ANNUAL INFORMATION FORM | 2014 FEBRUARY 23, 2015 TABLE OF CONTENTS 1. CORPORATE STRUCTURE 6.2 SECURITY RATINGS 23 1.1 NAME, ADDRESS AND 1 INCORPORATION INFORMATION 7. MARKET FOR SECURITIES 7.1 STOCK EXCHANGE LISTINGS 26 2. INTERCORPORATE RELATIONSHIPS 7.2 TRADING PRICE AND VOLUME 26 2.1 PRINCIPAL SUBSIDIARIES 2 8. DIRECTORS AND OFFICERS 3. GENERAL DEVELOPMENTS OF THE BUSINESS 8.1 DIRECTORS 27 3.1 RECENT DEVELOPMENTS 3 8.2 CEASE TRADE ORDERS, 28 BANKRUPTCIES, PENALTIES OR 4. DESCRIPTION OF THE BUSINESS SANCTIONS 4.1 BACKGROUND AND NETWORK 7 8.3 SENIOR OFFICERS 28 4.2 STRATEGY 7 8.4 SHAREHOLDINGS OF DIRECTORS AND 28 4.3 PARTNERSHIPS, ALLIANCES AND 8 OFFICERS NETWORK EFFICIENCY 4.4 NETWORK AND RIGHT-OF-WAY 8 9. LEGAL PROCEEDINGS AND REGULATORY 29 4.5 QUARTERLY TRENDS 11 ACTIONS 4.6 BUSINESS CATEGORIES 11 4.7 REVENUES 12 10. TRANSFER AGENTS AND REGISTRARS 4.8 RAILWAY PERFORMANCE 16 10.1 TRANSFER AGENT 30 4.9 FRANCHISE INVESTMENT 17 18 4.10 OPERATING PLAN (“OP”) 11. INTERESTS OF EXPERTS 31 4.11 INFORMATION TECHNOLOGY 18 4.12 BUSINESS RISKS AND ENTERPRISE RISK 18 12. AUDIT COMMITTEE MANAGEMENT 12.1 COMPOSITION OF THE AUDIT 32 4.13 INDEMNIFICATIONS 18 COMMITTEE AND RELEVANT 4.14 SAFETY 19 EDUCATION AND EXPERIENCE 4.15 ENVIRONMENTAL PROTECTION 19 12.2 PRE-APPROVAL OF POLICIES AND 33 4.16 INSURANCE 20 PROCEDURES 4.17 COMPETITIVE CONDITIONS 20 12.3 AUDIT COMMITTEE CHARTER 33 12.4 AUDIT AND NON-AUDIT FEES AND 40 5. DIVIDENDS SERVICES 5.1 DECLARED DIVIDENDS AND DIVIDEND 21 POLICY 13. FORWARD LOOKING INFORMATION 41 6. CAPITAL STRUCTURE 14. ADDITIONAL INFORMATION 6.1 DESCRIPTION OF CAPITAL STRUCTURE 22 14.1 ADDITIONAL COMPANY 42 INFORMATION February 23, 2015 CANADIAN PACIFIC 1. CORPORATE STRUCTURE In this Annual Information Form (“AIF”), “our”, “us”, (“the CBCA”). On July 20, 2001, CP amended its “we”, “CP” and “the Company” refer to Canadian Articles of Incorporation to change its name to Pacific Railway Limited (“CPRL”), CPRL and its Canadian Pacific Railway Limited. On October 1, subsidiaries, CPRL and one or more of its 2001, Canadian Pacific Limited (“CPL”) completed subsidiaries, or one or more of CPRL’s subsidiaries, an arrangement (“the Arrangement”) pursuant to as the context may require. All information in this section 192 of the CBCA whereby it distributed to AIF is stated as at December 31, 2014 and all its common shareholders all of the shares of newly financial statements were prepared in accordance formed corporations holding the assets of four of with United States generally accepted accounting CPL’s five primary operating divisions. The transfer principles (“GAAP”) unless otherwise indicated. of Canadian Pacific Railway Company (“CPRC”), Except where otherwise indicated, all financial previously a wholly owned subsidiary of CPL, to information and references to “dollar” or “$” CPRL was accomplished as part of a series of steps, reflected herein are expressed in Canadian dollars. pursuant to the terms of the Arrangement. 1.1 Name, Address and Incorporation Information The Company’s registered, executive and head Canadian Pacific Railway Limited was incorporated office is located at 7550 Ogden Dale Road S.E., on June 22, 2001, as 3913732 Canada Inc. Calgary, Alberta T2C 4X9. pursuant to the Canada Business Corporations Act 2014 ANNUAL INFORMATION FORM 1 2. INTERCORPORATE RELATIONSHIPS 2.1 Principal Subsidiaries The table below sets out the Company’s principal subsidiaries, including the jurisdiction of incorporation and the percentage of voting and non-voting securities CP currently own directly or indirectly: Percentage of Percentage Non-Voting Securities of Voting Beneficially Owned, Incorporated Securities or over which under the Held Directly Control or Direction Principal Subsidiary(1) Laws of or Indirectly is Exercised Canadian Pacific Railway Company Canada 100% Not applicable Soo Line Corporation(2) Minnesota 100% Not applicable Soo Line Railroad Company(3) Minnesota 100% Not applicable Dakota, Minnesota & Eastern Railroad Corporation(4) Delaware 100% Not applicable Delaware and Hudson Railway Company, Inc.(3) Delaware 100% Not applicable Mount Stephen Properties Inc.(5) Canada 100% Not applicable (1) This table does not include all of the Company’s subsidiaries. The assets and revenues of unnamed subsidiaries did not exceed 10% of the total consolidated assets or total consolidated revenues of CP individually, or 20% of the total consolidated assets or total consolidated revenues of CP in aggregate. (2) Indirect wholly owned subsidiary of Canadian Pacific Railway Company. (3) Wholly owned subsidiary of Soo Line Corporation. (4) Indirect wholly owned subsidiary of Soo Line Corporation. (5) Wholly owned subsidiary of Canadian Pacific Railway Company. 