of shareholders and 2018 management proxy circular · letter to the shareholders from the chair of...

Notice of Annual Meeting of Shareholders and 2018 Management Proxy Circular

Your worldwide training partner of choice

Table of Contents

Letter to the Shareholders from the Chair of the Board and the President and CEO i

Proxy Circular Summary ii

About CAE iii

Definitions 1

Noticeof2018AnnualShareholders’Meeting 3Section 1 About Voting Your Shares 5Section 2 BusinessoftheMeeting 8Section 3 AbouttheNominatedDirectors 13Section 4 CorporateGovernance 21Section 5 Board Committee Reports 25Section 6 DirectorCompensation 34Section 7 ExecutiveCompensation 37

CompensationDiscussionandAnalysis 37FY2018CAEPerformanceHighlights 37CompensationObjectives 39SettingExecutiveCompensation 39ComparatorGroup 41CompensationPolicyandObjectives 43ExecutiveShareOwnershipRequirements 54RiskMitigation 55DeterminationoftheNEOs’CompensationinFY2018 57ShareholderReturnPerformanceGraph 61Pay for Performance Linkage 62PayforPerformanceRelativetoComparatorGroup 64

CompensationofOurNamedExecutiveOfficers 66Summary Compensation Table 66IncentivePlanAwards 67PensionArrangements 69TerminationandChangeofControlBenefits 70

Section 8 OtherImportantInformation 74Section 9 AppendixA–BoardofDirectors’Charter 75Section 10 Appendix B – Summary of the Principal TermsoftheRightsPlan 78Section 11 Appendix C – Resolution to Approve the RenewaloftheRightsPlan 81

Letter to the Shareholders m t e a t e a

and the President and CEO

Dear fellow Shareholders,

It isourpleasure to inviteyou toattendCAE’s2018AnnualShareholderMeeting.As inprioryears,wewillmeettoconsider importantmatters affectingourCompany.WhetherornotyouplantoattendtheMeeting,weencourageyoutoreviewtheenclosedinformation,considertheresolutionsputforthbytheBoardandvoteyourShares.

AsaShareholder,youhavetherighttovoteyourSharesonallitemsthatcomebeforetheMeeting.Yourvoteis importanttousandweencourageyoutoexerciseyourrighteither inpersonattheMeetingorbyproxy.

ThisCircularalsogivesyoudetailsaboutalltheitemsforconsiderationandhowtovote.Italsocontainsinformation about the nominated Directors, the auditors, reports from the various committees of the BoardandCAE’scorporategovernancepractices.

AttheMeeting,wewill,asalways,reviewourfinancialposition,includingtheincreasedvaluewearedeliveringtoShareholders, andourbusinessoperations.Wewill also respond to your commentsandquestions.

Finally,wewanttothankyouforyourcontinuedconfidenceinandsupportofCAEandweremaincommittedtodeliveringworld-classperformanceandcreatinglong-termvalueforourShareholders.Welookforwardtoseeingyouatthisyear’sMeeting.

JamesF.Hankinson(signed) MarcParent(signed) Chair of the Board President and CEO

June15,2018

CAEINC.|2018|ManagementProxyCircular i

a mmaThissummaryhighlightssomeoftheimportantinformationyouwillfindinthisCircular.Thesehighlightsdo not contain all the information that you should consider, and you should read this entire Circular before voting your Shares.

Shareholder Voting Matters

Voting Mattera te

e mmen at nPage Reference for M e n mat n

Electionof10Directors FOR each nominee 8

Appointing PricewaterhouseCoopers LLP as Auditors FOR 9

Advisory Vote on Executive Compensation FOR 10

Approval of the Renewal of the Rights Plan FOR 11

20 8 e man e g g t

2 8

Record Revenue

8Record Earnings

e a e m Continuing operations

8

Share Price Appreciation e a g

Cash Conversion 2 et n me

g e et n on Capital

m e

Strong Financial Position – Net Debt-to-Total Capital Ratio

0

g e et n to Shareholders

1. BeforespecificitemsinFY2017andbeforeU.S.taxreformimpactandnetgainsonstrategictransactionsrelatingtoAsianjoint-ventures.2. BeforeU.S.taxreformandnetgainsonstrategictransactionsrelatingtoAsianjoint-ventures.3. Combiningcashandstockdividendsandsharerepurchases.Note: EPS from continuing operations before specific items, Backlog and Return on Capital Employed are all non-GAAP financial measures and are defined in CAE’sFY2018 ManagementDiscussion&Analysis.

Voting by Proxy is the Easiest WayPleaserefertotheenclosedformofproxyoryourvotinginstructionformortoSection1– “About Voting

a e m e n mat n n t e t ng met a a a e t e e t t te n t e nte net te e ne n e n at t e Meet ng n t nee t et n m or voting instructions.

Review this Proxy Circular and Vote in One of Four Ways

IN PERSON VIATHEINTERNET BYTELEPHONE BYMAIL

$1.03

FY2017

$1.11

FY2018

$20.32

FY2017

$23.98

FY2018

$7.5B

FY2017

$7.8B

FY2018

11.2%

FY2017

12.3% 2

FY2018

26.5%

FY2017

21.5%

FY2018

$126.3M

FY2017

$138.7M

FY2018

ii CAEINC.|2018|ManagementProxyCircular

About CAECAEisagloballeaderintrainingforthecivilaviation,defenceandsecurity,andhealthcaremarkets.Backedbyarecordofmorethan70yearsofindustryfirsts,wecontinuetohelpdefineglobaltrainingstandardswithourinnovativevirtual-to-livetrainingsolutionstomakeflyingsafer,maintaindefenceforcereadinessandenhancepatientsafety.Wehavethebroadestglobalpresenceintheindustry,withover8,500employees,160sitesandtraininglocationsinover35countries.Eachyear,wetrainmorethan120,000civilanddefencecrewmembersandthousandsofhealthcareprofessionalsworldwide.

Ourtrainingsolutionscompriseacombinationofproductsandservices,withnearly60%ofourbusinessbeingderivedfromtheprovisionofservices.

Founded in 1947 and headquartered in Montreal, Canada, CAE has built an excellent reputation andlong-standing customer relationships based on experience, strong technical capabilities, a highly trained workforceandglobalreach.

Our Strategy

End-to-End Training Partner of Choice

Our vision is to be the recognized global training partner of choice to enhance customer safety, efficiencyandreadiness.

Achieving this goal depends on the successful implementation of four strategic imperatives, which will help protect our leadership position andgrowourmarketshare.

Our global leadership stems from our:

• Comprehensive training solutions• Highlyqualifiedandpassionateemployees• Extensive experience and credibility

delivering academic, simulator and live flyingtraining

• Industry-leading global training network• Commitment to excellence and innovation spanningmorethan70years

• Close collaboration with regulators and policymakers to help shape the future of training

• Abilitytoreducecustomers’environmentalimpact through simulation-based training

Four Areas of Strategic Priority

Four areas of strategic priority to protect CAE’sleadership position, achieve superior growth, and ultimately realize our vision to be the recognized global training partner of choice:

CAEINC.|2018|ManagementProxyCircular iii

Six pillars of strengthWe believe there are six fundamental strengths that underpin our strategy and position us well forsustainable long-term growth:

g eg ee e ng ne

Weoperateinhighlyregulatedindustries with mandatory and recurring training requirements for maintaining professionalcertifications.Ourlong-term agreements with many airlines and business aircraft operators and defence forces are also an important source of our recurring business.

ea m n a ge Ma et

Significant untapped marketopportunities exist in our three growing core markets. Whilewe’re leading the simulationproducts market, we’re alsopursuing training markets that are several multiples larger thantheproductsmarket.

Potential for Superior Returns

At CAE, we believe we have the potential to grow faster than the underlying markets and that our large backlog and recurring revenue profile give us greatervisibility.

Strong m et t e M at

Our global training network, unique end-to-end cadet-to captain training solutions, training systems integrator (TSI) expertise, unrivalledcustomer intimacy and strong, recognizable brand further strengthen our competitive moat.

Underlying Secular Tailwinds

The civil aviation and defence sectors are enjoying strong tailwinds.Airpassengertrafficand defence budgets are expected to increase globally overthenext10years.

Culture of Innovation

Innovation is part of our DNA and our people make it happen. Incollaboration with our customers, we design and deliver the most sophisticatedtrainingsolutions.

e t e m en at n g g t• Executive bonuses based on 167% of CAE targets achieved, as well as personal objectives, reflect CAE’s

profitability performance in FY2018.• 200% payout of the performance share units that vested in FY2018 based on the performance of FY2017

EPS compared to the set target.

e t e m en at n e t a t e

• Minimumthresholdlevelsofcorporateperformancetobemettoallowforpaymentsunder the annual and long-term incentives

• CapsonannualbonusesandPSUpayouts

• Balanced mix of short, medium and long-term compensation

• 50%ofFY2018LTIPawardsisperformancebased,directlytiedtotheachievement of the CAE strategic plan

• Pensionableearningsbasedonactualyearsserved(plusanyseveranceperiodincertaincircumstances)

• Change of control severance limited to two times salary and bonuses

• Clawback policy

• Minimumshareownershipandoptionprofitretentionguidelines

• Anti-hedging policy

iv CAEINC.|2018|ManagementProxyCircular

About CAE

e nan e g g tThe following table shows some of the ways CAE continues to adhere to the highest standards in corporate governanceithasmaintainedthroughoutitshistory.

• Number of Director nominees 10

• Number of non-employee Independent Director nominees 9

• Board Committee members (including the Governance Committee, which is responsibleforrecommendingnewDirectorstojointheBoard)areallIndependent

• Average age of Director nominees 60

• Annual election of Directors

• Directorselectedindividually(ratherthanslatevoting)

• MajorityvotingguidelinesforDirectors

• Other board commitments and interlocks policy

• Separate Chair and CEO

• Director tenure and age term limits

• Share ownership requirements for Directors and executives

• Board orientation/education program

• NumberofBoardmeetingsheldinFY2018 7

• NumberoffinancialexpertsontheAuditCommittee 2

• Code of Business Conduct

• Annual advisory vote on executive compensation

• Formal Board and Committee evaluation processes

• No dual-class shares

CAEINC.|2018|ManagementProxyCircular v

About CAE

e t m nee

ame AgeDirector

Since PositionIndepen-

dentmm ttee

Mem e 1

a anmm ttee

Attendance20 8

OtherPublic

a ee m eten e

Margaret S.eg n

56 2015 Corporate Director YES Audit 100% N/A • Knowledge of industry• Strategic leadership

and management• HumanResources

n M ae M. Fortier

56 2010 Vice-Chair, RBC CapitalMarkets

YES HRC(Chair) 83% N/A • Knowledge of industry• Finance/Accounting• Governance/Board

Alan N. MacGibbon

62 2015 Corporate Director YES Audit(Chair)HRC

100% 1 • Finance/Accounting• HumanResources• Strategic leadership and

management

n n Manley

68 2008 President and CEO, Business Council of Canada

YES GC HRC

87% 2 • Strategic leadership and management

• HumanResources• Governance/Board

FrançoisOlivier

53 2017 President and CEO, TranscontinentalInc.

YES Audit 100% 1 • Strategic leadership and management

• Finance/Accounting• HumanResources

MarcParent

57 2008 President and CEO, CAE NO N/A 100% 1 • Knowledge of industry• Strategic leadership and

management• R&D

Michael E. Roach

66 2017 Corporate Director YES Audit 100% 1 • Finance/Accounting• Strategic leadership and

management• HumanResources

Gen. t n

Schwartz, et

66 N/A Corporate Director YES N/A N/A 2 • Knowledge of industry• Strategic leadership and

management• Governance/Board

n e Stevens

61 2013 Corporate Director YES GC(Chair)HRC


• Knowledge of industry• R&D

at a ne Stevenson

55 2007 Corporate Director YES AuditGC


• Finance/Accounting• Governance/Board

1 Refertopage1fordefinitions.

vi CAEINC.|2018|ManagementProxyCircular

About CAE

e n t n

e ta n e ne e m 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.In this Circular, a reference to “fiscal year” is a reference to thefiscal or financial year from April 1 to March 31 of the year stated. WealsousethefollowingdefinedtermsthroughoutthisCircular.

$ Canadiandollars.

t mm ttee TheAuditCommitteeofourBoardofDirectors.

a OurBoardofDirectors.

Civil CivilAviationTrainingSolutions.

Circular ThisManagementProxyCircular.

mm n a e or Shares

ReferstoCommonSharesofCAE.

CSA CanadianSecuritiesAdministrators.

Defense DefenseandSecurity.

DSU ReferstoDeferredShareUnitsofCAE.ThevalueofaDSUisequivalenttothevalueofaShare.

ESOP EmployeeStockOptionPlan.

ESPP EmployeeStockPurchasePlan.

EPS EarningsperShare.

FY ReferstoafinancialyearofCAE,fromApril1toMarch31ofthefollowingcalendar year. For example, FY2018 refers to the 12 months endedMarch31,2018.

Governance mm ttee

TheGovernanceCommitteeofourBoard.

ea t a e Healthcarebusiness.

man e e mm ttee

TheHumanResourcesCommitteeofourBoard.

Independent Directors Refers to the standards of independence established by CAE’s CorporateGovernance 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 GovernancePracticesandNationalPolicy58-201.

LTU ReferstoaLong-TermIncentiveDeferredShareUnit.ThevalueofaLTUisequivalenttothevalueofaShare.

MD&A Refers theManagement Discussion and Analysis section of CAE’s annualreportfortheyearendedMarch31,2018.

CAEINC.|2018|ManagementProxyCircular 1

Definitions

Meeting TheAnnualMeetingofCAEShareholderstobeheldonAugust14,2018.

ame e t e e

ThePresident andCEO,Chief FinancialOfficer and the threemosthighlycompensatedpolicy-makingexecutivesasatMarch31,2018.

NYSE TheNewYorkStockExchange.

PSU ReferstoPerformanceShareUnitsofCAE.ThevalueofaPSUisequivalenttothevalueofaShare.

PwC PricewaterhouseCoopers LLP, Chartered Professional Accountants in Montréal,Québec.

Rights Plan The Shareholder Protection Rights Plan Agreement between CAE and Computershare Trust Company of Canada, as rights agent, dated March7,1990,asamendedandrestatedfromtimetotime.

Record Date June15,2018.

ROCE Returnoncapitalemployed.

t me ReferstoRestrictedShareUnitsofCAE.ThevalueofaRSUisequivalenttothevalueofaShare.

RSUP RestrictedShareUnitPlan.

SEC UnitedStatesSecuritiesandExchangeCommission.

SOI Segmentoperatingincome.

SOX TheSarbanes-OxleyActof2002.

STIP Short-termincentiveprogram.

TSX TheTorontoStockExchange.

Currency, Exchange Rates and Share Prices

All amounts referred to in this Circular are presented in Canadian dollars, unlessotherwisestated.InanumberofinstancesinthisCircular,includingwith respect to calculation of the in-the-money value of stock options denominated in Canadian dollars, information based on our Share price has beencalculatedonthebasisoftheCanadiandollar.

n mat n en The information in this Circular is current as of June 7, 2018 unlessotherwisestated.

2 CAEINC.|2018|ManagementProxyCircular

t e 20 8 nn a a e e Meet ng

WhenTuesday,August14,2018at11:00a.m.(EasternTime)

WhereCAEHeadOffice(Entrance4–Auditorium),8585Côte-de-Liesse,Saint-Laurent(Québec),Canada

What the Meeting is About1 ReceiveCAEConsolidatedFinancialStatementsandtheindependentauditors’reportforthefiscalyear

endedMarch31,2018;

2. ElectDirectorswhowillserveuntiltheendofthenextannualshareholders’meeting;

3. Reappoint PricewaterhouseCoopers LLP as our independent auditors who will serve until the end of thenextannualshareholders’meetingandtoauthorizetheCompany’sBoardtofixtheindependentauditors’remuneration;

4. Vote,inanadvisory,non-bindingmanner,onCAE’sapproachtoexecutivecompensationdescribedintheaccompanyingCircular;

5. Approve the resolution to renew the Rights Plan as set out in Appendix C – Resolution to Approve the Renewal of the Rights Plan, the principal terms of which are described in Appendix B – Summary of the Principal Terms of the Rights Plan –tothisCircular;and

6. TransactanyotherbusinessthatmayproperlycomebeforetheMeeting.

You have the Right to VoteAsaholderof recordofCommonSharesat thecloseofbusinesson June15,2018,youareentitled toreceivenoticeofandvoteattheMeeting.

YouareaskedtoconsiderandtovoteyourSharesonitemstwotofivelistedaboveandanyotheritemsthatmayproperlycomebeforetheMeetingoranyadjournment.

Ifyouareunable toattendtheMeetingandwant toensurethatyourSharesarevoted,pleasesubmityour votes by proxy as described under “ t te a e ”intheaccompanyingManagementProxyCircular(the“Circular”).Tobevalid,ourtransferagent,ComputershareTrustCompanyofCanada,mustreceiveyourproxyby11:00a.m.(EasternTime)onAugust13,2018. IftheMeetingisadjournedorpostponed,Computersharemustreceiveyourproxynolaterthan24hours(excludingSaturdays,Sundaysandholidays)priortoanysuchadjournmentorpostponement.

Accompanying this Notice of AnnualMeeting is the Circular, which containsmore information on thematterstobeaddressedattheMeeting.

Notice-And-AccessAspartofanefforttoreduceenvironmentalimpactsofexcessiveprinting,andtosavepostagecosts,CAEisoptingtousethe“Notice-and-Access”provisionsofCanadiansecuritiesrules.

The “Notice-and-Access” provisions allow Canadian companies to post electronic versions of shareholder meetingmaterialsinlieuofmailingphysicalcopiesofsuchdocumentstoshareholders.

Shareholders who have already signed up for electronic delivery of shareholder materials will continue to receivethembyemail.

Uponspecificrequest,physicalcopiesofsuchmaterialscanbemadeavailabletoshareholders.


t e Meet ng Mate aOnComputershareInvestorServicesInc.’s(“ m te a e”)website: www.envisionreports.com/CAE2018e

OnSEDAR:www.sedar.com

OnCAE’swebsite:www.cae.com/investors/financial-reports/

Shareholders are reminded to read the Circular and other Meeting materials carefully before votingtheirShares.

t e e t a a e t e Meet ng Mate ae e t e Meet ng

IfyournameappearsonaSharecertificate,youareconsideredasa“registeredshareholder”.YoumayrequestpapercopiesoftheMeetingmaterialsatnocosttoyoubycallingComputersharetoll-free,withinNorthAmericaat1-866-962-0498ordirect,fromoutsideofNorthAmericaat514-982-8716andenteringyourcontrolnumberasindicatedonyourformofproxy.

If your Common Shares are listed in an account statement provided to you by an intermediary, you are consideredas a “non-registered shareholder”. Youmay requestpaper copiesof theMeetingmaterialsfromBroadridgeatnocosttoyouuptooneyearfromthedatetheCircularwasfiledonSEDARthroughtheInternetbygoingtowww.proxyvote.comorbytelephoneat1-877-907-7643andenteringthe16-digitcontrolnumberprovidedonthevotinginstructionformandfollowingtheinstructionsprovided.

Pleasenotethatyouwillnotreceiveanotherformofproxyorvotinginstructionform;pleaseretainyourcurrentonetovoteyourShares.

Inanycase,requestsshouldbereceivedatleastfive(5)businessdayspriortotheproxydepositdateandtimesetoutintheaccompanyingproxyorvotinginstructionforminordertoreceivetheMeetingmaterialsinadvanceofsuchdateandtheMeetingdate.

After the MeetingBytelephoneat1-866-962-0492oronlineatinvestor.relations@cae.com.AcopyoftheMeetingmaterialswillbesenttoyouwithinten(10)calendardaysofreceivingyourrequest.

By order of the Board of Directors

June15,2018 MARKHOUNSELL(signed) Montréal,Québec GeneralCounsel,ChiefComplianceOfficerand Corporate Secretary


Notice of 2018 Annual Shareholders’ Meeting

Record DateJune15,2018istherecorddatefortheMeeting.

Shareholders Entitled to VoteOnly holders of our Common Shares at the close of business on the Record Date are entitled to receive noticeofandtoattend(inpersonorbyproxy)andvoteattheMeetingoranyadjournment.ThelistofShareholders on the Record Date is available for inspection during usual business hours at Computershare TrustCompanyofCanada,100UniversityAvenue,8thFloor,Toronto,OntarioM5J2Y1,andattheMeeting.

Shares and VotesAsofJune14,2018,267,744,105CommonSharesareissuedandoutstanding.EachCommonShareisentitledtoonevote.

Principal ShareholdersTotheknowledgeoftheDirectorsandofficersofCAE(fromrecordsandpubliclyfiledreports),thereisnopersonwhobeneficiallyownsorexercisescontrolordirectionovermorethan10%oftheCommonShares.

AllDirectorsandofficersasagroup(17persons)ownedbeneficiallyorexercisedcontrolordirectionover370,086CommonSharesrepresenting0.14%oftheclassasatJune14,2018.

te m tantYourvoteisimportant.PleasereadtheinformationbelowtoensureyourSharesareproperlyvoted.

t te a eYou may vote your Shares in one of the following ways:

1 Inperson,attheMeetingifyouare:

a) aregistered Shareholder, you do not need to complete and return the enclosed form of proxy.Whenyouarriveat theMeeting,aComputersharerepresentativewill registeryourattendancebeforeyouentertheMeeting.

b)anon-registered Shareholder(includingaparticipantintheemployeeplan)ANDyou wishtovote inperson,youMUSTcompleteandreturnavoting instruction formno later than11:00a.m.(EasternTime)onAugust13,2018appointingyourself.

2. By proxy:

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

by telephone: call the telephone number on your proxy form

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

byappointinganotherpersontoattendandvoteattheMeetingonyourbehalf

e e t t e en e m n t t n

Section 1About Voting Your Shares


ntment eIfyouchoosetovotebyproxy,youaregivingthepersonorpeoplenamedonyourproxyform(referredtoas a “Proxyholder”)theauthoritytovoteyourSharesonyourbehalfattheMeetingoranyadjournmentorpostponementthereof.

e a e e ng te managementThrough this Circular, Management t ng n nne t n t t e matte t e addressed at the Meeting (oranyadjournment(s)orpostponements(s)thereof)tobeheldatthetimeand place and for the purposes set forth in the accompanying Notice of the Meeting.

ThesolicitationwillbeprimarilymadebymailbutproxiesmayalsobesolicitedpersonallybytheofficersofCAEatnominalcost.ThecostofManagement’ssolicitationofproxieswillbebornebyCAE.

Unless you specify a different proxyholder, the e an e t e name a e e nte n t e en e m ame an n n Ma a ent an n e te en

will vote your Shares.

e t e t an managementShareholders desiring t a nt me e n t e t an ame an n n Ma a ent an

n e te en as their representative at theMeetingmay do so eitherby inserting such other e n name n t e an a e e m et ng an t e e m and, in

eithercase,delivering thecompletedproxy toCAE’sCorporateSecretaryat8585Côte-de-Liesse,Saint-Laurent,Québec,H4T1G6ortoComputershareTrustCompanyofCanada,100UniversityAvenue,8th Floor, Toronto,Ontario,M5J2Y1n ate t an 11 00 a m a te n me n g t 1 2018(or,inthecaseofanadjournmentorpostponement,nolaterthan11:00a.m.(EasternTime)onthelastbusinessdayprecedingthedayofsuchadjournmentorpostponementthereof).

Voting of ProxiesYou may indicate on the proxy form how you want your proxyholder to vote your Shares, or you can let yourproxyholderdecideforyou.IfyoudonotspecifyontheproxyformhowyouwantyourSharestobevoted,yourproxyholderwillhavethediscretiontovoteyourSharesastheyseefit.

The enclosed proxy form gives the proxyholder discretion with respect to any amendments or changes tomattersdescribedintheNoticeofAnnualMeetingandwithrespecttoanyothermatterswhichmayproperlycomebeforetheMeeting(includinganyadjournmentorpostponementthereof).

At the time of printing this Circular, the management of CAE knows of no such amendments, variations or othermatterstocomebeforetheMeeting.

Unless you specify a different proxyholder or specify how you want your Shares to be voted, ame an n n Ma a ent an n e te en will vote your Shares:

a) FORelectingthenominatedDirectorswhoarelistedinthisCircular;

b) FORappointingPwCasauditorsandfortheauthorizationoftheDirectorstofixtheirremuneration;

c) FORapprovingtheadvisoryresolutiononexecutivecompensation;and

d) FOR approving the resolution to approve the renewal of the Rights Plan set out in Appendix C –Resolution to Approve the Renewal of the Rights Plan –tothisCircular.


Section 1 (continued)About Voting Your Shares

Revocation of ProxiesYou have the right to revoke a proxy by ANY of the following methods:

a) Vote again by phone or Internet no later than 11:00 a.m. (Eastern Time) on August 13, 2018 (ornolaterthan11:00a.m.onthelastbusinessdaypriortothedateofanyadjournedorpostponedMeeting);

b) Deliveranothercompletedandsignedproxyform,datedlaterthanthefirstproxyform,bymailorfaxsuchthat it isreceivedbyCAE’sCorporateSecretaryat8585Côte-de-Liesse,Saint-Laurent,Québec,H4T1G6orbyComputershareTrustCompanyofCanada,100UniversityAvenue,8th Floor, Toronto, Ontario,M5J2Y1nolaterthan11:00a.m.(EasternTime)onAugust13,2018(ornolaterthan11:00a.m.onthelastbusinessdaypriortothedateofanyadjournedorpostponedMeeting);or

c) DeliverasignedwrittennoticerevokingtheproxytothescrutineersoftheMeeting,totheattentionoftheMeetingChair,atorpriortothecommencementoftheMeeting(includinginthecaseofanyadjournmentorpostponementoftheMeeting).

Electronic Access to Proxy-Related Materials and Annual and Quarterly ReportsWe offer our Shareholders the opportunity to viewmanagement proxy circulars, annual reports andquarterlyreports throughthe Internet insteadofreceivingpapercopies in themail.YouwillfindmoreinformationonthismatterintheNotice-and-Accesssectionabove.


Section 1 (continued)About Voting Your Shares

e e e nan a tatementCAE’s financial statements including the auditors’ report, for the year endedonMarch31, 2018will bepresentedtoShareholdersattheMeeting.TheycanalsobeaccessedonCAE’swebsiteatwww.cae.com,onSEDARatwww.sedar.com,oronEDGARatwww.sec.gov. a e e te e e n nne t n with t e nan a tatement .

2 Elect 10 Directors

10

m nee

0

Independent

2

nte

8

te FOR in 2017

e age a Meeting Attendance n 20 8

1 Theonlynon-independentDirectorisCAE’sPresidentandCEO.

Youwillbeelectingaboardofdirectors (“ a ”)of 10members.EachDirector iselectedannually foraterm,whichexpiresnolaterthanthenextannualmeetingofShareholders.

Allofthefollowingnominees,exceptforGeneralNortonA.Schwartz,arecurrentlymembersoftheBoardofDirectors,andhavebeenrecommendedbytheGCandtheBoardforelectionattheMeeting:

• MargaretS.(Peg)Billson• TheHonourableMichaelM.Fortier,P.C.• AlanN.MacGibbon• TheHonourableJohnP.Manley,P.C.,O.C• François Olivier

• MarcParent• MichaelE.Roach• GeneralNortonA.Schwartz,USA(Ret.)• AndrewJ.Stevens• KatharineB.Stevenson

JamesF.HankinsonandGen.PeterJ.Schoomaker,USA(Ret.)arenotstandingforre-electionattheMeetingastheyareretiringonAugust14,2018.

Eachnomineewaselectedatour2017annualShareholders’meetingheldonAugust10,2017,byamajorityofthevotescast,exceptforMr.Roach,whowaselectedtotheBoardonNovember10,2017andGeneralNortonA.Schwartz,whowaspreviouslyadirectorofCAEUSAInc.andisafirsttimenominee.

Please refer to Section 3– “ t t e m nate e t ” for further information regarding the experience, the selection process and other relevant information you should consider in casting your vote foreachnominee.

Self-imposed term and age limits ensure CAE benefits from a combination of experience and fresh perspectivesThe Board of Directors has passed a resolution establishing term limits comprising the following:• uptotwosix-yearperiodsofservice,toaggregatetwelveyearsmaximum;and• nonomineemaybeproposedpasttheirattaining72yearsofage.

The Board of Directors believes these limits, subject to reasoned exceptions, are appropriate to ensure fresh skillsetsandperspectivesareperiodicallybroughttotheoversightofCAE’sbusiness.Mr.JamesF.Hankinsonwas exempted by resolution of the Board of Directors from the twelve-year service limit as part of the plannedsuccessionforCAE’sformerChairoftheBoardofDirectorsinFY2014.ThetenureoftheChairinthatrolemay,withtheBoard’sconcurrence,extendforfiveyearsfromthedateofcommencement.

Section 2ne t e Meet ng


Majority voting guidelinesEachDirectoroftheCompanymustbeelectedbyamajority(50%+1vote)ofthevotescastwithrespecttohisorherelection,otherthanatcontestedmeetings(“Ma t t ng e ement”).

InaccordancewiththeBoard’smajorityvotingpolicy,anynomineeforDirectorinanuncontestedelectionwho receives a greater number of “withhold” votes from his or her election than votes “for” his or her election(a“ma t t te”)shalltenderhisorherresignationtotheChairoftheGovernanceCommitteeimmediatelyfollowingcertificationoftheShareholdervote.

