CAE : Annual Information Form for FY20

2020

ANNUAL INFORMATION FORM

(Fiscal Year Ended March 31, 2020)

CORPORATE OFFICE 8585 Chemin Côte-de-Liesse

Saint-Laurent, Québec

June 10, 2020

Canada H4T 1G6

TABLE OF CONTENTS

• 1. CORPORATE STRUCTURE OF CAE .............................................................................. 2

  • 1.1 Name, Address and Incorporation ............................................................. 2

  • 1.2 Inter-corporate Relationships .................................................................... 2

• 2. OVERVIEW OF CAE AND THE DEVELOPMENT OF ITS BUSINESS ............................. 2

  • 2.1 Overview .................................................................................................. 2

  • 2.2 Geographic and Segment Revenues and Locations ................................. 3

  • 2.3 Our Mission .............................................................................................. 7

  • 2.4 Our Vision ................................................................................................. 7

  • 2.5 Our Strategy and Operations .................................................................... 7

  • 2.6 Industry Overview and Trends ................................................................ 12

  • 2.7 Research and Development (R&D) ......................................................... 13

  • 2.8 Production and Services ......................................................................... 16

  • 2.9 Specialized Skills and Knowledge ........................................................... 17

  • 2.10 Competition ............................................................................................ 18

  • 2.11 Components ........................................................................................... 18

  • 2.12 Intellectual Property ................................................................................ 18

  • 2.13 Cycles .................................................................................................... 19

  • 2.14 Environmental Matters ............................................................................ 19

  • 2.15 Employees ............................................................................................. 19

  • 2.16 Foreign Exchange .................................................................................. 20

• 3. DESCRIPTION OF THE BUSINESS SEGMENTS .......................................................... 20

  • 3.1 Civil Aviation Training Solutions ............................................................. 20

  • 3.2 Civil Market Trends and Outlook ............................................................. 22

  • 3.3 Defence and Security ............................................................................. 24

  • 3.4 Defence Market Trends and Outlook ...................................................... 26

  • 3.5 Defence Contracts .................................................................................. 29

  • 3.6 Healthcare .............................................................................................. 30

  • 3.7 Healthcare Market Trends and Outlook .................................................. 32

• 4. BUSINESS RISK AND UNCERTAINTY .......................................................................... 34

  • 4.1 Risks relating to the COVID-19 Pandemic .............................................. 35

  • 4.2 Risks relating to the Industry .................................................................. 37

  • 4.3 Risks relating to the Company ................................................................ 41

  • 4.4 Risks relating to the Market .................................................................... 49

• 5. DIVIDENDS AND DISTRIBUTIONS ............................................................................... 52

  • 5.1 Dividends ............................................................................................... 52

  • 5.2 Repurchase and Cancellation of Common Shares ................................. 52

• 6. DESCRIPTION OF CAPITAL STRUCTURE ................................................................... 53

• 7. MARKET FOR SECURITIES ......................................................................................... 53

  7.1 Trading Price and Volume ...................................................................... 53

• 8. DIRECTORS AND OFFICERS ....................................................................................... 54

  • 8.1 Name and Occupation ............................................................................ 55

  • 8.2 Cease Trade Orders, Bankruptcies, Penalties or Sanctions .................... 61

• 9. TRANSFER AGENT AND REGISTRAR ......................................................................... 61

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10.

AUDIT COMMITTEE ...................................................................................................... 61

10.1 Charter ................................................................................................... 61

10.2 Membership ........................................................................................... 61

11. APPROVAL OF SERVICES ........................................................................................... 62

12. ADDITIONAL INFORMATION ........................................................................................ 63

GLOSSARY.............................................................................................................................. 64

SCHEDULE A-SUBSIDIARIES AND OTHER INVESTMENTS............................................... 67

SCHEDULE B-AUDIT COMMITTEE CHARTER..................................................................... 74

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INFORMATION INCORPORATED BY REFERENCE

CAE's Management's Discussion and Analysis and our Consolidated Financial Statements for the year ended March 31,2020, and the notes thereto (Consolidated Financial Statements) appear in the Annual Financial Report to Shareholders for the year ended March 31, 2020 (Annual Financial Report). The Consolidated Financial Statements were prepared in accordance with Part 1 of the CPA Canada Handbook, referred to as accounting and international financial reporting standards. The information contained in the Management's Discussion and Analysis(MD&A) and the Consolidated Financial Statements for the year ended March 31, 2020, and the notes thereto, is specifically incorporated by reference into this Annual Information Form (AIF). Any parts of the Annual Financial Report not specifically incorporated by reference do not form part of this AIF.

