CANADIAN PACIFIC RAILWAY LTD/CN (Form: 10-K, Received: 02/29/2016 12:16:50)

Title of Each Class

Name of Each Exchange on which Registered

Common Shares, without par value

New York Stock Exchange

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark one)



x	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT OF 1934

For fiscal year ended December 31, 2015



o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number 001-01342

Canadian Pacific Railway Limited

(Exact name of registrant as specified in its charter)



Canada		98-0355078
(State or Other Jurisdiction of Incorporation or Organization)		(IRS Employer Identification No.)

7550 Ogden Dale Road S.E., Calgary, Alberta, Canada		T2C 4X9
(Address of Principal Executive Offices)		(Zip Code)

Registrant’s Telephone Number, Including Area Code: (403) 319-7000

Securities registered pursuant to Section 12(b) of the Act:

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes þ No o

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act.

Yes o No þ

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes þ No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. þ

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.



Large accelerated filer þ	Accelerated filer o	Non-accelerated filer o	Smaller reporting company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ

As of June 30, 2015 the last business day of the registrant's most recently completed second fiscal quarter, the aggregate market value of the voting stock held by non-affiliates of the registrant was $23,580,095,732 million, based on the closing sales price per share as reported by the New York Stock Exchange on such date.

As of the close of business on February 26, 2016, there were 153,021,661 shares of the registrant's Common Stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the definitive proxy statement relating to registrant’s 2016 annual and special meeting of shareholders (the “Proxy Statement”) are incorporated by reference in Part III hereof.

CANADIAN PACIFIC RAILWAY LIMITED

FORM 10-K

TABLE OF CONTENTS



	PART I
		Page
Item 1.	Business	4
Item 1A.	Risk Factors	14
Item 1B.	Unresolved Staff Comments	16
Item 2.	Properties	17
Item 3.	Legal Proceedings	21
Item 4.	Mine Safety Disclosures	21
	Executive Officers of the Registrant	22

	PART II
Item 5.	Market for Registrant's Common Equity, Related Shareholder Matters and Issuer Purchases of	24
	Equity Securities
Item 6.	Selected Financial Data	26
Item 7.	Management's Discussion and Analysis of Financial Condition and Results of Operations	27
Item 7A.	Quantitative and Qualitative Disclosures about Market Risk	57
Item 8.	Financial Statements and Supplementary Data	58
Item 9.	Changes in and Disagreements With Accountants on Accounting and Financial Disclosure	113
Item 9A.	Controls and Procedures	113
Item 9B.	Other Information	115

	PART III
Item 10.	Directors, Executive Officers and Corporate Governance	116
Item 11.	Executive Compensation	116
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related	116
	Shareholder Matters
Item 13.	Certain Relationships and Related Transactions, and Director Independence	116
Item 14.	Principal Accounting Fees and Services	116

	PART IV
Item 15.	Exhibits, Financial Statement Schedules	117
	Signatures	122

PART I

ITEM 1. BUSINESS

Company Overview

Canadian Pacific Railway Limited (“CPRL”), together with its subsidiaries (“CP” or the “Company”), operates a transcontinental railway in Canada and the United States (“U.S.”). CP's diverse business mix includes bulk commodities, merchandise freight and intermodal traffic over a network of approximately 12,500 miles, serving the principal business centres of Canada from Montreal, Quebec, to Vancouver, British Columbia, and the U.S. Northeast and Midwest regions.

CPRL was incorporated on June 22, 2001, under the Canada Business Corporations Act and controls and owns all of the Common Shares of Canadian Pacific Railway Company (“CPRC”) which was incorporated by Letters Patent in 1881 pursuant to an Act of the Parliament of Canada. The Company’s registered, executive and head office is located at 7550 Ogden Dale Road S.E., Calgary, Alberta T2C 4X9. CP's Common Shares are listed on the Toronto Stock Exchange (“TSX”) and the New York Stock Exchange (“NYSE”) under the symbol “CP”.

For purposes of this report, all references herein to “CP,” “the Company,” “we,” “our” and “us” refer to CPRL, CPRL and its subsidiaries, CPRL and one or more of its subsidiaries, or one or more of CPRL's subsidiaries, as the context may require. All references to currency amounts included in this annual report, including the Consolidated Financial Statements, are in Canadian dollars unless specifically noted otherwise.

For additional information regarding CP's network and geographical locations refer to Item 2. Properties.

Strategy

CP is driving change as it moves through its transformational journey to become the best railroad in North America while creating long-term value for shareholders. The Company is focused on providing customers with industry-leading rail service; driving sustainable, profitable growth; optimizing its assets; and reducing costs while remaining a leader in rail safety. Looking forward, CP is executing its strategic plan to become the lowest cost rail carrier centred on five key foundations, which are the Company’s performance drivers.

Provide Service: Providing efficient and consistent transportation solutions for the Company’s customers. “Doing what we say we are going to do” is what drives CP in providing a reliable product with a lower cost operating model. Centralized planning aligned with local execution is bringing the Company closer to the customer and accelerating decision-making.

Control Costs: Controlling and removing unnecessary costs from the organization, eliminating bureaucracy and continuing to identify productivity enhancements are the keys to success.

Optimize Assets: Through longer sidings, improved asset utilization and increased train lengths, the Company is moving increased volumes with fewer locomotives and cars while unlocking capacity for future growth potential.

Operate Safely: Each year, CP safely moves millions of carloads of freight across North America while ensuring the safety of our people and the communities through which we operate. Safety is never to be compromised. Continuous research and development in state-of-the-art safety technology and highly focused employees ensure our trains are built for safe, efficient operations across our network.

Develop People: CP recognizes that none of the other foundations can be achieved without its people. Every CP employee is a railroader and the Company is shaping a new culture focused on a passion for service with integrity in everything it does. Coaching and mentoring managers into becoming leaders will help drive CP forward.

Business Developments

During the fourth quarter of 2015, CP proposed a business combination with Norfolk Southern Corporation (“NS”). While CP is firmly of the view that a business combination would deliver improved levels of service to customers and communities while enhancing competition and creating significant shareholder value, to date, NS has rejected CP’s proposal. On February 9, 2016, CP notified NS of its intent to submit a resolution to NS shareholders to ask their Board of Directors to engage in good faith discussions with CP regarding a business combination transaction involving CP and NS that would create a true end-to-end transcontinental railroad that would enhance competition, benefit the public and drive economic growth.

During the third quarter of 2015, the Company completed the sale of approximately 283 miles of the Delaware and Hudson Railway Company, Inc.’s line between Sunbury, Pennsylvania, and Schenectady, New York (“D&H South”) to NS for proceeds of $281 million (U.S. $214 million).

During the first quarter of 2015, CP entered into an agreement to create a joint venture with Canadian Dream Venture LP called Dream VHP Limited Partnership. The joint venture was created to evaluate the Company’s real estate and to explore innovative ways to maximize value, including industrial, commercial and residential development.

During the second quarter of 2014, the Company completed the sale of approximately 660 miles of the Dakota, Minnesota & Eastern (“DM&E”) tracks between Tracy, Minnesota; Rapid City, South Dakota; Colony, Wyoming; and Crawford, Nebraska to Genesee & Wyoming Inc. (“G&W”) for proceeds of $236 million (U.S. $218 million).

Change in Executive Officers

On February 11, 2015, the Company announced that Executive Vice-President and Chief Financial Officer (“CFO”), Mr. Bart W. Demosky, had decided to leave the Company. On May 4, 2015, the Company announced Mr. Mark J. Erceg was appointed Executive Vice-President and Chief Financial Officer. Mr. Erceg joined the Company on May 18, 2015.

On October 27, 2015, the Company announced that Mr. Paul A. Guthrie will retire in the first quarter of 2016. Mr. Guthrie was appointed Special Counsel to the Chief Executive Officer (“CEO”) to support the transition. Mr. Jeffrey J. Ellis was appointed Chief Legal Officer and Corporate Secretary effective November 23, 2015.

Change in Board of Directors

Effective May 14, 2015, Mr. Keith E. Creel and the Hon. John R. Baird were elected to the Board of Directors of Canadian Pacific Railway Limited.

On July 3, 2015, Mr. Stephen C. Tobias resigned as a member of the Company’s Board of Directors. Mr. Tobias joined the Board on May 17, 2012.

On July 20, 2015, Mr. Andrew F. Reardon was elected Chairman of the Board. On July 20, 2015, Mr. Gary F. Colter and Ms. Krystyna T. Hoeg resigned as members of the Company’s Board of Directors. Mr. Colter joined the Board on May 17, 2012 and was the Chairman of the Board from May 1, 2014 until his resignation. Ms. Hoeg joined the Board on May 11, 2007.

Ms. Linda J. Morgan, who was a director of the Company since 2006 and Chair of the Health, Safety, Security, and Environment Committee and Member of the Audit Committee, passed away on November 4, 2015.

On January 26, 2016, Mr. Paul C. Hilal resigned from the Board. Mr. Matthew H. Paull was appointed to the Company's Board of Directors on January 26, 2016 and is currently the Chair of the Audit Committee.

Operations

The Company operates in only one operating segment: rail transportation. Although the Company provides a breakdown of revenue by business line, the overall financial and operational performance of the Company is analyzed as one segment due to the integrated nature of the rail network. Additional information regarding the Company's business and operations, including revenue and financial information and information by geographic location, is presented in Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations, and Item 8. Financial Statements and Supplementary Data, Note 29 Segmented and geographic information.

Lines of Business

The Company transports bulk commodities, merchandise freight and intermodal traffic. Bulk commodities include grain, coal, potash, fertilizers and sulphur. Merchandise freight consists of finished vehicles and automotive parts, as well as forest and industrial and consumer products. Intermodal traffic consists largely of retail goods in overseas containers that can be transported by train, ship and truck and in domestic containers and trailers that can be moved by train and truck.

The Company’s revenues are primarily derived from transporting freight. In 2015, the Company generated freight revenues totalling $ 6,552 million ($ 6,464 million in 2014 and $ 5,982 million in 2013). The following charts compare the percentage of the Company’s total freight revenues derived from each of the three major business lines in 2015, 2014 and 2013:



2015 Freight revenues	2014 Freight revenues	2013 Freight revenues

BULK

CP’s bulk business represented approximately 44% of total freight revenues in 2015.

The following charts compare the percentage of the Company's freight revenues derived from bulk commodities transportation, including per commodity business in 2015, 2014 and 2013:



2015 Bulk revenues	2014 Bulk revenues	2013 Bulk revenues

Canadian Grain

The Company’s Canadian grain business represented approximately 37% of bulk revenues, which is 16% of total freight revenues in 2015.

Canadian grain transported by CP consists of both whole grains, such as wheat, corn, soybeans and canola, and processed products such as meals, oils and flour. This business is centred in the Canadian Prairies (Alberta, Saskatchewan and Manitoba), with grain shipped primarily west to the Port Metro Vancouver in British Columbia ("B.C.") and east to the Port of Thunder Bay in Ontario for export. Grain is also shipped to the U.S., Mexico and to Eastern Canada for domestic consumption.

Canadian grain includes a division of business that is regulated by the Canadian government through the Canada Transportation Act (“CTA”). This regulated business is subject to a maximum revenue entitlement (“MRE”). Under this regulation, railroads can set their own rates for individual movements. However, the MRE governs aggregate revenue earned by the railroad based on a formula

that factors in the total volumes, length of haul, average revenue per ton and inflationary adjustments. The regulation applies to Western Canadian export grain shipments to the ports of Vancouver and Thunder Bay.

U.S. Grain

CP’s U.S. grain business represented approximately 18% of bulk revenues, which is 8% of total freight revenues in 2015.

U.S. grain transported by CP consists of both whole grains, such as wheat, corn and soybeans, and processed products such as meals, oils and flour. This business is centred in the states of North Dakota, Minnesota, Iowa and South Dakota. Export grain traffic from this producing region is shipped to ports at Duluth and Superior in Minnesota. In partnership with other railroads, CP also moves grain to export terminals in the U.S. Pacific Northwest and the Gulf of Mexico. Grain destined for domestic consumption moves east via Chicago, Illinois to the U.S. Northeast or is interchanged with other carriers to the U.S. Southeast, Pacific Northwest and Californian markets.

Coal

The Company’s Coal business represented approximately 22% of bulk revenues, which is 10% of total freight revenues in 2015.

CP handles mostly metallurgical coal destined for export through the Port Metro Vancouver for use in the steelmaking process in the Pacific Rim, Europe and South America. CP’s Canadian coal traffic originates mainly from Teck Resource Limited’s mines in southeastern B.C. CP moves coal west from these mines to port terminals for export to world markets, east for the U.S. Midwest markets and for consumption in steelmaking mills along the Great Lakes.

In the U.S., CP moves primarily thermal coal from connecting railways serving the thermal coal fields in the Powder River Basin in Montana and Wyoming. It is then delivered to power-generating facilities in the U.S. Midwest. CP also serves petroleum coke operations in Canada and the U.S., where the product is used for power generation and aluminum production.

Potash

The Company's Potash business represented approximately 13% of bulk revenues, which is 5% of total freight revenues in 2015.

The Company’s potash traffic moves mainly from Saskatchewan to offshore markets through the ports of Vancouver, Thunder Bay and Portland, Oregon and to markets in the U.S. All potash shipments for export beyond Canada and the U.S. are marketed by Canpotex Limited, a joint venture among Saskatchewan’s potash producers. Independently, these producers move domestic potash with CP primarily to the U.S. Midwest for local application.

Fertilizers and Sulphur

Fertilizers and sulphur business represented approximately 10% of bulk revenues, which is 4% of total freight revenues in 2015.

Chemical fertilizers are transported to markets in Canada and the U.S. from key production areas in the Canadian Prairies. Phosphate fertilizer is also transported from U.S. and Canadian producers to markets in Canada and the northern U.S. CP provides transportation services from major nitrogen production facilities in Western Canada and has efficient routes to the major U.S. markets. CP also has direct service to key fertilizer distribution terminals, including via facilities on the Mississippi River system at Minneapolis-St. Paul, Minnesota, as well as access to Great Lakes vessels at Thunder Bay.

Most sulphur is produced in Alberta as a byproduct of processing sour natural gas, refining crude oil and upgrading bitumen produced in the Alberta oil sands. Sulphur is a raw material used primarily in the manufacturing of sulphuric acid, which is used most extensively in the production of phosphate fertilizers. Demand for elemental sulphur rises with demand for fertilizers. Sulphuric acid is also a key ingredient in industrial processes ranging from smelting and nickel leaching to paper production.

MERCHANDISE

CP’s merchandise business represented approximately 36% of total freight revenues in 2015.

The following charts compare the percentage of the Company's freight revenues derived from merchandise transportation, including per merchandise business in 2015, 2014 and 2013:



2015 Merchandise revenues	2014 Merchandise revenues	2013 Merchandise revenues

Merchandise products move in trains of mixed freight and in a variety of car types. Service involves delivering products to many different customers and destinations. In addition to traditional rail service, CP moves merchandise traffic through a network of truck-rail transload facilities and provides logistics services.

Forest Products

The Company’s Forest products business represented approximately 11% of merchandise revenues, which is 4% of total freight revenues in 2015.

Forest products traffic includes wood pulp, paper, paperboard, newsprint, lumber, panel and oriented strand board shipped from key producing areas in B.C., northern Alberta, northern Saskatchewan, Ontario and Quebec to destinations throughout North America.

Chemicals and Plastics

The Company’s Chemicals and plastics business represented approximately 30% of merchandise revenues, which is 11% of total freight revenues in 2015.

Petroleum products represent the largest segment of this business, followed by chemicals and plastics.

Petroleum products consist of commodities such as liquefied petroleum gas (“LPG”), gasoline, diesel, condensate, asphalt and lubricant oils. The majority of the Company’s Western Canadian petroleum products traffic originates in Saskatchewan and in the Alberta Industrial Heartland, Canada’s largest hydrocarbon processing region. The Bakken formation region in Saskatchewan and North Dakota is another source of condensate, LPG and natural gas liquids. Interchange with several rail interline partners gives the Company access to refineries and export facilities in the Pacific Northwest, Northeast U.S. and Gulf Coast, as well as the Texas and Louisiana petrochemical corridor and port connections.

The Company’s chemical traffic includes products such as ethylene glycol, styrene, sulphuric acid, methanol, sodium chlorate, caustic soda and soda ash. These shipments originate from Eastern Canada, Alberta, the U.S. Midwest and the Gulf of Mexico and move to end markets in Canada, the U.S. and overseas.

The most commonly shipped plastics products are polyethylene and polypropylene. Almost half of the Company’s plastics originate in central and northern Alberta and move to various North American destinations.

Crude

The Company’s Crude business represented approximately 17% of merchandise revenues, which is 6% of total freight revenues in 2015.

Crude moves from production facilities throughout Alberta, Saskatchewan and North Dakota. CP has connections to these production facilities as well as access to pipeline terminals. Oil sands products originating in northern Alberta are delivered by pipeline systems to hub terminals in Edmonton, Hardisty and the Alberta Industrial Heartland, where rail and pipeline are the options for onward transportation. CP connects to numerous Saskatchewan oil-producing regions, including ones in Shaunavon, Lloydminster, Kerrobert and the Bakken formation, and CP has numerous facilities in the North Dakota Bakken oil-producing region.

CP’s main crude unloading destination terminal is located in Albany, New York. This terminal is a rail-to-vessel operation that can reach refineries along the Canadian and U.S. East Coast, and the U.S. Gulf Coast. CP also accesses other refineries and terminals on the U.S. East Coast, Gulf Coast and West Coast through established interline partnerships.

Metals, Minerals and Consumer Products

The Company’s Metals, minerals and consumer products business represented approximately 27% of merchandise revenues, which is 10% of total freight revenues in 2015.

Metals, minerals and consumer products include a wide array of commodities such as aggregates, steel, consumer products and non-ferrous metals.

Frac sand and cement are the dominant aggregates. Frac sand originates at mines located along the Company’s network in Wisconsin and moves to a diverse set of shale formations across North America. The majority of the Company’s cement traffic is shipped directly from production facilities in Alberta, Iowa and Ontario to energy and construction projects in North Dakota, Alberta, Manitoba and the U.S. Midwest.

CP transports steel in various forms from mills in Ontario, Saskatchewan and Iowa to a variety of industrial users. The Company carries base metals such as copper, lead, zinc and aluminum. CP also moves ores from mines to smelters and refineries for processing, and the processed metal to automobile and consumer products manufacturers.

Consumer products traffic consists of a diverse mix of goods, including food products, building materials, packaging products and waste products.

Automotive

The Company’s Automotive business represented approximately 15% of merchandise revenues, which is 5% of total freight revenues in 2015.

CP’s automotive portfolio consists of four finished vehicle traffic segments: import vehicles that move through Port Metro Vancouver to Eastern Canadian markets; Canadian-produced vehicles that ship to the U.S. from Ontario production facilities; U.S.-produced vehicles that ship within the U.S. as well as cross-border into Canadian markets; and Mexican-produced vehicles that ship to the U.S. and Canada. In addition to finished vehicles, CP ships automotive parts, machinery and pre-owned vehicles. A comprehensive network of automotive compounds is utilized to facilitate final delivery of vehicles to dealers throughout Canada and in the U.S.

INTERMODAL

The Company’s intermodal business represented approximately 20% of total freight revenues in 2015.

The following charts compare the percentage of the Company's freight revenues derived from intermodal transportation, including the percentage of revenues generated from domestic and international intermodal transportation in 2015, 2014 and 2013:



2015 Intermodal revenues	2014 Intermodal revenues	2013 Intermodal revenues

Domestic intermodal freight consists primarily of manufactured consumer products moved in 53-foot containers within North America. International intermodal freight moves in marine containers to and from ports and North American inland markets.

Domestic Intermodal

The Company’s Domestic intermodal business represented approximately 56% of intermodal revenues, which is 12% of total freight revenues in 2015.

CP’s Domestic intermodal business moves goods from a broad spectrum of industries including food, retail, less-than truckload, trucking and forest products as well as various other consumer-related products. Key service factors in domestic intermodal include consistent on-time delivery, the ability to provide door-to-door service and the availability of value-added services. The majority of the Company’s Domestic intermodal business originates in Canada where CP markets its services directly to retailers, providing complete door-to-door service and maintaining direct relationships with its customers. In the U.S., the Company’s service is delivered mainly through wholesalers.

International Intermodal

The Company’s International intermodal business represented approximately 44% of intermodal revenues, which is 9% of total freight revenues in 2015.

CP’s International intermodal business consists primarily of containerized traffic moving between the ports of Vancouver, Montreal and New York and inland points across Canada and the U.S. Import traffic from the Port Metro Vancouver is mainly long-haul business destined for Eastern Canada and the U.S. Midwest and Northeast. The Company’s trans-Pacific service offers the shortest route between the Port Metro Vancouver and Chicago. CP works closely with the Port of Montreal, a major year-round East Coast gateway to Europe, to serve markets primarily in Canada and the U.S. Midwest. The Company’s U.S. Northeast service connects Eastern Canada with the Port of New York, offering a competitive alternative to trucks.

Fuel Cost Recovery Program

The short-term volatility in fuel prices may adversely or positively impact revenues. CP employs a fuel cost recovery program designed to automatically respond to fluctuations in fuel prices and help reduce volatility to changing fuel prices. Fuel surcharge revenues are earned on individual shipments primarily based on On Highway Diesel; as such, fuel surcharge revenue is a function of freight volumes. Fuel surcharge revenues accounted for approximately 4% of the Company's total freight revenues in 2015.

Non-freight Revenues

Non-freight revenues accounted for approximately 2% of the Company’s total revenues in 2015. Non-freight revenues are generated from leasing certain assets, switching fees, other arrangements including logistical services and contracts with passenger service operators.

Significant Customers

For each of the years ended December 31, 2015, 2014 and 2013, no customer comprised more than 10% of total revenues or accounts receivable.

Competition

The Company is subject to competition from other railways, motor carriers, ship and barge operators, and pipelines. Price is only one factor of importance as shippers and receivers choose a transportation service provider. Service is another factor and requirements, both in terms of transit time and reliability, vary by shipper and commodity. As a result, the Company’s primary competition varies by commodity, geographic location and mode of available transportation. CP’s primary rail competitors are Canadian National Railway Company (“CN”), which operates throughout much of the Company’s territory in Canada and Burlington Northern Santa Fe, LLC (“BNSF”), which operates throughout much of the Company’s territory in the U.S. Midwest. Other railways also operate in parts of the Company’s territory. Depending on the specific market, competing railroads and deregulated motor carriers may exert pressure on price and service levels.

Seasonality

Volumes and revenues from certain goods are stronger during different periods of the year. First-quarter revenues are typically lower mainly due to winter weather conditions, closure of the Great Lakes ports and reduced transportation of retail goods. Second and third-quarter revenues generally improve over the first quarter as fertilizer volumes are typically highest during the second quarter and demand for construction-related goods is generally highest in the third quarter. Revenues are typically strongest in the fourth quarter, primarily as a result of the transportation of grain after the harvest, fall fertilizer programs and increased demand for retail goods moved by rail. Operating income is also affected by seasonal fluctuations. Operating income is typically lowest in the first quarter due to lower freight revenue and higher operating costs associated with winter conditions. Net income is also influenced

by seasonal fluctuations in customer demand and weather-related issues.

Regulations

Government Regulation

The Company’s railway operations are subject to extensive federal laws, regulations and rules in both Canada and the U.S., which directly affect how operations and business activities are managed.

Operations are subject to economic and safety regulation in Canada primarily by the Canadian Transportation Agency (“the Agency”), Transport Canada, the CTA and the Railway Safety Act (“RSA”). The CTA provides shipper rate and service remedies, including final offer arbitration, competitive line rates and compulsory inter-switching in Canada. The Agency regulates the MRE for the movement of export grain, commuter and passenger access, charges for ancillary services and noise-related disputes. Transport Canada regulates safety-related aspects of railway operations in Canada.

The Company’s U.S. operations are subject to economic and safety regulation by the Surface Transportation Board (“STB”) and the Federal Railroad Administration (“FRA”). The STB is an economic regulatory body with jurisdiction over railroad rate and service issues and reviewing proposed railroad mergers and other transactions. The FRA regulates safety-related aspects of the Company’s railway operations in the U.S. under the Federal Railroad Safety Act, as well as rail portions of other safety statutes.

Various other regulators directly and indirectly affect the Company’s operations in areas such as health, safety, security, environmental and other matters.

Regulatory Change

On May 29, 2014, the Government of Canada enacted the Fair Rail for Grain Farmers Act (the “Fair Rail Act”). This legislation authorizes the federal cabinet to require the Company and CN to move a minimum amount of grain, which amount is determined by and may be adjusted by the federal cabinet. There is currently no minimum grain volume required by the federal cabinet. In addition, the Fair Rail Act expands the terms and conditions associated with the inter-switching provisions of the CTA in the provinces of Alberta, Saskatchewan and Manitoba, provides that the Agency make regulations specifying what constitutes operational terms that may be subject to service agreement arbitration, and gives the Agency the power to order a railway to compensate any person who has incurred expenses because of a failure to meet obligations under Sections 113 and 114 of the CTA, or does not meet its obligations under the terms of a confidential contract that includes a compensation clause. Further, the Fair Rail Act amends the Canada Grain Act to permit the regulation of contracts relating to grain and the arbitration of disputes respecting the provisions of those contracts.

After the tragic accident in Lac-Mégantic, Quebec in July of 2013 involving a non-related short-line railroad, the Government of Canada implemented several measures pursuant to the Rail Safety Act (Canada) and the Transportation of Dangerous Goods Act (Canada). These modifications implemented changes with respect to rules associated with securing unattended trains, the classification of crude being imported, handled, offered for transport or transported, and the provision of information to municipalities through which dangerous goods are transported by rail. The U.S. federal government has taken similar actions. These changes did not have a material impact on CP’s operating practices.

On February 20, 2015, the Government of Canada introduced Bill C-52 “An Act to amend the CTA and the RSA”, which received Royal Assent on June 18, 2015 to come into force upon a date set by Order of Council. Bill C-52 sets out new minimum insurance requirements for federally regulated railways based on: amounts of crude and toxic inhalation hazards/poisonous inhalation hazards moved; imposes strict liability; limits railway liability to the minimum insurance level; mandates the creation of a fund of $250 million paid for by crude shippers, to be utilized for damages beyond $1 billion (in respect of CP); allows railways and insurers to have existing rights to pursue other parties (subrogation); and prevents shifting liability to shippers from railways except through written agreement. It is too soon for the Company to determine the impact that these amendments to the CTA and the RSA will have on the Company’s financial condition and results from operations.

On May 1, 2015, the U.S. Transportation Secretary announced the final rule for new rail tank car standard for flammable liquids and the retrofitting schedule for older tank cars used to transport flammable liquids. The development of the new tank car standard was done in coordination between Transport Canada, the U.S. Pipeline and Hazardous Materials Safety Administration (“PHMSA”) and the FRA. This announcement was followed by publishing the new tank car standard in Canada on May 20, 2015. The new tank car standards require new tanks used to move flammable liquids to have: top-fitting protection; thermal protection including a jacket; the use of 9/16 inch normalized steel for the tank car; full head shield; and improved bottom outlet valves. In the U.S. the new standards also included new operational protocols for trains transporting large volumes of flammable liquids such as the use of electronically controlled pneumatic (“ECP”) brakes for trains carrying 70 or more cars of flammable liquids, routing requirements, speed restrictions, and information for local government agencies. The U.S. rule also provides new sampling and testing requirements for the classification of energy products placed into transport. In Canada, operational protocols such as speed restrictions to 40 miles per hour in census metropolitan areas, crude sampling and testing requirements, and sharing information with municipal first responders, had previously been implemented. CP does not own any tank cars used for commercial transportation of hazardous commodities.

On October 29, 2015, the Surface Transportation Extension Act of 2015 was signed into law. The law extends, by three years, the deadline for the U.S. rail industry to implement Positive Train Control (“PTC”), a set of highly advanced technologies designed to prevent train-to-train collisions, speed-related derailments, and other accidents caused by human error by determining the precise location, direction and speed of trains, warning train operators of potential problems, and taking immediate action if an operator does not respond. Legislation passed by the U.S. Congress in 2008 mandated that PTC systems be put into service by the end of 2015 on rail lines used to transport passengers or toxic-by-inhalation materials. The Surface Transportation Extension Act of 2015 extended the deadline to install and activate PTC to December 31, 2018, allowing the Company additional time to ensure safe and effective implementation of PTC on its rail network.

For further details on the capital expenditures associated with compliance with the PTC regulatory mandate, refer to Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations, Liquidity and Capital Resources.

On December 4, 2015 the Fixing America’s Surface Transportation (“FAST”) Act was signed into law, representing the first long-term transportation legislation enacted in the U.S. in over a decade. The FAST Act contains key provisions on safety enhancements for tank cars moving flammable liquids in the U.S. and ECP train braking. Among those key provisions, the FAST Act requires new tank cars to be equipped with thermal blankets, requires all legacy DOT-111 tank cars moving flammable liquids to be upgraded to new retrofit standards(regardless of how many cars may be in a train), and sets minimum requirements for protection of certain valves. While the law preserves PHMSA’s May 2015 final rule mandating ECP brakes on certain trains, it requires an independent evaluation of this braking technology and a real-world derailment test. The FAST Act further calls for the U.S. Secretary of Transportation to re-evaluate its ECP final rule within the next two years using the results of this evaluation to determine whether ECP braking system requirements are justified.

Finally, the STB Reauthorization Act of 2015 was signed into law on December 18, 2015. The law requires numerous changes to the structure and composition of the STB, removing it from under the Department of Transportation and establishing the STB as an independent U.S. agency, as well as increasing STB Board membership from three to five members. Notably, the law vests in the STB certain limited enforcement powers, by authorizing it to investigate rail carrier violations on the STB Board’s own initiative. The law also requires the STB to establish a voluntary binding arbitration process to resolve rail rate and practice disputes. It is too soon for the Company to anticipate the impact that these changes and new investigative authorities might have on CP, since the STB has yet to develop and propose rules implementing these laws.

Environmental Laws and Regulations

The Company’s operations and real estate assets are subject to extensive federal, provincial, state and local environmental laws and regulations governing emissions to the air, discharges to waters and the handling, storage, transportation and disposal of waste and other materials. If the Company is found to have violated such laws or regulations it could have a material adverse effect on the Company’s business or operating results. In addition, in operating a railway, it is possible that releases of hazardous materials during derailments or other accidents may occur that could cause harm to human health or to the environment. Costs of remediation, damages and changes in regulations could materially affect the Company’s operating results and reputation.

The Company has implemented a comprehensive Environmental Management System to facilitate the reduction of environmental risk. CP's Annual Corporate Operations Environmental Plan states the current environmental goals, objectives and strategies.

Specific environmental programs are in place to address areas such as air emissions, wastewater, management of vegetation, chemicals and waste, storage tanks and fueling facilities. CP has also undertaken environmental impact assessments and risk assessments to identify, prevent and mitigate environmental risks. There is continued focus on preventing spills and other incidents that have a negative impact on the environment. There is an established Strategic Emergency Response Contractor network and spill equipment kits are located across Canada and the U.S. to ensure a rapid and efficient response in the event of an environmental incident. In addition, emergency preparedness and response plans are regularly updated and tested.

The Company has developed an environmental audit program that comprehensively, systematically and regularly assesses the Company’s facilities for compliance with legal requirements and the Company’s policies for conformance to accepted industry standards. Included in this is a corrective action follow-up process and semi-annual review by senior management.

CP focuses on key strategies, identifying tactics and actions to support commitments to the community. The Company’s strategies include:


•	protecting the environment;


•	ensuring compliance with applicable environmental laws and regulations;


•	promoting awareness and training;


•	managing emergencies through preparedness; and


•	encouraging involvement, consultation and dialogue with communities along the Company’s lines.

Security

CP is subject to statutory and regulatory directives in Canada and the U.S. that address security concerns. CP plays a critical role in the North American transportation system. Rail lines, facilities and equipment, including railcars carrying hazardous materials, could be direct targets or indirect casualties of terrorist attacks. Regulations by the Department of Transportation and the Department of Homeland Security in the U.S. include speed restrictions, chain of custody and security measures, which can impact service and increase costs for the transportation of hazardous materials, especially toxic inhalation hazard (“TIH”) materials. Legislative changes in Canada to the Transportation of Dangerous Goods Act are expected to add new security regulatory requirements similar to those in the U.S. In addition, insurance premiums for some or all of the Company’s current coverage could increase significantly, or certain coverage may not be available to the Company in the future. While CP will continue to work closely with Canadian and U.S. government agencies, future decisions by these agencies on security matters or decisions by the industry in response to security threats to the North American rail network could have a material adverse effect on the Company's business or operating results.

CP takes the following security measures:

•

CP employs its own police service that works closely with communities, other law enforcement and government agencies to promote railway safety and infrastructure security. As a railway law enforcement agency, CP Police Services are headquartered in Calgary, Alberta, with police officers assigned to over 25 field offices responsible for railway police operations in six Canadian provinces and 14 U.S. states. CP Police Services operate on the CP rail network as well as in areas where CP has non-railway operations.


•	CP’s Police Communication Centre (“PCC”) operates 24 hours a day. The PCC receives reports of emergencies, dangerous or potentially dangerous conditions, and other safety and security issues from our employees, the public, and law enforcement and other government officials, and ensures that proper emergency responders are notified as well as governing bodies.

•

CP’s Security Management Plan is a comprehensive, risk-based plan modelled on and developed in conjunction with the security plan prepared by the Association of American Railroads post-September 11, 2001. Under this plan, CP routinely examines and prioritizes railroad assets, physical and cyber vulnerabilities, and threats, as well as tests and revises measures to provide essential railroad security. To address cyber security risks, CP implements mitigation programs that evolve with the changing technology threat environment. The Company has also worked diligently to establish backup sites to ensure a seamless transition in the event that the Company's operating systems are the target of a cyber-attack. By doing so, CP is able maintain network fluidity.


•	CP security efforts consist of a wide variety of measures including employee training, engagement with our customers and training of emergency responders.

Available Information

CP makes available on or through its website www.cpr.ca free of charge, its annual reports on Form 10-K, quarterly reports, current reports on Form 8-K and all amendments to those reports as soon as reasonably practicable after such reports are filed with or furnished to the Securities and Exchange Commission (“SEC”). Also, filings made pursuant to Section 16 of the Securities Exchange Act of 1934 (“Exchange Act”) with the SEC by our executive officers, directors and other reporting persons with respect to the Company's Common Shares are made available free of charge, through our website. Our website also contains charters for each of the committees of our Board of Directors, our corporate governance guidelines and our Code of Business Ethics. This Form 10-K and other SEC filings made by CP are also accessible through the SEC’s website at www.sec.gov .

The Company has included the CEO and CFO certifications regarding the Company's public disclosure required by Section 302 of the Sarbanes-Oxley Act of 2002 as an Exhibit to this report.

ITEM 1A. RISK FACTORS

The risks set forth in the following risk factors could have a materially adverse effect on the Company's financial condition, results of operations, and liquidity, and could cause those results to differ materially from those expressed or implied in the Company's forward-looking statements.

The information set forth in this Item 1A. Risk Factors should be read in conjunction with the rest of the information included in this annual report, including Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations and Item 8. Financial Statements and Supplementary Data.

As a common carrier, the Company is required by law to transport dangerous goods and hazardous materials, which could expose the Company to significant costs and claims. Railways, including CP, are legally required to transport dangerous goods and hazardous materials as part of their common carrier obligations regardless of risk or potential exposure of loss. CP transports dangerous goods and hazardous materials, including but not limited to crude oil, ethanol and TIH materials such as chlorine and anhydrous ammonia. A train accident involving hazardous materials could result in significant claims against CP arising from personal injury and property or natural resource damage, environmental penalties and remediation obligations. Such claims, if insured, could exceed the existing insurance coverage commercially available to CP, which could have a material adverse effect on CP’s financial condition and liquidity. CP is also required to comply with rules and regulations regarding the handling of dangerous goods and hazardous materials in Canada and the U.S. Noncompliance with these rules and regulations can subject the Company to significant penalties and could factor in litigation arising out of a train accident. Changes to these rules and regulations could also increase operating costs, reduce operating efficiencies and impact service delivery.

The Company is subject to significant governmental legislation and regulation over commercial, operating and environmental matters. The Company's railway operations are subject to extensive federal laws, regulations and rules in both Canada and the U.S. Operations are subject to economic and safety regulations in Canada primarily by the Agency, Transport Canada, the CTA and the RSA. The Company's U.S. operations are subject to economic and safety regulation by the STB and the FRA. Various other regulators directly and indirectly affect the Company's operations in areas such as health, safety, security, environmental and other matters. Additional economic regulation of the rail industry by these regulators or the Canadian and U.S. legislatures, whether under new or existing laws, could have a significant negative impact on the Company's ability to determine prices for rail services and result in a material adverse effect in the future on the Company's financial position, results of operations, and liquidity in a particular year or quarter. This potential material adverse effect could also result in reduced capital spending on the Company's rail network or abandonment of lines.

The Company's compliance with safety and security regulations may result in increased capital expenditures and operating costs. For example, compliance with the Rail Safety Improvement Act of 2008 will result in additional capital expenditures associated with the statutorily mandated implementation of PTC. In addition to increased capital expenditures, implementation of such regulations may result in reduced operational efficiency and service levels, as well as increased operating expenses.

The Company's operations are subject to extensive federal, state, provincial and local environmental laws concerning, among other matters, emissions to the air, land and water and the handling of hazardous materials and wastes. Violation of these laws and regulations can result in significant fines and penalties as well as other potential impacts to CP's operations. These laws can impose strict, and in some circumstances, joint and several liability on both current and former owners and operators of facilities. Such environmental liabilities may also be raised by adjacent landowners or third parties. In addition, in operating a railway, it is possible that releases of hazardous materials during derailments or other accidents may occur that could cause harm to human health or to the environment. Costs of remediation, damages and changes in regulations could materially affect the Company's operating results and reputation. The Company has been, and may in the future be, subject to allegations or findings to the effect that it has violated, or is strictly liable under, environmental laws or regulations. The Company currently has obligations at existing sites for investigation, remediation and monitoring and will likely have obligations at other sites in the future. The actual costs associated with both current and long-term liabilities may vary from company estimates due to a number of factors including, but not limited to changes in: the content or interpretation of environmental laws and regulations; required remedial actions; technology associated with site investigation or remediation; and the involvement and financial viability of other parties that may be responsible for portions of those liabilities.

Global economic conditions could negatively affect demand for commodities and other freight transported by the Company. A decline or disruption in domestic or global economic conditions that affect the supply or demand for the commodities that CP transports may decrease CP’s freight volumes and may result in a material adverse effect on CP’s financial or operating results and liquidity. Economic conditions resulting in bankruptcies of one or more large customers could have a significant impact on CP's financial position, results of operations, and liquidity in a particular year or quarter.

The Company faces competition from other transportation providers, and failure to compete effectively could adversely affect results of operations, financial condition and liquidity. The Company faces significant competition for freight transportation in Canada and the U.S., including competition from other railways, pipelines, trucking and barge companies. Competition is based mainly on price, quality of service and access to markets. Other transportation providers generally use public rights-of-way that are built and maintained by government entities, while CP and other railroads must use internal resources to build and maintain their rail networks. Competition with the trucking industry is generally based on freight rates, flexibility of service and transit time

performance. Any future improvements or expenditures materially increasing the quality or reducing the cost of alternative modes of transportation, or legislation that eliminates or significantly reduces the burden of the size or weight limitations currently applicable to trucking carriers, could have a material adverse effect on CP's results of operations, financial condition, and liquidity.

The operations of carriers with which the Company interchanges may adversely affect operations. The Company's ability to provide rail services to customers in Canada and the U.S. largely depends upon its ability to maintain cooperative relationships with connecting carriers with respect to, among other matters, freight rates, revenue division, car supply and locomotive availability, data exchange and communications, reciprocal switching, interchange, and trackage rights. Deterioration in the operations or services provided by connecting carriers, or in the Company's relationship with those connecting carriers, could result in CP's inability to meet customers' demands or require the Company to use alternate train routes, which could result in significant additional costs and network inefficiencies.

The availability of qualified personnel could adversely affect the Company's operations. Changes in employee demographics, training requirements, and the availability of qualified personnel, particularly locomotive engineers and trainpersons, could negatively impact the Company’s ability to meet demand for rail services. Unpredictable increases in the demand for rail services may increase the risk of having insufficient numbers of trained personnel, which could have a material adverse effect on the Company’s results of operations, financial condition, and liquidity. In addition, changes in operations and other technology improvements may significantly impact the number of employees required to meet the demand for rail services.

Strikes or work stoppages could adversely affect the Company's operations. Class I railroads are party to collective bargaining agreements with various labour unions. The majority of CP's employees belong to labour unions and are subject to these agreements. Disputes with regard to the terms of these agreements or the Company's potential inability to negotiate acceptable contracts with these unions could result in, among other things, strikes, work stoppages, slowdowns or lockouts, which could cause a significant disruption of the Company's operations and have a material adverse effect on the Company's results of operations, financial condition, and liquidity. Additionally, future national labour agreements, or provisions of labour agreements related to health care, could significantly increase the Company's costs for health and welfare benefits, which could have a material adverse impact on its financial condition and liquidity.

The Company may be subject to various claims and lawsuits that could result in significant expenditures. The Company by the nature of its operation is exposed to the potential for a variety of litigations, lawsuits and other claims, including personal injury claims, labour and employment, commercial and contract disputes, environmental liability, freight claims and property damage claims. In respect of workers' claims in Canada related to occupational health and safety, the Workers' Compensation Act (Canada) covers those matters. In the U.S., the Federal Employer's Liability Act ("FELA") is applicable to railroad employees. A provision for lawsuits or other claims will be accrued according to applicable accounting standards, reflecting the assessment of the actual damages incurred based upon the facts and circumstances known at the time. Any material changes to litigation trends, a catastrophic rail accident or series of accidents involving freight loss, property damage, personal injury, environmental liability or other significant matters could have a material adverse effect on the Company's results of operations, financial position, and liquidity, in each case, to the extent not covered by insurance.

The Company may be affected by acts of terrorism, war, risk of war or regulatory changes to combat the risk of terrorism or war. CP plays a critical role in the North American transportation system, and therefore could become the target for acts of terrorism or war. CP is also involved in the transportation of hazardous materials, which could result in CP equipment or infrastructure being direct targets or indirect casualties of terrorist attacks. Acts of terrorism, or other similar events, any government response thereto, and war or risk of war could cause significant business interruption losses to CP and may adversely affect the Company’s results of operations, financial condition, and liquidity.

Severe weather or natural disasters could result in significant business interruptions and costs to the Company. CP is exposed to severe weather conditions including earthquakes, floods, fires, avalanches, mudslides, extreme temperatures and significant precipitation that may cause business interruptions that can adversely affect the Company’s entire rail network and result in increased costs, increased liabilities and decreased revenues, which could have a material adverse effect on the Company’s results of operations, financial condition, and liquidity. Insurance maintained by the Company to protect against loss of business and other related consequences resulting from these natural occurrences is subject to coverage limitations, depending on the nature of the risk insured. This insurance may not be sufficient to cover all of the Company's damages or damages to others, and this insurance may not continue to be available at commercially reasonable rates. Even with insurance, if any natural occurrence leads to a catastrophic interruption of services, the Company may not be able to restore services without a significant interruption in operations.

The Company relies on technology and technological improvements to operate its business. Information technology is critical to all aspects of CP’s business. If the Company were to experience a significant disruption or failure of one or more of the information technology or communications systems (either a result of an intentional cyber or malicious act or an unintentional error) it could result in service interruptions or other failures, misappropriation of confidential information and deficiencies, which could have a material adverse effect on the Company's results of operations, financial condition, and liquidity. If CP is unable to acquire or implement new technology, the Company may suffer a competitive disadvantage, which could also have an adverse effect on its results of operations, financial condition, and liquidity.

The state of capital markets could adversely affect the Company's liquidity. Weakness in the capital and credit markets could negatively impact the Company’s access to capital. From time to time, the Company relies on the capital markets to provide some of its capital requirements, including the issuance of long-term debt instruments and commercial paper. Significant instability or disruptions of the capital markets and the credit markets, or deterioration of the Company's financial condition due to internal or external factors could restrict or eliminate the Company's access to, and/or significantly increase the cost of, various financing sources, including bank credit facilities and issuance of corporate bonds. Instability or disruptions of the capital markets and deterioration of the Company's financial condition, alone or in combination, could also result in a reduction in the Company's credit rating to below investment grade, which could also further prohibit or restrict the Company from accessing external sources of short and long-term debt financing, and/or significantly increase the associated costs.

Disruptions within the supply chain could negatively affect the Company's operational efficiencies and increase costs. The North American transportation system is integrated. CP’s operations and service may be negatively impacted by service disruptions of other transportation links, such as ports, handling facilities, customer facilities, and other railways. A prolonged service disruption at one of these entities could have a material adverse effect on the Company's results of operations, financial condition, and liquidity.

The Company may be affected by fluctuating fuel prices. Fuel expense constitutes a significant portion of the Company’s operating costs. Fuel prices can be subject to dramatic fluctuations, and significant price increases could have a material adverse effect on the Company's results of operations. The Company currently recovers a significant amount of its fuel expenses from customers through fuel surcharge revenues, but the Company cannot be certain that it will always be able to mitigate rising or elevated fuel costs through fuel surcharge revenues. Factors affecting fuel prices include: worldwide oil demand, international politics, weather, refinery capacity, supplier and upstream outages, unplanned infrastructure failures, and labour and political instability.

The Company is dependent on certain key suppliers of core railway equipment and materials that could result in increased price volatility or significant shortages of materials, which could adversely affect results of operations, financial condition, and liquidity. Due to the complexity and specialized nature of core railway equipment and infrastructure (including rolling stock equipment, locomotives, rail and ties), there can be a limited number of suppliers of rail equipment and materials available. Should these specialized suppliers cease production or experience capacity or supply shortages, this concentration of suppliers could result in CP experiencing cost increases or difficulty in obtaining rail equipment and materials, which could have a material adverse effect on the Company's results of operations, financial condition, and liquidity. Additionally, CP’s operations are dependent on the availability of diesel fuel. A significant fuel supply shortage arising from production decreases, increased demand in existing or emerging foreign markets, disruption of oil imports, disruption of domestic refinery production, damage to refinery or pipeline infrastructure, political unrest, war or other factors, could have a material adverse effect on the Company's results of operations, financial position, and liquidity in a particular year or quarter.

The Company may be directly and indirectly affected by the impacts of global climate change. The impact of global climate change may affect the Company both directly and indirectly. There is potential for significant impacts on CP's infrastructure due to changes in temperature and precipitation as well as increases in extreme weather events such as flooding and storms. These changes may result in substantial costs to respond during the event, recover from the event and possibly to modify existing or future infrastructure requirements to prevent recurrence. Government action to address climate change may involve both economic instruments such as carbon taxation as well as restrictions on economic sectors such as cap and trade. The Company is subject to carbon taxation systems in some of the jurisdictions in which it operates and there is a possibility in other jurisdictions in the future. As a significant consumer of diesel fuel, these carbon taxes increase the Company's business costs. While the Company is not currently subject to a cap on emissions, there is also a possibility in the future. Cap and trade programs or other government restrictions on certain market sectors can also impact current and potential customers including thermal coal and petroleum crude oil.

ITEM 1B. UNRESOLVED STAFF COMMENTS

None.

ITEM 2. PROPERTIES

CP provides rail and intermodal freight transportation services over a 12,500 -mile track network, serving the principal business centres of Canada, from Montreal, Quebec to Vancouver, B.C., and the U.S. Midwest and Northeast regions. The Company's railway feeds directly into the U.S. heartland from the East and West coasts. Agreements with other carriers extend the Company's market reach east of Montreal in Canada, through the U.S. and into Mexico.

Network Geography

The Company’s network extends from Port Metro Vancouver on Canada’s Pacific Coast to the Port of Montreal in Eastern Canada, and to the U.S. industrial centres of Chicago, Illinois; Detroit, Michigan; Buffalo, New York; Kansas City, Missouri; and Minneapolis, Minnesota.

The Company’s network is composed of three primary corridors: Western, Central and Eastern.

The Western Corridor: Vancouver to Thunder Bay

Overview – The Western Corridor links Vancouver with Thunder Bay, which is the Western Canadian terminus of the Company’s Eastern Corridor. With service through Calgary, Alberta, the Western Corridor is an important part of the Company’s routes between Vancouver and the U.S. Midwest, and between Vancouver and Eastern Canada. The Western Corridor provides access to the Port of Thunder Bay, Canada’s primary Great Lakes bulk terminal.

Products – The Western Corridor is the Company’s primary route for bulk and resource products traffic from Western Canada to Port Metro Vancouver for export. CP also handles significant volumes of international intermodal containers and domestic general merchandise traffic.

Feeder Lines – CP supports its Western Corridor with four significant feeder lines: the “Coal Route”, which links southeastern B.C. coal deposits to the Western Corridor and to coal terminals at the Port Metro Vancouver; the “Edmonton-Calgary Route”, which provides rail access to Alberta’s Industrial Heartland in addition to the petrochemical facilities in central Alberta; the “Pacific CanAm Route”, which connects Calgary and Medicine Hat in Alberta with Pacific Northwest rail routes at Kingsgate, B.C. via Crowsnest Pass, Alberta; and the “North Main Line Route” that provides rail service to customers between Portage la Prairie, Manitoba and Wetaskiwin, Alberta, including intermediate points Yorkton and Saskatoon in Saskatchewan. This line is an important collector of Canadian grain and fertilizer, serving the potash mines located east and west of Saskatoon and many high-throughput grain elevators and processing facilities. In addition, this line provides direct access to refining and upgrading facilities at Lloydminster, Alberta and Western Canada’s largest pipeline terminal at Hardisty, Alberta.

Connections – The Company’s Western Corridor connects with the Union Pacific Railroad (“UP”) at Kingsgate and with BNSF at Coutts, Alberta, and at New Westminster and Huntingdon in B.C. This corridor also connects with CN at many locations including Thunder Bay, Winnipeg, Regina and Saskatoon in Saskatchewan, Red Deer, Camrose, Calgary and Edmonton in Alberta, Kamloops, B.C. and several locations in the Greater Vancouver area.

Yards and Repair Facilities – CP supports rail operations on the Western Corridor with main rail yards at Vancouver, Calgary, Edmonton, Alberta, Moose Jaw in Saskatchewan, Winnipeg and Thunder Bay. CP also has major intermodal terminals at Vancouver, Calgary, Edmonton, Regina and Winnipeg. The Company has locomotive and railcar repair facilities at Golden, Vancouver, Calgary, Moose Jaw and Winnipeg.

The Central Corridor: Moose Jaw and Winnipeg to Chicago and Kansas City

Overview – The Central Corridor connects with the Western Corridor at Moose Jaw and Winnipeg. By running south to Chicago and Kansas City through the Twin Cities of Minneapolis and St. Paul, Minnesota and Milwaukee, Wisconsin, CP provides a direct, single-carrier route between Western Canada and the U.S. Midwest, providing access to Great Lakes and Mississippi River ports. From La Crosse, Wisconsin, the Central Corridor continues south towards Kansas City via the Quad Cities (which includes Davenport and Bettendorf in Iowa, and Rock Island, Moline and East Moline in Illinois), providing an efficient route for traffic destined for southern U.S. and Mexican markets. CP’s Kansas City line also has a direct connection into Chicago and by extension to points east on CP’s network such as Toronto, Ontario and the Port of Montreal.

Products – Traffic transported on the Central Corridor include intermodal containers from Port Metro Vancouver, fertilizers, chemicals, crude, grain, automotive and other agricultural products.

Feeder Lines – The Company has operating rights over the BNSF line between Minneapolis and the twin ports of Duluth, Minnesota and Superior, Wisconsin. CP maintains its own yard facilities at the Twin Ports that provide an outlet for grain from the U.S. Midwest to the grain terminals at these ports, and a strategic entry point for large dimensional shipments that can be routed via CP's network to locations such as Alberta's Industrial Heartland to serve the needs of the oil sands and energy industry. The DM&E route from Winona, Minnesota to Tracy, Minnesota provides access to key agricultural and industrial commodities. CP’s feeder line between Drake and Newtown in North Dakota is geographically situated in a highly strategic region for Bakken oil production. CP also owns two significant feeder lines in North Dakota and western Minnesota operated by the Dakota Missouri Valley and Western Railroad, and the Northern Plains Railroad respectively. Both of these short lines are also active in providing service to agricultural and Bakken-oil related customers.

Connections – The Company’s Central Corridor connects with all major railways at Chicago. Outside of Chicago, CP has major connections with BNSF at Minneapolis and at Minot, North Dakota and with UP at St. Paul and Mankato, Minnesota. CP connects with CN at Milwaukee and Chicago. At Kansas City, CP connects with Kansas City Southern (“KCS”), BNSF, NS and UP. CP’s Central Corridor also links to several short-line railways that primarily serve grain and coal producing areas in the U.S., and extend CP’s market reach in the rich agricultural areas of the U.S. Midwest.

Yards and Repair Facilities – The Company supports rail operations on the Central Corridor with main rail yards in Chicago, Milwaukee, Wisconsin, St. Paul and Glenwood in Minnesota, and Mason City and Nahant in Iowa. CP owns 49% of the Indiana Harbor Belt, a switching railway serving Greater Chicago and northwest Indiana, and has a major intermodal terminal in Chicago and one in Minneapolis. In addition, CP has a major locomotive repair facility at St. Paul and car repair facilities at St. Paul and Chicago. CP shares a yard with KCS in Kansas City.

The Eastern Corridor: Thunder Bay to Montreal, Detroit and Albany, New York

Overview – The Eastern Corridor extends from Thunder Bay through to its eastern terminus at Montreal and from Toronto to Chicago via Windsor, Ontario/Detroit, Michigan. The Company’s Eastern Corridor provides shippers direct rail service from Toronto and Montreal to Calgary and Vancouver via the Company’s Western Corridor and to the U.S. via the Central Corridor. This is a key element of the Company’s transcontinental intermodal service. Other services include truck trailers moving in drive-on/drive-off Expressway service between Montreal and Toronto. The corridor also supports the Company’s market position at the Port of Montreal by providing one of the shortest rail routes for European cargo destined to the U.S. Midwest, using the CP-owned route between Montreal and Detroit, coupled with a trackage rights arrangement on NS tracks between Detroit and Chicago.

Products – Major traffic categories transported in the Eastern Corridor include forest, chemicals and plastics, crude, metals, minerals and consumer products, intermodal containers, automotive products and general merchandise.

Feeder Lines – A major feeder line that serves the steel industry at Hamilton, Ontario provides connections to the Company’s Northeast U.S. corridor and both CSX Corporation (“CSX”) and NS at Buffalo. The D&H feeder line extends from Montreal to Albany.

Connections – The Eastern Corridor connects with a number of short-line railways including routes from Montreal to Quebec City, Quebec and Montreal to St. John, New Brunswick and Searsport, Maine. Connections are also made with PanAm Southern at Mechanicville for service to the Boston area and New England and the Vermont Railway at Whitehall, New York. Through haulage arrangements, CP has service to Fresh Pond, New York to connect with New York & Atlantic Railway and Philadelphia as well as a number of short-lines in Pennsylvania. Connections are also made with CN at a number of locations, including Sudbury, North Bay, Windsor, London, Hamilton, and Toronto in Ontario and Montreal and at Detroit. CP connects with NS and CSX at Buffalo, NS at Schenectady, New York and CSX at Albany.

Yards and Repair Facilities – CP supports its rail operations in the Eastern Corridor with major rail yards at Sudbury, Toronto, London in Ontario and Montreal. The Company’s largest intermodal facility is located in the northern Toronto suburb of Vaughan and serves the Greater Toronto and southwestern Ontario areas. CP also operates intermodal terminals at Montreal and Detroit. Terminals for the Company’s Expressway service are located in Montreal and at Milton, Ontario in the Greater Toronto area.

The Company has locomotive repair facilities at Montreal and Toronto and car repair facilities at Thunder Bay, Toronto and Montreal.

Right-of-Way

The Company’s rail network is standard gauge, which is used by all major railways in Canada, the U.S. and Mexico. Continuous welded rail is used on the core main line network.

CP uses different train control systems on portions of the Company’s owned track, depending on the volume of rail traffic. Remotely controlled centralized traffic control signals are used to authorize the movement of trains. CP is currently in the development stage of its PTC strategy for portions of its U.S. network.

In other corridors, train movements are directed by written instructions transmitted electronically and by radio from rail traffic controllers to train crews. In some specific areas of intermediate traffic density, CP uses an automatic block signaling system in conjunction with written instructions from rail traffic controllers.

Track and Infrastructure

With a track network of approximately 12,500 miles, CP owns approximately 9,000 miles of track. An additional 3,500 miles of track are owned jointly, leased or operated under trackage rights. The track miles reflect the size of CP’s network that connects markets, customers and other railroads. Of the total mileage operated, approximately 5,700 miles are located in Western Canada, 1,900 miles in Eastern Canada, 4,500 miles in the U.S. Midwest and 400 miles in the U.S. Northeast. CP’s network accesses the U.S. market directly through three wholly owned subsidiaries: Soo Line Railroad Company (“Soo Line”), a Class I railway operating in the U.S. Midwest; DM&E, a wholly owned subsidiary of the Soo Line, which operates in the U.S. Midwest; and the Delaware and Hudson Railway Company, Inc. (“D&H”), which operates between Eastern Canada and major U.S. Northeast markets, including New York City, New York; Philadelphia, Pennsylvania; and Washington, D.C.

At December 31, 2015, the breakdown of track miles is as follows:



	Total
First main track	12,559
Second and other main track	1,203
Passing sidings and yard track	4,285
Industrial and way track	810
Total track miles	18,857

Rail Facilities

CP operates numerous facilities including: terminals for intermodal and other freight; classification rail yards for train-building and switching, storage-in-transit and other activities; offices to administer and manage operations; dispatch centres to direct traffic on the rail network; crew quarters to house train crews along the rail line; shops and other facilities for fueling; maintenance and repairs of locomotives; and facilities for maintenance of freight cars and other equipment. Typically in all of our major yards, CP Police Services have offices to ensure the safety and security of the yards and operations.

The following table includes our major yards and terminals on CP's network:



Major Classification Yards	Major Intermodal Terminals
Vancouver, British Columbia	Vancouver, British Columbia
Calgary, Alberta	Calgary, Alberta
Edmonton, Alberta	Edmonton, Alberta
Moose Jaw, Saskatchewan	Regina, Saskatchewan
Winnipeg, Manitoba	Winnipeg, Manitoba
Toronto, Ontario	Vaughan, Ontario
Montreal, Quebec	Montreal, Quebec
Chicago, Illinois	Chicago, Illinois
St Paul, Minnesota	St Paul, Minnesota

Equipment

CP's equipment includes: owned and leased locomotives and railcars; heavy maintenance equipment and machinery; other equipment and tools in our shops, offices, and facilities; and vehicles for maintenance, transportation of crews, and other activities.

The Company’s locomotive fleet is composed of largely high-adhesion alternating current locomotives that are more fuel-efficient and reliable and have superior hauling capacity, compared with standard direct current locomotives. As of December 31, 2015, the Company had 600 locomotives in storage; as a result, the Company does not foresee the need to acquire new locomotives for the next several years. As of December 31, 2015, CP owned or leased the following locomotive units:



Locomotives	Owned	Leased	Total	Average Age (in years)
Road freight
High-adhesion alternating current	726	43	769	10
Standard direct current	412	—	412	30
Road switcher	344	—	344	23
Yard switcher	24	—	24	36
Total locomotives	1,506	43	1,549	25

CP owns and leases a fleet of 39,420 freight cars. Owned freight cars include units acquired by CP, equipment leased to third parties, and under capitalized leases. Leased freight cars include all units under a short-term or long-term operating lease or financed equipment. As of December 31, 2015, CP owned and leased the following units of freight cars:



Freight cars	Owned	Leased	Total	Average Age (in years)
Box car	2,160	784	2,944	31
Covered hopper	7,142	12,793	19,935	28
Flat car	1,593	693	2,286	23
Gondola	2,863	2,700	5,563	20
Intermodal	1,333	—	1,333	13
Multi-level autorack	2,875	642	3,517	28
Company service car	2,672	243	2,915	47
Open top hopper	355	352	707	28
Tank car	28	192	220	10
Total freight cars	21,021	18,399	39,420	28

As of December 31, 2015, CP owned and leased the following units of intermodal equipment:



Intermodal equipment	Owned	Leased	Total	Average Age (in years)
Containers	6,625	1,730	8,355	8
Chassis	5,150	856	6,006	12
Total intermodal equipment	11,775	2,586	14,361	10

Headquarters Office Building

CP owns and operates a multi-building campus in Calgary, encompassing the head office building, a data centre, training facility, and other office and operational buildings.

The Company's main dispatch centre is located in Calgary, and is the primary dispatching facility in Canada. Rail Traffic Controllers coordinate and dispatch crews, and manage the day-to-day locomotive management along the network, 24 hours a day and seven days a week. The operations centre has a complete backup system in the event of any power disruption.

In addition to fully operational redundant systems, CP has a fully integrated Business Continuity Centre, should CP's operations centre be affected by any natural disaster, fire, cyber-attack, or hostile threat.

CP also maintains a secondary dispatch centre located in Minneapolis, Minnesota, where a facility similar to the one in Calgary exists. It services the dispatching needs of locomotives and train crews working out of the U.S.

Capital Expenditures

The Company incurs expenditures to expand and enhance its rail network, rolling stock and other infrastructure. These expenditures are aimed at improving efficiency and safety of our operations. Such investments are also an integral part of the Company's multi-year capital program and supports growth initiatives. For further details, refer to Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations, Liquidity and Capital Resources.

Encumbrances

Refer to Item 8. Financial Statements and Supplementary Data, Note 19 Debt, for information on the Company's capital lease obligations and assets held as collateral under these agreements.

ITEM 3. LEGAL PROCEEDINGS

For further details refer to Item 8. Financial Statements and Supplementary Data, Note 27 Commitments and Contingencies.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

EXECUTIVE OFFICERS OF THE REGISTRANT

Our executive officers generally are elected and designated annually by the Board of Directors at its first meeting held after the annual meeting of shareholders, and they hold office until their successors are elected. Executive officers also may be elected and designated throughout the year as the Board of Directors considers appropriate. There are no family relationships among our officers, nor any arrangement or understanding between any officer and any other person pursuant to which the officer was selected. As of the date of this filing, the executive officers’ names, ages and business experience are:



Name, Age and Position	Business Experience
E. Hunter Harrison, 71 Chief Executive Officer	Mr. Harrison has been the Chief Executive Officer of CP since February 5, 2013. Prior to his current role he was the President and Chief Executive Officer from June 2012 to February 2013. Prior to joining CP, Mr. Harrison was retired from January 2010 to June 2012 and served as President and Chief Executive Officer at CN from 2003 to 2009 and as the Executive Vice-President and Chief Operating Officer from 1998 to 2002. He served on CN’s Board of Directors for 10 years. Prior to joining CN, Mr. Harrison was President and CEO at Illinois Central Corporation ("IC"), and Illinois Central Rail Road Company ("ICRR") from 1993 to 1998, during which time he was also a member of the Board. Mr. Harrison held various positions throughout his time at IC and ICRR, including Vice-President, COO and Senior VP of Operations.
Keith E. Creel, 47 President and Chief Operating Officer	Mr. Creel has been the President and Chief Operating Officer of CP since February 5, 2013. Prior to joining CP, Mr. Creel was Executive Vice-President and Chief Operating Officer at CN from January 2010 to February 2013. During his time at CN, Mr. Creel held various positions including Executive Vice-President, Operations, Senior Vice-President Eastern Region, Senior Vice-President Western Region, and Vice-President of the Prairie Division. Mr. Creel began his railroad career at Burlington Northern Railway in 1992 as an intermodal ramp manager in Birmingham, Alabama. He also spent part of his career at Grand Trunk Western Railroad as a superintendent and general manager, and at Illinois Central Railroad as a trainmaster and director of corridor operations, prior to its merger with CN in 1999.
Jeffrey J. Ellis, 48 Chief Legal Officer and Corporate Secretary	Mr. Ellis has been the Chief Legal Officer and Corporate Secretary of CP since November 23, 2015. Prior to joining CP, Mr. Ellis held various roles at BMO Financial Group, including Executive Vice-President and U.S. General Counsel from April 2013 to November 2015, Senior Vice-President, Deputy General Counsel and Assistant Corporate Secretary, Personal & Commercial U.S. BMO Financial Group from November 2011 to April 2013, and Vice-President, Deputy General Counsel and Assistant Corporate Secretary, Personal & Commercial Canada BMO Financial Group from April 2006 to November 2011. Mr. Ellis has a JD and LLM from Osgoode Hall Law School, an MBA from the Richard Ivey School of Business at the University of Western Ontario and a BA and MA from the University of Toronto. Prior to joining BMO Financial Group, Mr. Ellis practiced corporate and commercial law at Borden Ladner Gervais LLP.
Mark J. Erceg, CFA, 46 Executive Vice-President and Chief Financial Officer	Mr. Erceg has been the Executive Vice-President and Chief Financial Officer of CP since May 18, 2015. Prior to joining CP, Mr. Erceg was Executive Vice-President and Chief Financial Officer of Masonite International Corporation from June 2010 to May 2015. Masonite International is a leading global designer and manufacturer of interior and exterior doors with annual revenues of approximately $1.8 billion. Before joining Masonite International, Mr. Erceg worked at Procter & Gamble for 18 years in roles of increasing responsibility. Mr. Erceg has earned the right to use the Chartered Financial Analyst designation and holds a bachelor’s degree in Accounting and an MBA from Indiana University’s Kelly School of Business.
Peter J. Edwards, 55 Vice-President, Human Resources and Labour Relations	Mr. Edwards has been the Vice-President, Human Resources and Labour Relations of CP since June 5, 2013 and was the Vice-President, Human Resources and Industrial Relations from May 2010 to June 2013. Prior to joining CP, Mr. Edwards held senior human resources related positions at Labatt Breweries/Interbrew and CN. He has also co-authored two books on managing a changing railway (How We Work and Why and Change, Leadership, Mud and Why). Mr. Edwards also co-authored "SwitchPoints: Culture Change on the Fast Track to Business Success ". Mr. Edwards holds a bachelor's and master's degree in Industrial Relations from Queen's University in Ontario.



Laird J. Pitz, 71 Vice-President and Chief Risk Officer	Mr. Pitz has been Vice-President and Chief Risk Officer of CP since October 29, 2014 and was the Vice-President Security and Risk Management of CP from April 2014 to October 2014. Prior to joining CP, Mr. Pitz was retired from March 2012 to April 2014 and Vice-President, Risk Mitigation, of CN from September 2003 to March 2012. Mr. Pitz, a Vietnam War veteran and former Federal Bureau of Investigation special agent, is a 40-year career professional who has directed strategic and operational risk mitigation, security and crisis management functions for companies operating in a wide range of fields including defence, logistics and transportation.
Michael J. Redeker, 55 Vice-President and Chief Information Officer	Mr. Redeker has been the Vice-President and Chief Information Officer of CP since October 15, 2012. Prior to joining CP, Mr. Redeker was the Vice-President and Chief Information Officer of Alberta Treasury Branch from May 2007 to September 2012. He also spent 11 years at IBM Canada, where he focused on delivering quality information technology services within the financial services industry.
Mark K. Wallace, 46 Vice-President, Corporate Affairs and Chief of Staff	Mr. Wallace has been the Vice-President, Corporate Affairs and Chief of Staff of CP since September 21, 2012 and was the Chief of Staff – Office of the President and CEO of CP from July 2012 to September 2012. Prior to joining CP, Mr. Wallace held the title of Client Partner at Longview Communications from January 2012 to April 2012 and was the head of Investor Relations at Husky Injection Molding Systems Inc. from July 2010 to July 2011. Mr. Wallace has also spent over 15 years in various senior management positions with CN, including leading the Public Affairs function in both Canada and the U.S., holding the role of Chief of Staff in the Office of the President and CEO and working in Investor Relations for over six years.

PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED SHAREHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Share Price and Dividend Information

CP's Common Shares are listed on the TSX and on the NYSE under the symbol "CP". The tables below present for the quarters indicated, information on the dividends declared and the high and low share price of CP's Common Shares. The decision to declare any future cash dividend, including the amount of any such dividend and the establishment of record and payment dates, will be determined, in each quarter, by the Company's Board of Directors, in its sole discretion.

Following table indicates share data of CP's Common Shares listed on the TSX (in Canadian dollars):



		Q1	Q2	Q3	Q4	YTD
2015	Dividends	$0.3500	$0.3500	$0.3500	$0.3500	$1.4000
	Common Share Price
	High	$245.05	$241.73	$212.06	$204.40	$245.05
	Low	$205.95	$195.69	$172.01	$168.12	$168.12

2014	Dividends	$0.3500	$0.3500	$0.3500	$0.3500	$1.4000
	Common Share Price
	High	$176.72	$202.08	$236.04	$247.56	$247.56
	Low	$155.02	$156.64	$192.79	$197.14	$155.02

Following table indicates share data of CP's Common Shares listed on the NYSE (in U.S. dollars):



		Q1	Q2	Q3	Q4	YTD
2015	Dividends	$0.2800	$0.2840	$0.2640	$0.2520	$1.0800
	Common Share Price
	High	$194.66	$198.44	$163.39	$157.82	$198.44
	Low	$173.69	$158.04	$129.83	$122.27	$122.27

2014	Dividends	$0.3130	$0.3260	$0.3160	$0.3010	$1.2560
	Common Share Price
	High	$159.77	$186.00	$210.87	$220.20	$220.20
	Low	$139.37	$142.73	$179.90	$170.51	$139.37

Share Capital

At February 26, 2016, the latest practicable date, there were 153,021,661 Common Shares and no preferred shares issued and outstanding, which consists of 15,222 holders of record of the Company's Common Shares. In addition, CP has a Management Stock Option Incentive Plan (“MSOIP”), under which key officers and employees are granted options to purchase CP shares. Each option granted can be exercised for one Common Share. At February 26, 2016, 2.7 million options were outstanding under the Company’s MSOIP and stand-alone option agreements entered into with Mr. E. Hunter Harrison and Mr. Keith E. Creel. There are 1.5 million options available to be issued by the Company’s MSOIP in the future.

CP has a Director's Stock Option Plan (“DSOP”), under which directors are granted options to purchase CP shares. There are no outstanding options under the DSOP, which has 0.3 million options available to be issued in the future.

Securities Authorized for Issuance Under Equity Compensation Plans

For further details, refer to Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters for information about securities authorized for issuance under our equity compensation plan.

Stock Performance Graph

The following graph provides an indicator of cumulative total shareholder return on the Company’s Common Shares, of an assumed investment of $100, as compared to the TSX 60 Index (“TSX 60”), the Standard & Poor's 500 Stock Index (“S&P 500”), and the

peer group index (comprising CN, KCS, UP, NS and CSX) on December 31 for each of the years indicated. The values for the assumed investments depicted on the graph and in the table have been calculated assuming that any cash dividends are reinvested.

Issuer Purchase of Equity Securities

During 2015, CP repurchased 13.5 million Common Shares for $2,748 million at an average price of $202.79 . The following table presents Common Shares repurchased during each month for the fourth quarter of 2015 .



2015	Total Number of Shares Purchased	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Maximum Number of Shares (or Units) that May Yet Be Purchased Under the Plans or Programs
October 1 to October 31	577,800	$	196.30	577,800	561,992
November 1 to November 30	—	—		—	—
December 1 to December 31	—	—		—	—
Ending Balance	577,800	$	196.30	577,800	561,992

ITEM 6. SELECTED FINANCIAL DATA

The following table presents as of, and for the years ended, December 31, selected financial data related to the Company’s financial results for the last five fiscal years. The selected financial data should be read in conjunction with Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations and Item 8. Financial Statements and Supplementary Data.



(in millions, except per share data, percentages and ratios)	2015			2014			2013			2012			2011
Financial Performance
Revenues	$	6,712		$	6,620		$	6,133		$	5,695		$	5,177
Operating income	2,688			2,339			1,420			949			967
Adjusted operating income ⁽¹⁾	2,620			2,335			1,844			1,309			967
Net income	1,352			1,476			875			484			570
Adjusted income ⁽¹⁾	1,625			1,482			1,132			753			538
Basic earnings per share	8.47			8.54			5.00			2.82			3.37
Diluted earnings per share	8.40			8.46			4.96			2.79			3.34
Adjusted diluted earnings per share ⁽¹⁾	10.10			8.50			6.42			4.34			3.15
Dividends declared per share	1.4000			1.4000			1.4000			1.3500			1.1700
Financial Position
Total assets ⁽²⁾	$	19,637		$	16,550		$	16,680		$	14,433		$	13,969
Total long-term obligations ⁽²⁾⁽³⁾	9,012			5,712			4,747			4,696			4,771
Shareholders’ equity	4,796			5,610			7,097			5,097			4,649
Cash provided by operating activities	2,459			2,123			1,950			1,328			512
Free cash ⁽¹⁾	1,155			725			530			93			(724		)
Financial Ratios
Return on invested capital ("ROIC") ⁽¹⁾	12.9		%	14.4		%	10.1		%	7.3		%	8.4		%
Adjusted ROIC ⁽¹⁾	15.2		%	14.5		%	12.3		%	10.0		%	7.9		%
Operating ratio ⁽⁴⁾	60.0		%	64.7		%	76.8		%	83.3		%	81.3		%
Adjusted operating ratio ⁽¹⁾	61.0		%	64.7		%	69.9		%	77.0		%	81.3		%


⁽¹⁾	These measures have no standardized meanings prescribed by generally accepted accounting principles in the United States of America ("GAAP") and, therefore, may not be comparable to similar measures presented by other companies. These measures are defined and reconciled in Non-GAAP Measures in Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.


⁽²⁾	2011–2014 comparative period figures have been restated for retrospective adoption of Accounting Standards Update ("ASU") 2015-17. See further discussion in Item 8. Financial Statements and Supplementary Data, Note 2 Accounting changes. 2011 and 2012 comparative period figures have also been restated for retrospective adoption of ASU 2015-03.


⁽³⁾	Excludes deferred income taxes: $ 3,391 million , $ 2,717 million , $2,559 million, $1,838 million and $1,718 million, and other non-financial deferred liabilities of $ 991 million , $ 1,100 million , $ 898 million , $ 1,574 million and $ 1,621 million at December 31, 2015 , 2014 , 2013, 2012 and 2011 respectively.


⁽⁴⁾	Operating ratio is defined as operating expenses divided by revenues.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis should be read in conjunction with the Company’s Consolidated Financial Statements and the related notes in Item 8. Financial Statements and Supplementary Data, and other information in this annual report. Except where otherwise indicated, all financial information reflected herein is expressed in Canadian dollars.

Executive Summary

2015 Results

•

Financial performance – In 2015, CP reported Diluted EPS of $8.40 while Adjusted diluted EPS climbed to a record $10.10, a 19% improvement compared to the Adjusted diluted EPS of $8.50 in 2014. CP’s commitment to operational efficiency produced a best-ever full-year reported and Adjusted operating ratio of 60.0% and 61.0%, beating the previous record, set in 2014, by 470 and 370 basis points, respectively. Adjusted diluted EPS and Adjusted operating ratio are defined and reconciled in Non-GAAP Measures and discussed further in Results of Operations of this Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

•

Free cash flow – In 2015, CP generated record Free cash flow of $1.15 billion, an increase of 59% over the prior year. The increase was primarily driven by higher cash from operations and proceeds from asset sales, partially offset by higher capital expenditures of $1.5 billion. Free cash flow is defined and reconciled in Non-GAAP Measures and discussed further in Performance Indicators of this Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

•

Operating performance – CP’s continued focus on asset utilization and network investments resulted in significant improvements to CP’s key operating metrics. In 2015, CP’s network train speed increased by 19% to 21.4 miles per hour, terminal dwell improved by 17% to 7.2 hours and fuel efficiency improved by 4% to 0.994 U.S. gallons of locomotive fuel consumed per 1,000 gross ton-miles ("GTMs"). These metrics are discussed further in Performance Indicators of this Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.

2016 Outlook

The Company's outlook for the full year 2016 includes:


•	Operating ratio below 59%;


•	Double-digit EPS growth from full-year 2015 Adjusted diluted EPS of $10.10; and


•	Capital expenditures of approximately $1.1 billion.

Performance Indicators

The following table lists the key measures of the Company’s operating performance:



				% Change
For the year ended December 31	2015 ⁽¹⁾	2014 ⁽¹⁾	2013	2015 vs. 2014		2014 vs. 2013
Operations Performance
Freight gross ton-miles (“GTMs”) (millions)	263,333	272,862	267,629	(3	)	2
Revenue ton-miles (“RTMs”) (millions)	145,257	149,849	144,249	(3	)	4
Train miles (thousands)	34,047	36,252	37,817	(6	)	(4	)
Average train weight – excluding local traffic (tons)	8,314	8,076	7,573	3		7
Average train length – excluding local traffic (feet)	6,935	6,682	6,530	4		2
Average terminal dwell (hours)	7.2	8.7	7.1	(17	)	23
Average train speed (mph)	21.4	18.0	18.4	19		(2	)
Fuel efficiency (U.S. gallons of locomotive fuel consumed /1,000 GTMs)	0.994	1.035	1.060	(4	)	(2	)
Total employees (average)	13,735	14,498	15,011	(5	)	(3	)
Total employees (end of period)	12,739	14,352	14,506	(11	)	(1	)
Workforce (end of period)	12,899	14,698	14,977	(12	)	(2	)
Safety Indicators
FRA personal injuries per 200,000 employee-hours	1.74	1.67	1.71	4		(2	)
FRA train accidents per million train miles	1.30	1.26	1.80	3		(30	)

⁽¹⁾ Certain figures have been revised to conform with current presentation or have been updated to reflect new information.

Operations Performance

GTMs are defined as the movement of total train weight over a distance of one mile. Total train weight comprises the weight of the freight cars, their contents, and any inactive locomotives. An increase in GTMs indicates additional workload. GTMs for 2015 were 263,333 million , a 3% decrease compared with 272,862 million in 2014. This decline was primarily due to a drop in volumes in the Intermodal, Crude and Metals, minerals and consumer products lines of business.

GTMs in 2014 increased by 2% compared with 267,629 million in 2013. This improvement was primarily due to higher shipments in Canadian grain, Crude, Domestic intermodal, and Metals, minerals and consumer products.

RTMs are defined as the movement of one revenue-producing ton of freight over a distance of one mile. RTMs measure the relative weight and distance of rail freight moved by the Company. RTMs for 2015 were 145,257 million , a decrease of 4,592 million or 3% compared with 149,849 million in 2014. This decrease was primarily due to lower volumes of Crude; Metals, minerals and consumer products; and U.S. grain. This decrease in RTMs was partially offset by increased shipments of Potash, Canadian grain and Forest products.

RTMs for 2014 were 149,849 million , an increase of 4% compared with 144,249 million in 2013. This increase was primarily due to higher Canadian originating shipments of grain; volumes in energy-related commodities and frac sand; and Domestic intermodal shipments. This increase was partially offset by lower International intermodal shipments; Fertilizers and sulphur shipments; and U.S. originating thermal coal shipments.

Train miles for 2015 decrease d by 6% compared with 2014 and in 2014 decreased by 4% compared with 2013, reflecting continuous improvements in operating efficiency from longer, heavier trains.

Average train weight is defined as the average gross weight of CP trains, both loaded and empty. This excludes trains in short-haul service, work trains used to move CP’s track equipment and materials, and the haulage of other railways’ trains on CP’s network. Average train weight increase d in 2015 by 238 tons, or 3% , from 2014.

The average train length is the sum of each car multiplied by the distance travelled, divided by train miles. Local trains are excluded from this measure. Average train length increase d in 2015 by 253 feet, or 4% , from 2014.

Both average train weight and length in 2015 benefited from improvements in operating plan efficiency.

Average train weight increased in 2014 by 503 tons, or 7%, from 2013. Average train length increased in 2014 by 152 feet, or 2%, from 2013. Average train weight and length benefited significantly from improvements in operating plan efficiency and increased

bulk traffic being conveyed in longer, heavier trains. Both of these improvements leverage the siding extensions completed in 2013 and 2014.

The average terminal dwell is defined as the average time a freight car resides within terminal boundaries expressed in hours. The timing starts with a train arriving in the terminal, a customer releasing the car to the Company, or a car arriving at interchange from another railway. The timing ends when the train leaves, a customer receives the car from CP, or the freight car is transferred to another railway. Freight cars are excluded if they are being stored at the terminal or used in track repairs. Average terminal dwell decrease d by 17% in 2015 from 8.7 hours in 2014 on average to 7.2 hours in 2015. This favourable decrease was primarily due to continued improvements in yard operating performance.

Average terminal dwell, the average time a freight car resides in a terminal, increased by 23% in 2014 to 8.7 hours from 7.1 hours in 2013. The unfavourable increase was primarily due to operational challenges in the U.S. Midwest.

The average train speed is defined as a measure of the line-haul movement from origin to destination including terminal dwell hours. It is calculated by dividing the total train miles travelled by the total train hours operated. This calculation does not include delay time related to customer or foreign railways and excludes the time and distance travelled by: i) trains used in or around CP’s yards; ii) passenger trains; and iii) trains used for repairing track. Average train speed was 21.4 miles per hour in 2015, an increase of 19% , from 18.0 miles per hour in 2014. This favourable increase was primarily due to improved train design and operating plan execution.

Average train speed in 2014 decreased by 2%, from 18.4 miles per hour in 2013. The unfavourable decrease was primarily due to operational challenges in the U.S. Midwest. This decrease was partially offset by speed improvements in the fourth quarter of 2014 through improved asset velocity, decreased terminal dwell, and successful execution of the Company’s operating plan.

Fuel efficiency improved by 4% in 2015 compared to 2014. Improvements in fuel efficiency were a result of increased locomotive productivity, operational fluidity, and execution of the Company's fuel conservation strategies.

Fuel efficiency improved by 3% in 2014 compared to 2013. This improvement was primarily due to the continued execution of the Company’s fuel conservation strategy and increased locomotive productivity from higher average train weights.

The average number of total employees for 2015 decrease d by 763 , or 5% , compared with 2014. The total number of employees as at December 31, 2015 was 12,739 , a decrease of 11% compared with 14,352 in 2014. This improvement was primarily due to job reductions as a result of continuing strong operational performance and natural attrition.

The average number of total employees for 2014 decreased by 513, or 3%, compared with 2013. The total number of employees as at December 31, 2014 was 14,352 , a decrease of 154 employees compared with 14,506 in 2013. This improvement was primarily due to job reductions as a result of continuing strong operational performance and natural attrition, partially offset by additional Information Technology employees as part of the Company’s insourcing strategy.

The workforce is the total employees plus part-time employees, contractors and consultants. The workforce as at December 31, 2015 decrease d by 1,799 , or 12% , compared with December 31, 2014. The workforce as at December 31, 2014 decreased by 279, or 2%, compared with December 31, 2013. This improvement was primarily due to job reductions as a result of continuing strong operational performance, natural attrition and fewer contractors.

Safety Indicators

Safety is a key priority and core strategy for CP’s management, employees and Board of Directors. The Company’s two main safety indicators – personal injuries and train accidents – follow strict U.S. FRA reporting guidelines.

The FRA personal injury rate per 200,000 employee-hours is the number of personal injuries multiplied by 200,000 and divided by total employee hours. Personal injuries are defined as injuries that require employees to lose time away from work, modify their normal duties or obtain medical treatment beyond minor first aid. FRA employee-hours are the total hours worked, excluding vacation and sick time, by all employees, excluding contractors. The FRA personal injury rate per 200,000 employee-hours for CP was 1.74 in 2015, 1.67 in 2014 and 1.71 in 2013.

The FRA train accidents rate is the number of train accidents, multiplied by 1,000,000 and divided by total train miles. Train accidents included in this metric meet or exceed the FRA reporting threshold of U.S. $10,500 or $13,900 in damage. The FRA train accident rate for CP in 2015 was 1.30 accidents per million train miles, compared with 1.26 in 2014 and 1.80 in 2013.

Results of Operations

Income

Operating income was $ 2,688 million in 2015, an increase of $ 349 million , or 15% , from $ 2,339 million in 2014. This increase was primarily due to:


•	the favourable impact of the change in foreign exchange (“FX”);


•	efficiencies generated from improved operating performance and asset utilization;


•	the gain on sale of D&H South;


•	lower share-based compensation primarily driven by the change in share price and lower incentive-based compensation;


•	lower fuel price; and


•	higher land sales.

This increase was partially offset by:


•	lower traffic volume;


•	higher pension expense;


•	higher wage and benefit inflation; and


•	higher casualty expenses as a result of more costly mishaps.

Operating income was $2,339 million in 2014, an increase of $919 million, or 65%, from $1,420 million in 2013. This increase was primarily due to:


•	an asset impairment charge in 2013;


•	higher volumes of traffic;


•	efficiency savings generated from improved operating performance, asset utilization and insourcing of certain Information Technology activities;


•	lower pension expense;


•	the favourable impact of the change in foreign exchange; and


•	lower casualty expense.

This increase in Operating income was partially offset by higher incentive and stock-based compensation resulting from improved corporate performance and higher wage and benefit inflation.

Adjusted operating income, defined and reconciled in Non-GAAP Measures of this Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations, was $2,620 million in 2015, an increase of $285 million, or 12%, from $2,335 million in 2014. This increase was due to the same factors discussed above for the increase in Operating income except that Adjusted operating income excludes the gain on sale of D&H South.

Adjusted operating income was $2,335 million in 2014, an increase from $1,844 million in 2013. This improvement was primarily due to higher volumes generating higher freight revenues and efficiency savings, partially offset by higher incentive and stock-based compensation resulting from improved corporate performance, and higher wage and benefit inflation.

Net income was $1,352 million in 2015, a decrease of $124 million, or 8%, from $1,476 million in 2014. This decrease was primarily due to the unfavourable impact of FX translation on U.S. dollar-denominated debt and higher interest expense on new debt issued in 2015, partially offset by higher operating income.

Net income was $1,476 million in 2014, an increase of $601 million, or 69%, from $875 million in 2013. This increase was primarily due to higher Operating income, partially offset by an increase in Income tax expense.

Adjusted income, defined and reconciled in Non-GAAP Measures of this Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations, was $1,625 million in 2015, an increase of $143 million, or 10%, from $1,482 million in 2014. This increase was primarily due to an increase in Adjusted operating income, partially offset by increased Income tax expense.

Diluted Earnings per Share

Diluted earnings per share was $8.40 in 2015, a decrease of $0.06, or 1% from $8.46 in 2014. This decrease was primarily due to lower Net income, partially offset by lower average outstanding shares due to the Company's share repurchase program.

Diluted earnings per share was $8.46 in 2014, an increase of $3.50, or 71% from $4.96 in 2013. This increase was primarily due to higher Net income and lower average outstanding shares due to the Company's share repurchase program.

Adjusted diluted EPS, defined and reconciled in Non-GAAP Measures of this Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations, was $10.10 in 2015, an increase of $1.60, or 19%, from $8.50 in 2014. Adjusted diluted EPS was $8.50 in 2014, an increase of $2.08, or 32%, from $6.42 in 2013. These increases were primarily due to higher Adjusted income and lower average outstanding shares due to the Company’s share repurchase program.

Operating Ratio

The Operating ratio provides the percentage of revenues used to operate the railway. A lower percentage normally indicates higher efficiency in the operation of the railway. The Company’s Operating ratio was 60.0% in 2015, a 470 basis point improvement from 64.7% in 2014. This improvement was primarily due to:


•	the favourable impact of the change in FX;


•	efficiencies generated from improved operating performance and asset utilization;


•	the gain on sale of D&H South;


•	lower share-based compensation primarily driven by the change in share price and lower incentive-based compensation;


•	lower fuel price; and


•	higher land sales.

This improvement was partially offset by:


•	lower traffic volume;


•	higher pension expense;


•	higher wage and benefit inflation; and


•	higher casualty expenses as a result of more costly mishaps.

The Company’s Operating ratio was 64.7% in 2014, a decrease from 76.8% in 2013. This improvement was primarily due to an asset impairment charge in 2013, higher volumes of traffic generating higher freight revenues, and efficiency savings, partially offset by higher incentive and stock-based compensation resulting from improved corporate performance, and higher wage and benefit inflation.

Adjusted operating ratio, defined and reconciled in Non-GAAP Measures of this Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations, was 61.0% in 2015, a 370 basis point improvement from 64.7% in 2014. The improvement in Adjusted operating ratio reflects the same factors discussed above except that Adjusted operating ratio excludes the gain on sale of D&H South.

Adjusted operating ratio was 64.7% in 2014, a decrease from 69.9% in 2013. This improvement was primarily due to higher volumes generating higher freight revenues and efficiency savings, partially offset by higher incentive and stock-based compensation resulting from improved corporate performance, and higher wage and benefit inflation.

Return on Invested Capital

ROIC is a measure of how productively the Company uses its long-term capital investments, representing critical indicators of good operating and investment decisions made by management, and is an important performance criteria in determining certain elements of the Company's long-term incentive plan. ROIC was 12.9% in 2015, a 150 basis point decrease compared to 14.4% in 2014 due to the issuance of long-term debt, partially offset by the reduction in total Shareholders’ equity, primarily due to the Company's share repurchase program. ROIC was 14.4% in 2014, a 440 basis point increase compared to 10.1% in 2013 due to higher income and lower total shareholder's equity, primarily due to the Company’s share repurchase program.

Adjusted ROIC was 15.2% at December 31, 2015, compared with 14.5% in 2014 and compared to 12.3% in 2013. These increases are the result of increased Adjusted operating income, partially offset by increased Income tax expense and the reductions in total Shareholders’ equity as discussed above. ROIC and Adjusted ROIC, defined and reconciled in Non-GAAP Measures of this Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Impact of FX on Earnings

Fluctuations in FX affect the Company’s results because U.S. dollar-denominated revenues and expenses are translated into Canadian dollars. U.S. dollar-denominated revenues and expenses increase (decrease) when the Canadian dollar weakens (strengthens) in relation to the U.S. dollar. In 2015, the impact of a stronger U.S. dollar resulted in an increase in total revenues of $553 million, an increase in total operating expenses of $306 million and an increase in interest expense of $37 million.



