3 April 2012

Canadian Pacific Recommends Shareholders Elect CP Nominees

Calgary Alberta - Canadian Pacific today sent the following letter to shareholders in connection with the Company's annual meeting of shareholders to be held on 17 May 2012.
 
Dear Fellow Shareholder:
 
Canadian Pacific's annual meeting of shareholders is coming up on 17 May 2012, and we strongly recommend you vote for the CP director nominees, all of whom are highly qualified, engaged, and informed business leaders who best serve the interests of ALL CP shareholders. CP's Multi-Year Plan is realizing the potential of CP's unique assets and delivering record operating metrics. Fred Green, the Company's CEO, and his management team have utilized their thorough knowledge of CP's business to develop and implement this plan. Your Board is using its extensive experience in railroading and other relevant fields to oversee the implementation of the Multi-Year Plan and is holding management accountable for the results.
 
CP has the right plan, the right management team, and the right Board, to generate substantial value for shareholders.
 
The Board believes that replacing Fred Green with Hunter Harrison, as demanded by Pershing Square, would delay and damage CP's value-generating plan and would undermine CP's ongoing initiatives to increase volume and improve operations and profitability. On behalf of the Board, I encourage you to vote FOR CP's nominees using the WHITE "universal" proxy on the Internet, or by signing, dating, and returning the enclosed WHITE universal proxy in the postage-paid envelope provided.
 
CP'S BOARD IS COMMITTED TO ACHIEVING RESULTS
 
As Michael Phelps, Chairman of the Board's Management Resources and Compensation Committee, said at CP's 2012 Investor Day on 27 Mar 2012, "We've put out a three-year target... The expectation is of a significant, measurable, evident, continuous, improvement, or else... We understand the expectations from the marketplace and we expect to see improvement."
 
Make no mistake, we are holding management accountable and we are delivering on our Plan.
 
CP'S CULTURE OF CHANGE IS MOVING THE NEEDLE
 
CP has a culture of change that is reinforced at every level of the organization from the Board of Directors to our employees in the field. This culture of change is producing results as evidenced by record operating metrics, the innovative methods we use to make new markets for sustained growth, and in the consistent renewal of expertise on our Board of Directors.
 
At CP's 2012 Investor Day, COO Mike Franczak noted, "The disciplined execution of our multi-year programs and the Integrated Operating Plan is driving results. The needle is moving. We have a solid plan and a capable team executing it. We are generating clear, sustainable results, and we have line-of-sight to the improvements in productivity and cost savings that will deliver CP's Multi-Year Plan."
 
CP's senior management and members of its Board of Directors welcomed the opportunity at Investor Day to showcase the Company's aggressive and successful execution of its Multi-Year Plan. The Company is achieving record operating metrics.
 
Compared to our three-year averages, during the first two months of 2012, CP's efforts resulted in:
 
·  a 26 percent reduction in active cars online;
 
·  an 11 percent increase in assessorial revenue;
 
·  a 29 percent improvement in terminal dwell.
 
Our current terminal dwell time is at a record low level for CP and places us close to best-in-class for the entire industry. With record terminal dwell and train speeds, we have improved our car miles per car day to a record level of over 205 miles per day. This improvement has allowed us to move an average of 15 percent more gross ton miles per day while reducing active cars by 15,000 from our three-year average for the same period.
 
CP IS EXPANDING MARKET PRESENCE
 
Pershing Square recently misleadingly claimed that CP lost market share to Canadian National under Fred Green. To the contrary, under Fred Green's leadership, CP has expanded its presence in emerging markets, such as energy. CP now reliably moves large volumes of crude by rail into the Gulf, the Midwest, the US Northeast, eastern Canada, and the west coast of Canada. CP's market development in energy will provide up to $400 million in new annual revenues over the next three to four years.
 
We have regained our full Canadian grain market share, and for the 2011/2012 crop year to date, we have exceeded the five-year average volume by 16 percent. In Intermodal, volumes are up in domestic markets and in the markets we serve, we have regained 100 percent of shipping lines and all associated lanes. We have received strong customer support for our progress, and we expect further growth as we continue to deliver strong service execution.
 
