NOTICE OF ANNUAL MEETING OF SHAREHOLDERS

NOTICE IS HEREBY GIVEN that the annual meeting of shareholders of Canadian Pacific Railway Limited will be held at the Fairmont Palliser Hotel, 133 - 9^th Avenue S.W., Calgary, Alberta, at 9:00 a.m. (Mountain Time) on Tuesday, April 20, 2004, for the following purposes:

Shareholders of record at the close of business on March 9, 2004, will be entitled to vote at the meeting and are encouraged to participate either in person or by proxy.

By order of the board of directors,

Robert V. Horte		Calgary, Alberta
Corporate Secretary		February 19, 2004

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

Canadian Pacific Railway     1

MANAGEMENT PROXY CIRCULAR

2     Canadian Pacific Railway

GENERAL INFORMATION

This Circular is furnished in connection with the solicitation of proxies by the management of the Corporation to be used at the Meeting to be held on April 20, 2004, at the Fairmont Palliser Hotel, 133 – 9^th Avenue S.W., Calgary, Alberta, for the purposes set out in the accompanying Notice .

The cost of soliciting proxies will be borne by CPRL. While proxies will be solicited primarily by mail, certain employees of CPRL may also solicit proxies in person or by telephone. CPRL has retained Georgeson, 66 Wellington Street West, Toronto Dominion Bank Tower, Suite 5210, Toronto, Ontario, M5K 1J3, at a fee of approximately $32,500 plus out-of-pocket expenses, to aid in the solicitation of proxies in Canada and the United States.

Proxies are counted and tabulated by CPRL’s transfer agent, Computershare, 9^th Floor, 100 University Avenue, Toronto, Ontario, M5J 2Y1. Computershare maintains the confidentiality of individual shareholder votes. However, proxies will be submitted to management where they contain comments clearly intended for management or to meet legal requirements.

Unless otherwise noted, the information contained in this Circular is given as of February 19, 2004, and all dollar amounts used in this document are in Canadian dollars.

INFORMATION ON VOTING
Voting Shares and Principal Shareholders

At February 19, 2004, there were 158,679,209 Shares outstanding. Each Share carries one vote.

To the knowledge of the directors and officers of CPRL, based on information at February 19, 2004, no individual or corporation beneficially owned, directly or indirectly, or exercised control over, more than ten per cent of the outstanding Shares.

Record Date and Provisions Relating to Voting

The board of directors of CPRL has fixed March 9, 2004, as the Record Date for the purpose of determining shareholders entitled to receive the Notice. Each shareholder is entitled to one vote for each Share held, as shown as registered in such holder’s name on the list of shareholders prepared as of the close of business on the Record Date.

Appointment of Proxyholders

Shareholders wishing to be represented by proxy at the Meeting must deposit a properly executed proxy with Computershare or Georgeson, agents for CPRL, not less than 24 hours prior to the time fixed for holding the Meeting (or any adjournment thereof).

Registered shareholders may also vote by telephone or over the Internet by following the instructions provided on the enclosed form of proxy.

All Shares represented by a properly executed proxy will be voted or withheld from voting on the matters identified in the Notice in accordance with the instructions of the shareholder as specified thereon.

Shareholders who have appointed a named appointee of management to act and vote on their behalf, as provided in the enclosed form of proxy, and who do not provide instructions concerning any matter identified in the Notice will have the Shares represented by such proxy voted FOR the election of the persons nominated for election as directors as set forth in this Circular and FOR the appointment of PricewaterhouseCoopers LLP as auditors.

The enclosed form of proxy, when properly signed, confers discretionary authority on the person or persons named to vote on any amendment to matters identified in the Notice and on any other matter properly coming before the

Canadian Pacific Railway     3

BUSINESS TO BE TRANSACTED AT THE MEETING

This Circular contains information relating to the receipt of CPRL’s audited consolidated financial statements, the election of directors and the appointment of auditors.

1. FINANCIAL STATEMENTS
The audited consolidated financial statements of the Corporation for the year ended December 31, 2003, and the report of the auditors thereon will be placed before the Meeting. These audited consolidated financial statements form part of the Annual Report of the Corporation which was mailed to shareholders with the Notice and Circular. Additional copies of the Annual Report, in English or French, may be obtained from the Corporate Secretary of CPRL upon request and will be available at the Meeting.

2. ELECTION OF DIRECTORS
CPRL’s articles provide for the board of directors to consist of a minimum of five and a maximum of 20 directors.