The Governance Committee will promptly consider the tendered resignation and recommend to the Boardwhethertoacceptorrejectit.Intheabsenceofexceptionalcircumstances,theBoardexpectstheGovernanceCommitteewillrecommendthattheBoardofDirectorsacceptsuchresignation.

The Boardwill act on the Governance Committee’s recommendation not later than 90 days followingthedateoftheShareholders’meetingatwhichtheelectionoccurred.Indecidingwhethertoacceptthetendered resignation, the Board will consider the factors considered by the Governance Committee and any additionalinformationandfactorstheBoardbelievestoberelevant.TheBoardshallaccepttheresignationabsentexceptionalcircumstances.

The resignation of the Director whose election did notmeet theMajority Voting Requirement will beeffectivewhenacceptedbytheBoard.ADirectorwhotendersaresignationpursuanttothispolicywillnot participate in the Governance Committee recommendation or the Board consideration whether to accept or reject the resignation, and will not attend any part of a meeting of the Board or the Governance Committeeatwhichhisorherresignationisdiscussedorarelatedresolutionisvotedupon.

PromptlyfollowingtheBoard’sdecision,theCompanywillissueanewsreleasedisclosingthatdecisionandprovidingafullexplanationofthedecisionreached.AcopyofthenewsreleasewiththeBoard’sdecisionwillbeprovidedtotheTorontoStockExchange.

IftheBoarddecidestoaccepttheDirector’sresignation,theGovernanceCommitteewillrecommendtotheBoardwhethertofilltheresultingvacancyortoreducethesizeoftheBoard.Ifamajorityofthemembersof the Governance Committee received a majority withhold vote at the same election, then the independent Directors who did not receive a majority withhold vote will appoint a Board committee amongst themselves solely for the purpose of considering the tendered resignations and will recommend to the Board whether toacceptorrejectthem.

Detailed voting results will be disclosed after the MeetingPromptly,after theMeeting,wewillpubliclydisclose thenumberandpercentageofvotescast forandwithheld in respect of each nominee, as well as those cast for and against each other matter voted on by ShareholdersattheMeeting.

The Board of Directors recommends that Shareholders vote FOR the election of the 10 nominatedmembersoftheBoard.

3 Appoint the Auditors

The Board, on recommendation by the Audit Committee, proposes that PwC, Chartered Accountants, Montréal,Québecbere-appointedasauditorsofCAEtoholdofficeuntilthecloseofthenextannualmeetingofShareholdersandthattheDirectorsofCAEbeauthorizedtofixtheirremuneration.

PwChasservedasauditorsofCAEsince1991.


Section 2 (continued)ne t e Meet ng

PwC provides three types of services to CAE and its subsidiaries1 Audit Services:feesbilledforprofessionalservicesfortheauditofCAE’sannualconsolidatedfinancial

statements and services that are normally provided by PwC in connection with statutory and regulatory filings,includingtheauditoftheinternalcontrolsandfinancialreportingasrequiredbySOXandtheequivalentrulesadoptedbytheCSA.

2. Audit-related Services: fees relating to work performed in connection with CAE’s acquisitions,translationandothermiscellaneousaccounting-relatedservices.

3. Tax Services:feesrelatingtotaxcompliance,taxplanningandtaxadvice.

Auditors independenceTheAuditCommitteehasdiscussedwithPwCitsindependencefromManagementandCAE,hasconsideredandconcludedthattheprovisionofnon-auditservicesiscompatiblewithmaintainingsuchindependence.

Furthermore, as per its policy, the Audit Committee reviews and pre-approves all non-audit services providedbytheexternalauditorsaboveaspecifiedlevel.

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

FEE TYPE20 8

m n2017

m n

1.Auditservices 4.6 4.1

2.Audit-relatedservices 0.2 0.2

3.Taxservices 0.6 0.9

Total 5.4 5.2

InordertofurthersupportPwC’sindependence,theAuditCommitteehassetapolicyconcerningCAE’shiringofcurrentandformerpartnersandemployeesofPwCwhowereengagedonCAE’saccountintherecentyears.

The Board of Directors recommends that Shareholders vote FORtheappointmentofPWCasCAE’sauditors.

te n e t e m en at nAs detailed in Section 7– ‘‘ e t e m en at n”, CAE’s executive compensation philosophy andprograms are based on the fundamental principle of pay-for-performance to align the interests of our executiveswiththoseofourShareholders.ThiscompensationapproachallowsCAEtoattractandretainhigh-performing executives who are strongly incentivised to create value for CAE’s Shareholders on asustainablebasis.

WeencourageyoutocarefullyreadthissectionoftheCircularwhichdescribesouroverallapproachtoexecutive compensation, the objectives of our executive compensation program, how compensation decisions aremade and the compensation paid to ourmost highly paid executive officers in the lastthreeyears.

AttheMeeting,Shareholderswillbeaskedtoconsiderandtocastanadvisory,non-bindingvoteonCAE’sapproach to executive compensation –thisisoftenreferredtoas“sayonpay”.

ee a t n 2018

Audit Services 85%Tax Services 11%Audit-Related 4%Services



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

‘‘Resolved, on an advisory basis and not to diminish the role and responsibilities of the Board of Directors, that the Shareholders accept the approach to executive compensation disclosed in this Management Proxy Circular’’.

Becauseyourvoteisadvisory,itwillnotbebindingupontheBoard.However,theHRCwillreviewandanalyzethe results of the vote and take into consideration such results when reviewing executive compensation philosophyandprograms.

The Board of Directors recommends that Shareholders vote FORtheresolutionsetoutabove.

IfamajorityoftheSharesrepresentedinpersonorbyproxyattheMeetingarevotedagainsttheabovenon-bindingadvisoryresolution,theBoardChairortheHRCChairwilloverseeaprocesstoengagewithShareholderswithaviewtogivingShareholderstheopportunitytoexpresstheirspecificconcerns.TheBoardofDirectorsand theHRCwill consider theresultsof thisprocessand, ifappropriate, reviewtheCompany’sapproachtoexecutivecompensationinthecontextofShareholders’specificconcerns.

Ourapproachtoexecutivecompensationwasapprovedby92.5%ofthevotescastontheresolutionduringourAugust10,2017annualmeetingofShareholders.

5 Approval of the Renewal of the Rights PlanCAEisapartytotheRightsPlan,initiallyadoptedonMarch7,1990,andlastrenewedfollowingShareholders’approvalonAugust12,2015.TheRightsPlanwillexpireonAugust15,2018unlesstheShareholdersvoteattheMeetingtocontinueitsoperationforanadditionaltermendingonthedateimmediatelyafterCAE’sannualmeetingofShareholderstobeheldin2021.TheBoardofDirectorshasdeterminedtorecommendrenewing the existing Rights Plan, with amendments to reflect changes to the take-over bid regimeadoptedinMay2016underCanadiansecuritieslegislation,aswellasminoramendmentstoreflectcurrentmarketpractice.

CAE believes that the Rights Plan preserves the fair treatment of Shareholders, is consistent with current bestCanadiancorporategovernancepracticesandaddressesinstitutionalinvestorguidelines.TheRightsPlan was not adopted in response any actual or threatened take-over bid or other proposal from a third partytoacquirecontrolofCAE.ItdoesnotreducethedutyoftheBoardtoacthonestly,ingoodfaithandinthebestinterestsofCAE,andtoactonthatbasisifanyofferismadefortheCommonSharesofCAE.TheRightsPlanisnotintendedtoandwillnotentrenchtheBoard.

Purpose of the Rights PlanThe2016amendmentstothetake-overbidregimeaddresssomeoftheconcernsthatrightsplanswereoriginally designed to address, particularly as they relate to providing shareholders and boards of directors with adequate time to consider and evaluate any unsolicited take-over bid for the shares of a company and to provide boards of directors with adequate time to identify, develop and negotiate value-enhancing alternatives,ifconsideredappropriate,toanysuchunsolicitedbid.Theamendmentsalsolargelyaddresstheobjectiveofenablingshareholderstomakeinformedandcoordinatedtenderdecisions.

However,the2016legislativeamendmentsdonotaddresstheriskofa“creepingbid”(whereapersonmayacquire a controlling position in a company in reliance on exemptions from the take-over bid rules, without havingtomakeatake-overbidtoallshareholdersandwithouthavingtopayacontrolpremium).Specifically,the Board continues to believe that a rights plan is in the best interests of CAE to provide protection against certain actions that could result in unequal treatment of Shareholders under Canadian securities laws, includingthe following: (i)apersoncouldacquireeffectivecontrolof theCompanyunderoneormoreprivate agreements at a premium to the market price, resulting in a change of control transaction without thepaymentofapremiumtoallShareholders,(ii)apersoncouldslowlyaccumulatesharesoftheCompany



through stock exchange acquisitions over time, resulting in an acquisition of effective control withoutpaymentoffairvalueforcontrol,(iii)apersonseekingtoacquirecontroloftheCompanycouldenterintoagreementswithShareholderswho,togetherwiththeacquiror,holdmorethan20%oftheoutstandingCommon Shares of the Company irrevocably committing such holders to tender their Common Shares of theCompanytoatake-overbid,theeffectofwhichwouldbetosignificantlyhamper,ifnotterminate,anyreasonableprospectfortheBoardtorunavalueenhancingauctionprocess,and(iv)itmaybepossiblefora person to engage in transactions outside of Canada without regard to the take-over bid protections of Canadiansecuritieslaws.

mma men ment t t e g t anThe Rights Plan includes a number of proposed minor amendments made to clarify certain provisions and toreflectcurrentmarketpractice.Theamendmentsofamoresubstantivenatureareasfollows(pleaserefertothedefinitionsintheattachedAppendixB–SummaryofthePrincipalTermsoftheRightsPlan):• the minimum period that a take-over bid must remain open for the bid to constitute a “Permitted Bid”

thatdoesnottriggertheseparationoftheRightsundertheRightsPlanwasamendedfrom60to105days(orsuchshorterperiodaspermittedbylegislation)toalignwiththeamendedtake-overbidlegislation;

• the minimum period that a “Competing Permitted Bid” must remain open was amended to be the applicableperiodrequiredbytheamendedtake-overbidlegislation;

• thedefinitionof“ExemptAcquisitions”wasexpandedtoincludeamalgamations,plansofarrangementand similar transactions having the requisite Board and Shareholder approvals as well as acquisitions made as an intermediate step in a series of related transactions, provided that the shares are then distributedouttotheacquiror’ssecurityholderswithin10daysoftheacquisition;and

• amendmentsweremadetopermitbook-entryformregistrationofRights.

Renewal of the Rights PlanAt theMeeting, Shareholderswill be asked to consider and vote to approve the renewalof theRightsPlan, a summary of which is set forth in the attached Appendix B – Summary of the Principal Terms of theRightsPlan.ThissummaryisqualifiedinitsentiretybyreferencetothetextoftheRightsPlan,whichisavailableuponrequestfromtheGeneralCounsel,ChiefComplianceOfficerandCorporateSecretaryofCAEatCAEInc.,8585Côte-de-Liesse,Saint-Laurent,Québec,H4T1G6,telephonenumber514-734-5779andfacsimilenumber514-340-5530.TheRightsPlanmayalsobeaccessedonCAE’swebsite(www.cae.com).CapitalizedtermsusedinsuchsummarywithoutexpressdefinitionhavethemeaningsattributedtheretointheRightsPlan.

TheRightsPlanwillcontinueineffectonlyifitisapprovedbyordinaryresolutionoftheholdersofCommonShares of CAE at theMeeting. The text of the resolution approving the Rights Plan (the “Rights Plan Resolution”)issetforthinAppendixC–ResolutiontoApprovetheRenewaloftheRightsPlan.Ifnotsoapproved,theRightsPlanwillterminateandtheRightsissuedunderitwillbevoid.

The Board of Directors recommends that Shareholders vote FORtheRightsPlanResolution.

Other businessFollowingtheconclusionoftheformalbusinessconductedattheMeeting,wewill:• provide an update on our business operations, and• invitequestionsandcommentsfromShareholders.



ThisSectionpresentsbiographicaldata,Boardactivity(i.e.BoardandCommitteemeetingsattendedfromApril1,2017toMarch31,2018)andShareownershipinformationwithrespecttoeachnomineetheBoardofDirectors is recommendingFORelectionbyShareholdersat theMeeting.Adescriptionof theBoardNominee selection criteria, andnominationprocess andBoardAttributes follows the individual tables.“Market Value” refers to the product of the sumof the Common Shares andDSUs held by aDirectormultipliedbytheclosingpriceontheTSXofaCommonShareonJune7,2017andJune7,2018.Footnotesspecifictoeachnomineearepresentedimmediatelybelowtheirbiography.

8

Average 2017 Votes FOR

0

Independent Directors

60

Average Age

5

Average Tenure (years)

Average a

Attendance1 Fornon-executiveDirectors.

Section 3t t e m nate e t


Age: 56Albuquerque,NewMexico,U.S.

Directorsince:2015(Independent)

Votes in Favour at LastAnnualMeeting:99.34%

Ma ga et eg nMs. Billson is a veteran aviation business leader with over 30 years of experience leadingtechnologyrichcompanies,includingservingasthePresident&CEOofBBAAviationAftermarketServices,adivisionofBBAAviationplc.,asPresident&GeneralManageroftheAirplaneDivisionofEclipseAviationandastheVice-President&GeneralManagerofAirframeSystemsatHoneywellInternationalInc.Ms.BillsonhasaMaster’sdegreeinEngineering-Aerospaceand,inrecognitionofherindustryaccomplishments,hasbeeninductedintoEmbry-RiddleAeronauticalUniversity’sHallofFame.Ms.Billsonisalsoaninstrument-ratedpilot.

a Mem e an tten an e

Board of Directors 7of7 100%

Audit Committee 4of4 100%

Total 11 of 11 00

t e m an a

Current N/A

Former Skywest,Inc. ’07–’15

e t e e

Datemm n

Shares DSUs TotalMa et Value

M n m m Ownership

e ement

e ement

June7,2018 – 22,377 22,377 $618,500 $501,000 123%

June7,2017 – 15,015 15,015 $332,582 $435,000 76%

Age: 56Mount-Royal,Quebec,Canada



e n a e M ae M t e Mr.FortierjoinedRBCCapitalMarkets(RBCCM)asaVice-Chairin2010.PriortojoiningRBCCM,Mr.FortierwasapartnerofOgilvyRenaultLLP(nowNortonRoseFulbrightCanadaLLP)andaSeniorAdvisertoMorganStanleyinCanada.Between 2006 and 2008,Mr. Fortier held various positions in theGovernment of Canada, asMinisterofPublicWorksandGovernmentServices,MinisterofInternationalTradeandMinisterresponsibleforGreaterMontréal.Priortothat,Mr.Fortierwasactiveintheinvestmentbankingindustry,firstasaManagingDirectorwithCreditSuisseFirstBoston(1999–2004)andthenasaManagingDirectorwithTDSecurities(2004–2006).Mr. Fortier alsopracticed lawwithOgilvyRenault LLP (1985– 1999) in the areasof corporatefinanceandmergersandacquisitions.HewasbasedinLondon,Englandforseveralyearsduringthisperiod.



HumanResourcesCommittee 5 of 5 100%

Total 10 of 12 8

t e m an a

Current N/A

Former Aimia Inc. ’09–’18

e t e e

Datemm n


M n m m Ownership

e ement

e ement

June7,2018 10,000 58,382 68,382 $1,890,078 $501,000 377%

June7,2017 10,000 49,886 59,886 $1,326,475 $435,000 305%


Section 3 (continued)t t e m nate e t

Age: 62Toronto, Ontario, Canada



Alan N. MacGibbonMr.MacGibbon served as non-executive Vice Chair of the law firmOsler, Hoskin & HarcourtLLP from July2014 toDecember2017.HewasGlobalManagingDirector,Quality,StrategyandCommunicationsofDeloitteToucheTohmatsuLimited(2011–2013),andwasalsoSeniorCounseltoDeloitteLLP(Canada)(2012–2013),andtheManagingPartnerandChiefExecutiveofDeloitteLLP(Canada)priortoJune2012.Mr. MacGibbon holds an undergraduate degree in business administration and an honorarydoctorate degree from the University of New Brunswick. Mr. MacGibbon is a CharteredProfessional Accountant, a Chartered Accountant and a Fellow of the Chartered Professional AccountantsofOntario.



AuditCommittee(Chair) 4of4 100%

HumanResourcesCommittee 1 2 of 2 100%

Total 13 of 13 00

t e m an a

Current TD Bank ‘14– present

Former N/A

e t e e

Datemm n

Shares 2 DSUs TotalMa et Value

M n m m Ownership

e ement

e ement

June7,2018 4,088 26,729 30,817 $851,782 $501,000 170%

June7,2017 4,074 18,036 22,110 $489,737 $435,000 113%1 Mr.MacGibbonjoinedtheHumanResourcesCommitteeinNovember2017.2 1,011ofthesesharesareownedbeneficiallybyMr.MacGibbon’sspouse,underthedirectionofMr.MacGibbon.

Age:68Ottawa, Ontario, Canada



e n a e n Man e Mr.Manley 1 is President and Chief Executive Officer of the Business Council of Canada (not-for-profit)andChairofCanadianImperialBankofCommerce.From2004to2009,heservedasCounseltoMcCarthyTétraultLLP,anationallawfirm.Priortothat,Mr.Manleyhada16-yearcareerinpolitics,servingasDeputyPrimeMinisterofCanadaandMinisterintheportfoliosofIndustry,ForeignAffairsandFinance.Mr.ManleyobtainedaBachelorofArtsfromCarletonUniversityandaJurisDoctoratefromtheUniversityofOttawa,isacertifiedCharteredDirectorfromMcMasterUniversityandholdshonorarydoctoratesfromsixCanadianuniversities.



HumanResourcesCommittee 4of5 80%

Governance Committee 2of3 67%

Total 13 of 15 8

t e m an a

Current Canadian Imperial Bank of Commerce (CIBC)

‘05 – present

Telus Corporation ‘12– present

Former CanadianPacificRailway Limited

‘06 –‘13

Nortel Corporation ‘04–‘09

e t e e

Datemm n


M n m m Ownership

e ement

e ement

June7,2018 – 106,550 106,550 $2,945,042 $501,000 588%

June7,2017 – 97,462 97,462 $2,158,783 $435,000 496%1 Mr.ManleywasaDirectorofNortelNetworksCorporation(“Nortel”)andNortelNetworksLimited(“NNL”)whenNortelandNNL

weregrantedcreditorprotectionundertheCCAAonJanuary14,2009andunderothersimilarbankruptcylegislationintheU.S.andotherjurisdictions.



Age:53Montreal,Quebec, Canada



François OlivierFrançois Olivier became President and Chief Executive Officer of Transcontinental Inc. in2008.After joining thePrinting sectorof Transcontinental in 1993,hewenton tobecome theGeneralManager of one to several printing facilities, andultimately the Senior Vice-Presidentof theNewspaperGroup.He later took on the role of President of the Information ProductsPrintingsector,andbecameChiefOperatingOfficerofTranscontinentalin2007.PriortojoiningTranscontinental,FrançoisOlivierworkedasGeneralManagerofCanadaPackers.HehasaB.Sc.fromMcGillUniversityandisagraduateoftheProgramforManagementDevelopmentatHarvardBusinessSchool.



Audit Committee 1 2 of 2 100%

Total 9 of 9 00

t e m an a

Current TranscontinentalInc. ’08– present

Former N/A

e t e e

Datemm n


M n m m Ownership

e ement

e ement 2

June7,2018 – 7,874 7,874 $217,637 $501,000 43%

June7,2017 – 897 897 $19,869 $435,000 5%1 Mr.OlivierjoinedtheAuditCommitteeinAugust2017.2 Mr.OlivierjoinedtheBoardonFebruary14,2017andisrequiredtoreceivehiscompensationinrespecttohisservicesasaDirector

inDSUsuntilhisMinimumOwnershipRequirementisattained.

Age:57Montreal,Quebec, Canada

Directorsince:2008


Marc ParentMr. Parent has been the President and CEO of CAE Inc. since October 2009. He joined theCompany in February 2005 as Group President, Simulation Products, was appointed Group President,SimulationProductsandMilitaryTraining&ServicesinMay2006,andthenExecutiveVicePresidentandChiefOperatingOfficer inNovember2008.Mr.Parenthasover30yearsofexperienceintheaerospaceindustry.BeforejoiningCAE,Mr.ParentheldvariouspositionswithCanadairandwithinBombardierAerospaceinCanadaandtheU.S.Mr.ParentispastChairoftheBoardofDirectorsoftheAerospaceIndustriesAssociationofCanada(AIAC)andofAéroMontréal(Québec’saerospacecluster).Mr.ParentgraduatedasanengineerfromÉcolePolytechnique,isagraduateoftheHarvardBusinessSchoolAdvancedManagementProgramandholdsanhonorarydoctorate fromÉcole Polytechnique.Mr. Parent is an active pilot holding a Transport CanadaAirlineTransportPilotlicense.



Total 7 of 7 00

t e m an a

Current Telus Corporation ‘17– present

Former N/A

e t e e 2

Datemm n

SharesFY2004 LTUs LTUs Total

Ma et Value

June7,2018 245,103 41,719 225,273 512,095 $14,154,306

June7,2017 237,888 41,086 221,857 500,831 $11,093,4071 UponinvitationofBoardCommittees,Mr.Parentattendedallorapartoftheirmeetings.2 AsPresidentandCEO,Mr.ParenthasahigherownershiptargetthananIndependentDirector(pleasereferto“ExecutiveShare

OwnershipRequirements”inSection7fordetailsconcerningMr.Parent’sShareownershiprequirements).



Age: 66Montreal,Quebec, Canada


Votes in Favour at Last AnnualMeeting:N/A

Michael E. RoachAn experienced business and technology leader, Mr. Roach served as President and ChiefExecutiveOfficer(2006-2016)ofCGIGroupInc.untilhisretirement.HeisChairmanoftheBoardofInteracCorp.,aprivatecompany(sinceFebruary2018).PriorpositionsincludePresidentandChiefOperatingOfficerofCGIGroupInc.andPresidentandChiefExecutiveOfficerofBellSygmaInc.,aBellCanadatechnologysubsidiary.Mr.RoachholdsaBachelorofArtsinEconomicsandPoliticalScience,aswellasanHonoraryDoctorate inBusinessAdministrationfromLaurentianUniversityinSudbury,Ontario.



AuditCommittee 1of1 100%

Total 4 of 4 00

t e m an a

Current CGIGroupInc. ‘06 – present

Former N/A

e t e e

Datemm n


M n m m Ownership

e ement

e ement 2

June7,2018 – 2,806 2,806 $77,558 $501,000 15%1 Mr.RoachjoinedtheBoardandwasappointedtotheAuditCommitteeonNovember10,2017.2 Mr.RoachjoinedtheBoardonNovember10,2017andisrequiredtoreceivehiscompensationinrespectofhisservicesasa Director

inDSUsuntilhisMinimumOwnershipRequirementisattained.

Age: 66McLean,Virginia,U.S.

Director since: N/A First time nominee (Independent)

Votes in Favour at Last AnnualMeeting:N/A

General Norton A. Schwartz, USA (ret.)GeneralSchwartzisthePresidentandChiefExecutiveOfficerofBusinessExecutivesforNationalSecurity since 2013. General Schwartz is also a retired United States Air Force General whoservedas theChiefofStaffof theUnitedStatesAirForce from2008until2012.Asamemberof the JointChiefsof Staff,General Schwartz functionedasamilitary adviser to theSecretaryofDefense,NationalSecurityCouncilandthePresidentoftheUnitedStatesofAmerica.Duringthis time, General Schwartz served as the senior uniformed Air Force officer responsible forthe organization, training and equipping of active duty, guard, and reserve forces and civilian workforce serving in the United States and overseas. He previously served as Commander,UnitedStatesTransportationCommandfromSeptember2005toAugust2008andDirectorforOperationsandDirectoroftheJointStafffrom2002to2005.GeneralSchwartzpreviouslyservedontheboardofdirectorsofCAE,USAInc.from2014to2018.


Board of Directors N/A

t e m an a

Current WescoAircraftHoldingsInc.

‘13– present

Cobham, plc ‘18– present

Former N/A



Age:61Cheltenham, Gloucestershire,U.K.



n e te enMr.StevensisacorporateDirectorbasedintheU.K.whohasoperatingexperiencegloballyintheaerospaceanddefencesector.BeginningwiththeDowtyGroup,aleadingBritishmanufacturerof aircraft equipment (1976– 1994),he joinedBowthorpeplc (1994– 1996),Messier-DowtyasManagingDirectorthenChiefOperatingOfficer(1996–2000),Rolls-Royce,whereheservedasManagingDirectorDefenceAerospace(2001–2003),andCobhamplcasaBoardmemberwhereheservedvariouslyasGroupManagingDirector,AerospaceSystems,ChiefOperatingOfficerandChiefExecutiveOfficer(2003–2012).Mr.StevensisaCharteredEngineer,witha1st Class honour degree in Product Engineering from AstonUniversity.HeisaFellowoftheRoyalAeronauticalSociety,aFellowoftheInstitutionofElectricalEngineersandwasawardedahonouraryDoctorofSciencein2013.


Board of Directors 7of7 100%HumanResourcesCommittee

5 of 5 100%

GovernanceCommittee(Chair)

3of3 100%

Total 15 of 15 00

t e m an a

Current Héroux-DevtekInc ‘14– presentDe La Rue plc ‘12– present

Former Cobham plc ‘03–‘12

e t e e

Datemm n


M n m m Ownership

e ement

e ement

June7,2018 – 52,955 52,955 $1,463,676 $501,000 292%June7,2017 – 43,749 43,749 $969,040 $435,000 223%

Age: 55Toronto, Ontario,Canada



at a ne te en nMs.StevensonisacorporateDirectorwhohasservedonavarietyofcorporateboardsinCanadaand theUnitedStates.Shewas formerly theglobalTreasurerofNortelNetworksCorporation(Nortel). Prior to joiningNortel, sheheldprogressively senior finance roles in investment andcorporate banking at J.P.Morgan and Company, Inc.Ms. Stevenson serves asDirector of thepublic companies listed below, and chairs the Corporate Governance Committee of Canadian ImperialBankofCommerce.Ms.StevensonholdsaBachelorofArtsdegree(MagnaCumLaude)fromHarvardUniversityandhastheprofessionaldesignationICD.DgrantedbytheInstituteofCorporateDirectors(ICD).


Board of Directors 7of7 100%Audit Committee 4of4 100%Governance 3of3 100%Total 14 of 14 00

t e m an a

Current Capital Power Corporation

‘17– present

Canadian Imperial Bank ofCommerce(CIBC)

‘11– present

OpenTextCorp. ‘08– presentFormer Valeant Pharmaceuticals

InternationalInc.‘10–‘16

OSIPharmaceuticalsInc. ‘05 –‘10

e t e e

Datemm n


M n m m Ownership

e ement

e ement

June7,2018 600 109,153 109,753 $3,033,573 $501,000 606%June7,2017 600 100,025 100,625 $2,228,844 $435,000 512%



e t e e t n an m nat n ePart of the Governance Committee’s responsibility is to identify and recruit suitable potential Boardmembers and recommend to the Board nominees for election at annual Shareholders meetings, taking intoconsiderationthePolicyRegardingBoardandExecutiveOfficerDiversity.

Tofulfillthismandate,theGC:• Identifies desirable skill sets, industry experience, diverse backgrounds, international experience,

relationships and other attributes that would assist the Board of Directors in the conduct of its responsibilitiesandalsofurtherCAE’sinterests(referto“ a tt te ”below).

• Reviews with the Chair, President and CEO and other Directors possible candidates, including the existing membersoftheBoardofDirectors,whichmaymeetsomeorallofsuchattributes.

• Considers potential conflicts of interest, independence issues and interlocking directorships ofpotentialcandidates.

• Approaches with the Chair and other Directors potential candidates not already serving as Directors to determinetheiravailabilityandinterestinservingonCAE’sBoard,andwillinterviewthoseinterestedtodeterminetheirsuitabilityfornomination.

• Reviews with other members of the Board of Directors the potential nomination of any new Director beforeafinaldeterminationtonominatethemismade.

Board members must:• Demonstratehighethicalstandardsandintegrity,includingabidingbyCAE’sCodeofConduct;• ActhonestlyandingoodfaithregardingCAE’sbestinterests;• DevotesufficienttimetoCAE’saffairsandexerciseprudenceanddiligenceinfulfillingalltheirBoard-

relatedresponsibilities;• GiveindependentjudgmentonissuesfacingCAE;• UnderstandandchallengeCAE’sbusinessplansandstrategy;• EffectivelyparticipateinallBoard-relateddeliberations;• MakereasonableeffortstoattendBoardandcommitteemeetings;and• Review the management materials provided in advance of, and otherwise prepare for, all

Boardmeetings.

UnderthearticlesofCAE,theBoardofDirectorsmayconsistofaminimumofthreeandamaximumoftwenty-oneDirectors.TheDirectorsaretobeelectedannuallyasprovidedinCAE’sby-laws.EachDirectorwillholdofficeuntil thenextannualmeetingoruntilhisorhersuccessor isdulyelectedunlesshisorherofficeisearliervacatedinaccordancewiththeby-laws.Inaccordancewiththeby-laws,theBoardofDirectorshasfixedthenumberofDirectorstobeelectedattheMeetingatten.



a tt teThe following matrix identifying the age, tenure, professionalskills,expertiseandqualificationsofnominated Directors is reviewed by the Governance CommitteeannuallytoensureCAEbenefitsfromanappropriate combination of skills, experience with CAE’sbusinessmattersandcorporategovernancestandards and fresh perspectives:

• n n em ee e t n m nee t a t ta n m e 10 e t

are Independent.

