CAE : FY24 Global Annual Activity and Sustainability Report

FISCAL YEAR 2024

Global Annual Activity and Sustainability Report

Global Annual Activity and Sustainability Report About this report

About this report

Approach and scope

Our Global Annual Activity and Sustainability Report consolidates information on CAE's strategy, sustainability activities and fiscal year 2024 (FY24) performance into one document. This report includes all the information typically found in a company's sustainability report and the executive summary of the editorial pages of an annual report. By combining our reporting, we provide stakeholders a single source of information that covers these key interconnected areas.

Our approach also signals that we regard sustainability as inseparable from CAE's core business strategy and activities, built-in everything we do from the start. As presented in the Sustainability reporting section, our solutions generate benefits across three central dimensions: environmental, social and governance (ESG).

This report covers our global operations and, unless otherwise stated, presents quantitative and qualitative information for the fiscal year ended March 31, 2024 (FY24). This document has been subject to formal internal review processes and approval by CAE's senior management and Board of Directors. However, our FY24 report did not undergo any external assurance process; CAE intends to engage in external assurance in the coming years. All figures in this report are in Canadian dollars unless otherwise stated. For all financial data, see our FY24 Management's

Discussion and Analysis (MD&A).

Reporting standards

We diligently monitor evolving non-financial disclosure regulations everywhere we operate to align our reporting practices accordingly. Please find below the comprehensive list of reporting standards we currently follow.

This report references the Sustainability Standards of the Global Reporting Initiative (GRI). We outline how this report aligns with various GRI Standards and reference relevant information sources in GRI indicators.

In line with industry-specific Sustainability Accounting Standards Board (SASB) guidelines, we report on two categories: Aerospace

• Defense and Professional & Commercial Services. You will find this disclosure in our SASB Index.

We also provide Task Force on Climate-related Financial Disclosures (TCFD) reporting. You will find this disclosure in our

TCFD Index.

CAE abides by the principles of the United Nations Global Compact as a signatory and we continue our progress on the five UN Sustainable Development Goals identified as most aligned with our corporate strategy and business model. We also report to the Carbon Disclosure Project (CDP) and are a member of RE100.

CAE is preparing to transition to include certain key performance indicators in our financial disclosure, in accordance with applicable criteria and regulatory planning.

Companion documents

FY24 Annual Information Form

FY24 Management Proxy Circular

FY24 Management's Discussion and Analysis(MD&A) 1

Feedback

We welcome your views on the topics covered in this report. Please send your comments, suggestions and questions to [e-mail].

• Also known under the title of ''Financial Report''

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Global Annual Activity and Sustainability Report About this report

Non-IFRS and other financial measures

This report includes non-IFRS financial measures, non-IFRS ratios, capital management measures and supplementary financial measures. These measures are not standardized financial measures prescribed under IFRS and therefore should not be confused with, or used as an alternative for, performance measures calculated according to IFRS. Furthermore, these measures should not be compared with similarly titled measures provided or used by other issuers. Management believes that these measures provide additional insight into our operating performance and trends and facilitate comparisons across reporting periods.

For further information, refer to non-IFRS and other financial measures definitions in our Appendix.

Performance Measures	Growth Measures
- Gross profit margin (or gross profit as a% of revenue);	- Adjusted order intake;
- Operating income margin (or operating income as a% of revenue);	- Adjusted backlog;
- Adjusted segment operating income or loss;	- Book-to-sales ratio.
- Adjusted segment operating income margin
(or adjusted segment operating income as a% of revenue);
- Adjusted effective tax rate
- Adjusted net income or loss;
- Adjusted earnings or loss per share (EPS);
- EBITDA and Adjusted EBITDA;
- Free cash flow.

Liquidity and Capital Structure Measures

• Non-cashworking capital;
• Capital employed;
• Adjusted return on capital employed (ROCE);
• Net debt;
• Net debt-to-capital;
• Net debt-to-EBITDA and net debt-to-adjusted EBITDA;
• Maintenance and growth capital expenditures.

Definitions of all non-IFRS and other financial measures are provided in Section 12.1 "Non-IFRSand other financial measure definitions" of the FY24 Management's Discussion and Analysis (MD&A) to give the reader a better understanding of the indicators used by management. In addition, when applicable, we provide a quantitative reconciliation of the non-IFRS and other financial measures to the most directly comparable measure under IFRS. Refer to Section 12.1 "Non-IFRSand other financial measure definitions" for references where these reconciliations are provided.