Mr. Tim Faithfull was appointed to the board of directors on December 10, 2003, the board having that day increased the number of directors from 11 to 12, for a term ending at the close of the Meeting.

The Rt. Hon. The Viscount Weir will retire at the Meeting, having attained the retirement age for directors under the terms of the Corporation’s General By-Law. Accordingly, the board has reduced the number of directors from 12 to 11, effective April 20, 2004.

The terms of office of each of the remaining directors will expire at the close of the Meeting. Shareholders will be asked to elect directors to hold office until the close of the next annual meeting of shareholders or until their successors are otherwise duly elected or appointed.

The Governance Committee reviews annually the qualifications of persons proposed for election to the board of directors and submits its recommendations to the board for consideration. The persons proposed for nomination are, in the opinion of the board, well qualified to act as directors for the ensuing year. Each nominee has established his or her eligibility and willingness to serve as a director if elected. The persons named in the proxy are officers of CPRL who intend to vote at the Meeting for the election of the nominees whose names are set out below, unless specifically instructed on the proxy to withhold such vote. If, prior to the Meeting, any of the listed nominees becomes unable or unwilling to serve, the persons named in the proxy will have the right to use their discretion in voting for such other properly qualified nominees.

The board has established the following committees: the Audit Committee, the Governance Committee, the E&S Committee, the Compensation Committee, and the Pension Committee. The board does not have an Executive Committee. The membership of these committees is set out in the table below.

Information regarding the proposed nominees and the number of Shares, Options and DSUs of CPRL beneficially owned by each of them, is as follows:

Nominees for Election to the Board of Directors

5

6     Canadian Pacific Railway

Canadian Pacific Railway     7

Board of Directors’ Compensation

Compensation Philosophy

Directors who are also employees of CPR do not receive any compensation for board or committee service. The following compensation philosophy therefore applies only to non-employee directors.

The compensation philosophy was reviewed in July of 2003 by external compensation consultants. A subset of Canadian autonomous companies with annual revenues between $2 billion and $10 billion was selected as the comparator group used to establish competitive pay practices for the directors. Cash compensation was targeted at the 50^th percentile and stock-based compensation at the 75^th percentile, resulting in a total direct compensation target between the 50^th and 75^th percentiles of the comparator group.

As a result of the review, the DSOP was suspended on July 21, 2003, and replaced with annual grants of DSUs. Newly appointed or elected directors are entitled to receive an initial grant of $100,000 in DSUs upon joining the board, and thereafter an annual grant of $50,000 in DSUs following each annual meeting of shareholders.

2003 Directors’ Compensation

To align the composition of the Chairman’s compensation with the above philosophy and to move toward the target levels, a number of changes were made, effective April 1, 2003. The Chairman’s total direct compensation was increased from $200,000 to $233,000, and the difference of $33,000 paid to him in DSUs. His annual cash retainer was also reduced from $200,000 to $150,000, and the difference of $50,000 paid in the form of DSUs. As a result, the Chairman’s total compensation in 2003 was as follows:

8     Canadian Pacific Railway

The Chairman was also reimbursed for travel and out-of-pocket expenses related to the board and committee meetings.

To move toward the above-stated compensation philosophy, the annual stock-based compensation for other non-employee directors was increased by $20,000, effective April 1, 2003. In addition, to reflect the increased responsibilities and time commitment associated with Audit Committee membership, the annual Audit Committee retainer was increased to $10,000 for the committee chairman and to $6,000 for other committee members, effective April 1, 2003. Actual compensation in 2003 for non-employee directors was therefore as follows:

The actual 2003 compensation for the Chairman of the board and other non-employee directors reflects the effective dates of the various changes in compensation referred to earlier in this Board of Directors’ Compensation section.

In respect of the year 2003, the average cash compensation paid to non-employee directors other than the Chairman and Mr. Faithfull, was $71,254. Mr. Faithfull was appointed to the board on December 10, 2003, and received $100,000 in DSUs at that time.

Non-employee directors not resident in Canada were paid the same face amount of annual retainers and meeting fees in U.S. dollars. Non-employee directors were also reimbursed for travel and out-of-pocket expenses related to the board and committee meetings.

