(b) Deliver another completed and signed proxy form, dated later than the first proxy form, by mail or fax such that it is received by CAE’s Chief Legal Officer at 8585 Côte-de-Liesse, Saint-Laurent, Québec, H4T 1G6 or by Computershare Trust Company of Canada, 320 Bay Street,

5 | CAE INC. | 2026 | Management Proxy Circular

Section 1 – About Voting Your Shares

14th Floor, Toronto, Ontario, M5H 4A6 no later than 3:00 p.m. (Eastern Time) on August 10, 2026 (or not less than 48 hours (excluding Saturdays, Sundays and holidays) prior to the date of any adjourned or postponed Meeting.

Electronic access to proxy-related materials and annual and quarterly reports

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

Electronic delivery in future

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

6 | CAE INC. | 2026 | Management Proxy Circular

7 | CAE INC. | 2026 | Management Proxy Circular

Section 2 – Business of the Meeting

1 Receive CAE’s Consolidated Financial Statements

CAE’s consolidated financial statements including the auditor’s report, for the year ended on March 31, 2026 will be presented to Shareholders at the Meeting. They can also be accessed on CAE’s website at www.cae.com, on SEDAR+ at www.sedarplus.ca, or on EDGAR at www.sec.gov. No Shareholder vote is required in connection with the consolidated financial statements.

2 Elect 13 Directors

Nominees

84.6%1

Independent

Average Age

97.8%

% Votes FOR
in 2025

95.7%

Average Board Meeting Attendance

1.The only non-Independent Director nominees are CAE’s Executive Chairman, Mr. Rovinescu, and its President and CEO, Mr. Bromberg. “Independent Directors” refers to the standards of independence established by CAE’s Corporate Governance Guidelines, applicable corporate governance rules of the New York Stock Exchange and SEC, and under the Canadian Securities Administrators’ National Instrument 58-101 – Disclosure of Corporate Governance Practices and National Policy 58-201.

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


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

8 | CAE INC. | 2026 | Management Proxy Circular

Section 2 – Business of the Meeting

Twelve of the nominees were elected at our 2025 annual Shareholders’ meeting held on August 13, 2025, by a majority of the votes cast (average of 97.8% of votes cast in favour). Mr. Ross is a first-time nominee.

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

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

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

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

—up to twelve years maximum;

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

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

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

Majority voting requirement

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

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

—to satisfy Canadian residency requirements; or

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

Detailed voting results will be disclosed after the Meeting

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


The Board of Directors recommends that Shareholders vote FOR the election of the 13 nominated members of the Board.

9 | CAE INC. | 2026 | Management Proxy Circular

Section 2 – Business of the Meeting

3 Appoint the Auditor

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

PwC has served as auditor of CAE since 1991.

PwC provides three types of services to CAE and its subsidiaries

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

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

3.Tax Services: fees relating to tax compliance, tax planning and tax advice.

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

Auditor’s independence

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

The Audit Committee annually assesses the independence, qualifications, and performance of the external auditor, and performs a comprehensive review every five years, with the last comprehensive review performed in August 2023. The scope of the annual and comprehensive reviews covers audit quality, including independence, objectivity and professional skepticism, quality of service, candor of communications and PwC’s ability to meet CAE’s future needs. Assessments are based, among other things, on the audit plan submitted, the risk areas identified, the

nature of the audit findings, reports presented to the Audit Committee. The annual and comprehensive assessments also consider audit quality indicators (AQIs), which the external auditor reports on quarterly. The use of AQIs is recommended by Canadian regulatory and accounting member bodies, such as CPA Canada, the Canadian Public Accountability Board, the Institute of Corporate Directors and the Canadian Centre for Audit Quality, and provides the Audit Committee with additional useful quantitative and qualitative information for the purpose of evaluating the external auditor.

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

Fees Paid by CAE to PwC in FY2026

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


Fee Type	2026 ($ millions)	2025 ($ millions)
1. Audit services	7.3	7.5
2. Audit-related services	0.4	0.4
3. Tax services	0.3	0.4
4. All other services	0.0	0.0
Total	8.0	8.3

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


The Board of Directors recommends that Shareholders vote FOR the appointment of PwC as CAE’s auditor.

10 | CAE INC. | 2026 | Management Proxy Circular

Section 2 – Business of the Meeting

4 Advisory Vote on Executive Compensation

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

Section 7 of the Circular describes our overall approach to executive compensation, the objectives of our executive compensation program, how compensation decisions are made and the compensation paid to our named executive officers in the last three years. Section 7 also describes the continued Shareholder outreach conducted in FY2026, seeking input on our compensation programs.

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

The text of the “say on pay” resolution reads as follows:

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

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

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

Our approach to executive compensation was approved by 95.2% of the votes cast on the resolution during our August 13, 2025 annual meeting of Shareholders. Please refer to Section 7 – Executive Compensation – Compensation Discussion and Analysis – Shareholder Engagement, which describes our significant engagement initiatives with investors in FY2026, including with respect to our executive compensation programs.


The Board of Directors recommends that Shareholders vote FOR the resolution set out above.

5 Other Business

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

11 | CAE INC. | 2026 | Management Proxy Circular

12 | CAE INC. | 2026 | Management Proxy Circular

Section 3 – About the Nominated Directors

This Section presents a profile of each nominated Director, including an explanation of each nominated Director’s experience, languages, education, skills, qualifications and core competencies, attendance at Board and Committee meetings from April 1, 2025 to March 31, 2026, total value of compensation received in FY2026, Share ownership information, the extent of fulfillment of the Minimum Ownership requirements, previous voting results, as well as participation on the boards of other public companies. A description of the Director Selection and Nomination Process, Board Attributes and Demographics and a tabular summary of our Directors’ Skills and Experiences follows the individual tables. “Market Value” refers to the product of the sum of the Shares and DSUs held by a Director multiplied by the closing price on the TSX of a Share on March 31, 2025 and March 31, 2026.

Non-Canadian resident Directors are paid in U.S. dollars on the basis of a one-for-one exchange rate of Canadian dollars to U.S. dollars, and their share ownership requirements are in U.S. dollars. As such, for these Directors the “Total Value of Compensation Received in FY2026” reflects payments made in U.S. dollars for each quarter of FY2026, which were converted to Canadian dollars using the exchange rate on the last business day of the respective quarter, being, for each U.S. dollar, $1.36 in Q1, $1.39 in Q2, $1.37 in Q3 and 1.39 in Q4. In addition, the “Market Value” of their securities held on March 31, 2025 and March 31, 2026 has been converted to U.S. dollars using the Bank of Canada daily exchange rate on the last business day of FY2025 and FY2026, respectively being 0.70 and 0.72 U.S. dollars per Canadian dollar.

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


97.8%	84.6%1	60	2.46	95.7%
Average 2025 Votes FOR	Independent Directors	Average Age	Average Tenure (years)	Average Board Attendance

1.The only non-Independent Director nominees are CAE’s Executive Chairman, Mr. Rovinescu, and its President and CEO, Mr. Bromberg.

13 | CAE INC. | 2026 | Management Proxy Circular

Section 3 – About the Nominated Directors


Sophie Brochu Lead Independent Director1
Age: 63 Bromont, Québec, Canada Independent Director since: 2023 Committees: Governance (Chair) Total Value of Compensation Received in FY2026: $321,118 Languages: English, French
Experience Hydro-Québec–President and Chief Executive Officer (2020 – 2023) Énergir (formerly Gaz-Métro)–President and Chief Executive Officer (2007 – 2019); Vice-President, Business Development and other executive roles (1997 – 2007) Began her career as a financial analyst at Société québécoise d’initiatives pétrolières (SOQUIP) in 1987
Skills, Qualifications and Core Competencies Strategic Leadership and Management experience gained while serving as CEO at Energir and Hydro Quebec Human Resources / Compensation expertise gained during her service in CEO roles where she had ultimate oversight for succession planning, talent management and retention, and alignment of HR compensation programs with strategic orientations, as well as during her service on HR/Compensation committees of various public boards Government Relations expertise gained from her over 35 years of deep experience with energy utilities and regulated entities, both in Canada and the US, which involve various and complex governmental relations, both at the political and administrative levels, which resulted in her extensive strategic understanding of public policies Sustainability expertise through her over 25 years of experience in the deployment of health and safety programs, establishment of environmental frameworks, fostering of deep relationships with various stakeholders, and advancing of workplace culture practices at the organizations that she oversaw

Education BA, Economics, Université Laval 1.Ms. Brochu was appointed Lead Independent Director on August 13, 2025.




2025 Voting Results
Votes For	96.96%	248,776,836
Votes Against	3.04%	7,796,974

Other Public Company Boards
Compagnie de Saint-Gobain S.A. (2024 – present)
CGI Inc. (2019 – 2020; 2023 – present)
Bank of Montreal (2011 – 2023)

Board and Committee Attendance2
Board of Directors	9 of 9	100%
Governance Committee	3 of 3	100%
Human Resources Committee	3 of 3	100%
Total	15 of 15	100%
2.Ms. Brochu left the Human Resource Committee on August 13, 2025.

Share Ownership
	March 31, 2026	March 31, 2025
Shares	—	—
DSUs	22,832	14,576
Total	22,832	14,576
Market Value	$826,964	$515,699
Minimum Ownership Requirement	$425,000	$425,000
% of Achievement	195%	121%

14 | CAE INC. | 2026 | Management Proxy Circular

Section 3 – About the Nominated Directors


Matthew Bromberg President and CEO
Age: 56 Westmount, Québec, Canada Director since: 2025 Total Value of Compensation Received in FY2026: please refer to Section 7 – Executive Compensation – Compensation of our Named Executive Officers for details concerning Mr. Bromberg’s compensation Languages: English
Experience CAE Inc.–President and CEO (2025) Northrop Grumman–Corporate Vice President, Global Operations (2022 – 2025) Raytheon Technologies–President, Pratt & Whitney Military Engines (2017 – 2022); President, Pratt & Whitney Commercial Aftermarket Operations (2013 – 2017); Vice President, United Technologies Corporate Strategy & Development (2011 – 2013); Vice President, Hamilton Sundstrand/Collins Customer Service (2009 – 2011); Vice President, Pratt & Whitney Program Management (2006 – 2009); Vice President, Strategy & Development Corporate/Pratt & Whitney (2002 – 2006) Goldman Sachs–Associate Banker, Investment Banking Division, Mergers and Strategic Advisory (2000 – 2002) U.S. Department of the Navy–Submarine Officer (1992 – 1997)
Skills, Qualifications and Core Competencies Knowledge of Industry gained over a career spanning nearly 25 years in leadership roles at leading large multinational aerospace and defence companies Strategic Leadership and Management experience developed in executive roles leading large-scale international operations through periods of growth, restructuring, transformation and divestitures Capital Markets / M&A experience gained while working in investment banking, where he was directly responsible for corporate portfolio structure and inorganic growth strategy Manufacturing / Supply Chain expertise developed while leading global operations for a large defence company and overseeing the transformation of its $20 billion supply chain

Education BA, Physics, University of California, Berkley MS, Mechanical Engineering, Massachusetts Institute of Technology MBA, Massachusetts Institute of Technology’s Sloan School of Management




2025 Voting Results
Votes For	99.95%	256,450,571
Votes Against	0.05%	122,644

Other Public Company Boards
None

Board and Committee Attendance1
Board of Directors	4 of 4	100%
Total	4 of 4	100%
1.Mr. Bromberg joined the Board on August 13, 2025. Upon invitation of the Board Committees, he attended all or part of their meetings.

Share Ownership2
	March 31, 2026	March 31, 2025
Shares	2,508	—
Stock Options	108,173	—
PSUs	377,221	—
RSUs	150,156	—

2. As President and CEO, Mr. Bromberg has a higher ownership target than an Independent Director. Please refer to Section 7 – Executive Compensation - Compensation Discussion and Analysis - Compensation Governance – Executive Share Ownership Requirements for details concerning Mr. Bromberg’s Share ownership requirements.

15 | CAE INC. | 2026 | Management Proxy Circular

Section 3 – About the Nominated Directors


Patrick Decostre
Age: 53 Montréal, Québec, Canada Independent Director since: 2024 Committees: Audit Total Value of Compensation Received in FY2026: $273,204 Languages: English, French
Experience Boralex Inc.–President and Chief Executive Officer (2020 – present); Vice President and Chief Operating Officer (2019 – 2020); Vice President and General Manager of Boralex’s European subsidiaries (2001 – 2019)
Skills, Qualifications and Core Competencies Strategic Leadership and Management experience gained in this role as CEO of Boralex since 2020, and during 20+ years in leadership positions in Europe for Boralex while building and growing the company Human Resources / Compensation expertise gained while serving as General Manager, COO and CEO of Boralex, dealing with human resources, organizational design, transformation and compensation Risk Management experience gained while serving as COO and CEO of Boralex, working with the board to set up new identification and risk management systems, including sustainability risks Capital Markets / M&A expertise gained through equity markets investor relations experience, as well as debt financing and refinancing, acquisitions and divestitures, and acquisitions integration throughout his time at Boralex

Education BSc, Civil Engineering in Physics, Université Libre de Bruxelles – École Polytechnique de Bruxelles Masters in Technological & Industrial Management, Université Libre de Bruxelles – Solvey Brussels School of Economics and Management




2025 Voting Results
Votes For	99.51%	255,304,235
Votes Against	0.49%	1,269,577

Other Public Company Boards
Boralex Inc. (2020 – present)

Board and Committee Attendance
Board of Directors	7 of 9	78%
Audit Committee	3 of 4	75%
Total	10 of 13	77%

Share Ownership
	March 31, 2026	March 31, 2025
Shares	400	400
DSUs	14,203	7,171
Total	14,603	7,571
Market Value	$528,917	$267,862
Minimum Ownership Requirement	$425,000	$425,000
% of Achievement	124%	63%

16 | CAE INC. | 2026 | Management Proxy Circular

Section 3 – About the Nominated Directors


Elise Eberwein
Age: 61 Scottsdale, Arizona, U.S. Independent Director since: 2022 Committees: Governance, Human Resources (Chair) Total Value of Compensation Received in FY2026: $404,523 Languages: English
Experience American Airlines, Inc.–Executive Vice President, People and Communications (2013 – 2022) US Airways–Executive Vice President, People, Communications and Public Affairs (2005 – 2013) America West Airlines–Vice President, Corporate Communications (2003 – 2005) Served in key executive roles with Frontier Airlines and Western Pacific Airlines Began her aviation career as a flight attendant
Skills, Qualifications and Core Competencies Knowledge of Industry gained over her 35 years in the commercial aviation sector while working for six airlines, including several start-up low-cost airlines and three major airlines: America West, US Airways, and American Airlines Strategic Leadership and Management experience gained while in leadership roles at US Airways and American Airlines which also included being a member of the executive management team leading two major airline mergers with responsibility for the subsequent integration work Human Resources / Compensation expertise gained through her roles leading all HR functions for more than 15 years, including serving as Chief Human Resources Officer for American Airlines, which resulted in her developing extensive executive compensation knowledge, talent development and succession planning experience Sustainability expertise obtained while developing and leading the diversity and inclusion initiatives as part of her responsibilities as CHRO of American Airlines

Education BA, Mass Communications, Lindenwood University Executive MBA, Colorado State University




2025 Voting Results
Votes For	99.14%	254,365,361
Votes Against	0.86%	2,208,451

Other Public Company Boards
None

Board and Committee Attendance
Board of Directors	8 of 9	89%
Governance Committee	3 of 3	100%
Human Resources Committee	6 of 6	100%
Total	17 of 18	94%

Share Ownership
	March 31, 2026	March 31, 2025
Shares	14,500	14,500
DSUs	22,329	16,483
Total	36,829	30,983
Market Value	US$956,985	US$762,502
Minimum Ownership Requirement	US$425,000	US$425,000
% of Achievement	225%	179%

17 | CAE INC. | 2026 | Management Proxy Circular

Section 3 – About the Nominated Directors


Ian L. Edwards
Age: 63 Montréal, Québec, Canada Independent Director since: 2024 Committees: Audit Total Value of Compensation Received in FY2026: $273,204 Languages: English
Experience AtkinsRéalis–President and Chief Executive Officer (2019 – present); Chief Operating Officer (2019); President, Infrastructure (2015 – 2019); Executive Vice-President, Infrastructure Construction (2014 – 2015) Leighton Group–Managing Director of Leighton Asia, India and Offshore (2012 – 2014); Executive General Manager of Leighton Asia (2008 – 2012) Gammon Construction Limited–Divisional Director (2008); Director – Civil Division (2007 – 2008)
Skills, Qualifications and Core Competencies Strategic Management and Leadership experience gained as President and CEO of AtkinsRéalis, overseeing a repositioning of the company, including simplifying its operations and geographic spread, exiting business lines and evolving the company into a premier engineering services and nuclear company Human Resources / Compensation expertise developed as President and CEO of AtkinsRéalis, which role entails oversight of the overall remuneration framework throughout the organization, as well as through his role as Chair of the HR Committee during his tenure on the board of Canada Steamship Lines Sustainability expertise gained throughout his tenure at AtkinsRéalis, where sustainable projects drive over 50% of revenues and key pillars of growth are centered around energy transition Risk Management experience obtained while President and CEO of AtkinsRéalis, where he oversaw a complete overhaul of the company’s risk management system, including implementing an ERM process, regular business and project reviews at the CEO level, and strong board oversight

Education Higher and Ordinary Certificates, Civil Engineering, University of Central Lancashire Fellow – Institution of Civil Engineers Fellow – Hong Kong Institution of Engineers




2025 Voting Results
Votes For	99.50%	255,280,011
Votes Against	0.50%	1,293,203

Other Public Company Boards
AtkinsRéalis Group Inc. (2019 – present)

Board and Committee Attendance
Board of Directors	8 of 9	89%
Audit Committee	4 of 4	100%
Total	12 of 13	92%

Share Ownership
	March 31, 2026	March 31, 2025
Shares	—	—
DSUs	11,905	4,873
Total	11,905	4,873
Market Value	$431,204	$172,407
Minimum Ownership Requirement	$425,000	$425,000
% of Achievement	101%	41%

18 | CAE INC. | 2026 | Management Proxy Circular

Section 3 – About the Nominated Directors


Marianne Harrison
Age: 62 Dover, New Hampshire, U.S. Independent Director since: 2019 Committees: Audit (Chair) (financial expert), Technology Total Value of Compensation Received in FY2026: $406,028 Languages: English
Experience Manulife Financial Corporation–President and Chief Executive Officer of John Hancock Life Insurance Company, the U.S. division of Manulife Financial Corporation and a member of Manulife’s Executive Leadership Team (2017 – 2023); President and Chief Executive Officer of Manulife Canada, Manulife’s Canadian Division (2013 – 2017); held several leadership positions across the company, including President and General Manager for John Hancock Long-Term Care Insurance, and Executive Vice President and Controller for Manulife (2003-2013) TD Bank Group–Chief Financial Officer of Wealth Management after holding various other positions (1998 – 2003) PwC–Senior Manager after holding numerous other positions (1986 – 1998)
Skills, Qualifications and Core Competencies Strategic Leadership and Management experience gained while running all aspects of the P&L and serving as President and CEO of both John Hancock and Manulife Canada Finance / Accounting expertise developed during over 35 years in the financial industry including roles as Auditor for PWC; Corporate Controller Manulife Financial; and CFO Wealth Management TD Bank and was recognized by her election as a Fellow of the Profession, the highest designation for professional achievement conferred by the Chartered Professional Accountants of Ontario Risk Management experience gained throughout her career in financial services and as an active member of the Segment Risk Committee while serving as President and CEO John Hancock and Manulife Canada Capital Markets / M&A experience gained at Manulife Financial, where she was an active participant during mergers with both John Hancock and Standard Life, and the divestiture of Signature Services by John Hancock, as well as through having responsibility for the use of capital to ensure risk adjusted returns and company hurdle rates are met in both Canada and the U.S. Segment

Education BA, English, University of Western Ontario Diploma in Accounting, Wilfrid Laurier University




2025 Voting Results
Votes For	99.00%	254,018,393
Votes Against	1.00%	2,555,420

Other Public Company Boards
Canadian Imperial Bank of Commerce (2025 – present)

Board and Committee Attendance
Board of Directors	9 of 9	100%
Audit Committee	4 of 4	100%
Technology Committee	1 of 2	50%
Total	14 of 15	93%

Share Ownership
	March 31, 2026	March 31, 2025
Shares	—	20,000
DSUs	61,295	52,200
Total	61,295	72,200
Market Value	US$1,592,707	US$1,776,866
Minimum Ownership Requirement	US$425,000	US$425,000
% of Achievement	375%	418%

19 | CAE INC. | 2026 | Management Proxy Circular

Section 3 – About the Nominated Directors


Peter Lee
Age: 40 Corte Madera, California, U.S. Independent Director1 since: 2025 Committees: Human Resources Total Value of Compensation Received in FY2026: None2 Languages: English
Experience Browning West–Co-Founder and Partner (2019 – present) Criterion Capital Management–Investment Associate (2016 – 2019) Grey Mountain Partners – Senior Associate (2010 – 2014) Began his career as an Investment Banking Analyst at Lazard Frères.
Skills, Qualifications and Core Competencies Finance / Accounting expertise developed while working in private equity and public equity investing for 13 years and investment banking for 2 years Human Resources / Compensation experience gained while serving as Chair of the Compensation and Human Resources Committee of Gildan Activewear, a NYSE and TSX listed company based in Montréal Capital Markets / M&A expertise acquired through various roles over the course of his career in private equity and public equity investing, and investment banking, including 6 years as Co-Founder and Partner of Browning West Risk Management experience developed while assessing risks associated with both private and public companies when conducting due diligence for potential investments over his 13-year investing career

Education BA, Carleton College MBA, Harvard Business School

1.Mr. Lee is a nominee of Browning West, LP, pursuant to a customary cooperation and standstill agreement. The Board has determined that Mr. Lee is independent based on a number of factors, including the fact that as of June 11, 2026, Browning West, LP held less than 5% of our total issued and outstanding Shares.




2025 Voting Results
Votes For	99.94%	256,428,182
Votes Against	0.06%	145,630

Other Public Company Boards
Gildan Activewear Inc. (2024 – present)

Board and Committee Attendance
Board of Directors	9 of 9	100%
Human Resources Committee	5 of 6	83%
Total	14 of 15	93%

Share Ownership2
	March 31, 2026	March 31, 2025
Shares	—	—
DSUs	—	—
Total	—	—
Market Value	—	—
Minimum Ownership Requirement	N/A	N/A
% of Achievement	N/A	N/A
2.Mr. Lee has waived all compensation as a Director , in accordance with Browning West’s policy requiring its employees sitting on a board of a portfolio company to waive any board compensation. As such, and given Mr. Lee’s alignment with CAE Shareholder interests through Browning West’s participation in CAE, the Board has exempted him from CAE’s director share ownership requirement.

20 | CAE INC. | 2026 | Management Proxy Circular

Section 3 – About the Nominated Directors


Katherine A. Lehman
Age: 51 New York, New York, U.S. Independent Director since: 2025 Committees: Governance Total Value of Compensation Received in FY2026: $377,053 Languages: English
Experience Palladium Equity Partners, LLC–Partner, Palladium Heritage (2022 – present), leading a private equity fund focused on investing in lower middle market companies in the industrial and business services industries Hilltop Private Capital–Managing Partner and Co-Founder (2016 – 2022), a private equity firm focused on industrial and business services industries Lincolnshire Management–Managing Director and prior roles (2001 – 2016)
Skills, Qualifications and Core Competencies Capital Markets / M&A experience gained through ~25 years in private equity investing at Palladium Equity, Hilltop Private Capital and Lincolnshire Management as well as public and private board roles with acquisitive companies, where she executed or had oversight for acquisitions, divestitures, capital raising and capital allocation activities Manufacturing / Supply Chain expertise acquired as a private equity investor and board member, where many of the companies she works with are multi-site and often multi-national manufacturing or distribution companies, where manufacturing processes, supply chain management, product development and logistics are crucial Finance / Accounting expertise developed while overseeing companies, including serving on numerous board audit committees as well as through detailed diligence and executing M&A transactions Human Resources / Compensation experience gained while overseeing succession planning and the implementation of compensation, leadership development and retention programs at the board level, through service on the HR/compensation committees at Navient, Stella-Jones and numerous private companies

Education BS, Economics, The Wharton School at the University of Pennsylvania MBA, Columbia Business School




2025 Voting Results
Votes For	99.87%	256,250,677
Votes Against	0.13%	323,136
Other Public Company Boards
Stella-Jones Inc. (2016 – present)
Navient Corporation (2014 – 2022)
Board and Committee Attendance
Board of Directors	9 of 9	100%
Governance Committee	3 of 3	100%
Total	12 of 12	100%

Share Ownership1
	March 31, 2026	March 31, 2025
Shares	—	—
DSUs	10,988	1,282
Total	10,988	1,282
Market Value	US$285,507	US$31,550
Minimum Ownership Requirement	US$425,000	US$425,000
% of Achievement	67%	7%
1.Ms. Lehman joined the Board on February 14, 2025 and must meet her required holdings over the five-year period from such date.

21 | CAE INC. | 2026 | Management Proxy Circular

Section 3 – About the Nominated Directors


Mary Lou Maher
Age: 66 Toronto, Ontario, Canada Independent Director since: 2021 Committees: Audit (financial expert), Human Resources Total Value of Compensation Received in FY2026: $285,301 Languages: English
Experience KPMG Canada–Canadian Managing Partner, Quality and Risk and Global Head of Inclusion and Diversity KPMG International (2017 – 2021); held various executive and governance roles, including Chief Financial Officer, Chief Inclusion and Diversity Officer and Chief Human Resources Officer (1983 – 2017)
Skills, Qualifications and Core Competencies Finance / Accounting expertise developed during her many years at KPMG where she gained audit experience in retail, manufacturing, financial services (banking and brokerage), hospitality, healthcare and real estate and was recognized through her election as a Fellow of the Chartered Professional Accountants of Ontario Human Resources / Compensation expertise gained while serving as Chief Human Resource Officer, Chief Inclusion and Diversity Officer and Global Head of Inclusion and Diversity at KPMG, where she created KPMG Canada’s first ever National Diversity Council and was the executive sponsor of pride@kpmg Risk Management experience gained while serving as a member of the KPMG Canadian Executive and Global Risk Management leadership teams, which are responsible for managing risk and legal matters for KPMG Canada including Enterprise Risk Management Strategic Leadership and Management experience obtained while working in various positions on the KPMG leadership team and while serving on three public company boards

Education BCom, McMaster University Fellow Chartered Professional Accountant




2025 Voting Results
Votes For	99.67%	255,736,237
Votes Against	0.33%	836,976

Other Public Company Boards
Canadian Imperial Bank of Commerce (2021 – present)
Magna International Inc. (2021 – present)

Board and Committee Attendance1
Board of Directors	9 of 9	100%
Audit Committee	2 of 2	100%
Human Resources Committee	6 of 6	100%
Total	17 of 17	100%
1.Ms. Maher joined the Audit Committee on August 13, 2025.
Share Ownership
	March 31, 2026	March 31, 2025
Shares	—	6,500
DSUs	27,158	22,923
Total	27,158	29,423
Market Value	$983,673	$1,040,986
Minimum Ownership Requirement	$425,000	$425,000
% of Achievement	231%	245%

22 | CAE INC. | 2026 | Management Proxy Circular

Section 3 – About the Nominated Directors


Bruce Ross
Age: 64 Toronto, Ontario, Canada Independent Director since: First time nominee (Independent1) Committees: N/A Total Value of Compensation Received in FY2026: N/A Languages: English
Experience Royal Bank of Canada–Group Head, AI (2026); Group Head, Technology & Operations (2014 – 2026) IBM– General Manager, Technology Services, North America (2013 – 2014); General Manager, Technology Services, Europe (2012 – 2013); President, IBM Canada (2010 – 2012); General Manager, Technology Services, U.K., Ireland and South Africa and other executive roles (2000 – 2010)
Skills, Qualifications and Core Competencies Information Technology / Cybersecurity / Digital expertise gained over 12 years as RBC’s Group Head, Technology and Operations, leading 18,000 professionals supporting 19 million clients across 5 global businesses in 29 countries, including co-leading RBC’s integration of HSBC Canada, achieving an industry-first close and convert in a single weekend Strategic Leadership and Management experience gained through global operational roles, including as an officer of RBC and a member of its Group Operating Committee which guides RBC’s strategic investments, and as a member of IBM’s Global Strategy team and Senior Executive leadership team for 7 years Research & Development experience leading RBC’s technology transformation over 13 years as Group Head of Technology and Operations and Group Head of RBC AI, including co-leading its evolution into a digitally enabled relationship bank and leading the RBC Borealis AI team, which has generated 300+ patents Risk Management experience gained managing RBC’s global cybersecurity function for 12 years, building IT and Operational Risk capabilities, and serving on the RBC Global Risk Committee, overseeing risk appetite in an evolving risk landscape

Education BESc, Engineering, University of Western Ontario




2025 Voting Results
Votes For	N/A	N/A
Votes Against	N/A	N/A

Other Public Company Boards
None

Board and Committee Attendance1
Board of Directors	N/A	N/A
Total	N/A	N/A

Share Ownership1
		March 31, 2026
Shares		293
DSUs		—
Total		293
Market Value		$10,612
Minimum Ownership Requirement		$425,000
% of Achievement		2%
1.Mr. Ross does not currently serve as a Director and will become a Director following his election at the Meeting.

23 | CAE INC. | 2026 | Management Proxy Circular

Section 3 – About the Nominated Directors


Calin Rovinescu, C.M. Executive Chairman1
Age: 70 Toronto, Ontario, Canada Director since: 2025 Total Value of Compensation Received in FY2026: $2,056,774 Languages: English, French
Experience Air Canada–President and Chief Executive Officer (2009 – 2021); Chief Restructuring Officer (2003 – 2004); Executive Vice President, Corporate Development & Strategy (2000 – 2004) Star Alliance–Chair of the Chief Executive Board (2012 – 2016); Board Member (2009 – 2021) International Air Transport Association–Chair (2014 – 2015); Member of the Board of Governors (2010 – 2020) Genuity Capital Markets–Co-Founder and Principal (2005 – 2009) Stikeman Elliott–Managing Partner (1996 – 2000); Partner (1984 - 1996); Associate Lawyer (1979 – 1984)
Skills, Qualifications and Core Competencies Knowledge of Industry gained throughout his multiple leadership roles at Air Canada, as well as in the course of his service on the boards, including as Chair, of Star Alliance and the International Air Transport Association Strategic Leadership and Management experience developed while serving in executive roles at Air Canada, where he led Air Canada’s transformation into one of the world’s leading airlines, expanding its network and producing record financial results and stock market performance Legal / Governance expertise gained during his time at Stikeman Elliott, a leading Canadian law firm, where he practiced corporate law for over 20 years, including 4 years as Managing Partner of the firm’s Montréal office Capital Markets / M&A experience developed in his role as Co-Founder and Principal of Genuity Capital Markets, an independent investment banking and securities brokerage firm

Education LL.B, University of Ottawa LL.L, Université de Montréal 1.Mr. Rovinescu served as non-executive Chair of the Board from February 14, 2025 to August 13, 2025. He assumed the expanded role of Executive Chairman on August 13, 2025 to assist with the transition of the incoming CEO, meet with investors, government representatives and other stakeholders and help to develop the transformation plan and long term strategy for the next chapter of growth and value creation at CAE. As that process is now well underway, Mr. Rovinescu will revert to the role of non-executive Chair of the Board effective January 1, 2027.




2025 Voting Results
Votes For	96.02%	246,365,363
Votes Against	3.98%	10,208,447

Other Public Company Boards
BCE Inc. / Bell Canada (2016 – present)
The Bank of Nova Scotia (2020 – 2025)

Board and Committee Attendance2
Board of Directors	9 of 9	100%
Total	9 of 9	100%
2.As Executive Chairman, Mr. Rovinescu attends all Committee meetings.
Share Ownership3
	March 31, 2026	March 31, 2025
Shares	15,000	15,000
DSUs	53,861	1,492
Total	68,861	16,492
Market Value	$2,494,151	$583,487
Minimum Ownership Requirement	$7,500,000	$950,000
% of Achievement	33%	61%
3.Mr. Rovinescu joined the Board on February 14, 2025 and must meet his required holdings over the five-year period from such date. His minimum ownership requirement as non-executive Chair of the Board was $950,000. It increased to $7,500,000 following his appointment as Executive Chairman on August 13, 2025. His holdings represent 263% of the required holdings for a non-executive Chair of the Board.

24 | CAE INC. | 2026 | Management Proxy Circular

Section 3 – About the Nominated Directors


Patrick M. Shanahan
Age: 63 Seattle, Washington, U.S. Independent Director since: 2022 Committees: Human Resources Total Value of Compensation Received in FY2026: $377,053 Languages: English
Experience Spirit AeroSystems Inc.–President and Chief Executive Officer (2023 – 2025) U.S. Department of Defense–U.S. Acting Secretary of Defense (2019); 33rd U.S. Deputy Secretary of Defense, where he helped lead the development of several key Department of Defense policies and strategies (2017 – 2018) The Boeing Company–Senior Vice President, Supply Chain & Operations (2016 – 2017); Senior Vice President of Commercial Airplane Programs, managing profit and loss for the 737, 747, 767, 777 and 787 programs and the operations at Boeing’s principal manufacturing sites (2008 – 2016); Vice President and General Manager of the 787 Dreamliner, leading the program during a critical development period (2007 – 2008); Vice President and General Manager of Boeing Missile Defense Systems (2004 – 2007); Vice President and General Manager of Boeing Rotorcraft Systems (2002 – 2004); joined in 1986
Skills, Qualifications and Core Competencies Knowledge of Industry gained as CEO of Spirit AeroSystems and three decades employed by Boeing overseeing both their civil aviation and defence units and as the “customer” while serving in the U.S. Department of Defense Strategic Leadership and Management experience obtained through his service in the U.S. Department of Defense, including as the Acting Secretary of Defense and the 33rd Deputy Secretary of Defense, where he oversaw the management of coordinating and supervising all matters related to the U.S. Armed Forces, as well as during his time in leadership roles at Boeing and Spirit AeroSystems Risk Management expertise developed through his roles at Spirit AeroSystems and Boeing overseeing development and execution of numerous complex civil aviation and defence programs Manufacturing / Supply Chain expertise gained through his roles at Spirit AeroSystems and Boeing overseeing development and execution of civil aviation and defence programs that included responsibilities for manufacturing operations, and supplier management functions, including implementation of advanced manufacturing technologies and global supply chain strategies

Education BS, Mechanical Engineering, University of Washington MS, Mechanical Engineering, Massachusetts Institute of Technology MBA, Massachusetts Institute of Technology’s Sloan School of Management




2025 Voting Results
Votes For	91.82%	235,573,867
Votes Against	8.18%	20,999,344

Other Public Company Boards
Leidos Holdings, Inc. (2022 – present)
Spirit AeroSystems Inc. (2021 – 2025)
Eve Holdings, Inc. (2021 – 2022)

Board and Committee Attendance
Board of Directors	9 of 9	100%
Human Resources Committee	6 of 6	100%
Total	15 of 15	100%

Share Ownership
	March 31, 2026	March 31, 2025
Shares	—	—
DSUs	24,215	18,368
Total	24,215	18,368
Market Value	US$629,199	US$452,043
Minimum Ownership Requirement	US$425,000	US$425,000
% of Achievement	148%	106%

25 | CAE INC. | 2026 | Management Proxy Circular

Section 3 – About the Nominated Directors


Louis Têtu
Age: 62 Québec City, Québec, Canada Independent Director1 since: 2025 Committees: Audit, Technology Total Value of Compensation Received in FY2026: $280,183 Languages: English, French
Experience Coveo Solutions Inc.–Executive Chairman (2025 – present); Chairman and Chief Executive Officer (2008 – 2025) Taleo Corporation–Chief Executive Officer and Chairman (1999 – 2007) Baan Corporation–President of Baan Supply-Chain Solutions (1996 – 1998) Berclain Group–President (1989 – 1996)
Skills, Qualifications and Core Competencies Strategic Leadership and Management experience gained throughout his 30-year career as CEO, including 19 years as CEO and Chairman of publicly traded companies Research & Development experience gained through his active involvement in technology R&D and innovation as CEO of several international software companies, two of which he co-founded Information Technology / Cybersecurity / Digital expertise developed during his time at Coveo, a global provider of artificial intelligence powered software platforms for e-commerce, customer service and workplace applications, at Taleo, a leading international provider of cloud software for talent and human capital management, and at Baan, a global supplier of supply chain management software Manufacturing / Supply Chain knowledge acquired as President of Baan Supply-Chain Solutions and international software companies specialized in manufacturing, logistics and supply chain management software

Education Bachelor of Engineering, Université Laval Commercially licensed helicopter pilot
1.Mr. Têtu is a nominee of Caisse de dépôt et placement du Québec (“La Caisse”), pursuant to a customary nomination right agreement. The Board has determined that Mr. Têtu is independent based on a number of factors, including the fact that as of June 11, 2026, La Caisse held less than 10% of our total issued and outstanding Shares, and that Mr. Têtu is not an executive officer of La Caisse.




2025 Voting Results
Votes For	91.65%	235,158,380
Votes Against	8.35%	21,415,430

Other Public Company Boards
Alimentation Couche-Tard Inc. (2019 – present)
Coveo Solutions Inc. (2021 – present)
Industrial Alliance Insurance and Financial Services Inc. (2016 – 2022)

Board and Committee Attendance
Board of Directors	9 of 9	100%
Audit Committee	4of 4	100%
Technology Committee	2 of 2	100%
Total	15 of 15	100%

Share Ownership
	March 31, 2026	March 31, 2025
Shares	21,200	14,500
DSUs	8,100	892
Total	29,300	15,392
Market Value	$1,061,258	$544,569
Minimum Ownership Requirement	$425,000	$425,000
% of Achievement	250%	128%

26 | CAE INC. | 2026 | Management Proxy Circular

Section 3 – About the Nominated Directors

Director Selection and Nomination Process

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

To fulfill this mandate, the Governance Committee:

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

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

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

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

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

Board members must:

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

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

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

—Give independent judgment on issues facing CAE;

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

—Effectively participate in all Board-related deliberations;

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

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

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

27 | CAE INC. | 2026 | Management Proxy Circular

Section 3 – About the Nominated Directors

Board Attributes

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

—Other than the Executive Chairman, all non-employee Director nominees (11 out of a total number of 13 nominees) are currently independent.

—All Board Committee members are independent.

Board Demographics

Sophie Brochu

Matthew Bromberg

Patrick Decostre

Elise Eberwein

Ian L. Edwards

Marianne Harrison

Peter Lee

Katherine A. Lehman

Mary Lou Maher

Bruce Ross

Calin Rovinescu

Patrick M. Shanahan

Louis Têtu

Gender

French1

●

English1

●

Other language(s)1

Under 60

●

60-69

●

70+

●

Canadian citizen or permanent resident

●

0-5 years tenure

●

6-10 years tenure

●

More than 10 years tenure

1.At a minimum, business proficiency, unless otherwise indicated.

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Section 3 – About the Nominated Directors

Skills and Experiences

Sophie Brochu

Matthew Bromberg

Patrick Decostre

Elise Eberwein

Ian L. Edwards

Marianne Harrison

Pater Lee

Katherine A. Lehman

Mary Lou Maher

Bruce Ross

Calin Rovinescu

Patrick M. Shanahan

Louis Têtu

Knowledge of Industry

Experience with, or understanding of, some or all of the markets or industries which are directly relevant to CAE, including civil aviation and defence.

●

Strategic Leadership and Management

Experience as senior executive of a public company or other major organization, and executive or management experience developing, evaluating and implementing a strategic plan.

●

Finance / Accounting

Experience with, or understanding of, financial accounting and reporting and corporate finance, and familiarity with internal financial and accounting controls and IFRS.

●

Human Resources / Compensation

Experience with, or understanding of, executive compensation and benefits, including benefits and incentive programs, talent management and retention, leadership development, and succession planning.

●

Government Relations

Experience with, or understanding of, regulatory, political and public policy in Canada, the United States and/or international jurisdictions.

●

R&D

Experience with the oversight of large-scale R&D programs.

●

Legal / Governance

Experience with, or understanding of, corporate governance issues and practices, including the legal, compliance and regulatory environment applicable to public companies or other major organizations.

●

Information Technology / Cybersecurity / Digital

Experience with, or understanding of, the design and implementation, or oversight of the design and implementation, of enterprise-wide information technology systems, client-based digital infrastructures, data analytics, privacy and cybersecurity strategy and policies.

●

Sustainability

Experience with, or understanding of, sustainability practices and programs, including climate change and decarbonization, health and safety, inclusion and equal opportunities and social responsibility.

●

Risk Management

Experience with, or understanding of, the identification and assessment of risks and risk management systems.

●

International Markets

Experience with, or understanding of, overseas markets where the Company has operations.

●

Capital Markets / M&A

Experience overseeing the allocation of capital to ensure superior risk-adjusted financial returns and in capital structure strategy and corporate transactions, including mergers, acquisitions, or divestitures of major assets and/or private/public entities.

●

Manufacturing / Supply Chain

Experience with, or understanding of, sourcing, manufacturing, supply chain, infrastructure, information management, logistics, and product development, distribution and marketing.

●

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Section 4 – Corporate Governance

Our Commitment to Sound Corporate Governance

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

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

Regulatory compliance

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

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

Best practices and continuous improvement

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

Communication and Shareholder engagement

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

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

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

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

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

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Section 4 – Corporate Governance

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

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

We appreciate the importance of engaging with our Shareholders to better understand their views, concerns, and priorities related to our business operations, performance, and executive compensation programs. In FY2023, we initiated a proactive engagement process with our Shareholders. We have continued this process in FY2026 and have committed to regular annual shareholder engagement with our Shareholders. Please refer to Section 7 – Executive Compensation – Compensation Discussion and Analysis - Shareholder Engagement, which describes our significant engagement initiatives with investors in FY2026.

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

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

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

Shareholders may ask to meet with the Executive Chairman, the Lead Independent Director, the Chair of any Board Committee or an individual Director to discuss compensation and governance-related topics for which the Board is directly responsible. The Executive Chairman will consider such meeting requests in consultation with the Chair of the Governance Committee and the Chief Legal Officer. The Board reserves the right to decline requests for meetings for any reason it deems appropriate, including where the proposed topics for the meeting are not related to compensation and corporate governance matters and are better handled by management.

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

—Investor and analyst events and non-deal roadshows;

—In person or videoconference meetings with our President and Chief Executive Officer, Chief Financial Officer, Chief Strategy Officer and senior leaders within our global operations;

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

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

—Quarterly earnings presentations available on our website.

We also receive feedback through:

—Our Shareholders’ Annual General Meeting;

—Regular discussions with investors and sell-side analysts;

—A dedicated address for email inquiries;

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

—Active, ongoing engagement with investors to provide them with the most up to date and comprehensive guidance on our growth perspectives and the future value of their investment.

Board and management roles

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

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Section 4 – Corporate Governance

President and CEO’s role and responsibilities

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

The Executive Chairman’s and Lead Independent Director’s roles and responsibilities

The Executive Chairman works closely with the President and CEO in the development and execution of the Company's strategic initiatives while also being responsible for the effective functioning of the Board. The primary functions of the Lead Independent Director are to provide independent leadership to the Board and to facilitate the functioning of the Board independently of management. The position descriptions for both roles are available on our website. The Executive Chairman position description sets out the Executive Chairman’s main responsibilities and duties:

—Represent the Board in discussions with management and third parties;

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

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

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

—Provide guidance and support to the President and CEO in developing and executing strategy initiatives and meet with the President and CEO regularly to provide feedback and advice on behalf of the Board and other stakeholders;

—In collaboration with the President and CEO, lead the Company in its relations with shareholders, business partners, financial institutions, government actors, external stakeholders and employees and act as a principal spokesperson for the Company.

Correspondence to the Independent Directors may be sent to the attention of the Lead Independent Director of the Board, by email at board@cae.com or at CAE’s address listed in this Circular.

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

The Independent Directors met separately from the President and CEO at each of the meetings of the Board during FY2026, and at each meeting of the HRC, GC, Technology Committee (“TC”) and Audit Committee. Following Mr. Rovinescu’s shift to the role of Executive Chairman, the Independent Directors also met separately from the Executive Chairman at each meeting of the Board. At the Board meetings, the Independent Directors’ meetings are chaired by the Lead Independent Director. At Committee meetings, such sessions are chaired by the independent Chair of that Committee. The Board, its Committees, the Lead Independent Director as well as individual Directors are also able to retain and meet with external advisors and consultants at the expense of CAE in appropriate circumstances. In fact, the Board has regular access to information independent of management through the external and internal auditors, as well as independent compensation consultants and independent legal counsel. The Board believes that sufficient processes are in place to enable it to function independently of management.

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Section 4 – Corporate Governance

Delegation to standing Board committees composed entirely of Independent Directors

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

Audit

Governance

Human Resources

Technology

Ayman Antoun

Chair

Sophie Brochu

Chair

Patrick Decostre

Elise Eberwein

Chair

Ian L. Edwards

Marianne Harrison

Chair

Peter Lee

Katherine A. Lehman

Mary Lou Maher

Patrick M. Shanahan

Louis Têtu

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

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

Other Board commitments and Interlocks Policy

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

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

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

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

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

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

None of CAE’s Directors is considered overboarded.

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Section 4 – Corporate Governance

Orientation and continuing education

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

Directors are encouraged to attend conferences, seminars or courses, whether industry-specific or relevant to their role as a Director, at CAE’s expense. They have access to an evergreen supply of current research and analysis, news reports, and studies on governance and compensation practices through the Board’s website. Directors regularly attend education sessions organized by management, and participate in CAE site visits, industry events and trade shows. Given the rapidly changing technology and competitive environment, management provides regular in-depth reviews of business segment performance, issues relevant to CAE’s business and industry developments, as well as updates on governance, competition, fiduciary duties, changes in law, technology and other educational material. The Board also receives quarterly updates on health and safety (including aviation safety), sustainability matters (including climate change) and compliance matters like anti-corruption, corporate policies and procedures, foreign representatives, workplace ethics, export controls, sanctions screening, and data protection and privacy. The table below provides an overview of selected education sessions, presentations and reports attended or received in FY2026.


Period	Subject	Attendees
Q1 FY 2026	Strategic updates on industry, macroeconomic, technology, product, strategy, government relations, financial, people and sustainability developments	Entire Board
	Quarterly reports on business highlights, strategic priorities and enterprise risk management	Entire Board
	International corporate tax law reform	Audit Committee
	Sustainability trends and regulations, including climate change and decarbonization targets	Governance Committee
	Competitive market analysis of board of directors’ compensation	Governance Committee
	Updates on aviation safety trends and developments	Human Resources Committee
Q2 FY2026	Quarterly reports on business highlights, strategic priorities and enterprise risk management	Entire Board
	Cybersecurity update	Entire Board
	Enterprise risk management framework and policy review	Audit Committee
	Review of the control environment	Audit Committee
	Updates on human resources initiatives and workplace culture efforts	Human Resources Committee
Q3 FY 2026	Quarterly reports on business highlights, strategic priorities and enterprise risk management	Entire Board
	Portfolio review of non-core assets	Entire Board
	Presentation on sustainability reporting frameworks	Audit Committee
	Global insurance review	Audit Committee
	Annual review of foreign representatives	Governance Committee
	Global security review	Governance Committee
	Updates on labour relations and incentive plan design	Human Resources Committee
	Annual review of aviation safety and governance	Human Resources Committee
	Cybersecurity deep dive on data exposure risks	Technology Committee
Q4 FY2026	Quarterly reports on business highlights, strategic priorities and enterprise risk management	Entire Board
	Update on transformation initiatives	Entire Board
	Developments in capital structure, treasury and credit rating environment	Audit Committee
	Annual internal audit plan	Audit Committee
	Market and geopolitical trends relating to sustainability matters and decarbonization	Governance Committee
	Review of incentive plan and retirement plan designs	Human Resources Committee
	Compensation peer group review	Human Resources Committee
	Annual update on cybersecurity management, risks and trends, including artificial intelligence	Technology Committee

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Section 4 – Corporate Governance

Strategic planning oversight

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

The Board holds in-depth strategy sessions every year. In April 2025, the Board reviewed and approved the FY2026 budget and FY2026-FY2030 strategic plan. As part of the review, the Board considered the strategic plans and priorities for each of the two business segments. The Board also focused on CAE’s transformation plan, the key risks and opportunities facing the business relating to strategic and operational execution, the changing economic and geopolitical environment, the competitive and regulatory environment, maintaining strong financial discipline and a strong capital position, operational resilience (including information security and data management), and stakeholder and regulatory expectations on climate and social actions. The Board also reviewed trends emerging in strategic and financial decision making with a focus on the future of technology, industry and competitive trends, macroeconomic and geopolitical shifts, climate change, sustainability, workplace culture, digital, health and safety, and strategic partnerships. The Executive Management Committee reviewed and discussed the feedback and perspectives provided by the Board and the Board then approved the updated strategic plan.

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

Enterprise risk management oversight

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

This framework relies on the Three Lines Model where the business segments and risk management functions work in a coordinated manner to manage critical risks and continuously improve the risk management process, while Internal Audit provides independent and objective assurance over the adequacy and effectiveness of the governance and ERM framework:

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

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

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

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Section 4 – Corporate Governance

Pursuant to our ERM policy:

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

—Internal Audit provides to the Audit Committee and management an independent and objective appraisal of the adequacy and effectiveness of the Company’s governance and ERM framework, control environment and internal control systems.

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

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

The table below reflects principal oversight responsibilities for each of the FY2026 enterprise risks listed:

You can find a more comprehensive discussion of risk management in Section 9 – Business Risk and Uncertainty of our Management Discussion and Analysis for the fourth quarter and year ended March 31, 2026, filed with the Canadian securities commissions and provided to the U.S. Securities and Exchange Commission under Form 6-K, and available on our website (www.cae.com), on SEDAR+ (www.sedarplus.ca), and on EDGAR (www.sec.gov).

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Section 4 – Corporate Governance

Ethical business conduct

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

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

Conflicts of interest and related party transactions

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

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

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

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

Assessment of Directors by the GC

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

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Section 4 – Corporate Governance

meets with the Chair of the Board at least once annually to discuss his or her individual performance and the performance of the Board as a whole. As well, the Executive Chairman’s performance is evaluated and assessed through one-on-one meetings between each Director and the Chair of the Governance Committee. Both the Executive Chairman and the Chair of the Governance Committee then report back to the full Board. Given the recent changes to the Board, the appointment of a new Chair and a new CEO, CAE did not engage a third-party supplier for this assessment in FY2026. The Executive Chairman instead met separately with each Director to obtain their feedback on governance matters and reported back to the Board. The Board expects to reinstate the standard assessment process in FY2027.

Sustainability

At CAE, sustainability is integral to who we are as a company and an enabler of our enterprise-wide transformation. Sustainability is embedded in our culture and built into our business model, our decisions and actions, supporting disciplined execution, long term performance and resilience. CAE’s noble purpose, making the world safer, captures how we make a difference in the world and drives our decisions and actions as we transform our portfolio and operating model. Making civil aviation safer, and supporting sovereignty, security and safety with allied forces mission readiness, are both rooted in the principles of sustainability impact.

Over FY2026, many of our initiatives had significant sustainability and efficiency impacts. Amongst those initiatives:

—Our decarbonization strategy remains anchored in near-term (10 years) science-based emissions reduction targets. CAE is committed to reduce Scope 1 and 2 emissions by 85.7% against FY2019 baseline and Scope 3 emissions by 32.5% against FY2022 baseline by the end of FY2033. The Scope 3 target is applicable only to the following categories: purchased goods and services, capital goods and fuel- and energy-related activities (not included in scope 1 or 2). During the fiscal year, CAE continued to advance its decarbonization efforts through the execution of a comprehensive enterprise-wide decarbonization strategy, structured across multiple value streams and translated into targeted, business unit level tactical decarbonization plans. Progress was achieved primarily within the buildings and operations value stream through the use of long-term, market-based renewable electricity arrangements that support additional renewable generation, the deployment of on-site solar generation, energy efficient replacement of aging equipment, and the incorporation of recognized green building certifications across selected sites.

—In addition, CAE completed the first phase of its environmental life cycle assessment (LCA) as part of a broader effort to support product-related sustainability

progress and the evolving regulatory reporting requirements of our customers. Building on this foundation, we introduced a sustainable design approach across three core manufacturing activities—development, sourcing and production—designed to promote repairability, maintenance, reuse and upcycling, while reducing product weight, waste and energy consumption. These guidelines also incorporate strengthened controlled substances management and phase out processes, in alignment with applicable regulatory obligations. To support consistent application, LCA considerations are being progressively embedded into design processes, informing resource efficient design choices and the identification of circular economy solutions.

—These initiatives are further supported by the implementation of an internal shadow carbon price, which is now embedded in investment decision-making processes to support the identification of lower carbon solutions and potential climate mitigation measures at the outset.

—CAE has maintained a strong focus on collaboration with customers, suppliers, partners and industry peers to support the sustainability agenda of the aerospace sector. This includes continued engagement with strategic suppliers through the Resilient Together program and ongoing support, including through its role as a co-founder of the non-profit organization Décarbone+, to strengthen suppliers’ carbon measurement and decarbonization capabilities and contribute to longer term sector resilience and competitiveness

—Our sustainability strategy is also driven by our commitment to create social value and foster a culture where every employee can grow, contribute, and succeed based on skills and contributions. During the fiscal year, we also advanced our reconciliation journey in Canada by achieving PAIR Committed Level II, strengthening engagement with our Indigenous Advisory Board, reinforcing accountability across the organization, and pursuing collaborative opportunities with Indigenous partners and academic institutions, alongside targeted training for Canadian groups of employees.

—During the fiscal year, CAE launched its first global sustainability training program for all employees, establishing sustainability capability as a strategic enabler and equipping employees worldwide to consistently integrate sustainability considerations into operations and decision-making. In parallel, CAE adopted its first dedicated sustainability policy, reinforcing its commitments and providing a structured framework for accountability and governance across the organization.

39 | CAE INC. | 2026 | Management Proxy Circular

Section 4 – Corporate Governance

—During the fiscal year, we marked a significant step forward in the evolution of our sustainability reporting and oversight by obtaining external limited assurance, for the first time, over our Scope 1 and Scope 2 greenhouse gas emissions. This achievement reflects the robustness and increasing maturity of our sustainability data governance framework, internal controls and reporting discipline, and reinforces our commitment to transparency, reliability and decision-useful disclosure.

—In support of its regulatory readiness, CAE’s Internal Audit team completed a preliminary review of CAE’s sustainability data points, processes and controls in preparation for its first sustainability disclosures aligned with the Corporate Sustainability Reporting Directive (CSRD). Consistent with the same requirements, CAE completed its double materiality assessment during the year, establishing a structured foundation to guide sustainability strategy, risk management, priorities and accountability going forward. This year again, we expanded our transparency efforts on Scope 3 GHG emissions inventory with the disclosure of an additional category, Investments, for the first time.

—Taken together, these achievements demonstrate how sustainability is increasingly embedded into CAE’s enterprise-wide transformation, strengthening capital discipline, operating model effectiveness and long-term value creation through more rigorous, lifecycle-based and performance-driven decision-making.

Our performance and achievements related to sustainability factors are set out in our Global Annual Activity and Sustainability Report. Our objectives, management approach, initiatives and highlights across all material sustainability matters are also outlined in this report, which is available at www.cae.com/sustainability.

Reporting standards

Our reporting references the Sustainability Standards of the Global Reporting Initiative (GRI). An independent institution, the GRI provides a globally accepted framework for sustainability disclosures across companies and industries, and the GHG Protocol Corporate Standard, for all calculations related to greenhouse gas emissions. CAE is advancing toward alignment with the International Financial Reporting Standards (IFRS) Sustainability Disclosure Standards, including IFRS S1 and S2. Our disclosures follow Task Force on Climate-related Financial Disclosures recommendations and Sustainability Accounting Standards Board Standards for Aerospace & Defense and Professional & Commercial Services. We are also transitioning our reporting to align with the CSRD and European Sustainability Reporting Standards (ESRS). Detailed disclosures, including results from

CAE’s first double materiality assessment are available in our FY2026 Global Annual Activity and Sustainability Report and its appendices. Each material topic is tagged to the relevant ESRS topic for transparency and traceability.

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

CAE’s commitments are translated in its policies and codes, including the following available on CAE’s website:

—Anti-Corruption Policy;

—Business Courtesies Policy;

—Charitable Donations and Sponsorships Policy;

—Code of Business Conduct;

—Conflict Minerals Policy;

—Global Environment, Health and Safety Policy;

—Human Rights Policy;

—Inclusion and Equal Opportunities Policy;

—Internal Reporting and Whistleblowing Policy;

—Lobbying and Political Contributions Policy;

—Supplier and Business Partner Code of Conduct; and

—Sustainability Policy.

We monitor the latest developments in sustainability reporting expectations, its future integration to financial disclosure, and continuously adjust our disclosure in line with regulatory requirements and best practices. Information about CAE’s sustainability strategy and initiatives can be found in our Global Annual Activity and Sustainability Report available online at www.cae.com/sustainability.

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Section 4 – Corporate Governance

Governance and oversight

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

The Board’s Governance Committee receives updates three times a year on sustainability trends, market signals, pulses from all stakeholders and progress on CAE’s multi-year sustainability roadmap. These updates, which include progress on corporate disclosure of non-financial performance, are presented by the Chief People and Sustainability Officer (CPSO). The Governance Committee regularly evaluates continuous enhancement of the company’s ethical practices and policies that govern our business actions while also overseeing CAE’s sustainability strategy, risk management, reporting and operating performance, including climate-related targets and monitoring of progress towards such targets, as well as CAE’s Modern Slavery and Human Trafficking Statement prepared pursuant to Canada’s Fighting Against Forced Labour and Child Labour in Supply Chains Act and the United Kingdom’s Modern Slavery Act 2015.

The Board’s Audit Committee is informed on a quarterly basis of IT, artificial intelligence and cybersecurity matters impacting controls and the integrity of financial data and public disclosures. The Committee has specific oversight responsibility for CAE’s enterprise risk management policy framework, including sustainability-related risks and receives an annual update by the CFO on trends and regulatory obligations related to corporate sustainability disclosure.

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

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

Composition and representation

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

In May 2015, upon the GC’s recommendation, the Board adopted CAE’s first policy relating to board and executive composition, which in 2025 became the Board and Executive Management Composition Policy (the “Composition Policy”). The Composition Policy was amended in 2018, and in 2020 its scope was broadened by expressly enumerating women, Indigenous peoples, persons with disabilities and members of visible minorities, as defined in the Employment Equity Act (Canada) (collectively, “Designated Groups”), among the diverse groups which are the focus of the Composition Policy.

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

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

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

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

41 | CAE INC. | 2026 | Management Proxy Circular

Section 4 – Corporate Governance

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

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

We have committed to and met various representation objectives over the years. For example, in August 2022, we met our objective, established in May 2018, that women represent at least 30% of Board Directors by 2022. Our Board seeks gender parity, and as of May 2026, we maintain, in alignment with expectations under Canadian securities laws and the Canada Business Corporations Act, established representation objectives that women represent at least 30% of Board Directors, and that at least 33% of executive officers and 40% of Board Directors form part of certain diversity groups (including women, persons with disabilities, Indigenous peoples, members of visible minorities and the LGBTQ2+

community). We do not have a separate representation objective specific to women in executive officer positions, as we have opted for a more fulsome objective encompassing numerous diversity groups. This approach was adopted following the achievement, in 2022, of the prior representation objective established in May 2020 that women represent at least 30% of executive officers by 2022.

While we exceeded all our representation objectives in FY2024, we did not meet the objective relating to executive officers in FY2025 or FY2026, following leadership changes and a reduction in the size of the Executive Management Committee. The representation objectives relating to our Board Directors were met, with 38% of Board Directors being women and 46% of directors forming part of one or more diversity groups.

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

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

Directors

Women

Women, Persons with disabilities, Indigenous Peoples, members of visible minorities and the LGBTQ2+ community

Objective

Status

Objective

Status

30%

Met in FY2026

40%

Met in FY2026


Executive Officers	Women, Persons with disabilities, Indigenous Peoples, members of visible minorities and the LGBTQ2+ community
	Objective	Status
	33%	Not met in FY2026

Representation as of June 11, 2026


	Women		Persons with disabilities		Indigenous peoples		Members of visible minorities		Members of LGBTQ2+ community		Total Number	Individuals who are members of more than one group
	Number	%	Number	%	Number	%	Number	%	Number	%
Board of Directors	5	38	0	0	0	0	1	8	1	8	7		1
Executive Officers	2	18	0	0	0	0	0	0	0	0	2		0

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

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Section 5 - Board Committee Reports

The Governance Committee


Highlights for FY2026 —With the assistance of the Board’s compensation consultants, the GC recommended for approval by the Board changes to Director compensation, effective August 13, 2025, based on peer group benchmarking. —The GC reviewed and recommended for approval by the Board CAE’s annual Modern Slavery and Human Trafficking Statement. —The GC reviewed and approved revised Committee Tenure and Membership, Human Rights, Lobbying and Political Contributions, Conflicts of Interest, Insider Trading and Anti-Hedging policies.			—The GC reviewed CAE’s sustainability performance, including progress towards the business units’ science-based decarbonization action plans to align with CAE’s SBTi targets. —The GC reviewed the mission, scope of responsibility and duty of care of CAE’s global security function, including its crisis management and business continuity programs. —The GC agreed to recommend for approval by the Board changes to CAE’s Board and Executive Management Composition Policy and an updated version of CAE’s Corporate Governance Guidelines. —The GC reviewed and approved amendments to the Governance Committee Charter and Annual Workplan.

The GC held three meetings in FY2026;
aggregate attendance: 100%.



S. Brochu (Chair)	A. Antoun	E. Eberwein	K. Lehman

The GC assists the Board in developing and implementing our corporate governance guidelines, monitoring assessments of CAE’s corporate governance by various stakeholders and recommending where necessary possible improvements in CAE’s governance, identifying individuals qualified to become members of the Board and determining the composition of the Board and its committees, monitoring the interests of Directors and executive officers, reviewing the role and conduct of the Board, evaluating the performance of the Board and its Committees, reviewing the independence of each member of the Board, preparing the Board’s succession plan, determining the Directors’ remuneration, developing and overseeing an assessment process for the Board, overseeing CAE’s principal compliance programs, and reviewing and recommending for Board approval our corporate policies concerning business conduct, insider trading and anti-hedging, high standards of corporate governance, ethics, sustainability matters, inclusion and

equal opportunities, and human rights. The GC is also responsible for reviewing CAE’s sustainability strategy, risk management, reporting and operating performance, including climate-related targets and monitoring of progress towards such targets.

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

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

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Section 5 - Board Committee Reports

The Audit Committee


Highlights for FY2026 —The Committee reviewed and recommended approval to the Board of the quarterly interim consolidated financial statements, Management Discussion and Analysis (“MD&A”) and the press releases for the quarterly results. —The Committee reviewed the MD&A section of CAE’s annual report for the fiscal year ended March 31, 2025 and audited consolidated financial statements of CAE prepared by management for the fiscal year ended March 31, 2025 with management and PwC, and thereafter recommended that they be approved and filed with the Autorité des marchés financiers and the SEC. —The Committee approved the CAE Internal Audit plan and budget for the FY2027 cycle and approved the Internal Audit Director Objectives. —The Committee reviewed PwC’s FY2026 work plan and approved PwC audit engagement letter and services fees. —The Committee reviewed audit service performance and any best practices to implement going forward. —The Committee oversaw the compliance process related to the certification and attestation requirements of SOX and related SEC rules, as well as of the rules relating to audit committees and certification of financial information adopted by the CSA.			—The Committee also reviewed fraud review processes, litigation, securities and exchanges compliance, information technology, artificial intelligence and cybersecurity matters impacting controls and the integrity of financial data and public disclosures, sustainability reporting framework, insurance coverage, related-party fees, capital structure, M&A performance, S&P rating and outlook, financing activities, treasury, tax planning and compliance, and IFRS accounting standard changes. —The Committee assessed and recommended for approval by the Board the renewal of the normal course issuer bid program to repurchase for cancellation a portion of CAE’s outstanding Shares. —The Committee reviewed in detail operational risks relating to CAE’s commercial aviation training, business aviation training, U.S. Defense and Security and Flightscape businesses. —The Committee reviewed and approved a revised version of the Policy and Procedures for Audit and Non-Audit Services. —The Committee reviewed amendments to the Disclosure Policy, Enterprise Risk Management Policy, the Hiring Policy Regarding External Auditors, and the Audit Committee Charter and Annual Workplan and recommended these modifications for approval by the Board.

The Audit Committee held four meetings in FY2026;
aggregate attendance: 95%.

M. Harrison
(Chair)

P. Decostre

I.L. Edwards

M. Maher

L. Têtu

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

All members of the Audit Committee are Independent Directors. Marianne Harrison and Mary Lou Maher have been determined by the Board to be the Audit Committee financial experts. In addition,

the Board, in its judgment, has determined that each other member of the Audit Committee is financially literate.

Also see our Annual Information Form for the year ended March 31, 2026 (which you can access on our website at www.cae.com, on SEDAR+ at www.sedarplus.ca and on EDGAR at www.sec.gov), for information about the Audit Committee, including its charter and Audit Committee policies and procedures for engaging the external auditors. The charter of the Audit Committee is also available in the governance section of our website at www.cae.com.

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

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Section 5 - Board Committee Reports

The Human Resources Committee


Highlights for FY2026 —The HRC oversaw the CEO transition process and the onboarding of CAE’s new President and CEO. —The HRC completed an annual review of the Company’s long-term (LTIP) and short-term (STIP) incentive plans to ensure market competitiveness, alignment with the Company’s strategic ambitions and Shareholders’ interests, and reviewed and approved the FY2027 STIP and LTIP design. —The HRC conducted a compensation risk assessment with the assistance of its independent compensation consultant to identify potential risks associated with the Company’s compensation programs, practices and policies. —The HRC reviewed and agreed to maintain the Company’s comparator group for executive compensation benchmarking.			—The HRC reviewed and approved executive management compensation, including the FY2025 STIP payout and FY2026 LTIP awards, as well as the CEO’s FY2026 objectives and performance. —The HRC reviewed and approved the succession plan for the Company’s executives, conducted talent and leadership reviews as well as other HR and workplace culture initiatives. —The HRC agreed to recommend for approval by the Board changes to CAE’s Omnibus Incentive Plan. —The HRC reviewed the Company’s retirement savings plans and the Retirement Plans Investment Policy. —The HRC reviewed the quarterly health and safety reports as well as the aviation safety and labour relations annual reports.

The HRC held six meetings in FY2026;
aggregate attendance: 96%.



E. Eberwein (Chair)	P. Lee	M. Maher	P.M. Shanahan

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

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

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

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

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Section 5 - Board Committee Reports

The Technology Committee


Highlights for FY2026 —The TC reviewed and recommended for approval by the Board the first Technology Committee Charter. —The TC reviewed and approved its first Annual Workplan. —The TC reviewed CAE’s FY2026 global technology and products strategy and its alignment with CAE’s strategic pillars. —The TC reviewed cybersecurity compliance, emerging risks, key drivers and trends, outlook, investigations and near misses.			—The TC conducted a deep dive into CAE’s data exposure, including top enterprise cyber risks, industry benchmarking, and priorities and outcomes for CAE’s cyber project portfolio. —The TC reviewed the impact, strategic value, prioritization and progress tracking of technical debt at CAE. —The TC reviewed quarterly updates to CAE’s enterprise risk profile relating to cybersecurity, artificial intelligence and other technology risks.

The TC was constituted during FY2026 and held two
meetings in FY2026; aggregate attendance: 83%.



A. Antoun (Chair)	M. Harrison	L. Têtu

The TC assists the Board of Directors in its oversight responsibilities relating to the Company’s overall technology and data strategy, its alignment with the Company’s strategic plan and its deployment across the Company and its subsidiaries, cybersecurity and artificial intelligence, risk management and incident reporting, and other risks arising from the Company’s technology strategy, information technology systems and related investments and operations.

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

The members of the TC are selected for their experience and knowledge with respect to information technology, cybersecurity, data management, artificial intelligence and technology more broadly. Descriptions of the TC members’ credentials and past experience that make them qualified and effective technology decision-makers can be found in Section 3 – About the Nominated Directors.

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Section 6 – Director Compensation

Director Compensation

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

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

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

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

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

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


Director compensation benchmarking and comparator group To benchmark Directors’ compensation, the Governance Committee uses the same comparator group of companies as that used to benchmark Named Executive Officers’ (“NEOs”) compensation. This comparator group comprises a mix of Canadian and U.S. publicly-listed companies that have relevance to CAE in terms of head office location, market segment or business activities, and revenue and market capitalization. —Same comparator group as for NEOs. —Director comparator group reviewed in FY2026, last updated in FY2025. —Directors are paid a flat all-inclusive fee to reflect responsibilities, time commitment and risks of being effective Directors.

Any Director who is also an employee of the Company or any of its subsidiaries does not receive any compensation as a Director. Effective August 13, 2025, Directors’ all-inclusive fees were set as follows:


Position	Annual Fee1	Form of Payment
Executive Chairman of the Board2	$3,000,000	$1,500,000 in DSUs $1,500,000 in cash or DSUs at Director’s election
Non-Executive Chair of the Board3	$420,000	$230,000 in DSUs $190,000 in cash or DSUs at Director’s election
Board Member	$240,000	$155,000 in DSUs $85,000 in cash or DSUs at Director’s election
Lead Independent Director	$50,000	$25,000 in DSUs $25,000 in cash or DSUs at Director’s election
Board Committee Chair4	$25,000	Cash or DSUs at Director’s election
Board Committee Member	$11,000	Cash or DSUs at Director’s election

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

2.The Executive Chairman does not receive additional compensation for Board membership or as non-executive Chair of the Board.

4.Committee Chairs do not receive additional compensation for Committee membership.

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Section 6 – Director Compensation

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

Non-Employee Directors’ Deferred Share Unit Plan (Directors’ DSU Plan)

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

Risk mitigation

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

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

Anti-Hedging Policy

The policy provides that no Director or CAE executive (defined to include senior officers and vice-presidents) may, at any time, purchase or otherwise enter into any financial instrument or arrangement that is designed to or could reasonably be expected to monetize, hedge, or offset a decrease in the market value of any CAE securities (including but not limited to DSUs), including prepaid variable forward contracts, short sales and synthetic short positions, instruments for the purchase or sale of call or put options not issued by CAE, equity swaps, collars, units of exchangeable funds, digital-asset-based or tokenized instruments (including tokenized derivatives or synthetic exposures referencing CAE securities) or any similar instrument or arrangement, whether executed on- or off-exchange.


Minimum shareholding requirements Directors are required to own the equivalent of five times the Board annual cash fee in the form of Shares and/or DSUs. The required holding must be achieved over a five-year period from the initial date of election of the Director to the Board. A non-employee Director is not, once the minimum Share and/or DSU ownership target is reached, obligated to acquire more Shares or DSUs if the value of his/her investment in CAE drops due to stock market fluctuations. —Minimum shareholding requirements align Directors’ and Shareholders’ interests. —Equal to five times the annual Board cash fee. —The required holding must be acquired over a five-year period from the initial date of election of the Director to the Board.

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Section 6 – Director Compensation

Directors’ compensation table

The following table summarizes compensation earned by non-employee Directors of CAE during FY2026:


Name	Total Fees Earned	Paid in Cash	Paid in DSUs1
Ayman Antoun	$289,065	—	$289,065
Sophie Brochu	$321,118	—	$321,118
Patrick Decostre	$273,204	—	$273,204
Elise Eberwein2	$404,523	$177,488	$227,035
Ian L. Edwards	$273,204	—	$273,204
Marianne Harrison2	$406,028	$49,135	$356,893
Peter Lee3	—	—	—
Katherine A. Lehman2	$377,053	—	$377,053
Mary Lou Maher	$285,301	$120,785	$164,516
Calin Rovinescu4	$2,056,774	—	$2,056,774
Patrick M. Shanahan2	$377,053	$150,018	$227,035
Louis Têtu	$280,183	—	$280,183

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

2.Non-Canadian resident Directors are paid in U.S. dollars on the basis of a one-for-one exchange rate of Canadian dollars to U.S. dollars. The amounts shown include payments made in U.S. dollars for each quarter of FY2026, which were converted to Canadian dollars using the exchange rate on the last business day of the respective quarter, being, for each U.S. dollar, $1.36 in Q1, $1.39 in Q2, $1.37 in Q3 and $1.39 in Q4.

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

4.Mr. Rovinescu served as non-executive Chair of the Board from February 14, 2025 to August 13, 2025, and was appointed Executive Chairman on August 13, 2025. He elected to receive 100% of his compensation in DSUs, both during his time as non-executive Chair of the Board and after his appointment as Executive Chairman.

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Section 6 – Director Compensation

Directors’ share-based awards

The following table shows for each non-employee Director the number of DSUs outstanding at the beginning of the fiscal year ended March 31, 2026, the number and the value of the DSUs that vested during such year, and the number and the value of all outstanding DSUs as at March 31, 2026. The non-employee Directors are not eligible to receive stock options or other option-based awards.


	Share-based Awards
Name	Number of DSUs at the Beginning of FY2026	Number of DSUs Vested During the Year1	Value Vested During the Year2	Number of DSUs at the End of FY2026	Market Value of DSUs not Paid Out or Distributed3
Ayman Antoun	23,340	7,434	$289,065	30,774	$1,114,627
Sophie Brochu	14,576	8,256	$321,118	22,832	$826,964
Patrick Decostre	7,171	7,032	$273,204	14,203	$514,429
Elise Eberwein	16,483	5,846	$227,035	22,329	$808,773
Ian L. Edwards	4,873	7,032	$273,204	11,905	$431,204
Marianne Harrison	52,200	9,095	$356,893	61,295	$2,220,111
Peter Lee4	—	—	—	—	—
Katherine A. Lehman	1,282	9,706	$377,053	10,988	$397,975
Mary Lou Maher	22,923	4,235	$164,516	27,158	$983,673
Calin Rovinescu5	1,492	52,369	$2,056,774	53,861	$1,950,851
Patrick M. Shanahan	18,368	5,847	$227,035	24,215	$877,055
Louis Têtu	892	7,208	$280,183	8,100	$293,394

1.Represents the number of DSUs each non-employee Director earned during FY2026. The DSUs vest immediately but are redeemable and paid out only after the non-employee Director ceases to be a Director of CAE in accordance with the terms of the Directors DSU Plan. Numbers containing fractions have been rounded for calculation purposes.

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

3.The market value of the DSUs was determined by multiplying the number of all DSUs vested but not paid out or distributed, including additional DSUs equivalent in value to the dividends paid on the Shares credited in-year, as at March 31, 2026 by the closing price of the Shares on the TSX on March 31, 2026, which was $36.22. Numbers containing fractions have been rounded for calculation purposes.

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

5.Mr. Rovinescu served as non-executive Chair of the Board from February 14, 2025 to August 13, 2025, and was appointed Executive Chairman on August 13, 2025. He elected to receive 100% of his compensation in DSUs, both during his time as non-executive Chair of the Board and after his appointment as Executive Chairman.

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Section 7 – Executive Compensation

Letter from the Chair of the Human Resources Committee

Dear Shareholders,

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

We are committed to transparent disclosure of CAE’s performance, including key elements of our executive compensation program, the alignment between performance and pay outcomes, and feedback from our ongoing engagement with shareholders. In August 2025, the Company’s annual “Say on Pay” advisory vote received strong support, with 95.2% of shareholders’ votes in favor of CAE’s disciplined approach to executive compensation.

CEO Appointment

A new CEO joined CAE during FY2026 in August 2025 at the last AGM. Matthew Bromberg’s appointment was the result of a robust recruitment process that also reset much of the executive leadership team, including the appointment of a new CFO. Recruiting capable and highly successful executives from their previous employers required ensuring their compensation made them whole of what they were leaving behind, and we also sought to invest them completely in CAE’s success going forward. These make-whole amounts are detailed in section Long-Term Incentive Plan and they are again reflected in the Summary Compensation Table. Since joining CAE, Matthew has very quickly assessed CAE’s strengths and opportunities for improvement, resulting in a Transformation Plan that we have discussed in detail publicly and that we will continue to provide updates on. Importantly, our FY27 executive compensation program reflects expected outcomes tied directly to our long-term Transformation Plan.

Looking Back

The FY26 Short-Term Incentive Plan (“STIP”) paid out on achievement of adjusted earnings per share* (“EPS”) and revenue goals. For FY2026, the corporate performance was assessed at 84% of target, reflecting adjusted EPS* performance weighted 67% assessed at 89% of target and revenue performance weighted 33% assessed at 73% of target. While we assessed Mr. Bromberg’s performance for FY2026 we honored his employment agreement requiring an overall STIP payout that should not be less than the annual target, pro-rated from his start date in FY2026.

The FY2026 Long-Term Incentive Plan (“LTIP”) is weighted 60% to Performance Share Units (“PSU”s), 20% to Restricted Share Units (“RSU”s) and 20% to Stock. PSUs granted in FY2026 vest contingent on the achievement of adjusted segment operating income margin*, cash from operations and adjusted ROCE* targets. PSUs granted in FY2024 whose performance period concluded in FY2026 were tied to the same three financial measures, adjusted segment operating income margin*, cash from operations and adjusted ROCE, all three equally weighted at 33%, and paid out with a performance factor of 26%.

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

Looking Ahead

For FY2027 and beyond, our Transformation Plan consists of three priorities: focusing our portfolio where we excel, being pragmatic about our capital discipline, on both the current footprint and future investments, and finally creating and building a culture, operating cadence and toolset that support continuous improvement and performance. Key to achieving these lies in Matthew’s strategic leadership to evolve CAE’s culture to one with heightened discipline around pricing, portfolio building, partnerships, R&D investments and capital allocation. Matthew has built a talented team to lead this work while ensuring the changes CAE will undergo will be carried out while effectively communicating these changes to our team at large.

* Non-IFRSand Other Financial Measures (see Appendix B).