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Global Annual Activity and Sustainability Report

Table of contents

2	About this report	5	A message from our	10 Overview
			Chief Executive Officer	13	Strategy

Business highlights

15

Civil Aviation

18

Defense & Security

Sustainability reporting

22 A message from our

Chief Sustainability Officer

41 Environment

1. Climate change resilience

1. Carbon impact

1. Decarbonization strategy

1. Energy consumption

53 Sustainable products and services

57 Sustainable sourcing

1. Responsible resource use

1. Biodiversity

26 Sustainability program

67 Social	124	Governance
67	Talent management	124	Corporate governance
78	Occupational health	128	Business ethics
	and safety	133	Data privacy
82	Aviation safety
137	Cybersecurity
89	Diversity, equity and inclusion
142	Responsible supply chain
100	Human rights		management

104 R&D and innovation

114 Community and education

Appendix

149 Site certifications	157 Global Reporting Initiative	183 SASB Index
	(GRI) indicators

187 Gender equality indicators	190 Task Force on Climate-related
	Financial Disclosures reporting

205 Non-IFRS and other financial measure definitions

211 Caution regarding	213 List of acronyms
forward-looking statements

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Global Annual Activity and Sustainability ReportA message from our Chief Executive Officer

A message from our Chief Executive Officer

Building a stronger CAE for all our stakeholders

Over the past year, CAE has continued to leverage our unparalleled experience to foster innovation and help make the world a safer place. We fixed our gaze on the horizon. We made bold, forward- thinking decisions. We positioned CAE for future success.

We continued our attractive revenue growth trajectory, driven by market-related factors as well as ongoing share expansion. We identified ways to further strengthen our competitive position and demonstrated clear market leadership with the introduction of new technologies and solutions that make our company an unquestioned leader in advancing safety, readiness and operational efficiency.

Marc Parent, C.M.

President and Chief Executive Officer

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Global Annual Activity and Sustainability Report A message from our Chief Executive Officer

We also seized the opportunity to de-riskpre-COVID-19 contractual exposures, streamline our portfolio, and extend our position as sustainability leaders. Moreover, we maintained our status as aviation's lead training innovator. We know that our ongoing investments in technology will not only contribute to our future returns, but also make a positive impact on our customers' success and the millions of people they serve.

Today, we enjoy a strong financial position that is bolstered by ongoing deleveraging efforts, providing us the optionality to invest in our future and return cash to shareholders. With this foundation firmly in place, we have shaped an exciting future for our company, our customers, our employees, and our shareholders.

Bold actions to secure our future

In a market challenged by high inflation, we moved to reshape our company in meaningful ways to drive greater focus, efficiency, and optimization across the portfolio. The divestiture of our Healthcare business in February 2024 positioned it for future growth under new ownership while enabling us to focus on our core aerospace and defence markets.

At the executive level, in May 2024, we appointed Nick Leontidis to the newly created role of Chief Operating Officer (COO). Nick, a 36-year CAE veteran and former Group President of our Civil Aviation business segment, will drive rigorous program execution, help build our backlog, promote enhanced collaboration across departments, and further entrench our culture of One CAE. This new organizational structure will allow us to continue to capitalize on the powerful synergies between our two business segments, and unlock further value for CAE now and in the future.

We also took necessary steps to re-baseline our Defense & Security business, through changes in leadership and the accelerated recognition of risks on eight specific fixed-price contracts that were awarded before COVID-19. Although they are a small fraction of our programs, those eight contracts represented a drag on the segment's performance and future risk profile. With this repositioning, CAE is ready to take advantage of the right people, the right technology, and the right opportunities in the pipeline to unlock long-term success.

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Global Annual Activity and Sustainability Report A message from our Chief Executive Officer

Civil Aviation reaches new heights

Our Civil Aviation business continues to set the standard for performance in the marketplace. It executed exceptionally well again in FY24, posting strong growth and record profitability. Delivering exceptional value for our customers continues to be our top priority, and we were proud to demonstrate how CAE can rapidly and effectively scale our training and flight operations solutions to meet the needs of our customers as they grow.