Directors’ Ownership Requirements

To ensure that directors’ compensation is aligned with shareholders’ interests, non-employee directors are required to hold $125,000 in either Shares or DSUs within five years of their initial election or appointment to the board. The Chairman of the board is required to hold $750,000 in either Shares or DSUs. These amounts represent five times (increased in 2003 from four times) their respective annual cash retainers.

Shareholdings of Directors

Directors’ Deferred Share Unit Plan (DSU Plan)

Under the DSU Plan, the directors may elect annually to receive all or a portion of their annual retainer and committee and meeting fees in the form of DSUs. A DSU is a bookkeeping entry having the same value as one Share, but is not paid out in cash until the director leaves the board, thereby providing an ongoing equity stake in the Corporation throughout the director’s tenure. DSUs attract dividends in the form of additional DSUs at the same rate as dividends on Shares. After leaving the board, the director will receive a cash amount equal to the value of the DSUs held by such director, based on the market value of the Shares at that time, minus applicable taxes.

Canadian Pacific Railway     9

The director must elect to participate in this aspect of the DSU Plan prior to the beginning of each calendar year. In addition, the DSU Plan provides for all directors to receive 100% of their long-term compensation in the form of DSUs.

Only non-employee directors participate in the DSU Plan.

Directors’ Stock Option Plan (DSOP)

Following the 2003 Annual Meeting, each non-employee director received a grant of 4,000 Options at an exercise price of $32.82. The grant date was May 1, 2003.

On July 21, 2003, the board of directors suspended all further grants of Options under the DSOP. The DSOP previously provided grants of Options to purchase 8,000 Shares to each newly-appointed or elected non-employee director. Non-employee directors also received annual grants of 4,000 Options on the third trading day of the TSX following each annual meeting of shareholders at which directors were elected. The exercise price for Options was set at the market value of Shares at the time of grant. Subject to applicable securities rules, Options granted under the DSOP may be exercised from time to time on and after the date of the grant for a period of 10 years. Outstanding Options granted prior to the suspension of the DSOP on July 21, 2003, remain in effect with no amendments. The maximum number of Shares approved for issuance under the DSOP is 500,000. As of December 31, 2003, there were 340,000 Options remaining in the pool.

Directors’ Meeting Attendance

10     Canadian Pacific Railway

3. APPOINTMENT OF AUDITORS

A resolution will be submitted to the Meeting appointing PricewaterhouseCoopers LLP as auditors of CPRL for a term expiring at the close of the 2005 annual meeting of shareholders. To be effective, the resolution must be approved by a majority of the votes cast by the shareholders voting in respect of the resolution. Representatives of PricewaterhouseCoopers LLP will be present at the Meeting with the opportunity to make a statement if they so desire and to respond to appropriate questions.

PricewaterhouseCoopers LLP and its predecessor firm have acted as the auditors of the Corporation’s wholly-owned subsidiary, CPRC, for more than five years and have been the Corporation’s auditors since October 1, 2001.

Audit and Non-Audit Fees and Services - 2003 & 2002

Fees payable to PricewaterhouseCoopers LLP for the years ended December 31, 2003, and December 31, 2002, totaled $1,501,000 and $2,447,000, respectively, as detailed in the following table:

The nature of the services provided by PricewaterhouseCoopers LLP under each of the categories indicated in the table is described below.

Audit Fees

Audit fees were for professional services rendered for the audit of CPR’s annual financial statements and services provided in connection with statutory and regulatory filings or engagements.

Audit-Related Fees

Audit-related fees were for assurance and related services reasonably related to the performance of the audit or review of the annual statements and are not reported under “Audit Fees” above. These services consisted of: special attest services as required by various government entities; accounting consultations and special audits in connection with acquisitions; the audit of financial statements of certain subsidiaries and of various pension and benefits plans of CPR; the audit of fuel indices; assistance with prospectus filings; and assistance with preparations for compliance with Section 404 of the SOA.

Tax Fees

Tax fees were for tax compliance, tax advice and tax planning professional services. These services consisted of: tax compliance including the review of tax returns; assistance with questions regarding tax audits, the preparation of employee tax returns under CPR’s expatriate tax services program and assistance in completing routine tax schedules and calculations;

Canadian Pacific Railway     11

tax planning and advisory services relating to common forms of domestic and international taxation (i.e. income tax, capital tax, goods and services tax, and valued added tax); and, in 2002, assistance with tax filings for the reorganization of CPR’s former parent company, Canadian Pacific Limited.