• a mm ttee mem e are Independent.

Age Tenure at CAE m eten e

Und

er 6

0

60 –

69

70+

0 –

5 y

ears

6 –

10

year

s

Mor

e th

an 1

0 ye

ars

Know

ledg

e of

indu

stry

Stra

tegi

c le

ader

ship

an m

anag

emen

t

nan

ent

ng

man

e

e

R&D e

nan

ea

Ma ga et eg n

n M ae M t e

Alan N. MacGibbon

n n Man e

François Olivier

Marc Parent

Michael E. Roach

Gen. Norton A. Schwartz, USA (Ret.)

n e te en

at a ne te en n



mm tment t n ate e nan eThe Board of Directors and management team take pride in knowing that CAE has maintained the highest standardsincorporategovernance.CAE’scorporategovernanceisrootedinthebasicprinciplethatproperandethicalpracticesleadtothecreationandpreservationofShareholdervalue.

Our governance structure enables independent, experienced and accomplished Directors to provide advice,insightandoversighttoadvancetheinterestsoftheCompanyandourShareholders.

eg at m an eAs aCanadian reporting issuerwithCommonShares listedon the TSX and theNYSE, CAE’s corporategovernance practices are required to meet and exceed applicable rules adopted by the CSA and the SEC, as wellasprovisionsoftherulesoftheNYSEandofSOX.

Most of the NYSE’s corporate governance listing standards are not mandatory for CAE as a non-U.S.company,butCAE is required todisclose the significantdifferencesbetween its corporate governancepractices and the requirements applicable to United States companies listed on the NYSE. Except assummarizedonCAE’swebsite(http://www.cae.com/investors/governance),CAEisincompliancewiththeNYSErequirementsinallsignificantrespects.CAEalsocomplieswiththoseprovisionsofSOXandtherulesadoptedbytheSECpursuanttothatActthatarecurrentlyapplicabletoCAE.

e t a t e an nt n m ementThe 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 tocomplywithanynewrulesissuedbytheCSAandotherapplicableregulatoryauthorities.Wealsomonitorrecommended best practices of shareholder representatives and other organizations and will implement anysuchpracticewebelievetobeinthebestinterestoftheCompany.

an a en an ng ng mm n at nCAE is committed to ensure open, ongoing dialogue with Shareholders, employees, other investors and thepublic. ThroughCAE’sdisclosurepolicy andprocedures, theBoardensures that communicationofmaterial information to investors is timely and accurate, and broadly disseminated in accordance with all applicablesecuritieslawsandstockexchangerules.CAE’sGlobalCommunicationsandInvestorRelations’departmentrespondstoinvestorinquiries.CAE’stransferagent,ComputershareTrustCompanyofCanada,hasa toll-freenumber (1-800-564-6253)andwebsite (www.computershare.com) toassistShareholders.Shareholdersmayalsosendcommentsviaemailtoinvestor.relations@cae.com.Inaddition,CAEprovidesinformationon itsbusinessonCAE’swebsite (www.cae.com)and itsfilingwith theCanadiansecuritiesregulatorsandtheSECcanbeaccessedatwww.sedar.comandwww.sec.gov/edgarrespectively.

Shareholders are encouraged to view the following downloadable documents as well as others that are statedtobeavailableonCAE’swebsitewww.cae.com/investors/governance.Theinformationlocatedonthe website is a a a a e n nt t an a e e n e e t t t e ate e eta

e a tmentattheaddresssetoutinthisCircular.• CAE’sCorporateGovernanceGuidelines(includingMajorityVotingPolicy);• SummaryofsignificantwaysthatCAEpracticesdifferfromgovernancerequirementsofU.S.domestic

companiesundertheNYSElistingstandards;• GeneralBy-laws(includingAdvanceNoticePolicy);• CertificateandArticlesofAmalgamation;• RightsPlan;• BoardCommitteeCharters;• PositionDescriptionsforthePresidentandCEO,BoardChairandeachBoardCommitteeChair;• CodeofBusinessConduct;and• EmployeeStockOptionPlan.

Section 4Corporate Governance


a an management eThepurposeoftheBoardanditscommitteesistobuildlong-termvaluefortheCompany’sShareholdersandtoensurethecontinuityandvitalityoftheCompany’sbusinessesbysettingpolicyfortheCompany,overseeing strategic planning, monitoring the Company’s performance, providing management withappropriateadviceandperformancefeedback.ManagementisresponsibleforandtheBoardiscommittedtoensuringthatCAEoperatesinalegalandethicallyresponsiblemanner.TheBoard’sstewardshiprole,specificresponsibilities,compositionalrequirementsandvariousothermattersaresetoutinAppendixA– BoardofDirectors’Charter–tothisCircular.

e ent an e an e n t eThe position description for the President and CEO is developed with input from the President and CEO, andisapprovedbytheGovernanceCommitteeandtheBoardofDirectors.ThedescriptionprovidesthatthePresidentandCEOisresponsiblefordefining,communicatingandimplementingthestrategicdirection,goalsandcorevaluesofCAEwithaviewtomaximizingCAE’svalue. Italsoprovidesthat thePresidentand CEO is accountable to the Board for, amongst other things, formulating and executing business strategies,overseeingCAE’scorporategovernancestructureandframework,overallresponsibilityforthemanagementofCAE’sbusiness,buildingandmaintaininganetworkofstrategicrelationshipswithbusinessleaders,governmentalofficialsand investors,developingand implementingahumanresourcestrategywhich develops leadership capabilities, and creating an organizational structure and culture that optimize andsustainhighlevelsofperformance.

e a a n e en entMr.JamesF.Hankinson,thecurrentnon-executiveChairoftheBoard,isresponsibleforensuringthattheBoardofDirectorsdischargesitsresponsibilitiesindependentlyofmanagement.CorrespondencetotheIndependentDirectorsmaybesenttotheattentionoftheChairoftheBoard,atCAE’saddresslistedinthisCircular.

The Board Chair position description sets out the Chair’s responsibilities and duties in guidingthe Board in the fulfillment of their stewardshiprole, namely:

a meet ng atten an e a e age n 20 8

• RepresenttheBoardindiscussionwithmanagement;• RepresenttheBoardindiscussionwiththirdparties;• GenerallyensurethattheBoardfunctionsindependentlyofManagement;• ChairandencouragefreeandopendiscussionsattheBoardmeetings;• TogetherwiththeGC,identifyguidelinesfortheselectionof,andevaluationofconductoftheDirectors;

and• ReporttoShareholdersonbehalfoftheBoard.

e e n a e t en e t e a ma n t n n e en ent ManagementThe Independent Directors met separately from the President and CEO at each of the meetings of the BoardofDirectorsduringFY2018,andateachmeetingoftheHRC,GCandAuditCommittee.AttheBoardmeetings, the Independent Directors’ meetings are chaired by the non-executive Chair; at Committeemeetings,bytheChairofthatCommittee.TheBoard,itsCommitteesaswellasindividualDirectorsarealso able to retain and meet with external advisors and consultants at the expense of CAE in appropriate circumstances.Infact,theBoardhasregularaccesstoinformationindependentofmanagementthroughthe external and internal auditors, as well as independent compensation consultants and the possibility of independentlegalcounsel.TheBoardbelievesthatsufficientprocessesareinplacetoenableittofunctionindependentlyofmanagement.


Section 4 (continued)Corporate Governance

e egat n t tan ng a mm ttee m e ent e n e en ent e tIn order to enable it to effectively fulfill its responsibilities, the Board has established three standingcommitteees currently composed of the following Independent Directors as of the Record Date:

Governance Audit man e e

Ma ga et eg n

n M ae M t e Chair

Alan N. MacGibbon Chair

n n Man e

François Olivier

Michael E. Roach

en ete ma e et

n e te en Chair

at a ne te en n1 Mr.SchoomakerisacurrentDirectorbutheisretiringonAugust14,2018andisnotstandingforre-electionattheMeeting.

The nature and scope of authority and responsibility delegated to each standing committee is set forth in the Committee Charters presented in Section 5 – “ a mm ttee e t ” which can also be found onourwebsiteunder “CorporateGovernance”alongwitheachCommitteeChair’spositiondescription.

TheappointmentofspecificDirectorstoeachofthestandingBoardCommitteesisgenerallyintendedtoreflecttherelevanceofIndependentDirectors’skillsandexperiencetotheapplicableCommittee’sCharter(refertoSection3– “ t t e m nate e t ”fordetailsabouttheselectionprocessandcriteria).

Orientation and continuing educationNewDirectorsmeetwithCAEexecutiveofficers,includingthePresidentandCEOandVicePresident,FinanceandCFO,todiscussCAE’sexpectationsof itsDirectorsandtodiscussCAEbusinessandstrategicplans.NewDirectorsalsoreviewCAE’scurrentbusinessplan,detailedagendasandmaterialsofpreviousBoardmeetings.NewDirectorsofCAEreceiveacomprehensivereferencemanualcontainingallkeycorporateand Board policies, including the Code of Business Conduct and other relevant materials and executive briefingsessions.AllDirectorshaveregularaccesstoseniormanagementtodiscussBoardpresentationsandothermattersofinterest.CAEmanagementandtheGovernanceCommitteekeepallDirectorsawareofmajordevelopmentsincorporategovernance,importanttrendsandnewlegalorregulatoryrequirements.TheBoardalsoreceivespresentationsfromseniormanagementonCAE’sperformanceandissuesrelevanttothebusinessofCAE,theindustryandthecompetitiveenvironmentinwhichitoperates.

The Governance Committee encourages CAE’s Directors to attend conferences, seminars or courseswhethertheybeindustry-specifictoCAEorwhetherrelevanttofulfilltheirroleasaDirector,thecostofwhichwillbebornebyCAE.Inrecognitionoftherapidlychangingtechnologyandcompetitiveenvironmentand emerging markets in our business, the Board requires management to provide an in-depth review of the business segments in which we operate at regularly scheduled meetings, as well as our industry in general. The Board and its Committees are continually updated byManagement on developmentsrelated to corporate governance, Directors’ fiduciary duties, changes in law, industry news and othereducationalmaterial.

Ethical business conductCAEhasaCodeofBusinessConduct that governs the conductofCAE’sDirectors, officers, employees,contractorsandconsultants.CAEusesEthicspoint,athird-partywhistleblowerreportingservice,tofacilitatereporting of breaches of the Code of Business Conduct and any other misconduct. Apart from anyindividualreportstheBoardorHumanResourcesandAuditCommitteesmayreceivefrommanagementor the whistleblower service, the Governance Committee receives a quarterly and an annual report from managementonCAE’smanagement’scompliancewiththeCodeofBusinessConduct.



management e g tEnterpriseriskmanagement isessential toCAEgiventhesize,natureandcomplexityof itsoperations.CAEhasimplementedaEnterpriseRiskManagementPolicywhichsetsoutitsframeworkandprocessestoensurethatrisksareidentified,measured,managed,andreportedproactivelyandinamannerthatisconsistentwiththeexpectationsoftheBoardandtheinterestsofCAE’sinternalandexternalstakeholders,includingemployees,shareholders,clients,andsuppliers.

Pursuant to our policy:

• theBoardisaccountablefortheoversightofriskmanagementofallmaterialriskfactorsrelatedtoCAE’sbusiness,includingrisksrelatedtoethicsandgovernance,strategy,legislation,financesandoperations.This oversight requires the Board and management to establish risk management policies and practices andtoensurethatthesepoliciesandpracticesremainadequate,prudentandcomprehensiveatalltimes.TheBoardisaccountableforunderstandingCAE’skeyenterpriserisks.TheBoardanditsCommitteesreview the key enterprise risks to ensure the adequacy of the risk management process for identifying, assessingandmanagingsuchrisks.

• our business units exercise the daily management of their risks and controls and implement corrective actionstoaddressanyprocessandcontroldeficiencies.

• the Vice President, Strategy and Investor Relations provides operational risk oversight in various risk management,compliance,andcontrollership functionsandadvisesseniormanagementaccordingly.

• theAuditCommitteeandseniormanagementprovideanindependentappraisalofCAE’sriskmanagementframework,controlenvironmentandinternalcontrolsystems.

Attheannualstrategysession,theBoardevaluatesCAE’sidentifiedcategoriesofrisk.Further,theBoardreceives updates from the President and CEO and other members of management on enterprise risk throughouttheyear.InFY2018,theBoardpaidparticularattentiontorisksrelatedtocompetition.

You can find a more comprehensive discussion of risk management in Section 9 – Business risk and uncertaintyofourfourthquarterandyearendedMarch31,2018ManagementDiscussionandAnalysis,filedwiththeCanadiansecuritiescommissions,theU.S.SecuritiesandExchangeCommissionunderForm6-K,andavailableonourwebsite(www.cae.com),onSEDAR(www.sedar.com),andonEDGAR(www.sec.gov).

e ment e t t e Refer to Section 5 – “ a mm ttee e t ”.

m en at nRefer to Section 5 – “ a mm ttee e t – e man e e mm ttee”, Section 6 –“ e t m en at n”andSection7– “ e t e m en at n – ett ng e t e m en at n – e t e ”.



e e nan e mm ttee

Assists the Board in developing and implementing our corporate governance guidelines, identifying individualsqualifiedtobecomemembersoftheBoardanddeterminingthecompositionoftheBoardand itscommittees,preparing theBoard’ssuccessionplan,determining theDirectors’ remuneration,developing and overseeing an assessment process for the Board, and reviewing and recommending for Board approval our corporate policies concerning business conduct, high standards of corporate governance,ethics,andhumanrights.

ThemembersoftheGCareallIndependentDirectorsandtheGC’scharterisavailableinthegovernancesectionofourwebsiteatCAE.com.

TheGCheldthreemeetingsinFY2018;aggregateattendance:91.6%.

A.J.Stevens(Chair) Hon.J.P.Manley Gen.P.J.Schoomaker, K.B.Stevenson USA(Ret.)

The members of the Governance Committee are selected for their experience and knowledge with respect togovernancemattersgenerally.DescriptionsofMr.Stevens,theHonourableMr.Manley,andGeneralSchoomaker’scredentialsandpastexperiencecanbefoundinthesubsequentHumanResourceCommitteereport.DescriptionsofMs.Stevenson’scredentialsandpastexperiencecanbefoundinthesubsequentAuditCommitteereport.

g g t 20 8• The GC reviewed recommendations made by an ad-hoc committee of the Board tasked with succession

planningtoidentifyasuccessortoMr.HankinsonasChairoftheBoard.Mr.HankinsonisscheduledtoretireconcurrentwiththeMeeting.

• The GC considered several possible candidates for nomination to the Board to maintain the required skillsanddiversityprofileoftheBoardincontemplationofapproachingtermlimitsforsomeDirectorsandconsideredandrecommendedthecandidaciesofMr.RoachandGen.SchwartzfornominationtotheBoard.

• TheGCoversawchangestothecompositionofcommitteesasaresultofMr.Gagné’sretirementfromtheBoardonAugust10,2017andagreedtorecommendtheappointmentofMr.RoachasmemberoftheAuditCommitteeuponhisappointmenttotheBoard.

• AnAnnualBoardofDirectorsandGovernanceCommitteePerformanceReviewsurveywascarriedout;theoverallresultscontinuetobepositiveandreinforcestronglevelsofsupportandengagement.

• WiththeassistanceoftheBoard’scompensationconsultants,theGCrecommendedchangestoBoardcompensation,effectiveJanuary1,2018.

• The GC reviewed amendments to the Corporate Governance Guidelines to address requirements from the Toronto Stock Exchange relating to director election requirements and recommended these forapproval.

• TheGCreviewedCAE’scurrentmandatoryretirementpolicyandrecommendedtomaintainthecurrentpolicyofamaximum12-yeartermandretirementatage72inlightofresearchconcerningmarkettrendsandfeedbackfromDirectors.

Section 5a mm ttee e t


• The GC reviewed and approved revisions to the Other Board Commitments and Interlocks Policy which now requires Directors to disclose proposed appointments on other company boards for approval by theGovernanceCommitteeandtheChairoftheBoard.

• The GC reviewed an agreed to recommend for approval by the Board the revised Board charter and positiondescriptionsfortheChairfortheBoard,thecommitteechairsandtheChiefExecutiveOfficer.

• TheGCconsideredMr.Parent’sproposedappointment to theTelusCorporationboardofdirectors.• The GC reviewed and approved revisions to the Code of Business Conduct so that the same code would

applytodirectors,managementandallemployees.• TheGCreviewedandagreedtorecommendforapprovalbytheBoardCAE’snewHumanRightsPolicy.• The GC reviewed and approved the location of the annual Strategic Plan meeting coupled with other

meetingswithcustomersandCAEbusinessunits.

InadditiontoaccessthroughtheBoard’swebsitetoanevergreensupplyofcurrentresearchandanalysis,news reports and academic studies on best governance and compensation practices and other aspects of boardandfiduciaryresponsibilitiesanduseofresearchandeducationaltools,thefollowingactivitieswereconductedinFY2018toensurethatallrequirededucationalresourcesareavailabletoDirectorstoproperlydischarge their responsibilities:• BoardmeetinginLondon,UKtoreviewtheCompany’sFY2018– FY2022 long term strategic plan and

permittingsitevisitstotheCAEtrainingfacilitieslocatedinBurgessHillandattheBensonAirForcebase;• QuarterlyupdatesfrommanagementonCAE’scompliancewithsuchmattersasanti-corruption,theuse

offoreignrepresentatives,ethicsintheworkplace,andexportcontrollaws;and• Numerous presentations on CAE’s markets, technology, industry developments and other

educationalmaterial.

t e a mm tment an nte The following policy applies to all Directors:

(a) Nomore thantwoDirectorsshouldserveon thesameoutsideboardoroutsideboardcommittee,unlessotherwiseagreedbytheBoard.

(b) Directorswhoareemployedaschiefexecutiveofficers,orinotherseniorexecutivepositionsonafull-time basis with a public company, should not serve on the boards of more than two public companies inadditiontoCAE’sBoard.

(c) Directorswho:(i)havefulltimeemploymentwithnon-publiccompanies,(ii)havefull-timeemploymentwithpubliccompaniesbutnotasCEO,or(iii)donothavefulltimeemployment,shouldnotserveontheboardsofmorethanfourpubliccompaniesinadditiontoCAE’sBoard.

(d) ThePresidentandChiefExecutiveOfficerofCAEshouldnot serveon theboardofmore thanoneother public company and should not serve on the board of any other public company where the chief executiveofficerofthatothercompanyservesontheCAEBoard.

(e) Priortoacceptinganyadditionalpubliccompanyboardofdirectors’appointment,aDirectormustfirstdisclosetheproposedappointmentforreviewbytheGovernanceCommitteeandtheChairoftheBoard.

a e a at n eThe Governance Committee has the mandate and responsibility to review, on an annual basis, the performanceandeffectivenessof theBoardasawholeandeach individualDirector. TheChairof theGovernance Committee annually approves and distributes a comprehensive questionnaire to each member oftheBoardregardingvariousaspectsofBoardandindividualperformance.Thequestionnairecoversawiderangeofissues,includingtheoperationandeffectivenessoftheBoardanditscommittees,thelevelof knowledge of the Directors relating to the business of CAE and the risks it faces, and the contribution ofindividualDirectors,andallowsforcommentandsuggestions.TheChairoftheGovernanceCommitteecompiles responses to the questionnaire and prepares a report to the Governance Committee which providesa report to the fullBoard. TheGovernanceCommitteemay then recommend changesbasedupon such feedback to enhance Board performance or refer any areas requiring follow-up to the relevant


Section 5 (continued)a mm ttee e t

committees.Inadditiontotheforegoing,eachDirectorindividuallymeetswiththeChairoftheBoardatleast once annually to discuss his or her individual performance and the performance of the Board as awhole.Aswell, theChairof theBoard’sperformance is evaluatedandassessed throughone-on-onemeetingsbetweeneachDirectorandtheChairoftheGovernanceCommittee.BoththeChairoftheBoardandtheChairoftheGovernanceCommitteethenreportbacktothefullBoard.

e e a mem e m en at nWiththeassistanceoftheBoard’scompensationconsultants,HugessenConsultingInc.,theGCreviewedthe level of compensation of Directors using the same list of comparator companies as that adopted by the HRCforbenchmarkingtheNEOs’compensation(seeSection7–“ExecutiveCompensation”).

SimilartoCAE’sexecutivecompensationphilosophy,CAEDirectorcompensationistargetedattheblendedmedianofCanadianandU.S.peers(50%Canada/50%U.S.)

WitheffectasofJanuary1,2018,thefollowingchangeswererecommendedforapprovalbytheBoard:• IncreasetheBoardChair’sannualDSUretainervaluefrom$132,500to$142,500• IncreasetheannualDSUretainervaluefrom$82,500to$104,500forothernon-employeeDirectors• Discontinue paying the Committee Chairs retainer fees other than the Committee Chair retainer fees• Reduce the GC Committee Chair retainer fee from $25,000 to $20,000

ItisimportantthattheBoardofDirectors’compensationbesufficientlycompetitivetopermitCAEtoattractgoodcandidatestoreflectCAE’sinternationalscopeofbusiness.

e t n m a nt n e t e e ne n tTheCommittee is kept apprisedof every report filedwith the independent thirdparty responsible forreceivinganycomplaintsunderCAE’sCodeofBusinessConduct,aswellasrelevantcomplaintsreceivedbyCAEseniormanagement.TheCommitteeisregularlyinformedoftheresolutionofsuchcomplaints(asistheChairoftheAuditCommitteewheremisconductrelatingtofinancialaccounting,booksandrecordkeeping,fraudorsimilarfinancialimproprietyisalleged)andtheresultsoftheannualcertificationprocessforCAEemployeesunderCAE’sCodeofBusinessConduct.

Diversity initiativesInMay 2015, following the GC’s recommendation, the Board adopted the Policy Regarding Board andExecutiveOfficerDiversity.

ThePolicyconfirms theguidingprinciple that theBoardwillnominateDirectorsandappointexecutiveofficersbasedonmeritandtheneedsofCAEattherelevanttime,and,thatCAEisstronglycommittedtofinding thebestpeople toserve insuchroles.ThePolicyalsorecognizes thatdiversityhelpsensurethat (a) Director and executive officers provide the necessary range of perspectives, experiences andexpertiserequiredtoachieveeffectivestewardshipandmanagementofCAE,and(b)avarietyofdifferingperspectives are included in addressing issues, while providing a greater likelihood that proposed solutions willberobustandcomprehensive.GenderdiversityisspecificallyacknowledgedinthePolicyasasignificantaspectofdiversity.

The Policy provides that:• inidentifyingpotentialcandidatestoserveontheBoard,theCommitteewill(a)consideronlycandidates

who are highly qualified based on their talents, experience, expertise and character (b) take intoaccount criteria that promote diversity, including, but not limited to, gender, international background, nationality,age,andindustryknowledge,(c)endeavortouseanyavailablenetworkoforganizationsandassociationsthatmayhelpidentifydiversecandidates,and(d)inordertosupportthespecificobjectiveof gender diversity, consider the level of representation ofwomenon theBoard; and in identifyingpotentialcandidatesforappointmentasPresidentandCEOandforotherexecutiveofficerpositions,theHumanResourcesCommitteeandthePresidentandCEO,respectively,will(a)considerindividualsfromavarietyofbackgroundsandperspectiveswiththeCompany’sdiversityobjectivesinmind,including,withoutlimitation,thespecificobjectiveofgenderdiversity,and(b)considerthelevelofrepresentationofwomeninexecutiveofficepositions.



InMay 2018, the Board, on the recommendation of the GC, updated the Policy Regarding Board andExecutiveOfficerDiversity,andadoptedatargetthatwomenrepresentatleast30%ofdirectorsby2022.The Board remains committed to its diversity initiatives and will continue to include diversity as an important considerationintheselectionprocessofanyfuturecandidates.

In order to ensure that the Policy is appropriately implemented and to measure its effectiveness,at least annually:• theCommitteewillassessandreport totheBoardregardingtheefficacyof theDirectornomination

processatachievingtheCompany’sdiversityobjectives;and• thePresidentandCEOwillassessandreportannuallytotheHumanResourcesCommitteeregarding

theefficacyoftheexecutiveofficerappointmentprocessatachievingtheCompany’sdiversityobjectives.

CAEhasnotadoptedtargetsforthenumberofwomenorotherdiversegroupsinexecutiveofficerpositions,duetothesmallsizeofthisgroupandthechallengetoeffectchangeatthislevelofseniorityintheorganization.Itbelievesthatdoingsocouldresultinapotentialconflictwiththeprinciplethatthepresenceoftherequisitecompetencies,skills,businessandfinancialexperience,personalqualitiesandlevelofcommitmentshouldbeof paramount importancewhen considering executiveofficer appointments.However, CAE recognizesthatdiversityisanessentialconsiderationintheselectionprocessfornewexecutiveofficersandintendstoimplementproactivestepstoincreasethenumberofwomeninleadershippositions.

Twooften(or20%)ofCAE’sDirectorNomineesandtwooften(or20%)oftheCompany’scurrentexecutivesarewomen.Atotalof6womenoccupyseniormanagementpositions(i.e.vicepresidentorabove),whichrepresents19%oftheCompany’stotalseniormanagementpopulation.



e t mm ttee

AssiststheBoardinitsoversightoftheintegrityofourconsolidatedfinancialstatements,compliancewithapplicablelegalandregulatoryrequirements,theindependence,qualificationsandappointmentof theexternal auditors, theperformanceofboth theexternal and internal auditors,management’sresponsibilityforassessingandreportingontheeffectivenessofinternalcontrolsandourenterpriseriskmanagementprocesses.

Also seeourAnnual InformationForm for the yearendedMarch31, 2018 (which you canaccessonourwebsiteatCAE.com,onSEDARatsedar.comandonEDGARatsec.gov),forinformationabouttheAudit Committee, including its mandate and Audit Committee policies and procedures for engaging the externalauditors.

Allmembersof theAuditCommitteeare IndependentDirectors.Mr.MacGibbon,andMs.StevensonhavebeendeterminedbytheBoardtobetheAuditCommitteefinancialexperts.Inaddition,theBoard,initsjudgment,hasdeterminedthateachothermemberoftheAuditCommitteeisfinanciallyliterate.TheCharteroftheAuditCommitteeisavailableinthegovernancesectionofourwebsiteatCAE.com.

TheAuditCommitteeheldfourmeetingsinFY2018;aggregateattendance:100%.

A.N.MacGibbon(Chair) P.Billson F.Olivier M.E.Roach K.B.Stevenson

The members of the Audit Committee are selected for their experience and knowledge with respect to financial reporting, internal controls and riskmanagement. Below are details of committeemembers’careerhighlightsthatmakethemqualifiedandeffectiveAuditCommitteedecision-makers:

Mr.MacGibbon,ChairoftheAuditCommittee,bringsawealthoffinancialexpertisetothecommittee.HewasformerlytheManagingPartnerandChiefExecutiveofDeloitteLLP(Canada),amemberofDeloitte’sBoard of Directors, and a member of the Executive and Board of Directors of Deloitte Touche Tohmatsu Limited.Mr.MacGibbon isacharteredprofessionalaccountantandaFellowof theOntario InstituteofCharteredProfessionalAccountants.

Ms.Billsonhasextensivemanagerialexperiencewithintheaerospacesector.Thismanagerialexperience,setoutinSection3above,hasprovidedMs.Billsonwithsignificantinsightintofinancialissuesencounteredbycompaniesconductingbusinesswithintheaerospacesector.

Mr.Olivierhas significantmanagerialexperience, inparticularasPresidentandChiefExecutiveOfficerof Transcontinental Inc. Mr. Olivier is also a graduate of the Program for Management DevelopmentatHarvardBusinessSchool.

Mr.RoachhasextensiveleadershipexperienceinCanadianpublictechnology-focusedcompanies,includingasPresidentandChiefExecutiveOfficerofCGIGroup Inc. for 10 years.Mr.RoachholdsaBachelorofArtsinEconomicsandPoliticalScience,aswellasanHonoraryDoctorateinBusinessAdministrationfromLaurentianUniversityinSudbury,Ontario.

Ms.Stevensonhasextensivefinancialandaccountingexperience,includingfromherservicesasTreasurerofNortelNetworksCorporation,asafinanceexecutivewithJ.P.MorganChase&Co.,andasformerChairoftheAuditCommitteeofOSIPharmaceuticals,Inc.ShecurrentlyservesontheAuditCommitteesofOpenText Corporation and Capital Power Corporation and chairs the Corporate Governance Committee of CanadianImperialBankofCommerce.



g g t 20 8• Thecommitteereviewedtheinternalauditplanandquarterlyinternalauditreports.• ThecommitteemonitoredtheapplicationofIFRS9andIFRS15.• Throughout the past year, the committee reviewed, with and without management present, the results

ofPwC’scommunicationswithCAErequiredbygenerallyacceptedauditingstandards.• Thecommitteereviewedindetailquarterly interimfinancial informationandearningspressreleases

beforetheirpublicrelease.• ThecommitteealsoreviewedandrecommendedapprovaltotheBoardofthequarterlyMD&Aandthe

pressreleasesforthequarterlyresults.• The committee reviewed theMD&Aand audited consolidated financial statements of CAEprepared

bymanagementforthefiscalyearendedMarch31,2018withmanagementandPwC,andthereafterrecommendedthattheybeandfiledwiththeAutoritédesmarchésfinanciersandtheSEC.