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Section 7 – Executive Compensation

With this backdrop, we have adjusted our executive compensation programs by building both our FY27 STIP and our FY27 LTIP to reflect prioritizing our core assets, improving our investment outcomes and driving operational excellence. Specifically, highlights are:

—FY27 STIP, will include two financial metrics—free cash flow, which comprises 45% of the total STIP and adjusted segment operating income margin*, which comprises 45% of the total STIP. The last ten percent of our FY27 STIP encompasses safety and employee engagement to reflect our core mission of safety and to reflect our belief that the only way to build a sustainable new way of operating at CAE is to do so with a motivated and engaged team

—Simplifying our FY27 LTIP by eliminating stock options and increasing the weighting on restricted share units from 20% to 40%, resulting in a construct for the FY27 LTIP of 60% Performance Share Units and 40% Restricted Share Units. We also updated nearly half of the performance share weighting in our FY27 LTIP to emphasize efficiency and profitability by incorporating a 3-year average adjusted return on invested capital* (ROIC) at 40% and a 3-year average adjusted earnings per share* at 60%

—Establishing a more consistent framework to actively review CAE’s total shareholder return relative to competitive companies as well as other large companies in North America as critical context for setting incentive plan targets and assessing CAE’s performance holistically. We know our Shareholders have many options to invest their capital and CAE must earn our share of those investment opportunities. While we analyzed several custom peer groups, none demonstrated a sufficiently strong correlation with CAE’s share price performance to support their explicit use for incentive plan design. Even so, our committee has developed several peer groups and indices, including the TSX 60 and an aerospace index, under which we will consistently review CAE’s relative total shareholder return as part of our holistic assessment of the STIP and LTIP outcomes versus the performance of the business.

These changes reflect our ongoing open dialogue with our shareholders. In FY26, we participated in over 75 direct engagements, and our directors and investor relations team actively listened to shareholder input and took actions to address their feedback. Please see Section 7- Executive Compensation – Compensation Discussion and Analysis – Shareholder Engagement for more specifics.

As we continue the work ahead, we will look forward to ongoing dialogue with our shareholders to ensure alignment with your expectations, fostering an exchange of ideas and ensuring our strategies and governance practices continue to align with CAE’s business objectives and our mission of ensuring a safer world.

Sincerely,



			Elise Eberwein Chair of the Human Resources Committee

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

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Section 7 – Executive Compensation

Compensation Discussion and Analysis

This Section describes our compensation philosophy, policies and programs, and provides the details with respect to the compensation awarded to our Named Executive Officers (“NEO”) in FY2026.


For FY2026, our NEOs were: —Matthew Bromberg, President and Chief Executive Officer —Marc Parent, Former President and Chief Executive Officer —Ryan McLeod, Chief Financial Officer —Constantino Malatesta, Former Interim Chief Financial Officer —Carter Copeland, President – Flightscape —Juan Araujo, Senior Vice President – Operations —Pascal Grenier, President – Defense & Security

Where to find it


Compensation Discussion and Analysis			Page
Executive Summary			57
Compensation Decisions			60
Shareholder Engagement			62
Talent Development and Succession Planning			63
Compensation Philosophy			64
Executive Compensation Programs			66
FY2026 Compensation Outcomes			77
Long-Term Incentive Plan (Annual Award, One-Time for Forfeited Equity and Transition Awards)			80
Determination of NEOs’ Individual Performance			84
Compensation Governance			89
Alignment of Compensation and Performance			94
Compensation of Our Named Executive Officers			Page
Summary Compensation Table			98
Outstanding Share-Based Awards and Option-Based Awards			101
Incentive Plan Awards – Value Vested or Earned During the Year			102
Pension Arrangements			103
Termination and Change of Control Benefits			105

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Section 7 – Executive Compensation

Executive Summary

CAE Performance

In FY2026, CAE launched a transformation plan designed to sharpen our portfolio, strengthen capital discipline and elevate performance. So far, we have made good progress against our priorities to improve how we operate, invest and create long-term value for all our stakeholders. We have completed our portfolio review and identified several non-core assets for strategic review, begun optimizing our Civil training network, taken focused actions to structurally improve our cost base and investment processes, and streamlined our organizational structure to strengthen execution. These actions are aimed at improving our margins, returns, and free cash flow* and will improve CAE’s long-term financial, operational and competitive resilience.

While we have been executing the early stages of our transformation program, CAE has continued to deliver solid consolidated financial performance. In FY2026, we grew our revenues by 4%, generated a strong cash conversion rate* of 123% and exceeded our deleveraging target ahead of schedule.

In our Civil business, the combination of softer than expected market conditions (reflected in just 42 full-flight simulator sales) and negative impacts from the conflict in the Middle East resulted in FY2026 Civil results coming in below our original expectations. Nonetheless, Civil delivered approximately 1% revenue growth, adjusted segment operating income margin* of 19%, a full-year book-to-sales ratio* of 0.96x and responsibly lowered its capital expenditures to align with market demand and our increased focus on returns and capital objectives.

This year, our Defense & Security business delivered a meaningful step-up in performance, exceeding our expectations. Revenue growth was 9%, adjusted segment operating income margin* expanded approximately 170 basis points to approximately 9% and we delivered a quarterly adjusted segment operating income margin* in Q3 above 10% for the first time in over six years. Refreshed leadership and a new organizational structure have generated recurring cost savings, improved execution, and enhanced synergies across the enterprise. Looking forward, with a total adjusted backlog* of nearly $11 billion, our D&S business continues to have solid momentum.

The long-term growth prospects in our markets remain strong. Our Civil business continues to benefit from strong and durable fundamentals with aviation training solutions representing an essential component of a secular growth market. Boeing, Airbus and business jet OEMs have backlogs that extend beyond several years of deliveries, providing multi-year visibility for our key end-markets. CAE’s business is also underpinned by global regulatory requirements mandating recurrent training for pilots and crew to maintain certification on each aircraft type. This built-in regulatory cadence provides a stable, recurring demand base that makes Civil inherently less cyclical. Additional growth is driven by the ongoing need to train new pilots due to fleet expansion and retirements, as well as transition training for existing pilots moving between aircraft platforms across commercial and business aviation. Our D&S business is at the front-end of an up-cycle driven by rising defence budgets across NATO and allied nations, many of which are now targeting spending levels approaching 5% of GDP. In Canada, the government has articulated an ambition to reach that level by 2035, representing a generational investment opportunity. This environment creates a significant opening for CAE to continue evolving as an international defence leader based in Canada, leveraging its technology, domain expertise, and global network to deliver greater value for customers and shareholders. Heightened geopolitical tensions, modernization imperatives, and a global shortage of uniformed personnel are driving sustained demand for CAE’s training, simulation, and mission rehearsal solutions. Militaries increasingly rely on CAE to sustain readiness and operational effectiveness.

Overall, we see an opportunity to leverage our ongoing transformation to prioritize core assets and competencies, improve investment outcomes, and drive operational excellence to enable a growth strategy that leads our markets, generates better returns on capital, higher margins, improved free cash flow and value creation. Across the Civil and Defense ecosystems, CAE is well-positioned to capitalize on its position as the trusted partner for safety and mission readiness.

In FY2026, we continued to center our strategic and operational goals around our strategic pillars – Market Leadership, Revolutionizing Training, Efficient Growth and Skills and Culture. The key accomplishments for each are as follows:

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

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Section 7 – Executive Compensation

Market Leadership

We are continuing to position CAE as a clear leader in our markets by focusing our portfolio where we can win, establishing strategic partnerships, expanding our footprint to match customer demand and capturing once-in-a-generation defence opportunities. Key accomplishments include:

—Signed a worldwide cooperation agreement with Saab that positions CAE as the preferred supplier for select training and simulation requirements related to its Airborne Early Warning and Control aircraft and other platforms

—Signed a 15-year training agreement to launch a new cutting-edge training center in Calgary with WestJet

—Identified several non-core assets representing approximately 8% of our revenue; we will pursue divestitures where economics, structure and timing support value creation for CAE

—Generated a 1.1x book-to-sales ratio* in Defense & Security

—Experienced growth in our business aviation network and celebrated the opening of our new state-of-the-art training centre in Vienna.

—Announced the pursuit of strategic alternatives for Flightscape, our aviation software business, as part of our ongoing portfolio optimization and disciplined approach to capital allocation.

—Extended Training Service Agreements with Cebu Pacific on the Airbus A320 and the ATR 72-600 platforms until 2037, one of eight agreements worth more than $160M signed at the Singapore Airshow

—Selected to deliver Australia’s Future Air Mission Training System, a 10-year, $270M award

—Proudly hosted Prime Minister Mark Carney for the announcement of Canada’s first Defence Industrial Strategy

—Secured several long-term airline operations digital solutions deals, such as Republic Airways which selected Flightscape to transform its airline operations

Revolutionizing Training

Our investments in technology aim to create world-class product and training offerings, improve customer experience, generate long-term competitive differentiation and improve internal performance. We are committed to driving a focused innovation portfolio that generates attractive returns, improves safety and creates the future of our industry. Key accomplishments include:

—Started a comprehensive review of our R&D portfolio to ensure alignment with our strategy and return thresholds

—CAE’s training solutions were selected by two of the pioneering companies in advanced air mobility, Joby Aviation and Eve Air Mobility

—Continued to establish our Prodigy image generator as a key differentiator that allows us to deliver high-fidelity visualization

—Published the Airplane Standard Operating Procedures Manual for business and general aviation to enhance safety in training and day-to-day operations

—Implemented Competency-Based Training and Assessment principles in Business Aviation, representing a structural evolution in aviation training

—Expanded the use of CAE Ridge, our proven and advanced 3D visualization tool to our Air Traffic Services offering

—Qualified the world’s first Boeing 777-9 full-flight simulator with the FAA and EASA

—Began development of the Factory of the Future roadmap to modernize how we design, produce and deliver simulators

Efficient Growth

We initiated our transformation plan to establish a more consistent and resilient business that generates higher margins, returns and cash flow through a focus on performance and capital discipline. Key accomplishments include:

—Delivered continued improvement in D&S adjusted segment operating income margin*

—Generated a cash conversion rate* of 123%

—Began optimizing our Civil aviation training network by reducing capital expenditures, identifying 10% of deployed commercial airline simulators for removal and relocating additional devices to improve utilization and returns

—Identified opportunities to selectively integrate elements of our business aviation and commercial aviation training networks

—Revised our corporate policies and procedures to apply higher bars for returns and payback periods on all new capital projects

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

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Section 7 – Executive Compensation

—Improved our bidding and commercial decision-making, applying more rigorous standards and prioritizing returns, free cash flow*, pricing discipline, and alignment with our network strategy

—Initiated the transition of approximately 80 Finance and HR processes into a modernized global shared-service operations

Skills & Culture

FY2026 has been a pivotal year of leadership transition, with a new CEO, CFO and refreshed management team. While we simplify the organization, tighten accountability, and drive performance, leadership is focused on delivering the transformation, maintaining CAE’s strong culture and attracting, developing and retaining top talent with the right incentives. Key accomplishments include:

—Appointed Matthew Bromberg as President and CEO. Matthew is a proven leader who brings deep expertise in both aerospace and defence and is driving CAE’s transformation and continued evolution into the future

—Appointed Ryan McLeod as CFO, bringing deep experience in operational finance, capital discipline and transformation execution

—Appointed Juan Araujo as Senior Vice President of Operations, bringing more than 25 years of experience in international leadership and deep expertise in operations

—Established a transformation program office with dedicated executive leadership

—Other key appointments made in Civil, Defense & Security, Flightscape, Strategy, Technology and Communications to accelerate CAE’s momentum and strengthen our position as a global leader across our markets

—Raised $1.3M in the Centraide (United Way) campaign to support vulnerable communities across Greater Montreal and Canada

—Included on TIME Canada’s Best Companies 2025 list

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

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Section 7 – Executive Compensation

Compensation Decisions

In FY2026

Both the short-term incentive plan and the long-term incentive plan remain unchanged from FY2025. The following provides an overview of the key features of each plan.

Short-Term Incentive Plan (STIP)

—Our FY2026 STIP measured our financial performance using a combination of Business Unit and CAE-level results for our Business Unit Leaders. The President and Chief Executive Officer and his direct reports were measured 100% on CAE consolidated results.

—To assess CAE’s financial performance under the STIP, the plan focused on two financial measures, adjusted EPS* and revenue, respectively weighted 2/3rd and 1/3rd to promote strong and profitable growth.

Long-Term Incentive Plan (LTIP)

—Our FY2026 LTIP remained unchanged from FY2025 design and consisted of Performance Share Units (PSUs), Restricted Share Units (RSUs) and stock options.

—The PSUs under the LTIP were measured against three equally weighted performance metrics: adjusted cash from operations, adjusted segment operating income margin* and adjusted return on capital employed* (ROCE).

NEW in FY2027

Short-Term Incentive Plan (STIP)

Effective April 1, 2026 (FY2027), the following changes have been implemented in the STIP:

—The Company performance component is now evaluated as a single consolidated measure, eliminating the prior mix of Business Unit and CAE‑level financial performance. The Company performance component continues to represent 75% of the overall score, with the remaining 25% based on individual performance. Individual performance outcomes will then be adjusted by multiplying them to the Company performance component, ensuring that overall payouts and resulting budget distributions appropriately reflect CAE’s overall performance.

—To assess Company performance, the STIP now focuses on two financial measures, free cash flow* and adjusted segment operating income margin*, each weighted at 45% to promote efficient and profitable growth.

—The remaining 10% is based on four equally weighted non-financial measures assessing employee safety and engagement. Our safety objectives are assessed via two metrics: Injury Frequency Rate (IFR) and an Aviation Safety Index. Our employee engagement is measured via two metrics: Engagement Score and Transformation Score. The introduction of a transformation score reflects the importance of maintaining strong employee engagement during a period of significant organizational change. While management is focused on driving operational efficiencies, it is equally critical that employees understand the rationale behind these initiatives and remain aligned with CAE’s long-term strategic objectives. Management has therefore introduced a dedicated metric to measure employee engagement as a key enabler of the Company’s transformation, a decision endorsed by the Board.

Long-Term Incentive Plan (LTIP)

—Our FY2027 LTIP will consist of two instruments: Performance Share Units (PSUs) and Restricted Share Units (RSUs), representing 60% and 40% of the target award value, respectively. Stock Options are no longer part of our LTIP.

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

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Section 7 – Executive Compensation

—Our FY2027 LTIP emphasizes profitability and capital efficiency, with the PSU portion measured against two performance metrics: adjusted earnings per share* (EPS) and adjusted return on invested capital* (ROIC). These metrics represent 60% and 40% of the PSU target opportunity, respectively.

—We continue to actively review CAE’s total shareholder return (TSR) relative to both our compensation peers and other large companies in North America as critical context for setting incentive plan targets and assessing CAE’s performance holistically.

—Starting in FY2027, we elected to make that review more robust and consistent. While TSR is not a formal metric under the LTIP, this expanded framework enables the HRC and the Board to more rigorously monitor relative shareholder outcomes. These insights continue to inform the Board’s evaluation of executive compensation outcomes and reinforce alignment with the shareholder experience.

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

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Section 7 – Executive Compensation

Shareholder Engagement

At CAE, we recognize that regular, transparent and active engagement with our shareholders is crucial. We value the perspectives of our shareholders and actively engage in understanding their views, concerns, and priorities related to our strategy and performance. Over the past year, the Executive Chairman, CEO, CAE executives, and our investor relations team have engaged extensively with our top shareholders through numerous initiatives. Throughout FY2026, we participated in over 75 direct engagements with our top ten shareholders. Our Executive Chairman attended approximately 30 direct engagement sessions with current and prospective shareholders, ensuring a smooth transition and instilling investor confidence in our new CEO amid the launch of CAE’s transformation strategy.

Direct outreach to investors: Our investor relations team is highly proactive and dedicated to maintaining regular communication with shareholders, addressing their questions and concerns promptly. Throughout FY2026, we participated in over 500 meetings and over 700 direct engagements with individual shareholders, prospective shareholders and sell-side analysts. In total, our direct engagements with shareholders represented 47% of CAE’s shares outstanding. More specifically, CAE’s senior management and IR team attended 14 sell-side conferences and investor panels, participated in 4 non-deal roadshows with the CEO and CSO, and hosted 13 site visits and meetings with investors and analysts at various CAE sites around the world.

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

Earnings calls: CAE executives engage with the investment community on a quarterly basis to review CAE’s financial and operating results and outlook.

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

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Section 7 – Executive Compensation

Talent Development and Succession Planning

The Board, with the assistance of the Human Resources Committee, oversees succession planning and regularly reviews succession and talent development for CAE’s executive leadership team. Our new CEO, Matthew Bromberg, was appointed in August of FY2026 and has worked closely with the Board on our executive organization structure.

Throughout the year, under Matthew Bromberg's leadership as President and CEO, CAE implemented strategic changes to its Executive Management aimed at strengthening execution, accountability, and alignment with growth priorities. These adjustments focused on sharpening the company structure and responding effectively to shifts in Civil Aviation, Defense & Security, and global markets.

After a period of assessment, CAE renewed its Executive Management Committee, appointing leaders with both internal and external expertise.

Ryan McLeod was named Chief Financial Officer, effective February 23, 2026, following a thorough search process to enhance financial leadership and support long-term growth.

Pascal Grenier was appointed President of Defense & Security on March 9, 2026, overseeing the global defense portfolio and strategic oversight for the U.S. Defense & Security segment, enhancing alignment and cohesion across CAE’s global defence operations. Alexandre Prevost was appointed President of Civil Aviation Training on November 12, 2025, bringing nearly two decades of experience at CAE and a strong operational track record to lead an integrated global civil aviation organization. Juan Araujo was appointed Senior Vice President, Operations on January 5, 2026, consolidating operational responsibilities to ensure efficiency and performance. Other key appointments were made within our Executive Management Committee, aiming to accelerate CAE’s momentum and strengthen our position as a global leader across our markets.

As part of this effective succession planning and reorganization, and in order to retain and engage executives through this transition and the leadership transition and reorganization, we provided retention awards to several key executives. These are detailed in section Long-Term Incentive Plan. Altogether, these changes reflect CAE’s move toward an integrated, results-driven leadership model designed to advance its strategic objectives and sustain high performance.

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Section 7 – Executive Compensation

Compensation Philosophy

Compensation Objectives

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

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Section 7 – Executive Compensation

Compensation principles

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


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

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


President and CEO			Other NEOs

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Section 7 – Executive Compensation

Executive Compensation Programs

CAE’s executive compensation program has five main components: base salary, short-term incentive, long-term incentive, pension, and perquisites and benefits. The table below provides highlights of each component and describes the purpose and CAE’s policy for each component. Compensation for the President and CEO is determined and paid in USD, reflective of his recruitment to CAE from the United States. Summary Compensation Table information is presented in CAD, reflecting exchange rate volatility. To provide transparent disclosure of our President and CEO’s compensation, we have included a supplemental table which shows his Summary Compensation Table information on an annualized basis in USD, the currency of his compensation.

Overview

Form

Plan Highlights

Plan Objectives

Philosopy

Base Salary

Cash

Fixed pay annual review

Provide a base of regular income to attract and retain qualified leaders

Recognize scope and responsibilities of the position as well as the experience and sustained performance of the individual

Set competitive with the median of the comparator group

Short-term Incentive (STIP)

Cash

Annual award based on corporate (75%) and individual objectives (KPIs) (25%)

Executives can elect to receive some or all STIP payment as Executive Deferred Share Units

Reward the achievement of the Company’s financial, operational and non-financial objectives

Reward the achievement of individual objectives aligned with the executive’s area of responsibility and role in achieving operational results

Drive superior individual and corporate performance

Set competitive with the median of the comparator group

Designed to result in above median payouts for superior performance

Performance metrics are aligned to the strategic plan and approved annually

Long-term Incentive (LTIP)

Performance Share Units (60%), Restricted Share Units (20%), Stock Options (20%)

LTIP value is awarded in different medium to long-term compensation vehicles with both time and performance vesting based on achievement of longer-term financial objectives

Align management’s interests with Shareholders value growth

Reward the achievement of sustained market performance

Attract and retain key talent

Set competitive with the median of the comparator group

Ability to award LTI within a range and impact of Share price and financial performance designed to provide pay outcomes closely aligned with performance

Retirement Programs

Monthly pension or retirement account in cash at retirement

A supplementary pension plan is offered to provide additional retirement benefits beyond those available under standard registered plans, and is in the form of a supplemental Defined Benefit plan,
a supplemental Defined Contribution plan or a Non-Qualified Defined Contribution plan (NQDC).

Support retention of key executives

Set consistent with historical approach

Perquisites and Other Benefits

Employee Stock Purchase Plan (“ESPP”)

Perquisites

ESPP: Employees and executives may purchase CAE Shares up to 18% of their base salary; CAE matches 50% of the employee contributions, up to a maximum of 3% of the employee’s annual base salary

Perquisites: Cash allowance to cover certain expenses to support health and well-being

Provide executives with a Share ownership building vehicle

Set to be market competitive

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Section 7 – Executive Compensation

Base salaries

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

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

Annual Incentive Program Design


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

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

The table below outlines FY2026 STIP target ranges by NEO, effective as of March 31, 2026.


STIP Target as a % of Base Salary
NEO	Minimum	Target	Maximum
Matthew Bromberg	0%	125%	250%
Marc Parent	0%	125%	250%
Ryan McLeod	0%	85%	170%
Constantino Malatesta 1	0%	75%	150%
Carter Copeland 2	0%	75%	150%
Juan Araujo	0%	55%	110%
Pascal Grenier 3	0%	75%	150%

1.This percentage of base salary represents Mr. Malatesta's annual STIP target for his interim role as Chief Financial Officer, effective between April 1, 2025 and February 22, 2026.

2.Mr. Copeland’s annual STIP target remained the same following his appointment as President – Flightscape, effective March 9, 2026.

3.STIP target percentage for Mr. Grenier has been changed following his appointment as President – Defense & Security, effective March 9, 2026.

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

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Section 7 – Executive Compensation

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

The table below illustrates the annual STIP payout calculation for NEOs

In FY2026, the Company performance factor was based on two financial measures detailed in the table below:


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

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

In FY2026, for the President and CEO and his direct reports the Company performance component of our STIP (representing 75% of the payout) is measured based on CAE overall performance. For other Business Unit Leaders, the Company performance of the STIP is based on a mix of Business Unit and CAE performance (2/3rd weighting to BU performance and 1/3rd weighting to CAE performance).

Adjusted EPS* and revenue were the two financial performance measures used to calculate the Company Performance Factor, weighted 2/3rd and 1/3rd, respectively and payout was set at 50% of target for the achievement of threshold performance. As before, payout is 0% if performance is below the threshold level.

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

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

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Section 7 – Executive Compensation

Long-Term Incentive Program Design


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

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

The table below outlines FY2026 LTIP target ranges by NEO:


LTIP Target as a % of Base Salary
NEO	Minimum	Target	Maximum
Matthew Bromberg	-	500%	-
Marc Parent	-	585%	-
Ryan McLeod	-	400%	-
Constantino Malatesta 1	100%	175%	250%
Carter Copeland 2	70%	135%	200%
Juan Araujo	40%	95%	150%
Pascal Grenier 3	-	165%	-

1.LTIP target percentage of base salary represents Mr. Malatesta’s target for FY2026 as Interim Chief Financial Officer.

2.LTIP target percentage of base salary for Mr. Copeland remained the same following his appointment as President – Flightscape, effective March 9, 2026.

3.LTIP target percentage of base salary represents Mr. Grenier’s target for FY2026 as President – Defense & Security, effective March 9, 2026.

CAE’s FY2026 LTIP consists of PSUs, RSUs and Stock Options. All NEOs were eligible for an annual grant under each of these plans, with the exception of Mr. McLeod and Mr. Araujo, who were not employed at the time of grant. Awards were allocated as follows:


LTIP Mix
Components	Weighting	Vesting
PSUs	60%	3-year cliff vesting
RSUs	20%	3-year cliff vesting
Stock Options	20%	4-year ratable vesting (25% per year)

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Section 7 – Executive Compensation

Performance Share Units



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

PSUs are a long-term incentive vehicle that vest on a three-year cliff basis, with payout contingent on the achievement of pre-established financial performance objectives over the performance period, aligned with the execution of CAE’s strategic plan.

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

Since FY2024, the PSU performance measures used by the Company include three equally weighted financial measures: adjusted segment operating income margin*, net cash provided by operating activities and adjusted ROCE*. These measures were used for PSUs granted under the Omnibus Incentive Plan in FY2026 and are further described below:

PSU Performance Measures

Driver

Performance Measure

Weighting

Why this Measure is Important

Performance Assessment

Profitability

Adjusted Segment Operating margin*

33%

Reflects the efficiency and profitability of the Company's core operations after deducting operating expenses (excluding interest and taxes)

Measured yearly and weighted:

-1/6th year one

-1/3rd year two

-1/2 year three

Growth

Cash from operations

33%

Focuses on the cash inflows and outflows directly related to the Company's day-to-day business operations, providing a clear picture of the Company's ability to generate cash to meet its obligations

Measured as a cumulative amount over a 3-year period

Return

Adjusted ROCE*

33%

Measures the efficiency with which the Company utilizes its capital to generate profits

Measured at the end of year 3

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

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Section 7 – Executive Compensation

Restricted Share Units


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

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

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

Stock Options


—Exercise price equal to the volume-weighted average trading price of the Shares on the TSX for the five (5) trading days before the date of the grant			—Option term: 7 years. —Vesting: 25% per year, starting on the first anniversary date of the grant, subject to the participant’s continued active employment with CAE on each applicable vesting date.

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

Omnibus Incentive Plan


—Encourage greater Share ownership —Stock Options are settled in Shares issued from treasury —PSUs and RSUs are settled in Shares, in cash or in a combination thereof			—Provides flexibility to the Company to grant both whole Share awards, such as PSUs and RSUs as well as Stock Options

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

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Section 7 – Executive Compensation

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

The Omnibus Incentive Plan provides that the maximum number of Shares that may be issued thereunder cannot exceed 10,000,000 (representing 3.11% of the issued and outstanding Shares as at March 31, 2026).

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

Share Units

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

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

Stock Options

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

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

Executive Deferred Share Unit Plan


—Executive DSU Plan helps our executives build their Share ownership in CAE. —Allows for elective deferral of STIP to DSUs. —One DSU is equal in value to one Share of CAE.			—DSUs are only payable when the executive leaves CAE. —Executive DSU Plan is non-dilutive as all DSUs are paid out in cash.

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

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

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Section 7 – Executive Compensation

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

Inactive Equity-Based Plans with Legacy Participants

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

Fiscal 2005 Deferred Share Unit Plan

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

Fiscal 2004 Deferred Share Unit Plan

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

Employee Stock Option Plan

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

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

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

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

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

73 | CAE INC. | 2026 | Management Proxy Circular

Section 7 – Executive Compensation

Securities Authorized for Issuance under the Equity Compensation Plans

The following table provides information as at March 31, 2026 on the Company’s compensation plans under which equity securities of the Company are authorized for issuance.


	Number of securities to be issued upon exercise of outstanding options, warrants and rights (#) A	Weighted average exercise price of outstanding options, warrants and rights ($) B	Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column A) (#) C
Equity compensation plans approved by securityholders
Employee Stock Option Plan (“ESOP”)	1,212,845	30.77	0
Omnibus Incentive Plan1	5,071,515	29.96	4,728,935
Equity compensation plans not approved by securityholders
	-	-	-
Total	6,284,360	-	4,728,935

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

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


	2026	2025	2024
Employee Stock Option Plan (“ESOP”)	0.00%	0.00%	0.0%
Omnibus Incentive Plan1	0.70%	0.65%	0.56%

1.The burn rate assumes that PSUs will vest based on a performance multiplier of 100%. If we assume that the PSUs will vest based on our maximum performance multiplier of 200%, the burn rate would increase to 1.02%. The burn rate also assumes that all awards will be settled in Shares issued from treasury. However, under the terms of the Omnibus Incentive Plan, CAE has the option to settle PSUs and RSUs through purchases on the open market or in cash.

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

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Section 7 – Executive Compensation

As at March 31, 2026, the number of Shares issued under the Omnibus Incentive Plan since its adoption was 199,550 and the total number of outstanding share-settled securities awarded under the Omnibus Incentive Plan was 5,071,514 (representing 1.58% of the issued and outstanding Shares as at such date). This leaves 4,728,935 share-settled securities remaining available for grant (representing 1.47% of the issued and outstanding Shares as at March 31, 2026).


Plan	Plan Maximum1	Outstanding Securities Awarded2	Remaining Securities Available for Grant3
Employee Stock Option Plan (“ESOP”)4	0 (0%)	0 (0%)	0 (0%)
Omnibus Incentive Plan	10,000,000 (3.11%)	5,071,515 (1.58%)	4,728,935 (1.47%)

1.The maximum number of securities issuable under each equity compensation plan, expressed as a fixed number (percentage represents the ratio between the maximum number of securities issuable and the number of issued and outstanding Shares as of March 31, 2026).

2.The number of outstanding share-settled securities awarded under each equity compensation plan as of March 31, 2026 (percentage represents the ratio between the number of outstanding share-settled securities awarded and the number of issued and outstanding Shares as of the same date).

3.The number of securities under each equity compensation plan that are available for grant as of March 31, 2026 (percentage represents the ratio between the number of securities under each equity compensation plan and the number of issued and outstanding Shares as of the same date).

4.Following approval of the Omnibus Incentive Plan in 2023, no grants were made under the Employee Stock Option Plan.

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Section 7 – Executive Compensation

Pension, Benefits and Perquisites


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

Eligible employees participate in the Retirement Plan for Employees of CAE Inc. and associated companies. Eligible executives participate in the Pension Plan for Designated Executive Employees of CAE Inc. and associated companies (the “Designated Pension Plan”), and in the Supplementary Pension Plan of CAE Inc. and associated companies (the “Supplementary Pension Plan”). The Designated Pension Plan is a defined benefit plan to which CAE and participants contribute.

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

During FY2026, the Human Resources Committee of the Board conducted a comprehensive review of the Supplementary Pension Plan. As a result of this review, it was determined that the plan will be closed to any new executives promoted or joining CAE in the future. This recent decision applies to both Mr. McLeod and Mr. Araujo. While new executives will continue to receive some form of supplemental pension benefit, the specific design and structure of these future arrangements have not yet been finalized.

Employee Stock Purchase Plan


Provide employees with a Share ownership building vehicle and a savings vehicle beyond the pension plan.

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

Change in Control Contracts

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

Perquisites

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

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Section 7 – Executive Compensation

FY2026 Compensation Outcomes

FY2026 financial performance reflected a mixed operating environment, with adjusted EPS* and revenue outcomes below established incentive targets. As these metrics are key drivers of STIP funding, this underperformance resulted in a lower CAE performance multiplier for the year. Under the LTIP, adjusted segment operating income margin* and adjusted return on capital employed* (ROCE) also performed below pre-established targets over the three-year cycle. These outcomes are consistent with CAE’s overall financial results for the fiscal year, which were achieved against a backdrop of softer market conditions in certain segments and ongoing execution challenges, while also reflecting continued progress on strategic priorities and the advancement of the Company’s transformation plan. Overall, the results reinforce the direct link between Company performance and variable compensation outcomes, while underscoring the importance of disciplined execution and operational improvement as CAE continues to position the business for long-term performance.

Base salaries

The salaries of the President and CEO and his direct reports are determined in accordance with CAE’s compensation philosophy and policy, and are reviewed and approved annually by the Board of Directors. The HRC reviews benchmark data to ensure that the President and CEO’s and his direct reports’ total direct compensation (base salary, short-term and long-term incentives) are in line with CAE’s compensation philosophy. The changes to base salary are market-competitive, based on benchmarking relative to our compensation peer group and reflect individual performance, experience, scope and criticality of the role and internal equity considerations. The salary increases below were determined at the start of FY2026 and were based on benchmarking conducted by the Committee’s independent compensation advisor.

The table below outlines base salaries of all NEOs:


NEO	Currency	FY2025 Base Salary ($)	FY2026 Base Salary ($) in paid currency	Increase
Matthew Bromberg 1	USD	-	1,100,000	-
Marc Parent 2	CAD	1,323,000	1,323,000	0%
Ryan McLeod 3	CAD	-	700,000	-
Constantino Malatesta 4	CAD	500,000	571,600	14%
Carter Copeland 5	USD	618,000	618,000	0%
Juan Araujo 6	USD	-	560,000	-
Pascal Grenier 7	CAD	504,820	575,000	14%

1.Mr. Bromberg's base salary is paid in USD and represents $1,518,000 when converted to Canadian dollars using the FY2026 average exchange rate of 1.38.

2.Mr. Parent left the Company August 13, 2025. The compensation disclosed above represents his annualized base salary.

3.Mr. McLeod was appointed on February 23, 2026. The compensation disclosed above represents his annualized base salary.

4.Mr. Malatesta’s compensation disclosed above reflects his annualized base salary as interim CFO.

5.Mr. Copeland's base salary is paid in USD and represents $852,840 for FY2026 when converted to Canadian dollars using the FY2026 average exchange rate of 1.38.

6.Mr. Araujo was appointed January 5, 2026. The compensation disclosed above represents his annualized base salary paid in USD, which represents $772,800 when converted to Canadian dollars using the FY2026 average exchange rate of 1.38.

7.Mr. Grenier was appointed President – Defense & Security on March 9, 2026. His FY2026 salary reflects an increase effective March 9, 2026 to recognize his additional responsibilities.

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

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Section 7 – Executive Compensation

Short-Term Incentive Plan

Corporate Performance

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

The table below illustrates the respective weights for each FY2026 CAE corporate performance measure, as well as the actual results and related payout levels.

Performance Measure1

Threshold (50%)

Target (100%)

Maximum (200%)

Actual Performance2

Weighting

Score

Adjusted EPS*

$1.05

$1.23

$1.31

$1.19

67%

89%

Revenue

$5,763M

$6,468M

$6,558M

$6,085M

33%

73%

STIP Payout

84%

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

2.For incentive plan purposes, adjusted EPS* and revenue are normalized for foreign exchange. In addition, revenue includes revenues generated by Joint Ventures. The numbers presented in this column reflect such adjustments. Actual results before foreign exchange adjustments are as follows: $1.20 for adjusted EPS* and $6,158M for revenue.

The remaining 25% of the NEOs’ annual incentive is awarded based on predetermined operational and financial measures specific to each executive. As with other performance measures, individual performance is assessed between 0% and 200%. For FY2026, the individual performance factor for NEOs varied between 100% and 140%. While the Committee assessed Mr. Bromberg’s performance for FY2026 based on his key strategic achievements, under his employment agreement it was agreed that his overall STIP payout for FY2026, pro-rated from his hire date for FY2026 , would not fall below target (see Section 7 – Executive Compensation – Compensation Discussion and Analysis – Determination of NEOs Individual Performance).

In assessing the individual performance factor for the CEO, the HRC assesses the CEO’s performance relative to specific financial and operational CEO performance goals that are set at the start of the fiscal year. The specific targets for these goals are not disclosed as they include competitively sensitive information. However, the achievements relevant to the HRC’s consideration and assessment are listed below in Section 7. While the HRC engaged in this evaluation process for FY2026, in accordance with the terms of Mr. Bromberg’s employment agreement, which requires that he receive a pro-rated target bonus for his period of employment during FY2026, with the resulting payout not falling below this target, the Committee and the Board did not apply a specific performance factor to assess the CEO’s individual performance.

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

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Section 7 – Executive Compensation

Individual Payout

The table below shows the calculation of the FY2026 STIP payout to each NEO:


NEO	Currency	Year-end Base Salary1 ($)	X	Target STIP (% of base salary)	X		(Company Performance Factor (75%)	+	Individual Performance Factor (25%)	)	=	FY2026 STIP Payout ($)
Matthew Bromberg 2, 3	USD	1,100,000	X	125%	X		100%				=	1,086,250
Marc Parent 4	CAD	1,323,000	X	125%	X	(	84%	+	100%		=	534,275
Ryan McLeod 5	CAD	700,000	X	85%	X		100%				=	595,000
Constantino Malatesta	CAD	571,600	X	75%	X	(	84%	+	140%	)	=	420,126
Carter Copeland 2	USD	618,000	X	75%	X	(	84%	+	100%	)	=	407,880
Juan Araujo 2,6	USD	560,000	X	55%	X	(	84%	+	100%	)	=	62,339
Pascal Grenier	CAD	575,000	X	75%	X	(	84%	+	140%	)	=	422,625

1.Annual base salary in nominal dollars as of March 31, 2026.

2.For Mr. Bromberg, Mr. Copeland and Mr. Araujo, the base salaries are paid in USD. When converted to Canadian dollars using the FY2026 average exchange rate of 1.38, their respective base salaries represent $1,518,000, $852,840 and $772,800.

3.Mr. Bromberg’s base salary reflects his annualized base salary in U.S. dollars. As per his employment agreement, FY2026 STIP payout reflects pro-rated target bonus for his period of employment during the fiscal year, with the resulting payout not falling below his target. While the Committee and the Board assessed his individual performance at year-end, no specific individual performance factor was applied.

4.Mr. Parent’s base salary represents his annualized rate. Pursuant to his departure agreement, the STIP payout covers the period from April 1, 2025, through the departure date of August 13, 2025, and is calculated using an individual multiplier of 100% along with the same Corporate Performance Factor applied to EMC members.

5.Mr. McLeod’s base salary reflects his annualized base salary. As per Mr. McLeod’s employment agreement, STIP payout for FY2026 reflects the annual amount at target to offset the annual incentive payment forfeited upon leaving his former employer.

6.Mr. Araujo’s STIP payout amount reflects the amount for the period between January 5, 2026 and March 31, 2026.

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Section 7 – Executive Compensation

Long-Term Incentive Plan

FY2026 Annual LTIP Award

The table below sets out the actual annual awards granted to the NEOs with reference to fiscal year 2026:


NEOs	FY2026 LTIP award (% of base salary)	Currency	Salary at time of grant ($)1	FY2026 LTIP award Value ($)2	Weighting
					PSUs (60%)3, 6		RSUs (20%)4,6		Stock Options (20%)5
					($)	(#)	($)	(#)	($)	(#)
Matthew Bromberg 7	500%	USD	1,100,000	5,500,000	3,300,000	120,857	1,100,000	40,286	1,100,000	108,173
Marc Parent	585%	CAD	1,323,000	7,739,600	4,643,760	132,793	1,547,920	44,264	1,547,920	113,069
Ryan McLeod8	-
Constantino Malatesta	250%	CAD	521,600	1,304,000	782,400	22,373	260,800	7,458	260,800	19,050
Carter Copeland	200%	USD	618,000	1,236,000	741,600	29,119	247,200	9,706	247,200	24,794
Juan Araujo8	-
Pascal Grenier	150%	CAD	504,820	757,230	454,338	12,992	151,446	4,331	151,446	11,063

1.Annual base salary at time of grant (June 2025). For Mr. Bromberg and Mr. Copeland, the base salaries are paid in USD.

2.For Mr. Bromberg and Mr. Copeland, the award value was converted from USD to CAD using the exchange rate at time of grant of 1.37 for Mr. Copeland and 1.36 for Mr. Bromberg.

3.PSU awards under the Omnibus Plan (see Section 7 – Executive Compensation – Compensation Discussion and Analysis – Omnibus Incentive Plan for details). Under this plan, the granted units may vest in May 2028, subject to CAE’s performance compared to the payout grids approved by the HRC and the participant’s continued employment with CAE. Depending on the overall performance of each year during the performance period, the target rate of units granted will be multiplied by a factor ranging from 0% to 200%. Vested PSUs will be settled in Shares (either issued from treasury or purchased on the open market), in cash or in a combination thereof.

4.RSU awards under the Omnibus Plan (see Section 7 – Executive Compensation – Compensation Discussion and Analysis – Omnibus Incentive Plan for details). Under this plan, 100% of the granted units will vest in May 2028, subject to the participant’s continued employment with CAE. Vested RSUs will be settled in Shares (either issued from treasury or purchased on the open market), in cash or in combination thereof.

5.Stock option awards under the Omnibus Plan (see Section 7 – Executive Compensation – Compensation Discussion and Analysis – Omnibus Incentive Plan for details). Under this plan, options are granted with an exercise price equal to the volume-weighted average price per Share on the TSX for the five trading days immediately preceding the grant date. At each of the first four anniversaries of the grant, 25% of the award vests and becomes exercisable. Strike price for FY2026 Stock Options is $34.97.

6.The grant price on grant date is $34.97 for PSUs and RSUs, representing the volume-weighted average price of the Shares on the TSX on the five trading days immediately preceding the grant date.

7.LTIP target percentage of base salary represents Mr. Bromberg’s target for FY2026. Mr. Bromberg’s appointment was June 16, 2025. Therefore, his annual LTIP grant was made on June 16, 2025. The grant price on grant date for PSUs and RSUs is $37.02, representing the volume-weighted average price of the Shares on the TSX over the five trading days immediately preceding the grant date. The strike price for the Stock Options granted is $37.02.

8.Mr. McLeod and Mr. Araujo were not employed by CAE at the time of the annual grant and, as such, did not receive awards at that time. Both executives received grants in connection with their appointments to partially offset long-term incentives forfeited upon leaving their former employer (see further details provided in section FY2026 One-Time Executive Awards for Forfeited Equity).

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Section 7 – Executive Compensation

FY2026 One-Time Executive Awards for Forfeited Equity

In connection with their appointment, the Human Resources Committee approved one‑time PSU and RSU awards to the following NEOs to offset long‑term incentive awards forfeited upon leaving their former employers and induce them to join CAE. In connection with his appointment as President and Chief Executive Officer, Mr. Bromberg received one-time PSU awards respectively linked to CAE’s performance period FY2025 to FY2027 and FY2026 to FY2028, as well as a one-time RSU award that will cliff vest after one year. Mr. McLeod and Mr. Araujo also received one-time RSU awards that will cliff vest after three years.

To the extent that awards partially offset those forfeited, the award as well as its vesting period is generally aligned with the nature and vesting schedule of the awards forfeited by these executives at their former employers. Amounts described in this section are not reflected in the table above FY2026 Annual LTIP Award.

Incumbent

Award Type

Grant Date

Vesting Date

Award Value

# Units Granted1

Share Price on Grant date 2

Matthew

Bromberg

RSUs

June 16, 2025

June 16, 2026

USD3,000,000

109,870

CAD37.02

PSUs

June 16, 2025

June 16, 2027

USD3,000,000

109,870

CAD37.02

PSUs

June 16, 2025

June 16, 2028

USD4,000,000

146,494

CAD37.02

Ryan McLeod

RSUs

February 25, 2026

February 25, 2029

CAD2,800,000

69,051

CAD40.55

Juan Araujo

RSUs

February 25, 2026

February 25, 2029

USD2,000,000

67,499

CAD40.55

1.For Mr. Bromberg, the award values was converted from USD to CAD at time of grant using the exchange rate of 1.36. The number of units granted was then determined by dividing the CAD award value by the volume-weighted average price of the Shares on the TSX on the five trading days immediately preceding the grant date.

2.For Mr. Bromberg , Mr. McLeod and Mr. Arujo, the share price on grant date represents the volume-weighted average price of the Shares on the TSX over the five trading days immediately preceding the grant date.

FY2026 One-Time Executive Transition Awards

In connection with the CEO recruitment process and the Company’s ongoing strategic transformation, which together materially increases executive retention risk, the Human Resources Committee approved special retention RSU awards to selected incumbents. These awards are intended to secure the continuity and engagement of critical, high-caliber CEO direct reports during this period of significant leadership change following Mr. Bromberg’s appointment. These grants will cliff vest three years from June 16, 2025. These amounts are not reflected in the table above FY2026 Annual LTIP Award.

Incumbent

Award Type

Grant Date

Vesting Date

Award Value1

# Units Granted1

Share Price on Grant date1

Carter Copeland

RSUs

June 16, 2025

June 16, 2028

USD 618,000

22,633

CAD37.02

Pascal Grenier

RSUs

June 16, 2025

June 16, 2028

CAD505,000

13,641

CAD37.02

1.For Mr. Copeland, the award value was converted from USD to CAD at time of grant using the exchange rate of 1.36. The number of units granted was then determined by dividing the converted award value by the share price on grant date, defined as the volume-weighted average trading price of the Shares on the TSX over the five trading days immediately preceding the grant date.

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Section 7 – Executive Compensation

FY2024 PSU (Performance Period Ending on March 31, 2026)

The table below presents the PSU performance and related payout details of the fiscal year covered in this disclosure. The vesting of the PSUs granted in FY2024 was tied to the performance of three equally weighted financial measures, adjusted segment operating income margin*, cash from operations and adjusted return on capital employed (ROCE)*. Three-year financial targets were determined on the basis of the strategic plan approved by the Board of Directors and payout grids were set for each measure and approved by the HRC. For each measure, the target rate of granted units is multiplied by a factor ranging from 0% to 200%. The overall payout multiplier continues to range from 0% to 200%. In accordance with the terms of the FY2024 PSU Plan, the HRC reviewed CAE’s adjusted segment operating income margin*, cash from operations and adjusted ROCE* performance for the fiscal year ended March 31, 2026, and approved the following results for PSUs granted in FY2024:


	Threshold (0%)	Target (100%)	Maximum (200%)	Actual Performance	Weighting	Score
Adjusted Segment Operating Income Margin* - FY2024	13.7%	14.7%	16.2%	12.68%	1/6	0%
Adjusted Segment Operating Income Margin* - FY2025	16.2%	17.2%	18.7%	15.54%	1/3	0%
Adjusted Segment Operating Income Margin* - FY2026	16.6%	17.6%	19.1%	14.40%	1/2	0%
FY2024 to FY2026 Adjusted Segment Operating Income Margin* Multiplier					33%	0%


	Threshold (0%)	Target (100%)	Maximum (200%)	Actual Performance	Weighting	Payout Level
Cash from Operations – Cumulative FY2024 to FY2026	$2,076	$2,326	$2,701	$2,273	33%	79%


	Threshold (0%)	Target (100%)	Maximum (200%)	Actual Performance	Weighting	Payout Level
Adjusted ROCE* – At the end of FY2026	7.20%	7.95%	9.07%	6.87%	33%	0%


	Weighting	Payout Level	Weighted Result
Adjusted Segment Operating Income Margin*	33%	0%	0%
Cash from Operations	33%	79%	26%
Adjusted ROCE*	33%	0%	0%
FY2024 PSU Multiplier			26%

The Committee considered that the overall performance multiplier of 26% of target for FY2024 PSUs, with the resulting 3-year performance period ending on March 31, 2026 appropriately linked compensation outcomes with CAE’s performance.

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

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Section 7 – Executive Compensation

The below table shows for each eligible NEO the payout value of FY2024 PSU grants with the resulting 3-year performance period ending March 31, 2026. The actual amounts paid out to each eligible NEO in June 2026 for PSUs granted in FY2024 are as follows:


NEO	FY2024 PSUs award (# of units)	X	FY2024 PSUs Performance Factor (%)	X	Market Share Price ($)	=	PSU Value2 ($)
Matthew Bromberg	-	X	-	X	-	=	-
Marc Parent	134,378	X	26%	X	$35.20	=	$1,229,827
Ryan McLeod	-	X	-	X	-	=	-
Constantino Malatesta1	3,194	X	26%	X	$35.20	=	$29,231
Carter Copeland	22,002	X	26%	X	$35.20	=	$201,362
Juan Araujo	-	X	-	X	-	=	-
Pascal Grenier	13,073	X	26%	X	$35.20	=	$119,644

1.Mr. Malatesta was appointed interim CFO during FY2025, therefore his FY2024 award reflects his previous role as Chief Accounting Officer and Vice President, Controller Office.

2.PSUs were redeemed using the volume-weighted average price of the Shares on the TSX for the five trading days immediately preceding the final vesting date of the grant ($35.20).

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Section 7 – Executive Compensation

Determination of NEOs’ Individual Performance

As previously discussed, this section paints a portrait of the major achievements of each NEO for FY2026. These were the main key performance indicators (KPIs) in determining the individual performance multiplier applicable to their annual incentive awards.


Matthew Bromberg President and Chief Executive Officer			Mr. Bromberg is CAE’s President and Chief Executive Officer. He is a proven leader with deep experience in both aerospace and defence, involving large-scale international operations, and brings decades of leadership at major global public companies, with a strong track record in driving operational excellence, transformation, and growth. Prior to joining CAE, Mr. Bromberg was Corporate Vice President of Global Operations at Northrop Grumman, where he spearheaded substantial enterprise-wise cost efficiencies by driving program excellence, streamlining operations, and leading a major supply chain transformation. He led the corporate Operations Council and was a member of the company’s executive leadership team. Previously, Mr. Bromberg served as President of Military Engines at Pratt & Whitney, a division of Raytheon Technologies. Over his 20-year career at Raytheon, he held senior leadership positions in general management, corporate strategy, and business development. Notably, he led Pratt & Whitney Commercial Aftermarket Operations and served as Vice President of United Technologies Corporate Strategy & Development. Earlier in his career, Mr. Bromberg worked as an investment banker with Goldman Sachs and then led several key acquisitions and divestitures at United Technologies, developing an extensive M&A background. A proud military veteran, he served as a submarine officer in the U.S. Navy. Mr. Bromberg holds a bachelor’s degree in physics from the University of California, Berkeley, as well as a Master of Business Administration and a Master of Mechanical Engineering from the Massachusetts Institute of Technology. He serves on the Board of Governors of the United Services Organization and on the Board of the Massachusetts Institute of Technology Leaders for Global Operations program.
FY2026 Goals Financial Performance: Drive sustainable growth and revenue, while maintaining a balanced performance across Civil and Defense segments. Expand profitability and earnings per share* (EPS) through disciplined execution and a continued focus on cost structure optimization. Cash Discipline: Enhance free cash flow* (FCF) conversion through improved cash generation and disciplined capital management, supporting ongoing deleveraging efforts. Leadership and Organizational Effectiveness: Successfully execute the CEO transition and integration, ensuring business continuity and reinforcing credibility with shareholders and key stakeholders. Strengthen organizational culture by reinforcing accountability, driving a high-performance mindset, and aligning leadership behaviors with strategic priorities. Capital Allocation, Governance and Risk Management: Advance a disciplined approach to capital allocation, including optimization of capital expenditures (capex) and active portfolio management. Maintain a strong focus on operational excellence and cost discipline, including workforce optimization and the continued integration of enterprise risk management (ERM) practices. Customer, Partnerships and Market Engagement: Strengthen strategic relationships with customers and original equipment manufacturers (OEMs), reinforcing the Company’s position as a trusted and value-added partner to key stakeholders.

FY2026 Achievements
Financial Performance and Cash Discipline: Delivered revenue of $4.9B in line with plan, with strong Defense growth offsetting softer Civil market conditions. Demonstrated disciplined capital management, including an approximate 10–19% reduction in capital expenditures and achieving a 123% cash conversion rate*. Executed workforce optimization initiatives and implemented targeted cost control measures to enhance efficiency. Transformation and Portfolio Optimization: Launched a multi-year Transformation Plan focused on portfolio optimization, capital discipline, and operational performance, supported by a robust governance framework and execution structure. Advanced portfolio actions, including positioning select non-core businesses for potential divestiture. Initiated a Global Shared Operations (HR and Finance) project and deployed AI-driven productivity programs to drive enterprise-wide efficiencies. Leadership and Organizational Effectiveness: Successfully executed the CEO transition, ensuring continuity while strengthening stakeholder confidence and engagement. Strengthened the leadership team through key executive appointments and organizational redesigns to enhance spans of control, reduce layers, and reinforce accountability.			Capital Allocation, Governance and Risk Management: Enhanced capital allocation discipline and governance frameworks, including improved bid discipline and oversight. Embedded enterprise risk management (ERM) practices into business processes and strategic decision-making. Operational Excellence: Strengthened operational rigour through enhanced program management and disciplined bid processes. Initiated ERP deployment and factory modernization initiatives to support long-term operational performance. Customer, Partnerships and Market Engagement: Secured strategic agreements and partnerships, strengthening relationships with key OEMs and customers, including Gulfstream, Leonardo, Saab and TKMS. Delivered strong investor engagement, contributing to improved market sentiment and reinforcing the Company’s strategic narrative. Strengthening Sustainability Governance and Carbon Discipline: Enhanced data governance through first-time limited assurance of Scope 1 and 2 emissions, supporting CAE’s transition to regulated reporting, while reducing total GHG emissions by 7% year over year. Integrated a shadow internal carbon price into capital allocation discipline as part of the Transformation agenda.

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

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Section 7 – Executive Compensation


Ryan McLeod Chief Financial Officer						Mr. McLeod is the Chief Financial Officer at CAE. In this role, he oversees the global finance organization and plays a pivotal role in advancing CAE’s growth and operational excellence. Mr. McLeod is an accomplished finance executive recognized for his strategic leadership and ability to drive organizational success. Prior to this appointment, Mr. McLeod served as the Chief Financial Officer (CFO) of ATS Corporation, since 2020. In this role, he led the global finance team, shaping financial strategy, and enabling sustainable growth. As CFO, Mr. McLeod oversaw revenue growth from $1.4 billion to $3.0 billion along with margin expansion. He successfully led ATS Corporation's U.S. Initial Public Offering and the execution of 18 strategic acquisitions across North America, Europe, and Southeast Asia. Mr. McLeod also strengthened the company's balance sheet through multiple debt issuances totaling over $1 billion. From 2010 to 2020, Mr. McLeod served as Vice President, Corporate Controller at ATS Corporation, where he led external reporting, global controllership, taxation, and developed the company's investor relations strategy. During his 18-year tenure at ATS Corporation, the company experienced exceptional growth. Earlier in his career, he held finance leadership roles at CIBC Mellon and spent four years with Ernst & Young LLP's Audit & Assurance practice. Mr. McLeod earned his Chartered Professional Accountant and Chartered Accountant designations from the Institute of Chartered Accountants of Ontario and holds an Honours Bachelor of Business Administration from Wilfrid Laurier University.
FY2026 Goals Strategic goals are typically established at the beginning of the fiscal year. As Mr. McLeod joined CAE late in FY2026, specific strategic goals were not formally assigned to him for that fiscal year.


FY2026 Achievements
Participated in the preparation and consolidation of the FY27 Annual Operating Plan, ensuring alignment with the updated business reorganization, financial assumptions, and strategic priorities. Participated in shaping and validating the FY27–FY31 Strategic Plan, including scenario analysis, capital allocation considerations, and financial risk assessment. Worked with the EMC to finalize the transformation roadmap, including governance, sequencing, investment phasing, and value‑creation tracking. Established close working relationships with the CEO and EMC contributing to effective financial governance and decision support. Advanced onboarding priorities by gaining a rapid understanding of CAE’s financial structure, transformation agenda, and key operational drivers. Engaged with Finance leadership and key stakeholders globally to ensure continuity, alignment, and execution discipline during the transition period. Demonstrated collaborative leadership by engaging closely with EMC and functional leaders to drive alignment on financial priorities and transformation objectives.			Brought a structured and disciplined approach to complex decision‑making, balancing short‑term execution needs with longer‑term strategic considerations. Promoted a culture of rigour, transparency, and accountability in financial planning, governance, and performance discussions. Actively encouraged open communication and challenge, creating space for informed debate and data‑driven decision‑making. Demonstrated strong commitment to CAE values, including integrity, respect, and teamwork, particularly during periods of transformation and change. Invested time in listening and relationship‑building as part of onboarding, showing curiosity and respect for CAE’s culture, people, and operating model. Supported a change‑ready culture by reinforcing clarity, consistency, and purpose in messaging related to the transformation agenda.

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

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Section 7 – Executive Compensation


Carter Copeland President – Flightscape			Mr. Copeland was named CAE’s President of Flightscape in March 2026. He leads the team that develops digital crew and flight management solutions for airlines and business aviation operators. Prior to joining CAE, Mr. Copeland served as the President and co-founder of Melius Research, an independent research, consulting, and data analytics firm. Before co-founding Melius, Mr. Copeland was Managing Director and Senior Analyst covering the Global Aerospace and Defense sector for Barclays PLC. Prior to Barclays, he held various roles of increasing responsibility in the aerospace and defense research practice at Lehman Brothers. Before beginning his career on Wall Street, Mr. Copeland served on the staff of the Federal Reserve Board of Governors in Washington, D.C., aiding in monetary policy work and conducting corporate finance research. Mr. Copeland graduated with honours from the University of Alabama, with a degree in Economics. He also holds an MBA from Washington University in St. Louis, where he was a recipient of the prestigious Wood Fellowship. He is a Chartered Financial Analyst and formerly served as a member of the Corporate Leaders program on the Council of Foreign Relations. Additionally, he currently serves on the CIMG advisory board at the University of Alabama. Mr. Copeland is a co-author of the book Lessons from the Titans.
FY2026 Goals Establish and communicate CAE’s corporate strategic vision and associated plans, overseeing the rollout of strategic frameworks and governance processes across the organization through application of a One CAE approach. Continue leadership of CAE’s M&A and Structured Finance function as well as Global Procurement and Supply Management, with particular focus on capital efficiency, investment discipline, and returns on deployed capital. Lead a comprehensive review of CAE’s business portfolio with a focus on long-term value creation, culminating in a clearly defined strategy for portfolio shaping and capital reallocation across the enterprise. Oversee a rigorous assessment of CAE’s multi-year capital deployment performance, with emphasis on maturing investment prioritization processes and improving screening and tracking of organic and inorganic capital allocation. Assume leadership responsibilities as President of CAE’s Flightscape business unit, including oversight of the evaluation of strategic alternatives for the business unit. Partner with business units and functions across CAE to enhance operational and financial performance, and continue to execute on special projects as needed at the direction of the CEO and Board of Directors.


FY2026 Achievements
Leadership of CAE’s corporate strategic planning and associated governance processes, providing ongoing analytical and strategic support for the Company’s multi-year transformation efforts. During the year, successfully oversaw the ongoing evolution of CAE’s strategic framework and associated tracking tools across the organization. Additionally, conducted and led numerous reviews and detailed analyses on key issues, including macroeconomic and geopolitical risks, market-related demand dynamics, transformation benchmarking, and financial reporting in support of Board and executive decision-making. Led a comprehensive evaluation of CAE’s business portfolio with a focus on long-term value creation, resulting in a clearly defined portfolio shaping strategy covering a meaningful portion of CAE’s revenue. This effort centered on rigorous analysis of business unit performance, competitive positioning, and capital allocation across the enterprise, and culminated in actionable recommendations that are expected to drive significant shareholder value through disciplined portfolio optimization and reallocation of capital toward higher-return opportunities.			Led CAE’s M&A and Structured Finance function as well as Global Procurement and Supply Management. In these capacities, initiated a holistic assessment of CAE’s capital deployment strategy with the aim of maturing investment processes and enhancing returns on capital, and crafted updated corporate policies and procedures for organic capital investment aimed at better screening, prioritizing, and tracking performance. Additionally, explored several areas of operational efficiency including inventory management and strategic planning. Assumed leadership responsibilities as President of CAE’s Flightscape business unit, overseeing the business and leading the evaluation of strategic alternatives for the asset in partnership with the Board of Directors and external advisors. In this capacity, conducted comprehensive business immersion across all major operating locations and customer relationships, assembled and aligned the teams on key factors underpinning the strategic evaluation process. Co-led CAE’s technology incubation effort in partnership with the Chief Technology Officer, exploring training solutions leveraging Apple Vision Pro.

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Section 7 – Executive Compensation


Juan Araujo Senior Vice President – Operations			Mr. Araujo was appointed Senior Vice President, Operations at CAE on January 5, 2026. In this role, he is responsible for enhancing consistency, efficiency, and performance across CAE’s global products organization and driving greater synergies between its Civil and Defense businesses. Mr. Araujo oversees teams responsible for Global Manufacturing, Hardware Engineering, Global Safety, Facilities and Global Procurement and Supply Management. Mr. Araujo brings more than 25 years of international leadership experience across the aerospace, defence, and industrial sectors, with deep expertise in operations, MRO (maintenance, repair, and overhaul), engineering, and digital transformation. He has managed large-scale, complex organizations with P&Ls ranging from $300 million to more than $2.3 billion. Mr. Araujo has successfully led major footprint rationalizations across more than a dozen global facilities and spearheaded strategies that significantly improved productivity, reduced costs, and enhanced customer satisfaction. Renowned for his expertise in operational transformation, lean manufacturing, and digital innovation, he has consistently delivered growth, expanded margins, and improved customer satisfaction through best-in-class processes and systems. Mr. Araujo’s professional journey began in academia as a research team leader at Clarkson University, where he led a Department of Energy–funded gas turbine project in collaboration with GE’s Gas Turbine Research Division. He went on to build a strong technical foundation as a research and design engineer and continuous improvement professional. As a turbine design engineer, he developed designs for the High-Speed Civil Transport (HSCT) program and the PW2000 engine. Before joining CAE, Mr. Araujo served as President of Davis-Standard, a global leader in extrusion and converting technologies. He previously held senior executive positions at global organizations including Chief Operating Officer (COO) at Paradigm Precision and Enjet Aero, and Vice President at Collins Aerospace (RTX), where he led operations, aftermarket and MRO businesses generating more than $6 billion in annual revenue. He also served as Group President of MRO at Wencor Group (Warburg Pincus), overseeing multiple business units and international operations. Mr. Araujo holds an MBA from Rensselaer Polytechnic Institute, an M.S. and B.S. in Mechanical Engineering from Clarkson University and has completed executive programs at INSEAD and the Darden School of Business. Multilingual and culturally adept, he possesses extensive international leadership experience and board-level governance exposure. A recognized innovator, Mr. Araujo holds a U.S. patent for a digital MRO tracking system and has authored industry research published by ASME.
FY2026 Goals Strategic goals are typically established at the beginning of the fiscal year. As Mr. Araujo joined CAE late in FY2026, specific strategic goals were not formally assigned to him for that fiscal year.


FY2026 Achievements
Established the strategic, organizational, and governance foundations required to improve operational efficiency, cost predictability, quality, and safety outcomes over time. Built strong cross-division relationships across Civil and Defense executive and operational leadership, creating a foundation for improved collaboration, alignment, and enterprise-level decision-making. Built and reorganized a global leadership team, aligning roles and responsibilities with individual strengths, and clarifying accountability to support execution and decision-making. Unified Hardware & Software Engineering, Health & Safety, and Quality within Operations to streamline governance, improve execution, enhance accountability, and support cross-functional alignment.			Led deep-dive, fact-based reviews of manufacturing and supply chain processes (product and non-product), identifying structural and operational performance gaps and improvement opportunities. Defined clear manufacturing transformation strategies and high-level execution plans to address identified gaps and accelerate operational performance improvements. Built an accountable leadership culture grounded in collaboration, transparency, and execution discipline.

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Section 7 – Executive Compensation


Pascal Grenier President – Defense & Security			Mr. Grenier is President – Defense & Security. In this role, he oversees CAE’s global defence portfolio and provides strategic oversight for the U.S. Defense & Security segment, strengthening alignment across CAE’s worldwide defence operations and reinforcing CAE’s position as a trusted defence partner delivering scalable mission readiness. Prior to his current role, Mr. Grenier served as President, Flightscape, where he led CAE’s aviation software business providing advanced digital crew and flight management solutions to airline and business aviation operators worldwide. Mr. Grenier has more than 25 years of experience at CAE. Previously, he was Senior Vice President, Global Operations, Technologies & Innovation, where he led CAE’s global operations and technology functions across the enterprise, including Engineering, Manufacturing, Sourcing and Procurement, Quality Assurance, Innovation, IT and Digital Solutions. Through these responsibilities and the management of a multibillion-dollar portfolio, Mr. Grenier developed deep expertise in programme performance, mission-critical technologies and the disciplined execution required to deliver complex defence programmes. His deep understanding of CAE’s capabilities, customer needs and market dynamics supports the company’s continued leadership in training and mission critical technology. Beyond CAE, Mr. Grenier serves on the board of the Council of Canadian Academies and co-chairs the Transport & Industry division of Centraide Montréal. Mr. Grenier holds a Bachelor of Mechanical Engineering (Honours) from Université de Montréal – École Polytechnique and is a member of the Ordre des ingénieurs du Québec.
FY2026 Goals Deliver financial performance in line with plan for the Flightscape business through disciplined cost management, margin expansion, and commercial execution. Accelerate profitable growth by increasing customer win rates, expanding recurring revenue, including improving new customer win rates and increasing contracted annual recurring revenue. Scale implementation and service delivery to improve throughput, meet customer schedule and onboarding, and operational predictability. Increase customer value and loyalty through product excellence, high service reliability, and improved customer advocacy, including achieving a Net Promoter Score above 20 or higher and sustaining service level agreement performance at or above 99.99%. Advance the product and innovation roadmap to reinforce market leadership in unified airline operations platforms, including launching the Flightscape brand and value proposition. Strengthen organizational capability by developing leaders, improving engagement, and maintaining diversity and succession strength during transformation. As Mr. Grenier assumed his new role as President, Defense & Security on March 9, 2026, formal strategic goals related to the Defense business were not established for FY2026.


FY2026 Achievements
Delivered FY2026 adjusted segment operating income* (SOI) on plan for the Flightscape business. This outcome was driven by rigorous cost control, improved commercial quality and disciplined earnings management, demonstrating strong financial governance and consistent execution in a challenging operating environment. Delivered run rate savings through operational simplification and transformation initiatives, while establishing a clear roadmap for additional cost reduction and margin expansion. Significantly accelerated delivery throughput, with implementation volume increasing- despite ongoing customer dependencies. Strengthened Flightscape’s competitive position through the establishment of five strategic partnerships, strong customer advocacy and service, and a resilient talent base supported by high employee engagement, low voluntary turnover.			Launched a new brand and value proposition for Flightscape, aligning customers and stakeholders around a unified enterprise narrative while balancing near-term execution with long-term strategic priorities during a period of transition. Fostered a high-accountability, trust-based culture by empowering leaders, encouraging constructive challenge and investing in talent development. Enhanced transparency through all regular employee Q&A sessions, maintaining open communication and providing employees with a direct forum to raise questions and concerns. Sustained operational momentum and outcomes through the early stages of the Flightscape divestiture, leading with resilience and positive engagement across teams and external stakeholders. Restructured the management team to strengthen capability and reduce overhead and partnered closely with incoming Flightscape President Carter Copeland and the broader leadership team to support a smooth and effective leadership transition.

Not all details of the NEO targets have been disclosed due to the potential competitive prejudice to CAE in doing so. The NEOs’ performance against their objectives was reviewed by the HRC, in addition to having been reviewed by the President and CEO during the fiscal year.

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

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Section 7 – Executive Compensation

Compensation Governance

Role of the HRC in setting executive compensation

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

Performance Measure

Management

CEO

Independent Compensation Consultant

HRC

Board

Executive compensation and benefits programs design

Develop

Review

Recommend

Approve

Annual NEO compensation

Develop

Recommend

Review

Approve

Annual CEO compensation

Develop

Recommend

Approve

Annual and long-term incentive plan measures, targets and performance results

Develop

Review

Recommend

Approve

Comparator group for executive compensation benchmarking purposes

Review

Develop

Approve

Role of the independent compensation consultants

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

Meridian’s mandate during FY2026 was to prepare and review materials presented to the HRC including updates to CAE’s comparator group for benchmarking executive and Board of Directors compensation and on the design of the Company’s executive compensation programs. No CAE Director or officer has any affiliation with Meridian and Meridian meets the independence standards applied to executive compensation consultants.

CAE’s management also retains the services of experts in the field of executive compensation. In the past three years it has used the services of Gallagher to assist with several analyses related to executive compensation.

The following table shows the fees related to executive compensation work paid by CAE to Meridian and Gallagher in FY2025 and FY2026.


	Meridian		Gallagher
	FY2026	FY2025	FY2026	FY2025
Executive Compensation	$345,655	$296,399	$36,356	$16,081
All Other Fees1	-	-	$17,100	-
Total	$345,655	$296,399	$53,456	$16,081

1.Gallagher’s other fees related to work for Pay Equity maintenance.

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Section 7 – Executive Compensation

Risk Mitigation

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

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

The following characteristics of our compensation program in FY2026 were identified as having risk-mitigating effects:


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


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

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Section 7 – Executive Compensation

The HRC conducts an annual compensation risk assessment with the assistance of its independent compensation consulting firm Meridian to identify potential risks associated with CAE’s compensation programs, practices and policies. In FY2026, the assessment concluded that the risks associated with the compensation programs are not reasonably likely to have a material adverse effect on the Company.

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

FY2026 Comparator Group


The CAE comparator group was reviewed in FY2026 to ensure the companies in the group and underlying selection criteria are still relevant. No changes were made to the comparator group.			The comparator group includes size-appropriate companies operating in at least one of CAE’s market segments, with a similar financial and operational footprint, or with which CAE competes for talent.

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

—Principal place of business

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

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

—Companies that compete with CAE for talent (CAE recruits executive talent from the U.S. and internationally)

When CAE benchmarks executive compensation relative to the comparator companies, compensation values in USD for peer U.S. resident executives are converted at par (1:1) to manage foreign exchange and avoid inflating compensation at U.S. companies for purposes of benchmarking compensation. CAE’s comparator group consists of the following 20 companies, nine of which are Canadian and the remaining 11 are American.


Comparator Group
Air Canada	Booz Allen Hamilton Holding Corporation	Hexcel Corporation	Open Text Corporation
AMETEK, Inc.	BRP Inc.	Howmet Aerospace Inc.	Science Applications International Corporation
AtkinsRéalis Group Inc.	CACI International Inc	IDEX Corporation	Teledyne Technologies Incorporated
ATS Corporation	CGI Inc.	Leonardo DRS, Inc.	Woodward, Inc.
Bombardier Inc.	Curtiss-Wright Corporation	NFI Group Inc.	WSP Global Inc.

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Section 7 – Executive Compensation

Executive Share Ownership Requirements


—Share ownership requirements must be achieved within 5 years from hire or promotion to an executive position. —Only Shares, DSUs and 50% of RSUs are included.			—Majority of NEOs retain 25% of the net profit realized from option exercises in CAE Shares for the duration of their employment at CAE.

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


Share Ownership Targets (as a % of base salary)
NEO			% of Base Salary
Matthew Bromberg			500%
Ryan McLeod			250%
Carter Copeland			200%
Juan Araujo			200%
Pascal Grenier			250%

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

In addition, for each option exercise, the CEO, CFO as well as the President Defense & Security and President Civil Aviation retain CAE Shares equivalent in value to 25% of the net profit realized on such option exercise for the duration of their employment with CAE. This policy further aligns executive interests with those of our Shareholders and ensures that executives do not take advantage of short-term Share price movement.

The CEO is required to retain his Share ownership requirement for one year after retirement.

As of March 31, 2026, one NEO met the ownership guidelines. The table below sets forth the minimum number of Shares/units to be held by the NEO who has already met the requirement, the required value in dollars to meet the ownership guidelines and the actual value held as a percent of the annual base salary.

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Section 7 – Executive Compensation


NEO	Share Ownership Requirement as Percent of Salary (%)	Ownership Status	Target Date	Number of Shares/ Units to be Held Once Requirement Met (#)	Value Required to Meet Guidelines1 ($)	Completion to Meet Share Ownership Guidelines (%)	Value Held in Shares/ Units2 ($)	Value of Shares/Units Held as Percent of Salary3 (%)
Matthew Bromberg	500	Time to meet	June 2030	210,118	7,601,226	37	2,806,748	185
Ryan McLeod	250	Time to meet	February 2031	48,375	1,750,000	71	1,248,994	178
Carter Copeland4	200	Time to meet	August 2026	47,220	1,708,203	70	1,188,093	139
Juan Araujo	200	Time to meet	January 2031	42,788	1,547,886	80	1,230,573	159
Pascal Grenier	250	Already Met	March 2031	39,736	N/A	100	1,487,070	259

1.Not applicable if the Share ownership requirement is already met.

2.Calculated based on the number of Shares, DSUs, LTUs, and 50% of RSUs held as of March 31, 2026 and the average closing Share price on the TSX during the five trading days preceding March 31, 2026 ($36.18) in accordance with the Share Ownership Guidelines Policy.

3.Calculated based on the annual base salary as of March 31, 2026. For Mr. Bromberg, Mr. Araujo and Mr. Copeland, the base salary was converted to Canadian dollars using the FY2026 average exchange rate of 1.38.

4.Mr. Copeland is approaching the target date to meet his share ownership requirement and, consistent with prior years, elected to convert a portion of his STIP payout into Executive DSUs.

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Section 7 – Executive Compensation

Alignment of Compensation and Performance

Shareholders Return Performance Graph

The following graph compares the cumulative Shareholders return of the Shares with the cumulative returns of each of the S&P/TSX Composite Index and the S&P Aerospace & Defense Select Industry Index for a five-year period commencing March 31, 20211, along with a discussion of the trend in executive officer compensation over the same period (in the paragraph that follows the table).

Comparison of Five-year Cumulative Total Return of CAE Inc. vs. S&P/TSX Composite Index and S&P Aerospace & Defense Select Industry Index


	2021	2022	2023	2024	2025	2026
CAE Inc.	$100	$91	$85	$78	$99	$101
S&P/TSX Composite Index	$100	$120	$114	$130	$150	$203
S&P Aerospace & Defense Index	$100	$100	$95	$115	$133	$211

1.$100 invested in Shares traded on the TSX on March 31, 2021. Values are as at the last trading date during the month of March in the specified years and from the S&P/TSX Composite Total Return Index and S&P Aerospace & Defense Select Industry Total Return Index, which assume dividend reinvestment.

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Section 7 – Executive Compensation

Discussion of trend in executive officer compensation over the same period

The CEO realizable pay and performance table shown below in this section reflects annual incentive payouts, which are generally well aligned with Share price and financial performance. Additionally, all of our long-term incentive awards are in the form of CAE equity, the value of which aligns with our financial performance and directly tracks the value of our equity over the lifetime of the award; it is the realized and realizable value of these awards, rather than their grant date value, which is tied directly to our Share price. The components of our executive compensation that align with performance are:

—Annual incentive: Results on the annual scorecard have been directionally aligned with Share price performance over the five-year period. Payouts have ranged from 16% to 166% of target over the last five years.

—PSUs: Our PSUs, which are linked to key financial objectives, have paid out in relation to our financial, operating and Share price performance over the five-year timeframe, with PSUs paying out at 63% of target for those granted in FY2023 and 26% of target for those granted in FY2024. PSUs precisely track the underlying value of CAE’s Share price, so there is 100% alignment with Share price performance over the 5-year period.

—RSUs: RSUs precisely track the underlying value of CAE’s Share price, so upon redemption there is 100% alignment with Share price performance over the five-year period.

—Stock options: Stock options are only valuable to recipients to the extent that Share price appreciates. As of March 31, 2026, based on a closing stock price of $36.22, FY2021, FY2023, FY2024, FY2025 and FY2026 stock option grants are in-the-money for executives who were active on the grant date. Only FY2022 stock options for executives who were active on the grant date and those granted to Chief Executive Office, Mr. Bromberg during FY2026 are out-of-the-money and have no value.

CEO Realizable Pay and Performance

A significant portion (69%) of Mr. Bromberg’s compensation as President and CEO consists of fully at-risk long-term incentives (the FY2026 LTIP mix is 60% PSUs, 20% RSUs, 20% stock options), which are designed to focus the CEO on CAE’s long-term success. The LTIP is directly affected by the performance of CAE’s Share price:

—Stock options only have value to the extent the Share price increases;

—RSUs are directly impacted by Share price;

—PSUs are directly impacted by Share price and financial performance.

The table below is a look back comparing grant-date total target direct compensation for Messrs. Parent (FY2024 and FY2025) and Bromberg (FY2026) to the realizable value of this compensation during the last three years to Shareholder returns. The analysis is based on the return of a $100 investment by a Shareholder at the start of a period, compared to $100 of total direct compensation for the CEO for each year. In 2024, Shareholder returns are above the CEO’s realized compensation value; in 2025 and 2026, Shareholder returns are more closely aligned with the CEO realizable compensation value, which suggests our compensation programs are strongly aligned with Shareholder value creation.

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Section 7 – Executive Compensation


Total Target Direct Pay1 (CAD)		Realizable Pay2 (CAD)	% Change in CEO Pay	% Change in TSR	From	To	Change in CEO relative Pay to $100 of CEO Pay	Change in TSR Relative to $100 Invested in CAE Shares
Fiscal 2024	$9,393,319	$5,429,042	-42%	+19%	March 31, 2023	March 31, 2026	$58	$119
Fiscal 2025	$10,716,352	$13,905,595	+30%	+29%	March 31, 2024	March 31, 2026	$130	$129
Fiscal 20263	$10,906,804	$8,562,022	-16%	+2%	March 31, 2025	March 31, 2026	$84	$102
Average	$10,335,325	$10,737,449	-9%	+17%			$91	$117

1.Includes salary, target bonus, long-term incentive grant of PSUs, RSUs and stock options as reported in the Summary Compensation Table. Excludes pension and all other compensation value.

2.Includes salary, actual bonus paid (assuming tracking at 100%), value of stock options that are in-the-money and the market value of unvested PSUs and RSUs (assuming PSUs vest at target for FY 2025 and FY2026 grants, assumed tracking performance multiplier of 100% for FY2024 cycle). Equity valued as at March 31, 2026 closing stock price ($36.22). Excludes pension and all other compensation value.

3.Excludes Mr. Bromberg's special one-time RSU and PSU awards he received in June 2025. Mr. Bromberg is paid in US dollars, as such his base salary and bonus are converted to Canadian dollars using a conversion exchange rate of 1.39 on March 31, 2026. Mr. Bromberg’s 2026 salary and bonus have been prorated reflecting his service in the role.

The table below compares target and realizable CEO compensation values.

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Section 7 – Executive Compensation

Reconciliation of Mr. Bromberg’s LTI Grants in FY2026

The above graph comparing target and realizable pay includes the FY2026 annual equity grant awarded to Mr. Matthew Bromberg as part of his ongoing compensation framework. Consistent with a focus on recurring, performance-based compensation, the analysis excludes the one-time sign-on awards granted to offset long-term incentive awards forfeited upon leaving his former employer, as these awards are transitional in nature and not representative of his regular annual pay opportunity. The table below provides a detailed overview of the equity grants awarded during the year, together with the rationale supporting each grant.