All Other Fees

Fees disclosed under this category were for products and services other than those described under “Audit Fees”, “Audit-Related Fees” and “Tax Fees”, above. In 2003, these services consisted of assistance in reviewing an agreement and proposed transaction, and in 2002 of: assistance with insurance claims; consultation on computer systems for human resources, freight handling, management reporting and budgeting; financial information systems design and implementation services, which services were completed before July 30, 2002; and assistance with financial forecasting for a proposed joint venture.

REPORTS OF COMMITTEES OF THE BOARD

REPORT OF THE AUDIT COMMITTEE

The Audit Committee is comprised of four directors, all of whom are unrelated and independent. Its purpose is to fulfill applicable public company audit committee obligations and to assist the board in fulfilling its responsibilities in relation to the oversight of the external and internal auditors and financial and risk management matters, including internal and disclosure controls and procedures.

The Audit Committee reviewed its Terms of Reference in 2003, taking into account, among other things, the NYSE Standards, the SOA, the TSX Guidelines and Proposed TSX Guidelines. Changes to the Terms of Reference were approved by the board as recommended to it by the Audit Committee. A copy of the revised Terms of Reference is attached to this Circular in Appendix 3.

12     Canadian Pacific Railway

Internal Auditors

Internal Controls and Financial Reporting Processes

Complaints Process

Finance and Treasury

Risk Management

Pension Plan

Canadian Pacific Railway     13

Throughout 2003, the Audit Committee met regularly with the external auditors, the Director, Internal Audit, the Executive Vice-President and Chief Financial Officer, the Vice-President and Comptroller, the Vice-President and Treasurer and other members of management.

The Audit Committee is satisfied that it has fulfilled all of its responsibilities under its Terms of Reference in 2003.

R. Phillips (Chair), S.E. Bachand, J.E. Cleghorn, M.W. Wright

REPORT OF THE GOVERNANCE COMMITTEE

The Governance Committee is comprised of all 11 independent and unrelated members of the board. It has overall responsibility for monitoring and assessing the functioning of the board and its committees, and for developing and implementing good corporate governance practices. In addition, the Governance Committee identifies individuals qualified to become board members and recommends to the board the director nominees for the annual meetings of shareholders. It also has oversight responsibility in respect of major issues of public policy relevant to the business of the Corporation and its subsidiaries.

The Governance Committee reviewed its Terms of Reference in 2003, taking into account, among other things, the NYSE Standards, the SOA, the TSX Guidelines and the Proposed TSX Guidelines. Changes to the Terms of Reference were approved by the board as recommended by the Governance Committee. A copy of the revised Terms of Reference is attached to this Circular in Appendix 3.

The Governance Committee met privately without management present prior to each meeting of the board, to discuss corporate governance and other matters relating to its mandate.

14     Canadian Pacific Railway

The Governance Committee is satisfied that it has fulfilled all of its responsibilities under its Terms of Reference in 2003.

J.E. Newall (Chair), S.E. Bachand, J.E. Cleghorn, T.W. Faithfull, J. Lamarre, J.R. Nininger, M. Paquin, M.E.J. Phelps, R. Phillips, The Rt. Hon., The Viscount Weir, M.W. Wright

REPORT OF THE E&S COMMITTEE

The E&S Committee is comprised of six directors, all of whom are unrelated and independent. Its purpose is to review and evaluate with management the environmental and safety practices, policies and procedures of CPR to ensure their effective implementation and compliance with applicable legislation, regulatory requirements and industry standards. The E&S Committee also reviews reports on, and monitors, specific environmental and safety issues and incidents, provides advice and direction to management thereon, and makes reports and recommendations to the board on environmental and safety matters.

The E&S Committee reviewed its Terms of Reference in 2003 and determined that no changes were required. A copy of the Terms of Reference is attached to this Circular in Appendix 3.

The E&S Committee is satisfied that it has fulfilled all of its responsibilities under its Terms of Reference in 2003.

M.E.J. Phelps (Chair), T.W. Faithfull, J. Lamarre, J.R. Nininger, M. Paquin, The Rt. Hon., The Viscount Weir

REPORT OF THE PENSION COMMITTEE

The Pension Committee is comprised of five directors, all of whom are unrelated and independent. Its purpose is to assist the board in overseeing the administration and governance of the pension plans of CPRC, in order to meet applicable legal and fiduciary obligations to plan members.