• ThecommitteeadoptedaPolicyandProcedureforAuditandNon-AuditServices.• The committee reviewed amendments to the Enterprise Risk Policy to incorporate the compilation of a

RiskProfileandthecreationofaRiskPolicyandrecommendedtheseforapproval.• The committee reviewed the processes involved in evaluating CAE’s internal controls and oversaw

the complianceprocess related to the certificationandattestation requirementsof SOXand relatedSECrules,aswellasoftherulesrelatingtoauditcommitteesandcertificationoffinancialinformationadoptedbytheCSA.

• The committee also reviewed export controls, fraud review processes, information technology and cyber securityrisks,capitalstructureandtreasury,taxcomplianceandIFRSaccountingstandardchanges.

• ThecommitteereviewedamendmentstotheHiringPolicyRegardingExternalAuditorstoincorporatechanges to clarify prohibited roles and to avoid any potential conflict as to the independence oftheauditors.

• The committee reviewed amendments to the Disclosure Policy to incorporate changes that ensure timely,consistent,andfairdisclosureofcorporateinformation.



e man e e mm ttee

Assists the Board of Directors in its oversight responsibilities relating to compensation, nomination, evaluationandsuccessionofthePresidentandCEO,otherofficersandmanagementpersonnel;overseestheCompany’senvironment,healthandsafetyandaviationsafetypoliciesandpractices,pensionplanadministrationandpensionfundinvestments,andmanagementdevelopmentandsuccessionplanning.

AllmembersoftheHRCareIndependentDirectors.ThemandateoftheHRCisavailableinthegovernancesectionofourwebsiteatCAE.com.

TheHRCheldfivemeetingsinFY2018,aggregateattendance:96%.

Hon.M.M.Fortier(Chair) A.MacGibbon Hon.J.P.Manley Gen.PeterJ.Schoomaker, A.J.Stevens USA(Ret.)

The HRC is responsible to oversee the Company’s executive compensation programs and successionplanning.WeconstantlyensurethatmembersoftheHRChavetheexperienceandknowledgetofulfillthisrole.Belowaredetailsofcommitteemembers’careerhighlightsthatmakethemqualifiedandeffectiveHRdecision-makers:• TheHonourableMr.Fortier,ChairoftheHRC,aspastChairoftheHumanResourcesandCompensation

Committee of Aimia Inc. and as past Minister of Public Works and Government Services, Minister ofInternationalTradeandMinisterresponsibleforGreaterMontréalfortheCanadianGovernment,hasextensive experience dealing with human resources and compensation matters in both corporate and governmententities.

• Mr.MacGibbonjoinedtheHRCinNovember2017.Mr.MacGibbonisdirectorofToronto-DominionBankandwaspreviouslyViceChairofOsler,Hoskin&HarcourtLLP.Mr.MacGibbonwasalsoGlobalManagingDirector,Quality,Strategy,andCommunicationsofDeloitteToucheTohmatsuLimited.Intheseroles,Mr.MacGibbonhasdealtextensivelywithhumanresourcesandcompensationissues.

• TheHonourableMr.Manley,asPresidentandCEOoftheCanadianCouncilofChiefExecutives,pastDeputyPrimeMinisterofCanadaandpastCabinetMinister(Industry,ForeignAffairsandFinancedepartments,non-concurrently),hasextensiveexperiencedealingwithhumanresourcesandcompensationmattersinbothcorporateandgovernmententities.Hecurrentlysitsasamemberoftwootherpubliccompanyboards,givinghimamorediverseperspectiveonhumanresourcespractices.

• GeneralSchoomakerhasbeenamemberoftheHRCsince2010.Hehasdealtwithhumanresourcesmatters as a four-star U.S. Army General. General Schoomaker serves on the Compensation andGovernanceCommitteesoftheBoardofDirectorsofARAInc.(aprivatecompany),andalsoformerlyservedontheCompensationCommitteeofDynCorp.HehastheexperienceandbackgroundtoaddressCAE’shumanresourcesissuesandcompensationpractices.

• Mr. Stevens, as past CEO of a public company and a boardmember of Canadian and internationalcompanies, has extensive experience in compensation matters at both the executive and employee levelsinacorporateenvironment.

As past CEOs and/or seniormilitary/government leaders/managing directors, allmembers of the HRCpossessthefinancialknowledgerequiredinordertoassessanddeterminetheapplicabilityofmeasuresand targets utilized in determining variable compensation and assessing executive performance against targetsandoverallCompanyperformance.



g g t 20 8

Talent managementInFY2018,CAEcontinuedtheexecutionofitsleadershipandsuccessioninitiativethroughouttheCompany.In addition to the focus on identification and development of key talents deeper into the organization,anincreasedfocuswasalsodirectedtowardstheidentificationanddevelopmentofcurrentandfuturefemaleleadersacrossCAE.AspecificsegmentoftheAnnualLeadershipDevelopmentProcess(ALDP)wasdedicatedto the identification and discussion of high potential female talent at all levels of the organization andsubsequentdiscussionaroundtheirfuturedevelopmentopportunities.TheHRCreviewedacomprehensiveDiversity&Inclusioninitiativethatwaslaunchedtofurthersupportthiseffort.Theintentionoftheprogramistocreatetheawareness,toolsandinfrastructuretosupporttheCompany’sgoalstoincreasetheleveloffemalerepresentationinleadershippositions.

TheHRCalsoreviewedanewapproachtoCAE’sperformancemanagementsystemthatwasdevelopedin FY2018 to further support thedevelopment of CAE employees. This newapproachwasdesigned tofacilitate a greater level of conversations, transparency and people development through multi-way feedback.TheprogramwaslaunchedinQ3,wasrolledoutinstagesoverthefollowingmonthsandwillbefullyimplementedinQ2FY2019.

Throughitscommitmenttoleadershipdevelopment,theCompanywasabletoprovideforaneffectivelevelof movement of some of its key talents into development roles within various business units and regions, servingtodeveloptheseindividualsandfurtherstrengthenourleadershipincertainareas.InFY2019,inconjunctionwiththeCompany-wideALDPandthefocusondiversity&inclusionalongwithperformancemanagement, the Company will continue to develop these high potential individuals and look to further facilitatedevelopmentopportunitiesforourkeytalentacrosstheorganization.TheseactionswillsupporttheHRC’soversightoftheCompany’seffortstoensuretheeffectivedevelopmentofCAE’sfutureexecutiveleaderssothatasufficientleadershipandtalentpipelineisinplacetomeettheCompany’sfutureneeds.

Executive compensationDuring FY2018,HRC reviewed the CAE comparator group to ensure compliancewith criteria regardingfinancialsizeandindustry,locationandscaleofoperation.Asaresult,thecomparatorgroupwasupdatedto include 26 Canadian and U.S. companies which represent not only the Company’s competitors forbusinessbutalsofortalent.TheHRCalsoreviewedtheSTIPdesign.Toreinforcecollaborationacrossallbusinessunitsandregions,executivepayoutswillbebased100%onoverallCAEresultsinFY2019(exceptHealthcare). For the Healthcare team, the incentive plan remains weighted towards its business unitperformance.ThefocusonbusinessunitresultswillremainimportantandwillbereflectedthroughtheindividualSTIPmultiplierforthebusinessunitGroupPresidents.

The HRC also conducted a compensation risk assessment with the assistance of its independentcompensationconsultanttoidentifypotentialrisksassociatedwithCAE’scompensationprograms,practicesandpolicies.TheassessmentconcludedthattherisksarereasonablyunlikelytohaveamaterialadverseeffectontheCompany.

Health and safetyIn addition to compensation matters, a key responsibility of the HRC relates to Health and SafetyperformancewithinCAE.ThisisanareathathasreceivedsignificantattentionfromboththemanagementteamandtheHRC.TheperformanceofthebusinessinmattersofhealthandsafetyreflectsthisfocuswithverysignificantimprovementsinFY2018.Overall,acrosstheorganization,strongsafetyperformancewasevidentinarecordableaccidentdeclineof24%,areductionintheinjuryfrequencyrateof29%andthedayslostbeingreducedby52%.



MajoractivitiesandtopicscoveredbytheHRCaredetailedonaby-meetingbasisinthecalendarbelow:

Regular Meetings Agenda

May 2017

e e • Executive compensation trends• Proxy circular• PresidentandCEOFY2017performanceandFY2018objectives• AnnualHRCself-evaluation• Environment, health and safety

a • STIP,LTIPawardsandmeritincreasesforthePresidentandCEO’sdirectreports• PayoutsunderFY2017STIPandperformanceshareunitgrantawardedinFY2015• FY2018annualcompensationplan• PresidentandCEOobjectivesforFY2018

August 2017

e e • SuccessionplanningandAnnualLeadershipDevelopmentProcess(ALDP)• Diversity Program• STIP update• Retirement and savings plans• Proxy advisory reports• Environment, health and safety

em e 20

e e • FY2019STIPandLTIPdesign• STIP update• Executive share ownership guidelines status• Labour relations update• IndependenceletterfromtheBoard’scompensationconsultant• Environment, health and safety

a • Revised comparator group

e a 20 8

e e • Environment, health and safety• Talentandleadershipupdate(ALDP,diversity,performancemanagementandvalues)• STIP update• FY2019STIPandLTIPdesign• ReviewofHRCmandateandworkplan• GlassLewisandISSupdatesandFY2018proxypreparation• Executive compensation trends and updates



This section provides information pertaining to the compensation, Share ownership and Share ownership requirementsofournon-employeeDirectors.

Our compensation program for non-employee Directors has the following objectives:• Attractandretainhighlyqualified,committedandtalentedmembersoftheBoardwithanextensiveand

relevantbreadthofexperience;and• AligntheinterestsofDirectorswiththoseofourShareholders.

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

The Governance Committee reviews every second year the compensation of non-employee Directors 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 competitivewithdirectors’compensationtrends.AnyDirectorwhoisalsoanemployeeoftheCompanyoranyofitssubsidiariesdoesnotreceiveanycompensationasaDirector.

EffectiveJanuary1,2018,Directors’all-inclusivefeesweresetasfollows:

Position Annual Fee m a ment

Board Chair $310,000• $142,500inDSUs• $167,500incashorDSUsatDirector’selection

BoardMember $167,000• $104,500inDSUs• $62,500incashorDSUsatDirector’selection

Board Committee Chair 1 $25,000 • DSUsuptominimumownershiprequirement• CashorDSUsatDirector’selectionthereafter

BoardCommitteeMember $10,000• DSUsuptominimumownershiprequirement• CashorDSUsatDirector’selectionthereafter

SpecialAdHocSteeringCommitteeChair $25,000 • CashorDSUsatDirector’selection

SpecialAdHocSteeringCommitteeMember $15,000 • CashorDSUsatDirector’selection

1 TheGovernanceCommitteechaircompensationisof$20,000.CommitteeChairsdonotreceiveadditionalcompensationforCommitteemembership.

TheBoardbelievestheall-inclusiveannualflatfee(inlieuofretainersandattendancefees)compensateDirectorsfairlyandequitablyfortherisks,timecommitmentandresponsibilitiesinbeingeffectiveDirectors.

e t m en at n en ma ng an m a at g To benchmark Directors’ compensation,the Governance Committee uses the same comparator group of companies as that used to benchmark NEOs’ compensation. ThiscomparatorgroupcomprisesCanadianandU.S.publicly-listed companies that have relevance toCAE in termsof headoffice location,marketsegment or business activities, revenue and market capitalization. The comparator groupwasreviewedinNovember2017asadjustmentswere made to account for merger and acquisition activities and to ensure it continues to reflectCAE’semploymentmarketandfinancial results.RefertoSection7– “ e t e m en at n” of this Circular for the companies included in CAE’s latest Comparator Group and detailedselection criteria. Prior to this exercise, the lastevaluationwasperformedinFY2015.

• ame m a at g a

• e t m en at n en ma e an a te n 2018

• e t a e a a at a n e ee t e e t e n t e t me

mm tment an e ate t e ng e e t e e t

Section 6e t m en at n


n m ee e t e e e a e n t an e t anADSUisequal invaluetooneCommonShareofCAEandaccruesadditionalunits inanamountequalto each dividend paid on Common Shares. DSUs earned by non-employeeDirectors vest immediatelybut are only redeemable after terminationof theDirector’s servicewithCAE. Payment in cash is thenmade based on the market value of the equivalent number of Common Shares, net of tax and any other applicablewithholdings.

M n m m a e e e ementDirectors are required to own the equivalent of threeyears’ofBoardannualbasefeesintheformof Common Shares and/or DSUs. Directors arerequired to receive their compensation in respect of their services, including, without limitation, the annual retainer for serving as a member of the Board or a committee thereof, in Deferred Share Unitsuntilsuchshareholdingisattained.

Non-employee Directors holding Common Sharesand/orDSUsofa value that is less thanthe equivalent of three years of Board annual base fees receive all fees in the form of DSUs.Once such minimum is reached, a non-employee Director may elect to continue to participate in theDirectors’DSUPlan in respectofpartorallof his or her annual Board and Committee fees over and above the annual fee component paid inDSUs.

• M n m m a e ng e ement a gn e t an a e e nte e t

• a t t ee t me t e ann a eta ne

• Annual retainer paid in DSUs until the e ement atta ne

• a tate e t a e ement m n m m a e ng e ement

A non-employee Director is not, once the minimum Common Share and/or DSU ownership target isreached,obligatedtoacquiremoreSharesorDSUsifthevalueofhis/herinvestmentinCAEdropsduetostockmarketfluctuations.

m t gat nAsperthetermsoftheDSUPlan,therightsandinterestsofaDirectorinrespectoftheDSUsheldinsuchparticipant’saccountarenottransferableorassignableotherthanforspecificcasesoflegalsuccession.

CAEmaintainsDirectors’andofficers’liabilityinsuranceforitsDirectorsandofficers,aswellasthoseofitssubsidiariesasagroup.

nt e g ng ThepolicyprovidesthatnoDirectororCAEexecutive(definedtoincludeseniorofficersandvice-presidents)may,atanytime,purchaseorotherwiseenterintofinancialinstruments,includingprepaidvariableforwardcontracts, instruments for the short sale or purchase or sale of call or put options, equity swaps, collars, or unitsofexchangeablefunds,thataredesignedtoorthatmayreasonablybeexpectedtohavetheeffectofhedgingoroffsettingadecrease in themarketvalueofanyCAEsecurities, includingbutnot limitedtoDSUs.


Section 6 (continued)e t m en at n

e t m en at n ta eThefollowingtablesummarizescompensationearnedbynon-employeeDirectorsofCAEduringFY2018:

ame Total Fees Earned ($) Paid in Cash ($) Paid in DSUs ($)

MargaretS.(Peg)Billson 160,500 – 160,500

Hon.MichaelM.Fortier 173,995 – 173,995

JamesF.Hankinson 302,500 167,500 135,000

PaulGagné 2 68,441 – 68,441

AlanN.MacGibbon 189,398 – 189,398

Hon.JohnP.Manley 170,500 – 170,500

François Olivier 156,898 – 156,898

MichaelE.Roach 3 65,778 – 65,778

Gen.PeterJ.Schoomaker,USA(Ret.) 170,500 – 170,500

AndrewJ.Stevens 191,750 – 191,750

KatharineB.Stevenson 170,500 – 170,500

1 RepresentsthevalueofDSUsdeterminedbasedonthegrantdatefairvalueoftheawardinaccordancewithaccountingstandards.ThevalueofeachunitissettoCAE’sclosingSharepriceonthedateofgrant.

2 Mr.GagnéceasedhisserviceasDirectorinAugust,2017.3 Mr.RoachjoinedtheBoardonNovember10,2017.

e t a e a e a aThefollowingtableshowsforeachnon-employeeDirectorthenumberofDSUsoutstandingatthebeginningofthefiscalyearendedMarch31,2018,thenumberandthevalueoftheDSUsthatvestedduringsuchyear,andthenumberandthevalueofalloutstandingDSUsasatMarch31,2018.Thenon-employeeDirectorsarenoteligibletoreceivestockoptionsorotheroption-basedawards.

Share-based Awards

ame

m e DSUs at theeg nn ng

20 8(#)

m e DSUs Vested

During theYear 2

(#)

Value VestedDuring the

Year($)

m e DSUs at the

n 20 8(#)

Ma et a e of DSUs not Paid Out or

Distributed($)

MargaretS.(Peg)Billson 15,015 7,361 166,734 22,377 536,593

Hon.MichaelM.Fortier 49,886 8,495 192,559 58,382 1,399,998

JamesF.Hankinson 140,416 8,184 185,248 148,601 3,563,443

AlanN.MacGibbon 18,036 8,693 196,870 26,729 640,962

Hon.JohnP.Manley 97,462 9,089 205,823 106,550 2,555,076

François Olivier 897 6,976 158,122 7,874 188,808

MichaelE.Roach – 2,806 65,861 2,806 67,299

Gen.PeterJ.Schoomaker,USA(Ret.) 87,599 8,935 202,351 96,535 2,314,905

AndrewJ.Stevens 43,749 9,206 208,315 52,955 1,269,861

KatharineB.Stevenson 100,025 9,128 206,725 109,153 2,617,496

1 Mr.GagnéisnotincludedsinceheceasedhisserviceasDirectorofCAEinAugust2017andasaresult,allhisDSUshavesincebeenpaidout.2 RepresentsthenumberofDSUseachnon-employeeDirectorearnedduringFY2018,includingadditionalDSUsequivalentinvaluetothedividendspaidontheCommonShares

creditedin-year,roundedtothenearestwholenumber.TheDSUsvestimmediatelybutareredemableandpaidoutonlyafterthenon-employeeDirectorceasestobeaDirectorofCAEinaccordancewiththetermsoftheDirectorsDSUPlan.

3 ThevaluewasdeterminedbymultiplyingthenumberofDSUs,includingadditionalDSUsequivalentinvaluetothedividendspaidontheCommonSharescreditedin-year,bytheclosingpricesoftheCommonSharesontheTSXontherespectivedatesofeachgrant.TheDSUsaregrantedattheendofeachquarter.

4 ThemarketvalueoftheDSUswasdeterminedbymultiplyingthenumberofallDSUsvestedbutnotpaidoutordistributed,includingadditionalDSUsequivalentinvaluetothedividendspaidontheCommonSharescreditedin-year,asatMarch31,2018bytheclosingpriceoftheCommonSharesontheTSXonMarch29,2018,whichwas$23.98.Numberscontainingfractionshavebeenroundedupforcalculationpurposes.


Section 6 (continued)e t m en at n

m en at n n an naThis section describes our compensation philosophy, policies and programs, and provides the detailswith respect to the compensation awarded to our Named Executive Officers in FY2018. For FY2018,our NEOS were:• Marc Parent, President and CEO• Sonya Branco, Vice President, Finance and Chief Financial Officer• Gene Colabatistto, Group President, Defence and Security• Nick Leontidis, Group President, Civil Aviation Training Solutions• Mark Hounsell, General Counsel, Chief Compliance Officer and Corporate Secretary

20 8 e man e g g t In FY2018, CAE delivered a strong financial performance, with all segments showing year-over-year revenueand operating income growth. The results continue to validate our training strategy and represent animportant step in our pursuit to be the Recognized Global Training Partner of Choice. The emphasis ontraining, continued strong execution, and supportivemarket conditions enabled solid financial performancein both Civil Aviation Training Solutions (“Civil”) and Defence & Security (“Defence”) businesses. TheHealthcare business resumed growth with the launch of innovative products and a broader market reach.

The following chart outlines CAE’s strategy and highlights in relation to FY2018 achievements.

In FY2018, our strategy for capital and other resource allocation decisions was guided by three overarchingstrategic imperatives: grow by providing the most comprehensive solutions worldwide to enable us to bethe recognized global training partner of choice; protect our leadership position by ensuring the highestlevels of customer satisfaction and operational excellence; and innovate by driving new technology andofferings which advance training for our customers.

Strategic Priority e e ement

Protect • Solid track record of customer satisfaction underpinning our vision to be the recognizedglobaltrainingpartnerofchoice.

• 50full-flightsimulatorssold.• Above plan capacity training volume delivered in several of our live training programs,withpositivecustomerfeedback.

• Best-in-classsafetyandstandardsprogramestablishedinDefence.

Grow • Year-over-yearrevenuesincreasedby5%toarecord$2.8billion.• Deliveredarecordorderintakeof$3.9Bandbacklogof$7.8billion.• AnnualEPSfromcontinuingoperationsgrewby8%to$1.11 1.• Financialpositionstrengthenedwithanetdebttototalcapitalratioof21.5%.• Sustainedstrongfinancialresultstranslatedinto18%sharepriceappreciationduringFY2018.

• ContinuedstrongutilizationoftheCiviltrainingnetwork.• In Civil, signed comprehensive long-term training agreements with airlines includingAirAsia,JazzAviation,AirTransatandVirginAtlantic;inbusinessaviation, signed long-term contracts with customers world-wide, including Elit’AviaandFlexjet.

• InDefence,TrainingSystemsIntegrator(TSI)contractswithQatarEmiriAirForceandBrazilianNavy.

1 AnnualEPSfromcontinuingoperationsof$1.29($1.11adjustedbeforeU.S.taxreformimpactandnetgainsonstrategictransactionsrelatingtoAsianjoint-ventures), upfrom$0.93(up8%from$1.03beforespecificitems)inprioryears.

Section 7e t e m en at n


Strategic Priority e e ement

Innovate • First-everPilotDemandreportpublished.• CAEReal-timeInsightsandStandardizedEvaluations(CAERise™)launched,thefirstcommercialNextgenerationtrainingsystemthatstrengthensinstructors’abilitytodeliverstandardizedtrainingbyusinglivedataduringtraining sessions and providing insights and a new source of data to enhance airlines’pilottrainingprograms.

• CAE’saugmentedrealityandvirtualreality(AR/VR)basedcapabilities,integrated live-virtual-constructive and next generation training systems demonstrated and recognized as “Best in Show” technology at I/ITSEC, theworld’slargestmodeling,simulationandtrainingtradeshow.

• CAEHealthCare’sAR/VRcapabilitiesrecognizedwiththeUnityImpactAwardfor technological innovation in education and healthcare, and with an inauguralinnovationawardof.OrgCommunity.

• InnovativeproductslaunchedinHealthcare,suchasCAEJuno,aclinicalskills manikin for nursing, Anesthesia SimSTAT, a screen-based simulation approved by the American Board of Anethesiology, augmented reality trainingsolutionsformedicaldeviceOEMs(AbiomedandMedtronic),andCAELucinaAR,theworld’sfirstaugmentedrealitychildbirthsimulator.

• EnteredintoapartnershipwiththeAmericanHeartAssociation(AHA)forthedeliveryoflifesavingAHAcoursesincertainmarkets.

m nt n ng e at n 1

FY2017 FY2018

$1.03

$1.11+8%

et n n a ta m e 1

FY2017 FY2018

11.2%

12.3%

+1.1percentage

points

Share Price

FY2017 FY2018

$20.32

$23.98

+18%

a g

FY2017 FY2018

$7.5B $7.8B4%

1 AnnualEPSfromcontinuingoperationsof$1.29($1.11adjustedbeforeU.S.taxreformimpactandnetgainsonstrategictransactionsrelatingtoAsianjoint-ventures),upfrom$0.93(up8%from$1.03beforespecificitems)inprioryears.


Section 7 (continued)e t e m en at n

FY2018overallCompanyperformanceresultedinmaximumpayoutlevelsfortwooutoffourannualshort-termincentive(STIP)metrics,andintheCAESTIPpayoutfactorof167%.

Details are provided in the section “ e t e m en at n – ete m nat n t e m en at n n 2018”.

m en at n e t eMuch of CAE’s success in developing and growing its worldwide business is attributable to havinghighly qualified and motivated employees. The executive compensation programs are based ona pay-for-performance philosophy. Executives receive salaries, annual short-term incentive awardscontingent upon attaining consolidated, business unit and individual achievements, and long-term incentiveawardsthatmotivateexecutivestocreateincreasingandsustainablevaluefortheShareholders.Inaddition,executivesreceivepension,perquisitesandbenefits.

The objectives of the CAE executive compensation programs are to:

• Attract,retain,andmotivatequalifiedexecutives

• AlignexecutivesandShareholders’interestsaroundthecreationofincrementalvalue

• Foster teamwork and entrepreneurial spirit

• Establish an explicit and visible link between all elements of compensation and corporate and individual performance

• Integrate compensation with the development and successful execution of strategic and operational plans

ett ng e t e m en at nm en at n n e

CAE’s compensation policies and practices arestructured in a balanced way, such that they do not create risks that could have a material adverse effectontheCompany.

e em a e e t e m en at n g am n a a e

an ng te m m en at n t at t e interests of our executives with those of our Shareholders.



TheprinciplesunderlyingCAE’sexecutivecompensationprogramsareasfollows:

a e man e The majority of compensation is variable, contingent and directly linked to financial and operational performancemetrics, as well as CAE’s sharepriceperformance.

a an e The portion of total compensation that is performance-based increases with anexecutive’slevelofresponsibility.

ng te m For our most senior executives, long-term stock-based compensation opportunitiesoutweighshort-termcash-basedopportunities.

a e e a gnment The financial interests of executives are aligned with the interests ofour Shareholders through stock-based compensation, and annual and long-term performance metrics that correlate with sustainable Shareholder valuegrowth.

m et t ene Total compensation is competitive to attract, retain, and motivate CAE’sexecutive teamwhile fostering entrepreneurial spirit. This is achieved byproviding compensation at the median of our comparator group but paying uptothe75thpercentileforsuperiorperformance.

Responsibility Compensationtakesintoaccounteachexecutive’sresponsibilitytoalwaysact in accordance with our ethical, environmental and health and safety objectives,channeledthroughourCodeofBusinessConduct.Commitmentto ethical and corporate responsibilities is a fundamental belief underlying all aspects of our behaviour and compensation plans, from setting targets toconductingregularperformanceassessmentsandsuccessionplanning.Financialandoperationalperformancemustnotcompromisethesevalues.

e t e n ett ng e e t e m en at nTheHRCactsasanadvisorycommitteetotheBoardofDirectors.TheBoardassignsresponsibilitiestotheHRCwithregardstothereview,approval,andadministrationofCAE’scompensationprograms.ThemaincomponentsoftheHRC’smandatewithrespecttocompensationare:• Reviewandapprovethedesignofexecutivecompensationandbenefitsprograms;• Reviewandconsidertheinputofindependentexternalconsultants;• ReviewandapprovethecompositionoftheCAE’scomparatorgroup;• Asappropriate,meetwithShareholderstodiscussexecutivecompensationandbenefits;• Report to the Board on how plan changes to compensation and benefits impact CAE’s financial

performanceandobligations;• RecommendtotheBoardthePresidentandCEO’scompensation;• ReviewandapproveonbehalfoftheBoardmanagement’srecommendationsforannualcompensation

ofthePresidentandCEO’sdirectreports;• Reviewandapprovechangestopensionplans,includinginvestmentstrategies;and• PreparetheCompensationDiscussion&Analysissectionoftheannualmanagementproxycircularand

otherdisclosuredocuments.



e m en at n n tantThe HRC retains the services of an independent compensation consultant, Hugessen ConsultingInc. (“ ge en”), to provide advice on executive compensationmatters. Hugessen is responsible forreviewingmaterialspresentedtotheHRConcompensation-relatedmattersandassiststheCompanyinthedesignofitsexecutivecompensationprograms.HugessenperformsdutiesfortheHRConly.NoCAEDirectororofficerhasanyaffiliationwithHugessen.

CAE’smanagementalsousestheservicesofPCI–PerraultConsultingInc.(“PCI – Perrault”)toassistCAEin the review of the CAE comparator group, benchmarking of its executive and Board of Director positions, aswellasinthedraftingoftheannualmanagementproxycircular.

WhiletheHRCandtheBoardreceiveinputfromothers,theyareresponsibleforthedesign,applicationandoversightoftheCAE’sexecutivecompensationprograms.

ThefollowingtableshowsthefeespaidbyCAEtoHugessenandPCI-PerraultforFY2018andFY2017.

Fees paid toge en

Fees paid toPCI – Perrault

Year 20 8 FY2017 20 8 FY2017

Executive Compensation $169,183 $94,842 $64,537 $23,193

OtherMandates – – – –

Total 8 8 2 $64,537 $23,193

m a at Executive compensation is benchmarked every other year with the assistance of compensation consultants, PCI – Perrault, who prepare an analysis of CAE’s compensation against compensationpracticeswithinthecomparatorgroup.Themostrecent executive compensation benchmarking was conductedinFY2018.

e m a at g n e m an e t at e ate n at ea t ne ma et egment a e a m a nan a an

operational footprint, and with which m ete ta ent

CAE’scomparatorgroupcomprisesabroadmixtureofrelevantCanadianandUScompanies.CAE’sbusinessunits compete within several market segments and not all CAE competitors are present in all the segments orpublishorprovidesegment-specificcompensationdisclosurerelevanttoCAE.Therefore,CAEincludescompaniesthatareactiveinatleastoneofitsactivitysegments.Thetablebelowindicatesthemainactivitiesforwhichthecomparatorgroupcompanieswerechosen.

The following criteria are also considered when selecting comparator group companies:• Headofficelocation• Companyfinancials(revenueandmarketcapitalization)• Companies with business operations outside of Canada, reflecting the fact that over 90% of CAE’s

revenues are generated outside of Canada• CompaniesthatcompetewithCAEfortalent(inandoutsideofCanada)reflectingCAE’smultinational

reality.InFY2018,twooutofthreeofthePresidentandCEO’sdirectreportsleadingabusinessunitwerebasedoutsideofCanada.