2 CANADIAN PACIFIC 3. GENERAL DEVELOPMENTS OF THE BUSINESS 3.1 Recent Developments • at September 26, 2014, CP terminated its existing revolving credit facility agreement dated as of 2014 Developments November 29, 2013. On the same day CP entered On May 7, 2014, CP announced Chief Executive into a new revolving credit facility agreement with Officer E. Hunter Harrison agreed to a contract 15 highly rated financial institutions for a extension with the railway for an additional year, commitment amount of U.S. $2 billion. The facility and will remain with the Company until 2017. Prior includes a U.S. $1 billion five years portion and a to the Company’s shareholder meeting on May 1, U.S. $1 billion one year plus one year term out 2014, it was announced that Mr. Richard Kelly portion. The facility can accommodate draws of would not stand for re-election as a member of the cash and/or letters of credit at market competitive Company’s Board of Directors. On May 1, 2014, the pricing. At December 31, 2014, the facility was Company announced that Gary Colter was elected undrawn; and Chairman of the Company’s Board of Directors. • on March 17, 2014 the Company commenced a Effective May 20, 2014, the Hon. Jim Prentice Normal Course Issuer Bid (“NCIB”) to purchase, for resigned as a member of the Company’s Board of cancellation up to 5.3 million common shares. On Directors. Mr. Prentice had been appointed to the September 29, 2014, the Company announced the Board on June 7, 2013. amendment of the NCIB to increase the maximum On October 1-2, 2014, the Company unveiled new number of its Common Shares that could be growth targets extending to 2018. These financial purchased from 5.3 million to 12.7 million by expectations include: March 16, 2015. From March 17, 2014 to December 31, 2014, the Company repurchased • more than doubling diluted earnings per share 10.5 million Common shares for $2,089 million at (“EPS”) over the next four years compared to 2014; an average price of $199.42 per share. • growing annual revenue to $10 billion in 2018; As a result of the Company’s improved financial and position, CP received two ratings upgrades in 2014 • generating cumulative cash flow before dividends from all three agencies. Standard & Poor’s (“S&P”), of $6 billion through 2018. Moody’s Investors Services (“Moody’s”), and Dominion Bond Rating Services (“DBRS”) increased Over the course of 2014 and in early 2015, CP took their ratings to BBB+, Baa1 and BBB (High), a number of steps to optimize the Company’s respectively, from BBB-, Baa3, and BBB (Low), capital structure and lower cost of capital. Key respectively. In addition, the Company was assigned initiatives included: short-term ratings on its newly established U.S. • on January 28, 2015, CP issued U.S. $700 million commercial paper program. S&P, Moody’s, and 2.900% 10-year Notes due 2025 for net proceeds DBRS assigned ratings of A-2, P-2, and R-2 (High), of U.S.$694 million; respectively. • during the fourth quarter of 2014, the Company On November 17, 2014, the Company announced a established a commercial paper program which proposed agreement with Norfolk Southern enabled it to issue commercial paper up to a Corporation (“NS”) for the sale of approximately 283 maximum aggregate principal amount of U.S. $1 miles of the Delaware and Hudson Railway Company, billion in the form of unsecured promissory notes. Inc.’s line between Sunbury, Pennsylvania, and The commercial paper program is backed by a U.S. Schenectady, New York. The assets expected to be $1 billion committed, revolving credit facility, sold to NS upon completion of this transaction have which matures on September 26, 2016. As at been classified as Assets held for sale on the December 31, 2014, the Company had total Company’s Consolidated Balance Sheets. The assets commercial paper borrowings of U.S. $675 million continue to be reported at their carrying value as this (CDN $783 million) presented in Long-term debt is lower than their expected fair value. The sale to NS, on the Company’s Consolidated Balance Sheets; when agreed, will be subject to regulatory approval 2014 ANNUAL INFORMATION FORM 3 by the U.S. Surface Transportation Board and is Proxy Contest expected to close in 2015. In January 2012, Pershing Square Capital On January 2, 2014, the Company executed an Management, L.P. (“Pershing Square”) launched a agreement with Genesee & Wyoming Inc. (“G&W”) proxy contest in order to replace a minority of the for the sale of the Dakota, Minnesota, & Eastern Board of Directors of the Company (the “Board”) (“DM&E”) West tracks between Tracy, Minnesota and to advocate for management change (the and Rapid City, South Dakota, Colony, Wyoming “Proxy Contest”). The proxy contest was settled in and Crawford, Nebraska. DM&E West encompasses May 2012 with changes described below in approximately 660 miles and the sale closed on “Change in Board of Directors” and “Management May 30, 2014 for U.S.