The Pension Committee reviewed its Terms of Reference in 2003 and determined that no amendment was required, except to reduce the quorum requirement for committee meetings from three members to two. A copy of the Terms of Reference is attached to this Circular in Appendix 3.

Canadian Pacific Railway     15

The Pension Committee is satisfied that it has fulfilled all of its responsibilities under its Terms of Reference in 2003.

J.E. Cleghorn (Chair),T.W. Faithfull, J. Lamarre, R. Phillips, The Rt. Hon., The Viscount Weir

REPORT OF THE COMPENSATION COMMITTEE

The Compensation Committee is comprised of four directors, all of whom are unrelated and independent. Its purpose is to fulfill applicable public company compensation committee legal obligations and to discharge the board’s responsibilities relating to:

The Compensation Committee reviewed its Terms of Reference in 2003, taking into account, among other things, the NYSE Standards, the SOA, the TSX Guidelines and the Proposed TSX Guidelines. Changes to the Terms of Reference were approved by the board as recommended to it by the Compensation Committee. A copy of the revised Terms of Reference is attached to this Circular in Appendix 3.

In addition to other matters dealt with in 2003, the Compensation Committee:

The Compensation Committee is satisfied that it has fulfilled all of its responsibilities under its Terms of Reference in 2003.

S.E. Bachand (Chair), J.R. Nininger, M.E.J. Phelps, M.W. Wright

STATEMENT OF EXECUTIVE COMPENSATION
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION

Compensation Philosophy and Process

CPR’s executive compensation program is designed to attract and retain talented executives and to focus their efforts on performance improvement and sustained shareholder value creation. Total compensation for each Executive Officer, including those named in the Summary Compensation Table, is designed to be between the 50^th and 75^th percentiles of corresponding positions in the Comparator Group. This design is accomplished through targeting base salary and annual incentive compensation at the 50^th percentile of the Comparator Group while placing stock-based compensation at the 75^th percentile of the Comparator Group.

16     Canadian Pacific Railway

The compensation of Executive Officers, including the Named Executive Officers, is evaluated and recommended by the Compensation Committee to the Governance Committee, in the case of the CEO, and by the Compensation Committee to the board of directors, in the case of all the other Executive Officers. To establish competitive levels of executive compensation, the Compensation Committee reviews information obtained through independent compensation consultants.

Composition of Executive Compensation

Direct compensation for Executive Officers is comprised of base salary, annual incentive and stock-based compensation. The percentage mix of each element varies in accordance with the level of the individual’s position in the organization and is regularly reviewed against competitive practice. The percentage of direct compensation relating to both short and long-term performance incentive plans ranges from 57% for Vice-Presidents to 76% for the CEO.

Base Salary

The Compensation Committee recommends to the board of directors, and in the case of the CEO, to the Governance Committee, the base salaries of the Executive Officers, following a review of market data. Salaries are adjusted, as needed, based on individual performance, responsibility and experience, to ensure that they reflect the contribution of each Executive Officer. In establishing the base salary for each Executive Officer, the Corporation targets the market median (50^th percentile) paid to the comparable executive officers of the Comparator Group.

Annual Incentive Plan

The Corporation believes that incentive pay encourages employees to contribute to CPR’s business or functional units’ performance and CPR’s overall performance. To this end, CPR’s Performance Incentive Plan provides an opportunity for participants, including all Executive Officers, to earn an annual cash award based on the achievement of corporate targets and individual business objectives, which are set at the beginning of the year.

The plan was amended for the 2003 plan year to place a stronger emphasis on individual performance. The new plan design is comprised of two performance components: individual and corporate. The weighting of each component is dependent on an employee’s level in the organization. Executive Officers have an individual to corporate weighting of 25%/ 75%, senior managers have a weighting of 40%/60%, and the remaining participants have a weighting of 50%/50%.

The degree to which an award is earned under the individual component is largely dependent on the achievement of established individual performance objectives calibrated through CPR’s performance management program. For any award to be payable under the individual component, CPR must attain a minimum level of corporate performance, which is set annually by the board.

The award payable under the corporate component is dependent on how well the Corporation does against a performance target set annually by the board. For any award to be payable under the corporate component, CPR must attain a specified threshold of corporate performance, which is also set annually by the board.

Potential awards are expressed as a percentage of base salary. The target award levels for Named Executive Officers range between 35% and 60% of base salary. The maximum bonus opportunity for exceptional CPR financial performance and individual contribution is 200% of the target award level.

