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1.	to receive the consolidated financial statements for the year ended December 31, 2004, and the auditors’ report thereon;
2.	to elect directors;
3.	to appoint auditors;
4.	consider and, if deemed advisable, to pass, with or without variation an ordinary resolution to approve the reconfirmation, amendment and restatement of the Corporation’s Shareholder Rights Plan; and
5.	to transact such other business as may properly come before the meeting or any adjournment thereof.

NOTE:

Registered shareholders of Canadian Pacific Railway Limited wishing to vote by proxy are requested to complete and return the enclosed form of proxy in the envelope provided to the Corporation’s transfer agent, Computershare Trust Company of Canada. Registered shareholders may also vote by telephone or Internet by following the instructions provided on the enclosed form of proxy. Non-registered shareholders should refer to page 4 of the management proxy circular for information on how to vote their shares. Proxies must be received by Computershare Trust Company of Canada or Georgeson Shareholder Communications Canada, agents for Canadian Pacific Railway Limited, not less than 24 hours prior to the time fixed for holding the meeting (or any adjournment thereof), in order to be used at the meeting.

 

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				Page
NOTICE OF ANNUAL AND SPECIAL MEETING OF SHAREHOLDERS					1
MANAGEMENT PROXY CIRCULAR					2
	Glossary of Terms				2
	General Information				3
	Information on Voting				3
BUSINESS TO BE TRANSACTED AT THE MEETING					4
	1.   Financial Statements				4
	2.   Election of Directors				4
		Interlocking Directorships			8
		Directors’ Meeting Attendance			8
		Directors’ Share Ownership Requirements			8
		Directors’ Compensation			10
		Total Cash Compensation Paid in 2004			11
		Directors’ Deferred Share Unit Plan (DSU Plan)			11
		Directors’ Stock Option Plan (DSOP)			11
	3.   Appointment of Auditors				12
		Audit and Non-Audit Fees and Services — 2004 & 2003			12
	4.   Shareholder Rights Plan				13
REPORTS OF COMMITTEES OF THE BOARD					16
	Report of the Audit Committee				16
	Report of the Governance Committee				17
	Report of the E&S Committee				18
	Report of the Pension Committee				19
	Report of the Compensation Committee				19
STATEMENT OF EXECUTIVE COMPENSATION					20
	Compensation Committee Report on Executive Compensation				20
	Summary Compensation Table				26
	Options and SAR Grants during 2004				27
	Aggregated Options and SAR exercises during 2004 and year-end Options and SAR values				27
	Securities Authorized for Issuance Under Equity Compensation Plans				28
	Pension Plans				28
	Employment Contract and Change of Control Agreements				30
PERFORMANCE GRAPH					30
INDEBTEDNESS OF DIRECTORS AND EXECUTIVE OFFICERS					31
ADDITIONAL ITEMS					31
	Directors’ and Officers’ Liability Insurance				31
	Corporate Governance				31
	Shareholder Proposals				34
	Availability of Documents				34
	Directors’ Approval				34
APPENDIX 1
	STATEMENT OF CORPORATE GOVERNANCE PRACTICES
APPENDIX 2
	DIRECTOR INDEPENDENCE
APPENDIX 3
	TERMS OF REFERENCE — BOARD COMMITTEES

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1.	to receive the consolidated financial statements for the year ended December 31, 2004, and the auditors’ report thereon;
2.	to elect directors;
3.	to appoint auditors;
4.	consider and, if deemed advisable, to pass, with or without variation an ordinary resolution to approve the reconfirmation, amendment and restatement of the Corporation’s Shareholder Rights Plan; and
5.	to transact such other business as may properly come before the meeting or any adjournment thereof.

NOTE:

Registered shareholders of Canadian Pacific Railway Limited wishing to vote by proxy are requested to complete and return the enclosed form of proxy in the envelope provided to the Corporation’s transfer agent, Computershare Trust Company of Canada. Registered shareholders may also vote by telephone or Internet by following the instructions provided on the enclosed form of proxy. Non-registered shareholders should refer to page 4 of the management proxy circular for information on how to vote their shares. Proxies must be received by Computershare Trust Company of Canada or Georgeson Shareholder Communications Canada, agents for Canadian Pacific Railway Limited, not less than 24 hours prior to the time fixed for holding the meeting (or any adjournment thereof), in order to be used at the meeting.

1

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3

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4

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Stephen E. Bachand(a)		Director since October 2001
		Mr. Bachand, 66, of Ponte Vedra, Florida is the Retired President and Chief Executive Officer of Canadian Tire Corporation, Limited, a hardgoods retailer specializing in automotive, sports and leisure, and home products. He held that position from March 1993 until his retirement in August 2000. He is also a director of the Bank of Montreal and Fairmont Hotels & Resorts Inc. He graduated from Williams College in Williamstown, Massachusetts with a B.A. and from the Darden School of the University of Virginia with an M.B.A. He is the Chair of the Compensation Committee, and a member of the Audit Committee and the Governance Committee.
John E. Cleghorn, O.C., F.C.A. (a)		Director since October 2001
		Mr. Cleghorn, 63, of Toronto, Ontario is the Chairman of SNC-Lavalin Group Inc., an international engineering and construction firm. He is the retired Chairman and Chief Executive Officer of the Royal Bank of Canada. He held that position from January 1995 until his retirement in July 2001. He is also a director of Finning International Inc., Molson Coors Brewing Company, Nortel Networks Corporation and Nortel Networks Limited. He is a Member of the Faculty of Management, Advisory Board and Governor Emeritus of McGill University, Immediate Past Chairman of Historica Foundation of Canada, Chancellor Emeritus of Wilfrid Laurier University and a director of Atlantic Salmon Federation. He graduated from McGill University in Montreal with a B.Com. and is a chartered accountant. He is the Chair of the Pension Committee, and a member of the Audit Committee and the Governance Committee

5

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Tim W. Faithfull		Director since December 2003
		Mr. Faithfull, 60, of Oxford, England is the Retired President and Chief Executive Officer of Shell Canada Limited, an oil and gas company. He held that position from April 1999 until July 2003. He is a director of TransAlta Corporation, AMEC plc and Shell Pensions Trust Limited. From 1996 until 1999 he was Chairman and Chief Executive Officer of Shell Companies in Singapore. During this period he was also a director of DBS Bank and PSA Corporation. Between 1999 and July 2003 he was a member of the boards of Calgary Health Trust and The EPCOR Centre for the Performing Arts. He graduated from the University of Oxford (Keble College), with a B.A. in Philosophy, Politics and Economics and is an alumnus of the London Business School (Senior Executive Program). He is a member of the Governance Committee, the E&S Committee and the Compensation Committee.
James E. Newall, O.C.		Director since October 2001
		Mr. Newall, 69, of Calgary, Alberta is the Chairman of the Board of Directors of the Corporation and Chairman of NOVA Chemicals Corporation, a chemicals company producing sytrenics and olefins and polyolefin products. He has held the latter position since July 1998. In January 2004, he was appointed Chairman of the Board of Directors of Novelis Inc., an aluminium rolled products company. He served as Chief Executive Officer of NOVA Corporation from August 1991 until July 1998. He is also a director of Maple Leaf Foods, Nova Chemicals Corporation and Novelis Inc. He graduated from the University of Saskatchewan with a B.Com. He is the Chair of the Governance Committee.
Dr. James R. Nininger		Director since October 2001
		Dr. Nininger, 68, of Ottawa, Ontario is the Retired President and Chief Executive Officer of The Conference Board of Canada, a private not-for-profit research group. He held that position from September 1978 until his retirement in August 2001. He is also a director of Power Corporation of Canada, a member of the Human Resources Committee of the National Arts Centre, a member of the Board of Directors of Community Foundations of Canada, the Community Foundation of Ottawa and the Canadian Patient Safety Institute. He graduated from the University of Ottawa with a B.Com. from the University of Western Ontario with an M.B.A. and from the University of Michigan with a PhD. He is a member of the Governance Committee, the E&S Committee and the Compensation Committee.

6

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Madeleine Paquin		Director since October 2001
		Ms. Paquin, 43, of Montreal, Quebec is the President and Chief Executive Officer of Logistec Corporation, an international cargo-handling company. She has held that position since January 1996. She is also a director of Sun Life Assurance Company of Canada, Sun Life Financial Inc., Aéroports de Montréal, and the Chamber of Maritime Commerce. She graduated from École des Hautes Études Commerciales, Université de Montréal with a G.D.A.S. and from the Richard Ivey School of Business, University of Western Ontario with a H.B.A. She is a member of the Audit Committee, the Governance Committee and the E&S Committee.
Michael E.J. Phelps, O.C.		Director since October 2001
		Mr. Phelps, 57, of West Vancouver, British Columbia, is the Chairman of Dornoch Capital Inc., a private investment company. He is also Chairman of the Advisory Board, Duke Energy Gas Transmission-Canada, and is Chairman of Fairborne Energy Ltd. He is the former Chairman and Chief Executive Officer of Westcoast Energy Inc. He held that position from June 1988 until March 2002. He is a director of Canfor Corporation, Duke Energy Corporation, and Fairborne Energy Ltd. He is a member of the Advisory Board of Aon Reed Stenhouse Inc. He was appointed an Officer of the Order of Canada in 2001. He graduated from the University of Manitoba with a B.A. and an L.L.B. and from the London School of Economics with an L.L.M. He is the Chair of the E&S Committee, and a member of the Governance Committee and the Compensation Committee.
Roger Phillips, O.C.		Director since October 2001
		Mr. Phillips, 65, of Regina, Saskatchewan, is the Retired President and Chief Executive Officer of IPSCO Inc., a steel manufacturing company. He held that position from February 1982 until his retirement in December 2001. He is also a director of Inco Limited, Toronto Dominion Bank, Imperial Oil Limited and Cleveland-Cliffs Inc. Mr. Phillips is a Fellow of the Institute of Physics and a Member of the Canadian Association of Physicists. He is also President of La Sauciere Investments Inc., a private company. He was appointed an Officer of the Order of Canada in 1999 and was presented with the Saskatchewan Order of Merit in 2002. He graduated from McGill University in Montreal with a B.Sc. in Physics and Mathematics. He is the Chair of the Audit Committee, and a member of the Governance Committee and Pension Committee.
Robert J. Ritchie		Director since October 2001
		Mr. Ritchie, 60, of Calgary, Alberta, is the President and Chief Executive Officer of the Corporation. He is also President and Chief Executive Officer of CPRC, a position that he has held since March 1995. He is a director of ShawCor Ltd. and is on the Advisory Board of Willis Canada Inc. He is also a director and Chair of the Railway Association of Canada and a director of the Association of American Railroads and the Van Horne Institute. He graduated from McGill University in Montreal with a B.Sc. and from the University of Western Ontario with an M.B.A.

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Michael W. Wright		Director since October 2001
		Mr. Wright, 66, of Longboat Key, Florida, is the Retired Chairman of the Board and Chief Executive Officer of SUPERVALU INC., a food distributor and grocery retailer. He was Chairman and Chief Executive Officer from June 1981 to June 2001 and Chairman until June 2002. He is also a past chairman of Food Distributors International and the Food Marketing Institute. He is a director of Wells Fargo & Company, Honeywell International, Inc., S.C. Johnson & Son, Inc., and Cargill Inc. He is a Trustee Emeritus of the University of Minnesota Foundation and is a member of the University of Minnesota Law School Board of Visitors and the Board of Trustees of St. Thomas Academy. He graduated from the University of Minnesota with a B.A. and from the University of Minnesota Law School with a J.D. (Honours). He is a member of the Audit Committee, the Governance Committee and the Compensation Committee.

(a)

S.E. Bachand was a director of Krystal Bond Inc. when it was subject to a cease trade order on April 12, 2002 for failure to file financial statements. It has since ceased to operate as a going concern. J.E. Cleghorn, a director of Nortel Networks Corporation and Nortel Networks Limited is subject to a cease trade order issued in May 2004, for failure to file certain financial statements, by the Ontario Securities Commission against directors, officers and certain other current and former employees prohibiting trading in Nortel Networks securities.

													Audit										Governance										E&S										Pension										Compensation
			Board										Committee										Committee										Committee										Committee										Committee
			(5 meetings)										(6 meetings)										(6 meetings)										(2 meetings)										(2 meetings)										(5 meetings)
Name			#					%					#					%					#					%					#					%					#					%					#					%
S.E. Bachand				5					100					6					100					6					100					—					—					—					—					5					100
J.E. Cleghorn				5					100					6					100					6					100					—					—					2					100					—					—
T.W. Faithfull (a)				4					80					—					—					6					100					2					100					1/1					100					4/4					100
J.E. Newall				5					100					—					—					6					100					—					—					—					—					—					—
J.R. Nininger				5					100					—					—					6					100					2					100					—					—					5					100
M. Paquin(a)				5					100					4/4					100					6					100					2					100					—					—					—					—
M.E.J. Phelps				5					100					—					—					6					100					2					100					—					—					5					100
R. Phillips				5					100					6					100					6					100					—					—					2					100					—					—
R.J. Ritchie(b)				5					100					—					—					—					—					—					—					—					—					—					—
M.W. Wright				5					100					6					100					6					100					—					—					—					—					5					100

(a)	Was not a member of certain committees for the entire year.
(b)	Attends committee meetings, in full or in part, as appropriate, as a non-voting director at the request of the committees.