Grant	Rationale	LTIP award Value ($) (CAD)	PSUs		RSUs		Stock Options
			($)	(#)	($)	(#)	($)	(#)
FY2026	Standard FY2026 Grant at 60% PSUs, 20% RSUs and 20% Stock Options	$7,456,900	4,474,140	120,857	1,491,380	40,286	1,491,380	108,173
One-Time Sign-On Awards	Match forfeited unvested equity at former employer	$13,558,000	9,490,600	256,364	4,067,400	109,870	--	--

Summary Compensation table – Presented with annualized compensation

The following table is intended to provide a clearer view of the annual compensation of Mr. Bromberg by presenting all elements included in the Summary Compensation Table on an annualized basis, to better illustrate his annual compensation. To facilitate comparability of his ongoing compensation, the table excludes the make‑whole awards granted to Mr. Bromberg to offset long-term incentive awards forfeited upon leaving his former employer, as described above as well as any special compensation paid in relation to this special year of transition.


Name and Principal Position	Year	Salary		Share-Based Awards		Option-Based Awards		Non-Equity Incentive Plan Compensation - Annual Incentive Plan	Pension Value		All Other Compensation2		Total Compensation
Matthew Bromberg1	2026	$	1,100,000	$	4,400,000	$	1,100,000	1,375,000	$	581,895	$	36,050	$	8,592,945

1.Mr. Bromberg compensation is paid in U.S. dollars.

2.Represents annual benefits paid in USD to Mr. Bromberg, namely CAE’s contribution to ESPP plan.

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Section 7 – Executive Compensation

Compensation of Our Named Executive Officers

Summary Compensation Table

The first of the following tables provides a summary of compensation earned during the last three fiscal years ended March 31 by the President and Chief Executive Officer, the former President and Chief Executive Officer, the Chief Financial Officer, the former Interim Chief Financial Officer, and by the three most highly compensated policy-making executives who served as executive officers of CAE or its subsidiaries as at March 31, 2026 (collectively, “Named Executive Officers” or “NEOs”).


Name and Principal Position	Year	Salary	Share-Based Awards1	Option-Based Awards2	Non-Equity Incentive Plan Compensation - Annual Incentive Plan3	Pension Value4	All Other Compensation5	Total Compensation
Matthew Bromberg6,7 President and Chief Executive Officer	2026	$1,196,893	$5,965,534 $13,558,0008 $19,523,534	$1,491,706	$2,189,025	$803,000	$208,378	$11,854,535 $13,558,0008 $25,412,535
	2025
	2024
Ryan McLeod8 Chief Financial Officer	2026	$72,917	$2,800,018	$0	$1,095,000 12	$4,900	$5,557	$3,978,392
	2025
	2024
Carter Copeland6 President - Flightscape	2026	$851,582	$1,357,700 $837,8849 $2,195,584	$339,430	$562,874	$388,000	$73,746	$3,573,333 $837,8849 $4,411,216
	2025	$824,641	$1,313,833	$328,462	$733,399	$453,000	$59,990	$3,713,325
	2024	$706,145	$840,476	$210,120	$281,729	$307,000	$50,786	$2,396,256
Juan Araujo6,8,13 Senior Vice President, Operations	2026	$178,345	$2,737,084	$0	$431,028	$4,013	$16,352	$3,366,822
	2025
	2024
Pascal Grenier President – Defense & Security	2026	$506,757	$ 605,775 $505,0009 $1,110,775	$151,452	$422,625	$873,000	$65,724	$2,625,334 $505,0009 $3,130,334
	2025	$485,499	$588,143	$147,033	$316,066	$230,000	$62,983	$1,829,724
	2024	$458,710	$499,398	$124,846	$118,889	$195,000	$61,093	$1,457,936
Marc Parent10 Former President and Chief Executive Officer	2026	$486,102	$6,191,683	$1,547,915	$534,275	$801,000	$6,509,878	$16,070,854
	2025	$1,323,000	$6,191,677	$1,547,919	$2,013,441	$2,916,000	$153,124	$14,145,161
	2024	$1,312,500	$5,133,249	$1,283,306	$256,331	$1,851,000	$100,235	$9,936,621
Constantino Malatesta11 Former Interim Chief Financial Officer	2026	$476,544	$1,043,190	$260,795	$510,126	$501,000	$51,033	$2,842,688
	2025	$440,455	$144,004	$36,002	$619,688	$921,000	$51,648	$2,212,797
	2024	$300,983	$122,020	$30,502	$84,652	$174,000	$49,769	$761,926

1.Represents the value of Share-based awards granted under the Omnibus Incentive Plan in FY2024, FY2025 and FY2026. The value disclosed for the RSUs and PSUs represents the award date value calculated by multiplying the number of RSUs and PSUs awarded at target (100%) by CAE’s volume-weighted average Share price on the TSX during the five trading days immediately preceding the grant date ($28.65 for units granted in June of FY2024, $25.42 for units granted in June of FY2025, $32.48 for units granted in November of FY2025, $34.97 for units granted in May of FY2026, $37.02 for units granted in June of FY2026 and $40.55 for units granted in February of FY2026). Such value differs from the accounting grant date fair value determined in accordance with IFRS2, Share-based Payments, as the accounting fair value is assessed with the Share price on the date of the award (rather than on a volume-weighted average price). The accounting grant date fair value would be as follows if using the Share closing price on the TSX on the respective grant date ($27.83 on June 9, 2023, $25.78 on June 6, 2024, $32.91 on November 29, 2024, $34.20 on May 26, 2025, $36.49 on June 16, 2025 and $40.20 on February 25, 2026): Mr. Bromberg: $19,244,023 in FY2026 (a negative difference of $279,510); Mr. McLeod: $2,775,850 in FY2026 (a negative difference of $24,168); Mr. Copeland: $816,421 in FY2024 (a negative difference of $24,056), $1,332,439 in FY2025 (a difference of $18,607) and $2,153,693 in FY2026 (a negative difference of $41,891); Mr. Araujo: $2,731,460 in FY2026 (a negative

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Section 7 – Executive Compensation

difference of $23,625); Mr. Grenier: $485,105 in FY2024 (a negative difference of $14,293), $596,472 in FY2025 (a difference of $8,329) and $1,090,207 (a negative difference of $20,568); Mr. Parent: $4,986,329 in FY2024 (a negative difference of $146,920), $6,279,364 in FY2025 (a difference of $87,687) and $6,055,349 in FY2026 (a negative difference of $136,334); and Mr. Malatesta: $118,528 in FY2024 (a negative difference of $3,492), $146,044 in FY2025 (a difference of $2,040) and $1,020,220 in FY2026 (a negative difference of $22,970). Note that the actual value paid, if any, will differ.

2.Represents the value of option-based awards granted under the Omnibus Incentive Plan in FY2024, FY2025 and FY2026 determined based on the grant-date fair value of the award in accordance with IFRS2. Note that actual value received, if any, will differ. The value of each option is determined by using the Black-Scholes model with the following assumptions:


	FY2026 June	FY2026 May	FY2025 June	FY2024 June
Dividend yield	0.00%	0.00%	0.58%	0.72%
Expected volatility	37.96%	39.55%	39.32%	41.86%
Risk-free interest rate	2.99%	2.92%	3.53%	3.72%
Expected option term	4.82	5.03	5.01	4.52
Black-Scholes Value	37.25%	39.15%	37.65%	36.29%

3.Represents the STIP payout earned in each fiscal year and paid in the first quarter of the following year (see Section 7 – Executive Compensation – Compensation Discussion and Analysis – FY2026 Compensation Decision - Short-Term Incentive Plan for details).

4.The pension value shown corresponds to the compensatory value reported in the Defined Benefit Plan Table and includes the service cost and the impact of the increase in earnings in excess of actuarial assumptions.

5.All other compensation in FY2026 comprises other benefit expenses and allowances paid by CAE as follows:


	Automobile Expenses ($)	Health & Insurance Benefits ($)	Additional Perquisites ($)	Employer ESPP Contributions ($)	Relocation ($)	Other a ($)	Total ($)
Matthew Bromberg	-	3,051	-	35,031	170,296	-	208,378
Ryan McLeod	-	625	4,932	-	-	-	5,557
Carter Copeland	-	3,369	48,300	22,077	-	-	73,746
Juan Araujo	-	747	11,146	4,459	-	-	16,352
Pascal Grenier	-	16,213	34,308	15,203	-	-	65,724
Marc Parent	37,725	5,993	39,536	14,583	-	6,412,041a	6,509,878
Constantino Malatesta	-	20,987	25,000	5,046	-	-	51,033

a. Represents the terms agreed with former CEO, Marc Parent as part of his Departure Agreement. Amount includes $3,104,541, equivalent to 24 months of base salary (including certain benefits and perquisites) paid in the form of salary continuance and $3,307,500 equivalent to 24 months of target bonus (see Section 7 – Executive Compensation – Compensation Discussion and Analysis – Termination and Change of Control Benefits).

6.Amounts paid in U.S. dollars have been converted to Canadian dollars in this table using an average exchange rate of $1.38 in FY2026, same rate as used in the MD&A and financial statements.

7.Mr. Bromberg was appointed President and Chief Executive Officer of CAE on June 16, 2025. In connection with his appointment, Mr. Bromberg received a signing bonus of $690,000 and a STIP payout pro-rated for the duration of his service during FY2026 at target per the terms of his employment agreement for FY2026 ($1,499,025). Mr. Bromberg received an annual FY2026 grant of $7,456,900 on June 16, 2025. In addition, Mr. Bromberg received one-time RSU and PSU awards of $13,558,000 to partially offset long-term incentive awards that were forfeited upon leaving his former employer, as further detailed in footnote 8.

8.In connection with their appointment, the Human Resources Committee approved one-time PSU and RSU awards to Mr. Bromberg, Mr. McLeod and Mr. Araujo offset long-term incentive awards forfeited upon leaving their former employers. In connection with his appointment as President and Chief Executive Officer, Mr. Bromberg received one-time PSU awards respectively linked to CAE’s performance periods FY2025 to FY2027 and FY2026 to FY2028, as well as a one-time RSU award that will cliff vest after one year. Mr. McLeod and Mr. Araujo also received one-time RSU awards that will cliff vest after three years. Each award, as well as its vesting period, is generally aligned with the nature and vesting timing of the awards forfeited by these executives at their former employers.

Incumbent

Award Type

Grant Date

Vesting Date

Award Value a.

# Units Granted

Share Price on Grant date b.

Matthew Bromberg

RSUs

June 16, 2025

June 16, 2026

$4,067,400

109,870

$37.02

PSUs

June 16, 2025

June 16, 2027

$4,067,400

109,870

$37.02

PSUs

June 16, 2025

June 16, 2028

$5,423,200

146,494

$37.02

Ryan McLeod

RSUs

February 25, 2026

February 25, 2029

$2,800,000

69,051

$40.55

Juan Araujo

RSUs

February 25, 2026

February 25, 2029

$2,737,091

67,499

$29.63c

a.To align with the awards value granted during FY2026 as presented in the above Summary Compensation Table, award values are shown in CAD. For Mr. Bromberg and Mr. Araujo, the award values were converted to Canadian dollars using exchange rates of 1.36 and 1.37, respectively, on the grant date.

b.The share price on the grant date represents the volume-weighted average price of the Shares over the TSX on the five trading days immediately preceding the grant date.

c.The share price on grant date represents the volume-weighted average price of the Shares on the NYSE on the five trading days immediately preceding the grant date.

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Section 7 – Executive Compensation

9.In connection with the CEO succession process and the Company’s ongoing strategic transformation, which together materially increases executive retention risk, the Human Resources Committee approved special retention RSU awards to selected incumbents. These awards are intended to secure the continuity and engagement of critical, high-caliber CEO direct reports during this period of significant leadership change following Mr. Bromberg’s appointment.

Incumbent

Award Type

Grant Date

Vesting Date

Award Value a.

# Units Granted

Share Price on Grant date b.

Carter Copeland

RSUs

June 16, 2025

June 16, 2028

$837,884

22,633

$37.02

Pascal Grenier

RSUs

June 16, 2025

June 16, 2028

$505,000

13,641

$37.02

a.For Mr. Copeland, the award value was converted to Canadian dollars using a conversion exchange rate of 1.36 on the grant date.

b.The share price on the grant date represents the weighted average price of the Shares on the TSX over the five trading days immediately preceding the grant date.

10.Mr. Parent ceased his role as President and Chief Executive Officer of CAE on August 13, 2025.

11.Mr. Malatesta was appointed Interim Chief Financial Officer of CAE on August 12, 2024 and stepped down from this role on February 20, 2026. In connection with his interim appointment, Mr. Malatesta received a temporary allowance of $140,000 and a retention cash bonus of $90,000 in FY2026.

12.Mr. McLeod was appointed Chief Financial Officer on February 23, 2026. In connection with his appointment, Mr. McLeod received a signing bonus of $500,000 and STIP payout at target as per the terms of his employment agreement for FY2026 ($595,000). In addition, Mr. McLeod received a one-time RSU award, as detailed in footnote 8.

13.Mr. Araujo was appointed Senior Vice President, Operations on January 5, 2026. In connection with his appointment, Mr. Araujo received a signing bonus of $345,000 and STIP payout at pro-rated for FY2026 ($86,028).

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Section 7 – Executive Compensation

Outstanding Share-Based Awards and Option-Based Awards

The following table details the outstanding awards under CAE’s Share and option-based plans for the NEOs.


	Option-Based Awards				Share-Based Awards Market or Payout
Name	Number of Securities Underlying Unexercised Options (#)	Option Exercise Price1 ($)	Option Expiration Date	Value of Unexercised In-the-Money Options2 ($)	Number of Shares or Units of Shares that have not Vested3 (#)	Market or Payout value of Share- based Awards that have not Vested4 ($)	Value of Vested Share-Based Awards not Paid Out or Distributed5 ($)
Matthew Bromberg	108,173	37.02	06/16/2032	–

Total				–	527,378	19,101,631	–
Ryan McLeod

Total					69,051	2,501,027	–
Carter Copeland	24,794	34.97	05/26/2032	30,993
	34,322	25.42	06/06/2031	370,678
	20,804	28.65	06/09/2030	157,486
	2,200	26.83	08/22/2029	20,658
	16,100	33.47	06/10/2029	44,275
	13,000	35.71	09/01/2028	6,630
Total				630,719	126,198	4,570,892	150,932
Juan Araujo

Total					67,499	2,444,814	–
Pascal Grenier	11,063	34.97	05/26/2032	13,829
	15,364	25.42	06/06/2031	165,931
	12,361	28.65	06/09/2030	95,573
	14,200	33.47	06/10/2029	39,050
	15,700	36.82	06/01/2028	–
	33,000	20.57	06/01/2027	516,450
Total				828,833	61,858	2,240,497	315,904
Marc Parent	113,069	34.97	05/26/2032	141,336
	161,747	25.42	06/06/2031	1,746,868
	127,060	28.65	06/09/2030	961,844
	94,175	33.47	06/10/2029	258,981
	125,200	36.82	06/01/2028	–


Total				3,109,029	500,363	18,123,148	–
Constantino Malatesta	19,050	34.97	05/26/2032	23,813
	3,762	25.42	06/06/2031	40,630
	3,020	28.65	06/09/2030	22,861
	1,200	33.47	06/10/2029	3,300
	3,200	36.82	06/01/2028	–
Total				90,604	37,391	1,354,302	135,515

1.Pursuant to the terms of the plan, options under the ESOP and the Omnibus Incentive Plan were granted with an exercise price equal to the weighted average price of the Shares on the TSX for the five trading days immediately preceding the grant date (if the grant date falls within a black-out period or within five trading days following the end of a black-out period, the date of grant shall be presumed to be the sixth trading day following the end of such black-out period).

2.Options are in-the-money if the market value of the Shares covered by the options is greater than the option exercise price. The value shown is equal to the excess, if any, of the Share closing price on the TSX on March 31, 2026 ($36.22) over the option’s exercise price. The actual value

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Section 7 – Executive Compensation

realized will be based on the actual in-the-money value upon exercise of the options, if any. The options vest at 25% per year commencing one year after the grant date.

3.Represents the aggregate number of units that have not met all performance or employment conditions for payment as of March 31, 2026.

4.Payout value is established based on the expected payout as per the performance targets achieved as of March 31, 2026 for PSUs and based on the Share closing price on March 31, 2026 ($36.22) for LTUs, and for RSUs and PSUs payable in June 2026, June 2027, May 2028 and June 2028 and February 2029.

5.Represents the portion of units under the LTUP that are vested at the end of the fiscal year and the units under the Executive DSUP and for which payment is deferred to the termination of employment.

Incentive Plan Awards – Value Vested or Earned During the Year

The following table shows the value that was vested or earned, as well as the gain earned from options exercised, by the Named Executive Officers during FY2026 in respect of incentive plans.


	Option-Based Awards-Value Vested During the Year1 ($)	Number of Options Exercised During the Year (#)	Gain on Exercise During the Year ($)	Share-based Awards-Value Vested During the Year2 ($)	Non-Equity Incentive Plan Compensation- Value Earned During the Year3 ($)
Matthew Bromberg	-	-	-	-	1,499,025
Ryan McLeod	-	-	-	-	595,000
Carter Copeland	164,811	-	-	617,530	562,874
Juan Araujo	-	-	-	-	86,028
Pascal Grenier	82,091	38,400	194,779	473,006	422,625
Marc Parent	823,642	753,725	10,932,257	3,748,656	534,275
Constantino Malatesta	19,109	-	-	81,319	420,126

1.This represents the value of potential gains from options that vested during FY2026. These generally include the portion of the options that were awarded in the last four fiscal years that vested in the year. The potential gains are calculated as the excess, if any, of the closing price of Shares on the TSX on each of the option vesting dates in FY2026 over the exercise price. The actual value realized, if any, will differ and will be based on the Share price on the actual exercise date.

2.The value of Share units that vested during FY2026 includes: (i) the PSUs that vested on June 10, 2025 based on the average closing price of Shares on the 20 trading days preceding June 10, 2025, specifically $350,433 for Mr. Copeland, $309,258 for Mr. Grenier, $2,451,466 for Mr. Parent and $53,259 for Mr. Malatesta and the PSUs that vested on October 6, 2025 based on the average closing price of Shares on the 20 trading days preceding October 6, 2025, specifically $53,249 for Mr. Copeland; (ii) the RSUs that vested on June 10, 2025 based on the average closing price of Shares on the 20 trading days preceding June 10, 2025, specifically $185,414 for Mr. Copeland, $163,747 for Mr. Grenier, $1,297,190 for Mr. Parent and $28,061 for Mr. Malatesta and the RSUs that vested on October 6, 2025 based on the average closing price of Shares on the 20 trading days preceding October 6, 2025, specifically $28,434 for Mr. Copeland. None of the other PSUs or RSUs have vested as of March 31, 2026.

3.This represents the value paid in CAD to the NEOs under the short-term incentive plan for FY2026 (see Section 7 – Executive Compensation – Compensation Discussion and Analysis – FY2026 Compensation Decision - Short-Term Incentive Plan for details).

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Section 7 – Executive Compensation

Pension Arrangements


—Pensions payable under the Supplementary Pension Plan are conditional upon compliance with non-competition and non-solicitation clauses.			—No extra years of service are generally granted under the pension plans.

Canadian-based NEOs and key executives are members of the contributory Designated Pension Plan registered in Canada, whereas the U.S.-based NEOs and key executives are members of the CAE 401(k) plan for U.S. employees.

Supplementary Pension Plan

All NEOs, with the exception of Mr. McLeod and Mr. Araujo, are eligible to participate in the non-contributory Supplementary Pension Plan. The Supplementary Pension Plan provides a pension benefit upon normal retirement at age 65 so that the pensions payable under CAE’s pension arrangements will result in an annual pension equal to 2% of average annual earnings (being the five-year top average salary and actual short-term incentive compensation for each year of pensionable service). Executives may retire from the Company from age 60 with full pension entitlement. An executive is considered as having retired for the purposes of the Supplementary Pension Plan if, at the time of termination of employment with CAE, he/she is at least age 55 with a minimum of 5 years of participation in the Supplementary Pension Plan. The annual pension benefit will be reduced by between 0.5% and 0.25% per month prior to NEO’s normal retirement age depending on the age of the NEO at the time of retirement.

Pensions payable under the Supplementary Pension Plan are paid directly by CAE. In Canada, CAE is obligated to fund or provide security to ensure payments under the Supplementary Pension Plan upon retirement of the executive. CAE has elected to provide security by obtaining letters of credit for a trust fund established for those executives who have retired. CAE has secured certain NEO’s and key executives’ pension benefits by a letter of credit for a trust fund established for the executives.

During FY2026, the Human Resources Committee of the Board conducted a comprehensive review of the Supplementary Pension Plan described above. Following this review, it was determined that the plan will be closed to any new executives promoted or joining CAE in the future. For U.S.-based participants, our existing Non-Qualified Defined-Contribution plan (NQDC) will serve as a supplementary plan going forward. Whereas for Canadian participants, the specific design and structure of future supplementary pension arrangements have not yet been finalized.

CAE does not generally grant extra years of credited service under its pension plans. Receipt of pension benefits under the Supplementary Pension Plan is conditional upon compliance with non-competition and non-solicitation clauses.

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Section 7 – Executive Compensation


	Annual Benefits Payable
	Number of years of credited service (#)	At March 31, 2026 ($)	At age 65 ($)	Accrued obligation at start of the year ($)	Compensatory change1 ($)	Non- compensatory change2 ($)	Accrued obligation at year-end3 ($)
Matthew Bromberg4	0.82	25,100	676,000	-	803,000	(25,000)	778,000
Ryan McLeod	0.10	400	400	-	4,900	(100)	4,800
Carter Copeland4	4.60	103,400	668,000	1,501,000	388,000	(298,000)	1,591,000
Pascal Grenier	10.16	143,000	416,000	2,082,000	873,000	(213,000)	2,742,000
Marc Parent	21.17	1,218,000	1,218,000	15,855,000	801,000	(125,000)	16,531,000(5)
Constantino Malatesta	12.17	112,000	514,000	2,364,000	501,000	(360,000)	2,505,000

1.The change in benefit obligation that is compensatory includes the service cost and the increase in earnings in excess or below what was assumed. The service cost is the estimated value of the benefits accrued during the calendar year.

2.The change in benefit obligation that is not compensatory includes interest cost, change in assumptions, and gains and losses other than for a difference in earnings and the decrease in the discount rate used to value the pension plans which increases the accrued obligation.

3.The present values of the accumulated benefits reported in the above table are calculated in accordance with the assumptions used for financial reporting purposes. See Note 21 to CAE’s consolidated financial statements for the fiscal year ended March 31, 2026. The total present value of accumulated benefits in our financial statements is calculated in accordance with IFRS.

4.Mr. Bromberg’s and Mr. Copeland’s pensions are payable in US dollars converted to Canadian dollars using the FY2026 average exchange rate of 1.38.

5.This includes the net present value of the increase in annual benefits payable for service rendered up to August 13, 2025. For more details, refer to the Chief Executive Officer Departure Arrangement below - Section 7 – Executive Compensation – Termination and Change of Control Benefits.

The following table sets forth information with respect to the amounts accumulated under 401(k). Contributions were made in U.S. dollars. Amounts in this table are converted to Canadian dollars using the FY2026 average exchange rate of 1.38.


	Accrued obligation at start of the year ($)	Compensatory change ($)	Accrued obligation at year-end ($)
Juan Araujo	-	4,013	8,234

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Section 7 – Executive Compensation

Termination and Change of Control Benefits

Payment entitlements upon termination

The compensation plans applicable to the NEOs also contain provisions that apply upon termination of employment or Change of Control of CAE. CAE does not have a formal policy for providing severance payments in the case of termination of employment but may provide severance payments and benefits as required by law or pursuant to employment agreements with its NEOs.

In 2009, CAE signed an employment agreement with Mr. Parent that stipulates that his severance payments and benefits in the event of termination of employment without cause are two years’ salary plus target bonus and continuation of benefits. Pursuant to this agreement, Mr. Parent is also entitled to two years of service credit to the Designated Pension Plan and the Supplementary Pension Plan.

CAE‘s employment agreements with Mr. Bromberg, Mr. McLeod, Mr. Copeland, Mr. Grenier and Mr. Malatesta provide for the equivalent of two years’ salary plus target bonus payment in case of termination of employment without cause. CAE’s employment agreement with Mr. Araujo provides for the equivalent of one year salary payment in case of termination of employment without cause.

Moreover, CAE’s agreements with all NEOs, with the exception of Mr. Malatesta, entitle them to termination of employment benefits following a Change of Control of CAE where the executive’s employment is expressly or constructively terminated without cause within two years following a Change of Control. In such event, the executive is entitled to two years of annual compensation (salary, short-term incentive and employee benefits, payable as a lump sum), two years of credited service and the immediate vesting of supplementary credited service for the purposes of any pension or retirement income plans, payment of long-term incentive DSUs, and vesting of all unvested stock options, RSUs and PSUs, as per plan provisions.

Compensation Program

Resignation and Termination for Cause

Involuntary Termination

Retirement

Change of Control1

Annual Short-Term Incentive

Forfeit

Partial payment based on performance and time in position

Partial payment based on Company performance and time in position

Two times the greater of average three-year bonus or target bonus in case of termination2

Stock Options

Resignation: Vested options remain exercisable until the earlier of 30 days following the termination or the expiry date; unvested options are forfeited

Termination for cause: All options, whether vested or unvested, are forfeited

Stock Options granted prior to FY2024: Vested options remain exercisable until the earlier of 30 days following the termination or the expiry date; unvested options are forfeited

Stock Options granted as of FY2024: Vested options remain exercisable until the earlier of 90 days following the termination or the expiry date; unvested options are forfeited

Stock Options granted prior to FY2024: Vested options remain exercisable until the expiry date; unvested options continue to vest and must be exercised within 30 days following vesting date

Stock Options granted as of FY2024: Vested options remain exercisable until the expiry date; unvested options continue to vest and must be exercised up to the earlier of 90 days following the vesting date or the expiry date

Stock Options granted prior to FY2024: All options become vested, as per plan provisions.

Stock Options granted as of FY2024: Options will vest in full and become exercisable if they are not converted into or substituted by an alternative award; if converted, they will vest in full if a termination not for cause or a resignation for good reason occurs within two years of a Change of Control and will remain exercisable until the earlier of one year following the termination or resignation, or the expiry date

Performance Share Units

Resignation: Vested PSUs granted as of FY2024 will be settled as soon as possible; unvested PSUs are forfeited

Termination for cause: All PSUs are forfeited

PSUs granted as of FY2024: Vested PSUs will be settled as soon as possible; the Human Resources Committee may determine, in its sole discretion, that a pro-rated portion of the unvested PSUs (based on the number of fiscal years completed since the grant date) will immediately vest

Vested PSUs granted as of FY2024 will be settled as soon as possible; unvested PSUs will continue to vest and be paid out as scheduled, based on their vesting terms, including the achievement of performance criteria

PSUs granted as of FY2024: PSUs will vest in full if they are not converted into or substituted by an alternative award; if converted, they will vest in full and be settled as soon as possible after vesting if a termination not for cause or a resignation for good reason occurs within two years of a Change of Control

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Section 7 – Executive Compensation

Restricted Share Units

Resignation: Vested RSUs granted as of FY2024 will be settled as soon as possible; unvested RSUs are forfeited

Termination for cause: All RSUs are forfeited

RSUs granted as of FY2024: Vested RSUs will be settled as soon as possible; the Human Resources Committee may determine, in its sole discretion, that a pro-rated portion of the unvested RSUs (based on the number of fiscal years completed since the grant date) will immediately vest

Vested RSUs granted as of FY2024 will be settled as soon as possible; unvested RSUs will continue to vest and be paid out as scheduled, based on their vesting terms

RSUs granted as of FY2024: RSUs will vest in full if they are not converted into or substituted by an alternative award; if converted, they will vest in full and be settled as soon as possible after vesting if a termination not for cause or a resignation for good reason occurs within two years of a Change of Control

Deferred Share Units Grants from 04/2004

Vested units are paid out

All units become vested

Supplementary Pension Plan (SPP)

Resignation: If five or more years of participation in the SPP, accrued deferred pension at age 65 termination for cause: No benefits payable from the SPP

If five or more years of participation in the SPP, accrued deferred pension benefits at age 65

If age 55 or older with a minimum of five years of participation in SPP, immediate monthly pension payable

Immediate vesting and two years of additional service in case of termination2

Severance payments

Severance amount3 in case of termination

Severance amount4 in case of termination2

1.Change of Control is defined in the Change of Control Agreements between CAE and each NEO, with the exception of Mr. Malatesta. A Change of Control may be triggered by a number of events, notably an acquisition by a person of 20% of CAE’s voting rights which is accompanied by a change in the composition of the Board, an acquisition by a person of 35% of CAE’s voting rights or an acquisition of Shares representing half the equity of CAE. Compensation programs have various definitions of Change of Control events with different impacts on compensation. The provisions illustrated in the above table are for specific events that would provide the maximum benefits to the executives.

2.Pursuant to the Change of Control Agreements between CAE and each NEO, with the exception of Mr. Malatesta, termination is defined as termination without cause that occurs within the first two years following the Change of Control.

3.In the event of termination without cause, severance payable will be determined at the time of termination, taking into consideration the appropriate factors and current state of legislation and jurisprudence.

4.The severance amount is equal to two times the sum of base salary, target bonus (or actual bonus averaged over the last three years, if greater) and the sum of the value of employee benefits and perquisites provided to the executive.

In the event of death during active employment with CAE, the executive is deemed to have retired the day before his/her death if he/she was at least age 55, otherwise, he/she is deemed to have terminated his/her employment the day before his/her death.

Incremental amounts payable to NEOs upon specified termination events

The following table sets forth estimates of the incremental amounts payable to each active NEO upon specified events, assuming that each such event took place on March 31, 2026.


	Matthew Bromberg	Ryan McLeod	Carter Copeland	Juan Araujo	Pascal Grenier	Constantino Malatesta
Involuntary Termination
Salary/Severance	6,831,0001	2,590,000	2,984,9401	772,8001	2,012,500	1,750,000
LTUs	-	-	-	-	-	-
Options2	-	-	-	-	-	-
RSUs3	-	2,487,908	331,344	-	174,145	42,587
PSUs3	-	-	227,749	-	117,246	28,675
Supplementary Plan	-	-	-	-	-	-
Total	6,831,000	5,077,908	3,544,033	772,800	2,303,891	1,821,263

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Section 7 – Executive Compensation


Retirement
LTUs	–	–	-	-		-
RSUs	–	–	-	-		-
PSUs	–	–	-	-		-
Options	–	–	-	-		-
Supplementary Plan	-	–	-	-		-
Total	-	-	-	-		-
Termination Following Change in Control
Salary/Severance4	6,837,101	2,601,114	3,081,540	2,419,467	2,112,500	-
LTUs5	-	-	-	-	-	-
Options6	-	-	403,977	-	194,826	67,635
RSUs7	5,438,650	2,501,027	1,904,955	2,444,814	5,057,218	359,991
PSUs7	13,662,981	-	2,852,123	-	1,348,958	1,025,269
Supplementary Plan8	1,213,000	-	863,000	-	241,000	-
Total	27,151,732	5,102,141	9,105,595	4,864,281	8,954,502	1,452,625

1.Mr. Bromberg’s, Mr. Copeland’s and Mr. Araujo’s severance were converted into Canadian dollars using the FY2026 average exchange rate of 1.38.

2.For Mr. Bromberg, option value has been established by multiplying the number of options that would have vested upon termination without cause as of March 31, 2026 and using a closing price of Shares of $36.22 on March 31, 2026, less the applicable option exercise price. Note that actual value would differ.

3.The RSU and the PSU values have been established by multiplying the number of units that would have vested upon termination without cause as of March 31, 2026, based on performance during completed years, where applicable, and using the average fair market value of Shares on the TSX during the 5 trading days preceding the vesting date of March 31, 2026 which is $36.03. Note that actual value would differ.

4.Severance as per the Change of Control Agreements for each NEO.

5.The LTU value has been calculated by multiplying the number of units that would have vested upon a Change of Control as of March 31, 2026, and will be redeemable within the year following the year the executive’s employment is terminated. As of March 31, 2026, all LTUs had already vested.

6.Option value has been calculated by multiplying the number of options that would have vested upon a Change of Control as of March 31, 2026 using a closing price of Shares of $36.22 on March 31, 2026, less the applicable option exercise price. Note that actual value will differ.

7.RSU and PSU values have been established by multiplying the number of units that would have vested upon a Change of Control as of March 31, 2026 using a closing price of Shares on the TSX of $36.22 on March 31, 2026. Note that actual value would differ.

8.The Supplementary Pension Plan benefits set forth for each NEO reflect the incremental value of benefits for each termination event that exceeds the present value of benefits set forth in the “Pension Benefits” tables above.

Chief Executive Officer Departure Agreement

The Company’s former CEO, Marc Parent left the Company at the Annual General Meeting in August 2025. The terms of departure of the former CEO were finalized during the fourth quarter of fiscal 2025 pursuant to a Departure Agreement and are generally consistent with the former CEO’s existing employment agreement (including a determination by the Board of Directors that the former CEO’s departure technically qualified as a termination without cause under the terms of such employment agreement). As part of the Departure Agreement and in consideration of the payments and benefits outlined below, the former CEO agreed to comply with new non-solicitation and non-compete provisions for a period of 24 months following his departure. The receipt of payments and benefits under the Departure Agreement requires continued compliance by the former CEO with such new non-solicitation and non-compete provisions, as well as with the confidentiality provisions contained in his employment agreement. In addition, in consideration for these payments and benefits, he also agreed to assist the Company to ensure a smooth transition to his successor and remained in office until the Annual General Meeting held in August 2025.

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Section 7 – Executive Compensation

According to the Departure Agreement, the former CEO’s amounts and benefits include:

—24 months of base salary (including certain benefits and perquisites) in the form of salary continuance, representing $3,104,541;

—24 months of target bonus, which is 125% of his base salary, representing $3,307,500;

—24 months of additional service credited to the Designated Pension Plan and the Supplementary Pension Plan, representing an incremental value of $116,500 to his pension benefits on an annual basis; and

—an amendment to his Supplementary Pension Plan entitlements to bring him into line with the terms provided to other senior executives of the Company. This resulted in a prior pension benefits cap being removed and the actual (as opposed to target) STIP earned being used for future pension calculation purposes. This adjustment has been estimated to provide an additional annual pension value of $270,600. See also Section 7 – Executive Compensation – Compensation of our Named Executive Officers – Pension Arrangements.

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Section 8 – Other Important Information

Other Important Information

The management of CAE is aware of no business to be presented for action by the Shareholders at the Meeting other than that mentioned herein or in the Notice of Meeting.

Interest of informed persons in material transactions

No informed person (including any Director or executive officer) of CAE, any proposed Director of CAE, or any associate or affiliate of any informed person or proposed Director, had any material interest, direct or indirect, in any transaction since the commencement of CAE’s most recently completed financial year or in any proposed transaction which has materially affected or would materially affect CAE or any of its subsidiaries.

Indebtedness of Directors and executive officers

CAE does not offer its Directors or executive officers loans. CAE and its subsidiaries have not given any guarantee, support agreement, letter of credit or similar arrangement or understanding to any other entity in connection with indebtedness of CAE’s Directors or executive officers.

Shareholders proposals

To propose any matter for a vote by the Shareholders at an annual meeting of CAE, a Shareholder must send a proposal to the Chief Legal and Compliance Officer, and Corporate Secretary at CAE’s office at 8585 Côte-de-Liesse, Saint-Laurent, Québec, H4T 1G6 ninety (90) to one hundred fifty (150) days before the anniversary of CAE’s previous annual meeting, or within such other timeframe as prescribed by the applicable legislation. Shareholders will be required to submit notice of matters that they wish to raise at CAE’s 2027 annual meeting between March 15, 2027 and May 14, 2027. CAE may omit any proposal from its Circular and annual meeting for a number of reasons under applicable Canadian corporate law, including receipt of the proposal by CAE subsequent to the timeline noted above.

Request additional information

CAE shall provide to any person or company, upon written request to the Chief Legal Officer of CAE at CAE Inc., 8585 Côte-de-Liesse, Saint-Laurent, Québec, H4T 1G6, telephone number 514-734-5779 and facsimile number 514-340-5530:

1. one copy of the latest Annual Information Form of CAE together with one copy of any document or the pertinent pages of any document incorporated by reference therein;

2. one copy of the 2026 Annual Financial Report containing comparative financial statements of CAE for FY2026, together with the Auditor’s Report thereon and Management’s Discussion and Analysis; and

3. one copy of this Circular.

All such documents may also be accessed on CAE’s website (www.cae.com). Additional financial information is provided in CAE’s comparative financial statements and Management’s Discussion and Analysis available on SEDAR+ at www.sedarplus.ca for the most recently completed financial year.

The contents of this Circular have been approved by the Board of Directors of CAE.



			Mark Hounsell, Chief Legal Officer
June 11, 2026 Montréal, Québec

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Appendix A – Board of Directors’ Charter

CAE INC.
(“CAE” or the “Company”)

Responsibilities

CAE’s President and Chief Executive Officer and the Company’s other executive officers are responsible for the management of the Company. The Board of Directors (the “Board”) is responsible for the stewardship of the Company and for monitoring the actions of, and providing overall guidance and direction to management. The Board shall act in the best interest of the Company.

Committees

The Board may establish committees, as it deems necessary or desirable, to assist it in the fulfillment of its duties and responsibilities, with such terms of reference as the Board may determine and may delegate from time to time to such committees or other persons any of the Board’s responsibilities that may be lawfully delegated. As such, the Board currently maintains an Audit Committee, a Governance Committee, a Human Resources Committee and a Technology Committee. Each committee is comprised entirely of independent directors, as determined by the Board in light of securities laws and applicable exchange rules, and each member of a committee is appointed by the Board after thorough review of the requirements for membership on each such committee. The independent directors will periodically, as they see fit, hold meetings without management.

Strategy

The Board will maintain a strategic planning process and annually approve a strategic plan. Separately from the strategic plan, the Board also approves an annual budget for financial performance.

Enterprise Risk Management

The Board is accountable for the oversight of enterprise risk management. As such, the Board will review with management the Company’s risk appetite and risk tolerance and assess whether the Company’s strategy is consistent with the agreed-upon risk appetite and tolerance for the Company. The Board will also review and discuss with management all key enterprise risk exposures on an aggregate, company-wide basis, and the steps management has taken to monitor and to manage those exposures. This includes the review with management of the Board’s expectations as to each committee’s respective responsibilities for risk oversight and management of specific risks to ensure a shared understanding as to accountabilities and roles.

The Board will work with management to promote and actively cultivate a corporate culture that understands and implements enterprise-wide risk management.

Corporate Governance

Corporate governance issues are the responsibility of the full Board. This includes the disclosure thereof, including in the Company’s Annual Activity and Sustainability Report and Management Proxy Circular.

The Board periodically reviews a Disclosure Policy for the Company that, inter alia, addresses how the Company shall interact with shareholders, analysts and other stakeholders and covers the accurate and timely communication of all important information. The Company communicates with its stakeholders through a number of channels including its website, and they in turn can provide feedback to the Company in a number of ways, including e-mail.

The Board, through its Governance Committee, regularly reviews reports on compliance with the Company’s Code of Business Conduct and ethical practices. It periodically reviews Company policies with respect to decisions and other matters requiring Board approval.

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Appendix A – Board of Directors’ Charter

Audit, Finance and Risk Management

The Board, directly and through the Audit Committee, oversees:

(i) the integrity and quality of the Company’s financial reporting and the effectiveness of internal controls;

(ii) the risk management framework, including the identification of the principal risks of the Company’s business, and ensures that there are systems in place to effectively monitor, manage and mitigate these risks;

(iii) the Company’s compliance with legal and regulatory requirements;

(iv) the qualifications and independence of the Company’s external auditors;

(v) the performance of the Company’s internal accounting function and external auditors; and

(vi) the adequacy of the Company’s material public documents prior to their release.

Technology and Related Risk Management

The Board, directly and through the Technology Committee, oversees:

(i) the Company’s overall technology and data strategy, its alignment with the Company’s strategic plan and its deployment across the Company and its subsidiaries;

(ii) cybersecurity and artificial intelligence governance, risk management and incident reporting; and

(iii) other risks arising from the Company’s technology strategy, information technology systems and related investments and operations.

Succession Planning

The Board, with the help of the Human Resources Committee, ensures a succession plan is in place for the President and Chief Executive Officer and for other senior employees of the Company and monitors such plan.

Oversight and Compensation of Management

The Board considers recommendations of the Human Resources Committee with respect to:

(i) the appointment and compensation of senior officers of the Company at the level of Senior Vice President and above;

(ii) the implementation of processes for the recruitment, training, development and retention of senior employees who exhibit the highest standards of integrity and competence and any recommendation for improvement of the processes in place to develop high potential individuals, such as the Annual Leadership Development Process;

(iii) the compensation philosophy for the Company generally;

(iv) the adoption of any incentive compensation and equity-based plans, including stock option, stock purchase, deferred share unit, performance share unit, restricted share unit or other similar plans, in which employees are or may be eligible to participate; and

(v) the Company’s retirement policies and special cases.

The Board communicates to the President and Chief Executive Officer and periodically reviews the Board’s expectations regarding management’s performance and conduct of the affairs of the Company. The Board also periodically reviews the President and Chief Executive Officer’s position description and objectives and his performance against these objectives. Each year, after a performance evaluation, the Board approves, with the recommendation of the Human Resources Committee, the President and Chief Executive Officer’s compensation.

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Appendix A – Board of Directors’ Charter

Sustainability Matters

The Board, through the Governance and Human Resources committees, oversees and reviews the Company’s sustainability policies, practices, strategy and reporting (including Inclusion and Equal Opportunities; Data Protection and Privacy; Artificial Intelligence; Health & Safety (including Aviation Safety); Environment and Climate Change; Ethics and Anti-Corruption; Security; and Human Rights (including Modern Slavery)).

The Board, through the Audit Committee, reviews trends in corporate disclosure of non-financial performance (including sustainability related disclosure) and oversees the establishment and maintenance of a system of processes and controls to ensure the integrity, accuracy, and reliability of sustainability disclosures to be included in financial reporting.

Directors’ Qualifications, Compensation, Education and Orientation

The Board, through the Governance Committee, develops a process to determine, in light of the opportunities and risks facing the Company, what competencies, skills and personal qualities are required for new directors in order to add value to the Company while ensuring that the Board is constituted of a majority of individuals who are independent. With regards to Board composition, the Board ensures adherence to the term limits imposed on all directors and considers criteria that promote diversity, including but not limited to gender, international background, nationality, age and industry knowledge, in light of the Company’s Board and Executive Management Composition Policy.

The Board, through the Governance Committee, develops a program for the orientation and education of new directors, and ensures that prospective candidates for Board membership understand the role of the Board and its committees, the nature and operation of the Company’s business, and the contributions that individual directors are expected to make, and develops a program of continuing education if needed for directors.

The Board considers recommendations of the Governance Committee with respect to the level and forms of compensation for directors, which compensation shall reflect the responsibilities and risks involved in being a director of the Company.

Assessment of Board and Committee Effectiveness

The Board considers recommendations of the Governance Committee for the development and monitoring of processes for assessing the effectiveness of the Board, the committees of the Board, the committees’ chairs, the Chair of the Board and the contribution of individual directors, which assessments shall be made annually. These results are assessed by the Chair of the Board and/or the Chair of the Governance Committee and are reported to the full Board, which decides on actions deemed necessary, if any. The Board ensures that the number of directors and the composition of the Board permit the Board to operate in a prudent and efficient manner.

Retirement Plans

The Board is responsible for overseeing the management of the Company’s retirement plans and does this through its Human Resources Committee and Audit Committee.

Outside Advisors

Directors may hire outside advisors at the Company’s expense, subject to the approval of the Chair of the Board and have access to the advice and services of the Company’s Corporate Secretary, who is also the Chief Legal and Compliance Officer.

Last updated – August 13, 2025

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Appendix B – Non-IFRS and Other Financial Measures

This Circular includes non-IFRS financial measures, non-IFRS ratios, capital management measures and supplementary financial measures. These measures are not standardized financial measures prescribed under IFRS and therefore should not be confused with, or used as an alternative for, performance measures calculated according to IFRS. Furthermore, these measures should not be compared with similarly titled measures provided or used by other issuers. Management believes that these measures provide additional insight into our operating performance and trends and facilitate comparisons across reporting periods.

DEFINITIONS

A non-IFRS financial measure is a financial measure that depicts our financial performance, financial position, or cash flow and either excludes an amount that is included in or includes an amount that is excluded from the composition of the most directly comparable financial measures disclosed in our financial statements.

A non-IFRS ratio is a financial measure disclosed in the form of a ratio, fraction, percentage, or similar representation, that has a non‑IFRS financial measure as one or more of its components.

A total of segments measure is a financial measure that is a subtotal or total of two or more reportable segments and is disclosed within the notes to our consolidated financial statements, but not in our primary financial statements.

A capital management measure is a financial measure intended to enable an individual to evaluate our objectives, policies and processes for managing our capital and is disclosed within the notes to our consolidated financial statements, but not in our primary financial statements.

A supplementary financial measure is a financial measure that depicts our historical or expected future financial performance, financial position or cash flow and is not disclosed within our primary financial statements, nor does it meet the definition of any of the above measures.

Certain non-IFRS and other financial measures are provided on a consolidated basis and separately for each of our segments (Civil Aviation and Defense and Security) since we analyze their results and performance separately.

CHANGES TO NON-IFRS MEASURES

In the fourth quarter of fiscal 2026, we revised the composition and designation of certain non-IFRS measures to align with strategic priorities and enhance comparability with industry peers.

-Free cash flow was revised to include growth capital expenditures and capitalized development costs and exclude dividends paid;

-Adjusted return on invested capital (ROIC) replaced adjusted return on capital employed (ROCE); and

-Invested capital replaced capital employed, without changing the composition of this measure.

Comparative figures have been reclassified to conform to these changes.

PERFORMANCE MEASURES

Gross profit margin (or gross profit as a % of revenue)

Gross profit margin is a supplementary financial measure calculated by dividing our gross profit by revenue for a given period. We track it because we believe it provides an enhanced understanding of our operating performance and facilitates the comparison across reporting periods.

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Appendix B – Non-IFRS and Other Financial Measures

Operating income margin (or operating income as a % of revenue)

Operating income margin is a supplementary financial measure calculated by dividing our operating income by revenue for a given period. We track it because we believe it provides an enhanced understanding of our operating performance and facilitates the comparison across reporting periods.

Adjusted segment operating income or loss

Adjusted segment operating income or loss is a non-IFRS financial measure that gives us an indication of the profitability of each segment because it does not include the impact of any items not specifically related to the segment’s performance. We calculate adjusted segment operating income by taking operating income and adjusting for restructuring, integration and acquisition costs, and impairments and other gains and losses arising from significant strategic transactions or specific events. Impairments and other gains and losses arising from significant strategic transactions or specific events consist of the executive management transition costs (as described in Section 5.4 of the MD&A for the year ended March 31, 2026 and Section 5.6 of the MD&A for the year ended March 31, 2025), the gain on fair value remeasurement of SIMCOM (as described in Note 7 of our consolidated financial statements for the year ended March 31, 2025), the shareholder matters (as described in Section 5.5 of the MD&A for the year ended March 31, 2025), the impairment of goodwill (as described in Note 14 of our consolidated financial statements for the year ended March 31, 2024) and the impairment of technology and other non-financial assets (as described in Note 5 of our consolidated financial statements for the year ended March 31, 2024). We track adjusted segment operating income because we believe it provides an enhanced understanding of our operating performance and facilitates the comparison across reporting periods. Adjusted segment operating income on a consolidated basis is a total of segments measure since it is the profitability measure employed by management for making decisions about allocating resources to segments and assessing segment performance. Refer to Non-IFRS Measure Reconciliations below for a reconciliation of this measure to the most directly comparable measure under IFRS.

Adjusted segment operating income margin (or adjusted segment operating income as a % of revenue)

Adjusted segment operating income margin is a non-IFRS ratio calculated by dividing our adjusted segment operating income by revenue for a given period. We track it because we believe it provides an enhanced understanding of our operating performance and facilitates the comparison across reporting periods.

Adjusted effective tax rate

Adjusted effective tax rate is a supplementary financial measure that represents the effective tax rate on adjusted net income or loss. It is calculated by dividing our income tax expense by our earnings before income taxes, adjusting for the same items used to determine adjusted net income or loss. We track it because we believe it provides an enhanced understanding of the impact of changes in income tax rates and the mix of income on our operating performance and facilitates the comparison across reporting periods. Refer to Non-IFRS Measure Reconciliations below for a calculation of this measure.

Adjusted net income or loss

Adjusted net income or loss is a non-IFRS financial measure we use as an alternate view of our operating results. We calculate it by taking our net income attributable to equity holders of the Company from continuing operations and adjusting for restructuring, integration and acquisition costs, and impairments and other gains and losses arising from significant strategic transactions or specific events, after tax, as well as significant one-time tax items. Impairments and other gains and losses arising from significant strategic transactions or specific events consist of the executive management transition costs (as described in Section 5.4 of the MD&A for the year ended March 31, 2026 and Section 5.6 of the MD&A for the year ended March 31, 2025), the gain on fair value remeasurement of SIMCOM (as described in Note 7 of our consolidated financial statements for the year ended March 31, 2025), the shareholder matters (as described in Section 5.5 of the MD&A for the year ended March 31, 2025), the impairment of goodwill (as described in Note 14 of our consolidated financial statements for the year ended March 31, 2024) and the impairment of technology and other non-financial assets (as described in Note 5 of our consolidated financial statements for the year ended March 31, 2024). We track adjusted net income because we believe it provides an enhanced understanding of

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Appendix B – Non-IFRS and Other Financial Measures

our operating performance and facilitates the comparison across reporting periods. Refer to Non-IFRS Measure Reconciliations below for a reconciliation of this measure to the most directly comparable measure under IFRS.

Adjusted earnings or loss per share (EPS)

Adjusted earnings or loss per share is a non-IFRS ratio calculated by dividing adjusted net income or loss by the weighted average number of diluted shares. We track it because we believe it provides an enhanced understanding of our operating performance on a per share basis and facilitates the comparison across reporting periods. Refer to Non-IFRS Measure Reconciliations below for a calculation of this measure.

For incentive plans purposes, this measure is further adjusted for currency fluctuations.

EBITDA and Adjusted EBITDA

EBITDA is a non-IFRS financial measure which comprises net income or loss from continuing operations before income taxes, finance expense – net, depreciation and amortization. Adjusted EBITDA further adjusts for restructuring, integration and acquisition costs, and impairments and other gains and losses arising from significant strategic transactions or specific events. Impairments and other gains and losses arising from significant strategic transactions or specific events consist of the executive management transition costs (as described in Section 5.4 of the MD&A for the year ended March 31, 2026 and Section 5.6 of the MD&A for the year ended March 31, 2025), the gain on fair value remeasurement of SIMCOM (as described in Note 7 of our consolidated financial statements for the year ended March 31, 2025), the shareholder matters (as described in Section 5.5 of the MD&A for the year ended March 31, 2025), the impairment of goodwill (as described in Note 14 of our consolidated financial statements for the year ended March 31, 2024) and the impairment of technology and other non-financial assets (as described in Note 5 of our consolidated financial statements for the year ended March 31, 2024). We use EBITDA and adjusted EBITDA to evaluate our operating performance, by eliminating the impact of non-operational or non-cash items. Refer to Non-IFRS Measure Reconciliations below for a reconciliation of these measures to the most directly comparable measure under IFRS.

Free cash flow

Free cash flow is a non-IFRS financial measure that assesses our ability to generate cash from our ongoing operations after considering ongoing investments required for property, plant and equipment and intangible assets. It demonstrates our ability to generate cash to repay debt obligations, make strategic investments and return cash to shareholders through either dividends or share repurchases. We use it as an indicator of our financial strength and liquidity. We calculate it by taking the net cash generated by our continuing operating activities, subtracting property, plant and equipment expenditures, intangible assets expenditures and other investing activities and adding proceeds from the disposal of property, plant and equipment, dividends received from equity accounted investees and proceeds, net of payments, from equity accounted investees. Refer to Section 7.1 - Consolidated cash movements of the FY2026 MD&A for a reconciliation of this measure to the most directly comparable measure under IFRS, which reconciliation is incorporated by reference into this Circular.

Cash conversion rate

Cash conversion rate is a non-IFRS ratio calculated by dividing free cash flow by adjusted net income. We use it to assess our performance in cash flow generation and as a basis for evaluating our capitalization structure.

LIQUIDITY AND CAPITAL STRUCTURE MEASURES

Non-cash working capital

Non-cash working capital is a non-IFRS financial measure we use to monitor how much money we have committed in the day-to-day operation of our business. We calculate it by taking current assets (not including cash and cash equivalents and assets held for sale) and subtracting current liabilities (not including the current portion of long-term debt and liabilities held for sale). Refer to Section 8.1 - Consolidated invested capital of the FY2026 MD&A for a reconciliation of this measure to the most directly comparable measure under IFRS, which reconciliation is incorporated by reference into this Circular.

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Appendix B – Non-IFRS and Other Financial Measures

Invested capital

Invested capital is a non-IFRS financial measure we use to evaluate and monitor how much we are investing in our business:

•For the Company as a whole, we take total assets (not including cash and cash equivalents), and subtract total liabilities (not including long-term debt and the current portion of long-term debt);

•For each segment, we take the total assets (not including cash and cash equivalents, tax accounts, employee benefits assets and other non-operating assets), and subtract total liabilities (not including tax accounts, long-term debt and the current portion of long‑term debt, royalty obligations, employee benefit obligations and other non-operating liabilities).

Refer to Section 8.1 - Consolidated invested capital of the FY2026 MD&A for a reconciliation of this measure to the most directly comparable measure under IFRS, which reconciliation is incorporated by reference into this Circular.

Adjusted return on capital employed (ROCE)

Adjusted ROCE is a non-IFRS ratio calculated over a rolling four-quarter period by taking net income attributable to equity holders of the Company from continuing operations adjusting for net finance expense, after tax, restructuring, integration and acquisition costs, and impairments and other gains and losses arising from significant strategic transactions or specific events divided by the average capital employed from continuing operations. Impairments and other gains and losses arising from significant strategic transactions or specific events consist of the executive management transition costs (as described in Section 5.4 of the MD&A for the year ended March 31, 2026 and Section 5.6 of the MD&A for the year ended March 31, 2025), the gain on fair value remeasurement of SIMCOM (as described in Note 7 of our consolidated financial statements for the year ended March 31, 2025), the shareholder matters (as described in Section 5.5 of the MD&A for the year ended March 31, 2025), the impairment of goodwill (as described in Note 14 of our consolidated financial statements for the year ended March 31, 2024) and the impairment of technology and other non-financial assets (as described in Note 5 of our consolidated financial statements for the year ended March 31, 2024). We use adjusted ROCE to evaluate the profitability of our invested capital.

Adjusted return on invested capital (ROIC)

Adjusted ROIC is a non-IFRS ratio calculated over a rolling four-quarter period by taking adjusted net operating income after tax, divided by the average invested capital from continuing operations. Adjusted net operating income after tax is calculated by taking adjusted net income and further adjusting for finance expense – net, after tax, and amortization of acquired intangible assets, after tax. We use adjusted ROIC to evaluate the profitability of our invested capital. Refer to Non-IFRS Measure Reconciliations below for a calculation of this measure.

Net debt

Net debt is a capital management measure we use to monitor how much debt we have after taking into account cash and cash equivalents. We use it as an indicator of our overall financial position, and calculate it by taking our total long-term debt, including the current portion of long-term debt, and subtracting cash and cash equivalents. Refer to Section 8.1 - Consolidated invested capital of the FY2026 MD&A for a reconciliation of this measure to the most directly comparable measure under IFRS, which reconciliation is incorporated by reference into this Circular.

Net debt-to-capital

Net debt-to-capital is a capital management measure calculated as net debt divided by the sum of total equity plus net debt. We use this to manage our capital structure and monitor our capital allocation priorities.

Net debt-to-EBITDA and net debt-to-adjusted EBITDA

Net debt-to-EBITDA and net debt-to-adjusted EBITDA are non-IFRS ratios calculated as net debt divided by the last twelve months EBITDA (or adjusted EBITDA). We use net debt-to-EBITDA and net debt-to-adjusted EBITDA because they reflect our ability to service our debt obligations. Refer to Non-IFRS Measure Reconciliations below for a calculation of these measures.

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Appendix B – Non-IFRS and Other Financial Measures

Maintenance and growth capital expenditures

Maintenance capital expenditure is a supplementary financial measure we use to calculate the investment needed to sustain the current level of economic activity.

Growth capital expenditure is a supplementary financial measure we use to calculate the investment needed to increase the current level of economic activity.

The sum of maintenance capital expenditures and growth capital expenditures represents our total property, plant and equipment expenditures.

GROWTH MEASURES

Adjusted order intake

Adjusted order intake is a supplementary financial measure that represents the expected value of orders we have received:

—For the Civil Aviation segment, we consider an item part of our adjusted order intake when we have a legally binding commercial agreement with a client that includes enough detail about each party’s obligations to form the basis for a contract. Additionally, expected future revenues from customers under short-term and long-term training contracts are included when these customers commit to pay us training fees, or when we reasonably expect the revenue to be generated;

—For the Defense and Security segment, we consider an item part of our adjusted order intake when we have a legally binding commercial agreement with a client that includes enough detail about each party’s obligations to form the basis for a contract. Defense and Security contracts are usually executed over a long-term period but some of them must be renewed each year. For this segment, we only include a contract item in adjusted order intake when the customer has authorized the contract item and has received funding for it.

Adjusted backlog

•Adjusted backlog is a supplementary financial measure that represents expected future revenues and includes obligated backlog, joint venture backlog and unfunded backlog and options:

—Obligated backlog represents the value of our adjusted order intake not yet executed and is calculated by adding the adjusted order intake of the current period to the balance of the obligated backlog at the end of the previous fiscal year, subtracting the revenue recognized in the current period and adding or subtracting backlog adjustments. If the amount of an order already recognized in a previous fiscal year is modified, the backlog is revised through adjustments;

—Joint venture backlog is obligated backlog that represents the expected value of our share of orders that our joint ventures have received but have not yet executed. Joint venture backlog is determined on the same basis as obligated backlog described above, but excludes any portion of orders that have been directly subcontracted to a CAE subsidiary, which are already reflected in the determination of obligated backlog;

—Unfunded backlog represents legally binding Defense and Security orders with the U.S. government that we have received but have not yet executed and for which funding authorization has not yet been obtained. The uncertainty relates to the timing of the funding authorization, which is influenced by the government’s budget cycle, based on a September year-end. Options are included in adjusted backlog when there is a high probability of being exercised, which we define as at least 80% probable, but multi-award indefinite-delivery/indefinite-quantity (ID/IQ) contracts are excluded. When an option is exercised, it is considered adjusted order intake in that period, and it is removed from unfunded backlog and options.

Book-to-sales ratio

The book-to-sales ratio is a supplementary financial measure calculated by dividing adjusted order intake by revenue in a given period. We use it to monitor the level of future growth of the business over time.

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Appendix B – Non-IFRS and Other Financial Measures

SUPPLEMENTARY NON-FINANCIAL INFORMATION DEFINITIONS

Full-flight simulators (FFSs) in CAE’s network

A FFS is a full-size replica of a specific make, model and series of an aircraft cockpit, including a motion system. In our count of FFSs in the network, we generally only include FFSs that are of the highest fidelity and do not include any fixed based training devices, or other lower-level devices, as these are typically used in addition to FFSs in the same approved training programs.

Simulator equivalent unit (SEU)

SEU is a measure we use to show the total average number of FFSs available to generate earnings during the period. For example, in the case of a 50/50 flight training joint venture, we will report only 50% of the FFSs under this joint venture as a SEU. If a FFS is being powered down and relocated, it will not be included as a SEU until the FFS is re-installed and available to generate earnings.

Utilization rate

Utilization rate is a measure we use to assess the performance of our Civil simulator training network. While utilization rate does not perfectly correlate to revenue recognized, we track it, together with other measures, because we believe it is an indicator of our operating performance. We calculate it by taking the number of training hours sold on our simulators during the period divided by the practical training capacity available for the same period.

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Appendix B – Non-IFRS and Other Financial Measures

NON-IFRS MEASURE RECONCILIATIONS

Reconciliation of adjusted segment operating income


(amounts in millions)	Civil Aviation				Defense and Security				Total
Years ended March 31	2026		2025		2026		2025		2026		2025
Operating income	$	437.9	$	605.3	$	174.4	$	123.9	$	612.3	$	729.2
Restructuring, integration and acquisition costs	64.4		37.8		20.0		18.7		84.4		56.5
Impairments and other gains and losses arising from significant strategic transactions or specific events:
Executive management transition costs	8.2		4.7		5.8		3.6		14.0		8.3
Shareholder matters	—		6.3		—		4.3		—		10.6
Gain on fair value remeasurement of SIMCOM	—		(72.6)		—		—		—		(72.6)
Adjusted segment operating income	$	510.5	$	581.5	$	200.2	$	150.5	$	710.7	$	732.0

Reconciliation of adjusted net income and adjusted EPS


(amounts in millions, except per share amounts)		Years ended March 31
		2026		2025
Net income attributable to equity holders of the Company	$	313.1	$	405.3
Restructuring, integration and acquisition costs, after tax		63.0		43.2
Impairments and other gains and losses arising from significant strategic transactions or specific events:
Executive management transition costs, after tax		10.3		6.1
Shareholder matters, after tax		—		7.6
Gain on fair value remeasurement of SIMCOM, after tax		—		(76.7)
Adjusted net income	$	386.4	$	385.5
Average number of shares outstanding (diluted)		322.2		319.7
Adjusted EPS	$	1.20	$	1.21

Calculation of adjusted ROIC


(amounts in millions)		Last twelve months ended March 31
		2026		2025
Adjusted net income	$	386.4	$	385.5
Finance expense – net, after tax		166.7		166.9
Amortization of acquired intangible assets, after tax		67.7		62.5
Adjusted net operating income after tax	$	620.8	$	614.9
Average invested capital	$	8,165.7	$	7,705.3
Adjusted ROIC	%	7.6	%	8.0

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Appendix B – Non-IFRS and Other Financial Measures

Calculation of adjusted effective tax rate


(amounts in millions, except effective tax rates)		Years ended March 31
		2026		2025
Earnings before income taxes	$	400.2	$	513.7
Restructuring, integration and acquisition costs		84.4		56.5
Impairments and other gains and losses arising from significant strategic transactions or specific events:
Executive management transition costs		14.0		8.3
Shareholder matters		—		10.6
Gain on fair value remeasurement of SIMCOM		—		(72.6)
Adjusted earnings before income taxes	$	498.6	$	516.5

Income tax expense	$	77.5	$	98.7
Tax impact on restructuring, integration and acquisition costs		21.4		13.3
Tax impact on impairments and other gains and losses arising from significant strategic transactions or specific events:
Tax impact on executive management transition costs		3.7		2.2
Tax impact on shareholder matters		—		3.0
Tax impact on gain on fair value remeasurement of SIMCOM		—		4.1
Adjusted income tax expense	$	102.6	$	121.3

Effective tax rate	%	19	%	19
Adjusted effective tax rate	%	21	%	23

Reconciliation of EBITDA, adjusted EBITDA, net debt-to-EBITDA and net debt-to-adjusted EBITDA


(amounts in millions, except net debt-to-EBITDA ratios)		Last twelve months ended March 31
		2026		2025
Operating income	$	612.3	$	729.2
Depreciation and amortization		460.1		414.7
EBITDA	$	1,072.4	$	1,143.9
Restructuring, integration and acquisition costs		84.4		56.5
Impairments and other gains and losses arising from significant strategic transactions or specific events:
Executive management transition costs		14.0		8.3
Shareholder matters		—		10.6
Gain on fair value remeasurement of SIMCOM		—		(72.6)
Adjusted EBITDA	$	1,170.8	$	1,146.7
Net debt	$	2,681.8	$	3,176.7
Net debt-to-EBITDA		2.50		2.78
Net debt-to-adjusted EBITDA		2.29		2.77

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Appendix C – Summary of the Employee Stock Option Plan

The ESOP includes the following provisions:


Eligibility			Any salaried employee of CAE or its subsidiaries is eligible to participate in the ESOP. The ESOP does not permit grants to non-employee Directors. Subject to ESOP provisions related to employee death, retirement, or termination without cause, no option granted under ESOP may be exercised unless that employee wishing to exercise such option is currently employed by CAE or one of CAE’s subsidiaries and has served continuously in such capacity since the date of the grant of such option.
Limitations on Grants			An ESOP participant (which may include an employee management insider of CAE) may not hold options on more than 5% (on an undiluted basis) of the issued and outstanding Shares. The number of Shares issuable to insiders of CAE at any time under all security-based compensation arrangements cannot exceed 10% of the issued and outstanding Shares. The number of Shares issued to insiders of the Company within any one-year period under all security-based compensation arrangements cannot exceed 10% of the Company’s issued and outstanding Shares.
Exercise Price			The weighted average price of the Shares on the TSX on the five trading days immediately preceding the grant date (if the grant date falls within a blackout period or within five trading days following the end of a blackout period, the grant date shall be presumed to be the sixth trading day following the end of such blackout period).
Termination of Employment			Death: options may be exercised to the extent that the optionee was entitled to do so at the time of death. The options can be exercised only during the period expiring on the day that is earlier of six months following the date of death and the option termination date. Retirement: all unvested options shall continue to vest following the retirement date. Such retired optionee shall be entitled, (a) to exercise any vested options held as of the retirement date until the termination date for each such option; and (b) to exercise any options vesting after the retirement date only during the 30-day period following the vesting date of the post retirement vesting options, after which any such options which remain unexercised shall expire. Involuntary termination for cause: each unvested option shall terminate and become null, void and of no effect on the date on which the optionee ceases to serve the Company. Involuntary termination without cause and resignation: the optionee has the right for a period of 30 days (or until the normal expiry date of the option if earlier) from the date of ceasing to be an employee to exercise his or her option to the extent that he/she was entitled to exercise it on the date of ceasing to be an employee. Upon the expiration of such 30-day period (subject to extension if the end of the period falls within a blackout period), each option shall terminate and become null, void and of no effect on the date on which such optionee ceases to serve the Company.
Transferability/ Assignment of Options			Options are not transferable or assignable otherwise than by will or by operation of estate law.
Financial Assistance			The ESOP does not contain any financial assistance provisions to facilitate employees’ participation in the program.
Amendments			The ESOP provides that its terms, as well as those of any option, may be amended, terminated or waived in certain stated circumstances. The ESOP specifies in what situations Shareholders approval is required.

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Appendix C – Summary of the Employee Stock Option Plan


Amendments not Requiring Shareholders Approval			The HRC has the authority, in accordance with and subject to the terms of the ESOP, to amend, suspend or terminate the ESOP or any option granted under the ESOP without obtaining Shareholders approval to: (a) (i) amend any terms relating to the granting or exercise of options, including the terms relating to the eligibility for (other than for non-executive Directors) and limitations or conditions on participation in the ESOP, the amount and payment of the exercise price (other than a reduction thereof) or the vesting, exercise, expiry (other than an extension of the termination date except as contemplated in the ESOP), assignment (other than for financing or derivative-type transaction purposes) and adjustment of options, or (ii) add or amend any terms relating to any cashless exercise features; (b) amend the ESOP to permit the granting of Deferred or Restricted Share Units under the ESOP or to add or amend any other provisions which result in participants receiving securities of the Company while no cash consideration is received by the Company; (c) make changes that are necessary or desirable to comply with applicable laws, rules or regulations of any regulatory authorities having jurisdiction or any applicable stock exchange; (d) correct or rectify any ambiguity, defective provision, error or omission in the ESOP or in any option or make amendments of a “housekeeping” nature; (e) amend any terms relating to the administration of the ESOP; and (f) make any other amendment that does not require Shareholders approval by virtue of the ESOP, applicable laws or relevant stock exchange or regulatory requirements; provided such amendment, suspension or termination (i) does not adversely alter or impair any previously granted option without the optionee’s consent and (ii) is made in compliance with applicable laws, rules, regulations, by-laws and policies of, and receipt of any required approvals from, any applicable stock exchange or regulatory authorities having jurisdiction.
Amendments Requiring Shareholders Approval			The ESOP provides that Shareholders approval is required to make the following amendments: (a) increase the maximum number of Shares issuable under the ESOP, except in the case of an adjustment pursuant to Article VIII thereof (subdivisions, consolidations or reclassifications of Shares or other such events); (b) increase the number of Shares that may be issued to insiders or to any one optionee under the ESOP, in both cases except in the case of an adjustment pursuant to Article VIII thereof (subdivisions, consolidations or reclassifications of Shares or other such events); (c) allow non-employee Directors to be eligible for awards of options; (d) permit any option granted under the ESOP to be transferable or assignable other than by will or pursuant to succession laws (estate settlements); (e) reduce the exercise price of an option after the option has been granted or cancel any option and substitute such option by a new option with a reduced exercise price granted to the same optionee, except in the case of an adjustment pursuant to Article VIII of the ESOP; (f) extend the term of an option beyond the original expiry date, except in case of an extension due to a blackout period; (g) add a cashless exercise feature payable in cash or Shares, which does not provide for a full deduction of the number of underlying Shares from the ESOP reserve; (h) add any form of or amendment to financial assistance provisions in the ESOP which is more favourable to optionees; and (i) amend any provisions to the amendment provisions of the ESOP.

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Appendix C – Summary of the Employee Stock Option Plan


Change of Control			In the circumstances of a change in the beneficial ownership or control over the majority of the Shares of CAE or the sale of all or substantially all of CAE’s assets, the vesting of all options issued would be accelerated. A change of control is defined as (i) any event or circumstance where any person, any joint actor thereof or any person acting jointly or in concert therewith, or any combination thereof, acquires beneficial ownership or exercises control or direction, directly or indirectly (whether through a purchase, issuance or exchange of Shares or other voting securities, reorganization, amalgamation, merger, business combination, consolidation or other transaction or series of transactions having similar effect (or a plan of arrangement in connection with any of the foregoing)), other than solely involving the Company and any one or more of its subsidiaries, of a majority of the Shares or other voting securities of the Company or of any successor or resulting corporation or other person; or (ii) the sale or other disposition to a person other than a subsidiary of the Company of all or substantially all of the Company’s assets.
Adjustments			If certain corporate events affect the number or type of outstanding Shares, including, for example, a dividend in stock, stock split, stock consolidation or rights offering, adjustments will be made to the terms of the outstanding option grants as appropriate in such circumstances.

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Appendix D – Summary of the Omnibus Incentive Plan

On February 12, 2026, upon recommendation of the HRC, the Board approved amendments to the Omnibus Incentive Plan, in accordance with the amendment procedures stated therein which did not require shareholder approval. The TSX approved such amendments to the Omnibus Incentive Plan, which related to the treatment of grants made to participants in the six months immediately preceding their termination date after having reached the retirement eligibility date. The effect of the change is that such unvested grants will be forfeited on the termination date rather than continuing to vest in accordance with their vesting terms.

The Omnibus Incentive Plan includes the following provisions:


Eligibility			The HRC, in its sole discretion, from time to time designates the executive officers, employees and consultants of the Company or any of its subsidiaries to whom awards of PSUs, RUSs and/or Stock Options shall be granted and determine, if applicable, the number of Shares to be covered by such awards and the terms and conditions of such awards. The Omnibus Incentive Plan does not permit Stock Option grants to non-employee directors.
Limitations on Grants			The number of Shares issuable from treasury to any one participant shall not exceed more than 5% (on an undiluted basis) of the issued and outstanding Shares. The number of Shares issuable from treasury to insiders of CAE at any time under all security-based compensation arrangements cannot exceed 10% of the issued and outstanding Shares. The number of Shares issued from treasury to insiders of the Company within any one-year period under all security-based compensation arrangements cannot exceed 10% of the Company’s issued and outstanding Shares. The total number of Shares available for issuance under the Omnibus Incentive Plan shall be 10,000,000.
Exercise Price of Stock Options			All Stock Options granted under the Omnibus Incentive Plan have an exercise price which shall not be less than the market price of the Shares on the date of the grant. For purposes of the Omnibus Incentive Plan, the “market price “of the Shares as at a given date shall be the volume weighted average trading price of the Shares on the TSX for the five (5) trading days before such date. The HRC may, in its discretion, provide for procedures whereby Shares are sold, at the request of the participant, to cover the exercise price and the applicable withholding taxes, otherwise known as a “cashless exercise”, or to provide cash payments representing the value of the remaining Shares underlying the Stock Options. In the event of a “cashless exercise”, as permitted by the HRC, a participant may authorize a third-party broker to (i) pay on his or her behalf the Exercise Price for the number of Shares in respect of which the Stock Option is exercised, (ii) sell such portion of the Shares received upon exercise of the Stock Option which is sufficient to cover such Exercise Price and the amount necessary to satisfy any withholding tax obligations of the Company or any subsidiary, and (iii) remit to the Company or such subsidiary, as applicable, the portion of the proceeds sufficient to cover such withholding tax obligations.
Stock Option Term			The HRC shall determine, at the time of granting a Stock Option, the period during which the Stock Option is exercisable, which shall not be more than ten (10) years from the date of grant. Unless otherwise determined by the HRC, all unexercised Stock Options shall be cancelled at the expiry of such term. Should the expiration date for a Stock Option fall within a black-out period or within nine (9) trading days following the end of a black-out period, such expiration date shall be automatically extended to that date which is the tenth (10th) trading day after the end of the black-out period.
Share Unit Grant Date			Unless otherwise determined by the HRC, the date of grant of PSUs and RSUs shall not be before the sixth (6th) trading day following the day on which the HRC approves the grant of PSUs and RSUs.