• Companieswithsimilarbusinessprofiles,specifically: o Size o Business mix/industry similarity o Scale of operations outside home country o Talent requirements/primary competitors for talent



DuringFY2018,withtheassistanceofPCI-Perreault,theCAEcomparatorgroupwasupdatedtoensureallcompaniesstillmeetthecriteriaoutlinedonthepreviouspage.Thus,thefollowingisthelistofcomparatorcompaniesadoptedbytheHRCfortheFY2018benchmarkingexercise:

Aerospace Med. Devices Indus. Controls t a e a n ng m n t ng n Other Services

Canadian Group

BRPInc.

LinamarCorp.

MaxarTechnologies (formerlyMDA)

Open Text

ShawCor Ltd

SNC-LavalinGroupInc.

StantecInc.

WestJetAirlinesLtd.

US Group

AARCorp.

AMETEKInc.

AutodeskInc.

Cadence Design Systems

CraneCo.

CubicCorp.

Curtiss-WrightCorp

Esterline Technologies

GartnerInc.

HexcelCorporation

MoogInc.

RockwellCollinsInc.

SynopsysInc.

Teledyne Technologies

TransDigm Group

Triumph Group

VarianMedicalSystems

WoodwardInc.

CAEutilizesthecompensationdatafromeachoftheCanadianandtheU.S.groupofcomparatorcompaniesforbenchmarkingpurposes.TheCanadianandU.S.companiesareweightedinaggregateequallyandthecompensationvaluebetweenthetwocomparatorgroupsiscomparedatpar.

m a at g nan a

ana an m a at m a at m ne m a at

Revenue Ma et a Revenue Ma et a Revenue Ma et a

P25 $2,126M $3,031M $2,007M $3,672M $2,009M $2,885M

Median $4,337M $4,163M $2,551M $6,930M $2,636M $5,847M

P75 $5,492M $6,741M $2,925M $14,321M $4,012M $10,941M

CAE $2,705M $5,451M $2,705M $5,451M $2,705M $5,451M

CAE Position P32 P66 P63 P35 P55 P44

1 BasedonthemostrecentannualreportsatthetimeofthebenchmarkinginFY2018.



m en at n an e t eCAE’sexecutivecompensationprogramconsistsoffivemainelements:basesalary,short-termincentive,long-term incentives (restricted share units, performance share units and stock options), pension, andperquisitesandbenefits.ThetablebelowillustratesCAE’scompensationpolicy.Totaltargetcompensationispositionedatthemedianofthecomparatorgroupbutmayresultinpayinguptothe75th percentile for superiorperformance.

m en at n mma

m an g g t Plan Objectives Policy

ae

aa

• Cash • Fixed rate of pay • Annual review

• Provide a base of regular income toattractandretainqualifiedleaders

• Recognize scope and responsibilities of the position as well as the experience of the individual

• Reward individual performance

• Set at the 50th percentile of the comparator group

tte

m n

ent

e

• Cash • Annual award based on corporate and where appropriate, business unit metrics(75%)andpersonalobjectives(KPIs)(25%)forthePresidentandCEO and his direct reports

• AsofFY2017,executivescanelectto receive a portion of or their entire STIP payment in the form of ExecutiveDeferredShareUnits

• For other eligible employees, annual award based on corporate and business unit metrics multiplied by an individual performance multiplier

• Reward the achievement of theCompany’sfinancialandoperational objectives

• Reward the achievement of personal objectives aligned withanindividual’sareaofresponsibility and role in realizing operational results

• Drive superior individual and corporate performance

• Set at the 50th percentile of the comparator group but may result in paying up to the 75th percentile for superior performance

ngte

m n

ent

e(L

TIP)

• Performance share units (50%weight)

• Stock options (30%weight)

• Restricted share units (20%weight)

• LTIPvalueisawardedindifferentmedium to long-term compensation vehicles with both time and performance vesting based on achievementoflonger-termfinancialobjectives

• Alignmanagement’sinterestswithShareholder value growth

• Reward the achievement of sustained market performance

• Recognize individual contribution and potential

• Attract and retain key talent

• Set at the 50th percentile of the comparator group but may result in paying up to the 75th percentile for superior performance

Pens

ion

• Monthlypension in cash at retirement

• DefinedBenefitPlanforexecutivesrepresenting2%ofaverage5bestyearsofearnings(salaryplusSTIP),multiplied by pensionable service

• SupplementaryPlanofferedtotheNEOs for pension rights exceeding limits for basic registered plans

• Support retention of key executives

• Set at the 50th percentile of the comparator group

ete

an

t

een

et

• Employee Stock Purchase Plan(“ESPP”)

• Perquisites

• ESPP: Employees and executives may purchaseCAESharesupto18%oftheirbasesalary;CAEmatches50%of the employee contributions, up to amaximumof3%oftheemployee’sannual base salary

• Perquisites: cash allowance to cover certain expenses, such as car, club membership and health spending account

• Provide executives with a share ownership building vehicle

• Set to be market competitive



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

President and CEO

LTIP 52%Salary 18%Pension 10%Perquisities&Benefits 2%STIP 18%

t e e age

LTIP 37%Salary 25%Pension 19%Perquisities&Benefits 4%STIP 15%

a e a a eThebasesalariesofCAE’sexecutivesarepositionedatthemedianofthecomparatorgroup.Whileanexecutive’ssalaryisgenerallytargetedataspecificrange around the market median, such salary may vary depending on the individual’s performanceandlevelofexperience.

a e a a e a e et t e gn e t e t n e an e n t e an

n a e e en e an e man e

BasesalariesarereviewedbytheHRCannually,consideringindividualachievements,generalperformance,benchmarkinformationandmarketconditions.

nn a t te m n ent e g am The STIP provides for an annual cash incentive for executives and management employees based on CAE’s consolidated performance andindividual achievements (KPIs for the PresidentandCEOandhisdirectreports).GroupPresidents’STIP awards are also based on their business unit’sperformance.

e ann a t te m n ent e an m t ate t e a e ement e ann a

nan a an e at na e t

Financial targets and KPIs are established by the Board of Directors for the President and CEO at the beginningofeachfiscalyear;thesamefinancialtargetsapplyfortheSTIPglobally.

As of FY2017, the weighting between CAE and business unit performance for Group Presidents wasmodifiedfrom37.5%CAE/37.5%businessunitto45%CAE/30%businessunit.Thiswasdonetoputmoreemphasis on the CAE consolidated performance to support and enhance collaboration in delivering overall consolidatedresults.

Thus, the split between CAE consolidated corporate results, business unit results, and individual KPIs for executivesinFY2018wasasfollows:

e man e Mea e e g t ng

PositionConsolidated CAE

e man ene n t

e man e Individual KPIs

President and CEO 75% – 25%

Group Presidents 45% 30% 25%

Executives with corporate-wide responsibilities 75% – 25%



Financialandnon-financialtargetswerespecificallybasedonthefourmetricsdetailedinthetablebelow.InFY2018, theOrder Intake replacedpreviouslyusedBook-to-Salesmeasureas itwasdeemedamoreaccurate representation of the future operational growth and a more commonly used metric among CAEpeers.

CAE LEVEL

EarningsperShare(“EPS”) 1 SegmentOperatingIncome(“SOI”) 2

Order Intake 3 Order Intake 3

ReturnonCapitalEmployed(“ROCE”) 4 CashFlowMeasure

Customer Satisfaction Customer Satisfaction

Thecombinationoffinancialandcustomersatisfactionmetricsatthecorporateandbusinessunitlevelsensures all executives are accountable for CAE executing on its vision of being the “Training Partner ofChoice”.

The respective weighting of each individual metric is as follows:

Earnings per Share/ 50%Segment Operating IncomeReturn on Capital 20%Employed/Cash FlowOrder Intake 20%Customer Satisfaction 10%

Why EPS 1?Intendedtokeepmanagementfocusedonearningspershareachievement.Inthecaseofbusinessunittargets,SegmentOperatingIncome replaces EPS for profitabilitymeasurement, focusing the business unit Group Presidents on the achievement of resultsdirectlyundertheirspanofcontrol.

Why Order Intake 3?Demonstrates the level of growth in sales for the Company’s products and services, thus is a representation of the futureoperationalgrowth.

Why ROCE 4?ROCEisameasurethatisusedtoquantifythevaluethatisgeneratedbyourassets.ItdemonstratestheprofitabilitythatisgeneratedbytheinvestmentsmadebytheCompany,suchasCAPEX,R&D,etc.Atthebusinessunitlevel,ROCEisreplacedwithcashflowtoensurethebusinessunitGroupPresidentsfocusonmeasuresdirectlyundertheircontrol,specificallytheamountofcashgeneratedandinvestedintheirunit.

Why Customer Satisfaction?SupportsCAE’s“TrainingPartnerofChoice”valuepropositionasitiscriticalinensuringsustainedandcontinuedbusinesswithCAE’sclients,thusfurtherstrengtheningtheCompany’smarketleaderpositionforthefuture.

KPIs for the President and CEO and his direct reports are quantitative and qualitative performance targets set forthereportingbusinessunitsaswellasforthecorporatefunctions.Theserelateto,amongothers,qualitymeasures,customerexperience,operationalefficiency,technologyenhancements,riskmanagement,andleadershipdevelopmentandemployeeengagement.

Short-term incentives are paid in the form of cash bonuses based on a percentage of salary that varies depending on the level of responsibility. Actual STIP awards can reach up to two times target levelsdependingupontheachievementofthepreviouslynotedperformancemetricsandpersonalobjectives.TheSTIPpaymentsforthePresidentandCEO’sdirectreportsareapprovedbytheHRC,andbytheBoardin the case of the President and CEO, following a review at year-end that considers overall corporate and individualperformanceandotherfactors.EffectiveFY2017,CanadianandUS-basedexecutivescanelectto

1 EPS from continuing operations represents net earnings of the Company divided by the number of fully diluted Shares.2 Segment Operating Income represents operating profit for each business unit.3 Order Intake represents the expected value of orders received.4 ROCE represents the ratio over a rolling four-quarter period of net income attributable to equity holders of the Company excluding net finance expenses, after tax, divided by

theaveragecapitalemployed.ThemetricsnotedaboveareGAAPandnon-GAAPfinancialmeasuresandtheirdefinitionsareprovidedintheCompany’sFY2018ManagementDiscussion&Analysis.



deferaportionof,ortheirentireSTIPpaymenttotheExecutiveDeferredShareUnitPlan.Suchdeferredamount is converted to aDSU that is equal in value to oneCommonShareof CAE (seedetails under“Executive Deferred Share Unit Plan”).

The table below outlines target and maximum short-term incentive levels by position:

ange a a e a a

Position Target Ma m m

President and CEO 100% 200%

Group Presidents and Vice President, Finance and CFO 65% 130%

Vice-Presidents reporting to President and CEO 45% 90%

InaccordancewiththeSTIPterms,theoverallcorporateperformancemultiplieriscappedat100%iftheEPSresultdoesnotmeetthetargetapprovedbytheBoardofDirectors.

New Change in STIP design for FY2019

StartinginFY2019,STIPforallNEOswillbebased100%onoverallCAEresultstoreinforcecollaborationacross all regions andbusinessunits. The focusonbusiness resultswill remain important andwill bereflectedthroughtheindividualSTIPmultiplierforthebusinessunitGroupPresidents.

ng te m n ent e an The LTIP is designed to reward executives for their contributiontothecreationofShareholdervalue.These awards are considered annually as part of the total compensation review. The value of theLTIP varies by the level of responsibility and is awarded within the range detailed below, based on each executive’s performance as assessed bytheHRCandtheBoard.

ng te m n ent e an a gn management nte e t t a e price growth and related Shareholder value creation, and rewards sustained ma et e man e

ange a a e a a

Position M n m m Ma m m

President and CEO 250% 350%

Group Presidents and Vice President, Finance and CFO 100% 250%

Vice-Presidents reporting to President and CEO 40% 150%

ForFY2018,CAE’sLTIPwascomprisedofperformanceshareunits(“PSUs”),stockoptionsandrestrictedshareunits(“RSUs”).AllNEOswereeligibleforanannualgrantundereachoftheseplans,andawardswereallocated as follows:

Stock Options 30%Performance Share Units 50%Restricted Share Units 20%

Stock OptionsThe purpose of the Employee StockOption Plan (“ESOP”) is to provide key employees of CAEwith anopportunitytopurchaseCommonSharesandtobenefitfromtherelatedSharepriceappreciation,thusaligning closely the interests of such employees with those of our Shareholders, and to increase the ability ofCAEtoattractandretainindividualswithexceptionalskills.TheESOPwasamendedonJune15,2016andapprovedbyShareholdersatthe2016AnnualandSpecialShareholderMeetingonAugust10,2016.



FollowingtheShareholderapprovalofanadditional10,000,000SharesundertheESOPatthe2016AnnualandSpecialShareholderMeetingonAugust10,2016,theESOPprovidesfortheissuanceofamaximumof16,381,839CommonSharesuponexerciseofoptionsgrantedundertheplan.ThetotalnumberofSharesavailableundertheESOPrepresentsapproximately6%ofCAE’sissuedandoutstandingShares.

TheHRCestablishesrulesandguidelinesfortheadministrationoftheESOP,selectstheemployeestowhomawards are granted, determines the types of awards to be granted and the number of Shares covered by suchawards,setsthetermsandconditionsofsuchawardsandcancels,suspendsandamendsawards.TheHRChasthesolediscretiontomakedeterminationsunder,andtointerpret,theESOP.

ThenumberofoptionsissuedtoeachNEOundertheESOPvariesasapercentageoftheexecutive’sbasesalary divided by the fair value of an option at that time, which is determined by applying the Black-Scholes option-pricing valuation methodology. The number of outstanding options, as well as the other LTIPelementsareconsideredby theHRC indetermininghowmanynewoptionsmaybegranted inafiscalyear.During FY2018, stockoptionsweregranted to theNEOsandother keyemployeesofCAEand itssubsidiaries.CAE’sburnrate (theratioofoptionsgrantedvsCAE’s issuedandoutstandingShares)was0.76%inFY2018.

The plan permits stock option grants having a term ofup to ten years (should theexpirydate for anoption fall within a black out period or within nine business days following the expiration of a black out period, such expiry date shall be automatically extended to that date which is the tenth business dayaftertheendoftheblackoutperiod).However,options issuedasofFY2012haveatermofsevenyears.Inprioryears,theoptiontermwassixyears.Vestingisincrementalin25%tranches,startingonthefirstanniversarydateofthegrant.

• t n te m a t n g ante e e t e 2012 ea

• e t ng 2 e ea ta t ng n t e t anniversary of the grant date

• 2018 n ate at g ante options during the year versus issued and

t tan ng a e 0

TheESOPpermits,atthediscretionoftheHRC,thesurrenderandcancellationwithoutre-issueofanin-the-money option for cash equal to the fair market value of the Share underlying the option less the option exerciseprice,inlieuoftheShareitself(thefairmarketvalueofaShareshallbetheclosingpriceofaShareontheTSXonthetradingdayonwhichtheelectiondescribedaboveismade).

The ESOP includes the following provisions:

Eligibility Any salaried employee of CAE or its subsidiaries is eligible to participate in the ESOP.TheESOPdoesnotpermitgrantstonon-employeeDirectors.Subjectto 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 oneofCAE’ssubsidiariesandhasservedcontinuouslyinsuchcapacitysincethedateofthegrantofsuchoption.TheESOPdoesnotcontainanyfinancialassistanceprovisionstofacilitateemployees’participationintheprogram.

m tat n n ant AnESOPparticipant(whichmayincludeanemployeemanagementinsiderofCAE)maynotholdoptionsonmorethan5%(onanundilutedbasis)ofthe issued and outstanding Common Shares. The number of CommonShares issuable to insiders of CAE at any time under all security-based compensation arrangements cannot exceed 10% of the issued andoutstanding Common Shares. The number of Common Shares issued toinsiders of the Company within any one-year period under all security-based compensationarrangementscannotexceed 10%of theCompany’s issuedandoutstandingShares.



Exercise Price TheweightedaveragepriceoftheCommonSharesontheTSXonthefivetradingdays immediatelypreceding thegrantdate (if thegrantdate fallswithin ablackoutperiodorwithinfive tradingdays following theendofa black out period, the grant date shall be presumed to be the sixth trading dayfollowingtheendofsuchblack-outperiod).

e m nat n m ment

eat options may be exercised to the extent that the optionee was entitled todosoatthetimeofdeath.Theoptionscanbeexercisedonlyduringtheperiodexpiringonthedaythatisearlierof(x)sixmonthsfollowingthedateofdeathand(y)theoptionterminationdate.

et ement all unvested options shall continue to vest following the retirementdate.Suchretiredoptioneeshallbeentitled,(a)toexerciseanyvested options held as of the retirement date until the termination date for eachsuchoption;and(b)toexerciseanyoptionsvestingaftertheretirementdateonlyduring the30-dayperiod following thevestingdateof thepostretirement vesting options, after which any such options which remain unexercisedshallexpire.

n nta te m nat n a e each unvested option shall terminate andbecomenull,voidandofnoeffectonthedateonwhichtheoptioneesceasestoservetheCompany.

n nta te m nat n t t a e an e gnat n the optionee hastherightforaperiodof30days(oruntilthenormalexpirydateoftheoption if earlier) from thedateof ceasing tobe an employee to exercisehis 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-dayperiod(subjecttoextensioniftheendoftheperiodfallswithinablackoutperiod),eachoptionshall terminateandbecomenull, voidandofnoeffecton thedateonwhichsuchoptioneeceases toserve theCompany.

an e a t gnment t n

Options are not transferable or assignable otherwise than by will or by operationofestatelaw.

Financial Assistance TheESOPdoesnotcontainanyfinancialassistanceprovisionstofacilitateemployees’participationintheprogram.

men ment The ESOP provides that its terms, as well as those of any option, may be amended,terminatedorwaivedincertainstatedcircumstances.TheESOPspecifiesinwhatsituationsShareholderapprovalisrequired.



men ment n t e ng a e e

Approval

TheHRChastheauthority,inaccordancewithandsubjecttothetermsofthe ESOP, to amend, suspend or terminate the ESOP or any option granted under the ESOP without obtaining Shareholder 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 fornon-executiveDirectors)and limitationsorconditionsonparticipationintheESOP,theamountandpaymentof theoptionprice (otherthana reduction thereof) or the vesting, exercise, expiry (other than anextensionoftheterminationdateexceptascontemplatedintheESOP),assignment (other than for financing or derivative-type transactionpurposes) andadjustmentofoptions,or (ii) addoramendany termsrelatingtoanycashlessexercisefeatures;

(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 considerationisreceivedbytheCompany;

(c) make changes that are necessary or desirable to comply with applicable laws, rules or regulations of any regulatory authorities having jurisdiction oranyapplicablestockexchange;

(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) amendanytermsrelatingtotheadministrationoftheESOP;and

(f) make any other amendment that does not require Shareholder approval by virtue of the ESOP, applicable laws or relevant stock exchange or regulatoryrequirements;

providedsuchamendment,suspensionortermination(i)doesnotadverselyalterorimpairanypreviouslygrantedoptionwithouttheoptionee’sconsentand(ii)ismadeincompliancewithapplicablelaws,rules,regulations,by-lawsand policies of, and receipt of any required approvals from, any applicable stockexchangeorregulatoryauthoritieshavingjurisdiction.

men ment e ng Shareholder Approval

The ESOP provides that Shareholder 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;

(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 adjustmentpursuanttoArticleVIIIthereof;

(c) allownon-employeeDirectorstobeeligibleforawardsofoptions;



men ment e ng Shareholder Approval (continued)

(d) permit any option granted under the ESOP to be transferable or assignable otherthanbywillorpursuanttosuccessionlaws(estatesettlements);

(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 ofanadjustmentpursuanttoArticleVIIIoftheESOP;

(f) extend the term of an option beyond the original expiry date, except in caseofanextensionduetoablackoutperiod;

(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 theESOPreserve;

(h) addanyformoforamendmenttofinancialassistanceprovisionsintheESOPwhichismorefavourabletooptionees;and

(i) amendanyprovisionstotheamendmentprovisionsoftheESOP.

Change of Control Change in the beneficial ownership or control over the majority of theSharesofCAEorthesaleofallorsubstantiallyallofCAE’sassets. Insuchcircumstance,thevestingofalloptionsissuedwouldbeaccelerated.

tment If certain corporate events affect the number or type of outstandingCommon Shares, including, for example, a dividend in stock, stock split, stockconsolidationorrightsoffering,adjustmentswillbemadetothetermsof the outstanding option grants as appropriate in such circumstances.

AcopyoftheESOPcanbeaccessedonCAE’swebsiteatwww.cae.com,onSEDARatwww.sedar.com,oronEDGARatwww.sec.gov.

Equity compensation plan information

m e Securities to be

Issued Upon Exercise of

Outstanding Options

e entage Outstanding

Share Capital e e ente

Such Securities

Weighted-Average Exercise Price of

Outstanding Options

m e Securities ema n ng

Available For Future Issuance

n e t m en at n

Plans (Excluding e t e e e te

in 1st mn

e entage Outstanding Share

Capital Represented e t e

Employee Stock Option Plan 6,155,525 2.30% $17.31 8,522,189 3.18%

TheabovechartisbasedonMarch31,2018information.Asofthatdate,theweightedaverageremainingcontractual life for the outstanding optionswas 4.81 years. CAE’s only equity compensation plan is itsShareholder-approvedESOP.



ThefollowingtabledetailstheannualburnrateforthelastthreefiscalyearsendedMarch31:

20 8 2017 2016

Annual burn rate 0.76% 0.77% 0.65%

This burn rate indicates the number of Stock Options granted in each year as a percentage of the weighted averagenumberofsecuritiesoutstandingintheapplicablefiscalyear.CAEmonitorsitslong-termdilutionbylimitingtheequitycompensationtoreasonableawardsundertheESOP.

Performance Share Unit PlanIn FY2015, CAE adopted a Performance ShareUnit Plan (“PSUP”) for executives and seniormanagementofCAEanditssubsidiaries.ThePSUPhelpsensurethatexecutives’long-termincentivecompensation includes an element directly tied to theachievementoftheCAEstrategicplan.

Thedeterminationof thenumberofPSUstobegranted to a participant is made by dividing the dollarvalueofthePSUgrant(apercentageoftheparticipant’sbasesalary)bytheweightedaveragemarketpriceof theCommonSharesontheTSXon the five trading days preceding the date ofgrant (if the grant date falls within a black outperiod or within five trading days following theend of a black out period, the date of grant shall be presumed to be the sixth trading day following theendofsuchblack-outperiod).

• PSUP directly ties CAE executives to the a e ement t e t ateg an

• e a n a e t ne mm n a e of CAE.

• PSUP is non-dilutive as all vested PSUs are paid out in cash.

• e t ng ea e t t t e a e ement et e man e te a an t e a t ant nt n e em ment with CAE.

• 2018 e man e n t n ta get as set in the 3-year strategic plan approved

t e a e t

• Ma m m a t m t e et at 200

APSUisequalinvaluetooneCommonShareofCAE.PSUsvestthreeyearsfromthegrantdate,providedtheparticipant is still employedby theCompanyon the vestingdate. Further, FY2015andFY2016PSUgrantvestingissubjecttotheEPSachievementcomparedtotargetforthefiscalyearendedonMarch31st

immediatelyprecedingthegrantvestingdate.

StartingFY2017,theEPSachievementisdeterminedeachyearandafinalPSUpayoutmultiplierisappliedas follows:

EPS 1st Year Payout Multiplier 1/6EPS 2nd Year Payout Multiplier 1/3EPS 3rd Year Payout Multiplier 1/2

However,thefinalpayoutisonlyissuedattheendofthreeyears,providedtheparticipantisstillemployedby the Company on the third anniversary of the grant date. This change was introduced to promotecontinuous improvement in our performance against the strategic plan and to improve the retention value oftheplan.

EPStargetsaredeterminedonthebasisonthestrategicplanapprovedbytheBoardofDirectors.

BasedontheEPSresultandtheEPSpayoutgridapprovedbytheHRC inrespectof theoriginalgrant,thetargetrateofgrantedunitsismultipliedby afactorrangingfrom0%to200%.PSUPparticipantsareentitledtoreceivetheirvestedPSUsattheaveragefairmarketvalueoftheCommonSharesontheTSXforthe20tradingdaysprecedingthefinalvestingdateofthegrant.



ThePSUP is anunfundedplanandnon-dilutiveasall vestedPSUsarepaidout in cash. Therefore,nodisclosureof theannualburn rate isprovided. Fordetails concerning the treatmentofPSUs followingthe executive termination, resignation, retirement and change of control, please refer to Section 7–“Executive m en at n – e m nat n an ange nt ene t ”.

Restricted Share Unit PlanIn FY2015, CAE adopted a time-basedRestrictedShare Unit Plan (“RSUP”) for executives andseniormanagementofCAEand its subsidiaries.Thedeterminationof thenumberofRSUstobegranted to a participant is made by dividing the dollarvalueoftheRSUgrant(apercentageoftheparticipant’sbasesalary)bytheweightedaveragemarketpriceof theCommonSharesontheTSXon the five trading days preceding the date ofgrant (if the grant date falls within a black outperiod or within five trading days following theend of a black out period, the date of grant shall be presumed to be the sixth trading day following theendofsuchblack-outperiod).


• RSUP is non-dilutive as all vested RSUs are paid out in cash.

• e t ng ea e t t t e a t ant nt n e em ment

with CAE.

TheRSUisequalinvaluetooneCommonShareofCAE.RSUsaregrantedforathree-yearperiodandvestonthethirdanniversaryofthegrantbasedontheparticipant’scontinuedemploymentwithCAEuntilthattime.RSUPparticipantsareentitledtoreceivetheirvestedRSUsattheaveragefairmarketvalueoftheCommonSharesontheTSXforthe20tradingdaysprecedingthefinalvestingdateofthegrant.

TheRSUP is anunfundedplanandnon-dilutiveasall vestedRSUsarepaidout in cash. Therefore,nodisclosureoftheannualburnrateisprovided.FordetailsconcerningthetreatmentofRSUsfollowingtheexecutivetermination,resignation,retirementandchangeofcontrol,pleaserefertoSection7– “Executive

m en at n – e m nat n an ange nt ene t ”.

Executive Deferred Share Unit Plan InFY2017,CAEadoptedanExecutiveDeferredShareUnitPlan(“Executive DSUP”).ThepurposeoftheplanistoattractandretaintalentedindividualstoserveasofficersandexecutivesoftheCompanyandtohelpthem build their share ownership in CAE, thus promoting a greater alignment of interests between the executivesandtheShareholdersoftheCompany.

Under the Executive DSUP, Canadian andUS-basedexecutivescanelecttodeferaportionofor their entire short-term incentive payment to the ExecutiveDSUPonanannualbasis.Suchdeferredshort-term incentive amount is converted to a DSUbasedonthevolumeweightedaveragepriceof the Common Shares on the TSX during thelastfive tradingdaysprior to thedateonwhichsuch incentive compensation becomes payable to the executive. If the five-trading-day periodfalls within a black-out period, then the volume weighted average price is calculated based on the five-tradingdayperiodfollowingtheendofsuchblack-outperiod.

• Executive DSUP helps our executives build their share ownership in CAE.

• Allows for elective deferral of STIP to DSUs.


• DSUs are only payable when the executive leaves CAE.

• Executive DSUP is non-dilutive as all DSUs are paid out in cash.

ADSUisequalinvaluetooneCommonShareofCAE.TheDSUsaccruedividendequivalentspayableinadditionalunits inanamountequal todividendspaidonCommonShares.TheDSUsareonlypayablewhen theexecutive leaves theCompany.Uponorwithinadefinedperiod following the terminationof



theiremployment,DSUholdersareentitledtoreceivealumpsumcashpaymentequaltothenumberofDSUscreditedtohisorheraccountasofthatdatemultipliedbythevolumeweightedaveragepriceoftheCommonSharesontheTSXduringthelastfivetradingdayspriortothesettlementdate.

na t e t a e an t ega a t antSome NEOs have outstanding participation in the following long-term incentive plans, which are no longer active(nofurtherawardsaremadeundertheplans)buthaveyettobefullypaidout.

Fiscal 2005 Deferred Share Unit PlanCAEadoptedaLong-TermIncentiveDeferredShareUnitPlan(“LTUP”)inFY2005that,asamendedfromtimetotime,appliestoallgrantsmadethereafter.

DeferredShareUnits(“LTUs”)vestin20%incrementsoverfiveyears,commencingoneyearafterthegrantdate.LTUsaccruedividendequivalentspayableinadditionalunitsinamountsequaltodividendspaidonCommonShares.LTUsareonlyredeemableincash,followingtheunitholder’sretirementorterminationofemployment.NoLTUshavebeengrantedbyCAEafterFY2014.

Fiscal 2004 Deferred Share Unit PlanInFY2004,CAEadoptedaLong-TermIncentiveDeferredShareUnitPlan(“FY2004 LTUP”)forexecutivesofCAEanditssubsidiariestopartiallyreplacethegrantofoptionsunderCAE’sESOP.NoFY2004Long-TermIncentiveDeferredShareUnits(“FY2004 LTUs”)havebeengrantedbyCAEsinceFY2004.AllFY2004LTUsarefullyvestedforremainingplanparticipants.FY2004LTUsaccruedividendequivalentspayableinadditionalunitsinamountsequaltodividendspaidonCommonShares.FY2004LTUsareonlyredeemableincash,followingtheunitholder’sretirementorterminationofemployment.