Canadian to U.S. dollar
Average exchange rates	2015		2014		2013
For the year ended – December 31	$	1.28	$	1.10	$	1.03
For the three months ended – December 31	$	1.34	$	1.13	$	1.04



Canadian to U.S. dollar
Exchange rates	2015		2014		2013
Beginning of year – January 1	$	1.16	$	1.06	$	0.99
Beginning of quarter – April 1	$	1.27	$	1.11	$	1.02
Beginning of quarter – July 1	$	1.25	$	1.07	$	1.05
Beginning of quarter – October 1	$	1.33	$	1.12	$	1.03
End of quarter – December 31	$	1.38	$	1.16	$	1.06

In 2016, CP expects that for every $0.01 the U.S. dollar appreciates relative to the Canadian dollar, it will increase revenues by $30 million, operating expenses by $15 million and interest expense by $3 million on an annualized basis.

Impact of Fuel Price on Earnings

Fluctuations in fuel prices affect the Company’s results because fuel expense constitutes a significant portion of CP's operating costs. As fuel prices fluctuate, there will be a timing impact on earnings. In 2015, the impact of lower fuel prices resulted in a decrease in total revenues of $334 million and a decrease in total operating expenses of $403 million.



Average Fuel Price
(U.S. dollars per U.S. gallon)	2015		2014		2013
For the year ended – December 31	$	2.13	$	3.41	$	3.47
For the three months ended – December 31	$	1.91	$	3.11	$	3.51

Operating Revenues



							2015 vs. 2014							2014 vs. 2013
For the year ended December 31	2015		2014		2013		% Change		Total Change			FX Impact ⁽²⁾		% Change	Total Change			FX Impact ⁽²⁾
Freight revenues (in millions) ⁽¹⁾	$	6,552	$	6,464	$	5,982	1		$	88		$	549	8	$	482		$	217
Non-freight revenues (in millions)	160		156		151		3		4			4		3	5			1
Total revenues (in millions)	$	6,712	$	6,620	$	6,133	1		$	92		$	553	8	$	487		$	218
Carloads (in thousands)	2,628		2,684		2,688		(2	)	(56		)	N/A		—	(4		)	N/A
Revenue ton-miles (in millions)	145,257		149,849		144,249		(3	)	(4,592		)	N/A		4	5,600			N/A
Freight revenue per carload (dollars)	$	2,493	$	2,408	$	2,226	4		$	85		N/A		8	$	182		N/A
Freight revenue per revenue ton-miles (cents)	4.51		4.31		4.15		5		0.20			N/A		4	0.16			N/A

⁽¹⁾ Freight revenues include fuel surcharge revenues of $293 million in 2015, $637 million in 2014 and $598 million in 2013.

⁽²⁾ FX impact is a component of the Total Change.

The Company’s revenues are primarily derived from transporting freight. Non-freight revenue is generated from leasing of certain assets, switching fees, contracts with passenger service operators, and logistical management services. Changes in freight volumes generally contribute to corresponding changes in freight revenues and certain variable expenses, such as fuel, equipment rents and crew costs.

Freight Revenues

Freight revenues were $6,552 million in 2015, an increase of $88 million , or 1% from $6,464 million in 2014. This increase was primarily due to the favourable impact of the change in FX of $549 million and an increase in Canadian grain revenue due to increased exports. This increase was partially offset by the impact of lower fuel prices on fuel surcharge revenue of $334 million, and lower volumes of Metals, mineral and consumer products and Crude.

Freight revenues were $6,464 million in 2014, an increase of $482 million , or 8% from $5,982 million in 2013. This increase was primarily due to:


•	higher volumes in Canadian grain, Domestic intermodal, Crude, and Metals, minerals and consumer products;


•	higher freight rates; and


•	the favourable impact of the change in FX.

This increase was partially offset by:


•	lower shipments in International intermodal and Automotive, primarily due to the exit of certain customer contracts;


•	lower Fertilizers and sulphur shipments primarily due to sulphur production shutdowns; and


•	lower shipments in certain lines of business in the first half of the year due to the impact of harsh winter operating conditions.

Non-freight Revenues

Non-freight revenues were $160 million in 2015, an increase of $4 million , or 3% from $156 million in 2014. This increase was due to the favourable impact of the change in FX.

Non-freight revenues were $156 million in 2014, an increase of $5 million , or 3% from $151 million in 2013. This increase was primarily due to higher leasing revenues.

Lines of Business

Canadian Grain



							2015 vs. 2014							2014 vs. 2013
For the year ended December 31	2015		2014		2013		% Change		Total Change			FX Impact ⁽¹⁾		% Change		Total Change			FX Impact ⁽¹⁾
Freight revenues (in millions)	$	1,068	$	988	$	869	8		$	80		$	38	14		$	119		$	18
Carloads (in thousands)	285		291		256		(2	)	(6		)	N/A		14		35			N/A
Revenue ton-miles (in millions)	27,442		26,691		22,864		3		751			N/A		17		3,827			N/A
Freight revenue per carload (dollars)	$	3,750	$	3,391	$	3,397	11		$	359		N/A		—		$	(6	)	N/A
Freight revenue per revenue ton-mile (cents)	3.89		3.70		3.80		5		0.19			N/A		(3	)	(0.10		)	N/A

⁽¹⁾ FX impact is a component of the Total Change.

Canadian grain revenue was $1,068 million in 2015, an increase of $80 million , or 8% from $988 million in 2014. This increase was primarily due to higher freight rates, the favourable impact of the change in FX, and strong export volumes through Port of Vancouver, partially offset by lower fuel surcharge revenue.

Canadian grain revenue was $988 million in 2014, an increase of $119 million, or 14% from $869 million in 2013. This increase was primarily due to higher shipments as a result of strong export demand and record Canadian crop production, partially offset by reduced freight rates.

U.S. Grain



							2015 vs. 2014							2014 vs. 2013
For the year ended December 31	2015		2014		2013		% Change		Total Change			FX Impact ⁽¹⁾		% Change		Total Change			FX Impact ⁽¹⁾
Freight revenues (in millions)	$	522	$	503	$	431	4		$	19		$	87	17		$	72		$	32
Carloads (in thousands)	157		173		182		(9	)	(16		)	N/A		(5	)	(9		)	N/A
Revenue ton-miles (in millions)	10,625		11,724		11,119		(9	)	(1,099		)	N/A		5		605			N/A
Freight revenue per carload (dollars)	$	3,326	$	2,909	$	2,359	14		$	417		N/A		23		$	550		N/A
Freight revenue per revenue ton-mile (cents)	4.91		4.29		3.87		14		0.62			N/A		11		0.42			N/A

⁽¹⁾ FX impact is a component of the Total Change.

U.S. grain revenue was $522 million in 2015, an increase of $19 million , or 4% from $503 million in 2014. The increase was primarily due to the favourable impact of the change in FX, partially offset by a decrease in volumes of 9% primarily due to the reduction in export volumes, and lower fuel surcharge revenue.

U.S. grain revenue was $503 million in 2014, an increase of $72 million, or 17% from $431 million in 2013. This increase was primarily due to: higher freight rates; increased volume to the Pacific Northwest, which has a longer length of haul, in the second half of the year; and the favourable impact of the change in FX. This increase was partially offset by the impact of harsh winter operating conditions in the first quarter of 2014.

Coal



							2015 vs. 2014							2014 vs. 2013
For the year ended December 31	2015		2014		2013		% Change		Total Change			FX Impact ⁽¹⁾		% Change		Total Change			FX Impact ⁽¹⁾
Freight revenues (in millions)	$	639	$	621	$	627	3		$	18		$	12	(1	)	$	(6	)	$	6
Carloads (in thousands)	323		313		330		3		10			N/A		(5	)	(17		)	N/A
Revenue ton-miles (in millions)	22,164		22,443		23,172		(1	)	(279		)	N/A		(3	)	(729		)	N/A
Freight revenue per carload (dollars)	$	1,978	$	1,985	$	1,904	—		$	(7	)	N/A		4		$	81		N/A
Freight revenue per revenue ton-mile (cents)	2.88		2.77		2.71		4		0.11			N/A		2		0.06			N/A

⁽¹⁾ FX impact is a component of the Total Change.

Coal revenue was $639 million in 2015, an increase of $18 million , or 3% from $621 million in 2014. This increase was primarily due to the favourable impact of the change in FX and higher freight rates and volumes of U.S. originated thermal coal, partially offset by lower fuel surcharge revenue and a decline in volume in Canadian coal business.

Coal revenue was $621 million in 2014, a decrease of $6 million, or 1% from $627 million in 2013. This decrease was primarily due to lower shipments of U.S. originating thermal coal, partially offset by higher Canadian originating shipments of metallurgical coal, and increased freight rates.

Potash



							2015 vs. 2014							2014 vs. 2013
For the year ended December 31	2015		2014		2013		% Change		Total Change			FX Impact ⁽¹⁾		% Change	Total Change		FX Impact ⁽¹⁾
Freight revenues (in millions)	$	359	$	347	$	312	3		$	12		$	28	11	$	35	$	12
Carloads (in thousands)	124		118		114		5		6			N/A		4	4		N/A
Revenue ton-miles (in millions)	15,117		14,099		13,231		7		1,018			N/A		7	868		N/A
Freight revenue per carload (dollars)	$	2,887	$	2,941	$	2,745	(2	)	$	(54	)	N/A		7	$	196	N/A
Freight revenue per revenue ton-mile (cents)	2.37		2.46		2.36		(4	)	(0.09		)	N/A		4	0.10		N/A

⁽¹⁾ FX impact is a component of the Total Change.

Potash revenue was $359 million in 2015, an increase of $12 million , or 3% from $347 million in 2014. This increase was primarily due to the favourable impact of the change in FX and an increase in volumes where growth in export Potash, which has a lower revenue per RTM, outpaced domestic Potash growth.

Potash revenue was $347 million in 2014, an increase of $35 million, or 11% from $312 million in 2013. This increase was primarily due to: the favourable impact of the change in FX; higher shipments, driven by export volumes in the second half of 2014 and higher domestic shipments in the first half of 2014; and higher freight rates. This increase was partially offset by the impact of harsh winter operating conditions in the first quarter of 2014.

Fertilizers and Sulphur



							2015 vs. 2014							2014 vs. 2013
For the year ended December 31	2015		2014		2013		% Change		Total Change			FX Impact ⁽¹⁾		% Change		Total Change			FX Impact ⁽¹⁾
Freight revenues (in millions)	$	272	$	234	$	258	16		$	38		$	23	(9	)	$	(24	)	$	11
Carloads (in thousands)	62		61		71		2		1			N/A		(14	)	(10		)	N/A
Revenue ton-miles (in millions)	4,044		4,180		4,939		(3	)	(136		)	N/A		(15	)	(759		)	N/A
Freight revenue per carload (dollars)	$	4,410	$	3,801	$	3,615	16		$	609		N/A		5		$	186		N/A
Freight revenue per revenue ton-mile (cents)	6.71		5.59		5.22		20		1.12			N/A		7		0.37			N/A

⁽¹⁾ FX impact is a component of the Total Change.

Fertilizers and sulphur revenue was $272 million in 2015, an increase of $38 million , or 16% from $234 million in 2014. This increase was primarily due to the favourable impact of the change in FX, higher freight rates and a shift in mix of traffic to fertilizers, which generally has higher freight rates than sulphur.

Fertilizers and sulphur revenue was $234 million in 2014, a decrease of $24 million, or 9% from $258 million in 2013. This decrease was primarily due to lower shipments resulting from weak demand and high inventory levels at destination, and a delayed return to full production of sulphur customer facilities. This decrease was partially offset by the favourable impacts of the change in FX and higher freight rates.

Forest Products



							2015 vs. 2014					2014 vs. 2013
For the year ended December 31	2015		2014		2013		% Change	Total Change		FX Impact ⁽¹⁾		% Change		Total Change			FX Impact ⁽¹⁾
Freight revenues (in millions)	$	249	$	206	$	206	21	$	43	$	24	—		$	—		$	12
Carloads (in thousands)	62		59		66		5	3		N/A		(11	)	(7		)	N/A
Revenue ton-miles (in millions)	4,201		3,956		4,619		6	245		N/A		(14	)	(663		)	N/A
Freight revenue per carload (dollars)	$	4,026	$	3,493	$	3,132	15	$	533	N/A		12		$	361		N/A
Freight revenue per revenue ton-mile (cents)	5.92		5.20		4.46		14	0.72		N/A		17		0.74			N/A

⁽¹⁾ FX impact is a component of the Total Change.

Forest products revenue was $249 million in 2015, an increase of $43 million , or 21% from $206 million in 2014. This increase was primarily due to the favourable impact of the change in FX, improved pricing and a change in traffic mix to lumber and panel products, which generally have higher freight rates than pulp and paper.

Forest products revenue was $206 million in 2014, unchanged from 2013. Increases within Forest products were due to strong lumber demand with existing customers, the favourable impact of the change in FX, and higher freight rates. These increases were offset by the exit of certain lumber customer contracts in Western Canada and lower pulp and paper shipments due to customer production issues.

Chemicals and Plastics



							2015 vs. 2014						2014 vs. 2013
For the year ended December 31	2015		2014		2013		% Change	Total Change			FX Impact ⁽¹⁾		% Change	Total Change		FX Impact ⁽¹⁾
Freight revenues (in millions)	$	709	$	637	$	565	11	$	72		$	84	13	$	72	$	32
Carloads (in thousands)	203		198		197		3	5			N/A		1	1		N/A
Revenue ton-miles (in millions)	13,611		13,635		13,573		—	(24		)	N/A		—	62		N/A
Freight revenue per carload (dollars)	$	3,483	$	3,214	$	2,857	8	$	269		N/A		12	$	357	N/A
Freight revenue per revenue ton-mile (cents)	5.21		4.67		4.15		12	0.54			N/A		13	0.52		N/A

⁽¹⁾ FX impact is a component of the Total Change.

Chemicals and plastics revenue was $709 million in 2015, an increase of $72 million , or 11% from $637 million in 2014. This increase was primarily due to the favourable impact of the change in FX, partially offset by lower fuel surcharge revenue.

Chemicals and plastics revenue was $637 million in 2014, an increase of $72 million, or 13% from $565 million in 2013. This increase was primarily due to the favourable impact of the change in FX, higher freight rates, and an increase in volume from strong demand for liquefied petroleum gas, fuel oils, asphalt and plastics in the second half of 2014. This increase was partially offset by lower shipments of biofuels in the first half of the year that resulted from supply chain issues.

Crude



							2015 vs. 2014							2014 vs. 2013
For the year ended December 31	2015		2014		2013		% Change		Total Change			FX Impact ⁽¹⁾		% Change	Total Change		FX Impact ⁽¹⁾
Freight revenues (in millions)	$	393	$	484	$	375	(19	)	$	(91	)	$	71	29	$	109	$	26
Carloads (in thousands)	91		110		90		(17	)	(19		)	N/A		22	20		N/A
Revenue ton-miles (in millions)	13,280		16,312		13,898		(19	)	(3,032		)	N/A		17	2,414		N/A
Freight revenue per carload (dollars)	$	4,309	$	4,419	$	4,144	(2	)	$	(110	)	N/A		7	$	275	N/A
Freight revenue per revenue ton-mile (cents)	2.96		2.97		2.70		—		(0.01		)	N/A		10	0.27		N/A

⁽¹⁾ FX impact is a component of the Total Change.

Crude revenue was $393 million in 2015, a decrease of $91 million , or 19% from $484 million in 2014. This decrease was primarily due to a decline in volume as a result of the fall in crude oil prices and lower fuel surcharge revenue, partially offset by the favourable impact of the change in FX.

Crude revenue was $484 million in 2014, an increase of $109 million, or 29% from $375 million in 2013. This increase was primarily due to increased shipments from Western Canada and the Bakken region, the favourable impact of the change in FX, and higher freight rates.

Metals, Minerals and Consumer Products



							2015 vs. 2014							2014 vs. 2013
For the year ended December 31	2015		2014		2013		% Change		Total Change			FX Impact ⁽¹⁾		% Change	Total Change		FX Impact ⁽¹⁾
Freight revenues (in millions)	$	643	$	712	$	608	(10	)	$	(69	)	$	95	17	$	104	$	32
Carloads (in thousands)	217		253		232		(14	)	(36		)	N/A		9	21		N/A
Revenue ton-miles (in millions)	9,020		11,266		10,404		(20	)	(2,246		)	N/A		8	862		N/A
Freight revenue per carload (dollars)	$	2,963	$	2,814	$	2,655	5		$	149		N/A		6	$	159	N/A
Freight revenue per revenue ton-mile (cents)	7.13		6.32		5.90		13		0.81			N/A		7	0.42		N/A

⁽¹⁾ FX impact is a component of the Total Change.

Metals, minerals and consumer products revenue was $643 million in 2015, a decrease of $69 million , or 10% from $712 million in 2014. This decrease was primarily due to declines in the volume of frac sand, steel and other aggregates traffic, partially offset by the favourable impact of the change in FX.

Metals, minerals and consumer products revenue was $712 million in 2014, an increase of $104 million, or 17% from $608 million in 2013. This increase was primarily due to higher volumes, primarily as a result of strong frac sand demand, the favourable impact of the change in FX, and higher freight rates.

Automotive



							2015 vs. 2014							2014 vs. 2013
For the year ended December 31	2015		2014		2013		% Change		Total Change			FX Impact ⁽¹⁾		% Change		Total Change			FX Impact ⁽¹⁾
Freight revenues (in millions)	$	349	$	357	$	403	(2	)	$	(8	)	$	35	(11	)	$	(46	)	$	15
Carloads (in thousands)	131		134		146		(2	)	(3		)	N/A		(8	)	(12		)	N/A
Revenue ton-miles (in millions)	1,750		1,953		2,329		(10	)	(203		)	N/A		(16	)	(376		)	N/A
Freight revenue per carload (dollars)	$	2,659	$	2,670	$	2,758	—		$	(11	)	N/A		(3	)	$	(88	)	N/A
Freight revenue per revenue ton-mile (cents)	19.97		18.26		17.27		9		1.71			N/A		6		0.99			N/A

⁽¹⁾ FX impact is a component of the Total Change.

Automotive revenue was $349 million in 2015, a decrease of $8 million , or 2% from $357 million in 2014. This decrease was primarily due to lower fuel surcharge revenue and lower volumes driven by weaker traffic to Western Canada, partially offset by the favourable impact of the change in FX.

Automotive revenue was $357 million in 2014, a decrease of $46 million, or 11% from $403 million in 2013. This decrease was primarily due to a volume decline resulting from operational challenges in the U.S. Midwest following harsh winter operating conditions, the exit of a customer contract, and a reduction in long haul import traffic. This decrease was partially offset by the favourable impact of the change in FX.

Domestic Intermodal



							2015 vs. 2014							2014 vs. 2013
For the year ended December 31	2015		2014		2013		% Change		Total Change			FX Impact ⁽¹⁾		% Change		Total Change			FX Impact ⁽¹⁾
Freight revenues (in millions)	$	757	$	787	$	684	(4	)	$	(30	)	$	19	15		$	103		$	7
Carloads (in thousands)	414		428		370		(3	)	(14		)	N/A		16		58			N/A
Revenue ton-miles (in millions)	12,072		11,867		10,276		2		205			N/A		15		1,591			N/A
Freight revenue per carload (dollars)	$	1,831	$	1,837	$	1,850	—		$	(6	)	N/A		(1	)	$	(13	)	N/A
Freight revenue per revenue ton-mile (cents)	6.27		6.63		6.65		(5	)	(0.36		)	N/A		—		(0.02		)	N/A

⁽¹⁾ FX impact is a component of the Total Change.

Domestic intermodal revenue was $757 million in 2015, a decrease of $30 million , or 4% from $787 million in 2014. This decrease was primarily due to lower fuel surcharge revenue, partially offset by the favourable impact of the change in FX, and increased transcontinental traffic.

Domestic intermodal revenue was $787 million in 2014, an increase of $103 million, or 15% from $684 million in 2013. This increase was primarily due to higher volumes including short-haul expressway service between Toronto and Montreal.

International Intermodal



							2015 vs. 2014							2014 vs. 2013
For the year ended December 31	2015		2014		2013		% Change		Total Change			FX Impact ⁽¹⁾		% Change		Total Change			FX Impact ⁽¹⁾
Freight revenues (in millions)	$	592	$	588	$	644	1		$	4		$	33	(9	)	$	(56	)	$	14
Carloads (in thousands)	559		546		634		2		13			N/A		(14	)	(88		)	N/A
Revenue ton-miles (in millions)	11,931		11,723		13,825		2		208			N/A		(15	)	(2,102		)	N/A
Freight revenue per carload (dollars)	$	1,061	$	1,077	$	1,016	(1	)	$	(16	)	N/A		6		$	61		N/A
Freight revenue per revenue ton-mile (cents)	4.96		5.02		4.66		(1	)	(0.06		)	N/A		8		0.36			N/A

⁽¹⁾ FX impact is a component of the Total Change.

International intermodal revenue was $592 million in 2015, an increase of $4 million , or 1% from $588 million in 2014. This increase was primarily due to the favourable impact of the change in FX, partially offset by lower fuel surcharge revenue.

International intermodal revenue was $588 million in 2014, a decrease of $56 million, or 9% from $644 million in 2013. This decrease was due to lower volumes as a result of the exit of certain customer contracts. This decrease was partially offset by higher transcontinental container volumes from existing customers, higher freight rates, and the favourable impact of the change in FX.

Operating Expenses



2015 Operating expenses	2014 Operating expenses



								% Change							% Change
For the year ended December 31 (in millions)	2015			2014		2013		2015 vs. 2014		Total Change			FX Impact ⁽¹⁾		2014 vs. 2013		Total Change			FX Impact ⁽¹⁾
Compensation and benefits	$	1,371		$	1,348	$	1,378	2		$	23		$	62	(2	)	$	(30	)	$	23
Fuel	708			1,048		1,004		(32	)	(340		)	143		4		44			62
Materials	184			193		160		(5	)	(9		)	5		21		33			1
Equipment rents	174			155		173		12		19			18		(10	)	(18		)	9
Depreciation and amortization	595			552		565		8		43			18		(2	)	(13		)	8
Purchased services and other	1,060			985		998		8		75			60		(1	)	(13		)	60
Asset impairments	—			—		435		—		—			—		(100	)	(435		)	—
Gain on sale of D&H South	(68		)	—		—		100		(68		)	—		—		—			—
Total operating expenses	$	4,024		$	4,281	$	4,713	(6	)	$	(257	)	$	306	(9	)	$	(432	)	$	163

⁽¹⁾ FX impact is a component of the Total Change.

Operating expenses were $4,024 million in 2015, a decrease of $257 million , or 6% , from $4,281 million in 2014. This decrease was primarily due to:


•	the favourable impact of $403 million from lower fuel prices;


•	efficiencies generated from improved operating performance and asset utilization;


•	the favourable impact of $87 million from lower stock-based compensation primarily driven by the change in stock price and lower incentive-based compensation;


•	the $68 million favourable gain on sale of D&H South;


•	lower volume variable expenses; and


•	a $42 million increase in land sales.

This decrease was partially offset by:


•	the unfavourable impact of the change in FX of $306 million;


•	higher pension expense of $84 million;


•	the impact of wage and benefit inflation of approximately 3%; and


•	higher casualty expenses as a result of more costly mishaps of $37 million.

Operating expenses were $4,281 million in 2014, a decrease of $432 million , or 9% , from $4,713 million in 2013. This decrease was primarily due to:


•	an asset impairment charge of $435 million in 2013;


•	efficiencies generated from improved operating performance, asset utilization, and insourcing of certain IT activities;


•	lower pension expense of $96 million; and


•	lower casualty expense.

This decrease was partially offset by:


•	the unfavourable impact of the change in FX of $163 million;


•	higher stock-based and incentive compensation of $41 million;


•	the impact of wage and benefit inflation of approximately 3%;


•	higher material costs for freight car and locomotive repairs, and increased track maintenance activities; and


•	higher volume variable expenses as a result of an increase in workload, as measured by GTMs.

Compensation and Benefits

Compensation and benefits expense includes employee wages, salaries, fringe benefits and stock-based compensation. Compensation and benefits expense was $1,371 million in 2015, an increase of $23 million , or 2% , from $1,348 million in 2014. These increases were primarily due to:


•	higher pension expense of $84 million;


•	the unfavourable impact of the change in FX of $62 million; and


•	the impact of wage and benefit inflation of approximately 3%.

These increases were partially offset by:


•	the favourable impact of $87 million from lower stock-based compensation primarily driven by the change in stock price and lower incentive-based compensation;


•	lower costs achieved through job reductions;


•	road and yard efficiencies as a result of continuing strong operational performance; and


•	lower volume variable expenses as a result of a decrease in workload as measured by GTMs.

Fuel

Fuel expense consists mainly of fuel used by locomotives and includes provincial, state and federal fuel taxes. Fuel expense was $708 million in 2015, a decrease of $340 million , or 32% , from $1,048 million in 2014. These decreases were primarily due to:


•	the favourable impact of $403 million from lower fuel prices;


•	a reduction in workload, as measured by GTMs; and


•	improvements in fuel efficiency as a result of increased locomotive productivity of approximately 4%, operational fluidity and the advancement of the Company’s fuel conservation strategies.

These decreases were partially offset by the unfavourable impact of the change in FX of $143 million.

Materials

Materials expense includes the cost of material used for track, locomotive, freight car, building maintenance and software sustainment. Materials expense was $184 million in 2015, a decrease of $9 million or 5% , from $193 million in 2014. This decrease was primarily due to lower locomotive units maintained.

Equipment Rents

Equipment rents expense includes the cost associated with using other companies’ freight cars, intermodal equipment, and locomotives, net of rental income received from other railways for the use of CP’s equipment. Equipment rents expense was $174 million in 2015, an increase of $19 million or 12% from $155 million in 2014. This increase was primarily due to the unfavourable impact of the change in FX of $18 million, a return of subleased locomotives reducing rental income by $15 million, and a decrease in car hire expense resulting from the lower use of CP's equipment by other railroads. This increase was largely offset by the purchase of previously leased freight cars reducing rental expenses by $21 million and lower use of foreign equipment.

Depreciation and Amortization

Depreciation and amortization expense represents the charge associated with the use of track and roadway, buildings, rolling stock, information systems and other depreciable assets. Depreciation and amortization expense was $595 million for 2015, an increase of $43 million , or 8% , from $552 million in the same period of 2014. These increases were primarily due to a higher depreciable asset base and the unfavourable impact of the change in FX of $18 million.

Purchased Services and Other



										% Change
For the year ended December 31 (in millions)	2015			2014 ⁽²⁾			2013 ⁽²⁾			2015 vs. 2014	2014 vs. 2013
Support and facilities	$	298		$	297		$	313		—	(5	)
Track and operations	266			243			236			9	3
Intermodal	184			176			169			5	4
Equipment	196			166			165			18	1
Casualty	74			35			63			111	(44	)
Property taxes ⁽¹⁾	103			94			91			10	3
Other	13			6			(1		)	117	(700	)
Land sales	(74		)	(32		)	(38		)	131	(16	)
Total Purchased services and other	$	1,060		$	985		$	998		8	(1	)

⁽¹⁾ These amounts were previously included in Support and facilities.

⁽²⁾ Certain comparative figures have been reclassified within Purchased services and other to conform with 2015 presentation.

Purchased services and other expense encompasses a wide range of costs, including expenses for joint facilities, personal injuries and damage, environmental remediation, property and other taxes, contractor and consulting fees, insurance, and gains on land sales. Purchased services and other expense was $1,060 million in 2015, an increase of $75 million , or 8% from $985 million in 2014. This increase was primarily due to:


•	the unfavourable impact of the change in FX of $60 million;


•	higher casualty expenses as a result of more costly mishaps, reported in Casualty;


•	higher intermodal expenses related to pickup and delivery service, reported in Intermodal;


•	increased locomotive overhauls, reported in Equipment; and


•	higher legal fees and support costs, reported in Support and facilities.

This increase was partially offset by higher land sales of $42 million and efficiencies generated from the insourcing of certain IT activities, included in Support and facilities.

Gain on Sale of D&H South

On November 17, 2014, the Company announced a proposed agreement with NS for the sale of approximately 283 miles of the Delaware and Hudson Railway Company, Inc.’s line between Sunbury, Pennsylvania, and Schenectady, New York.

During the first quarter of 2015, the Company finalized a sales agreement with NS for D&H South. The sale, which received approval by the STB on May 15, 2015, was completed on September 18, 2015 for proceeds of $281 million (U.S. $214 million), subject to finalizing post-closing adjustments between the Company and NS in the first quarter of 2016. The assets sold were previously classified as “Assets held for sale” on the Company’s Consolidated Balance Sheet at December 31, 2014. The Company recorded a gain on sale of $68 million ($42 million after tax) from the transaction during the third quarter of 2015.

Other Income Statement Items

Other Income and Charges

Other income and charges consists of gains and losses from the change in FX on long-term debt discussed further in the Non-GAAP Measures of this Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations, and working capital, various costs related to financing, shareholder costs, equity income and other non-operating expenditures. Other income and charges was an expense of $335 million in 2015, compared to an expense of $19 million in 2014, an increase of $316 million , or 1,663% . This increase was primarily due to the unfavourable impact of FX translation of $297 million on U.S. dollar-denominated debt and the loss of $47 million on early redemption of notes. The increase was partially offset by $24 million of other FX gains and losses.

Other income and charges was an expense of $19 million in 2014, compared with an expense of $17 million in 2013, an increase of $2 million, or 12%. This increase was primarily due to FX losses on U.S. dollar-denominated debt, partially offset by higher equity earnings.

Net Interest Expense

Net interest expense includes interest on long-term debt and capital leases. Net interest expense was $394 million in 2015, an increase of $112 million , or 40% , from $282 million in 2014. This increase was primarily due to the unfavourable impact of the change in FX of $37 million and $74 million of interest on new debt issued in 2015.

Net interest expense was $282 million in 2014, an increase of $4 million, or 1%, from $278 million in 2013. This increase was primarily due to the unfavourable impact of the change in FX rates on U.S. dollar-denominated interest expense partially offset by higher interest income and the impact of principal repayments of debt securities.

Income Tax Expense

Income tax expense was $607 million in 2015, an increase of $45 million , or 8% , from $562 million in 2014. This increase was due to a higher effective income tax rate partially offset by lower taxable earnings in 2015.

Income tax expense was $562 million in 2014, an increase of $312 million, or 125%, from $250 million in 2013. This increase was due to higher taxable earnings and a higher effective income tax rate in 2014.

The effective income tax rate for 2015 was 31.0% on unadjusted earnings and 27.25% on adjusted earnings, compared with 27.6% on both unadjusted and adjusted earnings for 2014. The effective income tax rate for 2014 was 27.6%, compared with 22.2% for 2013.

The Company expects a normalized 2016 income tax rate of approximately 27.5%. The Company’s 2016 outlook for its normalized income tax rate is based on certain assumptions about events and developments that may or may not materialize or that may be offset entirely or partially by other events and developments, discussed further in Item 1A. Risk Factors. The Company expects an increase in cash tax payments in future years as a significant portion of previously unused income tax operating losses carried forward otherwise available to reduce income taxes, have been utilized.

Liquidity and Capital Resources

The Company believes adequate amounts of Cash and cash equivalents are available in the normal course of business to provide for ongoing operations, including the obligations identified in the tables in Contractual Commitments of this Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations. The Company is not aware of any trends or expected fluctuations in the Company's liquidity that would create any deficiencies. The Company's primary sources of liquidity include its Cash and cash equivalents, its bilateral letters of credit, and its revolving credit facility. As at December 31, 2015, the Company had $650 million of Cash and cash equivalents and, under its bilateral letters of credit facilities, the Company had letters of credit drawn of $375 million from a total available amount of $600 million. As at December 31, 2015, the Company's U.S. $2 billion revolving credit facility, which includes a U.S. $1 billion five-year portion and U.S. $1 billion one-year plus one-year term-out portion, was undrawn. The following discussion of operating, investing and financing activities describes the Company’s indicators of liquidity and capital resources.

Operating Activities

Cash provided by operating activities was $2,459 million in 2015 compared to $2,123 million in 2014, an increase of $336 million . The increase in Cash provided by operating activities was primarily due to higher cash generating earnings, and improvements in working capital as a result of a decrease in Accounts receivable attributable to higher collection rates and lower income taxes paid, partially offset by an increase in interest payments resulting from debt issued in 2015.

Cash provided by operating activities was $2,123 million in 2014, an increase of $173 million from $1,950 million in 2013. This increase was largely due to improved earnings, partially offset by higher income taxes paid and an increase in accounts receivable resulting from higher customer billings.

Investing Activities

Cash used in investing activities was $1,123 million in 2015, an increase of $373 million from $ 750 million in 2014. This increase was largely due to the $411 million change in Restricted cash and cash equivalents related to the release of collateral for letters of credit in 2014, and higher additions to properties ("capital programs") in 2015.

This increase was partially offset by higher proceeds from line sales, including $281 million for D&H South in 2015 compared to $236 million for DM&E West in 2014, and the sale of other assets for higher proceeds of $114 million in 2015 compared to $52 million in 2014.

Cash used in investing activities was $750 million in 2014, a decrease of $847 million from $1,597 million in 2013. This decrease was primarily due to a reduction in Restricted cash and cash equivalents related to the collateralizing of letters of credit. In addition the decrease reflects the proceeds received in 2014 from the sale of DM&E West, partially offset by higher additions to properties.

Additions to properties were $1,522 million in 2015, an increase of $73 million from $1,449 million in 2014. The increase, primarily in track and roadway investments, reflects CP’s strategy of reinvesting in the plant, enhancing throughput and capacity, and optimizing existing assets.

Additions to properties were $1,449 million in 2014, an increase of $213 million from $1,236 million in 2013. The increase, primarily in track and rolling stock investments, reflects CP’s strategy of reinvesting in the plant, enhancing throughput and capacity, and optimizing existing assets.

Capital Programs



For the year ended December 31 (in millions, except for track miles and crossties)	2015		2014		2013
Additions to properties
Track and roadway	$	1,119	$	1,011	$	831
Rolling stock	158		219		169
Information systems ⁽¹⁾	79		96		110
Buildings and other	180		150		155
Total – accrued additions to properties	1,536		1,476		1,265
Less:
Non-cash transactions	14		27		29
Cash invested in additions to properties (per Consolidated Statements of Cash Flows)	$	1,522	$	1,449	$	1,236
Track installation capital programs
Track miles of rail laid (miles)	468		492		429
Track miles of rail capacity expansion (miles)	22		21		24
Crossties installed (thousands)	1,009		1,040		926

⁽¹⁾ Information systems include hardware and software.

Track and roadway expenditures include the replacement and enhancement of the Company’s track infrastructure. Of the $1,119 million additions in 2015, approximately $832 million was invested in the renewal of depleted assets, namely rail, ties, ballast, signals, and bridges. Approximately $54 million was spent on PTC compliance requirements and $233 million was invested in network improvements, which increased productivity and capacity.

Rolling stock investments encompass locomotives and freight cars. In 2015, expenditures on locomotives were approximately $105 million and were focused on the remanufacture of older six-axle units. Freight car investments of approximately $53 million were largely focused on the acquisition of existing units previously held under operating leases.

In 2015, CP invested approximately $79 million in information systems primarily focused on rationalizing and enhancing business systems, providing real-time data, and modernizing core hardware and applications. Investments in buildings and other items were $180 million, and include items such as facility upgrades and renovations, vehicles, containers, and shop equipment.

For 2016, CP expects to invest approximately $1.1 billion in its capital programs, which will be financed with cash generated from operations and leverages the considerable network upgrade and improvement investments that have been made over the last several years. Approximately 75% of planned capital programs are for track and roadway, including approximately $44 million for PTC. Approximately 10% is expected to be allocated to rolling stock assets, including locomotive improvements and the continued acquisition of freight cars previously held under operating leases. Between 5% and 10% is expected to be allocated to information services, and between 5% and 10% is expected to be allocated to buildings and other.

Financing Activities

Cash used in financing activities was $957 million in 2015, a decrease of $673 million from $1,630 million in 2014. This decrease was largely due to the issuance of long-term debt during the 2015 fiscal year for total net proceeds of U.S. $2,669 million ($3,474 million), as discussed further in Item 8. Financial Statements and Supplementary Data, Note 19 Debt. During the first quarter of 2015, the Company also settled a notional U.S. $700 million floating-to-fixed interest rate swap agreements ("forward starting swaps") for a payment of U.S. $50 million ($63 million) that is discussed further in Item 8. Financial Statements and Supplementary Data, Note 20 Financial instruments. In addition, dividend payments decreased by $18 million to $226 million in 2015 as the Company's share repurchase program decreased shares outstanding.

The decrease in Cash used in financing activities was partially offset by higher payments of $2,787 million to buy back shares under the Company's share repurchase program, compared to $2,050 million in 2014, discussed further in Item 8. Financial Statements and Supplementary Data, Note 23 Shareholder's equity, the net repayment of commercial paper of $893 million compared to issuances in 2014 of $771 million, and the early redemption of four notes totalling U.S. $281 million ($374 million). This included the payments of principal of U.S. $247 million ($329 million) and early redemption premium of U.S. $34 million ($45 million).

The Company has available, as sources of financing, up to U.S. $2 billion under its revolving credit facility and up to $225 million under its bilateral letter of credit facilities, discussed further in Item 8. Financial Statements and Supplementary Data, Note 19 Debt. Under the bilateral letter of credit facilities, the Company has the option to post collateral in the form of Cash or cash equivalents, equal at least to the face value of the letter of credit issued. Collateral provided includes highly liquid investments purchased three months or less from maturity and is stated at cost, which approximates market value and is shown separately on the balance sheet as Restricted cash and cash equivalents. The Company can largely withdraw this collateral during any month. As at December 31, 2015, the revolving credit facility was undrawn and the Company did not draw from its revolving credit facility during the 2015 fiscal year. The revolving credit facility agreement requires the Company not to exceed a maximum debt to earnings before interest, tax, depreciation, and amortization ratio. As at December 31, 2015, the Company was in compliance with the threshold stipulated in this financial covenant.

Cash used in financing activities was $1,630 million in 2014, as compared to $220 million in 2013. This increase was largely due to payments made to buy back shares under the Company's share repurchase program and a repayment of a capital lease. These uses of cash were partially offset by proceeds from the issuance of commercial paper of U.S. $675 million ($771 million).

Interest Coverage Ratio

At December 31, 2015, the Company’s interest coverage ratio was 6.0, compared with 8.2 at December 31, 2014. This decrease was primarily due to an increase in Net interest expense of $112 million compared to the prior year, partially offset by a year over year improvement in Earnings before interest and taxes ("EBIT"). In 2015, EBIT was negatively impacted by FX on U.S. dollar-denominated debt and the early redemption premium on notes, and positively impacted by the gain on sale of D&H South, while in 2014 EBIT was negatively impacted by FX on U.S. dollar-denominated debt and positively impacted by the recovery of prior year labour restructuring charges.

Excluding these significant items from EBIT, Adjusted interest coverage ratio was 6.7 at December 31, 2015, compared with 8.3 at December 31, 2014. This decrease was primarily due to an increase in Net interest expense. Interest coverage ratio, Adjusted interest coverage ratio, EBIT, Adjusted EBIT, and significant items are defined and reconciled in Non-GAAP Measures of this Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Credit Measures

Credit ratings provide information relating to the Company’s financing costs, liquidity and operations and affect the Company’s ability to obtain short-term and long-term financing and/or the cost of such financing.

A mid-investment grade credit rating is an important measure in assessing the Company’s ability to maintain access to public financing and to minimize the cost of capital. It also affects the ability of the Company to engage in certain collateralized business activities on a cost-effective basis.

Credit ratings and outlooks are based on the rating agencies’ methodologies and can change from time to time to reflect their views of CP. Their views are affected by numerous factors including, but not limited to, the Company’s financial position and liquidity along with external factors beyond the Company’s control.

As at December 31, 2015, CP's credit rating from Standard & Poor's Rating Services ("Standard & Poor's"), Moody's Investor Service ("Moody's"), and Dominion Bond Rating Service Limited ("DBRS") remain unchanged from December 31, 2014.

Credit ratings as at December 31, 2015 ⁽¹⁾



Long-term debt			Outlook
Standard & Poor's
	Long-term corporate credit	BBB+	stable
	Senior secured debt	A	stable
	Senior unsecured debt	BBB+	stable
Moody's
	Senior unsecured debt	Baa1	stable
DBRS
	Unsecured debentures	BBB (high)	stable
	Medium-term notes	BBB (high)	stable

$1 billion Commercial paper program
Standard & Poor's		A-2	NA
Moody's		P-2	NA
DBRS		R-2 (high)	NA

⁽¹⁾ Credit ratings are not recommendations to purchase, hold or sell securities and do not address the market price or suitability of a specific security for a particular investor. Credit ratings are based on the rating agencies' methodologies and may be subject to revision or withdrawal at any time by the rating agencies.

The Company’s goal is to maintain a degree of continuity and predictability for investors by meeting a minimum threshold. The Adjusted net debt to Adjusted earnings before interest, tax, depreciation and amortization (“EBITDA”) ratio for the years ended December 31, 2015, 2014, and 2013 was 2.8 , 2.2 , and 2.1 , respectively. The increase between 2015 and 2014 was due to additional debt issued during the 2015 fiscal year, partially offset by the improved Adjusted income for the year ended December 31, 2015. The increase between 2014 and 2013 was due to additional debt issued in 2014, largely offset by the improved Adjusted income for the year ended December 31, 2014. Adjusted net debt to Adjusted EBITDA ratio and the Adjusted income are defined and reconciled in Non-GAAP Measures of this Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Free Cash

CP generated positive Free cash of $1,155 million in 2015, an increase of $430 million from $725 million in 2014. The increase was primarily due to an increase in cash provided by operating activities and proceeds received from the sale of D&H South in 2015, partially offset by proceeds received from the sale of DM&E West in 2014 and an increase in capital additions. Free cash is defined and reconciled in the Non-GAAP Measures of this Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Free cash is affected by the seasonal fluctuations and by other factors including the size of the Company's capital programs. Capital additions were $1,522 million in 2015, $73 million higher than 2014. The 2015 capital programs are discussed further above in Investing Activities.

Non-GAAP Measures

The Company presents non-GAAP measures and cash flow information to provide a basis for evaluating underlying earnings and liquidity trends in the Company’s business that can be compared with the results of operations in prior periods. In addition, these non-GAAP measures facilitate a multi-period assessment of long-term profitability allowing management and other external users of the Company’s consolidated financial information to compare profitability on a long-term basis, including assessing future profitability, with that of the Company’s peers.

These non-GAAP measures have no standardized meaning and are not defined by GAAP and, therefore, may not be comparable to similar measures presented by other companies. The presentation of these non-GAAP measures is not intended to be considered in isolation from, as a substitute for, or as superior to the financial information presented in accordance with GAAP.

Adjusted Performance Measures

The Company uses Adjusted operating income, Adjusted income, Adjusted diluted earnings per share and Adjusted operating ratio to evaluate the Company’s operating performance and for planning and forecasting future business operations and future profitability. These non-GAAP measures are presented in Item 6. Selected Financial Data and discussed further in other sections of this Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations. These non-GAAP measures provide meaningful supplemental information regarding operating results because they exclude certain significant items that are not considered indicative of future financial trends either by nature or amount. As a result, these items are excluded for management assessment of operational performance, allocation of resources and preparation of annual budgets. These significant items may include, but are not limited to, restructuring and asset impairment charges, individually significant gains and losses from sales of assets and certain items outside the control of management. These items may not be non-recurring. However, excluding these significant items from GAAP results allows for a consistent understanding of the Company's consolidated financial performance when performing a multi-period assessment including assessing the likelihood of future results. Accordingly, these non-GAAP financial measures may provide insight to investors and other external users of the Company's consolidated financial information.

In 2015, there were four significant items included in Net income as follows:


•	in the third quarter, a $68 million gain ($42 million after tax) related to the sale of D&H South;


•	in the third quarter, a $47 million charge ($35 million after tax) related to the early redemption premium on notes;


•	in the second quarter, an income tax expense of $23 million as a result of the change in the Alberta provincial corporate income tax rate; and


•	during the course of the year, net non-cash loss of $297 million ($257 million after tax) due to FX translation of the Company’s U.S. dollar-denominated debt as follows:


•	in the fourth quarter, a $115 million loss ($100 million after tax);


•	in the third quarter, a $128 million loss ($111 million after tax);


•	in the second quarter, a $10 million gain ($9 million after tax); and


•	in the first quarter, a $64 million loss ($55 million after tax).

In 2014, there were two significant items included in Net income as follows:


•	in the fourth quarter, $12 million net non-cash loss ($9 million after tax) due to FX translation on the Company’s U.S. dollar-denominated debt; and


•	in the first quarter, a recovery of $4 million ($3 million after tax) was recorded for the Company's 2012 labour restructuring initiative due to favourable experience gains, recorded in Compensation and benefits.

In 2013, there were five significant items included in Net income as follows:


•	in the fourth quarter, an asset impairment charge and accruals for future costs totalling $435 million ($257 million after tax) relating to the sale of DM&E West, which closed in the second quarter of 2014;


•	in the fourth quarter, management transition costs related to the retirement of the Company’s CFO and the appointment of the new CFO of $5 million ($4 million after tax);


•	in the fourth quarter, a recovery of $7 million ($5 million after tax) of the Company’s 2012 labour restructuring initiative due to favourable experience gains;


•	in the third quarter, an income tax expense of $7 million as a result of the change in the province of British Columbia’s corporate income tax rate; and


•	in the first quarter, a recovery of U.S. $9 million (U.S. $6 million after tax) related to settlement of certain management transition amounts that had been subject to legal proceedings.

In 2012, there were six significant items included in Net income as follows:


•	in the fourth quarter, an asset impairment charge of $185 million ($111 million after tax) with respect to the option to build into the Powder River Basin and another investment;


•	in the fourth quarter, an asset impairment charge of $80 million ($59 million after tax) related to a certain series of locomotives;


•	in the fourth quarter, a labour restructuring charge of $53 million ($39 million after tax) as part of a restructuring initiative;


•	in the second quarter, a charge of $42 million ($29 million after tax) with respect to compensation and other management transition costs;


•	in the first and second quarters, advisory fees of $27 million ($20 million after tax) related to shareholder matters; and


•	in the second quarter, an income tax expense of $11 million as a result of the change in the province of Ontario's corporate income tax rate.

In 2011, there were two significant items included in Net income as follows:


•	in the fourth quarter, advisory fees of $6 million ($5 million after tax) related to shareholder matters; and


•	in the fourth quarter, a benefit of $37 million resulting from the resolution of certain tax matters.

Reconciliation of Non-GAAP Performance Measures to GAAP Performance Measures

The following tables reconcile non-GAAP measures presented in Item 6. Selected Financial Data and discussed further in other sections of this Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations to the most directly comparable measures presented in accordance with GAAP for the years ended December 31, 2015, 2014, 2013, 2012 and 2011:

Adjusted operating income is calculated as Operating income reported on a GAAP basis less significant items.



Operating income	For the year ended December 31
(in millions)	2015		2014		2013			2012			2011
Adjusted operating income	$	2,620	$	2,335	$	1,844		$	1,309		$	967
Add significant items:
Gain on sale of D&H South	68		—		—			—			—
Labour restructuring	—		4		7			(53		)	—
Asset impairments	—		—		(435		)	(265		)	—
Management transition costs	—		—		4			(42		)	—
Operating income as reported	$	2,688	$	2,339	$	1,420		$	949		$	967

Adjusted income is calculated as Net income reported on a GAAP basis less significant items.



Net income	For the year ended December 31
(in millions)	2015			2014			2013			2012			2011
Adjusted income	$	1,625		$	1,482		$	1,132		$	753		$	538
Add significant items, net of tax:
Gain on sale of D&H South	42			—			—			—			—
Labour restructuring	—			3			5			(39		)	—
Asset impairments	—			—			(257		)	(170		)	—
Management transition costs	—			—			2			(29		)	—
Advisory fees related to shareholder matters	—			—			—			(20		)	(5		)
Impact of FX translation on U.S. dollar-denominated debt	(257		)	(9		)	—			—			—
Early redemption premium on notes	(35		)	—			—			—			—
Income tax rate change	(23		)	—			(7		)	(11		)	37
Net income as reported	$	1,352		$	1,476		$	875		$	484		$	570

Adjusted diluted earnings per share is calculated using Adjusted income, as defined above, divided by the weighted-average diluted shares outstanding during the period as determined in accordance with GAAP.



Diluted earnings per share	For the year ended December 31
	2015			2014			2013			2012			2011
Adjusted diluted earnings per share	$	10.10		$	8.50		$	6.42		$	4.34		$	3.15
Add significant items:
Gain on sale of D&H South	0.26			—			—			—			—
Labour restructuring	—			0.01			0.03			(0.22		)	—
Asset impairments	—			—			(1.46		)	(0.98		)	—
Management transition costs	—			—			0.01			(0.17		)	—
Advisory fees related to shareholder matters	—			—			—			(0.12		)	(0.03		)
Impact of FX translation on U.S. dollar-denominated debt	(1.60		)	(0.05		)	—			—			—
Early redemption premium on notes	(0.22		)	—			—			—			—
Income tax rate change	(0.14		)	—			(0.04		)	(0.06		)	0.22
Diluted earnings per share as reported	$	8.40		$	8.46		$	4.96		$	2.79		$	3.34

Adjusted operating ratio excludes those significant items that are reported within Operating income. Adjusted operating ratio is a key measure of operating performance tracked by management.



Operating ratio	For the year ended December 31
	2015		2014		2013		2012		2011
Adjusted operating ratio	61.0	%	64.7	%	69.9	%	77.0	%	81.3	%
Add significant items:
Gain on sale of D&H South	(1.0	)%	—		—		—		—
Labour restructuring	—		—		(0.1	)%	0.9	%	—
Asset impairments	—		—		7.1	%	4.7	%	—
Management transition costs	—		—		(0.1	)%	0.7	%	—
Operating ratio as reported	60.0	%	64.7	%	76.8	%	83.3	%	81.3	%

ROIC and Adjusted ROIC

ROIC is calculated as Operating income less Other income and charges, tax effected at the Company's annualized effective tax rate, on a rolling twelve-month basis, divided by the sum of Total shareholders' equity, Long-term debt, Long-term debt maturing within one year and Short-term borrowing, as presented in the Company's Consolidated Financial Statements, averaged between the beginning and ending balance over a rolling twelve-month period. Adjusted ROIC excludes significant items reported in Operating income and Other income and charges in the Company's Consolidated Financial Statements, as these significant items are not considered indicative of future financial trends either by nature or amount. ROIC and Adjusted ROIC are all-encompassing performance measures that measure how productively the Company uses its long-term capital investments, representing critical indicators of good operating and investment decisions made by management and are important performance criteria in determining certain elements of the Company's long-term incentive plan. ROIC and Adjusted ROIC are presented in Item 6. Selected Financial Data and discussed further in Results of Operations of this Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Calculation of ROIC and Adjusted ROIC



(in millions, except for percentages)	2015			2014			2013			2012			2011
Operating income for the year ended December 31	$	2,688		$	2,339		$	1,420		$	949		$	967
Less:
Other income and charges	335			19			17			37			18
Tax ⁽¹⁾	728			640			312			218			172
	$	1,625		$	1,680		$	1,091		$	694		$	777
Average for the twelve months of total shareholders' equity, long-term debt, long-term debt maturing within one year and short-term borrowing	$	12,561		$	11,653		$	10,842		$	9,564		$	9,259
ROIC	12.9		%	14.4		%	10.1		%	7.3		%	8.4		%

⁽¹⁾ Tax was calculated at annualized effective tax rate for each of the above items for the periods presented.



(in millions, except for percentages)	2015			2014			2013			2012			2011
Adjusted operating income for the year ended December 31	$	2,620		$	2,335		$	1,844		$	1,309		$	967
Less:
Other income and charges	335			19			17			37			18
Add significant items:
Advisory fees related to shareholder matters	—			—			—			27			6
Impact of FX translation on U.S. dollar-denominated debt	297			12			—			—			—
Early redemption premium on notes	47			—			—			—			—
Less: tax ⁽¹⁾	716			642			491			344			221
	$	1,913		$	1,686		$	1,336		$	955		$	734
Average for the twelve months of total shareholders' equity, long-term debt, long-term debt maturing within one year and short-term borrowing	$	12,561		$	11,653		$	10,842		$	9,564		$	9,259
Adjusted ROIC	15.2		%	14.5		%	12.3		%	10.0		%	7.9		%

⁽¹⁾ Tax was calculated at annualized effective tax rate for each of the above items for the periods presented.

Free Cash

Free cash is calculated as Cash provided by operating activities, less Cash used in investing activities, excluding Changes in restricted cash and cash equivalents and investment balances used to collateralize letters of credit, and Dividends paid, adjusted for changes in cash and cash equivalents balances resulting from FX fluctuations. Free cash is a measure that management considers to be an indicator of liquidity. Free cash is useful to investors and other external users of the consolidated financial information as it assists with the evaluation of the Company's ability to generate cash from its operations without incurring additional external financing. Positive Free cash indicates the amount of cash available for reinvestment in the business, or cash that can be returned to investors through increased dividends, stock repurchase programs, debt retirements or a combination of these. Conversely, negative Free cash indicates the amount of cash that must be raised from investors through new debt or equity issues, reduction in available cash balances or a combination of these. Free cash should be considered in addition to, rather than as a substitute for, Cash provided by operating activities. Free cash is presented in Item 6. Selected Financial Data and discussed further in Liquidity and Capital Resources of this Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Reconciliation of Cash Provided by Operating Activities to Free Cash



	For the year ended December 31
(in millions)	2015			2014			2013			2012			2011
Cash provided by operating activities	$	2,459		$	2,123		$	1,950		$	1,328		$	512
Cash used in investing activities	(1,123		)	(750		)	(1,597		)	(1,011		)	(1,044		)
Change in restricted cash and cash equivalents used to collateralize letters of credit ⁽¹⁾	—			(411		)	411			—			—
Dividends paid	(226		)	(244		)	(244		)	(223		)	(193		)
Effect of foreign currency fluctuations on U.S. dollar-denominated cash and cash equivalents	45			7			10			(1		)	1
Free cash	$	1,155		$	725		$	530		$	93		$	(724	)

⁽¹⁾ Changes in restricted cash and cash equivalents related to collateralized letters of credit are discussed further in Item 8. Financial Statements and Supplementary Data, Note 19 Debt.

Interest Coverage Ratio

Interest coverage ratio is measured, on a rolling twelve-month basis, as EBIT divided by Net interest expense. Interest coverage ratio is an indicator of liquidity used in assessing the Company’s debt servicing capabilities. This ratio provides useful information on how the Company's debt servicing capabilities have changed, period over period and in comparison to the Company’s peers. Additionally, investors, analysts, and lenders may use this measure to assess the Company's debt servicing capabilities. Interest coverage ratio is discussed further in Liquidity and Capital Resources of this Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Adjusted interest coverage ratio is calculated as Adjusted EBIT divided by Net interest expense. By excluding significant items which affect EBIT, Adjusted interest coverage ratio assists management in comparing the Company's performance over various reporting periods on a consistent basis. Adjusted interest coverage ratio is discussed further in Liquidity and Capital Resources of this Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Calculation of Interest Coverage Ratio and Adjusted Interest Coverage Ratio



(in millions, except for ratios)	2015		2014		2013
EBIT	$	2,353	$	2,320	$	1,403
Adjusted EBIT	$	2,629	$	2,328	$	1,827
Net interest expense	$	394	$	282	$	278
Interest coverage ratio	6.0		8.2		5.0
Adjusted interest coverage ratio	6.7		8.3		6.6

EBIT is calculated as Operating income, less Other income and charges. Adjusted EBIT excludes significant items reported in Operating income and Other income and charges. These are components of the calculations of Interest coverage ratio and Adjusted interest coverage ratio.



Earnings before interest and tax	For the year ended December 31
(in millions)	2015			2014			2013			2012			2011
Adjusted EBIT	$	2,629		$	2,328		$	1,827		$	1,299		$	955
Add Significant items:
Gain on sale of D&H South	68			—			—			—			—
Labour restructuring	—			4			7			(53		)	—
Asset impairments	—			—			(435		)	(265		)	—
Management transition	—			—			4			(42		)	—
Advisory costs related to shareholder matters	—			—			—			(27		)	(6		)
Impact of foreign exchange translation on U.S. dollar-denominated debt	(297		)	(12		)	—			—			—
Early redemption premium on notes	(47		)	—			—			—			—
EBIT	2,353			2,320			1,403			912			949
Less:
Net interest expense	394			282			278			276			252
Income tax expense	607			562			250			152			127
Net income as reported	$	1,352		$	1,476		$	875		$	484		$	570

Adjusted Net Debt to Adjusted EBITDA Ratio

Adjusted net debt is defined as Long-term debt, Long-term debt maturing within one year and Short-term borrowing as reported on the Company’s Consolidated Balance Sheets adjusted for pension plans deficit, the net present value of operating leases, which is discounted by the Company’s effective interest rate for each of the years presented, and Cash and cash equivalents. Adjusted EBITDA is calculated as Adjusted EBIT plus Depreciation and amortization, adjusted for net periodic pension and other benefit cost and operating lease expense. Adjusted net debt to adjusted EBITDA ratio is calculated as Adjusted net debt divided by Adjusted EBITDA.

The Adjusted net debt to adjusted EBITDA ratio is one of the key metrics used by credit rating agencies in assessing the Company's financial capacities and constraints and determining the credit rating of the Company. By excluding the impact of certain items that are not considered by management in developing a minimum threshold, Adjusted net debt to Adjusted EBITDA ratio provides a metric that management uses to evaluate the Company's financial discipline with respect to capital markets credit sensitivities from management's perspective and communicates it publicly with investors, analysts and credit rating agencies. Adjusted net debt to Adjusted EBITDA ratio is discussed further in Liquidity and Capital Resources of this Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Calculation of Adjusted Net Debt to Adjusted EBITDA Ratio



(in millions, except for ratios)	2015		2014		2013
Adjusted net debt as at December 31	$	9,041	$	6,268	$	5,108
Adjusted EBITDA for the year ended December 31	3,281		2,864		2,464
Adjusted net debt to Adjusted EBITDA ratio	2.8		2.2		2.1

The following tables reconcile Adjusted net debt to Long-term debt and Adjusted EBITDA to Adjusted EBIT for the years ended December 31, 2015, 2014, and 2013.

Reconciliation of Adjusted Net Debt to Long-term Debt



(in millions)	2015			2014			2013
Adjusted net debt as at December 31	$	9,041		$	6,268		$	5,108
Add:
Pension plans deficit	(295		)	(288		)	(227		)
Net present value of operating leases ⁽¹⁾	(439		)	(447		)	(518		)
Cash and cash equivalents	650			226			476
Long-term debt as at December 31	$	8,957		$	5,759		$	4,839

⁽¹⁾ Operating leases were discounted at the Company’s effective interest rate for each of the years presented.

Reconciliation of Adjusted EBITDA to Adjusted EBIT



(in millions)	2015			2014			2013
Adjusted EBITDA for the year ended December 31	$	3,281		$	2,864		$	2,464
Add:
Adjustment for net periodic pension and other benefit cost	70			137			82
Operating lease expense	(127		)	(121		)	(154		)
Depreciation and amortization	(595		)	(552		)	(565		)
Adjusted EBIT for the year ended December 31	$	2,629		$	2,328		$	1,827

Off-Balance Sheet Arrangements

Guarantees

At December 31, 2015 , the Company had residual value guarantees on operating lease commitments of $28 million, compared to $120 million at December 31, 2014 . The maximum amount that could be payable under these and all of the Company’s other guarantees cannot be reasonably estimated due to the nature of certain guarantees. All or a portion of amounts paid under certain guarantees could be recoverable from other parties or through insurance. As at December 31, 2015 , the fair value of these guarantees recognized as a liability was $4 million, compared to $3 million at December 31, 2014.

Contractual Commitments

The accompanying table indicates the Company’s obligations and commitments to make future payments for contracts, such as debt, capital lease and commercial arrangements.

Contractual Commitments

At December 31, 2015



Payments due by period (in millions)	Total		2016		2017 & 2018		2019 & 2020		2021 & beyond
Contractual commitments
Interest on long-term debt and capital lease	$	13,398	$	507	$	983	$	851	$	11,057
Long-term debt	8,784		26		807		576		7,375
Capital leases	174		4		9		11		150
Operating lease ⁽¹⁾	553		106		153		97		197
Supplier purchase	1,544		223		374		196		751
Other long-term liabilities ⁽²⁾	617		95		118		112		292
Total contractual commitments	$	25,070	$	961	$	2,444	$	1,843	$	19,822

⁽¹⁾ Residual value guarantees on certain leased equipment with a maximum exposure of $28 million are not included in the minimum payments shown above, as management believes that CP will not be required to make payments under these residual guarantees.

⁽²⁾ Includes expected cash payments for restructuring, environmental remediation, asset retirement obligations, post-retirement benefits, workers’ compensation benefits, long-term disability benefits, pension benefit payments for the Company’s non-registered supplemental pension plan and certain other long-term liabilities. Projected payments for post-retirement benefits, workers’ compensation benefits and long-term disability benefits include the anticipated payments for years 2016 to 2025. Pension contributions for the Company’s registered pension plans are not included due

to the volatility in calculating them. Pension payments are discussed further in Critical Accounting Estimates of this Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Certain Other Financial Commitments

In addition to the financial commitments mentioned previously in Off-Balance Sheet Arrangements and Contractual Commitments of this Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations, the Company is party to certain other financial commitments set forth in the table and discussed below.

Letters of Credit

Letters of credit are obtained mainly to provide security to third parties under the terms of various agreements, including workers’ compensation and supplemental pension plan. CP is liable for these contractual amounts in the case of non-performance under these agreements. Letters of credit are accommodated through a revolving credit facility and the Company’s bilateral letter of credit facility.

Capital Commitments

The Company remains committed to maintaining the current high level of plant quality and renewing the franchise. As part of this commitment, CP has entered into contracts with suppliers to make various capital purchases related to track programs. Payments for these commitments are due in 2016 through 2032. These expenditures are expected to be financed by cash generated from operations or by issuing new debt.

At December 31, 2015



Amount of commitments per period (in millions)	Total		2016		2017 & 2018		2019 & 2020		2021 & beyond
Commitments
Letters of credit	$	375	$	375	$	—	$	—	$	—
Capital commitments	374		296		44		19		15
Total commitments	$	749	$	671	$	44	$	19	$	15

Critical Accounting Estimates

To prepare consolidated financial statements that conform with GAAP, the Company is required to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reported periods. Using the most current information available, the Company reviews estimates on an ongoing basis, including those related to environmental liabilities, pensions and other benefits, property, plant and equipment, deferred income taxes, legal and personal injury liabilities and goodwill.

The development, selection and disclosure of these estimates, and this MD&A, have been reviewed by the Board of Directors’ Audit Committee, which is composed entirely of independent directors.

Environmental Liabilities

CP estimates the probable cost to be incurred in the remediation of property contaminated by past railway use. The Company screens and classifies sites according to typical activities and scale of operations conducted, and develops remediation strategies for each property based on the nature and extent of the contamination, as well as the location of the property and surrounding areas that may be adversely affected by the presence of contaminants. CP also considers available technologies, treatment and disposal facilities and the acceptability of site-specific plans based on the local regulatory environment. Site-specific plans range from containment and risk management of the contaminants through to the removal and treatment of the contaminants and affected soils and groundwater. The details of the estimates reflect the environmental liability at each property. The Company is committed to fully meeting regulatory and legal obligations with respect to environmental matters.

Liabilities for environmental remediation may change from time to time as new information about previously untested sites becomes known. The net liability may also vary as the courts decide legal proceedings against outside parties responsible for contamination. These potential charges, which cannot be quantified at this time, are not expected to be material to the Company’s financial position, but may materially affect income in the period in which a charge is recognized. Material increases to costs would be reflected as increases to Other long-term liabilities and Accounts payable and accrued liabilities on the Company’s Consolidated Balance Sheets and to Purchased services and other within Operating expenses on the Consolidated Statements of Income.

At December 31, 2015 and 2014, the accrual for environmental remediation on the Company’s Consolidated Balance Sheets amounted to $93 million and $91 million respectively, of which the long-term portion amounting to $80 million in 2015 and $75 million in 2014 was included in Other long-term liabilities and the short-term portion amounting to $13 million in 2015 and $16 million in 2014 was included in Accounts payable and accrued liabilities. Cash payments related to the Company’s environmental remediation

program totalled $18 million in 2015, compared with $8 million in 2014. The U.S. dollar-denominated portion of the liability was affected by the change in FX, resulting in an increase in environmental liabilities of $12 million in 2015 and $6 million in 2014.

Cash payments for environmental initiatives are estimated to be approximately $13 million in 2016, $11 million in 2017, $10 million in 2018 and a total of approximately $61 million over the remaining years through 2025, which will be paid in decreasing amounts. All payments will be funded from general operations.

CP continues to be responsible for remediation work on portions of a property in the state of Minnesota and continues to retain liability accruals for remaining future expected costs. The costs are expected to be incurred over approximately 10 years. The state’s voluntary investigation and remediation program will oversee the work to ensure it is completed in accordance with applicable standards.

Pensions and Other Benefits

CP has defined benefit and defined contribution pension plans. Other benefits include post-retirement medical and life insurance for pensioners, and some post-employment workers’ compensation and long-term disability benefits in Canada. Workers’ compensation and long-term disability benefits are discussed in the Legal and Personal Injury Liabilities section below. Pension and post-retirement benefits liabilities are subject to various external influences and uncertainties.

Pension costs are actuarially determined using the projected-benefit method pro-rated over the credited service periods of employees. This method incorporates best estimates of expected plan investment performance, salary escalation and retirement ages of employees. The expected return on fund assets is calculated using market-related asset values developed from a five-year average of market values for the fund’s public equity securities and absolute return strategies (with each prior year’s market value adjusted to the current date for assumed investment income during the intervening period) plus the market value of the fund’s fixed income, real estate and infrastructure securities, subject to the market-related asset value not being greater than 120% of the market value nor being less than 80% of the market value.

The discount rate used to determine the benefit obligation is based on market interest rates on high-quality corporate debt instruments with matching cash flows. Unrecognized actuarial gains and losses in excess of 10% of the greater of the benefit obligation and the market-related value of plan assets are amortized over the expected average remaining service period of active employees expected to receive benefits under the plan (approximately 10 years). Prior service costs arising from collectively bargained amendments to pension plan benefit provisions are amortized over the term of the applicable union agreement. Prior service costs arising from all other sources are amortized over the expected average remaining service period of active employees who were expected to receive benefits under the plan at the date of amendment.

The obligations with respect to post-retirement benefits, including health care and life insurance, are actuarially determined and are accrued using the projected-benefit method pro-rated over the credited service periods of employees. The obligations with respect to post-employment benefits, including some workers’ compensation and long-term disability benefits in Canada are the actuarial present value of benefits payable to employees with existing claims for injuries or disability.

Pension Liabilities and Pension Assets

The Company included pension benefit liabilities of $285 million in Pension and other benefit liabilities and $10 million in Accounts payable and accrued liabilities on the Company’s December 31, 2015 Consolidated Balance Sheets. The Company also included post-retirement benefits accruals of $387 million in Pension and other benefit liabilities and $21 million in Accounts payable and accrued liabilities on the Company’s December 31, 2015 Consolidated Balance Sheets. Accruals for self-insured workers' compensation and long-term disability benefit plans, including $86 million in Pension and other benefit liabilities, are discussed in the Legal and Personal Injury Liabilities section below.

The Company included pension benefit assets of $1,401 million in Pension assets on the Company’s December 31, 2015 Consolidated Balance Sheets.

Net Periodic Benefit Costs

Net periodic benefit costs for pensions and post-retirement benefits were included in Compensation and benefits on the December 31, 2015 Consolidated Statements of Income. Combined net periodic benefit costs for pensions and post-retirement benefits (excluding self-insured workers' compensation and long-term disability benefits) were $66 million in 2015, compared with net periodic benefit credits of $19 million in 2014.

Net periodic benefit costs for pensions were $41 million in 2015, compared with net periodic benefit credits of $44 million in 2014. The benefit cost portion related to defined benefit pensions was $32 million in 2015, compared with the benefit credit portion of $52 million in 2014. The benefit cost portion related to defined contribution pensions (equal to contributions) was $9 million in 2015, compared with $8 million for 2014. Net periodic benefit costs for post-retirement benefits were $25 million in 2015, compared with $25 million in 2014.

CP estimates net periodic benefit credits for defined benefit pensions to be approximately $90 million in 2016, and net periodic benefit costs for defined contribution pensions to be approximately $9 million in 2016. Net periodic benefit costs for post-retirement benefits in 2016 are not expected to differ materially from the 2015 costs.

Pension Plan Contributions

The Company made contributions of $81 million to the defined benefit pension plans in 2015, compared with $80 million in 2014. The Company’s main Canadian defined benefit pension plan accounts for 95% of CP’s pension obligation and can produce significant volatility in pension funding requirements, given the pension fund’s size, the many factors that drive the pension plan’s funded status, and Canadian statutory pension funding requirements. The Company made voluntary prepayments of $600 million in 2011, $650 million in 2010 and $500 million in 2009 to the Company’s main Canadian defined benefit pension plan. CP has applied $1,276 million of these voluntary prepayments to reduce its pension funding requirements in 2012–2015, leaving $474 million of the voluntary prepayments still available at December 31, 2015 to reduce CP’s pension funding requirements in 2016 and future years. CP continues to have significant flexibility with respect to the rate at which the remaining voluntary prepayments are applied to reduce future years’ pension contribution requirements, which allows CP to manage the volatility of future pension funding requirements. At this time, CP estimates it will apply $35 million of the remaining voluntary prepayments against its 2016 pension funding requirements.

CP estimates its aggregate pension contributions, including its defined benefit and defined contribution plan, to be in the range of $80 million to $90 million in 2016, and in the range of $60 million to $110 million per year from 2017 to 2019. These estimates reflect the Company’s current intentions with respect to the rate at which CP will apply the remaining voluntary prepayments against contribution requirements in the next few years.

Future pension contributions will be highly dependent on the Company’s actual experience with such variables as investment returns, interest rate fluctuations and demographic changes, on the rate at which previous years’ voluntary prepayments are applied against pension contribution requirements, and on any changes in the regulatory environment. CP will continue to make contributions to the pension plans that, at a minimum, meet pension legislative requirements.

Pension Plan Risks

Fluctuations in the liability and net periodic benefit costs for pensions result from favourable or unfavourable investment returns and changes in long-term interest rates. The impact of favourable or unfavourable investment returns is moderated by the use of a market-related asset value for the main Canadian defined benefit pension plan’s public equity securities and absolute return strategies. The impact of changes in long-term rates on pension obligations is partially offset by their impact on the pension funds’ investments in fixed income assets.

The plans’ investment policy provides a target allocation of approximately 46% of the plans’ assets to be invested in public equity securities. As a result, stock market performance is a key driver in determining the pension funds’ asset performance. If the rate of investment return on the plans’ public equity securities in 2015 had been 10 percentage points higher (or lower) than the actual 2015 rate of investment return on such securities, 2016 net periodic benefit costs for pensions would be lower (or higher) by $26 million.

Changes in bond yields can result in changes to discount rates and to changes in the value of fixed income assets. If the discount rate as at December 31, 2015 had been higher (or lower) by 0.1% with no related changes in the value of the pension funds’ investment in fixed income assets, 2016 net periodic benefit costs for pensions would be lower (or higher) by $13 million. However, a change in bond yields would also lead to a change in the value of the pension funds’ investment in fixed income assets, and this change would partially offset the impact to net periodic benefit costs noted above.

The Company estimates that an increase in the discount rate of 0.1% would decrease the defined benefit pension plans’ projected benefit obligations by approximately $151 million, and estimates that a decrease in the discount rate of 0.1% would increase the defined benefit pension plans’ projected benefit obligations by approximately $153 million. Similarly, for every 0.1% the actual return on assets varies above (or below) the estimated return for the year, the value of the defined benefit pension plans’ assets would increase (or decrease) by approximately $12 million.

Adverse experience with respect to these factors could eventually increase funding and pension expense significantly, while favourable experience with respect to these factors could eventually decrease funding and pension expense significantly.

Fluctuations in the post-retirement benefit obligation also can result from changes in the discount rate used. A 0.1% increase (decrease) in the discount rate would decrease (increase) the obligation by approximately $6 million.

CP reviews its pensioner mortality experience to ensure that the mortality assumption continues to be appropriate, or to determine what changes to the assumption is needed.

Property, Plant and Equipment

The Company follows the group depreciation method under which a single depreciation rate is applied to the total cost in a particular class of property, despite differences in the service life or salvage value of individual properties within the same class. CP performs depreciation studies of each property group approximately every three years to update depreciation rates. The depreciation studies are based on statistical analysis of historical retirements of properties in the group and incorporate engineering estimates of changes in current operations and of technological advances. CP depreciates the cost of properties, net of salvage, on a straight-line basis over the estimated useful life of the property group. The estimates of economic lives are uncertain and can vary due to technological changes or in the rate of wear. Additionally, the depreciation rates are updated to reflect the change in residual values of the assets in the class. Under the group depreciation method, retirements or disposals of properties in the normal course of business are accounted for by charging the cost of the property less any net salvage to accumulated depreciation. For the sale or retirement of larger groups of depreciable assets that are unusual and were not included in the Company’s depreciation studies, CP records a gain or loss for the difference between net proceeds and net book value of the assets sold or retired.

Due to the capital intensive nature of the railway industry, depreciation represents a significant part of operating expenses. The estimated useful lives of properties have a direct impact on the amount of depreciation recorded as a component of Properties on the Company’s Consolidated Balance Sheets. At December 31, 2015 and 2014, accumulated depreciation was $6,952 million and $6,505 million, respectively.

Revisions to the estimated useful lives and net salvage projections for properties constitute a change in accounting estimate and are addressed prospectively by amending depreciation rates. It is anticipated that there will be changes in the estimates of weighted average useful lives and net salvage for each property group as assets are acquired, used and retired. Substantial changes in either the useful lives of properties or the salvage assumptions could result in significant changes to depreciation expense. For example, if the estimated average life of road locomotives, the largest asset group, increased (or decreased) by 5%, annual depreciation expense would decrease (or increase) by approximately $3 million.

The Company reviews the carrying amounts of properties when circumstances indicate that such carrying amounts may not be recoverable based on future undiscounted cash flows. When such properties are determined to be impaired, recorded asset values are revised to their fair values and an impairment loss is recognized.

Deferred Income Taxes

CP accounts for deferred income taxes based on the liability method. This method focuses on the Company’s balance sheet and the temporary differences otherwise calculated from the comparison of book versus tax values. It is assumed that such temporary differences will be settled in the deferred income tax assets and liabilities at the balance sheet date.

In determining deferred income taxes, the Company makes estimates and assumptions regarding deferred tax matters, including estimating the timing of the realization and settlement of deferred income tax assets (including the benefit of tax losses) and liabilities. Deferred income taxes are calculated using enacted federal, provincial, and state future income tax rates, which may differ in future periods.

A deferred income tax expense of $234 million was included in Income tax expense for 2015 and $354 million was included in Income tax expense in 2014. The decrease in deferred income tax expense in 2015 was primarily due to the reclassification of deferred tax expense to current tax expense related to the D&H South sale, deferred tax recoveries related to FX translation on U.S. dollar-denominated debt and the early redemption premium on notes, and a lower deferred tax expense offset by a higher current tax expense due to the utilization of a significant portion of previously unused income tax operating losses carried forward. At December 31, 2015 and 2014, deferred income tax liabilities of $3,391 million and $2,717 million, respectively, were recorded as a long-term liability and are composed largely of temporary differences related to accounting for properties.

Legal and Personal Injury Liabilities

The Company is involved in litigation in Canada and the U.S. related to CP’s business. Management is required to establish estimates of the potential liability arising from incidents, claims and pending litigation, including personal injury claims and certain occupation-related and property damage claims.

Accruals for incidents, claims and litigation, including Workers' Compensation Board ("WCB") accruals, totalled $ 133 million , net of insurance recoveries, at December 31, 2015 and $ 150 million at December 31, 2014 . At December 31, 2015 and 2014 respectively, the total accrual included $ 86 million and $89 million in Pension and other benefit liabilities, $18 million and $15 million in Other long-term liabilities and $30 million and $47 million in Accounts payable and accrued liabilities, partially offset by $1 million and $1 million in Other assets.

Legal Liabilities

These estimates are determined on a case-by-case basis. They are based on an assessment of the actual damages incurred and current legal advice with respect to settlements in other similar cases. CP employs experienced claims adjusters who investigate and assess the validity of individual claims made against us and estimate the damages incurred.

A provision for incidents, claims or litigation is recorded based on the facts and circumstances known at the time. CP accrues for likely claims when the facts of an incident become known and investigation results provide a reasonable basis for estimating the liability. The lower end of the range is accrued if the facts and circumstances permit only a range of reasonable estimates and no single amount in that range is a better estimate than any other. Additionally, for administrative expediency, a general provision for lesser value injury cases is kept. Facts and circumstances related to asserted claims can change, and a process is in place to monitor accruals for changes in accounting estimates.

Personal Injury Liabilities

With respect to claims related to occupational health and safety in the provinces of Quebec, Ontario, Manitoba and B.C., claims administered through the WCB are actuarially determined. In the provinces of Saskatchewan and Alberta, the Company is assessed for an annual WCB contribution. As a result, this amount is not subject to estimation by management.

Railway employees in the U.S. are not covered by a workers’ compensation program, but are covered by U.S. federal law for railway employees. For accrual purposes, a combination of case-by-case analysis and statistical analysis is utilized.

Goodwill

As part of the acquisition of DM&E in 2007, CP recognized goodwill of U.S. $147 million on the allocation of the purchase price, determined as the excess of the purchase price over the fair value of the net assets acquired. Since the acquisition, the operations of DM&E have been integrated with CP’s U.S. operations and the related goodwill is allocated to CP’s U.S. reporting unit. Goodwill is tested for impairment at least once per year as at October 1st. The goodwill impairment test determines if the fair value of the reporting unit continues to exceed its net book value, or whether an impairment charge is required. The fair value of the reporting unit is affected by projections of its profitability including estimates of revenue growth, which are inherently uncertain.

The 2015 and 2014 annual test for impairment determined that the estimated fair value of CP’s U.S. reporting unit exceeded the net book value including the allocated goodwill by approximately 27% and 102%, respectively.

The impairment test was performed primarily using an income approach based on discounted cash flows. A discount rate of 10.0% was used, based on the Company’s weighted average cost of capital. The 2014 impairment test also used a discount rate of 10.0%. A change in discount rates of 0.25% would change the valuation by 4.0% to 4.4%. The valuation used revenue growth projections ranging from 2.8% to 5.0% annually. The revenue growth projection in the 2014 impairment test was 4.0% to 14.8%. A change in the long-term growth rate of 0.25% would change the valuation by 2.5% to 2.7%. A secondary approach used in the valuation was a market approach, which included a comparison of implied earnings multiples of CP U.S. to trading earnings multiples of comparable companies. The derived value of CP U.S. using the income approach compared favourably with the trading multiples of other Class I railroads. The income approach was chosen over the market approach; however, both approaches conclude that the assets of CP U.S. are fairly valued.

Decreases to the profit projections, which could be caused by a prolonged economic recession, or increases to the discount rate used in the valuation, could require an impairment in future periods. The carrying value of CP’s goodwill changes from period to period due to changes in the exchange rate. At December 31, 2015, goodwill was $198 million and was $164 million in 2014, the increase was primarily due to the favourable impact of the change in FX.

Forward-Looking Information

This MD&A and Annual Report on Form 10-K contains certain forward-looking statements within the meaning of the United States Private Securities Litigation Reform Act of 1995 and other relevant securities legislation. These forward-looking statements include, but are not limited to, statements concerning the Company’s defined benefit pension expectations for 2016 and through 2019, our expectations for 2016 which includes: operating ratio below 59%, double-digit EPS growth from full-year 2015 adjusted diluted EPS of $10.10, and capital expenditures of approximately $1.1 billion, as well as statements concerning the Company’s operations, anticipated financial performance, business prospects and strategies, including statements concerning the anticipation that cash flow from operations and various sources of financing will be sufficient to meet debt repayments and obligations in the foreseeable future and concerning anticipated capital programs, statements regarding future payments including income taxes and pension contributions, and capital expenditures. Forward-looking information typically contains statements with words such as “financial expectations”, “key assumptions”, “anticipate”, “believe”, “expect”, “plan”, “will”, “outlook”, “should” or similar words suggesting future outcomes.

Readers are cautioned not to place undue reliance on forward-looking information because it is possible that CP will not achieve predictions, forecasts, projections and other forms of forward-looking information. Current economic conditions render assumptions, although reasonable when made, subject to greater uncertainty. In addition, except as required by law, CP undertakes no obligation to update publicly or otherwise revise any forward-looking information, whether as a result of new information, future events or otherwise.

By its nature, forward-looking information involves numerous assumptions, inherent risks and uncertainties, including but not limited to the following factors: changes in business strategies; general North American and global economic, credit and business conditions; risks in agricultural production such as weather conditions and insect populations; the availability and price of energy commodities; the effects of competition and pricing pressures; industry capacity; shifts in market demand; inflation; changes in laws and regulations, including regulation of rates; changes in taxes and tax rates; potential increases in maintenance and operating costs; uncertainties of investigations, proceedings or other types of claims and litigation; labour disputes; risks and liabilities arising from derailments; transportation of dangerous goods; timing of completion of capital and maintenance projects; currency and interest rate fluctuations; effects of changes in market conditions on the financial position of pension plans and investments; and various events that could disrupt operations, including severe weather, droughts, floods, avalanches and earthquakes as well as security threats and the governmental response to them, and technological changes.

There are more specific factors that could cause actual results to differ materially from those described in the forward-looking statements contained in this MD&A. These more specific factors are identified and discussed in Item 1A. Risk Factors. Other risks are detailed from time to time in reports filed by CP with securities regulators in Canada and the United States.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Foreign Exchange Risk

Although CP conducts business primarily in Canada, a significant portion of its revenues, expenses, assets and liabilities including debt are denominated in U.S. dollars. The value of the Canadian dollar is affected by a number of domestic and international factors, including, without limitation, economic performance, and Canadian, U.S. and international monetary policies. Consequently, the Company’s results are affected by fluctuations in the exchange rate between these currencies. On an annualized basis, a $0.01 weakening (or strengthening) of the Canadian dollar positively (or negatively) impacts Freight revenues by approximately $29 million and negatively (or positively) impacts Operating expenses by approximately $13 million. FX translation on the Company’s U.S. dollar-denominated long-term debt is excluded from these sensitivities. To manage this exposure to fluctuations in exchange rates between Canadian and U.S. dollars, CP may sell or purchase U.S. dollar forwards at fixed rates in future periods. In addition, changes in the exchange rate between the Canadian dollar and other currencies (including the U.S. dollar) make the goods transported by the Company more or less competitive in the world marketplace and may in turn positively or negatively affect revenues.

Interest Rate Risk

In order to meet the Company’s capital structure requirements, CP may enter into long-term debt agreements. These debt agreements expose CP to increased interest costs on future fixed debt instruments and existing variable rate debt instruments, should market rates increase. In addition, the present value of the Company’s assets and liabilities will also vary with interest rate changes. To manage interest rate exposure, CP may enter into forward rate agreements such as treasury rate locks or bond forwards that lock in rates for a future date, thereby protecting against interest rate increases. CP may also enter into swap agreements whereby one party agrees to pay a fixed rate of interest while the other party pays a floating rate. Contingent on the direction of interest rates, the Company may incur higher costs depending on the contracted rate.

Information concerning market risk is set forth under Item 8. Financial Statements and Supplementary Data, Note 17 Accounts payable and accrued liabilities and Note 19 Debt.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS



	Page

Report of Independent Registered Public Accounting Firm	59

Consolidated Statements of Income
For the Year Ended December 31, 2015, 2014, and 2013	60

Consolidated Statements of Comprehensive Income
For the Year Ended December 31, 2015, 2014, and 2013	61

Consolidated Balance Sheets
At December 31, 2015, and 2014	62

Consolidated Statements of Cash Flows
For the Year Ended December 31, 2015, 2014, and 2013	63

Consolidated Statements of Changes in Shareholders' Equity
For the Year Ended December 31, 2015, 2014, and 2013	64

Notes to Consolidated Financial Statements	65

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and the Shareholders of Canadian Pacific Railway Limited:

We have audited the accompanying consolidated balance sheets of Canadian Pacific Railway Limited and subsidiaries (the “Company”) as of December 31, 2015 and 2014 and the related consolidated statements of income, comprehensive income, cash flows and changes in shareholders' equity for each of the years in the three-year period ended December 31, 2015. Our audits also included the financial statement schedule listed in the index at Item 15. The consolidated financial statements and financial statement schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on the financial statements and financial statement schedule based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Canadian Pacific Railway Limited and subsidiaries as of December 31, 2015 and 2014, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2015, in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, such financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company's internal control over financial reporting as of December 31, 2015, based on the criteria established in Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 29, 2016 expressed an unqualified opinion on the Company’s internal control over financial reporting.

/s/ Deloitte LLP

Chartered Professional Accountants, Chartered Accountants

February 29, 2016

Calgary, Canada

CONSOLIDATED STATEMENTS OF INCOME



Year ended December 31 (in millions of Canadian dollars except per share data)	2015			2014		2013
Revenues
Freight	$	6,552		$	6,464	$	5,982
Non-freight	160			156		151
Total revenues	6,712			6,620		6,133
Operating expenses
Compensation and benefits	1,371			1,348		1,378
Fuel	708			1,048		1,004
Materials	184			193		160
Equipment rents	174			155		173
Depreciation and amortization	595			552		565
Purchased services and other (Note 11)	1,060			985		998
Asset impairment (Note 3)	—			—		435
Gain on sale of Delaware & Hudson South (Note 12)	(68		)	—		—
Total operating expenses	4,024			4,281		4,713
Operating income	2,688			2,339		1,420
Less:
Other income and charges (Note 4)	335			19		17
Net interest expense (Note 5)	394			282		278
Income before income tax expense	1,959			2,038		1,125
Income tax expense (Note 6)	607			562		250
Net income	$	1,352		$	1,476	$	875
Earnings per share (Note 7)
Basic earnings per share	$	8.47		$	8.54	$	5.00
Diluted earnings per share	$	8.40		$	8.46	$	4.96
Weighted-average number of shares (millions) (Note 7)
Basic	159.7			172.8		174.9
Diluted	161.0			174.4		176.5

See Notes to Consolidated Financial Statements.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME



Year ended December 31 (in millions of Canadian dollars)	2015			2014			2013
Net income	$	1,352		$	1,476		$	875
Net (loss) gain in foreign currency translation adjustments, net of hedging activities	(86		)	(32		)	3
Change in derivatives designated as cash flow hedges	(69		)	(49		)	(1		)
Change in pension and post-retirement defined benefit plans	1,059			(941		)	1,681
Other comprehensive income (loss) before income taxes (Note 8)	904			(1,022		)	1,683
Income tax (expense) recovery on above items (Note 8)	(162		)	306			(418		)
Other comprehensive income (loss) (Note 8)	742			(716		)	1,265
Comprehensive income	$	2,094		$	760		$	2,140

See Notes to Consolidated Financial Statements.

CONSOLIDATED BALANCE SHEETS



As at December 31 (in millions of Canadian dollars except Common Shares)	2015			2014
Assets
Current assets
Cash and cash equivalents	$	650		$	226
Accounts receivable, net (Note 10)	645			702
Materials and supplies	188			177
Other current assets	54			116
	1,537			1,221
Investments (Note 13)	152			112
Properties (Note 14)	16,273			14,438
Assets held for sale (Note 12)	—			182
Goodwill and intangible assets (Note 15)	211			176
Pension asset (Note 24)	1,401			304
Other assets (Note 16)	63			117
Total assets	$	19,637		$	16,550
Liabilities and shareholders’ equity
Current liabilities
Accounts payable and accrued liabilities (Note 17)	$	1,417		$	1,277
Long-term debt maturing within one year (Note 19)	30			134
	1,447			1,411
Pension and other benefit liabilities (Note 24)	758			755
Other long-term liabilities (Note 21)	318			432
Long-term debt (Note 19)	8,927			5,625
Deferred income taxes (Note 6)	3,391			2,717
Total liabilities	14,841			10,940
Shareholders’ equity
Share capital (Note 23)	2,058			2,185
Authorized unlimited Common Shares without par value. Issued and outstanding are 153.0 million and 166.1 million at December 31, 2015 and 2014, respectively.
Authorized unlimited number of first and second preferred shares; none outstanding.
Additional paid-in capital	43			36
Accumulated other comprehensive loss (Note 8)	(1,477		)	(2,219		)
Retained earnings	4,172			5,608
	4,796			5,610
Total liabilities and shareholders’ equity	$	19,637		$	16,550

Commitments and contingencies (Note 27).

Certain figures have been reclassified due to retrospective adoption of change in accounting policy (Note 2).

See Notes to Consolidated Financial Statements.