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Appendix D – Summary of the Omnibus Incentive Plan


			Should the date of grant fall within a black-out period or within five (5) trading days after the end of a black-out period, then the date of grant shall be deemed to be the later of the sixth (6th) trading day following the end of such black-out period or the sixth (6th) trading day following the day on which the HRC approved the grant.
Vesting			Each PSU, RSU or Stock Option awarded to a participant shall be exercisable at such time or times and/or pursuant to the achievement of such performance criteria and/or other vesting conditions as the HRC may determine in its sole discretion at the time of granting the particular award. Unless otherwise determined by the HRC, PSUs credited to a participant’s account in respect of which the performance criteria have not been achieved, shall automatically be forfeited and be cancelled effective the last day of the applicable performance period.
Settlement of Share Units			All vested PSUs and RSUs shall be settled as soon as practicable following the applicable “share unit vesting determination date” but in all cases prior to the last day of the restriction period. The applicable settlement date shall be determined by the HRC but shall not fall within a black-out period or within five (5) trading days after the end of a black-out period, unless the last day of the “restriction period” falls within this period. For the purposes of the Omnibus Incentive Plan, the “share unit vesting determination date” shall be the date on which the HRC determines if the vesting conditions with respect to PSUs or RSUs (including any applicable performance criteria) have been met, and as a result, establishes the number of PSUs or RSUs, as applicable, that become vested, if any. For the purposes of the Omnibus Incentive Plan, the “restriction period” shall be the applicable restriction period in respect of a particular PSU or RSU, which period, unless otherwise determined by the HRC at the time the PSU or RSU is granted, shall end on the trading day preceding December 31 of the calendar year which is three (3) years after the calendar year in which the PSU or RSU was granted. The Company, in its sole discretion, may settle (or cause a subsidiary to settle), vested PSUs or RSUs, by providing a participant (or the liquidator, executor or administrator, as the case may be, of the estate of the participant) with: (i) in the case of settlement of PSUs or RSUs for their cash equivalent, delivery of cash to the participant representing the cash equivalent, through wire transfer, cheque or any other form of payment deemed acceptable by the HRC; (ii) in the case of settlement of PSUs or RSUs for Shares, delivery of Shares issued from treasury and/or purchased on the participant’s behalf on the open market; or (iii) in the case of settlement of the PSUs or RSUs for a combination of Shares and the cash equivalent, a combination of (i) and (ii) above.
Determination of Amounts			For purposes of determining the cash equivalent of PSUs or RSUs to be paid, such calculation will be made as of the settlement date based on the market value on such date multiplied by the number of vested PSUs or RSUs in the participant’s account, net of any applicable taxes. For the purposes of determining the number of Shares to be issued or delivered to a participant upon settlement of PSUs or RSUs, such calculation will be made as of the settlement date based on the whole number of Shares corresponding to the vested PSUs or RSUs recorded in the participant’s account, net of the whole number of Shares to be sold to satisfy any applicable taxes.
Termination of Employment			Termination for Cause: all awards granted to such participant, whether vested or unvested on the termination date, shall be forfeited. For the purposes of the Omnibus Incentive Plan, the determination by the HRC that the participant was discharged for cause shall be binding on the participant. “Cause” shall include a breach of the Company’s Code of Business Conduct or other

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Appendix D – Summary of the Omnibus Incentive Plan


			CAE policy, failure to perform specified and required duties after a written warning, serious misconduct or negligence of, among other things, a professional, ethical or legal nature, or moral turpitude. Resignation: (i) all unvested PSUs, RSUs and/or Stock Options granted to such participant will be forfeited on the termination date; (ii) all PSUs and RSUs granted to such participant and vested pursuant to the Omnibus Incentive Plan on the termination date will be settled (based on the vesting terms, including, if applicable, achievement of performance criteria, as determined in the final and sole discretion of the HRC) as soon as possible; and (iii) all vested Stock Options granted to such participant will remain exercisable until the earlier of: (A) thirty (30) days after the termination date; and (B) the expiry date of the options, after which time all such Stock Options will expire. For greater certainty, if, following a participant’s resignation, the end of the thirty (30) day period during which Stock Options may be exercised should fall within a black-out period or within nine (9) trading days following the end of a black-out period, such period shall be extended to the tenth (10th) trading day following the end of such black-out period. Retirement: (i) all unvested PSUs, RSUs and/or Options granted to such participant in the six (6) months preceding the termination date will be forfeited on the termination date; (ii) all other unvested PSUs and/or RSUs granted to such participant will continue to vest as determined by the HRC and will be settled, as applicable, based on their vesting terms, including, if applicable, achievement of performance criteria, as determined in the final and sole discretion of the HRC; (iii) all other unvested Stock Options granted to such participant will continue to vest in accordance with the terms of the Omnibus Incentive Plan and the participant’s grant agreement. Once vested, such Stock Options may only be exercised until the earlier of: (A) ninety (90) days following their vesting and (B) the expiry date of the Stock Options, after which time all unvested Stock Options will automatically expire. For greater certainty, if, following a participant’s retirement, the end of the ninety (90) day period during which Stock Options may be exercised should fall within a black-out period or within nine (9) trading days following the end of a black-out period, such period shall be extended to the tenth (10th) trading day following the end of such black-out period; (iv) all PSUs and RSUs granted to such participant and vested pursuant to the Omnibus Incentive Plan on the termination date will be settled (based on the vesting terms, including, if applicable, achievement of performance criteria, as determined in the final and sole discretion of the HRC) as soon as possible; and (v) all vested Stock Options granted to such participant will remain exercisable until their expiry date after which time all such Stock Options will automatically expire. Death or Long-Term Disability: (i) all unvested PSUs and/or RSUs granted to such participant will fully vest at target on the termination date and be settled as soon as possible (regardless of vesting terms including, if applicable, achievement of performance criteria); (ii) all unvested Stock Options granted to such participant will vest on the termination date and may only be exercised until the earlier of: (A) six (6) months following the termination date; and (B) the expiry date of the Stock Options, after which time all unvested Stock Options will automatically expire; (iii) all PSUs and RSUs granted to such participant and vested pursuant to the Omnibus Incentive Plan on the termination date will be settled (based on the vesting terms, including, if applicable, achievement of performance criteria, as determined in the final and sole discretion of the HRC) as soon as possible; and

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Appendix D – Summary of the Omnibus Incentive Plan


			(iv) all vested Stock Options granted to such participant will remain exercisable until the earlier: of (A) six (6) months after the termination date; and (B) the expiry date of the Stock Options, after which time all such options will automatically expire. For greater certainty, if, following a participant’s death or long-term disability, the end of the six (6) month period during which Stock Options may be exercised should fall within a black-out period or within nine (9) trading days following the end of a black-out period, such period shall be extended to the tenth (10th) trading day following the end of such black-out period. Termination without cause: (i) the HRC may, in its sole discretion, determine that a portion of the PSUs and/or RSUs granted to such participant, pro-rated to the number of fiscal years completed since their grant, will immediately vest on the termination date and be settled (based on their vesting terms, including, if applicable, achievement of performance criteria, up to the termination date, as determined in the final and sole discretion of the HRC); (ii) all unvested Stock Options granted to such participant will be forfeited on the termination date; (iii) all PSUs and RSUs granted to such participant and vested pursuant to the Omnibus Incentive Plan on the termination date will be settled (based on the vesting terms, including, if applicable, achievement of performance criteria, as determined in the final and sole discretion of the HRC) as soon as possible; and (iv) all vested Stock Options granted to such participant will remain exercisable until the earlier of: (A) ninety (90) days after the termination date; and (B) the expiry date of the Stock Options, after which time all such Stock Options will automatically expire. For greater certainty, if, following a participant’s termination without cause, the end of the ninety (90) day period during which Stock Options may be exercised should fall within a black-out period or within nine (9) trading days following the end of a black-out period, such period shall be extended to the tenth (10th) trading day following the end of such black-out period.
Transferability/ Assignment of Awards			Except as specifically provided in a grant agreement approved by the HRC, each award granted under the Omnibus Incentive Plan shall not be transferable or assignable otherwise than by will or by the laws of succession.
Financial Assistance			Unless otherwise determined by the HRC, the Company shall not offer financial assistance to any participant in regards to the exercise, vesting or payment of any award granted under the Omnibus Incentive Plan.
Amendments			The Omnibus Incentive Plan provides that its terms, as well as those of any grants, may be suspended, terminated, amended or revised in certain stated circumstances. The Omnibus Incentive Plan specifies in what situations Shareholders approval is required.
Amendments not Requiring Shareholders Approval			The Board may suspend or terminate the Omnibus Incentive Plan at any time, or from time to time amend or revise the terms of the Omnibus Incentive Plan or any granted awards without the consent of the participants, provided that such suspension, termination, amendment or revision shall: (i) not materially adversely alter or impair the rights of any participant, without the consent of such participant, except as permitted by the provisions of the Omnibus Incentive Plan; (ii) be in compliance with applicable law and with the prior approval, if required, of the Shareholders, a stock exchange or any other regulatory body having authority over the Company; and

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Appendix D – Summary of the Omnibus Incentive Plan


			(iii) be subject to Shareholders approval, where required by law or the requirements of a stock exchange, provided that the Board may, from time to time, in its absolute discretion and without approval of the Shareholders of the Company make the following amendments: a.amend any terms and conditions relating to the granting of awards, including the terms relating to the eligibility for and limitations or conditions on participation in the Omnibus Incentive Plan (other than to allow non-employee directors of the Company to be eligible for awards of Stock Options under the Omnibus Incentive Plan), the amount and payment of the exercise price (other than a reduction thereof) or the vesting, exercise, expiry (other than an extension of the expiry date except if due to a black-out period) and adjustment of awards as provided hereunder; b.make changes that are necessary or desirable to comply with applicable laws, rules or regulations of any regulatory authorities having jurisdiction or any relevant stock exchange; c.correct or rectify any ambiguity, defective provision, error or omission in the Omnibus Incentive Plan or make amendments of a "housekeeping" nature; d.amend any terms relating to the administration of the Omnibus Incentive Plan; and e.make any other amendment that does not require Shareholders approval by virtue of the Omnibus Incentive Plan, applicable laws, rules or regulations of any regulatory authorities having jurisdiction or any relevant stock exchange. The Board may also, by resolution, advance the date on which any award may be exercised or payable or, subject to applicable regulatory provisions, including any rules of a stock exchange, extend the expiration date of any award, in the manner to be set forth in such resolution, provided that the period during which a Stock Option is exercisable or a PSU or RSU remains outstanding does not exceed: (i) in the case of Stock Options, ten (10) years from the Stock Option grant date subject to an extension due to a black-out period; and (ii) in the case of PSUs and RSUs, the last day of the restriction period in respect of such PSUs and RSUs, and further provided that any such advancement or extension does not result in a violation of Section 409A of the United States Internal Revenue Code of 1986 (the “US Code”). The Board shall not, in the event of any such advancement or extension, be under any obligation to advance or extend the date on or by which any Stock Option may be exercised or any PSU or RSU may remain outstanding with respect to any other participant.
Amendments Requiring Shareholders Approval			The Omnibus Incentive Plan provides that the Board shall be required to obtain Shareholders approval to make the following amendments: (i) increase the maximum number of Shares issuable under the Omnibus Incentive Plan, except in the case of an adjustment as provided under the Omnibus Incentive Plan; (ii) increase the number of Shares that are issuable or that may be issued to insiders or to any one participant under the Omnibus Incentive Plan, except in the case of an adjustment as provided under the Omnibus Incentive Plan; (iii) allow non-employee directors of the Company to be eligible for awards of Stock Options under the Omnibus Incentive Plan; (iv) permit any award granted under the Omnibus Incentive Plan to be transferable or assignable other than by will or pursuant to succession laws; (v) reduce the exercise price of a Stock Options after the Stock Option has been granted to a participant or cancel any Stock Option and substitute such Stock Option by a new Stock Option with a reduced exercise price granted to the same participant, except in the case of an adjustment provided under the Omnibus Incentive Plan; (vi) extend the term of a Stock Option beyond the original expiry date, except in case of an extension due to a black-out period;

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Appendix D – Summary of the Omnibus Incentive Plan


			(vii) add any form of financial assistance and any amendment to a financial assistance provision in the Omnibus Incentive Plan which is more favourable to participants; and (viii) amend any provisions to the amendment provisions of the Omnibus Incentive Plan.
Change of Control			In the context of a change of control, all awards granted to a participant will be converted into or substituted by alternative awards, to the extent possible, and Stock Options, PSUs and RSUs which are not converted into or substituted by an alternative award shall vest (but, with respect to a U.S. taxpayer, shall not be settled or paid at such time unless doing so would not result in a violation of Section 409A of the U.S. Code) and, in the case of Stock Options, become exercisable in full immediately prior to the consummation of the transaction constituting the change of control. If alternative awards are available and a participant is terminated without cause or submits a resignation for good reason within twenty-four (24) calendar months after a change of control, all outstanding alternative awards which are not then exercisable shall vest and alternative awards in which Stock Options were converted will become exercisable in full upon such termination or resignation. Alternative awards in which PSUs and RSUs were converted will be settled as soon as possible after vesting. Alternative awards in which Stock Options were converted will remain exercisable until the earlier of: (i) one (1) year after the termination or resignation; and (ii) the original expiry date of the Stock Options, after which time all such alternative awards will expire. The provisions relating to a change of control may be varied in grant agreements for U.S. taxpayers in order to comply with Section 409A of the U.S. Code and, to the extent that the provisions relating to a change of control would case an award to a U.S. taxpayer to violate Section 409A of the U.S. Code, such provision will not apply to such U.S. taxpayer. A change of control is defined as (i) any event or circumstance where any person, any joint actor thereof or any person acting jointly or in concert therewith, or any combination thereof, acquires beneficial ownership or exercises control or direction, directly or indirectly (whether through a purchase, issuance or exchange of Shares or other voting securities, reorganization, amalgamation, merger, business combination, consolidation or other transaction or series of transactions having similar effect (or a plan of arrangement in connection with any of the foregoing)), other than solely involving the Company and any one or more of its subsidiaries, of a majority of the Shares or other voting securities of the Company or of any successor or resulting Company or other person; (ii) the sale or other disposition to a person other than a subsidiary of the Company of all or substantially all of the Company’s assets; (iii) the Company undergoing a liquidation or dissolution; or (iv) as a result of or in connection with: (A) a contested election of directors; or (B) a reorganization, amalgamation, merger, business combination, consolidation or other transaction or series of transactions involving the Company or any of its subsidiaries and another corporation or other entity, the nominees named in the most recent management information circular of the Company for election to the Board of directors no longer constitute a majority of the members of the Board of Director.
Adjustments			In the event of any subdivision, consolidation, reclassification, reorganization or any other change affecting the Shares, or any merger, amalgamation or consolidation of the Company with or into another corporation, or any distribution to all security holders of cash, evidences of indebtedness or other assets not in the ordinary course, or any transaction or change having a similar effect, the Board shall in its sole discretion, subject to the required approval of any stock exchange, determine the appropriate adjustments or substitutions to be made in such circumstances in order to maintain the economic rights of the participants in respect of awards under the Omnibus Incentive Plan, including, without limitation, adjustments to the exercise price, adjustments to the number of Shares to which a participant is entitled upon exercise or settlement, adjustments permitting the immediate exercise of any outstanding awards that are not otherwise exercisable or adjustments to the number or kind of Shares reserved for issuance.

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Financial Report FISCAL YEAR ENDED MARCH 31, 2026

At CAE, we exist to make the world safer. We deliver cutting-edge training, simulation, and critical operations solutions to prepare aviation professionals and defence forces for the moments that matter. Every day, we empower pilots, cabin crew, maintenance technicians, airlines, business aviation operators, and defence and security personnel to perform at their best and when the stakes are the highest. Around the globe, we're everywhere customers need us to be with sites and training locations in over 40 countries. For nearly 80 years, CAE has been at the forefront of innovation, consistently seeking to set the standard by delivering excellence in high-fidelity flight simulators and training solutions, while embedding sustainability at the heart of everything we do. By harnessing technology and enhancing human performance, we strive to be the trusted partner in advancing safety and mission readiness - today and tomorrow. Read our Global Annual Activity and Sustainability Report Our Global Annual Activity and Sustainability Report for fiscal year 2026 is available online. It outlines CAE’s strategic priorities, performance highlights, and key sustainability initiatives, progress and results, reflecting our continued commitment to transparency and sustainable growth. The report provides stakeholders with a consolidated view of our performance and illustrates how sustainability is embedded in our core business strategy and operations to generate long-term value. Learn more about how we manage our impacts and how our solutions contribute across the environmental, social, and governance pillars. cae.com/sustainability/ cae.com Follow us on : LinkedIn Instagram

Matthew Bromberg President and Chief Executive Officer A message from our Chief Executive Officer Our vision is to achieve consistent and reliable operational growth. That focus is reflected in clear financial targets for FY2030: approximately $125 million to $150 million annual transformation run-rate savings 1 and $950 million to $1 billion of adjusted segment operating income (under our updated definition) 1, underpinned by strong cash conversion and a leadership team focused on execution. We have taken practical steps over the past year to advance this goal. Notably, this includes a streamlined organizational structure dedicated to customer focus and growth but also balancing operations and free cash flow. 1 This report includes historical and forward-looking non-IFRS financial measures, non-IFRS ratios, capital management measures and supplementary financial measures. These measures are not standardized financial measures prescribed under IFRS and therefore should not be confused with, or used as an alternative for, performance measures calculated according to IFRS. Furthermore, these measures should not be compared with similarly titled measures provided or used by other issuers. For historical measures, refer to Section 11.1 “Non-IFRS and other financial measure definitions” and Section 11.3 “Non-IFRS measure reconciliations” of CAE’s MD&A for the year ended March 31, 2026 (which sections are incorporated by reference into this report) for the definitions and reconciliations of these measures to the most directly comparable measure under IFRS. For forward-looking measures, refer to the “Forward-looking financial measures” section of our May 21, 2026 press release announcing the results of our fourth quarter and full fiscal year 2026 (which section is incorporated by reference into this report) for definitions and reconciliations of these measures to their historical equivalents. Sharpening our focus, strengthening our future As I complete my first year as President and Chief Executive Officer of CAE, I am more convinced than ever of the remarkable opportunity ahead of us. Building on a strong foundation, we have a plan to maintain our market leadership and unlock the company’s full financial potential. That conviction is why I joined CAE: an iconic company with an industry-defining role in civil aviation and defence; a talented and global team with technology and relationships to lead in both markets; and strong underlying sector growth supporting both businesses for years to come. Airlines and business aircraft operators will need more pilots, technicians and crew over time, supporting demand for high-quality training in civil aviation. In defence, governments and allies are making generational investments in readiness by modernizing training and ramping up mission rehearsal. CAE has the capacity and technological edge to lead in both.

Operating with greater focus and discipline To convert this ambition into results, we launched a transformation focused on three priorities: focusing our portfolio where we excel, taking action to improve capital discipline across our current footprint and future investments, and finally creating and building a culture, operating cadence and toolset that support continuous improvement and performance. Together, they sharpen our focus on where we can win, where returns are strongest, and how the business performs and generates cash. Portfolio We are simplifying the portfolio and directing resources where CAE can compete, win and create the greatest value. About eight per cent of our revenue is non-core, and throughout fiscal 2027, we will streamline the company and strengthen our focus. The strategic review of Flightscape, announced in May, is one example. It is intended to position the software business for its next phase of growth while supporting a simpler, more focused CAE. 1 This report includes historical and forward-looking non-IFRS financial measures, non-IFRS ratios, capital management measures and supplementary financial measures. These measures are not standardized financial measures prescribed under IFRS and therefore should not be confused with, or used as an alternative for, performance measures calculated according to IFRS. Furthermore, these measures should not be compared with similarly titled measures provided or used by other issuers. For historical measures, refer to Section 11.1 “Non-IFRS and other financial measure definitions” and Section 11.3 “Non-IFRS measure reconciliations” of CAE’s MD&A for the year ended March 31, 2026 (which sections are incorporated by reference into this report) for the definitions and reconciliations of these measures to the most directly comparable measure under IFRS. For forward-looking measures, refer to the “Forward-looking financial measures” section of our May 21, 2026 press release announcing the results of our fourth quarter and full fiscal year 2026 (which section is incorporated by reference into this report) for definitions and reconciliations of these measures to their historical equivalents. Capital discipline We are taking a pragmatic approach to capital allocation and see areas where we can reduce our footprint and rationalize our civil training network. This reduction of almost 10% of our commercial aviation capacity will better align our network with demand, improve service delivery, and reinforce financial returns. We are also bolstering our future capital discipline, so every dollar deployed meets strategic and financial thresholds. This requires assessing capital expenditures, research and development, and operating spend across the organization, so resources are directed toward opportunities that can open attractive markets, solidify our competitive position and generate sustainable returns. In fiscal 2026, that meant lower capital expenditures year over year and rigorous cash discipline across the system. That discipline is already producing results. We moved to a more conventional definition of free cash flow 1 to improve transparency and accountability. We expect early free cash flow 1 improvement as we realign the operating model and prioritize higher-return initiatives. With deleveraging ahead of plan, we have greater flexibility to assess and execute our capital allocation priorities. Performance We are raising the bar on performance. That includes simplifying our operations and processes, investing in our factory and tools, and modernizing our workflow. This will enable more productive and profitable use of simulators, resources and assets, reducing complexity across sites and strengthening accountability. We are operating at a steady pace and applying more discipline after investments are made.

Civil Aviation Structural demand protecting returns through the cycle Most of the world’s population has yet to fly, highlighting the long runway ahead for aviation growth. Civil Aviation is a core driver of CAE’s value creation. As one of the global leaders in aviation training, with the largest simulator training network in the industry, we are exceptionally well positioned to benefit from structural growth in air travel and a significant global need for aviation talent. Major OEMs continue to carry deep order backlogs, reinforcing sustained demand for pilots, technicians and crew. By 2034, we estimate nearly 1.5 million civil aviation professionals will be needed, and CAE is ready to help train them at scale. While long-term fundamentals remain strong, fiscal 2026 demonstrated softness in Civil Aviation. Many factors tamped down market growth, including geopolitical uncertainty, events in the Middle East, OEM supply chain shortages, and aircraft groundings. This has required thoughtful operating choices. We have remained selective, prioritizing the quality of earnings over volume, and adjusted our outlook early as visibility evolved. Our revision reflected that selectivity, not a change in the underlying long-term demand profile. The same selectivity is shaping how we run the Civil business. We are pursuing synergies between our Business Aviation and Commercial Aviation segments, where it makes sense, including shared infrastructure, systems and back-office teams, while tailoring the customer experience to each segment. This reduces duplication and creates more capacity to advance products and technologies where customers value it most. Throughout this period, we hit important industry milestones, including the certification of the Boeing 777-9 FFS, the delivery of Joby and Eve simulators and early entrants in the emerging eVTOL market. Both reinforce CAE’s role as a trusted provider that delivers high-technology training devices and differentiated integrated training solutions. The result is a Civil business built to deliver stronger returns through the cycle.

Defense & Security Positioned for a multigenerational investment moment Demand in Defense & Security is evolving quickly. For the first time in decades, the defence industry is entering a growth cycle of a scale and duration that rivals civil aerospace. We are shaping the business for repeatable growth aligned with customer needs and sovereign investment. Our role in that cycle is anchored in the strengths of the business today. In simulation and mission rehearsal, CAE is one of the largest independent defence training providers, with the broadest platform and capability portfolio in the industry. Our enduring franchises anchor multi-decade programs and support careers that can span a lifetime at CAE, creating recurring revenue and a sturdy foundation for the business. During fiscal 2026, we strengthened that foundation by implementing a unified global defence leadership team while maintaining the dedicated U.S. governance required for that market. This is improving speed, alignment and accountability across the organization while enhancing our ability to execute consistently. Through CAE USA, we continue to deliver mission readiness to the U.S. Department of Defense, including F-16 training systems, while remaining aligned with major modernization priorities such as the U.S. Air Force’s Next-Generation Survivable Airborne Operations Center aircraft. That same strategic focus on readiness and sovereign capability is increasingly evident in Canada. The Defence Industrial Strategy, announced by Prime Minister Mark Carney at our Montreal headquarters, together with an $82 billion commitment to defence spending over the next five years, creates a significant domestic opportunity for CAE, including training across air, land, sea, space and cyber that reinforces Quebec and Canada as world-class aerospace hubs. More broadly, these priorities are also shaping demand across NATO and allied countries, where we deepened key relationships during the year, including through a worldwide co-operation agreement with Saab on GlobalEye and a sovereign training program with Australia’s Future Air Mission Training System.

Sustainability Driving efficiency and long-term value Sustainability is embedded in how we operate and how we make decisions across CAE. It is part of building a stronger, more efficient company for the long term. We continue to integrate it into project evaluation, capital allocation and product development, and we review progress regularly as part of our operating rhythm. That includes improving the efficiency of our operations, reducing energy use in our facilities and advancing next-generation products designed to lower power consumption and environmental impact. We are also incorporating carbon considerations into investment decisions so that business cases reflect both financial returns and emissions impact. These efforts reflect a practical approach to sustainability; one that supports performance, discipline and responsible growth. Looking ahead Taken together, these changes reinforce my confidence in CAE’s future. With our new structure and leadership team in place, we are well positioned to capture the growth opportunities ahead in both Civil Aviation and Defense & Security, while navigating near-term cycles with discipline and care. Our strategy is clear: expand margins, improve cash flow, reduce capital intensity and simplify the company to create long-term value. None of this is possible without our people. I want to thank CAE employees for their commitment, professionalism and resilience through a period of meaningful change. I am also deeply grateful to Calin Rovinescu and the Board for their guidance and support throughout this transition. Finally, I would like to thank our customers, partners and shareholders for their continued trust and confidence in CAE. The responsibility that comes with being one of the world’s largest training organizations is not lost on us. We are proud of the role CAE plays in preparing people for missions where performance, readiness and safety matter most. CAE plays an important role in making the world safer, and we will continue to earn that role every day through execution, innovation and trust. * This report includes forward-looking statements about our activities, events and developments that we expect to or anticipate may occur in the future including, for example, statements about our fiscal 2027 consolidated financial outlook , long-term transformation plan targets to fiscal 2030, transformation costs and savings, vision, strategies, market trends and outlook, future revenues, earnings, cash flow growth, profit trends, capital spending, expansions and new initiatives, including initiatives that pertain to sustainability matters, financial obligations, available liquidities, expected sales, general economic and political outlook, inflation trends, prospects and trends of the industry, expected annual recurring cost savings from operational excellence programs, management of the supply chain, estimated addressable markets, demand for CAE’s products and services, access to capital resources, our financial position, expected accretion in various financial metrics, expected capital returns to shareholders, business outlook and opportunities, objectives, development, plans, growth strategies and other strategic priorities, our competitive and leadership position in our markets, expansion of our market shares, CAE's ability and preparedness to respond to demand for new technologies, the sustainability of our operations, and other statements that are not historical facts. By their nature, forward-looking statements require us to make assumptions and are subject to inherent risks and uncertainties associated with our business which may cause actual results in future periods to differ materially from results indicated in forward-looking statements. While these statements are based on management’s expectations and assumptions regarding historical trends, current conditions and expected future developments, as well as other factors that we believe are reasonable and appropriate in the circumstances, readers are cautioned not to place undue reliance on these forward-looking statements as there is a risk that they may not be accurate. For more information, readers should refer to the sections “Caution regarding forward-looking statements” and “Material assumptions” under Section 2 of CAE’s MD&A for the year ended March 31, 2026 and in our May 21, 2026 press release announcing the results of our fourth quarter and full fiscal year 2026, which sections are incorporated by reference into this report.


Table of Contents
Management’s Discussion and Analysis
1.	HIGHLIGHTS		1
2.	INTRODUCTION		2
3.	ABOUT CAE		5
	3.1	Who we are	5
	3.2	Our purpose, mission and vision	5


	3.3	Our strategy	5
	3.4	Our operations	6
4.	FOREIGN EXCHANGE		11
5.	CONSOLIDATED RESULTS		12
	5.1	Results from operations – fourth quarter of fiscal 2026	12
	5.2	Results from operations – fiscal 2026	14
	5.3	Restructuring, integration and acquisition costs	16

	5.4	Executive management transition costs	16
	5.5	Shareholder matters	16
	5.6	Consolidated adjusted order intake and adjusted backlog	17
6.	RESULTS BY SEGMENT		18
	6.1	Civil Aviation	18
	6.2	Defense and Security	20

7.	CONSOLIDATED CASH MOVEMENTS AND LIQUIDITY		22
	7.1	Consolidated cash movements	22
	7.2	Sources of liquidity	23
	7.3	Government participation	23
	7.4	Contingencies and commitments	24
8.	CONSOLIDATED FINANCIAL POSITION		25
	8.1	Consolidated invested capital	25

	8.2	Off balance sheet arrangements	26
	8.3	Financial instruments	27



9.	BUSINESS RISK AND UNCERTAINTY		30
	9.1	Strategic risks	31
	9.2	Operational risks	36
	9.3	Cybersecurity risks	38
	9.4	Talent risks	39
	9.5	Financial risks	40
	9.6	Legal and compliance risks	43
	9.7	Sustainability risks	46
	9.8	Reputational risks	47
	9.9	Technological risks	47
	9.10	Data and artificial intelligence risks	47
10.	COMPENSATION OF KEY MANAGEMENT PERSONNEL		48
11.	NON-IFRS AND OTHER FINANCIAL MEASURES AND SUPPLEMENTARY NON-FINANCIAL INFORMATION		49
	11.1	Non-IFRS and other financial measure definitions	49
	11.2	Supplementary non-financial information definitions	52
	11.3	Non-IFRS measure reconciliations	53
12.	CHANGES IN ACCOUNTING POLICIES		55

	12.1	New and amended standards not yet adopted	55
	12.2	Use of judgements, estimates and assumptions	55
13.	INTERNAL CONTROL OVER FINANCIAL REPORTING		57


14.	OVERSIGHT ROLE OF AUDIT COMMITTEE AND BOARD OF DIRECTORS		57
15.	ADDITIONAL INFORMATION		57
16.	SELECTED FINANCIAL INFORMATION		58
Consolidated Financial Statements			59
Board of Directors and Officers			114
Shareholder and Investor Information			115

Management’s Discussion and Analysis

for the fourth quarter and year ended March 31, 2026

1. HIGHLIGHTS

FINANCIAL

FOURTH QUARTER OF FISCAL 2026


(amounts in millions, except per share amounts, adjusted ROIC, net debt-to-adjusted EBITDA and book-to-sales ratio)		Q4-2026		Q4-2025	Variance $		Variance %
Performance
Revenue	$	1,326.7	$	1,275.4	$	51.3	4	%
Operating income	$	127.4	$	239.9	$	(112.5)	(47	%)
Adjusted segment operating income(1)	$	211.8	$	258.8	$	(47.0)	(18	%)
Net income attributable to equity holders of the Company	$	73.1	$	135.9	$	(62.8)	(46	%)
Basic and diluted earnings per share (EPS)	$	0.23	$	0.42	$	(0.19)	(45	%)



Adjusted EPS(1)	$	0.42	$	0.47	$	(0.05)	(11	%)
Net cash provided by operating activities	$	185.6	$	322.7	$	(137.1)	(42	%)
Free cash flow(1)	$	135.0	$	194.2	$	(59.2)	(30	%)
Liquidity and Capital Structure
Invested capital(1)	$	8,069.9	$	8,152.7	$	(82.8)	(1	%)

Adjusted return on invested capital (ROIC)(1)	%	7.6	%	8.0

Net debt-to-adjusted EBITDA(1)		2.29		2.77
Growth
Adjusted order intake(1)	$	1,611.3	$	1,337.5	$	273.8	20	%
Adjusted backlog(1)	$	19,258.6	$	20,142.2	$	(883.6)	(4	%)
Book-to-sales ratio(1)		1.21		1.05
Book-to-sales ratio(1) for the last 12 months		1.02		1.64

FISCAL 2026




(amounts in millions, except per share amounts)		FY2026		FY2025	Variance $		Variance %
Performance
Revenue	$	4,914.0	$	4,707.9	$	206.1	4	%
Operating income	$	612.3	$	729.2	$	(116.9)	(16	%)
Adjusted segment operating income(1)	$	710.7	$	732.0	$	(21.3)	(3	%)
Net income attributable to equity holders of the Company	$	313.1	$	405.3	$	(92.2)	(23	%)
Basic EPS	$	0.98	$	1.27	$	(0.29)	(23	%)
Diluted EPS	$	0.97	$	1.27	$	(0.30)	(24	%)


Adjusted EPS(1)	$	1.20	$	1.21	$	(0.01)	(1	%)
Net cash provided by operating activities	$	791.9	$	896.5	$	(104.6)	(12	%)
Free cash flow(1)	$	473.8	$	474.9	$	(1.1)	—	%

(1) Non-IFRS financial measure, non-IFRS ratio, capital management measure, or supplementary financial measure. Refer to Section 11 “Non-IFRS and other financial measures and supplementary non-financial information” of this MD&A for the definitions and reconciliation of these measures to the most directly comparable measure under IFRS.

CHANGES TO NON-IFRS MEASURES

In the fourth quarter of fiscal 2026, we revised the composition and designation of certain non-IFRS measures to align with strategic priorities and enhance comparability with industry peers.

–Free cash flow was revised to include growth capital expenditures and capitalized development costs and exclude dividends paid;

–Adjusted return on invested capital (ROIC) replaced adjusted return on capital employed (ROCE); and

–Invested capital replaced capital employed, without changing the composition of this measure.

Comparative figures have been reclassified to conform to these changes.

CAE Financial Report 2026 I 1

Management’s Discussion and Analysis

2. INTRODUCTION

In this management’s discussion and analysis (MD&A), we, us, our, CAE and Company refer to CAE Inc. and its subsidiaries. Unless we have indicated otherwise:

–This year and 2026 mean the fiscal year ending March 31, 2026;

–Last year, prior year and a year ago mean the fiscal year ended March 31, 2025;

–Dollar amounts are in Canadian dollars.

This MD&A was prepared as of May 21, 2026. It is intended to enhance the understanding of our annual consolidated financial statements and notes for the year ended March 31, 2026 and should therefore be read in conjunction with this document. We have prepared it to help you understand our business, performance and financial condition for the year ended March 31, 2026. Except as otherwise indicated, all financial information has been reported in accordance with IFRS Accounting Standards (IFRS), as issued by the International Accounting Standards Board (IASB). All quarterly information disclosed in the MD&A is based on unaudited figures.

The MD&A provides you with a view of CAE as seen through the eyes of management and helps you understand the Company from a variety of perspectives:

–Our purpose, mission and vision;

–Our strategy;

–Our operations;

–Foreign exchange;

–Consolidated results;

–Results by segment;

–Consolidated cash movements and liquidity;

–Consolidated financial position;

–Business risk and uncertainty;

–Compensation of key management personnel;

–Non-IFRS and other financial measures and supplementary non-financial information;

–Changes in accounting policies;

–Internal control over financial reporting;

–Oversight role of Audit Committee and Board of Directors (the Board).

You will find our most recent financial report and Annual Information Form (AIF) on our website (www.cae.com), SEDAR+ (www.sedarplus.ca) and EDGAR (www.sec.gov). Holders of CAE’s securities may also request a printed copy of the Company’s consolidated financial statements and MD&A free of charge by contacting Investor Relations (investor.relations@cae.com).

NON-IFRS AND OTHER FINANCIAL MEASURES

This MD&A includes non-IFRS financial measures, non-IFRS ratios, capital management measures and supplementary financial measures. These measures are not standardized financial measures prescribed under IFRS and therefore should not be confused with, or used as an alternative for, performance measures calculated according to IFRS. Furthermore, these measures should not be compared with similarly titled measures provided or used by other issuers. Management believes that these measures provide additional insight into our operating performance and trends and facilitate comparisons across reporting periods.

Performance Measures

–Gross profit margin (or gross profit as a % of revenue);

–Operating income margin (or operating income as a % of revenue);

–Adjusted segment operating income or loss;

–Adjusted segment operating income margin (or adjusted segment operating income as a % of revenue);

–Adjusted effective tax rate;

–Adjusted net income or loss;

–Adjusted earnings or loss per share (EPS);

–EBITDA and Adjusted EBITDA;

–Free cash flow.

2 I CAE Financial Report 2026

Management’s Discussion and Analysis

Liquidity and Capital Structure Measures

–Non-cash working capital;

–Invested capital;

–Adjusted return on invested capital (ROIC);

–Net debt;

–Net debt-to-capital;

–Net debt-to-EBITDA and net debt-to-adjusted EBITDA;

–Maintenance and growth capital expenditures.

Growth Measures

–Adjusted order intake;

–Adjusted backlog;

–Book-to-sales ratio.

Definitions of all non-IFRS and other financial measures are provided in Section 11.1 “Non-IFRS and other financial measure definitions” of this MD&A to give the reader a better understanding of the indicators used by management. In addition, when applicable, we provide a quantitative reconciliation of the non-IFRS and other financial measures to the most directly comparable measure under IFRS. Refer to Section 11.1 “Non-IFRS and other financial measure definitions” for references to where these reconciliations are provided.

ABOUT MATERIAL INFORMATION

This MD&A includes the information we believe is material to investors after considering all circumstances, including potential market sensitivity. We consider something to be material if:

–It results in, or would reasonably be expected to result in, a significant change in the market price or value of our shares; or

–It is likely that a reasonable investor would consider the information to be important in making an investment decision.

CAUTION REGARDING FORWARD-LOOKING STATEMENTS

This MD&A includes forward-looking statements about our activities, events and developments that we expect to or anticipate may occur in the future including, for example, statements about our vision, strategies, market trends and outlook, future revenues, earnings, cash flow growth, profit trends, growth capital spending, expansions and new initiatives, including initiatives that pertain to sustainability matters, financial obligations, available liquidities, expected sales, general economic and political outlook, inflation trends, prospects and trends of an industry, expected annual recurring cost savings from operational excellence programs, our management of the supply chain, estimated addressable markets, demands for CAE’s products and services, our access to capital resources, our financial position, the expected accretion in various financial metrics, the expected capital returns to shareholders, our business outlook, business opportunities, objectives, development, plans, growth strategies and other strategic priorities, our competitive and leadership position in our markets, the expansion of our market shares, CAE's ability and preparedness to respond to demand for new technologies, the sustainability of our operations, our ability to retire the Legacy Contracts (as defined in Section 6.2 “Defense and Security” of this MD&A) as expected and to manage and mitigate the risks associated therewith, the impact of the retirement of the Legacy Contracts and other statements that are not historical facts. Since forward-looking statements and information relate to future events or future performance and reflect current expectations or beliefs regarding future events, they are typically identified by words such as “anticipate”, “believe”, “could”, “estimate”, “expect”, “intend”, “likely”, “may”, “plan”, “seek”, “should”, “will”, “strategy”, “future” or the negative thereof or other variations thereon suggesting future outcomes or statements regarding an outlook. All such statements constitute "forward-looking statements" within the meaning of applicable Canadian securities legislation and “forward-looking statements” within the meaning of the “safe harbor” provisions of the United States Private Securities Litigation Reform Act of 1995. By their nature, forward‑looking statements require us to make assumptions and are subject to inherent risks and uncertainties associated with our business which may cause actual results in future periods to differ materially from results indicated in forward‑looking statements. While these statements are based on management’s expectations and assumptions regarding historical trends, current conditions and expected future developments, as well as other factors that we believe are reasonable and appropriate in the circumstances, readers are cautioned not to place undue reliance on these forward-looking statements as there is a risk that they may not be accurate.

CAE Financial Report 2026 I 3

Management’s Discussion and Analysis

Important risks that could cause such differences include, but are not limited to, strategic risks, such as geopolitical uncertainty, transformation plan implementation, global economic conditions, competitive business environment, original equipment manufacturer (OEM) encroachment, inflation, international scope of our business, changes in U.S. trade policies or regulations, level and timing of defence spending, constraints within the civil aviation industry, our ability to penetrate new markets, research and development (R&D) activities, evolving standards and technology innovation and disruption, length of sales cycle, business development and awarding of new contracts, strategic partnerships and long-term contracts, our ability to effectively manage our growth, estimates of market opportunity and competing priorities; operational risks, such as supply chain disruptions, program management and execution, mergers, acquisitions and divestitures, business continuity, subcontractors, fixed price and long-term supply contracts, our continued reliance on certain parties and information, and global safety and governance; cybersecurity risks; talent risks, such as recruitment, development and retention, ability to attract, recruit and retain key personnel and management, corporate culture and labour relations; financial risks, such as availability of capital, customer credit risk, foreign exchange, effectiveness of internal controls over financial reporting, liquidity risk, interest rate volatility, shareholder activism, returns to shareholders, estimates used in accounting, impairment risk, pension plan funding, indebtedness, restructuring, integration and acquisition costs, sales of additional common shares, market price and volatility of our common shares, seasonality, taxation matters and adjusted backlog; legal and compliance risks, such as data rights and governance, U.S. foreign ownership, control or influence mitigation measures, compliance with laws and regulations, insurance coverage potential gaps, product-related liabilities, environmental laws and regulations, government audits and investigations, protection of our intellectual property and brand, third-party intellectual property, foreign private issuer status, and enforceability of civil liabilities against our directors and officers; sustainability risks, such as extreme climate events and the impact of natural or other disasters (including effects of climate change) and sustainability commitments and expectations; reputational risks; technological risks, such as information technology (IT) and reliance on third-party providers for information technology systems and infrastructure management; and data and artificial intelligence risks.

The foregoing list is not exhaustive and other unknown or unpredictable factors could also have a material adverse effect on the performance or results of CAE. Additionally, differences could arise because of events announced or completed after the date of this MD&A. You will find more information about the risks and uncertainties affecting our business in Section 9 “Business risk and uncertainty” of this MD&A. Readers are cautioned that any of the disclosed risks could have a material adverse effect on CAE’s forward-looking statements. Readers are also cautioned that the risks described above and elsewhere in this MD&A are not necessarily the only ones we face; additional risks and uncertainties that are presently unknown to us or that we may currently deem immaterial may adversely affect our business.

Except as required by law, we disclaim any intention or obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise. The forward-looking information and statements contained in this MD&A are expressly qualified by this cautionary statement.

In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based on information available to us as of the date of this MD&A. While we believe that information provides a reasonable basis for these statements, that information may be limited or incomplete. Our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all relevant information. These statements are inherently uncertain, and investors are cautioned not to unduly rely on these statements.

MATERIAL ASSUMPTIONS

The forward-looking statements set out in this MD&A are based on certain assumptions including, without limitation: the prevailing market conditions, geopolitical instability including the ongoing military conflicts in the Middle East and the rapidly evolving trade and tariff environment, the customer receptivity to our training and operational support solutions, the accuracy of our estimates of addressable markets and market opportunity, the realization of anticipated annual recurring cost savings and other intended benefits from restructuring initiatives, transformation plans or operational excellence programs, the ability to respond to anticipated inflationary pressures and our ability to pass along rising costs through increased prices, the actual impact to supply, production levels, and costs from global supply chain logistics challenges, the stability of foreign exchange rates, the ability to hedge exposures to fluctuations in interest rates and foreign exchange rates, the availability of borrowings to be drawn down under, and the utilization, of one or more of our senior credit agreements, our available liquidity from cash and cash equivalents, undrawn amounts on our revolving credit facility, the balance available under our receivable purchase facility, the assumption that our cash flows from operations and continued access to debt funding will be sufficient to meet financial requirements in the foreseeable future, access to expected capital resources within anticipated timeframes, no material financial, operational or competitive consequences from changes in regulations affecting our business, our ability to retain and attract new business, our ability to effectively execute and retire the remaining Legacy Contracts while managing the risks associated therewith, our ability to effectively execute on the opportunities identified as part of our transformation plan to simplify our structure, sharpen our focus and strengthen execution, and the realization of the expected strategic, financial and other benefits of our multi-year transformation plan in the timeframe anticipated and at expected cost levels. Air travel is a major driver for CAE's business and management relies on analysis from the International Air Transport Association (IATA) to inform its assumptions about the rate and profile of growth in its key civil aviation market. Accordingly, the assumptions outlined in this MD&A and, consequently, the forward-looking statements based on such assumptions, may turn out to be inaccurate. For additional information, including with respect to other assumptions underlying the forward-looking statements made in this MD&A, refer to Section 9 “Business risk and uncertainty” of this MD&A.

4 I CAE Financial Report 2026

Management’s Discussion and Analysis

3. ABOUT CAE

3.1 Who we are

CAE’s common shares are listed on the Toronto and New York stock exchanges (TSX / NYSE) under the symbol CAE.

3.2 Our purpose, mission and vision

Our purpose is to make the world safer.

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

3.3 Our strategy

CAE’s four strategic pillars

There are four fundamental pillars that underpin our strategy and investment thesis:

–Market leadership;

–Revolutionizing training;

–Efficient growth;

–Skills and culture.

Market leadership

We have established ourselves as a leader across our markets by being a trusted partner for our stakeholders and by embracing customer centricity. Looking forward, there remains significant headroom for continued growth in our large addressable markets. As a result, we are constantly seeking out ways to focus our portfolio around our core capabilities and enhance the performance of our customers. These actions will enable us to continue to win in our markets and extend our leadership positions. Furthermore, our products are deployed with a focus on integrated sustainability.

Revolutionizing training

We have a history of nearly 80 years of applying innovation and technology to create novel, world-class solutions and generate long‑term competitive differentiation. We are established as one of the global leaders in training, digital immersion, and modelling and simulation technologies. We use focused technology development to improve the performance of our businesses and generate value for our customers.

Efficient growth

We aim to maximize the benefits of our strong competitive positions and our ongoing transformation efforts to deliver profitable growth, higher returns on invested capital and improved free cash flow conversion. As we work to transform the business by continuing to focus on improved performance and capital discipline, we will drive operational excellence, cost optimization and apply a more prudent approach to pursuing both organic and inorganic growth.

Skills and culture

Our core values are innovation, integrity, empowerment, excellence and One CAE. We employ these values across a diverse global team to drive a unique social impact. We look to create a high-performing culture that values teamwork, professional growth, engagement and ownership. As a result, our employees across the globe share a passion to enhance safety and prepare our customers for the moments that matter.

CAE Financial Report 2026 I 5

Management’s Discussion and Analysis

3.4 Our operations

Our operations are managed through two segments:

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

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

CIVIL AVIATION MARKET

We have the global scale to address the total lifecycle needs of the professional pilot, from cadet to captain, with our comprehensive aviation training solutions. We are the world’s largest provider of civil aviation training services. Our deep industry experience and thought leadership, large installed base, strong relationships and reputation as a trusted partner enable us to access a broad share of the market. We provide aviation services in more than 35 countries and through our broad global training and services network, we serve all sectors of civil aviation including airlines and other commercial, business and helicopter aviation operators.

Among our thousands of customers, we have long-term training centre operations, training services agreements and joint ventures with over 50 major airlines and aircraft operators around the world. Our range of training solutions includes product and service offerings for pilots, cabin crew and aircraft maintenance technicians, training centre operations, curriculum development, courseware solutions and consulting services. We currently manage 371 full-flight simulators (FFSs), including those operating in our joint ventures. We offer industry-leading technology, and we are shaping the future of training through innovations such as our next generation training systems, including CAE Real-time Insights and Standardized Evaluations (CAE Rise), which improves training quality, objectivity and efficiency through the integration of untapped flight and simulator data-driven insights into training. In the development of new pilots, we operate one of the largest ab initio flight training network in the world and have approximately 20 cadet training programs globally. With our CAE airline operations digital solutions, we have further strengthened our position as a technology leader, complementing our flight simulator and training solutions while increasing our total addressable market.

Quality, fidelity, reliability and innovation are hallmarks of the CAE brand in flight simulation and we are the world leader in the development of civil flight simulators. We continuously innovate our processes and lead the market in the design, manufacture and integration of civil FFSs for major and regional commercial airlines, business aircraft operators, third-party training centres and OEMs.

We have established a wealth of experience in developing first‑to‑market simulators for more than 30 types of aircraft models. Our flight simulation equipment, including FFSs, are designed to meet the rigorous demands of their long and active service lives, often spanning several decades of continuous use. Our global reach enables us to provide best-in-class support services such as real-time, remote monitoring and enables us to leverage our extensive worldwide network of spare parts and service teams.

We believe the Civil Aviation segment is positioned as a gateway in a highly regulated, secular growth market, with an addressable market estimated at more than $7 billion, and headroom for growth.

Market drivers

Demand for training and airline operations digital solutions in the civil aviation market is driven by the following:

–Pilot and maintenance training and industry regulations;

–Safety and efficiency imperatives of commercial airlines and business aircraft operators;

–Expected long-term secular global growth in air travel;

–Expected long-term growth, including new aircraft deliveries and renewal of the active fleet of commercial and business aircraft;

–Demand for trained aviation professionals;

–Complexity of airline operations digital solutions;

–Air traffic services.

Pilot and maintenance training and industry regulations

Civil aviation training is a largely recurring business driven by a highly-regulated environment through global and domestic standards for pilot licensing and certification, amongst other regulatory requirements. These recurring training requirements are mandatory and are regulated by national and international aviation regulatory authorities such as the International Civil Aviation Organization (ICAO), European Aviation Safety Agency (EASA) and the U.S. Federal Aviation Administration (FAA).

In recent years, pilot certification processes and regulatory requirements have become increasingly stringent. Simulation-based pilot certification training is taking on a greater role internationally with the Multi-Crew Pilot License, with the Airline Transport Pilot certification requirements in the U.S. and with Upset Prevention and Recovery Training requirements mandated by both EASA and the FAA.

6 I CAE Financial Report 2026

Management’s Discussion and Analysis

Safety and efficiency imperatives of commercial airlines and business aircraft operators

The commercial airline industry is competitive, requiring operators to continuously pursue operational excellence and efficiency initiatives to achieve satisfactory returns while continuing to maintain the highest safety standards and the confidence of air travelers. Airlines are finding it increasingly more effective to seek expertise in training from trusted partners such as CAE to address growing efficiency gaps, pilot capability gaps, evolving regulatory and training environments, and on-going aircraft programs. Additionally, CAE offers business jet pilots one of the most advanced, respected and accessible training programs in the industry, covering a wide spectrum of business aircraft. Partnering with CAE gives immediate access to a world-wide fleet of simulators, courses, programs and instruction capabilities, and allows them flexibility in pursuing fleet training options that suit their business.

Our pilot training system, CAE Rise, is well positioned to elevate the pilot training experience. This system enables instructors to deliver training in accordance with airlines’ Standard Operating Procedures and enables instructors to objectively assess pilot competencies using live data during training sessions. Furthermore, CAE Rise augments instructors’ capability to identify pilot proficiency gaps and evolve airline training programs to the most advanced aviation safety standards, including Advanced Qualification Program and Evidence Based Training methodologies.

Expected long-term secular global growth in air travel

The secular growth in air travel results in long-term demand for flight, cabin, maintenance and ground personnel, which in turn drives demand for training and airline operations digital solutions.

In commercial aviation, as per the International Air Transport Association (IATA), global air passenger demand, measured by revenue passenger-kilometers (RPKs), has shown an increase of 5% for calendar 2025 compared to calendar 2024. In calendar 2025, international traffic experienced a 7% increase compared to the previous year, with capacity rising by 7%. Domestic traffic for calendar 2025 grew by 2% compared to calendar 2024, while capacity rose by 3%.

In air cargo, global demand, measured by cargo tonne-kilometers, increased 3% for calendar 2025 compared to calendar 2024 per IATA. International air cargo demand increased 4%, with consistently strong performance in Asia-Pacific.

In business aviation, flight activity has stabilized at structurally higher levels than 2019, reflecting a normalized market following the post-pandemic surge in demand. Business jet operations for calendar year 2025, as reported by the FAA, were up 4% over 2024. European business aviation operations as reported by Eurocontrol were up 2% in calendar 2025 compared to 2024.

However, in the near-term, elevated oil prices, high inflation, geopolitical tensions, the continuing military hostilities in various regions in the world, and industry supply chain issues are causing disruptions to our Civil operations.

Expected long-term growth, including new aircraft deliveries and renewal of the active fleet of commercial and business aircraft

As an integrated training solutions provider, our long-term growth is closely tied to the active commercial and business aircraft fleet. Both commercial and business aviation fleets are expected to grow over the next decade, with significant backlogs reported by all OEMs. Short and medium-term growth in aircraft fleets may experience pressure as OEMs face supply, capacity, and certification challenges in delivering aircraft.

Major business jet OEMs continue to deliver new aircraft against record backlogs, while advancing the introduction of new and upgraded platforms across the light, midsize, and large-cabin segments, including next-generation long-range business jets.

Our business aviation training network, comprehensive suite of training programs, key long-term OEM partnerships and ongoing network investments, position us well to effectively address the training demand arising from continued fleet growth and the entry‑into‑service of new aircraft programs.

Our strong competitive moat in the aviation market, as defined by our extensive global training network, best-in-class instructors, comprehensive training programs and strength in training partnerships with airlines and business aircraft operators, allows us to effectively address training needs that arise from a growing active fleet of aircraft.

We are well positioned to leverage our technology leadership and expertise, including CAE 7000XR Series FFSs, CAE 400XR, 500XR, and 600XR Series Flight Training Devices and CAE Simfinity™ ground school solutions, in delivering training equipment solutions that address the growing training needs of airlines, business jet operators, helicopter operators and now Advanced Air Mobility.

Demand for trained aviation professionals

Demand for trained aviation professionals is driven by air traffic growth, pilot retirements and by the number of aircraft deliveries. The expansion of global economies and operator aircraft fleets have resulted in demand for qualified aviation professionals to support the expected growth of the commercial and business aviation markets. We are well positioned in the training products and services market to address operators’ training requirements.

CAE Financial Report 2026 I 7

Management’s Discussion and Analysis

In June 2025, we released our 2025 Aviation Talent Forecast in which we estimated a global requirement of nearly 1.5 million new aviation professionals over the next ten years to sustain growth in civil aviation. In the commercial aviation domain, the projections show demand for almost 1.3 million new aviation professionals, including 267,000 pilots, 347,000 maintenance technicians and 678,000 cabin crew professionals. The business aviation segment will need 102,000 professionals, including 33,000 pilots and 69,000 maintenance technicians.

Complexity of airline operations digital solutions

Airlines need to closely manage their operations which come with daily challenges. To help optimize these operations, we offer a suite of airline operations digital products. This suite of products provides solutions for airline operations including training management, crew management, flight management, airport management, in-flight services management and operations control. With our integrated platform, the operations control desk now has a single environment to communicate, providing insights and predictions on possible disruption and delays allowing airlines to reduce operating costs and enhancing customer satisfaction.

The benefits for our airline management solution include reduced fuel and carbon emissions for both regular and irregular operations. Our crew and airport management solution decreases disruption related crew costs and improves staff utilization. Finally, our movement management solution decreases delay and cancellation costs for airlines.

Air traffic services

Air traffic services represent an adjacent growth opportunity for CAE, driven by sustained air traffic growth and the need to replace an aging global air traffic controller workforce. Our 2025 Aviation Talent Forecast estimates demand for approximately 71,000 new air traffic controllers over the next ten years, highlighting the long‑term need for training capacity in this sector. Leveraging our simulation expertise and training delivery capabilities, we are selectively developing our air traffic services offering as a complementary extension of our civil aviation training business.

DEFENSE AND SECURITY MARKET

Defense and Security addresses the critical needs of its customers operating in progressively complex environments. The ever‑changing global landscape requires Canada, the U.S. and their allies to prepare for the possibility of peer threats across increasingly integrated, multi‑domain operations in air, land, sea, space and cyber. Aligned with the priorities of Canadian, U.S., and allied national defence strategies, we leverage our core training and simulation expertise with advanced technologies to deliver innovative and scalable solutions that address military training and modernization needs and enhanced mission readiness requirements.

Our customers leverage synthetic environments and next-generation situational awareness to ensure mission success through planning, rehearsal and analysis in complex, multi-domain environments. Leveraging our integrated training systems and global presence, we work with the military, government, and industry to deliver tailored solutions at the pace and point of need. From mixed‑reality training devices and high‑fidelity full‑mission simulators to advanced maritime training and mission support solutions, we support critical personnel, from aircrews and naval operators to maintenance technicians on approximately 80 different platforms in multiple domains. Our extensive suite of simulation‑based technologies, coupled with advanced capabilities like biometrics, real-time feedback, artificial intelligence (AI) and adaptive rehearsal scenarios enhances training to deliver scalable and integrated solutions to critical personnel.

Utilizing the strength and expertise that spans our global business, our solutions range from turnkey training centres to tailored live, virtual, and constructive solutions at government-owned locations. We are everywhere our customers need us to be with a global network and local expertise to deliver training efficacy at all proficiency levels. At the CAE Dothan Training Center in Alabama, U.S. Army fixed-wing candidates enter initial training and the U.S. Air Force (USAF) Introductory Flight Training – Rotary-Wing program provides critical flight training to USAF student pilots. We also provide basic and advanced flight training at NATO Flight Training Centres across multiple sites in Canada. Going forward and answering the needs of Royal Canadian Air Force (RCAF), the Future Aircrew Training (FAcT) program will unify all phases of pilot and aircrew training under a single, modernized solution. Delivered through SkyAlyne, a joint venture between CAE and KF Aerospace, the program offers live flight, simulated, and ground school training, ensuring standardized, high-quality instruction for all aircrew roles. By streamlining the training and minimizing transition risks, CAE's integrated approach also enables the rapid adoption of new technologies and methodologies, supporting the RCAF's future operational readiness. Leveraging our expertise and strategic partnerships, we also support training in Europe with the International Flight Training School in Italy, a joint venture with Leonardo, along with providing ab initio training for the German Air Force at CAE’s Bremen Training Centre in Germany and a site in Montpellier, France.

As a collaborative partner of industry and government, we enhance customer readiness and enable modernization by integrating training systems across platforms, domains and locations.

CAE continues to expand its multi-domain training and sustainment presence through naval training programs for the Royal Canadian Navy and allied navies in Sweden and Australia, operational airborne sensor deliveries of CAE's world-leading magnetic anomaly MAD-XR ASW sensor, and continued F/A-18 fighter fleet sustainment and mission support services. Together, these offerings strengthen operational readiness across air and maritime domains and support evolving customer requirements in increasingly complex and contested operating environments.

8 I CAE Financial Report 2026

Management’s Discussion and Analysis

New generational platforms and programs are also rapidly transforming global training and require adaptive approaches to advance defence force readiness. We are essential partners for programs like FAcT through SkyAlyne, the MQ-9B SkyGuardian® Remotely Piloted Aircraft Systems with General Atomics Aeronautical Systems, Inc. as well as the Bell Textron’s tiltrotor aircraft the MV-75 for the U.S. Army Future Long Range Assault Aircraft. CAE has also been identified as a strategic partner to the Government of Canada to work with the RCAF to design and co-develop the Future Fighter Lead-in Training program. We continue to create opportunities through partnerships with Lockheed Martin on global C-130 training solutions, Boeing to support mission-critical platforms like the P-8 and CH-47 and our role as the Authorized Training Provider for Bombardier’s Global 6500 supporting the U.S. Army's High Accuracy Detection and Exploitation System. The increasing complexities of contracts and systems drive the industry toward collaboration as we continue to leverage our strategic relationships and culture of innovation to meet the ever-changing market landscape.

The mission readiness of defence and security forces increasingly requires connecting customers, platforms and locations at scale in a secured, multi‑domain environment for training and rehearsal. A real-time enterprise network, like the USAF Simulators Common Architecture Requirements and Standards (SCARS), is critical in enhancing operational test and training infrastructure and supporting distributed mission training and multi-domain operations. We lead the integration and standardization of aircraft simulators on SCARS to operate and train together in a strict cyber secure environment. Leveraging our expertise on SCARS and other programs like Flight School Training Support Services for the U.S. Army and the Platforms and Systems Training Contract for the Royal Australian Navy, we address the vast complexity and scale of digital environments, empower decision-makers at every level and advance the rigour of data‑driven capabilities and assessments so that our customers stay ahead of the evolving security landscape.

We believe the Defense and Security segment is positioned as a strategic partner to achieve transformational digital training solutions, next-generation situational awareness, and multi-domain operations. We estimate our addressable defence market across all five domains to be more than $20 billion.

Market drivers

Demand for training and operational support solutions in the defence and security markets is driven by the following:

–Accelerated defence spending as a reflection of heightened need for readiness and preparedness in light of geopolitical tensions and focus on sovereign capability;

–Expected stable demand on enduring platforms and increased opportunities on next-generation systems integrating training and operational technologies;

–Maximization of efficiencies through outsourced training and support services;

–Increased industry competition straining military aviation recruitment, training and retention;

–Increased demand for integrated, network training systems to support multi-domain conflict readiness and crew and collective training;

–Expanded utilization of synthetic environments to support efficacy, reduce costs and lower environmental impact.

Accelerated defence spending as a reflection of heightened need for readiness and preparedness in light of geopolitical tensions and focus on sovereign capability

According to the International Institute for Strategic Studies, global military expenditures grew to US$2.6 trillion in 2025, an increase of 3% when adjusting for inflation. In Canada, defence expenditures reached US$31.2 billion in 2025 or 2% of the GDP, which is expected to account for 5% by 2035, and U.S. defence spending reached US$921 billion. European defence expenditures reached US$563 billion, with Germany's increased spending driving the region's growth.

The European Union (EU) is progressing its Readiness 2030 (formerly ReArm Europe) agenda to mobilize up to €800 billion. The EU Commission announced in July 2025 the activation of the national escape clause of the Stability and Growth Pact, for four years, to offer additional budgetary space for defence spending, within the EU fiscal rules. Moreover, Security Action for Europe (SAFE) mechanism, which supports Readiness 2030 with €150 billion has proceeded to its next stage, as the approval of joint procurement projects concluded in mid-February 2026 moving on to the disbursement phase. Canada's defence industry will also benefit from its participation to the EU SAFE mechanism.

In the Middle East and North African regions, defence spending grew by 5%, reaching US$219 billion (excluding United States' Foreign Military Financing). Asia's aggregate spending was US$573 billion, up by 6% .

Expected stable demand on enduring platforms and increased opportunities on next-generation systems integrating training and operational technologies

We maintain a robust recurring business from our strong presence in enduring platforms, including long-term service contracts. Defence forces in mature markets are maximizing the potential of their existing platforms through upgrades, updates, and life extension programs of existing assets, which presents opportunities for simulator upgrades and training support services. Additionally, there is significant demand for enduring platforms such as the C-130, P-8, F-16, C295, MH-60R, NH90 and MQ-9 in global defence markets, necessitating new training systems and services. As defence forces gear up for next-generation platforms and increasingly engage in collaborative operations between manned and unmanned systems, opportunities continue to expand. Our global footprint with key defence customers and strategic partnerships with OEM providers such as Boeing, Lockheed Martin, Saab, Leonardo and Bell Textron uniquely position us to support next-generation platforms and facilitate a smooth transition from current to future training frameworks.

CAE Financial Report 2026 I 9

Management’s Discussion and Analysis

Maximization of efficiencies through outsourced training and support services

Defence forces and governments are continually exploring ways to improve efficiency and bolster readiness, enabling active‑duty personnel to concentrate on operational needs. A notable trend among defence forces is the outsourcing of various training and operational support services, including military training through flight training organizations. This strategy enhances throughput, making training programs more effective and scalable to accommodate a greater number of trainees. We expect this trend to persist, aligning with our long‑term strategy to expand recurring service offerings. We believe governments will increasingly turn to industry partners for training and operational support solutions, seeking faster delivery, reduced capital investment requirements, and improved readiness levels.

Increased industry competition straining military aviation recruitment, training and retention

The strong demand from the civil commercial and business aviation sectors have affected the recruitment, training and retention of military pilots. This challenge has prompted defence forces to explore various initiatives aimed at mitigating the pilot shortage, including modernization efforts focused on innovative training methods. Consequently, defence forces are evaluating the possibility of outsourcing instructor pilot roles and incorporating new technologies that improve the effectiveness and efficiency of pilot training. This approach not only increases training capacity but also opens new opportunities for our products, services and solutions.

Increased demand for integrated, network training systems to support multi-domain conflict readiness and crew and collective training

The changing geopolitical landscape and the need to prepare for a peer adversary, coupled with constraints in personnel and budget, have led defence forces worldwide to consider outsourcing the development, management and delivery of the training systems necessary for today’s complex operational environments. Increasingly, defence forces are considering a more integrated and holistic training approach across all domains. Defence forces seek to enhance efficiency, achieve cost savings, and foster integration and immersive training across multi-domain operations. As a training systems integrator, we utilize our leadership expertise to enhance enterprise training networks and provide comprehensive solutions that improve operational test and training infrastructure and supporting distributed mission training and multi‑domain operations.

Expanded utilization of synthetic environments to support efficacy, reduce costs and lower environmental impact

A key factor driving our expertise and capabilities is the growing adoption of synthetic environments across the defence community. More defence forces and governments are integrating synthetic environments into their training strategies to improve training effectiveness, reduce operational demands on platforms, mitigate risks associated with training and substantially lower costs. Additionally, synthetic training solutions help decrease our customers’ environmental impact by offering a safer alternative for multi‑domain training, significantly reducing the carbon footprint compared to traditional live training. Furthermore, when combined with artificial intelligence (AI) and cloud computing, these digitally immersive synthetic environments serve as valuable tools for planning, course of action analysis, and mission support.

10 I CAE Financial Report 2026

Management’s Discussion and Analysis

4. FOREIGN EXCHANGE

We report all dollar amounts in Canadian dollars. We value assets, liabilities and transactions that are measured in foreign currencies using various exchange rates as required by IFRS.

The tables below show the variations of the closing and average exchange rates for the two main foreign currencies in which we operate.

We used the closing foreign exchange rates below to value our assets, liabilities and adjusted backlog in Canadian dollars at the end of each of the following periods:


			Increase /
As at March 31	2026	2025	(decrease)
U.S. dollar (US$ or USD)	1.39	1.44	(3	%)
Euro (€ or EUR)	1.61	1.55	4	%

We used the average quarterly and yearly foreign exchange rates below to value our revenues and expenses throughout the following periods:


			Increase /				Increase /
	Q4-2026	Q4-2025	(decrease)		FY2026	FY2025	(decrease)
U.S. dollar (US$ or USD)	1.37	1.43	(4	%)	1.38	1.39	(1	%)
Euro (€ or EUR)	1.61	1.51	7	%	1.60	1.49	7	%

For the three months ended March 31, 2026, the effect of translating the results of our foreign operations into Canadian dollars resulted in a decrease in revenue of $17.3 million and a decrease in adjusted segment operating income of $2.7 million, when compared to fiscal 2025. For fiscal 2026, the effect of translating the results of our foreign operations into Canadian dollars resulted in an increase in revenue of $33.1 million and an increase in adjusted segment operating income of $4.9 million, when compared to fiscal 2025. We calculated this by translating the current year’s foreign currency revenue and adjusted segment operating income of our foreign operations using the average monthly exchange rates from the previous year and comparing these adjusted amounts to our current year reported results. You will find more details about our foreign exchange exposure and hedging strategies in Section 9. "Business risk and uncertainty" of this MD&A. A sensitivity analysis for foreign currency risk is included in Note 31 of our consolidated financial statements.

CAE Financial Report 2026 I 11

Management’s Discussion and Analysis

5. CONSOLIDATED RESULTS

5.1 Results from operations – fourth quarter of fiscal 2026


(amounts in millions, except per share amounts)		Q4-2026	Q3-2026	Q2-2026	Q1-2026	Q4-2025

Revenue	$	1,326.7	1,252.1	1,236.6	1,098.6	1,275.4
Cost of sales	$	925.7	889.9	917.3	790.3	884.7
Gross profit	$	401.0	362.2	319.3	308.3	390.7
As a % of revenue(1)	%	30.2	28.9	25.8	28.1	30.6
Research and development expenses	$	44.3	26.0	37.0	36.7	21.4
Selling, general and administrative expenses	$	154.9	161.7	148.3	159.4	164.1
Other (gains) and losses	$	9.9	4.0	(5.4)	—	(9.6)
Share of after-tax profit of equity accounted investees	$	(19.9)	(25.3)	(15.9)	(21.6)	(25.1)


Restructuring, integration and acquisition costs	$	84.4	—	—	—	—


Operating income	$	127.4	195.8	155.3	133.8	239.9
As a % of revenue(1)	%	9.6	15.6	12.6	12.2	18.8


Finance expense – net	$	46.5	54.1	56.9	54.6	56.5
Earnings before income taxes	$	80.9	141.7	98.4	79.2	183.4
Income tax expense	$	6.6	29.6	22.3	19.0	45.2
As a % of earnings before income taxes
(effective tax rate)	%	8	21	23	24	25


Net income	$	74.3	112.1	76.1	60.2	138.2
Attributable to:



Equity holders of the Company	$	73.1	108.9	73.9	57.2	135.9
Non-controlling interests	$	1.2	3.2	2.2	3.0	2.3
	$	74.3	112.1	76.1	60.2	138.2
EPS attributable to equity holders of the Company
Basic and diluted	$	0.23	0.34	0.23	0.18	0.42


Adjusted segment operating income(1)	$	211.8	195.8	155.3	147.8	258.8
Adjusted net income(1)	$	136.1	108.9	73.9	67.5	149.6
Adjusted EPS(1)	$	0.42	0.34	0.23	0.21	0.47

Revenue was $1,326.7 million this quarter, $51.3 million or 4% higher compared to the fourth quarter of fiscal 2025.

Revenue variances by segment were as follows:


(amounts in millions)
Three months ended March 31		2026		2025	Variance $		Variance %
Civil Aviation	$	746.7	$	728.4	$	18.3	3	%
Defense and Security		580.0		547.0		33.0	6	%
Revenue	$	1,326.7	$	1,275.4	$	51.3	4	%

You will find more details in Section 6 "Results by segment" of this MD&A.

12 I CAE Financial Report 2026

Management’s Discussion and Analysis

Gross profit was $401.0 million this quarter, $10.3 million or 3% higher compared to the fourth quarter of fiscal 2025. Gross profit variances by segment were as follows:


(amounts in millions)
Three months ended March 31		2026		2025	Variance $		Variance %
Civil Aviation	$	257.6	$	272.4	$	(14.8)	(5	%)
Defense and Security		143.4		118.3		25.1	21	%
Gross profit	$	401.0	$	390.7	$	10.3	3	%

You will find more details in Section 6 "Results by segment" of this MD&A.

Operating income was $127.4 million this quarter, $112.5 million or 47% lower compared to the fourth quarter of fiscal 2025. This period's operating income included restructuring costs of $84.4 million. Last year's operating income included costs related to shareholder matters of $10.6 million and executive management transition costs of $8.3 million. Operating income variances by segment were as follows:


(amounts in millions)
Three months ended March 31		2026		2025	Variance $		Variance %
Civil Aviation	$	88.0	$	197.4	$	(109.4)	(55	%)
Defense and Security		39.4		42.5		(3.1)	(7	%)
Operating income	$	127.4	$	239.9	$	(112.5)	(47	%)

You will find more details on the reconciliation between operating income and adjusted segment operating income in Section 11.3 "Non-IFRS measure reconciliations" of this MD&A.

Adjusted segment operating income was $211.8 million this quarter, $47.0 million or 18% lower compared to the fourth quarter of fiscal 2025. Adjusted segment operating income variances by segment were as follows:


(amounts in millions)
Three months ended March 31		2026		2025	Variance $		Variance %
Civil Aviation	$	152.4	$	208.4	$	(56.0)	(27	%)
Defense and Security		59.4		50.4		9.0	18	%
Adjusted segment operating income	$	211.8	$	258.8	$	(47.0)	(18	%)

You will find more details in Section 6 "Results by segment" of this MD&A.

Finance expense – net was $46.5 million this quarter, $10.0 million or 18% lower compared to the fourth quarter of fiscal 2025. The decrease was mainly due to lower finance expense on long-term debt due to a decreased level of borrowings during the period.

Income tax expense this quarter amounted to $6.6 million, representing an effective tax rate of 8%, compared to an effective tax rate of 25% last year. The adjusted effective tax rate on our adjusted net income was 17% this quarter compared to 25% in the fourth quarter of fiscal 2025. The decrease in the adjusted effective tax rate was mainly attributable to the mix of income from various jurisdictions.

CAE Financial Report 2026 I 13

Management’s Discussion and Analysis

5.2 Results from operations – fiscal 2026


(amounts in millions, except per share amounts)		FY2026	FY2025

Revenue	$	4,914.0	4,707.9
Cost of sales	$	3,523.2	3,407.8
Gross profit	$	1,390.8	1,300.1
As a % of revenue(1)	%	28.3	27.6
Research and development expenses	$	144.0	123.2
Selling, general and administrative expenses	$	624.3	565.4
Other (gains) and losses	$	8.5	(13.3)
Share of after-tax profit of equity accounted investees	$	(82.7)	(88.3)


Restructuring, integration and acquisition costs	$	84.4	56.5
Gain on remeasurement of previously held equity interest	$	—	(72.6)

Operating income	$	612.3	729.2
As a % of revenue(1)	%	12.5	15.5


Finance expense – net	$	212.1	215.5
Earnings before income taxes	$	400.2	513.7
Income tax expense	$	77.5	98.7
As a % of earnings before income taxes (effective tax rate)	%	19	19


Net income	$	322.7	415.0
Attributable to:



Equity holders of the Company	$	313.1	405.3
Non-controlling interests	$	9.6	9.7
	$	322.7	415.0
EPS attributable to equity holders of the Company
Basic	$	0.98	1.27
Diluted	$	0.97	1.27




Adjusted segment operating income(1)	$	710.7	732.0
Adjusted net income(1)	$	386.4	385.5
Adjusted EPS(1)	$	1.20	1.21

Revenue was $4,914.0 million this year, $206.1 million or 4% higher compared to last year. Revenue variances by segment were as follows:


(amounts in millions)
Years ended March 31		2026		2025	Variance $		Variance %
Civil Aviation	$	2,741.6	$	2,709.3	$	32.3	1	%
Defense and Security		2,172.4		1,998.6		173.8	9	%
Revenue	$	4,914.0	$	4,707.9	$	206.1	4	%

You will find more details in Section 6 "Results by segment" of this MD&A.

Gross profit was $1,390.8 million this year, $90.7 million or 7% higher compared to last year. Gross profit variances by segment were as follows:


(amounts in millions)
Years ended March 31		2026		2025	Variance $		Variance %
Civil Aviation	$	890.2	$	883.6	$	6.6	1	%
Defense and Security		500.6		416.5		84.1	20	%
Gross profit	$	1,390.8	$	1,300.1	$	90.7	7	%

You will find more details in Section 6 "Results by segment" of this MD&A.

14 I CAE Financial Report 2026

Management’s Discussion and Analysis

Operating income was $612.3 million this year, $116.9 million or 16% lower compared to last year. This period's operating income included executive management transition costs of $14.0 million and restructuring, integration and acquisition costs of $84.4 million. Last year's operating income included the gain on fair value remeasurement of SIMCOM of $72.6 million, costs related to shareholder matters of $10.6 million, executive management transition costs of $8.3 million and restructuring, integration and acquisition costs of $56.5 million. Operating income variances by segment were as follows:


(amounts in millions)
Years ended March 31		2026		2025	Variance $		Variance %
Civil Aviation	$	437.9	$	605.3	$	(167.4)	(28	%)
Defense and Security		174.4		123.9		50.5	41	%
Operating income	$	612.3	$	729.2	$	(116.9)	(16	%)

You will find more details on the reconciliation between operating income and adjusted segment operating income in Section 11.3 "Non-IFRS measure reconciliations" of this MD&A.

Adjusted segment operating income was $710.7 million this year, $21.3 million or 3% lower compared to last year. Adjusted segment operating income variances by segment were as follows:


(amounts in millions)
Years ended March 31		2026		2025	Variance $		Variance %
Civil Aviation	$	510.5	$	581.5	$	(71.0)	(12	%)
Defense and Security		200.2		150.5		49.7	33	%
Adjusted segment operating income	$	710.7	$	732.0	$	(21.3)	(3	%)

You will find more details in Section 6 "Results by segment" of this MD&A.

Finance expense – net was $212.1 million this year, $3.4 million or 2% lower compared to last year. The decrease was mainly due to lower finance expense on long-term debt due to a decreased level of borrowings during the period aligned with our deleveraging undertakings. The decrease was partially offset by additional finance expense on borrowings to finance the SIMCOM transaction in the third quarter of last year and higher finance expense on lease liabilities in support of training network expansions.

Income tax expense this year amounted to $77.5 million, representing an effective tax rate of 19% compared to an effective tax rate of 19% last year. The adjusted effective tax rate on our adjusted net income was 21% this year compared to 23% last year. The decrease in the adjusted effective tax rate was mainly attributable to the mix of income from various jurisdictions.

On July 4, 2025, a reconciliation bill titled “An Act to provide for reconciliation pursuant to title II of H. Con. Res 14” was signed into U.S. federal law. The reconciliation bill addresses numerous spending policies and also makes several adjustments to current tax law, including an increase to the base erosion and anti-abuse tax (BEAT) rate starting in calendar 2026, reinstating full deduction of U.S. qualified R&D expenditures starting in calendar 2025, permanently restoring the ability for immediate deduction of new investments in certain qualified depreciable assets made after January 19, 2025, and providing a higher deduction limitation for net interest expense starting in calendar 2025. This enactment had no material impact on our overall income tax expense nor on the effective tax rate.

CAE Financial Report 2026 I 15

Management’s Discussion and Analysis

5.3 Restructuring, integration and acquisition costs


	FY2026		FY2025		Q4-2026		Q4-2025
Impairment of non-financial assets – net	$	58.9	$	5.2	$	58.9	$	—
Severances and other employee related costs	13.2		33.9		13.2		—
Integration and acquisition costs	—		11.5		—		—
Other costs	12.3		5.9		12.3		—


Total restructuring, integration and acquisition costs	$	84.4	$	56.5	$	84.4	$	—

Year ended March 31, 2026

On November 11, 2025, we announced a transformation plan to simplify our structure, sharpen our focus and strengthen execution. The transformation focuses on streamlining our organizational structure, assessing our portfolio, tightening our capital discipline, and optimizing our operational performance. As a result of these measures, we expect to record approximately $200 million to $250 million of total expenses for this transformation plan, with the majority to be incurred in fiscal 2026 and fiscal 2027, and realize annual recurring savings of approximately $125 million to $150 million through fiscal 2030. In fiscal 2026, costs related to this program totalled $84.4 million and included $58.9 million of impairment of non-financial assets and $13.2 million of severances and other employee related costs. Impairment of non‑financial assets included impairments of capitalized development costs principally within Civil Aviation of $31.9 million related to technologies no longer aligned with the Company’s strategic focus, inventory write‑downs of $9.7 million within Civil Aviation and $8.0 million within Defense and Security associated with revised product designs and manufacturing requirements and the Company’s portfolio simplification, as well as impairments of simulators within Civil Aviation of $9.3 million.

Year ended March 31, 2025

During the fourth quarter of fiscal 2024, we announced that we would streamline our operating model and portfolio, optimize our cost structure and create efficiencies. This restructuring program was completed in the second quarter of fiscal 2025. In fiscal 2025, costs related to this program totalled $40.6 million and included $29.4 million of severances and other employee related costs and $5.2 million of impairment of non-financial assets. Impairment of non-financial assets primarily included the impairment of property, plant and equipment, intangible assets and right‑of‑use assets related to the termination of certain product offerings within the Civil Aviation segment.

In the second quarter of fiscal 2025, the integration activities associated with the fiscal 2022 acquisition of Sabre’s AirCentre airline operations portfolio (AirCentre) were completed. For the year ended March 31, 2025, restructuring, integration and acquisition costs associated with AirCentre amounted to $15.9 million.

5.4 Executive management transition costs

In November 2024, the Company announced its Chief Executive Officer (CEO) succession plan whereby the then-current CEO, Marc Parent, would leave the Company at the Annual and Special Meeting of Shareholders held on August 13, 2025. The CEO's terms of departure were finalized during the fourth quarter of fiscal 2025 and included non-compete and non-solicitation covenants, as well as other terms that were generally consistent with the previously agreed‑upon employment arrangement which remained in force until the departure date.

On June 2, 2025, we announced that at the conclusion of a rigorous global selection process, the Board, on the advice of the Company’s CEO Search Committee, unanimously appointed Matthew Bromberg as President and Chief Executive Officer of CAE, effective August 13, 2025. Mr. Bromberg joined CAE on June 16, 2025 as Incoming President and CEO, and worked closely with Mr. Parent throughout the transition to ensure continuity and a smooth handover of leadership responsibilities. Concurrently with Mr. Bromberg’s appointment, and following their election at the 2025 Annual and Special Meeting of Shareholders, Calin Rovinescu became Executive Chairman of the Board and Sophie Brochu became Lead Independent Director.

During fiscal 2026, the Company incurred $14.0 million (2025 – $8.3 million) of executive management transition costs, including $11.4 million (2025 – $6.3 million) related to the CEO's terms of departure, representing accrued expenses to the then-current CEO, and $2.6 million (2025 – $2.0 million) of other costs. These costs are recorded in selling, general and administrative expenses. The Company has not incurred any significant additional executive management transition costs subsequent to the first quarter of fiscal 2026.

5.5 Shareholder matters

In December 2024, we received a public letter from shareholder Browning West, LP requesting that CAE's Board engage with them on the recruitment process to identify our next CEO. In February 2025, we announced changes to our Board that included the appointment of four new directors and the concurrent retirement of four directors, including the Chair of the Board. In connection with these changes, we entered into a customary nomination rights agreement with the Caisse de dépôt et placement du Québec, one of our largest shareholders, and a customary cooperation and standstill agreement with Browning West, LP.

During fiscal 2025, we incurred one-time costs of approximately $10.6 million related to the above shareholder matters, consisting primarily of external advisory fees. These costs are recorded in selling, general and administrative expenses.