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																		Total number of					Total value of
								Number of					Number of					common shares and					common shares and
Director			Year					common shares					DSUs					DSUs					DSUs ($)(a)
S.E. Bachand				2004					3,129					14,260					17,389					714,688
				2003					3,129					8,195					11,324					414,232
				Change					0					6,065					6,065					300,456
J.E. Cleghorn				2004					5,000					4,894					9,894					406,643
				2003					5,000					1,576					6,576					240,550
				Change					0					3,318					3,318					166,093
T.W. Faithfull				2004					1,460					7,937					9,397					386,217
				2003					0					3,777					3,777					138,163
				Change					1,460					4,160					5,620					248,054
J.E. Newall				2004					20,000					23,640					43,640					1,793,604
				2003					20,000					14,905					34,905					1,276,825
				Change					0					8,735					8,735					516,779
J.R. Nininger				2004					1,500					2,624					4,124					169,496
				2003					1,500					450					1,950					71,331
				Change					0					2,174					2,174					98,165
M. Paquin				2004					100					5,344					5,444					223,748
				2003					100					2,168					2,268					82,963
				Change					0					3,176					3,176					140,785
M.E.J. Phelps				2004					16,479					2,624					19,103					785,133
				2003					13,479					450					13,929					509,523
				Change					3,000					2,174					5,174					275,610
R. Phillips				2004					3,088					10,318					13,406					550,987
				2003					3,088					5,660					8,748					320,002
				Change					0					4,658					4,658					230,985
R.J. Ritchie				2004					75,942					50,512					126,454					5,197,259
				2003					73,963					49,743					123,706					4,525,165
				Change					1,979					769					2,748					672,094
M.W. Wright				2004					1,000					13,313					14,313					588,264
				2003					1,000					7,452					8,452					309,174
				Change					0					5,861					5,861					279,090
TOTAL				2004					127,698					135,466					263,164					10,816,040
				2003					121,259					94,376					215,635					7,887,928
				Change					6,439					41,090					47,529					2,928,112

(a)	Total values determined by reference to the closing price of Shares on the TSX and DSUs owned by the directors on December 31, 2004 ($41.10) and December 31, 2003 ($36.58), and exclude options.

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						Audit				Other				Audit				Other
		Board				Committee				Committee				Committee				Committee
		Chair				Chair				Chairs				Members				Members
		($)(a)				($)				($)				($)				($)
Board member annual retainer			150,000				25,000				25,000				25,000				25,000
Stock based compensation (DSUs)			133,000				70,000				70,000				70,000				70,000
Committee chair/ member annual retainer			N/A				10,000				5,000				6,000				3,000
Board attendance fee per meeting			N/A				1,500				1,500				1,500				1,500
Committee attendance fee per meeting			N/A				1,500				1,500				1,500				1,500

(a)	All inclusive

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		Fees Paid
		Amount				Amount
		paid in				paid in								Stock Based				Total
		DSUs				cash				Total fees				Compensation				Compensation
Name		($)				($)				($)				(DSUs)($)				($)
S. E. Bachand(a)			81,000				0				81,000				70,000				151,000
J.E. Cleghorn			38,250				38,250				76,500				70,000				146,500
T.W. Faithfull(a)			32,750				32,750				65,500				70,000				135,500
J. Lamarre(b)			20,166				20,166				40,333				66,667				107,000
J.E. Newall			150,000				0				150,000				133,000				283,000
J.R. Nininger			0				67,000				67,000				70,000				137,000
M. Paquin			33,500				33,500				67,000				70,000				137,000
M.E.J. Phelps			0				72,000				72,000				70,000				142,000
R. Phillips			81,500				0				81,500				70,000				151,500
Viscount Weir(a)(c)			0				14,333				14,333				5,000				19,333
M.W. Wright(a)			76,000				0				76,000				70,000				146,000

(a)	paid in US dollars;
(b)	resigned from the board of directors on October 25, 2004;
(c)	retired from the board of directors at the 2004 annual meeting of shareholders

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Number of Options

Date of Grant

Expiry Date

Exercise Price

Granted

Oct. 17, 2001

Oct. 17, 2011

$27.62

8,000

April 17, 2002

April 17, 2012

$33.60

4,000

May 1, 2003

May 1, 2013

$32.82

4,000

		Year ended				Year ended
		December 31, 2004				December 31, 2003
Audit Fees		$	1,005,000			$	855,000
Audit-Related Fees		$	543,000			$	329,000
Tax Fees		$	350,000			$	310,000
All Other Fees		$	0			$	7,000
TOTAL		$	1,898,000			$	1,501,000

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4.	SHAREHOLDER RIGHTS PLAN

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	•	to amend the date for reconfirmation of the Shareholder Rights Plan from the annual meeting of the Corporation in 2005 to the annual meeting of the Corporation in 2008;
	•	to amend the definition of “Lock-up Agreement” to provide that no “break up” fees or other penalties that exceed in the aggregate the greater of 21/2% of the price or value of the consideration payable under the Subject Bid and 50% of the increase in the consideration resulting from another take-over bid or transaction shall be payable by shareholders if the shareholders fail to tender their Shares to the Subject Bid; and
	•	certain other amendments to reflect comments received from professional commentators on shareholder rights plans and to reflect the restatement of the Shareholder Rights Plan.

1.	The Shareholder Rights Plan dated as of July 31, 2001 and amended and restated as of February 19, 2002 between Canadian Pacific Railway Limited and Computershare Trust Company of Canada, as rights agent, be amended and restated as described in the Management Proxy Circular of the Corporation dated February 21, 2005;
2.	The making on or prior to the date hereof of any revisions to the Shareholder Rights Plan as may be required by any stock exchange or by professional commentators on shareholder rights plans in order to give effect to the foregoing revisions or to conform the Shareholder Rights Plan to versions of shareholder rights plans then prevalent for public reporting issuers in Canada, as may be approved by any two of the Chairman of the Board, the Chief Executive Officer, the Chief Financial Officer, any Vice-President or a director, is hereby approved;
3.	The Shareholder Rights Plan, as amended and restated in accordance with paragraphs 1 and 2 above, is hereby reconfirmed and approved;

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4.

Any director or officer of the Corporation, is hereby authorized, for and on behalf of the Corporation, to execute and deliver such other documents and instruments and take such other actions as such director or officer may determine to be necessary or advisable to implement this resolution and the matters authorized hereby, such determination to be conclusively evidenced by the execution and delivery of such documents or instruments and taking of any such actions.

	•	reviewed with management and the external and internal auditors prior to publication, the annual consolidated financial statements and notes thereto, the annual MD&A, the interim financial statements and notes thereto, the interim MD&A, and the Annual Information Form;
	•	reviewed a report on all critical accounting polices and practices to be used, and all alternative treatments of financial information within generally accepted accounting principles that had been discussed with management;

	•	approved the engagement of external resources to assist in the Corporation’s internal control review initiative in preparation for the filing with the SEC in 2006 of management’s first annual report on internal controls over financial reporting;
	•	reviewed the Corporation’s plans with respect to, received reports on, and monitored the progress of, the aforementioned initiative;
	•	received quarterly reports from the Corporation’s Disclosure Policy Committee with respect to management’s quarterly reviews of key internal controls over financial reporting and disclosure controls and procedures;

	•	reviewed and confirmed the independence of the Corporation’s external auditors, based on the external auditors’ disclosure of its relationships with the Corporation and its affiliates;
	•	reviewed a report of the external auditors on the auditors’ internal quality controls;
	•	approved a plan for the transition of the lead partner of the external auditors;
	•	reviewed the performance and qualifications of the external auditors and recommended their re-appointment for shareholder approval;

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	•	reviewed with management and the external auditors the scope and plans of the annual audit;
	•	met privately with representatives of the external auditors to discuss audit matters, the relationship and communications between the external auditors and management, and other issues which the external auditors or the Audit Committee wished to discuss;
	•	reviewed and pre-approved the provision by the external auditors of certain non-audit services not prohibited by the SOA and approved a pre-approval policy for audit and non-audit services to be provided by the external auditors;

	•	reviewed the experience, skills and performance of the internal auditors and approved a program for the rotation of selected high-potential employees through one- to two-year postings with the internal audit department;
	•	reviewed the annual work plan of the internal auditors, including resources;
	•	reviewed and discussed with the board and management reports by the internal auditors on the audits performed, and monitored management’s responses to matters set forth therein;
	•	met privately with the Director, Internal Audit, from time to time and prior to approving the annual and interim financial results press releases, financial statements, notes, MD&As and other financial reporting documents, to discuss relevant issues;

	•	reviewed with management and the internal and external auditors the adequacy of the internal controls and disclosure controls and procedures and reviewed reports thereon provided by the Disclosure Policy Committee;

	•	approved and monitored the financing plan for 2004;
	•	reviewed all major financings;
	•	reviewed the activities and plans of the Treasury Department;

	•	received reports on, and reviewed with management, matters relating to the enterprise risk management program, including insurance matters.

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	•	reviewed what competencies and skills the board as a whole should possess, what competencies, skills and personal and other qualities the existing directors possess, and the appropriate size of the board with a view to facilitating effective decision-making;
	•	reviewed and assessed potential new board candidates having regard to the foregoing and other relevant matters;
	•	recommended to the board the nominees to stand for election as directors at the Meeting;
	•	reviewed matters relating to the independence of each director and recommended approval by the board of revised criteria for director independence and of the Governance Committee’s assessment of the independence of each director;
	•	conducted an evaluation of the effectiveness of the board, its committees and each director, including the Chairman of the Board;
	•	reviewed and recommended to the board the director compensation philosophy and compensation to be paid to non-employee directors;
	•	approved amendments to the Corporation’s Corporate Governance Principles and Guidelines;
	•	evaluated the performance of the CEO and, upon recommendation by the Compensation Committee, approved the compensation to be paid to him in 2004;
	•	reviewed and monitored matters relating to CPR’s approach to corporate governance, in order to maintain the highest standards in that regard; and
	•	reviewed potential senior officer succession candidates and matters relating to senior officer succession planning.

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	•	reviewed with management all significant environmental matters relating to CPR, including legal and regulatory issues, the status of specific environmental issues, including the environmental audit program and corrective actions, CPR’s overall environmental remediation plan and resources, and wildlife mortality on the railway, and provided direction and guidance to management thereon; and
	•	reviewed with management all significant safety matters relating to CPR, including legal and regulatory issues, CPR’s overall approach to safety issues, its record of personal injuries and other accidents during 2004 and the status of specific personal injury incidents and fatalities, and provided direction and guidance to management thereon.

	•	reviewed the status of the Corporation’s initiative to outsource certain pension fund management matters to external investment and asset managers;
	•	reviewed and monitored the performance of the defined benefit and defined contribution pension funds;
	•	approved amendments to the defined benefit plan statement of investment policies and procedures;
	•	reviewed the financial status of, and funding issues related to, the defined benefit pension option;
	•	reviewed a report regarding compliance of employer contributions with funding policy and legislation and compliance by external investment and asset managers with respect to relevant policies, laws and regulations;
	•	reviewed and approved the pension plan audited financial statements;
	•	approved transaction approval and execution authorities for pension trust fund administrative matters; and
	•	appointed PricewaterhouseCoopers, LLP as auditor of the Canadian Pacific Railway Company Pension Plan.

	•	the appointment, compensation and reporting relationships of the Executive Officers;
	•	the compensation philosophy of the Corporation;
	•	the adoption and amendment of incentive compensation plans, equity based plans and retirement plans, subject to shareholder approval if required;

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	•	the establishment of performance objectives and the conduct of performance evaluations for certain Executive Officers;
	•	CPR’s organizational health; and
	•	succession planning.

	•	reviewed the structure and reporting relationships of senior management;
	•	extensively reviewed throughout the year succession plans for the CEO and development plans for internal CEO candidates;
	•	completed a full review of succession plans for members of the CPR Executive Committee and other Executive Officers;
	•	reviewed and made recommendations to the board for two Executive Officer appointments;
	•	reviewed with the assistance of an independent compensation consultant current trends in compensation, CPR’s overall compensation philosophy and the level of compensation to be paid to Executive Officers;
	•	approved the 2004 performance objectives of the CEO and the 2005 performance objectives of the CEO, COO and CFO;
	•	recommended to the Governance Committee the compensation to be paid to the CEO in 2004;
	•	recommended to the board a grant of Options pursuant to the Stock Option Plan, including setting the performance vesting targets for the performance Options;
	•	approved an allocation of Options available in 2005 for granting by the CEO from time to time to eligible employees in accordance with the Stock Option Plan;
	•	recommended to the board an amendment to the Executive DSU Plan;
	•	reviewed the payout level under the Performance Incentive Plan for the 2003 plan year;
	•	reviewed the progress of corporate performance as against the 2004 Performance Incentive Plan targets and as against the performance vesting targets for all outstanding performance Options;
	•	recommended to the board the targets for the 2005 Performance Incentive Plan awards; and
	•	reviewed and discussed with management CPR’s organizational health and effectiveness.