Approved on behalf of the Board:
	/s/ Andrew F. Reardon	/s/ Isabelle Courville
	Andrew F. Reardon, Director,	Isabelle Courville, Director,
	Chair of the Board	Chair of the Audit Committee

CONSOLIDATED STATEMENTS OF CASH FLOWS



Year ended December 31 (in millions of Canadian dollars)	2015			2014			2013
Operating activities
Net income	$	1,352		$	1,476		$	875
Reconciliation of net income to cash provided by operating activities:
Depreciation and amortization	595			552			565
Deferred income taxes (Note 6)	234			354			212
Pension funding in excess of expense (Note 24)	(49		)	(132		)	(55		)
Asset impairment (Note 3)	—			—			435
Other operating activities, net	52			(3		)	(80		)
Change in non-cash working capital balances related to operations (Note 9)	275			(124		)	(2		)
Cash provided by operating activities	2,459			2,123			1,950
Investing activities
Additions to properties (Note 14)	(1,522		)	(1,449		)	(1,236		)
Proceeds from the sale of west end of Dakota, Minnesota and Eastern Railroad (Note 3)	—			236			—
Proceeds from the sale of Delaware & Hudson South (Note 12)	281			—			—
Proceeds from sale of properties and other assets (Note 11)	114			52			73
Change in restricted cash and cash equivalents used to collateralize letters of credit (Note 19)	—			411			(411		)
Other	4			—			(23		)
Cash used in investing activities	(1,123		)	(750		)	(1,597		)
Financing activities
Dividends paid	(226		)	(244		)	(244		)
Issuance of CP Common Shares (Note 23)	43			62			83
Purchase of CP Common Shares (Note 23)	(2,787		)	(2,050		)	—
Issuance of long-term debt, excluding commercial paper (Note 19)	3,411			—			—
Repayment of long-term debt, excluding commercial paper (Note 19)	(505		)	(183		)	(56		)
Net (repayment) issuance of commercial paper (Note 19)	(893		)	771			—
Settlement of foreign exchange forward on long-term debt (Note 20)	—			17			—
Other	—			(3		)	(3		)
Cash used in financing activities	(957		)	(1,630		)	(220		)
Effect of foreign currency fluctuations on U.S. dollar-denominated cash and cash equivalents	45			7			10
Cash position
Increase (decrease) in cash and cash equivalents	424			(250		)	143
Cash and cash equivalents at beginning of year	226			476			333
Cash and cash equivalents at end of year	$	650		$	226		$	476
Supplemental disclosures of cash flow information:
Income taxes paid	$	176		$	226		$	31
Interest paid	$	336		$	309		$	295

See Notes to Consolidated Financial Statements.

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY



(in millions of Canadian dollars except per share data)	Share capital			Additional paid-in capital			Accumulated other comprehensive loss			Retained earnings			Total shareholders’ equity
Balance at December 31, 2012	$	2,127		$	41		$	(2,768	)	$	5,697		$	5,097
Net income	—			—			—			875			875
Other comprehensive income (Note 8)	—			—			1,265			—			1,265
Dividends declared ($1.4000 per share)	—			—			—			(246		)	(246		)
Effect of stock-based compensation expense	—			17			—			—			17
Shares issued under stock option plan (Note 23)	113			(24		)	—			—			89
Balance at December 31, 2013	2,240			34			(1,503		)	6,326			7,097
Net income	—			—			—			1,476			1,476
Other comprehensive loss (Note 8)	—			—			(716		)	—			(716		)
Dividends declared ($1.4000 per share)	—			—			—			(241		)	(241		)
Effect of stock-based compensation expense	—			19			—			—			19
CP Common Shares repurchased (Note 23)	(136		)	—			—			(1,953		)	(2,089		)
Shares issued under stock option plan (Note 23)	81			(17		)	—			—			64
Balance at December 31, 2014	2,185			36			(2,219		)	5,608			5,610
Net income	—			—			—			1,352			1,352
Other comprehensive income (Note 8)	—			—			742			—			742
Dividends declared ($1.4000 per share)	—			—			—			(221		)	(221		)
Effect of stock-based compensation expense	—			17			—			—			17
CP Common Shares repurchased (Note 23)	(181		)	—			—			(2,567		)	(2,748		)
Shares issued under stock option plan (Note 23)	54			(10		)	—			—			44
Balance at December 31, 2015	$	2,058		$	43		$	(1,477	)	$	4,172		$	4,796

See Notes to Consolidated Financial Statements.

CANADIAN PACIFIC RAILWAY LIMITED

Notes to Consolidated Financial Statements

December 31, 2015

Canadian Pacific Railway Limited (“CPRL”), through its subsidiaries (collectively referred to as “CP” or “the Company”), operates a transcontinental railway in Canada and the United States. CP provides rail and intermodal transportation services over a network of approximately 12,500 miles, serving the principal business centres of Canada from Montreal, Quebec, to Vancouver, British Columbia, and the U.S. Northeast and Midwest regions. CP’s railway network feeds directly into the U.S. heartland from the East and West coasts. Agreements with other carriers extend the Company’s market reach east of Montreal in Canada, throughout the U.S. and into Mexico. CP transports bulk commodities, merchandise freight and intermodal traffic. Bulk commodities include grain, coal, fertilizers and sulphur. Merchandise freight consists of finished vehicles and automotive parts, as well as forest and industrial and consumer products. Intermodal traffic consists largely of retail goods in overseas containers that can be transported by train, ship and truck, and in domestic containers and trailers that can be moved by train and truck.

1 Summary of significant accounting policies

Accounting principles generally accepted in the United States of America (“GAAP”)

These consolidated financial statements are expressed in Canadian dollars and have been prepared in accordance with GAAP.

Principles of consolidation

These consolidated financial statements include the accounts of CP and all its subsidiaries. The Company’s investments in which it has significant influence are accounted for using the equity method. All intercompany accounts and transactions have been eliminated.

Use of estimates

The preparation of these consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of revenues and expenses during the year, the reported amounts of assets and liabilities, and the disclosure of contingent assets and liabilities at the date of the financial statements. Management regularly reviews its estimates, including those related to environmental liabilities, pensions and other benefits, depreciable lives of properties, goodwill, deferred income tax assets and liabilities, as well as legal and personal injury liabilities based upon currently available information. Actual results could differ from these estimates.

Principal subsidiaries

The following list sets out CPRL’s principal railway operating subsidiaries, including the jurisdiction of incorporation. All of these subsidiaries are wholly owned, directly or indirectly, by CPRL as at December 31, 2015.



Principal subsidiary	Incorporated under the laws of
Canadian Pacific Railway Company	Canada
Soo Line Railroad Company (“Soo Line”)	Minnesota
Delaware and Hudson Railway Company, Inc. (“D&H”)	Delaware
Dakota, Minnesota & Eastern Railroad Corporation (“DM&E”)	Delaware
Mount Stephen Properties Inc. (“MSP”)	Canada

Revenue recognition

Railway freight revenues are recognized based on the percentage of completed service method. The allocation of revenue between reporting periods is based on the relative transit time in each reporting period with expenses recognized as incurred. Volume rebates to customers are accrued as a reduction of freight revenues based on estimated volume and contract terms as freight service is provided. Other revenues, including passenger revenue, revenue from leasing certain assets, switching fees, and revenue from logistics services, are recognized as service is performed or contractual obligations are met. Revenues are presented net of taxes collected from customers and remitted to government authorities.

Cash and cash equivalents

Cash and cash equivalents include highly liquid short-term investments that are readily convertible to cash with original maturities of three months or less, but exclude cash and cash equivalents subject to restrictions.

Restricted cash and cash equivalents

Cash and cash equivalents that are restricted as to withdrawal or usage, in accordance with specific agreements, are presented as restricted cash and cash equivalents on the balance sheets when applicable.

Foreign currency translation

Assets and liabilities denominated in foreign currencies, other than those held through foreign subsidiaries, are translated into Canadian dollars at the year-end exchange rate for monetary items and at the historical exchange rates for non-monetary items. Foreign currency revenues and expenses are translated at the exchange rates in effect on the dates of the related transactions. Foreign exchange ("FX") gains and losses, other than those arising from the translation of the Company’s net investment in foreign subsidiaries, are included in income.

The accounts of the Company’s foreign subsidiaries are translated into Canadian dollars using the year-end exchange rate for assets and liabilities and the average exchange rates during the year for revenues, expenses, gains and losses. FX gains and losses arising from the translation of these foreign subsidiaries’ accounts are included in “Other comprehensive income (loss)”. A portion of U.S. dollar-denominated long-term debt has been designated as a hedge of the net investment in foreign subsidiaries. As a result, unrealized FX gains and losses on U.S. dollar-denominated long-term debt, designated as a hedge, are offset against FX gains and losses arising from the translation of foreign subsidiaries’ accounts in “Other comprehensive income (loss)”.

Pensions and other benefits

Pension costs are actuarially determined using the projected-benefit method pro-rated over the credited service periods of employees. This method incorporates management’s best estimates of expected plan investment performance, salary escalation and retirement ages of employees. The expected return on fund assets is calculated using market-related asset values developed from a f ive-year average of market values for the fund’s public equity securities and absolute return strategies (with each prior year’s market value adjusted to the current date for assumed investment income during the intervening period) plus the market value of the fund’s fixed income, real estate and infrastructure securities, subject to the market-related asset value not being greater than 120% of the market value nor being less than 80% of the market value. The discount rate used to determine the projected benefit obligation is based on blended market interest rates on high-quality corporate debt instruments with matching cash flows. Unrecognized actuarial gains and losses in excess of 10% of the greater of the benefit obligation and the market-related value of plan assets are amortized over the expected average remaining service period of active employees expected to receive benefits under the plan (approximately 10 years). Prior service costs arising from collectively bargained amendments to pension plan benefit provisions are amortized over the term of the applicable union agreement. Prior service costs arising from all other sources are amortized over the expected average remaining service period of active employees who are expected to receive benefits under the plan at the date of amendment.

Costs for post-retirement and post-employment benefits other than pensions, including post-retirement health care and life insurance and some workers’ compensation and long-term disability benefits in Canada, are actuarially determined on a basis similar to pension costs.

The over or under funded status of defined benefit pension and other post-retirement benefit plans are measured as the difference between the fair value of the plan assets and the benefit obligation, and are recognized on the balance sheets. In addition, any unrecognized actuarial gains and losses and prior service costs and credits that arise during the period are recognized as a component of “Other comprehensive income (loss)”, net of tax.

Gains and losses on post-employment benefits that do not vest or accumulate, including some workers’ compensation and long-term disability benefits in Canada, are included immediately in income as “Compensation and benefits”.

Materials and supplies

Materials and supplies are carried at the lower of average cost or market and consist primarily of fuel and parts used in the repair and maintenance of track structures, equipment, locomotives and freight cars.

Properties

Fixed asset additions and major renewals are recorded at cost, including direct costs, attributable indirect costs and carrying costs, less accumulated depreciation and any impairment. When there is a legal obligation associated with the retirement of property, a liability is initially recognized at its fair value and a corresponding asset retirement cost is added to the gross book value of the related asset and amortized to expense over the estimated term to retirement. The Company reviews the carrying amounts of its properties whenever changes in circumstances indicate that such carrying amounts may not be recoverable based on future undiscounted cash flows. When such properties are determined to be impaired, recorded asset values are revised to their fair value.

The Company recognizes expenditures as additions to properties or operating expenses based on whether the expenditures increase the output or service capacity, lower the associated operating costs or extend the useful life of the properties and whether the expenditures exceed minimum physical and financial thresholds.

Much of the additions to properties, both new and replacement properties, are self-constructed. These are initially recorded at cost, including direct costs and attributable indirect costs, overheads and carrying costs. Direct costs include, among other things, labour costs, purchased services, equipment costs and material costs. Attributable indirect costs and overheads include incremental long-term variable costs resulting from the execution of capital projects. Indirect costs include largely local crew facilities, highway vehicles, work trains and area management costs. Overheads primarily include a portion of the cost of the Company’s engineering department, which plans, designs and administers these capital projects. These costs are allocated to projects by applying a measure consistent with the nature of the cost based on cost studies. For replacement properties, the project costs are allocated to dismantling and installation based on cost studies. Dismantling work is performed concurrently with the installation.

Ballast programs including undercutting, shoulder ballasting and renewal programs that form part of the annual track program are capitalized as this work, and the related added ballast material significantly improves drainage, which in turn extends the life of ties and other track materials. These costs are tracked separately from the underlying assets and depreciated over the period to the next estimated similar ballast program. Spot replacement of ballast is considered a repair which is expensed as incurred.

The costs of large refurbishments are capitalized and locomotive overhauls are expensed as incurred, except where overhauls represent a betterment of the locomotive in which case costs are capitalized.

The Company capitalizes development costs for major new computer systems.

The Company follows group depreciation which groups assets which are similar in nature and have similar economic lives. The property groups are depreciated on a straight-line basis reflecting their expected economic lives determined by studies of historical retirements of properties in the group and engineering estimates of changes in current operations and of technological advances. Actual use and retirement of assets may vary from current estimates, which would impact the amount of depreciation expense recognized in future periods. Rail and other track material in the U.S. are depreciated based directly on usage.

When depreciable property is retired or otherwise disposed of in the normal course of business, the book value, less net salvage proceeds, is charged to accumulated depreciation and if different than the assumptions under the depreciation study could potentially result in adjusted depreciation expense over a period of years. However, when removal costs exceed the salvage value on assets and the Company has no legal obligation to remove the assets, the removal costs incurred are charged to income in the period in which the assets are removed and are not charged to accumulated depreciation.

For the sale or retirement of larger groups of depreciable assets that are unusual and were not considered in depreciation studies, CP records a gain or loss for the difference between net proceeds and net book value of the assets sold or retired.

Equipment under capital lease is included in Properties and depreciated over the period of expected use.

Assets held for sale

Assets to be disposed that meet the held for sale criteria are reported at the lower of their carrying amount and fair value, less costs to sell, and are no longer depreciated.

Goodwill and intangible assets

Goodwill represents the excess of the purchase price over the fair value of identifiable net assets upon acquisition of a business. Goodwill is assigned to the reporting units that are expected to benefit from the business acquisition which, after integration of operations with the railway network, may be different than the acquired business.

The carrying value of goodwill, which is not amortized, is assessed for impairment annually in the fourth quarter of each year, or more frequently as economic events dictate. The fair value of the reporting unit is compared to its carrying value, including goodwill. If the fair value of the reporting unit is less than its carrying value goodwill is potentially impaired. The impairment charge that would be recognized is the excess of the carrying value of the goodwill over the fair value of the goodwill, determined in the same manner as in a business combination.

Intangible assets with finite lives are amortized on a straight-line basis over the estimated useful lives of the respective assets. Favourable leases, customer relationships and interline contracts have amortization periods ranging from 15 to 20 years. When there is a change in the estimated useful life of an intangible asset with a finite life, amortization is adjusted prospectively.

Financial instruments

Financial instruments are contracts that give rise to a financial asset of one party and a financial liability or equity instrument of another party.

Financial instruments are recognized initially at fair value, which is the amount of consideration that would be agreed upon in an arm’s-length transaction between willing parties.

Subsequent measurement depends on how the financial instruments have been classified. Accounts receivable and investments, classified as loans and receivables, are measured at amortized cost, using the effective interest method. Certain equity investments, classified as available for sale, are recognized at cost as fair value cannot be reliably established. Cash and cash equivalents are classified as held for trading and are measured at fair value. Accounts payable, accrued liabilities, short-term borrowings, dividends payable, other long-term liabilities and long-term debt, classified as other liabilities, are also measured at amortized cost.

Derivative financial instruments

Derivative financial and commodity instruments may be used from time to time by the Company to manage its exposure to risks relating to foreign currency exchange rates, stock-based compensation, interest rates and fuel prices. When CP utilizes derivative instruments in hedging relationships, CP identifies, designates and documents those hedging transactions and regularly tests the transactions to demonstrate effectiveness in order to continue hedge accounting.

All derivative instruments are classified as held for trading and recorded at fair value. Any change in the fair value of derivatives not designated as hedges is recognized in the period in which the change occurs in the Consolidated Statements of Income in the line item to which the derivative instrument is related. On the Consolidated Balance Sheets they are classified in “Other assets”, “Other long-term liabilities”, “Other current assets” or “Accounts payable and accrued liabilities” as applicable. Gains and losses arising from derivative instruments may affect the following lines on the Consolidated Statements of Income: “Revenues”, “Compensation and benefits”, “Fuel”, “Other income and charges”, and “Net interest expense”.

For fair value hedges, the periodic changes in values are recognized in income, on the same line as the changes in values of the hedged items are also recorded. For a cash flow hedge, the change in value of the effective portion is recognized in “Other comprehensive income (loss)”. Any ineffectiveness within an effective cash flow hedge is recognized in income as it arises in the same income account as the hedged item. Should a cash flow hedging relationship become ineffective, previously unrealized gains and losses remain within “Accumulated other comprehensive loss” until the hedged item is settled and, prospectively, future changes in value of the derivative are recognized in income. The change in value of the effective portion of a cash flow hedge remains in “Accumulated other comprehensive loss” until the related hedged item settles, at which time amounts recognized in “Accumulated other comprehensive loss” are reclassified to the same income or balance sheet account that records the hedged item.

In the Consolidated Statements of Cash Flows, cash flows relating to derivative instruments designated as hedges are included in the same line as the related hedged items.

The Company may from time to time enter into FX forward contracts to hedge anticipated sales in U.S. dollars, the related accounts receivable and future capital acquisitions. FX translation gains and losses on foreign currency-denominated derivative financial instruments used to hedge anticipated U.S. dollar-denominated sales are recognized as an adjustment of the revenues when the sale is recorded. Those used to hedge future capital acquisitions are recognized as an adjustment of the property amount when the acquisition is recorded.

The Company may from time to time enter into FX forward contracts as part of its short-term cash management strategy. These contracts would not be designated as hedges due to their short-term nature and are carried on the Consolidated Balance Sheets at fair value. Changes in fair value are recognized in income in the period in which the changes occur.

The Company may from time to time enter into interest rate swaps to manage the risk related to interest rate fluctuations. These swap agreements require the periodic exchange of payments without the exchange of the principal amount on which the payments are based. Interest expense on the debt is adjusted to include the payments owing or receivable under the interest rate swaps. These agreements are usually accounted for as cash flow hedges with gains and losses recorded in “Accumulated other comprehensive loss” and amortized to “Net interest expense” in the period that interest on the related debt is charged.

The Company may from time to time enter into forward rate agreements to fix interest rates for anticipated issuances of debt. These agreements are usually accounted for as cash flow hedges with gains and losses recorded in “Accumulated other comprehensive loss” and amortized to “Net interest expense” in the period that interest on the related debt is charged.

Restructuring accrual

Restructuring liabilities are recorded at their present value. The discount related to liabilities is amortized to “Compensation and benefits” over the payment period. Provisions for labour restructuring are recorded in “Other long-term liabilities”, except for the current portion, which is recorded in “Accounts payable and accrued liabilities”.

Environmental remediation

Environmental remediation accruals, recorded on an undiscounted basis unless a reliably determinable estimate as to amount and timing of costs can be established, cover site-specific remediation programs. The accruals are recorded when the costs to remediate are probable and reasonably estimable. Certain future costs to monitor sites are discounted at a risk free-rate. Provisions for environmental remediation costs are recorded in “Other long-term liabilities”, except for the current portion, which is recorded in “Accounts payable and accrued liabilities”.

Income taxes

The Company follows the liability method of accounting for income taxes. Deferred income tax assets and liabilities are determined based on differences between the financial reporting and tax bases of assets and liabilities using enacted tax rates and laws that will be in effect when the differences are expected to reverse.

The effect of a change in income tax rates on deferred income tax assets and liabilities is recognized in income in the period during which the change occurs.

When appropriate, the Company records a valuation allowance against deferred tax assets to reflect that these tax assets may not be realized. In determining whether a valuation allowance is appropriate, CP considers whether it is more likely than not that all or some portion of CP’s deferred tax assets will not be realized, based on management’s judgment using available evidence about future events.

At times, tax benefit claims may be challenged by a tax authority. Tax benefits are recognized only for tax positions that are more likely than not sustainable upon examination by tax authorities. The amount recognized is measured as the largest amount of benefit that is greater than 50% likely to be realized upon settlement. A liability for “unrecognized tax benefits” is recorded for any tax benefits claimed in CP’s tax returns that do not meet these recognition and measurement standards.

Investment and other similar tax credits are deferred on the Consolidated Balance Sheets and amortized to “Income tax expense” as the related asset is recognized in income.

Earnings per share

Basic earnings per share are calculated using the weighted average number of common shares outstanding during the year. Diluted earnings per share are calculated using the treasury stock method for determining the dilutive effect of options.

Stock-based compensation

CP follows the fair value based approach to account for stock options. Compensation expense and an increase in “Additional paid-in capital” are recognized for stock options over their vesting period, or over the period from the grant date to the date employees become eligible to retire when this is shorter than the vesting period, based on their estimated fair values on the grant date, as determined using the Black-Scholes option-pricing model.

Any consideration paid by employees on exercise of stock options is credited to “Share capital” when the option is exercised and the recorded fair value of the option is removed from “Additional paid-in capital“ and credited to “Share capital”.

Compensation expense is also recognized for deferred share units (“DSUs”), performance share units (“PSUs”) and restricted share units (“RSUs”) using the fair value method. Compensation expense is recognized over the vesting period, or for PSUs and DSUs only, over the period from the grant date to the date employees become eligible to retire when this is shorter than the vesting period. Forfeitures of DSUs, PSUs and RSUs are estimated at issuance and subsequently at the balance sheet date.

The employee share purchase plan (“ESPP”) gives rise to compensation expense that is recognized using the issue price by amortizing the cost over the vesting period or over the period from the grant date to the date employees become eligible to retire when this is shorter than the vesting period.

2 Accounting changes

Implemented in 2015

Disclosures for Investments in Certain Entities That Calculate Net Asset Value per Share (or Its Equivalent)

In May 2015, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2015-07, Disclosures for Investments in Certain Entities That Calculate Net Asset Value per Share (or Its Equivalent) under FASB Accounting Standards Codification (“ASC”) Topic 820 Fair Value Measurement. The amendments remove the requirement to categorize within the fair value hierarchy all investments for which fair value is measured using the net asset value per share practical expedient and certain disclosures related to those investments. This ASU was effective retrospectively for public entities for fiscal years, and interim periods

within those years, beginning on or after December 15, 2015. Early adoption of this ASU is permitted. The Company adopted the provisions of this ASU during the fourth quarter of 2015. As a result of the adoption of ASU 2015-07, $2,426 million and $2,069 million as of December 31, 2015 and 2014, respectively, of net asset value investments in the defined benefit pension plan assets are no longer included in Level 2 and Level 3 within the fair value hierarchy in Note 24.

Balance Sheet Classification of Deferred Taxes

In November 2015, the FASB issued ASU 2015-17, Balance Sheet Classification of Deferred Taxes, an amendment to FASB ASC Topic 740 Income Taxes. The amendments remove the requirement to separate deferred income tax liabilities and assets into current and non-current amounts in the balance sheet. The recognition and measurement guidance for deferred tax assets and liabilities are not affected by the amendments. This ASU can be applied prospectively or retrospectively for fiscal years, and interim periods within those years, beginning after December 15, 2016. Early adoption is permitted. The Company retrospectively adopted the provisions of this ASU during the fourth quarter of 2015.

As a result of the adoption of ASU 2015-17, the comparative period has been adjusted for the retrospective change in accounting principle with a reclassification of $56 million of current "Deferred income tax assets" against long-term "Deferred income tax liabilities" as at December 31, 2014. The Company is able to net these amounts as deferred tax liabilities exceed deferred tax assets in all tax jurisdictions. There was no impact on the Consolidated Statements of Income as a result of the adoption of the provisions of this ASU during the year ended December 31, 2015 and comparative periods.

Future changes

Amendments to the Consolidation Analysis

In February 2015, the FASB issued ASU 2015-02, Amendments to the Consolidation Analysis under FASB ASC Topic 810 Consolidation. The amendments require reporting entities to evaluate whether they should consolidate certain legal entities under the revised consolidation model. Specifically, the amendments modify the evaluation of whether limited partnerships and similar legal entities are variable interest entities (“VIEs”) or voting interest entities, eliminate the presumption that a general partner should consolidate a limited partnership and affect the consolidation analysis of reporting entities that are involved with VIEs, particularly those that have fee arrangements and related party relationships. This ASU is effective for public entities for fiscal years, and interim periods within those years, beginning after December 15, 2015. Entities have the option of using either a full retrospective or a modified retrospective approach to adopt this ASU. The Company is currently evaluating the impact on the consolidated financial statements from the adoption of this ASU.

Simplifying the Subsequent Measurement of Inventory

In July 2015, the FASB issued ASU 2015-11, Simplifying the Measurement of Inventory under FASB ASC Topic 330 Inventory. The amendments require reporting entities to measure inventory at the lower of cost and net realizable value. Net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. The amendments apply to inventory that is measured using the first-in, first-out or average cost basis. This ASU will be effective for public entities for fiscal years, and interim periods within those years, beginning after December 15, 2016, and will be applied prospectively. The Company has not, at this time, ascertained the full impact on the consolidated financial statements from the adoption of the guidance in this ASU but does not expect the impact to be material.

Revenue from Contracts with Customers

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers, a new FASB ASC Topic 606 Revenue from Contracts with Customers, which supersedes the revenue recognition requirements in Topic 605 Revenue Recognition and most industry-specific guidance throughout the Industry Topics of the Codification. This new standard requires an entity to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In addition, the new standard requires enhanced disclosures about revenue to help users of financial statements to understand the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers.

In August 2015, the FASB issued ASU 2015-14, Revenue from Contracts with Customers: Deferral of the Effective Date under FASB ASC Topic 606. The amendments defer the effective date of the guidance in ASU 2014-09 for public entities to annual reporting periods beginning after December 15, 2017, including interim reporting periods within that reporting period. Entities have the option of using either a full retrospective or a modified retrospective approach to adopt the ASU. The Company is currently evaluating the impact on the consolidated financial statements from the adoption of this ASU.

3 Asset impairment

Dakota, Minnesota & Eastern Railroad – West

On January 2, 2014, the Company executed an agreement with Genesee & Wyoming Inc. (“G&W”) for the sale of a portion of CP’s DM&E line between Tracy, Minnesota; Rapid City, South Dakota; Colony, Wyoming; and Crawford, Nebraska to connecting branch lines (“DM&E West”). The sale was subject to regulatory approval by the U.S. Surface Transportation Board (“STB”).

At December 31, 2013, the estimated fair value less estimated direct selling costs of DM&E West was $222 million . As a result, the Company recorded an asset impairment charge and accruals for future costs associated with the sale totalling $435 million ( $257 million after-tax) in 2013. The components of the asset impairment charge and charge for the accruals that were recorded against income as “Asset impairments” are as follows:



(in millions of Canadian dollars)	2013
Property, plant and equipment	$	426
Intangible assets	2
Goodwill (Note 15)	6
Total asset impairment charge	434
Accruals for future costs	1
Total charge	$	435

On May 30, 2014, the Company completed the sale of DM&E West to G&W for net proceeds of U.S. $218 million ( $236 million ).

4 Other income and charges



(in millions of Canadian dollars)	2015			2014		2013
Foreign exchange loss on long-term debt	$	297		$	11	$	2
Other foreign exchange (gains) losses	(24		)	—		2
Early redemption premium on notes (Note 19)	47			—		—
Other	15			8		13
Total other income and charges	$	335		$	19	$	17

5 Net interest expense



(in millions of Canadian dollars)	2015			2014			2013
Interest cost	$	409		$	301		$	296
Interest capitalized to Properties	(14		)	(15		)	(13		)
Interest expense	395			286			283
Interest income	(1		)	(4		)	(5		)
Net interest expense	$	394		$	282		$	278

Interest expense includes interest on capital leases of $11 million for the year ended December 31, 2015 (2014 – $12 million ; 2013 – $19 million ).

6 Income taxes

The following is a summary of the major components of the Company’s income tax expense:



(in millions of Canadian dollars)	2015		2014			2013
Current income tax expense	$	373	$	208		$	38
Deferred income tax expense
Origination and reversal of temporary differences	105		317			183
Effect of tax rate increases	23		—			7
Effect of hedge of net investment in foreign subsidiaries	100		42			29
Other	6		(5		)	(7		)
Total deferred income tax expense	234		354			212
Total income taxes	$	607	$	562		$	250
Income before income tax expense
Canada	$	1,099	$	1,269		$	1,019
Foreign	860		769			106
Total income before income tax expense	$	1,959	$	2,038		$	1,125
Income tax expense
Current
Canada	$	173	$	50		$	4
Foreign	200		158			34
Total current income tax expense	373		208			38
Deferred
Canada	163		292			256
Foreign	71		62			(44		)
Total deferred income tax expense	234		354			212
Total income taxes	$	607	$	562		$	250

The provision for deferred income taxes arises from temporary differences in the carrying values of assets and liabilities for financial statement and income tax purposes and the effect of loss carry forwards. The items comprising the deferred income tax assets and liabilities are as follows:



(in millions of Canadian dollars)	2015		2014
Deferred income tax assets
Restructuring liability	$	3	$	7
Amount related to tax losses carried forward	16		28
Liabilities carrying value in excess of tax basis	89		214
Future environmental remediation costs	33		32
Tax credits carried forward including minimum tax	—		20
Other	69		69
Total deferred income tax assets	210		370
Deferred income tax liabilities
Properties carrying value in excess of tax basis	3,553		3,052
Other	48		35
Total deferred income tax liabilities	3,601		3,087
Total net deferred income tax liabilities	$	3,391	$	2,717

The Company’s consolidated effective income tax rate differs from the expected Canadian statutory tax rates. Expected income tax expense at statutory rates is reconciled to income tax expense as follows:



(in millions of Canadian dollars, except percentage)	2015			2014			2013
Statutory federal and provincial income tax rate (Canada)	26.47		%	26.31		%	26.32		%
Expected income tax expense at Canadian enacted statutory tax rates	$	519		$	536		$	296
Increase (decrease) in taxes resulting from:
(Gains) / losses not subject to tax	28			(5		)	(6		)
Canadian tax rate differentials	1			(1		)	(1		)
Foreign tax rate differentials	39			36			(36		)
Effect of tax rate increases	23			—			7
Other	(3		)	(4		)	(10		)
Income tax expense	$	607		$	562		$	250

The Company has no unrecognized tax benefits from capital losses at December 31, 2015 and 2014.

The Company has not provided a deferred liability for the income taxes, if any, which might become payable on any temporary difference associated with its foreign investments because the Company intends to indefinitely reinvest in its foreign investments and has no intention to realize this difference by a sale of its interest in foreign investments.

During the second quarter of 2015, legislation was enacted to increase the province of Alberta's corporate income tax rate. As a

result, the Company recalculated its deferred income taxes as at January 1, 2015 based on this change and recorded an income tax expense of $23 million in the second quarter of 2015.

During the third quarter of 2013, legislation was enacted to increase the province of British Columbia’s corporate income tax rate. As a result, the Company recalculated its deferred income taxes as at January 1, 2013 based on this change and recorded an income tax expense of $7 million in the third quarter of 2013.

At December 31, 2015, the Company had income tax operating losses carried forward of $35 million , which have been recognized as a deferred tax asset. Certain of these losses carried forward will begin to expire in 2029, with the majority expiring between 2029 and 2035. The Company also has minimum tax credits of approximately $1 million that are carried forward indefinitely without expiration. The company did not have any investment tax credits carried forward.

It is more likely than not that the Company will realize the majority of its deferred income tax assets from the generation of future taxable income, as the payments for provisions, reserves and accruals are made and losses and tax credits carried forward are utilized.

The following table provides a reconciliation of uncertain tax positions in relation to unrecognized tax benefits for Canada and the United States for the year ended December 31, 2015:



(in millions of Canadian dollars)	2015			2014			2013
Unrecognized tax benefits at January 1	$	17		$	16		$	19
Increase in unrecognized:
Tax benefits related to the current year	4			2			4
Dispositions:
Gross uncertain tax benefits related to prior years	(6		)	(1		)	(7		)
Unrecognized tax benefits at December 31	$	15		$	17		$	16

If these uncertain tax positions were recognized, all of the amount of unrecognized tax positions as at December 31, 2015 would impact the Company’s effective tax rate.

The Company recognizes accrued interest and penalties related to unrecognized tax benefits as a component of income tax expense in the Company’s Consolidated Statements of Income. The total amount of accrued interest and penalties in 2015 was $4 million (2014 – $1 million ; 2013 – credit of $1 million ). The total amount of accrued interest and penalties associated with the unrecognized tax benefit at December 31, 2015 was $9 million (2014 – $5 million ; 2013 – $4 million ).

The Company and its subsidiaries are subject to either Canadian federal and provincial income tax, U.S. federal, state and local income tax, or the relevant income tax in other international jurisdictions. The Company has substantially concluded all Canadian

federal and provincial income tax matters for the years through 2012. The federal and provincial income tax returns filed for 2013 and subsequent years remain subject to examination by the Canadian taxation authorities. The Internal Revenue Service ("IRS") of the United States has completed their examinations and issued notices of deficiency for the tax years 2012 through 2013. The Company disagrees with many of their proposed adjustments, and is at the IRS Appeals for those years. The income tax returns for 2014 and subsequent years continue to remain subject to examination by the IRS. Additionally, various U.S. state tax authorities are examining the Company's state income tax returns for years 2011 through 2014. The Company believes that it has recorded sufficient income tax reserves at December 31, 2015 with respect to these income tax examinations.

The Company does not anticipate any material changes to the unrecognized tax benefits previously disclosed within the next twelve months as at December 31, 2015.

7 Earnings per share

Basic earnings per share have been calculated using net income for the year divided by the weighted average number of shares outstanding during the year.

Diluted earnings per share have been calculated using the treasury stock method which assumes that any proceeds received from the exercise of in-the-money options would be used to purchase Common Shares at the average market price for the period. For purposes of this calculation, at December 31, 2015, there were 2.5 million dilutive options outstanding (2014 – 3.1 million ; 2013 – 3.2 million ).

The number of shares used and the earnings per share calculations are reconciled as follows:



(in millions of Canadian dollars except per share data)	2015		2014		2013
Net income	$	1,352	$	1,476	$	875
Weighted average basic shares outstanding	159.7		172.8		174.9
Dilutive effect of weighted average number of stock options	1.3		1.6		1.6
Weighted average diluted shares outstanding	161.0		174.4		176.5
Earnings per share - basic	$	8.47	$	8.54	$	5.00
Earnings per share - diluted	$	8.40	$	8.46	$	4.96

In 2015, the number of options excluded from the computation of diluted earnings per share because their effect was not dilutive was 0.2 million (2014 – 0.1 million; 2013 – nil ).

8 Other comprehensive income (loss) and accumulated other comprehensive loss

The components of “Accumulated other comprehensive loss”, net of tax, are as follows:



(in millions of Canadian dollars)	2015			2014
Unrealized foreign exchange gain on translation of the net investment in U.S. subsidiaries	$	870		$	199
Unrealized foreign exchange loss on translation of the U.S. dollar-denominated long-term debt designated as a hedge of the net investment in U.S. subsidiaries	(741		)	(84		)
Deferred losses on settled hedge instruments	(11		)	(16		)
Unrealized effective losses on cash flow hedges	(89		)	(34		)
Amounts for defined benefit pension and other post-retirement plans not recognized in income	(1,504		)	(2,282		)
Equity accounted investments	(2		)	(2		)
Accumulated other comprehensive loss	$	(1,477	)	$	(2,219	)

Components of Other comprehensive income (loss) and the related tax effects are as follows:



(in millions of Canadian dollars)	Before tax amount			Income tax recovery (expense)			Net of tax amount
For the year ended December 31, 2015
Unrealized foreign exchange gain (loss) on:
Translation of the net investment in U.S. subsidiaries	$	671		$	—		$	671
Translation of the U.S. dollar-denominated long-term debt designated as a hedge of the net investment in U.S. subsidiaries (Note 20)	(757		)	100			(657		)
Change in derivatives designated as cash flow hedges:
Realized loss on cash flow hedges recognized in income	7			(2		)	5
Unrealized loss on cash flow hedges	(76		)	21			(55		)
Change in pension and other benefits actuarial gains and losses	1,058			(281		)	777
Change in prior service pension and other benefit costs	1			—			1
Other comprehensive income	$	904		$	(162	)	$	742
For the year ended December 31, 2014
Unrealized foreign exchange gain (loss) on:
Translation of the net investment in U.S. subsidiaries	$	287		$	—		$	287
Translation of the U.S. dollar-denominated long-term debt designated as a hedge of the net investment in U.S. subsidiaries (Note 20)	(319		)	42			(277		)
Change in derivatives designated as cash flow hedges:
Realized gain on cash flow hedges recognized in income	(3		)	—			(3		)
Unrealized loss on cash flow hedges	(46		)	12			(34		)
Change in pension and other benefits actuarial gains and losses	(873		)	234			(639		)
Change in prior service pension and other benefit costs	(68		)	18			(50		)
Other comprehensive loss	$	(1,022	)	$	306		$	(716	)
For the year ended December 31, 2013
Unrealized foreign exchange gain (loss) on:
Translation of the net investment in U.S. subsidiaries	$	220		$	—		$	220
Translation of the U.S. dollar-denominated long-term debt designated as a hedge of the net investment in U.S. subsidiaries (Note 20)	(217		)	28			(189		)
Change in derivatives designated as cash flow hedges:
Realized gain on cash flow hedges recognized in income	(19		)	—			(19		)
Unrealized gain on cash flow hedges	18			—			18
Change in pension and other benefits actuarial gains and losses	1,603			(427		)	1,176
Change in prior service pension and other benefit costs	78			(19		)	59
Other comprehensive income	$	1,683		$	(418	)	$	1,265

Changes in accumulated other comprehensive loss by component:



(in millions of Canadian dollars)	Foreign currency net of hedging activities ⁽¹⁾		Derivatives and other ⁽¹⁾			Pension and post- retirement defined benefit plans ⁽¹⁾			Total ⁽¹⁾
Opening balance, 2015	$	115	$	(52	)	$	(2,282	)	$	(2,219	)
Other comprehensive income (loss) before reclassifications	14		(55		)	585			544
Amounts reclassified from accumulated other comprehensive loss	—		5			193			198
Net current-period other comprehensive income (loss)	14		(50		)	778			742
Closing balance, 2015	$	129	$	(102	)	$	(1,504	)	$	(1,477	)
Opening balance, 2014	$	105	$	(15	)	$	(1,593	)	$	(1,503	)
Other comprehensive income (loss) before reclassifications	10		(34		)	(781		)	(805		)
Amounts reclassified from accumulated other comprehensive loss	—		(3		)	92			89
Net current-period other comprehensive income (loss)	10		(37		)	(689		)	(716		)
Closing balance, 2014	$	115	$	(52	)	$	(2,282	)	$	(2,219	)

⁽¹⁾ Amounts are presented net of tax.

Amounts in Pension and post-retirement defined benefit plans reclassified from Accumulated other comprehensive loss



	2015			2014
Amortization of prior service costs ⁽¹⁾	$	(5	)	$	(68	)
Recognition of net actuarial loss ⁽¹⁾	269			192
Total before income tax	$	264		$	124
Income tax recovery	(71		)	(32		)
Net of income tax	$	193		$	92

⁽¹⁾ Impacts Compensation and benefits on the Consolidated Statements of Income.

9 Change in non-cash working capital balances related to operations



(in millions of Canadian dollars)	2015		2014			2013
Source (use) of cash:
Accounts receivable, net	$	80	$	(112	)	$	(29	)
Materials and supplies	15		7			(19		)
Other current assets	55		(75		)	5
Accounts payable and accrued liabilities	125		56			41
Change in non-cash working capital	$	275	$	(124	)	$	(2	)

10 Accounts receivable, net



(in millions of Canadian dollars)	2015			2014
Freight	$	491		$	535
Non-freight	185			189
	676			724
Allowance for doubtful accounts	(31		)	(22		)
Total accounts receivable, net	$	645		$	702

The Company maintains an allowance for doubtful accounts based on expected collectability of accounts receivable. Credit losses are based on specific identification of uncollectable accounts, the application of historical percentages by aging category and an assessment of the current economic environment. At December 31, 2015, allowances of $31 million (2014 – $22 million ) were

recorded in “Accounts receivable, net”. During 2015, provisions of $7 million of accounts receivable (2014 – $2 million ; 2013 – $3 million ) were recorded within “Purchased services and other”.

11 Gain on settlement of legal proceedings related to the purchase and sale of a building

In 2013, CP provided an interest free loan pursuant to a court order to a corporation owned by a court appointed trustee (“the judicial trustee”) to facilitate the acquisition of a building. The building was held in trust during the legal proceedings with regard to CP’s entitlement to an exercised purchase option of the building (“purchase option”). As at December 31, 2014, the loan of $20 million and the purchase option with a carrying value of $8 million , were recorded as “Other assets” in the Company’s Consolidated Balance Sheets.

In the first quarter of 2015, CP reached a settlement with a third party that, following the sale of the building to an arm’s-length third party, resulted in resolution of legal proceedings. CP received $59 million for the sale of the building which included repayment of the aforementioned loan to the judicial trustee. A gain of $31 million ( $27 million after tax) was recorded as a credit within “Purchased services and other”.

12 Gain on sale of Delaware & Hudson South

On November 17, 2014, the Company announced a proposed agreement with Norfolk Southern Corporation (“NS”) for the sale of approximately 283 miles of the Delaware and Hudson Railway Company, Inc.’s line between Sunbury, Pennsylvania, and Schenectady, New York ("D&H South").

During the first quarter of 2015, the Company finalized a sales agreement with NS for D&H South. The sale, which received approval by the STB on May 15, 2015, was completed on September 18, 2015 for proceeds of $281 million (U.S. $214 million ), subject to finalizing post-closing adjustments between the Company and NS in the first quarter of 2016. The assets sold were previously classified as “Assets held for sale” on the Company’s Consolidated Balance Sheet at December 31, 2014. The Company recorded a gain on sale of $68 million ( $42 million after tax) from the transaction during the third quarter of 2015.

13 Investments



(in millions of Canadian dollars)	2015		2014
Rail investments accounted for on an equity basis	$	115	$	82
Other investments	37		30
Total investments	$	152	$	112

14 Properties



(in millions of Canadian dollars except percentages)	2015		2015						2014
	Average annual depreciation rate		Cost		Accumulated depreciation		Net book value		Cost		Accumulated depreciation		Net book value
Track and roadway	2.6	%	$	16,303	$	4,427	$	11,876	$	14,515	$	4,126	$	10,389
Buildings	3.2	%	642		165		477		571		150		421
Rolling stock	2.3	%	4,041		1,524		2,517		3,737		1,414		2,323
Information systems ⁽¹⁾	12.2	%	599		291		308		631		297		334
Other	3.5	%	1,640		545		1,095		1,489		518		971
Total			$	23,225	$	6,952	$	16,273	$	20,943	$	6,505	$	14,438

⁽¹⁾ During 2015, CP capitalized costs attributable to the design and development of internal-use software in the amount of $42 million (2014 – $69 million ; 2013 – $85 million ). Current year depreciation expense related to internal use software was $69 million (2014 – $70 million ; 2013 – $84 million ).

Capital leases included in properties



(in millions of Canadian dollars)	2015						2014
	Cost		Accumulated depreciation		Net book value		Cost		Accumulated depreciation		Net book value
Buildings	$	1	$	1	$	—	$	1	$	1	$	—
Rolling stock	311		96		215		311		87		224
Total assets held under capital lease	$	312	$	97	$	215	$	312	$	88	$	224

15 Goodwill and intangible assets



			Intangible assets
(in millions of Canadian dollars)	Goodwill		Cost		Accumulated amortization			Net carrying amount			Total goodwill and intangible assets
Balance at December 31, 2013	$	150	$	22	$	(10	)	$	12		$	162
Amortization	—		—		(1		)	(1		)	(1		)
Foreign exchange impact	14		—		1			1			15
Balance at December 31, 2014	$	164	$	22	$	(10	)	$	12		$	176
Amortization	—		—		(1		)	(1		)	(1		)
Foreign exchange impact	31		—		2			2			33
Additions	3		—		—			—			3
Balance at December 31, 2015	$	198	$	22	$	(9	)	$	13		$	211

As part of the acquisition of DM&E in 2007, CP recognized goodwill of U.S. $147 million on the allocation of the purchase price, determined as the excess of the purchase price over the fair value of the net assets acquired. Since the acquisition, the operations of DM&E have been integrated with CP’s U.S. operations and the related goodwill is allocated to CP’s U.S. reporting unit. Goodwill is tested for impairment at least once per year as at October 1 ^st . The goodwill impairment test determines if the fair value of the reporting unit continues to exceed its net book value, or whether an impairment charge is required. The fair value of the reporting unit is affected by projections of its profitability including estimates of revenue growth, which are inherently uncertain.

Intangible assets of $13 million (2014 – $12 million ), acquired in the acquisition of DM&E, include favourable leases, customer relationships and interline contracts.

The estimated amortization expense for intangible assets for 2016 to 2020 is insignificant each year.

16 Other assets



(in millions of Canadian dollars)	2015		2014
Long-term materials	$	20	$	30
Prepaid leases	9		9
Unamortized fees on credit facility	6		9
Contracted customer incentives	5		9
Long-term receivables	2		28
Other	21		32
Total other assets	$	63	$	117

Fees on credit facility and contracted customer incentives are amortized to income over the term of the related facility and over the term of the related revenue contract, respectively.

17 Accounts payable and accrued liabilities



(in millions of Canadian dollars)	2015		2014
Trade payables	$	339	$	407
Accrued charges	353		324
Income and other taxes payable	218		95
Accrued interest	147		75
Payroll-related accruals	88		72
Accrued vacation	69		66
Dividends payable	53		58
Personal injury and other claims provision	30		45
Purchase of CP Common Shares	—		39
Provision for environmental remediation (Note 21)	13		16
Stock-based compensation liabilities	48		14
Provision for restructuring (Note 18)	6		11
Other	53		55
Total accounts payable and accrued liabilities	$	1,417	$	1,277

18 Labour restructuring

At December 31, 2015, the provision for restructuring was $12 million (2014 – $24 million ; 2013 – $50 million ). The restructuring accrual was primarily for labour liabilities arising from restructuring plans, including those from prior year initiatives. Payments are expected to continue in diminishing amounts until 2025 .

Set out below is a reconciliation of CP’s liabilities associated with its restructuring accrual:



(in millions of Canadian dollars)	2015			2014			2013
Opening balance, January 1	$	24		$	50		$	89
Accrued	(2		)	(7		)	(8		)
Payments	(11		)	(21		)	(33		)
Amortization of discount ⁽¹⁾	1			2			2
Closing balance, December 31	$	12		$	24		$	50

⁽¹⁾ Amortization of discount is charged to income as “Compensation and benefits”.

19 Debt



(in millions of Canadian dollars)		Maturity	Currency in which payable	2015		2014
6.500%	10-year Notes (A)	2018-05	U.S.$	$	380	$	319
6.250%	10-year Medium Term Notes (A)	2018-06	CDN$	374		374
7.250%	10-year Notes (A)	2019-05	U.S.$	484		405
9.450%	30-year Debentures (A)	2021-08	U.S.$	346		290
5.100%	10-year Medium Term Notes (A)	2022-01	CDN$	125		125
4.500%	10-year Notes (A)	2022-01	U.S.$	343		287
4.450%	12.5-year Notes (A)	2023-03	U.S.$	483		405
7.125%	30-year Debentures (A)	2031-10	U.S.$	484		406
5.750%	30-year Debentures (A)	2033-03	U.S.$	339		282
5.950%	30-year Notes (A)	2037-05	U.S.$	615		515
6.450%	30-year Notes (A)	2039-11	CDN$	400		400
5.750%	30-year Notes (A)	2042-01	U.S.$	340		284
2.900%	10-year Notes (A)	2025-02	U.S.$	968		—
3.700%	10.5-year Notes (A)	2026-02	U.S.$	345		—
4.800%	30-year Notes (A)	2045-08	U.S.$	759		—
4.800%	20-year Notes (A)	2035-09	U.S.$	413		—
6.125%	100-year Notes (A)	2115-09	U.S.$	1,246		—
Secured Equipment Loan (B)		2015-08	CDN$	—		62
5.41%	Senior Secured Notes (C)	2024-03	U.S.$	138		121
6.91%	Secured Equipment Notes (D)	2024-10	CDN$	145		156
5.57%	Senior Secured Notes (E)	2024-12	U.S.$	—		65
7.49%	Equipment Trust Certificates (F)	2021-01	U.S.$	64		96
3.88%	Senior Secured Notes Series A & B (G)	2026-10/2026-12	U.S.$	—		148
4.28%	Senior Secured Notes (H)	2027-03	U.S.$	—		77
Other long-term loans (nil% – 5.50%)		2016 - 2025	U.S.$ / CDN$	10		2
Obligations under capital leases
	(6.313% – 6.99%) (I)	2022 - 2026	U.S.$	172		147
	(12.77%) (I)	2031-01	CDN$	3		3
Commercial paper (J)			U.S.$	—		783
				8,976		5,752
Perpetual 4% Consolidated Debenture Stock (K)			U.S.$	42		35
Perpetual 4% Consolidated Debenture Stock (K)			G.B.£	7		6
				9,025		5,793
Less: Unamortized fees on long-term debt				68		34
				8,957		5,759
Less: Long-term debt maturing within one year				30		134
				$	8,927	$	5,625

At December 31, 2015, the gross amount of long-term debt denominated in U.S. dollars was U.S. $5,788 million (2014 – U.S. $4,047 million ).

Annual maturities and principal repayments requirements, excluding those pertaining to capital leases, for each of the five years following 2015 are (in millions): 2016 – $26 ; 2017 – $29 ; 2018 – $778 ; 2019 – $508 ; 2020 – $68 .

Fees on long-term debt are amortized to income over the term of the related debt.

A. These debentures and notes pay interest semi-annually and are unsecured, but carry a negative pledge.

During the first quarter of 2015, the Company issued U.S. $700 million 2.900% 10 -year Notes due February 1, 2025 for net proceeds of U.S. $694 million ( $873 million ). In addition, the Company settled a notional U.S. $700 million of forward starting floating-to-fixed interest rate swap agreements (“forward starting swaps”) for a payment of U.S. $50 million ( $63 million ) cash (see Note 20). This payment was included in the same line item as the related hedged item on the Consolidated Statements of Cash Flows. Inclusive of the settlement of the forward starting swap, the annualized effective yield at issuance was 3.61% .

During the third quarter of 2015, the Company issued U.S. $550 million 4.800% 30 -year Notes due August 1, 2045 and U.S. $250 million 3.700% 10.5 -year notes due February 1, 2026 for a total of U.S. $800 million with net proceeds of U.S. $789 million ( $1,032 million ).

During the third quarter of 2015, the Company also issued U.S. $900 million 6.125% 100 -year Notes due September 15, 2115 and U.S. $300 million 4.800% 20 -year Notes due September 15, 2035 for a total of U.S. $1,200 million with net proceeds of U.S. $1,186 million ( $1,569 million ). At the time of the debt issuance the Company de-designated the hedging relationship for U.S. $700 million of the existing forward starting swaps. The Company did not cash settle these swaps and therefore recorded a non-cash loss of U.S. $36 million ( $47 million ) in “Accumulated other comprehensive loss” (see Note 20). Subsequently the Company re-designated these U.S. $700 million forward starting swaps as a hedging relationship to fix the benchmark rate on cash flows associated with a highly probable forecasted issuance of long-term notes.

B. The Secured Equipment Loan was collateralized by specific locomotive units. The floating interest rate was calculated based on a six-month average Canadian Dollar Offered Rate (calculated based on an average of Bankers’ Acceptance rates) plus 53 basis points (2015 – 1.74% ; 2014 – 1.89% ; 2013 – 1.93% ). The Company made blended payments of principal and interest semi-annually. Final repayment of the remaining principal balance of $53 million was completed in August 2015 .

C. The 5.41% Senior Secured Notes are collateralized by specific locomotive units with a carrying value of $130 million at December 31, 2015. The Company pays equal blended semi-annual payments of principal and interest. Final repayment of the remaining principal of U.S. $44 million is due in March 2024 .

D. The 6.91% Secured Equipment Notes are full recourse obligations of the Company collateralized by a first charge on specific locomotive units with a carrying value of $123 million at December 31, 2015. The Company pays equal blended semi-annual payments of principal and interest up to and including October 2024 .

E. During the third quarter of 2015, the 5.57% Senior Secured Notes were repaid in advance of their maturities for a total of U.S. $68 million ( $91 million ). The repayment was inclusive of the remaining principal of the notes, totalling U.S. $55 million ( $74 million ), an early redemption premium of U.S. $12 million ( $16 million ), and accrued interest of U.S. $1 million ( $1 million ). The early redemption premium and accrued interest are included in "Other income and charges" and "Net interest expense" on the Consolidated Statements of Income, respectively. The Company also expensed the unamortized financing fees of $1 million to "Other income and charges" upon payments of the notes.

F. The 7.49% Equipment Trust Certificates are secured by specific locomotive units with a carrying value of $126 million at December 31, 2015. The Company makes semi-annual payments that vary in amount and are interest-only payments or blended principal and interest payments. Final repayment of the remaining principal of U.S. $11 million is due in January 2021 .

G. During the third quarter of 2015, the 3.88% Senior Secured Notes Series were repaid in advance of their maturities for a total of U.S. $141 million ( $187 million ). The repayment is inclusive of the remaining principal of the notes, totalling U.S. $126 million ( $168 million ), an early redemption premium of U.S. $13 million ( $17 million ), and accrued interest of U.S. $2 million ( $2 million ). The early redemption premium and accrued interest are included in "Other income and charges" and "Net interest expense" on the Consolidated Statements of Income, respectively. The Company also expensed the unamortized financing fees of $1 million to "Other income and charges" upon payments of the notes.

H. During the third quarter of 2015, the 4.28% Senior Secured Notes were repaid in advance of their maturities for a total of U.S. $76 million ( $101 million ). The repayment was inclusive of the remaining principal of the notes, totalling U.S. $66 million ( $87 million ), an early redemption premium of U.S. $9 million ( $12 million ), and accrued interest of U.S. $1 million ( $2 million ). The early redemption premium and accrued interest are included in "Other income and charges" and "Net interest expense" on the Consolidated Statements of Income, respectively. The Company also expensed a negligible amount of unamortized financing fees to "Other income and charges" upon payments of the notes.

I. At December 31, 2015, capital lease obligations included in long-term debt were as follows:



(in millions of Canadian dollars)	Year	Capital leases
Minimum lease payments in:
	2016	$	16
	2017	16
	2018	16
	2019	16
	2020	16
	Thereafter	174
Total minimum lease payments		254
Less: Imputed interest		(79		)
Present value of minimum lease payments		175
Less: Current portion		(4		)
Long-term portion of capital lease obligations		$	171

During 2015, the Company had no additions to property, plant and equipment under capital lease obligations (2014 – $ nil ; 2013 – $ nil ).

The carrying value of the assets collateralizing the capital lease obligations was $215 million at December 31, 2015.

J. During the fourth quarter of 2014, the Company established a commercial paper program which enabled it to issue commercial paper up to a maximum aggregate principal amount of U.S. $1 billion in the form of unsecured promissory notes. The commercial paper program is backed by a U.S. $1 billion committed, revolving credit facility, which matures on September 23, 2017 . During the third quarter of 2015, the Company repaid all of its commercial paper borrowings and had no remaining commercial paper borrowings as at December 31, 2015. As at December 31, 2014, the Company had total commercial paper borrowings of U.S. $675 million ( $783 million ) presented in "Long-term debt" on the Consolidated Balance Sheets as the Company had the intent and the ability to renew these borrowings on a long-term basis. The weighted-average interest rate on these borrowings as at December 31, 2014 was 0.44% .

The Company presents issuances and repayments of commercial paper in the Consolidated Statements of Cash Flows on a net basis, all of which have a maturity less than 90 days .

K. The Consolidated Debenture Stock, authorized by an Act of Parliament of 1889, constitutes a first charge upon and over the whole of the undertaking, railways, works, rolling stock, plant, property and effects of the Company, with certain exceptions.

Credit facility

At September 26, 2014, the Company terminated its then existing revolving credit facility agreement dated as of November 29, 2013. On the same day, CP entered into a new revolving credit facility (the “facility”) agreement with 15 highly rated financial institutions for a commitment amount of U.S. $2 billion . The facility includes a U.S. $1 billion five-year portion and a U.S. $1 billion one-year plus one-year term-out portion. The facility can accommodate draws of cash and/or letters of credit at market competitive pricing. As at December 31, 2014, the facility was undrawn. The agreement required the Company not to exceed a maximum debt to total capitalization ratio. At December 31, 2014, the Company had satisfied this threshold stipulated in the financial covenant.

Effective June 15, 2015, the Company amended the facility agreement dated September 26, 2014, to more accurately reflect the expanded financial capacity of the Company. The amended credit facility agreement requires the Company not to exceed a maximum debt to earnings before interest, tax, depreciation, and amortization ratio.

Effective September 17, 2015, the Company extended the maturity date by one year on its credit facility. The maturity date on the first U.S. $1 billion tranche was extended to September 23, 2017; the maturity date on the second U.S. $1 billion tranche was extended to September 26, 2020. As at December 31, 2015, the Company remains in compliance with all terms and conditions of the credit facility arrangements and satisfied the threshold stipulated in the amended financial covenant. At December 31, 2015, the facility was undrawn.

In October 2014, CP terminated its existing uncommitted demand bilateral letter of credit facility agreements and entered into bilateral letter of credit facility agreements with six highly rated financial institutions to support its requirement to post letters of credit in the ordinary course of business. Under these agreements, the Company has the option to post collateral in the form of cash or cash equivalents, equal at least to the face value of the letter of credit issued. These agreements permit CP to withdraw amounts

posted as collateral at any time; therefore, the amounts posted as collateral are presented as “Cash and cash equivalents” on the Company’s Consolidated Balance Sheets.

At December 31, 2015, under its bilateral facilities the Company had letters of credit drawn of $375 million (December 31, 2014 - $412 million ) from a total available amount of $600 million (December 31, 2014 - $600 million ). Prior to these bilateral agreements, letters of credit were drawn under the Company’s revolving credit facility. At December 31, 2015, under the terms of the new bilateral letter of credit facilities, no cash and cash equivalents was recorded as “Restricted cash and cash equivalents” (December 31, 2014 – nil ).

20 Financial instruments

A. Fair values of financial instruments

The Company categorizes its financial assets and liabilities measured at fair value in line with the fair value hierarchy established by GAAP that prioritizes, with respect to reliability, the inputs to valuation techniques used to measure fair value. This hierarchy consists of three broad levels. Level 1 inputs consist of quoted prices (unadjusted) in active markets for identical assets and liabilities and give the highest priority to these inputs. Level 2 and 3 inputs are based on significant other observable inputs and significant unobservable inputs, respectively, and give lower priority to these inputs.

When possible, the estimated fair value is based on quoted market prices and, if not available, estimates from third-party brokers. For non-exchange traded derivatives classified in Level 2, the Company uses standard valuation techniques to calculate fair value. Primary inputs to these techniques include observable market prices (interest, FX and commodity) and volatility, depending on the type of derivative and nature of the underlying risk. The Company uses inputs and data used by willing market participants when valuing derivatives and considers its own credit default swap spread as well as those of its counterparties in its determination of fair value.

The carrying values of financial instruments equal or approximate their fair values with the exception of long-term debt which has a fair value of approximately $9,750 million at December 31, 2015 (December 31, 2014 – $6,939 million ) with a carrying value of $8,957 million (December 31, 2014 – $5,759 million ). The estimated fair value of current and long-term borrowings has been determined based on market information where available, or by discounting future payments of interest and principal at estimated interest rates expected to be available to the Company at period end. All derivatives and long-term debt are classified as Level 2.

As at December 31, 2015, the Company did not have any deposits in the form of short-term investments with financial institutions (2014 – $ nil ).

B. Financial risk management

Derivative financial instruments

Derivative financial instruments may be used to selectively reduce volatility associated with fluctuations in interest rates, FX rates, the price of fuel and stock-based compensation expense. Where derivatives are designated as hedging instruments, the relationship between the hedging instruments and their associated hedged items is documented, as well as the risk management objective and strategy for the use of the hedging instruments. This documentation includes linking the derivatives that are designated as fair value or cash flow hedges to specific assets or liabilities on the Consolidated Balance Sheets, commitments or forecasted transactions. At the time a derivative contract is entered into and at least quarterly thereafter, an assessment is made whether the derivative item is effective in offsetting the changes in fair value or cash flows of the hedged items. The derivative qualifies for hedge accounting treatment if it is effective in substantially mitigating the risk it was designed to address.

It is not the Company’s intent to use financial derivatives or commodity instruments for trading or speculative purposes.

Credit risk management

Credit risk refers to the possibility that a customer or counterparty will fail to fulfill its obligations under a contract and as a result create a financial loss for the Company.

The railway industry predominantly serves financially established customers and the Company has experienced limited financial losses with respect to credit risk. The credit worthiness of customers is assessed using credit scores supplied by a third party, and through direct monitoring of their financial well-being on a continual basis. The Company establishes guidelines for customer credit limits and should thresholds in these areas be reached, appropriate precautions are taken to improve collectability.

Counterparties to financial instruments expose the Company to credit losses in the event of non-performance. Counterparties for derivative and cash transactions are limited to high credit quality financial institutions, which are monitored on an on-going basis. Counterparty credit assessments are based on the financial health of the institutions and their credit ratings from external agencies. The Company does not anticipate non-performance that would materially impact the Company’s financial statements. In addition, the Company believes there are no significant concentrations of credit risk.

FX management

The Company conducts business transactions and owns assets in both Canada and the United States. As a result, the Company is exposed to fluctuations in value of financial commitments, assets, liabilities, income or cash flows due to changes in FX rates. The Company may enter into FX risk management transactions primarily to manage fluctuations in the exchange rate between Canadian and U.S. currencies. FX exposure is primarily mitigated through natural offsets created by revenues, expenditures and balance sheet positions incurred in the same currency. Where appropriate, the Company may negotiate with customers and suppliers to reduce the net exposure.

Occasionally the Company will enter into short-term FX forward contracts as part of its cash management strategy.

Net investment hedge

The FX gains and losses on long-term debt are mainly unrealized and can only be realized when U.S. dollar-denominated long-term debt matures or is settled. The Company also has long-term FX exposure on its investment in U.S. affiliates. The majority of the Company’s U.S. dollar-denominated long-term debt has been designated as a hedge of the net investment in foreign subsidiaries. This designation has the effect of mitigating volatility on net income by offsetting long-term FX gains and losses on U.S. dollar-denominated long-term debt and gains and losses on its net investment. The effective portion recognized in “Other comprehensive income” in 2015 was an FX loss of $757 million , the majority of which was unrealized, (2014 – unrealized loss of $319 million ; 2013 – unrealized loss of $217 million ) (Note 8). There was no ineffectiveness during 2015 (2014 – negligible ; 2013 – $ nil ).

FX forward contracts

The Company may enter into FX forward contracts to lock-in the amount of Canadian dollars it has to pay on U.S. dollar-denominated debt maturities.

At December 31, 2015 and 2014, the Company had no remaining FX forward contracts to fix the exchange rate on U.S. dollar-denominated debt maturities.

During 2014, the Company settled the FX forward contract related to the repayment of a capital lease due in January 2014 for proceeds of $8 million . The Company also settled, prior to maturity, the FX forward contracts related to the repayment of the 6.50% Notes due in May 2018 and its 7.25% Notes due in May 2019 for proceeds of $17 million with the offset recorded as realized gains of $3 million in “Accumulated other comprehensive loss” and $14 million in “Retained earnings”. Amounts remaining in “Accumulated other comprehensive loss” are being amortized to “Other income and charges” until the underlying debts, which were hedged, are repaid.

During 2014, the combined realized and unrealized FX gains were $3 million and were recorded in "Other income and charges" in relation to these derivatives (2013 - unrealized gain $18 million ). Gains recorded in “Other income and charges” were largely offset by unrealized losses on the underlying debt which the derivatives were designated to hedge. Similarly, losses were largely offset by unrealized gains on the underlying debt.

During 2015, $1 million of pre-tax gain related to these previously settled derivatives has been amortized from "Accumulated other comprehensive loss" to “Other income and charges”. At December 31, 2015, the Company expected that, during the next 12 months, a $1 million of pre-tax gain would be reclassified to “Other income and charges”.

Interest rate management

The Company is exposed to interest rate risk, which is the risk that the fair value or future cash flows of a financial instrument will vary as a result of changes in market interest rates. In order to manage funding needs or capital structure goals, the Company enters into debt or capital lease agreements that are subject to either fixed market interest rates set at the time of issue or floating rates determined by on-going market conditions. Debt subject to variable interest rates exposes the Company to variability in interest expense, while debt subject to fixed interest rates exposes the Company to variability in the fair value of debt.

To manage interest rate exposure, the Company accesses diverse sources of financing and manages borrowings in line with a targeted range of capital structure, debt ratings, liquidity needs, maturity schedule, and currency and interest rate profiles. In anticipation of future debt issuances, the Company may enter into forward rate agreements, that are designated as cash flow hedges, to substantially lock in all or a portion of the effective future interest expense. The Company may also enter into swap agreements, designated as fair value hedges, to manage the mix of fixed and floating rate debt.

Forward starting swaps

During the fourth quarter of 2014, the Company entered into forward starting floating-to-fixed interest rate swap agreements (“forward starting swaps”) totalling a notional U.S. $1.4 billion to fix the benchmark rate on cash flows associated with highly probable forecasted issuances of long-term notes. The effective portion of changes in fair value on the forward starting swaps is recorded in “Accumulated

other comprehensive loss”, net of tax, as cash flow hedges until the probable forecasted notes are issued. Subsequent to the notes issuance, amounts in “Accumulated other comprehensive loss” are reclassified to “Net interest expense”.

During the first quarter of 2015, the Company settled a notional U.S. $700 million of forward starting swaps related to the U.S. $700 million 2.900% 10-year notes issued in the same period. The fair value of these derivative instruments was a loss of U.S. $50 million ( $63 million ) at the time of settlement. The effective portion of changes in fair value on the forward starting swaps of U.S. $48 million ( $60 million ), was recorded in “Accumulated other comprehensive loss”, and is amortized to “Net interest expense” over the term of the underlying hedged notes. During 2015, a loss of $5 million related to these previously settled derivatives has been amortized to “Net interest expense”. The Company expects during the next 12 months, $6 million of losses will be amortized to “Net interest expense”. The ineffective portion of U.S. $2 million ( $2 million ), was recorded immediately in income as “Net interest expense” during the first quarter of 2015.

During the third quarter of 2015, the Company de-designated the hedging relationship for U.S. $700 million of forward starting swaps related to a portion of the U.S. $900 million 6.125% 100-year notes issued. The Company did not cash settle these swaps and therefore recorded a non-cash loss of U.S. $36 million ( $47 million ) at the time of de-designation. The effective portion of changes in fair value of the de-designated forward starting swaps of U.S. $36 million ( $47 million ) was recorded in “Accumulated other comprehensive loss” and is amortized to “Net interest expense” over the first 10 years as the underlying interest expense payments, which are hedged, of the U.S. $900 million notes are made. During 2015, a loss of $1 million related to these previously de-designated derivatives has been amortized to “Net interest expense”. The Company expects that during the next 12 months $5 million of losses will be amortized to “Net interest expense”. There was no ineffectiveness to record upon de-designation.

During the third quarter of 2015, the Company re-designated the forward starting swaps totalling U.S. $700 million to fix the benchmark rate on cash flows associated with a highly probable forecasted issuance of long-term notes. The effective portion of changes in fair value from the re-designation date on the forward starting swaps is recorded in “Accumulated other comprehensive loss”, net of tax, as cash flow hedges until the probable forecasted notes are issued. Subsequent to the notes being issued, amounts in “Accumulated other comprehensive loss” will be amortized to “Net interest expense”. As at December 31, 2015, the total fair value loss of $60 million derived from the remaining forward starting swaps was included in “Accounts payable and accrued liabilities” of which $13 million relates to the re-designated existing forward starting swaps. The effective portion of $13 million on the re-designated existing forward starting swaps is reflected in “Other comprehensive income” and the negligible ineffective portion is recorded to “Net interest expense” on the Consolidated Statements of Comprehensive Income and the Consolidated Statements of Income, respectively.

As at December 31, 2014, the unrealized loss derived from the forward starting swaps was $46 million , of which $21 million was included in “Accounts payable and accrued liabilities” and $25 million in “Other long-term liabilities” with the offset reflected in “Other comprehensive (loss) income” on the Consolidated Statements of Comprehensive Income.

Interest rate swaps

During the fourth quarter of 2014, the Company entered into floating-to-fixed interest rate swap agreements totalling U.S. $600 million to hedge the variability in cash flow associated with fluctuations in interest rates on commercial paper issuances. As at December 31, 2015, there were no remaining floating-to-fixed rate swap agreements outstanding. During the third quarter of 2015, as no commercial paper was outstanding or was forecasted to be issued for the balance of the year, the interest rate swaps previously designated as a cash flow hedge were de-designated and a negligible loss was reclassified from "Accumulated other comprehensive loss" to "Net interest expense". A negligible loss on the settlement of the interest rate swaps was recorded to "Net interest expense" during the fourth quarter of 2015.

Treasury rate locks

At December 31, 2015, the Company had net unamortized losses related to interest rate locks, which are accounted for as cash flow hedges, settled in previous years totalling $21 million (December 31, 2014 – $21 million ). This amount is composed of various unamortized gains and losses related to specific debts which are reflected in “Accumulated other comprehensive loss” and are amortized to “Net interest expense” in the period that interest on the related debt is charged. The amortization of these gains and losses resulted in a negligible increase to “Net interest expense” and “Other comprehensive income” in 2015 (2014 – negligible; 2013 – negligible). At December 31, 2015, the Company expected that, during the next 12 months, a negligible amount of loss related to these previously settled derivatives would be reclassified to “Net interest expense”.

Fuel price management

The Company is exposed to commodity risk related to purchases of diesel fuel and the potential reduction in net income due to increases in the price of diesel. Fuel expense constitutes a large portion of the Company’s operating costs and volatility in diesel fuel prices can have a significant impact on the Company’s income. Items affecting volatility in diesel prices include, but are not limited to, fluctuations in world markets for crude oil and distillate fuels, which can be affected by supply disruptions and geopolitical events.

The impact of variable fuel expense is mitigated substantially through fuel cost recovery programs, which apportion incremental changes in fuel prices to shippers through price indices, tariffs, and by contract, within agreed-upon guidelines. While these programs provide effective and meaningful coverage, residual exposure remains as the fuel expense risk may not be completely recovered from shippers due to timing and volatility in the market.

21 Other long-term liabilities



(in millions of Canadian dollars)	2015		2014
Provision for environmental remediation, net of current portion ⁽¹⁾	$	80	$	75
Stock-based compensation liabilities, net of current portion	73		145
Deferred revenue on rights-of-way licence agreements, net of current portion	33		33
Deferred retirement compensation	28		24
Deferred gains on sale leaseback transactions	22		25
Asset retirement obligations (Note 22)	22		23
Provision for restructuring, net of current portion ⁽²⁾ (Note 18)	6		13
Deferred hedging losses (Note 20)	—		25
Other, net of current portion	54		69
Total other long-term liabilities	$	318	$	432

⁽¹⁾ As at December 31, 2015, the aggregate provision for environmental remediation, including the current portion was $93 million (2014 – $91 million ).

⁽²⁾ As at December 31, 2015, the aggregate provision for restructuring, including the current portion was $12 million (2014 – $24 million ).

The deferred revenue on rights-of-way licence agreements, and deferred gains on sale leaseback transactions are being amortized to income on a straight-line basis over the related lease terms. Deferred income credits are being amortized over the life of the related asset.

Environmental remediation accruals

Environmental remediation accruals cover site-specific remediation programs. The estimate of the probable costs to be incurred in the remediation of properties contaminated by past railway use reflects the nature of contamination at individual sites according to typical activities and scale of operations conducted. CP has developed remediation strategies for each property based on the nature and extent of the contamination, as well as the location of the property and surrounding areas that may be adversely affected by the presence of contaminants, considering available technologies, treatment and disposal facilities and the acceptability of site-specific plans based on the local regulatory environment. Site-specific plans range from containment and risk management of the contaminants through to the removal and treatment of the contaminants and affected soils and groundwater. The details of the estimates reflect the environmental liability at each property. Provisions for environmental remediation costs are recorded in “Other long-term liabilities”, except for the current portion which is recorded in “Accounts payable and accrued liabilities”. Payments are expected to be made over 10 years to 2025.

The accruals for environmental remediation represent CP’s best estimate of its probable future obligation and include both asserted and unasserted claims, without reduction for anticipated recoveries from third parties. Although the recorded accruals include CP’s best estimate of all probable costs, CP’s total environmental remediation costs cannot be predicted with certainty. Accruals for environmental remediation may change from time to time as new information about previously untested sites becomes known, environmental laws and regulations evolve and advances are made in environmental remediation technology. The accruals may also vary as the courts decide legal proceedings against outside parties responsible for contamination. These potential charges, which cannot be quantified at this time, may materially affect income in the particular period in which a charge is recognized. Costs related to existing, but as yet unknown, or future contamination will be accrued in the period in which they become probable and reasonably estimable. Changes to costs are reflected as changes to “Other long-term liabilities” or “Accounts payable and accrued liabilities” on the Consolidated Balance Sheets and to “Purchased services and other” within operating expenses on the Consolidated Statements of Income. The amount charged to income in 2015 was $7 million (2014 – $4 million ; 2013 – $6 million ).

22 Asset retirement obligations

Asset retirement obligations are recorded in “Other long-term liabilities”. The majority of these liabilities are discounted at 6.25% . Accretion expense is included in “Depreciation and amortization” on the Consolidated Statements of Income.



(in millions of Canadian dollars)	2015			2014
Opening balance, January 1	$	23		$	24
Accretion	1			1
Liabilities settled	(1		)	(1		)
Revision to estimated cash flows	(1		)	(1		)
Closing balance, December 31	$	22		$	23

Upon the ultimate retirement of grain-dependent branch lines, the Company has to pay a fee, levied under the Canada Transportation Act, of $30,000 per mile of abandoned track. The undiscounted amount of the liability was $38 million at December 31, 2015 (2014 – $38 million ), which, when present valued, was $19 million at December 31, 2015 (2014 – $20 million ). The payments are expected to be made in the 2016 – 2044 period.

The Company also has a liability for a joint facility that will have to be settled upon the facility's retirement based on a proportion of use during the life of the asset. The estimate of the obligation at December 31, 2015, was $21 million (2014 – $21 million ), which, when present valued, was $3 million at December 31, 2015 (2014 – $3 million ). For purposes of estimating this liability, the payment related to the retirement of the joint facility is anticipated to be made in 30 years.

23 Shareholders’ equity

Authorized and issued share capital

The Company is authorized to issue an unlimited number of Common Shares, an unlimited number of First Preferred Shares and unlimited number of Second Preferred Shares. At December 31, 2015, no First or Second Preferred Shares had been issued.

An analysis of Common Share balances is as follows:



(number of shares in millions)	2015		2014		2013
Share capital, January 1	166.1		175.4		173.9
CP Common Shares repurchased	(13.7	)	(10.3	)	—
Shares issued under stock option plan	0.6		1.0		1.5
Share capital, December 31	153.0		166.1		175.4

The change in the “Share capital” balances includes $2 million (2014 – $3 million ; 2013 – $5 million ) related to the cancellation of the tandem share appreciation rights liability on exercise of tandem stock options, and $10 million (2014 – $17 million ; 2013 – $24 million ) of stock-based compensation transferred from “Additional paid-in capital”.

Share repurchase

On March 11, 2014, the Company announced a new share repurchase program to implement a normal course issuer bid

(“NCIB”) to purchase, for cancellation, up to 5.3 million Common Shares before March 16, 2015. On September 29, 2014, the

Company announced the amendment of the bid to increase the maximum number of its Common Shares that may be

purchased from 5.3 million to 12.7 million of its outstanding Common Shares. The Company completed the purchase of 10.5

million Common Shares in 2014. An additional 2.2 million Common Shares were purchased for $490 million in the first quarter of 2015 prior to the March 16, 2015 expiry date of the program.

On March 16, 2015, the Company announced the renewal of its NCIB, commencing March 18, 2015, to purchase up to 9.14

million of its outstanding Common Shares for cancellation before March 17, 2016. On August 31, 2015, the Company amended

the NCIB to increase the maximum number of its Common Shares that may be purchased from 9.14 million to 11.9 million of its

outstanding Common Shares. As at December 31, 2015, the Company had purchased 11.3 million Common Shares for $2,258

million under this current NCIB program.

All purchases are made in accordance with the bid at prevalent market prices plus brokerage fees, or such other prices that

may be permitted by the Toronto Stock Exchange, with consideration allocated to share capital up to the average carrying

amount of the shares, and any excess allocated to retained earnings. The following table provides the activities under the

share repurchase program:



	2015
Number of Common Shares repurchased ⁽¹⁾	13,549,977
Weighted-average price per share	$	202.79
Amount of repurchase (in millions) ⁽²⁾	$	2,748

⁽¹⁾ Excludes shares repurchased and not yet cancelled in the prior year.

⁽²⁾ Includes brokerage fees.

24 Pensions and other benefits

The Company has both defined benefit (“DB”) and defined contribution (“DC”) pension plans. At December 31, 2015, the Canadian pension plans represent approximately 99% of total combined pension plan assets and approximately 98% of total combined pension plan obligations.

The DB plans provide for pensions based principally on years of service and compensation rates near retirement. Pensions for Canadian pensioners are partially indexed to inflation. Annual employer contributions to the DB plans, which are actuarially determined, are made on the basis of being not less than the minimum amounts required by federal pension supervisory authorities.

The Company has other benefit plans including post-retirement health and life insurance for pensioners, and post-employment long-term disability and workers’ compensation benefits, which are based on Company-specific claims. At December 31, 2015, the Canadian other benefits plans represent approximately 96% of total combined other plan obligations.

The Finance Committee of the Board of Directors has approved an investment policy that establishes long-term asset mix targets which take into account the Company’s expected risk tolerances. Pension plan assets are managed by a suite of independent investment managers, with the allocation by manager reflecting these asset mix targets. Most of the assets are actively managed with the objective of outperforming applicable benchmarks. In accordance with the investment policy, derivative instruments may be used to hedge or adjust existing or anticipated exposures.

To develop the expected long-term rate of return assumption used in the calculation of net periodic benefit cost applicable to the market-related value of assets, the Company considers the expected composition of the plans’ assets, past experience and future estimates of long-term investment returns. Future estimates of investment returns reflect the expected annual yield on applicable fixed income capital market indices, and the long-term return expectation for public equity, real estate, infrastructure and absolute return investments and the expected added value (relative to applicable benchmark indices) from active management of pension fund assets.

The Company has elected to use a market-related value of assets for the purpose of calculating net periodic benefit cost, developed from a five -year average of market values for the plans’ public equity and absolute return investments (with each prior year’s market value adjusted to the current date for assumed investment income during the intervening period) plus the market value of the plans’ fixed income, real estate and infrastructure securities.

The benefit obligation is discounted using a discount rate that is a blended yield to maturity for a hypothetical portfolio of high-quality corporate debt instruments with matching cash flows. The discount rate is determined by management with the aid of third-party actuaries.

Net periodic benefit cost

The elements of net periodic benefit cost for DB pension plans and other benefits recognized in the year, including the recognition of an $11 million gain related to legacy pension plans, included the following components:



	Pensions									Other benefits
(in millions of Canadian dollars)	2015			2014			2013			2015		2014			2013
Current service cost (benefits earned by employees in the year)	$	126		$	106		$	135		$	12	$	14		$	16
Interest cost on benefit obligation	463			477			445			21		23			21
Expected return on fund assets	(816		)	(757		)	(746		)	—		—			—
Recognized net actuarial loss (gain)	265			190			267			2		(2		)	(11		)
Amortization of prior service costs	(6		)	(68		)	(58		)	1		—			—
Net periodic benefit cost (recovery)	$	32		$	(52	)	$	43		$	36	$	35		$	26

Projected benefit obligation, fund assets, and funded status

Information about the Company’s DB pension plans and other benefits, in aggregate, is as follows:



	Pensions						Other benefits
(in millions of Canadian dollars)	2015			2014			2015			2014
Change in projected benefit obligation:
Benefit obligation at January 1	$	11,360		$	9,921		$	517		$	483
Current service cost	126			106			12			14
Interest cost	463			477			21			23
Employee contributions	43			51			1			—
Benefits paid	(608		)	(579		)	(34		)	(27		)
Foreign currency changes	42			15			4			2
Plan amendments and other	(6		)	—			—			—
Actuarial loss (gain)	(226		)	1,369			(8		)	22
Projected benefit obligation at December 31	$	11,194		$	11,360		$	513		$	517



	Pensions						Other benefits
(in millions of Canadian dollars)	2015			2014			2015			2014
Change in fund assets:
Fair value of fund assets at January 1	$	11,376		$	10,722		$	7		$	8
Actual return on fund assets	1,374			1,088			(1		)	—
Employer contributions	81			80			33			26
Employee contributions	43			51			1			—
Benefits paid	(608		)	(579		)	(34		)	(27		)
Foreign currency changes	34			14			—			—
Fair value of fund assets at December 31	$	12,300		$	11,376		$	6		$	7
Funded status – plan surplus (deficit)	$	1,106		$	16		$	(507	)	$	(510	)



	2015						2014
	Pension plans in surplus			Pension plans in deficit			Pension plans in surplus			Pension plans in deficit
Projected benefit obligation at December 31	$	(10,681	)	$	(513	)	$	(10,878	)	$	(482	)
Fair value of fund assets at December 31	12,082			218			11,182			194
Funded Status	$	1,401		$	(295	)	$	304		$	(288	)

All Other benefits plans were in a deficit position at December 31, 2015 and 2014.

Pension asset and liabilities in the Company’s Consolidated Balance Sheets

Amounts recognized in the Company’s Consolidated Balance Sheets are as follows:



	Pensions						Other benefits
(in millions of Canadian dollars)	2015			2014			2015			2014
Pension asset	$	1,401		$	304		$	—		$	—
Accounts payable and accrued liabilities	(10		)	(9		)	(34		)	(34		)
Pension and other benefit liabilities	(285		)	(279		)	(473		)	(476		)
Total amount recognized	$	1,106		$	16		$	(507	)	$	(510	)

The defined benefit pension plans’ accumulated benefit obligation as at December 31, 2015 was $10,893 million (2014 – $10,975 million ). The accumulated benefit obligation is calculated on a basis similar to the projected benefit obligation, except no future salary increases are assumed in the projection of future benefits.

The measurement date used to determine the plan assets and the accrued benefit obligation is December 31 . The most recent actuarial valuation for pension funding purposes for the Company’s main Canadian pension plan was performed as at January 1, 2015. During 2016, the Company expects to file a new valuation with the pension regulator.

Accumulated other comprehensive losses

Amounts recognized in accumulated other comprehensive losses are as follows:



	Pensions						Other benefits
(in millions of Canadian dollars)	2015			2014			2015			2014
Net actuarial loss:
Other than deferred investment gains	$	3,144		$	3,895		$	77		$	86
Deferred investment gains	(1,101		)	(803		)	—			—
Prior service cost	(20		)	(20		)	4			5
Deferred income tax	(580		)	(858		)	(20		)	(23		)
Total (Note 8)	$	1,443		$	2,214		$	61		$	68

The unamortized actuarial loss and the unamortized prior service cost included in “Accumulated other comprehensive loss” that are expected to be recognized in net periodic benefit cost during 2016 are $191 million and a recovery of $7 million , respectively, for pensions and $3 million and $1 million , respectively, for other post-retirement benefits.

Actuarial assumptions

Weighted-average actuarial assumptions used were approximately:



(percentages)	2015		2014		2013
Benefit obligation at December 31:
Discount rate	4.22		4.09		4.90
Projected future salary increases	3.00		3.00		3.00
Health care cost trend rate	7.00	⁽¹⁾	7.00	⁽¹⁾	8.00	⁽²⁾
Benefit cost for year ended December 31:
Discount rate	4.09		4.90		4.28
Expected rate of return on fund assets	7.75		7.75		7.75
Projected future salary increases	3.00		3.00		3.00
Health care cost trend rate	7.00	⁽¹⁾	7.50	⁽²⁾	8.00	⁽²⁾

⁽¹⁾ The health care cost trend rate is assumed to be 7.00% in 2016 ( 7.00% in 2015), and then decreasing by 0.50% per year to an ultimate rate of 5.00% per year in 2020 and thereafter.

⁽²⁾ The health care cost trend rate was previously assumed to be 6.50% in 2016 ( 7.00% in 2015, 7.50% in 2014), and then decreasing by 0.50% per year to an ultimate rate of 5.00% per year in 2019 and thereafter.

Assumed health care cost trend rates have a significant effect on the amounts reported for the health care plans. A one-percentage-point change in the assumed health care cost trend rate would have the following effects:



(in millions of Canadian dollars)	One percentage point increase		One percentage point decrease
Increase (decrease) in the total of service and interest costs	$	—	$	—
Increase (decrease) in post-retirement benefit obligation	6		(6		)

In 2014, the Canadian Institute of Actuaries and the Society of Actuaries each published updated mortality tables based on broad pension plan experience in Canada and the U.S., respectively. At December 31, 2014, the Company changed the basis for its obligations for defined benefit pension and post-retirement benefit plans to these new mortality tables, with adjustments to reflect actual plan mortality experience to the extent that credible experience data were available. The changes to the new mortality tables increased the obligations for pensions and post-retirement benefits at that date by approximately $225 million . The Company's obligations for defined benefit pension and post-retirement benefit plans continue to be based on the new mortality tables at December 31, 2015.

Plan assets

Plan assets are recorded at fair value. The major asset categories are public equity securities, fixed income securities, real estate, infrastructure and absolute return investments. The fair values of the public equity and fixed income securities are primarily based on quoted market prices. Real estate values are based on annual valuations performed by external parties, taking into account current market conditions and recent sales transactions where practical and appropriate. Infrastructure values are based on the fair value of each fund’s assets as calculated by the fund manager, generally using a discounted cash flow analysis that takes into account current market conditions and recent sales transactions where practical and appropriate. Absolute return investments are a portfolio of units of externally managed hedge funds and are valued by the fund administrators.

The Company’s pension plan asset allocation, the current weighted average asset allocation targets and the current weighted average policy range for each major asset class, were as follows:



	Current asset allocation target	Current policy range	Percentage of plan assets at December 31
Asset allocation (percentage)	Current asset allocation target	Current policy range	2015	2014
Cash and cash equivalents	0.5	0 – 5	1.1	1.7
Fixed income	29.5	20 – 40	21.0	21.9
Public equity	46.0	35 – 55	54.5	52.5
Real estate and infrastructure	12.0	4 – 20	5.8	7.6
Absolute return	12.0	0 – 18	17.6	16.3
Total	100.0		100.0	100.0

Summary of the assets of the Company’s DB pension plans at fair values

The following is a summary of the assets of the Company’s DB pension plans at fair values at December 31, 2015 and 2014:



(in millions of Canadian dollars)	Quoted prices in active markets for identical assets (Level 1)		Significant other observable inputs Level (2)		Significant unobservable inputs (Level 3)		Investments measured at NAV ⁽¹⁾		Total
December 31, 2015
Cash and cash equivalents	$	129	$	11	$	—	$	—	$	140
Fixed income
• Government bonds ⁽²⁾	—		1,276		—		—		1,276
• Corporate bonds ⁽²⁾	—		1,228		—		—		1,228
• Mortgages ⁽³⁾	—		81		—		—		81
Public equities
• Canada	1,449		46		—		—		1,495
• U.S. and international	5,169		34		—		—		5,203
Real estate ⁽⁴⁾	—		—		451		—		451
Derivative assets ⁽⁵⁾	—		—		—		—		—
Absolute return ⁽⁶⁾
• Funds of hedge funds	—		—		—		781		781
• Multi-strategy funds	—		—		—		517		517
• Credit funds	—		—		—		555		555
• Equity funds	—		—		—		311		311
Infrastructure ⁽⁷⁾	—		—		—		262		262
	$	6,747	$	2,676	$	451	$	2,426	$	12,300
December 31, 2014
Cash and cash equivalents	$	106	$	83	$	—	$	—	$	189
Fixed income
• Government bonds ⁽²⁾	—		1,180		—		—		1,180
• Corporate bonds ⁽²⁾	—		1,229		—		—		1,229
• Mortgages ⁽³⁾	—		77		—		—		77
Public equities
• Canada	1,448		48		—		—		1,496
• U.S. and international	4,454		27		—		—		4,481
Real estate ⁽⁴⁾	—		—		654		—		654
Derivative assets ⁽⁵⁾	—		1		—		—		1
Absolute return ⁽⁶⁾
• Funds of hedge funds	—		—		—		652		652
• Multi-strategy funds	—		—		—		473		473
• Credit funds	—		—		—		490		490
• Equity funds	—		—		—		246		246
Infrastructure ⁽⁷⁾	—		—		—		208		208
	$	6,008	$	2,645	$	654	$	2,069	$	11,376

⁽¹⁾ Investments measured at net asset value ("NAV"):

Amounts are compromised of certain investments measured at fair value using NAV (or its equivalent) as a practical expedient. These investments have not been classified in the fair value hierarchy.

⁽²⁾ Government & Corporate Bonds:

Fair values for bonds are based on market prices supplied by independent sources as of the last trading day.

⁽³⁾ Mortgages:

The fair value of mortgages of $81 million (2014 – $77 million ) is based on current market yields of financial instruments of similar maturity, coupon and risk factors.

⁽⁴⁾ Real estate:

The fair value of real estate investments of $451 million (2014 – $654 million ) is based on property appraisals which use a number of approaches that typically include a discounted cash flow analysis, a direct capitalization income method and/or a direct comparison approach. Appraisals of real estate investments are generally performed semi-annually by qualified external accredited appraisers. There are $278 million of unfunded commitments for real estate investments as at December 31, 2015 (2014 – nil ).

⁽⁵⁾ The Company’s pension funds may utilize the following derivative instruments: equity futures to replicate equity index returns (Level 2); currency forwards to partially hedge foreign currency exposures (Level 2); bond forwards to reduce asset/liability interest rate risk exposures (Level 2); interest rate swaps to manage duration and interest rate risk (Level 2); credit default swaps to manage credit risk (Level 2); and options to manage interest rate risk and volatility (Level 2).

⁽⁶⁾ Absolute return:

The fair value of absolute return fund investments of $2,164 million (2014 – $1,861 million ) is based on the NAV reported by the fund administrators. The funds have different redemption policies and periods. There are no unfunded commitments for absolute return investments as at December 31, 2015 (2014 – nil ).



-	Fund of hedge funds invest in a portfolio of hedge funds that allocate capital across a broad array of funds and/or investment managers, with monthly redemptions upon 95 days' notice.
-	Multi-strategy funds include funds that invest in broadly diversified portfolios of equity, fixed income and derivative instruments with quarterly redemptions upon 60 days' notice.
-	Credit funds invest in an array of fixed income securities with quarterly redemptions upon 60 days' notice.
-	Equity funds invest primarily in U.S. and global equity securities. Redemptions range from quarterly upon 60 days notice to tri-annually upon 45 days' notice.