16 I CAE Financial Report 2026

Management’s Discussion and Analysis

5.6 Consolidated adjusted order intake and adjusted backlog


(amounts in millions)	Civil Aviation				Defense and Security				Total
Three months ended March 31	2026		2025		2026		2025		2026		2025
Obligated backlog(1), beginning of period	$	7,546.6	$	8,089.4	$	5,627.1	$	5,436.3	$	13,173.7	$	13,525.7
'+ adjusted order intake(1)	965.2		741.8		646.1		595.7		1,611.3		1,337.5
- revenue	(746.7)		(728.4)		(580.0)		(547.0)		(1,326.7)		(1,275.4)
+ / - adjustments	(4.8)		62.2		39.3		78.5		34.5		140.7
Obligated backlog(1), end of period	$	7,760.3	$	8,165.0	$	5,732.5	$	5,563.5	$	13,492.8	$	13,728.5
Joint venture backlog(1) (all obligated)	676.9		681.6		3,357.7		3,681.7		4,034.6		4,363.3
Unfunded backlog and options(1)	—		—		1,731.2		2,050.4		1,731.2		2,050.4
Adjusted backlog(1)	$	8,437.2	$	8,846.6	$	10,821.4	$	11,295.6	$	19,258.6	$	20,142.2


(amounts in millions)	Civil Aviation				Defense and Security				Total
Years ended March 31	2026		2025		2026		2025		2026		2025
Obligated backlog(1), beginning of period	$	8,165.0	$	6,107.5	$	5,563.5	$	3,407.8	$	13,728.5	$	9,515.3
'+ adjusted order intake(1)	2,641.8		3,717.4		2,384.4		3,986.1		5,026.2		7,703.5
- revenue	(2,741.6)		(2,709.3)		(2,172.4)		(1,998.6)		(4,914.0)		(4,707.9)
+ / - adjustments	(304.9)		1,049.4		(43.0)		168.2		(347.9)		1,217.6
Obligated backlog(1), end of period	$	7,760.3	$	8,165.0	$	5,732.5	$	5,563.5	$	13,492.8	$	13,728.5
Joint venture backlog(1) (all obligated)	676.9		681.6		3,357.7		3,681.7		4,034.6		4,363.3
Unfunded backlog and options(1)	—		—		1,731.2		2,050.4		1,731.2		2,050.4
Adjusted backlog(1)	$	8,437.2	$	8,846.6	$	10,821.4	$	11,295.6	$	19,258.6	$	20,142.2

The book-to-sales ratio for the quarter was 1.21x. The ratio for the last 12 months was 1.02x.

You will find more details in Section 6 "Results by segment" of this MD&A.

CAE Financial Report 2026 I 17

Management’s Discussion and Analysis

6. RESULTS BY SEGMENT

We manage our business and report our results in two segments:

–Civil Aviation;

–Defense and Security.

The method used for the allocation of assets jointly used by the operating segments and costs and liabilities jointly incurred (mostly corporate costs) between operating segments is based on the level of consumption when determinable and measurable, otherwise the allocation is based on a proportion of each segment’s cost of sales and revenue.

Unless otherwise indicated, elements within our segment revenue and adjusted segment operating income analysis are presented in order of magnitude.

6.1 Civil Aviation

FINANCIAL RESULTS


(amounts in millions)		FY2026	FY2025	Q4-2026	Q3-2026	Q2-2026	Q1-2026	Q4-2025
Revenue	$	2,741.6	2,709.3	746.7	717.2	670.0	607.7	728.4
Gross profit	$	890.2	883.6	257.6	232.9	198.6	201.1	272.4
As a % of revenue(1)	%	32.5	32.6	34.5	32.5	29.6	33.1	37.4
Operating income	$	437.9	605.3	88.0	141.8	108.7	99.4	197.4
Adjusted segment operating income(1)	$	510.5	581.5	152.4	141.8	108.7	107.6	208.4
As a % of revenue(1)	%	18.6	21.5	20.4	19.8	16.2	17.7	28.6
Depreciation and amortization	$	351.0	312.4	89.3	88.1	86.7	86.9	84.3
Property, plant and equipment
expenditures	$	163.7	229.7	23.5	29.0	48.3	62.9	62.6
Intangible asset expenditures	$	60.0	66.6	16.7	9.7	15.9	17.7	13.9
Invested capital(1)	$	5,766.5	5,894.3	5,766.5	5,691.8	5,913.9	5,838.0	5,894.3
Adjusted backlog(1)	$	8,437.2	8,846.6	8,437.2	8,227.8	8,477.1	8,379.8	8,846.6

Supplementary non-financial information
Simulator equivalent unit		301	286	305	305	297	298	298
FFSs in CAE's network		371	363	371	373	369	367	363
Utilization rate	%	70	74	73	71	64	71	75
FFS deliveries		52	61	17	15	12	8	15

Revenue was $746.7 million this quarter, $18.3 million or 3% higher compared to the fourth quarter of fiscal 2025. The increase compared to the fourth quarter of fiscal 2025 was mainly due to higher revenue recognized from simulator sales, driven by higher deliveries combined with a more favourable mix of product solutions, and higher revenue from used simulator sales across our network, predominantly structured as finance lease arrangements. The increase was partially offset by lower utilization on reduced initial training demand in business training services and lower revenue from airline operations digital solutions.

Revenue was $2,741.6 million this year, $32.3 million or 1% higher compared to last year. The increase compared to last year was mainly due to the consolidation into our results of SIMCOM following the increase in our ownership stake in the third quarter of last year and higher revenue from used simulator sales across our network, predominantly structured as finance lease arrangements and reflecting the timing of discrete asset dispositions during the period. The increase was partially offset by lower revenue recognized from simulator sales, driven by lower deliveries, and lower utilization on reduced initial training demand in business and commercial training services.

Gross profit was $257.6 million this quarter, $14.8 million or 5% lower compared to the fourth quarter of fiscal 2025. The decrease was mainly due to a lower contribution from business training services, driven by lower utilization on reduced initial training demand and a lower contribution from airline operations digital solutions. The decrease was partially offset by a higher contribution from simulator sales driven by higher deliveries and a more favourable mix of product solutions.

18 I CAE Financial Report 2026

Management’s Discussion and Analysis

Gross profit was $890.2 million this year, $6.6 million higher compared to last year. The increase compared to last year was mainly due to the consolidation into our results of SIMCOM following the increase in our ownership stake in the third quarter of last year and a higher contribution from used simulator sales across our network, predominantly structured as finance lease arrangements and reflecting the timing of discrete asset dispositions during the period. The increase was partially offset by a lower contribution from business and commercial training services, driven by lower utilization on reduced initial training demand and higher depreciation and amortization costs following an intensive, multi-year deployment schedule to support organic training centre growth. The contribution from simulator sales remained stable with lower deliveries being offset by a more favourable mix of product solutions.

Adjusted segment operating income was $152.4 million this quarter, $56.0 million or 27% lower compared to the fourth quarter of fiscal 2025. The decrease compared to the fourth quarter of fiscal 2025 was mainly due to a lower contribution from business training services, driven by lower utilization on reduced initial training demand, higher credit-related charges on financial assets, a lower contribution from airline operations digital solutions, higher net research and development costs, including the impact of accelerated government contributions received last year, lower profitability in our joint ventures primarily due to the impacts from the military conflicts in the Middle East and a gain on disposal of property, plant and equipment recognized last year. The decrease was partially offset by a higher contribution from simulator sales driven by higher deliveries and a more favourable mix of product solutions.

Adjusted segment operating income was $510.5 million this year, $71.0 million or 12% lower compared to last year. The decrease compared to last year was mainly due to a lower contribution from business and commercial training services, driven by lower utilization on reduced initial training demand and higher depreciation and amortization costs following an intensive, multi-year deployment schedule to support organic training centre growth, higher selling, general and administrative expenses, higher credit‑related charges on financial assets and higher net research and development costs, including the impact of accelerated government contributions received last year. The decrease was partially offset by the consolidation into our results of SIMCOM following the increase in our ownership stake in the third quarter of last year and a higher contribution from used simulator sales across our network, predominantly structured as finance lease arrangements and reflecting the timing of discrete asset dispositions during the period. The contribution from simulator sales remained stable with lower deliveries being offset by a more favourable mix of product solutions.

You will find more details on the reconciliation between operating income and adjusted segment operating income in Section 11.3 "Non-IFRS measure reconciliations" of this MD&A.

Property, plant and equipment expenditures were $23.5 million this quarter and $163.7 million for the year. Growth capital expenditures were $16.0 million for the quarter and $117.0 million for the year. Maintenance capital expenditures were $7.5 million for the quarter and $46.7 million for the year.

Invested capital increased by $74.7 million compared to last quarter and decreased by $127.8 million compared to last year. The increase compared to last quarter was mainly due to a higher investment in non-cash working capital and movements in foreign exchange rates, partially offset by lower intangible assets and lower property, plant and equipment including impairment charges incurred related to the transformation plan.

The decrease compared to last year was mainly due to lower intangible assets, movements in foreign exchange rates and lower property, plant and equipment, partially offset by a higher investment in non-cash working capital.

Adjusted backlog


	Three months ended				Years ended
	March 31				March 31
(amounts in millions)	2026		2025		2026		2025
Obligated backlog(1), beginning of period	$	7,546.6	$	8,089.4	$	8,165.0	$	6,107.5
+ adjusted order intake(1)	965.2		741.8		2,641.8		3,717.4
- revenue	(746.7)		(728.4)		(2,741.6)		(2,709.3)
+ / - adjustments	(4.8)		62.2		(304.9)		1,049.4
Obligated backlog(1), end of period	$	7,760.3	$	8,165.0	$	7,760.3	$	8,165.0
Joint venture backlog(1) (all obligated)	676.9		681.6		676.9		681.6
Adjusted backlog(1)	$	8,437.2	$	8,846.6	$	8,437.2	$	8,846.6

Adjusted order intake included contracts for 20 FFSs sold in the quarter, bringing the FFS order intake for the fiscal year to 42 FFSs.

Fiscal 2026 adjustments were mainly due to contract cancellations and foreign exchange movements.

This quarter's book-to-sales ratio was 1.29x. The ratio for the last 12 months was 0.96x.

CAE Financial Report 2026 I 19

Management’s Discussion and Analysis

6.2 Defense and Security

FINANCIAL RESULTS


(amounts in millions)		FY2026	FY2025	Q4-2026	Q3-2026	Q2-2026	Q1-2026	Q4-2025
Revenue	$	2,172.4	1,998.6	580.0	534.9	566.6	490.9	547.0
Gross profit	$	500.6	416.5	143.4	129.3	120.7	107.2	118.3
As a % of revenue(1)	%	23.0	20.8	24.7	24.2	21.3	21.8	21.6
Operating income	$	174.4	123.9	39.4	54.0	46.6	34.4	42.5
Adjusted segment operating income(1)	$	200.2	150.5	59.4	54.0	46.6	40.2	50.4

As a % of revenue(1)	%	9.2	7.5	10.2	10.1	8.2	8.2	9.2
Depreciation and amortization	$	109.1	102.3	27.6	27.4	27.3	26.8	26.2
Property, plant and equipment
expenditures	$	124.1	126.5	19.2	21.6	39.3	44.0	46.4
Intangible asset expenditures	$	13.7	21.3	1.8	3.1	4.1	4.7	3.7
Invested capital(1)	$	1,971.6	1,991.3	1,971.6	2,004.0	2,096.9	2,062.2	1,991.3
Adjusted backlog(1)	$	10,821.4	11,295.6	10,821.4	10,966.1	11,160.0	11,104.3	11,295.6

Revenue was $580.0 million this quarter, $33.0 million or 6% higher compared to the fourth quarter of fiscal 2025. The increase compared to the fourth quarter of fiscal 2025 was mainly due to higher revenue in North America, reflecting increased activity on new program awards and the ramp up of recently awarded contracts in the U.S. and Canada.

Revenue was $2,172.4 million this year, $173.8 million or 9% higher compared to last year. The increase compared to last year was mainly due to higher revenue in North America, reflecting increased activity on new program awards and the ramp up of recently awarded contracts in the U.S. and Canada, and higher revenue from products recognized upon delivery. This was partially offset by the completion of certain lower margin U.S. programs.

Gross profit was $143.4 million this quarter, $25.1 million or 21% higher compared to the fourth quarter of fiscal 2025. The increase compared to the fourth quarter of fiscal 2025 was mainly due to higher profitability and activity on our contracts in the U.S. and Canada, reflecting a more favourable mix of product contracts, and operational efficiencies achieved through the completion of certain lower margin U.S. programs.

Gross profit was $500.6 million this year, $84.1 million or 20% higher compared to last year. The increase compared to last year was mainly due to higher profitability and activity on new higher margin program awards and the ramp up of recently awarded contracts in the U.S. and Canada, reflecting a more favourable mix of product contracts. The increase was also due to operational efficiencies achieved through the completion of certain lower margin U.S. programs.

Adjusted segment operating income was $59.4 million this quarter, $9.0 million or 18% higher compared to the fourth quarter of fiscal 2025. The increase compared to the fourth quarter of fiscal 2025 was mainly due to higher profitability and activity on our contracts in the U.S. and Canada, reflecting a more favourable mix of product contracts, and operational efficiencies achieved through the completion of certain lower margin U.S. programs. The increase was partially offset by higher net research and development expenses, including the impact of accelerated government contributions received last year, and higher selling, general and administrative expenses.

Adjusted segment operating income was $200.2 million this year, $49.7 million or 33% higher compared to last year. The increase compared to last year was mainly due to higher profitability and activity on new higher margin program awards and the ramp up of recently awarded contracts in the U.S. and Canada, reflecting a more favourable mix of product contracts. The increase was also due to operational efficiencies achieved through the completion of certain lower margin U.S. programs, and partially offset by higher selling, general and administrative expenses.

You will find more details on the reconciliation between operating income and adjusted segment operating income in Section 11.3 "Non-IFRS measure reconciliations" of this MD&A.

20 I CAE Financial Report 2026

Management’s Discussion and Analysis

Property, plant and equipment expenditures were $19.2 million this quarter and $124.1 million for the year. Growth capital expenditures were $14.5 million for the quarter and $105.7 million for the year. Maintenance capital expenditures were $4.7 million for the quarter and $18.4 million for the year.

Invested capital decreased by $32.4 million compared to last quarter and by $19.7 million compared to last year. The decrease compared to last quarter was mainly due to a lower investment in non-cash working capital, partially offset by movements in foreign exchange rates.

The decrease compared to last year was mainly due to movements in foreign exchange rates and lower intangible assets, partially offset by higher property, plant and equipment.

Additional information pertaining to Defense and Security contracts

Within the Defense and Security segment, we have a number of fixed-price contracts which offer certain potential advantages and efficiencies but can also be negatively impacted by adverse changes to general economic conditions, including unforeseen supply chain disruptions, inflationary pressures, availability of labour and execution difficulties. These risks can result in cost overruns and reduced profit margins or losses. While these risks can often be managed or mitigated, there were eight distinct legacy contracts entered into prior to the COVID-19 pandemic that are fixed-price in structure, with little to no provision for cost escalation, and that have been more significantly impacted by these risks (the Legacy Contracts). Although only a small fraction of the current business, they disproportionately impacted overall Defense and Security profitability in previous fiscal years. As of March 31, 2026, we have completed four of the Legacy Contracts, and the impact of the ongoing execution of the remaining Legacy Contracts on the Defense and Security profitability is no longer expected to be material. Management is continuing to monitor the remaining Legacy Contracts as a separate group and will continue to take appropriate measures as may be necessary in the future to mitigate the cost pressures associated with them. For further details regarding the risks associated with CAE's program management and execution and its fixed price and long-term supply contracts, refer to Section 9 “Business risk and uncertainty” of this MD&A.

Adjusted backlog


	Three months ended				Years ended
	March 31				March 31
(amounts in millions)	2026		2025		2026		2025
Obligated backlog(1), beginning of period	$	5,627.1	$	5,436.3	$	5,563.5	$	3,407.8
'+ adjusted order intake(1)	646.1		595.7		2,384.4		3,986.1
- revenue	(580.0)		(547.0)		(2,172.4)		(1,998.6)
+ / - adjustments	39.3		78.5		(43.0)		168.2
Obligated backlog(1), end of period	$	5,732.5	$	5,563.5	$	5,732.5	$	5,563.5
Joint venture backlog(1) (all obligated)	3,357.7		3,681.7		3,357.7		3,681.7
Unfunded backlog and options(1)	1,731.2		2,050.4		1,731.2		2,050.4
Adjusted backlog(1)	$	10,821.4	$	11,295.6	$	10,821.4	$	11,295.6

Fiscal 2026 adjustments were mainly due to the revaluation of prior year contracts.

This quarter's book-to-sales ratio was 1.11x. The ratio for the last 12 months was 1.10x.

In fiscal 2026, $563.0 million was added to the unfunded backlog and $723.8 million was transferred to obligated backlog.

CAE Financial Report 2026 I 21

Management’s Discussion and Analysis

7. CONSOLIDATED CASH MOVEMENTS AND LIQUIDITY

We manage liquidity and regularly monitor the factors that could affect it, including:

–Cash generated from operations, including timing of milestone payments and management of working capital;

–Capital expenditure requirements;

–Scheduled repayments of long-term debt obligations, our credit capacity and expected future debt market conditions.

7.1 Consolidated cash movements


	Three months ended				Years ended
	March 31				March 31
(amounts in millions)	2026		2025		2026		2025
Cash provided by operating activities*	$	231.6	$	233.8	$	829.6	$	699.4
Changes in non-cash working capital	(46.0)		88.9		(37.7)		197.1
Net cash provided by operating activities	$	185.6	$	322.7	$	791.9	$	896.5
Maintenance capital expenditures(1)	(12.2)		(27.6)		(65.1)		(84.2)
Intangible assets expenditures excluding capitalized development costs	(1.3)		(3.8)		(11.4)		(20.9)
Proceeds from the disposal of property, plant and equipment	0.3		16.1		5.4		19.4
Net payments to equity accounted investees	(7.3)		(14.0)		(31.6)		(19.0)
Dividends received from equity accounted investees	18.6		—		79.6		28.7

Other investing activities	(1.0)		(4.0)		(10.0)		(6.6)

Free cash flow before growth expenditures	$	182.7	$	289.4	$	758.8	$	813.9
Growth capital expenditures(1)	(30.5)		(81.4)		(222.7)		(272.0)
Capitalized development costs	(17.2)		(13.8)		(62.3)		(67.0)
Free cash flow(1)	$	135.0	$	194.2	$	473.8	$	474.9
Net proceeds from the issuance of common shares	4.3		16.9		46.3		67.1
Repurchase and cancellation of common shares	(3.1)		—		(7.0)		(21.3)
Business combinations, net of cash acquired	—		—		—		(308.0)



Other cash movements, net	(0.2)		(0.1)		(2.7)		(3.6)

Effect of foreign exchange rate changes on cash and cash equivalents	1.6		6.7		(1.2)		19.2

Net change in cash before proceeds and repayment of long-term debt	$	137.6	$	217.7	$	509.2	$	228.3
* before changes in non-cash working capital

Net cash from operating activities was $185.6 million this quarter, $137.1 million lower compared to the fourth quarter of fiscal 2025. The decrease was mainly due to changes in non-cash working capital, driven by lower accounts payable and accrued liabilities.

Net cash from operating activities was $791.9 million this year, $104.6 million lower than last year. The decrease was mainly due to changes in non-cash working capital, partially offset by higher net income adjusted for non-cash items. The changes in non‑cash working capital primarily resulted from lower accounts payable and accrued liabilities.

Free cash flow was $135.0 million this quarter, $59.2 million lower compared to the fourth quarter of fiscal 2025. The decrease was mainly due to changes in non-cash working capital, driven by lower accounts payable and accrued liabilities, partially offset by lower capital expenditures and higher dividends received from equity accounted investees.

Free cash flow was $473.8 million this year, $1.1 million lower than last year. The decrease was mainly due to changes in non‑cash working capital, partially offset by higher net income adjusted for non‑cash items, lower capital expenditures and higher dividends received from equity accounted investees. The changes in non-cash working capital primarily resulted from lower accounts payable and accrued liabilities.

22 I CAE Financial Report 2026

Management’s Discussion and Analysis

7.2 Sources of liquidity

We have a committed unsecured revolving credit facility at floating rates, provided by a syndicate of lenders. In June 2025, we extended the maturity date of this facility by two years, until June 2030. The total amount available through this revolving credit facility as at March 31, 2026 was US$1.0 billion (2025 – US$1.0 billion). We and some of our subsidiaries can borrow funds directly from this credit facility to cover operating and general corporate expenses and to issue letters of credit up to a maximum of US$400.0 million (2025 – US$400.0 million). There was no amount drawn under the facility as at March 31, 2026 (2025 – nil), and US$16.1 million used for letters of credit (2025 ‑ US$14.1 million). The applicable interest rate on this revolving credit facility is variable, based on the bank’s prime rate, bankers’ acceptance rates or SOFR plus a margin based on CAE's credit rating.

We manage several bilateral facilities for the issuance of performance bonds, advance payment guarantees or similar instruments. Some of these facilities are covered by an unsecured Export Development Canada Performance Security Guarantee (PSG) for up to US$225.0 million (2025 – US$225.0 million). As at March 31, 2026, the total outstanding for these instruments under the PSG was $176.2 million (2025 – $211.8 million).

We manage an uncommitted receivable purchase facility of up to US$400.0 million (2025 – US$400.0 million), in which we sell interests in certain of our accounts receivable to third parties for cash consideration. As at March 31, 2026, the carrying amount of the original accounts receivable sold to financial institutions pursuant to the receivable purchase facility totalled $399.1 million (2025 – $453.6 million) of which $51.7 million (2025 – $39.9 million), corresponding to the extent of our continuing involvement, remains in accounts receivable with a corresponding liability included in accounts payable and accrued liabilities.

We have established supplier finance arrangements offered by some of our subsidiaries to certain key suppliers. Under these arrangements, we have the ability to submit supplier invoices, at our own discretion, to our financial institution who pays the supplier and allows us to extend our payment terms by 55 to 85 days. We pay the invoice amount and a service fee to the financial institution in accordance with the extended due dates. As at March 31, 2026, the carrying amount of accounts payable trade for this arrangement totalled nil (2025 – $73.3 million).

We have certain debt agreements which require the maintenance of standard financial covenants, which we are required to maintain compliance with at all times. As at March 31, 2026, we are compliant with all our financial covenants.

The following table summarizes the long-term debt:


	As at March 31		As at March 31
(amounts in millions)	2026		2025
Total long-term debt	$	3,234.2	$	3,470.4
Less:
Current portion of long-term debt	183.8		277.9
Current portion of lease liabilities	68.2		121.1
Long-term portion of long-term debt	$	2,982.2	$	3,071.4

Credit rating

On March 17, 2026, S&P Global Ratings revised CAE's outlook to stable from negative and reaffirmed CAE's credit rating of BBB-.

Term loans

In May 2025, we prepaid a US$125.0 million unsecured term loan due in July 2025.

In June 2025, we extended the maturity date of our US$200.0 million syndicated term loan, bearing interest at a variable rate, until June 2027. In February 2026, we converted this loan to a Canadian dollar loan valued at $273.3 million, with no changes to the maturity date.

In June 2025, we entered into an unsecured term loan agreement amounting to US$50.0 million maturing in June 2027, bearing interest at a variable rate. Proceeds from this term loan have been principally used to repay other various debt bearing higher interest rates.

Pension obligations

We maintain defined benefit and defined contribution pension plans. Our defined benefit pension plans are considered sufficiently funded. We expect to pay employer contributions and benefits of $28.3 million in fiscal 2027.

7.3 Government participation

We have agreements with various governments whereby the latter contribute a portion of the cost, based on expenditures incurred by CAE, of certain R&D programs for modeling, simulation and training services technology.

You will find more details in Note 27 of our consolidated financial statements.

CAE Financial Report 2026 I 23

Management’s Discussion and Analysis

7.4 Contingencies and commitments

Contingencies

From time to time, CAE is involved in legal proceedings, audits, litigations and claims arising in the ordinary course of our business. We operate in a highly regulated environment across many jurisdictions and is subject to, without limitation, laws and regulations relating to import-export controls, trade sanctions, anti-corruption, national security and aviation safety of each country. In addition, contracts with government agencies are subject to procurement regulations and other specific legal requirements. We are also required to comply with tax laws and regulations of any country in which we operate.

We are subject to investigations and audits from various government and regulatory agencies. In addition, CAE may identify, investigate, remediate and voluntarily disclose potential non-compliance with those laws and regulations. As a result, we can be subject to potential liabilities associated with those matters. Although it is possible that liabilities may be incurred in instances for which no accruals have been made, we do not believe that the ultimate outcome of these matters will have a material impact on our consolidated financial statements.

Dispute relating to final price adjustments for the sale of CAE’s Healthcare business

During the fourth quarter of fiscal 2024, we closed the sale of our Healthcare business to Madison Industries. The total consideration is subject to post-closing price adjustments, including on account of working capital. At the time of issuance of the consolidated financial statements, we are still engaged in a dispute with Madison Industries, which initially claimed up to approximately $60 million in final price adjustments. To date, no price adjustment has been agreed to or awarded in favour of the purchaser, and a limited number of items remain in dispute, representing an amount of approximately $15 million. Price adjustments in favour of the purchaser, if any, are not expected to exceed this amount and are not expected to exceed the amounts still outstanding and receivable from the purchaser.

Given the uncertainty regarding whether any amount will ultimately be payable in connection with the dispute, and as we continue to believe that there are strong grounds for defence and are vigorously defending our position, no amount has been recognized in our financial statements for any potential losses arising from this dispute as at March 31, 2026.

Class action proceeding

On July 16, 2024, the Company was served with an Application for authorization to bring an action pursuant to Section 225.4 of the Securities Act (Québec) and application for authorization to institute a class action before the Superior Court of Québec in the district of Montréal against the Company and certain of the Company’s officers. The class action, if authorized, would be brought on behalf of purchasers of the Company's common shares and is based upon allegations that the defendants made false and/or misleading statements to the public and seeks unspecified damages.

The class action requires authorization from the Court before it can move forward. Until it is authorized, there are no monetary claims pending against the defendants in the context of this Court proceeding. The defendants have strong legal defences to this Court proceeding and intend to defend the case vigorously. While the proceeding remains in preliminary stages and it is not possible to predict the final outcome or the timing of this Court proceeding, the Company has ascertained that substantially all of any amount payable under the proceeding would be insurable and any uninsured amounts payable by the Company have been adequately provisioned in the Company’s financial statements.

Commitments

We enter into contractual obligations and commercial commitments in the normal course of our business. The table below represents our contractual obligations and commitments for the next five fiscal years and thereafter:


(amounts in millions)	2027		2028		2029		2030		2031		Thereafter		Total
Long-term debt (excluding interest)	$	183.9	$	476.3	$	653.0	$	123.2	$	235.8	$	799.8	$	2,472.0
Lease liabilities	112.3		103.2		113.4		82.0		110.9		651.9		1,173.7
Purchase commitments	320.9		138.2		76.1		45.9		33.8		63.7		678.6
	$	617.1	$	717.7	$	842.5	$	251.1	$	380.5	$	1,515.4	$	4,324.3

We have purchase commitments related to agreements that are enforceable and legally binding. Most are agreements with subcontractors to provide services for long-term contracts that we have with our clients. The terms of the agreements are significant because they set out obligations to buy goods or services in fixed or minimum amounts, at fixed, minimum or variable prices and at various points in time.

As at March 31, 2026, we had other long-term liabilities that are not included in the table above such as employee benefits obligations and deferred tax liabilities. CAE’s cash obligation in respect of the employee benefits obligations depends on various elements including market returns, actuarial gains and losses and interest rates. We did not include deferred tax liabilities since future payments of income taxes depend on the amount of taxable earnings and on whether there are tax loss carry‑forwards available.

24 I CAE Financial Report 2026

Management’s Discussion and Analysis

8. CONSOLIDATED FINANCIAL POSITION

8.1 Consolidated invested capital


	As at March 31		As at March 31
(amounts in millions)	2026		2025

Current assets	$	2,265.2	$	2,143.6
Less: cash and cash equivalents	(552.4)		(293.7)

Current liabilities	(2,361.3)		(2,686.5)
Less: current portion of long-term debt	252.0		399.0
Non-cash working capital(1)	$	(396.5)	$	(437.6)

Property, plant and equipment	2,993.0		2,989.5
Intangible assets	3,692.2		3,871.0
Other long-term assets	2,197.4		2,209.7
Other long-term liabilities	(416.2)		(479.9)
Invested capital(1)	$	8,069.9	$	8,152.7

Adjusted return on invested capital (ROIC) was 7.6% this quarter, which compares to 8.0% in the fourth quarter of last year and 7.8% last quarter.

Non-cash working capital increased by $41.1 million compared to last year. The increase was mainly due to lower accounts payable and accrued liabilities, partially offset by lower inventories and higher contract liabilities.

Property, plant and equipment remained relatively unchanged compared to last year.

Intangible assets decreased by $178.8 million compared to last year. The decrease was mainly due to amortization in excess of capital expenditures, movements in foreign exchange rates and impairment charges incurred related to the transformation plan.

Other long-term assets remained relatively unchanged compared to last year.

Other long-term liabilities decreased by $63.7 million compared to last year. The decrease was mainly due to lower employee benefits obligations, resulting primarily from revised actuarial economic assumptions, driven by an increase in the discount rate used to determine our defined benefit pension plan obligations, and lower share-based payments liabilities.

Total debt decreased by $236.2 million compared to last year. The decrease in total debt was mainly due to the net repayments of borrowings and movements in foreign exchange rates.

CAE Financial Report 2026 I 25

Management’s Discussion and Analysis

Net debt decreased by $494.9 million compared to last year


(amounts in millions)		FY2026		FY2025
Net debt(1), beginning of period	$	3,176.7	$	2,914.2

Impact of cash movements on net debt
(see table in the consolidated cash movements section 7.1)		(509.2)		(228.3)
Effect of foreign exchange rate changes on long-term debt		(58.1)		146.1
Impact from business combinations		—		158.5
Additions and remeasurements of lease liabilities		37.4		153.4
Other		35.0		32.8

Change in net debt during the period	$	(494.9)	$	262.5
Net debt(1), end of period	$	2,681.8	$	3,176.7

		As at March 31		As at March 31
Liquidity measures		2026		2025
Net debt-to-capital(1)	%	33.2	%	39.0

Net debt-to-EBITDA(1)		2.50		2.78

Net debt-to-adjusted EBITDA(1)		2.29		2.77

Total equity increased by $412.1 million this year. The increase compared to last year was mainly due to net income realized this year and the impact of equity-settled awards.

Outstanding share data

Our articles of incorporation authorize the issue of an unlimited number of common shares and an unlimited number of preferred shares issued in series. We had a total of 321,734,387 common shares issued and outstanding as at March 31, 2026 with total share capital of $2,382.2 million. In addition, we had 2,848,913 options outstanding. As at April 30, 2026, we had a total of 321,534,400 common shares issued and outstanding and 2,841,957 options outstanding.

Repurchase and cancellation of common shares

On June 6, 2025, we announced the renewal of the normal course issuer bid program (NCIB) to purchase, for cancellation, up to 16,019,294 of our common shares. The NCIB began on June 10, 2025 and will end on June 9, 2026 or on such earlier date when the Company completes its purchases or elects to terminate the NCIB. These purchases may be made through the facilities of the TSX or the NYSE, or in such other manner as may be permitted under applicable stock exchange rules and securities laws, at the prevailing market price at the time of acquisition, plus brokerage fees. All common shares purchased pursuant to the NCIB will be cancelled.

During the three months ended March 31, 2026, we repurchased and cancelled a total of 85,100 common shares (2025 – nil) under the NCIB, at a weighted average price of $36.35 per common share (2025 – nil), for a total consideration of $3.1 million (2025 – nil). During the year ended March 31, 2026, we repurchased and cancelled a total of 191,100 common shares (2025 – 856,230) under the NCIB, at a weighted average price of $36.52 per common share (2025 – $24.85), for a total consideration of $7.0 million (2025 – $21.3 million).

8.2 Off balance sheet arrangements

In the normal course of business, we manage an uncommitted receivable purchase facility in which we sell interests in certain of our accounts receivable to third parties for cash consideration with limited recourse to CAE.

You will find more details about our financial assets program in Section 7.2 "Sources of liquidity".

26 I CAE Financial Report 2026

Management’s Discussion and Analysis

8.3 Financial instruments

We are exposed to various financial risks in the normal course of business. We enter into forward contracts and swap agreements to manage our exposure to fluctuations in foreign exchange rates, interest rates and share price which have an effect on our share‑based payments costs. We formally assess, both at inception of the hedge relationship and on an ongoing basis, whether the derivatives we use in hedging transactions are highly effective in offsetting changes in cash flows of hedged items in relation to the hedged risk. We enter into these transactions to reduce our exposure to risk and volatility, and not for trading or speculative purposes. We only enter into contracts with counterparties that are of high credit quality.

Classification of financial instruments

We have made the following classifications for our financial instruments:

Financial assets:

–Cash and cash equivalents, restricted cash and derivative instruments not designated as hedging instrument in a hedge relationship, are classified at fair value through profit and loss (FVTPL);

–Accounts receivable, non-current receivables, net investment in finance leases and advances are classified at amortized cost, except for those that are acquired for the purpose of selling or repurchasing in the near term and classified as held for trading which are measured at FVTPL;

–Equity investments are classified at fair value through OCI (FVOCI).

Financial liabilities:

–Accounts payable and accrued liabilities, long-term debt, including interest payable, as well as lease liabilities and royalty obligations are classified at amortized cost;

–Contingent consideration arising on business combinations and derivative instruments not designated as hedging instruments in a hedge relationship are classified at FVTPL.

Fair value of financial instruments

The fair value of a financial instrument is determined by reference to the available market information at the reporting date. When no active market exists for a financial instrument, we determine the fair value of that instrument based on valuation methodologies as discussed below. In determining assumptions required under a valuation model, we primarily use external, readily observable market data inputs. Assumptions or inputs that are not based on observable market data incorporate our best estimates of market participant assumptions. Counterparty credit risk and our own credit risk are taken into account in estimating the fair value of financial assets and financial liabilities.

The following assumptions and valuation methodologies have been used to measure the fair value of financial instruments:

–The fair value of cash and cash equivalents, accounts receivable and accounts payable and accrued liabilities approximate their carrying values due to their short-term maturities;

–The fair value of derivative instruments, which include forward contracts and swap agreements, is calculated as the present value of the estimated future cash flows using assumptions based on market conditions prevailing at each reporting date. The fair value of derivative instruments reflects the estimated amounts that we would receive or pay to settle the contracts at the reporting date;

–The fair value of the equity investments, which does not have a readily available market value, is estimated using a discounted cash flow model, which includes some assumptions that are not based on observable market prices or rates;

–The fair value of non-current receivables is estimated based on discounted cash flows using current interest rates for instruments with similar risks and remaining maturities;

–The fair value of long-term debts, royalties obligations and other non-current liabilities are estimated based on discounted cash flows using current interest rates for instruments with similar risks and remaining maturities.

A description of the fair value hierarchy is discussed in Note 29 of our consolidated financial statements.

Financial risk management

Due to the nature of the activities that we carry out and as a result of holding financial instruments, we are exposed to credit risk, liquidity risk and market risk, including foreign currency risk and interest rate risk. Our exposure to credit risk, liquidity risk and market risk is managed within risk management parameters documented in corporate policies. These risk management parameters remain unchanged since the previous period, unless otherwise indicated.

Credit risk

Credit risk is defined as our exposure to a financial loss if a debtor fails to meet its obligations in accordance with the terms and conditions of its arrangements with CAE. We are exposed to credit risk on our accounts receivable and certain other assets through our normal commercial activities. We are also exposed to credit risk through our normal treasury activities on our cash and cash equivalents and derivative financial assets. Credit risks arising from our normal commercial activities are managed with regards to customer credit risk.

CAE Financial Report 2026 I 27

Management’s Discussion and Analysis

Our customers are mainly established companies, some of which have publicly available credit ratings, as well as government agencies, which facilitates risk assessment and monitoring. In addition, we typically receive substantial non-refundable advance payments for contracts with customers. We closely monitor our exposure to major airline companies in order to mitigate our risk to the extent possible. Furthermore, our trade receivables are held with a wide range of commercial and government organizations and agencies. As well, our credit exposure is further reduced by the sale of certain of our accounts receivable to third-party financial institutions for cash consideration on a limited recourse basis (receivable purchase facility). We do not hold any collateral as security. The credit risk on cash and cash equivalents is mitigated by the fact that they are mainly in place with a diverse group of major North American and European financial institutions.

We are exposed to credit risk in the event of non-performance by counterparties to our derivative financial instruments. We use several measures to minimize this exposure. First, we enter into contracts with counterparties that are of high credit quality. We signed International Swaps & Derivatives Association, Inc. (ISDA) Master Agreements with all the counterparties with whom we trade derivative financial instruments. These agreements make it possible to offset when a contracting party defaults on the agreement, for each of the transactions covered by the agreement and in force at the time of default. Also, collateral or other security to support derivative financial instruments subject to credit risk can be requested by CAE or our counterparties (or both parties, if need be) when the net balance of gains and losses on each transaction exceeds a threshold defined in the ISDA Master Agreement. Finally, we monitor the credit standing of counterparties on a regular basis to help minimize credit risk exposure.

The carrying amounts presented in Note 10 and Note 29 of our consolidated financial statements represent the maximum exposure to credit risk for each respective financial asset as at the relevant dates. A summary of our exposure to credit risk and credit loss allowances for accounts receivable and contract assets by segments is included in Note 31 of our consolidated financial statements.

Client concentration risk

For the year ended March 31, 2026, contracts with the U.S. federal government and its various agencies included in the Defense and Security segment accounted for 21% (2025 – 21%) of consolidated revenue.

Liquidity risk

Liquidity risk is defined as the potential risk that we cannot meet our cash obligations as they become due. We manage this risk by establishing cash forecasts, as well as long-term operating and strategic plans. The management of consolidated liquidity requires a regular monitoring of expected cash inflows and outflows which is achieved through a forecast of our consolidated liquidity position, for efficient use of cash resources. Liquidity adequacy is assessed in view of seasonal needs, stress-test results, growth requirements and capital expenditures, and the maturity profile of indebtedness, including availability of credit facilities, working capital requirements, compliance with financial covenants and the funding of financial commitments. We manage our liquidity risk to maintain sufficient liquid financial resources to fund our operations and meet our commitments and obligations. We also regularly monitor any financing opportunities to optimize our capital structure and maintain appropriate financial flexibility.

Market risk

Market risk is defined as our exposure to a gain or a loss in the value of our financial instruments as a result of changes in market prices, whether those changes are caused by factors specific to the individual financial instruments or its issuer, or factors affecting all similar financial instruments traded in the market. We are mainly exposed to foreign currency risk and interest rate risk.

We use derivative instruments to manage market risk against the volatility in foreign exchange rates, interest rates and share-based payments in order to minimize their impact on our results and financial position. Our policy is not to utilize any derivative financial instruments for trading or speculative purposes.

Foreign currency risk

Foreign currency risk is defined as our exposure to a gain or a loss in the value of our financial instruments as a result of fluctuations in foreign exchange rates. We are exposed to foreign exchange rate variability primarily in relation to certain sale commitments, expected purchase transactions and debt denominated in a foreign currency, as well as on our net investment from our foreign operations which have functional currencies other than the Canadian dollar (in particular the U.S. dollar and Euro). In addition, these operations have exposures to foreign exchange rates primarily through cash and cash equivalents and other working capital accounts denominated in currencies other than their functional currencies.

We mitigate foreign currency risks by having our foreign operations transact in their functional currency for material procurement, sale contracts and financing activities.

We use forward foreign currency contracts and foreign currency swap agreements to manage our exposure from transactions in foreign currencies and to hedge our net investment in U.S. entities. These transactions include forecasted transactions and firm commitments denominated in foreign currencies. Our foreign currency hedging programs are typically unaffected by changes in market conditions, as related derivative financial instruments are generally held until their maturity, consistent with the objective to fix currency rates on the hedged item.

Hedge of net investments in foreign operations

As at March 31, 2026, we have designated a portion of our unsecured senior notes, term loans, fixed to fixed cross currency principal and interest rate swap agreements and foreign currency contracts as a hedge of our net investments in U.S. entities. Gains or losses on the translation of the designated portion of these USD denominated long‑term debts are recognized in OCI to offset any foreign exchange gains or losses on translation of the financial statements of those U.S. entities.

28 I CAE Financial Report 2026

Management’s Discussion and Analysis

Interest rate risk

Interest rate risk is defined as our exposure to a gain or a loss to the value of our financial instruments as a result of fluctuations in interest rates. We bear some interest rate fluctuation risk on our floating rate long-term debt and some fair value risk on our fixed interest long‑term debt. We mainly manage interest rate risk by fixing project-specific floating rate debt in order to reduce cash flow variability. We have floating rate debts through our revolving credit facility and other specific floating rate debts. A mix of fixed and floating interest rate debt is sought to reduce the net impact of fluctuating interest rates. Derivative financial instruments used to manage interest rate exposures are mainly interest rate swap agreements. As at March 31, 2026, 89% (2025 – 86%) of the long-term debt bears fixed interest rates.

Our interest rate hedging programs are typically unaffected by changes in market conditions, as related derivative financial instruments are generally held until their maturity to establish asset and liability management matching, consistent with the objective to reduce risks arising from interest rate movements.

Hedge of share-based payments expense

We have entered into equity swap agreements with major Canadian financial institutions to reduce our exposure to fluctuations in our share price relating to the cash-settled share-based payments plans. Pursuant to the agreement, we receive the economic benefit of dividends and share price appreciation while providing payments to the financial institutions for the institution’s cost of funds and any share price depreciation. The net effect of the equity swap agreements partly offset movements in our share price impacting the cost of the cash-settled share-based payments plans.

A sensitivity analysis for foreign currency risk and interest rate risk is included in Note 31 of our consolidated financial statements.

Indemnifications

In certain transactions involving business dispositions or sales of assets, we may provide indemnification to the counterparties with respect to future claims for certain unknown liabilities that exist, or arise from events occurring, prior to the transaction date, including liabilities for taxes, legal matters, environmental exposures, product liability, and other obligations. The terms of the indemnifications vary in duration and scope. While some of the indemnifications specify a maximum potential exposure and/or a termination date, many do not.

We believe that, other than liabilities already accrued, the maximum potential future payments that we could be required to make under these indemnifications are not determinable at this time, as any future payments would be dependent on the type and extent of the related claims, and all available defences, including insurance, which cannot be estimated. However, historically, costs incurred to settle claims related to these indemnifications have not been material our consolidated financial position, net income or cash flows.

CAE Financial Report 2026 I 29

Management’s Discussion and Analysis

9. BUSINESS RISK AND UNCERTAINTY

Risk strategy and philosophy

We operate in several industry segments which present a variety of risks and uncertainties. Our risk management strategy is forward‑looking, proactive and aligned with our corporate strategy. CAE’s risk-taking activities are undertaken with the understanding that risk‑taking and effective management of risks are necessary and integral to achieving strategic objectives and managing business operations.

When making decisions about risk-taking and risk management, we place the highest priority on the following objectives:

–To protect the health and safety of our employees, customers, stakeholders and the general public;

–To protect our reputation and brand;

–To maintain financial strength;

–To effectively and prudently deploy capital invested by our shareholders; and

–To safeguard the expectations we have established with our shareholders, customers and creditors.

The risks and uncertainties described below are risks that we currently believe could materially and adversely affect our business, financial condition and results of operation. These are not necessarily the only risks we face; additional risks and uncertainties that are presently unknown to us or that we may currently deem immaterial may adversely affect our business. One should carefully consider the following risk factors, in addition to the other information contained herein, before deciding to purchase CAE securities.

Risk governance

We maintain strong risk governance practices. Management and the Board discuss the critical risks facing our business quarterly, annually during the strategic planning and budgeting processes, and on an ad hoc basis, as deemed necessary. To mitigate the risks that may impact our business or future performance, management has established an enterprise risk management (ERM) policy and a framework that provides a structured approach to identify, assess, manage, monitor and report on risks.

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

CAE’s ERM Framework

Management develops and deploys risk strategies that align with our strategic objectives and business processes. Management continuously reviews the evolution of the critical risks facing our business and the Board oversees the risk management process and validates it through procedures performed by our internal auditors, when it deems necessary.

Risk approach and implementation

CAE promotes a strong risk culture that allows individuals and groups to make better risk-informed decisions aligned with our strategic objectives and risk appetite. A strong risk culture also allows us to maximize opportunities. Early identification of risks also helps CAE be more proactive and prevent major incidents. A strong risk culture and common approach to risk management are integral to our risk management practices.

30 I CAE Financial Report 2026

Management’s Discussion and Analysis

Each business unit and functional group identifies and assesses critical and emerging risks on an ongoing basis. Emerging risks are defined as risks that are not fully understood at the current time because they are developing quickly or unexpectedly, and for which the impacts on CAE are difficult to assess or are in the process of being assessed. Risk owners are responsible for managing risks they own, and for reporting, via the chain of command, the evolution of their risk profile. All risks are either measured quantitatively or assessed qualitatively and aggregated at an enterprise level. Risk assessment criteria provide a consistent risk assessment process and risk ratings.

CAE’s Enterprise Risk Profile is updated every quarter, and whenever major changes occur, with a named risk owner assigned to each item. The profile is reviewed quarterly by the Executive Management Committee, with a summary provided to the Board. Risks are escalated through management to senior leadership for impact assessment and action. Depending on the situation and our risk appetite, we may avoid, accept, transfer, or reduce a risk. We monitor and report on progress as part of our enterprise risk management process.

Risk Categories

We have grouped the risks that our business faces in the following categories and investors should read this Business Risk and Uncertainty section in full:

–Strategic: risks arising from inability to implement appropriate business plans or strategies, from inappropriate decision‑making processes or inappropriate utilization or allocation of resources and the inability to adapt to competition and changes in the market or financial environment;

–Operational: risks of loss arising from inadequate or failed internal processes, people, and systems or from external events;

–Cybersecurity: risks arising from potential threats or vulnerabilities that can lead to unauthorized access to, damage to or loss of CAE digital assets, systems or data;

–Talent: risks arising from failure to effectively manage talent recruitment, development, retention, key person reliance, wellbeing, operational safety, health and safety, and resource allocation;

–Financial: risks arising from ineffective management of financial tools leading to a loss in revenue/profit, shareholder value and/or CAE’s overall stability;

–Legal and compliance: risks arising from failure to comply with local and international laws or to identify proper legal protection (e.g., patents) or to implement appropriate corporate governance practices to shield CAE from unfavourable consequences;

–Sustainability: risks arising from climate events, social conditions, or ineffective practices that may lead to a tarnished reputation, loss of competitiveness, legal sanctions, or financial impact;

–Reputational: risks of a tarnished reputation and/or loss of confidence and trust with customers and key stakeholders caused by reputational impacting events;

–Technological: risks arising from ineffective practices related to IT infrastructure, technology investment and privacy and records retention; and

–Data and artificial intelligence: risks arising from inadequate data quality, governance, privacy or security, and from biased, unreliable, or improperly supervised AI systems that may impair decisions or operations.

9.1 Strategic risks

Geopolitical uncertainty

Geopolitical developments (e.g., political tensions, changes in government commitment, direction and regulatory requirements) can disrupt CAE’s operations and have a significant impact on CAE’s financial position. Throughout fiscal 2026, global uncertainty remained elevated, including trade and tariff uncertainty, and continued military hostilities in Ukraine and the Middle East. In some parts of the world, political instability has become more pronounced, protracted and unpredictable. Such rising or persisting geopolitical tensions, policy changes and prolonged political instability in various countries where we have a presence could lead to closures of our training facilities, delays or cancellation of orders, deliveries or projects, difficulties or increased costs related to repatriating capital or the expropriation of assets in which we have invested significant resources, particularly when the customers are state‑owned or state-controlled entities.

The escalation of military conflicts in the Middle East has contributed to heightened volatility in energy markets, including sharp increases in oil and jet fuel prices, which may adversely affect airline operating costs, customer demand, and overall economic conditions. Prolonged disruption to energy supply routes or sustained high fuel prices could, directly or indirectly, lead to reduced air traffic growth, airline bankruptcy, restructuring or deferral of investments, and broader macroeconomic slowdown, which in turn could negatively impact CAE’s customers, operations, results and financial position. These conflicts may also result in supply chain disruptions, including through the closure, restriction or increased risk associated with key global trade routes in the region, which may impact the availability, timing and cost of critical components and materials.

Additionally, geopolitical developments can have potentially wide-ranging consequences for global market volatility and economic conditions, and the resulting impacts to the economy, financial markets, inflation, interest rates and unemployment, among others, could adversely affect CAE’s performance. It is also possible that in the markets we serve, unanticipated political instability and political developments impacting international trade, including trade disputes, increased tariffs and sanctions, may negatively impact markets and cause weaker macroeconomic conditions or drive political or national sentiment, impacting CAE’s operating environment, results and financial position.

CAE Financial Report 2026 I 31

Management’s Discussion and Analysis

Transformation plan implementation

CAE has embarked on a multi-year transformation plan designed to simplify its structure, sharpen its focus and strengthen execution to support long‑term value creation. The plan is complex and involves significant organizational, operational, technological and cultural changes across the Company. The success of the plan is subject to the related risks discussed throughout this Business risks and uncertainty section, as it is interconnected with our broader strategy and further depends on, among other things, effective planning, execution, prioritization, governance, change management and coordination across multiple business units and functions, as well as the timely achievement of key milestones and adaptation to the changing business environment over a years-long process.

The implementation of the transformation plan may result in operational disruption, including impacts on productivity, program execution, customer delivery and systems performance. The plan involves significant changes to systems and processes, which may give rise to integration challenges, technology implementation risks, and increased reliance on third‑party service providers. In addition, the transformation plan may require significant management attention and resources, which could adversely affect the execution of other business priorities. It may also affect employee engagement and retention, disrupt relationships with customers, suppliers and government partners, or create challenges in maintaining effective internal controls over financial reporting and disclosure controls and procedures during the transition. Misalignment of transformation initiatives or ineffective coordination across the organization could result in delays, inefficiencies or failure to achieve intended outcomes.

There can be no assurance that the transformation plan will be implemented as planned, within expected timeframes or cost parameters, or that its benefits will be fully, partially or timely realized. If we fail to successfully execute on the plan, if it fails to adequately support our strategy, if its costs exceed expectations, or if its anticipated benefits are delayed or not achieved, it could have a material adverse effect on our business, financial condition, results of operations and cash flows.

Global economic conditions

CAE’s results from operations are sensitive to and may be significantly impacted by changes in the economic conditions of the industries and geographic areas in which we operate. CAE may fail to anticipate and/or react in an agile manner to known and unanticipated global economic conditions (e.g., business cycles, tariffs, trends, inflation, unemployment, financial soundness, and supplier and consumer confidence). Also, any prolonged or significant impact arising from difficult economic conditions may have an adverse effect on our business, results from operations and financial condition.

Competitive business environment

We sell our simulation products, training services and software solutions in highly competitive international markets and we expect such competition to intensify in the future. CAE may lose its competitive advantage by failing to anticipate and/or react in an agile manner to known and unexpected moves by existing or new competitors as well as changes imposed by regulatory agencies, including changes to aviation safety standards that could increase competition in our markets. New participants have emerged in recent years and the competitive environment is intense and rapidly evolving on the cost and technology fronts. This has been driven, in part, by the growth of independent training device manufacturers and the proliferation of technologies such as artificial intelligence, augmented reality, virtual reality and mixed reality. Additionally, aerospace and defence companies are positioning themselves to try to take greater market share by consolidating through mergers and acquisitions and vertical integration strategies and by developing their own internal capabilities. Some of our competitors in the simulation and training markets are also involved in other major segments of the aerospace and defence industry beyond simulation and training. As such, some of them are larger than we are, and may have greater financial, technical, marketing, manufacturing and distribution resources and market share which could adversely affect CAE’s ability to compete successfully. In addition, our main competitors are either aircraft manufacturers, or have well‑established relationships with aircraft manufacturers, airlines and governments, which may give them an advantage when competing for projects.

Moreover, as we expand our product portfolio to software solutions, we face new competitors who are able to leverage a larger installed customer base and their involvement beyond software solutions to adopt more aggressive pricing policies and offer more attractive sales terms, which could cause us to lose potential sales or to sell our software at lower prices. We also face competition from niche companies that offer particular software solutions that attempt to address certain problems that our software solves or certain customer needs. We expect to continue to invest resources in research and development to continue to enhance our software solutions and leverage a high level of customer satisfaction, but there is no assurance that we can satisfy customer demands as they evolve.

Finally, economic growth and pressure underlie the demand for all of our products and services. Periods of economic recession, constrained credit, government austerity and/or international commercial sanctions generally lead to heightened competition for demand of our services and products. This in turn, typically leads to a reduction in profit on sales won during such a period. Should such conditions occur, we could experience price and margin erosion.

32 I CAE Financial Report 2026

Management’s Discussion and Analysis

OEM encroachment

We secure data, parts, equipment and many other inputs from a wide variety of OEMs, subcontractors and other sources. CAE may lose its competitive advantage by failing to anticipate and/or react in an agile manner to known and unanticipated changes from existing and/or new OEMs. Also, we are not always able to find two or more sources for inputs that we require, and, in the case of specific aircraft simulators and other training equipment, significant inputs can only be sole-sourced. We may therefore be vulnerable to delivery schedule delays, the financial condition of the sole-source suppliers and their willingness to deal with us. Within their corporate groups, some sole-source suppliers include businesses that compete with parts of our business and reap certain critical advantages; an OEM controls the pricing for the data, parts and equipment packages that are often required to manufacture a simulator specific to that OEM’s aircraft, which in turn, is a critical capital cost for any simulation-based training service provider. This could lead to onerous licencing terms, high licence fees or even refusal to licence to us the data, parts and equipment packages that are often required to manufacture and operate a simulator based on an OEM’s aircraft.

CAE, as an independent training provider and simulator manufacturer, has the ability to replicate certain aircraft platforms without data, parts and equipment from the OEM. Where we use an internally produced simulation model for an aircraft or develop courseware without using OEM-sourced and licenced data, parts and equipment, the OEM in question may attempt retaliatory or obstructive actions against us to block the provision of training services or manufacturing, sale and/or deployment for training of a simulator for such aircraft, claiming breach of intellectual property rights or other legal basis. Such actions may cause us to incur material legal fees and/or may delay or prevent completion of the simulator development project or provision of training services, which may negatively impact our financial results.

Similarly, where we use open-source software, freeware or commercial off-the-shelf software from a third party, the third party in question or other persons may attempt retaliatory or obstructive actions against us to block the use of such software or freeware, claiming breach of licence rights or other legal basis. Such actions may cause us to incur material legal fees and/or may delay or prevent completion of the simulator development project or provision of training services, which may negatively impact our financial results.

Inflation

Our operations are vulnerable to increases in costs of significant inputs, such as energy, components, raw materials, and transportation. Ongoing inflation would further drive up our overall operational costs. We may not be able to pass unplanned increases in costs to our customers in full or at all in a timely manner, successfully negotiate requests for equitable adjustment from our government customers, or otherwise offset such unforeseen cost increases through efficiencies and the like, and as a result any significant increases in our costs and/or the failure of our measures to limit their impact could have a material adverse effect on our business, financial condition, prospects and/or results of operations.

International scope of our business

We have operations in over 40 countries including our joint venture operations. We also sell and deliver products and services to customers around the world. Sales to customers outside Canada made up approximately 90% of revenue in fiscal 2026. We expect sales outside Canada to continue to represent a significant portion of revenue in the foreseeable future. As a result, we are subject to the risks inherent in conducting business abroad, including, among other things:

–Change in Canadian and foreign government policies, laws, regulations and regulatory requirements, or the interpretation, application, and/or enforcement thereof, including with regards to sourcing restrictions, requirements to expend a portion of program funds locally and governmental industrial cooperation or participation requirements (also known as offset arrangements);

–Adoption of new, and the expansion of existing tariffs, embargoes, controls, sanctions, trade, work or travel restrictions and other restrictions;

–Recessions and other economic crises in other regions or specific foreign economies and the impact on our cost of doing business in those regions;

–Acts of war, civil unrest, force majeure and terrorism;

–Social and economic instability;

–Risk that inter-governmental relationships may deteriorate such that CAE’s operations in a given country may be negatively impacted;

–Limitations on the CAE’s ability to repatriate cash, funds or capital invested or held in jurisdictions outside Canada;

–Difficulties, delays and expenditures that may be experienced or incurred in connection with the movement and clearance of personnel and goods through the customs and immigration authorities of multiple jurisdictions; and

–Complexity and corruption risks of using foreign representatives, consultants and other business partners.

While the impact of these risks is difficult to predict, any one of them could adversely affect our financial position, results of operations, reputation and/or cash flows.

CAE Financial Report 2026 I 33

Management’s Discussion and Analysis

Changes in U.S. trade policies or regulations

Recent policy decisions by the U.S. presidential administration and related court rulings have introduced greater uncertainty with respect to trade policies, tariffs and government regulations affecting trade between the U.S. and other countries. Major developments in trade relations, such as the potential renegotiation or termination of the Canada-United States-Mexico Agreement, or the imposition of unilateral tariffs or other trade barriers on products imported into the U.S. as well as retaliatory tariffs or other trade barriers imposed by the U.S.’s trading partners, could impact the availability and cost of materials, resources and services, and the availability and cost of our products to U.S. customers, which in turn may affect our competitiveness and results of operations. The implementation of previously-announced, postponed, or new tariffs, or the escalation of trade disputes which interfere with our supply chain and our sales in affected markets, could have an adverse effect on our operations and profitability. In addition, rising protectionism and anti‑globalization sentiment in the United States and other countries may adversely impact long-term economic growth in the countries in which we operate, which in turn may affect our business, results of operations and financial condition.

There can be no guarantee that existing tariffs will be lifted, that new tariffs or changes to existing trade agreements would not be implemented, or that we will be able to avoid or mitigate the impact of such tariffs or changes to trade agreements. Such changes, even if temporary, could result in CAE absorbing some or all of the cost of new tariffs, and cause delays in CAE’s supply chain. The materialization of any of the foregoing could have a material adverse effect on our business, financial condition and results of operations.

Level and timing of defence spending

A significant portion of our revenue is generated by sales to defence and security customers around the world. We provide products and services for numerous programs to Canadian, European, Indo-Pacific, Middle Eastern, U.K., U.S., and other foreign governments as both the prime and/or subcontractor. As defence spending comes from public funds and is always competing with other public interests for funding, there is a risk associated with the level of spending a particular country may devote to defence as well as the timing of defence contract awards, which can be very difficult to predict and may be impacted by numerous factors such as the political environment, foreign policy, macroeconomic conditions, the nature of the international threat environment and the risk of availability of funding influenced by customers’ budget cycles. Fluctuations in defence spending in the markets in which we operate or a significant delay in the timing of defence procurement could have a material negative impact on our future revenue, earnings and operations.

Civil aviation industry

A significant portion of our revenue comes from supplying equipment and training services to the commercial and business airline industries. The civil aviation market is predominantly driven by long-term trends in airline passenger and cargo traffic. The principal factors underlying long-term traffic growth are sustained economic growth and political stability both in developed and emerging markets. Potential impediments to steady growth include acts of terrorism, health crises, natural disasters, the interruption of global mobility, oil price volatility, increased global environmental regulations or other major world events.

Demand for training solutions in the civil aviation market is further influenced by airline profitability, availability of aircraft financing, OEMs ability to supply aircraft, world trade policies, technological advances, government-to-government relations, national aviation authority regulations, price and other competitive factors, fuel prices and geopolitical environment.

Constraints in the credit market may reduce the ability of airlines and others to purchase new aircraft, negatively affecting the demand for our training equipment and services, and the purchase of our products. In addition, airline consolidations, fleet decisions or financial challenges involving airline customers could impact our revenues and limit our opportunity to generate profits from those customers.

Our ability to penetrate new markets

Penetration of new markets, including as a result of new technologies, represents both a risk and an opportunity for CAE. Success in these markets is by no means assured. As we operate in new markets, unforeseen difficulties, major investments and additional expenditures could arise, which may have an adverse effect on our operations, financial position, profitability and reputation. Penetrating a new market is inherently more difficult than managing within our already established markets. New products and technologies introduced in new markets could also generate unanticipated safety or other concerns resulting in expanded product liability risks, potential product recalls and other regulatory issues that could have an adverse impact on us.

Research and development activities

We carry out some of our R&D initiatives with the financial participation of governments, including the Government of Quebec and the Government of Canada. We also receive investment tax credits from federal and provincial governments in Canada and from the federal government in the U.S., the U.K. and Poland on eligible R&D activities that we undertake. The level of government financial participation and investment tax credits we receive reflects government policy, fiscal policy and other political and economic factors. We may not, in the future, choose to or be able to replace these existing programs with programs of comparable benefit to us, which could have a negative impact on our financial performance and R&D activities. Moreover, the investment tax credits available to us can be reduced by changes to the respective governments’ legislation which could have a negative impact on our financial performance and R&D activities. In addition, these credits and programs are routinely subject to review and audit, which may result in challenges and disputes and could result in reductions or reversals of grants, credits or contributions previously received. Our agreements with government entities which fund a portion of our eligible R&D obligations include certain eligibility criteria, performance conditions, ongoing compliance obligations, commitments and events of default whereby suspension of funding, repayment obligations, accelerated repayment and/or termination of the agreements may result if we fail to meet these conditions and commitments throughout the repayment period and if no mutual agreement is found following the mandatory resolution processes.

34 I CAE Financial Report 2026

Management’s Discussion and Analysis

Furthermore, our R&D investments in new products or technologies may or may not be successful. Our long-term growth, competitiveness and continued profitability are dependent on our ability to anticipate and adapt to changes in markets, to continue to develop new products or technologies and to align our global presence with worldwide market opportunities. Our results may be impacted if we invest in products that are not accepted on the market, if customer demand or preferences change, if new products are not brought to market in a timely manner, if we lack commercial or procurement experience, if we experience delays in obtaining regulatory approvals, or if our products become obsolete. We may also incur cost overruns in developing and bringing to market new products.

Evolving standards and technology innovation and disruption

The civil aviation and defense and security markets in which we operate are characterized by changes in customer requirements, new aircraft models, evolving industry standards, increased power to analyze data and evolving customer expectations influenced by global trends such as climate change, pandemics, the growth of developing markets, population growth and demographic factors. CAE may fail to catch the next wave of market disruption and/or be displaced by disruptive technologies or services due to inadequate resourcing, organization and management of transformation. If we do not accurately predict the needs of our existing and prospective customers, develop new products, enhance existing products and services and invest in and develop new technologies that address those evolving standards and technologies, we may lose current customers and be unable to attract new customers or penetrate new markets successfully. This could reduce our revenue and market share.

The evolution of technology could also have a negative impact on the value of our fleet of FFSs or require significant investments to update our fleet to the evolving technology. The adoption of disruptive technologies, such as AI, advanced computing platforms and autonomous aircraft, presents opportunities for us, but may result in new and complex risks. Also, our business could be negatively affected if our products do not successfully integrate or operate with other sophisticated software, hardware, computing and communications systems that are also continually evolving.

Length of sales cycle

The sales cycle for our products and services can be long and unpredictable, ranging from 6 to 18 months for Civil Aviation applications and from 6 to 24 months or longer for Defense and Security applications. During the time when customers are evaluating our products and services, we may incur expenses and management time. Incurring these expenditures in a period that has no corresponding revenue will affect our operating results and financial position. We expect this trend to continue, though it may be disrupted by the volatile geopolitical environment, or supply chain or labour disruptions. We may pre-build certain products in anticipation of orders to come and to facilitate a faster delivery schedule to gain competitive advantage; if orders for those products do not materialize when expected, we have to carry the pre-built product in inventory for a period of time until a sale is realized.

Business development and awarding of new contracts

We obtain most of our contracts through competitive bidding processes. As the competitive environment intensifies, the number of bid protests may increase. Significant costs and managerial time are required to prepare bids and proposals for contracts that may not ultimately be awarded to CAE, may be split with competitors, or may be delayed beyond the timeframe we had planned. A significant portion of our revenue is dependent on obtaining new orders and continued replenishment of our adjusted backlog. We cannot be certain that we will continue to win contracts through competitive bidding processes at the same rate as we have in the past. Moreover, certain foreign governments increasingly rely on certain types of contracts that are subject to multiple competitive bidding processes, including multi-vendor indefinite delivery/indefinite quantity (ID/IQ), General Services Administration Pricing Schedule and other supply chain leveraging strategies, which may result in greater competition and increased pricing pressure. Furthermore, our competitive environment is also affected by a significant number of bid protests from unsuccessful bidders on new program awards. Bid protests can result in contract modifications or the award decision being reversed and loss of the contract award. Even where a bid protest does not result in the loss of an award, the resolution can extend the time until the contract activity can begin, which can reduce our earnings in the period in which the contract would otherwise be performed.

Strategic partnerships and long-term contracts

We have long-term strategic partnerships and contracts with major airlines, aircraft operators and defence forces around the world, including Authorized Training Provider agreements. These long-term contracts are included in our backlog at the awarded amount but could be subject to unexpected adjustments or cancellations and therefore do not represent a guarantee of our future revenues. We cannot be certain that these partnerships and contracts will be renewed on similar terms, or at all, when they expire, and our financial results could be adversely affected by our partners' level of operations, revenue, financial health, contribution and indemnifications. We can make no assurance that customers will fulfill existing purchase commitments, exercise purchase options or purchase additional products or services from CAE.

CAE Financial Report 2026 I 35

Management’s Discussion and Analysis

Our ability to effectively manage our growth

Our growth has placed and may continue to place significant demands on our management and operational and financial infrastructure. As our operations grow in size, scope and complexity, and as we identify and pursue new opportunities, we may be subject to both transition and growth-related risks, including capacity constraints and pressure on our internal systems and controls, and may need to increase the scale of our infrastructure (financial, management, informational, personnel and otherwise). There can be no assurance we will be able to respond adequately or quickly enough to the changing demands that material expansion will impose on management, team members and existing infrastructure, and changes to our operating structure may result in increased costs or inefficiencies that we cannot anticipate. Our ability to manage future growth effectively requires us to continue to implement and improve financial, management and operational processes and systems and to expand, train and manage our employee base. As our organization continues to grow and we are required to implement more complex organizational management structures, we may find it increasingly difficult to maintain the benefits of our corporate culture and efficiencies, including our ability to quickly develop and launch new and innovative products. Any of these difficulties could adversely impact our business performance and results of operations.

Estimates of market opportunity

The estimates of market opportunity included in this MD&A, including those we have generated ourselves, are subject to significant uncertainty and are based on assumptions and estimates. While our estimates of the addressable markets included in this report were made in good faith and are based on assumptions and estimates we believe to be reasonable, these estimates may not prove to be accurately indicative of our future growth. Further, even if the estimates of our market opportunity do prove to be accurate, we could fail to capture a significant portion, or any portion, of the available markets.

Competing priorities

We may implement transformation, restructuring, cost reduction or other business process initiatives from time to time that could result in competing priorities throughout the organization. Responding to competing priorities as well as critical and time-sensitive matters as they emerge throughout the organization may divert management’s and key employees’ attention from other strategic priorities, and cause us to reduce, delay, or alter initiatives that could otherwise increase our long-term value.

9.2 Operational risks

Supply chain disruptions

Unpredictable shifts in supply and demand patterns on a global scale may cause delays in project delivery, increase price pressure from single sourced items and overall project costs and result in declining bid performance. The widening geopolitical fractures and tensions intensify global supply chain imbalances. Further, conservative and protective behaviours from businesses and governments, such as increasing demand, hoarding, and tariffs, as well as increased competition for critical raw materials or components—including those experiencing shortages or cost inflation due to heightened demand for semiconductors and other inputs supporting AI technologies—may hinder our ability to secure such commodities in a timely fashion or at budgeted costs or both, thus impacting our operational and financial performance. In this context, supply chain disruptions may hinder our ability to execute projects in a timely manner, support aftermarket needs, finish projects or leave us with unsold materials or products, all of which could result in penalties or impacts on contract profitability and could have a material adverse effect on our business, financial condition and results of operations. Delays and volatility specific to our supply chain requirements could ultimately have an overall negative impact on our ability to compete on the market, our client relationships, our growth, reputation, financial performance and cash flows.

Program management and execution

CAE may fail to accurately estimate the resources and costs required to fulfill increasingly large and complex contract commitments, as well as to effectively manage and control our costs, which may impact our profitability.

When making proposals, we rely heavily on our estimates of costs and timing for completing the associated projects, as well as assumptions regarding technical issues. We may bid on programs for which the work activities, deliverables, and timelines are vague or for which the solicitation incompletely describes the actual work, which may result in inaccurate pricing assumptions. Furthermore, we may realize the lost opportunity cost of not bidding on and winning other contracts that we may have pursued otherwise.

Contracts are often long-term and may involve new technologies, unforeseen events, such as technological difficulties, cost fluctuations, significant inflation, problems with suppliers, and cost overruns. These factors affect the cost estimates of the contracts we bid on, which can result in the contractual price becoming less favourable or even unprofitable for us. Our profitability could also be negatively affected if we continue to experience increased labour/material inflationary pressures, economic headwinds and global supply chain disruptions.

If we experience difficulties or do not meet program milestones, we may be unable to achieve program milestones as currently scheduled and may have to devote more resources than originally anticipated, which may impact timely execution and profitability.

36 I CAE Financial Report 2026

Management’s Discussion and Analysis

Mergers, acquisitions and divestitures

CAE may fail to achieve the expected strategy, synergies and outcomes associated with the integration of acquired entities. The realization of anticipated benefits from mergers, acquisitions and related activities depends, in part, upon our ability to integrate the acquired business, the realization of synergies both in terms of successfully marketing our broadened product and service portfolio, efficient consolidation of the operations of the acquired businesses into our existing operations, cost management to avoid duplication, information systems integration, technology investments, staff reorganization, establishment of controls, procedures, and policies, performance of the management team and other personnel of the acquired operations as well as cultural alignment. There can be no assurance that we will realize anticipated synergies, or that we will meet any financial and performance targets provided. In addition, our inability to adequately integrate an acquired business in a timely manner might result in departures of qualified personnel or lost business opportunities which would negatively impact operations and financial results. There are also risks associated with the acquisition of a business where certain legacy liabilities could arise and where there is strong reliance and dependency on certain key suppliers.

Occasionally, we divest of businesses or subsidiaries to increase focus on our core businesses. There can be no guarantee that we will realize the anticipated benefits of any such divestiture within reasonable timing, price and conditions. Divestitures are subject to various risks, including unforeseen costs, liabilities resulting from litigation or other claims, the risk of failing to secure adequate limitations of liability and the potential exposure to retained or unassumed liabilities relating to pre-divestiture operations. We may also fail to realize sufficient proceeds from a divestiture, which could reduce balance sheet assets and trigger goodwill or intangible asset write‑downs. Additionally, acquisitions or divestitures may result in loss of access to historical business records if legacy systems or hosting arrangements are discontinued, which can limit CAE’s ability to respond to future audits, inquiries, or claims.

Business continuity

CAE may be unable to recover from business interruptions, including pandemics, natural disasters, political/social unrest, acts of war, terrorism, and IT disruptions including those at third-party suppliers and service providers, in an efficient and timely manner. Such disruptions may cause delays in the execution of certain programs which require us to incur additional non-compensable costs, including overtime work, that are necessary to meet clients’ schedules to avoid penalties or sanctions under contracts or even the cancellation of some contracts. These business interruptions can also have a detrimental effect on our customers’ operations and may lead to aircraft being grounded and flights delayed. Our vulnerability and that of our partners and service providers to security breaches, denial of service attacks or other hacking or phishing attacks has also increased since the COVID-19 pandemic, the increased geopolitical tensions and our recent acquisitions.

Subcontractors

We engage subcontractors for many of our contracts with whom we may have disputes, including with regard to the quality, safety and timeliness of their work, customer concerns, or their failure to comply with applicable laws. Subcontractors may not be able to acquire or maintain the quality of the materials, components, subsystems and services they supply, which might result in greater product returns, service problems, warranty claims and increased levels of risk. In connection with our government contracts, we may be required to procure certain materials, components and parts from local suppliers or supply sources approved by government authorities. CAE relies on subcontractors and other suppliers to comply with applicable laws, regulations and other requirements regarding procurement of counterfeit, unauthorized or otherwise non-compliant parts or materials. Each of these subcontractor risks could have a material adverse effect on our business, financial condition, results of operations and cash flows.

Fixed price and long-term supply contracts

We provide a number of our products and services through fixed-price contracts that enable us, contrary to cost-reimbursable contracts, to benefit from performance improvements, cost reductions and efficiencies, but also require us to absorb cost overruns reducing profit margins or incurring losses if we are unable to achieve estimated costs and revenues. It can be difficult to estimate all of the costs associated with these contracts, including assumptions on future rates of inflation, or to accurately project the level of sales we may ultimately achieve. In addition, a number of contracts to supply equipment and services to commercial airlines and defence organizations are long-term agreements that can run up to 25 years. While some of these contracts can be adjusted for increases in inflation and costs, the adjustments may not fully offset the increases, or we may not be able to successfully negotiate requests for equitable adjustment from our government customers, which could negatively affect the results of our operations. Other contracts involve new technologies and applications and unforeseen events, such as technological challenges, fluctuations in the price of raw materials, a significant increase in inflation, tariffs, problems with our suppliers and cost overruns, can result in the contractual price becoming less favourable or even unprofitable to us over time. Some of our programs rely on the supply of OEM systems as specified by our customers and over which we may have limited control over pricing and against which our customer contracts may not sufficiently provision to cover unplanned price increases from such OEMs.

In particular, within the Defense and Security segment, we have a number of fixed-price contracts which offer certain potential advantages and efficiencies but can also be negatively impacted by adverse changes to general economic conditions, including unforeseen supply chain disruptions, inflationary pressures, availability of labour and execution difficulties. These risks can result in cost overruns and reduced profit margins or losses. While these risks can often be managed or mitigated, there were eight distinct legacy contracts identified in fiscal 2024, that were entered into prior to the COVID-19 pandemic that are fixed-price in structure, with little to no provision for cost escalation, and that have been more significantly impacted by these risks (the Legacy Contracts).

CAE Financial Report 2026 I 37

Management’s Discussion and Analysis

The recognition of risks associated with the Legacy Contracts was accelerated in the fourth quarter of fiscal 2024 following revised agreements on scope and timing with customers, suppliers and other stakeholders, which resulted in profit adjustments associated with the reassessment of estimated costs. The extent to which the ongoing risk retirement on these programs might impact Defense and Security margins in the coming quarters will depend on the actual timing of program close outs, customer acceptance, and the ability to mitigate associated risks and costs as we continue to execute them. As at March 31, 2026, we have completed four of the Legacy Contracts.

The impact of the ongoing execution of the remaining Legacy Contracts on the Defense and Security profitability is no longer expected to be material. However, if our efforts to execute and retire the Legacy Contracts within expected timeframes and within projected costs are not as anticipated, whether individually or in the aggregate, it could result in continuing material impacts on the overall Defense and Security segment financial position and results, the severity of which cannot be predicted at this time.

Continued reliance on certain parties and information

Following an acquisition closing date, CAE may continue to depend on the acquired company's personnel, good faith, expertise, historical performance, technical resources and information systems, timely support, proprietary information and judgment to provide services to customers under a transitional services agreement. Consequently, we may remain vulnerable to adverse developments in the business and affairs of parties with whom we contract.

Despite our efforts to conduct thorough investigations in connection with any acquisition or related transaction, there is an inherent risk regarding the accuracy, quality and completeness of the information provided to CAE. Additionally, there may also be liabilities, deficiencies or other claims associated with companies or assets we acquire that were not discovered or accurately quantified during our due diligence, potentially resulting in unanticipated costs. CAE may not always be able to independently verify the accuracy or completeness of such information, and there may be unknown events or circumstances relating to acquisition targets that could affect the completeness or accuracy of the information provided to us. Furthermore, post-transaction changes—such as account deactivations, business closures, or system retirements—may reduce access to historical records, creating challenges in verifying past obligations or defending against later claims.

Global safety and governance

We strive to maintain a safe operating and working environment for all our employees and subcontractors, as well as for customers undergoing training at our facilities, and to control risks and hazards in the workplace as well as risks that may occur through delivery of our training or use of our products and services. In the course of our activities, employees may be exposed to hazardous situations, including working in the presence of electricity, working at heights and using specialized tools. Despite the application of our rigorous safety protocols and training programs, there remains an inherent risk of accidents or illness in the workplace. Any significant incident could result in operational disruptions, legal liabilities, increased insurance costs and reputational damage. In addition, failure to comply with operational safety, aviation safety and health and safety regulations could result in fines and affect our ability to win new contracts.

9.3 Cybersecurity risks

Cybersecurity

CAE’s operational continuity and business performance is dependent on the reliability and trust of our digital value chains. These value chains support our critical business, operational and sales functions. CAE could be negatively impacted by threats to the security of its digital, IT and other related electronic systems. CAE could be faced with the risk of disruption, loss, theft, misuse, or unauthorized access to pertinent sensitive data (e.g., intellectual property) and confidential information (e.g., customer, partner and employee information) stored on CAE’s systems and technologies and/or those of its partners, suppliers, and vendors and non‑compliance with regulatory, legislative and commercial security requirements.

Cybersecurity incidents related to our information technology systems, digital platforms and software supply chain are a threat to the integrity, reliability, and availability of technology and data. Cybersecurity incidents may take the form of system failures and non‑availability, software bugs or defects, cyber-attacks, cyber extortion (including ransomware), breaches of systems security, electronic crime, malware, unauthorized attempts to gain access to our proprietary and sensitive information, hacking, phishing, identity theft, theft of intellectual property and confidential information, denial-of-service attacks aimed at causing network failures and services interruption and other cybersecurity threats to our information technology infrastructure and systems.

Continued use of remote work and use of video conferencing and collaborative platforms (initially implemented by CAE in response to the pandemic) has increased the pressure on our information technology infrastructure which, in turn, may increase CAE’s vulnerability to these risks. In addition, subcontractors may, based on the requirements of their participation in our processes, be granted access to our IT platform and software solutions, thereby exposing us to heightened IT and cybersecurity risks.

A successful breach of security of our information systems could lead to theft or misuse of our customers’, employees’, suppliers’, shareholders’, or business contacts’ proprietary, confidential, or personal data information and result in third-party claims against us, reputational harm, regulatory fines or financial loss.

IT, digital and cybersecurity risks could disrupt our operations and cause our airline customers’ operations to be significantly disrupted by having to ground their fleet or delay flights.

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Management’s Discussion and Analysis

Cybersecurity risks include the risk of loss of, corruption of, or unauthorized disclosure or access to business information and data, confidential, classified or restricted information. This may include unauthorized access to information belonging to CAE, our employees, or our business partners, including aircraft OEMs, fixed based operations and customers. These risks expose us to client attrition, non-compliance with privacy legislation or any other laws in effect, litigation, regulatory fines, penalties or regulatory action, compliance costs, corrective measures, investigative or restoration costs, cost hikes to maintain and upgrade technological infrastructures and systems or reputational harm, all of which could have a negative effect on CAE’s operating results, reporting capabilities, profitability and reputation.

