CP's Sends Letter to Sahreholders; Says Strong, Established Customer Relationships Support Growth, Profitability and CONTINUED Success of Multi-Year Plan

Canadian Pacific

today sent the following letter to shareholders: CP's management team is aggressively and successfully executing on the Company's Multi-Year Plan and has the full support of the Board of Directors. Your Board and management team firmly believe that CP's strong, established relationships with customers will continue to create significant value for shareholders. Strong and profitable customer relationships are essential to maintaining and expanding the volume growth that underpins CP's Multi-Year Plan to increase earnings per share, drive down the railroad's operating ratio and deliver greater shareholder value. The Board believes that Pershing Square's demand that the Company replace its CEO, Fred Green, with Hunter Harrison would put at severe risk the significant forward momentum the Company is making on the Multi-Year Plan. During 2011 and early in 2012, CP has signed a number of commercial agreements with customers, terminal operators and ports that will drive improvements in supply chain performance and enable growth. We announced a new five-year agreement with Canadian Tire and a ten-year agreement with Canpotex. In addition, CP has worked with our customers, leveraging technology to enhance car request management and implementing new productivity tools. These relationships, and the volume growth that follows, are forecast to deliver an improvement of approximately 600 basis points to CP's OR between 2011 and 2014. Our scheduled grain program has been successfully implemented in Canada; and the U.S. program is expected to be implemented by August 2012. In addition, CP has, for many years, had a comprehensive program focused on enhancing the customer experience. This includes customer satisfaction surveys, the launch of a Customer Advisory Council, introduction of a new Customer Relationship Management System and enhanced electronic self-serve capabilities. CP's emphasis on strong customer relationships is paying off, positioning the Company to achieve robust volume growth. Longer-term contracts, such as those under which CP transports millions of tons of coal and potash, have price escalation and full fuel recovery built in, and planned capital investment to improve productivity is expected to further improve profitability over the term of these contracts. As part of our Multi-Year Plan, CP is focused on expanding network capacity to safely and efficiently support higher volumes while controlling costs so that the best possible operational and financial results can be achieved. CP is taking advantage of our network reach by using our Kansas City gateway and its Northeast U.S. destination points to extend our length of haul and increase revenue and profitability. In working with new customers, CP has created new opportunities such as long-haul full train loads of ethanol and oil. It is also noteworthy that CP now handles approximately 1.5 billion gallons of ethanol annually, including 1.1 billion gallons from the former DM&E territory, compared to the approximately 390 million gallons originated by the DM&E prior to its acquisition by CP. CP's successful market development activities have enabled us to successfully take advantage of our access to the Bakken oil formation, the Marcellus gas formation and the Alberta oil sands area. As a result, CP is attracting new customers to invest and ship by rail energy related products, including crude oil, sulphur, fuels, diluents and materials key to the energy industry, such as pipe and frac sand. Through our network to the Northeast U.S., and through the Kansas City gateway to the U.S. Gulf Coast, CP is able to partner with the energy industry to facilitate growth in moving oil and energy-related materials. In short, we believe that by developing new opportunities to drive volume enabled by delivering dependable service to our customer base, we can get the most out of CP's unique assets to maximize shareholder value. The DM&E transaction, and other investments made under the Company's Multi-Year Plan, have positioned CP to be able to exploit new market opportunities. CP is making strategic investments across our network that are aligned with our growth opportunities. These investments include: Siding and track expansions; Enhanced infrastructure in the Western corridor to support productivity and growth and increased train sizes in coal, potash, and intermodal; Investments in the North Mainline between Portage La Prairie, MB and Edmonton, AB designed to meet increased potash volumes, reduce route miles and increase efficiency with longer trains; and A $100 million capital investment in our U.S. network, including investments in the U.S. Midwest corridor, allowing increased North-South volumes in order to meet increased traffic demands and enabling us to capitalize on the Bakken's strong growth potential. CP's capital investments to enhance our network give our customers added confidence in CP's ability to efficiently move not only current volume but volume growth such as that planned by Teck, CP's largest customer. Teck is investing over $1 billion to expand its coal production to more than 30 million metric tons, a 30 per cent increase from 2010 production. CP's plans include handling two-thirds of CP's growth with Teck using existing trains by extending sidings and enabling longer trains. We expect both Canadian and U.S. coal volumes to strengthen in 2012. In total, CP intends to invest between $1.1 and $1.2 billion each year through 2014 in order to be able to deliver quality service and provide the network capacity to fully capitalize on market opportunities and volume growth, as well as enhance productivity and reduce costs.