⁽⁷⁾ Infrastructure:

Infrastructure fund values of $262 million (2014 – $208 million ) are based on the NAV of the funds that invest directly in infrastructure investments. The fair values of the investments have been estimated using the capital accounts representing the plans ownership interest in the funds. The investment in each fund is not subject to redemption and is normally returned through distributions as a result of the liquidation of the underlying infrastructure investments. It was estimated that the investments in these funds will be liquidated over the weighted-average period of approximately two years. As at December 31, 2015, unfunded commitments for infrastructure investments were negligible (2014 – negligible ).

Portion of the assets of the Company’s DB pension plans measured at fair value using unobservable inputs (Level 3)

During 2014 and 2015 the portion of the assets of the Company’s DB pension plans measured at fair value using unobservable inputs (Level 3) changed as follows ⁽¹⁾ :



(in millions of Canadian dollars)	Real Estate
As at January 1, 2014	$	847
Disbursements	(236		)
Net realized gains	67
Decrease in net unrealized gains	(24		)
As at December 31, 2014	$	654
Disbursements	(223		)
Net realized gains	64
Decrease in net unrealized gains	(44		)
As at December 31, 2015	$	451

⁽¹⁾ Upon adoption of ASU 2015-07, investments measured at NAV are no longer required to be categorized within the fair value hierarchy.

Level 3 fair value measurements for real estate investments are based on the NAV reported by the fund administrator, property appraisals and discounted cash flow analysis, of which there are no reasonable alternative assumptions. Therefore it is not practicable to provide a sensitivity analysis.

Additional plan assets information

The Company’s expected long-term target return is 7.75% , net of all fees and expenses. In identifying the asset allocation ranges, consideration was given to the long-term nature of the underlying plan liabilities, the solvency and going-concern financial position of the plan, long-term return expectations and the risks associated with key asset classes as well as the relationships of returns on key asset classes with each other, inflation and interest rates. When advantageous and with due consideration, derivative instruments may be utilized, provided the total value of the underlying assets represented by financial derivatives, excluding currency forwards, is limited to 30% of the market value of the fund.

When investing in foreign securities, the plans are exposed to foreign currency risk; the effect of which is included in the valuation of the foreign securities. The plans were 44% exposed to the U.S. dollar, 14% exposed to European currencies, and 5% exposed to various other currencies, as at December 31, 2015.

At December 31, 2015, fund assets consisted primarily of listed stocks and bonds, including 188,276 of the Company’s Common Shares (2014 – 184,392 ) at a market value of $33 million (2014 – $41 million ) and 6.25% Unsecured Notes issued by the Company at a par value of $3 million (2014 – $2 million ) and a market value of $3 million (2014 – $2 million ).

Cash flows

In 2015, the Company contributed $90 million to its pension plans (2014 – $88 million ; 2013 – $105 million ), including $9 million to the DC plans (2014 – $8 million ; 2013 – $7 million ), $69 million to the Canadian registered and U.S. qualified DB pension plans (2014 – $67 million ; 2013 – $86 million ), and $12 million to the Canadian non-registered supplemental pension plan (2014 – $13 million ; 2013 – $12 million ). In addition, the Company made payments directly to employees, their beneficiaries or estates or to third-party benefit administrators of $33 million in 2015 (2014 – $26 million ; 2013 – $32 million ) with respect to other benefits.

Estimated future benefit payments

The estimated future defined benefit pension and other benefit payments to be paid by the plans for each of the next five years and the subsequent five-year period are as follows:



(in millions of Canadian dollars)	Pensions		Other benefits
2016	$	595	$	36
2017	609		35
2018	621		35
2019	632		34
2020	642		33
2021 – 2025	3,318		158

The benefit payments from the Canadian registered and U.S. qualified DB pension plans are payable from their respective pension funds. Benefit payments from the supplemental pension plan and from the other benefits plans are payable directly from the Company.

Defined contribution plan

Canadian non-unionized employees hired prior to July 1, 2010 had the option to participate in the Canadian DC plan. All Canadian non-unionized employees hired after such date must participate in this plan. Employee contributions are based on a percentage of salary. The Company matches employee contributions to a maximum percentage each year.

Effective July 1, 2010, a new U.S. DC plan was established. All U.S. non-unionized employees hired after such date must participate in this plan. Employees do not contribute to the plan. The Company annually contributes a percentage of salary.

The DC plans provide a pension based on total employee and employer contributions plus investment income earned on those contributions.

In 2015, the net cost of the DC plans, which generally equals the employer’s required contribution, was $9 million (2014 – $8 million ; 2013 – $7 million ).

Contributions to multi-employer plans

Some of the Company’s unionized employees in the U.S. are members of a U.S. national multi-employer benefit plan. Contributions made by the Company to this plan in 2015 in respect of post-retirement medical benefits were $4 million (2014 – $4 million ; 2013 – $5 million ).

25 Stock-based compensation

At December 31, 2015, the Company had several stock-based compensation plans, including a stock option plan, various cash settled liability plans and an employee stock savings plan. These plans resulted in an expense in 2015 of $66 million (2014 – $110 million ; 2013 – $92 million ).

A. Stock Option Plan

Summary of stock options

The following table summarizes the Company’s stock option plan as at December 31:



	Options outstanding				Nonvested options
	Number of options		Weighted average exercise price		Number of options		Weighted average grant date fair value
Outstanding, January 1, 2015	2,738,689		$	94.35	1,423,962		$	32.35
New options granted	317,202		230.91		317,202		55.28
Exercised	(542,816	)	77.19		—		—
Vested	—		—		(654,283	)	26.69
Forfeited	(101,963	)	171.34		(101,463	)	48.06
Expired	(3,139	)	49.08		(439	)	26.02
Outstanding at December 31, 2015	2,407,973		$	113.01	984,979		$	41.88
Vested or expected to vest at December 31, 2015 ⁽¹⁾	2,399,076		$	112.71	N/A		N/A
Exercisable at December 31, 2015	1,422,994		$	80.55	N/A		N/A

⁽¹⁾ As at December 31, 2015, the weighted average remaining term of vested or expected to vest options was 5.2 years with an aggregate intrinsic value of $171 million .

The following table provides the number of stock options outstanding and exercisable as at December 31, 2015 by range of exercise price and their related intrinsic aggregate value, and for options outstanding, the weighted-average years to expiration. The table also provides the aggregate intrinsic value for in-the-money stock options, which represents the amount that would have been received by option holders had they exercised their options on December 31, 2015 at the Company’s closing stock price of $176.73 .



	Options outstanding							Options exercisable
Range of exercise prices	Number of options	Weighted average years to expiration	Weighted average exercise price		Aggregate intrinsic value (millions)			Number of options	Weighted average exercise price		Aggregate intrinsic value (millions)
$36.29 – $72.54	464,345	2.8	$	60.48	$	54		464,345	$	60.48	$	54
$72.55 – $74.55	650,000	6.5	73.39		67			487,500	73.39		50
$74.56 – $129.15	644,608	6.5	103.32		47			394,104	96.21		32
$129.16 – $244.54	649,020	8.6	199.89		(15		)	77,045	166.73		1
Total ⁽¹⁾	2,407,973	6.3	$	113.01	$	153		1,422,994	$	80.55	$	137

⁽¹⁾ As at December 31, 2015, the total number of in-the-money stock options outstanding was 2,049,968 with a weighted-average exercise price of $93.81 . The weighted-average years to expiration of exercisable stock options is 5.3 years .

Under the fair value method, the fair value of options at the grant date was approximately $18 million for options issued in 2015 (2014 – $21 million ; 2013 – $20 million ). The weighted average fair value assumptions were approximately:



	2015			2014			2013
Expected option life (years) ⁽¹⁾	5.25			5.98			6.25
Risk-free interest rate ⁽²⁾	1.10		%	1.66		%	1.60		%
Expected stock price volatility ⁽³⁾	26		%	29		%	30		%
Expected annual dividends per share ⁽⁴⁾	$	1.40		$	1.40		$	1.40
Estimated forfeiture rate ⁽⁵⁾	1.2		%	1.2		%	1.2		%
Weighted average grant date fair value of options granted during the year	$	55.28		$	48.88		$	35.40

⁽¹⁾ Represents the period of time that awards are expected to be outstanding. Historical data on exercise behaviour or, when available, specific expectations regarding future exercise behaviour were used to estimate the expected life of the option.

⁽²⁾ Based on the implied yield available on zero-coupon government issues with an equivalent remaining term at the time of the grant.

⁽³⁾ Based on the historical stock price volatility of the Company’s stock over a period commensurate with the expected term of the option.

⁽⁴⁾ Determined by the current annual dividend at the time of grant. The Company does not employ different dividend yields throughout the contractual term of the option.

⁽⁵⁾ The Company estimated forfeitures based on past experience. The rate is monitored on a periodic basis.

In 2015, the expense for stock options (regular and performance) was $15 million (2014 – $18 million ; 2013 – $17 million ). At December 31, 2015, there was $13 million of total unrecognized compensation related to stock options which is expected to be recognized over a weighted-average period of approximately 0.9 years.

The total fair value of shares vested for the stock option plan during 2015 was $17 million (2014 – $15 million ; 2013 – $5 million ).

The following table provides information related to all options exercised in the stock option plan during the years ended December 31:



(in millions of Canadian dollars)	2015		2014		2013
Total intrinsic value	$	72	$	115	$	103
Cash received by the Company upon exercise of options	43		62		83

B. Other Share-based Plans

Performance share units plan

During 2015, the Company issued 137,958 PSUs with a grant date fair value of $30 million . These units attract dividend equivalents in the form of additional units based on the dividends paid on the Company’s Common Shares. PSUs vest and are settled in cash or in CP Common Shares, approximately three years after the grant date, contingent upon CP’s performance (performance factor). The fair value of PSUs is measured periodically until settlement, using a latticed-based valuation model. In addition, on the grant date a Monte Carlo simulation model, which utilizes multiple input variables, is utilized to determine the probability of satisfying the performance and market conditions stipulated in the grant.

The performance period for the PSUs issued in 2015 is January 1, 2015 to December 31, 2017. The performance factors for these PSUs are Operating Ratio, Return on Invested Capital, Total Shareholder Return (“TSR”) compared to the S&P/TSX60 index, and TSR compared to Class I railways. Beginning with PSUs granted in 2014, grant recipients who are eligible to retire and have provided six months of service during the performance period are entitled to the full award. Previous to 2014, only a pro-rata share of units was retained at retirement.

The performance period for the PSUs issued in 2014 is January 1, 2014 to December 31, 2016. The performance factors for these PSUs are Operating Ratio, Free cash flow, TSR compared to the S&P/TSX60 index, and TSR compared to Class I railways.

The performance period for the PSUs issued in the fourth quarter of 2012 and in 2013 was January 1, 2013 to December 31, 2015. The performance factors for these PSUs were Operating Ratio, Free cash flow, TSR compared to the S&P/TSX60 index, and TSR compared to Class I railways. All performance factors met the 200% payout thresholds, in effect resulting in a target payout of 200% on 300,095 total outstanding awards as at December 31, 2015. A payout of $79 million on 217,179 outstanding awards, occurred on December 31, 2015 and was calculated using the Company's average share price using the last 30 trading days preceding December 31, 2015.

The following table summarizes information related to the Company’s PSUs as at December 31:



	2015		2014
Outstanding, January 1	460,783		349,925
Granted	137,958		165,500
Units, in lieu of dividends	3,570		3,296
Settled	(217,179	)	—
Forfeited	(36,856	)	(57,938	)
Outstanding, December 31	348,276		460,783

In 2015, the expense for PSUs was $55 million (2014 – $50 million ; 2013 – $25 million ). At December 31, 2015, there was $17 million of total unrecognized compensation related to PSUs which is expected to be recognized over a weighted-average period of approximately 1.4 years.

Deferred share units plan

The Company established the DSU plan as a means to compensate and assist in attaining share ownership targets set for certain key employees and Directors. A DSU entitles the holder to receive, upon redemption, a cash payment equivalent to the Company's average share price using the 10 trading days prior to redemption. DSUs vest over various periods of up to 48 months and are only redeemable for a specified period after employment is terminated.

Senior managers may elect to receive DSUs in lieu of annual bonus cash payments in the bonus deferral program. In addition, senior managers will be granted a 25% company match of DSUs when deferring cash to DSUs to meet ownership targets. The

election to receive eligible payments in DSUs is no longer available to a participant when the value of the participant’s DSUs is sufficient to meet the Company’s stock ownership guidelines. Senior managers have five years to meet their ownership targets.

An expense to income for DSUs is recognized over the vesting period for both the initial subscription price and the change in value between reporting periods.

The following table summarizes information related to the DSUs as at December 31:



	2015		2014
Outstanding, January 1	308,447		332,221
Granted	21,690		58,460
Units, in lieu of dividends	2,015		2,572
Forfeited	(2,192	)	(711	)
Settled	(11,784	)	(84,095	)
Outstanding, December 31	318,176		308,447

During 2015, the Company granted 21,690 DSUs with a grant date fair value of $5 million . In 2015, the expense recovery due to the share price reduction in the year for DSUs was $10 million (2014 – $28 million expense; 2013 – $32 million expense). At December 31, 2015, there was $1 million of total unrecognized compensation related to DSUs which is expected to be recognized over a weighted-average period of approximately 0.3 years.

Restricted share units plan

The Company issued 2,614 RSUs in 2015 with a grant date fair value of $1 million . The RSUs are notional full value shares that attract dividend equivalents in the form of additional units based on the dividends paid on the Company’s Common Shares. RSUs have no performance factors attached to them, settle in cash, and fully vest over various periods up to 36 months . An expense to income for RSUs is recognized over the vesting period for both the initial subscription price and the change in value between reporting periods. In 2015, the expense for RSUs was $2 million (2014 – $9 million ; 2013 – $10 million ). At December 31, 2015, there was $2 million of total unrecognized compensation related to RSUs that is expected to be recognized over a weighted-average period of approximately 1.7 years.

The following table summarizes information related to the Company’s RSUs as at December 31:



	2015		2014
Outstanding, January 1	47,520		92,333
Granted	2,614		16,325
Units, in lieu of dividends	207		700
Settled	(31,193	)	(53,964	)
Forfeited	(46	)	(7,874	)
Outstanding, December 31	19,102		47,520

Summary of share based liabilities paid

The following table summarizes the total share based liabilities paid for each of the years ended December 31:



(in millions of Canadian dollars)	2015		2014		2013
Plan
DSUs	$	3	$	17	$	17
PSUs	79		—		—
RSUs	8		12		9
Total	$	90	$	29	$	26

C. Employee share purchase plan

The Company has an employee share purchase plan whereby both employee and the Company contributions are used to purchase shares on the open market for employees. The Company’s contributions are expensed over the one year vesting period. Under the plan, the Company matches $1 for every $3 contributed by employees up to a maximum employee contribution of 6% of annual salary.

The total number of shares purchased in 2015 on behalf of participants, including the Company contribution, was 131,703 (2014 – 176,906 ; 2013 – 271,934 ). In 2015, the Company’s contributions totalled $5 million (2014 – $5 million ; 2013 – $5 million ) and the related expense was $4 million (2014 – $5 million ; 2013 – $5 million ).

26 Variable interest entities

The Company leases equipment from certain trusts, which have been determined to be variable interest entities financed by a combination of debt and equity provided by unrelated third parties. The lease agreements, which are classified as operating leases, have a fixed price purchase option which create the Company’s variable interest and result in the trusts being considered variable interest entities.

Maintaining and operating the leased assets according to specific contractual obligations outlined in the terms of the lease agreements and industry standards is the Company’s responsibility. The rigor of the contractual terms of the lease agreements and industry standards are such that the Company has limited discretion over the maintenance activities associated with these assets. As such, the Company concluded these terms do not provide the Company with the power to direct the activities of the variable interest entities in a way that has a significant impact on the entities’ economic performance.

The financial exposure to the Company as a result of its involvement with the variable interest entities is equal to the fixed lease payments due to the trusts. In 2015, lease payments after tax were $11 million . Future minimum lease payments, before tax, of $233 million will be payable over the next 15 years (Note 27).

The Company does not guarantee the residual value of the assets to the lessor; however, it must deliver to the lessor the assets in good operating condition, subject to normal wear and tear, at the end of the lease term.

As the Company’s actions and decisions do not significantly affect the variable interest entities’ performance, and the Company’s fixed price purchase option is not considered to be potentially significant to the variable interest entities, the Company is not considered to be the primary beneficiary, and does not consolidate these variable interest entities.

27 Commitments and contingencies

In the normal course of its operations, the Company becomes involved in various legal actions, including claims relating to injuries and damage to property. The Company maintains provisions it considers to be adequate for such actions. While the final outcome with respect to actions outstanding or pending at December 31, 2015, cannot be predicted with certainty, it is the opinion of management that their resolution will not have a material adverse effect on the Company’s financial position or results of operations.

Commitments

At December 31, 2015, the Company had committed to total future capital expenditures amounting to $375 million and operating expenditures relating to supplier purchase obligations, such as locomotive maintenance and overhaul agreements, as well as agreements to purchase other goods and services amounting to approximately $1.5 billion for the years 2016 - 2032 of which CP estimates approximately $800 million will be incurred in the next five years.

As at December 31, 2015, the Company’s commitments under operating leases were estimated at $553 million in aggregate, with minimum annual payments in each of the next five years and thereafter as follows:



(in millions of Canadian dollars)	Operating leases
2016	$	107
2017	90
2018	62
2019	52
2020	45
Thereafter	197
Total minimum lease payments	$	553

Expenses for operating leases for the year ended December 31, 2015, were $127 million (2014 – $121 million ; 2013 – $154 million ).

Legal proceedings related to Lac-Mégantic rail accident

On July 6, 2013, a train carrying crude oil operated by Montreal Maine and Atlantic Railway (“MMA”) and/or its subsidiary, Montreal Maine and Atlantic Canada Co. (“MMAC”, and collectively with MMA, the “MMA Group”) derailed and exploded in Lac-Mégantic, Quebec on a section of railway line owned by the MMA Group. The previous day CP had interchanged the train to the MMA Group, and after that interchange MMA Group exercised exclusive control over the train.

Following this incident, the Minister of Sustainable Development, Environment, Wildlife and Parks of Quebec issued an order directing certain named parties to recover the contaminants and to clean up and decontaminate the derailment site. CP was added as a named party on August 14, 2013 (the “Amended Cleanup Order”). CP is a party to an administrative appeal with respect to the Amended Cleanup Order. No hearing date on the merits of CP’s appeal has been scheduled. Directly related to this matter, the Province of Quebec filed a lawsuit against CP before the Quebec Superior Court on July 6, 2015 in which it claims $409 million for the damages sustained by the province as a result of the expenses incurred following the derailment, including costs incurred for the work carried out pursuant to the Amended Cleanup Order. The province alleges that CP had custody or control of the contaminants that were discharged in Lac-Mégantic on July 6, 2013, and that CP was otherwise negligent and therefore is solidarily (joint and severally) liable with the other third parties responsible for the accident. No timetable governing the conduct of this lawsuit has been ordered by the court.

A class action lawsuit has also been filed in the Superior Court of Quebec on behalf of a class of persons and entities residing in, owning or leasing property in, operating a business in or physically present in Lac-Mégantic (the “Class Action”). The lawsuit seeks damages caused by the derailment including for wrongful deaths, personal injuries, and property damages. CP was added as a defendant on August 16, 2013. On May 8, 2015, the Superior Court of Quebec authorized the institution of the Class Action as against CP and as against the shipper, Western Petroleum, and the shipper’s parent, World Fuel Services (collectively, the “World Fuel Defendants”). The World Fuel Defendants have since settled. No timetable governing the conduct of this lawsuit has been ordered by the Superior Court of Quebec.

In the wake of the derailment and ensuing litigation, MMAC filed for bankruptcy in Canada (the “Canadian Proceeding”) and MMA filed for bankruptcy in the United States (the “U.S. Proceeding”). An Adversary Proceeding filed by the MMA U.S. bankruptcy trustee against CP, Irving Oil and the World Fuel Defendants accuses CP of failing to ensure that World Fuel Defendants or Irving Oil properly classified the oil lading and of not refusing to ship the oil in DOT-111 tank cars. The trustee has since settled with the World Fuel Defendants and Irving Oil and now maintains that CP misfeasance is based upon the railroad’s failure to abide by a Canadian regulation in North Dakota that supposedly would have caused the originating railroad to refuse to carry the crude oil based upon reason to suspect inaccurate classification. Private party litigation in Texas, Illinois, and Maine charges CP with the misclassification and mis-packaging (i.e., DOT-111 tank car) negligence. Those cases include a class action and a mass action in Texas and wrongful death actions in Illinois and Maine. CP removed all cases to U.S. federal court, and motions have been filed with respect to jurisdiction and venue.

In response to CP’s motion to withdraw the adversary proceedings from the U.S. Proceeding, the trustee maintained that Canadian law rather than U.S. law controlled, and the court found that if the federal regulations governed, the case was not complex enough to warrant withdrawal. CP moved to dismiss for want of personal jurisdiction, but that motion, which was heard on August 18, 2015, has been denied. Motions to dismiss on procedural grounds are pending in the private litigation. The parties recently stipulated that the bankruptcy adversary proceedings would be tried in district court before a jury .

Plans of arrangement have been approved both in the Canadian Proceeding and the U.S. Proceeding. These Plans provide for the distribution of a fund of approximately $440 million amongst those who claimed loss or damage as a result of the derailment and will release those parties which contributed to the fund from any further liability. The Plans also provide for broadly worded third-party releases and injunctions that prevent actions against settling parties. CP has not participated in the settlement and hence will not benefit from any third-party releases or injunctions. In addition, both Plans contain judgment reduction provisions. Pursuant to these provisions, in the event of a judgment against CP in a case arising from the Lac-Mégantic derailment, CP should receive a credit for the greater of (i) the settlement monies received by the plaintiff(s) for the claim, or (ii) the amount which, but for the third-party non-debtor injunctions, CP would have been entitled to obtain from third parties other than MMA and MMAC through contribution or indemnification. CP may also have rights to judgment reduction, as part of the contribution/indemnification credit, for the fault of MMA and/or MMAC. The provisions of the Plans also provide for a potential re-allocation of some aspects of the MMA Group’s liability among plaintiffs and non-settling parties.

Besides litigation that has now been commenced by wrongful death, personal injury, and property damage plaintiffs against CP in Maine, Texas, and Illinois, CP has received two damage to cargo notices of claims from the shipper of the oil on the derailed train, Western Petroleum. Western Petroleum submitted U.S. and Canadian notices of claims for the same damages and, under the Carmack Amendment (the U.S. damage to cargo statute), seeks to recover for all injuries associated with, and indemnification for all claims arising from, the derailment. Both jurisdictions permit a shipper to recover the value of damaged lading against any carrier in the delivery chain, subject to limitations in the carrier’s tariffs. CP’s tariffs significantly restrict shipper damage claim rights.

Western Petroleum is part of the World Fuel Services group, and those entities recently settled with the trustee. In connection with that settlement, Western Petroleum assigned to the bankruptcy trustee the right to delegate those cargo-related claims. To date the trustee has not so delegated, but he has indicated that the cargo claims will be assigned to the Trust to be formed to handle

distributions of funds to wrongful death plaintiffs. Before the settlement, both the World Fuel Services group and the trustee maintained that Carmack liability extends beyond lading losses to cover all damages incurred by the World Fuel Services group or Irving Oil associated with the derailment. CP disputes this interpretation of the law. CP disputes this interpretation of damages to lading law and CP’s tariffs, if applicable, preclude such a result.

At this early stage of the legal proceedings, any potential liability and the quantum of potential loss cannot be determined. Nevertheless, CP denies liability for the MMA derailment and intends to vigorously defend itself in the proceedings described above and in any proceeding that may be commenced in the future.

Legal proceedings initiated by Canadian National Railway Company

On August 13, 2015, Canadian National Railway Company (“CN”) issued a statement of claim against the Company and an employee. The statement of claim was amended on January 7, 2016 to include an additional employee and an officer of the Company. The principal allegations against the Company are that the Company obtained and benefited from certain confidential CN customer data. CN is seeking damages but has not yet provided evidence to substantiate its damages claim. The Company plans to defend this claim and the amount of loss, if any, to the Company as a result of the claim cannot be reasonably estimated.

28 Guarantees

In the normal course of operating the railway, the Company enters into contractual arrangements that involve providing certain guarantees, which extend over the term of the contracts. These guarantees include, but are not limited to:


•	residual value guarantees on operating lease commitments of $28 million at December 31, 2015;


•	guarantees to pay other parties in the event of the occurrence of specified events, including damage to equipment, in relation to assets used in the operation of the railway through operating leases, rental agreements, easements, trackage, and interline agreements; and


•	indemnifications of certain tax-related payments incurred by lessors and lenders.

The maximum amount that could be payable under these guarantees, excluding residual value guarantees, cannot be reasonably estimated due to the nature of certain of these guarantees. All or a portion of amounts paid under guarantees to other parties in the event of the occurrence of specified events could be recoverable from other parties or through insurance. The Company has accrued for all guarantees that it expects to pay. At December 31, 2015, these accruals amounted to $4 million (2014 – $3 million ), recorded in “Accounts payable and accrued liabilities”.

Indemnifications

Pursuant to a trust and custodial services agreement with the trustee of the Canadian Pacific Railway Company Pension Plan, the Company has undertaken to indemnify and save harmless the trustee, to the extent not paid by the fund, from any and all taxes, claims, liabilities, damages, costs, and expenses arising out of the performance of the trustee’s obligations under the agreement, except as a result of misconduct by the trustee. The indemnity includes liabilities, costs, or expenses relating to any legal reporting or notification obligations of the trustee with respect to the defined contribution option of the pension plans or otherwise with respect to the assets of the pension plans that are not part of the fund. The indemnity survives the termination or expiry of the agreement with respect to claims and liabilities arising prior to the termination or expiry. At December 31, 2015, the Company had not recorded a liability associated with this indemnification, as it does not expect to make any payments pertaining to it.

29 Segmented and geographic information

Operating segment

The Company operates in only one operating segment: rail transportation. Operating results by geographic areas, railway corridors or other lower level components or units of operation are not reviewed by the Company’s chief operating decision maker to make decisions about the allocation of resources to, or the assessment of performance of, such geographic areas, corridors, components or units of operation.

In the years ended December 31, 2015, 2014, and 2013, no one customer comprised more than 10% of total revenues and accounts receivable.

100

Geographic information



(in millions of Canadian dollars)	Canada		United States		Total
2015
Revenues	$	4,662	$	2,050	$	6,712
Long-term assets excluding financial instruments, mortgages receivable, and deferred tax assets	$	10,630	$	6,068	$	16,698
2014
Revenues	$	4,655	$	1,965	$	6,620
Long-term assets excluding financial instruments, mortgages receivable, and deferred tax assets	$	10,114	$	4,733	$	14,847
2013
Revenues	$	4,330	$	1,803	$	6,133
Long-term assets excluding financial instruments, mortgages receivable, and deferred tax assets	$	9,842	$	4,237	$	14,079

30 Selected quarterly data (unaudited)



For the quarter ended	2015								2014
(in millions of Canadian dollars, except per share data)	Dec. 31		Sep. 30		Jun. 30		Mar. 31		Dec. 31		Sep. 30		Jun. 30		Mar. 31
Total revenues	$	1,687	$	1,709	$	1,651	$	1,665	$	1,760	$	1,670	$	1,681	$	1,509
Operating income	677		753		646		612		708		621		587		423
Net income	319		323		390		320		451		400		371		254
Basic earnings per share ⁽¹⁾	$	2.09	$	2.05	$	2.38	$	1.94	$	2.66	$	2.33	$	2.13	$	1.45
Diluted earnings per share	2.08		2.04		2.36		1.92		2.63		2.31		2.11		1.44

⁽¹⁾ Per share net income for the four quarters combined may not equal the per share net income for the year due to rounding.

101

31 Condensed consolidating financial information

Canadian Pacific Railway Company, a 100%-owned subsidiary of Canadian Pacific Railway Limited (“CPRL”), is the issuer of certain debt securities, which are fully and unconditionally guaranteed by CPRL. The following tables present condensed consolidating financial information (“CCFI”) in accordance with Rule 3-10(c) of Regulation S-X.

Investments in subsidiaries are accounted for under the equity method when presenting the CCFI.

The tables include all adjustments necessary to reconcile the CCFI on a consolidated basis to CPRL’s consolidated financial statements for the periods presented.

CONDENSED CONSOLIDATING STATEMENTS OF INCOME

YEAR ENDED DECEMBER 31, 2015



(in millions of Canadian dollars)	CPRL (Parent Guarantor)			CPRC (Subsidiary Issuer)		Non-Guarantor Subsidiaries			Consolidating Adjustments and Eliminations			CPRL Consolidated
Revenues
Freight	$	—		$	4,532	$	2,020		$	—		$	6,552
Non-freight	—			128		363			(331		)	160
Total revenues	—			4,660		2,383			(331		)	6,712
Operating expenses
Compensation and benefits	—			943		428			—			1,371
Fuel	—			549		159			—			708
Materials	—			148		36			—			184
Equipment rents	—			181		(7		)	—			174
Depreciation and amortization	—			411		184			—			595
Purchased services and other	—			711		680			(331		)	1,060
Gain on sale of Delaware & Hudson South	—			—		(68		)	—			(68		)
Total operating expenses	—			2,943		1,412			(331		)	4,024
Operating income	—			1,717		971			—			2,688
Less:
Other income and charges	84			322		(71		)	—			335
Net interest (income) expense	(5		)	447		(48		)	—			394
(Loss) income before income tax expense and equity in net earnings of subsidiaries	(79		)	948		1,090			—			1,959
Less: Income tax (recovery) expense	(21		)	303		325			—			607
Add: Equity in net earnings of subsidiaries	1,410			765		—			(2,175		)	—
Net income	$	1,352		$	1,410	$	765		$	(2,175	)	$	1,352

102

CONDENSED CONSOLIDATING STATEMENTS OF INCOME

YEAR ENDED DECEMBER 31, 2014



(in millions of Canadian dollars)	CPRL (Parent Guarantor)			CPRC (Subsidiary Issuer)		Non-Guarantor Subsidiaries			Consolidating Adjustments and Eliminations			CPRL Consolidated
Revenues
Freight	$	—		$	4,524	$	1,940		$	—		$	6,464
Non-freight	—			130		357			(331		)	156
Total revenues	—			4,654		2,297			(331		)	6,620
Operating expenses
Compensation and benefits	—			945		403			—			1,348
Fuel	—			779		269			—			1,048
Materials	—			156		37			—			193
Equipment rents	—			137		18			—			155
Depreciation and amortization	—			396		156			—			552
Purchased services and other	—			706		610			(331		)	985
Total operating expenses	—			3,119		1,493			(331		)	4,281
Operating income	—			1,535		804			—			2,339
Less:
Other income and charges	3			46		(30		)	—			19
Net interest expense	—			250		32			—			282
(Loss) income before income tax expense and equity in net earnings of subsidiaries	(3		)	1,239		802			—			2,038
Less: Income tax (recovery) expense	(1		)	320		243			—			562
Add: Equity in net earnings of subsidiaries	1,478			559		—			(2,037		)	—
Net income	$	1,476		$	1,478	$	559		$	(2,037	)	$	1,476

103

CONDENSED CONSOLIDATING STATEMENTS OF INCOME

YEAR ENDED DECEMBER 31, 2013



(in millions of Canadian dollars)	CPRL (Parent Guarantor)			CPRC (Subsidiary Issuer)		Non-Guarantor Subsidiaries			Consolidating Adjustments and Eliminations			CPRL Consolidated
Revenues
Freight	$	—		$	4,201	$	1,781		$	—		$	5,982
Non-freight	—			128		364			(341		)	151
Total revenues	—			4,329		2,145			(341		)	6,133
Operating expenses
Compensation and benefits	—			1,021		357			—			1,378
Fuel	—			751		253			—			1,004
Materials	—			125		35			—			160
Equipment rents	—			150		23			—			173
Depreciation and amortization	—			416		149			—			565
Purchased services and other	—			690		649			(341		)	998
Asset impairment	—			—		435			—			435
Total operating expenses	—			3,153		1,901			(341		)	4,713
Operating income	—			1,176		244			—			1,420
Less:
Other income and charges	1			28		(12		)	—			17
Net interest (income) expense	(1		)	211		68			—			278
Income before income tax expense and equity in net earnings of subsidiaries	—			937		188			—			1,125
Less: Income tax expense	—			243		7			—			250
Add: Equity in net earnings of subsidiaries	875			181		—			(1,056		)	—
Net income	$	875		$	875	$	181		$	(1,056	)	$	875

104

CONDENSED CONSOLIDATING STATEMENTS OF COMPREHENSIVE INCOME

YEAR ENDED DECEMBER 31, 2015



(in millions of Canadian dollars)	CPRL (Parent Guarantor)		CPRC (Subsidiary Issuer)			Non-Guarantor Subsidiaries			Consolidating Adjustments and Eliminations			CPRL Consolidated
Net income	$	1,352	$	1,410		$	765		$	(2,175	)	$	1,352
Net (loss) gain in foreign currency translation adjustments, net of hedging activities	—		(757		)	671			—			(86		)
Change in derivatives designated as cash flow hedges	—		(69		)	—			—			(69		)
Change in pension and post-retirement defined benefit plans	—		1,061			(2		)	—			1,059
Other comprehensive income before income taxes	—		235			669			—			904
Income tax (expense) recovery on above items	—		(163		)	1			—			(162		)
Equity accounted investments	742		670			—			(1,412		)	—
Other comprehensive income	742		742			670			(1,412		)	742
Comprehensive income	$	2,094	$	2,152		$	1,435		$	(3,587	)	$	2,094

105

CONDENSED CONSOLIDATING STATEMENTS OF COMPREHENSIVE INCOME

YEAR ENDED DECEMBER 31, 2014



(in millions of Canadian dollars)	CPRL (Parent Guarantor)			CPRC (Subsidiary Issuer)			Non-Guarantor Subsidiaries			Consolidating Adjustments and Eliminations			CPRL Consolidated
Net income	$	1,476		$	1,478		$	559		$	(2,037	)	$	1,476
Net (loss) gain in foreign currency translation adjustments, net of hedging activities	—			(316		)	284			—			(32		)
Change in derivatives designated as cash flow hedges	—			(49		)	—			—			(49		)
Change in pension and post-retirement defined benefit plans	—			(908		)	(33		)	—			(941		)
Other comprehensive (loss) income before income taxes	—			(1,273		)	251			—			(1,022		)
Income tax recovery on above items	—			293			13			—			306
Equity accounted investments	(716		)	264			—			452			—
Other comprehensive (loss) income	(716		)	(716		)	264			452			(716		)
Comprehensive income	$	760		$	762		$	823		$	(1,585	)	$	760

106

CONDENSED CONSOLIDATING STATEMENTS OF COMPREHENSIVE INCOME

YEAR ENDED DECEMBER 31, 2013



(in millions of Canadian dollars)	CPRL (Parent Guarantor)		CPRC (Subsidiary Issuer)			Non-Guarantor Subsidiaries			Consolidating Adjustments and Eliminations			CPRL Consolidated
Net income	$	875	$	875		$	181		$	(1,056	)	$	875
Net (loss) gain in foreign currency translation adjustments, net of hedging activities	—		(219		)	222			—			3
Change in derivatives designated as cash flow hedges	—		(1		)	—			—			(1		)
Change in pension and post-retirement defined benefit plans	—		1,631			50			—			1,681
Other comprehensive income before income taxes	—		1,411			272			—			1,683
Income tax recovery on above items	—		(400		)	(18		)	—			(418		)
Equity accounted investments	1,265		254			—			(1,519		)	—
Other comprehensive income	1,265		1,265			254			(1,519		)	1,265
Comprehensive income	$	2,140	$	2,140		$	435		$	(2,575	)	$	2,140

107

CONDENSED CONSOLIDATING BALANCE SHEETS

AS AT DECEMBER 31, 2015



(in millions of Canadian dollars)	CPRL (Parent Guarantor)			CPRC (Subsidiary Issuer)			Non-Guarantor Subsidiaries		Consolidating Adjustments and Eliminations			CPRL Consolidated
Assets
Current assets
Cash and cash equivalents	$	—		$	502		$	148	$	—		$	650
Accounts receivable, net	—			452			193		—			645
Accounts receivable, inter-company	59			105			265		(429		)	—
Short-term advances to affiliates	—			75			3,483		(3,558		)	—
Materials and supplies	—			154			34		—			188
Other current assets	—			37			17		—			54
	59			1,325			4,140		(3,987		)	1,537
Long-term advances to affiliates	501			207			376		(1,084		)	—
Investments	—			22			130		—			152
Investments in subsidiaries	7,518			9,832			—		(17,350		)	—
Properties	—			8,481			7,792		—			16,273
Goodwill and intangible assets	—			3			208		—			211
Pension asset	—			1,401			—		—			1,401
Other assets	—			55			8		—			63
Deferred income taxes	25			—			—		(25		)	—
Total assets	$	8,103		$	21,326		$	12,654	$	(22,446	)	$	19,637
Liabilities and shareholders’ equity
Current liabilities
Accounts payable and accrued liabilities	$	54		$	1,122		$	241	$	—		$	1,417
Accounts payable, inter-company	—			325			104		(429		)	—
Short-term advances from affiliates	3,253			230			75		(3,558		)	—
Long-term debt maturing within one year	—			24			6		—			30
	3,307			1,701			426		(3,987		)	1,447
Pension and other benefit liabilities	—			676			82		—			758
Long-term advances from affiliates	—			877			207		(1,084		)	—
Other long-term liabilities	—			186			132		—			318
Long-term debt	—			8,863			64		—			8,927
Deferred income taxes	—			1,505			1,911		(25		)	3,391
Total liabilities	3,307			13,808			2,822		(5,096		)	14,841
Shareholders’ equity
Share capital	2,058			1,037			5,465		(6,502		)	2,058
Additional paid-in capital	43			1,568			613		(2,181		)	43
Accumulated other comprehensive (loss) income	(1,477		)	(1,477		)	840		637			(1,477		)
Retained earnings	4,172			6,390			2,914		(9,304		)	4,172
	4,796			7,518			9,832		(17,350		)	4,796
Total liabilities and shareholders’ equity	$	8,103		$	21,326		$	12,654	$	(22,446	)	$	19,637

108

CONDENSED CONSOLIDATING BALANCE SHEETS

AS AT DECEMBER 31, 2014



(in millions of Canadian dollars)	CPRL (Parent Guarantor)			CPRC (Subsidiary Issuer)			Non-Guarantor Subsidiaries		Consolidating Adjustments and Eliminations			CPRL Consolidated
Assets
Current assets
Cash and cash equivalents	$	—		$	152		$	74	$	—		$	226
Accounts receivable, net	—			490			212		—			702
Accounts receivable, inter-company	58			147			230		(435		)	—
Short-term advances to affiliates	—			170			1,974		(2,144		)	—
Materials and supplies	—			137			40		—			177
Other current assets	—			27			89		—			116
	58			1,123			2,619		(2,579		)	1,221
Long-term advances to affiliates	1			207			1,316		(1,524		)	—
Investments	—			15			97		—			112
Investments in subsidiaries	7,618			8,231			—		(15,849		)	—
Properties	—			7,976			6,462		—			14,438
Assets held for sale	—			8			174		—			182
Goodwill and intangible assets	—			—			176		—			176
Pension asset	—			304			—		—			304
Other assets	—			94			23		—			117
Deferred income taxes	4			15			37		(56		)	—
Total assets	$	7,681		$	17,973		$	10,904	$	(20,008	)	$	16,550
Liabilities and shareholders’ equity
Current liabilities
Accounts payable and accrued liabilities	$	97		$	896		$	284	$	—		$	1,277
Accounts payable, inter-company	—			288			147		(435		)	—
Short-term advances from affiliates	1,974			—			170		(2,144		)	—
Long-term debt maturing within one year	—			91			43		—			134
	2,071			1,275			644		(2,579		)	1,411
Pension and other benefit liabilities	—			692			63		—			755
Long-term advances from affiliates	—			1,316			208		(1,524		)	—
Other long-term liabilities	—			286			146		—			432
Long-term debt	—			5,570			55		—			5,625
Deferred income taxes	—			1,216			1,557		(56		)	2,717
Total liabilities	2,071			10,355			2,673		(4,159		)	10,940
Shareholders’ equity
Share capital	2,185			1,037			5,122		(6,159		)	2,185
Additional paid-in capital	36			1,547			569		(2,116		)	36
Accumulated other comprehensive loss	(2,219		)	(2,219		)	170		2,049			(2,219		)
Retained earnings	5,608			7,253			2,370		(9,623		)	5,608
	5,610			7,618			8,231		(15,849		)	5,610
Total liabilities and shareholders’ equity	$	7,681		$	17,973		$	10,904	$	(20,008	)	$	16,550

109

CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS

YEAR ENDED DECEMBER 31, 2015



(in millions of Canadian dollars)	CPRL (Parent Guarantor)			CPRC (Subsidiary Issuer)			Non-Guarantor Subsidiaries			Consolidating Adjustments and Eliminations			CPRL Consolidated
Cash provided by operating activities	$	2,283		$	1,650		$	1,074		$	(2,548	)	$	2,459
Investing activities
Additions to properties	—			(766		)	(756		)	—			(1,522		)
Proceeds from the sale of Delaware & Hudson South	—			—			281			—			281
Proceeds from sale of properties and other assets	—			103			11			—			114
Advances to affiliates	(1,133		)	(311		)	(1,820		)	3,264			—
Repayment of advances to affiliates	—			804			1,000			(1,804		)	—
Capital contributions to affiliates	—			(1,655		)	—			1,655			—
Repurchase of share capital from affiliates	—			1,210			—			(1,210		)	—
Other	—			6			(2		)	—			4
Cash used in investing activities	(1,133		)	(609		)	(1,286		)	1,905			(1,123		)
Financing activities
Dividends paid	(226		)	(2,272		)	(276		)	2,548			(226		)
Issuance of share capital	—			—			1,655			(1,655		)	—
Return of share capital to affiliates	—			—			(1,210		)	1,210			—
Issuance of CP Common Shares	43			—			—			—			43
Purchase of CP Common Shares	(2,787		)	—			—			—			(2,787		)
Issuance of long-term debt, excluding commercial paper	—			3,411			—			—			3,411
Repayment of long-term debt, excluding commercial paper	—			(461		)	(44		)	—			(505		)
Net repayment of commercial paper	—			(893		)	—			—			(893		)
Advances from affiliates	1,820			500			944			(3,264		)	—
Repayment of advances from affiliates	—			(1,000		)	(804		)	1,804			—
Cash (used in) provided by financing activities	(1,150		)	(715		)	265			643			(957		)
Effect of foreign currency fluctuations on U.S. dollar-denominated cash and cash equivalents	—			24			21			—			45
Cash position
Increase in cash and cash equivalents	—			350			74			—			424
Cash and cash equivalents at beginning of year	—			152			74			—			226
Cash and cash equivalents at end of year	$	—		$	502		$	148		$	—		$	650

110

CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS

YEAR ENDED DECEMBER 31, 2014



(in millions of Canadian dollars)	CPRL (Parent Guarantor)			CPRC (Subsidiary Issuer)			Non-Guarantor Subsidiaries			Consolidating Adjustments and Eliminations			CPRL Consolidated
Cash provided by operating activities	$	183		$	1,684		$	604		$	(348	)	$	2,123
Investing activities
Additions to properties	—			(816		)	(702		)	69			(1,449		)
Proceeds from the sale of west end of Dakota, Minnesota and Eastern Railroad	—			—			236			—			236
Proceeds from sale of properties and other assets	—			116			5			(69		)	52
Advances to affiliates	—			(611		)	(2,636		)	3,247			—
Repayment of advances to affiliates	—			2,167			1,592			(3,759		)	—
Capital contributions to affiliates	—			(2,927		)	—			2,927			—
Change in restricted cash and cash equivalents used to collateralize letters of credit	—			411			—			—			411
Other	—			2			(2		)	—			—
Cash used in investing activities	—			(1,658		)	(1,507		)	2,415			(750		)
Financing activities
Dividends paid	(244		)	(182		)	(166		)	348			(244		)
Issuance of share capital	—			—			2,927			(2,927		)	—
Issuance of CP Common Shares	62			—			—			—			62
Purchase of CP Common Shares	(2,050		)	—			—			—			(2,050		)
Repayment of long-term debt, excluding commercial paper	—			(174		)	(9		)	—			(183		)
Net issuance of commercial paper	—			771			—			—			771
Settlement of foreign exchange forward on long-term debt	—			17			—			—			17
Advances from affiliates	2,049			1,198			—			(3,247		)	—
Repayment of advances from affiliates	—			(1,592		)	(2,167		)	3,759			—
Other	—			—			(3		)	—			(3		)
Cash (used in) provided by financing activities	(183		)	38			582			(2,067		)	(1,630		)
Effect of foreign currency fluctuations on U.S. dollar-denominated cash and cash equivalents	—			(3		)	10			—			7
Cash position
Increase (decrease) in cash and cash equivalents	—			61			(311		)	—			(250		)
Cash and cash equivalents at beginning of year	—			91			385			—			476
Cash and cash equivalents at end of year	$	—		$	152		$	74		$	—		$	226

111

CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS

YEAR ENDED DECEMBER 31, 2013



(in millions of Canadian dollars)	CPRL (Parent Guarantor)			CPRC (Subsidiary Issuer)			Non-Guarantor Subsidiaries			Consolidating Adjustments and Eliminations			CPRL Consolidated
Cash provided by operating activities	$	123		$	1,327		$	707		$	(207	)	$	1,950
Investing activities
Additions to properties	—			(882		)	(470		)	116			(1,236		)
Proceeds from sale of properties and other assets	—			65			124			(116		)	73
Advances to affiliates	—			—			(137		)	137			—
Repayment of advances to affiliates	—			—			84			(84		)	—
Capital contributions to affiliates	—			(100		)	—			100			—
Change in restricted cash and cash equivalents used to collateralize letters of credit	—			(411		)	—			—			(411		)
Other	—			(21		)	(2		)	—			(23		)
Cash used in investing activities	—			(1,349		)	(401		)	153			(1,597		)
Financing activities
Dividends paid	(244		)	(123		)	(84		)	207			(244		)
Issuance of share capital	—			—			100			(100		)	—
Issuance of CP Common Shares	83			—			—			—			83
Issuance of long-term debt, excluding commercial paper	—			60			(60		)	—			—
Repayment of long-term debt, excluding commercial paper	—			(48		)	(8		)	—			(56		)
Advances from affiliates	38			99			—			(137		)	—
Repayment of advances from affiliates	—			(84		)	—			84			—
Other	—			(3		)	—			—			(3		)
Cash used in financing activities	(123		)	(99		)	(52		)	54			(220		)
Effect of foreign currency fluctuations on U.S. dollar-denominated cash and cash equivalents	—			1			9			—			10
Cash position
(Decrease) increase in cash and cash equivalents	—			(120		)	263			—			143
Cash and cash equivalents at beginning of year	—			211			122			—			333
Cash and cash equivalents at end of year	$	—		$	91		$	385		$	—		$	476

112

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

ITEM 9A. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

As of December 31, 2015, an evaluation was carried out under the supervision of and with the participation of CP's management, including CEO and CFO, of the effectiveness of the design and operation of the Company's disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act. Based on that evaluation, the CEO and CFO concluded that these disclosure controls and procedures were effective as of December 31, 2015, to ensure that information required to be disclosed by the Company in reports that they file or submit under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified by the SEC rules and forms and (ii) accumulated and communicated to the Company’s management, including the CEO and CFO, as appropriate, to allow timely decisions regarding required disclosure.

Management's Report on Internal Control over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting for the Company as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act. Due to its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Management has assessed the effectiveness of the Company’s internal control over financial reporting in accordance with the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in “Internal Control-Integrated Framework (2013)”. Based on this assessment, management concluded that the Company maintained effective internal control over financial reporting as of December 31, 2015. All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to the reliability of financial reporting and preparation of financial statements in accordance with generally accepted accounting principles.

The effect of the Company's internal control over financial reporting as of December 31, 2015 has been audited by Deloitte LLP, the Company's independent registered public accounting firm, as stated in their report, which is included herein.

Changes in Internal Control over Financial Reporting

During the year, the Company has not identified any changes in internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

113

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and the Shareholders of Canadian Pacific Railway Limited:

We have audited the internal control over financial reporting of Canadian Pacific Railway Limited and subsidiaries (the “Company”) as of December 31, 2015, based on the criteria established in Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. The Company's management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company's internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company's internal control over financial reporting is a process designed by, or under the supervision of, the company's principal executive and principal financial officers, or persons performing similar functions, and effected by the company's board of directors, management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.

Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2015, based on the criteria established in Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated financial statements and financial statement schedule as of and for the year ended December 31, 2015 of the Company and our report dated February 29, 2016 expressed an unqualified opinion on those financial statements.

/s/ Deloitte LLP

Chartered Professional Accountants, Chartered Accountants

February 29, 2016

Calgary, Canada

114

ITEM 9B. OTHER INFORMATION

None.

115

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

In accordance with Instruction G(3) of Form 10-K, the information required by this item is incorporated herein by reference to the Company's definitive Proxy Statement filed with the SEC on February 29, 2016 (the “Proxy Statement”).

Directors of Registrant

The information regarding directors is included in the Nominees for Election to the Board section of the Proxy Statement and is incorporated herein by reference.

The information regarding the Audit Committee is included in the Statement of Corporate Governance section of the Proxy Statement and is incorporated herein by reference.

Executive Officers of Registrant

The information regarding executive officers is included in Part I of this report under Executive Officers of the Registrant, following Item 4. Mine Safety Disclosures.

Compliance with Section 16(a) of the Exchange Act

The information regarding the compliance with Section 16(a) of the Securities Exchange Act of 1934 is included in Section 16(a) Beneficial Ownership Reporting Compliance section of the Proxy Statement and is incorporated herein by reference.

Code of Ethics for Chief Executive Officer and Senior Financial Officers

The Board of Directors of CP has adopted the Code of Ethics for the Chief Executive Officer and Senior Financial Officers, which is accessible through CP's website at http://www.cpr.ca/en/about-cp/corporate-governance . All amendments to the code, and all waivers of the code with respect to any of the officers covered by it, will be posted on CP’s website and provided in print to any person who requests them.

ITEM 11. EXECUTIVE COMPENSATION

In accordance with Instruction G(3) of Form 10-K, the information required by this item regarding executive compensation is included in the Statement of Executive Compensation section of the Proxy Statement and is incorporated herein by reference.

The information regarding the Compensation Committee is included in the Report of the Management Resources and Compensation Committee section of the Proxy Statement and is incorporated herein by reference.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

In accordance with Instruction G(3) of Form 10-K, the information required by this item is included in the Management Stock Option Incentive Plan section and the Security Ownership of Certain Beneficial Owners and Management section of the Proxy Statement and is incorporated herein by reference.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

In accordance with Instruction G(3) of Form 10-K, the information require by this item regarding director independence and transactions with related persons is included in the Statement of Corporate Governance section and the Nominees for Election to the Board section of the Proxy Statement, which is incorporated herein by reference.

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES

In accordance with Instruction G(3) of Form 10-K, the information required by this item regarding the fees billed by the independent registered public accounting firm and the nature of services comprising the fees is included in the Statement of Corporate Governance section of the Proxy Statement.

116

PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES

The following documents are filed as part of this report:


(a)	Financial Statements

The financial statements filed as part of this filing are listed on the Index to Consolidated Financial Statements in Item 8. Financial Statements and Supplementary Data.


(b)	Financial Statement Schedules

Schedule II - Valuation and Qualifying Accounts



(in millions of Canadian dollars)	Beginning balance at January 1		Additions charged to expenses		Payments and other reductions			Impact of FX		Ending balance at December 31
Accruals for legal, personal injury and casualty-related claims ⁽¹⁾
2013	$	172	$	62	$	(84	)	$	3	$	153
2014	$	153	$	32	$	(38	)	$	3	$	150
2015	$	150	$	79	$	(102	)	$	6	$	133
Environmental liabilities
2013	$	89	$	6	$	(9	)	$	4	$	90
2014	$	90	$	4	$	(9	)	$	6	$	91
2015	$	91	$	7	$	(17	)	$	12	$	93

⁽¹⁾ Includes WCB, FELA, occupational, foreign car damage and property & lading damage claims.

117


(c)	Exhibits

Exhibits are listed in the exhibit index below. The exhibits include management contracts, compensatory plans and arrangements required to be filed as exhibits to the Form 10-K by Item 601 (10) (iii) of Regulation S-K.



Exhibit	Description
3	Articles of incorporation and Bylaws:
3.1**	Restated Certificate and Articles of Incorporation of Canadian Pacific Railway Limited (incorporated by reference to Exhibit 99.2 to Canadian Pacific Railway Limited’s Form 6-K filed with the Securities and Exchange Commission on October 22, 2015, File No. 001-01342).
3.2**	By-law No. 1, as amended, of Canadian Pacific Railway Limited (incorporated by reference to Exhibit 1 to Canadian Pacific Railway Limited’s Form 6-K filed with the Securities and Exchange Commission on May 22, 2009, File No. 001-01342).
3.3**	By-law No. 2 of Canadian Pacific Railway Limited (incorporated by reference to Exhibit 99.1 to Canadian Pacific Railway Limited’s Form 6-K filed with the Securities and Exchange Commission on March 13, 2015, File No. 001-01342).
3.4**	General By-law, as amended, of Canadian Pacific Railway Company, a wholly owned subsidiary of Canadian Pacific Railway Limited (incorporated by reference to Exhibit 2 to Canadian Pacific Railway Limited’s Form 6-K filed with the Securities and Exchange Commission on May 22, 2009, File No. 001-01342).
4	Instruments Defining the Rights of Security Holders, Including Indentures:
4.1**	Indenture dated as of May 8, 2007 between Canadian Pacific Railway Company and The Bank of New York Mellon.
4.2**	First Supplemental Indenture dated as of May 8, 2007 between Canadian Pacific Railway Company and The Bank of New York Mellon.
4.3**	Second Supplemental Indenture dated as of May 20, 2008 between Canadian Pacific Railway Company and The Bank of New York Mellon.
4.4**	Third Supplemental Indenture dated as of May 15, 2009 between Canadian Pacific Railway Company and The Bank of New York Mellon.
4.5**	Fourth Supplemental Indenture dated as of September 23, 2010 between Canadian Pacific Railway Company and The Bank of New York Mellon.
4.6**	Fifth Supplemental Indenture dated as of December 1, 2011 between Canadian Pacific Railway Company and The Bank of New York Mellon.
4.7**	Sixth Supplemental Indenture dated as of February 2, 2015 between Canadian Pacific Railway Company and The Bank of New York Mellon.
4.8**	Seventh Supplemental Indenture dated as of August 3, 2015 between Canadian Pacific Railway Company and The Bank of New York Mellon.
4.9**	Eighth Supplemental Indenture dated as of November 24, 2015 among Canadian Pacific Railway Limited, Canadian Pacific Railway Company and The Bank of New York Mellon.
4.10**	Indenture dated as of October 30, 2001 between Canadian Pacific Railway Company and The Bank of New York Mellon.
4.11**	First Supplemental Indenture dated as of April 23, 2004 between Canadian Pacific Railway Company and The Bank of New York Mellon.
4.12**	Second Supplemental Indenture dated as of October 12, 2011 between Canadian Pacific Railway Limited and The Bank of New York Mellon.
4.13**	Third Supplemental Indenture dated as of October 13, 2011 between Canadian Pacific Railway Company and The Bank of New York Mellon.
4.14**	Fourth Supplemental Indenture dated as of November 24, 2015 among Canadian Pacific Railway Limited, Canadian Pacific Railway Company and The Bank of New York Mellon.
4.15**	Indenture dated as of July 15, 1991 between Canadian Pacific Railway Company and Harris Trust and Savings Bank.
4.16**	First Supplemental Indenture dated as of July 1, 1996 between Canadian Pacific Railway Company and Harris Trust and Savings Bank.
4.17**	Second Supplemental Indenture dated as of November 24, 2015 among Canadian Pacific Railway Limited, Canadian Pacific Railway Company and The Bank of New York Mellon (as successor in interest to Harris Trust and Savings Bank).
4.18**	Indenture dated as of May 23, 2008 between Canadian Pacific Railway Company and Computershare Trust Company of Canada.
4.19**	First Supplemental Indenture dated as of November 24, 2015 among Canadian Pacific Railway Limited, Canadian Pacific Railway Company and Computershare Trust Company of Canada.

118



4.20**	Indenture dated as of September 11, 2015, from Canadian Pacific Railway Company to Wells Fargo Bank, National Association, as Trustee (incorporated by reference to Exhibit 99.1 to Canadian Pacific Railway Limited’s Registration Statement on Form 6-K filed with the Securities and Exchange Commission on September 14, 2015, File No. 001-01342).
4.21**	First Supplemental Indenture dated as of September 11, 2015 between Canadian Pacific Railway Company and The Bank of New York Mellon.
4.22**	Second Supplemental Indenture dated as of November 24, 2015 among Canadian Pacific Railway Limited, Canadian Pacific Railway Company and The Bank of New York Mellon.
4.23**	Guarantee of Canadian Pacific Railway Company’s Perpetual 4% Consolidated Debenture Stock dated as of December 18, 2015, between Canadian Pacific Railway Limited and Canadian Pacific Railway Company.
10	Material Contracts:
10.1* ^, **	CP 401(k) Savings Plan, as amended and restated effective October 27, 2014 (incorporated by reference to Exhibit 4.5 to Canadian Pacific Railway Limited’s Registration Statement on Form S-8 filed with the Securities and Exchange Commission on December 21, 2015, File No. 333-208647).
10.2* ^, **	Stand-Alone Option Agreement dated February 4, 2013 between the Registrant and Keith Creel (incorporated by reference to Exhibit 4.2 to Canadian Pacific Railway Limited’s Registration Statement on Form S-8 filed with the Securities and Exchange Commission on May 24, 2013, File No. 333-188827).
10.3* ^, **	Performance Share Unit Plan for Eligible Employees of Canadian Pacific Railway Limited, adopted with effect from February 17, 2009, as amended February 22, 2013, April 30, 2014 and February 18, 2015.
10.4* ^, **	Canadian Pacific Railway Limited Amended and Restated Management Stock Option Incentive Plan, as amended and restated effective November 19, 2015.
10.5* ^, **	Canadian Pacific Railway Limited Employee Share Purchase Plan (U.S.) dated July 1, 2006 ("ESPP (U.S.)"), and Amendment to the ESPP (U.S.) effective January 1, 2015, and Amendment to the ESPP (U.S.) January 1, 2016.
10.6* ^, **	Stand-Alone Option Agreement dated June 26, 2012 between the Registrant and E. Hunter Harrison (incorporated by reference to Exhibit 4.2 to Canadian Pacific Railway Limited’s Registration Statement on Form S-8 filed with the Securities and Exchange Commission on September 14, 2012, File No. 333-183891).
10.7* ^, **	Directors' Stock Option Plan, effective October 1, 2001.
10.8* ^, **	Directors' Deferred Share Unit Plan, as amended effective July 1, 2013.
10.9* ^, **	Senior Executives' Deferred Share Unit Plan, effective as of January 1, 2001, as amended September 6, 2012.
10.10* ^, **	Canadian Pacific Railway Limited Employee Share Purchase Plan (Canada) dated July 1, 2006 ("ESPP (Canada)"), and Amendment to the ESPP (Canada) effective January 1, 2013, and Amendment to the ESPP (Canada) effective November 5, 2013, and Amendment to the ESPP (Canada) effective July 17, 2014.
10.11* ^, **	Canadian Pacific U.S. Salaried Retirement Income Plan, as restated effective January 1, 2015.
10.12* ^, **	Canadian Pacific U.S. Supplemental Executive Retirement Plan, effective January 1, 2013 ("CPUSERP"), and First Amendment to the CPUSERP effective November 14, 2013, and Second Amendment to the CPUSERP effective January 1, 2014.
10.13* ^, **	Restricted Share Unit Plan for Eligible Employees of Canadian Pacific Railway Limited, effective August 2, 2011, as amended February 21, 2013.
10.14* ^, **	Short Term Incentive Plan for Non-Unionized Employees (Canada) and US Salaried Employees, effective January 1, 2014.
10.15* ^, **	Canadian Pacific Railway Company Pension Plan (Pension Plan Rules), consolidated as at January 1, 2009.
10.16* ^, **	Amendment Number 1, effective July 1, 2010, to the Defined Contribution Provisions (Appendix B) of the Canadian Pacific Railway Company Pension Plan (Pension Plan Rules), consolidated as at January 1, 2009.
10.17* ^, **	Amendment Number 2, effective April 1, 2011, to the Defined Contribution Provisions (Appendix B) of the Canadian Pacific Railway Company Pension Plan (Pension Plan Rules), consolidated as at January 1, 2009.
10.18* ^, **	Amendment Number 3, effective January 1, 2013, to the Defined Contribution Provisions (Appendix B) of the Canadian Pacific Railway Company Pension Plan (Pension Plan Rules), consolidated as at January 1, 2009.
10.19* ^, **	Amendment Number 1 to the Canadian Pacific Railway Company Pension Plan (Pension Plan Rules), consolidated as at January 1, 2009, approved by the Board of Directors on December 16, 2009.
10.20* ^, **	Amendment Number 2, effective January 1, 2010, to the Canadian Pacific Railway Company Pension Plan (Pension Plan Rules), consolidated as at January 1, 2009.
10.21* ^, **	Amendment Number 3, effective January 1, 2010, to the Canadian Pacific Railway Company Pension Plan (Pension Plan Rules), consolidated as at January 1, 2009.

119



10.22* ^, **	Amendment Number 4, effective January 1, 2011, to the Canadian Pacific Railway Company Pension Plan (Pension Plan Rules), consolidated as at January 1, 2009.
10.23* ^, **	Amendment Number 5, effective January 1, 2011, to the Canadian Pacific Railway Company Pension Plan (Pension Plan Rules), consolidated as at January 1, 2009.
10.24* ^, **	Amendment Number 6, effective October 1, 2012, to the Canadian Pacific Railway Company Pension Plan (Pension Plan Rules), consolidated as at January 1, 2009.
10.25* ^, **	Amendment Number 7, effective January 1, 2013, to the Canadian Pacific Railway Company Pension Plan (Pension Plan Rules), consolidated as at January 1, 2009.
10.26* ^, **	Amendment Number 8, effective January 1, 2013, to the Canadian Pacific Railway Company Pension Plan (Pension Plan Rules), consolidated as at January 1, 2009.
10.27* ^, **	Amendment Number 9, effective January 1, 2013, to the Canadian Pacific Railway Company Pension Plan (Pension Plan Rules), consolidated as at January 1, 2009.
10.28* ^, **	Amendment Number 10, effective January 1, 2013, to the Canadian Pacific Railway Company Pension Plan (Pension Plan Rules), consolidated as at January 1, 2009.
10.29* ^, **	Amendment Number 11, effective January 1, 2013, to the Canadian Pacific Railway Company Pension Plan (Pension Plan Rules), consolidated as at January 1, 2009.
10.30* ^, **	Amendment Number 12, effective January 1, 2015, to the Canadian Pacific Railway Company Pension Plan (Pension Plan Rules), consolidated as at January 1, 2009.
10.31* ^, **	Amendment Number 13, effective January 1, 2015, to the Canadian Pacific Railway Company Pension Plan (Pension Plan Rules), consolidated as at January 1, 2009.
10.32* ^, **	Canadian Pacific Railway Company Secondary Pension Plan (Pension Plan Rules), effective June 1, 2013.
10.33* ^, **	Amendment Number 1, effective June 1, 2013, to the Canadian Pacific Railway Company Secondary Pension Plan (Pension Plan Rules), effective June 1, 2013.
10.34* ^, **	Amendment Number 2, effective January 1, 2015, to the Canadian Pacific Railway Company Secondary Pension Plan (Pension Plan Rules) effective January 1, 2015.
10.35* ^, **	Canadian Pacific Supplemental Executive Retirement Plan, effective January 1, 2011.
10.36* ^, **	Executive Employment Agreement between Canadian Pacific Railway Company and Hunter Harrison, effective as of June 28, 2012.
10.37* ^, **	Amendment dated as of May 5, 2014, to the Executive Employment Agreement between Canadian Pacific Railway Company and Hunter Harrison, effective as of June 28, 2012.
10.38* ^, **	Executive Employment Agreement between Canadian Pacific Railway Company, Soo Line Railroad Company and Keith Creel, effective as of February 5, 2013.
10.39* ^, **	Amendment dated August 10, 2015, to the Executive Employment Agreement between Canadian Pacific Railway Company, Soo Line Railroad Company and Keith Creel, effective as of February 5, 2013.
10.40* ^, **	Offer of Employment Letter to Mark Erceg dated April 30, 2015.
10.41* ^, **	Change in Control Agreement between Canadian Pacific Railway Company and Mark Erceg made as of May 18, 2015.
10.42* ^, **	Offer of Employment Letter to Mark Wallace dated July 16, 2012.
10.43* ^, **	Change in Control Agreement between Canadian Pacific Railway Company and Mark Wallace made as of May 1, 2014.
10.44* ^, **	Offer of Employment Letter to Laird Pitz dated March 7, 2014.
10.45**	Credit Agreement dated as of September 26, 2014 among Canadian Pacific Railway Company and CPR Securities Limited, as borrowers, Canadian Pacific Railway Limited, as covenantor, the Financial Institutions that are signatories to the Credit Agreement, as Lenders, the Royal Bank of Canada, as Administrative Agent, RBC Capital Markets, J.P. Morgan Securities LLC, TD Securities, Morgan Stanley MUFG Loan Partners, LLC and Citibank, N.A., Canadian Branch, as Co-Lead Arrangers, RBC Capital Markets and J.P. Morgan Securities LLC, as Joint Bookrunners, J.P. Morgan Chase Bank, N.A., as Syndication Agent, The Toronto-Dominion Bank, Morgan Stanley MUFG Loan Partners, LLC and Citibank, N.A., Canadian Branch, as Co-Documentation Agents.
10.46**	First Amending Agreement dated as of June 15, 2015, to the Credit Agreement dated September 26, 2014, among Canadian Pacific Railway Company and CPR Securities Limited, as borrowers, Canadian Pacific Railway Limited, as covenantor, the signatories to this First Amending Agreement to the Credit Agreement, as Lenders, the Royal Bank of Canada, as Administrative Agent.
10.47**	Second Amending Agreement dated as of September 17, 2015, to the Credit Agreement dated September 26, 2014, among Canadian Pacific Railway Company and CPR Securities Limited, as borrowers, Canadian Pacific Railway Limited, as covenantor, the signatories to the Second Amending Agreement to this Credit Agreement, as Lenders, the Royal Bank of Canada, as Administrative Agent.
12.1**	Ratio of earnings to fixed charges
21.1**	Subsidiaries of the registrant
23.1**	Consent of Independent Registered Public Accounting Firm

120



24.1**	Power of attorney (included on the signature pages of this Form 10-K)
31.1**	CEO Rule 13a-14(a) Certifications
31.2**	CFO Rule 13a-14(a) Certifications
32.1**	CEO Section 1350 Certifications
32.2**	CFO Section 1350 Certifications
99.1**	Annual CEO Certification pursuant to NYSE Rule 303A.12(a)
101.INS**	XBRL Instance Document
101.SCH**	XBRL Taxonomy Extension Schema Document
101.CAL**	XBRL Taxonomy Extension Calculation Linkbase Document
101.LAB**	XBRL Taxonomy Extension Label Linkbase Document
101.DEF**	XBRL Taxonomy Extension Definition Linkbase Document
101.PRE**	XBRL Taxonomy Extension Presentation Linkbase Document
	The following financial information from Canadian Pacific Railway Limited’s Annual Report on Form 10-K for the year ended December 31, 2015, formatted in Extensible Business Reporting Language (XBRL) includes: (i) the Consolidated Statements of Income of each of the years ended December 31, 2015, 2014, and 2013; (ii) the Consolidated Statements of Comprehensive Income for each of the years ended December 31, 2015, 2014, and 2013; (iii) the Consolidated Balance Sheets at December 31, 2015 and 2014; (iv) the Consolidated Statements of Cash Flows for the years ended December 31, 2015, 2014, and 2013; (v) the Consolidated Statements of Changes in Shareholders’ Equity for each of the three years ended December 31, 2015, 2014, and 2013; and (vi) the Notes to Consolidated Financial Statements.

* Management contract or compensatory arrangement

**Filed with this Statement

121

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.



CANADIAN PACIFIC RAILWAY LIMITED
(Registrant)
By:	/s/ E. HUNTER HARRISON
	E. Hunter Harrison
	Chief Executive Officer

Dated: February 29 , 2016

POWER OF ATTORNEY

Each of the undersigned do hereby appoint each of Mark J. Erceg and Jeffrey J. Ellis, his or her true and lawful attorney-in-fact and agent, to sign on his or her behalf the Company’s Annual Report on Form 10-K, for the year ended December 31, 2015, and any and all amendments thereto, and to file the same, with all exhibits thereto, with the Securities and Exchange Commission.

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Company and in the capacities indicated on February 29, 2016.



Signature	Title
/s/ E. HUNTER HARRISON	Chief Executive Officer and Director
E. Hunter Harrison	(Principal Executive Officer)

/s/ MARK J. ERCEG	Executive Vice President and Chief Financial Officer
Mark J. Erceg	(Principal Financial Officer)

/s/ JEFFREY D. KAMPSEN	Vice President and Controller
Jeffrey D. Kampsen

/s/ ANDREW F. REARDON	Chairman of the Board of Directors
Andrew F. Reardon

/s/ WILLIAM A. ACKMAN	Director
William A. Ackman

/s/ JOHN R. BAIRD	Director
John R. Baird

/s/ ISABELLE COURVILLE	Director
Isabelle Courville

/s/ KEITH E. CREEL	Director
Keith E. Creel

/s/ REBECCA MACDONALD	Director
Rebecca MacDonald

/s/ DR. ANTHONY R. MELMAN	Director
Dr. Anthony R. Melman

/s/ MATTHEW H. PAULL	Director
Matthew H. Paull

122

I HEREBY CERTIFY that the articles of incorporation of the above-named corporation were restated under section 180 of the Canada Business

Canada Bu

Dividends: The holders of the Common Shares will be entitled to receive dividends if, as and when declared by the board of directors of the Corporation (the “board”) out of the assets of the Corporation properly applicable to the payment of dividends in such amounts and payable in such manner as the board

may fr

(a)

May 22, 2009

CANADIAN PACIFIC RAILWAY LIMITED

By-LAW NO. 1 AS AMENDED

CANADIAN PACIFIC RAILWAY LIMITED BY-LAW NO. 1

A by-law regulating generally the transaction of the business and affairs of Canadian Pacific Railway Limited.

SECTION ONE

INTERPRETATION


1.01	Definitions

In this by-law, which may be cited as the General By-law, unless the context otherwise requires:

“Act” means the Canada Business Corporations Act , and any statute that may be substituted therefor, as from time to time amended:

“Articles” means the articles of the Corporation as defined in the Act; “Board” means the Board of Directors of the Corporation; “Corporation” means Canadian Pacific Railway Limited;

“meeting of shareholders” means any meeting of shareholders including an annual meeting;

“non-business day” means Saturday, Sunday and any other day that is a holiday as defined in the Interpretation Act (Canada);

“recorded address” means in the case of a shareholder the address as recorded in the securities register; and in the case of joint shareholders the address appearing in the securities register in respect of such joint holding or the first address so appearing if there are two or more; and in the case of a director, officer or auditor, the latest address as recorded in the records of the Corporation.


1.02	Construction

Save as aforesaid, words and expressions defined in the Act have the same meanings when used herein; words importing the singular include the plural and vice versa; words importing the masculine gender include the feminine

and neuter genders; and words importing persons include individuals, bodies corporate, partnerships, trusts and unincorporated organizations.

SECTION TWO

MEETINGS OF SHAREHOLDERS


2.01	Meetings of Shareholders

The annual meeting of shareholders shall be held in each year on a date to be determined by the Board. The Board, the Chairman or the President may call a meeting of shareholders, other than an annual meeting of shareholders, at any time. If the directors or shareholders of the Corporation call a meeting of shareholders pursuant to the Act, the directors or shareholders, as the case may be, may determine that the meeting shall be held, in accordance with the Act, entirely by means of telephonic, electronic or other communication facility that permits all participants to communicate adequately with each other during the meeting.


2.02	Chairman, Secretary and Scrutineers

The chairman of any meeting of shareholders shall be the Chairman or, in the absence of such officer, the President or, in the absence of such officer, any director who is present and willing to act as chairman of the meeting. If no such person is present within fifteen minutes from the time fixed for holding the meeting, the persons present and entitled to vote shall choose one of their number to act as chairman. The secretary of any meeting of shareholders shall be the Secretary of the Corporation. If the Secretary is absent, the chairman shall appoint some person, who need not be a shareholder, to act as secretary of the meeting. The chairman may appoint one or more persons who need not be shareholders to act as scrutineers at the meeting.


2.03	Persons Entitled to be Present

The only persons entitled to be present at a meeting of shareholders shall be those entitled to vote thereat, the directors, the President, the auditor of the Corporation and others who, although not entitled to vote, are entitled or required under any provision of the Act or the Articles or the General By-law to be present. Any other person may be admitted with the consent of the meeting or of the chairman of the meeting.


2.04	Quorum

Except as otherwise provided in the Articles, a quorum for the transaction of business at any meeting of shareholders shall be at least two

persons present in person, each being a shareholder entitled to vote thereat or a duly appointed proxyholder for or representative of such a shareholder and together holding or representing in the aggregate not less than 25% of the outstanding shares of the Corporation entitled to be voted at the meeting.

SECTION THREE

DIRECTORS


3.01	Number of Directors

Subject to the Articles, the number of directors of the Corporation may be fixed from time to time by resolution of the Board.


3.02	Qualification of Directors

No person shall be elected or appointed a director if the person is disqualified from being a director under the Act. A director ceases to hold office when the director ceases to be qualified as a director under the Act or Articles.


3.03	Quorum

A majority of the directors shall form a quorum of the Board.


3.04	Meeting Following Annual Meeting

The Board shall meet without notice as soon as practicable after each annual meeting of shareholders to transact such business as may come before the meeting and to appoint by election from among their number the Chairman, who also may be appointed to other offices. The Board also may but need not appoint a President who need not be a director of the Corporation.


3.05	Other Meetings of the Board

Meetings of the Board shall be held from time to time at a time and place determined by the Board, the Chairman, the President, or any two directors.


3.06	Notice of Meeting

Subject to any resolution of the Board, notice of the time and place of each meeting of the Board requiring notice shall be given to each director not less than 24 hours before the time at which the meeting is to be held.

3.07 Chairman

The chairman of any meeting of the Board shall be the Chairman or, in the absence of such officer, the President or, in the absence of such officer, any director who is present and willing to act as chairman of the meeting.

3.08 Votes to Govern

At all meetings of the Board, every question shall be decided by a majority of the votes cast. The chairman of any meeting may vote as a director.

3.09 Remuneration

No director who is a salaried officer of the Corporation shall be entitled to any remuneration for the performance of duties as a director. If any director or officer of the Corporation shall be employed by or shall perform services for the Corporation otherwise than as a director or officer or shall be a member of a firm or a shareholder, director or officer of a body corporate which is employed by or performs services for the Corporation, the fact of being a director or officer of the Corporation shall not disentitle such director or officer of such firm or body corporate, as the case may be, from receiving proper remuneration for such services.

SECTION FOUR

THE TRANSACTION OF BUSINESS


4.01	Execution of Instruments

All instruments and documents of whatsoever kind may be signed on behalf of the Corporation by two persons, one of whom is the Chairman, the President, a Vice-President or a director of the Corporation and the other of whom is the Secretary, the Treasurer, an Assistant Secretary or an Assistant Treasurer. The Board may from time to time determine the manner in which and the person or persons by whom any particular instrument or document or class of instruments or documents may or shall be signed, including the use of facsimile reproduction of any or all signatures and the use of the corporate seal or a facsimile reproduction thereof.


4.02	Cheques

All cheques upon the bank or banks where the funds of the Corporation are kept shall be drawn payable to the order of the party entitled to

the payment to be made, which cheques, notwithstanding section 4.01, shall be signed by the Treasurer, or by an Assistant Treasurer, or by such other person as may be appointed by the Board, and countersigned by the President, or by a Vice-President, or by some other person authorized by the Board so to do. The Board may from time to time authorize the signing and countersigning of cheques by means of the facsimile signature of any of the persons authorized to sign or countersign cheques.

SECTION FIVE

DIVIDENDS


5.01	Dividends

The Board may from time to time declare dividends payable to shareholders according to their respective rights.


5.02	Dividend Payment

A dividend payable in money may be paid by cheque drawn on the Corporation’s bankers, or one of them, to the order of each registered holder of shares of a class or series in respect of which the dividend has been declared, and mailed by prepaid ordinary mail to such registered holder at the holder’s recorded address. In the case of joint holders the cheque shall, unless such joint holders otherwise direct, be made payable to the order of all such joint holders and mailed to them at their recorded address. The Corporation may pay a dividend by cheque to a registered holder or to joint holders other than in the manner herein set out, if the registered holder or joint holders so request. The mailing of such cheque as aforesaid, unless the same is not paid on due presentation, shall satisfy and discharge the liability for the dividend to the extent of the sum represented thereby plus the amount of any tax which the Corporation is required to and does withhold.


5.03	Idem

The Corporation may, when directed by a registered holder of a share in respect of which a dividend in money has been declared, pay the dividend in the manner so directed.


5.04	Non-receipt or Loss of Dividend Cheques

In the event of non-receipt or loss of any dividend cheque by the person to whom it is sent, the Corporation shall issue to such person a replacement cheque for a like amount on such terms as to indemnity,

reimbursement of expenses and evidence of non-receipt or loss and of entitlement as the Board, the Vice-President in charge of finance or the Treasurer may from time to time prescribe, whether generally or in a particular case.

SECTION SIX

BORROWING AND RELATED POWERS


6.01	Borrowing and Related Powers

The Board may, without authorization of the shareholders,


(a)	borrow money upon the credit of the Corporation;


(b)	issue, reissue, sell or pledge debt obligations of the Corporation;


(c)	subject to the Act, give a guarantee on behalf of the Corporation to secure performance of an obligation of any person; and


(d)	mortgage, hypothecate, pledge or otherwise create a security interest in all or any property of the Corporation, owned or subsequently acquired, to secure any obligation of the Corporation.

The Board may, by resolution, delegate the powers referred to in this section to a director, a committee of directors or an officer.

SECTION SEVEN

PROTECTION OF DIRECTORS AND OFFICERS


7.01	Limitation of Liability

No director or officer shall be liable for the acts, receipts, neglects or defaults of any other director, officer, employee or agent, or for joining in any receipt or act for conformity, or for any loss, damage or expense happening to the Corporation through the insufficiency or deficiency of title to any property acquired by, for or on behalf of the Corporation, or for the insufficiency or deficiency of any security in or upon which any of the moneys of the Corporation shall be placed out or invested, or for any loss or damage arising from the bankruptcy, insolvency or tortuous act of any person with whom any moneys, securities or effects shall be lodged or deposited, or for any loss, conversion,

misapplication or misappropriation of or any damage resulting from any dealings with any moneys, securities or other assets belonging to the Corporation, or for any other loss, damage or misfortune whatever which may happen in the execution of the duties of the director’s or officer’s respective office or trust or in relation thereto unless the same shall happen by or through the director’s or officer’s failure to act honestly and in good faith with a view to the best interests of the Corporation and to exercise the care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances.


7.02	Indemnity

The Corporation shall indemnify a director or officer of the Corporation, a former director or officer of the Corporation or a person who acts or acted at the Corporation’s request as a director or officer of a body corporate of which the Corporation is or was a shareholder or creditor, and the heirs and legal representatives thereof, to the extent permitted by the Act or otherwise by law.

SECTION EIGHT

NOTICES


8.01	Method of Giving Notices

Any notice, communication or document to be given, sent, delivered or served pursuant to the Act, the regulations thereunder, the Articles, the General By-law or otherwise, to a shareholder, director, officer or auditor shall be sufficiently given if delivered personally to the person to whom it is to be given or if delivered to the person’s recorded address or if mailed to the person at the person’s recorded address by prepaid ordinary or air mail or if sent to the person at the person’s recorded address by any means of prepaid transmitted or recorded communication, including facsimile, or other electronic means. A notice so delivered shall be deemed to have been given when it is delivered personally or to the recorded address as aforesaid; a notice so mailed shall be deemed to have been given when deposited in a post office or public letter box; and a notice so sent by any means of transmitted or recorded communication shall be deemed to have been given when dispatched or delivered to the appropriate communication company or agency or its representative for dispatch.


8.02	Omissions and Errors

The accidental omission to give any notice to any shareholder, director, officer or auditor or the non-receipt of any notice by any such person or

any error in any notice not affecting the substance thereof shall not invalidate any action taken at any meeting to which the notice related.


8.03	Persons Entitled by Death or Operation of Law

Every person who, by operation of law, transfer, death of a shareholder or any other means whatsoever, becomes entitled to any share shall be bound by every notice in respect of such share which shall have been duly given to the shareholder from whom such person derives such person’s title to such share prior to such person’s name and address being entered on the securities register.


8.04	Waiver of Notice

A shareholder, proxyholder, director, officer or auditor may at any time waive any notice, or waive or abridge the time for any notice, required to be given to him under any provision of the Act, the regulations thereunder, the Articles, the General By-law or otherwise and such waiver or abridgment, whether given before or after the meeting or other event of which notice is required to be given, shall cure any default or defect in the giving or in the time of such notice, as the case may be. Any such waiver or abridgment shall be in writing except a waiver of notice of a meeting of shareholders or of the Board or of a committee of the Board which may be given in any manner.

SECTION NINE

EFFECTIVE DATE AND REPEAL

9.01 Effective Date

The General By-law is effective as of July 30, 2001.


9.02	Repeal

All previous by-laws of the Corporation are repealed on the coming into force of the General By-law.


9.03	Effect of Repeal

otherwise shall continue to be operative until amended or repealed except to the extent that they are inconsistent with the General By-law.

MADE the 30 th day of July, 2001.

WITNESS the corporate seal of the Corporation.

_ (signed M. Grandin) President

_ (signed G. Feigel) Secretary

March 13, 2015

CANADIAN PACIFIC RAILWAY LIMITED

BY-LAW NO.2

2398594

CANADIAN PACIFIC RAILWAY LIMITED BY-LAW NO.2

A by-law relating to certain procedural requirements for the election of directors of Canadian Pacific Railway Limited.


1.01	Definitions

In this By-law, which may be cited as By-law No. 2, unless the context otherwise requires:

"Act" means the Canada Business Corporations Act, and any statute that may be substituted therefor, as from time to time amended;

"Applicable Securities Laws" means the applicable securities legislation of each relevant province and territory of Canada, as amended from time to time, the rules, regulations and forms made or promulgated under any such statute and the published national instruments, multilateral instruments, policies, bulletins and notices of the securities commission and similar regulatory authority of each province and territory of Canada;

"Articles" means the articles of Corporation as defined in the Act; "Board" means the Board of Directors of the Corporation; "Corporation" means Canadian Pacific Railway Limited; and

"public announcement" means disclosure in a press release reported by a national news service in Canada, or in a document publicly filed by the Corporation under its profile on the System of Electronic Document Analysis and Retrieval at www.sedar.com.


2.01	Nomination Procedures

Subject only to the Act and the Articles of the Corporation, only persons who are nominated in accordance with the following procedures shall be eligible for election as directors of the Corporation. Nominations of persons for election to the Board may be made at any annual meeting of shareholders, or at any special meeting of shareholders if one of the purposes for which the special meeting was called is the election of directors:


(a)	by or at the direction of the Board, including pursuant to a notice of meeting;


(b)	by or at the direction or request of one or more shareholders pursuant to a proposal made in accordance with the provisions of the Act, or a requisition of the shareholders made in accordance with the provisions of the Act; or

(c)

by any person (a "Nominating Shareholder"): (A) who, at the close of business on the date of the giving of the notice provided for below in this By-law and on the record date for notice of such meeting of shareholders, is entered in the securities register as a holder of one or more shares carrying the right to vote at such meeting or who beneficially owns shares that are entitled to be voted at such meeting; and (B) who complies with the notice procedures set forth below in this By-law.


3.01	Timely Notice

In addition to any other applicable requirements, for a nomination to be made by a Nominating Shareholder, the Nominating Shareholder must have given timely notice thereof in proper written form to the Secretary of the Corporation at the principal executive offices of the Corporation in accordance with section 5.01 below.


4.01	Manner of Timely Notice

To be timely, a Nominating Shareholder's notice to the Secretary of the Corporation must be made:

(a) in the case of an annual meeting of shareholders, not less than 30 days prior to the date of the annual meeting of shareholders; provided, however, that in the event that the annual meeting of shareholders is to be held on a date that is less than 50 days after the date on which the first meeting was made, notice by the Nominating Shareholder may be made not later than the close of business on the tenth (10th) day following the Notice Date; and

(b) in the case of a special meeting (which is not also an annual meeting) of shareholders called for the purpose of electing directors (whether or not called for other purposes as well), not later than the close of business on the fifteenth (15th) day following the day on which the first public announcement of the date of the special meeting of shareholders was made.

5.01 Proper Form of Timely Notice

To be in proper written form, a Nominating Shareholder's notice to the Secretary of the Corporation must set forth:

(a)

as to each person whom the Nominating Shareholder proposes to nominate for election as a director: (A) the name, age, business address and residential address of the person; (B) the principal occupation or employment of the person for the last five years; (C) the status of such person as a "resident Canadian" as defined in the Act; (D) the class or series and number of shares in the capital of the Corporation which are controlled or which are owned beneficially or of record by the person as of

the record date for the meeting of shareholders (if such date shall then have been made publicly available and shall have occurred) and as of the date of such notice; and (E) any other information relating to the person that would be required to be disclosed in a dissident's proxy circular in connection with solicitations of proxies for election of directors pursuant to the Act and Applicable Securities Laws; and


(b)	as to the Nominating Shareholder giving the notice, any information relating to such Nominating Shareholder that would be required to be made in a dissident's proxy circular in connection with solicitations of proxies for election of directors pursuant to the Act and Applicable Securities Laws.

6.01 Notice to be Updated

All information to be provided in a timely notice pursuant to section 5.01 above shall be provided as of the date of such notice. If requested by the Corporation, the Nominating Shareholder shall update such information forthwith so that it is true and correct in all material respects as of the record date for the meeting of shareholders.

7.01 Eligibility for Nomination as a Director

No person shall be eligible for election as a director of the Corporation unless nominated in accordance with the provisions of this By-law; provided, however, that nothing in this By-law shall be deemed to preclude discussion by a shareholder (as distinct from the nomination of directors) at a meeting of shareholders of any matter in respect of which it would have been entitled to submit a proposal pursuant to the provisions of the Act. The Chairman of the meeting shall have the power and duty to determine whether a nomination was made in accordance with the procedures set forth in the foregoing provisions and, if any proposed nomination is not in compliance with such foregoing provisions, to declare that such defective nomination shall be disregarded.

8.01 Delivery of Notice

Notwithstanding any other provision of this By-law, notice given to the Secretary of the Corporation pursuant to this By-law may only be given by personal delivery, facsimile transmission or by email (to the Secretary of the Corporation), and shall be deemed to have been given and made only at the time it is served by personal delivery, email or sent by facsimile transmission (provided that receipt of confirmation of such transmission has been received) to the Secretary at the address of the principal executive offices of the Corporation; provided that if such delivery or electronic communication is made on a day which is a not a business day or later than 5:00 p.m. (Calgary time) on a day which is a business day, then such delivery or electronic communication shall be deemed to have been made on the subsequent day that is a business day.

9.01 Board Discretion

Notwithstanding the foregoing, the Board may, in its sole discretion, waive any requirement in this By-law.

10.01 Effective Date

Subject to its confirmation by the shareholders in accordance with the Act, this By-law is effective as of March 13, 2015.

MADE this 13th day of March, 2015.

WITNESS the corporate seal of the Corporation.

(signed "Gary F. Colter ") (signed "Paul A. Guthrie" )

Chairman of the Board Corporate Secretary

May 22, 2009

CANADIAN PACIFIC RAILWAY COMPANY

GENERAL BY-LAW AS AMENDED

CANADIAN PACIFIC RAILWAY COMPANY GENERAL BY-LAW

A by-law regulating generally the transaction of the business and affairs of Canadian Pacific Railway Company.

SECTION ONE INTERPRETATION


1.01	Definitions

In this by-law, which may be cited as the General By-law, unless the context otherwise requires:

“Act” means the Canada Business Corporations Act , and any statute that may be substituted therefor, as from time to time amended:

“Articles” means the articles of the Corporation as defined in the Act; “Board” means the Board of Directors of the Corporation; “Corporation” means Canadian Pacific Railway Company;

“meeting of shareholders” means any meeting of shareholders including an annual meeting;

“non-business day” means Saturday, Sunday and any other day that is a holiday as defined in the Interpretation Act (Canada);


1.02	Construction

Save as aforesaid, words and expressions defined in the Act have the same meanings when used herein; and words importing the singular include the plural and vice versa; words importing the masculine gender include the feminine and neuter genders; and words importing persons include individuals, bodies corporate, partnerships, trusts and unincorporated organizations.

SECTION TWO MEETINGS OF SHAREHOLDERS


2.01	Meetings of Shareholders

The annual meeting of shareholders shall be held in each year on a date to be determined by the Board of Directors. The Board or the Chairman of the Board may call a meeting of shareholders, other than an annual meeting of shareholders, at any time. If the directors or shareholders of the Corporation call a meeting of shareholders pursuant to the Act, the directors or shareholders, as the case may be, may determine that the meeting shall be held, in accordance with the Act, entirely by means of telephonic, electronic or other communication facility that permits all participants to communicate adequately with each other during the meeting.