CONTINUAL BOARD RENEWAL ENSURES THE BOARD HAS THE SKILLS NEEDED TO OVERSEE THE SUCCESSFUL EXECUTION OF THE MULTI-YEAR PLAN
 
The CP Board has extensive, relevant, experience in railroads and complementary industries including energy, natural resources, food and agriculture, and includes leaders from the fields of law, government, banking, and finance. It is the right Board to guide CP through the successful execution of the Multi-Year Plan and beyond.
 
The CP Board is regularly renewed with new directors who offer complementary skills and experience. More than half of the directors on the CP Board have joined since 2006. In 2011, CP further strengthened the Board with the addition of Rick George, Chief Executive Officer of Suncor Energy, and seasoned railroad executives, Tony Ingram and Ed Harris. As both a shipper of petroleum products and a supplier of fuel to the rail industry, Rick's years of leadership at Suncor have provided him a multi-faceted understanding of CP's industry. Tony and Ed have served in senior management roles at four of the seven Class I railroads in North America and together bring over 80 years of rail experience.
 
We believe it is in shareholders' best interests to use CP's WHITE universal proxy to elect Mr. Ackman to the CP Board to allow for constructive, Board-level dialogue, based on the relevant facts and information concerning CP and the Multi-Year Plan. We are confident that, once Mr. Ackman understands the facts and how this team is executing on its plan, he will endorse the plan.
 
PERSHING SQUARE'S NOMINEES AND DEMANDS WOULD DAMAGE CP - VOTE FOR THE CP NOMINEES TODAY
 
The CP Board believes that Pershing Square's demand that CP replace the Company's CEO with Mr. Harrison would damage CP. The resulting disruption would undermine and delay CP's ongoing initiatives to improve profitability by increasing volume through consistent, reliable service, improving operations through strategic investments, and containing costs. Replacing the CEO when he is successfully executing the Multi-Year Plan represents unwarranted risk, it is exactly the wrong thing to do at exactly the wrong time.
 
We urge you to vote for CP's nominees, John E. Cleghorn, Tim W. Faithfull, Richard L. George, Frederic J. Green, Edmond L. Harris, Krystyna T. Hoeg, Tony L. Ingram, Richard C. Kelly, The Honourable John P. Manley, Linda J. Morgan, Madeleine Paquin, Michael E.J. Phelps, Roger Phillips, David W. Raisbeck, Hartley T. Richardson, and William A. Ackman by using the WHITE universal proxy and NOT to vote for Pershing Square's other director nominees or return any proxy sent to you by Pershing Square.
 
CP'S UNIVERSAL PROXY PROVIDES SHAREHOLDERS WITH A CLEAR AND FAIR MEANS OF CHOOSING THE BEST BOARD FOR CP
 
CP believes that voting for the election of directors is a fundamental right of share ownership and that shareholders should therefore have as much flexibility and choice as possible when exercising their right to elect directors. In order to achieve this, CP is using a WHITE universal proxy.
 
As CP is using a universal proxy containing all of the CP nominees as well as any other nominees proposed by Pershing Square, there is no need to use any other form of proxy regardless of how you propose to vote.
 
We encourage you to ask any questions you may have about how to use the WHITE universal proxy by contacting MacKenzie Partners, Inc. at 1-800-322-2885 or Georgeson at 1-866-374-9187.
 
You may vote for CP's nominees in accordance with the instructions provided on the WHITE universal proxy on the Internet, or by signing, dating, and returning the WHITE universal proxy in the postage-paid envelope provided. Only your last-dated proxy will count. Any proxy may be revoked at any time prior to its exercise at the annual meeting as described in the Management Proxy Circular.
 
You can visit www.cpOnTrack.com for more information about CP, our team, and our value-generating Multi-Year Plan.
 
CP has the right plan, the right management team, and the right Board to generate substantial value for shareholders. Vote FOR CP's nominees using the WHITE universal proxy today.
 
On behalf of CP's Board of Directors, thank you for your continued support and interest in CP.
 
Sincerely,
 
John E. Cleghorn - Chairman of the Board of Directors.