Due to the nature of our commercial aviation and defence-related activities, CAE may be targeted by sophisticated, state-sponsored cyber threat actors seeking to disrupt operations, access sensitive information or compromise our systems or those of our partners, a risk that is further accentuated by the increasing geopolitical stressors.

Given the highly evolving nature of cyber or other security threats or disruptions and their increased frequency, the impact of any future incident cannot be easily predicted, and the costs related to such threats or disruptions may not be fully insured or indemnified by other means. In addition, the digital transformation, and the adoption of emerging technologies, such as AI, deep fakes, quantum threats, use of automated techniques by adversaries and the increasing use of “frontier” cyber offensive techniques, call for continued focus and investment to manage our risks effectively.

Furthermore, we may experience similar security threats at customer sites that we operate or manage or to which we gain access to deliver services. CAE may be impacted by cybersecurity risks and similar incidents at our customers, suppliers and partners, as cybersecurity incidents originating within third-party environments may propagate through shared systems, software updates or data integrations, even where our own systems are not directly compromised. These parties have varying levels of cybersecurity maturity, expertise and safeguards, and some may have an elevated threat condition due to their involvement in government and defense contracts, which can similarly elevate the risk to CAE and the likelihood of the threats we face.

9.4 Talent risks

Recruitment, development and retention

CAE may be unable to attract, develop and retain top talent, key people and critical roles to achieve CAE’s global strategic objectives. To support our growth strategies, objectives and normal business operations, CAE needs to maintain a sufficient, qualified and engaged workforce. Our financial position, global brand reputation and ability to achieve strategic objectives may be negatively affected by a failure to manage attrition, to retain and integrate key personnel, to maintain an appropriately sized workforce to meet contract needs and to transition employees from completed projects to new projects or between internal business groups. The identification and the development of our future leaders are becoming a necessity to secure a solid succession planning for critical roles. Failure to plan the succession for critical positions could lead to leadership instability and loss of key talent. In recent years, and consistent with broader industry trends, CAE has faced evolving talent-related challenges and risks, including the need to adapt our workforce to accelerating artificial intelligence and digital advancements, evolving expectations and responsibilities for people leaders that require ongoing upskilling, and changing needs and expectations of newer generations of employees. These factors may make it more difficult to recruit, attract and retain skilled personnel, reducing the availability of our workforce and potentially negatively impacting our business.

Key personnel and management

Our continued success will depend in part on our ability to attract, recruit and retain key personnel and management with relevant skills, expertise and experience, including technology developers of our intellectual property and leaders capable of being ambassadors of our corporate culture. CAE is dependent on the industry experience, qualifications and knowledge of a variety of employees, including our executive officers, managers and other key employees to execute our business plan and operate our business.

During fiscal 2026, CAE completed leadership transitions with the appointment of a new President and Chief Executive Officer and a new Chief Financial Officer. While these appointments are intended to provide leadership continuity and support the execution of CAE’s strategic objectives, the integration of new senior leaders involves risks, including alignment on strategic priorities, organizational effectiveness and decision-making processes. Such integration periods may require additional management attention and could, if not managed effectively, impact execution in the near term. Moreover, there is no guarantee that any member of our leadership or other key employees will continue to serve in their roles for any particular period of time. A loss of, or significant turnover among senior leadership or other key employees could materially adversely affect our business, results of operations and financial condition. The emergency succession plan designed to address the immediate replacement of key personnel may present logistical challenges and incremental costs, and any failure to implement such a plan effectively could impair our operations until suitable replacements are identified.

Corporate culture

We believe that a critical contributor to our success has been our corporate culture, which is based on our core values of One CAE, Innovation, Empowerment, Excellence and Integrity. As we continue to grow and develop, we must effectively integrate, develop and motivate a growing number of employees across various countries, including employees who join CAE through acquisitions. In addition, we must preserve our ability to execute quickly in further developing our products and services and implementing new features and initiatives. Preserving our corporate culture is crucial as it affects employee engagement, innovation, and operational effectiveness. Failing to adapt could hinder recruitment, retention, and our overall business strategy execution.

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Management’s Discussion and Analysis

Labour relations

Approximately 1,800 employees are represented by unions and are covered by 48 collective agreements as of March 31, 2026. These collective bargaining agreements have varying terms and expiration dates. If we experience difficulties with renewals and renegotiations of existing collective agreements or if our employees pursue new collective representation, we could incur additional expenses and may be subject to work stoppages, slow-downs or other labour-related disruptions. Any such expenses or delays could adversely affect our programs served by employees who are covered by such agreements or representation.

9.5 Financial risks

Availability of capital

We depend, in part, upon our debt funding and access to capital markets. We have various debt facilities, including lease liabilities, with maturities ranging between calendar 2026 and 2071, and we cannot provide assurance that these facilities will be refinanced at the same cost, for the same duration and on similar terms as were previously available. If we require additional debt funding, our market liquidity may not be sufficient considering multiple factors including significant instability or disruptions of the capital markets, a deterioration in or weakening of our financial position due to internal or external factors, restrictions or prohibitions on CAE’s access to these facilities, or significant increase in the cost of one or more of these facilities, including credit facilities or the issuance of medium- and long-term debt, which may adversely affect our ability to fund our operations and contractual or financing commitments.

Our unsecured senior notes, term loans and revolving credit facility include standard events of default and covenant provisions whereby accelerated repayment and/or termination of the agreements may result if we were to default on payment or violate certain covenants. In the event that we are unable to maintain compliance with such covenants, we may have restricted access to capital, and we would be required to obtain amendments or waivers from our lenders, refinance the indebtedness subject to covenants or take other mitigating actions prior to a potential breach.

Availability of capital could also be negatively impacted should a deterioration of CAE’s financial position result in a reduction or downgrade of its credit rating. This could limit CAE’s access to sources of short-term and long-term debt financing. In addition, this could significantly increase the costs associated with utilizing short-term or long-term debt facilities or future refinancing of such facilities, which would in turn have a material adverse effect on CAE’s business, financial profile and results of operations.

Customer credit risk

We are exposed to credit risk on our accounts receivable and certain other assets through our normal commercial activities. Adverse changes in a customer's financial condition could cause us to limit or discontinue business with that customer, require us to assume more credit risk relating to that customer's future business, or result in uncollectible trade accounts receivable from that customer. Future credit losses relating to any one of our major customers could be material and could result in a material charge to our financial results.

Foreign exchange

Our operations are global with approximately 90% of our revenue generated from worldwide exports and international activities generally denominated in foreign currencies, mainly the U.S. dollar and the Euro. Our revenue is generated approximately 50% in the U.S., and the balance in Europe and the rest of the world.

Two areas of our business are exposed to fluctuations of foreign exchange rates; our global network of training, software and services operations, and our production operations in Canada as a significant portion of the revenue generated in Canada is in foreign currencies, while a large portion of our operating costs is in Canadian dollars.

For our Canadian operations, when the Canadian dollar increases in value, it negatively affects the translation of our foreign currency denominated revenue and hence our financial results because our results are consolidated in Canadian dollars for financial reporting purposes. However, when the Canadian dollar decreases in value, it negatively affects our foreign currency-denominated costs. Since not all of our revenue is hedged, it is not possible to completely offset the effects of changing foreign currency values, which leaves some residual exposure that may impact our financial results. This residual exposure may be higher when currencies experience significant short-term volatility.

Business conducted through our foreign operations are substantially based in local currencies which are translated to Canadian dollars for financial reporting purposes. Appreciation of foreign currencies against the Canadian dollar would have a positive translation impact and a devaluation of foreign currencies against the Canadian dollar would have the opposite effect.

Effectiveness of internal controls over financial reporting

Our disclosure controls and procedures and internal controls over financial reporting may fail to prevent certain material errors and fraud. A control system can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. Further, the design and operating effectiveness of control procedures must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Due to the inherent limitations in control systems, no evaluation of controls can provide absolute assurance that all control issues within an organization are detected. The inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of errors or mistakes. Controls can also be circumvented by individual acts of certain persons, by collusion of two or more people or by management override of the controls. Due to these inherent limitations, misstatements due to error or fraud may occur and may not be detected in a timely manner or at all.

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Management’s Discussion and Analysis

Any failure of our internal controls could have an adverse effect on our results of operations, harm our reputation and limit our ability to produce timely and accurate financial statements or comply with applicable regulations, causing investors to lose confidence in our reported financial information. If we are unable to implement any of the required changes to our internal control over financial reporting effectively or efficiently or are required to do so earlier than anticipated, it could adversely affect our operations, financial reporting and results of operations.

Liquidity risk

Liquidity risk is defined as the potential risk that we cannot meet our cash obligations as they become due. The increased geopolitical uncertainty and general economic conditions have amplified the unpredictability of business and transaction cycles, thereby bringing uncertainty as to the cash we expect to generate from our operations and our ability to meet financial requirements in the foreseeable future.

Interest rates

We are exposed to risk on the interest rate of our debt. If interest rates increase, our floating rate long-term debt would increase even though the amount borrowed remained the same, and net income and cash flows would decrease, which could materially and adversely affect CAE’s financial condition and operating results. Increasing interest rates may also restrict our ability to expand into new markets if we do not have access to debt or equity capital on acceptable terms, which in turn may negatively affect our competitiveness and results of operations. Similarly, changes in interest rates may negatively affect the ability of our customers to deploy capital or to obtain credit to finance their businesses on acceptable terms, which will impact their demand and ability to pay for our products and services.

Shareholder activism

We may be subject to legal and business challenges in the operation of our business due to actions instituted by activist shareholders or others who may from time to time engage in proxy solicitations, advance shareholder proposals, attempt to acquire control via a hostile take over bid or otherwise or attempt to involve themselves in the governance, strategic direction, and operations of CAE. Responding to such challenges can be costly and time-consuming, disrupting operations, requiring us to incur increased advisory fees and related costs, and diverting the attention of CAE’s board, senior management and employees from the pursuit of our business strategies. Perceived uncertainties as to CAE’s future direction resulting from such challenges could result in the loss of potential business opportunities, cause concern to current or potential investors, make it more difficult to attract and retain qualified personnel and business partners, and affect our relationships with vendors, customers and other third parties. Actions of activist shareholders may cause significant fluctuations in the market price for CAE’s securities based on temporary or speculative market perceptions or other factors that do not necessarily reflect the underlying fundamentals and prospects of CAE’s business.

Returns to shareholders

Payment of dividends and other cash or capital returns (such as a normal course issuer bid for the repurchase of our outstanding shares) to our shareholders are at the discretion of the Board of Directors and depend on various factors, including our operating cash flows, sources of capital, the satisfaction of solvency tests and other financial requirements, our operations and financial results, our ability to repatriate cash from our subsidiaries, as well as our dividend and other policies which may be reviewed from time to time.

No assurance can be given as to whether or when CAE will declare and pay dividends in the future, or the frequency or amount of any such dividend. In addition, cash disbursements used to pay dividends or for the repurchase of our outstanding shares may have an impact on available cash to use to respond to unforeseen challenges or other capital allocation priorities that might have generated higher returns or contributed to CAE's long-term growth.

Estimates used in accounting

Accounting for our contracts, notably contracts for the design, engineering, and manufacturing of training devices, requires judgment associated with estimating contract revenue and costs and assumptions for schedule and technical issues. Because of the significance of the judgments and estimation processes involved in accounting for our contracts, materially different amounts could be recorded if we used different assumptions or if the underlying circumstances were to change. Changes in underlying assumptions, circumstances or estimates may have an impact on our financial statements including but not limited to impairment testing and fair value determination, and may adversely affect our future results of operations and financial condition.

Impairment risk

The carrying amounts of our non-financial assets subject to amortization are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Goodwill and assets that are not yet available for use are tested for impairment annually or at any time if an indicator of impairment exists. Factors that may result in a change in circumstances, indicating that the carrying value of our goodwill or non-financial assets may not be recoverable include reduced future estimated cash flows, slower growth rates than forecasted and a decline in our share price and market capitalization. Change in key assumptions, such as a failure to meet our five-year strategic plan or other unanticipated circumstances, including market conditions, may affect the accuracy or validity of our estimates. Because of the significance of our goodwill and other non-financial assets, any future impairment of these assets could require material non-cash charges to our operating results, which also could have a material adverse effect on our financial condition.

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Management’s Discussion and Analysis

Pension plans

Economic and capital market fluctuations can negatively affect the investment performance, funding and expense associated with our defined benefit pension plans. Pension funding for these plans is based on actuarial estimates and is subject to limitations under applicable regulations. Actuarial estimates prepared during the year were based on, amongst others, assumptions regarding the performance of financial markets, discount rates, inflation rates, future salary increases, estimated retirement ages and mortality rates. The actuarial funding valuation reports determine the amount of cash contributions that we are required to make into registered retirement plans. There can be no assurance that our pension expense and the funding of these plans will not increase in the future, thereby negatively impacting our earnings, cash flow and shareholders' equity.

Indebtedness

CAE may achieve strategic growth objectives by financing costs of investments out of available liquidities, including cash on hand and/or advances or drawdowns under one or more of our revolving credit facility or other debt financing. Such borrowings could have material adverse consequences for CAE, including: limiting our ability to obtain additional financing for working capital, capital expenditures, product development, debt service requirements, acquisitions and general corporate or other purposes; restricting our flexibility and discretion to operate our business; negatively impacting the credit rating of our long-term debt; limiting our ability to declare dividends on our common shares or buy back our outstanding shares; having to dedicate a portion of our cash flows from operations to the payment of interest on our existing indebtedness and not having such cash flows available for other purposes, exposing us to increased interest expense on borrowings at variable rates; limiting our ability to adjust to changing market conditions; placing CAE at a competitive disadvantage compared to our competitors that have incurred less debt; making CAE more vulnerable in a downturn in general economic conditions; and making it more difficult for us to satisfy our covenants with respect to our indebtedness. There is no guarantee that we will be able to obtain additional indebtedness or other financing on terms favourable to us or at all to repay the principal on such indebtedness when it becomes due.

If we are unable to generate sufficient funds to meet our obligations under our outstanding indebtedness, we may be required to refinance, restructure or otherwise amend or waive some or all such obligations, sell assets or raise additional cash through additional issuances of our equity. In such case, we cannot make any assurances that we would be able to obtain such refinancing on terms as favourable as our current financing or that amendments or waivers would be obtained, that such restructuring, sales of assets or issuances of equity can be accomplished or, if accomplished, would raise sufficient funds to meet these obligations.

Restructuring, integration and acquisition costs

We may launch restructuring initiatives, transformation plans or operational excellence programs from time to time. Costs associated with these initiatives include severances and other employee-related costs, impairment of non-financial assets, and other direct costs associated with the closing or relocation of facilities, the closing of a product line or activity, or the downsizing of operations. We may also incur heightened operating costs in order to execute management’s plan. Such expenses are difficult to estimate accurately and may exceed estimates. We may also be unable to realize the anticipated recurring cost savings and other intended benefits from these initiatives within the expected timeframe. If we fail to successfully implement these initiatives, or obtain sufficient funding to execute the plan, it could have a material adverse effect on our business, financial condition, results of operations and cash flows.

Additionally, we incur several costs associated with completing acquisitions and integrating the operations of CAE and acquired companies. The majority of these costs are non-recurring expenses resulting from an acquisition and will consist of transaction costs related to the acquisition, including financial, legal and accounting costs, facilities and information technology systems costs and employment‑related costs. Such expenses are difficult to estimate accurately and may exceed estimates. We may also fail to accurately forecast the financial impact of an acquisition or other strategic transactions, including tax and accounting charges. Accordingly, the benefits from an acquisition may be offset by unexpected costs incurred in integrating the businesses, which could cause our revenue assumptions to be inaccurate.

Sales of additional common shares

Any future issuance of common shares, or other securities convertible into common shares, may result in dilution to present and prospective common shareholders as well as dilution in earnings per share. CAE cannot predict the size of future issuances of common shares or the effect that future issuances and sales of common shares will have on the market price of the common shares. Issuances of a substantial number of additional common shares (or securities convertible into common shares), or the perception that such issuances could occur, may adversely affect the prevailing market price for the common shares.

Market price and volatility of our common shares

The market price of our common shares may be volatile and subject to wide fluctuations in response to numerous factors, many of which are beyond our control and are unrelated to our performance. There can be no assurance that the market price of the common shares will not experience significant fluctuations in the future, including fluctuations that are unrelated to our performance.

Following a significant decline in the market price of a company’s securities, there may be instances of securities class action litigation being instituted against such company. The Company is currently a defendant in a shareholder-instituted class action proceeding, alleging such a decline in the market price of our common shares during the first quarter of fiscal 2025. We cannot provide any assurance that similar litigation will not occur in the future. The existing proceeding and any future similar proceedings could result in substantial costs and a diversion of management’s attention and resources, which could have a material adverse effect on our business, operating results, and financial condition. Due to the inherent uncertainties of litigation, it is not possible to predict the final outcome of the existing proceeding and other related proceedings generally, nor to determine the amount of potential losses, if any, that may be incurred in connection with any final judgment on these matters.

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Management’s Discussion and Analysis

We maintain insurance coverage for various aspects of our business and operations, including for litigation. Our insurance programs have varying coverage limits and maximums, and insurance companies may deny claims we might make. Please refer to “Insurance coverage potential gaps” under Section 9.6 “Legal and compliance risks” of this MD&A for more detail regarding the risks associated with our insurance coverage.

Seasonality

Our business, revenues and cash flows are affected by certain seasonal trends. In the Civil Aviation segment, the level of training delivered is driven by the availability of pilots to train, which tends to be lower in the second quarter as pilots are flying more and training less, thus, driving lower revenues. In the Defense and Security segment, revenue and cash collection is not as consistent across quarters throughout the year as contract awards and availability of funding are influenced by customers’ budget cycles. We expect these trends to continue, but may be disturbed by the volatile geopolitical environment, supply chain and/or labour disruptions.

Taxation matters

We collect and pay significant amounts of taxes to various tax authorities. As our operations are complex and the related tax interpretations, regulations, legislation and jurisprudence that pertain to our activities are subject to continual change and evolving interpretation, the final outcome of the taxation of many transactions is uncertain. Also, a substantial portion of our business is conducted in foreign countries and is thereby subject to numerous countries’ tax laws and fiscal policies. A change in applicable tax laws, treaties or regulations or their interpretation, such as the introduction of Pillar Two Model Rules designed to ensure large multinational enterprises pay a minimum level of tax on income arising in each jurisdiction they operate, could result in a higher effective tax rate on our earnings which could significantly impact our financial results.

Adjusted backlog

Adjusted backlog represents management’s estimate of the aggregate amount of the revenues expected to be realized in the future. The termination, modification, delay, or suspension of multiple contracts may have a material and adverse effect on future revenues and profitability. We cannot guarantee that the revenues initially anticipated in our adjusted order intake will be realized in full, in a timely manner, or at all, or that, even if realized, such revenues will result in profits or cash generation as expected, and any shortfall may be significant. The materialization of any of the risks with respect to adjusted backlog could have a material adverse effect on our business, financial condition, cash flows and results of operations.

9.6 Legal and compliance risks

Data rights and governance

In providing services and solutions to clients, we collect, utilize, store and communicate confidential, personal, classified and proprietary information that may be highly sensitive. Any security breach, improper use, or unauthorized access or misappropriation of such information could result in regulatory penalties, audits or investigations by government agencies, as well as reputation harm or a loss of confidence in our products and services.

Further, the management, use and protection of personal data are becoming increasingly important, particularly given the high value of such information and the associated operational, reputational, and regulatory compliance risks, including compliance with the European Union’s General Data Protection Regulation, the U.K.’s General Data Protection Regulation, Canada’s federal Personal Information Protection and Electronic Documents Act and substantially similar equivalents at the provincial level, the California Consumer Privacy Act, and the proliferation of similar regulatory frameworks in other regions. Compliance with these continuously evolving requirements is complex and may add to our compliance costs. Furthermore, our use of AI introduces additional and evolving risks as we continue to incorporate AI systems into our operations.

U.S. foreign ownership, control or influence mitigation measures

CAE and certain of our subsidiaries are parties to agreements with various departments and agencies of the U.S. government, including the U.S. Department of Defense, which require that these subsidiaries be issued facility security clearances under the U.S. Government National Industrial Security Program. This program requires that any corporation that maintains a facility security clearance be insulated from foreign ownership, control or influence (FOCI) via a mitigation agreement. As a Canadian company, we have entered into a FOCI mitigation agreement with the U.S. Department of Defense that enables these U.S. subsidiaries to obtain and maintain the requisite facility security clearances to enter into and perform on classified contracts with the U.S. government. Specifically, the mitigation agreement is a Special Security Agreement (SSA) for CAE USA Inc. If CAE fails to maintain compliance with the SSA, the facility security clearances for CAE USA Inc. could be terminated. If this occurred, our U.S. subsidiaries would no longer be eligible to enter into new contracts requiring a facility security clearance and could lose the right to perform certain existing contracts with the U.S. government to completion.

Compliance with laws and regulations

CAE operates in a highly regulated environment across multiple jurisdictions and is subject to laws and regulations relating to, without limitation, import-export controls, trade sanctions, anti-corruption, national security and aviation safety. These laws and regulations may change over time and without notice, which could impact our sales and operations in ways that we cannot predict. While such changes could present opportunities, they could also have a materially negative effect on our results of operations or financial condition. For instance, changes imposed by a regulatory agency, including changes to aviation safety standards, could restrict our ability to sell or licence certain products to customers, resulting in lost revenue. We could also be required to make unplanned modifications to our products or services, which could cause delays, increase inventory levels, or lead to postponed or cancelled sales or changes to sales predictions. Our compliance with government import‑export regulations (such as the International Traffic in Arms Regulations) may also be subject to audits or investigations, which could result in potential liabilities.

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Management’s Discussion and Analysis

Export control restrictions could also negatively impact our operations. For example, CAE’s technology and services may be subject to export permit approvals and regulatory requirements which could take several months to obtain, thereby resulting in potential delays in obtaining export permits or even preventing us from exporting to certain countries, entities or people in or from a country. Also, failure to comply with export control requirements could lead to fines and/or being excluded from government contracts or subcontracts and reputational damages, which would negatively affect our revenue from operations and profitability and could have a negative effect on our ability to procure other government contracts in the future.

As a contractor to various governments, CAE must comply with procurement regulations and other specific legal requirements, such as sourcing restrictions, requirements to expend a portion of program funds locally and governmental industrial cooperation or participation requirements (also known as offset arrangements). These regulations and other requirements, although often customary in government contracting, increase our contract performance risks and compliance costs and are regularly evolving. Failure to comply with these regulations and other requirements could negatively impact our revenue from operations and profitability, and could have a negative effect on our ability to procure other government contracts in the future. In various jurisdictions, governments have been pursuing and may continue to pursue policies that could negatively impact our profitability, including seeking to shift additional responsibility and performance risks to the contractor.

In addition, CAE’s global operations are subject to Canadian and foreign laws and regulations, including, without limitation, the Corruption of Foreign Public Officials Act (Canada), the Foreign Corrupt Practices Act (United States), the U.K. Bribery Act and other anti-corruption laws. Failure by CAE and its employees or by any business partner or supplier working on our behalf to comply with anti-corruption requirements could result in administrative, civil, or criminal liabilities, including suspension and debarment from bidding for or performing government contracts

Insurance coverage potential gaps

CAE products, services and/or operations can result in injury or damage to customers and other third parties, exposing CAE to substantial claims and litigation. Such claims could relate to, among other things, personal injury, loss of life, property damage and financial loss.

As part of its business operations, CAE maintains a certain level of insurance coverage, subject to varying limits, deductibles or retentions. There can be no assurance that the available insurance will be sufficient in limits and comprehensive in scope to respond to potential claims. Our insurance is purchased from a number of third-party insurers, often in layered insurance arrangements. In the event that limits purchased or coverage may be inadequate, CAE may be forced to bear substantial costs, resulting in an adverse impact on our financial condition, cash flows, or operating results. Moreover, any accident, failure of, or defect in our products or services, even if fully indemnified or insured, could significantly impact the cost and availability of adequate insurance in the future.

Product-related liabilities

Simulators, software solutions and other products sold by CAE may contain defects or may be subject to human error which may present a safety risk. Said defects, or human error due to manual input, could result in non-conformity costs, warranty claims, potential product liability and personal injury claims and/or major disruption in the operations of our customers. CAE may incur significant costs to issue a product recall or to modify or retrofit these products to ensure their safety, whether these are mandated by aviation authorities or otherwise. In addition to litigation and settlement costs related to liability claims, an adverse judgment against CAE or customers’ fleet being grounded due to potential safety risks in our software solutions may cause reputational damage and have a significant adverse effect on our business and operating results.

CAE may also be subject to product liability claims relating to equipment and services of discontinued operations or businesses sold, whereby CAE has retained past liabilities. We cannot be certain that current insurance coverage will be sufficient to cover one or more substantial claims.

Environmental laws and regulations

CAE is exposed to various environmental risks and is, directly and indirectly through our customers’ obligations, subject to complying or supporting our customers’ compliance with environmental laws and regulations which vary from country to country and are subject to change. CAE’s inability to comply with environmental laws and regulations or to provide adequate information and support to our customers could result in penalties, lawsuits and potential harm to our competitiveness and reputation.

New laws and regulations, stricter enforcement of existing laws and regulations, the discovery of previously unknown contamination, new clean-up requirements or claims on environmental indemnities we committed to may result in us having to incur substantial costs. This could have a materially negative effect on our financial condition and results of operations.

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Management’s Discussion and Analysis

Government audits and investigations

Government agencies routinely audit and investigate government contractors, as well as recipients of government grants and contributions, thereby increasing performance and compliance costs. These agencies may review our performance under our contracts, business processes, cost structure, and compliance with applicable laws, regulations and standards. Our costs incurred for each year are subject to audit by government agencies, which can result in payment demands related to costs they believe should be disallowed or a reduction or reversal of government grants and contributions to R&D programs. Although we work with governments to assess the merits of claims and, where appropriate, reserve for amounts disputed, we could be required to provide repayments to governments which could have a negative effect on our results of operations. We may continue to experience an increased number of audits and challenges to government accounting matters and business systems for current and past years, as well as a lengthened period of time required to close open audits, an increased number of broad requests for information and an increased risk of withholding of payments. If an audit or investigation were to uncover improper or illegal activities, we could be subject to further fines, administrative actions, termination of contracts, forfeiture of profits, repayment of amounts received, suspension of payments or debarment from business with the government. The government could impose additional payment withholds or seek consideration for material not in compliance with associated sourcing standards.

Protection of our intellectual property and brand

We rely, in part, on trade secrets, copyrights, patents, industrial designs, trademarks and contractual restrictions, such as confidentiality agreements and licences, to establish and protect our proprietary rights. These may not be effective in preventing a misuse of our technology or in deterring others from developing similar technologies. We may be limited in our ability to acquire or enforce our intellectual property rights in some countries. Litigation related to our intellectual property rights could be lengthy and costly and could negatively affect our operations or financial results, whether or not we are successful in defending a claim. As the partner of choice elevating safety, efficiency and readiness, our brand is a significant asset. From time to time, we may authorize the use of our brand, under third party licence agreements. In addition, within certain of our flight training operations, we rely on third-party providers for specific services, while remaining accountable for performance delivered under our brand. Adverse publicity related to incidents or litigation involving us, our partners or suppliers may impact the value of our brand.

Third-party intellectual property

Our products may contain sophisticated software and hardware, including computer systems, optical systems and electronics, that are supplied to us by third parties. Moreover, our production of simulators often depends on receiving confidential or proprietary data on the functions, design and performance of a product or system that our simulators are intended to simulate. Our training systems may also involve the collection and analysis of customer performance data in connection with the use of our training systems. We may not be able to obtain access to such software, systems and data sets on reasonable terms, or at all. Infringement claims could be brought against us or against our customers. We may not be successful in defending these claims and we may not be able to develop certain functionalities, designs, and processes that do not infringe on the rights of third parties, or obtain licences on terms that are commercially acceptable, if at all. The markets in which we operate are subject to extensive patenting by third parties. Our ability to modify existing products or to develop new products and services may be constrained by third-party patents such that we incur incremental costs to licence the use of the patent or design around the claims made therein.

Foreign private issuer status

As a “foreign private issuer,” as such term is defined in Rule 405 under the U.S. Securities Act, we are permitted, under a multijurisdictional disclosure system adopted by the securities regulatory authorities in Canada and the U.S., to prepare our disclosure documents filed under the U.S. Securities Exchange Act of 1934, as amended (U.S. Exchange Act), in accordance with Canadian disclosure requirements. Under the U.S. Exchange Act, we are subject to reporting obligations that, in certain respects, are less detailed and less frequent than those of U.S. domestic reporting companies. As a result, we do not file the same reports that a U.S. domestic issuer would file with the U.S. Securities and Exchange Commission (SEC), although we are required to file or furnish to the SEC the continuous disclosure documents that we are required to file in Canada under Canadian securities laws.

In relying on U.S. stock exchange rules that permit a foreign private issuer to follow the corporate governance practices of its home country, CAE is permitted to follow certain Canadian corporate governance practices instead of those otherwise required under the corporate governance standards for U.S. domestic issuers, except to the extent that such laws would be contrary to U.S. securities laws and provided that we disclose the significant differences between our corporate governance practices and the applicable corporate governance standards applicable to U.S. domestic issuers.

Further, as a foreign private issuer, we are exempt from a number of requirements under U.S. securities laws that apply to public companies that are not foreign private issuers. In particular, we are exempt from the rules and regulations under the Exchange Act related to the furnishing and content of proxy statements, and our officers, directors and principal shareholders are exempt from the reporting and short-swing profit recovery provisions contained in Section 16 of the U.S. Exchange Act. CAE is exempt from the provisions of Regulation FD, which prohibits the selective disclosure of material non-public information to, among others, broker‑dealers and holders of a company’s securities under circumstances in which it is reasonably foreseeable that the holder will trade in our securities on the basis of the information.

CAE Financial Report 2026 I 45

Management’s Discussion and Analysis

Even though Canadian securities law requirements regarding the disclosure of material and non-public information by public companies are similar to U.S. securities law requirements and we voluntarily seek to comply with Regulation FD, these exemptions and leniencies will reduce the frequency and scope of information and protections to which purchasers are entitled as investors. Shareholders should not expect to receive the same information at the same time as such information is provided by U.S. domestic companies. In addition, we have four months after the end of each fiscal year to file our Annual Information Form with the SEC and are not required under the U.S. Exchange Act to file quarterly reports with the SEC as promptly as U.S. domestic companies whose securities are registered under the U.S. Exchange Act would do.

We may in the future lose our foreign private issuer status as a result of changes in our shareholder base or U.S. regulatory developments. Although we have elected to comply with certain U.S. regulatory provisions and corporate governance requirements, our loss of foreign private issuer status would make such compliance mandatory. The regulatory and compliance costs to us under securities laws and U.S. stock exchange rules as a U.S. domestic issuer would be significantly more than the costs incurred as a Canadian foreign private issuer.

Enforceability of civil liabilities against our directors and officers

CAE is governed by the Canada Business Corporations Act with our principal place of business in Canada. Most of our directors and officers reside in Canada or elsewhere outside the U.S. The majority of our assets and all or a substantial portion of the assets of these directors and officers may be located outside the U.S. Consequently, it may be difficult for investors who reside in the U.S. to effect service of process in the U.S. upon CAE or upon such persons who are not residents of the U.S., or to realize upon judgments of courts of the U.S. predicated upon the civil liability provisions of the U.S. federal securities laws. Similarly, some of CAE’s directors and officers may be residents of countries other than Canada and all or a substantial portion of the assets of such persons may be located outside Canada. As a result, it may be difficult for Canadian investors to initiate a lawsuit within Canada against these persons.

9.7 Sustainability risks

Extreme climate events and the impact of natural or other disasters (including effects of climate change)

Climate change, reflected in an increase in extreme events such as extreme heat, heavy rainfall, drought and cyclones, can disrupt our operations and supply chain, damage our infrastructure, endanger the health and safety of our employees, affect the availability and cost of materials, resources and services, reduce air traffic, increase insurance costs, and even compromise our ability to obtain adequate insurance coverage for all the major risks to which we are exposed. These disruptions may have a significant impact on our operating results, financial position and liquidity. In addition, evolving regulatory frameworks related to climate change add additional responsibilities specific to the products and services we provide.

Sustainability commitments and expectations

Evolving stakeholder expectations with respect to sustainability matters may pose risks to CAE’s competitive advantage, brand and reputation, ability to attract and retain talent, financial outlook, cost of capital, global supply chain and business continuity, which may impact our ability to achieve long-term business objectives. Increased public awareness and growing concerns about climate change (including the “anti-flying” movement and tendencies towards sustainable travel initiatives) and the global transition to a low carbon economy result in a broad range of impacts, including potential risks for CAE and its business partners’ market outlook.

CAE may fail to adequately monitor the emerging risks in a rapidly changing ecosystem and to sufficiently address evolving expectations related to corporate culture, business conduct and ethics, responsible management of its supply chain, transparency, respect for human rights, working and safety conditions, as well as equal opportunities, among other factors, which could affect corporate profitability and reputation.

Additional sustainability-related regulations, changes in reporting frameworks and guidance, emergence of “greenwashing” legal actions by activist groups, increasing regulatory expectations as well as continuing reforms pertaining to mandatory disclosure create a new uncertain and evolving set of compliance risks. Gaps in perception and acceptability of how sustainability factors in shareholder value also call for increased vigilance when it comes to sustainability reporting and communication.

More acute generalized scrutiny also adds pressure to secure reliable and precise sustainability data with clear accountability across the organization and to deploy robust data collection processes with effective controls that will allow external verification in the near future. A lack of precise, auditable and complete data accurately reflecting the progress on CAE’s multi-year roadmap could hinder our credibility.

As CAE’s sustainability performance is assessed by proxy advisory agencies, we could also face governance issues if we do not meet their expectations.

46 I CAE Financial Report 2026

Management’s Discussion and Analysis

9.8 Reputational risks

Reputational risk

Reputational risk may arise under many situations including, among other things:

–Quality or performance issues of our products or services and new technologies we launch;

–Inability to penetrate new markets or to meet expectations or demand for newly developed products and technologies;

–Failure to maintain ethically and socially responsible operations;

–Relationships or dealings with customers and other counterparties that could expose CAE to ethics, compliance and reputational risks;

–Negative perceptions regarding the defence and security industry and related product and service offerings;

–Injuries or death arising from safety-related operational, training or health and safety incidents during the operation process or training activities;

–Unethical conduct by our employees, agents, subcontractors, suppliers and/or business partners; and

–Alleged or proven non-compliance with laws or regulations by our employees, agents, subcontractors, suppliers and/or business partners.

Any negative publicity about CAE or damage to our image and reputation could have a negative adverse impact on customers' and other key stakeholders’ perception and trust, may prevent CAE to recruit necessary talent and may cause the cancellation of current work or negatively influence our ability to obtain contracts. Many of CAE’s other risks intersect with reputational risk and may therefore amplify this risk.

The growing use of social and digital media increases the speed at which information or misinformation can be shared, and negative publicity, whether accurate or not, could seriously damage CAE’s reputation. Increasing social and political polarization can trigger organized boycotts and targeted online campaigns unrelated to product or service quality. Damage to our reputation or brand image could adversely affect our business, including our ability to hire and retain talent. Reputational risk intersects with many of CAE’s other risks and may therefore exacerbate these risks.

9.9 Technological risks

Information technology

CAE’s operations rely heavily on information technology infrastructure, software as a service and other software applications, whether hosted internally or outsourced. As we expand our product portfolio to include software solutions and place greater emphasis on digital strategy and AI, this reliance on information technology infrastructure and systems has become even more critical. Our business also requires the appropriate and secure handling of sensitive and confidential information from third parties such as aircraft OEMs, national defence forces and customers. Any material disruption in our technology systems could have a material adverse effect on our business, financial condition, prospects and/or results of operations. Similarly, any material technological issue with our software solutions or with data feeds, infrastructure or systems provided by third parties could result in financial losses and/or impairments in our customers' operations.

System modernization, updates and system replacements can temporarily disrupt our business activities. Conversely, failure to maintain, upgrade, replace or properly implement such new information technology systems could result in increased risk of a cybersecurity incident and have an adverse effect on operational efficiency, revenue or reputation. In addition, the digital transformation and the adoption of emerging technologies, such as AI and machine learning, require continued focus and investment to manage those risks effectively.

Reliance on third-party providers for information technology systems and infrastructure management

Operations for some information technology systems maintenance and support services and infrastructure management functions are outsourced to third-party service providers. If these service providers are disrupted or do not perform effectively, it may have a material adverse impact on CAE's operations and customers.

Third-party providers’ services are often subscription-based, subjecting us to various subscription pricing models based on market trends. Strategic renegotiation of such agreements can be lengthy, and it is important to manage and review performance of our third‑party providers on a continuous basis.

9.10 Data and artificial intelligence risks

Data and artificial intelligence

CAE increasingly relies on data-driven technologies and AI to support operations, product development and digital transformation initiatives. The effective and responsible use of data and AI depends on the availability, quality, security and governance of data, as well as on the appropriate design, deployment, monitoring and oversight of AI-enabled systems.

Risks associated with data and AI technologies may include hallucinations, harmful, inaccurate or biased outputs, lack of transparency or explainability, unintended operational impacts, misuse of data or unintentional data leakage, model performance degradation through algorithmic exploitation or otherwise, intellectual property concerns, overreliance on AI systems interfering with individual autonomy and judgment, increased dependence on third-party tools or platforms, environmental impact of AI use, and evolving legal and regulatory requirements relating to AI. Failures in data governance or AI controls could adversely affect operational performance, customer trust, regulatory compliance or CAE’s reputation, and may require additional investment or remediation efforts.

CAE Financial Report 2026 I 47

Management’s Discussion and Analysis

10. COMPENSATION OF KEY MANAGEMENT PERSONNEL

Key management personnel have the ability and responsibility to make major operational, financial and strategic decisions for the Company. We determined that key management personnel consist of the Board of Directors and its Management Team, which is comprised of the President and Chief Executive Officer (CEO) and executive officers who report directly to him. As at March 31, 2026, key management personnel consist of 12 non-employee Directors and 11 executive officers (2025 – 12 non-employee Directors and 8 executive officers).

The compensation expense of key management for employee services recognized in income are as follows:


(amounts in millions)	2026		2025
Salaries and other short-term employee benefits	$	11.3	$	12.5
Post-employment benefits – defined benefit plans	3.2		2.0
Costs related to the CEO's terms of departure	11.4		6.3
Termination benefits	—		5.0
Share-based payments expense	15.7		22.2
	$	41.6	$	48.0

In November 2024, the Company announced its CEO succession plan whereby the then-current CEO, Marc Parent, would leave the Company at the Annual and Special Meeting of Shareholders held on August 13, 2025. The CEO's terms of departure were finalized during the fourth quarter of fiscal 2025 and included non-compete and non-solicitation covenants, as well as other terms that were generally consistent with the previously agreed‑upon employment arrangement which remained in force until the departure date.

During fiscal 2026, the Company incurred $14.0 million (2025 – $8.3 million) of executive management transition costs, including $11.4 million (2025 – $6.3 million) related to the CEO's terms of departure, representing accrued expenses to the then‑current CEO, and $2.6 million (2025 – $2.0 million) of other costs. These costs are recorded in selling, general and administrative expenses. The Company has not incurred any significant additional executive management transition costs subsequent to the first quarter of fiscal 2026.

For the year ended March 31, 2026, the compensation earned by non-employee Directors amounted to $5.3 million (2025 – $3.9 million), which included the grant date fair value of deferred share units (DSUs) as well as cash payments.

48 I CAE Financial Report 2026

Management’s Discussion and Analysis

11. NON-IFRS AND OTHER FINANCIAL MEASURES AND SUPPLEMENTARY NON-FINANCIAL INFORMATION

11.1 Non-IFRS and other financial measure definitions

A non-IFRS ratio is a financial measure disclosed in the form of a ratio, fraction, percentage, or similar representation, that has a non‑IFRS financial measure as one or more of its components.

CHANGES TO NON-IFRS MEASURES

In the fourth quarter of fiscal 2026, we revised the composition and designation of certain non-IFRS measures to align with strategic priorities and enhance comparability with industry peers.

–Free cash flow was revised to include growth capital expenditures and capitalized development costs and exclude dividends paid;

–Adjusted return on invested capital (ROIC) replaced adjusted return on capital employed (ROCE); and

–Invested capital replaced capital employed, without changing the composition of this measure.

Comparative figures have been reclassified to conform to these changes.

PERFORMANCE MEASURES

Gross profit margin (or gross profit as a % of revenue)

Operating income margin (or operating income as a % of revenue)

Adjusted segment operating income or loss

Adjusted segment operating income or loss is a non-IFRS financial measure that gives us an indication of the profitability of each segment because it does not include the impact of any items not specifically related to the segment’s performance. We calculate adjusted segment operating income by taking operating income and adjusting for restructuring, integration and acquisition costs, and impairments and other gains and losses arising from significant strategic transactions or specific events. Impairments and other gains and losses arising from significant strategic transactions or specific events consist of the executive management transition costs (as described in Section 5.4 of this MD&A and Section 5.6 of the MD&A for the year ended March 31, 2025), the gain on fair value remeasurement of SIMCOM (as described in Note 7 of our consolidated financial statements for the year ended March 31, 2025), the shareholder matters (as described in Section 5.5 of the MD&A for the year ended March 31, 2025), the impairment of goodwill (as described in Note 14 of our consolidated financial statements for the year ended March 31, 2024) and the impairment of technology and other non-financial assets (as described in Note 5 of our consolidated financial statements for the year ended March 31, 2024). We track adjusted segment operating income because we believe it provides an enhanced understanding of our operating performance and facilitates the comparison across reporting periods. Adjusted segment operating income on a consolidated basis is a total of segments measure since it is the profitability measure employed by management for making decisions about allocating resources to segments and assessing segment performance. Refer to Section 11.3 “Non‑IFRS measure reconciliations” of this MD&A for a reconciliation of this measure to the most directly comparable measure under IFRS.

CAE Financial Report 2026 I 49

Management’s Discussion and Analysis

Adjusted segment operating income margin (or adjusted segment operating income as a % of revenue)

Adjusted effective tax rate

Adjusted effective tax rate is a supplementary financial measure that represents the effective tax rate on adjusted net income or loss. It is calculated by dividing our income tax expense by our earnings before income taxes, adjusting for the same items used to determine adjusted net income or loss. We track it because we believe it provides an enhanced understanding of the impact of changes in income tax rates and the mix of income on our operating performance and facilitates the comparison across reporting periods. Refer to Section 11.3 “Non‑IFRS measure reconciliations” of this MD&A for a calculation of this measure.

Adjusted net income or loss

Adjusted net income or loss is a non-IFRS financial measure we use as an alternate view of our operating results. We calculate it by taking our net income attributable to equity holders of the Company from continuing operations and adjusting for restructuring, integration and acquisition costs, and impairments and other gains and losses arising from significant strategic transactions or specific events, after tax, as well as significant one-time tax items. Impairments and other gains and losses arising from significant strategic transactions or specific events consist of the executive management transition costs (as described in Section 5.4 of this MD&A and Section 5.6 of the MD&A for the year ended March 31, 2025), the gain on fair value remeasurement of SIMCOM (as described in Note 7 of our consolidated financial statements for the year ended March 31, 2025), the shareholder matters (as described in Section 5.5 of the MD&A for the year ended March 31, 2025), the impairment of goodwill (as described in Note 14 of our consolidated financial statements for the year ended March 31, 2024) and the impairment of technology and other non-financial assets (as described in Note 5 of our consolidated financial statements for the year ended March 31, 2024). We track adjusted net income because we believe it provides an enhanced understanding of our operating performance and facilitates the comparison across reporting periods. Refer to Section 11.3 “Non-IFRS measure reconciliations” of this MD&A for a reconciliation of this measure to the most directly comparable measure under IFRS.

Adjusted earnings or loss per share (EPS)

Adjusted earnings or loss per share is a non-IFRS ratio calculated by dividing adjusted net income or loss by the weighted average number of diluted shares. We track it because we believe it provides an enhanced understanding of our operating performance on a per share basis and facilitates the comparison across reporting periods. Refer to Section 11.3 “Non-IFRS measure reconciliations” of this MD&A for a calculation of this measure.

EBITDA and Adjusted EBITDA

EBITDA is a non-IFRS financial measure which comprises net income or loss from continuing operations before income taxes, finance expense – net, depreciation and amortization. Adjusted EBITDA further adjusts for restructuring, integration and acquisition costs, and impairments and other gains and losses arising from significant strategic transactions or specific events. Impairments and other gains and losses arising from significant strategic transactions or specific events consist of the executive management transition costs (as described in Section 5.4 of this MD&A and Section 5.6 of the MD&A for the year ended March 31, 2025), the gain on fair value remeasurement of SIMCOM (as described in Note 7 of our consolidated financial statements for the year ended March 31, 2025), the shareholder matters (as described in Section 5.5 of the MD&A for the year ended March 31, 2025), the impairment of goodwill (as described in Note 14 of our consolidated financial statements for the year ended March 31, 2024) and the impairment of technology and other non-financial assets (as described in Note 5 of our consolidated financial statements for the year ended March 31, 2024). We use EBITDA and adjusted EBITDA to evaluate our operating performance, by eliminating the impact of non-operational or non‑cash items. Refer to Section 11.3 “Non-IFRS measure reconciliations” of this MD&A for a reconciliation of these measures to the most directly comparable measure under IFRS.

Free cash flow

Free cash flow is a non-IFRS financial measure that assesses our ability to generate cash from our ongoing operations after considering ongoing investments required for property, plant and equipment and intangible assets. It demonstrates our ability to generate cash to repay debt obligations, make strategic investments and return cash to shareholders through either dividends or share repurchases. We use it as an indicator of our financial strength and liquidity. We calculate it by taking the net cash generated by our continuing operating activities, subtracting property, plant and equipment expenditures, intangible assets expenditures and other investing activities and adding proceeds from the disposal of property, plant and equipment, dividends received from equity accounted investees and proceeds, net of payments, from equity accounted investees. Refer to Section 7.1 “Consolidated cash movements” of this MD&A for a reconciliation of this measure to the most directly comparable measure under IFRS.

50 I CAE Financial Report 2026

Management’s Discussion and Analysis

LIQUIDITY AND CAPITAL STRUCTURE MEASURES

Non-cash working capital

Non-cash working capital is a non-IFRS financial measure we use to monitor how much money we have committed in the day-to-day operation of our business. We calculate it by taking current assets (not including cash and cash equivalents and assets held for sale) and subtracting current liabilities (not including the current portion of long-term debt and liabilities held for sale). Refer to Section 8.1 “Consolidated invested capital” of this MD&A for a reconciliation of this measure to the most directly comparable measure under IFRS.

Invested capital

Invested capital is a non-IFRS financial measure we use to evaluate and monitor how much we are investing in our business:

–For the Company as a whole, we take total assets (not including cash and cash equivalents), and subtract total liabilities (not including long-term debt and the current portion of long-term debt);

–For each segment, we take the total assets (not including cash and cash equivalents, tax accounts, employee benefits assets and other non-operating assets), and subtract total liabilities (not including tax accounts, long-term debt and the current portion of long‑term debt, royalty obligations, employee benefit obligations and other non-operating liabilities).

Refer to Section 8.1 “Consolidated invested capital” of this MD&A for a reconciliation of this measure to the most directly comparable measure under IFRS.

Adjusted return on invested capital (ROIC)

Adjusted ROIC is a non-IFRS ratio calculated over a rolling four-quarter period by taking adjusted net operating income after tax, divided by the average invested capital from continuing operations. Adjusted net operating income after tax is calculated by taking adjusted net income and further adjusting for finance expense – net, after tax, and amortization of acquired intangible assets, after tax. We use adjusted ROIC to evaluate the profitability of our invested capital. Refer to Section 11.3 “Non-IFRS measure reconciliations” of this MD&A for a calculation of this measure.

Net debt

Net debt is a capital management measure we use to monitor how much debt we have after taking into account cash and cash equivalents. We use it as an indicator of our overall financial position, and calculate it by taking our total long-term debt, including the current portion of long-term debt, and subtracting cash and cash equivalents. Refer to Section 8.1 “Consolidated invested capital” of this MD&A for a reconciliation of this measure to the most directly comparable measure under IFRS.

Net debt-to-capital

Net debt-to-EBITDA and net debt-to-adjusted EBITDA

Net debt-to-EBITDA and net debt-to-adjusted EBITDA are non-IFRS ratios calculated as net debt divided by the last twelve months EBITDA (or adjusted EBITDA). We use net debt-to-EBITDA and net debt-to-adjusted EBITDA because they reflect our ability to service our debt obligations. Refer to Section 11.3 “Non-IFRS measure reconciliations” of this MD&A for a calculation of these measures.

Maintenance and growth capital expenditures

Maintenance capital expenditure is a supplementary financial measure we use to calculate the investment needed to sustain the current level of economic activity.

Growth capital expenditure is a supplementary financial measure we use to calculate the investment needed to increase the current level of economic activity.

The sum of maintenance capital expenditures and growth capital expenditures represents our total property, plant and equipment expenditures.

CAE Financial Report 2026 I 51

Management’s Discussion and Analysis

GROWTH MEASURES

Adjusted order intake

Adjusted order intake is a supplementary financial measure that represents the expected value of orders we have received:

–For the Civil Aviation segment, we consider an item part of our adjusted order intake when we have a legally binding commercial agreement with a client that includes enough detail about each party’s obligations to form the basis for a contract. Additionally, expected future revenues from customers under short-term and long-term training contracts are included when these customers commit to pay us training fees, or when we reasonably expect the revenue to be generated;

–For the Defense and Security segment, we consider an item part of our adjusted order intake when we have a legally binding commercial agreement with a client that includes enough detail about each party’s obligations to form the basis for a contract. Defense and Security contracts are usually executed over a long-term period but some of them must be renewed each year. For this segment, we only include a contract item in adjusted order intake when the customer has authorized the contract item and has received funding for it.

Adjusted backlog

Adjusted backlog is a supplementary financial measure that represents expected future revenues and includes obligated backlog, joint venture backlog and unfunded backlog and options:

–Obligated backlog represents the value of our adjusted order intake not yet executed and is calculated by adding the adjusted order intake of the current period to the balance of the obligated backlog at the end of the previous fiscal year, subtracting the revenue recognized in the current period and adding or subtracting backlog adjustments. If the amount of an order already recognized in a previous fiscal year is modified, the backlog is revised through adjustments;

–Joint venture backlog is obligated backlog that represents the expected value of our share of orders that our joint ventures have received but have not yet executed. Joint venture backlog is determined on the same basis as obligated backlog described above, but excludes any portion of orders that have been directly subcontracted to a CAE subsidiary, which are already reflected in the determination of obligated backlog;

–Unfunded backlog represents legally binding Defense and Security orders with the U.S. government that we have received but have not yet executed and for which funding authorization has not yet been obtained. The uncertainty relates to the timing of the funding authorization, which is influenced by the government’s budget cycle, based on a September year-end. Options are included in adjusted backlog when there is a high probability of being exercised, which we define as at least 80% probable, but multi-award indefinite-delivery/indefinite-quantity (ID/IQ) contracts are excluded. When an option is exercised, it is considered adjusted order intake in that period, and it is removed from unfunded backlog and options.

Book-to-sales ratio

11.2 Supplementary non-financial information definitions

Full-flight simulators (FFSs) in CAE's network

Simulator equivalent unit (SEU)

Utilization rate

52 I CAE Financial Report 2026

Management’s Discussion and Analysis

11.3 Non-IFRS measure reconciliations

Reconciliation of adjusted segment operating income



					Defense
(amounts in millions)	Civil Aviation				and Security				Total
Three months ended March 31	2026		2025		2026		2025		2026		2025
Operating income	$	88.0	$	197.4	$	39.4	$	42.5	$	127.4	$	239.9
Restructuring, integration and acquisition costs	64.4		—		20.0		—		84.4		—
Impairments and other gains and losses arising from
significant strategic transactions or specific events:
Executive management transition costs	—		4.7		—		3.6		—		8.3
Shareholder matters	—		6.3		—		4.3		—		10.6




Adjusted segment operating income	$	152.4	$	208.4	$	59.4	$	50.4	$	211.8	$	258.8


					Defense
(amounts in millions)	Civil Aviation				and Security				Total
Years ended March 31	2026		2025		2026		2025		2026		2025
Operating income	$	437.9	$	605.3	$	174.4	$	123.9	$	612.3	$	729.2
Restructuring, integration and acquisition costs	64.4		37.8		20.0		18.7		84.4		56.5
Impairments and other gains and losses arising from
significant strategic transactions or specific events:
Executive management transition costs	8.2		4.7		5.8		3.6		14.0		8.3
Shareholder matters	—		6.3		—		4.3		—		10.6
Gain on fair value remeasurement of SIMCOM	—		(72.6)		—		—		—		(72.6)





Adjusted segment operating income	$	510.5	$	581.5	$	200.2	$	150.5	$	710.7	$	732.0

Reconciliation of adjusted net income and adjusted EPS


		Three months ended					Years ended
	March 31					March 31
(amounts in millions, except per share amounts)		2026		2025			2026		2025
Net income attributable to equity holders of the Company		$	73.1	$	135.9		$	313.1	$	405.3

Restructuring, integration and acquisition costs, after tax		63.0		—			63.0		43.2
Impairments and other gains and losses arising from
significant strategic transactions or specific events:


Executive management transition costs, after tax		—		6.1			10.3		6.1
Shareholder matters, after tax		—		7.6			—		7.6
Gain on fair value remeasurement of SIMCOM, after tax		—		—			—		(76.7)


Adjusted net income		$	136.1	$	149.6		$	386.4	$	385.5

Average number of shares outstanding (diluted)		323.2		321.1			322.2		319.7

Adjusted EPS		$	0.42	$	0.47		$	1.20	$	1.21

CAE Financial Report 2026 I 53

Management’s Discussion and Analysis

Calculation of adjusted effective tax rate


		Three months ended				Years ended
		March 31				March 31
(amounts in millions, except effective tax rates)		2026		2025		2026		2025
Earnings before income taxes	$	80.9	$	183.4	$	400.2	$	513.7
Restructuring, integration and acquisition costs		84.4		—		84.4		56.5
Impairments and other gains and losses arising from
significant strategic transactions or specific events:


Executive management transition costs		—		8.3		14.0		8.3
Shareholder matters		—		10.6		—		10.6
Gain on fair value remeasurement of SIMCOM		—		—		—		(72.6)


Adjusted earnings before income taxes	$	165.3	$	202.3	$	498.6	$	516.5

Income tax expense	$	6.6	$	45.2	$	77.5	$	98.7
Tax impact on restructuring, integration and acquisition costs		21.4		—		21.4		13.3
Tax impact on impairments and other gains and losses arising
from significant strategic transactions or specific events:


Tax impact on executive management transition costs		—		2.2		3.7		2.2
Tax impact on shareholder matters		—		3.0		—		3.0
Tax impact on gain on fair value remeasurement of SIMCOM		—		—		—		4.1


Adjusted income tax expense	$	28.0	$	50.4	$	102.6	$	121.3

Effective tax rate	%	8	%	25	%	19	%	19
Adjusted effective tax rate	%	17	%	25	%	21	%	23

Reconciliation of EBITDA, adjusted EBITDA, net debt-to-EBITDA and net debt-to-adjusted EBITDA


	Last twelve months ended
		March 31
(amounts in millions, except net debt-to-EBITDA ratios)			2026		2025
Operating income			$	612.3	$	729.2
Depreciation and amortization			460.1		414.7
EBITDA			$	1,072.4	$	1,143.9
Restructuring, integration and acquisition costs			84.4		56.5
Impairments and other gains and losses arising from
significant strategic transactions or specific events:


Executive management transition costs			14.0		8.3
Shareholder matters			—		10.6
Gain on fair value remeasurement of SIMCOM			—		(72.6)


Adjusted EBITDA			$	1,170.8	$	1,146.7



Net debt			$	2,681.8	$	3,176.7

Net debt-to-EBITDA			2.50		2.78
Net debt-to-adjusted EBITDA			2.29		2.77

54 I CAE Financial Report 2026

Management’s Discussion and Analysis

Calculation of adjusted ROIC


	Last twelve months ended
		March 31
(amounts in millions)			2026		2025
Adjusted net income		$	386.4	$	385.5
Finance expense – net, after tax			166.7		166.9
Amortization of acquired intangible assets, after tax			67.7		62.5

Adjusted net operating income after tax		$	620.8	$	614.9

Average invested capital		$	8,165.7	$	7,705.3

Adjusted ROIC		%	7.6	%	8.0

12. CHANGES IN ACCOUNTING POLICIES

12.1 New and amended standards not yet adopted

Amendments to IFRS 7 – Financial Statements Disclosures and IFRS 9 – Financial Instruments

In May 2024, the IASB issued amendments to IFRS 7 - Financial Statements Disclosures and IFRS 9 - Financial Instruments to clarify the date of recognition and derecognition of some financial assets and liabilities, with a new exception for some financial liabilities settled through an electronic cash transfer system, to clarify and add further guidance for assessing whether a financial asset meets the solely payments of principal and interest (SPPI) criterion, add new disclosures for certain instruments with contractual terms that can change cash flows (such as some instruments with features linked to the achievement of environment, social and governance (ESG) targets), and update the disclosures for equity instruments designated at FVOCI.

These amendments to IFRS 7 and IFRS 9 will be effective for our fiscal period beginning on April 1, 2026, with earlier adoption permitted, and are not expected to have a material impact on our consolidated financial statements.

IFRS 18 – Presentation and Disclosure in Financial Statements

In April 2024, the IASB issued IFRS 18 - Presentation and Disclosure in Financial Statements which sets out requirements for the presentation and disclosure of information in the financial statements. IFRS 18 will replace IAS 1 - Presentation of Financial Statements but carries forward many of the requirements from IAS 1. IFRS 18 introduces a defined structure for the income statement, composed of required categories and subtotals, and disclosure requirements for management-defined performance measures.

IFRS 18 will be effective for our fiscal period beginning on April 1, 2027. We continue to evaluate the impact of the new standard on our consolidated financial statements.

12.2 Use of judgements, estimates and assumptions

The preparation of the consolidated financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies, the reported amounts of assets and liabilities and disclosures at the date of the consolidated financial statements, as well as the reported amounts of revenues and expenses for the period reported. It also requires management to exercise its judgement in applying accounting policies. The areas involving a high degree of judgement or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements are disclosed below. Actual results could differ from those estimates. Changes will be reported in the period in which they are identified.

Business combinations

Business combinations are accounted for in accordance with the acquisition method as of the date control is transferred. The consideration transferred and the acquiree’s identifiable assets, liabilities and contingent liabilities are measured at their fair value at the date of acquisition, which may be estimated using an income, market or cost valuation method. Depending on the complexity of determining these valuations, we either consult with independent experts or develop the fair value internally by using appropriate valuation techniques which are generally based on a forecast of the total expected future net discounted cash flows. These evaluations are linked closely to the assumptions made by management regarding the future performance of the related assets and the discount rate. Contingent consideration is measured at fair value using a discounted cash flow model.

The judgments made in determining the estimated fair value assigned to the net identifiable assets acquired, as well as the estimated useful life of non-financial assets, could impact the net income of subsequent periods through depreciation and amortization, and in certain instances through impairment charges. We believe that the estimated fair values assigned to the net identifiable assets acquired are based on reasonable assumptions that a marketplace participant would use. While we use our best estimates and assumptions to accurately value the net identifiable assets acquired at the acquisition date, estimates are inherently uncertain and subject to refinement.

CAE Financial Report 2026 I 55

Management’s Discussion and Analysis

During the measurement period, for up to 12 months following the acquisition, we recorded adjustments to the initial estimate of the net identifiable assets acquired based on new information obtained that would have existed as of the date of the acquisition. Any adjustment that arises from information obtained that did not exist as of the date of the acquisition will be recorded in the period the adjustment arises.

Development costs

Development costs are recognized as intangible assets and are amortized over their useful lives when they meet the criteria for capitalization. Forecasted revenue and profitability for the relevant projects are used to assess compliance with the capitalization criteria and to assess the recoverable amount of the assets.

Impairment of non-financial assets

Our impairment test for goodwill is based on estimates of the recoverable amount of the CGU or group of CGUs to which goodwill has been allocated and uses valuation models such as the discounted cash flows model (level 3). Management applies significant judgement in developing the cash flow model, which includes the use of key assumptions including expected revenue growth, margin projections and the discount rates. Management also applies judgement when reflecting the impact surrounding current market view of risk and uncertainty and macroeconomic conditions. These estimates, including the methodology used, can have a material impact on the respective values and ultimately the amount of any goodwill impairment.

Likewise, whenever property, plant and equipment and intangible assets are tested for impairment, the determination of the assets’ recoverable amount involves the use of estimates by management and can have a material impact on the respective values and ultimately the amount of any impairment.

Revenue recognition

Transaction price allocated to performance obligations

In allocating the transaction price for contracts with multiple performance obligations, we estimate the stand-alone selling price using the expected cost plus a margin approach if they are not directly observable.

Determining the measure of progress of performance obligations satisfied over time

For contracts where revenue is recognized over time using the cost input method, we apply judgement in estimating the total costs to complete the contract.

The determination of the total costs to complete a contract is based on estimates that can be affected by several factors, including program management and execution difficulties, technological challenges, cost of materials, supply chain disruptions, inflationary pressures, availability of labour and problems with suppliers or subcontractors.

Management conducts monthly reviews of our estimated costs to complete as well as our revenue and margins recognized, on a contract-by-contract basis. The impact of any revisions in cost and revenue estimates is reflected in the period in which the need for a revision becomes known.

Defined benefit pension plans

The cost of defined benefit pension plans and the present value of the employee benefit obligations are determined using actuarial valuations. Actuarial valuations involve, amongst others, making assumptions about discount rates, future salary increases and mortality rates. All assumptions are reviewed at each reporting date. Any changes in these assumptions will impact the carrying amount of the employee benefit obligations and the cost of the defined benefit pension plans. In determining the appropriate discount rate, management considers the interest rates of high quality corporate bonds that are denominated in the currency in which the benefits will be paid, and that have terms to maturity approximating the terms of the related pension liability. The mortality rate is based on publicly available mortality tables for the specific country. Future salary increases and pension increases are based on expected future inflation rates for the specific country. Individual discount rates are derived from the yield curve and are used to determine the service cost and interest cost of the Canadian defined benefit pension plans at the beginning of the year. The present value of the employee benefit obligations for these Canadian plans is determined based on the individual discount rates derived from the yield curve at the end of the year. Other key assumptions for pension obligations are based, in part, on current market conditions. See Note 21 of our consolidated financial statements for further details regarding assumptions used.

Income taxes

We are subject to income tax laws in numerous jurisdictions. Judgement is required in determining the worldwide provision for income taxes. The determination of tax liabilities and assets involves uncertainties in the interpretation of complex tax regulations. We provide for potential tax liabilities based on the weighted average probability of the possible outcomes. Differences between actual results and those estimates could influence the income tax liabilities and deferred tax liabilities in the period in which such determinations are made.

Deferred tax assets are recognized to the extent that it is probable that taxable profit will be available against the losses that can be utilized. Significant management judgement is required to determine the amount of deferred tax assets that can be recognized, based upon the likely timing and the level of future taxable profits together with future tax planning strategies. The recorded amount of total deferred tax assets could be altered if estimates of projected future taxable income and benefits from available tax strategies are lowered, or if changes in current tax regulations are enacted that impose restrictions on the timing or extent of our ability to utilize future tax benefits.

56 I CAE Financial Report 2026

Management’s Discussion and Analysis

13. INTERNAL CONTROL OVER FINANCIAL REPORTING

The Company has established and maintains disclosure controls and procedures designed to provide reasonable assurance that material information relating to the Company is communicated to the President and Chief Executive Officer and the Chief Financial Officer by others, particularly during the period in which annual and interim filings are prepared, and that information required to be disclosed by the Company in its annual filings, interim filings or other reports filed or submitted by the Company under Canadian and U.S. securities laws is recorded, processed, summarized and reported within the time periods specified under those laws and the related rules.

As of March 31, 2026, management evaluated, under the supervision of and with the participation of the President and Chief Executive Officer and the Chief Financial Officer, the effectiveness of the Company’s disclosure controls and procedures as defined under National Instrument 52-109 adopted by the Canadian Securities Administrators and in Rule 13(a)-15(e) under the U.S. Securities Exchange Act of 1934, as amended, and have concluded that the Company’s disclosure controls and procedures were effective.

The Company has also established and maintains internal control over financial reporting, as defined under National Instrument 52-109 and in Rule 13(a)-15(f) under the U.S. Securities Exchange Act of 1934, as amended. The Company’s internal control over financial reporting is a process designed, under the supervision of the President and Chief Executive Officer as well as the Chief Financial Officer, and effected by management and other key CAE personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the Company’s consolidated financial statements for external reporting purposes in accordance with IFRS as issued by the IASB. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Management has assessed the effectiveness of the Company’s internal control over financial reporting as of March 31, 2026 using the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control – Integrated Framework (2013). Based on this assessment, management has determined that the Company’s internal control over financial reporting was effective as of March 31, 2026.

There were no changes in the Company’s internal control over financial reporting that occurred during the fourth quarter and fiscal year 2026 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

14. OVERSIGHT ROLE OF AUDIT COMMITTEE AND BOARD OF DIRECTORS

The Audit Committee reviews our annual MD&A and related consolidated financial statements with management and the external auditor and recommends them to the Board for their approval. Management and our internal auditor also provide the Audit Committee with regular reports assessing our internal controls and procedures for financial reporting. The external auditor reports regularly to management on any weaknesses it finds in our internal control, and these reports are reviewed by the Audit Committee.

15. ADDITIONAL INFORMATION

You will find additional information about CAE, including our most recent AIF, on our website at www.cae.com, or on SEDAR+ at www.sedarplus.ca or on EDGAR at www.sec.gov.

CAE Financial Report 2026 I 57

Management’s Discussion and Analysis

16. SELECTED FINANCIAL INFORMATION

The following table provides selected quarterly financial information for the past three fiscal years.


(amounts in millions, except per share amounts)	Q1		Q2	Q3	Q4	Total
Fiscal 2026
Revenue	$	1,098.6	1,236.6	1,252.1	1,326.7	4,914.0
Net income	$	60.2	76.1	112.1	74.3	322.7
Equity holders of the Company	$	57.2	73.9	108.9	73.1	313.1


Non-controlling interests	$	3.0	2.2	3.2	1.2	9.6
Basic EPS attributable to equity holders of the Company	$	0.18	0.23	0.34	0.23	0.98


Diluted EPS attributable to equity holders of the Company	$	0.18	0.23	0.34	0.23	0.97


Adjusted EPS(1)	$	0.21	0.23	0.34	0.42	1.20
Average number of shares outstanding (basic)	320.4		320.7	321.4	321.8	321.1
Average number of shares outstanding (diluted)	321.1		322.2	322.7	323.2	322.2



Fiscal 2025
Revenue	$	1,072.5	1,136.6	1,223.4	1,275.4	4,707.9
Net income	$	50.8	54.8	171.2	138.2	415.0
Equity holders of the Company	$	48.3	52.5	168.6	135.9	405.3


Non-controlling interests	$	2.5	2.3	2.6	2.3	9.7
Basic and diluted EPS attributable to equity holders of the Company	$	0.15	0.16	0.53	0.42	1.27





Adjusted EPS(1)	$	0.21	0.24	0.29	0.47	1.21
Average number of shares outstanding (basic)	318.6		318.7	319.0	320.0	319.1
Average number of shares outstanding (diluted)	318.8		319.1	319.8	321.1	319.7



Fiscal 2024
Revenue	$	1,012.0	1,050.0	1,094.5	1,126.3	4,282.8
Net income (loss)	$	67.8	61.1	59.1	(484.3)	(296.3)
Equity holders of the Company
Continuing operations	$	64.8	56.2	58.4	(504.7)	(325.3)
Discontinued operations	$	0.5	2.2	(1.9)	20.5	21.3
Non-controlling interests	$	2.5	2.7	2.6	(0.1)	7.7
Basic and diluted EPS attributable to equity holders of the Company	$	0.20	0.18	0.17	(1.52)	(0.95)
Continuing operations	$	0.20	0.17	0.18	(1.58)	(1.02)
Discontinued operations	$	—	0.01	(0.01)	0.06	0.07



Adjusted EPS(1)	$	0.24	0.26	0.24	0.12	0.87
Average number of shares outstanding (basic)	318.0		318.2	318.3	318.3	318.2

Average number of shares outstanding (diluted)	318.8		319.2	319.1	318.3	318.2

The following table provides selected annual financial information for the past three fiscal years.


(amounts in millions)	2026		2025		2024









Financial position:
Total assets	$	11,147.8	$	11,213.8	$	9,834.1
Total non-current financial liabilities(2)	3,069.4		3,185.2		2,855.4
Total net debt	2,681.8		3,176.7		2,914.2

(2) Includes long-term debt, long-term derivative liabilities and other long-term liabilities meeting the definition of a financial liability.

58 I CAE Financial Report 2026

CAE INC.

CONSOLIDATED FINANCIAL STATEMENTS


Management’s Report on Internal Control Over Financial Reporting			60
Report of Independent Registered Public Accounting Firm			61
Consolidated Financial Statements
Consolidated income statement			63
Consolidated statement of comprehensive income			64
Consolidated statement of financial position			65
Consolidated statement of changes in equity			66
Consolidated statement of cash flows			67
Notes to the Consolidated Financial Statements
Note 1 - Nature of operations and summary of material accounting policies			68

Note 2 - Business combinations			83

Note 3 - Operating segments and geographic information			84
Note 4 - Other (gains) and losses			86
Note 5 - Restructuring, integration and acquisition costs			86
Note 6 - Gain on remeasurement of previously held equity interest			86

Note 7 - Finance expense - net			87
Note 8 - Income taxes			87
Note 9 - Share capital and earnings per share			89
Note 10 - Accounts receivable			90
Note 11 - Balance from contracts with customers			90
Note 12 - Inventories			90
Note 13 - Property, plant and equipment			91
Note 14 - Intangible assets			91
Note 15 - Leases			93
Note 16 - Investment in equity accounted investees			94
Note 17 - Other non-current assets			95
Note 18 - Accounts payable and accrued liabilities			95
Note 19 - Provisions			95
Note 20 - Debt facilities			95
Note 21 - Employee benefits obligations			97
Note 22 - Other non-current liabilities			100
Note 23 - Supplementary cash flows information			100
Note 24 - Accumulated other comprehensive income			101
Note 25 - Share-based payments			101
Note 26 - Employee compensation			104
Note 27 - Government participation			104

Note 28 - Contingencies and commitments			105
Note 29 - Fair value of financial instruments			106
Note 30 - Capital risk management			107
Note 31 - Financial risk management			108

Note 32 - Compensation of key management personnel			113

CAE Financial Report 2026 | 59

Management’s Report on Internal Control Over Financial Reporting

The management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting. The Company’s internal control over financial reporting is a process designed, under the supervision of and with the participation of the President and Chief Executive Officer and the Chief Financial Officer, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the Company’s consolidated financial statements for external reporting purposes in accordance with IFRS Accounting Standards (IFRS), as issued by the International Accounting Standards Board (IASB).

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

The effectiveness of the Company’s internal control over financial reporting as of March 31, 2026 has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report included herein.

/s/ Matthew Bromberg /s/ Ryan McLeod

President and Chief Executive Officer Chief Financial Officer

May 21, 2026

60 | CAE Financial Report 2026

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Shareholders of CAE Inc.

Opinions on the Financial Statements and Internal Control over Financial Reporting

We have audited the accompanying consolidated statements of financial position of CAE Inc. and its subsidiaries (the Company) as of March 31, 2026 and 2025, and the related consolidated statements of income, of comprehensive income, of changes in equity and of cash flows for the years then ended, including the related notes (collectively referred to as the consolidated financial statements). We also have audited the Company’s internal control over financial reporting as of March 31, 2026, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of March 31, 2026 and 2025, and its financial performance and its cash flows for the years then ended in conformity with IFRS Accounting Standards as issued by the International Accounting Standards Board. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of March 31, 2026, based on criteria established in Internal Control – Integrated Framework (2013) issued by the COSO.

Basis for Opinions

The Company’s management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company’s internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

CAE Financial Report 2026 | 61

Critical Audit Matters

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Revenue recognition – Estimated costs to complete certain contracts

As described in Note 1 to the consolidated financial statements, the Company recognizes revenue from contracts with customers for the design, engineering, and manufacturing of training devices over time using the cost input method when management determines that these devices have a sufficient level of customization such that they have no alternative use and the Company has enforceable rights to payment for work completed to date. For the year ended March 31, 2026, a portion of total consolidated revenue of $4.9 billion related to revenue recognized from contracts with customers over time using the cost input method. For contracts where revenue is recognized over time using the cost input method, management applies judgment in estimating the total costs to complete the contract. The determination of the total costs to complete a contract is based on estimates that can be affected by several factors, including program management and execution difficulties, technological challenges, cost of materials, supply chain disruptions, inflationary pressures, availability of labour and problems with suppliers or subcontractors. The impact of any revisions in cost and revenue estimates is reflected in the period in which the need for a revision becomes known.

The principal considerations for our determination that performing procedures relating to revenue recognition for estimated costs to complete certain contracts is a critical audit matter are that there was judgment applied by management in estimating the total costs to complete the contracts. This in turn led to a high degree of auditor judgment, subjectivity and effort in performing procedures and evaluating audit evidence related to the total costs to complete the contracts estimated by management.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to the revenue recognition process including controls over the estimation of the total costs to complete the contracts. These procedures also included, among others, testing management’s process for estimating the total costs to complete the contracts for a sample of contracts, which included testing the completeness, accuracy and relevance of the data used in the estimate of the work performed to date as a proportion of the total work to be performed; and evaluating the reasonableness of total costs to complete the contracts by considering the factors identified by management as impacting those costs. Evaluating the reasonableness of total costs to complete the contracts involved assessing, on a sample basis, management’s ability to reasonably estimate total costs to complete the contracts by comparing changes in estimated costs with the prior year estimate or estimated costs to complete the contracts for new contracts; performing a lookback analysis to assess variances between actual and estimated costs for completed contracts; and performing procedures to evaluate the timely identification of factors which may warrant a modification to a previous cost estimate.

/s/PricewaterhouseCoopers LLP

Montréal, Canada

May 21, 2026

We have served as the Company’s auditor since 1991.

62 | CAE Financial Report 2026

Consolidated Financial Statements

Consolidated Income Statement



Years ended March 31
(amounts in millions of Canadian dollars, except per share amounts)	Notes		2026		2025



Revenue	3	$	4,914.0	$	4,707.9
Cost of sales			3,523.2		3,407.8
Gross profit		$	1,390.8	$	1,300.1
Research and development expenses			144.0		123.2
Selling, general and administrative expenses			624.3		565.4
Other (gains) and losses	4		8.5		(13.3)
Share of after-tax profit of equity accounted investees	3		(82.7)		(88.3)
Restructuring, integration and acquisition costs	5		84.4		56.5

Gain on remeasurement of previously held equity interest	6		—		(72.6)
Operating income		$	612.3	$	729.2


Finance expense – net	7		212.1		215.5
Earnings before income taxes		$	400.2	$	513.7
Income tax expense	8		77.5		98.7


Net income		$	322.7	$	415.0
Attributable to:
Equity holders of the Company		$	313.1	$	405.3
Non-controlling interests			9.6		9.7

Earnings per share attributable to equity holders of the Company
Basic	9	$	0.98	$	1.27


Diluted	9		0.97		1.27

The accompanying notes form an integral part of these Consolidated Financial Statements.

CAE Financial Report 2026 | 63

Consolidated Financial Statements

Consolidated Statement of Comprehensive Income



Years ended March 31
(amounts in millions of Canadian dollars)	Notes		2026		2025


Net income		$	322.7	$	415.0
Items that may be reclassified to net income
Foreign currency exchange differences on translation of foreign operations		$	(105.7)	$	381.9
Net gain (loss) on hedges of net investment in foreign operations			61.5		(125.2)
Reclassification to income of gains on foreign currency exchange differences			(5.1)		(10.1)
Net gain (loss) on cash flow hedges			6.1		(41.4)
Reclassification to income of losses on cash flow hedges			8.1		20.6
Income taxes	8		(0.4)		5.9
		$	(35.5)	$	231.7
Items that will never be reclassified to net income
Remeasurement of defined benefit pension plan obligations	21	$	79.3	$	(54.3)

Income taxes	8		(21.0)		14.4
		$	58.3	$	(39.9)
Other comprehensive income		$	22.8	$	191.8


Total comprehensive income		$	345.5	$	606.8
Attributable to:
Equity holders of the Company		$	336.8	$	593.2
Non-controlling interests			8.7		13.6

The accompanying notes form an integral part of these Consolidated Financial Statements.

64 | CAE Financial Report 2026

Consolidated Financial Statements

Consolidated Statement of Financial Position



As at March 31
(amounts in millions of Canadian dollars)	Notes		2026		2025
Assets
Cash and cash equivalents		$	552.4	$	293.7

Accounts receivable	10		624.3		612.0
Contract assets	11		485.3		482.2
Inventories	12		454.8		595.0
Prepayments			77.2		78.2
Income taxes recoverable and tax credits recoverable			61.5		59.0
Derivative financial assets			9.7		23.5

Total current assets		$	2,265.2	$	2,143.6
Property, plant and equipment	13		2,993.0		2,989.5
Right-of-use assets	15		743.4		788.0
Intangible assets	14		3,692.2		3,871.0
Investment in equity accounted investees	16		572.7		559.1
Employee benefits assets	21		44.5		11.6
Deferred tax assets	8		147.6		191.8
Derivative financial assets			0.6		1.4
Other non-current assets	17		688.6		657.8
Total assets		$	11,147.8	$	11,213.8

Liabilities and equity
Accounts payable and accrued liabilities	18	$	935.1	$	1,190.8
Provisions	19		42.8		34.5
Income taxes payable			20.0		18.4
Contract liabilities	11		1,086.9		1,001.6
Current portion of long-term debt	20		252.0		399.0

Derivative financial liabilities			24.5		42.2

Total current liabilities		$	2,361.3	$	2,686.5
Provisions	19		11.2		14.3
Long-term debt	20		2,982.2		3,071.4

Employee benefits obligations	21		106.1		134.1
Deferred tax liabilities	8		38.3		40.7
Derivative financial liabilities			14.6		22.4
Other non-current liabilities	22		246.0		268.4
Total liabilities		$	5,759.7	$	6,237.8
Equity
Share capital	9	$	2,382.2	$	2,327.1
Contributed surplus			96.8		69.8
Accumulated other comprehensive income	24		347.2		381.8
Retained earnings			2,478.6		2,112.8
Equity attributable to equity holders of the Company		$	5,304.8	$	4,891.5
Non-controlling interests			83.3		84.5
Total equity		$	5,388.1	$	4,976.0
Total liabilities and equity		$	11,147.8	$	11,213.8

The accompanying notes form an integral part of these Consolidated Financial Statements.