2.02	Chairman, Secretary and Scrutineers

The chairman of any meeting of shareholders shall be the Chairman of the Board or, in the absence of such officer, the Chairman of the Corporation or, in the absence of such officer, the President or, in the absence of such officer, any director who is present and willing to act as chairman of the meeting. If no such person is present within fifteen minutes from the time fixed for holding the meeting, the persons present and entitled to vote shall choose one of their number to act as chairman. The secretary of any meeting of shareholders shall be the Secretary of the Corporation. If the Secretary is absent, the chairman shall appoint some person, who need not be a shareholder, to act as secretary of the meeting. The chairman may appoint one or more persons who need not be shareholders to act as scrutineers at the meeting.


2.03	Persons Entitled to be Present

The only persons entitled to be present at a meeting of shareholders shall be those entitled to vote thereat, the directors, the Chairman of the Corporation, the President, the auditor of the Corporation and others who, although not entitled to vote, are entitled or required under any provision of the Act or the Articles or the General By-law to be present. Any other person may be admitted with the consent of the meeting or of the chairman of the meeting.


2.04	Quorum

Except as otherwise provided in the Articles, a quorum for the transaction of business at any meeting of shareholders shall be at least two persons present in person, each being a shareholder entitled to vote thereat or a

duly appointed proxyholder for or representative of such a shareholder and together holding or representing in the aggregate not less than 25% of the outstanding shares of the Corporation entitled to be voted at the meeting.

SECTION THREE DIRECTORS


3.01	Number of Directors

Subject to the Articles, the number of directors of the Corporation may be fixed from time to time by resolution of the Board.


3.02	Qualification of Directors


3.03	Quorum

A majority of the directors shall form a quorum of the Board.


3.04	Meeting Following Annual Meeting

The Board shall meet without notice as soon as practicable after each annual meeting of shareholders to transact such business as may come before the meeting and to appoint by election from among their number: the Chairman, who also may be appointed to other offices. The Board also may but need not appoint a President, who need not be a director of the Corporation.


3.05	Other Meetings of the Board

Meetings of the Board shall be held from time to time at a time and place determined by the Board, the Chairman of the Board, the Chairman of the Corporation, the President, or any two directors.


3.06	Notice of Meeting

Subject to any resolution of the Board, notice of the time and place of each meeting of the Board requiring notice shall be given to each director not less than twenty-four hours before the time at which the meeting is to be held.

3.07 Chairman

The chairman of any meeting of the Board shall be the Chairman of the Board or, in the absence of such officer, any director who is present and willing to act as chairman of the meeting.

3.08 Votes to Govern

At all meetings of the Board, every question shall be decided by a majority of the votes cast. The chairman of any meeting may vote as a director.

3.09 Remuneration

SECTION FOUR

THE TRANSACTION OF BUSINESS


4.01	Execution of Instruments


4.02	Cheques

All cheques upon the bank or banks where the funds of the Corporation are kept shall be drawn payable to the order of the party entitled to the payment to be made, which cheques, notwithstanding section 4.01, shall be

signed by the Treasurer, or by an Assistant Treasurer, or by such other person as may be appointed by the Board, and countersigned by the Chairman of the Corporation, or by the President, or by a Vice-President, or by some other person authorized by the Board so to do. The Board may from time to time authorize the signing and countersigning of cheques by means of the facsimile signature of any of the persons authorized to sign or countersign cheques.

SECTION FIVE DIVIDENDS


5.01	Dividends

The Board may from time to time declare dividends payable to shareholders according to their respective rights.


5.02	Dividend Payment


5.03	Idem

The Corporation may, when directed by a registered holder of a share in respect of which a dividend in money has been declared, pay the dividend in the manner so directed.


5.04	Non-receipt or Loss of Dividend Cheques

SECTION SIX BORROWING AND RELATED POWERS


6.01	Borrowing and Related Powers

The Board may, without authorization of the shareholders,


(a)	borrow money upon the credit of the Corporation;


(b)	issue, reissue, sell or pledge debt obligations of the Corporation;


(c)	subject to the Act, give a guarantee on behalf of the Corporation to secure performance of an obligation of any person; and


(d)	mortgage, hypothecate, pledge or otherwise create a security interest in all or any property of the Corporation, owned or subsequently acquired, to secure any obligation of the Corporation.

The Board may, by resolution, delegate the powers referred to in this section to a director, a committee of directors or an officer.

SECTION SEVEN

PROTECTION OF DIRECTORS AND OFFICERS


7.01	Limitation of Liability


7.02	Indemnity

SECTION EIGHT NOTICES


8.01	Method of Giving Notices

Any notice, communication or document to be given, sent, delivered or served pursuant to the Act, the regulations thereunder, the Articles, the General By-law or otherwise, to a shareholder, director, officer or auditor shall be sufficiently given if delivered personally to the person to whom it is to be given or if delivered to the person’s recorded address or if mailed to the person at the person’s recorded address by prepaid ordinary or air mail or if sent to the person at the person’s recorded address by any means of prepaid transmitted or recorded communication, including facsimile, or other electronic means that produce a written copy. A notice so delivered shall be deemed to have been given when it is delivered personally or to the recorded address as aforesaid; a notice so mailed shall be deemed to have been given when deposited in a post office or public letter box; and a notice so sent by any means of transmitted or recorded communication shall be deemed to have been given when dispatched or delivered to the appropriate communication company or agency or its representative for dispatch.


8.02	Omissions and Errors

The accidental omission to give any notice to any shareholder, director, officer or auditor or the non-receipt of any notice by any such person or

any error in any notice not affecting the substance thereof shall not invalidate any action taken at any meeting to which the notice related.


8.03	Persons Entitled by Death or Operation of Law

Every person who, by operation of law, transfer, death of a shareholder or any other means whatsoever, becomes entitled to any share, shall be bound by every notice in respect of such share which shall have been duly given to the shareholder from whom such person derives such person’s title to such share prior to such person’s name and address being entered on the securities register.


8.04	Waiver of Notice

A shareholder, proxyholder, director, officer or auditor may at any time waive any notice, or waive or abridge the time for any notice, required to be given to him under any provision of the Act, the regulations thereunder, the Articles, the General By-law or otherwise and such waiver or abridgment, whether given before or after the meeting or other event of which notice is required to be given, shall cure any default of defect in the giving or in the time of such notice, as the case may be. Any such waiver or abridgment shall be in writing except a waiver of notice of a meeting of shareholders or of the Board or of a committee of the Board which may be given in any manner.

SECTION NINE REPEAL


9.01	Repeal

All previous by-laws of the Corporation (other than By-law numbered 47 relating to the Consolidated Debenture Stock, the provisions of which shall continue to apply, mutatis mutandis so as to conform to the Act) are repealed on the coming into force of the General By-law.


9.02	Effect of Repeal

All persons appointed or elected under any by-law repealed on the coming into force of the General By-law shall continue to act until ceasing to hold office or until re-appointed or re-elected and all resolutions of the shareholders or the Board having continuing effect and passed under any repealed by-law or otherwise shall continue to be operative until amended or repealed except to the extent that they are inconsistent with the General By-law.

- 10 -

MADE this 22nd day of May, 2009.

WITNESS the corporate seal of the Corporation.

(signed J. Cleghorn) (signed K. Fleming)

Chairman of the Board Corporate Secretary

CANADIAN PACIFIC RAILWAY COMPANY

US$450,000,000 5.950% Notes due 2037

OFFICERS' CERTIFICATE PURSUANT TO SECTION 1.02 OF THE INDENTURE

Reference is made to Section 1.02 of the Indenture (the "Indenture"), dated as of May 8, 2007 among Canadian Pacific Railway Company, a corporation amalgamated under the laws of Canada (the "Company") and The Bank of New York, as trustee (the "Trustee"), as supplemented by a first supplemental indenture dated May 8, 2007.

The undersigned, Frederic J. Green, President and Chief Executive Officer and Michael

R. Lambert, Vice-President and Chief Financial Officer of the Company hereby certify for and on behalf of the Company that, with respect to the issuance of the Company's 5.950% Notes due 2037 (the "Securities") established pursuant to (i) the resolutions of the Board of Directors of the Company adopted on December 12, 2006 and April 22, 2007, and (ii) a Company Authentication and Delivery Order dated the date hereof (collectively, the "Enabling Documents"):

1. The undersigned have read the provisions of the Indenture setting forth the conditions precedent (the "Conditions Precedent") to the issuance, authentication and delivery of the Securities, and the definitions in the Indenture relating thereto.

2. The undersigned have examined the Enabling Documents relating to the authorization, execution, authentication, issuance and delivery of the Securities, certificates of the Company and certain agreements and other instruments and documents deemed necessary as a basis for the opinions and statements hereinafter expressed.

3. In the opinion of the undersigned, such examination is sufficient to enable the undersigned to express an informed opinion as to the matters set forth in paragraph (4) below.


4.	The Company has complied with the Conditions Precedent in accordance with

the terms of the Indenture.

TRDOCSO l/81225.6

IN WITNESS WHEREOF, each of the undersigned has executed this Certificate as of this 8th day of May, 2007.

CANADIAN PACIFIC RAILWAY COMPANY

By: /s/ Frederic J. Green

Name: Frederic J. Green

Title: President and Chief Executive Officer

By: /s/ Michael R. Lambert

Name: Michael R. Lambert

Title: Executive Vice-President

and Chief Financial Officer

TRDOCSO l/81225.3 2

CANADIAN PACIFIC RAILWAY COMPANY

And

THE BANK OF NEW YORK

Trustee

Indenture

made as of May 8, 2007

Providing for the issue of

Debt Securities in unlimited principal amount

Doc #:NY7:3108 I 2.8



TABLE OF CONTENTS

ARTICLE ONE DEFINITIONS AND OTHER PROVISIONS OF GENERAL		2
Section 1.01	Definitions	2
Section 1.02	Compliance Certificates and Opinions	14
Section 1.03	Form of Documents Delivered to Trustee	15
Section 1.04	Acts of Holders	15
Section 1.05	Notices, Etc., to Trustee	18
Section 1.06	Notices, Etc., to Corporation	18
Section 1.07	Notice to Holders; Waiver	18
Section 1.08	Effect of Headings and Table of Contents	19
Section 1.09	Successors and Assigns	19
Section 1.1	Separability Clause	19
Section 1.11	Benefits of Indenture	19
Section 1.12	Governing Law	20
Section 1.13	Language Clause	20
Section 1.14	Legal Holidays	20
Section 1.15	Counterparts	20
Section 1.16	Securities in a Foreign Currency or in Euros	21
Section 1.17	Judgment Currency	21
Section 1.18	Agent for Process; Submission to Jurisdiction	22
Section 1.19	Shareholder, Officers and Directors Exempt from Individual Liability	23
Section 1.20	Force Majeure	23

ARTICLE TWO SECURITY FORMS		25
Section 2.01	Form of Trustee's Certificate of Authentication	25
Section 2.02	Forms Generally	25

ARTICLE THREE THE SECURITIES		27
Section 3.01	Amount Unlimited; Issuable in Series	27
Section 3.02	Execution, Authentication and Delivery	29
Section 3.03	Denomination and Date of Securities	33
Section 3.04	Temporary Securities	33
Section 3.05	Registration, Transfer and Exchange	34
Section 3.06	Mutilated, Defaced, Destroyed, Lost or Stolen Securities	37
Section 3.07	Payment; Interest Rights Preserved	38
Section 3.08	Persons Deemed Owners	40
Section 3.09	Cancellation	40
Section 3.10	Computation of Interest	41
Section 3.11	Currency and Manner of Payments in Respect of Securities	41
Section 3.12	Appointment and Resignation of Successor Exchange Rate Agent.	44

ARTICLE FOUR SATISFACTION AND DISCHARGE		46
Section 4.01	Satisfaction and Discharge of lndenture	46
Section 4.02	Application of Trust Money	47




ARTICLE FIVE REMEDIES		48
Section 5.01	Event of Default	48
Section 5.02	Acceleration of Maturity	49
Section 5.03	Waiver of Acceleration Upon Default.	51
Section 5.04	Enforcement of Payment of Trustee	52
Section 5.05	Trustee May File Proofs of Claim	52
Section 5.06	Trustee May Enforce Claims without Possession of Securities	54
Section 5.07	Application of Money Collected	54
Section 5.08	Limitation on Suits	55
Section 5.09	Unconditional Right of Holders to Receive Principal, Premium and Interest	56
Section 5.10	Restoration of Rights and Remedies	56
Section 5.11	Rights and Remedies Cumulative	56
Section 5.12	Delay or Omission Not Waiver	56
Section 5.13	Control by Holders	57
Section 5.14	Waiver of Past Defaults	57
Section 5.15	Undertaking for Costs	57
Section 5.16	Waiver of Usury, Stay or Extension Laws	58

ARTICLE SIX THE TRUSTEE
Section 6.01	Certain Duties and Responsibilities	59
Section 6.02	Certain Rights of Trustee	60
Section 6.03	Protection of Trustee	62
Section 6.04	Trustee Not Required to Give Security	63
Section 6.05	No Person Dealing with Trustee Need Inquire	63
Section 6.06	May Hold Securities	63
Section 6.07	Money Held In Trust	63
Section 6.08	Disqualification; Conflicting Interest	64
Section 6.09	Corporate Trustee Required; Eligibility	64
Section 6.10	Resignation and Removal; Appointment of Successor	64
Section 6.11	Acceptance of Appointment by Successor	66
Section 6.12	Merger, Consolidation, Amalgamation or Succession to Trustee	67
Section 6 13	Appointment of Authenticating Agent	67
Section 6.14	Notice of Defaults	69

ARTICLE SEVEN CONSOLIDATION, MERGER, AMALGAMATION, SALE or TRANSFER		70
Section 7.01	Consolidation, Merger, Amalgamation or Succession to Business	70
Section 7.02	Successor to Possess Powers of the Corporation.	71

ARTICLE EIGHT SUPPLEMENTAL INDENTURES		72
Section 8.01	Supplemental Indentures Without Consent of Holders	72
Section 8.02	Supplemental Indentures With Consent of Holders	73
Section 8.03	Execution of Supplemental Indentures	74
Section 8.04	Effect of Supplemental Indentures	74
Section 8.05	Reference in Securities to Supplemental Indentures	74



Section 8.06	Conformity with Trust Indenture Act.	75
Section 8.07	Notice of Supplemental Indentures	75

ARTICLE NINE COVENANTS OF THE CORPORATION		76
Section 9.01	General Covenants	76
Section 9.02	Certificates of Compliance	76
Section 9.03	Maintenance of Office or Agency	76
Section 9.04	Money for Securities Payments to Be Held In Trust	77
Section 9.05	Maintenance of Corporate Existence	78
Section 9.06	Payment of Taxes and Other Claims	78
Section 9.07	Additional Amounts	78
Section 9.08	Original Issue Discount	80

ARTICLE TEN REDEMPTION OF SECURITIES		81
Section 10.01	Applicability of Article	81
Section 10.02	Election to Redeem; Notice to Trustee	81
Section 10.03	Selection by Trustee of Securities to be Redeemed	81
Section 10.04	Notice of Redemption	82
Section 10.05	Deposit of Redemption Price	83
Section 10.06	Securities Payable on Redemption Date	83
Section 10.07	Securities Redeemed In Part	84
Section 10.08	Redemption at the Option of the Corporation for Taxation Reasons	84

ARTICLE ELEVEN SINKING FUNDS		86
Section 11.01	Applicability of Article	86
Section 11.02	Satisfaction of Sinking Fund Payments with Securities	86
Section 11.03	Redemption of Securities for Sinking Fund	86

ARTICLE TWELVE DEFEASANCE AND COVENANT DEFEASANCE		88
Section 12.01	Corporation's Option to Effect Defeasance or Covenant Defeasance	88
Section 12.02	Defeasance and Discharge	88
Section 12.03	Covenant Defeasance	88
Section 12.04	Conditions to Defeasance or Covenant Defeasance	89
Section 12.05	Deposited Money and Government Obligations to be Held In Trust; Other Miscellaneous Provisions	91
Section 12.06	Reinstatement	91

ARTICLE THIRTEEN MEETINGS OF HOLDERS		93
Section 13.01	Purposes for which Meetings May be Called	93
Section 13.02	Convening of Meetings	93
Section 13.03	Notice	93
Section 13.04	Persons Entitled to Vote, to be Present and to Speak at Meetings	94
Section 13.05	Quorum; Action	94
Section 13.06	Determination of Voting Rights; Conduct and Adjournment of Meetings	95
Section 13.07	Manner of Voting; Recording of Action	96
Section 13.08	Instrument in lieu of Resolution	96



Section 13.09	Evidence of Instruments of Holders	97
Section 13.10	Binding Effect of Resolutions	97
Section 13.11	No Delay of Rights	97
Section 13.12	Waiver of Jury Trial	97

ARTICLE FOURTEEN REPAYMENT AT OPTION OF HOLDERS		98
Section 14.01	Applicability of Article	98
Section 14.02	Repayment of Securities	98
Section 14.03	Exercise of Option	98
Section 14.04	When Securities Presented for Repayment Become Due and Payable	99
Section 14.05	Securities Repaid in Part	100

ARTICLE FIFTEEN HOLDERS’ LISTS AND REPORTS BY TRUSTEE AND COMPANY		101
Section 15.01	Disclosure of Names and Addresses of Holders	101
Section 15.02	Reports by Trustee	101
Section 15.03	Reports by the Company	101

CANADIAN PACIFIC RAILWAY COMPANY

Reconciliation and tie between Trust Indenture Act of 1939, as amended and Indenture, dated as of May 8, 2007



Trust Indenture Act	Indenture Section
§310(a)(l )	6.09
(a)(2)	6.09
(b)	6.08,. 6.10
( c)	Not Applicable
§311(a)	Not Applicable
(b)	Not Applicable
( c)	Not Applicable
§312(a)	Not Applicable
(b)( l )	Not Applicable
( c)	15.01
§313(a)	15.02
(b)	15.02
( c)	15.02
(d)	15.02
§314(a)	15.03, 9.02
(a)(4)	9.02
(b)	Not Applicable
(c)(l )	1.02
(c)(2)	1.02
(d)	Not Applicable
(e)	1.02
(f)	Not Applicable
§315(a)	6.0 l (a)
(b)	6.14
( c)	6.01(b)
(d)	6.0 l (c)
(d)(l)	6.0 l (a), 6.0l (c)
(d)(2)	6.0 l (c)
(d)(3)	6.0l (c)
(e)	5.15
§3l 6(a)( l )(A)	5.13
(a)( l )(B)	5.03, 5.14
(a)(2)	Not Applicable
(b)	5.09
( c)	1.04(f)
§317(a)( l )	5.04
(a)(2)	5.05
(b)	9.05
§318(a)	1.12

THIS INDENTURE is made as of May 8, 2007 between Canadian Pacific Railway Company, a corporation governed by the laws of Canada, and having its registered office at the City of Calgary in the Province of Alberta, Canada (the "Corporation"), and The Bank of New York, a New York banking corporation, as trustee (the "Trustee").

WHEREAS the Corporation has duly authorized the execution and delivery of this Indenture to provide for the issuance from time to time of its debentures, notes or other evidences of indebtedness (collectively, the "Securities"), to be issued in one or more series as in this Indenture provided;

WHEREAS this Indenture is subject to the provisions of the Trust Indenture Act of 1939, as amended, that are required to be part of this Indenture and shall, to the extent applicable, be governed by such provisions; and

WHEREAS all things necessary to make this Indenture a valid and legally binding agreement in accordance with its terms have been done;

NOW THEREFORE THIS INDENTURE WITNESSES THAT:

For and in consideration of the premises and the purchase of the Securities by the Holders thereof, it is mutually covenanted and agreed, for the equal and proportionate benefit of the respective Holders from time to time of the Securities and of the Coupons, if any, appertaining thereto, as follows:

ARTICLE ONE DEFINITIONS AND OTHER PROVISIONS

OF GENERAL APPLICATION

Section 1.01 Definitions .

For all purposes of this Indenture and in the Securities, except as otherwise expressly provided or unless the subject matter or context otherwise requires:

" Accelerated indebtedness " has the meaning specified in Section 5.01.

" Act ", when used with respect to any Holder, has the meaning specified in Section 1.04;

" Additional Amounts " has the meaning specified in Section 9.08.

" Affiliate " of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For the purposes of this definition, "control", when used with respect to any specified Person, means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the tem1s "controlling" and "controlled" have meanings correlative to the foregoing;

" Authenticating Agent " means, with respect to the Securities of any series, any Person authorized by the Trustee to act on behalf of the Trustee to authenticate the Securities of such series;

" Authorized Agent " has the meaning specified in Section 1.18;

" Authorized Newspaper " means a newspaper (which, in the case of Canada, will, if practicable, be either The Globe & Mail or the National Post, in the case of The City of New York, will, if practicable, be The Wall Street Journal (Eastern Edition), in the case of the United Kingdom, will, if practicable, be The Financial Times (London Edition)

and, in the case of Luxembourg, will, if practicable, be The Luxembourg Wort), printed in an official language of the country of publication, customarily published at least once a day for at least five days in each calendar week and of general circulation in Canada, The City of New York, the United Kingdom or Luxembourg, as applicable. If it shall be impractical, in the opinion of the Trustee, to make any publication of any notice required hereby in an Authorized Newspaper, any publication or other notice in lieu thereof which is made or given with the approval of the Trustee shall constitute a sufficient publication of such notice;

" Borrowed Money " means Indebtedness in respect of moneys borrowed (including interest and other charges in respect thereof) and moneys raised by the issue of notes, bonds, debentures or other evidences of moneys borrowed;

" Business Day ", when used with respect to any Place of Payment and subject to Section 1.14, means a day other than a Saturday or a Sunday and other than a day on

which banking institutions in such Place of Payment are authorized or obligated by law or regulation to close; ·

" Canadian Taxes " has the meaning specified in Section 9.08;

" Capital Lease Obligation " means the obligation of a Person, as lessee, to pay rent or other amounts to the lessor under a lease of real or personal property which is required to be classified and accounted for as a capital lease on a consolidated balance sheet of such Person in accordance with GAAP;

" Commission " means the U.S. Securities and Exchange Commission, as from time to time constituted, created under the Securities Exchange Act of 1934, or if at any time after the execution of this Indenture such Commission is not existing and performing the duties now assigned to it under the Trust Indenture Act, then the body performing such duties at such time;

" Component Currency " has the meaning specified in Section 3.11;

" Consolidated Net Tangible Assets " means the total amount of assets detern1ined·on a consolidated basis after deducting therefrom:


(i)	all current liabilities (excluding any Indebtedness classified as a current liability and any current liabilities which are by their terms extendible or renewable at the option of the obligor thereon to a time more than

12 months after the time as of which the amount thereof is being computed);


(ii)	all good will, trade names, trademarks, patents, unamortized debt discount and expense and other like intangibles; and


(iii)	appropriate adjustments on account of minority interests of other Persons holding stock of the Corporation's Subsidiaries,

all as set forth on the most recent balance sheet of the Corporation and its consolidated Subsidiaries and computed in accordance with GAAP;

" Conversion Date" has the meaning specified in Section 3.11(b);

" Conversion Event " means the cessation of use of (i) a Foreign Currency (other than the Euro or other currency unit) both by the government of the country which issued such Currency and by a central bank or other public institution of or within the international banking community for the settlement of transactions, (ii) the Euro or (iii) any currency unit (or composite currency) other than the Euro for the purposes for which it was established;

" Corporate Trust Office " means the office of the Trustee at which its corporate trust business, at any particular time, shall be principally administered, which office at the date hereof is located at 101 Barclay Street, Floor 4-E, New York, New York 10286;

"Corporation" means Canadian Pacific Railway Company until a successor Person shall have become such pursuant to the applicable provisions of this Indenture, and thereafter "Corporation" shall mean such successor Person;

"Corporation Order" or "Corporation Request" means a written order or request of the Corporation, signed by any two of its Officers holding office at the time of signing, delivered to the Trustee;

"Corporation's Auditors" means an independent firm of chartered accountants duly appointed as auditors of the Corporation;

"Counsel" means any barrister or solicitor or attorney or firm of barristers or solicitors or attorneys who may be counsel for, or (except in the case of an Opinion of Counsel delivered pursuant to Section 10.08 and Section 12.04 or as otherwise provided) an employee of, the Corporation;

"Coupon" means any interest coupon appertaining to a Security;

"covenant defeasance" has the meaning specified in Section 12.03;

"Currency" means any currency or currencies, composite currency or currency unit or currency units, including, without limitation, the Euro, issued by the government of one or more countries or by any recognized confederation or association of such governments;

"Defaulted Interest" has the meaning specified in Section 3.07;

"Defeasance" has the meaning specified in Section 12.02;

" Depository " means, with respect to the Securities of any series issuable or issued in the form of one or more Registered Global Securities, the Person designated as Depository by the Corporation pursuant to Section 3.01 until a successor Depository shall have become such pursuant to the applicable provisions of this Indenture, and thereafter "Depository" shall mean each Person who is then a Depository hereunder; and if at any time there is more than one such Person, "Depository" as used with respect to the Securities of any such series shall mean each Depository with respect to the Registered Global Securities of such series;

"Director" means a director of the Corporation for the time being, and reference without more to action by the Directors means action by the Directors as a board or, whenever duly empowered, by the executive committee of the board;

"Directors' Resolution" means a resolution, a copy of which is certified by the Secretary or an Assistant Secretary of the Corporation to have been duly adopted or consented to by the Directors and to be in full force and effect on the date of such certification, delivered to the Trustee;

" Dollars " and " $ " means lawful money of Canada and "U.S. Dollars" and "U.S. $" means lawful money of the United States of America;

" Dollar Equivalent of the Currency Unit " has the meaning specified in Section 3.1 l (g);

" Dollar Equivalent of the Foreign Currency " has the meaning specified in Section 3.1 l (f);

" Election Date " has the meaning specified in Section 3.11(h);

" Euro " means the single Currency of the participating member states from time to time

of the European Union described in legislation of the European Counsel for the Operation of a single unified European currency (whether known as the Euro or otherwise);

" Event of Default " has the meaning specified in Section 5.01;

" Exchange Rate Agent " means, with respect to Securities of or within any series, unless otherwise specified with respect to any Securities pursuant to Section 3.01, a New York Clearing House bank, designated pursuant to Section 3.01 or Section 3.12;

" Exchange Rate Officer's Certificate " means a tested telex or a certificate setting forth

(i) the applicable Market Exchange Rate and (ii) the Dollar or Foreign Currency amounts of principal (and premium, if any) and interest, if any (on an aggregate basis and on the basis of a Security having the lowest denomination principal amount determined in accordance with Section 3.02 in the relevant Currency), payable with respect to a

Security of any series on the basis of such Market Exchange Rate, sent (in the case of a telex) or signed (in the case of a certificate) by the Treasurer, any Vice President or any Assistant Treasurer of the Corporation;

" Excluded Holder " has the meaning specified in Section 9.08;

" Foreign Currency " means a Currency issued by the government of a country other than the United States;

" GAAP '' means generally accepted accounting principles which are in effect from time to time in Canada or, if the Corporation hereafter detem1ines to prepare its consolidated financial statements in accordance with generally accepted accounting principles which are in effect from time to time in the United States, such principles;

Obligation or a specific payment of principal of or interest on any such Government Obligation held by such custodian for the account of the holder of such depository receipt, provided that (except as provided by law) such custodian is not authorized to make any deduction from the amount payable to the holder of such depository receipt from any amount received by the custodian in respect of such Government Obligation or

the specific payment of principal of or interest on such Government Obligation evidenced by such depository receipt;

"Holder" means (i) in the case of any Registered Security, the Person in whose name such Registered Security is registered in the Security Register and (ii) in the case of any Unregistered Security, the bearer of such Unregistered Security, or any Coupon appertaining thereto, as the case may be;

"Indebtedness" means and includes all items of indebtedness which, in accordance with GAAP, would be included in determining total liabilities as shown on the liability side of a balance sheet as at the date as of which Indebtedness is to be determined, but in any event including, without limitation, (1) obligations in respect of indebtedness for Borrowed Money secured by any Security Interest existing on property owned subject to such Security Interest, whether or not the obligations secured thereby shall have been assumed, and (2) guarantees and other contingent obligations in respect of, or any obligations to purchase or otherwise acquire or service, indebtedness of any other Person;

"Indenture" means this instrument as originally executed and delivered or, if amended

or supplemented as herein provided, as so amended or supplemented or both, and shall include the forms and terms of particular series of Securities established as contemplated

by Section 3.01 ; provided, however, that, if at any time more than one Person is acting as . Trustee under this instrument, "Indenture" shall mean, with respect to any one or more series of Securities for which such Person is Trustee, this instrument as originally

executed or as i t may from time to time be supplemented or amended by one or more indentures supplemental hereto entered into pursuant to the applicable provisions hereof and shall include the terms of particular series of Securities for which such Person is Trustee established as contemplated by Section 3.01 , exclusive, however, of any provisions or terms which relate solely to other series of Securities for which such Person is not Trustee, regardless of when such terms or provisions were adopted, and exclusive of any provisions or terms adopted by means of one or more indentures supplemental hereto executed and delivered after such Person had become such Trustee but to which such Person, as such Trustee, was not a party;

"Interest Payment Date", when used with respect to any Security, means the Stated Maturity of an installment of interest on such Security;

"Judgment Conversion Date" has the meaning specified in Section 1.17;

"Judgment Currency" has the meaning specified in Section 1.17;

"Mandatory sinking fund payment" has the meaning specified in Section 11.01;

" Market Exchange Rate " means, unless otherwise specified with respect to any Securities pursuant to Section 3.01, (i) for any conversion involving a currency unit on the one hand and Dollars or any Foreign Currency on the other, the exchange rate between the relevant currency unit and Dollars or such Foreign Currency calculated by the method specified pursuant to Section 3.01 for the Securities of the relevant Series,

(ii) for any conversion of Dollars into any Foreign Currency, the noon (New York City time) buying rate for such Foreign Currency for cable transfers quoted in New York City as certified for customs purposes by the Federal Reserve Bank of New York and (iii) for any conversion of one Foreign Currency into Dollars or another Foreign Currency, the spot rate at noon local time in the relevant market at which, in accordance with normal banking procedures, the Dollars or Foreign Currency into which conversion is being made could be purchased with the Foreign Currency from which conversion is being made from major banks located in either New York City, Toronto, London or any other principal market for Dollars or such purchased Foreign Currency, in each case determined by the Exchange Rate Agent. Unless otherwise specified with respect to any Securities pursuant to Section 3.01, in the event of the unavailability of any of the exchange rates provided for in the foregoing clauses (i), (ii) and (iii), the Exchange Rate Agent shall use, in its sole discretion and without l iabi lity on its part, such quotation of

the Federal Reserve Bank of New York as of the most recent available date, or quotations from one or more major banks in New York City, Toronto, London or another principal market for the Currency in question, or such other quotations as the Exchange Rate Agent shall deem appropriate. Unless otherwise specified by the Exchange Rate Agent, ifthere is more than one market for dealing in any Currency by reason of foreign exchange regulations or otherwise, the market to be used in respect of such Currency shall be that upon which a non-resident issuer of securities designated in such Currency would purchase such Currency in order to make payments in respect of such securities.

" Maturity '', when used with respect to any Security, means the date on which the principal of such Security or an installment of such principal becomes due and payable as therein or herein provided, whether at the Stated Maturity thereof, by declaration of acceleration, call for redemption or otherwise;

" Officer '', when used with respect to the Corporation, means the Chainnan of the Board, the President, any Vice President, any Treasurer, any Assistant Treasurer, the Controller, any Assistant Controller, the Secretary or any Assistant Secretary of the Corporation;

" Officers' Certificate " means a certificate of the Corporation, signed by any two Officers in their capacities as officers of the Corporation at the time of signing and not in their personal capacities, delivered to the Trustee;

" Opinion of Counsel " means a written opinion of Counsel;

" optional sinking fund payment " has the meaning specified in Section 11.01;

" Original Issue Discount Security " means any Security which provides for an amount less than the principal amount thereof to be due and payable upon a declaration of acceleration of the Maturity thereof pursuant to Section 5.02;

"Outstanding", when used with respect to Securities, means, as of any particular time, all such Securities theretofore authenticated and delivered under this Indenture, except:


(i)	Securities theretofore cancelled by the Trustee or delivered to the Trustee for cancellation;

(ii)

Securities, or portions thereof, for whose payment or redemption money in the necessary amount has been theretofore deposited with the Trustee or any Paying Agent (other than the Corporation) in trust or set aside and segregated in trust by the Corporation (if the Corporation shall act as its own Paying Agent) for the Holders of such Securities; provided that, if such Securities are to be redeemed, notice of such redemption has been duly given pursuant to this Indenture or provision therefor satisfactory to the Trustee has been made;


(iii)	Securities which have been paid pursuant to Section 3.06 or have been mutilated, lost, stolen or destroyed and in exchange for or in lieu of which other Securities have been authenticated and delivered pursuant to this Indenture; and


(iv)	Securities which have been defeased pursuant to Article Twelve;

provided, however, that in determining whether the Holders of the requisite princi pal amount of the Securities of any or all series then Outstanding have voted or have signed or given any request, demand, authorization, direction, notice, consent, requisition, waiver or other instrument or have taken any action or constitute a quorum at any meeting of Holders hereunder, (a) the principal amount of an Original Issue Discount Security which shall be deemed to be Outstanding for such purposes shall be the portion of the principal amount thereof that could be declared to be due and payable upon the occurrence of an Event of Default and the continuation thereof pursuant to the tenns of such Original Issue Discount Security as of such time and (b) Securities owned by the Corporation, or any other obligor upon the Securities, or any Subsidiary or any Affiliate of the Corporation or of such other obligor shall be disregarded and deemed not to be Outstanding, except that, in determining whether the Trustee shall be protected in relying upon any such request, demand, authorization, direction, notice, consent, requisition, waiver or other instrument or action or on the Holders present or represented at any meeting of Holders, only Securities which the Responsible Officer of the Trustee knows to be so owned shall be so disregarded;

"Parent" means Canadian Pacific Railway Limited;

"Paying Agent" means any Person authorized by the Corporation to pay the principal of (and premium, if any) or interest on any Securities on behalf of the Corporation;

redemption provisions, if any, with respect thereto are to be determined by the Corporation or its agents upon the issuance of such Securities;

"Permitted Encumbrances" means any of the following:


(i)	any Security Interest existing as of the date of the first issuance by us of the Securities issued pursuant to the Indenture, or arising thereafter pursuant to contractual commitments entered into prior to such issuance including without limitation, any outstanding Perpetual 4% Consolidated Debenture Stock of the Corporation, whether issued, pledged or vested in trust;


(ii)	any Security Interest in favor of the Corporation or any of its wholly owned Subsidiaries;


(iii)	any Security Interest existing on the property of any Person at the time such Person becomes a Subsidiary, or arising thereafter pursuant to contractual commitments entered into prior to and not in contemplation of such Person becoming a Subsidiary;

(iv)

any Security Interest on property of a Person which Security Interest exists at the time such Person is merged into, or amalgamated or consolidated with, the Corporation or a Subsidiary, or such property is otherwise acquired by the Corporation or a Subsidiary, provided that such Security Interest does not extend to property owned by the Corporation or such Subsidiary immediately prior to such merger, amalgamation, consolidation or acquisition;


(v)	any Security Interest already existing on property acquired (including by way of lease) by the Corporation or any of its Subsidiaries at the time of such acquisition;


(vi)	any Security Interest securing any Indebtedness incurred in the ordinary course of business and for the purpose of carrying on the same, repayable on demand or maturing within 12 months of the date when such Indebtedness is incurred or the date of any renewal or extension thereof;

(vii)

are overdue but the validity of which is being contested at the time by the Corporation or the Subsidiary, as the case may be, in good faith, (c) any

liens or rights of distress reserved in or exercisable under any lease for rent and for compliance with the terms of such lease, (d) any obligations or duties, affecting the property of the Corporation or that of a Subsidiary to any municipality or governmental, statutory or public authority, with respect to any franchise, grant, license or permit and any defects in title to structures or other facilities arising from the fact that such structures or facilities are constructed or installed on lands held by the Corporation or the Subsidiary under government permits, leases, licenses or other grants,

(e) any deposits or liens in connection with contracts, bids, tenders or expropriation proceedings, surety or appeal bonds, costs of litigation when required by law, public and statutory obligations and liens or claims incidental to current construction or operations including but not limited to, builders', mechanics', laborers', materialmen's, warehousemen's, carrier's and other similar liens, (f) the right reserved to or vested in any municipality or governmental or other public authority by any statutory provision or by the terms of any lease, license, franchise, grant or permit

to terminate any such lease, license, franchise, grant or permit or to require annual or other periodic payments as a condition to the continuance

thereof (g) any Security Interest the validity of which is being contested at the time by the Corporation or a Subsidiary in good faith or payment of which has been provided for by creation of a reserve in an amount in cash sufficient to pay the same in full, (h) any easements, rights-of-way and servitudes (including, without in any way limiting the generality of the foregoing, easements, rights-of-way and servitudes for railways, sewers, dykes, drains, gas and water mains or electric light and power or telephone conduits, poles, wires and cables) and minor defects, or irregularities of title that, in the opinion of the Corporation, will not in the aggregate materially and adversely impair the use or value of the land concerned for the purpose for which it is held by the Corporation or the Subsidiary, as

the case may be, (i) any security to a public utility or any municipality or governmental or other public authority when required by such utility or other authority in connection with the operations of the Corporation or the Subsidiary, as the case may be, (j) any liens and privileges arising out of judgments or awards with respect to which the Corporation or the Subsidiary shall be prosecuting an appeal or proceedings for review and with respect to which it shall be entitled to or shall have secured a stay of execution pending such appeal or proceedings for review and

(k) reservations, limitations, provisos and conditions, if any expressed in or affecting any grant of real or immoveable property or any interest therein;


(viii)	any Security Interest in respect of any Purchase Money Obligation;


(ix)	any extension, renewal, alteration or replacement (or successive extensions, renewals, alterations or replacements) in whole or in part, of any Security Interest referred to in the foregoing clauses (i) through (viii)

inclusive, provided that the principal amount of the Indebtedness secured thereby on the date of such extension, renewal, alteration or replacement is not increased and the Security Interest is limited to the property or other assets which secured the Security Interest so extended, renewed, altered or replaced (plus improvements on such property or other assets or the proceeds thereof); and


(x)	any Security Interest that would otherwise be prohibited (including any extensions, renewals, alterations or replacements thereof) provided that the aggregate Indebtedness outstanding and secured under this clause (x) does not (calculated at the time of the granting of the Security Interest) exceed an amount equal to 10% of Consolidated Net Tangible Assets.

"Person" means any individual, corporation, limited liability company, partnership; association, joint-stock company; trust, unincorporated organization or government or any agency or political subdivision thereof;

"Place of Payment", when used with respect to the Securities of any series, means the place or places where the principal of (and premium, if any) and interest on the Securities of such series are payable as determined by or pursuant to this Indenture;

"Purchase Money Obligation" means any monetary obligation (including a Capital Lease Obligation) created, assumed or incurred prior to, at the time of, or within 180 days after the acquisition (including by way of lease), construction or improvement of any real or tangible personal property, for the purpose of financing all or any part of the purchase price or lease payments in respect thereof, provided that the principal amount of such obligation may not exceed the unpaid portion of the purchase price or lease payments, as applicable, and further provided that any security given in respect of such obligation shall not extend to any property other than the property acquired in connection with which

such obligation was created or assumed and fixed improvements, if any, thereto or erected or constructed thereon and the proceeds thereof;

"Railroad Subsidiary" means a Subsidiary whose principal assets are Railway Properties;

"Railway Properties" means all main and branch lines of railway located in Canada or the United States, including all real property used as the right of way for such lines;

"Redemption Date" when used with respect to any Security to- be redeemed, means the date specified for such redemption in accordance with or pursuant to this Indenture;

"Redemption Price'', when used with respect to any Security to be redeemed, means the price at which such Security is to be redeemed in accordance with or pursuant to this Indenture;

"Registered Global Security" means a Security that evidences all or part of any series of Securities, is issued to the Depository for such series, or its nominee, in accordance with Section 3.02 and bears the legend prescribed in Section 3.02;

"Registered Security" means any Security registered on the Security Register;

"Regular Record Date", for the interest payable on any Interest Payment Date on the Registered Securities of any series, means the date specified for such purpose in accordance with or pursuant to this Indenture;

"Repayment Date" means, when used with respect to any Security to be repaid at the option of the Holder, the date fixed for such repayment pursuant to this Indenture;

"Required Currency" has the meaning specified in Section 1.17;

"Responsible Officer", when used with respect to the Trustee, means any vice president, any assistant treasurer, any senior trust officer, any trust officer, any assistant trust

officer, or any other officer of the Trustee customarily performing functions similar to those performed by any of the above designated officers and also means, with respect to a particular corporate trust matter, any other officer to whom such matter is referred

because of his or her knowledge of and familiarity with the particular subject and who shall have direct responsibility for the administration of this Indenture;

"Securities" has the meaning stated in the first recital of this instrument and more particularly means any Securities authenticated and delivered under this Indenture; provided, however , that if at any time there is more than one Person acting as Trustee under this Indenture, "Securities" with respect to the Indenture as to which such Person is Trustee shall have the meaning stated in the first recital of this Indenture and shall more particularly mean Securities authenticated and delivered under this Indenture, exclusive; however, of Securities of any series as to which such Person is not Trustee;

"Security Interest" means any security by way of an assignment, mortgage, charge, pledge, lien, encumbrance, title retention agreement or other security interest whatsoever, howsoever created or arising, whether absolute or contingent, fixed or floating, perfected or not, but not including any security interest in respect of a lease which is not a Capital Lease Obligation or any encumbrance that may be deemed to arise solely as a result of entering into an agreement not in violation of the terms of the Indenture to sell or otherwise transfer assets or property;

"Security Register" and "Security Registrar" have the respective meanings specified in Section 3.05;

"Shareholders' Equity" means, with respect to any Person, at any date, the aggregate of the Dollar amount of the outstanding share capital, the amount, without duplication, of any surplus, whether contributed or capital, and retained earnings, subject to any currency translation adjustment, all as set forth in such Person's most recent annual consolidated balance sheet;

" Significant Subsidiary " means a Subsidiary that constitutes a "significant subsidiary" as defined in Rule 1-02 of Regulation S-X under the U.S. Securities Exchange Act of 1934, as amended;

" Sinking Fund Payment Date " has the meaning specified in Section 11.01;

" Special Record Date ", for the payment of any Defaulted Interest, means a date fixed by the Trustee pursuant to Section 3.07;

" Specified Amount " has the meaning specified in Section 3.1 1;

" Stated Maturity ", when used with respect to any Security or any installment of principal thereof or interest thereon, means the date specified in such Security and any Coupon appertaining thereto as the fixed date on which the principal of such Security or such installment of principal or interest is due and payable;

" Subsidiary " means any corporation or other Person of which there are owned, directly

or indirectly, by or for the Corporation or by or for any corporation or other Person in like relation to the Corporation, Voting Shares or other interests which, in the aggregate, entitle the holders thereof to cast more than 50% of the votes which may be cast by the

holders of all outstanding Voting Shares of such first mentioned corporation or other Person for the election of its directors or, in the case of any Person which is not a corporation, Persons having similar powers or (if there are no such persons) entitle the holders thereof to more than 50% of the income or capital interests (however called) thereon and includes any corporation in like relation to a Subsidiary;

" Trust Indenture Act " means the Trust Indenture Act of 1939, as amended, as in force at the date as of which this Indenture was executed, except as provided in Section 8.06;

" Trustee " means The Bank of New York until a successor Trustee shall have become such pursuant to the applicable provisions of this Indenture, and thereafter "Trustee" shall mean or include each Person who is then a Trustee hereunder; and if at any time there is more than one such Person, "Trustee" as used with respect to the Securities of any series shall mean the Trustee with respect to the Securities of such series;

" United States " means the United States of America (including the states and the District of Columbia), its territories, possessions and other areas subject to its jurisdiction;

" Unregistered Security " means any Security other than a Registered Security; " Valuation Date " has the meaning specified in Section 3.11(c);

" Vice President ", when used with respect to the Corporation or the Trustee, means any vice president, whether or not designated by a number or a word or words added before or after the title "vice president";

" Voting Shares " means shares of capital stock of any class of a corporation and other interests of any other Persons having under all circumstances the right to vote for the

election of the directors of such corporation or in the case of any Person which is not a corporation, Persons having similar powers or (if there are no such persons) income or capital interests (however called), provided that, for the purpose of this definition, shares or other interests which only carry the right to vote conditionally on the happening of an event shall not be considered Voting Shares whether or not such event shall have happened;

"Yield to Maturity" means the yield to maturity on a series of Securities, calculated at the time of issuance of such series, or, if applicable, at the most recent redetern1ination of interest on such series, in accordance with accepted financial practice;

All accounting terms not otherwise defined herein have the meanings assigned to them in accordance with GAAP;

The words "hereto", "herein", "hereof ', "hereby" and "hereunder" and other words of similar import refer to this Indenture as a whole and not to any particular Article, Section or other subdivision and references to Articles and Sections are to Articles and Sections of this Indenture; and

Words importing the singular number only include the plural and vice versa, words importing any gender include any other gender and any reference to any statute or other legislation shall be deemed to be a reference to such legislation as now enacted or as the same may from time to time be .amended, re-enacted or replaced.

Section 1.02 Compliance Certificates and Opinions

Upon any application or request by the Corporation to the Trustee to take any action under any provision of this Indenture, the Corporation shall furnish to the Trustee an Officers' Certificate stating that all conditions precedent, if any, provided for in this Indenture relating to the proposed action have been complied with and an Opinion of Counsel stating that in the opinion of such Counsel all such conditions precedent, if any, have been complied with, except that in the case of any application or request as to which the furnishing of such documents is specifically required by any provision of this Indenture relating to such application or request, no additional certificate or opinion need be furnished.

Every certificate or opinion with respect to compliance with a condition or covenant provided for in this Indenture shall include:


(i)	a statement that each individual signing such certificate or opinion has

read and understands such covenant or condition and the definitions herein relating thereto;


(ii)	a brief statement as to the nature and scope of the examination and investigation upon which the statements or opinions contained in such certificate or opinion are based;


(iii)	a statement that, in the opinion of each such individual, he or she has made such examination or investigation as he or she believes necessary to

enable him or her to make the statement or express the opinion contained in such certificate or opinion as to'' whether or not such covenant or condition has been complied with; and


(iv)	a statement as to whether, in the opinion of each such individual, such condition or covenant has been complied with in accordance with the terms of the Indenture.

Section 1.03 Form of Documents Delivered to Trustee

In any case where several matters are required to be certified by, or covered by an opinion of, any specified Person, it shall not be necessary that all such matters be

certified by, or covered by the opinion of, only one such Person, or that they be so certified or covered by only one document, but one such Person may certify or give an opinion with respect to some matters and one or more other such Persons with respect to other matters, and any such Person may certify or give an opinion with respect to such matters in one or several documents.

Any certificate or opinion of an Officer may be based, insofar as it relates to legal matters, upon a certificate or opinion of, or representations by, Counsel, unless such Officer knows, or in the exercise of reasonable care should know, that the certificate or opinion or representations with respect to the legal matters upon which his or her certificate or opinion is based are erroneous. Any such certificate or opinion of Counsel may be based, insofar as it relates to factual matters, upon a certificate or opinion of, or representations by, an Officer or Officers stating that the information with respect to such factual matters is in the possession of the Corporation, unless such Counsel knows, or in the exercise of reasonable care should know, that the certificate or opinion or representations with respect to such factual matters are erroneous.

Any certificate or opinion of an Officer or Opinion of Counsel may be based, insofar as it relates to any accounting matters, upon a certificate or opinion of, or representations by, the Corporation's Auditors or an accountant or another firm of accountants engaged by the Corporation, unless such Officer or Counsel, as the case may be, knows, or in the exercise of reasonable care should know, that the certificate or opinion or representations with respect to such accounting matters are erroneous. Any certificate or opinion of any independent firm of chartered accountants filed with and directed to the Trustee shall contain a statement that such firm is independent.

Section 1.04 Acts of Holders

agent duly appointed in writing, and, except as herein otherwise expressly provided, such action shall become effective when such instrument or instruments are delivered to the Trustee and, if hereby expressly required, to the Corporation; (ii) by the record of such specified percentage of Holders voting in favor thereof at any meeting of such Holders duly called and held; and (iii) by a combination of such instrument or instruments and

any such record of a meeting. Such instrument or instruments and any such record (and the action embodied therein and evidenced thereby) are herein sometimes referred to as the "Act” of the Holders signing such instrument or instruments or voting at such meeting. Proof of the execution of any such instrument or of a writing appointing any such agent and of the holding by any Person of any of the Securities of any series shall be sufficient for any purpose of this Indenture and, subject to Section 6.0 1 , conclusive in favor of the Trustee and the Corporation, if made in the manner set forth in this Section.

(b) The fact and date of the execution by any such Person of any instrument or writing may be proved by the certificate of any notary public or other officer of any jurisdiction authorized to take acknowledgments of deeds or administer oaths that the Person executing such instrument or writing acknowledged to him or her the execution thereof, or by an affidavit of a witness to such execution sworn to before any such notary or other such officer. Where such execution is by or on behalf of any legal entity other than an individual, such certificate or affidavit shall also constitute sufficient proof of the authority of the Person executing the same.

(c) The ownership of an Unregistered Security of any series, or of any Coupon attached thereto at its issuance, and the identifying number of such Security and the date of such ownership, may be proved by the production of such Security or Coupon or by a certificate executed by any trust company, bank, banker or recognized securities dealer, wherever situated, if such certificate shall be deemed by the Trustee to be satisfactory. Each such certificate shall be dated and shall state that on the date thereof a Security of such series bearing a specified identifying number was deposited with such trust company, bank, banker or recognized securities dealer by the Person named in such certificate. Any such certificate may be issued in respect of one or more Unregistered Securities of one or more series specified therein. The ownership by the Person named in any such certificate of any Unregistered Security specified therein shall be presumed to continue unless at the time of any determination of such ownership and holding

(i) another certificate bearing a later date issued in respect of such Security shall be produced, (ii) such Security shall be produced by some other Person, (iii) such Unregistered Security shall have been exchanged for a Registered Security or (iv) such Security shall have ceased to be Outstanding.

(d) Subject to Section 6.0 1, the fact and date of the execution of any such instrument or writing and the ownership, principal amount and number(s) of any Unregistered Securities may also be proved in accordance with such reasonable rules and regulations as may be prescribed by the Trustee for any series or in any other manner which the Trustee may deem sufficient.

(e) In the case of Registered Securities, the ownership thereof shall be proved by the Security Register.

(f) The Corporation may fix a record date for the purpose of determining the identity of the Holders entitled to participate in any Act required or permitted under this Indenture, which record date shall be not earlier than 30 days prior to the first solicitation of the written instruments or vote required for such Act. If such a record date is fixed; the Persons who were the Holders of the Securities of the affected series at the close of business on such record date (or their duly authorized proxies) shall be the only Persons entitled to execute written instruments or to vote with respect to such Act, or to revoke any written instrument or vote previously delivered or given, whether or not such Persons shall continue to be Holders of the Securities of such series after such record date. With regard to any ac6on that may be given or taken hereunder only by Holders of a requisite principal amount of Outstanding Securities of any series (or their duly appointed agents) and for which a record date is set pursuant to this paragraph, the Corporation may, at its option, set an expiration date after which no such action purported to be given or taken by any Holder shall be effective hereunder unless given or taken on or prior to such expiration date by Holders of the requisite principal amount of Outstanding Securities of such series on such record date (or their duly appointed agents). On or prior to any expiration date set pursuant to this paragraph, the Corporation may, on one or more occasions at its option, extend such date to any later date. Nothing in this paragraph shall prevent any Holder (or any duly appointed agent thereof) from giving or taking, after any expiration date, any action identical to, or, at any time, contrary to or different from, any action given or taken, or purported to have been given or taken, hereunder by a Holder on or prior to such date, in which event the Corporation may set a record date in respect thereof pursuant to this paragraph. Notwithstanding the foregoing, the Corporation shall not set a record date for, and the provisions of this paragraph shall not apply with respect to, any action to be given or taken by Holders pursuant to Section 5.01 or 5.02.

(g) At any time prior to (but not after) the evidencing to the Trustee, as provided in paragraph (a) of this Section, of any Act by the Holders of the requisite percentage of the aggregate principal amount of the Securities of one or more series, as the case may be, any Holder of a Security, the serial number of which is shown by the evidence to be included among the serial numbers of the Securities the Holders of which have consented to such Act, may, by filing written notice at the Corporate Trust Office and upon proof of ownership as required or pem1itted by this Section, revoke any written instrument or vote with respect to such Act in respect of such Security. Except as provided in the preceding sentence, any request, demand, authorization, direction, notice, consent, waiver or other Act of the Holder of any Security shall bind every future Holder of the same Security and the Holder of every Security issued upon the registration of transfer thereof or in exchange therefor or in lieu thereof in respect of anything done, omitted or suffered to be done by the Trustee or the Corporation in reliance thereon, whether or not notation of such action is made upon such Security.

(h) Without limiting the foregoing, a Holder entitled hereunder to give or take any action hereunder with regard to any particular Security may do so with regard to all

or any part of the principal amount of such Security or by one or more duly appointed agents each of which may do so pursuant to such appointment with regard to all or any different part of such principal amount.

Section 1.05 Notices, Etc., to Trustee

Any request, demand, authorization, direction, notice, consent, waiver or Act of Holders or other document required or permitted by this Indenture to be made upon,

given or furnished to, or filed with, the Trustee by any Holder or by the Corporation shall be sufficient for every purpose hereunder if made, given, furnished or filed in writing to or with the Trustee (i) by delivery to the Trustee at the Corporate Trust Office, Attention: Corporate Trust Administration, (ii) by facsimile (with confirmation) to fax number (212) 815-5366 or (iii) by mail by registered letter, postage prepaid, to the Trustee at the Corporate Trust Office Attention: Corporate Trust Administration and, subject as

provided in this Section 1.05, shall be deemed to have been given when received. In the case of disruption in postal services any notice shall be seht by facsimile or delivered.

The Trustee may from time to time notify the Corporation of a change in address or facsimile number which thereafter, until changed by like notice, shall be the address or facsimile number of the Trustee for all purposes of this Indenture.

S ection 1.06 Notices, Etc., to Corporation

Any request, demand, authorization, direction, notice, consent, waiver, or Act of Holders or other document required or permitted by this Indenture to be made upon, given or furnished to, or filed with the Corporation under the provisions hereof by the Trustee or by any Holder shall be sufficient for every purpose hereunder if made, given, furnished or filed in writing to or with the Corporation (i) by delivery to Suite 500,

401 9th Avenue, S.W., Calgary, Alberta T2P 4Z4, Attention: Vice President, Legal Services and Corporate Secretary, (ii) by facsimile (with confirmation) to fax number

facsimile or on the third Business l)ay after mailing. Any delivery made or facsimile sent on a day other than a Business Day, or after 5:00 p.m. (New York time) on a Business Day, shall be deemed to be received on the next following Business Day. In the case of disruption in postal services any notice, if mailed, shall not be deemed to have been given until it is actually delivered to the Corporation. The Corporation may from time to time notify the Trustee of a change in address or facsimile number which thereafter, until changed by like notice, shall be the address or facsimile number of the Corporation for all purposes of this Indenture.

Section 1.07 Notice to Holders; Waiver

Holders of Registered Securities of any series or any Holders of Unregistered Securities of any series who shall have filed their names and addresses with the Trustee (for purposes of receipt of notice), given or served by being sent by electronic communication or by being deposited in the mail, first-class, postage prepaid, addressed to such Holders at their addresses or electronic communication numbers as they shall appear on the Security Register or at the addresses so filed, respectively, and (ii) in the case of any Holders of other Unregistered Securities, published at least once in an Authorized Newspaper in Canada (if required), in The City of New York (if required), the United Kingdom (if required) and Luxembourg (if required), not later than the latest date (if

any), and not earlier than the earliest date (if any), prescribed for the giving of such notice. The Corporation shall notify the Trustee of any required publication of any notices to Holders. In any case where notice to the Holders is given by mail, neither the failure to mail such notice, nor any defect in any notice so mailed, to any particular Holder shall affect the sufficiency of such notice with respect to the other Holders. In case, by reason of the suspension or disruption of or irregularities in regular mail service or by reason of any other cause, it shall be impracticable to give any such notice by mail, then such notification as shall be made with the approval of the Trustee shall constitute a sufficient notification for every purpose hereunder.

Where this Indenture or any Security provides for or permits notice in any manner, such notice may be waived in writing by the Person entitled to receive such notice, either before or after the event, and such waiver shall be the equivalent of such notice. Waivers of notice by Holders shall be filed with the Trustee, but such filing shall not be a condition precedent to the validity of any action taken in reliance upon such waiver.

Section 1.08 Effect of Headings and Table of Contents

The headings of the Articles and Sections herein and the Table of Contents are for convenience only and shall not affect the construction or interpretation hereof.

Section 1.09 Successors and Assigns


_	All covenants and agreements in this Indenture by the Corporation shall bind its successors and assigns, whether so expressed or not.

Section 1.10 Separability Clause

In case any provision in this Indenture or in the Securities or Coupons shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions thereof shall not in any way be affected or impaired by such invalidity, illegality or unenforceability.

Section 1.11 Benefits of Indenture

Nothing in this Indenture, in the Securities or in the Coupons, express or implied, shall give or be construed to give to any Person, other than the parties hereto and their

successors hereunder and the Holders, any benefit or any legal or equitable right, remedy or claim under this Indenture.

Section 1.12 Governing Law

This Indenture and each Security and Coupon shall be governed by and construed in accordance with the laws of the State of New York and the federal laws of the United States of America applicable thereto and shall be treated in all respects as New York contracts, except as may be otherwise required by mandatory provisions of law.

Section 1.13 Language Clause

Les parties aux presentes ont exige que la presente convention ainsi que tous Jes documents et avis qui s'y rattachent et/ou qui en decouleront soient rediges en langue anglaise. The parties hereto have required that this Indenture and all documents and notices related thereto be in English.

Section 1.14 Legal Holidays

In any case where any Interest Payment Date, Redemption Date, Sinking Fund Payment Date or Stated Maturity or Maturity or Coupon shall not be a Business Day in a Place of Payment then (notwithstanding any other provision of this Indenture, of the Securities or of the Coupons) payment of interest or principal (and premium, if any) need not be made at such Place of Payment on such date, but may be made on the next succeeding Business Day at such Place of Payment with the same force and effect as though made on the Interest Payment Date, the Redemption Date, at the Stated Maturity, the Sinking Fund Payment Date or at Maturity, and no interest shall accrue for the period from and after such Interest Payment Date, Redemption Date, Sinking Fund Payment Date or Stated Maturity of any Security or Maturity of any Security, as the case may be. Except as otherwise provided in the preceding sentence, whenever any period -of time

would begin or end, any calculation is to be made, or any other action to be taken hereunder shall be stated to be required to be taken, on a day other than a Business Day, such period of time shall begin or end, such calculation shall be made or such other

action shall be taken on the next succeeding Business Day and an extension of time shall be included for the-purposes of computation of interest thereon. Any payment made after 5:00 p.m. (New York time) on a Business Day shall be deemed to be made on the next following Business Day.

Section 1.15 Counterparts

This instrument may be executed in any number of counterparts, each of which so executed shall be deemed to be an original; but all such counterparts shall together constitute but one and the same instrument.

Section 1.16 Securities in a Foreign Currency or in Euros

Unless otherwise specified in or pursuant to a Directors' Resolution, a supplemental indenture or an Officers' Certificate delivered pursuant to Section 3.01 with respect to a particular series of Securities, whenever for purposes of this Indenture any action may be taken by the Holders of a specified percentage in aggregate principal amount of the Securities of one. or more series at the time Outstanding and, at such time, there are Outstanding Securities of any such affected series which are denominated in a Foreign Currency, then the principal amount of the Securities of such series which shall be deemed to be Outstanding for the purpose of taking such action shall be the amount of Dollars which could be obtained for such principal amount at the Market Exchange Rate on the applicable record date established pursuant to Section 1.04 or, if no such record date shall have been established, on the date that the taking of such action shall be authorized by Act of the Holders of the Securities of all such affected series. The provisions of this paragraph shall also apply in connection with any other action taken by the Holders pursuant to the terms of this Indenture, including without limitation any

action under Section 5.02.

All decisions and determinations of the Corporation regarding the Market Exchange Rate or any alternative determination provided for in the preceding paragraph shall be in its sole discretion and shall, in the absence of manifest error, be conclusive to the extent permitted by law for all purposes and irrevocably binding upon the Corporation and all Holders.

Section 1.17 Judgment Currency

(a) The Corporation agrees, to the fullest extent that it may effectively do so under applicable law, that if for the purpose of obtaining or enforcing judgment against the Corporation in any court it is or becomes necessary to convert the sum due in respect of the principal of (and premium; if any) or interest on the Securities of any series (the "Required Currency") into a currency in which a judgment will be rendered (the "Judgment Currency"), the conversion shall be made at the rate of exchange at which, in accordance with normal banking procedures, the Corporation could purchase in Calgary, Alberta, Canada the Required Currency with the Judgment Currency on the Business Day immediately preceding:


(i)	the date of actual payment of the amount due, in the case of any proceeding in the courts of the Province of Alberta or in the courts of any other jurisdiction that will give effect to such conversion being made on such date; or


(ii)	the date on which the final unappealable judgment is given, in the case of any proceeding in the courts of any other jurisdiction

(the date as of which such conversion is made pursuant to this clause being hereinafter in this Section 1.17 referred to as the "Judgment Conversion Date").

(b) If, in the case of any proceeding in the court of any jurisdiction referred to in clause (ii) of Section 1.17(a), there is a change in the rate of exchange prevailing between the Judgment Conversion Date and the date of actual payment of the amount due, the Corporation shall pay such additional amount (if any, but in any event not a lesser amount) as may be necessary to ensure that the amount paid in the Judgment Currency, when converted at the rate of exchange prevailing on the date of payment, will produce the amount of Dollars which could have been purchased with the amount of Judgment Currency stipulated in the judgment or judicial order at the rate of exchange prevailing on the Judgment Conversion Date.

(c) The Corporation also agrees, to the fullest extent that it may effectively do so under applicable law, that its obligations under this Indenture and the Securities of such series to make payments in the Required Currency (i) shall not be discharged or satisfied by any tender, or any recovery pursuant to any judgment, in any currency other than the Required Currency, except to the extent that such tender or recovery shall result in the effective receipt by the payee of the full amount of the Required Currency expressed to be payable in respect of such payments, (ii) shall be enforceable as an alternative or additional cause of action for the purpose of recovering in the Required Currency the amount, if any, by which such effective receipt shall fall short of the full amount of the Required Currency so expressed to be payable and (iii) shall not be

affected by judgment being obtained for any other sums due under this Indenture.

(d) The term "rate of exchange" in this Section 1.17 means the noon rate of exchange for the Judgment Currency in Dollars quoted by the Bank of Canada for the day in question.

(e) In the event of the winding-up of the Corporation at any time while any amount or damages owing under the Securities and this Indenture, or any judgment or order rendered in respect thereof, shall remain outstanding, the Corporation shall indemnify and hold the Holders and the Trustee harmless against any deficiency arising or resulting from any variation in rates of exchange between (I ) the date as of which the equivalent of the amount in the Required Currency due or contingently due under the Securities and this Indenture (other than under this Subsection (e)) is calculated for the purposes of such winding-up and (2) the final date for the filing of proofs of claim in such winding-up. For the purpose of this Subsection (e) the final date for the filing of proofs of claim in the winding-up of the Corporation shall be the date fixed by the liquidator or otherwise in accordance with the relevant provisions of applicable law as being the latest practicable date as at which liabilities of the Corporation may be

ascertained for such winding-up prior to payment by the liquidator or otherwise in respect thereto.

Section 1.18 Agent for Process; Submission to Jurisdiction

By its execution and delivery of this Indenture, the Corporation irrevocably designates and appoints CT Corporation System, 111 8 th Avenue, 13 th Floor, New York, New York 10011, U.S.A. as the Corporation's authorized agent (the "Authorized Agent") upon whom process may be served in any action, suit or proceeding arising out of or

relating to this Indenture, the Securities and/or the Coupons but for that purpose only, and agrees that service of process upon said CT Corporation System, and written notice of such service to the Corporation in the manner provided in Section 1.06, shall be deemed in every respect effective service of process upon the Corporation in any such action, suit or proceeding in any federal or state court in the Borough of Manhattan, The City of New York. The Corporation hereby irrevocably submits to the non-exclusive jurisdiction of any such court in respect of any such legal action or proceeding and waives any objection it may have to the laying of the venue of any such legal action or proceeding. Such designation shall be irrevocable until all amounts in respect of the principal of and

interest due and to become due on or in respect of all the Securities issued under this Indenture have been paid by the Corporation pursuant to the terms hereof and the _ Securities. Notwithstanding the foregoing, the Corporation reserves the right to appoint another Person located or with an office iri the Borough of Manhattan, The City of New York, selected in its discretion, as a successor Authorized Agent, and upon acceptance of such consent to service of process by such a successor the designation of the prior Authorized Agent shall terminate. The Corporation shall give notice to the Trustee and all Holders of the designation by them of a successor Authorized Agent. If for any

reason the Authorized Agent ceases to be able to act as the Authorized Agent or to have an address in the Borough of Manhattan, The City of New York, the Corporation will designate a successor authorized agent in accordance with the preceding sentence. The Corporation further agrees to take any and all action, including the execution and filing of any and all such documents and instruments, as may be necessary to continue the designation and appointment of said CT Corporation System, or of any successor

Authorized Agent of the Corporation, in full force and effect so long as any of the Securities or Coupons shall be outstanding.


Section 1.19	Shareholder, Officers and Directors Exempt from Individual Liability

any successor, under any rule- of law, statute or constitutional provision or by the enforcement of any assessment or by any legal or equitable proceeding or otherwise, all such liability being expressly waived and released by the acceptance of the Securities and the Coupons appertaining thereto by the Holders thereof and as part of the consideration for the issue of the Securities and the Coupons appertaining thereto.

Section 1.20 Force Majeure

In no event shall the Trustee be responsible or liable for any failure or delay in the performance of its obligations hereunder arising out of or caused by, directly or

indirectly, forces beyond its control, including, without limitation, strikes, work stoppages, accidents, acts of war or terrorism, civil or military disturbances, nuclear or natural catastrophes or acts of God, and interruptions, loss or malfunctions of utilities,

communications or computer (software and hardware) services; it being understood that the Trustee shall use reasonable efforts which are consistent with accepted practices in the banking industry to resume performance as soon as practicable under the circumstances.

ARTICLE TWO

SECURITY FORMS

Section 2.01 Forms Generally

The Securities of each series and the Coupons, if any, to be attached thereto shall be substantially in such form, not inconsistent with this Indenture, as shall be established by or pursuant to one or more Directors' Resolutions (as set forth in either a Directors' Resolution or, to the extent established pursuant to, rather than set forth in, a Directors' Resolution, an Officers' Certificate detailing such establishment) or in one or more indentures supplemental hereto, in each case with such appropriate insertions, omissions, substitutions and other variations as are required or permitted by this Indenture, and may have imprinted or otherwise reproduced thereon such letters, numbers or other marks of identification and such legends or endorsements, not inconsistent with this Indenture, as may be required to comply with any law or any rules or regulations pursuant thereto; or with any rules of any securities exchange, or to conform to general usage, all as may be determined by the Officers executing such Securities and Coupons, if any, as evidenced by their execution of such Securities and Coupons.

The definitive Securities and the Coupons, if any, to be attached thereto shall be printed, lithographed or engraved on steel engraved borders or may be produced in any other manner, all as determined by the Officers executing such Securities and Coupons, if any, as evidenced by their execution of such Securities and Coupons .

Section 2.02 Form of Trustee's Certificate of Authentication

Subject to Section 6.13, the Trustee's certificate of authentication on all Securities shall be in substantially the following form:

"This is one of the Securities of a series referred to in the within-mentioned Indenture.

The Bank of New York, as Trustee

Dated: By:

Authorized Signatory"

If at any time there shall be an Authenticating Agent appointed with respect to

any series of the Securities, the Securities of each such series shall bear, in addition to the form of the Trustee's certificate of authentication, an alternate certificate of authentication which shall be in substantially the following form:

"This is one of the Securities of a series referred to in the within-mentioned Indenture.

The Bank of New York. as Trustee

Dated:

By: as Authenticating Agent

By:

Authorized Signatory"

ARTICLE THREE

THE SECURITIES

Section 3.01 A mount Unlimited; Issuable in Series

The aggregate principal amount of Securities which may be authenticated and delivered under this Indenture is unlimited.

The Securities may be issued in one or more series, and, except as otherwise provided herein, each such series shall rank at least pari passu with all other unsecured and unsubordinated debt of the Corporation from time to time outstanding and pari passu with other Securities issued under this Indenture. There shall be established in or pursuant to one or more Directors' Resolutions (and to the extent established pursuant to, rather than set forth in, a Directors' Resolution, in an Officers' Certificate detailing such establishment) or in one or more indentures supplemental hereto, prior to the original issuance of the Securities of any series:

(1) the designation of the Securities of such series (which shall distinguish the Securities of such series from the Securities of all other series);

(2) any limit upon the aggregate principal amount of the Securities of such series which may be authenticated and delivered under this Indenture (except for Securities authenticated and delivered upon registration of transfer of, or in exchange for, or in lieu of, other Securities of such series pursuant to Section 3.04, 3.05, 3.06, 8.05 or

10.07 and except for any Securities which, pursuant to Section 3.02, are deemed never to have been authenticated and delivered hereunder);

(3) if other than U.S. Dollars, the coin or currency in which the Securities of such series are denominated (including, but not limited to, any Foreign Currency);

(4) the extent and manner, if any, to which payment on or in respect of Securities of that series will be senior or will be subordinated to the prior payment of other liabilities and obligations of the Corporation;

(5) the date or dates of issue of the Securities of such series and the date or dates on which the principal of the Securities of such series shall be payable and/or the method by which such date or dates shall be determined;

(6) the rate or rates at which the Securities of such series shall bear interest, if any, the date or dates from which such interest shall accrue, the Interest Payment Dates on which such interest shall be payable and, in the case of Registered Securities, the Regular Record Date for the interest payable on any Interest Payment Date and/or the method by which such rate or rates or date or dates shall be determined;

(7) any place or places other than the Corporate Trust Office where the principal of (and premium, if any) and interest on the Securities of such series shall be payable;

(8) the period or periods within which, the price or prices at which and the terms and conditions upon which the Securities of such series may be redeemed, in whole or in part, at the option of the Corporation, pursuant to any sinking fund or otherwise and/or the method by which such period or periods, price or prices and terms and conditions shall be determined;

(9) the right or obligation, if any, of the Corporation, to redeem, purchase or repay the Securities of such series pursuant to any voluntary or mandatory redemption, sinking fund or analogous provision and the period or periods within which, the price or prices at which and the terms and conditions upon which the Securities of such series shall be so redeemed, purchased or repaid and/or the method by which such period or periods, price or prices and terms and conditions shall be determined;

(10) if other than denominations of U.S. $1,000 and any integral multiple thereof in the case of Registered Securities or the Unregistered Securities, the denominations in which the Securities of such series shall be issuable or the method by which such denominations shall be detem1ined;

(11) if other than the principal amount thereof, the portion of the principal amount of the Securities of such series which shall be payable upon declaration of acceleration of the Maturity thereof or the method by which such portion shall be determined;

(12) if the principal of (and premium, if any) or interest on the Securities of such series are to be payable, at the election of the Corporation or a Holder thereof, in a coin or currency other than that in which the Securities of such series are denominated, the period or periods within which, and the terms and conditions upon which, such election may be made and/or the method by which such period or periods and terms and conditions shall be determined;

(13) if the amount of payments of the principal of (and premium, if any) and interest on the Securities of such series may be determined with reference to an index, the manner in which such amounts shall be determined;

(14) whether the Securities of such series will be issuable as Registered Securities (and if so, whether such Registered Securities will be issuable as Registered Global Securities) or Unregistered Securities (with or without Coupons), or any combination of the foregoing, any restrictions applicable to the offer, sale or delivery of Unregistered Securities or the payment of interest thereon and, if other than as provided in Section 3.05, the terms upon which Unregistered Securities of such series may be exchanged for Registered Securities of such series and vice versa;

(15) whether, under what circumstances and the Currency in which the Corporation will pay Additional Amounts as contemplated by Section 9.08 on the Securities of the series to any Holder (including any modification to the definition of such term) in respect of any tax, assessment or governmental charge and, if so, whether the

Corporation will have the option to redeem such Securities rather than pay such Additional Amounts (and the terms of any such option);

(16) if the Securities of the series are to be convertible into or exchangeable for any securities of any Person (including the Corporation), the terms and conditions upon which such Securities will be so convertible or exchangeable;

(17) the designation of the initial Exchange Rate Agent, if any;

(18) whether the Securities of such series will be issuable in the form of one or more Registered Global Securities, and the identification of the Depository for such Registered Global Securities;


(19)	if the Securities of such series are to be issuable in definitive form

(whether upon original issuance or upon exchange of a temporary Security of such series) only upon receipt of certain certificates or other documents or satisfaction of other conditions, the form and terms of such certificates, documents or conditions;

(20) any trustees, Depositories, authenticating or paying agents, transfer agents, registrars or other agents with respect to the Securities of such series;

(21) any additional events of default or covenants with respect to the Securities of such series or any Events of Default or covenants herein specified which shall not be applicable to the Securities of such series;

(22) the Person to whom any interest on a Security of any series shall be payable, if other than the Person in whose name that Security is registered at the close of business on the Regular Record Date for such interest; and


(23)	any other terms of such series.

All Securities of any one series and the Coupons, if any, appertaining thereto shall be substantially identical, except in the case of Registered Securities as to denomination and except as may otherwise be provided by or pursuant to the Directors' Resolution or Officers'- Certificate referred to-above or as may otherwise be set forth in any indenture supplemental hereto referred to above. All Securities of any series need not be issued at the same time and, unless otherwise provided, a series may be reopened for issuances of additional Securities of such series, if so provided by or pursuant to such Directors' Resolution, Officers' Certificate or supplemental indenture.

Section 3.02 Execution, Authentication and Delivery

The Securities shall be executed on behalf of the Corporation by any two of the following Officers: its Chairman of the Board, its President, any of its Vice Presidents, the Secretary, the Treasurer, or any of its Assistant Treasurers. The signature of any Officer on the Securities may be manual or facsimile. Typographical and other minor errors or defects in any such reproduction of such seal or any such signature shall not

affect the validity or enforceability of any Security which has been duly authenticated and delivered by the Trustee. The Coupons, if any, attached to the Securities of any series shall bear the facsimile signature of any Vice President of the Corporation. A facsimile signature upon a Security or a Coupon shall for all purposes of this Indenture be deemed to be the Signature of the person whose signature it purports to be.

In case any such Officer who shall have so executed any of the Securities or Coupons, if any, shall cease to hold such office before the Security or Coupon so executed (or the Security to which the Coupon so executed appertains) shall be authenticated and delivered by the Trustee or disposed of by the Corporation such Security or Coupon nevertheless may be authenticated and delivered or disposed of and shall bind the Corporation as though the Person who signed such Security or Coupon had not ceased to be such Officer; and any Security or Coupon may be so executed on behalf of the Corporation by such Persons as, at the actual date of execution of such Security or Coupon, shall be the proper officers of the Corporation although at the date of the execution and delivery of this Indenture any such Person was not such an officer.

At any time and from time to time after the execution and delivery of this Indenture, the Corporation may deli\ 1 er Securities of any series, having attached thereto the Coupons, if any, appertaining thereto, executed by the Corporation to the Trustee for authentication, together with a Corporation Order for the authentication and delivery of such Securities and the other applicable documents referred to below in this Section, and thereupon the Trustee shall authenticate and deliver such Securities pursuant to such Corporation Order or pursuant to procedures acceptable to the Trustee specified from time to time by a Corporation Order. In authenticating the Securities of any series and accepting the additional responsibilities under this Indenture in respect of the Securities of such series, the Trustee shall be provided with (but, in the case of subparagraphs (b), and (d) below, only at or before the time of the first request of the Corporation to the Trustee to authenticate Securities of such series) and, subject to Section 6.01, shall be fully protected in relying upon, unless and until such documents shall have been superseded or revoked:

(a) a Corporation Order requesting such authentication and setting forth delivery instructions if the Securities of such series and the Coupons, if any, appertaining

thereto are not to be delivered to the Corporation provided that, with respect to the Securities of any series which are subject to a Periodic Offering: (i) the Trustee shall authenticate and deliver the Securities of such series for original issue from time to time, in an aggregate principal amount not exceeding the aggregate principal amount established for such series, pursuant to a Corporation Order or pursuant to procedures acceptable to the Trustee specified from time to time by a Corporation Order, (ii) if so provided in or pursuant to the Directors' Resolution or supplemental indenture establishing the Securities of such series, the maturity date, the original issue date, the interest rate and any other terms of any or all of the Securities of such series and the Coupons, if any, appertaining thereto may be determined by a Corporation Order or pursuant to such procedures and (iii) if so provided in such procedures, such Corporation Order may authorize authentication and delivery pursuant to electronic instructions from

the Corporation or its duly authorized agent, which instructions shall be promptly confirmed in writing;

(b) any Directors' Resolution, Officers' Certificate and/or executed supplemental indenture referred to in Section 2.01 or 3.01 by or pursuant to which the form or forms and the terms of the Securities of such series and the Coupons, if any, appertaining thereto were established;

(c) an Officers' Certificate either setting forth the form or forms and the terms of the Securities of such series and the Coupons, if any, appertaining thereto or stating that such form or forms and terms have been established pursuant to Section 2.01 or 3.01 and comply with this Indenture, and covering such other matters as the Trustee may reasonably request, including, without limitation, evidence of compliance pursuant to Section 1.02 and that no Events of Default with respect to any of the Securities shall have occurred and be continuing; and


(d)	an Opinion of Counsel, substantially to the effect that:


(i)	the form or forms of the Securities of such series and the Coupons, if any, appertaining thereto have been duly authorized and established in conformity with the provisions of this Indenture;

(ii)

in the case of an underwritten offering, the terms of the Securities of such series have been duly authorized and established in conformity with the provisions of this Indenture; and in the case of an offering which is not underwritten, certain terms of the Securities of such series have been authorized and established pursuant to a Directors' Resolution, an Officers' Certificate or a supplemental indenture in accordance with the provisions of this Indenture, and when such other terms as are to be established pursuant to a Corporation Order or procedures set forth in a Corporation Order shall have been established, all of the terms of the Securities of such series will have been duly authorized and established in conformity with the provisions of this Indenture;

(iii)

when the Securities- of such series and the Coupons, if any, appertaining thereto shall have been executed by the Corporation and authenticated by the Trustee in accordance with the provisions of this Indenture and delivered to and duly paid for by the purchasers thereof, such Securities will have been duly issued under this Indenture and will be valid and legally binding obligations of the Corporation enforceable in accordance with their respective terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors' rights generally and to general principles of equity (regardless of whether considered in a proceeding in equity or at law), and will be entitled to the benefits of this Indenture;


(iv)	the issuance of such Securities and any Coupons will not contravene the articles of incorporation or by-laws of the Corporation or result in any violation of any of the terms or provisions of any law or regulation or of any indenture, mortgage or other agreement known to such Counsel by which the Corporation is bound; and


(v)	no consent, approval, authorization, order, registration or qualification of or with any governmental agency or body having jurisdiction over the Corporation is required for the execution and delivery of the Securities of such series by the Corporation except such as have been obtained, but no opinion need be expressed as to provincial or state securities or Blue Sky laws.

The Trustee shall have the right to decline to authenticate and deliver any Securities of any series under this Section if the Trustee, being advised by Counsel, shall determine that such action may not lawfully be taken or if the Trustee shall in good faith, by any one of its Responsible Officers, determine that such action would expose the Trustee to personal liability to the Holders of the Securities then Outstanding or would affect the Trustee's rights, duties or immunities under the Securities of such series or this Indenture in a manner which is not reasonably acceptable to the Trustee.

If the Corporation shall establish pursuant to Section 3.01 that the Securities of any series are to be issued in the form of one or more Registered Global Securities, then the Corporation shall execute and the Trustee shall, in accordance with this Section and the Corporation Order with respect to such series, authenticate and deliver one or more Registered Global Securities that (i) shall be in an aggregate principal amount equal to the aggregate principal amount specified in such Corporation Order, (ii) shall be registered in the name of the Depository therefor or its nominee, (iii) shall be delivered by the Trustee to such Depository or pursuant to such Depository's instructions and


(iv)	shall bear a legend substantially to the following effect:

"Unless and until it is exchanged in whole or in part for Securities in definitive registered form, this Security may not be transferred except as a whole by the Depository to the nominee of the Depository or by a nominee of the Depository to the Depository or another nominee of the Depository or by the Depository or any such nominee to a successor Depository or a nominee of such successor Depository."

Each Depository designated pursuant to Section 3.01 must, at the time of its designation and at all times while it serves as Depository, be a clearing agency registered under the U.S. Securities Exchange Act of 1934, as amended, and any other applicable statute or regulation. -

such Security has been duly authenticated and delivered hereunder and is entitled to the benefits of this Indenture. No Coupon shall be entitled to any benefit under this Indenture or be valid or obligatory for any purpose until the certificate of authentication on the Security to which such Coupon appertains shall have been duly executed as hereinabove provided. Notwithstanding the foregoing, if any Security shall have been authenticated and delivered hereunder but never issued and sold by the Corporation, and the Corporation shall deliver such Security and any Coupons appertaining thereto to the Trustee for cancellation as provided in Section 3.09, for all purposes of this Indenture such Security shall be deemed never to have been authenticated and delivered hereunder and shall never be entitled to the benefits of this Indenture.

Section 3.03 Denomination and Date of Securities

The Securities of each series shall be issuable as Registered Securities or Unregistered Securities in denominations established as provided in Section 3.01 or, with respect to the Registered Securities or the Unregistered Securities of any series if not so established, in denominations of $1,000 and any integral multiple thereof. The Securities of each series shall be numbered, lettered or otherwise distinguished in such manner or in accordance with such plan as the Officers executing the same may determine with the approval of the Trustee, as evidenced by the execution and authentication thereof.

Each Security shall be dated the date of its authentication. The Securities of each series shall bear interest, if any, from the date, and such interest shall be payable on the dates, established in or pursuant to Section 3.01.

Section 3.04 Temporary Securities

Pending the preparation of definitive Securities of any series, the Corporation may execute, and upon Corporation Order the Trustee shall authenticate and deliver,

such series, but with such omissions, insertions and variations as may be appropriate for temporary Securities, all as may be determined by the Corporation with the concurrence of the Trustee, as evidenced by the execution and authentication thereof. Temporary Securities may contain such references to any provisions of this Indenture as may be appropriate. Every temporary Security of any series shall be executed by the Corporation and authenticated by the Trustee upon the same conditions and in substantially the same manner, and with like effect, as the definitive Securities of such series. Without unreasonable delay, the Corporation shall execute and deliver to the Trustee for authentication definitive Securities of such series; and thereupon temporary Registered Securities of such series may be surrendered in exchange for definitive Registered Securities of such series without charge at each office or agency to be maintained for such purpose in a Place of Payment of that series, and temporary Unregistered Securities of such series may be surrendered in exchange for definitive Unregistered Securities of such series, having attached thereto appropriate Coupons, if any, without charge at any

office or agency to be maintained in a Place of Payment of that series. The Trustee shall authenticate and deliver in exchange for temporary Securities of such series so surrendered an equal aggregate principal amount of definitive Securities of such series in authorized denominations. Until so exchanged, the temporary Securities of any series shall be entitled to the same benefits under this Indenture as definitive Securities of such series, unless otherwise established pursuant to Section 3.01. The provisions of this Section are subject to any restrictions or limitations on the issue and delivery of temporary Unregistered Securities of any series that may be established pursuant to Section 3.01 (including any provision that Unregistered Securities of such series initially be issued in the form of a single global Unregistered Security to be delivered to a Depository or agency located outside the United States of America and the procedures pursuant to which definitive Unregistered Securities of such series would be issued in exchange for such temporary global Unregistered Security).

Section 3.05 Registration, Transfer and Exchange

The Corporation shall keep, or cause to be kept, at the Corporate Trust Office, or at any office or agency to be maintained by the Corporation in a Place of Payment, for each series of Securities issuable as Registered Securities a register (the "Security Register") in which, subject to such reasonable regulations as it may prescribe, the Corporation will provide for the registration of Registered Securities of such series and the registration of transfer of Registered Securities of such series. The Security Register shall be in written form in the English language or in any other form capable of being converted into such form within a reasonable time. At all reasonable times, any Security Register not maintained by the Trustee shall be open for inspection by the Trustee. Unless and until otherwise determined by the Corporation pursuant to Section 3.01, the Security Register with respect to each series of Securities issuable as Registered Securities shall be kept at the Corporate Trust Office and, for this purpose, the Trustee shall be designated the "Security Registrar". The holder of any Registered Security shall be entitled to inspect the Security Register at any time during normal business hours of the Trustee at the Corporate Trust Office and to make extracts therefrom.

Upon surrender for registration of transfer of any Registered Security of any series at any office or agency to be maintained for such purpose in a Place of Payment for that series, the Corporation shall execute, and the Trustee shall authenticate and deliver, in the name of the designated transferee or transferees one or more new Registered Securities of the same series of like tenor and terms in authorized denominations for a like aggregate principal amount.

Unregistered Securities (except for any temporary global Unregistered Securities) and Coupons (except for Coupons attached to any temporary global Unregistered Securities) shall be transferable by delivery.

Registered· Security to be exchanged at the office or agency to be maintained for such purpose in a Place of Payment for that series and upon payment, if the Corporation shall so require, of the charges hereinafter provided. At the option of the Holder thereof,. if the Securities of any series are issued in both registered and unregistered form, except as otherwise established for a particular series pursuant to Section 3,01, one or more Unregistered Securities of such series may be exchanged for Registered Securities of such series of like tenor and terms in authorized denominations for a like aggregate principal amount, upon surrender of any such Unregistered Security to be exchanged at the office or agency to be maintained for such purpose in a Place of Payment for that series, with, in the case of Unregistered Securities having Coupons attached, all unmatured Coupons and all matured Coupons in default thereto appertaining, and upon payment, if the Corporation shall so require, of the charges hereinafter provided. At the option of the Holder thereof, if Unregistered Securities of any series are issued in more than one authorized denomination, except as otherwise established for a particular series pursuant to Section 3.01, any such Unregistered Security may be exchanged for one or more Unregistered Securities of such series of like tenor and terms in authorized denominations for a like aggregate principal amount, upon surrender of any such Unregistered Securities at the office or agency to be maintained for such purpose in a Place of Payment for that series with, in the case of Unregistered Securities having Coupons attached, all unmatured Coupons and all matured Coupons in default thereto appertaining, and upon payment, if the Corporation shall so require, of the charges hereinafter provided. Unless otherwise established for a particular series pursuant to Section 3.01, Registered Securities of any series may not be exchanged for Unregistered Securities of such series. Whenever Securities of any series are so surrendered for exchange, the Corporation shall execute, and the Trustee shall authenticate and deliver, the Securities which the Holder making the exchange is entitled to receive. All Securities and Coupons surrendered upon any exchange or transfer provided for in this Indenture shall be promptly cancelled and disposed of by the Trustee, and the Trustee shall deliver a certificate of disposition thereof to the Corporation.

All Registered Securities of any series presented for registration of transfer, exchange, redemption or payment shall (if so required by the Corporation or the Trustee) be duly endorsed by, or be accompanied by a written instrument or instruments of transfer in form satisfactory to the Corporation and the Trustee duly executed by, the Holder or other appropriate person.

The Corporation may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any exchange or registration of transfer of Securities; but unless otherwise provided in the Securities to be exchanged or transferred, no service charge shall be made for any such transaction.

The Corporation shall not be required to (i) issue, exchange or register the transfer of Securities of any series during a period of 15 Business Days next preceding the first mailing or publication of notice of redemption of the Securities of such series to be redeemed, (ii) exchange or register the transfer of any Securities selected for redemption, in whole or in part, except the unredeemed portion of any Security to be redeemed in part

or (iii) exchange or register the transfer of any Security if the Holder thereof has exercised any right to require the Corporation to purchase such Security, in whole or in part, except any portion thereof not required to be so purchased.

Notwithstanding any other provision of this Section, unless and until it is exchanged in whole or in part for Securities in definitive registered form, a Registered Global Security representing all or a portion of the Securities of any series may not be transferred except as a whole by the Depository for such Registered Global Security to a nominee of such Depository or by a nominee of such Depository to such Depository or nominee of such Depository or by such Depository or any such nominee to a successor Depository for such Registered Global Security or a nominee of such successor Depository.

If at any time a Depository for any Registered Securities of a series represented by one or more Registered Global Securities shall notify the Corporation that it is unwilling or unable to continue as Depository for such Registered Securities or if at any time any such Depository shall no longer be eligible to continue as Depository, the Corporation shall appoint a successor Depository with respect to the Registered Securities held by

such Depository. If a successor Depository shall not be appointed by the Corporation within 90 days after the Corporation receives such notice or becomes aware of such ineligibility, the Corporation shall execute, and the Trustee upon receipt of a Corporation Order shall authenticate and deliver, in exchange for such Registered Global Securities, Registered Securities of such series in definitive form in authorized denominations for an aggregate principal amount equal to the aggregate principal amount of the Registered Global Securities held by such Depository.

lf an Event of Default described in clause (a) or (b) of Section 5.01 shall occur and be continuing with respect to any series of the Securities, the Corporation shall execute and deliver to the Trustee, together with a Corporation Order, and the Trustee shall, upon receipt thereof, authenticate and deliver, in exchange for Registered Global Securities evidencing the Securities of such series, Registered Securities of such series in definitive form in authorized denominations for an aggregate principal amount equal to the aggregate principal amount of such Registered Global Securities.

The Corporation may at any time, in its sole discretion, determine that the Registered Securities of a particular series shall no longer be represented by Registered Global Securities. In such event; the Corporation shall execute, and the Trustee upon receipt of a Corporation Order shall authenticate and deliver, in exchange for such Registered Global Securities, Registered Securities of such series in definitive form in authorized denominations for an aggregate principal amount equal to the aggregate principal amount of such Registered Global Securities.