	•	attracting, retaining and motivating talented executives in a challenging business environment;
	•	focusing the efforts of executives on performance improvement;
	•	recognizing individual contributions as well as overall business results; and

20

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	•	sustaining shareholder value creation by aligning the interests and awards of executives with those of the company shareholders

		CEO				COO/CFO				Sr. VP				VPs
		%				%				%				%
Base			24				34				38				43
Short-term			17				15				14				13
Long-term			59				51				48				44
Total			100				100				100				100

21

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Target Award

Level as a %

Corporate

Individual

of base

Component

Component

Level

salary (%)

Weighting (%)

Weighting (%)

CEO

70

75

25

Other Named Executive Officers

30 – 45

75

25

Other Executive Officers

30

75

25

Senior Managers

20 – 25

60

40

Remaining Participants

5 – 15

50

50

22

---

 

Level		Multiple of Salary
CEO		4X
COO		3X
CFO		2X
Sr. VP and VPs		1X

23

---

 

	•	40% – financial metrics, including operating income, top-line revenue growth from yield, operating ratio, free cash after dividends, and controls;
	•	20% – people/ organization — strengthening CPR leadership, succession planning, performance differentiation, and employee engagement;
	•	15% – specified strategic initiatives; and
	•	25% – service, safety (as measured by personal injuries and train accidents) and environmental (corrective actions and planning).

24

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			Percentage of Total
Compensation Component			Compensation
Base Salary				22	%
Performance Incentive Plan				15	%
Stock Option Plan				54	%
Benefits and Perquisites				1	%
All Other Compensation (including pension)				7	%
Total				100	%

25

---

 

						Annual Compensation												Long-term Compensation
																		Awards								Payouts
																		Securities
																		Under				Restricted
														Other				Options &				Shares or
														Annual				SARs				Restricted				LTIP				All Other
						Salary				Bonus				Compensation				Granted				Share Units				Payouts				Compensation
Name and Principal Position		Year				($)				($)				($)(d)				(#)(e)				($)				($)(f)				($)(g)
R.J. Ritchie			2004				806,250				800,000				25,764				208,800				0				0				15,964
President and			2003				743,750				84,375				24,046				207,000				0				0				14,726
Chief Executive Officer			2002				718,750				265,350				18,354				177,900				0				873,600				143,907
M.T. Waites(a)			2004				385,000				234,321				9,922				62,000				0				0				1,270
Executive Vice-President			2003				376,667				32,484				9,456				57,900				0				0				6,308
and Chief Financial Officer;			2002				332,500				98,088				6,517				47,900				0				333,775				160,699
Chief Executive Officer, US Network
F.J. Green(b)			2004				398,988				285,143				6,448				62,000				0				0				118,986
Executive Vice-President and			2003				286,000				12,513				4,827				33,900				0				0				12,163
Chief Operating Officer			2002				277,266				72,235				3,182				30,600				0				238,680				70,490
N.R. Foot			2004				292,750				137,064				4,385				38,200				0				0				5,796
Senior Vice-President,			2003				286,000				12,513				4,277				33,900				0				0				5,663
Operations			2002				277,266				73,323				3,166				31,200				0				238,680				69,924
M.M. Szel(c)			2004				270,750				114,675				4,207				28,700				0				0				5,361
Vice-President,			2003				256,000				14,513				4,103				28,600				0				0				5,069
Marketing and Sales-Bulk			2002				247,875				45,750				3,039				24,600				0				226,044				66,663

(a)	Mr. Waites was appointed Executive Vice-President and Chief Financial Officer; Chief Executive Officer US Network in March 2003.
(b)	Mr. Green was appointed Senior Vice-President, Marketing and Sales in April 2002, Executive Vice-President, Operations and Marketing in January 2004 and Executive Vice-President and Chief Operating Officer in October 2004.
(c)	Ms. Szel was appointed Vice-President, Marketing and Sales — Bulk in February 2004. In February 2005, she was appointed Senior Vice-President, Bulk Commodities and Government Affairs.
(d)	The value of perquisites and other personal benefits is not greater than the lesser of $50,000 and 10% of the total annual salary and bonus of each Named Executive Officer. These values represent the dividend equivalents accrued during each year in respect of DSUs awarded under the Executive DSU Plan.
(e)	Represents Options granted under the Stock Option Plan.

(f)	Payouts for 2002 were made under the CPR LTIP in place from January 1, 1999 to December 31, 2002. As a result of CPRL becoming a publicly traded company, the performance period was shortened by one year to December 31, 2001. The cash payout was based on measurable operational and financial targets at the end of the revised performance period adjusted for the impact of becoming public. The cash payout was made on December 31, 2002.
(g)	Represents the value of Shares purchased by CPR pursuant to the matching provisions of the ESPP. It also includes the value of matching DSUs awarded under the Executive DSU Plan.

26

---

 

																		Market Value of
			Securities, Under					% of Total Options/										Securities Underlying
			Options/SARs					SARs Granted to					Exercise or Base					Options/SARs on the
			Granted (#)					Employees in					Price					Date of Grant					Expiration
Name			(a)					Fiscal Year					($/Security)					($/Security)					Date
R.J. Ritchie				98,900					5.7					32.50					32.50					February 19, 2014
				109,900					6.3					32.50					32.50					February 19, 2009
M.T. Waites				33,800					1.9					32.50					32.50					February 19, 2014
				28,200					1.6					32.50					32.50					February 19, 2009
F.J. Green				33,800					1.9					32.50					32.50					February 19, 2014
				28,200					1.6					32.50					32.50					February 19, 2009
N.R. Foot				21,400					1.2					32.50					32.50					February 19, 2014
				16,800					1.0					32.50					32.50					February 19, 2009
M.M. Szel				13,600					0.8					32.50					32.50					February 19, 2014
				15,100					0.9					32.50					32.50					February 19, 2009

(a)

Under the Stock Option Plan each Named Executive Officer was granted regular and performance-accelerated Options to purchase Shares on February 19, 2004, at an exercise price of $32.50. SARs are attached to 50% of the regular Options, which expire February 19, 2014. Performance-accelerated Options expire February 19, 2009. One half of regular Options and SARs granted become exercisable two years after the grant and the balance become exercisable three years after the grant. Performance-accelerated Options become exercisable on the fourth anniversary of the grant or earlier upon the achievement by CPR of specified performance criteria. There is a minimum one-year vesting limit, even if the performance criteria have been achieved prior to the expiration of that time.

Value of Unexercised

Unexercised Options & SARs

In-The-Money Options & SARs

at Fiscal Year-End

at Fiscal Year-End

Securities Acquired

Aggregate Value

on Exrcise

Realzed

Exercsable

Unexerisable

Exercsable

Unexerisable

Name

(#)

($)

(#)(a)(b)

($)(c)

R.J. Ritchie

Nil

Nil

224,150

753,450

3,622,528

7,956,384

M.T. Waites

Nil

Nil

55,525

225,100

930,589

2,410,383

F.J. Green

Nil

Nil

20,100

154,800

237,250

1,582,017

N.R. Foot

Nil

Nil

23,300

140,600

288,452

1,514,811

M.M. Szel

Nil

Nil

26,475

110,950

467,142

1,192,300

(a)	SARs are attached to 50% of the number of Options set out in the table, with the exclusion of performance-accelerated Options granted under the Stock Option Plan.

27

---

 

(b)	One half of regular Options and SARs granted become exercisable two years after the grant, and the balance become exercisable three years after the grant. Performance-accelerated Options become exercisable on the fourth anniversary of the grant, or earlier upon the achievement by CPR of specified performance criteria. There is a minimum one-year vesting limit, even if the performance criteria have been achieved prior to the expiration of that time.
(c)	The value of unexercised in-the-money Options at December 31, 2004, is the difference between their exercise price and the fair market value of the underlying Shares on December 31, 2004. The value of such underlying Shares on such date was $41.10 These Options have not been, and may never be, exercised, and actual gains, if any, on exercise will depend on the value of the Shares on the date of exercise.

Number of securities available

Number of securities to be

Weighted-average exercise

for future issuance under

issued upon exercise of

price of outstanding

equity compensation plans

outstanding options,

options, warrants and

(excluding securities reflected

warrants and rights

rights

in column (a))

Plan Category

(a)

(b)

(c)

Equity compensation plans approved by security holders

7,752,080

$

29.32

3,213,843

Equity compensation plans not approved by security holders

Nil

Nil

Nil

Total

7,752,080

$

29.32

3,213,843

28

---

 

ANNUAL PENSION PAYABLE UPON RETIREMENT AT NORMAL RETIREMENT AGE
		Years of Service
						20				25				30				35
Remuneration		15
Including
annual bonus
$		$				$				$				$				$
300,000			155,828				174,138				186,601				194,891				200,425
400,000			213,221				236,729				252,731				263,374				270,425
500,000			273,883				301,241				319,864				332,251				340,425
600,000			330,613				363,444				385,791				400,656				410,425
700,000			387,344				425,646				451,718				469,060				480,425
800,000			444,075				487,848				517,645				537,464				550,425
900,000			518,368				560,371				588,963				607,981				620,425
1,000,000			577,050				623,720				655,488				676,620				690,425
1,200,000			694,413				750,418				788,540				813,897				830,425
1,400,000			811,777				877,116				921,592				951,175				970,425
1,600,000			929,141				1,003,814				1,054,644				1,088,453				1,110,425
1,700,000			987,823				1,067,163				1,121,169				1,157,092				1,180,425

						Accrued
						Obligation at				Years of								Projected Annual
		2004 Current				December 31,				Credited Service				Years of Credited				Benefit Payable at
		Service Cost(a)				2004				at December 31,				Service at Age				Age 65(d)
Named Executive Officer		($)				($)				2004(b)				65(c)				($)
R.J. Ritchie			262,000				10,350,000				34.50				35				875,000
M.T. Waites			144,000				1,230,000				16.08				35				310,000
F. Green			69,000				3,740,000				26.58				35				435,000
N. Foot			85,000				2,920,000				29.83				35				265,000
M. Szel			66,000				2,200,000				26.50				35				235,000

(a)	represents the employer cost with respect to service accrued in 2004
(b)	includes deemed credited service of 8.33 years for Mr. Waites
(c)	includes deemed credited service of 13.33 years for Mr. Waites
(d)	assumes no increase in base salary.

29

---

 

		Oct 2001				Dec 2001				Dec 2002				Dec 2003				Dec 2004
CPRL			100.00				142.60				140.57				167.68				191.30
S&P/TSX Composite Index			100.00				111.82				97.91				124.08				142.05

30

---

 

31

---

 

	Office of the Corporate Secretary
	Canadian Pacific Railway
	Suite 920, 401 — 9th Avenue S.W.
	Calgary, Alberta
	Canada T2P 4Z4

	Stephen E. Bachand
	John E. Cleghorn
	Madeleine Paquin
	Roger Phillips
	Michael W. Wright

32

---

 

	•	Two of the public company audit committees on which Mr. Cleghorn serves are the Audit Committees of CPRL and CPRC. As CPRC is a wholly-owned subsidiary of CPRL, and CPRL carries on no business operations and has no assets or liabilities of more than nominal value beyond its 100% shareholding in CPRC, the workload of the audit committees of the two companies is essentially equivalent to the workload of one public company audit committee;
	•	The two public companies other than CPRL and CPRC on whose audit committees Mr. Cleghorn serves have a holding company/ operating company relationship similar to that between CPRL and CPRC. Consequently, the workload involved in such audit committees is essentially equivalent to the workload of one public company audit committee; and
	•	Mr. Cleghorn is a retired chief executive officer of a large public company and qualifies, and has been designated as, an audit committee financial expert for CPRL and CPRC. As a result, he no longer has any day-to-day executive or managerial responsibilities and, in addition, brings to his role on the Audit Committee considerable business experience and a highly-focused and effective approach to audit-related matters.

33

---

 

34

---

 

			Does CPRL
			Align with
TSX Corporate Governance Guideline			TSX Guideline		Comments
1.   Board should explicitly assume responsibility for stewardship of the Corporation and specifically for:			Yes		The Governance Committee has adopted Corporate Governance Principles and Guidelines which provide that the board is the ultimate decision-making authority within the Corporation, except with respect to those matters, including the election of directors, that are reserved to shareholders. The board’s Terms of Reference provide, among other things, that the board is responsible for the stewardship of the Corporation and for monitoring the actions of, and providing overall guidance and direction to management. As the board has plenary power, its Terms of Reference are intended not to limit the powers of the board but to assist it in the exercise of its powers and the fulfillment of its duties.
					The Board’s Terms of Reference are included in Appendix 3 to this Circular.
	a.   adoption of a strategic planning process		Yes		One board meeting a year is specifically set aside for a substantial strategic planning session in which the board reviews and discusses strategies developed by management. At this meeting, the board reviews and approves a comprehensive strategic plan for the Corporation, which takes into account, among other things, the opportunities and risks of the business. The Corporation’s general strategies and their implementation are also discussed regularly at meetings of the board.