Deferral of cash incentivesCAEhadaDeferredShareUnitPlan(“legacy DSUP”)forexecutivesunderwhichanexecutiveelectedtoreceivecashincentivecompensationintheformofDeferredShareUnits(“legacy DSUs”).AlegacyDSUisequalinvaluetooneCommonShareofCAE.TheunitswereissuedbasedontheaverageclosingboardlotsalepriceperShareofCommonShares ontheTSXduringthelast10daysonwhichsuchSharestradedpriortothedateofissue.ThelegacyDSUsaccruedividendequivalentspayableinadditionalunitsinanamountequaltodividendspaidonCommonShares.Uponorwithinadefinedperiodfollowingterminationoftheiremployment, legacyDSUholdersareentitledtoreceivethefairmarketvalueof theequivalentnumber of Common Shares based on the average closing board lot sale price per Share of Common Shares ontheTSXduringthelast10daysonwhichsuchSharestradedpriortothesettlementdate.

en n ene t an e te

Pension BenefitsEligible employees participate in the Retirement Plan for Employees of CAE Inc. and AssociatedCompanies. Executives at a vice president leveland higher participate in the Pension Plan for DesignatedExecutiveEmployeesofCAEInc.andAssociatedCompanies(the“Designated Pension Plan”), and in the Supplementary Pension Planof CAE Inc. and Associated Companies (the“ ementa en n an”).TheDesignatedPension Plan is a defined benefit plan towhichCAEandparticipantscontribute.

• m te ng te m em ment t t e m an

• en n a a e n e t e ementa Pension Plan are conditional upon

m an e t n n m et t n an n nsolicitation clauses.

• No extra years of service are generally granted under the pension plans.

PensionspayableundertheSupplementaryPensionPlanarepaiddirectlybyCAE.SeeSection7– “Executive m en at n – en n angement ”fordetailsaboutthevalueoftheaccruedbenefittoeachofthe

NEOs.Exceptasdiscussedin“ChangeinControlContracts”below,CAEdoesnotgrantextrayearsofcreditedservice under its pension plans. Receipt of pension benefits under the Supplementary Pension Plan isconditionaluponcompliancewithnon-competitionandnon-solicitationclauses.



Employee Stock Purchase PlanUnder the CAE Employee Stock Purchase Plan,employees may make contributions towards the purchase of Common Shares of up to 18%of their annual base salary. Under the plan,CAE contributes $1 for every $2 of employeecontributions, toamaximumcontributionof3%oftheparticipant’sannualbasesalary.

• e em ee t a a e ne building vehicle and a savings vehicle beyond the pension plan.

Change in control contractsThreeoutoffiveNEOsareentitledtoterminationofemploymentbenefitsfollowingachangeofcontrolofCAEwheretheexecutive’semploymentisterminatedwithoutcausewithintwoyearsfollowingthechangeofcontrol.ThisistosafeguardtheCompany’snormalcourseofbusinessincaseofchangeofcontrol.SeeSection7– “ e t e m en at n – e m nat n an ange nt ene t ” for a summary oftheimpactofvariouseventsonthedifferentcompensationprogramsfortheNEOsanddetailsaboutthe approximate incremental value that could be realized by a NEO following termination or a change of controlevent.

PerquisitesFlexible perquisites give executives a cash allowance to cover certain expenses such as vehicle expenses, club memberships,personallegalandtaxadvice,andahealthcarespendingaccount.Suchallowanceistypicalforseniorexecutivepositionsandiscappedatpredeterminedlevelsbyposition.

e t e a e ne e ementUnderCAE’sShareOwnershipGuidelinesPolicy,eachexecutiveisexpectedtoownaminimumnumberofCommonSharesandunitsundertheDSUPandLTUP.ThevalueoftherequiredholdinginCommonSharesandunitsundertheDSUPandLTUPrepresents:

Executives a e a a

President and CEO 500%

Group Presidents and Vice President, Finance and CFO 250%

Other executives reporting directly to CEO 200%

Therequiredholdingmaybeacquiredoverafive-yearperiodfromthedateofhireorpromotiontotheexecutiveposition.FollowingtheadoptionoftheRSUPinFY2015,theHRCdecidedtoinclude50%oftheRSUsgrantedwhencalculatingtheshareownershiprequirementastheexecutivesarerequiredtobuyCommonShareswithafter-taxproceedsfromtheRSUsvesteduntiltheyreachtheirminimumownershiprequirements.SinceFebruary2014,theshareownershiprequirementsaretobetestedmonthlyuntiltherequirement ismet.At the time the requiredshareownershipvalue is reached, theminimumnumberof Shares/units to be held by the executive is locked-in and the executive is required to hold at least this numberofShares/unitsuntilretirementorterminationofemployment.

In addition, for each option exercise, the President and CEO has agreed to, and the Group Presidents and Vice President, Finance and CFO must retain ownership or control over CAE Shares equivalent in value to 25% of the net profit realized onsuch option exercise for the duration of their employmentwithCAE.Thispolicyencouragesallkey executives to hold a meaningful ownership interest in CAE to further align their interests with thoseofourShareholders.

• a e ne e ement m t e a e e t n ea m e m t n t e e t e t n

• n mm n a e an 0 are included.

• President and CEO, Vice President and CFO, an e ent eta n 2 t e net

t ea e m t n e e e n a e t e at n t e em ment

at CAE.



AsofMarch31,2018,threeNEOsheldCAESharesandunitsundertheDSUP,LTUPandRSUPvaluedinexcessoftheownershipguidelines.ThetablebelowsetsforththeminimumnumberofShares/unitstobe held by the NEOs who have already met the requirement, the required value in dollars to meet the ownershipguidelinesandtheactualvalueheldasapercentoftheannualbasesalary.

NEO

Share Ownership

e ement as Percent

of Salary OwnershipStatus Target Date

m e a e

Units to be e n e

e ement Met

(#)

Valuee eto Meet

Guidelines($)

m et n t

Meet Share

Ownership Guidelines

Valuee na e

Units 2

($)

Value ofa eUnitse a

Percent ofSalary

MarcParent 500 AlreadyMet N/A 286,858 4,300,000 100 13,159,429 1,360

Sonya Branco 4 250 In progress May2021 40,073 6 934,500 71 665,040 178

Gene Colabatistto 250 Already met N/A 73,302 1,100,250 100 2,479,242 404

Nick Leontidis 250 AlreadyMet N/A 65,044 975,000 100 6,486,831 1,429

MarkHounsell 5 200 In progress Feb.2021 34,460 6 803,600 70 559,400 139

1 Iftherequirementisalreadymet,thevaluethatwasrequiredatthelaterof:February2014(thedateatwhichShareownershipstartedtobetestedmonthly)orthetimetheNEOmettheownershiprequirements.ForMs.BrancoandMr.Hounsell,thenumberrepresentstherequiredShareownershipasapercentageoftheirbasesalaryasofMarch31,2018.Ms.BrancohaselectedtoreceiveaportionofherFY2017andFY2018STIPinDSUsundertheExecutiveDSUP.

2 CalculatedbasedonthenumberofShares,DSUs,LTUs,and50%ofRSUsheldasofMarch31,2018andtheaverageclosingSharepriceduringfivetradingdaysprecedingMarch31,2018($23.32)inaccordancewiththeShareOwnershipGuidelinesPolicy.

3 CalculatedbasedontheannualbasesalaryasofMarch31,2018.ForMr.Colabatistto,thebasesalarywasconvertedtoCanadiandollarsusingMarch29,2018exchangerateof$1.29.

4 Ms.BrancowaspromotedtothepositionofVicePresident,FinanceandCFOasofMay23,2016.5 Mr.HounsellwashiredasGeneralCounsel,ChiefComplianceofficerandCorporateSecretaryasofFebruary1,2016.6 ThenumbersdisclosedforMs.BrancoandMr.HounsellarebasedonanaverageclosingSharepriceduringfivetradingdaysprecedingMarch31,2018($23.32)inaccordance

withtheShareOwnershipGuidelinesPolicy.Assuch,theactualnumberofSharestobeheldwillbedeterminedatthetimewhentheShareownershiprequirementismet.

The following table details the total value of all accumulated Common Shares, LTUs and RSUs of thePresidentandCEOasofMarch31,2018.ThetableexcludesPSUsandstockoptionsastheirultimatevalueisuncertain.

t n t mentm e n t

(#)Total Value 2

($)

Common Shares 244,111 5,853,782

FY2004LTUs 41,719 1,000,422

LTUs 225,273 5,402,047

RSUs 3 106,390 2,551,232

Total 617,493 80 81 RepresentsthenumberofallCommonShares,LTUsandRSUsheldasofMarch31,2018.2 ThetotalvaluedisclosediscalculatedbymultiplyingthenumberofShares/unitsbytheclosingpriceoftheCommonSharesontheTSXonMarch29,2018,whichwas$23.98.3 RSUsaresubjecttoatime-vestingcondition,specificallyvesting3yearsfromthegrantdate.

M t gat nThe HRC and the Board of CAE believe thatexecutive compensation should be contingent on performance relative to pre-established targets and objectives. Also, management must achievetargets and objectives in a manner consistent with legalstandards,aswellasCAE’sethicalstandardsand internal policies. The HRC and the Boardregularly review the Company’s compensationpolicies and practices to ensure that they do not encourageinappropriaterisk-taking.

e e a e n me management practices in place to ensure CAE

m en at n g am n t en age na ate t te m ta ng e a t at e n ng te m

Shareholder value creation.



The HRC conducts an annual compensation risk assessment with the assistance of its independentcompensation consultant Hugessen to identify potential risks associated with CAE’s compensationprograms,practicesandpolicies.InFY2018,theassessmentconcludedthattherisksassociatedwiththecompensationprogramsarereasonablyunlikelytohaveamaterialadverseeffectontheCompany.

The following characteristics of our compensation program in FY2018 were identified as havingrisk-mitigatingeffects:• m t me m an nge te m m en at n encourages CAE executives to take

abalancedviewandmitigatesagainstexcessiverisk-takingoroverlyconservativebehaviour.• em a n ng te m e man e at target,only19%to20%ofaNEO’s target totaldirect

compensationistiedtoshort-termresults(annualshorttermincentiveaward),while49%to60%istiedtolong-termincentives(PSUs,optionsandRSUs).Forthepurposeofthisparagraph,targettotaldirectcompensationisdefinedasthesumofbasesalary,targetSTIPandtargetLTIP.

• a n ann a t te m n ent e a a is directly linked to, and determined by, overall corporatefinancialperformance(asmeasuredbytheSTIPfinancialtargets)andindividualperformance,sotheNEOcannotreapanexcessiverewardbasedonlyonhis/herownperformanceagainstfinancialorothertargets.

• e e e ate e man e an a a n ann a n ent e a a provide that the annual short-term incentive award payout can be zero, if minimum threshold levels of corporate, businessunitandindividualperformancearenotmet,andiscappedat200%wherecorporate,businessunit and individual performance objectives are exceeded, to prevent excessive payouts and to act as a disincentiveagainstexcessive risk-taking.Specifically, for theannual short-term incentiveaward, thecorporateperformancemultiplieriscappedat100%iftheEPStargetisnotmet.

• a a e e t e provides that CAE may seek repayment of incentive compensation foryearsinwhichfinancialresultsarerestatedasaresultoftheexecutive’sfraudulentorintentionalmisconductorintheeventoftheexecutivemisconductconstitutingcausefordismissal(suchas,butnot limited to, a breach of the CAE Code of Business Conduct or a breach of employment duties or obligationstotheCompany),orfollowingabreachbytheexecutiveofhis/herpost-employmentdutiesandobligationstotheCompany.

• Our anti-hedging policy prohibits executives from purchasing or otherwise entering into financialinstruments, including prepaid variable forward contracts, instruments for the short sale or sale of callorputoptions,equityswaps,collars,orunitsofexchangeablefundsdesignedtohedgeoroffseta decrease in themarket value of any CAE securities, including but not limited to DSUs they hold.

• The President and CEO has agreed to, and the Vice President, Finance and CFO, and the Group Presidents must eta n ne nt e a e e a ent n a e t 2 t e net t

m an t n e e e until their retirementor termination. This reduces the riskof short-termmaneuvers designed to temporarily lift the CAE Share price to the detriment of sustainable long-termresults.

• ate e an e e preclude individual executives from acting unilaterally withoutapprovalinthecaseofmaterialtransactionsidentifiedinthosepolicies.

• Our Share Ownership Guidelines Policy for the NEOs to own multiples of their annual base salary in CAEShares(seeSection7– “ e t e m en at n – e t e a e ne e ement ” above fordetails)discouragesexcessive short-term risk-takinggiven theexecutives’ exposure to thelonger-term CAE Share price movements through both their direct ownership and the LTIP elements theyhold.

• t na e e a t e ann a t te m n ent e t t e e t e further aligns the executives with the long-term interests of our Shareholders through additional exposure to the long-term CAESharepricemovements.

• e e te na m en at n n tant ensures that theHRCgetsan independentopiniononourexecutivecompensationprogramstovalidatetheplans’alignmentwithourpay-for-performancephilosophyandmarketbestpractices.



After considering the overall compensation program and taking into account both its knowledge of the pastperformanceoftheCAEmanagementteamandthenatureofCAE’svariousbusinesses,theHRCisnotawareofanyrisksarisingfromtheCAE’scompensationpoliciesandpracticesthatwouldbereasonablylikelytohaveamaterialadverseeffectonCAE.

ete m nat n t e m en at n n 20 8a e a a

ThesalariesofthePresidentandCEOandotherNEOsaredeterminedinaccordancewithCAE’scompensationphilosophy and policy, and are reviewed and approved, in the case of the President and CEO, annually by theindependentmembersoftheBoardofDirectors.TheHRCreviewsbenchmarkdatatoensurethatthePresidentandCEO’sandhisdirectreports’totaldirectcompensation(basesalary,short-termandlong-termincentives)isinlinewithCAE’scompensationphilosophy.

t e m n ent e an – ate an n a e man e75% of short-term incentive awards for the President and CEO and other NEOs with corporate-wideresponsibilities was based on the achievement of corporate performance metrics, namely EPS, Order Intake, ROCEandCustomerSatisfaction,asdetailedunderSection7– “ e t e m en at n – Annual Short-

e m n ent e g am”.AsforGroupPresidents,45%oftheirshort-termincentiveawardswasbasedontheachievementofcorporateperformancemetricsasdescribedabove,and30%ontheirrespectivebusiness unit performance metrics, which were the same as the corporate performance metrics, except for EPSbeingreplacedbySegmentOperatingIncomeandROCEbycashflowbeforefinancing.HavingeveryNEO’sannualincentiveevaluatedonthesameperformancemetricsreinforcestheteamworkamongstourexecutiveteamandmotivatesthemtoachievewidespreadsuccessforthewholeorganization.

ThetablebelowillustratestherespectiveweightsgiventoeachFY2018CAEcorporateperformancemetric,aswellastheactualresultsandrelatedpayoutlevels.

Weighting Threshold Target Ma m m Achieved Payout Level

STIP Payout 0% 100% 200%

Earnings per Share 1 50% $0.92 $1.05 $1.18 $1.13 2 73%

Order Intake 20% $2,645M $3,006M $3,366M $3,855M 40%

ReturnonCapital(ROCE) 20% 10.32% 11.46% 12.60% 12.80% 2 40%

Customer Satisfaction 10% Various Customer Satisfaction Indices 14%

Weighted Average STIP Payout1 IftheEPStargetisnotmet,thecorporateperformancemultiplieriscappedat100%.2 Adjustedforcertainelementsasperplanprovisions.

The business unit performance metrics for the Group Presidents consisted of stretch targets with respect toSegmentOperatingIncome,OrderIntake,CashFlowbeforeFinancingandCustomerSatisfaction.Actualtargetsarenotdisclosedgiventhesensitivecompetitivenatureofthisinformation.

The Civil business unit exceeded three of the four targets with the remaining one being met at target, resultingina154%payoutlevel.TheDefencebusinessunitexceededthreeoffivetargets,withtheremainingtwobeingbelowthetarget,resultingina107%payoutlevel.

Theremaining25%oftheNEOs’annualincentiveisawardedbasedonthemachievingtheirbusinessunitorfunctionpre-determinedindividualobjectives.Aswithotherperformancemeasures,suchachievementistranslatedintoanindividualmultiplierthatrangesfrom0%to200%.ForFY2018,theindividualperformancemultiplierforthePresidentandCEOwas200%whiletheaveragemultiplierforotherNEOswas185%.TheHRCdeterminedthePresidentandCEO’sindividualperformancemultiplierandreviewedandapprovedthePresidentandCEO’srecommendationsontheindividualperformancemultiplierforhisdirectreportsfollowing a detailed discussion about corporate and individual performance (described in detail in thenextsection).



The table below sets out the STIP targets, maximums and actual payout levels for the NEOs earned for FY2018,expressedasapercentageofbasesalary:

Position Target Max

Actual Payout

Level

President and CEO 100% 200% 175%

Vice President, Finance and CFO 65% 130% 111%

GroupPresident,Defence&Security 65% 130% 99%

Group President, Civil Aviation Training Solutions 65% 130% 111%

GeneralCounsel,ChiefComplianceOfficerandCorporateSecretary 45% 90% 77%

ng e m n ent e an

FY2018 LTIP GrantsThetablebelowsetsouttheLTIPrangesandactualawardstotheNEOsgrantedforFY2018,expressedasapercentageofsalary.

LTIP RangeActualGrantPosition M n m m Max

President and CEO 250% 350% 350%

Vice President, Finance and CFO 100% 250% 180%

GroupPresident,Defence&Security 100% 250% 220%

Group President, Civil Aviation Training Solutions 100% 250% 250%

GeneralCounsel,ChiefComplianceOfficerandCorporateSecretary 40% 150% 130%

FY2015 PSU Payouts ThevestingofthePSUsgrantedinFY2015wastiedtotheperformanceofCAEEPScomparedtopredeterminedtargetattheendofFY2017.AsperthetermsoftheFY2015PSUP,theHRCreviewedCAE’sEPSperformanceforthefiscalyearendedMarch31,2017andapprovedthefollowingresultsforperformanceshareunitsgrantedinFY2015:

Threshold Target Ma m m Achieved Payout Level

PSUPayout 0% 100% 200%

EPSFY2017 $0.79 $0.89 $0.99 $0.99 1

PSU Payout 2001 Adjustedforcertainelementsasperplanprovisions

ThePSUswerepaidoutinFY2018,inMay2017.Thefinalcashpayoutwasbasedonasharepriceof$21.29,theaveragefairmarketvalueoftheCommonSharesontheTSXforthe20tradingdaysprecedingthefinalvestingdateofthegrant,whichwasMay21,2017.TheactualamountspaidtoeacheligibleNEOinFY2018are disclosed in the table “Incentive Plan Awards – Value Vested or Earned During the Year”.



President and CEO – 20 8 m ment MaintargetsandobjectivesforFY2018andrelatedresultsofMarcParent,thePresidentandCEO,aresetout below:

1 t ateg t • ExceededtheplannedEPSperformance.• Deliveredannualrevenueof$2.8billion,anincreaseof5%fromFY2017.• AchievedstrongOrderIntake,at$3.9B,resultinginaBook-to-Salesratioof1.36.• ContinuedstrongutilizationoftheCiviltrainingnetwork.• Continuedstrongcashgeneration,withacashconversionratioof97% 1.• TwomajorTrainingSystemsIntegrator(TSI)contractwinsinDefencebusiness.• Successfullyexecutedpartnershipagreementswithtwoairlinesandonenon-airlinecustomer.• PurchasedinterestinourAsianjointventurefromAirAsia,withanexecutionofanexclusivelong-termcontract.• SuccessfuldevelopmentandcommercializationofNextGen(CAERise)training.• LaunchedaglobalDiversityandInclusionprogram,withtraininglaunchedtoseniorleadersacrossCAE.

2 t ateg t nn ate • CAE’sAR/VRbasedcapabilities,IntegratedLive-Virtual-ConstructiveandNextgenerationtrainingsystems

demonstratedandrecognizedas“BestinShow”technologyatI/ITSECtradeshow.• CAEHealthCare’sAR/VRcapabilitiesrecognizedwithUnityand.OrgCommunityawards.• Successfuldevelopmentandserviceentryofthemid-fidelityJunonursingtrainingsimulator.• Publishedafirst-everPilotDemandreport,whichwaswellreceivedbytheindustry.• Implementedacompletelyredesigned,word-classemployeeperformancemanagementprogram.• Implementedanewreal-timeon-lineemployeeengagementsurvey.• Continued excellent progress on process initiatives to make CAE training experience consistent and recognizable

acrossallcustomertouchpoints.• Conductedover90workshopstosupportintroductionofnewCAEvalues;workshopswerewellattendedand

will play a key role in CAE cultural transformation to an organization centered on delivering a best-in-class customerexperience.

t ateg t te t• Metallprocessimprovementprograminitiativetargetswithreducedmanufacturingleadtime.• Implementedglobalriskmanagementcommunicationandeducationtools;conductedexternalreviewofCAE’s

complianceprogramandupdatedtheCodeofBusinessConduct.• Establishedabest-in-classSafety&StandardsprograminDefence.• Achieveda29%reductionininjuryfrequencyrateanda52%decreaseindayslost.• Delivered above plan capacity training volume in several of our live training programs, with positive

customerfeedback.• DeployedanumberofinternalandexternaleventsaspartofcelebratingCAE’s70th anniversary, with a high level

ofemployeeparticipation;80%ofemployeesreportedthatthesecelebratoryeventsreinforcedtheirsenseofbelongingtoCAE.

TheBoardreviewedMr.Parent’sachievementsagainsteachoftheseobjectivesindetail,andconsideredhehadexceededmostofhisobjectives,asnotedabove.Thus,forFY2018,Mr.Parentreceivedashort-termincentive award of $1,695,370basedon the corporate financial performance against the STIP financialobjectives and his other accomplishments. The level of achievementwas 167% against the short-termincentiveplanperformancetargets,whichcomprise75%ofhisSTIP.TheBoardawardedMr.Parenta200%achievementrateonhispersonalKPIs,whichcomprisetheremaining25%ofhisSTIP.Thus,hisaggregateannualincentivepaymentrepresented175%ofhistargetbonus.

1 Excluding impacts of U.S. tax reform and net gains on strategic transactions relating to our Asian joint-ventures.



Other NEOs – 20 8 m ment Aspreviouslydiscussed,thissectionpaintsaportraitofthemajorachievementsofeachNEOforFY2018.Thesewerethemainkeyperformanceindicators(KPIs)indeterminingtheindividualperformancemultiplierapplicabletotheirannualincentiveawards.

n a an

Vice President, Finance andChiefFinancialOfficer

• PlayedanimportantroleintheachievementoftheCompany’sstrongfinancialperformance.

• SignificantlycontributedtostrongCAEROCEperformanceof12.3% 1 through effectivegovernanceofcapitalexpenditures,rigorouscashmanagement,supportininventorymanagementandimprovedfinancinginitiatives;strongfinancialmanagementresultedinaNetDebttoCapitalratioof21.5%andcashconversionratioof97% 1.

• PlannedandexecutedtheconversionforIFRS15andIFRS9,includingeffectivecommunicationsinternallyandexternallytostakeholders.

• LedseveralM&Atransactions,includingtheacquisitionofremainingsharesofAirAsia joint-venture and the divestiture of Zuhai joint-venture, the acquisition of a portfolio of simulator assets from a simulation leasing company, and the acquisitionofinterestinPelesys,acoursewareprovider.

• RealizedFY2018cybersecurityroadmap,includingnetworkaccesscontrol,cyber crisis management, new monitoring capabilities and security awarenesstraining.

Gene Colabatistto

Group President, Defence&Security

• Deliveredastrongfinancialperformancewithrevenuegrowthof5%andSOIgrowthof6%onayear-over-yearbasis;andorderintakewasstrongat$1.4billion.

• Completedrecordsettinglevelofbidsandproposalswithahighwinrate.• Improved delivery of complex programs with increased schedule and quality

performance;deliveredaboveplannedcapacityforcertainlivetrainingprograms,whileachievinghighlevelsofcustomersatisfaction.

• Establishedabest-in-classDefence&SecurityAviationSafety&Standardsprogram.

• FurtherestablishedCAEasaglobalTrainingSystemsIntegrator(TSI)withseveralnewlong-termcontracts;establishednewcapabilitiesinTSIprograms.

• Expanded development and succession plans of top program managers, with ahighretentionrateofkeyleadership/highpotentials.

e nt

Group President, Civil Aviation Training Solutions

• Deliveredasuperiorfinancialperformance,withrevenuegrowthof5%andSOIgrowthof12%onayear-over-yearbasisandarecordorderintakeof$2.3B.

• Achievedseveralstrategicallysignificanttrainingpartnerships.• LedthesuccessfulacquisitionandintegrationofAirAsia’sinterestinour

joint-venturewhilstbolsteringthepipelineofpotentialfutureopportunities.• Implemented actions to further solidify CAE as the Recognized Global Training

Partner of Choice, such as successfully launching Next Generation Training (CAERise),andincreasingwettrainingrevenueby10%.

• Realizedtwosignificantinitiativestoreducecivilbusinessunitrisk.

Ma n e

General Counsel, ChiefComplianceOfficerandCorporate Secretary

• SuccessfullysupportedthebusinessinnumerousM&Adealsandactivitiesacrossallbusinessunits,includingtheacquisitionofAirAsia’sinterestinourjoint-venture.

• Continued to enhance the overall CAE compliance program by leading a broad review of the program, further strengthening the Compliance department, and reviewingtheCodeofBusinessConduct.

• ContinuedimplementingthenextphaseoftheExportControlReformproject; phase1wascompleted,withaverypositivefeedbackfromtheemployees.

• Playedaleadershiproleinsuccessfullyconcludinglegaldisputes.• StreamlinedCorporatePoliciesandPrograms.• Created General Data Protection Regulation steering committee in anticipation

ofthenewEuropeanprivacylegislation.

1 Excluding impacts of U.S. tax reform and net gains on strategic transactions relating to our Asian joint-ventures.



Not all details of the NEO targets have been disclosed due to the potential competitive prejudice to CAE of doingso.TheNEOs’performanceagainsttheirobjectiveswasreviewedbytheHRCaftertheendofFY2018,inadditiontohavingbeenreviewedbythePresidentandCEOduringthefiscalyear.

a e e et n e man e aThe following graph compares the cumulative Shareholder return of the Common Shares with the cumulativereturnsofeachoftheS&P/TSXCompositeIndexandtheS&PAerospace&DefenceIndexforafive-yearperiodcommencingMarch31,2013 *.

m a n e ea m at e ta et n n m te n e an e a e e en e n e

20182013 2014 2015 2016 2017

CAE Inc. S&P/TSX Composite Index S&P Aerospace & Defense Index

$80

$100

$120

$140

$160

$180

$200

$220

$240

$260

$280

2013 2014 2015 2016 2017 20 8

CAEInc. $100 $149 $154 $160 $220 $264

S&P/TSXCompositeIndex $100 $116 $124 $116 $137 $140

S&PAerospace&DefenseIndex $100 $146 $170 $152 $196 $256

* $100investedinCommonSharestradedontheTSXonMarch31,2013.ValuesareasatthelasttradingdateduringthemonthofMarchinthespecifiedyearsandfromtheS&P/TSXCompositeTotalReturnIndexandS&PAerospace&DefenceTotalReturnIndex,whichassumedividendreinvestment.



a e man e n ageThefollowingchartcomparestheevolutionofCAE’stotalShareholderreturnwiththeevolutionofexecutivecompensation(asdisclosedintheSummaryCompensationTable)forboththePresidentandCEOandtheotherNamedExecutiveOfficers.ThetotalShareholderreturnassumes$100investedinCommonSharestradedontheTorontoStockExchangeonMarch31,2013.ValuesareasatthelasttradingdateduringthemonthofMarchinthespecifiedyears,includingthereinvestmentofdividends.

ange n e ent an an e age m en at n ta a e e et n

FY2018FY2013 FY2014 FY2015 FY2016 FY2017

CEO Compensation Average NEO Compensation CAE TSR TSX Composite TSR

— $6,000,000

— $5,000,000

— $4,000,000

— $3,000,000

— $2,000,000

— $1,000,000

— $0

— $8,000,000

— $7,000,000

$80

$100

$120

$140

$160

$180

$200

$220

$240

$260

$280

Notes:

1 InFY2013,theformerGroupPresident,Military,SimulationProducts,TrainingandServices’compensationwasincludeduptoSeptember28,2012,excludinghis3additionalyearsofservicecreditedintheSupplementalPensionPlan.

2 InFY2017,theformerCFO’scompensationwasincludeduptohisresignationfromtheCompanyonMay30,2016.

ThePresidentandCEO’sandtheNEO’stotalcompensationisnotspecificallybasedontheperformanceofCAE’sCommonSharesontheTSX,butratherontheoverallCompanyfinancialandoperationalperformance.

Ingeneral, thetrendinthePresidentandCEO’stotalcompensationfollowsthetrendintheCAE’stotalShareholder return. The performance graph shows a steady, year-over-year increase of CAE’s totalShareholderreturnfromFY2013toFY2016.InFY2017andFY2018,theincreaseisacceleratedbyanoutstandingCompanyperformanceandrelatedSharepriceappreciationandtotalShareholderreturngrowth.Asimilartrendcanalsobeobserved in thePresidentandCEO’s total compensation,whichwas increasingyear-over-yearfromFY2013toFY2016.InFY2017andFY2018,thePresidentandCEO’scompensationreflectedtheCAE’sgrowth inEPS,recordrevenueandbacklogresults,withtheSTIPachievedat194%and167%,respectively. With regards to other NEOs, the trend in their average compensation was impacted bychangesinthepositionsofGroupPresidentsinFY2013andFY2014,respectively.Thenewincumbentswerehired or promoted at lower compensation levels compared to their predecessors given they were new in theirroles.Thiscontributedtotheaveragenon-CEONEOcompensationbeingrelativelyunchangedfromFY2013toFY2016.InFY2017andFY2018,theaverageNEOcompensationslightlyincreasedasaresultoftheoutstandingCompanyperformanceandrelatedSTIPpayouts.TheincreaseinbothFY2017andFY2018wasalsopartiallyduetothetransferofMr.ColabatisttototheU.S.andrelatedconversionofhiscompensationfromU.S.dollarstoCanadiandollars.SuchincreasewashoweverslightlymitigatedbyachangeinCFOinFY2017,withMs.Branco’scompensationbeinglowercomparedtoherpredecessorconsideringshewasnewintherole.