If so established by the Corporation pursuant to Section 3.01 with respect to the Securities of a particular series represented by a Registered Global Security, the

Depository for such Registered Global Security may surrender such Registered Global Security in exchange, in whole or in part, for Registered Securities of such series in definitive form upon such terms as are acceptable to the Corporation and such

Depository. Thereupon, the Corporation shall execute, and the Trustee upon receipt of a Corporation Order shall authenticate and deliver:

(a) to each Person specified by such Depository, one or more new Registered Securities of such series in authorized denominations requested by such Person for an aggregate principal amount equal to, and in exchange for, such Person's beneficial interest in such Registered Global Security; and

(b) to such Depository, a new Registered Global Security in a denomination equal to the difference between the principal amount of the surrendered Registered Global Security and the aggregate principal amount of the Registered Securities authenticated and delivered pursuant to clause (a) above.

Upon the surrender for exchange of any Registered Global Security for Registered Securities in definitive form, such Registered Global Security shall be promptly cancelled and disposed of by the Trustee, and the Trustee shall deliver a certificate of disposition to the Corporation. Registered Securities in definitive form issued in exchange for a Registered Global Security pursuant to this Section shall be registered in such names and in such authorized denominations as the Depository for such Registered Global Security, pursuant to instructions from its direct or indirect participants or otherwise, shall instruct the Trustee or an agent of the Corporation or the Trustee. The Trustee or such agent shall deliver such Registered Securities to or as directed by the Persons in whose names such Registered Securities are so registered.

All Securities issued upon any registration of transfer or exchange of Securities shall be valid obligations of the Corporation, evidencing the same indebtedness, and entitled to the same benefits under this Indenture, as the Securities surrendered upon such registration of transfer or exchange.

Notwithstanding anything herein or in the terms of the Securities of any series to the contrary, none of the Corporation, the Trustee or any agent of the Corporation or the Trustee (any of which, other than the Corporation, shall rely on an Officers' Certificate and an Opinion of Counsel) shall be required to exchange any Unregistered Security of any series for a Registered Security of such series if such exchange would result in adverse income tax consequences to the Corporation (such as, for exanple, the inability of the Corporation to deduct from its income the interest payable on the Unregistered Securities) under then applicable income tax laws.

Section 3.06 Muti lated, Defaced, Destroyed, Lost or Stolen Securities

In case any temporary or definitive Security or any Coupon appertaining thereto shall become mutilated or defaced or be destroyed, lost or stolen, the Corporation shall execute, and the Trustee upon receipt of a Corporation Order shall authenticate and deliver, a new Security of the same series oflike tenor and terms, bearing a number or other distinguishing symbol not contemporaneously outstanding, in lieu of and substitution for the mutilated, defaced, destroyed, lost or stolen Security, with Coupons corresponding to any Coupons appertaining to the Security so mutilated, defaced,

destroyed, lost or stolen, or in lieu of or substitution for the Security to which such mutilated, defaced, destroyed, lost or stolen Coupon appertained, with Coupons corresponding to the Coupons so mutilated, defaced, destroyed, lost or stolen. In each case, the applicant for a substitute Security or Coupon shall furnish to the Corporation and to the Trustee and any agent of the Corporation or the Trustee such security or indemnity as may be required by them to save each of them harmless and, in each case of destruction, loss or theft, evidence to their satisfaction of the destruction, loss or theft of such Security or Coupon and of the ownership thereof and, in each case of mutilation or defacement, shall surrender the Security and related Coupons to the Trustee or such agent.

Upon the issuance of any substitute Security or Coupon under this Section, the Corporation may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other expenses (including the fees and expenses of the Trustee or its agent) connected therewith. In case any Security or Coupon which has matured or is about to mature or has been called for redemption in full shall become mutilated or defaced or be destroyed, lost or stolen, the Corporation may, instead of issuing a substitute Security, pay or authorize the payment of the same or the relevant Coupon (without surrender thereof except in the case of a mutilated or defaced Security or Coupon), if the applicant for such payment shall furnish to the Corporation and to the Trustee and any agent of the Corporation or the Trustee such security or indemnity as may be required by them to save each of them harmless, and, in each case of destruction, loss or theft, evidence to their satisfaction of the destruction, loss or theft of such Security or Coupon and of the ownership thereof.

Every substitute Security or Coupon of any series issued pursuant to this Section in lieu of any mutilated, destroyed, lost or stolen Security or Coupon shall constitute an additional contractual obligation of the Corporation, whether or not the mutilated, destroyed, lost or stolen Security or Coupon shall be at any time enforceable by anyone, and shall be entitled to all the benefits of this Indenture equally and proportionately with any and all other Securities or Coupons of such series duly authenticated and delivered hereunder. All Securities and Coupons shall be held and owned upon the express condition that, to the extent permitted by law, the foregoing provisions are exclusive with respect to the replacement or payment of mutilated,

defaced, destroyed, lost or stolen Securities and Coupons and shall preclude any and all other rights or remedies notwithstanding any law or statute existing or hereafter enacted to the contrary with respect to the replacement or payment of negotiable instruments or other securities without their surrender.

Section 3.07 Payment; Interest Rights Preserved

(a) Except as otherwise provided in accordance with Section 3.01 or 3.07(b) for the Registered Securities of a particular series, payments of the principal of (and premium, if any) and interest on any Registered Security (other than a Registered Global Security) will be made at the Corporate Trust Office except that, at the option of the Corporation, may be paid (i) by mailing checks for such interest payable to or upon the

written order of such Holders at their fast addresses as they appear on the Security Register, or (ii) by wire transfer to an account maintained by the Person entitled thereto as specified in the Security Register.

(b) Except as otherwise provided as contemplated by Section 3.01, interest on any Registered Security (other than a Registered Global Security) or on any Unregistered. Security registered as to interest shall be paid to the Person in whose name such Security or whose entitlement to interest is registered at the close of business on the Regular Record Date for such interest.

(c) Interest on any Securities with Coupons attached (together with any additional related amounts payable pursuant to the terms of such Securities) shall be payable only upon presentation and surrender of the several Coupons for such interest installments as are evidenced thereby as they severally mature. ·

(d) If any temporary Unregistered Security provides that interest thereon may be paid while in temporary form, the interest on any such temporary Unregistered Security (together with any additional related amounts payable pursuant to the terms of such Security) shall be paid, as to the installments of interest evidenced by Coupons attached thereto, if any, only upon presentation and surrender thereof, and, as to the other installments of interest, if any, only upon presentation of such temporary Unregistered Security for notation thereon of the payment of such interest, in each case subject to any restrictions that may be established pursuant to Section 3.0I .

(e) Any interest on any Registered Security which is payable, but is not punctually paid or duly provided for, on any Interest Payment Date ("Defaulted Interest") shall forthwith cease to be payable to the Holder on the relevant Regular Record Date by virtue of having been such Holder, and such Defaulted Interest may be paid by the Corporation, at its election in each case, as provided in paragraph (i) or (ii) below:

(i)

The Corporation may elect to make payment of any Defaulted Interest on Registered Securities and on Unregistered Securities registered as to interest to the Persons in whose names the Registered Securities or whose · entitlements to interest are registered at the close of business on a Special Record Date for the payment of such Defaulted Interest, which shall be fixed in the following manner. The Corporation shall notify the Trustee in writing of the amount of Defaulted Interest proposed to be paid on each such Security and the date of the proposed payment, and at the same time the Corporation shall deposit with the Trustee an amount of money equal to the aggregate amount proposed to be paid in respect of such Defaulted Interest or shall make arrangements satisfactory to the Trustee for such deposit prior to the date of the proposed payment, such money when deposited to be held in trust for the benefit of the Persons entitled to such Defaulted Interest as in this paragraph provided. Thereupon, the Trustee shall fix a Special Record Date for the payment of such Defaulted Interest which shall be not more than 15 days and not less than 10 days prior to the date of the proposed payment and not less than 10 days after the receipt by

the Trustee of the notice of the proposed payment. The Trustee shall promptly notify the Corporation of such Special Record Date and, in the name and at the expense of the Corporation, shall cause notice of the proposed payment of such Defaulted Interest and the Special Record Date therefor to be mailed, first-class postage prepaid, to each Holder of the Registered Securities or each Person so entitled to interest at his or her address as it appears in the Security Register, not less than I 0 days prior to such Special Record Date. Notice of the proposed payment of such Defaulted Interest and the Special Record Date therefor having been so mailed, such Defaulted Interest shall be Paid to the Persons in whose names the Registered Securities or whose entitlements to interest are registered at the close of business on such Special Record Date.

(ii)

The Corporation may make payment of any Defaulted Interest on the Registered Securities of any series in any other lawful manner not inconsistent with the requirements of an securities exchange on which such Registered Securities may be listed, and upon such notice as may be required by such exchange, after notice given by the Corporation to the Trustee of the proposed payment pursuant to this paragraph.

Section 3.08 Persons Deemed Owners

The Corporation, the Trustee and any agent of the Corporation or the Trustee may treat the Person in whose name each Registered Security is registered in the Security Register as the owner of such Registered Security for the purpose of receiving payment of or on account of the principal of (and premium, if any) and (subject to Section 3.07) interest, if any, on such Registered Security and for all other purposes whatsoever (other than the payment of Additional Amounts), whether or not such payment in respect of such Registered Security shall be overdue, and none of the Corporation, the Trustee and any agent of the Corporation or the Trustee shall be affected by any notice to the contrary. The Corporation, the Trustee and any agent of the Corporation or the Trustee may treat the Holder of any Unregistered Security and the Holder of any Coupon as the owner of such Unregistered Security or Coupon for the purpose of receiving payment thereof or on account thereof and for all other purposes whatsoever, whether or not such payment in respect of such Unregistered Security or Coupon shall be overdue and none of the Corporation, the Trustee and any agent of the Corporation or the Trustee shall be affected by any notice to the contrary. All such payments so made to any such Person or Holder, or upon the order of any such Person or Holder, shall be valid and, to the extent of the amounts so paid, effectual to satisfy and discharge the indebtedness on any such Security or Coupon.

Section 3.09 Cancellation

All Securities and Coupons surrendered for payment, redemption, repayment at the option of the Holder, registration of transfer or exchange, or for credit against any payment in respect of any sinking or analogous fund, if surrendered to the Corporation or any agent of the Corporation or any agent of the Trustee, shall be delivered to the Trustee

for cancellation or if surrendered to the Trustee, shall be cancelled by it; and no Securities or Coupons shall be issued in lieu thereof except as expressly permitted by any of the provisions of this Indenture. The Trustee shall dispose of cancelled Securities and Coupons in accordance with its customary procedures. If the Corporation or its agent shall acquire any of the Securities or Coupons, such acquisition shall not operate as a redemption or satisfaction of the indebtedness represented by such Securities or Coupons unless and until the same are delivered to the Trustee for cancellation. No Securities shall be authenticated in lieu of or in exchange for any Securities cancelled as provided in this Section, except as expressly permitted by this Indenture. AH cancelled Securities held by the Trustee shall be disposed of by the Trustee in accordance with its customary procedures and certification of their disposal delivered to the Corporation unless by Corporation Order the Corporation shall direct that cancelled Securities be returned to it.

Section 3.10 Computation of Interest

Except as otherwise established pursuant to Section 3.01 for the Securities of any series, interest on the Securities of each series shall be computed on the basis of a 360., day year of twelve 30-day months.

Section 3.11 Currency and Manner of Payments in Respect of Securities.

(a) With respect to Registered Securities of any series not permitting the election provided for in paragraph (b) below or the Holders of which have not made the election provided for in paragraph (b) below, and with respect to Unregistered Securities of any series, except as provided in paragraph (d) below, payment of the principal of (and premium, if any) and interest, if any, on any Registered or Unregistered Security of such series will be made in the Currency in which such Registered Security or Unregistered Security, as the case may be, is payable. The provisions of this Section 3.11 may be modified or superseded with respect to any Securities pursuant to Section 3.01.

(b) It may be provided pursuant to Section 3.01 with respect to Registered Securities of any series that Holders shall have the option, subject to paragraphs (d) and

(e) below, to receive payments of principal of (or premium, if any) or interest, if any, on such Registered Securities in any of the Currencies which may be designated for such election by delivering to the Trustee a written election with signature guarantees and in the applicable form established pursuant to Section 3.01, not later than the close of business on the Election Date immediately preceding the applicable payment date. If a Holder so elects to receive such payments in any such Currency, such election will remain in effect for such Holder or any transferee of such Holder until changed by such Holder or such transferee by written notice to the Trustee (but any such change must be made not later than the close of business on the Election Date immediately preceding the next payment date to be effective for the payment to be made on such payment date and no such change of election may be made with respect to payments to be made on any Registered Security of such series with respect to which an Event of Default has occurred or with respect to which the Corporation has deposited funds pursuant to Article Four or Twelve or with respect to which a notice of redemption has been given by the Corporation or a notice of option to elect repayment has been sent by such Holder or such

transferee). Any Holder of any such Registered Security who shall not have delivered any such election to the Trustee not later than the close of business on the applicable Election Date will be paid the amount due on the applicable payment date in the relevant Currency as provided in Section 3.1 l (a). The Trustee shall notify the Exchange Rate Agent as soon as practicable after the Election Date of the aggregate principal amount of Registered Securities for which Holders have made such written election.

(c) Unless otherwise specified pursuant to Section 3.0I , if the election referred to in paragraph (b) above has been provided for pursuant to Section 3.01, then, unless otherwise specified pursuant to Section 3.01, not later than the fourth Business Day after the Election Date for each payment date for Registered Securities of any series, the Exchange Rate Agent will deliver to the Corporation a written notice specifying, in the Currency in which Registered Securities of such series are payable, the respective aggregate amounts of principal of (and premium, if any) and interest, if any, on the Registered Securities to be paid on such payment date, specifying the amounts in such Currency so payable in respect of the Registered Securities as to which the Holders of Registered Securities of such series shall have elected to be paid in another Currency as provided in paragraph (b) above. If the election referred to in paragraph (b) above has been provided for pursuant to Section 3.01 and if at least one Holder has made such election, then, unless otherwise specified pursuant to Section 3.01, on the second Business Day preceding such payment date the Corporation will deliver to the Trustee for such series of Registered Securities an Exchange Rate Officer's Certificate in respect of the Dollar or Foreign Currency payments to be made on such payment date. Unless otherwise specified pursuant to Section 3.01, the Dollar or Foreign Currency amount receivable by Holders of Registered Securities who have elected payment in a Currency as provided in paragraph (b) above shall be determined by the Corporation on the basis of the applicable Market Exchange Rate in effect on the third Business Day (the "Valuation Date") immediately preceding each payment date, and such determination shall be conclusive and binding for all purposes, absent manifest error.

(d) If a Conversion Event occurs with respect to a Foreign Currency in which any of the Securities are denominated or payable other than pursuant to an election provided for pursuant to paragraph (b) above, then with respect to each date for the payment of principal of (and premium, if any) and interest, if any, on the applicable Securities denominated or payable in such Foreign Currency occurring after the last date on which such Foreign Currency was used (the "Conversion Date"), the Dollar shall be the Currency of payment for use on each such payment date. Unless otherwise specified pursuant to Section 3.01, the Dollar amount to be paid by the Corporation to the Trustee and by the Trustee or any Paying Agent to the Holders of such Securities with respect to such payment date shall be, in the case of a Foreign Currency other than a currency unit, the Dollar Equivalent of the Foreign Currency or, in the case of a currency unit, the Dollar Equivalent of the Currency Unit, in each case as determined by the Exchange Rate Agent in the manner provided in paragraph (f) or (g) below.

(e) Unless otherwise specified pursuant to Section 3.01 , if the Holder of a Registered Security denominated in any Currency shall have elected to be paid in another

Currency as provided in paragraph (b) above, and a Conversion Event occurs with respect to such elected Currency, such Holder shall receive payment in the Currency in which payment would have been made in the absence of such election; and if a Conversion Event occurs with respect to the Currency in which payment would have been made in

the absence of such election, such Holder shall receive payment in Dollars as provided in paragraph (d) above.

(f) The "Dollar Equivalent of the Foreign Currency" shall be determined by the Exchange Rate Agent and shall be obtained for each subsequent payment date by converting the specified Foreign Currency into Dollars at the Market Exchange Rate on the Conversion Date.

(g) The "Dollar Equivalent of the Currency Unit" .shall be determined by the Exchange Rate Agent and subject to the provisions of paragraph (h) below shall be the sum of each amount obtained by converting the Specified Amount of each Component Currency into Dollars at the Market Exchange Rate for such Component Currency on the Valuation Date with respect to each payment.

(h) For purposes of this Section 3.11 the following terms shall have the following meanings:

A "Component Currency" shall mean any Currency which, on the Conversion Date, was a component currency of the relevant currency unit, including, but not limited to, the Euro.

A "Specified Amount" of a Component Currency shall mean the number of units of such Component Currency or fractions thereof which were represented in the relevant 'currency unit, including, but not limited to, the Euro, on the Conversion Date. If after the Conversion Date the official unit of any Component Currency is altered by way of combination or subdivision, the Specified Amount of such Component Currency shall be divided or multiplied in the same proportion. If after the Conversion Date two or more Component Currencies are consolidated into a single currency, the respective Specified Amounts of such Component Currencies shall be replaced by an amount in such single Currency equal to the sum of the respective Specified Amounts of such consolidated Component Currencies expressed in such single Currency, and such amount shall thereafter be a Specified Amount and such single Currency shall thereafter be a Component Currency. If after the Conversion Date any Component Currency shall be divided into two or more currencies, the Specified Amount of such Component Currency shall be replaced by amounts of such two or more currencies, having an aggregate Dollar Equivalent value at the Market Exchange Rate on the date of such replacement equal to the Dollar Equivalent value of the Specified Amount of such former Component Currency at the Market Exchange Rate immediately before such division and such amounts shall thereafter be Specified Amounts and such currencies shall thereafter be Component Currencies. If, after the Conversion Date of the relevant currency unit, including, but not limited to, the Euro, a Conversion Event (other than any event referred to above in

this definition of "Specified Amount") occurs with respect to any Component Currency of such currency unit and is continuing on the applicable Valuation Date, the Specified Amount .of such Component Currency shall, for purposes of calculating the Dollar Equivalent of the Currency Unit, be converted into Dollars

at the Market Exchange Rate in effect on the Conversion Date of such Component Currency.

"Election Date" shall mean the date for any series of Registered Securities as specified pursuant to clause (12) of Section 3.01 by which the written election referred to in paragraph (b) above may be made.

All decisions and determinations of the Exchange Rate Agent regarding the Dollar Equivalent of the Foreign Currency, the Dollar Equivalent of the Currency Unit,

the Market Exchange Rate and changes in the Specified Amounts as specified above shall be in its sole discretion and shall, in the absence of manifest error, be conclusive for all purposes and irrevocably binding upon the Corporation, the Trustee and all Holders of such Securities denominated or payable in the relevant Currency. The Exchange Rate Agent shall promptly give written notice to the Corporation and the Trustee of any such decision or determination.

will promptly thereafter give notice in the manner provided for in Section 1.07 to the affected Holders) specifying the Conversion Date. In the event the Corporation so determines that a Conversion Event has occurred with respect to the Euro or any other currency unit in which Securities are denominated or payable, the Corporation will immediately give written notice thereof to the Trustee and to the Exchange Rate Agent (and the Trustee will promptly thereafter give notice in the manner provided for in Section 1.07 to the affected Holders) specifying the Conversion Date and the Specified Amount of each Component Currency on the Conversion Date. In the event the Corporation determines in good faith that any subsequent change in any Component Currency as set forth in the definition of Specified Amount above has occurred, the Corporation will similarly give written notice to the Trustee and the Exchange Rate Agent.

The Trustee shall be fully justified and protected in relying and acting upon information received by it from the Corporation and the Exchange Rate Agent and shall not otherwise have any duty or obligation to determine the accuracy or validity of such information independent of the Corporation or the Exchange Rate Agent.

Section 3.12 Appointment and Resignation of Successor Exchange Rate Agent

(a) Unless otherwise specified pursuant to Section 3.01, if and so long as the Securities of any series (i) are denominated in a Currency other than Dollars or (ii) may be payable in a Currency other than Dollars, or so long as it is required under any other provision of this Indenture, then the Corporation will maintain with respect to each such

series of Securities, or as so required, at least one Exchange Rate Agent. The Corporation will cause the Exchange Rate Agent to make the necessary foreign exchange determinations at the time and in the manner specified pursuant to Section 3.01 for the purpose of determining the applicable rate of exchange and, if applicable, for the purpose of converting the issued Currency into the applicable payment Currency for the payment of principal (and premium, if any) and interest, if any, pursuant to Section 3.11.

(b) No resignation of the Exchange Rate Agent and no appointment of a successor Exchange Rate Agent pursuant to this Section shall become effective until the acceptance of appointment by the successor Exchange Rate Agent as evidenced by a written instrument delivered to the Corporation and the Trustee.

(c) If the Exchange Rate Agent shall resign, be removed or become incapable of acting, or if a vacancy shall occur in the office of the Exchange Rate Agent for any cause with respect to the Securities of one or more series, the Corporation, by or pursuant to a Directors' Resolution, shall promptly appoint a successor Exchange Rate Agent or Exchange Rate Agents with respect to the Securities of that or those series (it being understood that any such successor Exchange Rate Agent may be appointed with respect to the Securities of one or more or all of such series and that, unless otherwise specified pursuant to Section 3.01, at any time there shall only be one Exchange Rate Agent with respect to the Securities of any particular series that are originally issued by the Corporation on the same date and that are initially denominated and/or payable in the same Currency).


	ARTICLE FOUR

SATISFACTION AND DISCHARGE

Section 4.01 Satisfaction and Discharge of Indenture

This Indenture shall cease to be of further effect (except as to any surviving rights of registration of transfer or exchange of Securities herein expressly provided for) and the Trustee, upon Corporation Request and at the expense of the Corporation, shall execute proper instruments acknowledging satisfaction and discharge of this Indenture, when:

(1) either


(i)	all Securities and Coupons theretofore authenticated and delivered (other than (A) Securities and Coupons which have been destroyed, lost or stolen and which have been replaced or paid as provided in Section 3.06 and

(B) Securities for whose payment money has theretofore been deposited in trust or segregated and held in trust by the Corporation and thereafter

repaid to the Corporation or discharged from such trust, as provided in Section 9.05) have been delivered to the Trustee for cancellation; or


(ii)	all such Securities and Coupons not theretofore delivered to the Trustee for cancellation


(A)	have become due and payable, or


(B)	will become due and payable at their Stated Maturity within one year, or


(C)	are to be called for redemption within one year under arrangements satisfactory to the Trustee for the giving of notice of redemption by the Trustee in the name, and at the expense, of the Corporation,

and the Corporation, in the case of clause (A), (B) or (C) of this clause (l)(ii), has, in accordance with the conditions set forth in Section 12.04(1), made or caused to be made deposits in trust for the

purpose in an amount which shall be sufficient to pay and discharge the entire indebtedness on such Securities and Coupons not theretofore delivered to the Trustee for cancellation, for principal (and premium, if any) and interest to the date of such deposit (in the case of Securities and Coupons which have become due and payable) or to the Stated Maturity or Redemption Date, as the case maybe;

(2) the Corporation has paid or caused to be paid all other sums payable hereunder by the Corporation; and

(3) the Corporation has delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that all conditions precedent herein provided for relating to the satisfaction and discharge of this Indenture have been complied with.

Notwithstanding the satisfaction and discharge of this Indenture, the obligations of the Corporation to the Trustee under Sections 6.03(vii) and 6.03(viii), the obligations of the Corporation to any Authenticating Agent under Section 6.13 and, if deposits shall have been made pursuant to clause (1)(ii) of the first paragraph of this Section, the obligations of the Trustee under Sections 4.02 and 12.05 and the last paragraph of Section 9.05 shall survive such satisfaction and discharge.

Section 4.02 Application of Trust Money

Subject to the provisions of the last paragraph of Section 9.05, all money deposited with the Trustee shall be held in trust and applied by it, in accordance with the provisions of the Securities, the Coupons and this Indenture, to the payment, either directly or through any Paying Agent (including the Corporation acting as its own Paying Agent) as the Trustee may determine, to the Persons entitled thereto of the principal (and premium, if any) and interest for whose payment such money has been deposited With the Trustee.

ARTICLE FIVE

REMEDIES

Section 5.01 Event of Default

"Event of Default", wherever used herein with respect to the Securities of any series, means any one of the following events (whatever the reason for such Event of Default and whether it shall be voluntary or involuntary or be effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body):

(1) default by the Corporation in the payment of all or any part of the principal of any of the Securities of such series when the same becomes due under any provision hereof or of such Securities;

(2) default by the Corporation in the payment of any interest upon any of the Securities of such series when and as the same shall become due and payable, and continuance of such default for a period of 30 days;

Corporation specifying such default and requiring the Corporation to put an end to the same, which notice the Trustee may give on its own initiative and shall give when requested to do so by the Holders of not less than 25% in aggregate principal amount of the Securities of all series then Outstanding affected thereby;

by the holders of such indebtedness, provided that if (a) such accelerated indebtedness is the result of an event of default which is not related to the failure to pay principal or interest on the terms, at the times and on the conditions set forth in such instrument, it will not be considered an Event of Default under this Section 5.01(4) until 30 days after such acceleration, or (b) if such accelerated indebtedness shall occur as a result of such failure to pay principal or interest or as a result of an event of default which is related to the failure to pay principal or interest on the terms, at the times, and on the conditions set out in any such indenture or instrument, then (i) if such accelerated indebtedness is, by its terms, non recourse to the Company or the Railroad Subsidiaries, it shall not be

considered an Event of Default for purposes of this Indenture; or (ii) if such accelerated indebtedness is recourse to the Company or the Railroad Subsidiaries, any requirement in connection with such failure to pay or event of default for the giving of notice or the

lapse of time or the happening of any further condition, event or act under such other indenture or instrument in connection with such failure to pay principal or an event of default shall be applicable together with an additional seven days before being considered an Event of Default for purposes of this Indenture;

(5) the entry of a decree or order by a court having jurisdiction in the premises adjudging the Corporation a bankrupt or insolvent, or approving as properly filed a petition seeking reorganization, arrangement, adjustment or composition of or in respect of the Corporation under or subject to the Bankruptcy and Insolvency Act (Canada), the Companies' Creditors Arrangement Act (Canada) or any other bankruptcy, insolvency or analogous laws, the issuance of a sequestration order or the appointment of a receiver, liquidator, assignee, trustee, sequestrator (or other similar official) of the Corporation or in receipt of any substantial part of the property of the Corporation or the ordering of the winding up, liquidation or dissolution of the Corporation, and any such decree, order or appointment continues unstayed and in effect for a period of 90 consecutive days; or the making by the Corporation or any Significant Subsidiary of a general assignment for the benefit of its creditors or other acknowledgment by the Corporation or any Significant Subsidiary of its insolvency, or the making of a bankruptcy receiving order against the Corporation or any Significant Subsidiary if the Corporation or any Significant Subsidiary fails to file an appeal therefrom within the applicable appeal period or, if the Corporation or any such Significant Subsidiary does file an appeal therefrom within such period, such order is not within a period of 60 days from the date thereof, and does not remain, vacated, discharged or stayed, or the making by the Corporation or any Significant Subsidiary of an authorized assignment or a proposal to its creditors, or the seeking of relief, under any bankruptcy or insolvency or analogous law (including, Without limitation, the Bankruptcy and Insolvency Act (Canada), the Companies Creditors Arrangement Act (Canada) or the Winding-up and Restructuring Act (Canada)), or the consenting to, or acquiescence by the Corporation or any Significant Subsidiary in, the appointment of a trustee, custodian, receiver or receiver and manager or any other officer with similar powers of the Corporation or any such Significant Subsidiary or of all of the assets of the Corporation or any such Significant Subsidiary or any part thereof the loss of which could reasonably be expected to materially and adversely affect the ability of the Corporation to perform its obligations under this Indenture; or

(6) any other Event of Default provided in or pursuant to the supplemental indenture, Directors' Resolution or Officers' Certificate establishing the terms of such series of Securities as provided in Section 3.01 or in the form or forms of Security for such series.

Section 5.02 Acceleration of Maturity

If an Event of Default described in clause (1) or (2) of Section 5.01 shall have occurred and be continuing with respect to the Securities of any series, then, and in each

and every such case, unless the principal of all of the· Securities of such series shall have already become due and payable, the Trustee may in its discretion and shall upon request in writing made by the Holders of not less than 25% in aggregate principal amount of the Securities of such series then Outstanding, by notice in writing to the Corporation, declare the entire principal (or, if any of the Securities of that series are Original Issue Discount Securities, the specified portion of the principal) of (and premium if any, on) all the Securities of such series then Outstanding and the interest accrued thereon and all other money owing under the provisions of the Indenture in respect of such Securities to be due and payable to the Trustee on demand and upon any such demand the same shall forthwith become immediately due and payable to the Trustee. If an Event of Default described in clause (3) or (6) of Section 5.01 shall have occurred and be continuing with respect to the Securities of one or more series, then, and in each and every such case, unless the principal of all of the Securities of such affected series shall have already become due and payable, the Trustee may in its discretion and shall upon request in writing made by the Holders of not less than 25% in aggregate principal amount of the Securities of all such affected series then Outstanding (voting as one class), by notice in writing to the Corporation, declare the entire principal (or, if any of the Securities of that series are Original Issue Discount Securities, the specified portion of the principal) of (and premium, if any, on) all the Securities of all such affected series then Outstanding and the interest accrued thereon and all other money owing under the provisions of the Indenture in respect of such Securities to be due and payable to the Trustee on demand, and upon any such demand the same shall forthwith become immediately due and payable. If an Event of Default described in clause (4) or (5) of Section 5.01 shall have occurred and be continuing, then, and in each and every such case, unless the principal of all Securities shall have already become due and payable, the Trustee may in its discretion and shall upon request in writing made by the Holders of not less than 25% in aggregate principal amount of all the Securities then Outstanding (voting as one class), by notice in writing to the Corporation, declare the entire principal (or, if any of the Securities of that series are Original Issue Discount Securities, the specified portion of the principal) of (and premium, if any, on) all the Securities then Outstanding and the interest accrued thereon and all other money owing under the provisions of the Indenture in respect of such Securities to be due and payable to the Trustee on demand, and upon any such demand the same shall forthwith become immediately due and payable.

The Corporation shall, upon demand of the Trustee, forthwith pay to the Trustee, for the benefit of the Holders of the Securities of such series, the whole amount then due and payable on such Securities, including all Coupons appertaining thereto, for the principal (or, if any of the Securities of that series ate Original Issue Discount Securities, the specified portion of the principal) of (and premium, if any) and interest accrued to the date of such payment on all such Securities of such series and all other money owing under the provisions of the Indenture in respect of such Securities, together with interest from the date of such demand to the date of such payment upon overdue principal and premium and, to the extent that payment of such interest shall be enforceable under applicable law, on overdue installments of interest and on such other money at the same rate as the rate of interest (or Yield to Maturity, in the case of Original Issue Discount Securities) specified in the Securities of such series; and, in addition thereto, such further

amount as shall be sufficient to cover the costs and expenses of collection, including the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and Counsel, except as a result of negligence or bad faith.

Until such demand shall be made by the Trustee, the Corporation shall pay the principal of (and premium, if any) and interest on the Securities of such series to the Holders in accordance with the terms hereof and thereof, whether or not payment of any amount in respect of such Securities of such series shall be overdue. ·

If an Event of Default shall have occurred and be continuing the Trustee shall, within 30 days after it becomes aware of the occurrence of such Event of Default, give notice of such Event of Default to the Holders of the Securities of all series then Outstanding affected thereby in the manner provided in Section 1.07, provided that, notwithstanding the foregoing, except in the case of Events of Default described in clauses (1) and (2) of Section 5.01, the Trustee shall not be required to give such notice if the Trustee in good faith shall have decided that the withholding of such notice is in the best interests of the Holders of the Securities of all series then Outstanding affected thereby and shall have so advised the Corporation in writing. Where a notice of the occurrence of an Event of Default has been given to the Holders of such Securities pursuant to the preceding sentence and the Event of Default is thereafter cured, the Trustee shall give notice that the Event of Default is no longer continuing to the Holders of such Securities within 30 days after it becomes aware that the Event of Default has been cured.

Section 5.03 Waiver of Acceleration Upon Default

In the event of the acceleration of maturity with respect to Securities of any series as provided in Section 5.02 hereof, and prior to such time as a judgment or decree for payment of the money due has been obtained by the Trustee as herein below in this Article provided, the Holders of not less than a majority in aggregate principal amount of the Securities of such affected series then Outstanding (voting as one class, except in the case of Events of Default described in clauses (1) and (2) of Section 5.0l, in which case each series of Securities as to which such an Event of Default shall have occurred shall vote as a separate class) shall have the power exercisable by the Act of such Holders to direct the Trustee to cancel the declarati9n made by the Trustee and the Trustee shall thereupon cancel the declaration if:

(1) the Corporation has paid or deposited with the Trustee a sum sufficient to pay:


(i)	all overdue interest on all Securities of that series; if any,


(ii)	the principal of (and premium, if any, on) any Securities of that series which have become due otherwise than by such declaration of acceleration and any interest thereon, if any, at the rate or rates prescribed therefor in such Securities,


(iii)	to the extent that payment of such interest is lawful, interest upon overdue interest, if any, at the rate or rates specified therefor in such Securities,


(iv)	all sums paid or advanced by the Trustee hereunder and the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, except as a result of negligence or bad faith, if any, and


(v)	any other amounts payable under this Indenture at such time otherwise than by reason of such declaration of acceleration;

and

(2) all Events of Default with respect to Securities of that series, other than the non-payment of the principal of Securities of that series which has become due solely by such declaration of acceleration, have been cured or waived;

provided that no such waiver or cancellation shall extend to or shall affect any subsequent default or breach or shall impair any right consequent thereon.

Section 5.04 Enforcement of Payment of Trustee

Subject to the provisions of Sections 5.01 and 5.03, in case the Corporation shall fail to pay to the Trustee or the Holders of the Securities of any series then Outstanding the principal of (or, premium, if any) or interest accrued on all the Securities of such series and other money owing hereunder, the Trustee may in its discretion and shall upon the request in writing of the Holders of not less than 25% in principal amount of the Securities of such series and upon being indemnified to its reasonable satisfaction against all costs, expenses and liabilities to be incurred, in its own name and as trustee of an express trust, institute judicial proceedings for the collection of the amounts so due and unpaid, prosecute such proceedings to judgment or final decree and enforce the same against the Corporation or any other obligor upon such Securities of such series and collect the money adjudged or decreed to be payable in the manner provided by law out of the property of the Corporation or any other obligor upon such Securities, wherever situated.

If an Event of Default with respect to the Securities of any series shall occur and be continuing, the Trustee may in its discretion proceed to protect and enforce its rights and the rights of the Holders of the Securities of such series by such appropriate judicial proceedings as the Trustee shall deem necessary to protect and enforce any such rights, whether for the specific enforcement of any covenant or agreement in this Indenture or in aid of the exercise of any power granted herein, or to enforce any other proper remedy.

Section 5.05 Trustee May File Proofs of Claim

Subject to the provisions of Article Seven, in case of the pendency of any receivership, insolvency, liquidation, bankruptcy, reorganization, arrangement,

adjustment, composition or other similar judicial proceeding relative to the Corporation or the assets of the Corporation, the Trustee (irrespective of whether the principal of the Securities of any series shall then be due and payable as therein expressed or by declaration or otherwise and irrespective of whether the Trustee shall have made any demand on the Corporation for the payment of overdue principal, premium or interest) shall be entitled and empowered, either in its own name or as trustee of an express trust, or as attorney-in-fact for the respective Holders of the Securities of any series, or in any one or more of such capacities, by intervention in such proceeding or otherwise:

(i)

to file and prove a claim, debt, petition or other document for the whole amount of the principal (and premium, if any) and interest (or if the Securities of any series are Original Issue Discount Securities, such portion of the principal amount as may be specified in the terms of such series) owing and unpaid in respect of the Securities of each series, and to execute and file such other papers or documents and do and perform all

such things as may be necessary or advisable in order to have the claims of the Trustee (including any claim for the reasonable compensation, · expenses, disbursements and advances of the Trustee, its agents and counsel, except as a result of negligence or bad faith) and of the Holders allowed in such judicial proceeding, and


(ii)	to collect and receive any money or other property payable or deliverable on any such claims and to distribute the same; and any custodian, receiver, liquidator, assignee, trustee, sequestrator or other similar official in any such judicial proceeding is hereby authorized by each Holder to make

such payments to the Trustee and, in the event that the Trustee shall consent to the making of such payments directly to the Holders, to pay to the Trustee any amount due it for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, except as a result of the Trustee's negligence or bad faith, and any other amounts due the Trustee under clause (3) of Sections 9.01 and 6.03(vii).

all such acts contemplated by clauses (i) and (ii) of this Section for and on behalf of such . Holders as may be necessary or advisable in the opinion of the Trustee. Subject to the provisions of Article Seven, nothing herein contained shall be deemed to authorize the Trustee, unless so authorized by Act of the Holders, to authorize or consent to or accept

or adopt on behalf of any Holder any plan of reorganization, arrangement, adjustment or composition affecting the Securities of any series or the rights of any Holder thereof or to authorize the Trustee to vote in respect of the claim of any Holder in any such

proceeding; provided, however, that the Trustee may, on behalf of the Holders, vote for the election of a trustee in bankruptcy or similar official and be a member of a creditors' or other similar committee.

Section 5.06 Trustee May Enforce Claims without Possession of Securities

All rights of action and claims under this Indenture, or under the Securities of any series or any Coupons appertaining thereto, may be prosecuted and enforced by the Trustee without the possession of any of the Securities of such series or such Coupons or the production thereof in any suit or proceeding relating thereto, and any such suit or proceeding instituted by the Trustee shall be brought in its own name as trustee of an express trust, and any recovery of judgment shall, after provision for the payment of the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, except as a result of the Trustee's negligence or bad faith, be for the ratable benefit of the Holders of the Securities and Coupons in respect of which such

judgment has been recovered subject to the provisions of this Indenture.

In any suit or proceeding brought by the Trustee (and also in any suit or proceeding involving the interpretation or construction of any provision of this Indenture to which the Trustee shall be a party), the Trustee shall be held to represent all the Holders of the Securities and Coupons appertaining thereto in respect to which action was taken, and it shall not be necessary to make any Holders of such Securities or Coupons parties to any such proceedings

Section 5.07 Application of Money Collected

Any money collected or received by the Trustee pursuant to this Article in respect of the Securities of any series shall be applied in the following order, at the date or dates fixed by the Trustee and, in the case of any distribution of such money on account of the principal of (or premium, if any) or interest on the Securities of such series, upon presentation of the several Securities and Coupons appertaining thereto in respect of which money has been collected and the notation thereon of such distribution if such principal, premium and interest be only partially paid or upon surrender thereof if fully paid:

(1) firstly, to pay or reimburse to the Trustee for all amounts due the Trustee under Sections 6.03(vii) and 6.03(viii);

(2) secondly, to pay or reimburse the Holders of the Securities of such series the costs, charges, expenses, advances and compensation to the Trustee in or about the execution of its trust, or otherwise in relation hereto, with interest thereon as herein provided;

interest, then such money shall be applied in accordance with such direction); provided that no payment shall be made in respect of any interest the time of payment of which has been extended contrary to the provisions of Section 9.01(2) hereof, until the prior

payment in full of all other money payable hereunder; and

(4) fourthly, the surplus, if any, of such money shall be paid to the Corporation.

Section 5.08 Limitation on Suits

No Holder of any Security of any series or of any Coupon shall have any right to institute any action, suit or proceeding, judicial or otherwise, with respect to this Indenture, for payment of any principal, premium, if any, or interest owing on any Security or Coupon, or for the execution of any trust or power hereunder or for the appointment of a custodian, receiver, liquidator, assignee, trustee, sequestrator or other similar official, or to have the Corporation wound up, or for any other remedy hereunder, unless:

(I) such Holder shall have previously given written notice to the Trustee of the occurrence of a continuing Event of Default hereunder with respect to the Securities of such series;

(2) the Holders of not less than 25% in aggregate principal amount of the Outstanding Securities of that series in the case of an Event of Default described in clause (1), (2), (3), (4), or (6) of Section 5.01, or in the case of an Event of Default described in clause (5) of Section 5.01, the Holders of not less than 25% in principal amount of all such affected series then Outstanding (voting as one class) shall have made written

request to the Trustee to institute such proceeding in its own name as Trustee hereunder;

(3) such Holder or Holders shall have offered to the Trustee, when so requested by the Trustee, reasonable indemnity satisfactory to it against the costs, expenses and liabilities to be incurred therein or thereby in compliance with such request;

(4) the Trustee for 60 days after its receipt of such notice, request and offer of indemnity shall have-failed to institute such action, suit or proceeding; and

(5) no direction inconsistent with such written request shall have been given to the Trustee during such 60 day period by the Holders of not less than a majority in aggregate principal amount of the Outstanding Securities of that series in the case of any Event of Default described in clause (1), (2), (3), (4) or (6) of Section 5.01 or, in the case of any Event of Default described in clause (5) of Section 5.01 by the Holders of a majority or more of all such affected series then Outstanding (voting as one class);

it being understood and intended that no one or more of Holders of Securities of any_ series or Coupons appertaining thereto shall have any right in any manner whatsoever by virtue of, or by availing of, any provision of this Indenture to affect, disturb or prejudice the rights of any other Holder of the Securities or the Coupons, or to obtain or to seek to

obtain preference or priority over any other such Holder or to enforce any right under this Indenture, except in the manner herein provided and for the equal and ratable benefit of all Holders of Securities of the affected series and Coupons appertaining thereto.


Section 5.09	Unconditional Right of Holders to Receive Principal, Premium and Interest

Security or Coupon or, in the case of redemption, on the Redemption Date and to institute · suit for the enforcement of any such payment, and such rights shall not be impaired

without the consent of such Holder.

Section 5.10 Restoration of Rights and Remedies

In case the Trustee or any Holder shall have proceeded to enforce any right or remedy under this Indenture and such proceeding shall have been discontinued or abandoned for any reason, or shall have been determined adversely to the Trustee or to such Holder, then, and in every such case, the Corporation, the Trustee and the Holders shall be restored severally and respectively to their former positions hereunder; and all rights, remedies and powers of the Corporation, the Trustee and the Holders shall continue as though no such proceeding had been taken.

Section 5.11 Rights and Remedies Cumulative

remedy shall, to the extent permitted by law, be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other appropriate right or remedy.

Section 5.12 Delay or Omission Not Waiver

No delay or omission of the Trustee or of any Holder of Securities or Coupons to exercise any right or remedy accruing upon any Event of Default shall impair any such right or remedy or constitute a waiver of any such Event of Default or an acquiescence therein. Every right and remedy given by this Article or by law to the Trustee or to the Holders may be exercised from time to time, and as often as may be deemed expedient,· by the Trustee or by the Holders, as the case maybe, except as otherwise expressly provided in this Indenture.

Section 5.13 Control by Holders

remedy available to the Trustee, or exercising any trust or power conferred on the Trustee with respect to the Securities of such affected series, provided that:

(1) such direction shall not be in conflict with any rule of law or with this Indenture;

(2) the Trustee may take any other action deemed proper by the Trustee which is not inconsistent with such direction; and

(3) the Trustee shall have the right to decide to follow such direction if the Trustee in good faith shall, by a Responsible Officer, determine that such direction be prejudicial to the Holders not joining in such direction or would involve the Trustee in personal liability.

Section 5.14 Waiver of Past Defaults

The Holders of a majority in aggregate principal amount of the Securities of all series at the time Outstanding with respect to which a default or breach or an Event of Default shall have occurred and be continuing (determined as provided in Section 5.02 and voting as one class) shall have the right exercisable by Act of such Holders to waive any past default or breach or Event of Default and its consequences, except a default

(1) in the payment of the principal of or any premium or interest on any Security of any such series, or

(2) in respect of a covenant ot provision hereof which under Article Eight cannot be modified or amended without the consent of all Holders of all Outstanding Securities of any such series affected.

Upon any such waiver, such default or breach shall cease to exist, and any Event of Default arising therefrom shall be deemed to have been cured, for every purpose of this Indenture, but no such waiver shall extend to any subsequent or other default or breach or Event of Default or impair any right consequent thereon.

Section 5.15 Undertaking for Costs

that such court may in its discretion assess reasonable costs, including reasonable · attorneys' fees and documented out-of-pocket expenses, against any party litigant in such suit, having due regard to the merits and good faith of the claims or defenses made by such party litigant

Section 5.16 Waiver of Usury, Stay or Extension Laws

The Corporation covenants (to the fullest extent that it may lawfully do so) that it will not at any time insist upon, or plead, or in any manner whatsoever claim or take the benefit or advantage of, any usury, stay or extension law wherever enacted, now or at any time hereafter in force, which may affect the covenants or the performance of this Indenture; and the Corporation (to the fullest extent that it may lawfully do so) hereby expressly waives all benefit or advantage of any such law and covenants that it will not hinder, delay or impede the execution of any power herein granted to the Trustee, but will suffer and permit the execution of every such power as though no such law had been enacted.

ARTICLE SIX

THE TRUSTEE

Section 6.01 Certain Duties and Responsibilities

(a) Except during the continuance of an Event of Default,

(i) The Trustee undertakes to perform such duties and only such duties as are specifically set forth in this Indenture, and no implied covenants or obligations shall be read into this Indenture against the Trustee.

(ii) In the absence of bad faith on its part, the Trustee, in the exercise of its rights and duties hereunder, may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture; but in the case of any such certificates or opinions which by any provision hereof are specifically required to be furnished to the Trustee, the Trustee shall be under a duty to examine the same to determine whether or not they conform to and comply with the requirements of this Indenture (but need not confirm or investigate the accuracy of any mathematical calculations or other facts stated therein).

(b) In case an event of default with respect to any series of Securities has

occurred and is continuing, the Trustee shall exercise with respect to the Securities of such series such of the rights and powers vested in it by this Indenture, and use the same degree of care and skill in their exercise, as a prudent man would exercise or use under the circumstances in the conduct of his own affairs.

(c) No provision of this Indenture shall be construed to relieve the Trustee from the duties imposed on it in Sections 6.0l (a) and (b) or from liability for its own negligent action, its own negligent failure to act or its own willful misconduct, except that:


(i)	this Subsection shall not be construed to limit the effect of Section 6.01;


(ii)	the Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer, unless it shall be proved that the Trustee was negligent i:n ascertaining the pertinent facts;


(iii)	the Trustee shall not be liable with respect to any action taken or omitted to be taken by it in good faith in accordance with an appropriate direction of the Holders pursuant to Section 5.13 relating to the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred upon the Trustee, under this Indenture; and

(iv)

no provision of this Indenture shall require the Trustee to expend or risk its own funds or otherwise incur any personal financial liability in the performance of any of its duties hereunder, or in the exercise of any of its rights or powers, if it shall have reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it.

(d) Whether or not therein expressly so provided, every provision of this Indenture relating to the conduct or affecting the liability of or affording protection to the Trustee shall be subject to the provisions of this Section. ·

Section 6.02 Certain Rights of Trustee

Subject to the provisions of Section 6.01 and Sections 315(a) through 315(d) of the Trust Indenture Act:

(a) the Trustee may conclusively rely and shall be protected in acting or refraining from acting upon any resolution, Officers' Certificate or other certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, Coupon, other evidence of indebtedness or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties;

(b) any order, request or direction of the Corporation mentioned herein shall be sufficiently evidenced by a Corporation Request or Corporation Order and any resolution of the Directors shall be sufficiently evidenced by a Directors' Resolution;

(i) as to any statements of fact, as evidence of the truth of such statements, and (ii) to the effect that any particular dealing or transaction or step or thing is, in the opinion of the Officers so certifying, expedient, as evidence that it is expedient; provided that the Trustee may in its sole discretion require from the Corporation or otherwise further evidence or information before acting or relying on such certificate;

(d) the Trustee may employ or retain such agents, counsel and other experts or assistants as it may reasonably require for the proper discharge of its duties hereunder and shall not be responsible for any misconduct or negligence o:n the part of any such persons who have been selected with due care by the Trustee;

(e) the Trustee may, in relation to this Indenture, act on the opinion or advice of or on information obtained from any Counsel, notary, valuer, surveyor, engineer, broker, auctioneer, accountant or other expert, whether obtained by the Trustee or by the Corporation or otherwise;

(f) the Trustee may consult with counsel of its selection and the advice of such counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon;

(g) the Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request or direction of any of the Holders pursuant to this Indenture, unless such Holders shall have offered and furnished to the Trustee funds for the purpose and indemnity satisfactory to the Trustee, acting reasonably, against the costs, expenses and liabilities which might be 'incurred by it in compliance with such request or direction;

(h) the Trustee may, before commencing (or at any time during the continuance of) any act, action or proceeding, require the Holders at whose instance it is acting to deposit with the Trustee the Securities held by them, for which Securities the Trustee shall issue receipts to the Holders;


•	inquiry or investigation into such facts or matters as it may see fit, and, if the Trustee shall determine to miike such further inquiry or investigation, it shall be entitled on reasonable notice to examine the books, records and premises of the Corporation,

personally or by agent or attorney), unless requested to do so by the Act of the Holders of a majority in aggregate principal amount of the Securities of such affected series then Outstanding; provided, however, that the Trustee may require indemnity satisfactory to the Trustee, acting reasonably, against the costs, expenses or liabilities likely to be incurred by it in the making of such investigation; and

(j) the Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents or attorneys; and the Trustee shall not be responsible for any misconduct or negligence on the part of any agent or attorney appointed with due care by it hereunder.

(k) the Trustee shall not be liable for any action taken, suffered, or omitted to be taken by it in good faith and reasonably believed by it to be authorized or within the discretion or rights or powers conferred upon it by this Indenture;

(l) the Trustee shall not be deemed to have notice of any Default or Event of Default unless a Responsible Officer of the Trustee has actual knowledge thereof or unless written notice of any event which is in fact such a Default is received by the Trustee at the Corporate Trust Office of the Trustee, and such notice references the Securities and this Indenture;

(m) the rights, privileges, protections, immunities and benefits given to the Trustee, including, without limitation, its right to be indemnified, are extended to, arid shall be enforceable by, the Trustee in each of its capacities hereunder, and to each agent, custodian and other Person employed to act hereunder;

(n) the Trustee may request that the Company deliver an Officers' Certificate setting forth the names of individuals and/or titles of officers authorized at such time to take specified actions pursuant to this Indenture, which Officers' Certificate may be signed by any person authorized to sigh an Officers' Certificate, including any person specified as so authorized in any such certificate previously delivered and not superseded; and

(o) in no event shall the Trustee be responsible or liable for special, indirect, or consequential loss or damage of any kind whatsoever (including, but not limited to, loss of profit).

Section 6.03 Protection of Trustee

By way of supplement to the provisions of any law for the time being relating to trustees, it is expressly declared and agreed as follows:


(i)	the recitals contained herein and in the Securities, except the Trustee's certificates of authentication, shall be taken as the statements of the Corporation, and neither the Trustee nor any Authenticating Agent shall be liable for or assume any responsibility for their correctness; .


(ii)	the Trustee makes no representations as to, and shall not be liable for, the validity or sufficiency of this Indenture or of the Securities or Coupons;


(iii)	neither the Trustee nor any Authenticating Agent shall be accountable for the use or application by the Corporation of any of the Securities or Coupons or of the proceeds thereof;


(iv)	nothing herein contained shall impose any obligation on the Trustee to see or to require evidence of registration or filing (or renewals thereof) of this Indenture or any instrument ancillary or supplemental hereto;


(v)	the Trustee shall not be bound to give any notice of the execution hereof;


(vi)	the Trustee shall not incur any liability or responsibility whatever or be in any way responsible for the consequence of any breach on the part of the Corporation of any of the covenants herein contained or of any act of the agents or servants of the Corporation;


(vii)	the Corporation shall indemnify the Trustee, its directors, officers and employees for, and hold it harmless against, any and all loss, liability or expense, including taxes (other than taxes based upon the income of the

Trustee) incurred without negligence or bad faith on its part, arising out of or in connection with the acceptance or administration of the trust or trusts hereunder, including the costs and expenses of defending itself against any claim (whether asserted by the Corporation, any Holder or any other Person) or liability in connection with the exercise or performance of any of its powers or duties hereunder; and


(viii)	the Corporation will pay the Trustee from time to time such compensation for all services hereunder as the parties shall agree from time to time and will repay to the Trustee on demand all expenditures or advances whatever that the Trustee may reasonably make or incur in and about the execution of the trusts hereby created (including the reasonable compensation and

the expenses and disbursements of its agents and counsel).

As security for the performance of the obligations of the Corporation under Sections 6.03(vii) and 6.03(viii), the Trustee shall have a lien prior to the Securities upon all property and funds held or collected by the Trustee as such, except funds held in trust for the payment of principal of (and premium, if any) or interest on particular Securities. The obligations of the Company under this Section shall survive the satisfaction and discharge of this Indenture and the resignation or removal of the Trustee.

Section 6.04 Trustee Not Required to Give Security

The Trustee shall not be required to give security for the execution of the trusts or its conduct or administration hereunder.

Section 6.05 No Person Dealing with Trustee Need Inquire

No person dealing with the Trustee shall be concerned to inquire whether the powers that the Trustee is purporting to exercise have become exercisable, or whether

any money remains due upon the Securities or to see to the application of any money paid to the Trustee.

Section 6.06 May Hold Securities

The Trustee, any Authenticating Agent, any Paying Agent, any Security Registrar or any other agent of the Corporation, in its individual or in any other capacity; may become the owner or pledgee of Securities or Coupons and, subject to Section 6.08, may otherwise deal with the Corporation with the same rights it would have if it were not Trustee, Authenticating Agent, Paying Agent, Security Registrar or such other agent, and without being liable to account for any profit made thereby.

Section 6.07 Money Held In Trust

Money held in trust hereunder need not be segregated from other funds except to the extent required by law. The Trustee shall be under no liability for interest on any money received by it hereunder except as otherwise agreed with the Corporation.

Section 6.08 Disqualification; Conflicting Interest

The Trustee for the Securities of any series issued hereunder shall be subject to the provisions of Section 310(b) of the Trust Indenture Act during the period of time provided for therein. In determining whether the Trustee has a conflicting interest as defined in Section 310(b) of the Trust Indenture Act with respect to the Securities of any series, there shall be excluded for purposes of the conflicting interest provisions of such Section 310(b) the Securities .of every other series issued under this Indenture. Nothing herein shall prevent the Trustee from filing with the Commission the application referred to in the second to last paragraph of Section 310(b) of the Trust Indenture Act.

Section 6.09 Corporate Trustee Required; Eligibility

such laws to exercise corporate trust powers and subject to supervision or examination by an authority of such government, or a political subdivision thereof, substantially equivalent to the supervision or examination applicable to an institution described in clause (i) above, in each case under clauses (i) and (ii) having a combined capital and surplus of at least $50,000,000 and its Corporate Trust Office in New York, New York, provided that there shall be such a corporation or other Person in such location willing to act upon customary and reasonable terms. If such corporation or other Person publishes reports of condition at least annually, pursuant to law or to the requirements of said supervising or examining authority, then for the purposes of this Section the combined capital and surplus of such corporation or other Person shall be deemed to be its

combined capital and surplus as set forth in its most recent report of condition so published. Neither the Corporation nor any Person directly or indirectly controlling, controlled by or under common control with the Corporation shall serve as Trustee. For purposes of the preceding sentence, the term "control shall mean the power to direct the management and policies of a Person directly or through one or more intermediaries, whether through the ownership of voting securities, by contract, or otherwise, and the terms "controlling" and "controlled" shall have meanings correlative to the foregoing. If at any time the Trustee shall cease to be eligible in accordance with the provisions of this Section, the Trustee shall resign immediately in the manner and with the effect

hereinafter specified in this Article.

Section 6.10 Resignation and Removal; Appointment of Successor

(a) No resignation or removal of the Trustee and no appointment of a successor Trustee pursuant to this Article shall become effective until the acceptance of appointment by the successor Trustee in accordance with the applicable requirements of Section 6.11.

(b) The Trustee may resign its trust and be discharged from all further duties and liabilities hereunder at any time with respect to the Securities of one or more series by giving to the Corporation three months' notice in writing or such shorter notice as the Corporation may accept as sufficient. If the instrument of acceptance by a successor Trustee required by Section 6.11 shall not have been delivered to the Trustee within 90 days after the giving of such notice of resignation, the resigning Trustee at the expense of

the Corporation may petition any court of competent jurisdiction for the appointment of a successor Trustee with respect to the Securities of such series.

(c) The Trustee may be removed at any time with respect to the Securities of any series by the Act of the Holders of a majority in aggregate principal amount of the Securities of such series then Outstanding delivered to the Trustee and to the Corporation. If the instrument of acceptance by a successor Trustee required by Section 6.11 shall not have been delivered to the Trustee within 90 days after such removal, the Trustee at the expense of the Corporation may petition any court of competent jurisdiction for the appointment of a successor Trustee with respect to the Securities of such series.


(d)	If at any time:


(i)	the Trustee shall fail to comply with Section 310(b) of the Trust Indenture Act pursuant to Section 6.08 with respect to the Securities of any series after written request therefor by the Corporation or by any Holder who has been a bona fide Holder of a Security of such series for at least six

months; or


(ii)	the Trustee shall cease to be eligible under Section 6.09 and shall fail to resign after written request therefor by the Corporation or by any such Holder; or


(iii)	the Trustee shall be dissolved, shall become incapable of acting or shall become or be adjudged a bankrupt or insolvent or a receiver of the Trustee or of its property shall be appointed or any public officer shall take charge or control of the Trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquidation;

then, in any such case (a) the Corporation by a Directors' Resolution may remove the Trustee with respect to the Securities of any or all series, as appropriate, or (b) subject to Section 5.15, any Holder who has been a bona fide Holder of a Security of an affected series for at least six months may, on behalf of such Holder and all other Holders similarly situated, petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee or Trustees. ··

resignation, removal or incapability, or the occurrence of such vacancy, a successor . Trustee with respect to the Securities of any series shall be appointed by Act of the Holders of a majority in aggregate principal amount of the Securities of such series then Outstanding delivered to the Corporation and the retiring Trustee, the successor Trustee so appointed shall, forthwith upon its acceptance of such appointment in accordance with the applicable requirements of Section 6.11, become the successor Trustee with respect to the Securities of such series and to that extent supersede the successor Trustee appointed by the Corporation with respect to the Securities of such series. If no successor Trustee with respect to the Securities of any series shall have been so appointed by the Corporation or the Holders and accepted appointment in the manner required by

Section 6.11, any Holder who has been a bona fide Holder of a Security of such series for at least six months may, on behalf of such Holder and all other Holders similarly situated, petition any court of competent jurisdiction for the appointment of a successor Trustee with respect to the Securities of such series.

(f) The Corporation shall give notice of each resignation and each removal of the Trustee with respect to the Securities of any series and each appointment of a successor Trustee with respect to the Securities of any series. If the Corporation shall fail to give such notice within 10 days after acceptance of appointment by the successor Trustee, the successor Trustee shall cause such notice to be given at the expense of the . Corporation. Each notice shall include the name of the successor Trustee with respect to the Securities of such series and the address of its Corporate Trust Office.

Section 6.11 Acceptance of Appointment by Successor

(a) In case of the appointment hereunder of a successor Trustee with respect

retiring Trustee shall, upon payment of its charges then unpaid, execute, acknowledge and deliver an instrument transferring to such successor Trustee all such rights, powers and trusts of the retiring Trustee and shall duly assign, transfer and deliver to such successor Trustee all property and money held by such retiring Trustee hereunder.

acknowledge and deliver an indenture supplemental hereto in which each successor Trustee shall accept such appointment and which shall (i) contain such provisions as shall be deemed necessary or desirable to transfer and confirm to, and to vest in, each

successor Trustee all the rights, powers, trusts and duties of the retiring Trustee with respect to the Securities of each series to which the appointment of such successor

Trustee relates, (ii) if the retiring Trustee shall not be retiring with respect to the Securities of all series, contain such provisions as shall be deemed necessary or desirable to confirm that all the rights, powers, trusts and duties of the retiring Trustee with respect to the Securities of the series as to which the retiring Trustee shall not be retiring shall continue to be vested in the retiring Trustee and (iii) add to or change any of the provisions of this Indenture to the extent necessary to provide for or facilitate the administration of the trusts hereunder by more than one Trustee, it being understood that nothing herein or in such supplemental indenture (except as specifically provided for therein) shall constitute such Trustees co-trustees of the same trust and that each such Trustee shall be trustee of a trust or trusts hereunder separate and apart from any trust or trusts hereunder administered by any other such Trustee; and upon the execution and delivery of such supplemental indenture, the resignation or removal of the retiring Trustee shall become effective to the extent provided therein, and each such successor Trustee, without any further act, deed or conveyance, shall become vested with all the rights, powers, trusts and duties of the retiring Trustee with respect to the Securities of each series to which the appointment of such successor Trustee relates, and upon payment of its outstanding fees and expenses, such retiring Trustee shall duly assign, transfer and deliver to each successor Trustee all property and money held by such retiring Trustee hereunder with respect to the Securities of each series to which the appointment 6f such successor Trustee relates.

(c) Upon request of any such successor Trustee, the Corporation shall execute any and all instruments for more fully and certainly vesting in and confirming to such successor Trustee all rights, powers and trusts referred to in Section 6.1 l (a) or (b), as the case may be.

(d) No successor Trustee shall accept its appointment unless at the time of such acceptance such successor Trustee shall be qualified and eligible under this Article.

Section 6.12 Merger, Consolidation, Amalgamation or Succession to Trustee

Any corporation into Which the Trustee may be merged or with which it may be consolidated or amalgamated, or any corporation resulting from any merger, consolidation or amalgamation to which the Trustee shall be a party, or any corporation

succeeding to all or substantially all of the corporate trust business of the Trustee, shall be the successor of the Trustee hereunder, provided such corporation shall be otherwise qualified and eligible under this Article, without the execution or filing of any paper or instrument or any further act on the part of any of the parties hereto. In case any

Securities shall have been authenticated, but not delivered, by the Trustee then in office, any successor by merger, conversion or consolidation to such authenticating Trustee may adopt such authentication and deliver the Securities so authenticated with the same effect as though such successor Trustee had itself authenticated such Securities.

Section 6.13 Appointment of Authenticating Agent

The Trustee may appoint an Authenticating Agent or Agents with respect to one or more series of the Securities which shall be authorized to act on behalf of, and subject

to the direction of, the Trustee to authenticate the Securities of such series, including Securities issued upon original issue, exchange, registration of transfer or partial redemption thereof or pursuant to Section 3.06; and Securities so authenticated shall be entitled to the benefits of this Indenture and shall be valid and obligatory for all purposes as though authenticated by the Trustee. ·Wherever reference is made in this Indenture to the authentication and delivery of the Securities of any series by the Trustee or to the Trustee's certificate of authentication, such reference shall be deemed to include authentication and delivery on behalf of the Trustee by any Authenticating Agent for such series and a certificate of authentication executed on behalf of the Trustee by such· Authenticating Agent. Each Authenticating Agent shall be acceptable to the Corporation and shall at all times be either (i) a corporation organized and doing business under the laws of the United States of America, any State thereof or the District of Columbia, authorized under such laws to act as Authenticating Agent, having a combined capital and surplus of not less than $50;000,000 and subject to supervision or examination by Federal or State authority or (ii) a corporation or other Person organized and doing business under the laws of Canada or any province thereof or England or Luxembourg, authorized under such laws to act as Authenticating Agent, having a combined capital · and surplus of not less than $50,000,000 and subject to supervision or examination by governmental authority of its jurisdiction of incorporation and organization. If such Authenticating Agent publishes reports of condition at least annually, pursuant to law or to the requirements of said supervising or examining authority, then for the purposes of this Section the combined capital and surplus of such Authenticating Agent shall be

deemed to be its combined capital and surplus as set forth in its most recent report of

condition so published. If at any time an Authenticating Agent shall cease to be eligible

in accordance with the provisions of this Section, such Authenticating Agent shall resign immediately in the manner and with the effect specified in this Section.

Any corporation into which an Authenticating Agent may be merged or converted or with which it may be consolidated or amalgamated, or any corporation resulting from any merger, conversion, consolidation or amalgamation to which such Authenticating Agent shall be a party, or any corporation succeeding to all or substantially all of the corporate agency or corporate trust business of any Authenticating Agent, shall be the successor to such Authenticating Agent with respect to all series of the Securities for which it served as Authenticating Agent, provided such corporation shall be otherwise eligible under this Section, without the execution or filing of any paper or any further act on the part of the Trustee or such Authenticating Agent.

appointment of a successor Trustee. Any successor Authenticating Agent, upon

acceptance of its appointment hereunder, shall become vested with all the rights, powers .. and duties of its predecessor hereunder, with like effect as though originally named as an Authenticating Agent. No successor Authenticating Agent shall be appointed unless eligible under the provisions of this Section.

The Corporation agrees to pay to each Authenticating Agent from time to time reasonable compensation for its services hereunder.

Section 6.14 Notice of Defaults

Within 30 days after the occurrence of any default hereunder with respect to Securities of any series, the Trustee shall transmit by mail to all Holders Securities of such series, as their mimes and addresses appear in the Security Register, notice of such default hereunder known to the Trustee, unless such default shall have been cured or waived; provided , however , that, except in the case of a default in the payment of the principal of (or premium, if any) or interest on any Security of such series or in payment of any sinking or purchase fund installment or analogous obligation with respect to Securities of such series, the Trustee shall be protected in withholding such notice if and so long as the board of directors, the executive committee or a trust committee of directors and/or Responsible Officers of the Trustee in good faith determine that the withholding of such notice is in the interests of the Holders Securities of such series; and provided , further , that in the case of any default of the character specified in Section 5.01(3) with respect to Securities of such series no such notice to Holders of Securities of such series shall be given until at least 60 days after the occurrence thereof. For the purpose of this Section, the term "default", with respect to Securities of any series; means any event which is, or after notice or lapse of time or both would become, an Event of Default with respect to Securities of such series.

ARTICLE SEVEN

CONSOLIDATION, MERGER, AMALGAMATION, SALE OR TRANSFER


Section 7.01	Consolidation, Merger, Amalgamation or Succession to Business

The Corporation shall not enter into any transaction (whether by way of consolidation, amalgamation, merger, transfer, sale or otherwise) whereby all or substantially all of its assets would become the property of any other Person (herein called a "Successor") unless:

(1) prior to or contemporaneously with the consummation of such transaction the Corporation and/or the Successor shall have executed such instruments, which may include a supplemental indenture, and done such things, if any, as are necessary or advisable to establish that upon the consummation of such transaction:


(i)	the Successor will have assumed all the covenants and obligations of the Corporation under this Indenture in respect of the Securities of every series; and


(ii)	the Securities of every series will be valid and binding obligations of the Successor entitling the Holders thereof, as against the Successor to all the rights of Holders of Securities under this Indenture;

it being understood, for greater certainty, that no supplemental indenture shall be required if the transaction in question is an amalgamation of the Corporation with any one or more corporations, which amalgamation is governed by the statutes of Canada or any province thereof and upon the effectiveness of such amalgamation, the Successor shall continue to be liable for all of the covenants and obligations of the Corporation under this Indenture in respect of the Securities of every series by operation of law;

(2) the Successor is a corporation, company, partnership, or trust organized and validly existing under the laws of Canada or any province thereof or of the United States, any state thereof or the District of Columbia;


(3)	the Corporation has delivered to the Trustee an Officers' Certificate and

an Opinion of Counsel each stating that such transaction and such supplemental indenture comply with this Article and all conditions precedent herein provided for relating to such transaction have been complied with; and

(4) immediately before and after giving effect to such transaction, no Event of Default, and no event which, after notice or lapse of time or both, would become an

Event of Default, shall have occurred and be continuing.

Section 7.02 Successor to Possess Powers of the Corporation

Whenever the conditions of Section 7.01 hereof shall have been duly observed and performed the Successor shall possess and from time to time may exercise each and every right and power of the Corporation under this Indenture in the name of the Corporation or otherwise and any act or proceeding by any provision hereof required to be done or performed by any Director or Officer of the Corporation may be done and performed with like force and effect by the like directors or officers of the Successor.

ARTICLE EIGHT SUPPLEMENTAL INDENTURES

Section 8.01 Supplemental Indentures Without Consent of Holders

Without the consent of the Holders of any series, the Corporation, when

authorized by a Directors' Resolution, and the Trustee, at any time and from time to time, may enter into one or more indentures supplemental hereto, in form satisfactory to the .. Trustee, for any one or more of the following purposes:

(1) to evidence the succession of another Person, or successive successions of other Persons, to the Corporation and the assumption by any such successor of the covenants and obligations of the Corporation herein and in the Securities and the Coupons appertaining thereto;

(2) to add to the covenants of the Corporation for the benefit of the Holders of all or any series of the Securities (and if such covenants are to be for the benefit of less than all series of the Securities, stating that such covenants are expressly being included solely for the benefit of such series) or to surrender any right or power herein conferred upon the Corporation;

(3) to add any additional Events of Default with respect to all or any series of the Securities for the .benefit of the Holders of all or any series of Securities;

(4) to add to or change any of the provisions of this Indenture to such extent as shall be necessary to permit or facilitate the issuance of the Securities in bearer form, registrable or not registrable as to principal, and with or without interest coupons or to permit or facilitate the issuance of Securities in uncertificated form; provided that any such action shall not adversely affect the interests of the Holders of any series or any related Coupons in any material respect;

(5) to add to, change or eliminate any provision of this Indenture in respect of one or more series of Securities, provided that any such addition, change or elimination shall become effective only when there is no Security Outstanding of any series created prior to the execution of such supplemental indenture which is entitled to the benefit of such provision;

(6) to secure the Securities and the Coupons appertaining thereto pursuant to the requirements of Section 9.01 or otherwise;

(7) to establish the form or forms and the terms of the Securities of any series as permitted by Sections 2.01 and 3.01;

facilitate the administration of the trusts hereunder by more than one Trustee, pursuant to the requirements of Section 6.11; or

(9) to cure any ambiguity, to correct or supplement any provision herein or in any supplemental indenture which may be defective or inconsistent with any other provision herein or in any supplemental indenture, or to make any other provisions as may be necessary or desirable, including the making of any modifications in the form of the Securities and the Coupons appertaining thereto, provided that such action shall be not prejudicial, in any material respect, to the interests of the Holders· of the Securities of any series or the Coupons appertaining thereto.

Section 8.02 Supplemental Indentures With Consent of Holders

Corporation and the Trustee, the Corporation, when authorized by a Directors'· Resolution, and the Trustee, at any time or from time to time, shall enter into an indenture or indentures supplemental hereto for the purpose of adding any provisions to or

changing in any manner or eliminating any of the provisions of this Indenture or any supplemental indenture or of modifying in any manner the rights of the Holders of the Securities of each such series or of the Coupons appertaining thereto; provided, however, that no such supplemental indenture shall, without the consent of all Holders of all Outstanding Securities affected thereby,

(1) change the Stated Maturity of the principal of, or any installment or principal of or interest on, such Security,

(2) reduce the principal amount thereof or the rate of interest thereon or any premium payable upon the redemption thereof,

(3) reduce the amount of the principal of an Original Issue Discount Security that would be due and payable upon a declaration of acceleration of the Maturity thereof pursuant to Section 5.02,

(4) change any Place of Payment where, or the coin or currency in which, such Security or any premium or interest thereon is payable,

(5) impair the right to institute suit for the enforcement of any such payment on or after the Stated Maturity thereof (or, in the case of redemption, on or after the Redemption Date),

with certain provisions of this Indenture or certain Events of Default hereunder and their consequences) provided for in this Indenture, or

(7) modify any of the provisions of this. Section or Section 5.14, except to increase any such percentage or adversely affect any right to convert or exchange any Security or to provide that certain other provisions of this Indenture cannot be modified or waived without the consent of the Holder of each Outstanding Security affected thereby, provided, however, that this clause shall not be deemed to require the consent of any Holder with respect to changes in the references to "the Trustee", in accordance with

the requirements of Sections 6.11 and 8.01(8) and concomitant changes in this Section, or the deletion of this proviso.

A supplemental indenture which changes or eliminates any covenant or other provision of this Indenture which has expressly been included solely for the benefit of one or more (but less than all) series of the Securities, or which modifies the rights of the Holders of such series or of the Coupons appertaining thereto with respect to such covenant or other provision, shall be deemed not to affect the rights under this Indenture of the Holders of the Securities of any other series or of the Coupons appertaining thereto. ·

It shall not be necessary for any Act of Holders under this Section to approve the particular form of any proposed supplemental indenture, but it shall be sufficient if such Act shall .approve the substance thereof.

Section 8.03 Execution of Supplemental Indentures

In executing, or accepting the additional trusts created by, any supplemental indenture permitted by this Article or the modifications thereby of the trusts created by this Indenture, the Trustee shall be provided with, and (subject to Section 6.01) shall be fully protected in relying upon, an Officers' Certificate and an Opinion of Counsel stating that the execution of such supplemental indenture is authorized or permitted by this Indenture. The Trustee may, but shall not be obligated to, enter into any such supplemental indenture which affects the Trustee's own rights, duties or immunities

under this Indenture or otherwise.

Section 8.04 Effect of Supplemental Indentures

Upon the execution of any supplemental indenture under this Article, this Indenture shall be modified in accordance therewith, and such supplemental indenture shall form a part of this Indenture for all purposes; and every Holder of the Securities theretofore or thereafter authenticated and delivered hereunder shall be bound thereby.

Section 8.05 Reference in Securities to Supplemental Indentures

The Securities of any series authenticated and delivered after the execution of any supplemental indenture pursuant to this Article may, and shall if required by the Trustee, bear a notation in form approved by the Trustee as to any matter provided for in such supplemental indenture. If the Corporation shall so determine, new Securities of any series so modified as to conform, in the opinion of the Trustee and the Corporation, to any such supplemental indenture may be prepared and executed by the Corporation and

authenticated and delivered by the Trustee in exchange for Outstanding Securities of such series.

Section 8.06 Conformity with Trust Indenture Act.

Every supplemental indenture executed pursuant to this Article shall conform to the requirements of the Trust Indenture Act as then in effect.

Section 8.07 Notice of Supplemental Indentures.

Promptly after the execution by the Corporation and the Trustee of any supplemental indenture pursuant to the provisions of Section 8.02, the Corporation shall give notice thereof to the Holders of each Outstanding Security affected, in the manner provided for in Section 1.07, setting forth in general terms the substance of such supplemental indenture.

ARTICLE NINE

COVENANTS OF THE CORPORATION

Section 9.01 General Covenants

The Corporation hereby covenants and agrees that, subject to all the provisions of this Indenture:

( 1) it will duly and punctually pay or cause to be paid to the Holder of every.

Security of each series the principal thereof, premium thereon, if any, and interest

accrued thereon and, in case of default, interest on the amount in default, on the dates and at the places, in the money and in the manner mentioned herein and in such Securities;

(2) in order to prevent any accumulation after the Stated Maturity of interest, it will not, directly or indirectly, extend or assent to the extension of time for payment of any interest upon any Security, and will not, directly or indirectly, be a party to or approve any such arrangement by purchasing or funding such interest or in any other manner; and

(3) so long as any of the Securities remain outstanding, it will not, and will not permit any Subsidiary to, create, assume or otherwise have outstanding any Security Interest, except for Permitted Encumbrances, on or over any present or future Railway Properties of the Corporation or any of its Subsidiaries or on any shares in the capital stock of any Railroad Subsidiary securing any Indebtedness of any Person without also at the same time or prior thereto securing equally and ratably with such other Indebtedness all of the Securities then Outstanding under the Indenture.

Section 9.02 Certificates of Compliance

The Corporation shall deliver to the Trustee annually within 120 days (or such longer period as the Trustee in its discretion may consent to) after the end of each fiscal year, and at any other reasonable time if the Trustee so requires, an Officers' Certificate stating that the Corporation has complied with all covenants, conditions or other requirements contained in this Indenture, non-compliance with which would, with the giving of notice or the lapse of time, or both, constitute an Event of Default hereunder or, if the Corporation has not complied with all such requirements, giving particulars as to each non-compliance.

Section 9.03 Maintenance of Office or Agency

The Corporation will maintain in each Place of Payment for the Securities of any series an office or agency where Securities of that series may be present d or surrendered

for payment, where Securities of that series may be surrendered for registration of transfer or exchange and where notices and demands to or upon the Corporation in respect of the Securities of that series and this Indenture may be served. The Corporation will give prompt written notice to the Trustee of the location, and any change in the

location, of such office or agency. If at any time the Corporation shall fail to maintain any

such required office or agency or shall fail to furnish the Trustee with the address thereof, such presentations, surrenders, notices and demands may be made or served at the Corporate Trust Office of the Trustee, and the Corporation hereby appoints the Trustee as its agent to receive all such presentations, surrenders, notices and demands.

The Corporation may also from time to time designate one or more other offices or agencies where the Securities of one or more series may be presented or surrendered for any or all such purposes and may from time to time rescind such designations; provided, however, that no such designation or rescission shall in any manner relieve the Corporation of its obligation to maintain an office or agency in each Place of Payment for Securities of any series for such purposes. The Corporation will give prompt written

notice to the Trustee of any such designation or rescission and of any change in the location of any such other office or agency.

Section 9.04 Money for Securities Payments to Be Held In Trust

If the Corporation shall at any time act as its own Paying Agent with respect to any series of Securities, it will, on or before each due date of the principal of or any premium or interest on any of the Securities of that series, segregate and hold in trust for the benefit of the Persons entitled thereto a sum sufficient to pay the principal and any premium and interest so becoming due until such sums shall be paid to such Persons or otherwise disposed of as herein provided and will promptly notify the Trustee of its actions or failure so to act.

Whenever the Corporation shall have one or more Paying Agents for any series of Securities, it will, prior to each due date of the principal of or any premium or interest on any Securities of that series, deposit with a Paying Agent a sum sufficient to pay such amount, and (unless such Paying Agent is the Trustee) the Corporation will promptly notify the Trustee of its action or failure so to act.

The Corporation will cause each Paying Agent for the Securities of any series other than the Trustee to execute and deliver to the Trustee an instrument in which such Paying Agent shall agree with the Trustee, subject to the provisions of this Section, that such Paying Agent will, during the continuance of any default by the Corporation (or any other obligor upon the Securities of that series) in the making of any payment in respect of the Securities of that series, upon the written request of the Trustee, forthwith pay to the Trustee all sums held in trust by such Paying Agent for payment in respect of the Securities of that series.

The Corporation may at any time, for the purpose of obtaining the satisfaction and discharge of this Indenture or for any other purpose, pay, or by Corporation Order direct any Paying Agent to pay, to the Trustee all sums held in trust by the Corporation or such Paying Agent, such sums to be held by the Trustee upon the same trusts as those upon which such sums were held by the Corporation or such Paying Agent; and, upon such payment by any Paying Agent to the Trustee, such Paying Agent shall be released from

all further liability with respect to such money.

Any money deposited with the Trustee or any Paying Agent, or then held by the Corporation, in trust for the payment of the principal of or any premium or interest on any Security of any series and remaining unclaimed for two years after such principal, premium or interest has become due and payable shall be paid to the Corporation on Corporation Request, or (if then held by the Corporation) shall be discharged from such trust; and the Holder of such Security shall thereafter, as an unsecured general creditor, look only to the Corporation for payment of such principal, premium or interest on such Security and all liability of the Trustee or such Paying Agent with respect to such trust money, and all liability of the Corporation as trustee thereof,.shall thereupon cease; provided, however, that the Trustee or such Paying Agent, before being required to make any such repayment, may at the expense of the Corporation cause to be published once, in an Authorized Newspaper in Canada, if required, and, if required, The City of New York and, if required, the United Kingdom and, if required, Luxembourg, notice that such money remains unclaimed and that, after a date specified therein, which shall be not less than 30 days from the date of such publication, any unclaimed balance of such money then remaining will be repaid to the Corporation.

Section 9.05 Maintenance of Corporate Existence

Subject to Article Seven, the Corporation will do or cause to be done all things necessary to preserve and keep in full force and effect its corporate existence in good standing and will conduct its business in a prudent manner.

Section 9.06 Payment of Taxes and Other Claims

The Corporation will pay or discharge or cause to be paid or discharged, before the same shall become delinquent, (i) all material taxes, assessments and governmental charges levied or imposed upon the Corporation or upon the income, profits or assets of the Corporation, and (ii) all lawful claims against the Corporation for labor, materials and supplies which, if unpaid, might by law become a lien upon the assets of the Corporation;

provided, however, that the Corporation shall not be required to pay or discharge or cause to be paid or discharged any such tax, assessment, charge or claim whose amount, applicability or validity is being contested in good faith by appropriate proceedings.

Section 9.07 Additional Amounts

net amount received by each Holder after such withholding or deduction (and after deducting any Canadian Taxes on such Additional Amounts) will not be less than the amount the Holder would have received if such Canadian Taxes had not been withheld or deducted. However, no Additional Amounts will be payable with respect to a payment made to a Holder (such Holder, an "Excluded Holder") in respect of the beneficial owner thereof:


(i)	with which the Corporation does not deal at arm's length (within the meaning of the Income Tax Act (Canada)) at the time of making such payment;


(ii)	which is subject to such Canadian Taxes by reason of the Holder being a resident, domicile or national of, or engaged in business or maintaining a permanent establishment or other physical presence in or otherwise having some connection with Canada or any province or territory thereof otherwise than by the mere holding of Securities or the receipt of

payments thereunder; or


(iii)	which is subject to such Canadian Taxes by reason of the Holder's failure to comply with any certification, identification, information, documentation or other reporting requirements if compliance is required by law, regulation, administrative practice or an applicable treaty as a precondition to exemption from, or a reduction in the rate of deduction or withholding of, such Canadian Taxes.

The Corporation will also:


(i)	make such withholding or deduction; and


(ii)	remit the full amount deducted or withheld to the relevant authority in accordance with applicable law. ·

The Corporation will furnish to the Holders of the Securities, within 30 days after the date the payment of any Canadian Taxes is due pursuant to applicable law, certified copies of tax receipts or other documents evidencing such payment by the Corporation.

The Corporation will indemnify and hold harmless each Holder (other than an Excluded Holder) and upon written request reimburse each such Holder for the amount of:


(i)	any Canadian Taxes so levied or imposed and paid by such Holder as a result of payments made under or with respect to the Securities;


(ii)	any liability (including penalties, interest and expenses) arising therefrom or with respect thereto; and


(iii)	any Canadian Taxes imposed with respect to any reimbursement under clause (i) or (ii) above, but excluding any such Canadian Taxes on such Holder's net income.

Wherever in this Indenture there is mentioned, in any context, the payment of principal (and premium, if any), interest or any other amount payable under or with respect to a Security, such mention shall be deemed to include mention of the payment of Additional Amounts to the extent that, in such context, Additional Amounts are, were or would be payable in respect thereof.

In any event, no Additional Amounts or indemnity will be payable in excess of the Additional Amounts or indemnity which would be required if the Holder was a resident of the United States for purposes of the Canada-U.S. Tax Convention (1980), as amended.

Section 9.08 Original Issue Discount

The Corporation shall provide to the Trustee on a timely basis such information as the Trustee requires to enable the Trustee to prepare and file any form 'required to be submitted by the Corporation with the Internal Revenue Service and the Holders of the Securities relating to original issue discount, including, without limitation, Form 1099- OID or any successor form. ·

ARTICLE TEN REDEMPTION OF SECURITIES

Section 10.01 Applicability of Article

The Securities of any series which are redeemable before their Stated Maturity shall .be redeemable in accordance with their terms and (except as otherwise established in accordance with Section 3.01 for the Securities of a particular series) in accordance with this Article.

Section 10.02 Election to Redeem; Notice to Trustee

redemption of Securities prior to the expiration of any restriction on such redemption provided in the terms of such Securities or elsewhere in this Indenture, the Corporation shall furnish the Trustee with an Officers' Certificate evidencing compliance with such restriction .

Section 10.03 Selection by Trustee of Securities to be Redeemed

If less than all the Securities of any series are to be redeemed (unless all of the Securities of such series and of a specified tenor are to be redeemed), the particular Securities to be redeemed shall be selected, not more than 60 days prior to the Redemption Date, by the Trustee from among the Outstanding Securities of such series (and, if applicable, of the specified tenor) not previously called for redemption, by such method as the Trustee shall deem fair and appropriate and which may provide for the selection for redemption of portions (equal to the minimum authorized denomination for the Securities of such series or any integral multiple thereof) of the principal amount of the Securities of such series of -a denomination larger than the minimum authorized denomination for the Securities of such series.

The Trustee shall promptly notify the Corporation in writing of the Securities selected for redemption and, in the case of any Securities selected for partial redemption, the principal amount thereof to be redeemed.

For all purposes of this Indenture, unless the context otherwise requires, all provisions relating to the redemption of Securities shall relate, in the case of any Securities redeemed or to be redeemed only in part, to the portion of the principal amount of such Securities which has been or is to be redeemed .

Section 10.04 Notice of Redemption

each case once in each of two successive calendar weeks, the first publication to be not less than 30 days and not more than 60 days prior to the Redemption Date. Any notice which is mailed in the manner herein provided shall be conclusively presumed to have been duly given, whether or not the Holder receives such notice. Failure to give notice by mail, or any defect in the notice to the Holder of any Security of any series designated for redemption in whole or in part, shall not affect the validity of the proceedings for the redemption of any other Security of such series.

All notices of redemption shall state:

(i) the Redemption Date;

(ii) the Redemption Price;

(iii) the accrued and unpaid interest;

(iv) the CUSIP or similar number of the Securities to be redeemed;

(v) if less than all of the Outstanding Securities of any series are to be redeemed, the identification (and, in the case of partial redemption, the portions of the principal amounts) of the particular Securities to be redeemed;

(vi) that on the Redemption Date the Redemption Price will become due and payable upon each such Security to be redeemed and that interest thereon will cease to accrue on and after such date;

(vii) the place or places where such Securities are to be surrendered for payment of the Redemption Price;

(viii) that the redemption is for a sinking or analogous fund, if such is the case;

(ix) in case any Security is to be redeemed in part only, the notice which relates to such Security shall state that on and after the Redemption Date, upon surrender of such Security, the holder will receive, without charge, a new Security or Securities of authorized denominations for the principal amount thereof remaining unredeemed;

(x) that, unless otherwise specified in such notice, Unregistered Securities of any series, if any, surrendered for redemption must be accompanied by all Coupons

maturing subsequent to the Redemption Date or the amount of any such missing Coupon or Coupons will be deducted from the Redemption Price unless security or indemnity satisfactory to the Corporation, the Trustee and any Paying Agent is furnished; and

(xi) if Unregistered Securities of any series are to be redeemed and any

Registered Securities of such series are not to be redeemed, and if such Unregistered Securities may be exchanged for Registered Securities not subject to redemption on such Redemption Date pursuant to Section 3.05 or otherwise, the last date, as determined by the Corporation, on which such exchanges may be made.

Each notice of redemption of Securities to be redeemed at the election of the Corporation shall be given by the Corporation or, at the Corporation's request, such request to be delivered at least 5 Business Days prior to the date of the publication of the notice (or such shorter period as the Trustee may agree to), by the Trustee in the name and at the expense of the Corporation.

Section 10.05 Deposit of Redemption Price

Prior to I 0 a.m. on any Redemption Date, the Corporation shall deposit with the Trustee or with a Paying Agent (or, if the Corporation shall be acting as its own Paying Agent, segregate and hold in trust as provided in Section 9.05) an amount of money sufficient to pay the Redemption Price of, and (except if the Redemption Date shall be an Interest Payment Date) accrued interest on, all the Securities which are to be redeemed on the Redemption Date.

Section 10.06 Securities Payable on Redemption Date

Notice of redemption having been given as aforesaid, the Securities so to be redeemed shall, on the Redemption Date, become due and payable at the Redemption Price therein specified in the Currency in which the Securities of such series are payable (together with accrued interest, if any, to the Redemption Date), and from and after such date (unless the Corporation shall default in the payment of the Redemption Price and accrued interest) such Securities shall cease to bear interest, and the unmatured Coupons, if any, appertaining thereto shall be void. Upon surrender of any such Security for redemption in accordance with such notice, together with all Coupons, if any, appertaining thereto maturing after the Redemption Date, such Security shall be paid by the Corporation at the Redemption Price, together with accrued interest to the Redemption Date; provided, however, that, unless otherwise specified as contemplated by Section 3.01 , installments of interest whose Stated Maturity is on or prior to the Redemption Date shall be payable, in the case of Unregistered Securitieswith Coupons attached thereto, to the Holders of the Coupons for such interest upon the surrender thereof or, in the case of Registered Securities, to the Holders of such Registered Securities, registered as such at the close of business on the relevant Regular or Special Record Dates according to their terms and the provisions of Section 307.

such Holder shall be entitled to receive the amount so deducted; provided , however , that interest represented by Coupons shall be payable only at an

office or agency located outside the United States (except as otherwise provided in Section 9.04) and, unless otherwise specified as contemplated by Section 3.01, only upon presentation and surrender of those Coupons.

If any Security called for redemption shall not be so paid upon surrender thereof for redemption, the principal (and premium, if any) shall, until paid, bear interest from the Redemption Date at the same rate specified in such Security as the rate of interest (or Yield to Maturity, in the case of Original Issue Discount Securities).

Section 10.07 Securities Redeemed In Part

Corporation and the Trustee duly executed by, the Holder thereof or other appropriate person), and the Corporation shall execute, and the Trustee shall authenticate and deliver to the Holder of such Security, without service charge, a new Security or Securities of the same series and of like tenor, of any authorized denomination as requested by such Holder, in aggregate principal amount equal to and in exchange for the unredeemed portion of the principal of the Security so surrendered.


Section 10.08	Redemption at the Option of the Corporation for Taxation Reasons

The Securities of a series will be subject to redemption in whole, but not in part, at the option of the Corporation, at any time, on not less than 30 nor more than 60 days. prior written notice, at a redemption price equal to I 00% of the principal amount thereof, together with accrued interest thereon to the redemption date, in the event there is more than an insubstantial risk that the Corporation has become or would become obligated to pay, on the next date on which any amount would be payable with respect to any such Securities, any Additional Amounts as a result of an amendment to or change in the laws (including any regulations promulgated thereunder) of Canada (or any political subdivision or taxing authority thereof or therein), or any amendment to or change in any official position regarding the application or interpretation of such laws or regulations, which change is announced or becomes effective on or after the date of the applicable prospectus by which such Securities are offered and sold. No redemption shall be made pursuant to this paragraph unless:


(i)	The Corporation shall have received an opinion of independent Counsel that there is more than an insubstantial risk that Additional Amounts will be payable on the next payment date in respect of such series of Securities;


(ii)	The Corporation shall have delivered to the Trustee an Officers' Certificate stating that the Corporation is entitled to redeem such Securities pursuant to the terms of such series of Securities; and


(iii)	At the time such notice of redemption is given, such obligation to pay such Additional Amounts remains in effect.