1-1

---

 

			Does CPRL
			Align with
TSX Corporate Governance Guideline			TSX Guideline		Comments
	b.   identification of principal risks, and implementation of risk management systems		Yes		As required by its Terms of Reference, the board, with the assistance of the Audit Committee, identifies the principal risks of the business of the Corporation and its subsidiaries and ensures the implementation of appropriate risk assessment and risk management policies and processes to manage these risks, and reviews and provides guidance to management on any outcomes, findings and issues arising in connection with the risk assessment and risk management policies and processes. The Audit Committee discusses risk assessment and risk management policies and processes to be implemented for the Corporation, reviews with management and the Corporation’s internal and external auditors the effectiveness and efficiency of such policies and processes and their compliance with other relevant policies of the Corporation, and makes recommendations to the board with respect to any outcomes, findings and issues arising in connection therewith. The Audit Committee also reviews management’s program to obtain appropriate insurance to mitigate risks.
	c.   succession planning including appointing, training and monitoring senior management		Yes		The Compensation Committee reviews, reports on and, where appropriate, provides recommendations to the board on the structure and reporting relationships of senior management of the Corporation and its major subsidiaries, succession planning for senior management positions in the Corporation, and the appointment of persons to the rank of Vice-President and above. The succession planning activity of the Compensation Committee includes matters relating to the training and monitoring of senior management.

1-2

---

 

			Does CPRL
			Align with
TSX Corporate Governance Guideline			TSX Guideline		Comments
	d.   communications policy		Yes		The board of directors has adopted, and periodically reviews and updates, a Disclosure and Insider Trading/ Reporting Policy prescribing the principles and procedures governing the Corporation’s approach to the disclosure of information and insider trading and reporting. Among the matters addressed in the policy are guidelines on the Corporation’s interaction with analysts and the public and measures to avoid selective disclosure. The board has also appointed a Disclosure Policy Committee comprised of senior financial, accounting, legal, investor relations, communications and business officers. The committee reports to the board and is responsible for overseeing and monitoring disclosure matters and implementing additional policies and procedures, where necessary, consistent with the Disclosure and Insider Trading/ Reporting Policy. The committee reviews all major disclosure documents, including the annual report, annual information form, annual and interim management’s discussion & analyses, management proxy circular, and all annual and interim earnings releases and financial statements, which are also approved by the board and/or one or more of its committees, in each case before they are distributed. Under the direction of the CEO and CFO, the Disclosure Policy Committee also oversees the Corporation’s disclosure controls and procedures and the periodic evaluation thereof, and reports to the Audit Committee quarterly thereon.
					In 2004, the Disclosure Policy Committee appointed a cross-functional Communications Sub-committee whose mandate is to review all significant external and internal presentations, speeches and other communications to ensure that they are compliant with applicable disclosure laws and consistent with overall corporate messaging.

1-3

---

 

			Does CPRL
			Align with
TSX Corporate Governance Guideline			TSX Guideline		Comments
					The Corporation’s shareholder and investor relations personnel provide information to, and respond to inquiries from, shareholders and other stakeholders, in accordance with the parameters set forth in the Disclosure and Insider Trading/ Reporting Policy and the directions of the board, senior management and the Disclosure Policy Committee.
	e.   integrity of internal control and management information systems		Yes		The board, through the Audit Committee, oversees the integrity of the internal control and management information systems of the Corporation and its subsidiaries, which are designed, monitored and periodically reviewed by the CEO, the CFO, the Comptroller, the Comptroller’s Office and the Internal Audit Department. Such systems are also examined periodically by the Corporation’s external auditors. On a quarterly basis, all senior officers are required to review the operation of the key internal controls within their respective areas of responsibility and to report any changes thereto to the Comptroller’s Office and provide written confirmations as to the operation and effectiveness of such controls. The Corporation is currently engaged in a more comprehensive documentation, review and assessment of its internal controls over financial reporting, in preparation for the issuance of management’s first annual report thereon to the U.S. Securities and Exchange Commission in 2006 pursuant to Section 404 of the SOA.
2.   Majority of directors should be “unrelated” (i.e. independent from management and free from any interest, business or other relationship which could, or could reasonably be perceived to, materially interfere with the director’s ability to act with a view to the best interests of the Corporation, other than interests and relationships arising from shareholding in the Corporation)			Yes		It is the board’s policy that all the directors shall meet applicable requirements for board service, and that a majority of the directors shall meet the requirements and guidelines with respect to being independent or unrelated to the Corporation, as set forth in applicable securities laws or the rules of any stock exchange on which the Corporation’s securities are listed for trading. The board’s Terms of Reference provide that the determinations as to whether a particular director satisfies the requirements for board membership shall be affirmatively made by the full board.
					If the proposed directors are elected to the board, 9 out of 10 directors will be unrelated to, and independent of, the Corporation.

1-4

---

 

		Does CPRL
		Align with
TSX Corporate Governance Guideline		TSX Guideline		Comments
3.   Disclose for each director the principles supporting the determination of whether directors are “unrelated”		Yes		The board has adopted the criteria: (1) for director independence set forth in the NYSE Standards; (2) for the independence of audit committee members prescribed by the SOA, Section 10A(m)(3) of the Exchange Act, and Rule 10A-3(b)(1) promulgated thereunder; (3) for director unrelatedness set forth in the Proposed TSX Guidelines; (4) for director independence set forth in Proposed National Instrument 58-101; and (5) for audit committee independence set forth in Multilateral Instrument 52-110. The specific criteria, as well as a summary of the board’s determinations as to the independence and unrelatedness of each director in relation thereto, are set forth in Appendix 2 to this Circular.
4.   Appoint a committee responsible for proposing and assessing directors		Yes		In addition to other responsibilities, the Governance Committee is required pursuant to its Terms of Reference to review from time to time and report to the Board regarding:
				(i)    what competencies and skills the board,as a whole, should possess,
				(ii)   what competencies, skills and personal and other qualities the existing directors possess,
				(iii)  the development of a process to determine, in light of the opportunities and risks facing the Corporation what competencies, skills and personal qualities are required for new directors in order to add value to the Corporation, and
				(iv)  the size of the board, with a view to facilitating effective decision-making.
				The Governance Committee identifies and recommends to the board qualified director nominees for appointment or election at the annual meeting of shareholders consistent with the criteria approved by the board and after taking into account the aforementioned matters. It also considers director nominees, if any, recommended by the shareholders for election as directors.
				Other responsibilities of the Governance Committee are set forth in its Terms of Reference, a copy of which is included in Appendix 3 to this Circular.

1-5

---

 

		Does CPRL
		Align with
TSX Corporate Governance Guideline		TSX Guideline		Comments
				All members of the Governance Committee are unrelated and independent.
5.   Implement a process for assessing the effectiveness of the board, its committees and individual directors		Yes		A formal evaluation of the effectiveness of the Board and its committees, the working relationship and communications between the Board and management, and the effectiveness and contribution of each director, is conducted annually through the use of an evaluation questionnaire completed by each director. The results are compiled and summarized by an external consultant and reviewed by the Governance Committee, which then makes recommendations as appropriate. The Chairman of the board also discusses the evaluations with individual directors from time to time, as necessary.
6.   Provide orientation and education programs for new directors		Yes		The Corporate Secretary’s Office prepares and updates a “Directors’ and Senior Officers’ Corporate Handbook” for new and existing directors. The Handbook contains, among other items: copies of all board and committee terms of reference, the Corporation’s charter documents and Disclosure and Insider Trading/ Reporting Policy, a corporate organizational chart outlining the Corporation’s structure and subsidiaries, current lists of directors and officers, information on directors’ and officers’ liability, the Corporation’s Corporate Governance Principles and Guidelines, the Code of Business Ethics, and the Code of Ethics for CEO and Senior Financial Officers.
				Presentations are made periodically to the board on different aspects of the business and operations of the Corporation and its subsidiaries, and the board is periodically escorted on educational tours of operating sites. From time to time, the Corporation arranges for members of the board to meet with employees, customers and other stakeholders to discuss matters relating to the Corporation’s business and operations.

1-6

---

 

		Does CPRL
		Align with
TSX Corporate Governance Guideline		TSX Guideline		Comments
				Detailed annual board and board committee meeting schedules and agendas are provided to all prospective and existing directors in advance and are reviewed and updated on an ongoing basis. As well, prospective board candidates are provided with general information about the business and operations of the Corporation and its subsidiaries, including its most recent disclosure documents.
7.   Examine size of board, with a view to its effectiveness		Yes		CPRL believes that its board must have enough directors to carry out its duties efficiently, while presenting a diversity of views and experience. The board and the Governance Committee review the contributions of the directors and consider whether the current size of the board facilitates effective decision-making. As indicated above, pursuant to its Terms of Reference, the Governance Committee is specifically required to review, at least annually, the composition of the board and board committees.
				The board currently believes that a total board membership of between 10 and 12 directors is within the desirable range and allows the board to deliberate effectively.
8.   Review adequacy and form of compensation of directors in light of risks and responsibilities		Yes		In accordance with its Terms of Reference, the Governance Committee conducts, at least annually, a review of compensation for board and committee service. In determining directors’ compensation, the Governance Committee considers, among other factors, time commitment, compensation provided by comparative companies, and risks and responsibilities.
9.   Committees should generally be composed of outside directors, a majority of whom are unrelated		Yes		All committees of the board are comprised solely of directors who are unrelated and independent.
				In addition to the Audit Committee, the Management Committee and the Governance Committee, the Board has also appointed an Environmental and Safety Committee (“E&S Committee”) and a Pension Trust Fund Committee (“PTF Committee”).

1-7

---

 

		Does CPRL
		Align with
TSX Corporate Governance Guideline		TSX Guideline		Comments
				The E&S Committee assists the board in fulfilling its oversight duties with respect to safety and environmental matters affecting the Corporation and its employees. The Pension Trust Fund Committee assists the board in overseeing the management of the Corporation’s pension plans and the pension trust fund.
10.  Assume or appoint a committee with responsibility for approach to corporate governance issues		Yes		The Governance Committee is responsible for developing the Corporation’s approach to corporate governance issues. The committee’s mandate includes:
				—  developing, recommending to the board and reviewing from time to time a code of business ethics applicable to all of the Corporation’s directors, officers, and employees, a code of ethics applicable to the Chief Executive Officer and senior financial officers of the Corporation collectively, the “Codes”) and a set of corporate governance principles and guidelines for the Corporation;
				—  monitoring compliance with the Codes and waivers from compliance therefrom, and ensuring that any issues relating to governance which are identified by the directors are raised with management;
				—  reviewing and, if deemed appropriate, approving any waivers of the Codes for executive officers or directors and promptly disclosing such waivers to the shareholders; and
				—  undertaking such other initiatives as are necessary or desirable to provide effective corporate governance for the Corporation and its subsidiaries.
				The Governance Committee has adopted Corporate Governance Principles and Guidelines for the Corporation and has not approved any waivers of the Codes for any executive officers or directors.

1-8

---

 

		Does CPRL
		Align with
TSX Corporate Governance Guideline		TSX Guideline		Comments
11.  Board, together with CEO, to develop position descriptions for the board and CEO, defining limits to management’s responsibility. Board to approve or develop CEO’s corporate objectives and assessing CEO against such objectives		Yes		The board has adopted its own Terms of Reference to assist it in exercising its overall plenary powers and fulfilling its duties. The Terms of Reference provide that management is responsible for the management of the Corporation and the board is responsible for stewardship of the Corporation and for monitoring the actions of, and providing overall guidance and direction to, management. Any responsibility which is not delegated to senior management or a board committee, or which is not within the general responsibility of senior management in accordance with the aforementioned division of duties, remains with the full board.
				In addition to those matters that must by law be approved by the board, management is required to seek board approval for major transactions including those that involve investments and expenditures above certain monetary thresholds.
				The Compensation Committee makes recommendations to the board concerning the structure and reporting relationships of senior management, including the CEO. It also establishes the CEO’s performance objectives and designs the process for evaluating the CEO’s performance. The Governance Committee conducts the performance evaluations of the CEO, in accordance with the evaluation process designed by the Compensation Committee, and reports its findings to the Compensation Committee for the purpose of enabling the Compensation Committee to recommend compensation for the CEO taking into account the results of the performance evaluations. The CEO’s annual performance objectives address all key elements of his duties and responsibilities, namely: overall leadership; strategy planning and implementation; financial performance; external relations; succession planning; and safety and environmental oversight and direction.
12.  Establish structures and procedures to enable the board to function independently of management		Yes		The Governance Committee, which is comprised of all the unrelated and independent board members, generally meets without the CEO or other management present prior to or following meetings of the board of directors.