InSection7– “ e t e m en at n – a e man e e at e t m a at ” there isamorerobustcomparisonofthePresidentandCEO’scompensation,bothdeclaredandrealizable,withourcomparatorgroupandrelativefinancialperformance.

a e man e n age 20 8 FY2017 FY2016

MarketCapitalization(asofMarch31) $6.420billion $5.454billion $4.050billion

Return on equity 16.2% 12.9% 12.3%

Total Shareholders average return – three-year compounded annual growth rate 14.1% 7.2% 6.9%

Diluted earnings per share from continuing operations $1.29 $0.93 $0.89

Dilutedearningspershareexcludingspecificitems $1.29 $1.03 1 $0.86

1 Non-GAAPmeasurecalculatedbyexcludingtheeffectperShareofrestructuringcostsandone-timetaxitemsfromthedilutedearningsperSharefromcontinuingoperationsattributabletoequityholdersoftheCompany.

Given the value and conditions related to the long-term incentive awards, it takes time to determine the effectivenessofourpay-for-performanceapproachandthealignmentbetweentheNEOs’compensationandtheShareholders’return.ThefollowingtablecomparesforeachyeartheNEOs’totalcompensation,aspresentedforthepast5years(orlesserperiodasanexecutivewithCAE),totheactualvaluerealizedovertime.

ame an n a t n Year

Disclosedm en at n

Less PensionValue

($)

ActualRealized

m en at n 2

($)

atMarch31,2018

M.ParentPresident and ChiefExecutiveOfficer

20182017201620152014

6,328,1805,937,8415,005,5774,419,8543,962,819

6,493,0652,906,1257,957,5519,703,7867,454,432

Total 25,654,271 34,514,959

S.BrancoVice President, Finance andChiefFinancialOfficer

2018201720162015

1,547,9281,110,905458,259547,335

1,225,061784,640414,512702,678

Total 3,664,427 2 8

G.ColabatisttoGroup President, Defenceand Security

20182017201620152014

3,430,6442,647,4071,840,0791,660,0481,514,632

3,590,0841,729,1591,070,3002,250,2811,559,945

Total 0 2 8 0 10,199,769

N.LeontidisGroup President, Civil AviationTraining Solutions

20182017201620152014

2,267,2571,873,9881,548,3141,521,4801,631,849

1,611,2711,284,6671,333,7592,389,4072,138,510

Total 8 8 2 888 8

M.HounsellGeneralCounsel,ChiefComplianceOfficerand Corporate Secretary

201820172016

1,300,7671,148,906575,377

1,152,343761,228210,877

Total 3,025,050 2 2 81 Sumofbasesalary,annualSTIPpaid,allothercompensation,andthegrantvalueofshare-basedandoption-basedawardsduringthefiscalyearasdisclosedintheCircular.2 Sumofbasesalary,annualSTIPpaid,allothercompensation,thepayoutvalueofRSUsandPSUsandthecurrentmarketvalueofthevestedDSUsassociatedwiththegrant

awardedforthatfiscalyear,andtheoptiongainfromanyoptionexerciseduringtheperiod.



a e man e e at e t m a at Toensurealignmentbetweenpayandperformance,theHRCreviewsthecompetitivenessofCAEPresidentandCEO’scompensationinthecontextoftheCompany’srelativeperformanceacrossseveralkeyfinancialmetrics.Thechartbelowprovidesacomparisonofthethree-yearPresidentandCEO’scompensationandCAE’sthree-yearperformancerelativetoCAE’scomparatorgroup(asmeasuredonan“asreported”basisandonarealizablebasis).

The chart below depicts the following:

1. ThepercentilerankofCAE’srelativeperformanceonthefollowingmetrics(measuredoverthelastthreefiscalyearsagainstthecomparatorgroup):• EarningsperShare(EPS)growth;• TotalShareholderReturn(TSR);• AverageReturnonCapitalEmployed(ROCE);• AverageOperatingMargin;and• Overall performance – based on the weighted performance of each of these four metrics with

weightingsof35%,35%,15%and15%respectively.

2. The percentile rank of CAE on declared and realizable President and CEO compensation over the past threefiscalyearsasdefinedbelow.

Three-year Declared Compensation = Total compensation for a three-year period as reported in the summarycompensationtable,excludingthepensionvalue.

Three-year Realizable Compensation = Cash compensation plus the market value of equity awards grantedoverthepastthreeyears.Itisequaltothesumofsalary,theannualincentivepaid,long-termincentives and all other compensation excluding the pension value. Long-term incentive values arebased on the following:• For time-vested equity: Value of all time-vested awards granted (share units and options)

during the measurement period of three years valued at the closing price on the last day of the measurementperiod.

• Forperformance-basedequity:Valueofallperformance-basedawards(regardlessofthedateitwasgranted)forwhichthefinalperformanceresultwasestablishedduringthemeasurementperiod,i.e., it is thevalueofperformance-basedawardsearnedbasedon thefinalperformanceresultsachieved during the measurement period of three years, and valued at the closing price on the last dayofthemeasurementperiod.

Note:PresidentandCEOcompensationfortheUSandCanadiancompanieswascomparedatpar.



a e man e 20 20 8

CAE’s Percentile in Peer Group

OverallPerformance

EPS Growth(35% weight)

TSR(35% weight)

Average ROCE(15% weight)

Average OperatingMargin

(15% weight)

70p

59p

3-yr Realizable Compensation 3-yr Declared Compensation (proxy)

81p

74p 74p 72p

41p

0p

10p

20p

30p

40p

50p

60p

70p

80p

90p

The chart above shows that overall Company performanceforthethree-yearperiodofFY2016toFY2018,asdefinedbytheEPSgrowth,TSR,averageROCE and average operating margin, compared to the performance of our peers during the same period was ranked at the 72nd percentile of the whole group. When comparing the three-yearrealizable compensation of the CAE President and CEO for the same period, it was aligned with the overall Company performance by being at the 70th percentile when compared to the realizable compensation of CEOs of companies in the CAE comparatorgroup.

e e a m an e man e t e t ee ea e 20 t 20 8

m a e t ee a e t t e t a t e e t e e ent an ea a e m en at n t e ame e

e t e e a m an e man e e ng an e at t e 0th percentile. The

e a e e ent an m en at n a g t a e t e me an t e m a at g



m en at n ame e t e emma m en at n a e

The first of the following tables provides a summary of compensation earned during the last three fiscalyears ended March 31 by the President and Chief Executive Officer, the Vice President, Finance and ChiefFinancial Officer, and by the three most highly compensated policy-making executives who served asexecutive officers of CAE or its subsidiaries as at March 31, 2018 (collectively, “ ame e t e e ”or “NEOs”).

n t n ent ean m en at n

ame n n a Position Year Salary

Share-a e

Awards

Option-a e

Awards 2

Annual Incentive

Plan

Long-e m

Incentive Plan

Pension Value

All Otherm en

sation

Totalm ensation

$ $ $ $ $ $ $ $

Marc ParentPresident and ChiefExecutiveOfficer

201820172016

961,200924,233888,667

2,370,4162,116,2962,034,816

1,126,080915,420640,614

1,695,3701,818,5401,292,408

000

596,000563,000604,000

175,114163,352149,072

6,924,1806,500,8415,609,577

n a anVice President, Finance and Chief FinancialOfficer

201820172016

365,667325,000230,884

471,113227,71562,982

223,83698,55019,864

413,049397,15096,353

000

289,000565,000106,000

74,26362,49048,176

1,836,9281,675,905564,259

Gene ColabatisttoGroup President, Defence &Security

201820172016

606,663556,287437,283

988,339640,994585,464

469,476277,254184,315

603,665635,373357,224

000

560,000473,000254,000

762,501537,499275,793

3,990,6443,120,4072,094,079

e ntGroup President, Civil Aviation Training Solutions

201820172016

451,433436,467423,733

794,573552,815536,713

377,568239,148169,035

504,621516,013304,101

000

529,000222,000222,000

139,062129,545114,732

2,796,2572,095,9881,770,314

Ma n e 8

General Counsel, ChiefComplianceOfficerand Corporate Secretary

201820172016

399,217384,417

62,500

366,027270,513193,500

173,880117,165171,000

307,377326,81032,265

000

198,000172,00014,000

54,26650,001

116,112

1,498,7671,320,906589,377

1 RepresentsthevalueofShare-basedawardsgrantedundertheRSUPandthePSUP.ThevaluedisclosedfortheRSUsandPSUsrepresentstheawarddatevaluecalculatedbymultiplyingthenumberofRSUsandPSUsawardedattarget(100%)byCAE’sweightedaverageSharepriceduringthefivetradingdaysimmediatelyprecedingthegrantdate($15.14forunitsawardedinMay2015(FY2016),$15.00forunitsawardedinMarch2016(FY2016),$16.15forunitsawardedinFY2017,and$22.17forunitsawardedinFY2018).SuchvaluediffersfromtheaccountinggrantdatefairvaluedeterminedinaccordancewithIFRS2,Share-basedPayments,astheaccountingfairvalueisassessedwiththeSharepriceonthedateoftheaward(ratherthanonanaverageprice).TheaccountinggrantdatefairvaluewouldbeasfollowsifusingtheCommonShareclosingpriceontheTSXontherespectivegrantdate($14.85onMay29,2015,$15.03onMarch16,2016,$16.39onMay31,2016,and$22.18onJune9,2017):Mr.Parent:$1,995,840inFY2016(anegativedifferenceof$38,976),$2,147,746inFY2017(adifferenceof$31,450),and$2,371,486inFY2018(adifferenceof$1,070);Ms.Branco$61,776inFY2016(anegativedifferenceof$1,206),$231,099inFY2017(adifferenceof$3,384)and$471,325inFY2018(adifferenceof$212);Mr.Colabatistto:$574,250inFY2016(anegativedifferenceof$11,214),$650,520inFY2017(adifferenceof$9,526)and$988,784inFY2018(adifferenceof$445);Mr.Leontidis:$526,433inFY2016(anegativedifferenceof$10,280),$561,030inFY2017(adifferenceof$8,215)and$794,931inFY2018(adifferenceof$358);andforMr.Hounsell:$193,887inFY2016(adifferenceof$387),$274,533inFY2017(adifferenceof$4,020)and$366,192inFY2018(adifferenceof$165).Notethattheactualvaluepaid,ifany,willdiffer.

2 Representsthevalueofoption-basedawardsgrantedundertheESOPanddeterminedbasedonthegrantdatefairvalueoftheawardinaccordancewithIFRS2.Notethatactualvaluereceived,ifany,willdiffer.ThevalueofeachoptionisdeterminedusingtheBlack-Scholesmodelwiththefollowingassumptions:

20 8 FY2017 FY2016 – March FY2016 – May

Dividend yield 1.44% 1.83% 2.00% 1.89%

Expected volatility 18.39% 19.66% 19.84% 20.12%

Risk-free interest rate 0.85% 0.75% 0.70% 0.85%

Expected option term 3.75 4 4 4

Black-Scholes Value 12.45% 13.56% 12.67% 12.62%



3 Represents theSTIPpayoutearned ineachfiscalyearandpaid in thefirstquarterof the followingyear (seeSection7– “ t e m n ent e an – Corporate and n a e man e”fordetails).Ms.BrancohaselectedtodeferaportionofherFY2017andFY2018STIPpayoutstotheExecutiveDSUP.

4 ThepensionvalueshowncorrespondstothecompensatoryvaluereportedintheDefinedBenefitPlanTableandincludestheservicecostandtheimpactoftheincreaseinearningsinexcessofactuarialassumptions.ForMr.Colabatistto,thevalueinFY2018alsoincludesCompanycontributionstotheNon-QualifiedDeferredCompensation(NQDC)planintheamountof$80,000.Mr.ColabatisttostoppedhisparticipationintheNQDCplanasofJanuary1,2018.

5 AllothercompensationinFY2018comprisesotherbenefitexpensesandallowancespaidbyCAEasfollows:

t m eExpenses

ea t Insurance

ene tOther

e te a a at nm e Contributions

Dividenda ent Total

M.Parent 23,288 27,178 3,240 – 28,836 92,572 175,114

S.Branco 21,487 14,365 22,513 – 10,970 4,928 74,263

G.Colabatistto 30,306 2,231 27,279 665,482 17,381 19,822 762,501

N.Leontidis 24,529 17,178 8,324 – 13,543 75,488 139,062

M.Hounsell 11,818 18,918 11,553 – 11,977 – 54,266

6 Ms.BrancowaspromotedtothepositionofVicePresident,FinanceandChiefFinancialOfficerasofMay23,2016.7 Mr.ColabatisttowastransferredtotheUnitedStatesasofJune27,2016.AmountspaidinUSdollarshavebeenconvertedtoCanadiandollarsusingaconversionrateof$1.31

inFY2017and$1.28inFY2018,sameasusedintheMD&Aandfinancialstatements.8 Mr.HounsellwashiredasGeneralCounsel,ChiefComplianceOfficerandCorporateSecretaryasofFebruary1,2016.TheamountshownforFY2016forMr.Hounsellunder

OtherCompensationincludesaspecialbonusof$113,120tocompensatefortheannualbonusamountthatheforfeitedfromhispastemployer.

Incentive Plan AwardsThe following tables provide information relating to each option-based awards and Share-based awards outstandingasatMarch31,2018 foreachNEO,aswellas thevaluevestedorearnedduringFY2018 inrespectofsuchincentiveplanawards.

a e an t n a e a a g ante n 20 8The following table details the awardsmade under CAE’s Share and option based plans for theNEOsinFY2018.

ameAward

TypeAward

Date

m e Securities, units or Other Rights

Payout or Expiration Date

GrantPrice

M. Parent RSU 1

PSU 2

Stock Option 3

09/06/201709/06/201709/06/2017

30,55076,370

408,000

09/06/202009/06/202008/06/2024

$22.17$22.17$22.17

an RSU 1

PSU 2

Stock Option 3

09/06/201709/06/201709/06/2017

6,07015,18081,100

09/06/202009/06/202008/06/2024

$22.17$22.17$22.17

G. Colabatistto RSU 1

PSU 2

Stock Option 3

09/06/201709/06/201709/06/2017

12,74031,840

170,100

09/06/202009/06/202008/06/2024

$22.17$22.17$22.17

N. Leontidis RSU 1

PSU 2

Stock Option 3

09/06/201709/06/201709/06/2017

10,24025,600

136,800

09/06/202009/06/202008/06/2024

$22.17$22.17$22.17

M n e RSU 1

PSU 2

Stock Option 3

09/06/201709/06/201709/06/2017

4,72011,79063,000

09/06/202009/06/202008/06/2024

$22.17$22.17$22.17

1 RSUawardsundertheRSUP(seeSection7– “ m en at n n na ”fordetails).Underthisplan,100%ofthegrantedunitswillvestinJune2020,subjecttotheparticipant’scontinuedemploymentwithCAE.VestedRSUswillbepaidbasedontheaverageCommonSharepriceontheTSXduringthe20tradingdaysprecedingthefinalvestingdateofthegrant.

2 PSUawardsunderthePSUP(seeSection7– “ m en at n n na ”fordetails).Underthisplan,thegrantedunitsmayvestinJune2020,subjecttoCAE’sEPSperformanceandtheEPSpayoutgridapprovedbytheHRCandtheparticipant’scontinuedemploymentwithCAE.DependingontheEPSperformanceeachyearduringtheperformanceperiod,thetargetrateofgrantedunitswillbemultipliedbyafactorrangingfrom0%to200%.VestedPSUswillbepaidbasedontheaverageSharepriceontheTSXduringthe20tradingdaysprecedingthefinalvestingdateofthegrant.

3 StockoptionsawardsundertheESOP(seeSection7– “ m en at n n na ”fordetails).UnderthisplanoptionsaregrantedwithanexercisepriceequaltotheweightedaveragepriceperCommonShareontheTSXonthefivetradingdaysimmediatelyprecedingthegrantdate(ifthegrantdatefallswithinablackoutperiodorwithinfivetradingdaysfollowingtheendoftheblackoutperiod,thedateofgrantshallbepresumedtobethesixthtradingdayfollowingtheendofsuchblackoutperiod).Ateachofthefirstfouranniversariesofthegrant,25%oftheawardvestsandbecomesexercisable.

4 ThegrantpriceongrantdateisequaltotheweightedaveragepriceoftheCommonSharesontheTSXonthefivetradingdaysimmediatelyprecedingthegrantdate,(ifthegrantdatefallswithinablackoutperiodorwithinfivetradingdaysfollowingtheendoftheblackoutperiod,thedateofgrantshallbepresumedtobethesixthtradingdayfollowingtheendofsuchblackoutperiod).



Outstanding share-based awards and option-based awardsThe following table details the outstanding awards under the CAE’s share and option based plans fortheNEOs.

t n a e a

a e a e a

Ma et a t

ame

m e Securities

UnderlyingUnexercised

Options

Option Exercise

Price

Option Expiration

Date

Value ofUnexercised

In-the-Money

Options 2

m e of Shares

or Units of Shares that

have not Vested

Ma et Payout

valueof Share-

based Awardsthat have not

Vested

Value of Vested

a e a eAwards notPaid Out or

Distributed

# $ $ # $ $

M. Parent 408,000418,000335,400266,000

22.1716.1515.1414.66

08/06/202430/05/202328/05/202220/05/2021

738,4803,272,9402,964,9362,479,120

Total 9,455,476 8 2 11,443,999 8 2

an 81,10033,750

5,2004,050

22.1716.1515.1414.66

08/06/202430/05/202328/05/202220/05/2021

146,791264,26345,96837,746

Total 8 40,094 1,032,675 324,204

G. Colabatistto 170,100126,60096,50078,600

110,100

22.1716.1515.1414.6611.02

08/06/202430/05/202328/05/202220/05/202120/05/2020

307,881991,278853,060732,552

1,426,896

Total 4,311,667 2 8 82 1,301,514

N. Leontidis 136,800109,20088,50085,300

22.1716.1515.1414.66

08/06/202430/05/202328/05/202220/05/2021

247,608855,036782,340794,996

Total 2 80 0 28 3,231,257 5,127,250

M n e 63,00053,50045,000

22.1716.1515.00

08/06/202430/05/202315/03/2023

114,030418,905404,100

Total 937,035 46,160 1,106,917 Nil1 Pursuanttothetermsoftheplan,optionsundertheESOPweregrantedwithanexercisepriceequaltotheweightedaveragepriceoftheCommonSharesontheTSXonthe

fivetradingdaysimmediatelyprecedingthegrantdate(ifthegrantdatefallswithinablackoutperiodorwithinfivetradingdaysfollowingtheendofablackoutperiod,thedateofgrantshallbepresumedtobethesixthtradingdayfollowingtheendofsuchblack-outperiod).

2 Optionsarein-the-moneyifthemarketvalueoftheCommonSharescoveredbytheoptionsisgreaterthantheoptionexerciseprice.Thevalueshownisequaltotheexcess,ifany,oftheCommonShareclosingpriceontheTSXonMarch29,2018($23.98)overtheoption’sexerciseprice.Theactualvaluerealizedwillbebasedontheactualin-the-moneyvalueuponexerciseoftheoptions,ifany.Theoptionsvestat25%peryearcommencingoneyearafterthegrantdate.

3 Representstheaggregatenumberofunitsthathavenotmetallperformanceoremploymentconditionsforpayment.4 PayoutvalueisestablishedbasedontheexpectedpayoutaspertheperformancetargetsachievedasofMarch31,2018forPSUsandbasedontheCommonShareclosing

priceonMarch29,2018($23.98)forLTUs,andforRSUsandPSUspayableinMay2018,May2019andJune2020.5 RepresentstheportionofunitsundertheLTUPthatarevestedattheendofthefiscalyearandtheunitsundertheExecutiveDSUPandforwhichpaymentisdeferredtothe

terminationofemployment.



Incentive plan awards – value vested or earned during the yearThefollowingtableshowsthevaluethatwasvestedorearnedbytheNamedExecutiveOfficersduringFY2018inrespectofincentiveplans.

ame

t n a e Awards-Value

VestedDuring the

Year

Share-based Awards-Value

VestedDuring the

Year 2

n t Incentive Plan

m en at nValue Earned

During the Year

$ $ $

M. Parent 2,472,391 4,685,135 1,695,370

an 165,282 295,485 413,049

G. Colabatistto 756,971 1,576,902 603,665

N. Leontidis 844,497 1,575,493 504,621

M n e 271,361 Nil 307,377

1 ThisrepresentsthevalueofpotentialgainsfromoptionsthatvestedduringFY2018.Thesegenerallyincludetheportionoftheoptionsthatwereawardedinthelastfourfiscalyearsthatvestedintheyear.Thepotentialgainsarecalculatedastheexcess,ifany,oftheclosingpriceofCommonSharesontheTSXoneachoftheoptionvestingdatesinFY2018overtheexerciseprice.Theactualvaluerealized,ifany,willdifferandwillbebasedontheCommonSharepriceontheactualexercisedate.

2 ThevalueofShareunitsthatvestedduringFY2018include:(i)theportionofunitsundertheLTUPthatwereawardedinthelastfivefiscalyearsthatvestedduringtheyear,basedontheclosingpriceofCommonSharesoneachoftherespectivevestingdates,forwhichpaymentisdeferredtotheterminationofemployment;(ii)thePSUsthatvestedonMay21,2017basedontheaverageclosingpriceofCommonSharesonthe20tradingdaysprecedingthevestingdateonMay21,2017,specifically$3,747,040forMr.Parent,$228,229forMs.Branco,$1,106,654forMr.Colabatisttoand$1,200,756forMr.Leontidis; (iii)theRSUsthatvestedonMay21,2017basedontheaverageclosingpriceofCommonSharesonthe20tradingdaysprecedingthevestingdateonMay21,2017,specifically$749,408forMr.Parent,$45,774forMs.Branco,$221,416forMr.Colabatisttoand$240,151forMr.Leontidis.Mr.Hounselldidnotbenefitfromthisgrant.NoneoftheotherPSUsorRSUshavevestedasofMarch31,2018.

3 ThisrepresentsthevaluepaidtotheNEOsundertheshort-termincentiveplanforFY2018year(seeSection7– “ t e m n ent e an – Corporate and Individual e man e”fordetails).

en n angementThe NEOs and key executives are members of the contributory Designated Pension Plan registered in Canada andthenon-contributorySupplementaryPensionPlan.Theamountspayableunderthesearrangementsare based on “average annual earnings” which are calculated on the basis of the 60 highest-paid consecutive monthsofbasesalaryandSTIPpayouts.

TheSupplementaryPensionPlanprovidesapensionbenefituponnormalretirementatage65sothatthetotalpensionspayableunderCAE’spensionarrangementswillresult inanannualpensionequalto2%of average annual earnings (being thefive-year top average salary andactual short-term incentivecompensation for NEOs other than the President and CEO for each year of pensionable service, assuming nolimitationontheamountpaidfromaregisteredpensionplanimposedbyCanadiantaxlegislation).ThePresidentandCEO’sshort-termincentivecompensationusedforthepurposeofdetermininghisaverageannualearningsisthetargetbonus.Hismaximumannualpensionbenefit is limitedtoonemillionfiftythousand dollars ($1,050,000). Executivesmay retire from the Company from age 60with full pensionentitlement.AnexecutiveisconsideredashavingretiredforthepurposesoftheSupplementaryPensionPlan if, at the time of termination of employment with CAE, he/she is at least age 55 with a minimum of 5yearsofparticipationintheSupplementaryPensionPlan.Theannualpensionbenefitwillbereducedbybetween0.5%and0.25%permonthpriortoNEO’snormalretirementagedependingontheageoftheNEOattimeofretirement.



Pensions payable under the Supplementary PensionPlanarepaiddirectlybyCAE.InCanada,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. CAEhas secured certain NEO’s and key executives’pensionbenefitsby a letterof credit for a trustfundestablishedfortheexecutives.

• en n a a e n e t e ementa Pension Plan are conditional upon

m an e t n n m et t n an non-solicitation clauses.

• No extra years of service are generally granted under the pension plans.

CAEdoesnotgenerallygrantextrayearsofcreditedserviceunderitspensionplans.ReceiptofpensionbenefitsundertheSupplementaryPensionPlanisconditionaluponthecompliancewithnon-competitionandnon-solicitationclauses.

e ne ene t an ta eThefollowingtablesetsforththecreditedyearsofpensionableserviceandthepresentvalueoftheNEOs’accumulatedbenefitsasatMarch31,2018under theDesignatedPensionPlanand theSupplementaryPensionPlansinconnectionwithretirement.

nn a ene t a a e

ame

m e years ofcredited

serviceAt March 31,

20 8At age

65

Accruedobligation at

start of theyear

m en atchange

Non- m en at

change 2

Accruedobligation at

year-end

# $ $ $ $ $ $

M. Parent 13.17 454,000 794,000 7,915,000 596,000 584,000 9,095,000

an 9.25 60,000 362,000 1,251,000 289,000 240,000 1,780,000

G. Colabatistto 5.83 93,000 273,000 1,543,000 480,000 215,000 2,238,000

N. Leontidis 18.00 241,000 397,000 4,254,000 529,000 418,000 5,201,000

M n e 2.17 26,000 219,000 220,000 198,000 77,000 495,000

1 Thechangeinbenefitobligationthatiscompensatoryincludestheservicecostandtheincreaseinearningsinexcessorbelowwhatwasassumed.Theservicecostistheestimatedvalueofthebenefitsaccruedduringthecalendaryear.

2 Thechangeinbenefitobligationthatisnotcompensatoryincludesinterestcost,changeinassumptions,andgainsandlossesotherthanforadifferenceinearningsandthedecreaseinthediscountrateusedtovaluethepensionplanswhichincreasestheaccruedobligation.

3 Thepresentvaluesoftheaccumulatedbenefitsreportedintheabovetablearecalculatedinaccordancewiththeassumptionsusedforfinancialreportingpurposes.SeeNote14toCAE’sconsolidatedfinancialstatementsforthefiscalyearendedMarch31,2018.ThetotalpresentvalueofaccumulatedbenefitsinourfinancialstatementsiscalculatedinaccordancewithIFRS.

4 Mr.Colabatistto’spensionispayableinUSdollarsconvertedtoCanadiandollarsusingaconversationrateof$1.29asofMarch29,2018.5 InFY2018,Mr.Colabatisttoalsoparticipatedinthe401(K)anduntilJanuary1,2018intheNon-QualifiedDeferredCompensation(NQDC)plan,bothcontributoryregistered

plansintheU.S.Mr.Colabatistto’saccruedpensionobligationatyear-endisoffsetbytheemployercontributedentitlementsunderthe401(K)andtheirrelatedinvestmentgainssothatthefinalpensioncalculationsdonotexceedthe2%ofaverageannualearningsformula.AsatApril1,2017,theaccumulatedvaluepursuanttoMr.Colabatistto’sparticipationintheNQDCplanwas$37,472.DuringFY2018,theemployercontributionwas$80,000.Asaresult,thetotalvalueaccumulatedinsuchplanasatMarch31,2018,includingcumulativeemployeecontributionsandrevenue,was$167,534.ActualamountswithrespecttotheNQDCareinUSdollarsconvertedtoCanadiandollarsusingaconversionrateof$1.28,sameasusedinthefinancialstatements.

For additional information about the Designated Pension Plan and the Supplementary Pension Plan, see Section7– “ e t e m en at n – e m nat n an ange nt ene t ”below.

e m nat n an ange nt ene ta ment ent t ement n te m nat n

ThevariouscompensationplansapplicabletotheNEOsalsocontaindifferentprovisionsthatapplyuponterminationofemploymentorchangeofcontrolofCAE.CAEdoesnothaveaformalpolicyforprovidingseverance payment in the case of termination of employment but may provide severance payments and benefitsasrequiredbylaw.

CAEhasneverthelessenteredintoemploymentagreementswithMessrs.Parent,ColabatisttoandHounsellthatprovideforthepaymentofseveranceamountsandcertainotherbenefitsintheeventofinvoluntaryterminationotherthanforcause.Mr.Parent’sseveranceentitlementonterminationofemploymentotherthan forcause is twoyears’ salaryplus targetbonus,benefitsandexpenses.Mr.Parentwouldalsobe



entitledtotwoyearsofservicecreditedtotheSupplementalPensionPlan.Mr.Colabatistto’sseveranceentitlementonterminationofemploymentotherthanforcauseis18monthsofsalaryplustargetbonus.Mr.Hounsell’sseveranceentitlementonterminationofemploymentotherthanforcauseis14months’salaryplustargetbonus.

CAEisalsopartytoagreementswiththreeexecutiveofficerswhoareNEOs,specificallyMessrs.Parent,Colabatistto and Leontidis, pursuant to which such executives are entitled to termination of employment benefitsfollowingachangeofcontrolofCAEwheretheexecutive’semploymentisexpresslyorimplicitly(constructivedismissal)terminatedwithoutcausewithintwoyearsfollowingthechangeofcontrol.Insuchevent, theexecutive isentitled to24monthsofannual compensation (salary, short-term incentiveandbenefits,payableasa lumpsum),paymentfor long-termincentivedeferredshareunits,theimmediatevesting of supplementary credited service for the purposes of any pension or retirement income plans, vesting of all options which vest within two years from the date of the termination or resignation of the executive and an extension of the exercise period for the options to permit the executive to exercise such optionswithinthe24monthsfromthedateofterminationorresignation.