ARTICLE ELEVEN

SINKING FUNDS

Section 11.01 Applicability of Article

The provisions of this Article shall be applicable to any sinking fund for the retirement of Securities of any series, except as otherwise established in accordance with Section 3.01 for the Securities of such series.

The minimum amount of any sinking fund payment provided for by the terms of the Securities of any series is in this Section referred to as a "mandatory sinking fund payment", and any payment in excess of such minimum amount provided for by the terms of the Securities of any series is in this Section referred to as an ''optional sinking. fund payment". The date on which any sinking fund payment is to be made is in this Section referred to as the "sinking fund. payment date". If so provided by the terms of the Securities of any series, the cash amount of any sinking fund payment may be subject to reduction as provided in Section 11.02. Each sinking fund payment in respect of the Securities of any series shall be applied to the redemption of the Securities of such series as provided for by the terms of the Securities of such series.

Section 11.02 Satisfaction of Sinking Fund Payments with Securities

Subject to Section 11.03, in lieu of making all or any part of any mandatory sinking fund payment with respect to the Securities of any series in cash, the Corporation. may at its option (i) deliver to the Trustee Securities of such series theretofore purchased or otherwise acquired (except upon redemption pursuant to any mandatory sinking fund payment) by the Corporation or receive credit for Securities of such series (not previously so credited) theretofore purchased or otherwise acquired (except as aforesaid) by the Corporation and delivered to the Trustee for cancellation pursuant to Section 3.09; (ii) receive credit for any optional sinking fund payments (not previously so credited) made pursuant to this Section; or (iii) receive credit for any Securities of such series (not previously so credited) redeemed by the Corporation through any optional redemption provision contained in the terms of such series. Such Securities shall be received and credited for such purpose by the Trustee at the Redemption Price specified in such Securities for redemption through operation of the sinking fund therefor and the amount of such mandatory sinking fund payment shall be reduced accordingly.

Section 11.03 Redemption of Securities for Sinking Fund

Not less than 60 days prior to each sinking fund payment date for the Securities of any series, the Corporation will deliver to the Trustee an Officers' Certificate (which

need not contain the statements required by Section 1.02) (i) specifying the portion of the mandatory sinking fund payment due on such sinking fund payment date satisfied by the payment of cash and the portion to be satisfied by credit of Securities of such series pursuant to Section 11.02, (ii) stating that none of the Securities of such series to be so credited has theretofore been so credited, and (iii) stating whether or not the Corporation intends to exercise its right to make an optional sinking fund payment on such date with

Securities, if any, shall not constitute a default hereunder, but shall constitute, on and as

of such 60th day, the irrevocable election by the Corporation that (i) the mandatory

sinking fund payment for the Securities of such series due on the next succeeding sinking fund payment date shall be paid entirely in cash and (ii) the Corporation will make no optional sinking fund payment with respect to the Securities of such series on such date. Not more than 60 days prior to each sinking fund payment date with respect to the Securities of any series, the Trustee shall select the Securities of such series to be redeemed upon such sinking fund payment date in the manner specified in Section 10.03 (the Trustee's decision as to such selection for redemption being final and binding on all parties) and cause notice of the redemption thereof to be given in the name and at the. expense of the Corporation in the manner provided in Section 10.04. Such notice of redemption having been duly given, the redemption of the Securities of such series to be redeemed shall be made upon the terms and in the manner stated in Sections 10.05, 10.06 and 10.07.

ARTICLE TWELVE DEFEASANCE AND COVENANT DEFEASANCE


Section 12.01	Corporation's Option to Effect Defeasance or Covenant Defeasance

Except as otherwise specified as contemplated by Section 3.01 for Securities of any series, the provisions of this Article Twelve shall be applicable to the Securities of each series; and the Corporation may at any time, at its option, by Directors' Resolution elect to have either Section 12.02 or Section 12.03 applied to the outstanding Securities of any series upon compliance with the applicable conditions set forth in this Article Twelve.

Section 12.02 Defeasance and Discharge

Upon the Corporation's exercise of the option provided in Section 12.01 to

defease the Securities of a particular series, the Corporation shall be discharged from its obligations with respect to the Securities of such series on the date that the applicable conditions set forth in Section 12.04 shall be satisfied. The term "defeasance" means that the Corporation shall be deemed to have paid and discharged the entire indebtedness represented by the Securities of such series and all Coupons appertaining thereto and to have satisfied all its other obligations under such Securities and Coupons and this Indenture insofar as such Securities and Coupons shall be concerned; and the Trustee, at the expense of the Corporation, shall execute proper instruments acknowledging the same; provided, however, that the following rights, obligations, powers, trusts, duties and

immunities shall survive until otherwise terminated or discharged hereunder: (i}the rights of the Holders of the Securities of such series and such Coupons to receive, solely from the trust fund provided for in Section 12.04, payments in respect of the principal of (and premium, if any) and interest on such Securities and Coupons when and as such

payments shall become due, (ii) the Corporation's obligations with respect to such Securities and Coupons under Sections 3.04, 3.05, 3.06 and 9.05, (iii) the rights, powers, trusts, duties and immunities of the Trustee hereunder, (iv) the rights and obligations under this Article Twelve and (v) the rights and obligations described in the second paragraph of Section 4.01. Subject to compliance with this Article Twelve, the Corporation may exercise its option with respect to defeasance under this Section 12.02 notwithstanding the prior exercise of its option with respect to covenant defeasance under Section 12.03 with respect to the Securities of such series.

Section 12.03 Covenant Defeasance

Upon the Corporation's exercise of the option provided in Section 12.01 to obtain a covenant defeasance with respect to the Securities of a particular series, the Corporation shall be released from its obligations under Sections 9.01(3), 9.04, 9.07 and 9.08 with respect to the Securities of such series on and after the date that the applicable conditions set forth in Section 12.04 shall be satisfied. The term "covenant defeasance" means that, with respect to the Securities of such series, the Corporation may omit to comply with

and shall have no liability in respect of any term, condition or limitation set forth in

Sections 9.01(3), 9.04, 9.07 and 9.08, whether directly or indirectly by reason of any reference elsewhere herein to such Section or Article or by reason of any reference in such Section or Article to any other provision herein or in any other document, and such omission to comply shall not constitute an Event of Default under Section 5.01 with respect to the Securities of such series; but the remaining provisions of this Indenture and the other terms of the Securities of such series shall be unaffected thereby.

Section 12.04 Conditions to Defeasance or Covenant Defeasailce

The following shall be the conditions to defeasance under Section 12.02 and covenant defeasance under Section 12.03 with respect to the Securities of a particular series:

(1) The Corporation shall have irrevocably deposited or caused to be deposited with the Trustee as a trust fund in trust for the purpose of making the payments described below, and dedicated solely to, the benefit of the Holders of the Securities of such series: (i) the Required Currency in an amount, or (ii) Government Obligations which, through scheduled payments of principal and interest in respect thereof in accordance with their terms, will assure, not later than one day before the due date of any payment, cash in an amount, or (iii) a combination thereof, sufficient, in the opinion of a nationally recognized firm of independent chartered accountants expressed in a written certification thereof delivered to the Trustee, to pay and discharge, and which shall be applied by the Trustee to pay and discharge: (A) the principal of (and premium, if any, on) and each installment of principal of (and premium, if any) and interest on the Securities of such series and the Coupons appertaining thereto on the Stated Maturity of such principal or installment of principal or interest; and (B) any mandatory sinking fund payments or analogous payments applicable to the Securities of such series on the dates on which such payments shall become due and payable in accordance with the terms of this Indenture and of such Securities. Before such a deposit, the Corporation may give to

the Trustee, in accordance with Section 10.02 hereof, a notice of its election to redeem all or any portion of such Outstanding Securities at a future date in accordance with the

terms of such Securities and Article Ten hereof, which notice shall be irrevocable.· Such irrevocable redemption notice, if given, shall be given effect in applying the foregoing.

(2) No Event of Default or event which, with notice or lapse of time or both, would become an Event of Default with respect to the Securities of such Series shall have occurred and be continuing on the date of such deposit or, insofar as Section 5.01(5) is concerned, at any time during the period ending on the 91st day after the date of such deposit (it being understood that this condition shall not be deemed satisfied until the expiration of such period).

(3) Such defeasance or covenant defeasance shall not result in a breach or violation of, or constitute a default under, this Indenture or any other agreement or instrument to which the Corporation is a party or by which it is bound.


(4)	Such defeasance or covenant defeasance shall not cause any Securities of

such series then listed on any national securities exchange registered under the U.S. Securities Exchange Act of 1934, as amended, to be delisted.

(5) In the case of a defeasance, the Corporation shall have delivered to the Trustee an Opinion of Counsel qualified to practice law in the United States stating that

and (B) (i) the Corporation has received from, or there has been published by, the Internal Revenue Service a ruling, or (ii) since the date of this Indenture, there has been a change in the applicable United States federal income tax laws or regulations in either case to the effect that, and based thereon such opinion shall confirm that, the Holders of the Securities of such series and the Coupons appertaining thereto will not recognize income, gain or loss for United States federal income tax purposes as a result of such defeasance and will be subject to United States federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such defeasance had not occurred.

(B) the Holders of Securities of such series then Outstanding and the Coupons appertaining thereto will not recognize income, gain or loss for United States federal income tax purposes as a result of such covenant defeasance and will be subject to United States federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such covenant defeasance had not occurred.

(7) The Corporation has delivered to the Trustee an Opinion of Counsel qualified to practice law in Canada or a ruling from the Canada Customs and Revenue Agency to the effect that the Holders of the Securities of such series then Outstanding

amounts, in the same manner and at the same times as would have been the case had such defeasance or covenant defeasance, as the case may be, not occurred (and for the

purposes of such opinion, such Canadian counsel shall assume that Holders of such series

then Outstanding include Holders who are not resident in Canada).


(8)	The Corporation shall have delivered to the Trustee an Officers'

Certificate and an Opinion of Counsel, each stating that all conditions precedent provided

for in this Section 12.04 relating to either the defeasance under Section 12.02 or the covenant defeasance under Section 12.03, as the case may be, have been satisfied.

(9) The Corporation is not an "insolvent person" within the meaning of the Bankruptcy and Insolvency Act (Canada) on the date of such deposit or at any time during the period ending on the 91st day after the date of such deposit (it being understood that this condition shall not be deemed satisfied until the expiration of such period).

(l0) The Corporation has delivered to the Trustee an Opinion of Counsel to the effect that such deposit shall not cause the Trustee or the trust so created to be subject to the Investment Company Act of 1940, as amended.


Section 12.05	Deposited Money and Government Obligations to be Held In Trust; Other Miscellaneous Provisions

Subject to the provisions of the last paragraph of Section 9.05, all money and Government Obligations (including the proceeds thereof) deposited with the Trustee (or other qualifying trustee (collectively, for the purposes of this Section 12.05, the "Trustee")) pursuant to Section 12.04 in respect of the Securities of a particular series then Outstanding and the Coupons appertaining thereto shall be held in trust and applied by the Trustee, in accordance with the provisions of such Securities and Coupons and this

Indenture, to the payment, either directly or through any Paying Agent as the Trustee may determine, to the Holders of such Securities and Coupons of all sums due and to become due thereon in respect of principal (and premium, if any) and interest, but such money need not be segregated from other funds except to the extent required by law.

The Corporation shall pay and indemnify the Trustee against any tax, fee or other charge imposed on or assessed against the Government Obligations deposited pursuant to Section 12.04 or the principal and interest received in respect thereof, other than any such tax, fee or other charge which by law is for the account of the Holders of the Securities and the Coupons for whose benefit such Government Obligations are held.

Anything in this Article Twelve to the contrary notwithstanding, the Trustee shall deliver or pay to the Corporation from time to time, upon Corporation Request, any money or Government Obligations held by it as provided in Section 12.04 which, in the opinion of a nationally recognized firm of independent chartered accountants expressed in a written certification thereof delivered to the Trustee, are in excess of the amount thereof which would then be required to be deposited for the purpose for which such money or Government Obligations were deposited.

Section 12.06 Reinstatement

If the Trustee or any Paying Agent is unable to apply any money in accordance with Section 12.05 by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, then the Corporation's obligations under this Indenture and such Securities shall be revived and

reinstated as though no deposit had occurred pursuant to Section 12.04 until such time as the Trustee or Paying Agent is permitted to apply all such money in accordance with Section 12.05; provided, however, that if the Corporation makes any payment of

principal of or interest on any such Security following the reinstatement of its obligations, the Corporation shall be subrogated to the rights of the Holders of such Securities to receive such payment from the money held by the Trustee or Paying Agent.


	ARTICLE THIRTEEN MEETINGS OF HOLDERS

Section 13.01 Purposes for which Meetings May be Called

A meeting of the Holders of the Securities of one or more series may be called at any time and from time to time pursuant to the provisions of this Article for one or more of the following purposes:

(1) to give any notice to the Corporation or to the Trustee, to give any directions to the Trustee, to consent to the waiving of any Event of Default hereunder and its consequences or to take any other action authorized to be taken by the Holders of the Securities of such series pursuant to any of the provisions of Article Five;

(2) to remove the Trustee and appoint a successor Trustee with respect to the Securities of such series pursuant to the provisions of Article Six;

(3) to consent to the execution of an indenture or indentures supplemental hereto pursuant to the provisions of Section 8.02; or

(4) to take any other action required or permitted to be taken by or on behalf of the Holders of any specified percentage of the aggregate principal amount of the Securities of such series under any other provision of this Indenture or under applicable law.

Section 13.02 Convening of Meetings

The Trustee or the Corporation may at any time and from time to time, and the Trustee shall on requisition in writing made by the Corporation or by the Holders of at least 25% of the aggregate principal amount of the Securities of one or more series then Outstanding, convene a meeting of the Holders of the Securities of such series to take any action specified in Section 13.01. In the event of the Trustee failing to convene a meeting within 21 days after the receipt of requisition made as aforesaid, the Corporation or the Holders of at least 25% of the aggregate principal amount of the Securities of such series, as the case may be, may convene such meeting. Every such meeting shall be held in The City of New York or at such other place as the Trustee may approve.

Section 13.03 Notice

Notice of every such meeting, setting forth the time and the place of such meeting and in general terms the action proposed to be taken at such meeting, shall be given by the Trustee or, in the event of the Trustee failing to convene a meeting specified in Section 13.02, by the Corporation or such Holders, not less than 21 and not more than 120 days prior to the date fixed for such meeting (i) if any Unregistered Securities of any affected series are then Outstanding, to the Holders thereof by publication of such notice at least twice in an Authorized Newspaper in such cities as the Trustee (or the Corporation or such Holders, if applicable) shall deem appropriate under the

circumstances, (ii) if any Unregistered Securities of any affected series are then Outstanding, to the Holders thereof who have filed their names and addresses with the Trustee by mailing such notice to such Holders at such addresses and (iii) if any Registered Securities of any affected series are then outstanding, by mailing such notice

to such Holders at their addresses as they shall appear on the Security Register. A copy of the notice shall be sent by prepaid registered mail to the Trustee unless the meeting has been called by it and to the Corporation unless the meeting has been called by it. A

Holder of Securities may waive notice of a meeting either before or after the meeting.

Section 13.04 Persons Entitled to Vote, to be Present and to Speak at Meetings

To be entitled to vote at any meeting of the Holders of the Securities of one or more series, a Person shall be (i) a Holder of one or more Securities of such series or

(ii) a Person appointed by an instrument ill' writing as proxy for a Holder of one or more Securities of such series. The only Persons who shall be entitled to be present or to speak at any such meeting shall be the Persons entitled to vote at such meeting and their Counsel, any representatives of the Trustee and its Counsel and any representatives of the Corporation and its Counsel.

Section 13.05 Quorum; Action

The Persons entitled to vote a majority in principal amount of the Outstanding Securities of a series shall constitute a quorum for a meeting of Holders of such series; provided , however , that, if any action is to be taken at such meeting with respect to a consent or waiver which this Indenture expressly provides may be given by the Holders of not less than a specified percentage in principal amount of the Outstanding Securities of a series, the Persons entitled to vote such specified percentage in principal amount of the Outstanding Securities of such series shall constitute a quorum. In the absence of a quorum within 30 minutes of the time appointed for any such meeting, the meeting shall, if convened at the request of Holders of such series, be dissolved. In any other case the meeting may be adjourned for a period of not less than 10 days as determined by the chairman of the meeting prior to the adjournment of such meeting. In the absence of a quorum at any such adjourned meeting, such adjourned meeting may be further

adjourned for a period of not less than 10 days as determined by the chairman of the meeting prior to the adjournment of such adjourned meeting. Notice of the reconvening of any adjourned meeting shall be given as provided in Section 13.03, except that such notice need be given only once not less than five days prior to the date on which the meeting is scheduled to be reconvened. Notice of the reconvening of any adjourned meeting shall state expressly the percentage, as provided above, of the principal amount of the Outstanding Securities of such series which shall constitute a quorum.

Subject to the foregoing, at the reconvening of any meeting adjourned for lack of a quorum the Persons entitled to vote 25% in principal amount of the Outstanding

Securities at the time shall constitute a quorum for the taking of any action set forth in the notice of the original meeting.

Except as limited by the proviso to Section 8.02, any r esolution presented to a meeting or adjourned meeting duly reconvened at which a quorum is present as aforesaid may be adopted by the affirmative vote of the Holders of not less than a majority in principal amount of the Outstanding Securities of such series; provided, however, that, except as limited by the proviso to Section 8.02, any resolution with respect to any request, demand, authorization, direction, notice, consent, waiver or other action which this Indenture expressly provides may be made, given or taken by the Holders of a specified percentage, which is less than a majority, in principal amount of the Outstanding Securities of a series may be adopted at a meeting or an adjourned meeting duly reconvened and at which a quorum is present as aforesaid by the affirmative vote of the Holders of not less than such specified percentage in principal amount of the Outstanding Securities of such series.

Any resolution passed or decision taken at any meeting of Holders of any series duly held in accordance with this Section shall be binding on all the Holders of Securities of such series and the related Coupons, whether or not present or represented at the meeting.

Notwithstanding the foregoing provisions of this Section 13.05, if any action is to be taken at a meeting of Holders of any series with respect to any request, demand, authorization, direction, notice, consent, waiver or other action that this Indenture expressly provides may be made, given or taken by the Holders of a specified percentage in principal amount of all Outstanding Securities affected thereby, or of the Holders of such series and one or more additional series:


(i)	there shall be no minimum quorum requirement for such meeting; and


(ii)	the principal amount of the Outstanding Securities of such series that vote in favor of such request, demand, authorization, direction, notice, consent, waiver or other action shall be taken into account in determining whether such request, demand, authorization, direction, notice, consent, waiver or other action has been made, given or taken under this Indenture.


Section 13.06	Determination of Voting Rights; Conduct and Ad journment of Meetings

(1) Notwithstanding any other provision of this Indenture, the Corporation, with the approval of the Trustee, in case it convenes the meeting or the Trustee in any other case may make such reasonable regulations as it may deem advisable for any meeting of the Holders of the Securities of one or more series in regard to (i) the proof of the holding of the Securities of such series, (ii) the appointment of proxies, (iii) the appointment and duties of inspectors of votes, (iv) the submission and examination of proxies and other evidence of the right to vote and (v) such other matters concerning the conduct of such meeting as it shall deem necessary or appropriate. Except as otherwise permitted or required by any such regulation, the holding of the Securities of such series and the appointment of any proxy shall be proved in the manner specified in

Section 1.04.

(2) The Trustee shall, by an instrument in writing, appoint a chairman and secretary of such meeting, unless the meeting shall have been convened by the Corporation or by Holders as provided in Section 13.02, in which case the Corporation or such Holders, as the case may be, shall in like manner appoint a chairman and secretary.

(3) At any such meeting, each Holder of the Securities of such series or the proxy therefor shall be entitled to one vote for each $1,000 principal amount of the Securities of such series held or represented by such Holder or proxy; provided, however, that no vote shall be cast or counted at any such meeting in respect of any Security of such series challenged as not Outstanding and ruled by the permanent chairman of such

meeting to be not Outstanding. No chairman of such meeting shall have any right to vote thereat, except as a Holder of the Securities of such series or as a proxy therefor.


(4)	At any such meeting duly called pursuant to the provisions of

Section 13.02, the presence of Persons holding or representing Securities of the affected series in an aggregate principal amount sufficient to take action on the business for the transaction of which such meeting was called shall constitute a quorum; but if less than a quorum shall be present, such meeting may be adjourned from time to time by the Holders of a majority in aggregate principal amount of the Securities of such series represented and entitled to vote at such meeting, and any such adjourned meeting may be held without further notice.

Section 13.07 Manner of Voting; Recording of Action

The vote upon any resolution submitted to any meeting of the Holders of the Securities of one or more series shall be by written ballots on which shall be subscribed the signatures of such Holders or their duly authorized proxies and the principal amount or amounts of the Securities represented thereby. The permanent chairman of such meeting shall appoint two inspectors of votes, who shall count all votes cast at such meeting for or against any resolution and shall make and file with the permanent secretary of such meeting their verified written report, in duplicate, of all votes cast at such meeting. A record, in duplicate, of the proceedings of such meeting shall be prepared by the permanent secretary of such meeting, and there shall be attached to such

record (i) such report of the inspectors of votes and (ii) affidavits by one or more persons, having knowledge of the facts, setting forth a copy of the notice of such meeting and showing that such notice was given as provided in Section 13.02. Such record shall be signed and verified by the affidavits of the permanent chairman and the permanent secretary of such meeting. One of such duplicate records shall be delivered to the Corporation and the other shall be delivered to the Trustee, to be preserved by the Trustee, the latter having attached thereto the ballots voted at such meeting. Any record so signed and verified shall be conclusive evidence of the matters therein stated.

Section 13.08 Instrument in lieu of Resolution

Notwithstanding the foregoing provisions of this Indenture, any resolution or instrument signed in one or more counterparts by or on behalf of the Holders of the specified percentage of the aggregate principal amount of the Securities of any series

shall have the same force and effect as a resolution passed by the Holders of such specified percentage at a meeting of the Holders of Securities of such series.

Section 13.09 Evidence of Instruments of Holders

Any request, direction, notice, consent or other instrument which this Indenture may require or permit to be signed or executed by the Holders of Securities may be in any number of concurrent instruments of similar tenor signed or executed by such Holders.

The Trustee may, in it discretion, require proof of execution in cases where it deems proof desirable and may accept such proof as it shall consider proper.

Section 13.10 Binding Effect of Resolutions

by Holders of the specified percentage of Securities of one or more series in accordance with Section 13.07 shall be binding upon all the Holders of Securities of such series, whether signatories thereto or not, and each and every Holder of Securities of such series and the Trustee (subject to the provisions for its indemnity herein contained) shall be bound to give effect thereto accordingly.

Section 13.11 No Delay of Rights

Nothing contained in this Article shall be deemed or construed to authorize or permit, by reason of any call of a meeting of the Holders of the Securities of one or more series, or any rights expressly or impliedly conferred hereunder to make such call, any hindrance or delay in the exercise of any right or rights conferred upon or reserved to the Trustee or to the Holders of the Securities of such series under any of the provisions of this Indenture or of the Securities of such series.

Section 13.12 Waiver of Jury Trial.

Each of the Corporation and the Trustee hereby irrevocably waives; to the fullest extent permitted by applicable law, any and all right to trial by jury in any legal proceeding arising out of or relating to this Indenture, the Securities or the transactions contemplated hereby.


	ARTICLE FOURTEEN REPAYMENT AT OPTION OF HOLDERS

Section 14.01 Applicability of Article

Repayment of Securities of any series before their Stated Maturity at the option of . Holders thereof shall be made in accordance with the terms of such Securities and (except as otherwise specified as contemplated by Section 3.01 for Securities of any series) in accordance with this Article.

Section 14.02 Repayment of Securities.

Securities of any series subject to repayment in whole or in part at the option of the Holders thereof will, unless otherwise provided in the terms of such Securities, be repaid at a price equal to the principal amount thereof, together with interest, if any, thereon accrued to the Repayment Date specified in or pursuant to the terms of such Securities. The Corporation covenants that on or before the Repayment Date it will deposit with the Trustee or with a Paying Agent (or, if the Corporation is acting as its own Paying Agent, segregate and hold in trust as provided in Section 9.05) an amount of money in the Currency in which the Securities of such series are payable (except as otherwise specified pursuant to Section 3.01 for the Securities of such series and except, if applicable, as provided in Sections 3.11(b), 3.11 (d) and 3.1l (e)) sufficient to pay the principal (or, if so provided by the terms of the Securities of any series, a percentage of the principal) of and (except if the Repayment Date shall be an Interest Payment Date) accrued interest, if any, on, all the Securities or portions thereof, as the case may be, to be repaid on such date

Section 14.03 Exercise of Option .

Securities of any series subject to repayment at the option of the Holders thereof will contain an "Option to Elect Repayment" form on the reverse of such Securities. To be repaid at the option of the Holder, any Security so providing for such repayment, with the "Option to Elect Repayment" form on the reverse of such Security duly completed by the Holder (or by the Holder's attorney duly authorized in writing), must be received by the Corporation at the Place of Payment therefor specified in the terms of such Security (or at such other place or places or which the Corporation shall from time to time notify the Holders of such Securities) not earlier than 45 days nor later than 30 days prior to the Repayment Date. If less than the entire principal amount of such Security is to be repaid in accordance with the terms of such Security, the principal amount of such Security to be repaid, in increments of the minimum denomination for Securities of such series, and the denomination or denominations of the Security or Securities to be issued to the Holder

for the portion of the principal amount of such Security surrendered that is not to be repaid, must be specified. The principal amount of any Security providing for repayment at the option of the Holder thereof may not be repaid in part if, following such repayment, the unpaid principal amount of such Security would be less than the minimum authorized denomination of Securities of the series of which such Security to be repaid is a part.

Except as otherwise may be provided by the terms of any Security providing for


•	: I

repayment at the option of the Holder thereof, exercise of the repayment option by the Holder shall be irrevocable unless waived by the Corporation.


Section 14.04	When Securities Presented for Repayment Become Due and Payable.

If Securities of any series providing for repayment at the option of the Holders thereof shall have been surrendered as provided in this Article and as provided by or pursuant to the terms of such Securities, such Securities or the portions thereof, as the case may be, to be repaid shall become due and payable and shall be paid by the Corporation on the Repayment Date therein specified, and on and after such Repayment Date (unless the Corporation shall default in the payment of such Securities on such Repayment Date) such Securities shall, if the same were interest-bearing, cease to bear interest and the Coupons for such interest appertaining to any Unregistered Securities so to be repaid, except to the extent provided below, shall be void. Upon surrender of any such Security for repayment in accordance with such provisions, together with all Coupons, if any, appertaining thereto maturing after the Repayment Date, the principal amount of such Security so to be repaid shall be paid by the Corporation, together with accrued interest, if any, to the Repayment Date; provided , however , that Coupons whose Stated Maturity is on or prior to the Repayment Date shall be payable only at an office or agency located outside the United States (except as otherwise provided in Section 9.04) and, unless otherwise specified p ursuant to Section 3.01, only upon presentation and surrender of such Coupons; and provided further that, in the case of Registered Securities, installments of interest, if any, whose Stated Maturity is on or prior to the Repayment Date shall be payable to the Holders of such Securities, or one or more Predecessor Securities, registered as such at the close of business on the relevant Record Dates according to their terms and the provisions of Section 3.07.

If any Unregistered Security surrendered for repayment shall not be accompanied by all appurtenant Coupons maturing after the Repayment Date, such Security may be paid after deducting from the amount payable therefor as provided in Section 14.02 an amount equal to the face amount of all such missing Coupons, or the surrender of such missing Coupon or Coupons may be waived by the Corporation and the Trustee if there be furnished to them such security or indemnity as they may require to save each of them and any Paying Agent harmless. If thereafter the Holder of such Security shall surrender to the Trustee or any Paying Agent any such missing Coupon in respect of which a deduction shall have been made as provided in the preceding sentence, such Holder shall be entitled to receive the amount so deducted; provided , however , that interest represented by Coupons shall be payable only at an office or agency located outside the United States (except as otherwise provided in Section 9.04) and, unless otherwise specified as contemplated by Section 3.01, only upon presentation and surrender of those Coupons.

Repayment Date at the rate of interest or Yield to Maturity (in the case of Original Issue Discount Securities) set forth in such Security,

Section 14.05 Securities Repaid in Part

Upon surrender of any Registered Security which is to be repaid in part only, the Corporation shall execute and the Trustee shall authenticate and deliver to the Holder of such Security, without service charge and at the expense of the Corporation, a new Registered Security or Securities of the same series, of any authorized denomination specified by the Holder, in an aggregate principal amount equal to and in exchange for the portion of the principal of such Security so surrendered which is not to be repaid .

ARTICLE FIFTEEN

HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY

Section 15.01 Disclosure of Names and Addresses of Holders

Every Holder of Securities or Coupons, by receiving and holding the same, agrees with the Company and the Trustee that none of the Company or the Trustee or any agent of either of them shall be held accountable by reason of the disclosure of any such information as to the names and addresses of the Holders in accordance with Section 312 of the Trust Indenture Act, regardless of the source from which such information was derived, and that the Trustee shall not be held accountable by reason of mailing any material pursuant to a request made under Section 312(b) of the Trust Indenture Act.

Section 15.02 Reports by Trustee

Within 60 days after May 15 of each year commencing with the first May 15 after the first issuance of Securities pursuant to this Indenture, the Trustee shall transmit to the Holders, in the manner and to the extent provided in Section 313(c) of the Trust Indenture Act, a brief report dated as of such May 15 if required by Section 313(a) of the Trust Indenture Act.

Section 15.03 Reports by the Company

The Company shall:

(1) file with the Trustee, within 15 days after the Parent is required to file the same with the Commission, copies of the annual reports and of the information,

.documents and other reports (or copies of such portions of any of the foregoing as the Commission may from time to time by rules and regulations prescribe} which the Parent may be required to file with the Commission pursuant to Section 13 or Section 15(d) of .· the Securities Exchange Act of 1934;

(2) file with the Trustee and the Commission, in accordance with rules and regulations prescribed from time to time by the Commission, such additional information, documents and reports with respect to compliance by the Company with the conditions and covenants of this Indenture as may be required from time to time by such rules and regulations;

(3) Notwithstanding that the Parent may not be required to remain subject to the reporting requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, or otherwise report on an annual and quarterly basis on forms provided for such annual and quarterly reporting pursuant to rules and regulations promulgated by the

Commission, the Company shall provide the Trustee:

(i) within 140 days after the end of each fiscal year, the information with respect to the Parent required to be contained in annual reports on Form 20-F or 40-F as applicable (or any successor form); and

(ii) within 60 days after the end of each of the first three fiscal quarters of each fiscal year, the information with respect to the Parent required to be contained in reports on Form 6-K (or any successor form) which, regardless of applicable requirements, shall, at a minimum, consist of such information

required to be provided in quarterly reports under the laws of Canada or any province thereof to security holders of a company with securities listed on The Toronto Stock Exchange, whether or not the Parent has any of its securities so listed.

(4) Such information will be prepared in accordance with U.S. or Canadian disclosure requirements and U.S. or Canadian generally accepted accounting principles;

(5) transmit to all Holders, in the manner and to the extent provided in Section 313(c) of the Trust Indenture Act, within 30 days after the filing thereof with the Trustee, such summaries of any information, documents and reports required to be filed by the Company pursuant to paragraphs (1), (2) and (3) of this Section as may be required by rules and regulations prescribed from time to time by the Commission.

(6) Delivery of such reports, information and documents to the Trustee is for informational purposes only and the Trustee's receipt of such shall not constitute constructive notice of any information contained therein or determinable from information contained therein, including the Company's compliance with any of its covenants hereunder (as to which the Trustee is entitled to rely exclusively on Officers' Certificates).

IN WITNESS WHEREOF the parties hereto have caused this Indenture to be duly executed as of the day and year first above written.

CANADIAN PACIFIC RAILWAY COMPANY

By: /s/ F.J. Green

F.J. Green

President and Chief Executive Officer

By: /s/ M.R. Lambert

M.R. Lambert

Executive Vice President and Chief Financial Officer

THE BANK OF NEW YORK

By:

IN WITNESS WHEREOF the parties hereto have caused this Indenture to be

duly executed as of the day and year first above written.

CANADIAN PACIFIC RAILWAY COMPANY

By:

F.J. Green

President and Chief Executive Officer

By:

M.R. Lambert

Executive Vice President and Chief Financial Officer

THE BANK OF NEW YORK

By: /s/ Bank of New York

Dated as of May 8, 2007

CANADIAN PACIFIC RAILWAY COMPANY

and

THE BANK OF NEW YORK

FIRST SUPPLEMENTAL INDENTURE

to the

TRUST INDENTURE

Dated as of May 8, 2007

Doc #:NY7:405671.4

TABLE OF CONTENTS

Page


1.	INTERPRETATIONS AND AMENDMENTS 1


1.1	First Supplemental Indenture 1


1.2	Definitions in First Supplemental Indenture 2


1.3	Interpretation not Affected by Headings 2


2.	NOTES 2


2.4	Form and Terms of Notes 2


2.5	Issuance of Notes 4


3.	REDEMPTION OF NOTES 4


3.6	Redemption of Notes 4


3.7	Certain Additional Definitions 5


4.	CHANGE OF CONTROL 6


4.8	Change of Control 6


4.9	Certain Additional Definitions 8


5.	GENERAL 9


5.1	Effectiveness 9


5.2	Effect of Recitals 10


5.3	Ratification of Original Indenture 10


5.4	Governing Law 10


5.5	Severability· 10


5.6	Acceptance of Trust 10


5.7	Counterparts and Formal Date 10

Doc #:NY7:405671.4

THIS FIRST SUPPLEMENTAL INDENTURE (this " First Supplemental Indenture ") dated as of May 8, 2007 between CANADIAN PACIFIC RAILWAY COMPANY , a corporation incorporated under the Canada Business Corporations Act and having its head office in the City of Calgary, in the Province of Alberta (the " Issuer ") and THE BANK OF NEW YORK , a banking corporation duly organized and existing under the laws of the State of New York, having an office in the City of New York, in the State of New York (the "Trustee")

RECITALS OF THE COMPANY

WHEREAS , the Issuer and the Trustee entered into an Indenture, dated as of May 8, 2007 (the " Original Indenture "). Section 8.01(7) of the Original Indenture provides that the Issuer and the Trustee may, without the consent of any Holder, enter into a supplemental indenture to establish the form or terms of Securities of any series as permitted by Section 2.01 and 3.01 thereof.

WHEREAS , pursuant to Sections 2.01 and 3.01 of the Original Indenture, the Issuer desires to provide for the establishment of a series of Securities under the Original Indenture, and the form and terms thereof, as hereinafter set forth.

WHEREAS , the Issuer has requested that the Trustee execute and deliver this First Supplemental Indenture. The Issuer has delivered to the Trustee an Opinion of Counsel and an Officers' Certificate pursuant to Sections 1.02 and 8.03 of the Original Indenture to the effect, among other things, that all conditions precedent provided for in the Indenture to the Trustee's execution and delivery of this First Supplemental Indenture have been complied with. All acts and things necessary have been done and performed to make this First Supplemental Indenture enforceable in accordance with its terms, and the execution and delivery of this First Supplemental Indenture has been duly authorized in all respects.

WHEREAS the proper officers of the Issuer have duly authorized the creation and issuance of: (i) a series of Securities to be designated as 5.950% Notes due 2037 (the " Notes ") and to be initially limited (subject to the exceptions described herein and in the

Original Indenture) to the aggregate principal amount of U.S. $450,000,000; the further terms and

conditions thereof being hereinafter set forth, all in accordance with a resolution of the directors of the Issuer;

NOW, THEREFORE, THIS FIRST SUPPLEMENTAL INDENTURE

WITNESSETH : For and in consideration of the premises and the purchase of the Securities (as herein defined) by the holders thereof, it is mutually covenanted and agreed, for the equal and proportionate benefit of all holders of the Securities, as follows:


1.	INTERPRETATIONS AND AMENDMENTS


1.1	First Supplemental Indenture

As used herein "First Supplemental Indenture" , "hereto" , "herein" , "hereof" , "hereby" , "hereunder" and similar expressions refer to this First Supplemental Indenture and

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not to any particular Article, Section or other portion hereof and include any and every instrument supplemental or ancillary hereto or in implementation hereof, and further include the terms of the Notes set forth in the form of Notes annexed as Schedule A hereto.

1.2 Definitions in First Supplemental Indenture

All terms contained in this First Supplemental Indenture which are defined in the Original Indenture and not defined herein shall, for all purposes hereof, have the meanings given to such terms in the Original Indenture, unless the context otherwise specifies or requires; provided, however, that notwithstanding the foregoing, the terms '' Issuer " and " Trustee " shall have the respective meanings given to them in the Original Indenture.

1.3 Interpretation not Affected by Headings

The division of this First Supplemental Indenture into Articles and Sections, the provision of the table of contents hereto and the insertion of headings are for convenience of reference only and shall not affect the construction or interpretation of this First Supplemental Indenture.


2.	NOTES


2.1	Form and Terms of Notes

There shall be and there is hereby created for issuance under the Original Indenture, as supplemented by this First Supplemental Indenture; (i) a series of Securities which shall consist of an aggregate principal amount of U.S.$450,000,000 Notes; provided, however, that if the Issuer shall, at any time after the date hereof, increase the principal amount of Notes which may be issued and issue such increased principal amount (or any portion thereof), then any such additional Notes so issued shall have the same form and terms (other than the date of issuance and the date from which interest thereon shall begin to accrue and, under certain circumstances, the first interest payment date), and shall carry the same right to receive accrued and unpaid interest, as the Notes theretofore issued; and provided, further, that, notwithstanding the foregoing, the Issuer shall not be entitled to increase the principal amount of Notes which may be issued or issue any such increased principal amount if the Issuer has effected satisfaction and discharge of the Indenture pursuant to Section 4.01 of the Original Indenture or defeasance or covenant defeasance pursuant to Article 12 of the Original Indenture.

The Notes will mature, and the principal of the Notes and accrued and unpaid interest thereon will be due and payable, on May 15, 2037, or such earlier date as the principal of any of the Notes may become due and payable in accordance with the provisions of the Original Indenture and this First Supplemental Indenture.

The Notes shall bear interest on the principal amount thereof from May 8, 2007 or from the last date to which interest shall have been paid or duly made available for payment on the Notes, whichever is later, at the rate of 5.950% per annum, payable semi-annually in arrears on May 15 and November 15 (each, an "Interest Payment Date" ) in each year, commencing November 15, 2007, until the principal of and premium, if any, on the applicable series of Notes is paid or duly made available for payment; and should the Issuer at any time default in the

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payment of any principal of, or premium, if any, or interest on the Notes when due, the Issuer shall pay interest (such interest to be payable on demand), to the extent permitted by law, on the amount in default at the same rate applicable to the Notes. Interest on the Notes shall be computed on the basis of a 360-day year comprised of twelve 30-day months. The interest payable, and punctually paid or duly provided for, on any Interest Payment Date will, as provided in the Original Indenture, be paid to the Persons in whose names the Notes (or one or more predecessor Notes) are registered at the close of business on May 1 or November 1 (the " Regular Record Dates "), as the case may be, immediately prior to such Interest Payment Date, regardless of whether any such Regular Record Date is a business day. Any such interest on the Notes not so punctually paid or duly provided for on any Interest Payment Date shall be payable, as applicable, as provided in the form of Note annexed hereto as Schedule A to this First Supplemental Indenture.

For the purposes only of the disclosure required by the Interest Act (Canada), and without affecting the amount of interest payable to any holder of a Note or the calculation of interest on any Note, if the rate of interest on any Note is calculated on the basis of a year (the " deemed year ") which contains fewer days than the actual number of days in the calendar year of calculation, such rate of interest shall be expressed as a yearly rate for the purposes of the Interest Act (Canada) by multiplying such rate of interest by the actual number of days in the calendar year of calculation and dividing it by the number of days in the deemed year.

All payments of principal of and premium, if any, and interest on the Notes will be made in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts, and all references herein to " United States dollars ", ''U.S.$ " or " U.S. dollars " shall be deemed to refer to such coin or currency of the United States of America.

The principal of and premium, if any, and interest on the Notes shall be payable, and the Notes may be surrendered for exchange, registration, transfer or discharge from registration, at the Corporate Trust Office of the Trustee in the City of New York, New York, and in such other places as the Issuer may from time to time designate in accordance with the Original Indenture. The Trustee is hereby appointed as the initial Paying Agent, registrar and transfer agent for the Notes in the City of New York, New York.

The Notes shall be issued only as fully registered Notes, without coupons, in denominations of U.S.$2,000 and integral multiples of $1,000 thereafter. Each series of Notes initially will be represented by one or more global Securities (collectively, the " Global Notes ") registered in the name of The Depository Trust Company, as Depositary or its nominee, or a successor depositary or its nominee.

The certificates representing the Notes shall bear the following legend: "UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN

PART FOR SECURITIES IN DEFINITIVE REGISTERED

FORM, THIS CERTIFICATE MAY NOT BE TRANSFERRED

EXCEPT AS A WHOLE BY DTC TO A NOMINEE OF DTC OR

BY A NOMINEE OF DTC TO DTC OR ANOTHER NOMINEE

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OF DTC OR BY DTC OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITARY OR A NOMINEE OF SUCH SUCCESSOR DEPOSITARY."

The Notes and the certificate of the Trustee endorsed thereon shall be in the form set out in Schedule A to this First Supplemental Indenture with such appropriate insertions, omissions, substitutions and variations as the Trustee may approve and shall be numbered in such manner as the Trustee may approve, such approvals of the Trustee concerning any Note to be conclusively evidenced by its certification of such Note.

The Security Register referred to in Section 3.05 of the Original Indenture shall, with respect to the Notes, be kept at the office or agency in the City of New York, New York that the Issuer may from time to time designate for such purpose (which shall initially be the Corporate Trust Office of the Trustee in the City of New York, New York), and at such other place or places as the Issuer with the approval of the Trustee may hereafter designate.

The Notes shall be subject to redemption at the option of the Issuer as provided in Article 3 of this First Supplemental Indenture and Article 10 of the Original Indenture and repurchase by the Issuer as provided in Article 4 of this First Supplemental Indenture. The Issuer shall not otherwise be required to redeem, purchase or repay Notes pursuant to any mandatory redemption, sinking fund or analogous provision or at the option of the holders thereof. The Notes will not be convertible into or exchangeable for securities of any Person.

The Notes shall have the other terms and provisions set forth in the forms of Notes attached hereto as Schedule A to this First Supplemental Indenture with the same force and effect as if such terms and provisions were set forth in full herein.

2.2 Issuance of Notes

The Notes in the aggregate principal amount of U.S.$450,000,000 shall be executed by the Designated Officer of the Issuer and delivered by the Issuer to the Trustee on the date of issue for authentication and delivery pursuant to and in accordance with the provisions of Section 3.02 of the Original Indenture and, upon the requirements of such provisions being complied with, the Notes shall be authenticated by or on behalf of the Trustee and delivered by it to or upon the Issuer Order of the Issuer without any further act or formality on the part of the Issuer. The Trustee shall have no duty or responsibility with respect to the use or application of any of the Notes so certified and delivered or the proceeds thereof.


3.	REDEMPTION OF NOTES


3.1	Redemption of Notes

The Notes will be redeemable at any time, in whole or from time to time in part, at the option of the Issuer (in the manner and in accordance with and subject to the terms and provisions set forth in Article 10 of the Original Indenture), at a Redemption Price equal to the greater of:


(a)	100% of the principal amount of the Notes to be redeemed; and

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(b)	the sum of the present values of the remaining scheduled payments of principal and interest thereon (exclusive of interest accrued to the date of redemption) discounted to the Redemption Date on a semi-annual basis (assuming a 360-day year consisting of twelve 30-day months) at the Treasury Yield, plus 20 basis points;

plus in each case accrued interest to the Redemption Date; provided that installments of interest on Notes which are due and payable on any date falling on or prior to a Redemption Date will be payable to the registered holders of such Notes (or one or more predecessor Notes), registered as such as of the close of business on the relevant Regular Record Dates.

The Issuer will provide notice to the Trustee prior to the Redemption Date of the calculation of the Redemption Price.


3.2	Certain Additional Definitions

For the purposes of this First Supplemental Indenture, the following expressions shall have the following meanings:

" Comparable Treasury Issue " means the United States Treasury security or securities selected by an Independent Investment Banker as having an actual or interpolated maturity comparable to the remaining term of the Securities to be redeemed that would be utilized, at the time of selection and in accordance with customary financial practice, in pricing new issues of corporate debt securities of comparable maturity to the remaining term of the Securities;

" Comparable Treasury Price " means (1) the average of the Reference Treasury Dealer Quotations for such redemption date, after excluding the highest and lowest of such Reference Treasury Dealer Quotations, or (2) if the Trustee obtains fewer than four such Reference Treasury Dealer Quotations, the average of all such Reference Treasury Dealer Quotations;

" Independent Investment Banker " means one of the Reference Treasury Dealers selected by the Trustee after consultation with the Corporation or, if such firm is unwilling or unable to select the Comparable Treasury Issue, an independent investment banking institution of national standing in the United States appointed by the Trustee after consultation with the Corporation;

" Reference Treasury Dealers " means Morgan Stanley & Co. Incorporated and RBC Capital Markets Corporation or their affiliates which are primary U.S. government securities dealers, and their respective successors; provided, however, that if any of the foregoing ceases to be a primary U.S. government securities dealer in The City of New York (a "Primary Treasury Dealer"), the Corporation will substitute therefor another Primary Treasury Dealer;

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percentage of its principal amount) quoted in writing to the Trustee by such Reference Treasury Dealer at 3:30p.m. New York time on the third business day preceding such redemption date; and

"Treasury Yield" means, with respect to any redemption date, the rate per annum equal to the semi-annual equivalent yield to maturity or interpolated (on a day count basis) of the Comparable Treasury Issue, assuming a price for the Comparable Treasury Issue (expressed as a percentage of its principal amount) equal to the Comparable Treasury Price for that redemption date.


4.	CHANGE OF CONTROL


4.1	Change of Control

(a) Upon the occurrence of a Change of Control Triggering Event, unless all Notes have been called for redemption pursuant to Section 3.1 hereof, each Holder of Notes shall have the right to require the Company to repurchase all or any part (equal to $2,000 or an integral multiple of $1,000 in excess thereof) of such Holder's Notes at an offer price in cash equal to the Change of Control Payment.

(b) Within 30 days following any Change of Control Triggering Event, the Company shall mail, or cause to be mailed, a notice to each Holder describing the transaction or transactions that constitute the Change of Control Triggering Event and specifying:


(i)	that the Change of Control Offer is being made pursuant to this Section 4.1 and that all Notes tendered will be accepted for payment;


(ii)	the Change of Control Payment and the purchase date, which shall be a Business Day no earlier than 30 days and no later than 60 days from the date such notice is mailed (the "Change of Control Payment Date");


(iii)	the CUSIP numbers for the Notes;

(iv) that any Note not tendered will continue to accrue interest; (v) that, unless the Company defaults in the payment of the

Change of Control Payment, all Notes accepted for

payment pursuant to the Change of Control Offer will cease to accrue interest after the Change of Control Payment

Date;


(vi)	that Holders electing to have any Notes purchased pursuant to a Change of Control Offer will be required to surrender such Notes to the Paying Agent at the address specified in the notice prior to the close of business on the third

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Business Day preceding the Change of Control Payment Date;

(vii)

that Holders will be entitled to withdraw their election referred to in clause (vi) if the Paying Agent receives, not later than the close of business on the second Business Day preceding the Change of Control Payment Date, a facsimile transmission or letter setting forth the name of the Holder, the principal amount of Notes delivered for purchase, and a statement that such Holder is withdrawing his election to have the Notes purchased;


(viii)	that Holders whose Notes are being purchased only in part will be issued new Notes equal in principal amount to the unpurchased portion of the Notes surrendered, which unpurchased portion will be equal to $2,000 in principal amount or an integral multiple of $1,000 in excess thereof; and


(ix)	if such notice is mailed prior to the date of the occurrence

of the Change of Control Triggering Event, that the Change of Control Offer is conditional on the Change of Control Triggering Event occurring on or prior to the Change of Control Payment Date.

(c) The Company shall cause the Change of Control Offer to remain open for at least 20 Business Days or such longer period as is required by applicable law. The Company shall comply with the requirements of Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder to the extent those laws and regulations are applicable in connection with the repurchase of the Notes as a result of a Change in Control Triggering Event. To the extent that the provisions of any securities laws or regulations conflict with the provisions of this Section 4.1, the Company will comply with the applicable securities laws and regulations and will not be deemed to have breached its obligations under this Section 4.1 by virtue of such conflict.

(d) On the Change of Control Payment Date, the Company will, to the extent lawful:


(i)	accept for payment all Notes or portions thereof properly tendered pursuant to the Change of Control Offer;


(ii)	deposit with the Paying Agent an amount equal to the Change of Control Payment in respect of all Notes or portions of Notes properly tendered; and


(iii)	deliver or cause to be delivered to the Trustee the Notes so accepted together with an Officers' Certificate stating the

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aggregate principal amount of Notes or portions of Notes being purchased by the Company.

(e) The Paying Agent will promptly mail to each Holder of Notes of each series properly tendered the Change of Control Payment for such Notes, and the Trustee will promptly authenticate and mail (or cause to be transferred by book entry) to each Holder a new Note equal in principal amount to any unpurchased portion of the Notes surrendered, if any; provided that each new Note will be in a principal amount of $2,000 or an integral multiple of

$1,000 in excess thereof. The Company will publicly announce the results of the Change of Control Offer on or as soon as practicable after the Change of Control Payment Date.

(f) The Company shall not be required to make a Change of Control Offer upon a Change of Control Triggering Event if a third party makes the Change of Control Offer in the manner, at the times and otherwise in compliance with the requirements set forth in this Section 4.1 applicable to a Change of Control Offer made by the Company and purchases all Notes properly tendered and not withdrawn under such Change of Control Offer.

(g) The Company may make a Change of Control Offer in advance of, but conditioned on, the occurrence of a Change of Control Triggering Event but otherwise in accordance with the provisions of this Section 4.1.

4.2 Certain Additional Definitions

For the purposes of this First Supplemental Indenture, the following expressions shall have the following meanings:

"Below Investment Grade Rating Event" means the Notes are rated below an Investment Grade Rating by each of the Rating Agencies (as defined below) on any date from the date of the public notice of an arrangement or transaction that could result in a Change of Control until the end of the 60-day period following public notice of the occurrence of the Change of Control, which 60-day period shall be extended if, by the end of the 60-day period, the rating of the notes is under publicly announced consideration for a possible downgrade by all of the Rating Agencies that have not downgraded their rating of the notes to a rating below an Investment Grade Rating, such extension to continue for so long as consideration for a possible downgrade continues by all of the Rating Agencies that have not downgraded their rating of the Notes to a rating below an Investment Grade Rating.

(2) the consummation of any transaction (including, without limitation, any merger or

amalgamation) the result of which is that any person (as such term is used in Section 13(d) of the Exchange Act) becomes the beneficial owner, directly or indirectly, of more than 50% of the

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then outstanding number of Canadian Pacific Railway Limited's voting shares; or (3) the first day on which a majority of the members of Canadian Pacific Railway Limited's Board of Directors are not Continuing Directors.

"Change of Control Offer" means an offer to repurchase Notes pursuant to Section 4.1 hereof.

"Change of Control Payment" means, with respect to Notes tendered for repurchase pursuant to a Change of Control Offer, an amount equal to 101% of the aggregate principal amount of such Notes plus accrued and unpaid interest thereon, if any, to the date of repurchase.

"Change of Control Triggering Event" means the occurrence of both a Change of Control and a Below Investment Grade Rating Event.

"Continuing Directors" means, as of any date of determination, any member of the Board of Directors of Canadian Pacific Railway Limited who (1) was a member of such Board of Directors on the date of the issuance of the notes; or (2) was nominated for election or elected to such Board of Directors with the approval of a majority of the Continuing Directors who were members of such Board of Directors at the time of such nomination or election (either by a specific vote or by approval of Canadian Pacific Railway Limited's proxy statement in which such member was named as a nominee for election as a director, without objection to such nomination).

"Investment Grade Rating" means a rating equal to or higher than Baa3 (or the equivalent) by Moody's and BBB- (or the equivalent) by S&P.

"Moody's" means Moody's Investors Service, Inc.

"Rating Agencies" means (l) each of Moody's and S&P; and (2) if either of Moody's or S&P ceases to rate the notes or fails to make a rating of the notes publicly available for any reason outside of the Company's control, a "nationally recognized statistical rating organization" within the meaning of Rule 15c3-1(c)(2)(vi)(F) under the Securities Exchange Act of 1934, as amended, selected by the Company (by a resolution of its Board of Directors) as a replacement agency for Moody's or S&P, or both of them, as the case may be or if a replacement agency is not selected, the remaining such agencies providing publicly available ratings of the notes.

"S&P" means Standard & Poor's Ratings Services, a division of the McGraw Hill Companies, Inc.


5.	GENERAL


5.1	Effectiveness

This First Supplemental Indenture will become effective upon its execution and delivery.

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5.2	Effect of Recitals

The recitals contained herein and in the Securities, except the Trustee's certificates of authentication, shall be taken as the statements of the Issuer, and neither the Trustee nor any Authenticating Agent assumes any responsibility for their correctness. Neither the Trustee nor any Authenticating Agent shall be accountable for the use or application by the Issuer of the Securities or the proceeds thereof. The Trustee makes no representations as to the validity or sufficiency of this First Supplemental Indenture or of the Securities except that the Trustee represents that it is duly authorized to execute and deliver this First Supplemental Indenture, authenticate the Securities and perform its obligations under the Original Indenture and hereunder, and that the statements made by it or to be made by it in a Statement of Eligibility and Qualification on Form T-1 supplied to the Issuer are true and accurate.


5.3	Ratification of Original Indenture

The Original Indenture as supplemented by this First Supplemental Indenture is in all respects ratified and confirmed, and this First Supplemental Indenture shall be deemed part of the Original Indenture in the manner and to the extent herein and therein provided.


5.4	Governing Law

This First Supplemental Indenture, the Original Indenture as supplemented hereby and the Securities shall be governed by and construed in accordance with the laws of the State of New York.


5.5	Severability

In case any provision in this First Supplemental Indenture, the Original Indenture as supplemented hereby or in the Securities shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby.


5.6	Acceptance of Trust

The Trustee hereby accepts the trusts in this First Supplemental Indenture declared and provided for and agrees to perform the same upon the terms and conditions herein before set forth in trust for the various Persons who shall from time to time be Note holders subject to all the terms and conditions herein set forth.


5.7	Counterparts and Formal Date

This First Supplemental Indenture may be executed in any number of counterparts, each of which so executed shall be deemed to be an original, but all such counterparts shall together constitute but one and the same instrument and notwithstanding their date of execution shall be deemed to bear the date first above written.

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IN WITNESS WHEREOF the parties hereto have executed this Supplemental Indenture on the date first above written.

CANADIAN PACIFIC RAILWAY COMPANY

By: /s/ F.J. Green

F.J. Green

President and Chief Executive Officer

By: /s/ M.R. Lambert

M.R. Lambert

Executive Vice President and Chief Financial Officer

BANK OF NEW YORK, as trustee

By:

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. IN WITNESS WHEREOF the parties hereto have executed this Supplemental

Indenture on the date first above written.

CANADIAN PACIFIC RAILWAY

COMPANY

By: _____________________________

F.J. Green

President and Chief Executive Officer

By: _________________________________

M.R. Lambert

Executive Vice President and

Chief Financial Officer

THE BANK OF NEW YORK, as trustee

By: /s/ THE BANK OF NEW YORK

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Dated as of May 20, 2008

CANADIAN PACIFIC RAILWAY COMPANY

and

THE BANK OF NEW YORK

SECOND SUPPLEMENTAL INDENTURE

to the

TRUST INDENTURE

Dated as of May 8, 2007

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TABLE OF CONTENTS


1.	INTERPRETATIONS AND AMENDMENTS 1


1.1	Second Supplemental Indenture 1


1.2	Definitions in Second Supplemental Indenture 2


1.3	Interpretation not Affected by Headings 2

2. 2013 NOTES 2


2.1	Form and Terms of 2013 Notes 2


2.2	Issuance of 2013 Notes 4

3. 2018 NOTES 4


3.1	Form and Terms of 2018 Notes 4


3.2	Issuance of 2018 Notes 7


4.	OPTIONAL REDEMPTION OF NOTES 7


4.1	Redemption of Notes 7


4.2	Certain Additional Definitions 7


5.	CHANGE OF CONTROL 8


5.1	Change of Control 8


5.2	Certain Additional Definitions 10


6.	GENERAL 12


6.1	Effectiveness 12


6.2	Effect of Recitals 12


6.3	Ratification of Original Indenture 12


6.4	Governing Law 13


6.5	Severability 13


6.6	Acceptance of Trust 13


6.7	Counterparts and Formal Date 13

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THIS SECOND SUPPLEMENTAL INDENTURE (this " Second Supplemental Indenture ") dated as of May 20, 2008 between CANADIAN PACIFIC RAILWAY COMPANY , a corporation incorporated under the Canada Business Corporations Act and having its head office in the City of Calgary, in the Province of Alberta (the " Issuer ") and THE BANK OF NEW YORK , a banking corporation duly organized and existing under the laws of the State of New York, having an office in the City of New York, in the State of New York (the "Trustee")

RECITALS OF THE COMPANY

WHEREAS , the Issuer has requested that the Trustee execute and deliver this Second Supplemental Indenture. The Issuer has delivered to the Trustee an Opinion of Counsel and an Officers' Certificate pursuant to Sections 1.02 and 8.03 of the Original Indenture to the effect, among other things, that all conditions precedent provided for in the Indenture to the Trustee's execution and delivery of this Second Supplemental Indenture have been complied with. All acts and things necessary have been done and performed to make this Second Supplemental Indenture enforceable in accordance with its terms, and the execution and delivery of this Second Supplemental Indenture has been duly authorized in all respects.

WHEREAS the proper officers of the Issuer have duly authorized the creation and issuance of: (i) a series of Securities to be designated as 5.75% Notes due 2013 (the " 2013 Notes ") and to be initially limited (subject to the exceptions described herein and in the Original Indenture) to the aggregate principal amount of U.S.$400,000,000, and (ii) a series of Securities to be designated as 6.50% Notes due 2018 (the " 2018 Notes " and together with the 2013 Notes, the "Notes") and to be initially limited (subject to the exceptions described herein and in the

Original Indenture) to the aggregate principal amount of U.S.$300,000,000; the further terms and conditions thereof being hereinafter set forth, all in accordance with a resolution of the directors of the Issuer;

NOW, THEREFORE, THIS SECOND SUPPLEMENTAL INDENTURE

WITNESSETH: For and in consideration of the premises and the purchase of the Securities (as herein defined) by the holders thereof, it is mutually covenanted and agreed, for the equal and proportionate benefit of all holders of the Securities, as follows:


1.	INTERPRETATIONS AND AMENDMENTS


1.1	Second Supplemental Indenture

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As used herein "Second Supplemental Indenture", "hereto", "herein", "hereof ', "hereby'', "hereunder" and similar expressions refer to this Second Supplemental Indenture and not to any particular Article, Section or other portion hereof and include any and every instrument supplemental or ancillary hereto or in implementation hereof, and further include the terms of the Notes set forth in the form of Notes annexed as Schedule A hereto.


1.2	Definitions in Second Supplemental Indenture

All terms contained in this Second Supplemental Indenture which are defined in the Original Indenture and not defined herein shall, for all purposes hereof, have the meanings given to such terms in the Original Indenture, unless the context otherwise specifies or requires; provided, however, that notwithstanding the foregoing, the terms " Issuer " and " Trustee " shall have the respective meanings given to them in the Original Indenture.


1.3	Interpretation not Affected by Headings

The division of this Second Supplemental Indenture into Articles and Sections, the provision of the table of contents hereto and the insertion of headings are for convenience of reference only and shall not affect the construction or interpretation of this Second Supplemental Indenture.


2.	2013 NOTES


2.1	Form and Terms of 2013 Notes

There shall be and there is hereby created for issuance under the Original Indenture, as supplemented by this Second Supplemental Indenture; (i) a series of Securities which shall consist of an aggregate principal amount of U.S.$400,000,000 2013 Notes; provided, however, that if the Issuer shall, at any time after the date hereof, increase the principal amount of 2013 Notes which may be issued and issue such increased principal amount (or any portion thereof), then any such additional 2013 Notes so issued shall have the same form and terms (other than the date of issuance and the date from which interest thereon shall begin to accrue and, under certain circumstances, the first interest payment date), and shall carry the same right to receive accrued and unpaid interest, as the 2013 Notes theretofore issued; and provided, further, that, notwithstanding the foregoing, the Issuer shall not be entitled to increase the principal amount of 2013 Notes which may be issued or issue any such increased principal amount if the Issuer has effected satisfaction and discharge of the Indenture pursuant to Section

4.01 of the Original Indenture or defeasance or covenant defeasance pursuant to Article 12 of the Original Indenture.

The 2013 Notes will mature, and the principal of the 2013 Notes and accrued and unpaid interest thereon will be due and payable, on May 15, 2013, or such earlier date as the principal of any of the 2013 Notes may become due and payable in accordance with the provisions of the Original Indenture and this Second Supplemental Indenture.

The 2013 Notes shall bear interest on the principal amount thereof from May 20, 2008 or from the last date to which interest shall have been paid or duly made available for payment on the 2013 Notes, whichever is later, at the rate of 5.75% per annum, payable semi-

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annually in arrears on May 15 and November 15 (each, a " 2013 Interest Payment Date ") in each year, commencing November 15, 2008, until the principal of and premium, if any, on the applicable series of 2013 Notes is paid or duly made available for payment; and should the Issuer at any time default in the payment of any principal of, or premium, if any, or interest on the 2013 Notes when due, the Issuer shall pay interest (such interest to be payable on demand), to the extent permitted by law, on the amount in default at the same rate applicable to the 2013 Notes. Interest on the 2013 Notes shall be computed on the basis of a 360-day year comprised of twelve 30-day months. The interest payable, and punctually paid or duly provided for, on any 2013 Interest Payment Date will, as provided in the Original Indenture, be paid to the Persons in whose names the 2013 Notes (or one or more predecessor 2013 Notes) are registered at the close of business on May 1 or November 1 (the " 2013 Regular Record Dates "), as the case may be, immediately prior to such 2013 Interest Payment Date, regardless of whether any such 2013 Regular Record Date is a business day. Any such interest on the 2013 Notes not so punctually paid or duly provided for on any 2013 Interest Payment Date shall be payable, as applicable, as provided in the form of Note annexed hereto as Schedule A to this Second Supplemental Indenture.

For the purposes only of the disclosure required by the Interest Act (Canada), and without affecting the amount of interest payable to any holder of a 2013 Note or the calculation of interest on any 2013 Note, if the rate of interest on any 2013 Note is calculated on the basis of a year (the " deemed year ") which contains fewer days than the actual number of days in the calendar year of calculation, such rate of interest shall be expressed as a yearly rate for the purposes of the Interest Act (Canada) by multiplying such rate of interest by the actual number of days in the calendar year of calculation and dividing it by the number of days in the deemed year.

All payments of principal of and premium, if any, and interest on the 2013 Notes will be made in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts, and all references herein to " United States dollars ", " U.S.$ " or " U.S. dollars " shall be deemed to refer to such coin or currency of the United States of America.

The principal of and premium, if any, and interest on the 2013 Notes shall be payable, and the 2013 Notes may be surrendered for exchange, registration, transfer or discharge from registration, at the Corporate Trust Office of the Trustee in the City of New York, New York, and in such other places as the Issuer may from time to time designate in accordance with the Original Indenture. The Trustee is hereby appointed as the initial Paying Agent, registrar and transfer agent for the 2013 Notes in the City of New York, New York.

The 2013 Notes shall be issued only as fully registered 2013 Notes, without coupons, in denominations of U.S. $2,000 and integral multiples of $1,000 thereafter. Each series of 2013 Notes initially will be represented by one or more global Securities (collectively, the " 2013 Global Notes ") registered in the name of The Depository Trust Company, as Depositary or its nominee, or a successor depositary or its nominee.

The certificates representing the 2013 Notes shall bear the following legend:

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"UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR SECURITIES IN DEFINITNE REGISTERED FORM, THIS CERTIFICATE MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY DTC TO A NOMINEE OF DTC OR BY A NOMINEE OF DTC TO DTC OR ANOTHER NOMINEE OF DTC OR BY DTC OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITARY OR A NOMINEE OF SUCH SUCCESSOR DEPOSITARY. "

The 2013 Notes and the certificate of the Trustee endorsed thereon shall be in the form set out in Schedule A to this Second Supplemental Indenture with such appropriate insertions, omissions, substitutions and variations as the Trustee may approve and shall be numbered in such manner as the Trustee may approve, such approvals of the Trustee concerning any 2013 Note to be conclusively evidenced by its certification of such 2013 Note.

The Security Register referred to in Section 3.05 of the Original Indenture shall, with respect to the 2013 Notes, be kept at the office or agency in the City of New York, New York that the Issuer may from time to time designate for such purpose (which shall initially be the Corporate Trust Office of the Trustee in the City of New York, New York), and at such other place or places as the Issuer with the approval of the Trustee may hereafter designate.

The 2013 Notes shall be subject to redemption at the option of the Issuer as provided in Article 4 (Optional Redemption of Notes) of this Second Supplemental Indenture and Article 10 of the Original Indenture and repurchase by the Issuer as provided in Article 5 of this Second Supplemental Indenture. The Issuer shall not otherwise be required to redeem, purchase or repay 2013 Notes pursuant to any mandatory redemption, sinking fund or analogous provision or at the option of the holders thereof. The 2013 Notes will not be convertible into or exchangeable for securities of any Person.

The 2013 Notes shall have the other terms and provisions set forth in the forms of 2013 Notes attached hereto as Schedule A to this Second Supplemental Indenture with the same force and effect as if such terms and provisions were set forth in full herein.

2.2 Issuance of 2013 Notes

The 2013 Notes in the aggregate principal amount of U.S.$400,000,000 shall be executed by the Designated Officer of the Issuer and delivered by the Issuer to the Trustee on the date of issue for authentication and delivery pursuant to and in accordance with the provisions of Section 3.02 of the Original Indenture and, upon the requirements of such provisions being complied with, the 2013 Notes shall be authenticated by or on behalf of the Trustee and delivered by it to or upon the Issuer Order of the Issuer without any further act or formality on the part of the Issuer. The Trustee shall have no duty or responsibility with respect to the use or application of any of the 2013 Notes so certified and delivered or the proceeds thereof.


3.	2018 NOTES


3.1	Form and Terms of 2018 Notes

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There shall be and there is hereby created for issuance under the Original Indenture, as supplemented by this Second Supplemental Indenture; (i) a series of Securities which shall consist of an aggregate principal amount of U.S.$300,000,000 2018 Notes; provided, however, that if the Issuer shall, at any time after the date hereof, increase the principal amount of 2018 Notes which may be issued and issue such increased principal amount (or any portion thereof), then any such additional 2018 Notes so issued shall have the same form and terms (other than the date of issuance and the date from which interest thereon shall begin to accrue and, under certain circumstances, the first interest payment date), and shall carry the same right to receive accrued and unpaid interest, as the 2018 Notes theretofore issued; and provided, further, that, notwithstanding the foregoing, the Issuer shall not be entitled to increase the principal amount of 2018 Notes which may be issued or issue any such increased principal amount if the Issuer has effected satisfaction and discharge of the Indenture pursuant to Section 4.01 of the Original Indenture or defeasance or covenant defeasance pursuant to Article 12 of the Original Indenture.

The 2018 Notes will mature, and the principal of the 2018 Notes and accrued and unpaid interest thereon will be due and payable, on May 15, 2018, or such earlier date as the principal of any of the 2018 Notes may become due and payable in accordance with the provisions of the Original Indenture and this Second Supplemental Indenture.

The 2018 Notes shall bear interest on the principal amount thereof from May 20, 2008 or from the last date to which interest shall have been paid or duly made available for payment on the 2018 Notes, whichever is later, at the rate of 6.50% per annum, payable semi annually in arrears on May 15 and November 15 (each, a "2018 Interest Payment Date") in each year, commencing November 15, 2008, until the principal of and premium, if any, on the applicable series of 2018 Notes is paid or duly made available for payment; and should the Issuer at any time default in the payment of any principal of, or premium, if any, or interest on the 2018 Notes when due, the Issuer shall pay interest (such interest to be payable on demand), to the extent permitted by law, on the amount in default at the same rate applicable to the 2018 Notes. Interest on the 2018 Notes shall be computed on the basis of a 360-day year comprised of twelve 30-day months. The interest payable, and punctually paid or duly provided for, on any 2018 Interest Payment Date will, as provided in the Original Indenture, be paid to the Persons in whose names the 2018 Notes (or one or more predecessor 2018 Notes) are registered at the close of business on May 1 or November 1 (the "2018 Regular Record Dates"), as the case may be, immediately prior to such 2018 Interest Payment Date, regardless of whether any such 2018 Regular Record Date is a business day. Any such interest on the 2018 Notes not so punctually paid or duly provided for on any 2018 Interest Payment Date shall be payable, as applicable, as provided in the form of 2018 Note annexed hereto as Schedule A to this Second Supplemental Indenture.

For the purposes only of the disclosure required by the Interest Act (Canada), and without affecting the amount of interest payable to any holder of a 2018 Note or the calculation of interest on any 2018 Note, if the rate of interest on any 2018 Note is calculated on the basis of the deemed year which contains fewer days than the actual number of days in the calendar year of calculation, such rate of interest shall be expressed as a yearly rate for the purposes of the Interest Act (Canada) by multiplying such rate of interest by the actual number of days in the calendar year of calculation and dividing it by the number of days in the deemed year.

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All payments of principal of and premium, if any, and interest on the 2018 Notes will be made in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts.

The principal of and premium, if any, and interest on the 2018 Notes shall be payable, and the 2018 Notes may be surrendered for exchange, registration, transfer or discharge from registration, at the Corporate Trust Office of the Trustee in the City of New York, New York, and in such other places as the Issuer may from time to time designate in accordance with the Original Indenture. The Trustee is hereby appointed as the initial Paying Agent, registrar and transfer agent for the 2018 Notes in the City of New York, New York.

The 2018 Notes shall be issued only as fully registered 2018 Notes, without coupons, in denominations of U.S.$2,000 and integral multiples of $1,000 thereafter. Each series of 2018 Notes initially will be represented by one or more global Securities (collectively, the " 2018 Global Notes ") registered in the name of The Depository Trust Company, as Depositary or its nominee, or a successor depositary or its nominee.

The certificates representing the 2018 Notes shall bear the following legend: "UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN

PART FOR SECURITIES IN DEFINITIVE REGISTERED FORM, THIS CERTIFICATE MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY DTC TO A NOMINEE OF DTC OR BY A NOMINEE OF DTC TO DTC OR ANOTHER NOMINEE OF DTC OR BY DTC OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITARY OR A NOMINEE OF SUCH SUCCESSOR DEPOSITARY."

The 2018 Notes and the certificate of the Trustee endorsed thereon shall be in the form set out in Schedule A to this Second Supplemental Indenture with such appropriate insertions, omissions, substitutions and variations as the Trustee may approve and shall be numbered in such manner as the Trustee may approve, such approvals of the Trustee concerning any 2018 Note to be conclusively evidenced by its certification of such 2018 Note.

The Security Register referred to in Section 3.05 of the Original Indenture shall, with respect to the 2018 Notes, be kept at the office or agency in the City of New York, New York that the Issuer may from time to time designate for such purpose (which shall initially be the Corporate Trust Office of the Trustee in the City of New York, New York), and at such other place or places as the Issuer with the approval of the Trustee may hereafter designate.

The 2018 Notes shall be subject to redemption at the option of the Issuer as provided in Article 4 (Optional Redemption of Notes) of this Second Supplemental Indenture and Article 10 of the Original Indenture and repurchase by the Issuer as provided in Article 5 of this Second Supplemental Indenture. The Issuer shall not otherwise be required to redeem, purchase or repay 2018 Notes pursuant to any mandatory redemption, sinking fund or analogous provision or at the option of the holders thereof. The 2018 Notes will not be convertible into or exchangeable for securities of any Person.

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The 2018 Notes shall have the other terms and provisions set forth in the forms of 2018 Notes attached hereto as Schedule A to this Second Supplemental Indenture with the same force and effect as if such terms and provisions were set forth in full herein.

3.2 Issuance of 2018 Notes

The 2018 Notes in the aggregate principal amount of U.S$300,000,000 shall be executed by the Designated Officer of the Issuer and delivered by the Issuer to the Trustee on the date of issue for authentication and delivery pursuant to and in accordance with the provisions of Section 3.02 of the Original Indenture and, upon the requirements of such provisions being complied with, the 2018 Notes shall be authenticated by or on behalf of the Trustee and delivered by it to or upon the Issuer Order of the Issuer without any further act or formality on the part of the Issuer. The Trustee shall have no duty or responsibility with respect to the use or application of any of the 2018 Notes so certified and delivered or the proceeds thereof.


4.	OPTIONAL REDEMPTION OF NOTES


4.1	Redemption of Notes


(a)	100% of the principal amount of the Notes to be redeemed; and


(b)	the sum of the present values of the remaining scheduled payments of principal and interest thereon (exclusive of interest accrued to the date of redemption) discounted to the Redemption Date on a semi-annual basis (assuming a 360-day year consisting of twelve 30-day months) at the Treasury Yield, plus 40 basis points;

The Issuer will provide notice to the Trustee prior to the Redemption Date of the calculation of the Redemption Price.


4.2	Certain Additional Definitions

For the purposes of this Second Supplemental Indenture, the following expressions shall have the following meanings:

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utilized, at the time of selection and in accordance with customary financial practice, in pricing new issues of corporate debt securities of comparable maturity to the remaining term of the Securities;

"Comparable Treasury Price" means (1) the average of the Reference Treasury Dealer Quotations for such redemption date, after excluding the highest and lowest of such Reference Treasury Dealer Quotations, or (2) if the Trustee obtains fewer than four such Reference Treasury Dealer Quotations, the average of all such Reference Treasury Dealer Quotations;

"Independent Investment Banker" means one of the Reference Treasury Dealers selected by the Trustee after consultation with the Corporation or, if such firm is unwilling or unable to select the Comparable Treasury Issue, an independent investment banking institution of national standing in the United States appointed by the Trustee after consultation with the Corporation;

"Reference Treasury Dealers" means Morgan Stanley & Co. Incorporated and REC Capital Markets Corporation or their affiliates which are primary U.S. government securities dealers, and their respective successors; provided, however, that if any of the foregoing ceases to be a primary U.S. government securities dealer in The City of New York (a "Primary Treasury Dealer"), the Corporation will substitute therefor another Primary Treasury Dealer;

"Reference Treasury Dealer Quotations" means, with respect to each Reference Treasury Dealer and any redemption date, the average, as determined by the Trustee, of the bid and asked prices for the Comparable Treasury Issue (expressed in each case as a percentage of its principal amount) quoted in writing to the Trustee by such Reference Treasury Dealer at 3:30 p.m. New York time on the third business day preceding such redemption date; and


5.	CHANGE OF CONTROL


5.1	Change of Control

(a) Upon the occurrence of a Change of Control Triggering Event, unless all Notes have been called for redemption pursuant to Section 4.1 hereof, each Holder of Notes shall have the right to require the Company to repurchase all or any part (equal to $2,000 or an integral multiple of $1,000 in excess thereof) of such Holder's Notes at an offer price in cash equal to the Change of Control Payment.

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(i)	that the Change of Control Offer is being made pursuant to this Section 4.1 and that all Notes tendered will be accepted for payment;


(ii)	the Change of Control Payment and the purchase date, which shall be a Business Day no earlier than 30 days and no later than 60 days from the date such notice is mailed (the "Change of Control Payment Date");


(iii)	the CUSIP numbers for the Notes;


(iv)	that any Note not tendered will continue to accrue interest;


(v)	that, unless the Company defaults in the payment of the Change of Control Payment, all Notes accepted for

payment pursuant to the Change of Control Offer will cease to accrue interest after the Change of Control Payment

Date;


(vi)	that Holders electing to have any Notes purchased pursuant to a Change of Control Offer will be required to surrender such Notes to the Paying Agent at the address specified in the notice prior to the close of business on the third Business Day preceding the Change of Control Payment Date;

(vii)


(viii)	that Holders whose Notes are being purchased only in part will be issued new Notes equal in principal amount to the unpurchased portion of the Notes surrendered, which unpurchased portion will be equal to $2,000 in principal amount or an integral multiple of $1,000 in excess thereof; and


(ix)	if such notice is mailed prior to the date of the occurrence of the Change of Control Triggering Event, that the Change of Control Offer is conditional on the Change of Control Triggering Event occurring on or prior to the Change of Control Payment Date.

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(c) The Company shall cause the Change of Control Offer to remain open for at least 20 Business Days or such longer period as is required by applicable law. The Company shall comply with the requirements of Rule 14e-I under the Exchange Act and any other securities laws and regulations thereunder to the extent those laws and regulations are applicable in connection with the repurchase of the Notes as a result of a Change in Control Triggering Event. To the extent that the provisions of any securities laws or regulations conflict with the provisions of this Section 4.1, the Company will comply with the applicable securities laws and regulations and will not be deemed to have breached its obligations under this Section

4.1 by virtue of such conflict.

(d) On the Change of Control Payment Date, the Company will, to the extent lawful:


(i)	accept for payment all Notes or portions thereof properly tendered pursuant to the Change of Control Offer;


(ii)	deposit with the Paying Agent an amount equal to the Change of Control Payment in respect of all Notes or portions of Notes properly tendered; and


(iii)	deliver or cause to be delivered to the Trustee the Notes so accepted together with an Officers' Certificate stating the aggregate principal amount of Notes or portions of Notes being purchased by the Company.

$1,000 in excess thereof. The Company will publicly announce the results of the Change of Control Offer on or as soon as practicable after the Change of Control Payment Date.

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5.2 Certain Additional Definitions

For the purposes of this Second Supplemental Indenture, the following expressions shall have the following meanings:

" Below Investment Grade Rating Event " means the Notes are rated below an Investment Grade Rating by at least two out of three of the Rating Agencies (as defined below), if there are three Rating Agencies, or all of the Rating Agencies, ifthere are less than three Rating Agencies, (the "Required Threshold") on any date from the date of the public notice of an arrangement or transaction that could result in a Change of Control until the end of the 60-day period following public notice of the occurrence of the Change of Control, which 60-day period shall be extended if, by the end of the 60-day period, the rating of the Notes is under publicly announced consideration for a possible downgrade by such number of Rating Agencies which, together with the Rating Agencies which have already lowered their ratings on the Notes as aforesaid, would aggregate in number the Required Threshold, such extension to continue for so long as consideration for a possible downgrade continues by such number of Rating Agencies which, together with the Rating Agencies which have already lowered their ratings on the Notes as aforesaid, would aggregate in number the Required Threshold.

(2) the consummation of any transaction (including, without limitation, any merger or amalgamation) the result of which is that any person (as such term is used in Section 13(d) of the Exchange Act) becomes the beneficial owner, directly or indirectly, of more than 50% of the

then outstanding number of Canadian Pacific Railway Limited's voting shares; or (3) the first day on which a majority of the members of Canadian Pacific .Railway Limited' s Board of Directors are not Continuing Directors.

" Change of Control Offer " means an offer to repurchase Notes pursuant to Section 4.1 hereof. .

" Change of Control Payment " means, with respect to Notes tendered for repurchase pursuant to a Change of Control Offer, an amount equal to 101% of the aggregate principal amount of such Notes plus accrued and unpaid interest thereon, if any, to the date of repurchase.

" Change of Control Triggering Event " means the occurrence of both a Change of Control and a Below Investment Grade Rating Event.

" Continuing Directors " means, as of any date of determination, any member of the Board of Directors of Canadian Pacific Railway Limited who (1) was a member of such Board of Directors on the date of the issuance of the Notes; or (2) was nominated for election or elected to such Board of Directors with the approval of a majority of the Continuing Directors who were members of such Board of Directors at the time of such nomination or election (either by a specific vote or by approval of Canadian Pacific Railway Limited's proxy statement in

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which such member was named as a nominee for election as a director, without objection to such nomination).

" DBRS " means DBRS Limited.

" Investment Grade Rating " means a rating equal to or higher than BBB (low) (or the equivalent) by DBRS, Baa3 (or the equivalent) by Moody's and BBB- (or the equivalent) by S&P.

" Moody's " means Moody's Investors Service, Inc.

" Rating Agencies " means (1) each of DBRS, Moody's and S&P; and (2) if one or more of DBRS, Moody's or S&P ceases to rate the Notes or fails to make a rating of the Notes publidy available for any reason outside of the Company's control, a "nationally recognized statistical rating organization" within the meaning of Rule 15c3-l(c)(2)(vi)(F) under the Securities Exchange Act of 1934, as amended, selected by the Company (by a resolution of its Board of Directors) as a replacement agency for one or more of DBRS, Moody's or S&P, as the case may be, or if a replacement agency is not selected, the remaining such agencies providing publicly available ratings of the Notes.

" Required Threshold " has the meaning set forth in the definition of Below Investment Grade Rating Event.

" S&P " means Standard & Poor, a Division of The McGraw-Hill Companies, Inc.


6.	GENERAL


6.1	Effectiveness

This Second Supplemental Indenture will become effective upon its execution and delivery.


6.2	Effect of Recitals

The recitals contained herein and in the Securities, except the Trustee's certificates of authentication, shall be taken as the statements of the Issuer, and neither the Trustee nor any Authenticating Agent assumes any responsibility for their correctness.· Neither the Trustee nor any Authenticating Agent shall be accountable for the use or application by the Issuer of the Securities or the proceeds thereof. The Trustee makes no representations as to the validity or sufficiency of this Second Supplemental Indenture or of the Securities except that the Trustee represents that it is duly authorized to execute and deliver this Second Supplemental Indenture, authenticate the Securities and perform its obligations under the Original Indenture and hereunder, and that the statements made by it or to be made by it in a Statement of Eligibility and Qualification on Form T-1 supplied to the Issuer are true and accurate.


6.3	Ratification of Original Indenture

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The Original Indenture as supplemented by this Second Supplemental Indenture is in all respects ratified and confirmed, and this Second Supplemental Indenture shall be deemed part of the Original Indenture in the manner and to the extent herein and therein provided.


6.4	Governing Law

This Second Supplemental Indenture, the Original Indenture as supplemented hereby and the Securities shall be governed by and construed in accordance with the laws of the State of New York.


6.5	Severability

In case any prov1s1on in this Second Supplemental Indenture, the Original Indenture as supplemented hereby or in the Securities shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby.


6.6	Acceptance of Trust

The Trustee hereby accepts the trusts in this Second Supplemental Indenture declared and provided for and agrees to perform the same upon the terms and conditions herein before set forth in trust for the various Persons who shall from time to time be Note holders subject to all the terms and conditions herein set forth.


6.7	Counterparts and Formal Date

This Second Supplemental Indenture may be executed in any number of counterparts, each of which so executed shall be deemed to be an original, but all such counterparts shall together constitute but one and the same instrument and notwithstanding their date of execution shall be deemed to bear the date first above written.

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IN WITNESS WHEREOF the parties hereto have executed this Supplemental Indenture on the date first above written.

CANADIAN PACIFIC RAILWAY COMPANY

By: /s/ F.J. Green

F. J. Green

President and Chief Executive

Officer

By: /s/ M.R. Lambert

M. R. Lambert

Executive Vice President and

Chief Financial Officer

THE BANK OF NEW YORK, as trustee

By:

[Signature Page for the Second Supplemental Indenture]

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IN WITNESS WHEREOF the parties hereto have executed this Supplemental Indenture on the date first above written.

CANADIAN PACIFIC RAILWAY COMPANY

By:

F.J. Green

President and Chief Executive Officer

By:

M.R. Lambert

Executive Vice President and

Chief Financial Officer

THE BANK OF NEW YORK, as trustee

By: /s/ Lesley Daley

LESLEY DALEY

ASSISTANT VICE PRESIDENT

[Signature Page for the Second Supplemental Indenture]

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Dated as of May 15, 2009

CANADIAN PACIFIC RAILWAY COMPANY

and

THE BANK OF NEW YORK MELLON

THIRD SUPPLEMENTAL INDENTURE

to the

TRUST INDENTURE

Dated as of May 8, 2007

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TABLE OF CONTENTS


1.	INTERPRETATIONS AND AMENDMENTS 1


1.1	Third Supplemental Indenture 1


1.2	Definitions in Third Supplemental Indenture 2


1.3	Interpretation not Affected by Headings 2


2.	NOTES 2


2.1	Form and Terms of Notes 2


2.2	Issuance of Notes 4


3.	OPTIONAL REDEMPTION OF NOTES 4


3.1	Redemption of Notes 4


3.2	Certain Additional Definitions 5


4.	CHANGE OF CONTROL 6


4.1	Change of Control 6


4.2	Certain Additional Definitions 8


5.	GENERAL 10


5.1	Effectiveness 10


5.2	Effect of Recitals 10


5.3	Ratification of Original Indenture 10


5.4	Governing Law 10


5.5	Severability 10


5.6	Acceptance of Trust 10


5.7	Counterparts and Formal Date 11

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THIS THIRD SUPPLEMENTAL INDENTURE (this "Third Supplemental Indenture") dated as of May 15, 2009 between CANADIAN PACIFIC RAILWAY COMPANY, a corporation incorporated under the Canada Business Corporations Act and having its head office in the City of Calgary, in the Province of Alberta (the "Issuer") and THE BANK OF NEW YORK MELLON, a banking corporation duly organized and existing under the laws of the State of New York, having an office in the City of New York, in the State of New York (the "Trustee")

RECITALS OF THE ISSUER

WHEREAS, the Issuer and the Trustee entered into an Indenture, dated as of May 8, 2007 (the "Original Indenture"). Section 8.01(7) of the Original Indenture provides that the Issuer and the Trustee may, without the consent of any Holder, enter into a supplemental indenture to establish the form or terms of Securities of any series as permitted by Section 2.01 and 3.01 thereof.

WHEREAS, pursuant to Sections 2.01 and 3.01 of the Original Indenture, the Issuer desires to provide for the establishment of a series of Securities under the Original Indenture, and the form and terms thereof, as hereinafter set forth.

WHEREAS, the Issuer has requested that the Trustee execute and deliver this Third Supplemental Indenture. The Issuer has delivered to the Trustee an Opinion of Counsel and an Officers' Certificate pursuant to Sections 1.02 and 8.03 of the Original Indenture to the effect, among other things, that all conditions precedent provided for in the Indenture to the Trustee's execution and delivery of this Third Supplemental Indenture have been complied with. All acts and things necessary have been done and performed to make this Third Supplemental Indenture enforceable in accordance with its terms, and the execution and delivery of this Third Supplemental Indenture has been duly authorized in all respects.

WHEREAS the proper officers of the Issuer have duly authorized the creation and issuance of a series of Securities to be designated as 7.25% Notes due 2019 (the "Notes") and to be initially limited (subject to the exceptions described herein and in the Original Indenture) to the aggregate principal amount of U.S.$350,000,000; the further terms and conditions thereof being hereinafter set forth, all in accordance with a resolution of the directors of the Issuer;

NOW, THEREFORE, THIS THIRD SUPPLEMENTAL INDENTURE

WITNESSETH: For and in consideration of the premises and the purchase of the Securities (as herein defined) by the holders thereof, it is mutually covenanted and agreed, for the equal and proportionate benefit of all holders of the Securities, as follows:


1.	INTERPRETATIONS AND AMENDMENTS


1.1	Third Supplemental Indenture

As used herein "Third Supplemental Indenture", "hereto", "herein", "hereof ', "hereby", "hereunder" and similar expressions refer to this Third Supplemental Indenture and

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1.2	Definitions in Third Supplemental Indenture

All terms contained in this Third Supplemental Indenture which are defined in the Original Indenture and not defined herein shall, for all purposes hereof, have the meanings given to such terms in the Original Indenture, unless the context otherwise specifies or requires; provided, however, that notwithstanding the foregoing, the terms "Issuer" and "Trustee" shall have the respective meanings given to them in the Original Indenture.


1.3	Interpretation not Affected by Headings

The division of this Third Supplemental Indenture into Articles and Sections, the provision of the table of contents hereto and the insertion of headings are for convenience of reference only and shall not affect the construction or interpretation of this Third Supplemental Indenture.


2.	NOTES


2.1	Form and Terms of Notes

There shall be and there is hereby created for issuance under the Original Indenture, as supplemented by this Third Supplemental Indenture; (i) a series of Securities which shall consist of an aggregate principal amount of U.S.$350,000,000 Notes; provided, however, that if the Issuer shall, at any time after the date hereof, increase the principal amount of Notes which may be issued and issue such increased principal amount (or any portion thereof), then any such additional Notes so issued shall have the same form and terms (other than the date of issuance and the date from which interest thereon shall begin to accrue and, under certain circumstances, the first interest payment date), and shall carry the same right to receive accrued and unpaid interest, as the Notes theretofore issued; and provided, further, that, notwithstanding the foregoing, the Issuer shall not be entitled to increase the principal amount of Notes which may be issued or issue any such increased principal amount if the Issuer has effected satisfaction and discharge of the Indenture pursuant to Section 4.01 of the Original Indenture or defeasance or covenant defeasance pursuant to Article 12 of the Original Indenture.

The Notes will mature, and the principal of the Notes and accrued and unpaid interest thereon will be due and payable, on May 15, 2019, or such earlier date as the principal of any of the Notes may become due and payable in accordance with the provisions of the Original Indenture and this Third Supplemental Indenture.