For the 2003 plan year the performance measure was operating income. Since the operating income threshold was not met, no award was payable based on corporate performance. In addition, since the operating income level fell below the minimum level of performance required for a payout under the individual component, in accordance with the plan design, no award was payable under the individual component of the plan. However, since uncontrollable factors such as extremely high world oil prices and the unanticipated strength of the Canadian dollar were major contributors to the operating

Canadian Pacific Railway     17

income falling below the minimum level of performance, the board, upon recommendation from management, authorized a partial payout of 50% of the individual component of the plan. No awards were approved for the corporate performance component.

Stock Option Plan

The purpose of the Stock Option Plan is to encourage key officers and employees of CPR to increase shareholder value and to participate in the growth and development of CPR. The Compensation Committee makes recommendations to the board of directors regarding grants of Options to Executive Officers. In determining the size of a new grant of Options, neither the amount nor the terms of previously granted Options are taken into consideration. The CEO, as well as the Chairman of the board and the Chairman of the Compensation Committee, also have authority to grant Options to employees within certain defined parameters.

Participants in the Stock Option Plan are granted a number of Options exercisable at the last closing market price of Shares on the TSX prior to the approval of the grant. The maximum number of Shares approved for issuance under the Stock Option Plan is 11,000,000. As at December 31, 2003, there were 4,530,699 Options remaining in the pool.

There are two types of Options: regular Options and performance-accelerated Options. Regular Options expire ten years from the date of grant. Half of the regular Options become exercisable on the second anniversary of the grant and the balance on the third anniversary. Tandem SARs may be attached to half the regular Options granted. The vesting requirements and term of SARs are consistent with the regular Options to which they are attached.

Performance-accelerated Options expire five years after the date of the grant and become exercisable on the fourth anniversary of the grant, or earlier, upon the achievement by CPR of specified performance criteria. Similar to previous years’ grants, the performance Options granted in 2003 had specific operating ratio targets as the performance criteria. None of the performance Options granted to date have had vesting accelerated by performance. There is a minimum one-year vesting requirement, even if the performance criteria have been achieved prior to that time. Aside from an initial grant of performance Options in October 2001 to all participants in recognition of CPRL becoming a publicly-traded company, grants of performance Options are restricted to executives and are designed to provide additional incentive opportunity, increasing their target long-term incentive opportunity from the median to the 75^th percentile of the Comparator Group.

Share Ownership Guidelines

To further align the interests of Executive Officers with those of shareholders, CPR encourages stock ownership and demonstrates this commitment by paying a significant portion of executive officer compensation through stock based compensation programs (DSUs, performance Options and regular Options).

CPR has share ownership guidelines in place for each of its Executive Officers. The guidelines set a level of share ownership, expressed as a multiple of the Executive Officer’s base salary, that the individual is required to hold. Shares and DSUs are included in determining an Executive Officer’s ownership level. The ownership guidelines range from 100% of base salary for vice-presidents and senior vice-presidents, to 200% of base salary for executive vice-presidents, to 300% of base salary for the chief operating officer and to 400% of base salary for the CEO. Each Executive Officer is expected to achieve the applicable minimum level of share ownership over a five-year period. Executive Officers promoted to a higher ownership level are expected to achieve the new level within five years from the date of the promotion.

As of December 31, 2003 all Named Executive Officers have achieved the applicable minimum level of share ownership.

18     Canadian Pacific Railway

Executive DSU Plan

The Executive DSU Plan was developed to strengthen the alignment of interests between executives and shareholders.

Under the Plan, Executive Officers may elect to receive all or a portion of their annual incentive award in DSUs. The Executive Officer must elect to participate in this aspect of the Executive DSU Plan prior to the beginning of the calendar year for which the annual incentive award is paid. When the annual incentive award is determined, the amount elected is converted to DSUs, which have a value equal to the average market price of a Share for the ten trading days immediately prior to December 31^st of the calendar year for which the award is paid.

To assist in the attainment of an Executive Officer’s share ownership guideline, during the first six months following the appointment of the Executive Officer, CPR will contribute one DSU for each three Shares or DSUs acquired by the individual. For the next 54 months following that six-month period, CPR will contribute one DSU for each four Shares or DSUs acquired by the Executive Officer. The CPR match is capped at the minimum level required to meet the share ownership guidelines when combined with the Executive Officer’s contribution. The matching DSUs will vest if the underlying Shares or DSUs are held for a three-year period.