Unless otherwise noted, all dollar references in this Annual Information Form are expressed in Canadian dollars.

References to fiscal 2020 refer to the period from April 1, 2019 to March 31, 2020, references to fiscal 2019 refer to the period from April 1, 2018 to March 31, 2019, and references to fiscal 2018 refer to the period from April 1, 2017 to March 31, 2018.

CAUTION REGARDING FORWARD-LOOKING STATEMENTS

This AIF 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, capital spending, expansions and new initiatives, financial obligations and expected sales. Forward-looking statements normally contain words likebelieve,expect,anticipate,plan, intend,continue,estimate,may,will,should, strategy, futureand similar

expressions. By their nature, forwardlooking 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.

Important risks that could cause such differences include, but are not limited to, risks relating to the COVID-19 pandemic such as health and safety, reduction and suspension of operations, global economic conditions, diversions of management attention, heightened IT risks, liquidity risks and credit risks, risks relating to the industry such as competition, business development and awarding of new contracts, level and timing of defence spending, government-funded defence and security programs, constraints within the civil aviation industry, regulatory matters, risks relating to CAE such as evolving standards and technology innovation, our ability to penetrate new markets, R&D activities, fixed-price and longterm supply contracts, strategic partnerships and long-term contracts, procurement and original equipment manufacturer (OEM) leverage, product integration and program management, protection of our intellectual property and brand, third-party intellectual property, loss of key personnel, labour relations, natural or other disasters, environmental laws and regulations, climate change, liability risks that may not be covered by indemnity or insurance, warranty or other product-related claims, integration of acquired businesses through mergers, acquisitions, joint ventures, strategic alliances or divestitures, reputational risk, U.S. foreign ownership, control or influence mitigation measures, length of sales cycle, seasonality, continued returns to shareholders, information technology and cybersecurity, our reliance on technology and thirdparty providers, data privacy, and risks relating to the market such as foreign exchange, availability of capital, credit risk, pension plan funding, doing business in foreign countries, geopolitical uncertainty, anti-corruption laws and taxationmatters. Additionally, differences could arise because of events announced or completed after the date of this AIF. You will find more information in theBusiness risk and uncertaintysection of the MD&A. We caution readers that the risks described above 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 AIF are expressly qualified by this cautionary statement.

1.

CORPORATE STRUCTURE OF CAE

1.1

Name, Address and Incorporation

On March 17, 1947 CAE Inc. (CompanyorCAE) was incorporated as Canadian Aviation Electronics Ltd. under the laws of Canada by letters patent. In 1965, the name of the Company was changed to CAE Industries Ltd. and in 1993 the Company changed its name to CAE Inc.

CAE was continued in 1977 under the Canada Business Corporations Act (CBCA). In 1979, CAE's articles were amended tochange its authorized share capital to an unlimited number of common shares, and again in 1981 to authorize an unlimited number of preferred shares, issuable in series, with such rights, privileges, restrictions and conditions as the Directors of CAE may determine.

On June 9, 1995, CAE's articles were amended to authorize the Directors to appoint additional Directors in accordance with the provisions of the CBCA. On April 1, 2001, the Company amalgamated with CAE Electronics Ltd., our wholly-owned subsidiary.

CAE's registered office is located at 8585 Côte-de-Liesse, Saint-Laurent, Québec, Canada H4T 1G6, telephone: [phone], fax: [phone].

1.2

Inter-corporate Relationships

The direct and indirect subsidiaries and other investments or ownership interests of CAE are set out in Schedule A hereto.

2.

OVERVIEW OF CAE AND THE DEVELOPMENT OF ITS BUSINESS

2.1

Overview

CAE is a global leader in training for the civil aviation, defence and security, and healthcare markets. Backed by a record of more than 70 years of industry firsts, we continue to help define global training standards with our innovative virtual-to-live training solutions to make flying safer, maintain defence force readiness and make healthcare safer. We have the broadest global presence in the industry, with over 10,500 employees, 160 sites and training locations in over 35 countries. Each year, we train more than 220,000 civil and defence crewmembers, including more than 135,000 pilots, and thousands of healthcare professionals worldwide.