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		Does CPRL
		Align with
TSX Corporate Governance Guideline		TSX Guideline		Comments
				The Governance Committee is chaired by J.E. Newall, who is independent and unrelated within the criteria established by the board.
13.  Establish an Audit Committee with a specifically defined mandate		Yes		As indicated above, the board has appointed an Audit Committee comprised solely of board members who are unrelated and independent. The mandate of the Audit Committee includes without limitation:
				—  annually reviewing reports from the Corporation’s external auditors describing: (1) all critical accounting policies and practices to be used, (2) all alternative treatments of financial information within generally accepted accounting principles that have been discussed with management, ramifications of the use of such alternative disclosures and treatments, and the treatment preferred by the external auditors, and (3) other material written communications between the external auditors and management;
				—  reviewing any reports on the above or similar topics, prepared by management or the internal auditors, and discussing with the external auditors any material issues raised in such reports;
				—  meeting to review with management and the external auditors the annual financial statements, the report of the external auditors thereon and the related MD&A, as well as the information derived from the financial statements as contained in the Annual Information Form and the Annual Report;
				—  reviewing and recommending to the board for approval, the audited financial statements and the MD&A, and reporting to the board on the committee’s review of the information derived from the financial statements, as contained in the Annual Information Form and the Annual Report;
				—  reviewing and discussing earnings press releases and the disclosure of earnings guidance and other financial information to the public including analysts and rating agencies;

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		Does CPRL
		Align with
TSX Corporate Governance Guideline		TSX Guideline		Comments
				—  being directly responsible, subject to applicable law, for the appointment, retention, termination, compensation and oversight of the external auditors;
				—  reviewing and discussing with the external auditors all significant relationships that the external auditors and their affiliates have with the Corporation and its affiliates in order to determine the external auditors’ independence;
				—  setting clear policies for the hiring by the Corporation of partners, employees and former partners and employees of the external auditors;
				—  pre-approving all audit and non-audit services to be provided to the Corporation by the external auditors, as well as the fees to be paid for such services, which pre-approval authority may be delegated to another independent member or members of the Audit Committee, provided that any pre- approvals granted by such member(s) are reported to the Committee at its next meeting;
				—  overseeing the internal audit function by, among other things, reviewing senior management action with respect to the appointment or dismissal of the Director of Internal Audit and affording the Director of Internal Audit unrestricted access to the Audit Committee;
				—  reviewing with management, the internal and external auditors, the Corporation’s financial reporting processes and internal controls;
				—  reviewing with the internal auditors the adequacy of internal controls and procedures related to any corporate transactions in which directors or officers of the Corporation have a personal interest;

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		Does CPRL
		Align with
TSX Corporate Governance Guideline		TSX Guideline		Comments
				—  establishing procedures for: (1) the receipt, retention and treatment of complaints regarding accounting, internal controls or auditing matters, and (2) the confidential, anonymous submission by employees of the Corporation of concerns regarding questionable accounting or auditing matters;
				—  meeting separately with management, the external auditors and the internal auditors periodically to discuss matters including any audit problems or difficulties and management’s response thereto;
				—  reviewing all major financings, including financial statement information contained in related prospectuses, information circulars, etc., and annually reviewing the Corporation’s financing plans and strategies;
				—  discussing risk assessment and risk management policies and processes to be implemented for the Corporation, reviewing with management and the Corporation’s internal and external auditors the effectiveness and efficiency of such policies and processes and their compliance with other relevant policies of the Corporation and making recommendations to the board with respect to any outcomes, findings and issues arising in connection therewith; and reviewing management’s program to obtain appropriate insurance to mitigate risks.
14.  Implement a system to enable individual directors to engage outside advisors, at the Corporation’s expense		Yes		The Corporation’s Corporate Governance Principles and Guidelines provide that the board and its committees may retain, at the Corporation’s expense, independent financial, legal, accounting and other advisers. As well, the Terms of Reference of the Governance Committee provide that the committee may approve, in such circumstances as it considers appropriate, the engagement of outside advisers by any one or more directors at the expense of the Corporation.

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	(i)	the director is, or has been within the last three years, an employee of the Corporation, or an immediate family member is, or has been within the last three years, an executive officer of the Corporation;
	(ii)	the director has received, or has an immediate family member who has received, during any twelve-month period within the last three years, more than U.S. $100,000 in direct compensation from the Corporation, other than director and committee fees and pension or other forms of deferred compensation for prior service (provided such compensation is not contingent in any way on continued service);
	(iii)	(A) the director or an immediate family member is a current partner of a firm that is the Corporation’s internal or external auditor; (B) the director is a current employee of such a firm; (C) the director has an immediate family member who is a current employee of such a firm and who participates in the firm’s audit, assurance or tax compliance (but not tax planning) practice; or (D) the director or an immediate family member was within the last three years (but is no longer) a partner or employee of such a firm and personally worked on the Corporation’s audit within that time;
	(iv)	the director or an immediate family member is, or has been within the last three years, employed as an executive officer of another company where any of the Corporation’s present executive officers at the same time serves or served on that company’s compensation committee; or
	(v)	the director is a current employee, or an immediate family member is a current executive officer, of a company that has made payments to, or received payments from, the Corporation for property or services in an amount which, in any of the last three fiscal years, exceeds the greater of U.S. $1 million, or 2% of such other company’s consolidated gross revenues.

2.	Immediate Family Member: For the purposes of these independence criteria, an “immediate family member” includes a person’s spouse, parents, children, siblings, mothers and fathers-in-law, sons and daughters-in-law, brothers and sisters-in-law, and anyone (other than domestic employees) who shares such person’s home. When applying the look-back provisions, the board need not consider individuals who are no longer immediate family members as a result of legal separation or divorce, or those who have died or become incapacitated.
3.	The board will broadly consider all relevant facts and circumstances that might signal potential conflicts of interest or that might bear on the materiality of a director’s relationship to the Corporation or any of its consolidated subsidiaries. In particular, when assessing the materiality of a director’s relationship with the Corporation, the board will consider the issue not merely from the standpoint of the director, but also from that of persons or organizations with which the director has an affiliation. Material relationships can include commercial, industrial, banking, consulting, legal, accounting, charitable and familial relationships, among others. However, ownership of even a significant amount of stock, by itself, is not a bar to an independence finding.

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1.	each member of the Audit Committee shall be a member of the board and shall otherwise be independent;
2.	in order to be considered to be independent for the aforementioned purposes, a member of the Audit Committee may not, other than in his or her capacity as a member of the Audit Committee, the board, or any other board committee:

	•	accept, directly or indirectly, any consulting, advisory, or other compensatory fee from the Corporation or any subsidiary thereof, provided that, unless the rules of the NYSE provide otherwise, compensatory fees do not include the receipt of fixed amounts of compensation under a retirement plan (including deferred compensation) for prior service with the issuer (provided that such compensation is not contingent in any way on continued service); or
	•	be an affiliated person of the Corporation or any subsidiary thereof.

1.	A member of the Corporation’s board is independent if the member has no direct or indirect material relationship with the Corporation.
2.	For the purposes of item 1, a material relationship means a relationship which could, in the view of the Corporation’s board, reasonably interfere with the exercise of a member’s independent judgment.
3.	Despite item 2, the following individuals are considered to have a material relationship with the Corporation:

	a)	an individual who is, or who has been, an employee or executive officer of the Corporation, unless the prescribed period has elapsed since the end of the service of employment;
	b)	an individual whose immediate family member is, or has been, an executive officer of the Corporation, unless the prescribed period has elapsed since the end of the service or employment;
	c)	an individual who is, or who has been, an affiliated entity of, a partner of, or employed by, a current or former internal or external auditor of the Corporation, unless the prescribed period has elapsed since the person’s relationship with the internal or external auditor, or the auditing relationship, has ended;
	d)	an individual whose immediate family member is, or has been, an affiliated entity of, a partner of, or employed in a professional capacity by, a current or former internal or external auditor of the Corporation, unless the prescribed period has elapsed since the person’s relationship with the internal or external auditor, or the auditing relationship, has ended;
	e)	an individual who is, or has been, or whose immediate family member is or has been, an executive officer of an entity if any of the Corporation’s current executive officers serve on the entity’s compensation committee, unless the prescribed period has elapsed since the end of the service or employment;
	f)	an individual who receives, or whose immediate family member receives, more than $75,000 per year in direct compensation from the Corporation, other than as remuneration for acting in his or her capacity as a member of the board of directors or any board committee, or as a part-time chair or vice-chair of the

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		board or any board committee, unless the prescribed period has elapsed since he or she ceased to receive more than $75,000 per year in such compensation.

4.	For the purposes of the foregoing, the “prescribed period” is the shorter of: (a) the period commencing on March 30, 2004, and ending immediately prior to the board’s determination of the independence of the director in question; and (b) the three-year period ending immediately prior to such determination.
5.	For the purposes of clauses 3(c) and 3(d), a partner does not include a fixed income partner whose interest in the internal or external auditor is limited to the receipt of fixed amounts of compensation (including deferred compensation) for prior service with an internal or external auditor if the compensation is not contingent in any way on continued service.
6.	For the purposes of clause 3(f), compensatory fees and direct compensation do not include the receipt of fixed amounts of compensation under a retirement plan (including deferred compensation) for prior service with the Corporation if the compensation is not contingent in any way on continued service.
7.	Despite item 3, a person will not be considered to have a material relationship with the Corporation solely because he or she

	a)	has previously acted as an interim chief executive officer of the Corporation; or
	b)	acts, or has previously acted, as a chair or vice-chair of the board of directors or any board committee, other than on a full-time basis.

8.	For the purposes of the foregoing independence determination, the term “immediate family member” means an individual’s spouse, parent, child, sibling, mother or father-in-law, son or daughter-in-law, brother or sister-in-law, and anyone (other than an employee of either the individual or the individual’s immediate family member) who shares the individual’s home.

1.	In addition to the foregoing, the members of the Audit Committee are considered to have a material relationship with the Corporation if:

	a)	the member has a relationship with the Corporation pursuant to which the individual may accept, directly or indirectly, any consulting, advisory or other compensatory fee from the Corporation or any subsidiary entity of the Corporation, other than as remuneration for acting in his or her capacity as a member of the board of directors or any board committee, or as a part-time chair or vice-chair of the board or any board committee; and
	b)	the member is an affiliated entity of the Corporation or any of its subsidiary entities.

2.	For the purposes of the foregoing:

	a)	compensatory fees and direct compensation do not include the receipt of fixed amounts of compensation under a retirement plan (including deferred compensation) for prior service with the Corporation if the compensation is not contingent in any way on continued service;
	b)	the indirect acceptance by a person of any consulting, advisory or other compensatory fee includes acceptance of a fee by:

	•	a person’s spouse, minor child or stepchild, or a child or stepchild who shares the person’s home; or
	•	an entity in which such person is a partner, member, an officer such as a managing director occupying a comparable position or executive officer, or occupies a similar position (except limited partners, non-managing members and those occupying similar positions who, in each case, have no active role in providing services to the entity) and which provides accounting, consulting, legal, investment banking or financial advisory services to the Corporation or any subsidiary entity of the Corporation.

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	The Canada Business Corporations Act (“CBCA”) provides that the Board of Directors (“Board”) shall manage, or supervise the management of, the business and affairs of the Corporation subject to any unanimous shareholder agreement, and further that every director and officer shall: act honestly and in good faith with a view to the best interests of the corporation; and exercise the care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances.
	As the Board has overall plenary power, these Terms of Reference are intended not to limit the powers of the Board but to assist the Board in the exercise of its powers and the fulfillment of its duties.

The members of the Boards of both CPRL and CPRC shall be identical. The election of directors is by the shareholders; however, it is a policy of the Board that a majority of the Directors shall meet all applicable requirements and guidelines for Board service, including requirements and guidelines with respect to being independent and unrelated to the Corporation, set forth in applicable securities laws, Canadian Securities Administrators’ policies or the rules of any stock exchange on which the Corporation’s securities are listed for trading. Determinations as to whether a particular Director satisfies the requirements for Board membership shall be affirmatively made by the full Board based on a broad consideration of all relevant facts and circumstances.

	The Board shall propose, upon recommendation by its Corporate Governance and Nominating Committee (the “CGNC”), nominees to the Board for election by shareholders at the Corporation’s annual meeting of shareholders.

	The Board shall appoint a Chair, who shall meet the independence requirements set forth in paragraph 2 of these Terms of Reference and shall not be an officer of the Corporation or any of its affiliates.

	The independent Directors on the Board shall meet at regularly scheduled sessions without management participation. The independent directors shall designate, and the Corporation shall disclose in the Corporation’s management proxy circular the name of, the Director who will preside at such executive sessions.

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	At the invitation of the Chair of the Board, individuals who are not Directors may attend any meeting of the Board.

Each Director is expected to attend each meeting of the Board and the Board Committees of which he or she is a member. Information relevant to the Board’s or a Committee’s consideration of matters to be discussed at a meeting will, whenever possible, be distributed to Directors sufficiently in advance of the meeting date to permit Directors to prepare for a discussion of such matters. Sensitive subject matters may be discussed at meetings of the Board or relevant Committee without written materials being distributed to Directors. Directors may consider the interests of constituencies such as employees, customers, suppliers and the public at large in determining the long and short-term interests of the Corporation and its shareholders.

Except for Directors who are also officers of the Corporation, no Director shall receive from the Corporation any compensation other than the fees to which he or she is entitled as a Director of the Corporation or a member of a committee of the Board. Directors who are also officers of the Corporation shall not be entitled to receive any Directors’ fees or other compensation in respect of their duties as Directors of the Corporation.

	Individual members of the Board may engage outside, legal, accounting or other advisers, at the expense of the Corporation, to obtain advice and assistance in respect of matters relating to their duties, responsibilities and powers as Directors, provided such engagement is first approved by the CGNC.