The Notes shall bear interest on the principal amount thereof from May 15, 2009 or from the last date to which interest shall have been paid or duly made available for payment on the Notes, whichever is later, at the rate of 7.25% per annum, payable semi-annually in arrears on May 15 and November 15 (each, an "Interest Payment Date") in each year, commencing November 15, 2009, until the principal of and premium, if any, on the applicable series of Notes is paid or duly made available for payment; and should the Issuer at any time

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default in the payment of any principal of, or premium, if any, or interest on the Notes when due, the Issuer shall pay interest (such interest to be payable on demand), to the extent permitted by law, on the amount in default at the same rate applicable to the Notes. Interest on the Notes shall be computed on the basis of a 360-day year comprised of twelve 30-day months. The interest payable, and punctually paid or duly provided for, on any Interest Payment Date will, as provided in the Original Indenture, be paid to the Persons in whose names the Notes (or one or more predecessor Notes) are registered at the close of business on May 1 or November 1 (the "Regular Record Dates"), as the case may be, immediately prior to such Interest Payment Date, regardless of whether any such Regular Record Date is a business day. Any such interest on the Notes not so punctually paid or duly provided for on any Interest Payment Date shall be payable, as applicable, as provided in the form of Note annexed hereto as Schedule A to this Third Supplemental Indenture.

For the purposes only of the disclosure required by the Interest Act (Canada), and without affecting the amount of interest payable to any holder of a Note or the calculation of interest on any Note, if the rate of interest on any Note is calculated on the basis of a year (the "deemed year") which contains fewer days than the actual number of days in the calendar year of calculation, such rate of interest shall be expressed as a yearly rate for the purposes of the Interest Act (Canada) by multiplying such rate of interest by the actual number of days in the calendar year of calculation and dividing it by the number of days in the deemed year.

All payments of principal of and premium, if any, and interest on the Notes will be made in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts, and all references herein to "United States dollars", "U.S.$" or "U.S. dollars" shall be deemed to refer to such coin or currency of the United States of America.

The Notes shall be issued only as fully registered Notes, without coupons, in denominations of U.S.$2,000 and integral multiples of $1,000 thereafter. Each series of Notes initially will be represented by one or more global Securities (collectively, the "Global Notes") registered in the name of The Depository Trust Company, as Depositary or its nominee, or a successor depositary or its nominee.

The certificates representing the Notes shall bear the following legend:

"UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR SECURITIES IN DEFINITIVE REGISTERED FORM, THIS CERTIFICATE MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY DTC TO A NOMINEE OF DTC OR BY A NOMINEE OF DTC TO DTC OR ANOTHER NOMINEE

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OF DTC OR BY DTC OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITARY OR A NOMINEE OF SUCH SUCCESSOR DEPOSITARY."

The Notes and the certificate of the Trustee endorsed thereon shall be in the form set out in Schedule A to this Third Supplemental Indenture with such appropriate insertions, omissions, substitutions and variations as the Trustee may approve and shall be numbered in such manner as the Trustee may approve, such approvals of the Trustee concerning any Note to be conclusively evidenced by its certification of such Note.

The Notes shall be subject to redemption at the option of the Issuer as provided in Article 4 (Optional Redemption of Notes) of this Third Supplemental Indenture and Article 10 of the Original Indenture and repurchase by the Issuer as provided in Article 5 of this Third Supplemental Indenture. The Issuer shall not otherwise be required to redeem, purchase or repay Notes pursuant to any mandatory redemption, sinking fund or analogous provision or at the option of the holders thereof. The Notes will not be convertible into or exchangeable for securities of any Person.

The Notes shall have the other terms and provisions set forth in the forms of Notes attached hereto as Schedule A to this Third Supplemental Indenture with the same force and effect as if such terms and provisions were set forth in full herein.

2.2 Issuance of Notes

The Notes in the aggregate principal amount of U.S.$350,000,000 shall be executed by the Designated Officer of the Issuer and delivered by the Issuer to the Trustee on the date of issue for authentication and delivery pursuant to and in accordance with the provisions of Section 3.02 of the Original Indenture and, upon the requirements of such provisions being complied with, the Notes shall be authenticated by or on behalf of the Trustee and delivered by it to or upon the Issuer Order of the Issuer without any further act or formality on the part of the Issuer. The Trustee shall have no duty or responsibility with respect to the use or application of any of the Notes so certified and delivered or the proceeds thereof.


3.	OPTIONAL REDEMPTION OF NOTES


3.1	Redemption of Notes

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(a)	100% of the principal amount of the Notes to be redeemed; and


(b)	the sum of the present values of the remaining scheduled payments of principal and interest thereon (exclusive of interest accrued to the date of redemption) discounted to the Redemption Date on a semi-annual basis (assuming a 360-day year consisting of twelve 30-day months) at the Treasury Yield, plus 50 basis points;

The Issuer will provide notice to the Trustee prior to the Redemption Date of the calculation of the Redemption Price.

3.2 Certain Additional Definitions

For the purposes of this Third Supplemental Indenture, the following expressions shall have the following meanings:

"Comparable Treasury Issue" means the United States Treasury security or securities selected by an Independent Investment Banker as having an actual or interpolated maturity comparable to the remaining term of the Securities to be redeemed that would be utilized, at the time of selection and in accordance with customary financial practice, in pricing new issues of corporate debt securities of comparable maturity to the remaining term of the Securities;

"Comparable Treasury Price" means (1) the average of the Reference Treasury Dealer Quotations for such redemption date, after excluding the highest and lowest of such Reference Treasury Dealer Quotations, or (2) if the Trustee is provided fewer than four such Reference Treasury Dealer Quotations, the average of all such Reference Treasury Dealer Quotations;

"Independent Investment Banker" means one of the Reference Treasury Dealers selected by the Issuer or, if such firm is unwilling or unable to select the Comparable Treasury Issue, an independent investment banking institution of national standing in the United States appointed by the Issuer;

"Reference Treasury Dealers" means J.P. Morgan Securities Inc. and Morgan Stanley & Co. Incorporated or their affiliates which are primary U.S. government securities dealers, and their respective successors; provided, however, that if any of the foregoing ceases to be a primary U.S. government securities dealer in The City of New York (a "Primary Treasury Dealer"), the Issuer will substitute therefor another Primary Treasury Dealer;

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percentage of its principal amount) quoted in writing to the Trustee by such Reference Treasury Dealer at 3:30 p.m. New York time on the third business day preceding such redemption date; and


4.	CHANGE OF CONTROL


4.1	Change of Control

(a) Upon the occurrence of a Change of Control Triggering Event, unless all Notes have been called for redemption pursuant to Section 4.1 hereof, each Holder of Notes shall have the right to require the Issuer to repurchase all or any part (equal to $2,000 or an integral multiple of $1,000 in excess thereof) of such Holder's Notes at an offer price in cash equal to the Change of Control Payment.

(b) Within 30 days following any Change of Control Triggering Event, the Issuer shall mail, or cause to be mailed, a notice to each Holder describing the transaction or transactions that constitute the Change of Control Triggering Event and specifying:


(i)	that the Change of Control Offer is being made pursuant to this Section 4.1 and that all Notes tendered will be accepted for payment;


(ii)	the Change of Control Payment and the purchase date, which shall be a Business Day no earlier than 30 days and no later than 60 days from the date such notice is mailed (the "Change of Control Payment Date");


(iii)	the CUSIP number for the Notes;


(iv)	that any Note not tendered will continue to accrue interest;


(v)	that, unless the Issuer defaults in the payment of the Change of Control Payment, all Notes accepted for

payment pursuant to the Change of Control Offer will cease to accrue interest after the Change of Control Payment

Date;


(vi)	that Holders electing to have any Notes purchased pursuant to a Change of Control Offer will be required to surrender such Notes to the Paying Agent at the address specified in the notice prior to the close of business on the third

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Business Day preceding the Change of Control Payment Date;

(vii)


(viii)	that Holders whose Notes are being purchased only in part will be issued new Notes equal in principal amount to the unpurchased portion of the Notes surrendered, which unpurchased portion will be equal to $2,000 in principal amount or an integral multiple of $1,000 in excess thereof; and


(ix)	if such notice is mailed prior to the date of the occurrence

of the Change of Control Triggering Event, that the Change of Control Offer is conditional on the Change of Control Triggering Event occurring on or prior to the Change of Control Payment Date.

(c) The Issuer shall cause the Change of Control Offer to remain open for at least 20 Business Days or such longer period as is required by applicable law. The Issuer shall comply with the requirements of Rule 14e-1 under the Securities Exchange Act of 1934, as amended (the "Exchange Act") and any other securities laws and regulations thereunder to the extent those laws and regulations are applicable in connection with the repurchase of the Notes as a result of a Change in Control Triggering Event. To the extent that the provisions of any securities laws or regulations conflict with the provisions of this Section 4.1, the Issuer will comply with the applicable securities laws and regulations and will not be deemed to have breached its obligations under this Section 4.1 by virtue of such conflict.

(d) On the Change of Control Payment Date, the Issuer will, to the extent lawful:


(i)	accept for payment all Notes or portions thereof properly tendered pursuant to the Change of Control Offer;


(ii)	deposit with the Paying Agent an amount equal to the Change of Control Payment in respect of all Notes or portions of Notes properly tendered; and


(iii)	deliver or cause to be delivered to the Trustee the Notes so accepted together with an Officers' Certificate stating the

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aggregate principal amount of Notes or portions of Notes being purchased by the Issuer.

$1,000 in excess thereof. The Issuer will publicly announce the results of the Change of Control Offer on or as soon as practicable after the Change of Control Payment Date.

(f) The Issuer shall not be required to make a Change of Control Offer upon a Change of Control Triggering Event if a third party makes the Change of Control Offer in the manner, at the times and otherwise in compliance with the requirements set forth in this Section 4.1 applicable to a Change of Control Offer made by the Issuer and purchases all Notes properly tendered and not withdrawn under such Change of Control Offer.

(g) The Issuer may make a Change of Control Offer in advance of, but conditioned on, the occurrence of a Change of Control Triggering Event but otherwise in accordance with the provisions of this Section 4.1.

4.2 Certain Additional Definitions

For the purposes of this Third Supplemental Indenture, the following expressions shall have the following meanings:

" Below Investment Grade Rating Event " means the Notes are rated below an Investment Grade Rating by at least two out of three of the Rating Agencies (as defined below), if there are three Rating Agencies, or all of the Rating Agencies, if there are less than three Rating Agencies, (the "Required Threshold") on any date from the date of the public notice of an arrangement or transaction that could result in a Change of Control until the end of the 60-day period following public notice of the occurrence of the Change of Control, which 60-day period shall be extended if, by the end of the 60-day period, the rating of the Notes is under publicly announced consideration for a possible downgrade by such number of Rating Agencies which, together with the Rating Agencies which have already lowered their ratings on the Notes as aforesaid, would aggregate in number the Required Threshold, such extension to continue for so long as consideration for a possible downgrade continues by such number of Rating Agencies which, together with the Rating Agencies which have already lowered their ratings on the Notes as aforesaid, would aggregate in number the Required Threshold.

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consummation of any transaction (including, without limitation, any merger or amalgamation) the result of which is that any person (as such term is used in Section 13(d) of the Exchange Act) becomes the beneficial owner, directly or indirectly, of more than 50% of the then outstanding number of Canadian Pacific Railway Limited's voting shares; or (3) the first day on which a majority of the members of Canadian Pacific Railway Limited's Board of Directors are not Continuing Directors.

" Change of Control Offer " means an offer to repurchase Notes pursuant to Section 4.1 hereof.

" Change of Control Payment " means, with respect to Notes tendered for repurchase pursuant to a Change of Control Offer, an amount equal to 101% of the aggregate principal amount of such Notes plus accrued and unpaid interest thereon, if any, to the date of repurchase.

" Change of Control Triggering Event " means the occurrence of both a Change of Control and a Below Investment Grade Rating Event.

" Continuing Directors " means, as of any date of determination, any member of the Board of Directors of Canadian Pacific Railway Limited who (1) was a member of such Board of Directors on the date of the issuance of the Notes; or (2) was nominated for election or elected to such Board of Directors with the approval of a majority of the Continuing Directors who were members of such Board of Directors at the time of such nomination or election (either by a specific vote or by approval of Canadian Pacific Railway Limited's proxy statement in which such member was named as a nominee for election as a director, without objection to such nomination).

" DBRS " means DBRS Limited.

" Investment Grade Rating " means a rating equal to or higher than BBB (low) (or the equivalent) by DBRS, Baa3 (or the equivalent) by Moody's and BBB- (or the equivalent) by S&P.

" Moody's " means Moody's Investors Service, Inc.

" Rating Agencies " means (1) each of DBRS, Moody's and S&P; and (2) if one or more of DBRS, Moody's or S&P ceases to rate the Notes or fails to make a rating of the Notes publicly available for any reason outside of the Issuer's control, a "nationally recognized statistical rating organization" within the meaning of Rule 15c3-l(c)(2)(vi)(F) under the Exchange Act, as amended, selected by the Issuer (by a resolution of its Board of Directors) as a replacement agency for one or more of DBRS, Moody's or S&P, as the case may be, or if a replacement agency is not selected, the remaining such agencies providing publicly available ratings of the Notes.

" Required Threshold " has the meaning set forth in the definition of Below Investment Grade Rating Event.

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"S&P" means Standard & Poor's, a Division of The McGraw-Hill Companies Inc.


5.	GENERAL


5.1	Effectiveness

This Third Supplemental Indenture will become effective upon its execution and delivery.


5.2	Effect of Recitals

The recitals contained herein and in the Securities, except the Trustee's certificates of authentication, shall be taken as the statements of the Issuer, and neither the Trustee nor any Authenticating Agent assumes any responsibility for their correctness. Neither the Trustee nor any Authenticating Agent shall be accountable for the use or application by the Issuer of the Securities or the proceeds thereof. The Trustee makes no representations as to the validity or sufficiency of this Third Supplemental Indenture or of the Securities except that the Trustee represents that it is duly authorized to execute and deliver this Third Supplemental Indenture, authenticate the Securities and perform its obligations under the Original Indenture and hereunder, and that the statements made by it or to be made by it in a Statement of Eligibility and Qualification on Form T-1 supplied to the Issuer are true and accurate.


5.3	Ratification of Original Indenture

The Original Indenture as supplemented by this Third Supplemental Indenture is in all respects ratified and confirmed, and this Third Supplemental Indenture shall be deemed part of the Original Indenture in the manner and to the extent herein and therein provided.


5.4	Governing Law

This Third Supplemental Indenture, the Original Indenture as supplemented hereby and the Securities shall be governed by and construed in accordance with the laws of the State of New York.


5.5	Severability

In case any provision in this Third Supplemental Indenture, the Original Indenture as supplemented hereby or in the Securities shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby.


5.6	Acceptance of Trust

The Trustee hereby accepts the trusts in this Third Supplemental Indenture declared and provided for and agrees to perform the same upon the terms and conditions herein before set forth in trust for the various Persons who shall from time to time be Note holders subject to all the terms and conditions herein set forth.

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5.7	Counterparts and Formal Date

This Third Supplemental Indenture may be executed in any number of counterparts, each of which so executed shall be deemed to be an original, but all such counterparts shall together constitute but one and the same instrument and notwithstanding their date of execution shall be deemed to bear the date first above written.

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IN WITNESS WHEREOF the parties hereto have executed this Supplemental Indenture on the date first above written.

CANADIAN PACIFIC RAILWAY COMPANY

By: /s/ Frederic J. Green

Frederic J. Green

President and Chief Executive Officer

By: /s/ Kathryn McQuade

Kathr yn McQuade

Executive Vice President and Chief Financial Officer

THE BANK OF NEW YORK MELLON,

as trustee

By:

[Signature Page for the Third Supplemental Indenture]

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IN WITNESS WHEREOF the parties hereto have executed this Supplemental Indenture on the date first above written.

CANADIAN PACIFIC RAILWAY COMPANY

By:

Frederic J. Green

President and Chief Executive Officer

By:

Kathryn McQuade

Executive Vice President and Chief Financial Officer

THE BANK OF NEW YORK MELLON,

as trustee

By: /s/ Lesley Daley

LESLEY DALEY

ASSISTANT VICE PRESIDENT

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Schedule A

FORM OF NOTE

Unless this certificate is presented by an authorized representative of The Depository Trust Company, a New York corporation ("DTC"), to the Corporation (as defined below) or its agent for registration of transfer, exchange or payment, and any certificate issued is registered in the name of Cede & Co. or such other name as is requested by an authorized representative of DTC (and any payment is made to Cede & Co. or to such other entity as is requested by an authorized representative of DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an interest herein.

Unless and until it is exchanged in whole or in part for Securities in definitive registered form, this certificate may not be transferred except as a whole by DTC to a nominee of DTC or by a nominee of DTC to DTC or another nominee of DTC or by DTC or any such nominee to a successor Depositary or a nominee of such successor Depositary.

CANADIAN PACIFIC RAILWAY COMPANY

7.25% Notes due 2019

No. 1 US$350,000,000

CUSIP: 13645RAJ3

Canadian Pacific Railway Company, a corporation duly organized and existing under the laws of Canada (herein called the "Corporation'', which term includes any successor Person under the Indenture hereinafter referred to), for value received, hereby promises to pay to Cede & Co., or its registered assigns, the principal sum of US$350,000,000 (THREE HUNDRED FIFTY MILLION UNITED STATES DOLLARS) on May 15, 2019, at the office or

agency of the Corporation referred to below, and to pay interest thereon on November 15, 2009 and semi-annually thereafter, on May 15 and November 15 in each year, from May 15, 2009, or from the most recent Interest Payment Date to which interest has been paid or duly provided for, at the rate of 7.25% per annum, until the principal hereof is paid or duly provided for, and (to the extent lawful) to pay on demand interest on any overdue interest at the rate borne by the Securities from the date on which such overdue interest becomes payable to the date payment of such interest has been made or duly provided for. The interest so payable, and punctually paid or duly provided for, on any Interest Payment Date will, as provided in such Indenture, be paid to the Person in whose name this Security is registered at the close of business on the Regular Record Date for such interest, which shall be the May 1 or November 1 (whether or not a Business Day), as the case may be, next preceding such Interest Payment Date. Any such interest not so punctually paid or duly provided for shall forthwith cease to be payable to the Holder on such Regular Record Date, and such defaulted interest, and (to the extent lawful) interest on such defaulted interest at the rate borne by the Securities, may be paid to the Person in whose name this Security is registered at the close of

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business on a Special Record Date for the payment of such Defaulted Interest to be fixed by the Trustee, notice whereof shall be given to

Holders of Securities not less than 10 days prior to such Special Record Date, or may be paid at any time in any other lawful manner not inconsistent with the requirements of any securities exchange on which the Securities may be listed, and upon such notice as may be required by such exchange, all as more fully provided in said Indenture. Reference is hereby made to the further provisions of this Security set forth on the reverse hereof, which further provisions shall for all purposes have the same effect as if set forth at this place.

Unless the certificate of authentication hereon has been duly executed by the Trustee by manual signature, this Security shall not be entitled to any benefit under the Indenture, or be valid or obligatory for any purpose.

IN WITNESS WHEREOF, the Corporation has caused this instrument to be duly executed under its corporate seal.


Dated: May___________, 2009	CANADIAN PACIFIC RAILWAY COMPANY

Name: Kathryn McQuade


Title:	Executive Vice-President and Chief Financial Officer

Name: Karen Fleming

Title: Senior Counsel and Corporate Secretary

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TRUSTEE'S CERTIFICATE OF AUTHENTICATION

This is one of the Securities referred to in, and issued under, the within-mentioned Indenture.

THE BANK OF NEW YORK MELLON,

as Trustee

Dated: __________________________ By _________________________________

Authorized Signatory

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[Reverse of Security]

This Security is one of a duly authorized issue of securities of the Corporation designated as its 7.25% Notes due 2019 (herein called the "Securities"), limited (except as otherwise provided in the Indenture referred to below) in aggregate principal amount to US$350,000,000, which may be issued under an indenture dated as of May 8, 2007, among the Corporation and The Bank of New York Mellon, as trustee (herein called the "Trustee", which term includes any successor trustee under the Indenture, as defined below), as supplemented by the Third Supplemental Indenture, among the Corporation and the Trustee (as supplemented by the Third Supplemental Indenture, the "Indenture"), to which Indenture and all indentures supplemental thereto reference is hereby made for a statement of the respective rights, limitations of rights, duties, obligations and immunities thereunder of the Corporation, the Trustee and the Holders of the Securities, and of the terms upon which the Securities are, and are to be, authenticated and delivered. This Security is a global Security representing US$350,000,000 aggregate principal amount of the Securities.

Payment of the principal of (and premium, if any, on) and interest on this Security will be made at the office or agency of the Corporation maintained or caused to be maintained for that purpose in New York, New York or at such other office or agency of the Corporation as may be maintained or caused to be maintained for such purpose, in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts; provided, however, that payment of the principal (and premium, if any) and interest may be made at the option of the Corporation (i) by check mailed to the address of the Person entitled thereto as such address shall appear on the Security Register or (ii) by wire transfer to an account maintained by the Person located in the United States entitled thereto as specified in the Security Register; provided , that principal paid in relation to any Security, redeemed at the option of the Corporation or upon Maturity, shall be paid to the Holder of such Security only upon presentation and surrender of such Security to such office or agency referred to above.

The Corporation will pay to the Holders such Additional Amounts as may be payable under Section 9.07 of the Indenture.

The Securities are subject to redemption upon not less than 30 nor more than 60 days' notice, at any time, as a whole or in part, at the election of the Corporation at a redemption price equal to the greater of (1) 100% of the principal amount of the Securities or (2) the sum of the present values of the remaining scheduled payments of principal and interest on the Securities to be redeemed (not including any portion of the payments of interest accrued as of the date of redemption) discounted to the redemption date on a semi-annual basis (assuming a 360- day year consisting of twelve 30-day months) at the Treasury Yield plus 50 basis points, plus, in the case of (I) and (2), accrued interest thereon to the date of redemption, all as provided in the Indenture.

percentage of its principal amount) equal to the Comparable Treasury Price for that redemption date.

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"Comparable Treasury Issue" means the United States Treasury security or securities selected by an Independent Investment Banker as having an actual or interpolated maturity comparable to the remaining term of the Securities to be redeemed that would be utilized, at the time of selection and in accordance with customary financial practice, in pricing new issues of corporate debt securities of comparable maturity to the remaining term of the Securities.

"Comparable Treasury Price" means (I) the average of the Reference Treasury Dealer Quotations for such redemption date, after excluding the highest and lowest of such Reference Treasury Dealer Quotations, or (2) if the Trustee is provided fewer than four such Reference Treasury Dealer Quotations, the average of all such Reference Treasury Dealer Quotations.

"Independent Investment Banker" means one of the Reference Treasury Dealers selected by the Corporation or, if such firm is unwilling or unable to select the Comparable Treasury Issue, an independent investment banking institution of national standing in the United States appointed by the Corporation.

"Reference Treasury Dealers" means J.P. Morgan Securities Inc. and Morgan Stanley & Co. Incorporated or their affiliates which are primary U.S. government securities dealers, and their respective successors; provided, however, that if any of the foregoing ceases to be a primary U.S. government securities dealer in The City of New York (a "Primary Treasury Dealer"), the Corporation will substitute therefor another Primary Treasury Dealer.

The Securities are also subject to redemption as a whole but not in part, at the option of the Corporation, at any time, on not less than 30 nor more than 60 days' prior written notice to each Holder of Securities to be redeemed at such Holder's address appearing on the Security Register at a redemption price equal to 100% of the principal amount, together with accrued and unpaid interest to the date fixed for redemption, in the event there is more than an insubstantial risk that the Corporation has become or would become obligated to pay, on the next date on which any amount would be payable with respect to the Securities, any Additional Amounts as a result of any amendment or change in the laws (including any regulations promulgated thereunder) of Canada (or any political subdivision or taxing authority thereof or therein), or any amendment to or change in any official position regarding the application or interpretation of such laws or regulations, which change or amendment is armounced or becomes effective on or after May 15, 2009, all as provided in Section 10.08 of the Indenture.

In the case of any redemption of Securities, interest installments whose Stated Maturity is on or prior to the Redemption Date will be payable to the Holders of such Securities of record at the close of business on the relevant Record Date referred to on the face hereof. Securities (or portions thereof) for whose redemption provision is made in accordance with the Indenture shall cease to bear interest from and after the Redemption Date.

The Securities do not have the benefit of sinking fund obligations.

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In the event of redemption of this Security in part only, a new Security or Securities for the unredeemed portion hereof shall be issued in the name of the Holder hereof upon the cancellation hereof.

If an Event of Default shall occur and be continuing, the principal of all the Securities may be declared due and payable in the manner and with the effect provided in the Indenture.

The Indenture contains provisions for defeasance at any time of (a) the entire indebtedness of the Corporation on this Security and (b) certain restrictive covenants and the related Defaults and Events of Default, upon compliance by the Corporation with certain conditions set forth therein, which provisions apply to this Security.

The Indenture permits, with certain exceptions as therein provided, the amendment thereof and the modification of the rights and obligations of the Corporation and the rights of the Holders under the Indenture at any time by the Corporation and the Trustee with the consent of the Holders of not less than a majority in aggregate principal amount of all affected Securities at the time Outstanding. The Indenture also contains provisions permitting the Holders of specified percentages in aggregate principal amount of the Securities at the time Outstanding, on behalf of the Holders of all the Securities affected thereby, to waive compliance by the Corporation with certain provisions of the Indenture and certain past defaults under the Indenture and their consequences. Any such consent or waiver by or on behalf of the Holder of this Security shall be conclusive and binding upon such Holder and upon all future Holders of this Security and of any Security issued upon the registration of transfer hereof or in exchange herefor or in lieu hereof whether or not notation of such consent or waiver is made upon this Security.

No reference herein to the Indenture and no provision of this Security or of the Indenture shall alter or impair the obligation of the Corporation, which is absolute and unconditional, to pay the principal of (and premium, if any, on) and interest on this Security at the times, place, and rate, and in the coin or currency, herein prescribed.

As provided in the Indenture and subject to certain limitations therein set forth, the transfer of this Security is registrable on the Security Register of the Corporation, upon surrender of this Security for registration of transfer at the office or agency of the Corporation maintained or caused to be maintained for such purpose in New York, New York duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Corporation and the Security Registrar duly executed by, the Holder hereof or his attorney duly authorized in

writing, and thereupon one or more new Securities, of authorized denominations and for the same aggregate principal amount, will be issued to the designated transferee or transferees.

The Securities are issuable only in registered form without coupons in denominations of US$2,000 and any integral multiple of $1,000 in excess thereof. As provided in the Indenture and subject to certain limitations therein set forth, the Securities are exchangeable for a like aggregate principal amount of Securities of a different authorized denomination, as requested by the Holder surrendering the same.

No service charge shall be made for any registration of transfer or exchange of Securities, but the Corporation may require payment of a sum sufficient to cover any tax or other

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governmental charge payable in connection therewith.

Prior to the time of due presentment of this Security for registration of transfer, the Corporation, the Trustee and any agent of the Corporation or the Trustees may treat the Person in whose name this Security is registered as the owner hereof for all purposes, whether or not this Security be overdue, and neither the Corporation, the Trustee nor any agent shall be affected by notice to the contrary.

Interest on this Security shall be computed on the basis of a 360-day year of twelve 30-day months. For the purposes of the Interest Act (Canada), the yearly rate of interest which is equivalent to the rate payable hereunder is the rate payable multiplied by the actual number of days in the year and divided by 360.

As provided for in the Indenture, the Corporation may, from time to time, without notice or consent of the Holders, create and issue additional Securities so that such additional Securities shall be consolidated and form a single series with the Securities initially issued by the Corporation and shall have the same terms as to status, redemption or otherwise as the Securities originally issued.

If at any time, (i) the Depositary notifies the Corporation that it is unwilling or unable or no longer qualifies to continue as Depositary or if at any time the Depositary shall no longer be registered or in good standing under the Securities Exchange Act of 1934, as amended, or other applicable statute or regulation and a successor depositary is not appointed by the Corporation within 90 days after the Corporation receives such notice or becomes aware of such condition, as the case may be, or (ii) the Corporation determines that the Securities shall no longer be represented by a global Security or Securities, then in such event the Corporation will execute and the Trustee will authenticate and deliver Securities in definitive registered form, in authorized denominations, and in an aggregate principal amount equal to the principal amount of this Security in exchange for this Security. Such Securities in definitive registered form shall be registered in such names and issued in such authorized denominations as the Depositary, pursuant to instructions from its direct or indirect participants or otherwise, shall instruct the Trustee. The Trustee shall deliver such Securities to the Persons in whose names such Securities are so registered.

The Indenture and this Security shall be governed by and construed in accordance with the laws of the State of New York.

All terms used in this Security which are defined in the Indenture shall have the meanings assigned to them in the Indenture.

Doc#: US I :5625421v4

Dated as of September 23, 2010

CANADIAN PACIFIC RAILWAY COMPANY

and

THE BANK OF NEW YORK MELLON

FOURTH SUPPLEMENTAL INDENTURE

to the

TRUST INDENTURE

Dated as of May 8, 2007

TABLE OF CONTENTS


1.	INTERPRETATIONS AND AMENDMENTS 1


1.1	Fourth Supplemental Indenture 1


1.2	Definitions in Fourth Supplemental Indenture 2


1.3	Interpretation not Affected by Headings 2


2.	NOTES 2


2.1	Form and Terms of Notes 2


2.2	Issuance of Notes 4


3.	OPTIONAL REDEMPTION OF NOTES 4


3.1	Redemption of Notes 4


3.2	Certain Additional Definitions 5


4.	CHANGE OF CONTROL 6


4.1	Change of Control 6


4.2	Certain Additional Definitions 8


5.	GENERAL 10


5.1	Effectiveness 10


5.2	Effect of Recitals 10


5.3	Ratification of Original Indenture 10


5.4	Governing Law 10


5.5	Severability 11


5.6	Acceptance of Trust 11


5.7	Counterparts and Formal Date 11

Doc#: US1:6575849v5

THIS FOURTH SUPPLEMENTAL INDENTURE (this "Fourth Supplemental Indenture") dated as of September 23, 2010 between CANADIAN PACIFIC RAILWAY COMPANY, a corporation incorporated under the Canada Business Corporations Act and having its head office in the City of Calgary, in the Province of Alberta (the "Issuer") and THE BANK OF NEW YORK MELLON, a banking corporation duly organized and existing under the laws of the State of New York, having an office in the City of New York, in the State of New York (the "Trustee")

RECITALS OF THE ISSUER

WHEREAS, the Issuer and the Trustee entered into an Indenture, dated as of May 8, 2007 (the "Original Indenture"). Section 8.01(7) of the Original Indenture provides

that the Issuer and the Trustee may, without the consent of any Holder, enter into a supplemental indenture to establish the form or terms of Securities of any series as permitted by Section 2.01 and 3.01 thereof.

WHEREAS, pursuant to Sections 2.01 and 3.01 of the Original Indenture, the Issuer desires to provide for the establishment of a series of Securities under the Original Indenture, and the form and terms thereof, as hereinafter set forth.

WHEREAS, the Issuer has requested that the Trustee execute and deliver this Fourth Supplemental Indenture. The Issuer has delivered to the Trustee an Opinion of Counsel and an Officers' Certificate pursuant to Sections 1.02 and 8.03 of the Original Indenture to the effect, among other things, that all conditions precedent provided for in the Indenture to the Trustee's execution and delivery of this Fourth Supplemental Indenture have been complied with. All acts and things necessary have been done and performed to make this Fourth Supplemental Indenture enforceable in accordance with its terms, and the execution and delivery of this Fourth Supplemental Indenture has been duly authorized in all respects.

WHEREAS the proper officers of the Issuer have duly authorized the creation and issuance of a series of Securities to be designated as 4.450% Notes due 2023 (the "Notes") and to be initially limited (subject to the exceptions described herein and in the Original Indenture) to the aggregate principal amount of U.S.$350,000,000; the further terms and conditions thereof being hereinafter set forth, all in accordance with a resolution of the directors of the Issuer;

NOW, THEREFORE, THIS FOURTH SUPPLEMENTAL INDENTURE

WITNESSETH: For and in consideration of the premises and the purchase of the Securities (as herein defined) by the holders thereof, it is mutually covenanted and agreed, for the equal and proportionate benefit of all holders of the Securities, as follows:


1.	INTERPRETATIONS AND AMENDMENTS


1.1	Fourth Supplemental Indenture

As used herein "Fourth Supplemental Indenture", "hereto", "herein", "hereof ', "hereby'', "hereunder" and similar expressions refer to this Fourth Supplemental

Indenture and not to any particular Article, Section or other portion hereof and include any and every instrument supplemental or ancillary hereto or in implementation hereof, and further include the terms of the Notes set forth in the form of Notes annexed as Schedule A hereto.


1.2	Definitions in Fourth Supplemental Indenture

All terms contained in this Fourth Supplemental Indenture which are defined in the Original Indenture and not defined herein shall, for all purposes hereof, have the meanings given to such terms in the Original Indenture, unless the context otherwise specifies or requires; provided, however, that notwithstanding the foregoing, the terms "Issuer" and "Trustee" shall have the respective meanings given to them in the Original Indenture.


1.3	Interpretation not Affected by Headings

The division of this Fourth Supplemental Indenture into Articles and Sections, the provision of the table of contents hereto and the insertion of headings are for convenience of reference only and shall not affect the construction or interpretation of this Fourth Supplemental Indenture.


2.	NOTES


2.1	Form and Terms of Notes

There shall be and there is hereby created for issuance under the Original Indenture, as supplemented by this Fourth Supplemental Indenture; (i) a series of Securities which shall consist of an aggregate principal amount of U.S.$350,000,000 Notes; provided, however, that if the Issuer shall, at any time after the date hereof, increase the principal amount of Notes which may be issued and issue such increased principal amount (or any portion thereof), then any such additional Notes so issued shall have the same form and terms (other than the date of issuance and the date from which interest thereon shall begin to accrue and, under certain circumstances, the first interest payment date), and shall carry the same right to receive accrued and unpaid interest, as the Notes theretofore issued; and provided, further, that, notwithstanding the foregoing, the Issuer shall not be entitled to increase the principal amount of Notes which may be issued or issue any such increased principal amount if the Issuer has effected satisfaction and discharge of the Indenture pursuant to Section 4.01 of the Original Indenture or defeasance or covenant defeasance pursuant to Article 12 of the Original Indenture.

The Notes will mature, and the principal of the Notes and accrued and unpaid interest thereon will be due and payable, on March 15, 2023, or such earlier date as the principal of any of the Notes may become due and payable in accordance with the provisions of the Original Indenture and this Fourth Supplemental Indenture.

The Notes shall bear interest on the principal amount thereof from September 23, 2010 or from the last date to which interest shall have been paid or duly made available for payment on the Notes, whichever is later, at the rate of 4.450% per annum, payable semi annually in arrears on March 15 and September 15 (each, an "Interest Payment Date") in each year, commencing March 15, 2011, until the principal of and premium, if any, on the applicable series of Notes is paid or duly made available for payment; and should the Issuer at any time

default in the payment of any principal of, or premium, if any, or interest on the Notes when due, the Issuer shall pay interest (such interest to be payable on demand), to the extent permitted by law, on the amount in default at the same rate applicable to the Notes. Interest on the Notes shall be computed on the basis of a 360-day year comprised of twelve 30-day months. The interest payable, and punctually paid or duly provided for, on any Interest Payment Date will, as provided in the Original Indenture, be paid to the Persons in whose names the Notes (or one or more predecessor Notes) are registered at the close of business on March 1 and September 1 (the "Regular Record Dates"), as the case may be, immediately prior to such Interest Payment Date, regardless of whether any such Regular Record Date is a business day. Any such interest on the Notes not so punctually paid or duly provided for on any Interest Payment Date shall be payable, as applicable, as provided in the form of Note annexed hereto as Schedule A to this Fourth Supplemental Indenture.

For the purposes only of the disclosure required by the Interest Act (Canada), and without affecting the amount of interest payable to any holder of a Note or the calculation of interest on any Note, if the rate of interest on any Note is calculated on the basis of a year (the "deemed year") which contains fewer days than the actual number of days in the calendar year of calculation, such rate of interest shall be expressed as a yearly rate for the purposes of the Interest Act (Canada) by multiplying such rate of interest by the actual number of days in the calendar year of calculation and dividing it by the number of days in the deemed year.

All payments of principal of and premium, if any, and interest on the Notes will be made in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts, and all references herein to "United States dollars", "U.S.$" or " U.S. dollars" shall be deemed to refer to such coin or currency of the United States of America.

The Notes shall be issued only as fully registered Notes, without coupons, in denominations of U.S.$2,000 and integral multiples of $1,000 thereafter. Each series of Notes initially will be represented by one or more global Securities (collectively, the "Global Notes") registered in the name of The Depository Trust Company, as Depositary or its nominee, or a successor depositary or its nominee.

The certificates representing the Notes shall bear the following legend:

OF DTC OR BY DTC OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITARY OR A NOMINEE OF SUCH SUCCESSOR DEPOSITARY."

The Notes and the certificate of the Trustee endorsed thereon shall be in the form set out in Schedule A to this Fourth Supplemental Indenture with such appropriate insertions, omissions, substitutions and variations as the Trustee may approve and shall be numbered in such manner as the Trustee may approve, such approvals of the Trustee concerning any Note to be conclusively evidenced by its certification of such Note.

The Notes shall be subject to redemption at the option of the Issuer as provided in Article 4 (Optional Redemption of Notes) of this Fourth Supplemental Indenture and Article 10 of the Original Indenture and repurchase by the Issuer as provided in Article 5 of this Fourth Supplemental Indenture. The Issuer shall not otherwise be required to redeem, purchase or repay Notes pursuant to any mandatory redemption, sinking fund or analogous provision or at the option of the holders thereof. The Notes will not be convertible into or exchangeable for securities of any Person.

The Notes shall have the other terms and provisions set forth in the forms of Notes attached hereto as Schedule A to this Fourth Supplemental Indenture with the same force and effect as if such terms and provisions were set forth in full herein.


2.2	Issuance of Notes


3.	OPTIONAL REDEMPTION OF NOTES


3.1	Redemption of Notes


(a)	100% of the principal amount of the Notes to be redeemed; and


(b)	the sum of the present values of the remaining scheduled payments of principal and interest thereon (exclusive of interest accrued to the date of redemption) discounted to the Redemption Date on a semi-annual basis (assuming a 360-day year consisting of twelve 30-day months) at the Treasury Yield, plus 30 basis points, or

(ii) if at any time after December 15, 2022, at a Redemption Price equal to 100% of the principal amount of the Notes to be redeemed;

The Issuer will provide notice to the Trustee prior to the Redemption Date of the calculation of the Redemption Price.

3.2 Certain Additional Definitions

For the purposes of this Fourth Supplemental Indenture, the following expressions shall have the following meanings:

"Comparable Treasury Issue" means the United States Treasury security or securities selected by an Independent Investment Banker as having an actual or interpolated maturity comparable to the remaining term of the Securities to be redeemed that would be utilized, at the time of selection and in accordance with customary financial practice, in pricing new issues of corporate debt securities of comparable maturity to the remaining term of the Securities;

"Reference Treasury Dealers" means Morgan Stanley & Co. Incorporated and Banc of America Securities LLC or their affiliates which are primary U.S. government securities dealers, and their respective successors; provided, however, that if any of the foregoing ceases to be a primary U.S. government securities dealer in The City of New York (a "Primary Treasury Dealer"), the Issuer will substitute therefor another Primary Treasury Dealer;


4.	CHANGE OF CONTROL


4.1	Change of Control

(a) Upon the occurrence of a Change of Control Triggering Event, unless all Notes have been called for redemption pursuant to Section 4.1 hereof, each Holder of Notes shall have the right to require the Issuer to repurchase all or any part (equal to $2,000 or an integral multiple of $1,000 in excess thereof) of such Holder's Notes at an offer price in cash equal to the Change of Control Payment.


(i)	that the Change of Control Offer is being made pursuant to this Section 4.1 and that all Notes tendered will be accepted for payment;


(ii)	the Change of Control Payment and the purchase date, which shall be a Business Day no earlier than 30 days and no later than 60 days from the date such notice is mailed (the "Change of Control Payment Date");


(iii)	the CUSIP number for the Notes;


(iv)	that any Note not tendered will continue to accrue interest;


(v)	that, unless the Issuer defaults in the payment of the Change of Control Payment, all Notes accepted for payment pursuant to the Change of Control Offer will cease to accrue interest after the Change of Control Payment Date;


(vi)	that Holders electing to have any Notes purchased pursuant to a Change of Control Offer will be required to surrender

such Notes to the Paying Agent at the address specified in the notice prior to the close of business on the third Business Day preceding the Change of Control Payment Date;

(vii)


(viii)	that Holders whose Notes are being purchased only in part will be issued new Notes equal in principal amount to the unpurchased portion of the Notes surrendered, which unpurchased portion will be equal to $2,000 in principal amount or an integral multiple of $1,000 in excess thereof; and


(ix)	if such notice is mailed prior to the date of the occurrence

of the Change of Control Triggering Event, that the Change of Control Offer is conditional on the Change of Control Triggering Event occurring on or prior to the Change of Control Payment Date.

(d) On the Change of Control Payment Date, the Issuer will, to the extent lawful:


(i)	accept for payment all Notes or portions thereof properly tendered pursuant to the Change of Control Offer;


(ii)	deposit with the Paying Agent an amount equal to the Change of Control Payment in respect of all Notes or portions of Notes properly tendered; and


(iii)	deliver or cause to be delivered to the Trustee the Notes so accepted together with an Officers' Certificate stating the

aggregate principal amount of Notes or portions of Notes being purchased by the Issuer.

$1,000 in excess thereof. The Issuer will publicly announce the results of the Change of Control Offer on or as soon as practicable after the Change of Control Payment Date.


4.2	Certain Additional Definitions

For the purposes of this Fourth Supplemental Indenture, the following expressions shall have the following meanings:

"Below Investment Grade Rating Event" means the Notes are rated below an Investment Grade Rating by at least two out of three of the Rating Agencies (as defined below), if there are three Rating Agencies, or all of the Rating Agencies, if there are less than three Rating Agencies, (the "Required Threshold") on any date from the date of the public notice of an arrangement or transaction that could result in a Change of Control until the end of the 60-day period following public notice of the occurrence of the Change of Control, which 60-day period shall be extended if, by the end of the 60-day period, the rating of the Notes is under publicly announced consideration for a possible downgrade by such number of Rating Agencies which, together with the Rating Agencies which have already lowered their ratings on the Notes as aforesaid, would aggregate in number the Required Threshold, such extension to continue for so long as consideration for a possible downgrade continues by such number of Rating Agencies which, together with the Rating Agencies which have already lowered their ratings on the Notes as aforesaid, would aggregate in number the Required Threshold.

is used in Section 13(d) of the Exchange Act) other than the Issuer, Canadian Pacific Railway Limited or any of the Issuer's or Canadian Pacific Railway Limited's subsidiaries; (2) the consummation of any transaction (including, without limitation, any merger or amalgamation) the result of which is that any person (as such term is used in Section 13(d) of the Exchange Act) becomes the beneficial owner, directly or indirectly, of more than 50% of the then outstanding number of Canadian Pacific Railway Limited's voting shares; or (3) the first day on which a majority of the members of Canadian Pacific Railway Limited's Board of Directors are not Continuing Directors.

" Change of Control Offer " means an offer to repurchase Notes pursuant to Section 4.1 hereof.

" Change of Control Payment " means, with respect to Notes tendered for repurchase pursuant to a Change of Control Offer, an amount equal to 101% of the aggregate principal amount of such Notes plus accrued and unpaid interest thereon, if any, to the date of repurchase.

" Change of Control Triggering Event " means the occurrence of both a Change of Control and a Below Investment Grade Rating Event.

" Continuing Directors " means, as of any date of determination, any member of the Board of Directors of Canadian Pacific Railway Limited who (1) was a member of such Board of Directors on the date of the issuance of the Notes; or (2) was nominated for election or elected to such Board of Directors with the approval of a majority of the Continuing Directors who were members of such Board of Directors at the time of such nomination or election (either by a specific vote or by approval of Canadian Pacific Railway Limited's proxy statement in which such member was named as a nominee for election as a director, without objection to such nomination).

" DBRS " means DBRS Limited.

" Investment Grade Rating " means a rating equal to or higher than BBB (low) (or the equivalent) by DBRS, Baa3 (or the equivalent) by Moody's and BBB- (or the equivalent) by S&P.

" Moody's " means Moody's Investors Service, Inc.

"Required Threshold" has the meaning set forth in the definition of Below Investment Grade Rating Event.

"S&P" means Standard & Poor's, a Division of The McGraw-Hill Companies Inc.


5.	GENERAL

5.1 Effectiveness

This Fourth Supplemental Indenture will become effective upon its execution and delivery.


5.2	Effect of Recitals

The recitals contained herein and in the Securities, except the Trustee's certificates of authentication, shall be taken as the statements of the Issuer, and neither the Trustee nor any Authenticating Agent assumes any responsibility for their correctness. Neither the Trustee nor any Authenticating Agent shall be accountable for the use or application by the Issuer of the Securities or the proceeds thereof. The Trustee makes no representations as to the validity or sufficiency of this Fourth Supplemental Indenture or of the Securities except that the Trustee represents that it is duly authorized to execute and deliver this Fourth Supplemental Indenture, authenticate the Securities and perform its obligations under the Original Indenture and hereunder, and that the statements made by it or to be made by it in a Statement of Eligibility and Qualification on Form T-1 supplied to the Issuer are true and accurate.


5.3	Ratification of Original Indenture

The Original Indenture as supplemented by this Fourth Supplemental Indenture is in all respects ratified and confirmed, and this Fourth Supplemental Indenture shall be deemed part of the Original Indenture in the manner and to the extent herein and therein provided.


5.4	Limitation on Liability

The Trustee shall act at the direction of the requisite noteholders without liability.


5.5	Jurisdiction

Each of the parties hereto hereby irrevocably consents to the jurisdiction of the courts of the State of New York and of any Federal Court located in the Borough of Manhattan

in the State of New York in connection with any action, suit or other proceeding arising out of or relating to this Fourth Supplemental Indenture or any action taken or omitted hrereunder, and waives any claim of forum non conveniens and any objections as to laying of venue.

5.6 Governing Law This Fourth Supplemental Indenture, the Original Indenture as supplemented hereby and the Securities shall be governed by and construed in accordance with the laws of the State of New York.


5.7	Severability

In case any prov1s 10n in this Fourth Supplemental Indenture, the Original Indenture as supplemented hereby or in the Securities shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby.


5.8	Acceptance of Trust

The Trustee hereby accepts the trusts in this Fourth Supplemental Indenture declared and provided for and agrees to perform the same upon the terms and conditions herein before set forth in trust for the various Persons who shall from time to time be Note holders subject to all the terms and conditions herein set forth.


5.9	Counterparts and Formal Date

This Fourth Supplemental Indenture may be executed in any number of counterparts, each of which so executed shall be deemed to be an original, but all such counterparts shall together constitute but one and the same instrument and notwithstanding their date of execution shall be deemed to bear the date first above written.

IN WITNESS WHEREOF the parties hereto have executed this Supplemental Indenture on the date first above written.

CANADIAN PACIFIC RAILWAY COMPANY

By: /s/ Donald S. Campbell

Name: Donald S. Campbell

Title: Vice-President, Finance

By: /s/ Kathryn B. McQuade

Name: Kathryn B. McQuade

Title: EVP & Chief Financial Officer

THE BANK OF NEW YORK MELLON,

as trustee

By:

[Signature Page for the Fourth Supplemental Indenture]

IN WITNESS WHEREOF the parties hereto have executed this Supplemental Indenture on the date first above written.

CANADIAN PACIFIC RAILWAY COMPANY

By:

Name:

Title:

By:

Name:

Title:

THE BANK OF NEW YORK MELLON,

as trustee

By: /s/ Lesley Daley

[Signature Page for the Fourth Supplemental Indenture]

Doc#: US1 :6575849v4

Dated as of December 1, 2011

CANADIAN PACIFIC RAILWAY COMPANY

and

THE BANK OF NEW YORK MELLON

FIFTH SUPPLEMENTAL INDENTURE

to the

TRUST INDENTURE

Dated as of May 8, 2007

THIS FIFTH SUPPLEMENTAL INDENTURE (this " Fifth Supplemental Indenture ") dated as of December 1, 2011 between CANADIAN PACIFIC RAILWAY COMPANY , a corporation incorporated under the Canada Business Corporations Act and having its head office in the City of Calgary, in the Province of Alberta (the " Issuer ") and THE BANK OF NEW YORK MELLON , a banking corporation duly organized and existing under the laws of the State of New York, having an office in the City of New York, in the State of New York (the "Trustee")

RECITALS OF THE ISSUER

WHEREAS, the Issuer and the Trustee entered into an Indenture, dated as of May 8, 2007 (the " Original Indenture'' ). Section 8.01(7) of the Original Indenture provides that the Issuer and the Trustee may, without the consent of any Holder, enter into a supplemental indenture to establish the form or terms of Securities of any series as permitted by Section 2.01 and 3.01 thereof.

WHEREAS, pursuant to Sections 2.01 and 3.01 of the Original Indenture, the Issuer desires to provide for the establishment of two series of Securities under the Original Indenture, and the form and terms thereof, as hereinafter set forth.

WHEREAS, the Issuer has requested that the Trustee execute and deliver this Fifth Supplemental Indenture. The Issuer has delivered to the Trustee an Opinion of Counsel and an Officers' Certificate pursuant to Sections 1.02 and 8.03 of the Original Indenture to the effect, among other things, that all conditions precedent provided for in the Indenture to the Trustee's execution and delivery of this Fifth Supplemental Indenture have been complied with. All acts and things necessary have been done and performed to make this Fifth Supplemental Indenture enforceable in accordance with its terms, and the execution and delivery of this Fifth Supplemental Indenture has been duly authorized in all respects.

WHEREAS the proper officers of the Issuer have duly authorized the creation and issuance of two series of Securities to be designated as 4.500% Notes due 2022 (the " 2022 Notes ") and 5.750% Notes due 2042 (the " 2042 Notes ", and together with the 2022 Notes, the "Notes") and each series to be initially limited (subject to the exceptions described herein and in the Original Indenture) to the aggregate principal amount of U.S.$250,000,000; the further terms and conditions thereof being hereinafter set forth, all in accordance with a resolution of the directors of the Issuer;

NOW, THEREFORE, THIS FIFTH SUPPLEMENTAL INDENTURE

WITNESSETH: For and in consideration of the premises and the purchase of the Securities (as herein defined) by the holders thereof, it is mutually covenanted and agreed, for the equal and proportionate benefit of all holders of the Securities, as follows:

l. INTERPRETATIONS AND AMENDMENTS

1.1 Fifth Supplemental Indenture

As used herein "Fifth Supplemental Indenture", "hereto", "herein", "hereof”, "hereby", "hereunder" and similar expressions refer to this Fifth Supplemental Indenture and not to any particular Article, Section or other portion hereof and include any and every instrument supplemental or ancillary hereto or in implementation hereof, and further include the terms of the Notes set forth in the form of Notes annexed as Schedule A-1 and Schedule A-2 hereto.


1.2	Definitions in Fifth Supplemental Indenture

All terms contained in this Fifth Supplemental Indenture which are defined in the Original Indenture and not defined herein shall, for all purposes hereof, have the meanings given to such terms i n the Original Indenture, unless the context otherwise specifies or requires; provided, however, that notwithstanding the foregoing, the terms "Issuer" and "Trustee" shall have the respective meanings given to them in the Original Indenture.


1.3	Interpretation not Affected by Headings

The division of this Fifth Supplemental Indenture into Articles and Sections, the provision of the table of contents hereto and the insertion of headings are for convenience of reference only and shall not affect the construction or interpretation of this Fifth Supplemental Indenture.


2.	NOTES


2.1	Form and Terms of Notes

There shall be and there is hereby created for issuance under the Original Indenture, as supplemented by this Fifth Supplemental Indenture (i) a series of Securities which shall consist of an aggregate principal amount of U.S.$250,000,000 2022 Notes and (ii) a series of Securities which shall consist of an aggregate principal amount of U.S.$250,000,000 2042 Notes; provided, however, that if the Issuer shall, at any time after the date hereof, increase the principal amount of 2022 Notes or 2042 Notes which may be issued and issue such increased principal amount (or any portion thereof), then any such additional 2022 Notes or 2042 Notes, as applicable, so issued shall have the same form and terms (other than the date of issuance and the date from which interest thereon shall begin to accrue and, under certain circumstances, the first interest payment date), and shall carry the same right to receive accrued and unpaid interest, as the 2022 Notes or 2042 Notes theretofore issued; and provided, further, that, notwithstanding the foregoing, the Issuer shall not be entitled to increase the principal amount of 2022 Notes or 2042 Notes which may be issued or issue any such increased principal amount if the Issuer has effected satisfaction and discharge of the Indenture pursuant to Section 4.01 of the Original Indenture or defeasance or covenant defeasance pursuant to Article 12 of the Original Indenture.

The 2022 Notes will mature, and the principal of the 2022 Notes and accrued and unpaid interest thereon will be due and payable, on January 15, 2022, or such earlier date as the principal of any of the 2022 Notes may become due and payable in accordance with the provisions of the Original Indenture and this Fifth Supplemental Indenture.

The 2042 Notes will mature, and the principal of the 2042 Notes and accrued and unpaid interest thereon will be due and payable, on January 15, 2042, or such earlier date as the principal of any of the 2042 Notes may become due and payable in accordance with the provisions of the Original Indenture re and this Fifth Supplemental Indenture.

The 2022 Notes and the 2042 Notes shall each bear interest on the principal amount thereof from December l , 2011 or from the last date to which interest shall have been paid or duly made available for payment on the 2022 Notes or the 2042 Notes, as applicable, whichever is later, at the rate of (i) 4.500% per annum for the 2022 Notes and (ii) 5.750% per annum for the 2042 Notes, in each case subject to adjustment pursuant to Article 5 hereof, payable semi-annually in arrears on January 15 and July 15 (each, an "Interest Payment Date" ) in each year, commencing July 15, 2012, until the principal of and premium, if any, on the applicable series of Notes is paid or duly made available for payment; and should the Issuer at any time default in the payment of any principal of, or premium, if any, or interest on the 2022 Notes or the 2042 Notes, as applicable, when due, the Issuer shall pay interest (such interest to be payable on demand), to the extent permitted by law, on the amount in default at the same rate applicable to the series of Notes on which the Issuer defaulted. Interest on the Notes of each series shall be computed on the basis of a 360-day year comprised of twelve 30-day months. The interest payable, and punctually paid or duly provided for, on any Interest Payment Date will, as provided in the Original Indenture, be paid to the Persons in whose names the Notes (or one or more predecessor Notes) are registered at the close of business on January l and July 1 (the "Regular Record Dates" ), as the case may be, immediately prior to such Interest Payment Date, regardless of whether any such Regular Record Date is a business day. Any such interest on the Notes not so punctually paid or duly provided for on any Interest Payment Date shall be payable, as applicable, as provided in the form of 2022 Note and form of 2042 Note annexed hereto as Schedule A-1 and Schedule A-2, respectively, to this Fifth Supplemental Indenture.

The Notes constitute unsecured obligations of the Issuer and rank pari passu with all of its other unsecured and unsubordinated debt from time to time outstanding and pari passu with other notes issued pursuant to the Original Indenture.

For the purposes only of the disclosure required by the Interest Act (Canada), and without affecting the amount of interest payable to any holder of a Note or the calculation of interest on any Note, if the rate of interest on any Note is calculated on the basis of a year (the "deemed year" ) which contains fewer days than the actual number of days in the calendar year of calculation, such rate of interest shall be expressed as a yearly rate for the purposes of the Interest Act (Canada) by multiplying such rate of interest by the actual number of days in the calendar year of calculation and dividing it by the number of days in the deemed year.

All payments of principal of and premium, if any, and interest on the Notes will be made in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts, and all references herein to "United States dollars", "U.S.$" or "U.S. dollars" shall be deemed to refer to such coin or currency of the United States of America.

The principal of and premium, if any, and interest on the Notes shall be payable, and the Notes may be surrendered for exchange, registration, transfer or discharge from

registration, at the Corporate Trust Office of the Trustee in the City of New York, New York, and in such other places as the Issuer may from time to time designate in accordance with the Original Indenture. The Trustee is hereby appointed as the initial Paying Agent, registrar and transfer agent for the Notes in the City of New York, New York.

The Notes of each series shall be issued only as fully registered Notes, without coupons, in denominations of U.S.$2,000 and integral multiples of U.S.$1,000 thereafter. Each series of Notes initially will be represented by one or more global Securities (collectively, the "Global Notes" ) registered in the name of The Depository Trust Company, as Depositary or its nominee, or a successor depositary or its nominee.

The certificates representing the Notes shall bear the following legend:

"UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR SECURITIES IN DEFINITIVE REGISTERED FORM, THIS CERTIFICATE MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY OTC TO A NOMINEE OF OTC OR BY A NOMINEE OF OTC TO OTC OR ANOTHER NOMINEE OF OTC OR BY OTC OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITARY OR A NOMINEE OF SUCH SUCCESSOR DEPOSITARY."

The 2022 Notes and the 2042 Notes and the certificate of the Trustee endorsed thereon shall be in the form set out in Schedule A-1 and Schedule A-2, respectively, to this Fifth Supplemental Indenture with such appropriate insertions, omissions, substitutions and variations as the Trustee may approve and shall be numbered in such manner as the Trustee may approve, such approvals of the Trustee concerning any Note to be conclusively evidenced by its certification of such Note.

The Security Register referred to in Section 3.05 of the Original Indenture shall, with respect to the Notes of each series, be kept at the office or agency in the City of New York, New York that the Issuer may from time to time designate for such purpose (which shall initially be the Corporate Trust Office of the Trustee in the City of New York, New York), and at such other place or places as the Issuer with the approval of the Trustee may hereafter designate.

The Notes shall be subject to redemption at the option of the Issuer as provided in Article 3 (Optional Redemption of Notes) of this Fifth Supplemental Indenture and Article 10 of the Original Indenture and repurchase by the Issuer as provided in Article 4 (Change of Control) of this Fifth Supplemental Indenture. The Issuer shall not otherwise be required to redeem, purchase or repay Notes of either series pursuant to any mandatory redemption, sinking fund or analogous provision or at the option of the holders thereof. The Notes will not be convertible into or exchangeable for securities of any Person.

The Issuer shall be required to pay Additional Amounts as contemplated in Section 9.07 of the Original Indenture.

The Notes shall have the other terms and provisions set forth in the applicable forms of Notes attached hereto as Schedule A-1 and Schedule A-2 to this Fifth Supplemental

Indenture with the same force and effect as if such terms and provisions were set forth in full herein.


2.2	Issuance of Notes

The 2022 Notes in the aggregate principal amount of U.S.$250,000,000 and the 2042 Notes in the aggregate principal amount of U.S.$250,000,000 shall each be executed by the Designated Officer of the Issuer and delivered by the Issuer to the Trustee on the date of issue for authentication and delivery pursuant to and in accordance with the provisions of Section 3.02 of the Original Indenture and, upon the requirements of such provisions being complied with, such Notes shall be authenticated by or on behalf of the Trustee and delivered by it to or upon the Issuer Order of the Issuer without any further act or formality on the part of the Issuer. The Trustee shall have no duty or responsibility with respect to the use or application of any of the Notes so certified and delivered or the proceeds thereof.


3.	OPTIONAL REDEMPTION OF NOTES


3.1	Redemption of Notes

Each of the 2022 Notes and the 2042 Notes will be redeemable at any time, in whole or in part, at the option of the Issuer (in the manner and in accordance with and subject to the terms and provisions set forth in Article 10 of the Original Indenture) at a Redemption Price equal to the greater of:


(a)	100% of the principal amount of the Notes to be redeemed; and

(b)

the sum of the present values of the remaining scheduled payments of principal and interest thereon (exclusive of interest accrued to the date of redemption) discounted to the Redemption Date on a semi-annual basis (assuming a 360-day year consisting of twelve 30-day months) at the Treasury Yield, plus 45 basis points in the case of the 2022 Notes and plus 45 basis points in the case of the 2042 Notes,

plus, in each case, accrued and unpaid interest to the Redemption Date; provided that installments of interest on Notes which are due and payable on any date falling on or prior to a Redemption Date will be payable to the registered holders of such Notes (or one or more predecessor Notes), registered as such as of the close of business on the relevant Regular Record Dates.

The Issuer will provide notice to the Trustee prior to the Redemption Date of the calculation of the Redemption Price.


3.2	Certain Additional Definitions

For the purposes of this Fifth Supplemental Indenture, the following expressions shall have the following meanings:

"Comparable Treasury Issue" means the United States Treasury security or securities selected by an Independent Investment Banker as having an actual or interpolated maturity comparable to the remaining term of the Securities to be redeemed that would be utilized, at the time of selection and in accordance with customary financial practice, in pricing new issues of corporate debt securities of comparable maturity to the remaining term of the Securities,

"Comparable Treasury Price" means (1) the average of the Reference Treasury Dealer Quotations for such redemption date, after excluding the highest and lowest of such Reference Treasury Dealer Quotations, or (2) if the Independent Investment Banker is provided fewer than four such Reference Treasury Dealer Quotations, the average of all such Reference Treasury Dealer Quotations,

"Reference Treasury Dealers" means J.P. Morgan Securities LLC or its affiliates which are primary U.S. government securities dealers, and their respective successors, plus four others which are primary U.S. Government securities dealers and their respective successors; provided, however, that if any of the foregoing ceases to be a primary U.S. government securities dealer in The City of New York (a "Primary Treasury Dealer"), the Issuer will substitute therefor another Primary Treasury Dealer,

"Reference Treasury Dealer Quotations" means, with respect to each Reference Treasury Dealer and any redemption date, the average, as determined by the Independent Investment Banker, of the bid and asked prices for the Comparable Treasury Issue (expressed in each case as a percentage of its principal amount) quoted in writing to the Trustee by such Reference Treasury Dealer at 3:30 p.m. New York time on the third business day preceding such redemption date,


4.	CHANGE OF CONTROL


4.1	Change of Control

(a) Upon the occurrence of a Change of Control Triggering Event in respect of a series of Notes, unless all Notes of such series have been called for redemption pursuant to this Section 3.1, each Holder of Notes of such series shall have the right to require the Issuer to repurchase all or any part (equal to U.S.$2,000 or an integral multiple of U.S.$1,000

in excess thereof) of such Holder's Notes of such series at an offer price in cash equal to the Change of Control Payment.

(b) Within 30 days following any Change of Control Triggering Event, the Issuer shall mail, or cause to be mailed, a notice to each Holder of Notes of the applicable series describing the transaction or transactions that constitute the Change of Control Triggering Event and specifying:


(i)	that the Change of Control Offer is being made pursuant to this Section 4.1 and that all Notes tendered will be accepted for payment;


(ii)	the Change of Control Payment and the purchase date, which shall be a Business Day no earlier than 30 days and no later than 60 days from the date such notice is mailed (the "Change of Control Payment Date");


(iii)	the CUSIP number for the Notes;


(iv)	that any Note not tendered will continue to accrue interest;


(v)	that, unless the Issuer defaults in the payment of the Change of Control Payment, all Notes accepted for payment pursuant to the Change of Control Offer will cease to accrue interest after the Change of Control Payment Date;


(vi)	that Holders electing to have any Notes purchased pursuant to a Change of Control Offer will be required to surrender such Notes to the Paying Agent at the address specified in the notice prior to the close of business on the third Business Day preceding the Change of Control Payment Date;

(vii)


(viii)	that Holders whose Notes are being purchased only in part will be issued new Notes equal i n principal amount to the unpurchased portion of the Notes surrendered, which unpurchased portion will be equal to U.S.$2,000 in

principal amount or an integral multiple of U.S.$1,000 in excess thereof; and


(ix)	if such notice is mailed prior to the date of the occurrence of the Change of Control Triggering Event, that the Change of Control Offer is conditional on the Change of Control Triggering Event occurring on or prior to the Change of Control Payment Date.

(c) The Issuer shall cause the Change of Control Offer to remain open for at least 20 Business Days or such longer period as is required by applicable law. The Issuer shall comply with the requirements of Rule l 4e-1 under the Securities Exchange Act of 1934, as amended (the "Exchange Act") and any other securities laws and regulations thereunder to the extent those laws and regulations are applicable in connection with the repurchase of the Notes as a result of a Change in Control Triggering Event. To the extent that the provisions of any securities laws or regulations conflict with the provisions of this Section 4.1, the Issuer will comply with the applicable securities laws and regulations and will not be deemed to have breached its obligations under this Section 4.1 by virtue of such conflict.


(d)	On the Change of Control Payment Date, the Issuer will, to the extent lawful:


(i)	accept for payment all Notes or portions thereof properly tendered pursuant to the Change of Control Offer;


(ii)	deposit with the Paying Agent an amount equal to the Change of Control Payment in respect of all Notes or portions of Notes properly tendered; and


(iii)	deliver or cause to be delivered to the Trustee the Notes so accepted together with an Officers' Certificate stating the aggregate principal amount of Notes or portions of Notes being purchased by the Issuer.

(e) The Paying Agent will promptly mail to each Holder of Notes of the applicable series properly tendered the Change of Control Payment for such Notes, and the Trustee will promptly authenticate and mail (or cause to be transferred by book entry) to each- Holder a new note equal in principal amount to any unpurchased portion of the Notes surrendered, if any; provided that each new Note will be in a principal amount of U.S.$2,000 or an integral multiple of U.S.$1,000 in excess thereof. The Issuer will publicly announce the results of the Change of Control Offer on or as soon as practicable after the Change of Control Payment Date.

Section 4.1 applicable to a Change of Control Offer made by the Issuer and purchases all Notes properly tendered and not withdrawn under such Change of Control Offer.


4.2	Certain Additional Definitions

For the purposes of this Fifth Supplemental Indenture, the following expressions shall have the following meanings:

"Below Investment Grade Rating Event" means the Notes of the applicable series are rated below an Investment Grade Rating by at least two out of three of the Rating Agencies (as defined below), if there are three Rating Agencies, or all of the Rating Agencies, if there are less than three Rating Agencies, (the "Required Threshold” ) on any date from the date of the public notice of an arrangement or transaction that could result in a Change of Control until the end of the 60-day period following public notice of the occurrence of the Change of Control, which 60-day period shall be extended if, by the end of the 60-day period, the rating of the Notes of such series is under publicly announced consideration for a possible downgrade by such number of Rating Agencies which, together with the Rating Agencies which have already lowered their ratings on the Notes of such series, as aforesaid, would aggregate in number the Required Threshold, such extension to continue for so long as consideration for a possible downgrade continues by such number of Rating Agencies which, together with the Rating Agencies which have already lowered their ratings on the Notes of such series, as aforesaid, would aggregate in number the Required Threshold.

"Change of Control" means the occurrence of any of the following: ( 1) the direct or indirect sale, transfer, conveyance or other disposition (other than by way of merger or amalgamation), in one or a series of related transactions, of all or substantially all of the properties or assets of the Issuer and its subsidiaries taken as a whole to any person (as such term is used in Section 13(d) of the Exchange Act) other than the Issuer, Canadian Pacific Railway Limited or any of the Issuer's or Canadian Pacific Railway Limited's subsidiaries; (2) the consummation of any transaction (including, without l imitation, any merger or amalgamation) the result of which is that any person (as such term is used in Section 13(d) of the Exchange Act) becomes the beneficial owner, directly or indirectly, of more than 50% of the then outstanding number of Canadian Pacific Railway Limited's voting shares; or (3) the first day on which a majority of the members of Canadian Pacific Railway Limited's Board of Directors are not Continuing Directors.

"Change of Control Offer" means an offer to repurchase Notes pursuant to Section 4.1 hereof.

. US I:7462678v9

I O

"Change of Control Triggering Event" means the occurrence of both a Change of Control and a Below Investment Grade Rating Event.

"Continuing Directors" means, as of any date of determination, any member of the Board of Directors of Canadian Pacific Railway Limited who ( l ) was a member of such Board of Directors on the date of the issuance of the Notes; or (2) was nominated for election or elected to such Board of Directors with the approval of a majority of the Continuing Directors who were members of such Board of Directors at the time of such nomination or election (either by a specific vote or by approval of Canadian Pacific Railway Limited's proxy statement in which such member was named as a nominee for election as a director, without objection to such nomination).

"DBRS" means DBRS Limited.

"Investment Grade Rating" means a rating equal to or higher than BBB (low) (or the equivalent) by DBRS, Baa3 (or the equivalent) by Moody's and BBB- (or the equivalent) by S&P.

"Moody's" means Moody's Investors Service, Inc.

"Rating Agencies" means (1) each of DBRS, Moody's and S&P; and (2) if one or more of DBRS, Moody's or S&P ceases to rate the Notes or fails to make a rating of the Notes publicly available for any reason outside of the Issuer's control, a "nationally recognized statistical rating organization" within the meaning of Ru le 15c3- I (c)(2)(vi)(F) under the Exchange Act, as amended, selected by the Issuer (by a resolution of its Board of Directors) as a replacement agency for one or more of DBRS, Moody's or S&P, as the case may be, or if a replacement agency is not selected, the remaining such agencies providing publicly available ratings of the Notes.

"Required Threshold" has the meaning set forth in the definition of Below Investment Grade Rating Event.

Inc.

"S&P" means Standard & Poor's, a Division of The McGraw-Hill Companies,


5.	INTEREST RATE ADJUSTMENT


5.1	Interest Rate Adjustment

The interest rate payable on each series of Notes will be subject to adjustments from time to time if Moody's (or, if applicable, any Substitute Rating Agency) or S&P (or, if applicable, any Substitute Rating Agency) downgrades (or subsequently upgrades) the debt rating assigned to such series of Notes, as set forth below.

If the ratings from Moody's or S&P (or, in either case if applicable, any Substitute Rating Agency) with respect to the Notes of a series is decreased to a rating set forth in the immediately following table with respect to that Rating Agency, the per annum interest rate on

the Notes of such series will increase from that set forth on the face of the applicable Note by the percentage set forth opposite that rating:

Rating Agency

Rating Level Moody’s* S&P* Percentage

1 Ba1 BB+ 0.25%

2 Ba2 BB 0.50%

3 Ba3 BB- 0.75%

4 B l or below B+ or below 1.00%

* Including the equivalent ratings of any Substitute Rating Agency

If at any time the interest rate on any series of Notes has been adjusted upward as a result of a decrease in a rating by a Rating Agency and that Rating Agency subsequently increases its rating with respect to such series of Notes to any of the threshold ratings set forth above, the per annum interest rate on that series of Notes will be decreased such that the per annum interest rate equals the interest rate set forth on the face of the applicable Note plus the percentage set forth opposite the rating in effect immediately following the increase in the table above; provided that if Moody's or any Substitute Rating Agency subsequently increases its rating of any series of Notes to "Baa3" (or its equivalent if with respect to any Substitute Rating Agency) or higher and S&P or any Substitute Rating Agency subsequently increases its rating of any series of Notes to "BBB-" (or its equivalent if with respect to any Substitute Rating Agency) or higher, the interest rate on that series of Notes will be decreased to the per annum interest rate on that series of Notes set forth on the face of the applicable Note.

No adjustment in the interest rate of any series of Notes shall be made solely as a result of a Rating Agency ceasing to provide a rating. If at any time less than two Rating Agencies provide a rating of any series of Notes, the Issuer will use its commercially reasonable efforts to obtain a rating of that series of Notes from a Substitute Rating Agency, to the extent one exists, and if a Substitute Rating Agency rates that series of Notes, for purposes of

determining any increase or decrease in the per annum interest rate on that series of Notes pursuant to the table above (a) such Substitute Rating Agency will be substituted for the last Rating Agency to provide a rating of that series of Notes but which has since ceased to provide such rating, (b) the relative ratings scale used by such Substitute Rating Agency to assign ratings to senior unsecured debt will be determined in good faith by an Independent Investment Banker and, for purposes of determining the applicable ratings included in the table above with respect to such Substitute Rating Agency, such ratings shall be deemed to be the equivalent ratings used

by Moody's and S&P in such table and (c) the per annum interest rate on that series of Notes will increase or decrease, as the case may be, such that the interest rate equals the interest rate set

forth on the face of the applicable Note plus the appropriate percentage, if any, set forth opposite the rating from such Substitute Rating Agency in the table above (taking into account the

provisions of clause (b) above). For so long as (i) only one Rating Agency provides a rating of any series of Notes, any increase or decrease in the interest rate of that series of Notes necessitated by a

reduction or increase in the rating by that Rating Agency shall be twice the applicable percentage set forth in the table above and (ii) no Rating Agency provides a rating of

any series of Notes, the interest rate on that series of Notes will increase to, or remain at, as the case may be, 2.00% above the interest rate set forth on the face of the applicable Note.

Each adjustment required by any decrease or increase in a rating set forth above, whether occasioned by the action of Moody's, S&P or any Substitute Rating Agency, shall be made independent of (and in addition to) any and all other adjustments. In no event shall (l) the per annum interest rate on any series of Notes be reduced below the interest rate set forth on the face of the applicable Note with respect to such series or (2) the per annum interest rate on any series of Notes exceed a rate that is 2.00% above the interest rate set forth on the face of the applicable Note.

Any interest rate increase or decrease described above will take effect on the next business day after the rating change has occurred.

The interest rates on any series of Notes will permanently cease to be subject to any adjustment described above (notwithstanding any subsequent decrease in the ratings by any Rating Agency) if that series of Notes becomes rated "A3" (or its equivalent) or higher by Moody's (or any Substitute Rating Agency) and "A-" (or its equivalent) or higher by S&P (or any Substitute Rating Agency), or one of those ratings if only rated by one Rating Agency, in each case with a stable or positive outlook.

The Issuer will provide written notice to the Trustee at any time that a Rati ng Agency, or Substitute Rating Agency, if applicable, adjusts the ratings applicable to each series of Notes.

The Issuer will provide written notice to the Trustee upon selection of a Substitute Rating Agency, which notice shall perm it the Trustee to conclusively rely upon the rating of each series of Notes assigned by such Substitute Rating Agency.


5.2	Certain Additional Definitions

For purposes of this Fifth Supplemental Indenture, the following expression shall have the following meaning:

"Substitute Rating Agency" means a nationally recognized statistical rating organization that rates the applicable series of Note.


6.	GENERAL

6.1 Effectiveness This Fifth Supplemental Indenture will become effective upon its execution and delivery.


6.2	Effect of Recitals

sufficiency of this Fifth Supplemental Indenture or of the Securities except that the Trustee represents that it is duly authorized to execute and deliver this Fifth Supplemental Indenture, authenticate the Securities and perform its obligations under the Original Indenture and hereunder, and that the statements made by it or to be made by it in a Statement of Eligibility and Qualification on Form T-1 supplied to the Issuer are true and accurate.

6.3 Ratification of Original Indenture

The Original Indenture as supplemented by this Fifth Supplemental Indenture is in all respects ratified and confirmed, and this Fifth Supplemental Indenture shall be deemed part of the Original Indenture in the manner and to the extent herein and therein provided.


6.4	Limitation on Liability

The Trustee shall act at the direction of the requisite noteholders without liability.


6.5	Jurisdiction

Each of the parties hereto hereby irrevocably consents to the jurisdiction of the courts of the State of New York and of any Federal Court located in the Borough of Manhattan in the State of New York in connection with any action, suit or other proceeding arising out of or relating to this Fifth Supplemental Indenture or any action taken or omitted hereunder, and waives any claim of forum non conveniens and any objections as to laying of venue.

6.6 Governing Law This Fifth Supplemental Indenture, the Original Indenture as supplemented hereby and the Securities shall be governed by and construed in accordance with the laws of the State of New York.

6.7 Severability

In case any provision in this Fifth Supplemental Indenture, the Original Indenture as supplemented hereby or in the, Securities shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby.


6.8	Acceptance of Trust

The Trustee hereby accepts the trusts in this Fifth Supplemental Indenture declared and provided for and agrees to perform the same upon the terms and conditions herein before set forth in trust for the various Persons who shall from time to time be Note holders subject to all the terms and conditions herein set forth.


6.9	Counterparts and Formal Date

This Fifth Supplemental Indenture may be executed in any number of counterparts, each of which so executed shall be deemed to be an original, but all such counterparts shall together constitute but one and the same instrument and notwithstanding their date of execution shall be deemed to bear the date first above written

IN WITNESS WHEREOF the parties hereto have executed this Supplemental Indenture on the date first above written .

CANADIAN PACIFIC RAILWAY COMPANY

By: /s/ Marlowe Allison

Name: Marlowe Allison

Title: Vice-President and Treasurer

By: /s/ Kathryn McQuade

Name: Kathryn McQuade

Title: Executive Vice-President and

Chief Financial Officer

THE BANK OF NEW YORK MELLON,

as trustee

By:_____________________________

[Signature Page for the Fifth Supplemental Indenture]

IN WITNESS WHEREOF the parties hereto have executed this Supplemental Indenture on the date first above written.

CANADIAN PACIFIC RAILWAY

COMPANY

By: ____________________________

Name: Marlow Allison

Title: Vice-President and Treasurer

______________________________

Name: Kathryn McQuade

Title: Executive Vice-President and

Chief Financial Officer

THE BANK OF NEW YORK MELLON,

as Trustee

By: __/s/ Catherine F. Donohue______

CATHERINE F. DONOHUE

VICE PRESIDENT

[Signature Page for the Fifth Supplemental Indenture]

TABLE OF CONTENTS

Page


1.	INTERPRETATIONS AND AMENDMENTS 1

1.1 Fifth Supplemental Indenture l


1.2	Definitions in Fifth Supplemental Indenture 2


1.3	Interpretation not Affected by Headings 2


2.	NOTES 2

2.1 Form and Terms of Notes 2

2.2 Issuance of Notes 5


3.	OPTIONAL REDEMPTION OF NOTES 5


3.1	Redemption of Notes 5


3.2	Certain Additional Definitions 5


4.	CHANGE OF CONTROL 6


4.1	Change of Control 6


4.2	Certain Additional Definitions 9


5.	INTEREST RATE ADJUSTMENT 10

5.1 Interest Rate Adjustment. l0

5.2 Certain Additional Definitions 12


6.	GENERAL 12


6.1	Effectiveness 12


6.2	Effect of Recitals 12


6.3	Ratification of Original Indenture 13


6.4	Limitation on Liability 12


6.5	Jurisdiction 12


6.6	Governing Law 13


6.7	Severability 13


6.8	Acceptance of Trust 13


6.9	Counterparts and Formal Date 13

US I :7462678v9

Schedule A-1

See attached

inasmuch as the registered owner hereof, Cede & Co., has an interest herein.

CANADIAN PACIFIC RAILWAY COMPANY

4.500% Notes due 2022

No. 1 US$250,000,000

CUSIP: 13645RAP9

Canadian Pacific Railway Company, a corporation duly organized and existing under the laws of Canada (herein called the "Corporation", which term includes any successor Person under the Indenture hereinafter referred to), for value received, hereby promises to pay to Cede & Co., or its registered assigns, the principal sum of US$250,000,000 (TWO HUNDRED FIFTY MILLION UNITED STATES DOLLARS) on January 15, 2022, at the office or agency of the Corporation referred to below, and to pay interest thereon on July 15, 2012 and semi annually thereafter, on January 15, and July 15 in each year, from December 1, 2011, or from the most recent Interest Payment Date to which interest has been paid or duly provided for, at the rate of 4.500% per annum (subject to adjustment in certain circumstances as set out in Article 5 of the Fifth Supplemental Indenture), until the principal hereof is paid or duly provided for, and (to the extent lawful) to pay on demand interest on any overdue interest at the rate borne by the Securities from the date on which such overdue interest becomes payable to the date payment of such interest has been made or duly provided for. The interest so payable, and punctually paid or duly provided for, on any Interest Payment Date will, as provided in such Indenture, be paid to the Person in whose name this Security is registered at the close of business on the Regular Record Date for such interest, which shall be January 1 or July 1 (whether or not a Business Day), as the case may be, next preceding such Interest Payment Date. Any such interest not so punctually paid or duly provided for shall forthwith cease to be payable to the Holder on such Regular Record Date, and such defaulted interest, and (to the extent lawful) interest on such defaulted interest at the rate borne by the Securities, may be paid to the Person in whose name this Security is registered at the close of business on a Special Record Date for the payment of

such Defaulted Interest to be fixed by the Trustee, notice whereof shall be given to Holders of Securities not less than 10 days prior to such Special Record Date, or may be paid at any time in any other lawful manner not inconsistent with the requirements of any securities exchange on which the Securities may be listed, and upon such notice as may be required by such exchange, all as more fully provided in said Indenture. Reference is hereby made to the further provisions of this Security set forth on the reverse hereof, which further provisions shall for all purposes have the same effect as if set forth at this place.

(signature page to follow)

IN WITNESS WHEREOF, the Corporation has caused this instrument to be duly executed under its corporate seal.


Dated: December 1, 2011	CANADIAN PACIFIC RAILWAY COMPANY

By:__________________________

Name: Kathryn McQuade


Title:	Executive Vice-President and Chief Financial Officer

By: ___________________________

Name: Marlowe Allison

Title: Vice-President and Treasurer

TRUSTEE'S CERTIFICATE OF AUTHENTICATION

Indenture.

This is one of the Securities referred to in, and issued under, the within-mentioned

THE BANK OF NEW YORK MELLON,

as Trustee

Dated__________________________ By:__________________________________

Authorized Signatory

[Reverse of Security]

This Security is one of a duly authorized issue of securities of the Corporation designated as its 4.500% Notes due 2022 (herein called the "Securities"), limited (except as otherwise provided in the Indenture referred to below) in aggregate principal amount to US$250,000,000, which may be issued under an indenture dated as of May 8, 2007, among the Corporation and The Bank of New York Mellon, as trustee (herein called the "Trustee", which term includes any successor trustee under the Indenture, as defined below), as supplemented by the Fifth Supplemental Indenture, among the Corporation and the Trustee (as supplemented by the Fifth Supplemental Indenture, the "Indenture"), to which Indenture and all indentures supplemental thereto reference is hereby made for a statement of the respective rights, limitations of rights, duties, obligations and immunities thereunder of the Corporation, the Trustee and the Holders of the Securities, and of the terms upon which the Securities are, and are to be, authenticated and delivered. This Security is a global Security representing US$250,000,000 aggregate principal amount of the Securities.

Payment of the principal of (and premium, if any, on) and interest on this Security will be made at the office or agency of the Corporation maintained or caused to be maintained for that purpose in New York, New York or at such other office or agency of the Corporation as may be maintained or caused to be maintained for such purpose, in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts; provided, however, that payment of the principal (and premium, if any) and interest may be made at the option of the Corporation (i) by check mailed to the address of the Person entitled thereto as such address shall appear on the Security Register or (ii) by wire transfer to an account maintained by the Person located in the United States entitled thereto as specified in the Security Register; provided, that principal paid in relation to any Security, redeemed at the option of the Corporation or upon Maturity, shall be paid to the Holder of such Security only upon presentation and surrender of such Security to such office or agency referred to above.

The Corporation will pay to the Holders such Additional Amounts as may be payable under Section 9.07 of the Indenture.

The Securities are subject to redemption upon not less than 30 nor more than 60 days' notice, at any time, as a whole or in part, at the election of the Corporation at a redemption price equal to the greater of (1) 100% of the principal amount of the Securities or (2) the sum of the present values of the remaining scheduled payments of principal and interest on the Securities to be redeemed (not including any portion of the payments of interest accrued to the date of redemption) discounted to the redemption date on a semi-annual basis (assuming a 360- day year consisting of twelve 30-day months) at the Treasury Yield plus 45 basis points, plus, in the case of (1) and (2), accrued interest thereon to the date of redemption, all as provided in the Indenture.

percentage of its principal amount) equal to the Comparable Treasury Price for that redemption date.

"Comparable Treasury Issue" means the United States Treasury security or securities selected by an Independent Investment Banker as having an actual or interpolated maturity comparable to the remaining term of the Securities to be redeemed that would be utilized, at the time of selection and in accordance with customary financial practice, in pricing new issues of corporate debt securities of comparable maturity to the remaining term of the Securities.

"Comparable Treasury Price" means (1) the average of the Reference Treasury Dealer Quotations for such redemption date, after excluding the highest and lowest of such Reference Treasury Dealer Quotations, or (2) if the Independent Investment Banker is provided fewer than four such Reference Treasury Dealer Quotations, the average of all such Reference Treasury Dealer Quotations.

"Reference Treasury Dealers" means J.P. Morgan Securities LLC or its affiliates which are primary U.S. government securities dealers, and their respective successors, plus four others which are primary U.S. Government securities dealers and their respective successors; provided, however, that if any of the foregoing ceases to be a primary U.S. government securities dealer in The City of New York (a "Primary Treasury Dealer"), the Corporation will substitute therefor another Primary Treasury Dealer.

The Securities are also subject to redemption as a whole but not in part, at the option of the Corporation, at any time, on not less than 30 nor more than 60 days' prior written notice to each Holder of Securities to be redeemed at such Holder's address appearing on the Security Register at a redemption price equal to 100% of the principal amount, together with accrued and unpaid interest to the date fixed for redemption, in the event there is more than an insubstantial risk that the Corporation has become or would become obligated to pay, on the next date on which any amount would be payable with respect to the Securities, any Additional Amounts as a result of any amendment or change in the laws (including any regulations promulgated thereunder) of Canada (or any political subdivision or taxing authority thereof or therein), or any amendment to or change in any official position regarding the application or interpretation of such laws or regulations, which change or amendment is announced or becomes effective on or after December 1, 2011, all as provided in Section 10.08 of the Indenture.

The Securities are also subject to redemption pursuant to Article 4 of the Fifth Supplemental Indenture.

The Securities do not have the benefit of sinking fund obligations.

In the event of redemption of this Security in part only, a new Security or Securities for the unredeemed portion hereof shall be issued in the name of the Holder hereof upon the cancellation hereof.

If an Event of Default shall occur and be continuing, the principal of all the Securities may be declared due and payable in the manner and with the effect provided in the Indenture.

and the Security Registrar duly executed by, the Holder hereof or his attorney duly authorized in writing, and thereupon one or more new Securities, of authorized denominations and for the same aggregate principal amount, will be issued to the designated transferee or transferees.

No service charge shall be made for any registration of transfer or exchange of Securities, but the Corporation may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith.

The Indenture and this Security shall be governed by and construed in accordance with the laws of the State of New York.

All terms used in this Security which are defined in the Indenture shall have the meanings assigned to them in the Indenture.

See attached

Schedule A-2

Unless and until it is exchanged in whole or in part for Securities in definitive registered form, this certificate may not be transferred except as a whole by DTC to a nominee of DTC or by a nominee of OTC to DTC or another nominee of DTC or by DTC or any such nominee to a successor Depositary or a nominee of such successor Depositary.

CANADIAN PACIFIC RAILWAY COMPANY

5.750% Notes due 2042

No. 1 US$250,000,000

CUSIP: 13645RAQ7

Canadian Pacific Railway Company, a corporation duly organized and existing under the laws of Canada (herein called the "Corporation", which term includes any successor Person under the Indenture hereinafter referred to), for value received, hereby promises to pay to Cede & Co., or its registered assigns, the principal sum of US$250,000,000 (TWO HUNDRED FIFTY MILLION UNITED STATES DOLLARS) on January 15, 2042, at the office or agency of the Corporation referred to below, and to pay interest thereon on July 15, 2012 and semi annually thereafter, on January 15, and July 15 in each year, from December 1, 2011, or from the most recent Interest Payment Date to which interest has been paid or duly provided for, at the rate of 5.750% per annum (subject to adjustment in certain circumstances as set out in Article 5 of the Fifth Supplemental Indenture), until the principal hereof is paid or duly provided for, and (to the extent lawful) to pay on demand interest on any overdue interest at the rate borne by the Securities from the date on which such overdue interest becomes payable to the date payment of such interest has been made or duly provided for. The interest so payable, and punctually paid or duly provided for, on any Interest Payment Date will, as provided in such Indenture, be paid to the Person in whose name this Security is registered at the close of business on the Regular Record Date for such interest, which shall be January 1 or July 1 (whether or not a Business Day), as the case may be, next preceding such Interest Payment Date. Any such interest not so punctually paid or duly provided for shall forthwith cease to be payable to the Holder on such Regular Record Date, and such defaulted interest, and (to the

extent lawful) interest on such defaulted interest at the rate borne by the Securities, may be paid to the Person in whose name this Security is registered at the close of business on a Special Record Date for the payment of

(signature page to follow)

IN WITNESS WHEREOF, the Corporation has caused this instrument to be duly executed under its corporate seal.


Dated: December 1, 2011	CANADIAN PACIFIC RAILWAY COMPANY

By:__________________________

Name: Kathryn McQuade

Title: Executive Vice-President and

Chief Financial Officer

By:___________________________

Name: Marlowe Allison

Title: Vice-President and Treasurer

TRUSTEE'S CERTIFICATE OF AUTHENTICATION

Indenture.

This is one of the Securities referred to in, and issued under, the within-mentioned

THE BANK OF NEW YORK MELLON,

as Trustee

Dated:______________________ By:_____________________________

Authorized Signatory

[Reverse of Security]

This Security is one of a duly authorized issue of securities of the Corporation designated as its 5.750% Notes due 2042 (herein called the "Securities"), limited (except as otherwise provided in the Indenture referred to below) in aggregate principal amount to US$250,000,000, which may be issued under an indenture dated as of May 8, 2007, among the Corporation and The Bank of New York Mellon, as trustee (herein called the "Trustee", which term includes any successor trustee under the Indenture, as defined below), as supplemented by the Fifth Supplemental Indenture, among the Corporation and the Trustee (as supplemented by the Fifth Supplemental Indenture, the "Indenture"), to which Indenture and all indentures supplemental thereto reference is hereby made for a statement of the respective rights, limitations of rights, duties, obligations and immunities thereunder of the Corporation, the Trustee and the Holders of the Securities, and of the terms upon which the Securities are, and are to be, authenticated and delivered. This Security is a global Security representing US$250,000,000 aggregate principal amount of the Securities.