CAE Financial Report 2026 | 65

Consolidated Financial Statements

Consolidated Statement of Changes in Equity


		Attributable to equity holders of the Company
		Common shares					Accumulated other							Non-
(amounts in millions of Canadian dollars,		Number of	Stated		Contributed		comprehensive			Retained			controlling			Total
except number of shares)	Notes	shares	value		surplus		income			earnings		Total	interests			equity


Balances as at March 31, 2024		318,312,233	$	2,252.9	$	55.4	$	154.0	$	1,762.6	$	4,224.9	$	77.7	$	4,302.6
Net income		—	$	—	$	—	$	—	$	405.3	$	405.3	$	9.7	$	415.0
Other comprehensive income (loss)		—		—		—		227.8		(39.9)		187.9		3.9		191.8






Total comprehensive income		—	$	—	$	—	$	227.8	$	365.4	$	593.2	$	13.6	$	606.8



Exercise of stock options	25	2,763,675		79.0		(11.9)		—		—		67.1		—		67.1
Settlement of equity-settled awards	25	45,430		1.3		(1.3)		—		—		—		—		—
Repurchase and cancellation of common shares	9	(856,230)		(6.1)		—		—		(15.2)		(21.3)		—		(21.3)
Equity-settled share-based payments expense, after tax	25	—		—		27.6		—		—		27.6		—		27.6


Transactions with non-controlling interests		—		—		—		—		—		—		(6.8)		(6.8)


Balances as at March 31, 2025		320,265,108	$	2,327.1	$	69.8	$	381.8	$	2,112.8	$	4,891.5	$	84.5	$	4,976.0


Net income		—	$	—	$	—	$	—	$	313.1	$	313.1	$	9.6	$	322.7
Other comprehensive (loss) income		—		—		—		(34.6)		58.3		23.7		(0.9)		22.8






Total comprehensive (loss) income		—	$	—	$	—	$	(34.6)	$	371.4	$	336.8	$	8.7	$	345.5


Exercise of stock options	25	1,657,429		56.4		(10.1)		—		—		46.3		—		46.3
Settlement of equity-settled awards	25	2,950		0.1		(0.1)		—		—		—		—		—
Repurchase and cancellation of common shares	9	(191,100)		(1.4)		—		—		(5.6)		(7.0)		—		(7.0)
Equity-settled share-based payments expense, after tax	25	—		—		37.2		—		—		37.2		—		37.2


Transactions with non-controlling interests		—		—		—		—		—		—		(9.9)		(9.9)


Balances as at March 31, 2026		321,734,387	$	2,382.2	$	96.8	$	347.2	$	2,478.6	$	5,304.8	$	83.3	$	5,388.1

The accompanying notes form an integral part of these Consolidated Financial Statements.

66 | CAE Financial Report 2026

Consolidated Financial Statements

Consolidated Statement of Cash Flows


Years ended March 31
(amounts in millions of Canadian dollars)	Notes		2026		2025
Operating activities
Net income		$	322.7	$	415.0
Adjustments for:
Depreciation and amortization	3		460.1		414.7

Impairment of non-financial assets – net			58.8		7.1
Share of after-tax profit of equity accounted investees			(82.7)		(88.3)
Deferred income taxes			21.9		44.9
Investment tax credits			(7.7)		(10.1)
Equity-settled share-based payments expense			36.7		25.2
Defined benefit pension plans			18.1		34.6

Derivative financial assets and liabilities – net			13.8		(39.8)

Gain on remeasurement of previously held equity interest	6		—		(72.6)
Other			(12.1)		(31.3)
Changes in non-cash working capital	23		(37.7)		197.1
Net cash provided by operating activities		$	791.9	$	896.5
Investing activities
Business combinations, net of cash acquired	2	$	—	$	(308.0)



Property, plant and equipment expenditures	13		(287.8)		(356.2)
Proceeds from disposal of property, plant and equipment			5.4		19.4



Intangible assets expenditures	14		(73.7)		(87.9)
Net payments to equity accounted investees			(31.6)		(19.0)
Dividends received from equity accounted investees			79.6		28.7
Other			(11.2)		(9.3)
Net cash used in investing activities		$	(319.3)	$	(732.3)
Financing activities


Net repayment of borrowing under revolving credit facilities	20	$	—	$	(45.0)
Proceeds from long-term debt	20		89.5		331.5
Repayment of long-term debt	20		(278.9)		(321.3)
Repayment of lease liabilities	20		(61.1)		(59.9)

Net proceeds from the issuance of common shares	9		46.3		67.1
Repurchase and cancellation of common shares	9		(7.0)		(21.3)

Other			(1.5)		(0.9)
Net cash used in financing activities		$	(212.7)	$	(49.8)
Effect of foreign currency exchange differences on cash and cash equivalents		$	(1.2)	$	19.2
Net increase in cash and cash equivalents		$	258.7	$	133.6
Cash and cash equivalents, beginning of year			293.7		160.1
Cash and cash equivalents, end of year		$	552.4	$	293.7

The accompanying notes form an integral part of these Consolidated Financial Statements.

CAE Financial Report 2026 | 67

Notes to the Consolidated Financial Statements

(Unless otherwise stated, all tabular amounts are in millions of Canadian dollars)

The consolidated financial statements were authorized for issue by the board of directors on May 21, 2026.

NOTE 1 – NATURE OF OPERATIONS AND SUMMARY OF MATERIAL ACCOUNTING POLICIES

Nature of operations

CAE exists to make the world safer. CAE delivers cutting-edge training, simulation, and critical operations solutions to prepare aviation professionals and defence forces for the moments that matter.

CAE Inc. and its subsidiaries’ (CAE or the Company) operations are managed through two segments:

(i)Civil Aviation – Provides comprehensive training solutions for flight, cabin, maintenance, ground personnel and air traffic controllers in commercial, business and helicopter aviation, a complete range of flight simulation training devices, ab initio pilot training and crew sourcing services, as well as airline operations digital solutions;

(ii)Defense and Security – A global training and simulation provider delivering scalable, platform-independent solutions that enable and enhance force readiness and security.

CAE Inc. is incorporated and domiciled in Canada with its registered and main office located at 8585 Côte-de-Liesse, Saint-Laurent, Québec, Canada, H4T 1G6. CAE common shares are traded on the Toronto Stock Exchange (TSX) and on the New York Stock Exchange (NYSE).

Basis of preparation

The material accounting policies applied in the preparation of these consolidated financial statements are described below. These policies have been consistently applied to all years presented, unless otherwise stated.

The consolidated financial statements have been prepared in accordance with Part I of the CPA Canada Handbook – Accounting and IFRS Accounting Standards (IFRS), as issued by the International Accounting Standards Board (IASB).

The consolidated financial statements have been prepared under the historical cost convention, except for the following items measured at fair value: contingent consideration, derivative financial instruments, financial instruments at fair value through profit and loss, financial instruments at fair value through other comprehensive income (OCI) and liabilities for cash-settled share-based arrangements.

Basis of consolidation

Subsidiaries

Subsidiaries are all entities over which the Company has control. Control exists when the Company is exposed to, or has the right to, variable returns from its involvement with the entity and has the ability to affect those returns through power over the entity. Subsidiaries are fully consolidated from the date control is obtained and they are no longer consolidated on the date control ceases. All intercompany accounts and transactions have been eliminated.

As at March 31, 2026, the Company's principal subsidiaries, including all subsidiaries representing individually more than 5% of total consolidated assets and 5% of consolidated revenue, are as follows:

% equity

Subsidiary

Country of incorporation

interest

CAE USA Inc.

United States

100

CAE SimuFlite Inc.

United States

100

Joint arrangements

Joint arrangements are arrangements in which the Company exercises joint control as established by contracts requiring unanimous consent for decisions about the activities that significantly affect the arrangement’s returns. When the Company has the rights to the net assets of the arrangement, the arrangement is classified as a joint venture and is accounted for using the equity method. When the Company has rights to the assets and obligations for the liabilities relating to an arrangement, the arrangement is classified as a joint operation and the Company accounts for each of its assets, liabilities and transactions, including its share of those held or incurred jointly, in relation to the joint operation.

Under the equity method of accounting, interests in joint ventures are initially recognized at cost and adjusted thereafter to recognize the Company’s share of the profits or losses and movements in OCI of the investee. When the Company’s share of losses in a joint venture equals or exceeds its interests in the joint ventures, the Company does not recognize further losses, unless it will incur obligations or make payments on behalf of the joint ventures.

68 | CAE Financial Report 2026

Notes to the Consolidated Financial Statements

Unrealized gains resulting from transactions with joint ventures are eliminated, to the extent of the Company’s share in the joint venture. For sales of products or services from the Company to its joint ventures, the elimination of unrealized profits is considered in the carrying value of the investment in equity accounted investees in the consolidated statement of financial position and in the share in profit or loss of equity accounted investees in the consolidated income statement.

As at March 31, 2026, the Company does not have any investment in equity accounted investees representing individually more than 5% of total consolidated assets.

Business combinations

Business combinations are accounted for under the acquisition method. The consideration transferred for the acquisition of a subsidiary is the fair value of the assets transferred, the liabilities incurred and the equity interests issued by the Company, if any, at the date control is obtained. The consideration transferred includes the fair value of any liability resulting from a contingent consideration arrangement. Acquisition-related costs, other than share and debt issue costs incurred to issue financial instruments that form part of the consideration transferred, are expensed as incurred. Identifiable assets acquired and liabilities assumed in a business combination are measured initially at their fair value at the acquisition date. If a business combination is achieved in stages, the Company remeasures its previously held interest in the acquiree at its acquisition-date fair value and recognizes the resulting gain or loss, if any, in income.

Contingent consideration classified as a liability is measured at fair value, with subsequent changes recognized in income. If the contingent consideration is classified as equity, it is not remeasured and its subsequent settlement is recorded within equity.

New information obtained during the measurement period, up to 12 months following the acquisition date, about facts and circumstances existing at the acquisition date affect the acquisition accounting.

Non-controlling interests

Non-controlling interests (NCI) represent equity interests in subsidiaries owned by outside parties. The share of net assets of subsidiaries attributable to non-controlling interests is presented as a component of equity. Changes in the Company’s ownership interest in subsidiaries that do not result in a loss of control are accounted for as equity transactions.

The Company treats transactions with non-controlling interests as transactions with equity owners of the Company. For interests purchased from non-controlling interests, the difference between any consideration paid and the relevant share acquired of the carrying value of net assets of the subsidiary is recorded in equity. Gains or losses on disposals of non-controlling interests are also recorded in equity.

Financial instruments and hedging relationships

Recognition, classification and measurement

A financial instrument is any contract that gives rise to a financial asset in one entity and a financial liability or equity instrument in another entity. Financial assets and financial liabilities, including derivatives, are recognized in the consolidated statement of financial position when the Company becomes a party to the contractual provisions of the financial instrument. On initial recognition, all financial instruments are measured at fair value.

Financial instruments are subsequently measured based on their classification, which are:

–Financial instruments measured at amortized cost;

–Financial instruments measured at fair value through profit or loss (FVTPL);

–Financial instruments measured at fair value through other comprehensive income (FVOCI).

Financial assets

A financial asset is measured at amortized cost if it meets both of the following conditions:

– The asset is held within a business model whose objective is to hold assets to collect contractual cash flows; and

– The contractual terms of the financial asset give rise, on specific dates, to cash flows that are solely payments of principal and interest (SPPI) on the principal amount outstanding.

Financial assets at amortized cost are subsequently measured using the effective interest rate (EIR) method and are subject to impairment. Gains and losses are recognized in income when the asset is derecognized, modified or impaired. The Company’s financial assets at amortized cost include accounts receivable and advances to a portfolio investment.

Financial assets at FVTPL include financial assets held for trading, financial assets designated upon initial recognition at fair value through profit or loss, and financial assets mandatorily required to be measured at fair value. Financial assets are classified as held for trading if they are acquired for the purpose of selling or repurchasing in the near term. Derivatives, including separated embedded derivatives, are also classified as held for trading unless they are designated as effective hedging instruments. Financial assets with cash flows that are not SPPI are classified and measured at FVTPL, irrespective of the business model. Financial assets at FVTPL are carried in the statement of financial position at fair value with net changes in fair value recognized in the income statement. The Company’s financial assets at FVTPL include cash and cash equivalents, and derivative instruments not designated as hedging instruments in a hedge relationship.

CAE Financial Report 2026 | 69

Notes to the Consolidated Financial Statements

Financial assets at FVOCI are equity investments the Company has irrevocably elected to classify at FVOCI. This classification is determined on an instrument-by-instrument basis. Gains and losses on these financial assets are never transferred to income. Dividends are recognized in the income statement when the right of payment has been established, except when the Company benefits from such proceeds as a recovery of part of the cost of the financial asset, in which case, such gains are recorded in OCI.

Financial assets are not reclassified subsequent to their initial recognition, unless the Company changes its business model for managing a specific financial asset.

Financial liabilities

Financial liabilities at FVTPL include financial liabilities held for trading and financial liabilities designated upon initial recognition at FVTPL. Financial liabilities are classified as held for trading if they are incurred for the purpose of repurchasing in the near term. This category also includes derivative financial instruments that are not designated as hedging instruments in a hedge relationship. Separated embedded derivatives are also classified as held for trading unless they are designated as effective hedging instruments.

Financial liabilities at FVTPL are carried in the statement of financial position at fair value with net changes in fair value recognized in the income statement. The Company’s financial liabilities measured at FVTPL include contingent liabilities arising on business combinations and also derivative instruments not designated as hedging instruments in a hedge relationship.

Financial liabilities at amortized cost are subsequently measured using the EIR method. Gains and losses are recognized in income when the liabilities are derecognized as well as through the EIR amortization process. The Company’s financial liabilities at amortized cost include accounts payables, accrued liabilities, long-term debt, including interest payable, and royalty obligations.

Transaction costs

Transaction costs that are directly related to the acquisition or issuance of financial assets and financial liabilities (other than those classified as FVTPL and FVOCI) are included in the fair value initially recognized for those financial instruments. These costs are amortized to income using the EIR method.

Offsetting of financial assets and financial liabilities

Financial assets and financial liabilities are offset and the net amount is presented in the consolidated statement of financial position when the Company has an unconditional and legally enforceable right to set off the recognized amounts and intends to settle on a net basis or to realize the assets and settle the liabilities simultaneously.

Hedge accounting

The Company uses derivative financial instruments, such as forward currency contracts, cross currency swaps and interest rate swaps to hedge its foreign currency risks and interest rate risks, respectively. A hedging relationship qualifies for hedge accounting when it meets all of the following effectiveness requirements:

–There is ‘an economic relationship’ between the hedged item and the hedging instrument;

–The effect of credit risk does not ‘dominate the value changes’ that result from that economic relationship;

–The hedge ratio of the hedging relationship is the same as that resulting from the quantities of:

–The hedged item that the Company actually hedges; and

–The hedging instrument that the Company actually uses to hedge that quantity of hedged item.

For the purpose of hedge accounting, hedges are classified as:

–Cash flow hedges when hedging the exposure to variability in cash flows that is either attributable to a particular risk associated with a recognized asset or liability or a highly probable forecast transaction or the foreign currency risk in an unrecognized firm commitment;

–Hedges of a net investment in a foreign operation;

–Fair value hedges when hedging the exposure to changes in the fair value of a recognized asset or liability or an unrecognized firm commitment.

Documentation

At the inception of a hedge relationship, the Company formally documents the designation of the hedge, the risk management objectives and strategy, the hedging relationship between the hedged item and hedging item and the method for testing the effectiveness of the hedge, which must be reasonably assured over the term of the hedging relationship and can be reliably measured. The Company formally assesses, both at inception of the hedge relationship and on an ongoing basis, whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in fair values or cash flows of hedged items in relation to the hedged risk.

Cash flow hedge

The effective portion of changes in the fair value of derivative instruments that are designated and qualify as cash flow hedges is recognized in OCI, while the ineffective portion is recognized immediately in income. Amounts accumulated in OCI are reclassified to income in the period in which the hedged item affects income. However, when the forecasted transactions that are hedged items result in recognition of non-financial items, gains and losses previously recognized in OCI are included in the initial carrying value of the related non-financial assets acquired or liabilities incurred. The deferred amounts are ultimately recognized in income as the related non-financial items are derecognized or amortized.

70 | CAE Financial Report 2026

Notes to the Consolidated Financial Statements

Hedge accounting is discontinued prospectively when the hedging relationship no longer meets the criteria for hedge accounting, when the designation is revoked, or when the hedging instrument expires or is sold. Any cumulative gain or loss directly recognized in OCI at that time remains in OCI until the hedged item is recognized in income. When it is probable that a hedged transaction will not occur, the cumulative gain or loss that was recognized in OCI is recognized in income immediately.

Hedge of net investments in foreign operations

The Company has designated certain long-term debts, fixed to fixed cross currency principal and interest rate swap agreements and forward currency contracts as a hedging item of the Company’s overall net investments in foreign operations whose activities are denominated in a currency other than the Company’s functional currency. The portion of gains or losses on the hedging item that is determined to be an effective hedge is recognized in OCI and is limited to the translation gain or loss on the net investment.

Derecognition

Financial assets

A financial asset is derecognized when:

–The rights to receive cash flows from the asset have expired; or

–The Company has transferred its rights to receive cash flows from the asset and either has transferred substantially all the risks and rewards of the asset or has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.

The Company is involved in a program in which it sells interests in certain of its accounts receivable. The Company continues to act as a collection agent. Under the program, the Company transfers some significant risks and rewards of the accounts receivable it sells and retains others. The accounts receivable are derecognized up to an amount corresponding to the extent of the Company's continuing involvement, which represents its maximum retained exposure.

Impairment of financial assets

The Company uses the expected credit loss (ECL) model for calculating impairment of financial assets and recognizes expected credit losses as loss allowances for assets measured at amortized cost. ECLs are based on the difference between the contractual cash flows due in accordance with the contract and all the cash flows that the Company expects to receive, discounted at the original or credit adjusted effective interest rate. ECLs are recognized in two stages. For credit exposures for which there has not been a significant increase in credit risk since initial recognition, ECLs are provided for credit losses that result from default events that are possible within the next 12-months (a 12-month ECL). For those credit exposures for which there has been a significant increase in credit risk since initial recognition, a loss allowance is required for credit losses expected over the remaining life of the exposure, irrespective of the timing of the default (a lifetime ECL).

For trade receivables and contract assets, the Company applies the simplified approach permitted by IFRS 9 - Financial Instruments, which requires expected lifetime losses to be recognized from initial recognition of the assets.

Financial liabilities

A financial liability is derecognized when the obligation under the liability is discharged, cancelled or expired.

When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and the recognition of a new liability, and the difference in the respective carrying amounts is recognized in the income statement.

Foreign currency translation

Foreign operations

CAE Inc.’s consolidated financial statements are presented in Canadian dollars, which is also the parent company’s functional currency. The functional currency of each of the Company’s subsidiaries is the currency of the primary economic environment in which they operate. Determination of the functional currency may involve certain judgements to determine the primary economic environment in which the subsidiary operates. Assets and liabilities of subsidiaries that have a functional currency other than the Canadian dollar are translated from their functional currency to Canadian dollars at exchange rates in effect at the reporting date. Revenue and expenses are translated at the average exchange rates. The resulting translation adjustments are included in OCI.

When CAE Inc. and its subsidiaries have a long-term intercompany balance receivable from or payable to a foreign operation for which settlement is not planned in the foreseeable future, such item is considered, in substance, a part of the Company’s net investment in that foreign operation. Gains or losses arising from the translation of those intercompany balances denominated in foreign currencies are also included in OCI.

Transactions and balances

Monetary assets and liabilities denominated in foreign currencies are translated at the prevailing exchange rate at the reporting date. Non-monetary assets and liabilities, and revenue and expense items denominated in foreign currencies are translated into the functional currency using the exchange rate prevailing at the dates of the respective transactions. Foreign exchange gains and losses resulting from the settlement of such transactions are recognized in income, except when deferred in OCI as qualifying cash flow hedges and qualifying net investment hedges.

CAE Financial Report 2026 | 71

Notes to the Consolidated Financial Statements

Cash and cash equivalents

Cash and cash equivalents consist of cash and highly-liquid investments with original terms to maturity of 90 days or less at the date of purchase.

Accounts receivable

Receivables are initially recognized at fair value and are subsequently carried at amortized cost, net of credit loss allowances, based on expected recoverability. The amount of the allowance is the difference between the asset’s carrying amount and the present value of the estimated future cash flows, discounted at the original effective interest rate. The loss is recognized in income. Subsequent recoveries of amounts previously provided for or written-off are recognized in income.

Inventories

Raw materials are valued at the lower of average cost and net realizable value. Spare parts to be used in the normal course of business are valued at the lower of cost, determined on a specific identification basis, and net realizable value. Work in progress is stated at the lower of cost, determined on a specific identification basis, and net realizable value. The cost of work in progress includes material, labour and an allocation of manufacturing overhead, which is based on normal operating capacity.

Net realizable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and the estimated costs necessary to generate revenue. In the case of raw materials and spare parts, the replacement cost is the best measure of net realizable value.

Property, plant and equipment

Property, plant and equipment are recorded at cost less any accumulated depreciation and impairment losses. Costs include expenditures that are directly attributable to the acquisition or manufacturing of the item. The cost of an item of property, plant and equipment that is initially recognized includes, when applicable, the initial present value estimate of the costs required to dismantle and remove the asset and restore the site on which it is located at the end of its useful life. Purchased software that is integral to the functionality of the related equipment is capitalized as part of that equipment. Subsequent costs, such as updates on training devices, are included in the asset’s carrying amount or recognized as a separate asset only when it is probable that future economic benefits will flow to the Company and the cost of the item can be reliably measured; otherwise, they are expensed.

A loss on disposal is recognized in income when the carrying value of a replaced item is derecognized, unless the item is transferred to inventories. If it is not practicable to determine the carrying value, the cost of the replacement and the accumulated depreciation calculated by reference to that cost will be used to derecognize the replaced part. The costs of day-to-day servicing of property, plant and equipment are recognized in income as incurred. Gains and losses on disposal of property, plant and equipment are determined by comparing the proceeds from disposal with its carrying amount, and are recognized within other gains and losses.

The different components of property, plant and equipment are recognized separately when their useful lives are materially different and such components are depreciated separately in income.

Land is not depreciated. The estimated useful lives, residual values and depreciation methods are as follows:


	Method	Depreciation rate / period
Buildings and improvements	Declining balance/Straight-line	2.5% to 10% / 3 to 40 years
Simulators	Straight-line (10% residual)	Not exceeding 25 years
Machinery and equipment	Declining balance/Straight-line	20% to 35% / 2 to 15 years
Aircraft	Straight-line (residual not exceeding 15%)	Not exceeding 25 years
Aircraft engines	Based on utilization	Not exceeding 3500 hours

As at March 31, 2026, the average remaining depreciation period for full-flight simulators is 11.0 years (2025 – 11.1 years).

Depreciation methods, useful lives and residual values are reviewed and adjusted, if appropriate, on a prospective basis at each reporting date.

Leases

At inception of a contract, the Company assesses whether a contract is, or contains, a lease. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration.

The Company as a lessee

The Company recognizes a right-of-use asset and liability at the lease commencement date. The right-of-use asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date, plus any initial direct costs incurred and an estimate of costs to dismantle and remove the underlying asset or to restore the underlying asset or the site on which it is located, less any lease incentives received.

72 | CAE Financial Report 2026

Notes to the Consolidated Financial Statements

The right-of-use asset is subsequently depreciated from the commencement date to the earlier of the end of the useful life of the right-of-use asset or the end of the lease term. If it is reasonably certain that the Company will obtain ownership by the end of the lease term through a purchase option, the leased asset is depreciated over its useful life. The depreciation periods, residual values (only applicable when it is reasonably certain that the Company will obtain ownership by the end of the lease term) and depreciation methods are as follows:


	Method	Depreciation period
Buildings and land	Straight-line	Not exceeding 50 years
Simulators	Straight-line (10% residual)	Not exceeding 25 years
Machinery and equipment	Straight-line	Not exceeding 7 years
Aircraft	Straight-line (residual not exceeding 15%)	Not exceeding 25 years
Aircraft engines	Based on utilization	Not exceeding 3500 hours

In addition, the right-of-use asset is reduced by impairment losses, if any, and adjusted for certain remeasurements of the lease liability.

The lease liability is initially measured at the present value of the lease payments at the commencement date, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the lessee’s incremental borrowing rate. Lease payments comprise of fixed payments, including in-substance fixed payments, variable lease payments that depend on an index or a rate, amounts expected to be payable under a residual value guarantee, the exercise price under a purchase option that the Company is reasonably certain to exercise, lease payments in an optional renewal period that the Company is reasonably certain to exercise and penalties for early termination of a lease if the Company is reasonably certain to terminate.

The lease liability is subsequently measured at amortized cost using the effective interest method and is remeasured when there is a change in future lease payments arising from a change in an index or rate, the estimate of the amount expected to be payable under a residual value guarantee or the Company’s assessment of whether it will exercise a purchase, renewal or termination option. When the lease liability is remeasured in this way, a corresponding adjustment is made to the carrying amount of the right-of-use asset or is recorded in profit or loss if the carrying amount of the right-of-use asset has been reduced to zero.

Lease modifications

A lease modification is a change in the scope of a lease, or the consideration for a lease, that was not part of its original terms and conditions. A lease modification is accounted for as a separate lease if the modification increases the scope of the lease by adding the right to use one or more underlying assets and the consideration for the lease increases by an amount commensurate with the stand-alone price that reflects the circumstances of the contract. Any other modification is not accounted for as a separate lease.

For a lease modification resulting in a decrease in the scope of the lease, the lease liability is remeasured, using a revised discount rate, to reflect the modified lease payments and the carrying amount of the right-of-use asset is reduced to reflect the partial or full termination of the lease. The difference between the reduction in the lease liability and the reduction in the corresponding right-of-use asset’s carrying value is recognized in profit or loss.

For all other lease modifications, the lease liability is remeasured, using a revised discount rate, to reflect the modified lease payments, with a corresponding adjustment to the right-of-use asset.

Short-term leases and leases of low-value assets

The Company recognizes the payments associated with short-term leases and leases of low-value assets as an expense on a straight-line basis over the lease term.

Sale and leaseback transaction

In a sale and leaseback transaction, the transfer of an asset is recognized as a sale when the customer has obtained control of the underlying asset which is aligned with the Company’s revenue recognition policy, otherwise the Company continues to recognize the transferred asset on the balance sheet and record a financial liability equal to the proceeds transferred. When the transfer of an asset satisfies the Company’s revenue recognition policy to be accounted for as revenue, a partial recognition of the profit from the sale is recorded immediately after the sale, which is equivalent to the proportion of the asset not retained by the Company through the lease. The proportion of the asset retained by the Company through the lease is recognized as a right-of-use asset and the lease liability is measured as the present value of future lease payments.

The Company as a lessor

The Company determines, at lease commencement, whether each lease is a finance or an operating lease. Leases in which substantially all the risks and rewards of ownership are transferred are classified as finance leases. All other leases are accounted for as operating leases.

With regards to finance leases, the asset is derecognized at the commencement of the lease. The net present value of the minimum lease payments and any discounted unguaranteed residual values of leased assets are presented as investment in finance leases. Finance income is recognized over the term of the lease based on the effective interest method. Revenue from operating leases is recognized on a straight-line basis over the term of the corresponding lease.

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Notes to the Consolidated Financial Statements

When the Company subleases one of its leases, it accounts for its interests in the head lease and the sub-lease separately. It assesses the lease classification of a sub-lease with reference to the right-of-use asset arising from the head lease, not with reference to the underlying asset.

Intangible assets

Goodwill

Goodwill is measured at cost less accumulated impairment losses, if any.

Goodwill arises on the acquisition of subsidiaries. Goodwill represents the excess of the aggregate of the cost of an acquisition, including the Company’s best estimate of the fair value of contingent consideration and the acquisition-date fair value of any previously held equity interest in the acquiree, over the fair value of the net identifiable assets of the acquiree at the acquisition date.

Gains and losses on the disposal of an entity include the carrying amount of goodwill allocated to the entity sold.

Research and development (R&D)

Research costs are expensed as incurred. Development costs are also charged to income in the period incurred unless they meet all the specific capitalization criteria established in IAS 38, Intangible Assets. Capitalized development costs are stated at cost and net of accumulated amortization and accumulated impairment losses, if any. Amortization of the capitalized development costs commences when the asset is available for use as intended by management and is included in research and development expenses.

Other intangible assets

Intangible assets acquired separately are measured at cost upon initial recognition. The cost of intangible assets acquired in a business combination is the fair value as at the acquisition date. Following initial recognition, intangible assets are carried at cost, net of accumulated amortization and accumulated impairment losses, if any.

The cost of an internally generated intangible asset comprises all directly attributable costs necessary to create, produce, and prepare the asset to be capable of operating in the manner intended by management.

Gains and losses on disposal of intangible assets are determined by comparing the proceeds from disposal with its carrying amount and are recognized within other gains and losses.

Configuration or customization costs in a cloud computing arrangement are also included when they meet the specific capitalization criteria.

Amortization

Amortization is calculated using the straight-line method for all intangible assets over their estimated useful lives as follows:


			Amortization period
Capitalized development costs			3 to 10 years
Customer relationships			3 to 20 years
Licenses			3 to 20 years
Technology, software and ERP			3 to 12 years
Other intangible assets			2 to 40 years

As at March 31, 2026, the average remaining amortization period for the capitalized development costs is 5.5 years (2025 ‑ 6.7 years), customer relationships is 12.9 years (2025 – 13.7 years), licenses is 12.2 years (2025 – 13.2 years), and technology, software and ERP is 5.9 years (2025 – 6.7 years). Amortization methods and useful lives are reviewed and adjusted, if appropriate, on a prospective basis at each reporting date.

Impairment of non-financial assets

The carrying amounts of the Company’s non-financial assets subject to amortization are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Goodwill and assets that are not yet available for use are tested for impairment annually or at any time if an indicator of impairment exists.

The recoverable amount of an asset or a cash-generating unit (CGU) is the greater of its value in use and its fair value less costs of disposal. The recoverable amount is determined for an individual asset; unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. In such cases, the CGU that the asset belongs to is used to determine the recoverable amount.

For the purposes of impairment testing, the goodwill acquired in a business combination is allocated to CGUs or groups of CGUs, which generally corresponds to its operating segments or one level below, that are expected to benefit from the synergies of the combination, irrespective of whether other assets or liabilities of the acquiree are assigned to those units.

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Notes to the Consolidated Financial Statements

An impairment loss is recognized if the carrying amount of an asset or CGU exceeds its estimated recoverable amount. Where the recoverable amount of a CGU to which goodwill has been allocated is lower than the CGU’s carrying amount, the related goodwill is impaired. Any remaining amount of impairment exceeding the impaired goodwill is recognized on a pro rata basis of the carrying amount of the other assets in the respective CGU. Impairment losses are recognized in income.

The Company evaluates impairment losses, other than goodwill impairment, for potential reversals at each reporting date. An impairment loss is reversed if there is any indication that the loss has decreased or no longer exists due to changes in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortization, if no impairment loss had been recognized. Such reversal is recognized in income.

Borrowing costs

Borrowing costs that are directly attributable to the acquisition or construction of a qualifying asset are capitalized as part of the cost of the asset. A qualifying asset is one that takes a substantial period of time to get ready for its intended use. Capitalization of borrowing costs ceases when the asset is completed and ready for use as intended by management. All other borrowing costs are recognized as finance expense in income, as incurred.

Other assets

Restricted cash

The Company is required to hold a defined amount of cash as collateral under the terms of certain subsidiaries’ external bank financing, government-related sales contracts and business combination arrangements.

Deferred financing costs

Deferred financing costs related to the revolving credit facilities, when it is probable that some or all of the facilities will be drawn down, and deferred financing costs related to sale and leaseback agreements are included in other assets at cost and are amortized on a straight-line basis over the term of the related financing agreements.

Accounts payable and accrued liabilities

Accounts payable and accrued liabilities are recognized initially at fair value and subsequently measured at amortized cost using the effective interest method.

Provisions

Provisions are recognized when the Company has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources will be required to settle the obligation and the amount can be reliably estimated. Provisions are measured at the present value of the expenditures expected to be required to settle the obligation using a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the obligation. The increase in the provision due to passage of time is recognized as a finance expense. When there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by considering the class of obligations as a whole.

Estimated contract losses

Provisions for estimated contract losses are recognized as an onerous contract provision in the period in which it is determined that the unavoidable costs of meeting the obligations under the contract exceed the economic benefits expected to be received under it. The unavoidable costs under a contract reflect the least net cost of exiting from the contract, which is the lower of the cost of fulfilling it and any compensation or penalties arising from failure to fulfil it.

Restoration and simulator removal

In certain situations, simulators are installed at locations that are not owned by the Company. In some of these cases, the Company has an obligation to dismantle and remove the simulators from these sites and to restore the location to its original condition. A provision is recognized for the present value of estimated costs to be incurred to dismantle and remove the simulators from these sites and restore the location. The provision also includes amounts relating to leased land and buildings where restoration costs are contractually required at the end of the lease. Where such costs arise as a result of capital expenditure, these restoration costs are also capitalized.

Restructuring

Restructuring costs consist mainly of severances and other related costs.

Legal claims

The amount represents a provision for certain legal claims brought against the Company. The corresponding charge is recognized in income. Management’s best estimate is that the outcome of these legal claims will not give rise to any significant loss beyond the amounts provided at March 31, 2026.

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Notes to the Consolidated Financial Statements

Warranties

A provision is recognized for expected warranty claims on products sold based on historical experience of the level of repairs and returns. It is expected that most of these costs will be incurred in a period ranging from 1 to 3 years. Assumptions used to calculate the provision for warranties were based on current sales levels and current information available about returns based on the warranty period of products sold.

Long-term debt

Long-term debt is recognized initially at fair value, net of transaction costs incurred. They are subsequently stated at amortized cost. Any difference between the proceeds, net of transaction costs, and the redemption value is recognized in income over the period of borrowings using the effective interest method.

Fees paid on the establishment of loan facilities are recognized as transaction costs of the loan to the extent that it is probable that some or all of the facility will be drawn down. In these cases, the fee is deferred until the drawdown occurs. To the extent that there is no evidence that it is probable that some or all of the facility will be drawn down, the fee is capitalized as a prepayment for liquidity services and amortized over the period of the facility to which it relates.

Share capital

Common shares are classified as equity. Incremental costs directly attributable to the issue of new shares or stock options are shown in equity as a deduction, net of tax, from the proceeds.

When share capital recognized as equity is repurchased, the amount of the consideration paid, which includes directly attributable costs, net of tax, is recognized as a deduction from equity.

Revenue recognition

The Company recognizes revenue when it transfers the control of the promised goods or services to the customer. The transaction price is the amount of consideration to which the Company is expected to be entitled to in exchange for transferring promised goods or services. Variable consideration is included in the transaction price when it is highly probable that there will be no significant reversal of revenue in the future. Variable consideration is usually derived from sales incentives, in the form of discounts or volume rebates, and penalties. The Company identifies the various performance obligations of the contract and allocates the transaction price based on the estimated relative stand-alone selling prices of the promised goods or services underlying each performance obligation.

The Company’s performance obligations are satisfied over time or at a point in time depending on the transfer of control to the customer.

Sales of goods and services

Customized training devices

Revenue from contracts with customers for the design, engineering, and manufacturing of training devices are recognized over time using the cost input method when the Company determines that these devices have a sufficient level of customization such that they have no alternative use and the Company has enforceable rights to payment for work completed to date. The measure of progress toward complete satisfaction of the performance obligation is generally determined by comparing the actual direct costs incurred to date to the total estimated direct costs for the entire contract. When the Company determines that there is an alternative use for these devices, revenue is recognized at a point in time, when the customer obtains control of the device.

Standardized training devices

Revenue from contracts with customers for the manufacturing of standardized training devices is recognized at a point in time, when the customer obtains control of the device.

Training services

Revenue from the sale of training hours or training courses are recognized at a point in time, when services are rendered. For flight schools, cadet training courses are offered mainly by way of ground school and live aircraft flight. For both phases, revenue is recognized over time, using the time elapsed input method.

Product maintenance, support and updates

Revenue from the sale of product maintenance services and post-delivery customer support are recognized over time, using the time elapsed output method or costs incurred method. Revenue from update services, to enhance a training device currently owned by a customer, are recognized over time, using the cost input method.

Spare parts

Revenue from the sale of spare parts is recognized at a point in time, which is generally on delivery to the customer.

76 | CAE Financial Report 2026

Notes to the Consolidated Financial Statements

Software arrangements

Revenue from software arrangements that provide the Company’s customers with the right to use the software without any significant development or integration work is recognized at a point in time, on delivery or, in case of a renewed arrangement, at the renewal date. Revenue from fixed-price software arrangements and software customization contracts that require significant production, modification, or customization of software is recognized over time using the cost input method. Revenue from Software as a service (SaaS) arrangements provide the Company's customers with the right to access a cloud-based environment that the Company provides and manages, the right to receive support and to use the software, however the customer does not have the right to control the software. Revenue from SaaS arrangements is recognized over time, using the time elapsed output method.

Other

Significant financing component

The Company accounts for a significant financing component on contracts of more than 12 months where timing of cash receipts and revenue recognition differ substantially. The transaction price for such contracts is adjusted for the time value of money, using the rate that would be reflected in a separate financing transaction between the Company and its customers at contract inception, to take into consideration the significant financing component.

Non-monetary transactions

The Company may also enter into sales arrangements where little or no monetary consideration is involved. The non-monetary transactions are measured at the most reliable measure of the fair value of the asset or service given up or fair value of the asset or service received.

Contract modifications

Contract modifications, which consist of an increase in the scope or price of a contract, are accounted for as a separate contract when the additional goods or services to be delivered are distinct from those delivered prior to the contract modification and when the price increases by an amount of consideration that reflects its stand-alone selling price. Contract modifications are treated prospectively when the additional goods or services are distinct, but the price increase does not reflect the stand-alone selling price. When the remaining goods or services are not distinct, the Company recognizes an adjustment to revenue of the initial contract on a cumulative catch-up basis at the date of the contract modification.

Costs to obtain and to fulfill a contract

The Company recognizes incremental costs of obtaining a contract as an asset when they are expected to be recovered over a period of more than one year. The Company recognizes costs directly related to fulfilling a contract with a customer as an asset when they generate or enhance resources that will be used to satisfy the performance obligation in the future, and they are expected to be recovered. These assets are amortized on a systematic basis that is consistent with the Company’s transfer of the related goods or services to the customer.

Right to invoice

If the Company has the right to invoice a customer in an amount that directly corresponds with the value of the Company’s performance to date, then revenue can be recognized at the invoice amount.

Contract balances

The timing of revenue recognition, billing and cash collections results in accounts receivable, contract assets and contract liabilities on the consolidated financial position.

Contract assets are recognized when revenue is recognized in excess of billings or when the Company has a right to consideration and that right is conditional to something other than the passage of time. Contract assets are subsequently transferred to accounts receivable when the right to payment becomes unconditional. Contract liabilities are recognized when payments received from customers are in excess of revenue recognized. Contract liabilities are subsequently recognized in revenue when the Company satisfies its performance obligations.

Contract assets and contract liabilities are reported in a net position on a contract-by-contract basis at the end of each reporting period and are classified as current based on the Company's normal operating cycle.

Employee benefits

Defined benefit pension plans

The Company maintains defined benefit pension plans that provide benefits based on length of service and final average earnings.

The defined benefit asset or liability comprises the present value of the defined benefit obligation at the reporting date less the fair value of plan assets out of which the obligations are to be settled. The defined benefit obligations are actuarially determined for each plan using the projected unit credit method. The present value of the defined benefit obligation is determined by discounting the estimated future cash flows using the interest rate of high-quality corporate bonds that are denominated in the currency in which the benefit will be paid and that have terms to maturity approximating the terms of the related pension obligation. In countries where there is no deep market in such bonds, the market rates on government bonds are used.

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Notes to the Consolidated Financial Statements

The value of any employee benefit asset recognized is restricted to the present value of any economic benefits available in the form of refunds from the plan or reductions in the future contributions to the plan (asset ceiling test). Minimum funding requirements may give rise to an additional liability to the extent that they require paying contributions to cover an existing shortfall. Plan assets can only be used to fund employee benefits, are not available to the creditors of the Company, nor can they be paid directly to the Company. Fair value of plan assets is based on market price information.

The Company determines the net pension cost of its Canadian defined benefit plans utilizing individual discount rates derived from the yield curve.

Actuarial gains and losses arising from experience adjustments, changes in actuarial assumptions and the effect of any asset ceiling and minimum liability are recognized to OCI in the period in which they arise. Past service costs are recognized as an expense as incurred at the earlier of when the plan amendment or curtailment occurs and when the entity recognizes related termination benefits.

Defined contribution pension plans

The Company also maintains defined contribution plans for which the Company pays fixed contributions to publicly or privately administered pension insurance plans on a mandatory, contractual or voluntary basis. The Company has no legal or constructive obligation to pay further amounts if the fund does not hold sufficient assets to pay the benefits to all employees. Obligations for contributions to defined contribution pension plans are recognized as an employee benefit expense in income as the services are provided.

Termination benefits

Termination benefits are recognized as an expense when the Company is demonstrably committed, without realistic possibility of withdrawal, to a formal detailed plan to either terminate employment before the normal retirement date, or to provide termination benefits as a result of an offer made to encourage voluntary redundancy. Termination benefits for voluntary redundancies are recognized as an expense, if the Company has made an offer of voluntary redundancy, based on the number of employees expected to accept the offer. Benefits falling due more than 12 months after the reporting date are discounted to their present value.

Share-based payment transactions

The Company’s share-based payment plans consist of two categories: equity-settled share-based payment plans comprised of the stock option plan, a restricted share units (RSU) plan and a performance share units (PSU) plan; and cash-settled share-based payments plans that include the stock purchase plan, deferred share units (DSU) plans, a restricted share units (RSU) plan and a performance share units (PSU) plan.

For both categories, the fair value of the employee services received in exchange is recognized as an expense in income. Service and non-market performance conditions attached to the transactions are not taken into account in determining fair value.

Stock options

The cost of stock option transactions is measured at fair value using the Black-Scholes option pricing model. The compensation expense is measured at the grant date and recognized over the service period with a corresponding increase to contributed surplus. The cumulative expenses recognized for stock option transactions at each reporting date represents the extent to which the vesting period has expired and management’s best estimate of the number of equity instruments that will ultimately vest. For options with graded vesting, each tranche is considered a separate grant with a different vesting date and fair value, and each tranche is accounted for separately. When the stock options are exercised, the Company issues new common shares and the proceeds received net of any directly attributable transaction costs are credited to share capital.

Equity-settled RSU and PSU plans

The cost of RSU and PSU transactions is measured at fair value using the Company’s share price on the date of the grant. The number of units expected to vest are estimated at the grant date and subsequently re-measured at the end of each reporting period. The resulting compensation expense, adjusted for expectations related to attainment of performance criteria, if any, and cancellations, is recognized over the vesting period, with a corresponding increase to contributed surplus, on a straight-line basis.

Cash-settled plans

For cash-settled plans, a corresponding liability is recognized. The fair value of employee services received is calculated by multiplying the number of units expected to vest with the fair value of one unit as of grant date based on the market price of the Company’s common shares. The fair value of the stock purchase plan is a function of the Company’s contributions. Until the liability is settled, the Company re-measures the fair value of the liability at the end of each reporting period and at the date of settlement, with any changes in fair value recognized in income for the period. The Company has entered into equity swap agreements in order to reduce its earnings exposure related to the fluctuation in the Company’s share price relating to the DSU plans, RSU plan and PSU plan.

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Notes to the Consolidated Financial Statements

Restructuring, integration and acquisition costs

Restructuring costs

Restructuring costs are part of a program that is planned and controlled by management, and materially changes either the scope of a business undertaken by the Company or the manner in which that business is conducted. Restructuring costs include costs directly related to significant exit activities, such as the sale or termination of a line of business, the closure of business locations or the relocation of business activities, significant changes in management structure, or fundamental reorganizations that have a material effect on the nature and focus of the Company’s operations.

For the Company, restructuring costs include severances and other employee related costs, cost associated with the impairment (or reversal of impairment) of non-financial assets, including property, plant and equipment, right-of-use assets, intangible assets and inventory, and other direct costs associated with the closing or relocation of facilities, the closing of a product line or activity, or the downsizing of operations.

Restructuring costs are expensed when incurred, or when a legal or constructive obligation exists. A restructuring provision is only recognized when an obligating event has arisen.

Integration costs

Integration costs represent incremental costs directly related to the integration of acquired businesses in the Company’s ongoing activities. This primarily includes expenditures related to regulatory and process standardization, systems integration and other activities.

Acquisition costs

Acquisition costs represent costs directly related to business combinations, successful or not. These costs include expenses, fees, commissions and other costs associated with the collection of information, negotiation of contracts, risk assessments, and the services of lawyers, advisors and specialists.

Current and deferred income tax

Income tax expense comprises current and deferred tax. An income tax expense is recognized in income except to the extent that it relates to items recognized in OCI or directly in equity, in which case it is recognized in OCI or directly in equity, respectively.

Current tax is the amount expected to be paid or recovered from taxation authorities on the taxable income or loss for the year, using tax rates enacted or substantively enacted at the reporting date in the countries where the Company and its subsidiaries operate and generate taxable income, and any adjustment to tax payable or receivable in respect of previous years.

Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. It establishes provisions, where appropriate, on the basis of amounts expected to be paid to the tax authorities.

Deferred tax is recognized using the financial position liability method, providing for temporary differences between the tax bases of assets or liabilities and their carrying amounts in the consolidated financial statements, except for temporary differences on the initial recognition of assets and liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable income.

Deferred income tax is provided on temporary differences arising on investments in subsidiaries, and jointly controlled entities, except where the timing of the reversal of the temporary difference is controlled by the Company and it is probable that the temporary difference will not reverse in the foreseeable future.

Deferred tax is measured on an undiscounted basis at the tax rates that are expected to be applied to temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the reporting date.

Deferred tax assets are recognized for all deductible temporary differences and carry forward of unused tax losses. The recognition of deferred tax assets are limited to the amount which is probable to be realized.

Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that a recognized deferred tax asset will be realized. Unrecognized deferred tax assets are reassessed at each reporting date and are recognized to the extent that it has become probable that an unrecognized deferred tax asset will be realized.

Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and they relate to income taxes levied by the same tax authority on the same taxable entity, or on different taxable entities which intend to settle current tax liabilities and assets on a net basis or if their tax assets and liabilities will be realized simultaneously.

Taxes on income in the interim periods are accrued by jurisdiction using the effective tax rate that would be applicable to expected total annual profit or loss of the jurisdiction.

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Notes to the Consolidated Financial Statements

The Company has determined that income taxes arising from the global minimum top-up income tax under Pillar Two tax legislation are income taxes within the scope of IAS 12. The Company accounts for such income taxes as a current tax when it is incurred. The Company has applied a temporary mandatory exception to recognize and disclose information about deferred income tax assets and liabilities arising from jurisdictions implementing the global minimum tax rules.

Earnings per share

Earnings per share is calculated by dividing the net income for the period attributable to the equity holders of the Company by the weighted average number of common shares outstanding during the period. The diluted weighted average number of common shares outstanding is calculated by taking into account the dilution that would occur if the securities or other agreements for the issuance of common shares were exercised or converted into common shares at the later of the beginning of the period or the issuance date unless it is anti-dilutive. The treasury stock method is used to determine the dilutive effect of stock options and other equity-settled share-based payments. The treasury stock method is a method of recognizing the use of proceeds that could be obtained upon the exercise of stock options in computing diluted earnings per share. It assumes that any proceeds would be used to purchase common shares at the average market price during the period. The Company’s stock options, equity-settled restricted share units (RSU) and equity-settled performance share units (PSU) have a dilutive potential on common shares.

Government participation

Government contributions are recognized when there is reasonable assurance that the contributions will be received, and all attached conditions will be complied with by the Company. Government contributions related to the acquisition of non-financial assets are recorded as a reduction of the cost of the related asset while government contributions related to current expenses are recorded as a reduction of the related expenses.

Royalty obligations

The Company may receive partial funding from government entities for eligible spending related to specified R&D projects. In exchange, the Company repays a percentage of certain revenue during specified years. The initial measurement of the royalty obligation is discounted using the prevailing market rates of interest, at that time, for a similar instrument (similar as to currency, term, type of interest rate, guarantees or other factors) with a similar credit rating and range from 7.5% to 8.5%. The difference between the funding received and the discounted value of the royalty obligation is accounted for as a government contribution. The current portion of the royalty obligation is included as part of accrued liabilities and the long-term portion is included as part of other non-current liabilities.

R&D obligations

The Company may enter into loan arrangements with government entities at below‑market interest rates to fund a portion of eligible spending related to specified R&D projects. The initial measurement of the R&D obligation is discounted using the prevailing market rates of interest, at that time, for a similar instrument (similar as to currency, term, type of interest rate, guarantees or other factors) with a similar credit rating. The difference between the funding received and the discounted value of the R&D obligation is accounted for as a government contribution. R&D obligations are presented as part of the long-term debt.

Investment tax credits

Investment tax credits are deemed to be equivalent to government contributions. These government contributions are received for costs incurred in R&D projects. Investment tax credits expected to be recovered within 12 months are classified as Income taxes recoverable and tax credits recoverable and those expected to be recovered beyond 12 months are classified in Other non-current assets.

New and amended standards not yet adopted by the Company

Amendments to IFRS 7 – Financial Statements Disclosures and IFRS 9 – Financial Instruments

In May 2024, the IASB issued amendments to IFRS 7 - Financial Statements Disclosures and IFRS 9 - Financial Instruments to clarify the date of recognition and derecognition of some financial assets and liabilities, with a new exception for some financial liabilities settled through an electronic cash transfer system, to clarify and add further guidance for assessing whether a financial asset meets the SPPI criterion, add new disclosures for certain instruments with contractual terms that can change cash flows (such as some instruments with features linked to the achievement of environment, social and governance (ESG) targets), and update the disclosures for equity instruments designated at FVOCI.

These amendments to IFRS 7 and IFRS 9 will be effective for the Company's fiscal period beginning on April 1, 2026, with earlier adoption permitted, and are not expected to have a material impact on its consolidated financial statements.

IFRS 18 – Presentation and Disclosure in Financial Statements

In April 2024, the IASB issued IFRS 18 - Presentation and Disclosure in Financial Statements which sets out requirements for the presentation and disclosure of information in the financial statements. IFRS 18 will replace IAS 1 – Presentation of Financial Statements but carries forward many of the requirements from IAS 1. IFRS 18 introduces a defined structure for the income statement, composed of required categories and subtotals, and disclosure requirements for management-defined performance measures.

IFRS 18 will be effective for the Company's fiscal period beginning on April 1, 2027. The Company continues to evaluate the impact of the new standard on its consolidated financial statements.

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Notes to the Consolidated Financial Statements

Use of judgements, estimates and assumptions

The preparation of the consolidated financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies, the reported amounts of assets and liabilities and disclosures at the date of the consolidated financial statements, as well as the reported amounts of revenues and expenses for the period reported. It also requires management to exercise its judgement in applying the Company’s accounting policies. The areas involving a high degree of judgement or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements are disclosed below. Actual results could differ from those estimates. Changes will be reported in the period in which they are identified.

Business combinations

Business combinations are accounted for in accordance with the acquisition method as of the date control is transferred. The consideration transferred and the acquiree’s identifiable assets, liabilities and contingent liabilities are measured at their fair value at the date of acquisition, which may be estimated using an income, market or cost valuation method. Depending on the complexity of determining these valuations, the Company either consults with independent experts or develops the fair value internally by using appropriate valuation techniques which are generally based on a forecast of the total expected future net discounted cash flows. These evaluations are linked closely to the assumptions made by management regarding the future performance of the related assets and the discount rate. Contingent consideration is measured at fair value using a discounted cash flow model.

The judgments made in determining the estimated fair value assigned to the net identifiable assets acquired, as well as the estimated useful life of non-financial assets, could impact the net income of subsequent periods through depreciation and amortization, and in certain instances through impairment charges. The Company believes that the estimated fair values assigned to the net identifiable assets acquired are based on reasonable assumptions that a marketplace participant would use. While the Company uses its best estimates and assumptions to accurately value the net identifiable assets acquired at the acquisition date, estimates are inherently uncertain and subject to refinement.

During the measurement period, for up to 12 months following the acquisition, the Company records adjustments to the initial estimate of the net identifiable assets acquired based on new information obtained that would have existed as of the date of the acquisition. Any adjustment that arises from information obtained that did not exist as of the date of the acquisition will be recorded in the period the adjustment arises.

Development costs

Impairment of non-financial assets

The Company’s impairment test for goodwill is based on estimates of the recoverable amount of the CGU or group of CGUs to which goodwill has been allocated and uses valuation models such as the discounted cash flows model (level 3). Management applies significant judgement in developing the cash flow model, which includes the use of key assumptions including expected revenue growth, margin projections and the discount rates. Management also applies judgement when reflecting the impact surrounding current market view of risk and uncertainty and macroeconomic conditions. These estimates, including the methodology used, can have a material impact on the respective values and ultimately the amount of any goodwill impairment.

Revenue recognition

Transaction price allocated to performance obligations

In allocating the transaction price for contracts with multiple performance obligations, the Company estimates the stand-alone selling price using the expected cost plus a margin approach if they are not directly observable.

Determining the measure of progress of performance obligations satisfied over time

For contracts where revenue is recognized over time using the cost input method, the Company applies judgement in estimating the total costs to complete the contract.

Management conducts monthly reviews of its estimated costs to complete as well as its revenue and margins recognized, on a contract-by-contract basis. The impact of any revisions in cost and revenue estimates is reflected in the period in which the need for a revision becomes known.

CAE Financial Report 2026 | 81

Notes to the Consolidated Financial Statements

Defined benefit pension plans

The cost of defined benefit pension plans and the present value of the employee benefit obligations are determined using actuarial valuations. Actuarial valuations involve, amongst others, making assumptions about discount rates, future salary increases and mortality rates. All assumptions are reviewed at each reporting date. Any changes in these assumptions will impact the carrying amount of the employee benefit obligations and the cost of the defined benefit pension plans. In determining the appropriate discount rate, management considers the interest rates of high-quality corporate bonds that are denominated in the currency in which the benefits will be paid, and that have terms to maturity approximating the terms of the related pension liability. The mortality rate is based on publicly available mortality tables for the specific country. Future salary increases and pension increases are based on expected future inflation rates for the specific country. Individual discount rates are derived from the yield curve and are used to determine the service cost and interest cost of the Canadian defined benefit pension plans at the beginning of the year. The present value of the employee benefit obligations for these Canadian plans is determined based on the individual discount rates derived from the yield curve at the end of the year. Other key assumptions for pension obligations are based, in part, on current market conditions. See Note 21 for further details regarding assumptions used.

Income taxes

The Company is subject to income tax laws in numerous jurisdictions. Judgement is required in determining the worldwide provision for income taxes. The determination of tax liabilities and assets involves uncertainties in the interpretation of complex tax regulations. The Company provides for potential tax liabilities based on the weighted average probability of the possible outcomes. Differences between actual results and those estimates could influence the income tax liabilities and deferred tax liabilities in the period in which such determinations are made.

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Notes to the Consolidated Financial Statements

NOTE 2 – BUSINESS COMBINATIONS

Year ended March 31, 2025

SIMCOM Aviation Training

On November 5, 2024, the Company increased its ownership stake in its existing SIMCOM Aviation Training (SIMCOM) joint venture by purchasing an additional interest from Volo Sicuro for a cash consideration of $322.8 million (US$232.3 million), subject to customary adjustments.

As a result, the Company obtained control over SIMCOM’s four training centres located in the U.S. providing pilot training across multiple business aviation aircraft platforms. Additionally, CAE and SIMCOM have extended their current exclusive business aviation training services agreement with Flexjet, LLC, a related party of Volo Sicuro, and its affiliates by 5 years, bringing the remaining exclusivity period to 15 years.

Prior to acquiring control, the Company's 50% ownership in SIMCOM was accounted for using the equity method. The change in control provided for the remeasurement of the previously held equity interest in SIMCOM to its fair value. The fair value of the Company's previously held equity interest in SIMCOM was determined by applying a non-controlling discount to the consideration paid on the acquisition date and was valued at $230.6 million. As a result, the Company recorded a net remeasurement gain of $72.6 million (Note 6).

As at March 31, 2025, the determination of the fair value of the net assets acquired and liabilities assumed arising from the SIMCOM acquisition are as follows:


		SIMCOM
Current assets, excluding cash on hand	$	20.4
Current liabilities		(29.4)
Property, plant and equipment		135.5
Right-of-use assets		128.4
Intangible assets		504.8
Deferred tax		(23.7)
Long-term debt, including current portion		(158.5)
Non-current liabilities		(16.5)
Fair value of net assets acquired, excluding cash acquired	$	561.0
Cash acquired		14.8
Total purchase consideration	$	575.8

Settlement of pre-existing balances with SIMCOM		(22.4)
Fair value of the Company's previously held equity interest in SIMCOM		(230.6)
Total cash consideration paid on acquisition date	$	322.8

The fair value of the acquired intangible assets amounts to $504.8 million and consists of goodwill of $379.6 million (non‑deductible for tax purposes), customer relationships of $124.5 million and other intangibles of $0.7 million. The goodwill arising from this acquisition is attributable to the expansion of CAE's customer installed base of business aviation flight simulators, market capacity and expected synergies from combining operations.

The net assets acquired, including intangible assets, of SIMCOM are included in the Civil Aviation segment.

The purchase price allocation was final as at March 31, 2025.

CAE Financial Report 2026 | 83

Notes to the Consolidated Financial Statements

NOTE 3 – OPERATING SEGMENTS AND GEOGRAPHIC INFORMATION

The Company elected to organize its operating segments principally on the basis of its customer markets. The Company manages its operations through its two segments: Civil Aviation and Defense and Security. Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker.

The Company has decided to disaggregate revenue from contracts with customers by segment, by products and services and by geographic regions as the Company believes it best depicts how the nature, amount, timing and uncertainty of its revenue and cash flows are affected by economic factors.

Results by segment

The profitability measure employed by the Company for making decisions about allocating resources to segments and assessing segment performance is adjusted segment operating income. Adjusted segment operating income is calculated by taking operating income and adjusting for restructuring, integration and acquisition costs, and impairments and other gains and losses arising from significant strategic transactions or specific events, which gives an indication of the profitability of each segment because it does not include the impact of items not specifically related to the segment’s performance. For the years ended March 31, 2026 and 2025, impairments and other gains and losses arising from significant strategic transactions or specific events consist of the executive management transition costs (recorded in selling, general and administrative expenses), the gain on fair value remeasurement of SIMCOM (Note 6), and the shareholder matters (recorded in selling, general and administrative expenses).

The accounting principles used to prepare the information by operating segments are the same as those used to prepare the Company’s consolidated financial statements. The method used for the allocation of assets jointly used by operating segments and costs and liabilities jointly incurred (mostly corporate costs) between operating segments is based on the level of consumption when determinable and measurable, otherwise the allocation is based on a proportion of each segment’s cost of sales and revenue.

Specified items included in the segment profitability measure are as follows:


					Defense
	Civil Aviation				and Security				Total
	2026		2025		2026		2025			2026		2025
External revenue	$	2,741.6	$	2,709.3	$	2,172.4	$	1,998.6		$	4,914.0	$	4,707.9

Depreciation and amortization	351.0		312.4		109.1		102.3			460.1		414.7





Share of after-tax profit of equity accounted investees	58.7		68.3		24.0		20.0			82.7		88.3
Gross profit	890.2		883.6		500.6		416.5			1,390.8		1,300.1
Operating income	437.9		605.3		174.4		123.9			612.3		729.2
Adjusted segment operating income	510.5		581.5		200.2		150.5			710.7		732.0

Reconciliation of adjusted segment operating income is as follows:


					Defense
	Civil Aviation				and Security				Total
	2026		2025		2026		2025			2026		2025
Operating income	$	437.9	$	605.3	$	174.4	$	123.9		$	612.3	$	729.2
Restructuring, integration and acquisition costs (Note 5)	64.4		37.8		20.0		18.7			84.4		56.5
Impairments and other gains and losses arising from
significant strategic transactions or specific events:
Executive management transition costs	8.2		4.7		5.8		3.6			14.0		8.3
Gain on fair value remeasurement of SIMCOM (Note 6)	—		(72.6)		—		—			—		(72.6)
Shareholder matters	—		6.3		—		4.3			—		10.6






Adjusted segment operating income	$	510.5	$	581.5	$	200.2	$	150.5		$	710.7	$	732.0

Capital expenditures by segment, which consist of property, plant and equipment expenditures and intangible assets expenditures (excluding those acquired in business combinations), are as follows:


	2026		2025
Civil Aviation	$	223.7	$	296.3
Defense and Security	137.8		147.8

Total capital expenditures	$	361.5	$	444.1

84 | CAE Financial Report 2026

Notes to the Consolidated Financial Statements

Assets and liabilities employed by segment

The Company uses assets employed and liabilities employed to assess resources allocated to each segment. Assets employed include accounts receivable, contract assets, inventories, prepayments, property, plant and equipment, right-of-use assets, intangible assets, investment in equity accounted investees, derivative financial assets and other non-current assets. Liabilities employed include accounts payable and accrued liabilities, provisions, contract liabilities, derivative financial liabilities and other non-current liabilities.

Assets and liabilities employed by segment are reconciled to total assets and liabilities as follows:


		2026		2025
Assets employed
Civil Aviation	$	6,896.4	$	7,263.4
Defense and Security		3,046.5		3,000.6


Assets not included in assets employed by segment		1,204.9		949.8
Total assets	$	11,147.8	$	11,213.8
Liabilities employed
Civil Aviation	$	1,129.9	$	1,369.1
Defense and Security		1,074.9		1,009.3


Liabilities not included in liabilities employed by segment		3,554.9		3,859.4
Total liabilities	$	5,759.7	$	6,237.8

Products and services information

The Company's revenue from external customers for its products and services are as follows:


					Defense
	Civil Aviation				and Security						Total
	2026		2025		2026		2025		2026		2025
Products	$	931.1	$	963.7	$	1,096.0	$	907.7	$	2,027.1	$	1,871.4
Training, software and services	1,810.5		1,745.6		1,076.4		1,090.9		2,886.9		2,836.5
Total external revenue	$	2,741.6	$	2,709.3	$	2,172.4	$	1,998.6	$	4,914.0	$	4,707.9

Geographic information

The Company markets its products and services globally. Revenues are attributed to geographical regions based on the location of customers. Non-current assets other than financial instruments, deferred tax assets and employee benefits assets are attributed to geographical regions based on the location of the assets, excluding goodwill. Goodwill is presented by geographical regions based on the Company’s allocation of the related purchase price.


		2026		2025
External revenue
Canada	$	498.7	$	474.2
United States		2,194.2		2,241.8
United Kingdom		245.2		281.6
Rest of Americas		114.3		133.0
Europe		746.1		663.6
Asia		908.8		759.9
Oceania and Africa		206.7		153.8
	$	4,914.0	$	4,707.9

		2026		2025
Non-current assets other than financial instruments, deferred tax assets and employee benefits assets
Canada	$	1,496.2	$	1,541.7
United States		4,369.1		4,534.7
United Kingdom		394.8		399.0
Rest of Americas		222.5		221.8
Europe		1,229.2		1,162.3
Asia		570.1		610.8
Oceania and Africa		201.5		188.2
	$	8,483.4	$	8,658.5

CAE Financial Report 2026 | 85

Notes to the Consolidated Financial Statements

NOTE 4 – OTHER (GAINS) AND LOSSES


		2026		2025

Net loss (gain) on foreign currency exchange differences	$	3.2	$	(1.4)

Remeasurement of royalty obligations		(3.8)		(2.9)


Gain on disposal of property, plant and equipment		—		(6.4)
Other		9.1		(2.6)
Other (gains) and losses	$	8.5	$	(13.3)

NOTE 5 – RESTRUCTURING, INTEGRATION AND ACQUISITION COSTS


		2026		2025
Impairment of non-financial assets – net	$	58.9	$	5.2
Severances and other employee related costs		13.2		33.9
Integration and acquisition costs		—		11.5
Other costs		12.3		5.9

Total restructuring, integration and acquisition costs	$	84.4	$	56.5

Year ended March 31, 2026

On November 11, 2025, the Company announced a transformation plan to simplify its structure, sharpen its focus and strengthen execution. The transformation focuses on streamlining the Company's organizational structure, assessing its portfolio, tightening its capital discipline, and optimizing its operational performance. For the year ended March 31, 2026, costs related to this program totalled $84.4 million and included $58.9 million of impairment of non-financial assets and $13.2 million of severances and other employee related costs. Impairment of non‑financial assets included impairments of capitalized development costs principally within Civil Aviation of $31.9 million related to technologies no longer aligned with the Company’s strategic focus, inventory write‑downs of $9.7 million within Civil Aviation and $8.0 million within Defense and Security associated with revised product designs and manufacturing requirements and the Company’s portfolio simplification, as well as impairments of simulators within Civil Aviation of $9.3 million.

Year ended March 31, 2025

During the fourth quarter of fiscal 2024, the Company announced that it would streamline its operating model and portfolio, optimize its cost structure and create efficiencies. This restructuring program was completed in the second quarter of fiscal 2025. In fiscal 2025, costs related to this program totalled $40.6 million and included $29.4 million of severances and other employee related costs and $5.2 million of impairment of non-financial assets. Impairment of non-financial assets primarily included the impairment of property, plant and equipment, intangible assets and right‑of‑use assets related to the termination of certain product offerings within the Civil Aviation segment.

NOTE 6 – GAIN ON REMEASUREMENT OF PREVIOUSLY HELD EQUITY INTEREST

Year ended March 31, 2025

Gain on fair value remeasurement of SIMCOM

On November 5, 2024, the Company increased its ownership stake in its existing SIMCOM joint venture, obtaining control of the entity. Prior to acquiring control, the Company's 50% ownership in SIMCOM was accounted for using the equity method. The change in control provided for the remeasurement of the previously held equity interest in SIMCOM to its fair value with any difference compared to the carrying value to be recognized as a gain or loss in the income statement, as well as the derecognition of a portion of Civil Aviation's goodwill, based on the relative fair value of the previously held equity interest in SIMCOM compared to the cash generating unit included in the Civil Aviation segment. As a result, the Company recorded a net remeasurement gain of $72.6 million, including the derecognition of goodwill and associated cumulative foreign exchange differences of $29.4 million and $7.7 million, respectively, and other costs of $5.3 million.

86 | CAE Financial Report 2026

Notes to the Consolidated Financial Statements

NOTE 7 – FINANCE EXPENSE – NET


		2026		2025
Finance expense:
Long-term debt (other than lease liabilities)	$	144.0	$	156.0
Lease liabilities		48.4		43.1


Other		44.2		42.8
Borrowing costs capitalized		(5.9)		(5.2)
Finance expense	$	230.7	$	236.7
Finance income:
Loans and investment in finance leases	$	(12.0)	$	(13.8)
Other		(6.6)		(7.4)
Finance income	$	(18.6)	$	(21.2)
Finance expense – net	$	212.1	$	215.5

NOTE 8 – INCOME TAXES

Income tax expense

The reconciliation of income taxes at Canadian statutory rates with the income tax expense is as follows:



		2026			2025
Earnings before income taxes	$	400.2		$	513.7
Canadian statutory income tax rates		26.5	%		26.5	%
Income taxes at Canadian statutory rates	$	106.1		$	136.2
Effect of differences in tax rates in other jurisdictions		(13.6)			1.8
Tax benefits not previously recognized and unrecognized tax benefits		(0.5)			(6.8)
Non-taxable gain on fair value remeasurement of SIMCOM		—			(21.9)
Non-deductible expenses		5.5			—
Tax impact on after tax profit of equity accounted investees		(17.7)			(18.5)
Prior years' tax adjustments		(1.9)			2.8
Other		(0.4)			5.1
Income tax expense	$	77.5		$	98.7
Effective tax rate		19	%		19	%

The Company's applicable tax rate corresponds to the combined Canadian tax rates applicable in the provinces where the Company operates.

Significant components of the provision for the income tax expense are as follows:



		2026		2025
Current income tax expense :
Current year	$	36.2	$	56.7
Prior years' tax adjustments		19.4		(2.7)
Deferred income tax expense:
Tax benefit not previously recognized used to reduce the deferred tax expense		(0.5)		(6.8)

Origination and reversal of temporary differences		22.4		51.5

Income tax expense	$	77.5	$	98.7

CAE Financial Report 2026 | 87

Notes to the Consolidated Financial Statements

Deferred tax assets and liabilities

During the year ended March 31, 2026, movements in temporary differences are as follows:






														Foreign
	Balance												currency
	beginning		Recognized			Recognized			Recognized				exchange			Balance
	of year		in income				in OCI			in equity		differences	end of year
Non-capital loss carryforwards	$	89.7		$	87.0		$	—		$	—			$	1.6		$	178.3
Unclaimed research & development expenditures	227.8			(133.9)			—			—				(4.6)			89.3
Investment tax credits	(76.8)			(6.2)			—			—				—			(83.0)
Property, plant and equipment and right-of-use of assets	(168.0)			(24.4)			—			—				4.6			(187.8)
Intangible assets	(126.8)			12.3			—			—				1.0			(113.5)
Amounts not currently deductible including interest limitation	110.7			23.0			—			0.5				(1.6)			132.6
Government participation	93.6			5.0			—			—				—			98.6
Other	0.9			15.3			(21.4)			—				—			(5.2)
Net deferred tax assets	$	151.1		$	(21.9)		$	(21.4)		$	0.5			$	1.0		$	109.3

During the year ended March 31, 2025, movements in temporary differences are as follows:






																Foreign
	Balance											Business				currency
	beginning		Recognized			Recognized			Recognized			combinations				exchange			Balance
	of year		in income				in OCI		in equity			(Note 2)			differences			end of year
Non-capital loss carryforwards	$	142.5		$	(61.3)		$	—		—			$	3.3		$	5.2		$	89.7
Unclaimed research & development expenditures	162.1			59.0			—			—			—			6.7			227.8
Investment tax credits	(73.8)			(3.0)			—			—			—			—			(76.8)
Property, plant and equipment and right-of-use of assets	(154.1)			9.3			—			—			(11.1)			(12.1)			(168.0)
Intangible assets	(39.0)			(59.7)			—			—			(26.3)			(1.8)			(126.8)
Amounts not currently deductible including interest limitation	76.9			22.7			—			2.4			6.5			2.2			110.7
Government participation	86.4			7.2			—			—			—			—			93.6
Other	(4.3)			(18.9)			20.3			—			3.9			(0.1)			0.9
Net deferred tax assets	$	196.7		$	(44.7)		$	20.3		$	2.4		$	(23.7)		$	0.1		$	151.1

As at March 31, 2026, net deferred tax assets of $69.7 million (2025 – $148.7 million) were recognized in jurisdictions that incurred losses this fiscal year or the preceding fiscal year. Based upon the level of historical taxable income or projections for future taxable income, management believes it is probable that the Company will realize the benefits of these net deferred tax assets.

As at March 31, 2026, a deferred income tax liability on taxable temporary differences of $3,549.9 million (2025 – $3,456.4 million) related to investments in subsidiaries and interests in joint ventures has not been recognized, because the Company controls the timing of the reversal of the temporary differences and believes it is probable that the temporary differences will not be reversed in the foreseeable future.

The non-capital losses incurred in various jurisdictions expire as follows:


Expiry date	Unrecognized		Recognized






2027-2031	$	18.8	$	3.0
2032-2046		21.9		71.8
No expiry date		174.7		658.1
	$	215.4	$	732.9

As at March 31, 2026, the Company has $98.9 million (2025 – $130.4 million) of deductible temporary differences for which deferred tax assets have not been recognized. The Company also has $170.5million (2025 – $156.2 million) of capital losses for which deferred tax assets have not been recognized with no expiry date.

Global minimum tax (Pillar Two)

As at March 31, 2026, the Company recognized a current income tax expense related to the Pillar Two tax of $2.5 million (2025 ‑ $2.6 million) mainly related to the Company's operations in the United Arab Emirates and Hungary where the statutory income tax rates are below the 15% determined by the Pillar Two rules.

88 | CAE Financial Report 2026

Notes to the Consolidated Financial Statements

Reconciliation bill

On July 4, 2025, a reconciliation bill titled “An Act to provide for reconciliation pursuant to title II of H. Con. Res 14” was signed into U.S. federal law. The reconciliation bill addresses numerous spending policies and also makes several adjustments to current tax law, including an increase to the base erosion and anti-abuse tax (BEAT) rate starting in calendar 2026, reinstating full deduction of U.S. qualified R&D expenditures starting in calendar 2025, permanently restoring the ability for immediate deduction of new investments in certain qualified depreciable assets made after January 19, 2025, and providing a higher deduction limitation for net interest expense starting in calendar 2025. This enactment had no material impact on the Company's overall income tax expense nor on the effective tax rate this year.

NOTE 9 – SHARE CAPITAL AND EARNINGS PER SHARE

Share capital

Authorized and issued shares

The Company is authorized to issue an unlimited number of common shares without par value and an unlimited number of preferred shares without par value, issuable in series.

The preferred shares may be issued with rights and conditions to be determined by the Board of Directors, prior to their issue. To date, the Company has not issued any preferred shares.

As at March 31, 2026, the number of common shares issued and fully paid was 321,734,387 (2025 – 320,265,108).

Repurchase and cancellation of common shares

On June 6, 2025, the Company announced the renewal of the normal course issuer bid program (NCIB) to purchase, for cancellation, up to 16,019,294 of its common shares. The NCIB began on June 10, 2025 and will end on June 9, 2026 or on such earlier date when the Company completes its purchases or elects to terminate the NCIB. These purchases may be made through the facilities of the TSX or the NYSE, or in such other manner as may be permitted under applicable stock exchange rules and securities laws, at the prevailing market price at the time of acquisition, plus brokerage fees. All common shares purchased pursuant to the NCIB will be cancelled.

During the year ended March 31, 2026, the Company repurchased and cancelled a total of 191,100 common shares (2025 – 856,230) under the NCIB, at a weighted average price of $36.52 per common share (2025 – $24.85), for a total consideration of $7.0 million (2025 – $21.3 million).

Earnings per share computation

The denominators for the basic and diluted earnings per share computations are as follows:


	2026	2025
Weighted average number of common shares outstanding	321,075,968	319,072,751
Effect of dilutive stock options and equity-settled share-based payments	1,081,855	645,501
Weighted average number of common shares outstanding for diluted earnings per share calculation	322,157,823	319,718,252

As at March 31, 2026, no stock options to acquire common shares (2025 – 1,637,584) have been excluded from the above calculation since their inclusion would have had an anti-dilutive effect.

CAE Financial Report 2026 | 89

Notes to the Consolidated Financial Statements

NOTE 10 – ACCOUNTS RECEIVABLE

Details of accounts receivable are as follows:


		2026		2025
Current trade receivables	$	233.5	$	256.3
Past due trade receivables
1-30 days		71.4		68.9
31-60 days		22.6		18.1
61-90 days		12.7		15.1
Greater than 90 days		64.7		83.6
Total trade receivables	$	404.9	$	442.0
Investment in finance leases (Note 15)		21.0		16.0
Receivables from related parties (Note 16)		152.8		61.2
Other receivables		68.0		114.1
Credit loss allowances		(22.4)		(21.3)
Total accounts receivable	$	624.3	$	612.0

Changes in credit loss allowances are as follows:


		2026		2025
Credit loss allowances, beginning of year	$	(21.3)	$	(20.9)
Additions		(9.7)		(3.4)
Amounts charged off		6.2		3.7
Unused amounts reversed		2.0		0.3

Foreign currency exchange differences		0.4		(1.0)
Credit loss allowances, end of year	$	(22.4)	$	(21.3)

NOTE 11 – BALANCE FROM CONTRACTS WITH CUSTOMERS

Net contract liabilities are as follows:


		2026		2025
Contract assets - current	$	485.3	$	482.2
Contract assets - non-current (Note 17)		37.3		38.8
Contract liabilities - current		(1,086.9)		(1,001.6)
Contract liabilities - non-current (Note 22)		(144.0)		(126.8)
Net contract liabilities	$	(708.3)	$	(607.4)

During the year ended March 31, 2026, the Company recognized revenue of $802.9 million (2025 – $740.0 million) that was included in the contract liability balance at the beginning of the year.

During the year ended March 31, 2026, the Company recognized an increase in revenue of $11.8 million (2025 – increase of $45.7 million) related to performance obligations partially satisfied in previous years. This primarily related to revisions to estimated costs to complete certain contracts that impacted revenue and measures of completion and changes in transaction price.

Remaining performance obligations

As at March 31, 2026, the amount of revenue expected to be realized in future years from performance obligations that are unsatisfied, or partially unsatisfied, was $8,562.4 million. The Company expects to recognize approximately 35% of these remaining performance obligations as revenue by March 31, 2027, an additional 18% by March 31, 2028 and the balance thereafter.

NOTE 12 – INVENTORIES


		2026		2025
Work in progress	$	246.6	$	348.4
Raw materials, supplies and manufactured products		208.2		246.6
Total inventories	$	454.8	$	595.0

During the year ended March 31, 2026, the use of inventory recognized in cost of sales amounted to $552.2 million (2025 ‑ $557.2 million) and the impairment of inventories to net realizable value amounted to $17.6 million (2025 – $2.1 million).