In Commercial Aviation, we maintained our attractive market share through organic network expansion and outsourcing agreements with major airlines. In Business Aviation, we deployed several new simulators to meet growing customer demand and to serve new geographies. Furthermore, we leveraged our strong airline relationships and innovative new software solutions in our Flight Operation Solutions segment, which further augmented our addressable markets.

This year was one of remarkable momentum in orders from both new and existing customers, with

1. full-yearbook-to-sales ratio1 of 1.24x and a record year-end adjusted backlog1 of $6.4 billion, including orders for 64 full-flight simulators (FFS). During the year, we signed multiple key training agreements with airline partners including Akasa Air, Air France KLM Group, Air Europa, ITA Airways, and Delta Airlines among many others. Furthermore, we expanded our training centre footprint with the opening of CAE's Savannah training centre and began work on the opening of new CAE training centres in Athens, Greece and Vienna, Austria. Finally, we continued to develop and roll out CAE Flight Operations Solutions' modernized software portfolio, which aims to deliver incremental value to our customers and capture additional share.

As a company, our vision is to be the partner of choice across all of our end markets, including original equipment manufacturers and regulatory partners. In this spirit, this year we took our longstanding partnership with Boeing to the next level, officially becoming a Boeing Authorized Training Provider. CAE is proud to be the first to offer Boeing's Competency-Based Training and Assessment curriculum. Working together, we aim to enhance training efficacy and aviation safety through collaborative data sharing and complementary digital capabilities.

• Non-IFRSfinancial measure, non-IFRS ratio, capital management measure, or supplementary financial measure. Refer to the Appendix for the definitions and reconciliations of these measures to the most directly comparable measure under IFRS.

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Global Annual Activity and Sustainability Report A message from our Chief Executive Officer

Defense & Security focused on profitable new growth

The re-baselining of our Defense & Security business segment has created a firm base from which to thrive. We see a clear path to improving profitability in the coming quarters through the efforts taken to accelerate the recognition of contractual risks.

Defense continues to demonstrate its ability to capture new business in a year marked by large strategic program wins, with strong order intake resulting in a full-yearbook-to-sales ratio1 of 1.04x. Additionally, subsequent to year-end, SkyAlyne - our joint venture with KF Aerospace for defence aviation training - was awarded an $11.2 billion, 25-year contract from the Government of Canada to train the next generation of Royal Canadian Air Force pilots and aircrew. The impending ramp-up on these successes and several additional large strategic wins anticipated in FY25 point to a strong growth outlook and further improvement in our margin rates.

Our unique combination of digital capabilities and expertise has proven invaluable in providing new opportunities and expanding the addressable market across five domains: air, land, sea, space and cyber. During the year, we were proud to be selected on Canada's Remotely Piloted Aircraft System (RPAS) program, and we were excited to secure synergistic cross-CAE opportunities with the award of a Bombardier Global 6500 full-flight simulator to support the High Accuracy Detection and Exploitation System (HADES) program. Strong underlying tailwinds across the defence market remain intact, and we are poised to capture an increasing share of our markets.

Positioning CAE at the forefront of innovation

Over the past year, we made remarkable advances in accelerating the development of next-generation technologies under our consolidated Global Technology and Product (GTP) organization, which brought groundbreaking innovations to market and streamlined processes to drive efficiencies across our company. GTP has been a catalyst for cross-business-unit technology collaboration, yielding transformative results and paving the way for future tech development across our entire company.

By integrating our Civil Aviation and Defense & Security technological ecosystems, we leveraged our capabilities to enhance human performance, elevate safety in our industry and further increase our business value, giving rise to unique products like CAE Rise and CAE Prodigy. Our One CAE approach allowed us to invest efficiently in our core technologies, generating value across our business lines.

Exemplifying the power of our technology collaboration in action, CAE Prodigy became the first full-flight simulator with a gaming engine-powered image generator to achieve Level D qualification

- the highest level of qualification available.

This same technology will soon power our most advanced simulation products in defence, and offers an unmatched capability for our defence customers. Alongside Prodigy, further advancement of our newly launched CAE Connect platform delivers an unparalleled digitally connected customer experience to our Commercial and Business aviation customers.

At CAE, we are tireless innovators. Driven by curiosity, we have been proactive in identifying more than 100 potential use cases throughout the organization for artificial intelligence. These efforts will create value and optimize operations for both our customers and our own organization.