The following is a summary of compensation that the NEOs are entitled to receive upon the occurrence of specificeventsoftermination.

m en at ng am

Resignation an e m nat n for Cause

Involuntarye m nat n et ement Change of Control

Annual Short-Term Incentive

Forfeit Partial payment based on performance and time in position

Partial payment based on performance and time in position

Two times the greater of average three-year bonus or target bonus in case of termination 2

Stock Options Resignation:30daystoexercise vested options Termination for cause: All options are cancelled

30daystoexercisevested options

Exercise vested options uptoexpirydate;unvested options continue to vest and must be exercised within30daysfollowingvesting date

All options become vested

Performance ShareUnits

All units are forfeited PSUsgrantedinFY2015andFY2016:unitspartially vest at a rate of 1/3foreachfullyearofemployment completed since grant date PSUsgrantedasofFY2017:unitspartiallyvestatarateof1/6,1/3and1/2foreachfullyear of employment completed since grant date

All units will be paid out as scheduled subject to performance criteria

Unvestedunitsvestatthegreaterof100%orthe multiplier resulting from the actual EPS performance as of the ChangeofControldate;all vested unitsbecome payable at the closing price of CAE sharesontheTSXonsuch date

RestrictedShareUnits All units are forfeited Unitspartiallyvestatarateof1/3foreachfullyear of employment completed since the grant date

All units will be paid out as scheduled

Unvestedunitsvestas of the Change of Controldate;allvestedunits become payable at the closing price of CAEsharesontheTSXon such date

DeferredShareUnitsGrantsfrom04/2004

Vested units are paid out

Vested units are paid out

All units become vested All units become vested



m en at ng am

Resignation an e m nat n for Cause

Involuntarye m nat n et ement Change of Control

Supplemental Pension Plan(SPP)

Resignation:Iffiveor more years of participation in the SPP, accrued deferred pension at age 65 Termination for cause: Nobenefitspayablefrom the SPP

Iffiveormoreyearsof participation in the SPP, accrued deferred pensionbenefitsatage65

If age 55 or older with aminimumoffiveyearsof participation in SPP, immediate monthly pension payable

Immediate vesting and two years of additional service in case of termination 2

Severance payments – Severance amount 3 in case of termination

– Severance amount 4 in case of termination 2

1 ChangeofcontrolisdefinedintheChangeofControlAgreementsbetweenCAEandeachNamedExecutiveOfficer,exceptforMs.BrancoandMr.Hounsellwhodonotbenefitfromsuchagreement.Achangeofcontrolmaybetriggeredbyanumberofevents,notablyanacquisitionbyapersonof20%ofCAE’svotingrightswhichisaccompaniedbyachangeinthecompositionoftheBoard,anacquisitionbyapersonof35%ofCAE’svotingrightsoranacquisitionofsharesrepresentinghalftheequityofCAE.Compensationprogramshavevariousdefinitionsofchangeofcontroleventswithdifferentimpactsoncompensation.Theprovisionsillustratedintheabovetableareforspecificeventsthatwouldprovidethemaximumbenefitstotheexecutives.

2 Pursuant to theChangeofControlAgreementsbetweenCAEandeachNamedExecutiveOfficer,except forMs.BrancoandMr.Hounsellwhodonotbenefit fromsuchagreement,followingachangeofcontrol,terminationisdefinedasaninvoluntaryterminationthatoccurswithinthefirsttwoyearsfollowingthechangeofcontrol.

3 Intheeventof involuntaryterminationwhenseveranceispayable, itwillbedeterminedatthetimeoftermination,takingintoconsiderationtheappropriatefactorsandcurrentstateoflegislationandjurisprudence.Mr.Parent’sseveranceentitlementonterminationofemploymentotherthanforcauseistwoyears’salaryplustargetbonus,benefitsandexpenses.Mr.ParentwouldalsobeentitledtotwoyearsofservicecreditedtotheSupplementalPensionPlan.Mr.Colabatistto’sseveranceentitlementonterminationofemploymentotherthanforcauseis18monthsofsalaryplustargetbonus.Mr.Hounsell’sseveranceentitlementonterminationofemploymentotherthanforcauseis14months’salaryplustargetbonus.TheseveranceamountisundeterminedforotherNEOs.

4 Theseveranceamountisequaltotwotimesthesumofbasesalary,targetbonus(oractualbonusaveragedoverthelastthreeyears,ifgreater),andthesumofthevalueofinsurancebenefitsandperquisitesprovidedtotheexecutive.

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 employmentthedaybeforehis/herdeath.

m nt a a e t n e e te m nat n e ent ThefollowingtablesetsforthestimatesoftheamountspayabletotheNEOsuponspecifiedevents,assumingthateachsucheventtookplaceonMarch31,2018.Thetabledoesnotquantifybenefitsunderplansthataregenerallyavailabletosalariedemployeesanddonotdiscriminateinfavourofexecutiveofficers,includingtheRetirementPlanForEmployeesofCAEInc.andAssociatedCompanies,theordinaryDSUplanandtheEmployeeStockPurchasePlan.Inaddition,thetabledoesnotincludethevalueofoutstandingequityawardsthathavepreviouslyvested,suchasstockoptionsandDSUs/LTUs,whicharesetforthaboveinSection7– “Executive

m en at n – Incentive Plan Awards”.Fordescriptionsofthecompensationplansandagreementsthatprovide for the payments set forth in the following table, including our change in control agreements, see Section7– “ e t e m en at n – e m nat n an ange nt ene t ”.

M. Parent an G. Colabatistto N. Leontidis M n e

$ $ $ $ $

n nta e m nat nSalary/Severance 1 3,969,600 Undetermined 1,519,042 Undetermined 679,712LTUs – – – – –Options – – – – –RSUs 2 894,880 50,212 261,947 235,313 239,622PSUs 2 3,741,200 171,942 1,087,502 984,885 93,687Supplementary Plan 1,319,000 – – – –Total 2 80 222,154 2 8 8 220 8 1,013,021

et ement Eligible Not eligible Eligible Eligible Not eligible LTUs 212,727 – 69,389 93,707 –RSUs – – – – –PSUs – – – – –Options – – – – –Supplementary Plan – – – – –Total 212,727 – 8 93,707 –



M. Parent an G. Colabatistto N. Leontidis M n e

e m nat n ng ange n ntSalary/Severance 3 5,239,012 Undetermined 2,411,316 1,891,157 679,712LTUs 4 212,727 13,993 69,389 93,707 –Options 5 5,295,433 494,768 1,661,008 1,478,804 832,309RSUs 6 2,551,232 270,734 842,417 722,997 537,392PSUs 6 10,046,485 917,211 3,209,731 2,789,553 750,622Supplementary Plan 7 1,319,000 – 587,000 479,000 –Total 2 88 1,696,706 8 80 8 2 8 2 800 01 Intheeventof involuntaryterminationwhenseveranceispayable, itwillbedeterminedatthetimeoftermination,takingintoconsiderationtheappropriatefactorsand

currentstateoflegislationandjurisprudence.Mr.Parent’sseveranceentitlementonterminationofemploymentotherthanforcauseistwoyears’salaryplustargetbonus,benefits and expenses.Mr. Parent would also be entitled to two years of service credited to the Supplemental Pension Plan.Mr. Colabatistto’s severance entitlementon termination of employment other than for cause is 18 months’ salary plus target bonus. Mr. Colabatistto’s severance was converted into Canadian dollars usingMarch29,2018exchangerateof$1.29.Mr.Hounsell’sseveranceentitlementonterminationofemploymentother thanforcause is14months’salaryplus targetbonus.

2 Thetime-RSUandthePSUvalueshavebeenestablishedbymultiplyingthenumberofunitsthatwouldhavevesteduponinvoluntaryterminationasofMarch31,2018,basedonperformanceduringcompletedyears,whereapplicable,andusingtheaveragefairmarketvalueofCommonSharesontheTSXduringthe20tradingdaysprecedingthevestingdateof$23.50.Notethatactualvaluewillwoulddiffer.

3 SeveranceamountsforMessrs.Parent,LeontidisandColabatisttoareaspertheirChangeofControlAgreements,Ms.BrancoandMr.Hounselldonotbenefitfromsuchagreement.Mr.Hounsell’sseveranceentitlementonterminationofemploymentotherthanforcauseis14months’salaryplustargetbonusaspernote1above.

4 TheLTUvaluehasbeencalculatedbymultiplyingthenumberofunitsthatwouldhavevesteduponachangeofcontrolasofMarch31,2018,andwhichwillberedeemablewithintheyearfollowingtheyeartheexecutive’semploymentisterminated.Thevaluewascalculatedat$23.98,theclosingpriceofCommonSharesontheTSXonMarch29,2018.Notethatactualvaluewilldiffer.

5 OptionvaluehasbeencalculatedbymultiplyingthenumberofoptionsthatwouldhavevesteduponachangeofcontrolasofMarch31,2018usingaclosingpriceofCommonSharesof$23.98onMarch29,2018,lesstheapplicableoptionexerciseprice.Notethatactualvaluewilldiffer.

6 RSUandPSUvaluehasbeenestablishedbymultiplyingthenumberofunitsthatwouldhavevesteduponachangeofcontrolasofMarch31,2018usingaclosingpriceofCommonSharesontheTSXof$23.98.Notethatactualvaluewilldiffer.

7 TheSupplementaryPensionPlanbenefitssetforthforeachNEOreflecttheincrementalvalueofbenefitsforeachterminationeventthatexceedsthepresentvalueofbenefitsset forth in the “ en n ene t ”tablesabove.WhileonlyMessrs.Parent,ColabatisttoandLeontidisareeligibleforretirement,itwasassumedforthispurposethateachoftheotherNEOswillretireattheageof60.



The management of CAE is aware of no business to be presented for action by the Shareholders at the MeetingotherthanthatmentionedhereinorintheNoticeofMeeting.

nte e t n me e n n mate a t an a t nNoinformedperson(includinganyDirectororexecutiveofficer)ofCAE,anyproposedDirectorofCAE,oranyassociateoraffiliateofanyinformedpersonorproposedDirector,hadanymaterial interest,directorindirect,inanytransactionsincethecommencementofCAE’smostrecentlycompletedfinancialyearor in anyproposed transactionwhichhasmaterially affectedorwouldmaterially affect CAEor anyofitssubsidiaries.

n e te ne e t an e e t e eCAEdoesnotoffer itsDirectorsorexecutiveofficers loans.CAEanditssubsidiarieshavenotgivenanyguarantee, support agreement, letter of credit or similar arrangement or understanding to any other entity inconnectionwithindebtednessofCAE’sDirectorsorexecutiveofficers.

Shareholder proposalsTo propose any matter for a vote by the Shareholders at an annual meeting of CAE, a Shareholder must sendaproposaltotheGeneralCounsel,ChiefComplianceOfficerandCorporateSecretaryatCAE’sofficeat8585Côte-de-Liesse,Saint-Laurent,QuébecH4T1G6atleast90daysbeforetheanniversarydateofthenoticeforthepreviousyear’sannualmeeting.ProposalsforCAE’s2019annualmeetingmustbereceivednolaterthanMarch18,2019.CAEmayomitanyproposalfromitsProxyCircularandannualmeetingfora number of reasons under applicable Canadian corporate law, including receipt of the proposal by CAE subsequenttothe deadlinenotedabove.

e e t a t na n mat nCAE shall provide to any person or company, upon written request to the General Counsel, Chief Compliance OfficerandCorporateSecretaryofCAEatCAEInc.,8585Côte-de-Liesse,Saint-Laurent,Québec,H4T1G6,telephonenumber514-734-5779andfacsimilenumber514-340-5530:

1 one copy of the latest Annual Information Form of CAE together with one copy of any document or the pertinentpagesofanydocumentincorporatedbyreferencetherein;

2. onecopyofthe2018AnnualFinancialReportcontainingcomparativefinancialstatementsofCAEforFY2018, togetherwith theAuditors’Report thereonandManagement’sDiscussionandAnalysis;and

3. onecopyofthisCircular.

AllsuchdocumentsmayalsobeaccessedonCAE’swebsite(www.cae.com).AdditionalfinancialinformationisprovidedinCAE’scomparativefinancialstatementsandManagement’sDiscussionandAnalysis,oronSEDARatwww.sedar.comforthemostrecentlycompletedfinancialyear.

ThecontentsofthisCircularhavebeenapprovedbytheBoardofDirectorsofCAE.

MarkHounsell(signed) GeneralCounsel,ChiefComplianceOfficerandCorporateSecretary

Montréal,Québec June15,2018

Section 8t e m tant n mat n


n a e t e n t eCAE’sPresidentandChiefExecutiveOfficerandtheCompany’sotherexecutiveofficersareresponsibleforthemanagementoftheCompany.TheBoardofDirectors(the“ a ”)isresponsibleforthestewardshipof the Company and for monitoring the actions of, and providing overall guidance and direction tomanagement.

MandateTheBoardshallactinthebestinterestoftheCompany.Infulfillingitsmandate,theBoardshall,amongother things:

mm tteeTheBoardmayestablishcommittees,asitdeemsnecessaryordesirable,toassistitinthefulfillmentofitsduties and responsibilities, with such terms of reference as the Board may determine, and may delegate fromtimetotimetosuchcommitteesorotherpersonsanyoftheBoard’sresponsibilitiesthatmaybelawfully delegated. As such, the Board currently maintains an Audit Committee, a Human ResourcesCommitteeandaGovernanceCommittee.Eachcommitteeiscomprisedentirelyofindependentdirectors,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 meetingswithoutmanagement.

StrategyThe Board will maintain a strategic planning process and annually approve a strategic plan that takes into account,amongotherthings,theopportunitiesandprincipalrisksoftheCompany’sbusiness.TheBoardalsosupervisesmanagementintheimplementationofappropriateriskmanagementsystems.Separatelyfromthestrategicplan,theBoardalsoapprovesanannualbudgetforfinancialperformance.

Corporate governanceCorporategovernanceissuesaretheresponsibilityofthefullBoard.ThisincludesthedisclosurethereofintheCompany’sannualreportandManagementProxyCircular.

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 communicationof all important information. TheCompany communicateswith its stakeholdersthrough a number of channels including its website, and they in turn can provide feedback to the Company inanumberofways,includinge-mail.

The Board, through its Governance Committee, regularly reviews reports on compliance with the Company’sCode of Business Conduct and ethical practices.ItperiodicallyreviewsCompanypolicieswithrespecttodecisionsandothermattersrequiringBoardapproval.

t nan e an managementThe Board, directly and through the Audit Committee, oversees:

(i) theintegrityandqualityoftheCompany’sfinancialreportingandtheeffectivenessofinternalcontrolsandtheCompany’sriskmanagementprocesses;

(ii) theCompany’scompliancewithlegalandregulatoryrequirements;

(iii) thequalificationsandindependenceoftheCompany’sexternalauditors;

(iv) theperformanceoftheCompany’sinternalaccountingfunctionandexternalauditors;and

(v) theadequacyoftheCompany’smaterialpublicdocumentspriortotheirrelease.

Succession planningTheBoard,withthehelpoftheHumanResourcesCommittee,ensuresasuccessionplanisinplacefortheChiefExecutiveOfficerandforothersenioremployeesoftheCompanyandmonitorssuchplan.

Section 9Appendix A – a e t a te


e g t an m en at n managementTheBoardconsidersrecommendationsoftheHumanResourcesCommitteewithrespectto:

(i) theappointmentandcompensationofseniorofficersoftheCompanyatthelevelofVicePresidentandabove;

(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 LeadershipDevelopmentProcess;

(iii) thecompensationphilosophyfortheCompanygenerally;

(iv) the adoption of any incentive compensation and equity-based plans, including stock option, stock purchase, deferred share unit, restricted share unit or other similar plans, in which employees are or maybeeligibletoparticipate;and

(v) theCompany’sretirementpoliciesandspecialcases.

The Board communicates to the President and Chief Executive Officer and periodically reviews theBoard’sexpectationsregardingmanagement’sperformanceandconductoftheaffairsoftheCompany.TheBoardalsoperiodicallyreviewsthePresidentandChiefExecutiveOfficer’spositiondescriptionandobjectivesandhisperformanceagainsttheseobjectives.Eachyear,afteraperformanceevaluation,theBoardapproves,withtherecommendationoftheHumanResourcesCommittee,thePresidentandChiefExecutiveOfficer’scompensation.

ea t a et an n nment matteThe Board ensures, through reasonable measures, that the Company has appropriate health, safety and environment policies and procedures and reviews any material issues relating to such matters and management’sresponsethereto.

e t a at n m en at n e at n an entat nThe 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 amajorityof individualswhoare independent.With regards toBoard composition, theBoard ensuresadherence to the term limits imposed on all directors and takes into account criteria that promote diversity, including but not limited to gender, international background, nationality, age and industry knowledge, in lightoftheCompany’sPolicyRegardingBoardandExecutiveOfficerDiversity.

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 theBoardanditscommittees,thenatureandoperationoftheCompany’sbusiness,andthecontributionsthat individual directors are expected to make, and develops a program of continuing education if needed fordirectors.

The Board considers recommendations of the Governance Committee with respect to the level and forms ofcompensationfordirectors,whichcompensationshallreflecttheresponsibilitiesandrisksinvolvedinbeingadirectoroftheCompany.

e ment a an mm ttee e e t eneThe Board considers recommendations of the Governance Committee for the development and monitoring ofprocessesforassessingtheeffectivenessoftheBoard,thecommitteesoftheBoard,thecommittees’chairs, the Chair of the Board and the contribution of individual Directors, which assessments shall be madeannually.TheseresultsareassessedbytheChairoftheBoardand/ortheChairoftheGovernanceCommitteeandarereportedtothefullBoard,whichdecidesonactionsdeemednecessary, ifany.TheBoard ensures that the number of Directors and the composition of the Board permit the Board to operate inaprudentandefficientmanner.


Section 9 (continued)en a e t a te

Pension plansTheBoardisresponsibleforoverseeingthemanagementoftheCompany’spensionplansanddoesthisthroughitsHumanResourcesCommittee.

Outside advisorsDirectorsmayhireoutsideadvisersattheCompany’sexpense,subjecttotheapprovaloftheChairoftheBoard,andhaveaccesstotheadviceandservicesoftheCompany’sCorporateSecretary,whoisalsotheGeneralCounselandChiefComplianceOfficer.

November 10, 2017


Section 9 (continued)en a e t a te

ThissummaryoftheRightsPlan,asproposedtobeamendedandrestated,isqualifiedinitsentiretybyreference to the text of the Rights Plan which is available upon request from the General Counsel, Chief ComplianceOfficerandSecretaryofCAEatCAEInc.,8585Côte-de-Liesse,Saint-Laurent,QuébecH4T1G6,telephonenumber514-734-5779andfacsimilenumber514-340-5530.TheRightsPlanmayalsobeaccessedonCAE’swebsite(www.cae.com).CapitalizedtermsusedinthissummarywithoutexpressdefinitionhavethemeaningsascribedtheretointheRightsPlan.

Issue of RightsCAEissuedoneright(a “Right”)inrespectofeachCommonShareoutstandingatthecloseofbusinessonMarch7,1990(the“ e me”).CAEhasissuedandwillcontinuetoissueRightsonthesamebasisforeach Common Share issued after the Record Time but prior to the earlier of the Separation Time and the ExpirationTime(bothdefinedbelow).

g t e t ate an an e a tBefore the Separation Time, the Rights will be evidenced by certificates or book entry confirmationstatements for the Common Shares and such Rights are not transferable separate from the Common Shares.FromandaftertheSeparationTime,theRightswillbeevidencedbyseparateRightsCertificatesorinseparatebookentryconfirmationstatementsandwillbetransferableseparatefromandindependentoftheCommonShares.

Exercise of RightsRightsarenotexercisablebeforetheSeparationTime.AftertheSeparationTimeandbeforetheExpirationTime,eachRightentitlestheholdertoacquireoneCommonSharefortheexercisePriceof$100(subjecttocertainanti-dilutionadjustments)(the“Exercise Price”).ThisExercisePriceisapriceinexcessoftheestimated maximum value of the Common Shares during the term of the Rights Plan as determined by the BoardofDirectors.

UpontheoccurrenceofaFlip-InEvent(definedbelow)priortotheExpirationTime(definedbelow),eachRight(otherthananyRightheldbyan“AcquiringPerson”,whichwillbecomenullandvoidasaresultofsuchFlip-InEvent)maybeexercisedtopurchasethatnumberofCommonShareswhichhaveanaggregatemarketpriceequaltotwicetheExercisePriceoftheRightsforapriceequaltotheExercisePrice.Effectively,thismeansaShareholder(otherthantheAcquiringPerson)canacquireadditionalCommonSharesfromtreasuryathalftheirMarketPrice.

e n t n ng e nSubjecttocertainexceptions,anAcquiringPersonisapersonwhoistheBeneficialOwner(definedbelow)of20%ormoreoftheoutstandingCommonShares.

e n t n ene a neApersonisaBeneficialOwnerifsuchpersonoritsaffiliatesorassociatesoranyother personactingjointlyor in concert:

1 ownsthesecuritiesinlaworequity;and

2. has the right to acquire (immediately or within 60 days) the securities upon the exercise of anyconvertible securities or pursuant to an agreement, arrangement or understanding (other than acustomary underwriting agreement, pledge of securities or business combination agreement requiring Shareholderapproval).

However,apersonisnotaBeneficialOwnerundertheRightsPlanwhere:

1 the securities have been deposited or tendered pursuant to a take-over bid, unless those securities have beentakenuporpaidfor;

2. by reason of the holders of such securities having agreed to deposit or tender such securities to a take-overbidpursuanttoaPermittedLock-UpAgreement;

Section 10en – mma t e n a e m

of the Rights Plan


3. suchperson (includinga fundmanager, trustcompany,pension fundadministrator, trusteeornon-discretionary client accounts of registered brokers or dealers) is engaged in the management ofinvestment funds for others, as long as that person:

a)holdsthoseCommonSharesintheordinarycourseofitsbusinessfortheaccountofothers;and

b)isnotmakingatake-overbidoractingjointlyorinconcertwithapersonwhoismakingatake-overbid;or

4. such person is a registered holder of securities as a result of carrying on the business of or acting as a nomineeofasecuritiesdepository.

e n t n e a at n meSeparation Time occurs on the tenth business day after the earlier of:

1 thefirstdateofpublicannouncementthataFlip-InEventhasoccurred;

2. the date of the commencement or announcement of the intent of a person to commence a take-over bid(otherthanaPermittedBidorCompetingBid)orsuchlaterdateasdeterminedbytheBoard;and

3. the date on which a Permitted Bid or Competing Bid ceases to qualify as such or such later date as determinedbytheBoard.

e n t n a n entAFlip-InEventoccurswhenapersonbecomesanAcquiringPerson.

UpontheoccurrenceofaFlip-InEvent,anyRightsthatarebeneficiallyownedbyanAcquiringPersonoranyof its related parties to whom the Acquiring Person has transferred its Rights will become null and void as aresultofwhichtheAcquiringPerson’sinvestmentinCAEwillbegreatlydilutedifasubstantialportionoftheRightsareexercisedafteraFlip-InEventoccurs.

e n t n e m tte APermittedBidisatake-overbidmadebyaperson(the“ e ”)pursuanttoatake-overbidcircularthatcomplies with the following conditions:

1 thebidismadetoallregisteredholdersofCommonShares(otherthanCommonSharesheldbytheOfferor)onidenticaltermsandconditions;

2. noCommonSharesmaybetakenuporpaidforunderthebidfor105daysfollowingthecommencementofthebidorsuchshorterminimumperiodasispermittedbysecuritieslegislation;

3. noCommonSharesmaybetakenuporpaidforunlessmorethan50%oftheoutstandingCommonSharesheldbyShareholdersotherthantheOfferorandcertainrelatedpartieshavebeendepositedpursuanttothebidandnotwithdrawn;

4. the Common Shares may be deposited to and withdrawn from the take-over bid at any time before its expiry;and

5. if,onthedatespecifiedfortake-upandpayment,theconditioninparagraph3aboveissatisfied,thebidshallremainopenforanadditionalperiodofatleast10daystopermittheremainingShareholderstotendertheirCommonShares.

e n t n m et ng A Competing Bid is a take-over bid that:

1 ismadewhileanotherPermittedBidisinexistence;and

2. satisfiesalltherequirementsofaPermittedBidexceptthatnoCommonSharesmaybetakenuporpaidfor under the Competing Bid until it has been open for deposit for at least the same number of days as theminimuminitialdepositperiodofthePermittedBid.


Section 10 (continued)en mma t e n a e m t e g t an

e n t n e m tte g eementAPermittedLock-UpAgreement isanagreementbetweenapersonmakingatake-overbidandoneormoreShareholders(eacha“ e e n”)underwhichtheLocked-upPersonsagreetodepositortender their Common Shares to such take-over bid and which provides:

1 (i)nolimitontherightoftheLocked-upPersonstowithdrawitsCommonSharesinordertodepositthemtoaCompetingBid(orterminatetheagreementinordertosupportanothertransaction)wherethepriceorvaluerepresentedundertheCompetingBid(orothertransaction)exceedsthepriceorvaluerepresentedundertheoriginaltake-overbid;or(ii)limitssuchrighttowithdrawitsCommonSharesinordertodeposit themtoaCompetingBid (or terminatetheagreement inordertosupportanothertransaction) where the price or value represented under the Competing Bid (or other transaction)exceeds the price or value represented under the original take-over bid by as much as or more than anamountspecifiedundertheoriginaltake-overbid,andthespecifiedamountisnotmorethan7%of thepriceorvaluerepresentedunder theoriginal take-overbid,and theCompetingBid (orothertransaction)ismadeforthesamenumberofCommonSharesastheoriginaltake-overbid;and

2. forno“break-up”feeor“top-up”feeinexcessofthegreaterof:(i)2.5%ofthepriceorvaluepayableundertheoriginaltake-overbidtoLocked-upPersons;and(ii)50%oftheamountbywhichthepriceorvaluepayabletoLocked-upPersonsunderaCompetingBid(orothertransaction)exceedsthepriceorvalue payable to Locked-up Persons under the original take-over bid, shall be payable by such Locked-up Persons in the event that the original take-over bid is not successfully completed or if any Locked-up PersonfailstotendertheirCommonSharesundertheoriginaltake-overbid.

e em t n g tThe Rights may be redeemed by the Board at its option with the prior approval of the Shareholders at any timebeforeaFlip-InEventoccursataredemptionpriceof$0.00001perRight.Inaddition,theRightswillbe redeemed automatically in the event of a successful Permitted Bid, Competing Bid or a bid for which theBoardhaswaivedtheoperationoftheRightsPlan.CAEisnotrequiredtopaytheredemptionpricetoanyholderofRightsunlesstheholderisentitledtoreceiveatleast$10.00inrespectofallRightsheldbysuchholder.

WaiverBefore a Flip-In Event occurs, the Board may waive the application of the Flip-In provisions of the Rights Plan to any prospective Flip-In Event which would occur by reason of a take-over bid made by a take-over bid circular to all registeredholdersofCommonShares.However, if theBoardwaives theRightsPlanwith respect to a particular bid, it will be deemed to have waived the Rights Plan with respect to any other take-over bid made by take-over bid circular to all registered holders of Common Shares before the expiry ofthatfirstbid.Otherwaiversofthe“Flip-In”provisionsoftheRightsPlanwillrequirepriorapprovaloftheShareholders.

The Board may also waive the “Flip-In” provisions of the Rights Plan in respect of any Flip-In Event provided that the Board has determined that the Acquiring Person became an Acquiring Person through inadvertence andhasreduceditsownershiptosuchalevelthatitisnolongeranAcquiringPerson.

e m t e g t anProvidedthatthecontinuationoftheRightsPlanisapprovedbyShareholdersattheMeeting,theRightsPlanwillexpire,unlessterminatedearlier,onthedateimmediatelyafterCAE’sannualmeetingofShareholderstobeheldin2021.IftheRightsPlanisnotapprovedbyShareholdersattheMeeting,theRightsPlanwillterminateonAugust15,2018.

men ng eExcept for minor amendments to correct typographical errors and amendments to maintain the validity of the Rights Plan as a result of a change of law, Shareholder or rightsholder approval is required for amendmentstotheRightsPlan.

Rights AgentComputershareTrustCompanyofCanada.

Rightsholder not a ShareholderUntilaRightisexercised,theholdersthereofassuch,willhavenorightsasaShareholder.80 CAEINC.|2018|ManagementProxyCircular

Section 10 (continued)en mma t e n a e m t e g t an

Be it resolved that:

1 The renewal of the Shareholder Protection Rights Plan Agreement between CAE Inc. (“CAE”) andComputershare Trust Company of Canada, as rights agent, datedMarch 7, 1990, as amended andrestated from time to time, a summary of which is set forth in Appendix B to the accompanying proxy informationcircular,isherebyapproved.

2. AnyofficerorDirectorofCAEbeandisherebyauthorizedanddirectedforandonbehalfandinthename of CAE to execute, whether under the corporate seal of CAE or otherwise, and deliver all such documents and instruments, and to do or cause to be done all such other acts and things, as may be necessaryordesirabletogiveeffecttotheforegoing.

Section 11Appendix C – Resolution to Approve the Renewal of the Rights Plan


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