90 | CAE Financial Report 2026

Notes to the Consolidated Financial Statements

NOTE 13 – PROPERTY, PLANT AND EQUIPMENT


					Machinery					Assets
	Buildings					and				under
(amounts in millions)		and land	Simulators		equipment			Aircraft	construction			Total
Net book value as at March 31, 2024	$	387.0	$	1,727.8	$	61.6	$	79.6	$	259.6	$	2,515.6
Additions		18.8		4.7		9.9		17.5		305.3		356.2


Business combinations (Note 2)		72.1		22.4		4.3		—		36.7		135.5
Disposals		(0.2)		—		(0.2)		(12.1)		(0.1)		(12.6)

Depreciation		(30.1)		(148.2)		(20.2)		(6.3)		—		(204.8)
Impairment		(0.8)		(0.4)		(0.2)		(0.8)		—		(2.2)
Purchase of assets under lease (Note 15)		—		—		—		9.1		—		9.1
Transfers and others		52.9		262.6		6.6		(3.8)		(294.4)		23.9
Foreign currency exchange differences		23.7		128.2		2.4		5.1		9.4		168.8


Net book value as at March 31, 2025	$	523.4	$	1,997.1	$	64.2	$	88.3	$	316.5	$	2,989.5
Additions		19.2		22.0		12.9		13.8		219.9		287.8


Disposals		—		(0.2)		(1.5)		(4.9)		—		(6.6)

Depreciation		(34.4)		(157.6)		(19.3)		(8.7)		—		(220.0)
Impairment		—		(9.3)		—		—		—		(9.3)

Transfers and others		7.4		173.4		14.2		11.4		(228.1)		(21.7)
Foreign currency exchange differences		(7.6)		(10.6)		(0.1)		(1.9)		(6.5)		(26.7)
Net book value as at March 31, 2026	$	508.0	$	2,014.8	$	70.4	$	98.0	$	301.8	$	2,993.0


					Machinery					Assets
	Buildings					and				under
(amounts in millions)		and land	Simulators		equipment			Aircraft	construction			Total
Cost	$	842.5	$	3,158.7	$	241.6	$	129.4	$	316.5	$	4,688.7
Accumulated depreciation and impairment		(319.1)		(1,161.6)		(177.4)		(41.1)		—		(1,699.2)


Net book value as at March 31, 2025	$	523.4	$	1,997.1	$	64.2	$	88.3	$	316.5	$	2,989.5
Cost	$	858.7	$	3,244.7	$	261.1	$	142.1	$	301.8	$	4,808.4
Accumulated depreciation and impairment		(350.7)		(1,229.9)		(190.7)		(44.1)		—		(1,815.4)
Net book value as at March 31, 2026	$	508.0	$	2,014.8	$	70.4	$	98.0	$	301.8	$	2,993.0

During the year ended March 31, 2026, depreciation of $219.0 million (2025 – $204.0 million) has been recorded in cost of sales and $1.0 million (2025 – $0.8 million) in selling, general and administrative expenses.

NOTE 14 – INTANGIBLE ASSETS


			Capitalized						Technology,			Other
(amounts in millions)			development		Customer				software		intangible
	Goodwill			costs	relationships		Licenses		and ERP			assets		Total
Net book value as at March 31, 2024	$	1,971.3	$	287.2	$	505.2	$	246.3	$	253.4	$	8.5	$	3,271.9
Additions – internal development		—		67.0		—		—		19.6		—		86.6
Additions – acquired separately		—		—		—		1.2		—		0.1		1.3
Additions – non cash		—		—		—		—		—		6.4		6.4
Business combinations (Note 2 and 6)		350.2		0.7		124.5		—		—		—		475.4



Amortization		—		(35.8)		(44.5)		(17.2)		(33.8)		(1.2)		(132.5)
Impairment		—		(2.1)		—		—		—		—		(2.1)

Transfers and others		—		(0.5)		—		—		(4.8)		0.1		(5.2)
Foreign currency exchange differences		118.2		3.8		32.5		5.1		9.1		0.5		169.2
Net book value as at March 31, 2025	$	2,439.7	$	320.3	$	617.7	$	235.4	$	243.5	$	14.4	$	3,871.0
Additions – internal development		—		62.3		—		—		10.4		—		72.7
Additions – acquired separately		—		—		—		1.0		—		—		1.0
Additions – non cash		—		—		—		—		—		5.6		5.6


Amortization		—		(49.7)		(49.9)		(17.3)		(38.5)		(2.2)		(157.6)
Impairment		—		(31.4)		—		—		(0.5)		—		(31.9)


Transfers and others		—		(8.3)		—		—		2.3		0.4		(5.6)
Foreign currency exchange differences		(39.9)		(2.5)		(13.4)		(2.7)		(4.7)		0.2		(63.0)
Net book value as at March 31, 2026	$	2,399.8	$	290.7	$	554.4	$	216.4	$	212.5	$	18.4	$	3,692.2

CAE Financial Report 2026 | 91

Notes to the Consolidated Financial Statements



			Capitalized						Technology,			Other
			development		Customer				software		intangible
	Goodwill			costs	relationships		Licenses			and ERP		assets		Total
Cost	$	3,040.3	$	599.1	$	955.6	$	337.4	$	528.6	$	45.2	$	5,506.2
Accumulated amortization and impairment		(600.6)		(278.8)		(337.9)		(102.0)		(285.1)		(30.8)		(1,635.2)
Net book value as at March 31, 2025	$	2,439.7	$	320.3	$	617.7	$	235.4	$	243.5	$	14.4	$	3,871.0
Cost	$	2,983.5	$	618.2	$	940.8	$	334.7	$	527.5	$	52.5	$	5,457.2
Accumulated amortization and impairment		(583.7)		(327.5)		(386.4)		(118.3)		(315.0)		(34.1)		(1,765.0)
Net book value as at March 31, 2026	$	2,399.8	$	290.7	$	554.4	$	216.4	$	212.5	$	18.4	$	3,692.2

During the year ended March 31, 2026, amortization of $108.6 million (2025 – $97.7 million) has been recorded in cost of sales and $49.0 million (2025 – $34.8 million) in research and development expenses.

Goodwill

The carrying amount of goodwill allocated to the Company's CGUs per operating segment is as follows:


			Defense
	Civil Aviation		and Security		Total
Net book value as at March 31, 2024	$	1,120.8	$	850.5	$	1,971.3
Business combinations (Note 2 and 6)		350.2		—		350.2


Foreign currency exchange differences		69.8		48.4		118.2
Net book value as at March 31, 2025	$	1,540.8	$	898.9	$	2,439.7



Foreign currency exchange differences		(14.5)		(25.4)		(39.9)
Net book value as at March 31, 2026	$	1,526.3	$	873.5	$	2,399.8

Goodwill is allocated to CGUs or a group of CGUs, which generally corresponds to the Company’s operating segments or one level below.

The Company performed its annual impairment test for goodwill during the fourth quarter of fiscal 2026. The Company determined the recoverable amount of each of its CGUs based on fair value less costs of disposal calculations using a discounted cash flow model. The recoverable amount of each CGU is calculated using estimated cash flows derived from the Company's five-year strategic plan as approved by the Board of Directors. The cash flows are based on expectations of market growth, industry reports and trends, and past performance. Cash flows subsequent to the five‑year period were extrapolated using a constant terminal value growth rate of 2%, which is consistent with forecasts included in industry reports specific to the industry in which each CGU operates. The discount rates used to calculate the recoverable amounts reflect each CGUs’ specific risks and market conditions, including the market view of risk for each CGU, and range from 8.4% to 9.7%.

During the year ended March 31, 2026, the estimated recoverable amount of each CGU exceeded their carrying amount. As a result, there was no impairment identified.

Variations in the Company assumptions and estimates, particularly in the expected revenue growth, margin projections and the discount rate could have a significant impact on fair value. For the year ended March 31, 2026, a decrease of 1% in expected revenue growth, a decrease of 1% in margin projections, or an increase of 1% in the discount rate would not have resulted in an impairment charge in any of our CGUs or group of CGUs.

92 | CAE Financial Report 2026

Notes to the Consolidated Financial Statements

NOTE 15 – LEASES

Leases as lessee

Right-of-use assets



					Machinery
	Buildings					and
	and land		Simulators		equipment			Aircraft	Total











Net book value as at March 31, 2024	$	473.9	$	51.9	$	9.9	$	10.1	$	545.8
Additions and remeasurements		135.4		—		18.0		—		153.4
Business combinations (Note 2)		22.4		106.0		—		—		128.4

Depreciation		(45.8)		(13.3)		(5.2)		(1.0)		(65.3)
Impairment		(0.7)		—		—		—		(0.7)
Purchase of assets under lease (Note 13)		—		—		—		(9.1)		(9.1)
Transfers and others		(0.9)		—		0.7		—		(0.2)
Foreign currency exchange differences		29.0		6.5		0.2		—		35.7
Net book value as at March 31, 2025	$	613.3	$	151.1	$	23.6	$	—	$	788.0
Additions and remeasurements		37.4		—		—		—		37.4



Depreciation		(52.4)		(14.4)		(6.6)		—		(73.4)


Transfers and others		(7.9)		6.1		—		—		(1.8)
Foreign currency exchange differences		(2.5)		(3.8)		(0.5)		—		(6.8)
Net book value as at March 31, 2026	$	587.9	$	139.0	$	16.5	$	—	$	743.4

During the year ended March 31, 2026, depreciation of $72.7 million (2025 – $64.0 million) has been recorded in cost of sales and $0.7 million (2025 – $1.3 million) in selling, general and administrative expenses.

Short-term leases, leases of low-value assets and variable lease payments

During the year ended March 31, 2026, expenses of $17.5 million (2025 – $21.0 million) have been recognized in net income relating to short-term leases, leases of low-value assets and variable lease payments not included in the measurement of lease liabilities.

Leases as lessor

Operating Leases

As at March 31, 2026, the net book value of simulators leased under operating leases to third parties was $123.4 million (2025 – $115.9 million).

Undiscounted lease payments to be received under operating leases are as follows:


		2026		2025
Less than 1 year	$	52.5	$	49.1
Between 1 and 2 years		40.4		39.3
Between 2 and 3 years		24.0		30.7
Between 3 and 4 years		14.1		17.0
Between 4 and 5 years		11.5		13.4
More than 5 years		19.7		14.0
Total undiscounted lease payments receivable	$	162.2	$	163.5

CAE Financial Report 2026 | 93

Notes to the Consolidated Financial Statements

Finance Leases

Undiscounted lease payments to be received under finance leases are as follows:


		2026		2025
Less than 1 year	$	29.2	$	23.9
Between 1 and 2 years		23.1		21.3
Between 2 and 3 years		19.6		18.2
Between 3 and 4 years		18.3		15.9
Between 4 and 5 years		15.1		16.4
More than 5 years		109.3		118.4
Total undiscounted lease payments receivable	$	214.6	$	214.1
Unearned finance income		(52.3)		(56.3)
Discounted unguaranteed residual values of leased assets		(12.4)		(15.8)
Total investment in finance leases	$	149.9	$	142.0
Current portion (Note 10)		21.0		16.0
Non-current portion (Note 17)	$	128.9	$	126.0

NOTE 16 – INVESTMENT IN EQUITY ACCOUNTED INVESTEES


Net book value as at March 31, 2024	$	588.8


Non-cash contributions to equity accounted investees		13.0
Acquisition of control of SIMCOM (Note 2)		(131.0)
Share of after-tax profit before elimination of unrealized profits		96.2
Elimination of unrealized profits on transactions with equity accounted investees – net		(7.8)
Dividends received from equity accounted investees		(28.7)
Dividends declared but not yet received from equity accounted investees		(7.2)

Transfers and others		0.7
Foreign currency exchange differences		35.1
Net book value as at March 31, 2025	$	559.1

Cash contributions to equity accounted investees		14.5


Share of after-tax profit before elimination of unrealized profits		86.9
Elimination of unrealized profits on transactions with equity accounted investees – net		(4.2)
Dividends received from equity accounted investees		(79.6)

Transfers and others		7.4
Foreign currency exchange differences		(11.4)
Net book value as at March 31, 2026	$	572.7

When the Company's share of losses in a joint venture equals or exceeds its interests in the joint ventures, the Company does not recognize further losses, unless it will incur obligations or make payments on behalf of the joint ventures. During the year ended March 31, 2026, the Company's unrecognized share of profit in joint ventures was $1.9 million (2025 – $1.8 million). As at March 31, 2026, the cumulative unrecognized share of losses for these joint ventures was $6.6 million (2025 – $8.5 million) and the cumulative unrecognized share of comprehensive loss of these joint ventures was $5.4 million (2025 – $7.6 million).

The Company’s outstanding balances with its equity accounted investees are as follows:


		2026		2025
Accounts receivable (Note 10)	$	154.1	$	63.2
Contract assets		29.3		22.3
Other non-current assets		51.2		39.5
Accounts payable and accrued liabilities (Note 18)		8.1		14.9
Contract liabilities		147.9		57.5

The Company’s transactions with its equity accounted investees are as follows:


		2026		2025
Revenue	$	270.0	$	278.7
Purchases		3.1		1.4
Other income		2.9		2.4

94 | CAE Financial Report 2026

Notes to the Consolidated Financial Statements

NOTE 17 – OTHER NON-CURRENT ASSETS


		2026		2025

Contract assets (Note 11)	$	37.3	$	38.8



Investment in finance leases (Note 15)		128.9		126.0
Non-current receivables		93.2		94.7
Investment tax credits		330.9		303.4
Other		98.3		94.9
	$	688.6	$	657.8

NOTE 18 – ACCOUNTS PAYABLE AND ACCRUED LIABILITIES


		2026		2025
Accounts payable trade	$	507.1	$	701.0
Accrued and other liabilities		407.1		463.6

Amount due to related parties (Note 16)		8.1		14.9
Current portion of royalty obligations		12.8		11.3
	$	935.1	$	1,190.8

NOTE 19 – PROVISIONS

Changes in provisions are as follows:


	Restoration									Onerous
	and simulator									contracts
	removal		Restructuring			Legal	Warranties		and other			Total


Provisions, as at March 31, 2025	$	11.0	$	7.6	$	4.6	$	15.4	$	10.2	$	48.8
Additions		—		13.2		7.1		15.1		5.2		40.6

Amount used		(0.6)		(9.3)		—		(14.1)		(8.9)		(32.9)
Reversal of unused amounts		—		(0.2)		—		(2.3)		(0.2)		(2.7)

Foreign currency exchange differences		(0.1)		0.1		(0.1)		—		0.2		0.1
Transfers and others		0.3		—		—		—		(0.2)		0.1
Provisions, as at March 31, 2026	$	10.6	$	11.4	$	11.6	$	14.1	$	6.3	$	54.0
Current portion	$	—	$	11.4	$	11.6	$	13.5	$	6.3	$	42.8
Non-current portion	$	10.6	$	—	$	—	$	0.6	$	—	$	11.2

NOTE 20 – DEBT FACILITIES

Long-term debt, net of transaction costs is as follows:


			Repayment					2026				2025
Notional amount				period		Current	Non-current			Current	Non-current
Unsecured senior notes
U.S. dollar, fixed rate - 3.60% to 4.90%	US$	778.0		2026-2034	$	102.0	$	978.7	$	20.0	$	1,114.7
Canadian dollar, Series 1, fixed rate - 5.54%	$	400.0		2028		—		398.7		—		398.1
Canadian dollar, fixed rate - 4.15%	$	5.7		2027		2.9		2.8		2.9		5.7

Term loans
U.S. dollar, variable rate	US$	47.7		2026-2027		4.1		61.9		178.7		288.3
Canadian dollar, variable rate	$	285.9		2026-2028		5.6		280.4		5.6		12.6
Other						—		—		33.5		—
Lease liabilities
U.S. dollar				2026-2071		42.3		433.3		92.0		432.0
Other				2026-2054		25.9		260.7		29.1		239.0

R&D obligations
Canadian dollar				2026-2048		69.2		565.7		37.2		581.0
Revolving credit facilities
U.S. dollar, variable rate						—		—		—		—
Canadian dollar, variable rate						—		—		—		—
Total long-term debt					$	252.0	$	2,982.2	$	399.0	$	3,071.4

CAE Financial Report 2026 | 95

Notes to the Consolidated Financial Statements

Revolving credit facility

In June 2025, the Company extended the maturity date of its US$1.0 billion unsecured revolving credit facility by two years, until June 2030.

Term loans

In May 2025, the Company prepaid a US$125.0 million unsecured term loan due in July 2025.

In June 2025, the Company extended the maturity date of a US$200.0 million syndicated term loan, bearing interest at a variable rate, until June 2027. In February 2026, the Company converted this loan to a Canadian dollar loan valued at $273.3 million, with no changes to the maturity date.

In June 2025, the Company entered into an unsecured term loan agreement amounting to US$50.0 million maturing in June 2027, bearing interest at a variable rate.

Information on the change in long-term debt for which cash flows have been classified as financing activities in the statement of cash flows are as follows:


	Unsecured								Revolving
		senior		Term		Lease		R&D		credit
		notes		loans		liabilities	obligations			facility		Total
Net book value as at March 31, 2024	$	1,678.3	$	239.9	$	551.9	$	574.2	$	30.0	$	3,074.3
Changes from financing cash flows
Net repayment from borrowing under
revolving credit facilities		—		—		—		—		(45.0)		(45.0)
Proceeds from long-term debt		—		285.8		—		45.7		—		331.5
Repayment of long-term debt		(216.1)		(72.6)		—		(32.6)		—		(321.3)
Repayment of lease liabilities		—		—		(59.9)		—		—		(59.9)
Total changes from financing cash flows	$	(216.1)	$	213.2	$	(59.9)	$	13.1	$	(45.0)	$	(94.7)
Non-cash changes
Business combinations (Note 2)		—		48.5		110.0		—		—		158.5
Foreign currency exchange differences		78.1		16.3		36.7		—		15.0		146.1
Additions and remeasurements of lease liabilities		—		—		153.4		—		—		153.4

Accretion		—		—		—		32.5		—		32.5

Other		1.1		0.8		—		(1.6)		—		0.3
Total non-cash changes	$	79.2	$	65.6	$	300.1	$	30.9	$	15.0	$	490.8


Net book value as at March 31, 2025	$	1,541.4	$	518.7	$	792.1	$	618.2	$	—	$	3,470.4
Changes from financing cash flows
Net repayment from borrowing under
revolving credit facilities		—		—		—		—		—		—
Proceeds from long-term debt		—		68.4		—		21.1		—		89.5
Repayment of long-term debt		(22.1)		(217.9)		—		(38.9)		—		(278.9)
Repayment of lease liabilities		—		—		(61.1)		—		—		(61.1)
Total changes from financing cash flows	$	(22.1)	$	(149.5)	$	(61.1)	$	(17.8)	$	—	$	(250.5)
Non-cash changes

Foreign currency exchange differences		(35.1)		(17.2)		(5.8)		—		—		(58.1)
Additions and remeasurements of lease liabilities		—		—		37.4		—		—		37.4

Accretion		—		—		—		34.1		—		34.1

Other		0.9		—		(0.4)		0.4		—		0.9
Total non-cash changes	$	(34.2)	$	(17.2)	$	31.2	$	34.5	$	—	$	14.3
Net book value as at March 31, 2026	$	1,485.1	$	352.0	$	762.2	$	634.9	$	—	$	3,234.2

As at March 31, 2026, the Company has no remaining R&D obligations in the drawdown phase, and the funding received to date on these loans will be repaid between calendar 2026 and 2048. These loan agreements with government entities include certain eligibility criteria, performance conditions, ongoing compliance obligations, commitments and events of default whereby suspension of funding, repayment obligations, accelerated repayment and/or termination of the agreements may result if the Company fails to meet these conditions and commitments throughout the repayment period and if no mutual agreement is found following the mandatory resolution processes.

The Company's unsecured senior notes, term loans and revolving credit facility include standard events of default and various covenant provisions, including financial covenants, whereby accelerated repayment and/or termination of the agreements may result if the Company were to default on payment or violate certain covenants. The Company is required to maintain compliance with these covenants at all times. As at March 31, 2026, the Company is in compliance with all of its financial covenants, as amended from time to time.

96 | CAE Financial Report 2026

Notes to the Consolidated Financial Statements

NOTE 21 – EMPLOYEE BENEFITS OBLIGATIONS

Defined benefit pension plans

The Company has three registered funded defined benefit pension plans in Canada (two for employees and one for designated executives) that provide benefits based on length of service and final average earnings. The Company also maintains a funded pension plan for employees in the United Kingdom that provides benefits based on similar provisions.

The Company’s annual contributions, to fund both benefits accruing in the year and deficits accumulated over prior years, and the plans’ financial position are determined based on actuarial valuations. Applicable pension legislations prescribe minimum funding requirements.

In addition, the Company maintains unfunded plans in Canada, United States and Germany that provide defined benefits based on length of service and final average earnings. These unfunded plans are the sole obligation of the Company, and there is no requirement to fund them. However, the Company is obligated to pay the benefits when they become due. As at March 31, 2026, the Company has issued letters of credit totalling $76.9 million (2025 – $63.9 million) to collateralize the obligations under the Canadian plans.

The funded plans are trustee administered funds. Plan assets held in trusts are governed by local regulations and practices in each country, as is the nature of the relationship between the Company and the trustees and their composition. Responsibility for governance of the plans, including investment decisions and contribution schedules, lies jointly with the Company and the board of trustees.

The employee benefits obligations are as follows:


		2026		2025
Funded defined benefit pension obligations	$	591.3	$	599.2
Fair value of plan assets		635.8		585.9
Funded defined benefit pension obligations (surplus) – net	$	(44.5)	$	13.3
Unfunded defined benefit pension obligations		106.1		109.2
Employee benefits obligations - net	$	61.6	$	122.5
Employee benefit assets	$	(44.5)	$	(11.6)
Employee benefit obligations	$	106.1	$	134.1

Changes in funded defined benefit pension obligations and fair value of plan assets are as follows:


						2026						2025
Canadian				Foreign		Total	Canadian			Foreign		Total
Pension obligations, beginning of year	$	593.8	$	5.4	$	599.2	$	471.3	$	5.0	$	476.3
Current service cost		34.5		—		34.5		32.9		—		32.9
Interest cost		25.7		0.3		26.0		22.4		0.3		22.7

Actuarial (gain) loss arising from:
Experience adjustments		0.6		—		0.6		43.3		0.1		43.4
Economic assumptions		(66.0)		—		(66.0)		23.3		(0.1)		23.2

Employee contributions		8.3		—		8.3		12.9		—		12.9
Pension benefits paid		(10.9)		(0.4)		(11.3)		(12.3)		(0.3)		(12.6)



Foreign currency exchange differences		—		—		—		—		0.4		0.4
Pension obligations, end of year	$	586.0	$	5.3	$	591.3	$	593.8	$	5.4	$	599.2
Fair value of plan assets, beginning of year	$	578.3	$	7.6	$	585.9	$	535.0	$	7.0	$	542.0
Interest income		25.1		0.4		25.5		26.0		0.4		26.4
Return on plan assets, excluding amounts
included in interest income		6.1		—		6.1		14.3		(0.1)		14.2
Employer contributions		22.3		—		22.3		1.8		—		1.8
Employee contributions		8.3		—		8.3		12.9		—		12.9
Pension benefits paid		(10.9)		(0.4)		(11.3)		(12.3)		(0.3)		(12.6)
Settlements		—		—		—		1.4		—		1.4


Administrative costs		(0.9)		—		(0.9)		(0.8)		—		(0.8)
Foreign currency exchange differences		—		(0.1)		(0.1)		—		0.6		0.6
Fair value of plan assets, end of year	$	628.3	$	7.5	$	635.8	$	578.3	$	7.6	$	585.9

During the year ended March 31, 2025, an actuarial funding valuation report was completed by an independent actuary for a funded defined benefit pension plan in Canada. As the plan funding had reached the limit prescribed by the Canadian Income Tax Act, the Company was prohibited from making employer contributions to the plan from January 1, 2024 to December 31, 2024.

CAE Financial Report 2026 | 97

Notes to the Consolidated Financial Statements

Changes in unfunded defined benefit pension obligations are as follows:


						2026						2025
Canadian				Foreign		Total	Canadian			Foreign		Total
Pension obligations, beginning of year	$	97.4	$	11.8	$	109.2	$	86.2	$	12.5	$	98.7
Current service cost		3.1		0.4		3.5		4.1		0.7		4.8
Interest cost		4.0		0.3		4.3		4.0		0.4		4.4
Past service cost		—		0.8		0.8		3.6		(1.2)		2.4
Actuarial (gain) loss arising from:
Experience adjustments		(2.5)		—		(2.5)		(0.2)		(1.0)		(1.2)
Economic assumptions		(4.7)		(0.6)		(5.3)		2.8		0.3		3.1

Pension benefits paid		(3.3)		(0.8)		(4.1)		(3.1)		(0.7)		(3.8)

Foreign currency exchange differences		—		0.2		0.2		—		0.8		0.8
Pension obligations, end of year	$	94.0	$	12.1	$	106.1	$	97.4	$	11.8	$	109.2

Net pension cost is as follows:


						2026						2025
Canadian				Foreign		Total	Canadian			Foreign		Total
Funded plans
Current service cost	$	34.5	$	—	$	34.5	$	32.9	$	—	$	32.9
Interest cost		25.7		0.3		26.0		22.4		0.3		22.7
Interest income		(25.1)		(0.4)		(25.5)		(26.0)		(0.4)		(26.4)

Settlement gain		—		—		—		(1.4)		—		(1.4)
Administrative cost		0.9		—		0.9		0.8		—		0.8
Net pension cost of funded plans	$	36.0	$	(0.1)	$	35.9	$	28.7	$	(0.1)	$	28.6
Unfunded plans
Current service cost	$	3.1	$	0.4	$	3.5	$	4.1	$	0.7	$	4.8
Interest cost		4.0		0.3		4.3		4.0		0.4		4.4
Past service cost		—		0.8		0.8		3.6		(1.2)		2.4
Net pension cost of unfunded plans	$	7.1	$	1.5	$	8.6	$	11.7	$	(0.1)	$	11.6
Total net pension cost	$	43.1	$	1.4	$	44.5	$	40.4	$	(0.2)	$	40.2

During the year ended March 31, 2026, pension costs of $23.0 million (2025 – $21.7 million) have been recorded in cost of sales, $4.8 million (2025 – $5.1 million) in research and development expenses, $9.6 million (2025 – $10.3 million) in selling, general and administrative expenses, nil (2025 – gain of $0.4 million) in restructuring, integration and acquisition costs, $4.8 million (2025 ‑ $0.7 million) in finance expense and $2.3 million (2025 – $2.8 million) were capitalized.

98 | CAE Financial Report 2026

Notes to the Consolidated Financial Statements

Fair value of the plan assets, by major categories, are as follows:


(amounts in millions)						2026						2025
		Quoted	Unquoted			Total		Quoted	Unquoted			Total
Canadian plans
Equity funds
Canadian	$	—	$	52.6	$	52.6	$	—	$	43.5	$	43.5
Foreign		—		186.9		186.9		—		157.8		157.8
Bond funds
Government		—		152.1		152.1		—		135.3		135.3
Corporate		—		62.8		62.8		—		63.4		63.4

Private and property investments		—		147.8		147.8		—		151.6		151.6
Cash and cash equivalents		—		7.2		7.2		—		14.6		14.6
Other		—		18.9		18.9		—		12.1		12.1
Total Canadian plans	$	—	$	628.3	$	628.3	$	—	$	578.3	$	578.3
Foreign plans

Equity instruments	$	0.4	$	—	$	0.4	$	0.4	$	—	$	0.4
Debt instruments

Corporate		6.8		—		6.8		6.9		—		6.9

Other		—		0.3		0.3		—		0.3		0.3
Total Foreign plans	$	7.2	$	0.3	$	7.5	$	7.3	$	0.3	$	7.6
Total plans	$	7.2	$	628.6	$	635.8	$	7.3	$	578.6	$	585.9

As at March 31, 2026 and March 31, 2025, there were no common shares of the Company in the pension plan assets.

Significant assumptions (weighted average) used are as follows:


			Canadian					Foreign
	2026			2025		2026		2025
Pension obligations as at March 31:
Discount rate	5.19	%		4.71	%	4.57	%	4.25	%
Compensation rate increases	3.50	%		3.67	%	2.54	%	2.48	%
Net pension cost for years ended March 31:
Discount rate	4.71	%		5.00	%	4.25	%	4.43	%
Compensation rate increases	3.67	%		3.69	%	2.48	%	2.68	%

Assumptions regarding future mortality are based on actuarial advice in accordance with published statistics and mortality tables and experience in each territory. The mortality tables and the average life expectancy in years for a member age 45 and 65 are as follows:


As at March 31, 2026			Life expectancy over 65 for a member
(in years)					Male				Female
Country	Mortality table	at age 45		at age 65		at age 45		at age 65
Canada	CPM private tables		23.9		22.5		26.4		25.1



Germany	Heubeck RT2018G		23.9		21.2		26.7		24.5
United Kingdom	S4PFA M CMI 2024		22.9		21.6		25.0		23.5
United States	CPM private tables		25.1		23.7		26.6		25.3


As at March 31, 2025			Life expectancy over 65 for a member
(in years)					Male				Female
Country	Mortality table	at age 45		at age 65		at age 45		at age 65
Canada	CPM private tables		23.9		22.5		26.3		25.0



Germany	Heubeck RT2018G		23.8		21.0		26.6		24.4

United Kingdom	S3PFA M CMI 2023		22.6		21.2		24.9		23.4
United States	CPM private tables		25.1		23.7		26.5		25.2

As at March 31, 2026, the weighted average duration of the defined benefit obligation is 18.2 years.

CAE Financial Report 2026 | 99

Notes to the Consolidated Financial Statements

The impact on the defined benefit obligation as a result of a 0.25% change in the significant assumptions as at March 31, 2026 are as follows:


			Funded plans			Unfunded plans
Canadian				Foreign	Canadian			Foreign		Total
Discount rate:
Increase	$	(25.6)	$	(0.1)	$	(2.6)	$	(0.3)	$	(28.6)
Decrease		27.6		0.1		2.7		0.4		30.8
Compensation rate:
Increase		10.9		—		0.4		—		11.3
Decrease		(10.4)		—		(0.4)		—		(10.8)

Through its defined benefit plans, the Company is exposed to a number of risks, the most significant being the exposure to asset volatility, to changes in bond yields and to changes in life expectancy. The plan liabilities are calculated using a discount rate set with reference to corporate bond yields, if plan assets underperform against this yield, this will create a deficit. A decrease in corporate bond yields will increase plan liabilities, although this will be partially offset by an increase in the value of the plans’ bond holdings. The plans’ obligations are to provide benefits for the duration of the life of its members, therefore, increases in life expectancy will result in an increase in the plans’ liabilities.

Contributions reflect actuarial assumptions of future investment returns, salary projections and future service benefits. The expected employer contributions and expected benefits paid for the next fiscal year are as follows:


	Canadian			Foreign		Total
Expected employer contributions in funded plans	$	24.2	$	—	$	24.2
Expected benefits paid in unfunded plans		3.3		0.8		4.1

NOTE 22 – OTHER NON-CURRENT LIABILITIES


		2026		2025
Contract liabilities (Note 11)	$	144.0	$	126.8
Share-based payments liabilities (Note 25)		22.0		40.3

Royalty obligations		54.5		66.1


Other		25.5		35.2
	$	246.0	$	268.4

NOTE 23 – SUPPLEMENTARY CASH FLOWS INFORMATION

Changes in non-cash working capital are as follows:


		2026		2025

Accounts receivable	$	(4.0)	$	76.4
Contract assets		4.5		77.1
Inventories		135.8		(11.0)
Prepayments		(7.4)		(10.2)
Income taxes		(16.2)		(53.8)
Accounts payable and accrued liabilities		(258.1)		54.1
Provisions		4.5		(9.7)
Contract liabilities		103.2		74.2
	$	(37.7)	$	197.1

Supplemental information:


		2026		2025
Interest paid	$	188.7	$	201.7
Interest received		18.5		20.9
Income taxes paid		49.9		101.4

100 | CAE Financial Report 2026

Notes to the Consolidated Financial Statements

NOTE 24 – ACCUMULATED OTHER COMPREHENSIVE INCOME


	Foreign currency
	exchange differences								Net changes in
	on translation of				Net changes in				financial assets
	foreign operations				cash flow hedges				carried at FVOCI						Total
	2026		2025		2026		2025		2026		2025		2026		2025
Balances, beginning of year	$	417.7	$	174.5	$	(34.6)	$	(19.2)	$	(1.3)	$	(1.3)	$	381.8	$	154.0
Other comprehensive (loss) income	(45.0)		243.2		10.4		(15.4)		—		—		(34.6)		227.8
Balances, end of year	$	372.7	$	417.7	$	(24.2)	$	(34.6)	$	(1.3)	$	(1.3)	$	347.2	$	381.8

NOTE 25 – SHARE-BASED PAYMENTS

The Company’s share-based payment plans consist of two categories: equity-settled share-based payment plans comprised of the stock option plan, a RSU plan and a PSU plan; and cash-settled share-based payments plans that include the stock purchase plan, deferred share units (DSU) plans, a RSU plan and a PSU plan.

Share-based payments expense are as follows:


		2026		2025
Equity-settled plans
Stock option plan	$	6.2	$	5.9
RSU plan		12.0		6.6
PSU plan		18.7		12.7
Cash-settled plans
Stock purchase plan		17.6		16.2
DSU plans		8.9		14.9
RSU plan		0.1		1.9
PSU plan		0.4		3.3
Total share-based payments expense	$	63.9	$	61.5
Impact of equity swap agreements (Note 31)		(3.1)		(14.6)
Amount capitalized		(0.8)		(1.0)
Share-based payments expense, net of equity swap (Note 26)	$	60.0	$	45.9

Carrying amount of share-based payments liabilities are as follows:


		2026		2025
Cash-settled plans
DSU plans	$	33.3	$	48.7
RSU plan		—		6.5
PSU plan		—		10.4
Total carrying amount of share-based payments liabilities	$	33.3	$	65.6
Current portion		11.3		25.3
Non-current portion (Note 22)	$	22.0	$	40.3

Stock option plan

Stock options to purchase common shares of the Company are granted to certain employees, officers and executives of the Company. The stock option exercise price is equal to the common shares weighted average price on the TSX of the five days of trading prior to the grant date. Stock options vest over four years of continuous employment from the grant date. The stock options must be exercised within a seven-year period, but are not exercisable during the first year after the grant date.

CAE Financial Report 2026 | 101

Notes to the Consolidated Financial Statements

Changes in outstanding stock options are as follows:


			2026			2025
		Weighted			Weighted
	Number of	average exercise		Number of	average exercise
stock options		price		stock options	price
Stock options outstanding, beginning of year	3,984,148	$	28.52	6,459,922	$	27.19
Granted	625,105		35.33	779,288		25.45
Exercised	(1,657,429)		27.94	(2,763,675)		24.29
Forfeited	(99,261)		29.93	(491,387)		29.96
Expired	(3,650)		27.14	—		—
Stock options outstanding, end of year	2,848,913	$	30.31	3,984,148	$	28.52
Stock options exercisable, end of year	1,406,633	$	29.83	2,525,692	$	28.44

During the year ended March 31, 2026, the weighted average market share price for stock options exercised was $39.58 (2025 ⁃ $30.57).

As at March 31, 2026, summarized information about the stock options issued and outstanding is as follows:


		Options Outstanding				Options Exercisable
		Weighted
	Number of	average remaining		Weighted		Number of	Weighted
Range of	stock options	contractual life		average exercise		stock options	average exercise
exercise prices	outstanding	(years)		price		exercisable	price
$20.57 to $26.78	937,639		3.68	$	23.61	470,985	$	21.81
$26.83 to $30.13	453,948		4.20		28.66	191,103		28.65
$33.47 to $38.01	1,457,326		3.83		35.13	744,545		35.20
Total	2,848,913		3.84	$	30.31	1,406,633	$	29.83

During the year ended March 31, 2026, the weighted average fair value of stock options granted was $13.71 (2025 – $9.58).

The assumptions used in the calculation of the fair value of the stock options on the grant date using the Black-Scholes option pricing model are as follows:


		2026			2025
Common share price	$	35.33		$	25.45
Exercise price	$	35.33		$	25.45
Dividend yield		—	%		0.58	%
Expected volatility		39.27	%		39.32	%
Risk-free interest rate		2.94	%		3.53	%
Expected stock option life		5 years			5 years

Expected volatility is estimated by considering historical average common share price volatility over the expected life of the stock options.

Equity-settled restricted share unit (RSU) plan

RSUs are granted to certain employees, officers and executives of the Company. RSUs are settled in shares, either issued from treasury or purchased on the open market, in cash or in a combination thereof, at the discretion of the Company. Restriction criteria include continuing employment for a period of up to three years. RSUs are settled three years after the grant date.

Changes in outstanding equity-settled RSUs are as follows:


	2026	2025
Equity-settled RSUs outstanding, beginning of year	574,726	292,634
Granted	599,684	393,805
Cancelled	(46,991)	(94,872)
Settled in shares	(1,702)	(15,370)
Settled in cash	(5,856)	(1,471)

Equity-settled RSUs outstanding, end of year	1,119,861	574,726
Equity-settled RSUs vested, end of year	760,647	404,144

102 | CAE Financial Report 2026

Notes to the Consolidated Financial Statements

Equity-settled performance share unit (PSU) plan

PSUs are granted to certain employees, officers and executives of the Company. PSUs are settled in shares, either issued from treasury or purchased on the open market, in cash or in a combination thereof, at the discretion of the Company. The target rate of granted units is multiplied by a factor which ranges from 0% to 200% based on the attainment of performance criteria set out pursuant to the plan, if restriction criteria are met. Restriction criteria include continuing employment for a period of up to three years. PSUs are settled three years after the grant date.

Changes in outstanding equity-settled PSUs are as follows:


	2026	2025
Equity-settled PSUs outstanding, beginning of year	1,409,472	780,786
Granted	1,021,502	903,341
Cancelled	(110,706)	(242,151)
Settled in shares	(1,248)	(30,060)
Settled in cash	(3,434)	(2,444)
Equity-settled PSUs outstanding, end of year	2,315,586	1,409,472
Equity-settled PSUs vested, end of year	1,600,821	1,037,878

Cash-settled stock purchase plan

Employees of the Company and its participating subsidiaries can acquire common shares through regular payroll deductions. The Company contributes $1 for every $2 of employee contributions, up to a maximum of 3% of the employee’s base salary. The employee and Company’s contributions are remitted to an independent plan administrator who purchases common shares on the market on behalf of the employee.

Cash-settled deferred share unit (DSU) plans

Non-employee directors holding less than the minimum required holdings of common shares of the Company receive their Board retainer compensation in the form of deferred share units (DSUs). A non-employee director holding no less than the minimum required holdings of common shares may also elect to participate in the DSU plan in respect of part or all of his or her retainer. Such retainer amount is converted to DSUs based on the common shares price on the TSX on the date such retainer becomes payable to the non‑employee director.

Certain executives can elect to defer a portion or entire short-term incentive payment to the DSU plan on an annual basis. Such deferred short-term incentive amount is converted to DSUs based on the common shares weighted average price on the TSX of the five days of trading prior to the date such incentive becomes payable to the executives.

DSUs entitle the holders to receive a cash payment equal to the common shares closing price on the TSX on the payment date, or, in certain cases, the weighted average price of the five days prior to the payment date. Holders are also entitled to dividend equivalents payable in additional DSUs in an amount equal to the dividends paid on the common shares from the date of issuance to the payment date.

DSUs vest immediately and are paid upon any termination of employment or when a non-employee director ceases to act as a director.

Changes in outstanding DSUs are as follows:


	2026	2025
DSUs outstanding, beginning of year	1,377,311	1,487,414
Granted	143,539	139,677
Redeemed	(599,613)	(249,780)

DSUs vested and outstanding, end of year	921,237	1,377,311

As at March 31, 2026, vested and outstanding DSUs includes 417,745 DSUs (2025 – 742,157) granted to certain employees, officers and executives of the Company under previous plans, which are paid upon any termination of employment of the holder. Under the previous plans, holders are also entitled to dividend equivalents payable in additional DSUs in an amount equal to the dividends paid on the common shares from the date of issuance to the payment date.

Cash-settled restricted share unit (RSU) plan

Restricted share units (RSUs) are granted to certain employees, officers and executives of the Company. RSUs entitle the holders to receive a cash payment based on the average closing price on the TSX for the 20 trading days preceding the vesting date, if restriction criteria are met. Restriction criteria include continuing employment for a period of up to three years. RSUs are paid three years after the grant date. Following the adoption of the Omnibus Incentive Plan in fiscal 2024, no new awards will be granted under this plan.

CAE Financial Report 2026 | 103

Notes to the Consolidated Financial Statements

Changes in outstanding cash-settled RSUs are as follows:


	2026	2025
Cash-settled RSUs outstanding, beginning of year	193,139	404,037

Cancelled	(5,320)	(43,833)
Redeemed	(187,819)	(167,065)

Cash-settled RSUs outstanding, end of year	—	193,139
Cash-settled RSUs vested, end of year	—	184,725

Cash-settled performance share unit (PSU) plan

Performance share units (PSUs) are granted to certain employees, officers and executives of the Company. PSUs entitle the holders to receive a cash payment equal to the average closing price on the TSX of the common shares for the 20 trading days preceding the vesting date multiplied by a factor which ranges from 0% to 200% based on the attainment of performance criteria set out pursuant to the plan, if restriction criteria are met. Restriction criteria include continuing employment for a period of up to three years. PSUs are paid three years after the grant date. Following the adoption of the Omnibus Incentive Plan in fiscal 2024, no new awards will be granted under this plan.

Changes in outstanding cash-settled PSUs are as follows:


	2026	2025
Cash-settled PSUs outstanding, beginning of year	491,896	912,281

Cancelled	(184,028)	(283,840)
Redeemed	(307,868)	(136,545)
Cash-settled PSUs outstanding, end of year	—	491,896
Cash-settled PSUs vested, end of year	—	467,991

NOTE 26 – EMPLOYEE COMPENSATION

Total employee compensation expense recognized in income is as follows:


(amounts in millions)		2026		2025
Salaries and other short-term employee benefits	$	1,724.7	$	1,697.0
Share-based payments expense, net of equity swap (Note 25)		60.0		45.9
Post-employment benefits – defined benefit plans (Note 21)		42.2		37.4
Post-employment benefits – defined contribution plans		42.6		39.8
Termination benefits		13.7		35.0
Total employee compensation	$	1,883.2	$	1,855.1

NOTE 27 – GOVERNMENT PARTICIPATION

Government contributions were recognized as follows:


		2026		2025
Credited to non-financial assets	$	6.5	$	21.4
Credited to income		11.5		34.3
	$	18.0	$	55.7

104 | CAE Financial Report 2026

Notes to the Consolidated Financial Statements

NOTE 28 – CONTINGENCIES AND COMMITMENTS

Contingencies

From time to time, the Company is involved in legal proceedings, audits, litigations and claims arising in the ordinary course of its business. The Company operates in a highly regulated environment across many jurisdictions and is subject to, without limitation, laws and regulations relating to import-export controls, trade sanctions, anti-corruption, national security and aviation safety of each country. In addition, contracts with government agencies are subject to procurement regulations and other specific legal requirements. The Company is also required to comply with tax laws and regulations of any country in which it operates.

The Company is subject to investigations and audits from various government and regulatory agencies. In addition, the Company may identify, investigate, remediate and voluntarily disclose potential non-compliance with those laws and regulations. As a result, the Company can be subject to potential liabilities associated with those matters. Although it is possible that liabilities may be incurred in instances for which no accruals have been made, the Company does not believe that the ultimate outcome of these matters will have a material impact on its consolidated financial statements.

Dispute relating to final price adjustments for the sale of CAE’s Healthcare business

During the fourth quarter of fiscal 2024, the Company closed the sale of its Healthcare business to Madison Industries. The total consideration is subject to post-closing price adjustments, including on account of working capital. At the time of issuance of the consolidated financial statements, the Company is still engaged in a dispute with Madison Industries, which initially claimed up to approximately $60 million in final price adjustments. To date, no price adjustment has been agreed to or awarded in favour of the purchaser, and a limited number of items remain in dispute, representing an amount of approximately $15 million. Price adjustments in favour of the purchaser, if any, are not expected to exceed this amount and are not expected to exceed the amounts still outstanding and receivable from the purchaser.

Given the uncertainty regarding whether any amount will ultimately be payable in connection with the dispute, and as we continue to believe that there are strong grounds for defence and are vigorously defending our position, no amount has been recognized in the Company's financial statements for any potential losses arising from this dispute as at March 31, 2026.

Class action proceeding

Commitments

Contractual purchase commitments that are not recognized as liabilities are as follows:


		2026		2025
Less than 1 year	$	320.9	$	411.8
Between 1 and 5 years		294.0		262.1
Later than 5 years		63.7		23.6
Total contractual purchase commitments	$	678.6	$	697.5

CAE Financial Report 2026 | 105

Notes to the Consolidated Financial Statements

NOTE 29 – FAIR VALUE OF FINANCIAL INSTRUMENTS

The fair value of a financial instrument is determined by reference to the available market information at the reporting date. When no active market exists for a financial instrument, the Company determines the fair value of that instrument based on valuation methodologies as discussed below. In determining assumptions required under a valuation model, the Company primarily uses external, readily observable market data inputs. Assumptions or inputs that are not based on observable market data incorporate the Company’s best estimates of market participant assumptions. Counterparty credit risk and the Company’s own credit risk are taken into account in estimating the fair value of financial assets and financial liabilities.

The following assumptions and valuation methodologies have been used to measure the fair value of financial instruments:

(i)The fair value of cash and cash equivalents, accounts receivable and accounts payable and accrued liabilities approximate their carrying values due to their short-term maturities;

(ii)The fair value of derivative instruments, which include forward contracts and swap agreements, is calculated as the present value of the estimated future cash flows using assumptions based on market conditions prevailing at each reporting date. The fair value of derivative instruments reflects the estimated amounts that the Company would receive or pay to settle the contracts at the reporting date;

(iii)The fair value of the equity investments, which does not have a readily available market value, is estimated using a discounted cash flow model, which includes some assumptions that are not based on observable market prices or rates;

(iv)The fair value of non-current receivables is estimated based on discounted cash flows using current interest rates for instruments with similar risks and remaining maturities;

(v)The fair value of long-term debts, royalties obligations and other non-current liabilities are estimated based on discounted cash flows using current interest rates for instruments with similar risks and remaining maturities.

Fair value hierarchy

The fair value hierarchy reflects the significance of the inputs used in making the measurements and has the following levels:

Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities;

Level 2: Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (i.e. as prices in markets that are not active) or indirectly (i.e. quoted prices for similar assets or liabilities);

Level 3: Inputs for the asset or liability that are not based on observable market data (unobservable inputs).

Each type of fair value is categorized based on the lowest level input that is significant to the fair value measurement in its entirety.

106 | CAE Financial Report 2026

Notes to the Consolidated Financial Statements

The carrying values and fair values of financial instruments, by category, are as follows:


					2026				2025
	Level	Carrying value		Fair value		Carrying value		Fair value
			Total		Total		Total		Total
Financial assets (liabilities) measured at FVTPL
Cash and cash equivalents	Level 1	$	552.4	$	552.4	$	293.7	$	293.7


Equity swap agreements	Level 2		1.0		1.0		13.0		13.0
Forward foreign currency contracts	Level 2		(6.5)		(6.5)		(6.4)		(6.4)


Derivatives assets (liabilities) designated in a hedge relationship
Foreign currency and interest rate swap agreements	Level 2		(10.0)		(10.0)		(14.4)		(14.4)
Forward foreign currency contracts	Level 2		(13.3)		(13.3)		(31.9)		(31.9)
Financial assets (liabilities) measured at amortized cost
Accounts receivable(1)	Level 2		579.2		579.2		567.7		567.7
Investment in finance leases	Level 2		149.9		145.1		142.0		135.8

Other non-current assets(2)	Level 2		76.2		76.2		79.5		79.5
Accounts payable and accrued liabilities(3)	Level 2		(699.9)		(699.9)		(914.4)		(914.4)

Total long-term debt(4)	Level 2		(2,477.1)		(2,488.3)		(2,684.7)		(2,700.6)
Other non-current liabilities(5)	Level 2		(72.6)		(65.3)		(91.4)		(84.8)
Financial assets measured at FVOCI
Equity investments	Level 3		1.4		1.4		1.4		1.4
		$	(1,919.3)	$	(1,928.0)	$	(2,645.9)	$	(2,661.4)

(1) Includes trade receivables, accrued receivables and certain other receivables.

(2) Includes non-current receivables and certain other non-current assets.

(3) Includes trade accounts payable, accrued liabilities, interest payable and current royalty obligations.

(4) Excludes lease liabilities. The carrying value of long-term debt excludes transaction costs.

(5) Includes non-current royalty obligations and other non-current liabilities.

During the year ended March 31, 2026, there were no significant changes in level 3 financial instruments.

NOTE 30 – CAPITAL RISK MANAGEMENT

The Company’s capital allocation priorities are focused on:

(i) Organic investments for sustainable and accretive growth;

(ii) Maintaining a strong balance sheet for optimal resiliency and financial flexibility;

(iii) Balancing returns to shareholders with leverage targets and growth investment opportunities.

The Company manages its capital structure and makes corresponding adjustments based on changes in economic conditions and the risk characteristics of the underlying assets. In order to maintain or adjust the capital structure, the Company may adjust the amount of dividends paid to shareholders, issue new shares or debt, use cash to reduce debt or repurchase shares.

To accomplish its objectives stated above, the Company monitors its capital on the basis of the net debt to capital. This ratio is calculated as net debt divided by the sum of total equity plus net debt. Net debt is calculated as total long-term debt, including the current portion of long-term debt less cash and cash equivalents. Total equity comprises share capital, contributed surplus, accumulated other comprehensive income, retained earnings and non-controlling interests.

The level of debt versus equity in the capital structure is monitored, and the ratios are as follows:


		2026		2025
Total long-term debt (Note 20)	$	3,234.2	$	3,470.4
Less: cash and cash equivalents		(552.4)		(293.7)
Net debt	$	2,681.8	$	3,176.7
Equity		5,388.1		4,976.0
Total net debt plus equity	$	8,069.9	$	8,152.7
Net debt-to-capital	%	33.2	%	39.0

CAE Financial Report 2026 | 107

Notes to the Consolidated Financial Statements

NOTE 31 – FINANCIAL RISK MANAGEMENT

Due to the nature of the activities that the Company carries out and as a result of holding financial instruments, the Company is exposed to credit risk, liquidity risk and market risk, including foreign currency risk and interest rate risk. The Company’s exposure to credit risk, liquidity risk and market risk is managed within risk management parameters documented in corporate policies. These risk management parameters remain unchanged since the previous period, unless otherwise indicated.

Credit risk

Credit risk is defined as the Company’s exposure to a financial loss if a debtor fails to meet its obligations in accordance with the terms and conditions of its arrangements with the Company. The Company is exposed to credit risk on its accounts receivable and certain other assets through its normal commercial activities. The Company is also exposed to credit risk through its normal treasury activities on its cash and cash equivalents and derivative financial assets. Credit risks arising from the Company’s normal commercial activities are managed with regards to customer credit risk.

The Company’s customers are mainly established companies, some of which have publicly available credit ratings, as well as government agencies, which facilitates risk assessment and monitoring. In addition, the Company typically receives substantial non‑refundable advance payments for contracts with customers. The Company closely monitors its exposure to major airline companies in order to mitigate its risk to the extent possible. Furthermore, the Company’s trade receivables are held with a wide range of commercial and government organizations and agencies. As well, the Company’s credit exposure is further reduced by the sale of certain of its accounts receivable to third-party financial institutions for cash consideration on a limited recourse basis (receivable purchase facility). The Company does not hold any collateral as security. The credit risk on cash and cash equivalents is mitigated by the fact that they are mainly in place with a diverse group of major North American and European financial institutions.

The Company is exposed to credit risk in the event of non-performance by counterparties to its derivative financial instruments. The Company uses several measures to minimize this exposure. First, the Company enters into contracts with counterparties that are of high credit quality. The Company signed International Swaps & Derivatives Association, Inc. (ISDA) Master Agreements with all the counterparties with whom it trades derivative financial instruments. These agreements make it possible to offset when a contracting party defaults on the agreement, for each of the transactions covered by the agreement and in force at the time of default. Also, collateral or other security to support derivative financial instruments subject to credit risk can be requested by the Company or its counterparties (or both parties, if need be) when the net balance of gains and losses on each transaction exceeds a threshold defined in the ISDA Master Agreement. Finally, the Company monitors the credit standing of counterparties on a regular basis to help minimize credit risk exposure.

The carrying amounts presented in Note 10 and Note 29 represent the maximum exposure to credit risk for each respective financial asset as at the relevant dates.

Exposure to credit risk and credit loss allowances for accounts receivable and contract assets by segment are as follows:


As at March 31, 2026		Civil Aviation			Defense and Security			Amounts not allocated to a segment			Total
Gross accounts receivable	$	350.0		$	254.3		$	42.4		$	646.7
Gross contract assets		157.8			364.7			—			522.6
Total	$	507.8		$	619.0		$	42.4		$	1,169.3
Credit loss allowances	$	(21.9)		$	(0.5)		$	—		$	(22.4)
As a %		4.3	%		0.1	%		—	%		1.9	%


As at March 31, 2025		Civil Aviation			Defense and Security			Amounts not allocated to a segment			Total
Gross accounts receivable	$	384.8		$	211.8		$	36.7		$	633.3
Gross contract assets		163.2			357.8			—			521.0
Total	$	548.0		$	569.6		$	36.7		$	1,154.3
Credit loss allowances	$	(19.3)		$	(2.0)		$	—		$	(21.3)
As a %		3.5	%		0.4	%		—	%		1.8	%

Client concentration risk

108 | CAE Financial Report 2026

Notes to the Consolidated Financial Statements

Liquidity risk

Liquidity risk is defined as the potential risk that the Company cannot meet its cash obligations as they become due. The Company manages this risk by establishing cash forecasts, as well as long-term operating and strategic plans. The management of consolidated liquidity requires a regular monitoring of expected cash inflows and outflows which is achieved through a forecast of the Company’s consolidated liquidity position, for efficient use of cash resources. Liquidity adequacy is assessed in view of seasonal needs, stress-test results, growth requirements and capital expenditures, and the maturity profile of indebtedness, including availability of credit facilities, working capital requirements, compliance with financial covenants and the funding of financial commitments. The Company manages its liquidity risk to maintain sufficient liquid financial resources to fund its operations and meet its commitments and obligations. The Company also regularly monitors any financing opportunities to optimize its capital structure and maintain appropriate financial flexibility.

In managing its liquidity risk, the Company has access to a committed unsecured revolving credit facility of US$1.0 billion (2025 ‑ US$1.0 billion). As well, the Company has agreements to sell interests in certain of its accounts receivable (receivable purchase facility) for an amount of up to US$400.0 million (2025 – US$400.0 million). As at March 31, 2026, the carrying amount of the original accounts receivable sold to a financial institution pursuant to the receivable purchase facility totaled $399.1 million (2025 ‑ $453.6 million) of which $51.7 million (2025 – $39.9 million), corresponding to the extent of the Company’s continuing involvement, remains in accounts receivable with a corresponding liability included in accounts payable and accrued liabilities.

The Company has established supplier finance arrangements offered by some of its subsidiaries to certain key suppliers. Under these arrangements, the Company has the ability to submit supplier invoices, at its own discretion, to its financial institution who pays the supplier and allows the Company to extend its payment terms by 55 to 85 days. The Company pays the invoice amount and a service fee to the financial institution in accordance with the extended due dates. As at March 31, 2026, the carrying amount of accounts payable trade for this arrangement totalled nil (2025 – $73.3 million).

The following tables present a maturity analysis based on the contractual maturity date of the Company’s financial liabilities based on expected cash flows. Cash flows from derivatives presented either as derivative assets or liabilities have been included, as the Company manages its derivative contracts on a gross basis. The amounts are the contractual undiscounted cash flows. All amounts contractually denominated in foreign currency are presented in Canadian dollar equivalent amounts using the period-end spot rate except as otherwise stated:


							Between		Between		Between		Between
	Carrying		Contractual		Less than			1 and		2 and		3 and		4 and	More than
As at March 31, 2026	amount		cash flows			1 year		2 years		3 years		4 years		5 years		5 years
Non-derivative financial liabilities
Accounts payable and accrued liabilities (1)	$	699.9	$	699.9	$	699.9	$	—	$	—	$	—	$	—	$	—
Total long-term debt (2)
Long-term debt (other than lease liabilities)		2,472.0		2,472.0		183.9		476.3		653.0		123.2		235.8		799.8
Interest and accretion		—		602.1		86.7		72.2		49.6		35.3		49.3		309.0
Lease liabilities		762.2		1,173.7		112.3		103.2		113.4		82.0		110.9		651.9
Other non-current liabilities (3)		72.6		122.1		—		24.1		27.8		22.2		21.9		26.1
	$	4,006.7	$	5,069.8	$	1,082.8	$	675.8	$	843.8	$	262.7	$	417.9	$	1,786.8
Net derivative financial liabilities (assets)

Forward foreign currency contracts (4)	$	19.8
Outflow			$	2,402.8	$	2,084.5	$	307.6	$	10.7	$	—	$	—	$	—
Inflow				(2,372.2)		(2,062.7)		(298.9)		(10.6)		—		—		—
Foreign currency and
interest rate swap agreements		10.0		20.2		1.0		1.2		18.0		—		—		—


Equity swap agreements		(1.0)		(1.0)		(1.0)		—		—		—		—		—
	$	28.8	$	49.8	$	21.8	$	9.9	$	18.1	$	—	$	—	$	—
	$	4,035.5	$	5,119.6	$	1,104.6	$	685.7	$	861.9	$	262.7	$	417.9	$	1,786.8

CAE Financial Report 2026 | 109

Notes to the Consolidated Financial Statements


							Between		Between		Between		Between
		Carrying	Contractual		Less than			1 and		2 and		3 and		4 and	More than
As at March 31, 2025		amount	cash flows			1 year		2 years		3 years		4 years		5 years		5 years
Non-derivative financial liabilities
Accounts payable and accrued liabilities (1)	$	914.4	$	914.4	$	914.4	$	—	$	—	$	—	$	—	$	—
Total long-term debt (2)
Long-term debt (other than lease liabilities)		2,678.3		2,678.3		277.9		469.3		140.6		654.5		121.7		1,014.3
Interest and accretion		—		686.2		93.2		74.6		67.5		50.0		34.7		366.2
Lease liabilities		792.1		1,237.2		170.7		98.9		90.3		101.8		69.9		705.6
Other non-current liabilities (3)		91.4		155.2		—		25.0		31.4		28.1		23.9		46.8
	$	4,476.2	$	5,671.3	$	1,456.2	$	667.8	$	329.8	$	834.4	$	250.2	$	2,132.9
Net derivative financial liabilities (assets)

Forward foreign currency contracts (4)	$	38.3
Outflow			$	2,829.3	$	2,481.4	$	305.6	$	39.4	$	2.9	$	—	$	—
Inflow				(2,780.2)		(2,443.3)		(295.4)		(38.5)		(3.0)		—		—
Foreign currency and
interest rate swap agreements		14.4		36.2		1.0		1.7		1.9		31.6		—		—


Equity swap agreements		(13.0)		(13.0)		(13.0)		—		—		—		—		—
	$	39.7	$	72.3	$	26.1	$	11.9	$	2.8	$	31.5	$	—	$	—
	$	4,515.9	$	5,743.6	$	1,482.3	$	679.7	$	332.6	$	865.9	$	250.2	$	2,132.9

(1) Includes trade accounts payable, accrued liabilities, interest payable, current portion of royalty obligations and certain payroll-related liabilities.

(2) Contractual cash flows include contractual interest and principal payments related to debt obligations. Contractual interests on debt obligations with variable interest rate are presented using the period-end rate.

(3) Includes non-current royalty obligations and other non-current liabilities.

(4) Outflows and inflows are presented in Canadian dollar equivalent using the contractual forward foreign currency rate.

The Company is party to an agreement that includes a put option, that if exercised, requires CAE to purchase the remaining equity interest in a joint venture. Under the terms of the agreement, the counterparty has the option to sell its shares in the joint venture at fair value. As at March 31, 2026, no value has been ascribed to the put option as the purchase price for the shares corresponds to their fair value.

Market risk

Market risk is defined as the Company’s exposure to a gain or a loss in the value of its financial instruments as a result of changes in market prices, whether those changes are caused by factors specific to the individual financial instruments or its issuer, or factors affecting all similar financial instruments traded in the market. The Company is mainly exposed to foreign currency risk and interest rate risk.

Derivative instruments are utilized by the Company to manage market risk against the volatility in foreign exchange rates, interest rates and share-based payments in order to minimize their impact on the Company’s results and financial position. The Company’s policy is not to utilize any derivative financial instruments for trading or speculative purposes.

Foreign currency risk

Foreign currency risk is defined as the Company’s exposure to a gain or a loss in the value of its financial instruments as a result of fluctuations in foreign exchange rates. The Company is exposed to foreign exchange rate variability primarily in relation to certain sale commitments, expected purchase transactions and debt denominated in a foreign currency, as well as on the net investment from its foreign operations which have functional currencies other than the Canadian dollar (in particular the U.S. dollar (USD) and Euro (€ or EUR). In addition, these operations have exposures to foreign exchange rates primarily through cash and cash equivalents and other working capital accounts denominated in currencies other than their functional currencies.

The Company mitigates foreign currency risks by having its foreign operations transact in their functional currency for material procurement, sale contracts and financing activities.

The Company uses forward foreign currency contracts and foreign currency swap agreements to manage the Company’s exposure from transactions in foreign currencies and to hedge its net investment in U.S. entities. These transactions include forecasted transactions and firm commitments denominated in foreign currencies.

110 | CAE Financial Report 2026

Notes to the Consolidated Financial Statements

The forward foreign currency contracts outstanding are as follows:


(amounts in millions, except average rate)				2026				2025
		Notional		Average		Notional		Average
Currencies (sold/bought)		amount	(1)	rate		amount	(1)	rate
USD/CDN
Less than 1 year	$	1,003.6		0.73	$	1,257.8		0.72
Between 1 and 3 years		259.7		0.74		250.8		0.73
Between 3 and 5 years		—		—		0.4		0.75




EUR/CDN
Less than 1 year		428.9		0.63		308.1		0.66
Between 1 and 3 years		55.1		0.64		60.7		0.66
Between 3 and 5 years		—		—		2.4		0.65








CDN/USD
Less than 1 year		231.5		1.38		489.6		1.42
Between 1 and 3 years		2.8		1.39		31.3		1.39
Between 3 and 5 years		—		—		0.2		1.37



Other currencies
Less than 1 year		420.6		n.a.		426.4		n.a.
Between 1 and 3 years		0.6		n.a.		1.6		n.a.
Total	$	2,402.8			$	2,829.3

(1) Exchange rates as at the end of the respective periods were used to translate amounts in foreign currencies.

As March 31, 2026, the Company uses fixed to fixed cross currency principal and interest rate swap agreements to effectively convert the $400.0 million unsecured senior notes into U.S. dollars. The Company has designated the swap agreements as a hedge of its net investments in U.S. entities against foreign currency fluctuations.

The Company’s foreign currency hedging programs are typically unaffected by changes in market conditions, as related derivative financial instruments are generally held until their maturity, consistent with the objective to fix currency rates on the hedged item.

Foreign currency risk sensitivity analysis

The sensitivity analysis on pre-tax net income presents the impact of foreign currency denominated financial instruments and adjusts their translation for a 5% strengthening in the relevant foreign currency as at the end of the respective periods. The sensitivity analysis on other comprehensive income (loss) presents the impact of a 5% strengthening in foreign currency rates on the fair value of foreign currency forward contracts designated as cash flow hedges as at the end of the respective periods. This analysis assumes all other variables remain constant.


	USD			EUR
	Net income		OCI	Net income		OCI
As at March 31, 2026		3.7	(16.6)		—	(6.2)
As at March 31, 2025		2.1	(10.5)		0.6	(1.1)

A weakening of 5% in the relevant foreign currency against the Canadian dollar would have an opposite impact on pre-tax net income and OCI.

Hedge of net investments in foreign operations

As at March 31, 2026, the Company has designated a portion of its unsecured senior notes, term loans, fixed to fixed cross currency principal and interest rate swap agreements and foreign currency contracts totaling US$1,430.0 million (2025 ‑ US$1,660.9 million) as a hedge of its net investments in U.S. entities. Gains or losses on the translation of the designated portion of these USD denominated long-term debts are recognized in OCI to offset any foreign exchange gains or losses on translation of the financial statements of those U.S. entities.

Interest rate risk

Interest rate risk is defined as the Company’s exposure to a gain or a loss to the value of its financial instruments as a result of fluctuations in interest rates. The Company bears some interest rate fluctuation risk on its floating rate long-term debt and some fair value risk on its fixed interest long-term debt. The Company mainly manages interest rate risk by fixing project-specific floating rate debt in order to reduce cash flow variability. The Company has floating rate debts through its revolving credit facility and other specific floating rate debts. A mix of fixed and floating interest rate debt is sought to reduce the net impact of fluctuating interest rates. Derivative financial instruments used to manage interest rate exposures are mainly interest rate swap agreements. As at March 31, 2026, 89% (2025 – 86%) of the long-term debt bears fixed interest rates.

The Company’s interest rate hedging programs are typically unaffected by changes in market conditions, as related derivative financial instruments are generally held until their maturity to establish asset and liability management matching, consistent with the objective to reduce risks arising from interest rate movements.

CAE Financial Report 2026 | 111

Notes to the Consolidated Financial Statements

Interest rate risk sensitivity analysis

During the year ended March 31, 2026, a 1% increase in interest rates would decrease net income by $4.8 million (2025 ‑ $5.2 million) and would not have a significant impact on OCI (2025 – not significant) assuming all other variables remained constant. A 1% decrease in interest rates would have an opposite impact on net income.

Hedge of share-based payments expense

The Company has entered into equity swap agreements with major Canadian financial institutions to reduce its exposure to fluctuations in its share price relating to the cash-settled share-based payments plans. Pursuant to the agreement, the Company receives the economic benefit of dividends and share price appreciation while providing payments to the financial institutions for the institution’s cost of funds and any share price depreciation. The net effect of the equity swap agreements partly offset movements in the Company’s share price impacting the cost of the cash-settled share-based payments plans. As at March 31, 2026, the equity swap agreements covered 900,000 common shares (2025 – 2,100,000) of the Company.

Letters of credit and guarantees

As at March 31, 2026, the Company had outstanding letters of credit and performance guarantees in the amount of $420.4 million (2025 – $406.2 million) issued in the normal course of business. These guarantees are issued under the revolving credit facility and bilateral facilities which are in most instances supported by the Performance Securities Guarantee (PSG).

The advance payment guarantees are related to progress/milestone payments made by the Company’s customers and are reduced or eliminated upon delivery of the product. The contract performance guarantees are linked to the completion of the intended product or service rendered by the Company and to the customer’s requirements. The customer releases the Company from these guarantees at the signing of a certificate of completion. The letter of credit for the lease obligation provides credit support for the benefit of the owner participant on a sale and leaseback transaction and varies according to the payment schedule of the lease agreement.


		2026		2025
Advance payments	$	222.0	$	207.2
Contract performance		100.2		110.7
Lease obligations		9.4		17.3
Financial obligations		88.8		69.5
Other		—		1.5
	$	420.4	$	406.2

Indemnifications

In certain transactions involving business dispositions or sales of assets, the Company may provide indemnification to the counterparties with respect to future claims for certain unknown liabilities that exist, or arise from events occurring, prior to the transaction date, including liabilities for taxes, legal matters, environmental exposures, product liability, and other obligations. The terms of the indemnifications vary in duration and scope. While some of the indemnifications specify a maximum potential exposure and/or a termination date, many do not.

The Company believes that, other than liabilities already accrued, the maximum potential future payments that it could be required to make under these indemnifications are not determinable at this time, as any future payments would be dependent on the type and extent of the related claims, and all available defences, including insurance, which cannot be estimated. However, historically, costs incurred to settle claims related to these indemnifications have not been material to the Company’s consolidated financial position, net income or cash flows.

112 | CAE Financial Report 2026

Notes to the Consolidated Financial Statements

NOTE 32 – COMPENSATION OF KEY MANAGEMENT PERSONNEL

Key management personnel have the ability and responsibility to make major operational, financial and strategic decisions for the Company. The Company determined that key management personnel consist of the Board of Directors and its Management Team, which is comprised of the President and Chief Executive Officer (CEO) and executive officers who report directly to him. As at March 31, 2026, key management personnel consist of 12 non-employee Directors and 11 executive officers (2025 – 12 non‑employee Directors and 8 executive officers).

The compensation expense of key management for employee services recognized in income are as follows:


		2026		2025
Salaries and other short-term employee benefits	$	11.3	$	12.5
Post-employment benefits – defined benefit plans		3.2		2.0
Costs related to the CEO's terms of departure		11.4		6.3
Termination benefits		—		5.0
Share-based payments expense		15.7		22.2
	$	41.6	$	48.0

During fiscal 2026, the Company incurred $14.0 million (2025 – $8.3 million) of executive management transition costs, including $11.4 million (2025 – $6.3 million) related to the CEO's terms of departure, representing accrued expenses to the then‑current CEO, and $2.6 million (2025 – $2.0 million) of other costs. These costs are recorded in selling, general and administrative expenses. The Company has not incurred any significant additional executive management transition costs subsequent to the first quarter of fiscal 2026.

For the year ended March 31, 2026, the compensation earned by non-employee Directors of the Company amounted to $5.3 million (2025 – $3.9 million), which included the grant date fair value of deferred share units (DSUs) as well as cash payments.

CAE Financial Report 2026 | 113

Board of Directors and Executive Officers BOARD OF DIRECTORS Ayman Antoun 3, 4* Chief Executive Officer, OpenText Corporation Oakville, Ontario Sophie Brochu 3* Corporate Director, and Lead Independent Director, CAE Inc. Bromont, Quebec Matthew Bromberg President and Chief Executive Officer, CAE Inc. Westmount, Quebec Patrick Decostre 2 President and CEO, Boralex Inc. Montreal, Quebec Elise Eberwein 1*, 3 Corporate Director Scottsdale, Arizona Ian L. Edwards 2 President and CEO, AtkinsRéalis Group Inc. Montreal, Quebec Marianne Harrison 2*, 4 Corporate Director Dover, New Hampshire Peter Lee 1 Co-Founder and Partner, Browning West, LP Corte Madera, California Katherine A. Lehman 3 Partner, Palladium Equity Partners, LLC New York, New York Mary Lou Maher 1, 2 Corporate Director Toronto, Ontario Calin Rovinescu Executive Chairman, CAE Inc. Toronto, Ontario The Honourable Patrick M. Shanahan 1 Corporate Director Seattle, Washington Louis Têtu 2, 4 Executive Chairman, Coveo Solutions Inc. Quebec City, Quebec EXECUTIVE OFFICERS Matthew Bromberg President and Chief Executive Officer Juan Araujo Senior Vice President, Operations Andrew Arnovitz Chief Strategy Officer Carter Copeland President - Flightscape Hélène V. Gagnon Chief People and Sustainability Officer Samantha Golinski Senior Vice President, Communications Pascal Grenier President, Defense & Security Mark Hounsell Chief Legal Officer Emmanuel Levitte Chief Technology Officer Ryan McLeod Chief Financial Officer Alexandre Prevost President, Civil Aviation 1 Member of the Human Resources Committee 2 Member of the Audit Committee 3 Member of the Governance Committee 4 Member of the Technology Committee (*) indicates Chair of the Committe CAE Financial Report 2026 | 114

Shareholder and Investor Information CAE SHARES CAE’s shares are traded on the Toronto Stock Exchange (TSX) and on the New York Stock Exchange (NYSE) under the symbol “CAE”. TRANSFER AGENT AND REGISTRAR Computershare Trust Company of Canada 320 Bay Street, 14th Floor Toronto, Ontario M5H 4A6 Tel. 1-800-564-6253 (toll free in Canada and the U.S.) www.computershare.com DUPLICATE MAILINGS To eliminate duplicate mailings by consolidating accounts, registered shareholders must contact Computershare Trust Company of Canada; non-registered shareholders must contact their investment brokers. INVESTOR RELATIONS Quarterly and annual reports as well as other corporate documents are available on our website at www.cae.com. These documents can also be obtained from our Investor Relations department. Investor Relations CAE Inc. 8585 Côte-de-Liesse Saint-Laurent, Quebec H4T 1G6 Tel. 1-514-734-5760 investor.relations@cae.com Version française Pour obtenir la version française du rapport financier, s’adresser à investisseurs@cae.com. AUDITOR PricewaterhouseCoopers LLP Chartered Professional Accountants Montreal, Quebec 2026 ANNUAL MEETING The Annual Shareholders Meeting will be held at 3 p.m. (Eastern Time), on Wednesday, August 12, 2026 in hybrid format, in person at Lumi Experience Montreal, 1250 René- Lévesque Blvd. W., Suite 3610, Montreal, Quebec, H3B 4X4 and via live webcast that will be available at cae.com/investors/. CORPORATE GOVERNANCE The following documents pertaining to CAE’s corporate governance practices may be accessed either from CAE’s website (www. cae.com) or by request from the Chief Legal Officer: ꟷ Board and Board Committee charters ꟷ Position descriptions for the Executive Chairman, the Lead Independent Director, the Committee Chairs and the Chief Executive Officer ꟷ CAE’s Code of Business Conduct ꟷ Corporate Governance Guidelines Most of the New York Stock Exchange’s (NYSE) corporate governance listing standards are not mandatory for CAE. Significant differences between CAE’s practices and the requirements applicable to U.S. companies listed on the NYSE are summarized on CAE’s website. CAE is otherwise in compliance with the NYSE requirements in all significant respects. NORMAL COURSE ISSUER BID On June 5, 2026, we announced the renewal of our normal course issuer bid (NCIB) to purchase up to 16,073,033 of our common shares, representing approximately 5% of the issued and outstanding common shares as at May 29, 2026. The NCIB began on June 10, 2026 and will end on June 9, 2027 or on such earlier date when we complete purchases or elect to terminate the NCIB. Purchases under the NCIB will be made through the facilities of the TSX in accordance with the TSX’s applicable policies or the facilities of the NYSE in compliance with applicable NYSE rules and policies and U.S. laws, or in such other manner as may be permitted under applicable stock exchange rules and applicable securities laws, including through alternative Canadian and US trading platforms and privately-negotiated, off- exchange block purchases. The price CAE will pay for any common shares is the market price at the time of acquisition, plus brokerage fees. In the case of off-exchange block purchases, purchases will be made at a discount to the prevailing market price in accordance with and subject to the terms of applicable exemptive relief. All common shares purchased pursuant to the NCIB will be cancelled. In connection with the NCIB, CAE has also entered into an automatic share purchase plan with TD Securities Inc. allowing it to purchase common shares under the NCIB when the company would ordinarily not be permitted to purchase shares due to regulatory restrictions and customary self-imposed black-out periods. Under the previous NCIB which began on June 10, 2025 and which expired on June 9, 2026, CAE received approval from the TSX to purchase up to 16,019,294 common shares. As at May 29, 2026, CAE had purchased a total of 565,259 common shares thereunder at a volume-weighted average price of $35.4418 per common share, for total consideration of $20.0 million. Copies of CAE’s NCIB notice may be obtained without charge by contacting the Chief Legal Officer. TRADEMARKS Trademarks and/or registered trademarks of CAE Inc. and/or its affiliates include but are not limited to CAE, CAE Simfinity, CAE Rise, CAE Prodigy, Flightscape, Powered by CAE, Dynamic Synthetic Environment (DSE), CAE 7000XR Series, CAE 3000 Series, CAE 600XR Series FTD, CAE Trax Academy, CAE Sprint Virtual Reality, and PRESAGIS. All other brands and product names referred to in this document and the logos reproduced herein remain the property of their respective owners. They may not be used, changed, copied or quoted without the written consent of the respective owner. All rights reserved. 115 | CAE Financial Report 2026

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CAE.COM Financial Report FISCAL YEAR ENDED MARCH 31, 2026

Source: View Original Filing on SEC EDGAR

FAQ

What is CAE (CAE) asking shareholders to vote on at the 2026 AGM?

Shareholders will vote to elect 13 directors, reappoint PwC as auditor, and approve an advisory resolution on executive compensation. They will also receive the consolidated financial statements for the year ended March 31, 2026 and consider any other proper business.

When and how can CAE (CAE) shareholders attend the 2026 annual meeting?

The meeting takes place August 12, 2026 at 3:00 p.m. (EDT) in Montréal and via live webcast. Registered and duly appointed proxyholders may participate, vote and ask questions either in person or online using a control number and the password “cae2026”.

How did CAE (CAE) executive incentive plans pay out for recent performance?

For FY2026, the corporate short‑term incentive factor was 84%, reflecting performance against strategic and financial goals. Performance Share Units vesting on FY2023–FY2025 results paid at 26%, aligning payouts with shareholder experience over that three‑year period.

What governance and board structure highlights does CAE (CAE) disclose?

CAE lists 13 director nominees, 11 of whom are independent, with an average age of 60 and average tenure of 2.46 years. The company maintains separate Chair and CEO roles, independent board committees, director term and age limits, and share ownership requirements for directors and executives.

How much did CAE (CAE) pay its external auditor PwC in FY2026?

CAE paid PwC total fees of $8.0 million in FY2026: $7.3 million for audit services, $0.4 million for audit‑related services, and $0.3 million for tax services. No fees were recorded under the “all other services” category over the last two fiscal years.

Filing Exhibits & Attachments

2 documents

Executive pay and board slate set out in CAE (NYSE: CAE) 2026 AGM circular

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FAQ

What is CAE (CAE) asking shareholders to vote on at the 2026 AGM?

When and how can CAE (CAE) shareholders attend the 2026 annual meeting?

How did CAE (CAE) executive incentive plans pay out for recent performance?

What governance and board structure highlights does CAE (CAE) disclose?

How much did CAE (CAE) pay its external auditor PwC in FY2026?

Filing Exhibits & Attachments

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