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Nuclear Sub Training Contract Awarded

Maritime Activity Reports, Inc.

July 1, 2004

FAST Training Services Ltd., equally owned by CAE and Alenia Marconi Systems (AMS), has agreed to the terms of an amendment increasing the value of its existing contract with the U.K. Ministry of Defence (MoD) by approximately C$445 million (£190 million) for the Astute Class Training Service (ACTS).

The value to CAE of this amendment is C$222 million based on the guaranteed level of training requirements from the MoD. This does not include the value of the subcontracts received by CAE from FAST.

In 2001, FAST was awarded a 30-year contract worth C$740 million to provide comprehensive training services to the Royal Navy to operate and maintain the first three Astute class nuclear submarines. Total value to CAE of the contract, including this amendment, is approximately C$585 million at the guaranteed level of training.

The amendment realigns the contract with the Astute submarine program, extends the duration to the expected out-of-service date of the third Astute submarine and addresses additional training requirements identified for these boats. CAE and AMS will enhance existing simulators with new capabilities, and provide additional computer-based trainers and other classroom training devices.

Training will start in 2006, and the contract will now cover a period of 36 years with a four-year option to extend available to the MoD.

The contract amendment is subject to financial close, which is expected to happen in the coming weeks

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