10.	Management is responsible for the management of the Corporation. The Board is responsible for the stewardship of the Corporation and for monitoring the actions of, and providing overall guidance and direction to, management.

	In fulfilling its mandate, the Board shall, among other things:

	a)	establish an Audit, Finance and Risk Management Committee (the “AFRMC”), a Management Resources and Compensation Committee (the “MRCC”), an Environmental and Safety Committee (the “ESC”), a Pension Trust Fund Committee (the “PTFC”) and the CGNC, each comprised entirely of independent Directors, and may establish such other committees as it deems necessary or desirable, to assist it in the fulfillment of its duties and responsibilities, with such terms of reference as the Board may determine, and may delegate from time to time to such committees or other persons any of the Board’s responsibilities that lawfully may be delegated. The Board shall determine whether Directors satisfy the requirements for membership on each such committee;
	b)	consider recommendations of the CGNC from time to time regarding the composition and terms of reference of the committees of the Board;

	c)	consider recommendations of the CGNC regarding the Corporation’s approach to governance issues and the adoption of corporate governance principles and guidelines for the Corporation, as well as the disclosure thereof in the Corporation’s annual report or management proxy circular;
	d)	consider recommendations of the CGNC regarding the adoption of:

	•	a code of business ethics applicable to Directors, officers and employees of the Corporation prescribing standards that are reasonably designed to promote integrity and honest and ethical conduct and deter wrongdoing, and
	•	a code of ethics applicable to the CEO and senior financial officers of the Corporation prescribing standards that are reasonably designed, in addition to deterring wrongdoing and promoting integrity

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		and honest and ethical conduct, to promote full, fair, accurate, timely and understandable disclosure in accordance with applicable legal requirements, compliance with applicable governmental laws, rules and regulations, the prompt internal reporting of violations of the latter code, and accountability for adherence to such code,

	and monitor any waivers granted by the CGNC from the aforementioned codes;

	e)	develop and annually review a disclosure and insider trading and reporting policy for the Corporation that, inter alia: addresses how the Corporation shall interact with analysts and the public; and contains measures for the Corporation to avoid selective disclosure;
	f)	monitor the integrity of the Corporation’s internal control, disclosure controls and procedures and management information systems;
	g)	develop and periodically review policies with respect to decisions and other matters requiring Board approval;
	h)	develop and periodically review policies and procedures for receiving feedback from shareholders with respect to the affairs of the Corporation;

	i)	adopt a strategic planning process and annually approve a strategic plan which takes into account, among other things, the opportunities and risk of the Corporation’s business;

	j)	authorize the AFRMC to assist the Board in overseeing:

	(i)	the integrity and quality of the Corporation’s financial reporting and systems of internal control and risk management,
	(ii)	the Corporation’s compliance with legal and regulatory requirements,
	(iii)	the qualifications and independence of the Corporation’s external auditors, and
	(iv)	the performance of the Corporation’s internal audit function and external auditors;

	k)	with the assistance of the AFRMC, identify the principal risks of the Corporation’s business and ensure the implementation of appropriate risk assessment and risk management policies and processes to manage these risks, and review and provide guidance to management on any outcomes, findings and issues arising in connection with the risk assessment and risk management policies and processes;

	l)	consider reports and recommendations of the ESC with respect to the Corporation’s environmental and safety policies and procedures and any issues relating to environmental and safety matters and management’s response thereto;

	m)	develop, upon recommendation of the MRCC, and monitor a succession plan for senior officers of the Corporation, including appointing, training and monitoring senior management;

	n)	consider recommendations of the MRCC with respect to:

	(i)	the appointment and compensation of senior officers of the Corporation at the level of Vice-President and above, other than the Chief Executive Officer,
	(ii)	the compensation philosophy for the Corporation generally,
	(iii)	the adoption of any incentive compensation and equity based plans, including stock option, stock purchase or other similar plans, in which officers are or may be eligible to participate, and
	(iv)	the amendment of the Corporation’s retirement plans;

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	o)	to the extent feasible, satisfy itself as to the integrity of the Chief Executive Officer and other executive officers and that the Chief Executive Officer and other executive officers create a culture of integrity throughout the organization;
	p)	communicate to management and periodically review the Board’s expectations regarding management’s performance and conduct of the affairs of the Corporation;

	q)	consider the advice and input of the CGNC regarding:

	(i)	what competencies and skills the Board, as a whole, should possess,
	(ii)	what competencies, skills and personal and other qualities the existing Directors possess,
	(iii)	the development of a process to determine, in light of the opportunities and risks facing the Corporation, what competencies, skills and personal qualities are required for new Directors in order to add value to the Corporation,
	(iv)	the size of the Board, with a view to facilitating effective decision-making,

	r)	consider recommendations of the CGNC with respect to the level and forms of compensation for Directors, which compensation shall reflect the responsibilities and risks involved in being a Director;
	s)	develop a program for the orientation and education of new Directors, and to ensure that prospective candidates for Board membership understand the role of the Board and its committees and the contributions that individual Directors are expected to make, and develop a program of continuing education for all Directors, so that they may maintain or enhance their skills and abilities as directors and ensure that their knowledge and understanding of the Corporation’s business remains current;

	t)	develop clear position descriptions for the Chairman of the Board and the Chairs of each of the Board Committees and, together with the Chief Executive Officer, develop a clear position description for the Chief Executive Officer which delineates management’s responsibilities;

	u)	consider recommendations of the CGNC for the development and monitoring of processes for assessing the effectiveness of the Board, the committees of the Board and the contribution of individual Directors, which assessments shall be made annually.

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The purposes of the Audit, Finance and Risk Management Committee (the “Committee”) of the Board of Directors of the Corporation are to fulfill applicable public company audit committee legal obligations and to assist the Board of Directors in fulfilling its oversight responsibilities in relation to the disclosure of financial statements and information derived from financial statements, and in relation to risk management matters including:

	•	the review of the annual and interim financial statements of the Corporation;
	•	the integrity and quality of the Corporation’s financial reporting and systems of internal control, and risk management;
	•	the Corporation’s compliance with legal and regulatory requirements;
	•	the qualifications, independence, engagement, compensation and performance of the Corporation’s external auditors; and
	•	the performance of the Corporation’s internal audit function;

	and to prepare, if required, an audit committee report for inclusion in the Corporation’s annual management proxy circular, in accordance with applicable rules and regulations.
	The Corporation’s external auditors shall report directly to the Committee.

The members of the Committee of each of CPRL and CPRC shall be identical and shall be Directors of CPRL and CPRC, respectively. The Committee shall consist of not less than three and not more than six Directors, none of whom is either an officer or employee of the Corporation or any of its subsidiaries. Members of the Committee shall meet applicable requirements and guidelines for audit committee service, including requirements and guidelines with respect to being independent and unrelated to the Corporation and to having accounting or related financial management expertise and financial literacy, set forth in applicable securities laws or the rules of any stock exchange on which the Corporation’s securities are listed for trading. No director who serves on the audit committee of more than two public companies other than the Corporation shall be eligible to serve as a member of the Committee, unless the Board of Directors has determined that such simultaneous service would not impair the ability of such member to effectively serve on the Committee. Determinations as to whether a particular Director satisfies the requirements for membership on the Committee shall be affirmatively made by the full Board.

	Members of the Committee shall be appointed from time to time by the Board and shall hold office at the pleasure of the Board. Where a vacancy occurs at any time in the membership of the Committee, it may be filled by the Board. The Board shall fill a vacancy whenever necessary to maintain a Committee membership of at least three Directors.

	The Board shall appoint a Chair for the Committee from among the Committee members.

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	If the Chair of the Committee is not present at any meeting of the Committee, one of the other members of the Committee who is present at the meeting shall be chosen by the Committee to preside at the meeting.

	The Committee shall appoint a Secretary who need not be a Director of the Corporation.

	The Committee shall meet at regularly scheduled meetings at least once every quarter and shall meet at such other times during each year as it deems appropriate. In addition, the Chair of the Committee may call a special meeting of the Committee at any time.

	Three members of the Committee shall constitute a quorum.

Notice of the time and place of every meeting shall be given in writing by any means of transmitted or recorded communication, including facsimile, telex, telegram or other electronic means that produces a written copy, to each member of the Committee at least 24 hours prior to the time fixed for such meeting; provided however, that a member may in any manner waive a notice of a meeting. Attendance of a member at a meeting constitutes a waiver of notice of the meeting, except where a member attends a meeting for the express purpose of objecting to the transaction of any business on the grounds that the meeting is not lawfully called.

	At the invitation of the Chair of the Committee, other individuals who are not members of the Committee may attend any meeting of the Committee.

	Subject to any statute or the articles and by-laws of the Corporation, the Committee shall fix its own procedures at meetings, keep records of its proceedings and report to the Board when the Committee may deem appropriate (but not later than the next meeting of the Board). The minutes of its meetings shall be tabled at the next meeting of the Board.

	The Committee may delegate from time to time to any person or committee of persons any of the Committee’s responsibilities that lawfully may be delegated.

	The Committee shall prepare a report to shareholders or others, concerning the Committee’s activities in the discharge of its responsibilities, when and as required by applicable laws or regulations.

	The Board recognizes that meeting the responsibilities of the Committee in a dynamic business environment requires a degree of flexibility. Accordingly, the procedures outlined in these Terms of Reference are meant to serve as guidelines rather than inflexible rules, and the Committee may adopt such different or additional procedures as it deems necessary from time to time.

	The Committee may retain, at its discretion, outside legal, accounting or other advisors, at the expense of the Corporation, to obtain advice and assistance in respect of any matters relating to its duties, responsibilities and powers as provided for or imposed by these Terms of Reference or otherwise by law.

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	The Committee shall be provided by the Corporation with appropriate funding, as determined by the Committee, for payment of:

	(i)	compensation of any outside advisers as contemplated by the immediately preceding paragraph;
	(ii)	compensation of any independent auditor engaged for the purpose of preparing or issuing an audit report or performing other audit, review or attest services for the Corporation; or
	(iii)	ordinary administrative expenses that are necessary or appropriate in carrying out the Committee’s duties.

	All outside legal, accounting or other advisors retained to assist the Committee shall be accountable ultimately to the Committee.

	No member of the Committee shall receive from the Corporation or any of its affiliates any compensation other than the fees to which he or she is entitled as a Director of the Corporation or a member of a committee of the Board. Such fees may be paid in cash and/or shares, options or other in-kind consideration ordinarily available to Directors.

17.

The Committee’s role is one of oversight. Management is responsible for preparing the interim and annual financial statements of the Corporation and for maintaining a system of risk assessment and internal controls to provide reasonable assurance that assets are safeguarded and that transactions are authorized, recorded and reported properly, for maintaining disclosure controls and procedures to ensure that it is informed on a timely basis of material developments and the Corporation complies with its public disclosure obligations, and for ensuring compliance by the Corporation with legal and regulatory requirements. The external auditors are responsible for auditing the Corporation’s financial statements. In carrying out its oversight responsibilities, the Committee does not provide any professional certification or special assurance as to the Corporation’s financial statements or the external auditors’ work.

	The Committee shall:

	a)	obtain and review annually prior to the completion of the external auditors’ annual audit of the year-end financial statements a report from the external auditors describing:

	(i)	all critical accounting policies and practices to be used;
	(ii)	all alternative treatments of financial information within generally accepted accounting principles that have been discussed with management, the ramifications of the use of such alternative disclosures and treatments, and the treatment preferred by the external auditors; and
	(iii)	other material written communications between the external auditors and management, such as any management letter or schedule of unadjusted differences;

	b)	review any reports on the above or similar topics prepared by management or the internal auditors and discuss with the external auditors any material issues raised in such reports;

	c)	meet to review with management and the external auditors the Corporation’s annual financial statements, the report of the external auditors thereon, the related Management’s Discussion and Analysis, and the information derived from the financial statements, as contained in the Annual Information Form and the Annual Report. Such review will include obtaining assurance from the external auditors that the audit was conducted in a manner consistent with applicable law and will include a review of:

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	(i)	all major issues regarding accounting principles and financial statement presentations, including any significant changes in the Corporation’s selection or application of accounting policies or principles;
	(ii)	all significant financial reporting issues and judgments made in connection with the preparation of the financial statements, including the effects on the financial statements of alternative methods within generally accepted accounting principles;
	(iii)	the effect of regulatory and accounting issues, as well as off-balance sheet structures, on the financial statements;
	(iv)	all major issues as to the adequacy of the Corporation’s internal controls and any special steps adopted in light of material control deficiencies; and
	(v)	the external auditors’ judgment about the quality, not just the acceptability, of the accounting principles applied in the Corporation’s financial reporting;

	d)	following such review with management and the external auditors, recommend to the Board of Directors whether to approve the audited annual financial statements of the Corporation and the related Management’s Discussion and Analysis, and report to the Board on the review by the Committee of the information derived from the financial statements contained in the Annual Information Form and Annual Report;

	e)	review with management and the external auditors the Corporation’s interim financial statements and its interim Management’s Discussion and Analysis, and if thought fit, approve the interim financial statements and interim Management’s Discussion and Analysis and the public release thereof by management;

	f)	review and discuss earnings press releases, including the use of “pro forma” or “adjusted” information determined other than in accordance with generally accepted accounting principles, and the disclosure by the Corporation of earnings guidance and other financial information to the public including analysts and rating agencies, it being understood that such discussions may, in the discretion of the Committee, be done generally (i.e., by discussing the types of information to be disclosed and the type of presentation to be made) and that the Committee need not discuss in advance each earnings release or each instance in which the Corporation discloses earnings guidance or other financial information; and be satisfied that adequate procedures are in place for the review of such public disclosures and periodically assess the adequacy of those procedures;

	g)	review with management, the external auditors and, if necessary, legal counsel all legal and regulatory matters and litigation, claims or contingencies, including tax assessments, that could have a material effect upon the financial position of the Corporation, and the manner in which these matters may be, or have been, disclosed in the financial statements; and obtain reports from management and review with the Corporation’s chief legal officer, or appropriate delegates, the Corporation’s compliance with legal and regulatory requirements;

	h)	subject to applicable law relating to the appointment and removal of the external auditors, be directly responsible for the appointment, retention, termination, compensation and oversight of the external auditors; and be responsible for the resolution of disagreements between management and the external auditors regarding financial reporting;

	i)	review and evaluate the lead audit partner of the external auditors and assure the regular rotation of the lead audit partner and the audit partner responsible for reviewing the audit and other audit partners, as

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		required by applicable law; and consider whether there should be a regular rotation of the external audit firm itself;

	j)	obtain and review, at least annually, and discuss with the external auditors a report by the external auditors describing the external auditors’ internal quality-control procedures, any material issues raised by the most recent internal quality-control review, or peer review, of the external auditors, or by any inquiry or investigation by governmental or professional authorities, within the preceding five years, respecting one or more independent audits carried out by the external auditors, and any steps taken to deal with any such issues;

	k)	review and discuss, at least annually, with the external auditors all relationships that the external auditors and their affiliates have with the Corporation and its affiliates in order to assess the external auditors’ independence, including, without limitation:

	(i)	obtaining and reviewing, at least annually, a formal written statement from the external auditors delineating all relationships that in the external auditors’ professional judgment may reasonably be thought to bear on the independence of the external auditors with respect to the Corporation,
	(ii)	discussing with the external auditors any disclosed relationships or services that may affect the objectivity and independence of the external auditors, and
	(iii)	recommending that the Board take appropriate action in response to the external auditors’ report to satisfy itself as to the external auditors’ independence;

	l)	set clear policies for the hiring by the Corporation of partners, employees and former partners and employees of the external auditors;

	m)	be solely responsible for the pre-approval of all audit and non-audit services to be provided to the Corporation and its subsidiary entities by the external auditors (subject to any prohibitions provided in applicable law), and of the fees paid for these services; provided however, that the Committee may delegate to an independent member or members of the Committee authority to pre-approve such non-audit services, and such member(s) shall report to the Committee at its next meeting following the granting any pre-approvals granted pursuant to such delegated authority;

	n)	oversee the internal audit function by reviewing senior management action with respect to the appointment or dismissal of the Director of Internal Audit; afford the Director of Internal Audit unrestricted access to the Committee; review the charter, activities, organizational structure, and the skills and experience of the Internal Audit Department; discuss with management and the external auditors the competence, performance and cooperation of the internal auditors; and discuss with management the compensation of the internal auditors;
	o)	review and consider, as appropriate, any significant reports and recommendations issued by the Corporation or by any external party relating to internal audit issues, together with management’s response thereto;

	p)	review with management, the internal auditors and the external auditors, the Corporation’s financial reporting processes and its internal controls;
	q)	review with the internal auditors the adequacy of internal controls and procedures related to any corporate transactions in which directors or officers of the Corporation have a personal interest, including

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		the expense accounts of officers of the Corporation at the level of Vice-President and above and officers’ use of corporate assets, and consider the results of any reviews thereof by the internal or external auditors;

	r)	establish procedures for:

	(i)	the receipt, retention and treatment of complaints received by the Corporation regarding accounting, internal accounting controls or auditing matters, and
	(ii)	the confidential, anonymous submission by employees of the Corporation of concerns regarding questionable accounting or auditing matters,

	and review periodically with management and the internal auditors these procedures and any significant complaints received;

	s)	meet separately with management, the external auditors and the internal auditors periodically to discuss matters of mutual interest, including any audit problems or difficulties and management’s response thereto, the responsibilities, budget and staffing of the Internal Audit Department and any matter that they recommend bringing to the attention of the full Board;

	t)	review all major financings, including financial statement information contained in related prospectuses, information circulars, etc., of the Corporation and its subsidiaries and annually review the Corporation’s financing plans and strategies;
	u)	review management’s plans with respect to Treasury operations, including such items as financial derivatives and hedging activities;

	v)	discuss risk assessment and risk management policies and processes to be implemented for the Corporation, review with management and the Corporation’s internal and external auditors the effectiveness and efficiency of such policies and processes and their compliance with other relevant policies of the Corporation, and make recommendations to the Board with respect to any outcomes, findings and issues arising in connection therewith;
	w)	review management’s program to obtain appropriate insurance to mitigate risks;

	x)	review and reassess the adequacy of these Terms of Reference at least annually, and otherwise as it deems appropriate, and recommend changes to the Board. The Committee shall also undertake an annual evaluation of the Committee’s performance.

	y)	perform such other activities, consistent with these Terms of Reference, the Corporation’s articles and by-laws and governing law, as the Committee or the Board deems appropriate.
	z)	Report regularly to the Board of Directors on the activities of the Committee.

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	The Corporate Governance and Nominating Committee (the “Committee”) has overall responsibility for monitoring and assessing the functioning of the Board and the Committees thereof, and for developing and implementing good corporate governance practices. In addition, the Committee:

	a)	identifies individuals qualified to become board members and recommends to the Board the Director nominees for the annual meetings of shareholders; and
	b)	has oversight responsibility in respect of major issues of public policy relevant to the business of the Corporation and its subsidiaries.

The membership of the Committee shall be comprised of not less than three Directors and not more than the number of Directors who are not officers or employees of the Corporation. No Director who is an officer or employee of the Corporation or any of its subsidiaries shall be a member of the Committee. All members of the Committee shall meet all requirements and guidelines for corporate governance and nominating committee service, including being independent and unrelated to the Corporation, set forth in applicable securities laws or the rules of any stock exchange on which the Corporation’s securities are listed for trading. Determinations as to whether a particular Director satisfies the requirements for membership on the Committee shall be affirmatively made by the full Board.

	Members of the Committee shall be appointed from time to time by the Board and shall hold office at the pleasure of the Board.

	Where a vacancy occurs at any time in the membership of the Committee, it may be filled by the Board. The Board shall fill any vacancy whenever necessary to maintain a Committee membership of at least three Directors.

	The Board shall appoint a Chair for the Committee.

	If the Chair of the Committee is not present at any meeting of the Committee, one of the other members of the Committee who is present at the meeting shall be chosen by the Committee to preside at the meeting.

	The Committee shall appoint a Secretary who need not be a director of the Corporation.

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	The Chair of the Committee or the Chairman of the Board or any two members of the Committee may call a meeting of the Committee. The Committee shall meet at least quarterly and at such other times as it deems appropriate, without management being present when the Committee deems appropriate.

	Three members of the Committee shall constitute a quorum.

Notice of the time and place of every meeting shall be given in writing, by any means of transmitted or recorded communication, including facsimile, telex, telegram or other electronic means that produces a written copy, to each member of the Committee at least 24 hours prior to the time fixed for such meeting; provided, however, that a member may in any manner waive a notice of a meeting. Attendance of a member at a meeting constitutes a waiver of notice of the meeting, except where a member attends a meeting for the express purpose of objecting to the transaction of any business on the grounds that the meeting is not lawfully called.

	At the invitation of the Chair of the Committee, individuals who are not members of the Committee may attend any meeting of the Committee.

	Subject to any statute or articles and by-laws of the Corporation, the Committee shall fix its own procedures at meetings, keep records of its proceedings and report to the Board when the Committee may deem appropriate (but not later than the next meeting of the Board).

	The Committee shall review its Terms of Reference annually or otherwise as it deems appropriate and propose recommended changes to the Board.

14.	The Committee shall:

	a)	review from time to time and report to the Board regarding:

	(i)	what competencies and skills the Board, as a whole, should possess,
	(ii)	what competencies, skills and personal and other qualities the existing Directors possess,
	(iii)	the development of a process to determine, in light of the opportunities and risks facing the Corporation, what competencies, skills and personal qualities are required for new Directors in order to add value to the Corporation,
	(iv)	the size of the Board, with a view to facilitating effective decision-making;

	and identify and recommend to the Board qualified Director nominees for appointment or election at the annual meeting of shareholders consistent with the criteria approved by the Board and after taking into account the aforementioned matters;

	b)	consider nominees, if any, recommended by the shareholders for election as directors;
	c)	have sole authority to:

	(i)	retain and terminate any search firm to be used to identify director candidates, and
	(ii)	to approve the search firm’s fees and other retention terms;

	d)	review from time to time the retirement age for directors;

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	e)	conduct, at least annually, a review of compensation for Board and Committee service, taking into account such issues as the time commitment, compensation provided by comparable companies, responsibilities of directors, and similar matters, and recommend any change in compensation to the Board for its consideration;

	f)	annually review and evaluate the performance and effectiveness of the Board, its committees, including the Committee, and individual Directors and make any recommendations thereon; and in so doing consider:

	(i)	in the case of the Board or a Committee, its terms of reference; and
	(ii)	in the case of an individual Director, the applicable position description(s), as well as the competencies and skills each individual is expected to bring to the Board;

	g)	assess the effectiveness of the working relationship and communications between the Board and management of the Corporation and its subsidiaries;
	h)	review any surveys completed by Directors dealing with effectiveness of the operation of the Board;
	i)	assess the availability, relevance and timeliness of information required by the Board;

	j)	review from time to time, and at least annually, the terms of reference of the Board and the composition and terms of reference of the various Committees of the Board, and make recommendations thereon to the Board;

	k)	develop, recommend to the Board, and review from time to time a code of business ethics applicable to the Corporation a code of ethics applicable to the Chief Executive Officer and senior financial officers of the Corporation (collectively, the “Codes”) and a set of corporate governance principles and guidelines for the Corporation;
	l)	monitor compliance with the Codes and waivers from compliance therefrom and ensure that any issues relating to governance which are identified by the Directors are raised with management;
	m)	review and, if deemed appropriate, approve any waivers of the Codes for executive officers or directors and promptly disclose such waivers to the shareholders;
	n)	undertake such other initiatives as are necessary or desirable to provide effective corporate governance for the Corporation;
	o)	review the Corporation’s disclosure of, or periodically disclose, if required, any significant ways in which the Corporation’s governance practices differ from those set forth in the New York Stock Exchange Listing Standards and in the Corporate Governance Guidelines of the Toronto Stock Exchange or, when and if adopted, corporate governance guidelines of the Canadian Securities Administrators; ,

	p)	conduct performance evaluations of the Chief Executive Officer in accordance with the performance evaluation process designed by the Management Resources and Compensation Committee and report the findings thereof to that Committee for the purpose of enabling it to make recommendations regarding compensation for the Chief Executive Officer;
	q)	establish the compensation for the Chief Executive Officer, taking into account the recommendations of the Management Resources and Compensation Committee;

	r)	review, from time to time, major issues of public policy relevant to the business of the Corporation and its subsidiaries;

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	s)	be authorized to approve, in such circumstances as it considers appropriate, the engagement by any one or more Directors of outside advisers, such engagement to be at the Corporation’s expense; and

	t)	perform such other activities, consistent with these Terms of Reference, the Corporation’s articles and by-laws and governing law, as the Committee or the Board deems appropriate.

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A.	Establishment of Committee and Procedures

1.	Composition of Committee

	The Environmental and Safety Committee (the “Committee”) shall consist of not less than three Directors and not more than six Directors, none of whom is either an officer or employee of the Corporation or any of its subsidiaries.

2.	Appointment of Committee Members

	Members of the Committee shall be appointed from time to time to hold office at the pleasure of the Board.

3.	Vacancies

	Where a vacancy occurs at any time in the membership of the Committee, it may be filled by the Board. The Board shall fill any vacancy if the membership of the Committee is less than two Directors.

4.	Committee Chair

	The Board shall appoint a Chair for the Committee.

5.	Absence of Committee Chair

	If the Chair of the Committee is not present at any meeting of the Committee, one of the other members of the Committee who is present at the meeting shall be chosen by the Committee to preside at the meeting.

6.	Secretary of Committee

	The Committee shall appoint a Secretary who need not be a director of the Corporation.

7.	Meetings

	The Chair of the Committee or the Chairman of the Board or any two members of the Committee may call a meeting of the Committee. The Committee shall meet at such times during each year as it deems appropriate.

8.	Quorum

	Three members of the Committee shall constitute a quorum.