Day in and day out, our pursuit of excellence through technological innovation continues to position us at the forefront of our industry. From training solutions for future platforms to integrated software as a service (SaaS) for flight operations and optimization, our technologies helped to move the world forward safer, faster and more sustainably.

• Non-IFRSfinancial measure, non-IFRS ratio, capital management measure, or supplementary financial measure. Refer to the Appendix for the definitions and reconciliations of these measures to the most directly comparable measure under IFRS.

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Global Annual Activity and Sustainability Report A message from our Chief Executive Officer

Forging a more sustainable world

Our mission is to make the world a safer place, and that extends to safeguarding a sustainable future in all that we do. As part of our sustainability journey, CAE is committed to decarbonizing our entire value chain, including our operations, training centres, products, services and supply chain.

This year, we honoured our commitment to further integrate sustainability into our business model and strategic decision-making by submitting near-termscience-based targets to the Science Based Targets initiative. With this step, CAE has set clear objectives across our business lines to reduce our carbon footprint and promote sustainable practices.

Our persistent efforts on sustainability have been recognized through our improved performance across various sustainability scores, including those from S&P and the Carbon Disclosure Project. Inclusion in the S&P 2024 Global Sustainability Index placed CAE in the top 15% of our industry, a testament to the hard work of our employees, partners and stakeholders who are helping us build a more sustainable future.

Diversity, equity and inclusion, another cornerstone of our sustainability strategy, remains vital for fostering fairness, innovation and resilience, and ensuring long-term success for our organization and the communities in which we operate. For the first time in 2024, we were recognized as one of Canada's Best Diversity Employers and among America's Greatest Workplaces for Women, a testament to our commitment to creating a workplace where all employees feel valued.

This year, we also took strides in our commitment to build enduring, meaningful and mutually beneficial relationships with Indigenous communities. We started this journey by convening our first Indigenous Advisory Board meeting and attaining Committed status in Progressive Aboriginal Relations Certification.

Defining the future of our industry in FY25 and beyond

As we reflect on a transformative year, where we took bold action to position ourselves for future success, we are seeing proof that our strategy is working. We are capitalizing on exciting opportunities across Civil and Defense. We have set the stage for enduring profitable growth and value creation in excess of market rates, with strong cash generation.

Innovation is what makes us different, and we will continue to harness its power to expand our market-leading position. Our approach, based on common solutions and scalable technology, will allow us to leverage our core strengths across our company

and drive our growth to new heights. Working as a team, we are developing technologies that will shape the future state of our industry and help our customers advance their safety, readiness, and operational efficiency goals.

Technology alone does not drive innovation - people do. CAE's team of 13,000 people around the world work together every day to develop and deploy the solutions of tomorrow. On behalf of CAE management, I would like to close by acknowledging the important role of our people in our achievements, and thanking them for their hard work and dedication.

I am truly grateful for all the opportunities I had this year to engage, listen and understand the evolving needs of our customers and partners.

Thank you for continuing to choose CAE.

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Global Annual Activity and Sustainability Report Overview

At CAE, we exist to make the world safer.

Our cutting-edge training and critical operations solutions empower pilots, airlines, defence and security forces to perform at their best every day and when the stakes are the highest. We equip those in critical roles with the skills and expertise needed to move our world forward safely. We provide digitally immersive training and operational support solutions to two markets globally:

Civil Aviation

Including major commercial airlines, regional airlines, business aircraft operators, civil helicopter operators, aircraft manufacturers, third-party training centres, flight training organizations, maintenance repair and overhaul organizations, and aircraft finance leasing companies.

Our mission

To lead at the frontier of digital immersion with software-based training and critical operational support solutions to make the world a safer place.

Defense & Security

Including defence forces, original equipment manufacturers (OEMs), government agencies and public safety organizations worldwide.

Our vision

To be the worldwide partner of choice in civil aviation and defence and security by revolutionizing our customer's training and critical operations with software-based and digitally immersive solutions to elevate safety, efficiency and readiness.

We are a proud partner of choice for those operating in the most complex environments.

Roots in innovation

When Ken Patrick, a former Royal Canadian Air Force officer, founded CAE in 1947, his goal was to "… take advantage of a war-trained team that was extremely innovative and very technology intensive." By the mid-1950s, we were already creating our first flight simulators. One innovation led to another and, by 1982, we had developed a flight simulator so realistic that training on real aircraft was no longer necessary.

The rest is history.

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