9.	Notice of Meetings

Notice of the time and place of every meeting shall be given, by any means of transmitted or recorded communication, including facsimile, telex, telegram or other electronic means that produces a written copy, to each member of the Committee at least 24 hours prior to the time fixed for such meeting, provided, however, that a member may in any manner waive a notice of a meeting; and attendance of a member at a meeting constitutes a waiver of notice of the meeting, except where a member attends a meeting for the express purpose of objecting to the transaction of any business on the grounds that the meeting is not lawfully called.

10.	Attendance of Others at Meetings

	At the invitation of the Chair of the Committee, individuals who are not members of the Committee may attend any meeting of the Committee.

11.	Procedure, Records and Reporting

	Subject to any statute or articles and by-laws of the Corporation, the Committee shall fix its own procedures at meetings, keep records of its proceedings and report to the Board when the Committee may deem appropriate (but not later than the next meeting of the Board).

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12.	Review of Terms of Reference

	The Committee shall review its Terms of Reference annually or otherwise as it deems appropriate and propose recommended changes to the Board.

B.	Mandate of Committee

13.	The Committee shall:

	a)	review and evaluate with management whether the existing environmental and safety practices and procedures of the Corporation and its subsidiaries comply with applicable legislation, regulatory requirements and industry standards, and prevent or mitigate losses;
	b)	review with management whether the Corporation’s environmental and safety policies (or those of its subsidiaries) are being effectively implemented;
	c)	review the effectiveness of the response by the Corporation or its subsidiaries, as the case may be, to environmental and safety issues, including compliance with applicable legislation, regulatory requirements and industry standards;
	d)	review and consider, as appropriate, reports and recommendations issued by the Corporation and its subsidiaries or by an external party relating to environmental and safety issues, together with management’s response thereto;
	e)	review with management and make recommendations to the Board of Directors as appropriate on matters relating to the environment and safety;
	f)	review and report, as appropriate, to the Board of Directors on the Corporation’s environmental and safety policies and procedures and, if appropriate, make recommendations to the Board thereon; and
	g)	review with management, the response to, and management of, environmental and safety issues by any or all of the Corporation’s subsidiaries and associated corporations.

14.	The Committee may, at the request of the Board or on its own initiative, investigate such other matters as are considered necessary or appropriate in the circumstances and in such matters shall have the authority to retain such experts as it may require.

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A.	Committee and Procedures

1.	Purpose

	The purposes of the Management Resources and Compensation Committee (the “Committee”) are to fulfill applicable public company compensation committee legal obligations and to assist the Board with its responsibilities relating to:

	•	the appointment, compensation and reporting relationships of the Corporation’s executives;
	•	the compensation philosophy of the Corporation;
	•	the adoption and amendment of incentive compensation plans, equity based plans and retirement plans, subject to shareholder approval if required;
	•	the establishment of performance objectives and the conduct of performance evaluations for certain senior officers;
	•	the Corporation’s organizational health; and
	•	succession planning.

2.	Composition of Committee

The Committee shall be comprised of not less than three and not more than six Directors, none of whom is either an officer or employee of the Corporation or any of its subsidiaries. All members of the Committee shall meet all requirements and guidelines for compensation committee service, including being independent and unrelated to the Corporation, set forth in applicable securities laws, securities commission policies or the rules of any stock exchange on which the Corporation’s securities are listed for trading. Determinations as to whether a particular Director satisfies the requirements for membership on the Committee shall be affirmatively made by the full Board.

3.	Appointment of Committee Members

	Members of the Committee shall be appointed from time to time by the Board and shall hold office at the pleasure of the Board.

4.	Vacancies

	Where a vacancy occurs at any time in the membership of the Committee, it may be filled by the Board. The Board shall fill a vacancy whenever necessary to maintain a Committee membership of at least three Directors.

5.	Committee Chair

	The Board shall appoint a Chair for the Committee.

6.	Absence of Committee Chair

	If the Chair of the Committee is not present at any meeting of the Committee, one of the other members of the Committee who is present at the meeting shall be chosen by the Committee to preside at the meeting.

7.	Secretary of Committee

	The Committee shall appoint a Secretary who need not be a Director of the Corporation.

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8.	Meetings

	The Chair of the Committee or the Chairman of the Board or any two of its other members may call a meeting of the Committee. The Committee shall meet at such times during each year as it deems appropriate, without management being present when the Committee deems appropriate.

9.	Quorum

	Three members of the Committee shall constitute a quorum.

10.	Notice of Meetings

Notice of the time and place of every meeting shall be given in writing, by any means of transmitted or recorded communication, including facsimile, telex, telegram, e-mail or other electronic means that produces a written copy, to each member of the Committee at least 24 hours prior to the time fixed for such meeting; provided, however, that a member may in any manner waive a notice of a meeting. Attendance of a member at a meeting constitutes a waiver of notice of the meeting, except where a member attends a meeting for the express purpose of objecting to the transaction of any business on the grounds that the meeting is not lawfully called.

11.	Attendance of Others at Meetings

	At the invitation of the Chair of the Committee, individuals who are not members of the Committee may attend any meeting of the Committee.

12.	Procedure, Records and Reporting

	Subject to any statute or articles and by-laws of the Corporation, the Committee shall fix its own procedures at meetings, keep records of its proceedings and report to the Board when the Committee may deem appropriate (but not later than the next meeting of the Board).

13.	Review of Terms of Reference and Committee’s Performance

	The Committee shall review its Terms of Reference as it deems appropriate and recommend changes to the Board. The Committee shall undertake an annual evaluation of the Committee’s performance.

B.	Mandate of Committee

14.	From time to time, the Committee shall consider and make recommendations to the Board concerning:

	a)	the structure and reporting relationship of senior management of the Corporation and its major subsidiaries;
	b)	succession planning for senior management positions in the Corporation;
	c)	the appointment of persons to the rank of Vice-President and above;
	d)	compensation philosophy for the Corporation generally;
	e)	the level of compensation to be paid to officers of the rank of Vice-President and above;
	f)	incentive compensation plans and equity based plans, including compensation, stock option, stock purchase or other similar plans in which officers are or may be eligible to participate, and the administration and monitoring, as required, of any benefits granted pursuant to any such plan referred to in this subparagraph;
	g)	amendments to the Corporation’s retirement plans as proposed by the Management Pension Committee, the financial implications of which amendments shall be provided to both the Committee and the Pension Trust Fund Committee); and
	h)	the organizational health, morale and employee attitudes.

15.	The Committee shall:

	a)	establish the performance objectives for the Chief Executive Officer (“CEO”), including the corporate goals and objectives relevant to CEO compensation, and design the process for evaluating the performance of the CEO;

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	b)	review and make recommendations to the Corporate Governance and Nominating Committee on the level of compensation to be paid to the CEO based on the evaluation of the CEO’s performance in light of the aforementioned corporate goals and objectives; and
	c)	have authority to retain, terminate and compensate, on such terms and at such fees or other compensation as the Committee may determine according to its sole discretion, any compensation consultant to be used to assist in the evaluation of CEO or senior executive compensation, and any other external advisors that the Committee deems necessary to permit it to carry out its duties.

16.	The Committee shall each year prepare and approve a “Report on Executive Compensation” to be included in the Corporation’s management proxy circular for its annual meeting of shareholders.
17.	The Committee may perform such other activities, consistent with these Terms of Reference, the Corporation’s articles and by-laws and governing law, as the Committee or the Board deems appropriate.

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	The Corporation’s wholly-owned subsidiary, Canadian Pacific Railway Company (“CPRC”) sponsors certain pension plans, both registered and non-registered, and the Corporation may itself sponsor registered and/or non-registered plans from time to time. As a result, the Corporation has established an appropriate governance structure for those of the plans that it may designate (collectively, the “Plans”) to enable the Corporation and CPRC to meet their legal and fiduciary obligations to members of the Plans.
	The governance structure for the Plans is as follows:

	•	The Corporation’s Board of Directors (the “Board) will retain full power to make all amendments to the Plans.
	•	Acting through the Board, the Corporation and CPRC have delegated certain responsibilities to the Pension Trust Fund Committee of the Board (“PTFC”). The PTFC will oversee the Plans and related funds and set certain pension-related policies and strategies.
	•	The PTFC will delegate certain pension monitoring and legislative compliance matters to a Management Pension Committee of CPRC (“MPC”) whose membership will include management, human resources, finance and legal staff. The MPC will monitor the administration and investment of the Plans and related funds.
	•	Appropriate CPRC staff will be responsible for monitoring the day-to-day administration and custody of the Plans.
	•	One or more professional investment managers will invest the assets of the Plans.
	•	The Corporation and CPRC will be assisted by such professional advisors as may be required to administer the Plans in accordance with the policies of the Corporation and applicable legislation.

	•	Actions by the Corporation and CPRC will be through the Board or authorized officers of the Corporation or of CPRC.
	•	The Corporation will be Administrator for the registered pension plans for purposes of pension legislation, and will oversee the Plans and related funds.
	•	The Board will be responsible for all non-fiduciary aspects of benefits policy, design of the Plans, and establishment and windup of the Plans. The Board also has the power to approve amendments to the Plans or delegate such power to others.
	•	The Board will appoint the membership of the PTFC and approve a pension governance structure for the MPC and any sub-committees thereof, and the President and Chief Executive Officer will appoint the membership of the MPC.
	•	The Board will be advised on decisions by the PTFC on investment policy and the selection of managers.
	•	The Board will approve the mandates and terms of reference of the PTFC and the MPC and delegate certain obligations to such committees, including authority for each to further delegate to appropriate individuals.
	•	The Board will monitor the PTFC with respect to the Plans and will receive an annual report from the PTFC on pension matters.

C.	Establishment of PTFC and Procedures

1.	Composition of PTFC

	The PTFC shall consist of not less than two Directors and not more than six Directors.

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	Members of the PTFC shall be appointed from time to time and shall hold office at the pleasure of the Board.

	Where a vacancy occurs at any time in the membership of the PTFC, it may be filled by the Board. The Board shall fill any vacancy if the membership of the PTFC is less than three Directors.

	The Board shall appoint a Chair for the PTFC.

	If the Chair of the PTFC is not present at any meeting of the PTFC, one of the other members of the PTFC who is present at the meeting shall be chosen by the PTFC to preside at the meeting.

	The PTFC shall appoint a Secretary who need not be a director of the Corporation.

	The Chair or the President of the Corporation or any other two members of the PTFC may call a meeting of the PTFC.

	Two members of the PTFC shall constitute a quorum.

Notice of the time and place of every meeting shall be given, by any means of transmitted or recorded communication, including facsimile, telex, telegram or other electronic means that produces a written copy, to each member of the PTFC at least 24 hours prior to the time fixed for such meeting, provided, however, that a member may in any manner waive a notice of a meeting; and attendance of a member at a meeting constitutes a waiver of notice of the meeting, except where a member attends a meeting for the express purpose of objecting to the transaction of any business on the grounds that the meeting is not lawfully called.

	At the invitation of the Chair of the PTFC, individuals who are not members of the Committee may attend any meeting of the PTFC.

	Subject to any statute or articles and by-laws of the Corporation, the Committee shall fix its own procedures at meetings, keep records of its proceedings and report to the Board as may be required from time to time, but not less than annually. Notwithstanding the foregoing, minutes of all meetings of the PTFC shall be kept by the Corporate Secretary of the Corporation.

	The PTFC shall review its Terms of Reference annually or otherwise as it deems appropriate and propose recommended changes to the Board.

	a)	have general oversight responsibility for the Plans as directed by the Board from time to time;
	b)	monitor the activities of the MPC;
	c)	based on recommendations by the MPC, approve the selection of investment manager(s), trustees, custodians and actuaries;

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	d)	receive the advice of the MPC and Chief Financial Officer on issues of investment policy and funding policy and approve the investment and funding policies for the Plans;
	e)	approve the Statement of Investment Policies and Procedures for the Plans, based on recommendations by the MPC;
	f)	review the criteria for trustee/custodian/ investment manager selection and the criteria used to measure the ongoing performance as approved by the MPC;
	g)	appoint the auditors for the Plans and review and approve the Plans’ audited financial statements;
	h)	by way of written mandate, delegate certain duties and responsibilities to appropriate staff and advisors in accordance with the Corporation’s overall governance structure for the Plans;
	i)	deliver annual reports to the Board in accordance with Section A. 11;
	j)	receive and review semi-annual reports from the MPC on relevant pension plan issues, including:

	—	design of the Plans
	—	background information on the Plans: contributions, membership
	—	overall financial conditions: assets, liabilities, surpluses or deficits, on a funding, solvency or windup basis as appropriate; current service costs; cash flow; highlights of related expenses
	—	summary of investment manager and trustee/custodian performance: reasons for changes to net assets, and compliance with investment policy
	—	proposed amendments to the Plans and related funding impact, if any
	—	recommendations on the continued tenure of investment managers, trustee/ custodian/ third party administrator, advisors, and MPC members and reasons therefore
	—	recommendations on investment policy and strategy and compliance with such strategies
	—	reports on any conflicts of interest
	—	legislative compliance
	—	upcoming pension trends or changes in Canada;

14.	The PTFC may, at the request of the Board or on its own initiative, investigate such other matters as are considered necessary or appropriate in the circumstances.

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