Executive Officers may only redeem their DSUs after termination of employment or retirement. The value of the DSU at the time of payment will be based on the average market price of a Share for the ten trading days immediately preceding the payment date.

Employee Share Purchase Plan

The Corporation believes that all employees have an impact on CPR’s success and that employees’ interests should be aligned with shareholders. In keeping with this belief, the Corporation provides a mechanism for CPR employees to acquire Shares through payroll deductions. Eligible employees may purchase Shares through the ESPP.

Under the ESPP, contributions by CPR and by eligible employees are used to make purchases of Shares on the open market. Each eligible employee may contribute up to six percent of the employee’s salary to the ESPP. CPR will purchase and contribute one Share for each three Shares purchased on behalf of each eligible employee under the ESPP. In no case will Shares be issued from treasury pursuant to the ESPP. Rather, the ESPP Administrator will purchase all Shares to be contributed under the ESPP on the open market. Shares contributed by CPR will not vest in favour of the eligible employee until the end of the first calendar quarter in which the underlying Shares purchased by the employee’s contribution have been held for a period of one year. Employees must remain participants of the ESPP at the time of vesting in order to receive the CPR match.

The Named Executive Officers are among the approximately 53% of employees who are participants in the ESPP.

CEO Compensation

The pay-for-performance philosophy of CPR’s executive compensation program applies to the CEO, Mr. R.J. Ritchie. On an annual basis, the Compensation Committee reviews the compensation paid to chief executive officers of the Comparator Group, in order to assess the competitiveness of the CEO’s compensation. Based upon the recommendation of the Compensation Committee, the compensation of the CEO is approved by the Governance Committee after careful assessment of his personal contribution to CPR’s performance. This assessment is based on a number of quantitative and qualitative factors, which are set annually by the Compensation Committee.

Mr. Ritchie is a participant in CPR’s Performance Incentive Plan, Stock Option Plan and ESPP. His base salary and annual incentive compensation are targeted at the 50^th percentile of the Comparator Group, while the stock-based compensation is targeted at the 75^th percentile to bring his total direct compensation between the 50^th and 75^th percentile of CEOs in the Comparator Group.

In 2003, Mr. Ritchie’s annual salary was increased to $750,000.

Canadian Pacific Railway     19

Under the Performance Incentive Plan, Mr. Ritchie’s target award level is 60% of base salary, of which 15% of base salary is attributable to the individual component and 45% of base salary is attributable to the corporate component of the plan. For 2003, the performance measure for the corporate component of the plan was operating income. As the Corporation did not meet the minimum level required for any payout under the plan, no award was payable to Mr. Ritchie either on the individual or corporate component. However, given the uncontrollable economic factors described herein under the subheading “Annual Incentive Plan”, a partial payout on the individual component was authorized by the board. No award payable based on the corporate component of the plan was approved. Under the individual component of the plan, Mr. Ritchie was granted an annual incentive award of $84,375, in recognition of his performance against his personal objectives relating to:

This award represents 11.25% of Mr. Ritchie’s base salary.

Under the Stock Option Plan Mr. Ritchie was granted 110,000 regular Options and 97,000 performance Options on February 18, 2003, at an exercise price of $31.45, the market price immediately preceding the date of the grant.

The relative weightings of the various components of the 2003 design of Mr. Ritchie’s total compensation, based on his target award levels under the Performance Incentive Plan and the Stock Option Plan, are set forth in the following table:

The foregoing report has been made by the members of the Compensation Committee:

S.E. Bachand (Chair), J.R. Nininger, M.E.J. Phelps, M.W. Wright

20     Canadian Pacific Railway

SUMMARY COMPENSATION TABLE

The following disclosure of executive compensation provides information on the compensation of CPR’s Named Executive Officers, being the CEO and CPR’s next four most highly compensated Executive Officers, during the year ended December 31, 2003.

Canadian Pacific Railway     21

OPTIONS AND SAR GRANTS DURING 2003

The following table shows Options and SARs granted under the Stock Option Plan for each of the Named Executive Officers for the fiscal year ended December 31, 2003.

AGGREGATED OPTIONS AND SAR EXERCISES DURING 2003 AND YEAR-END OPTIONS AND SAR VALUES

The following table sets out information on the exercise by each of the Named Executive Officers of Options and SARs granted under the Stock Option Plan for the fiscal year ended December 31, 2003, and the Options and SARs values at December 31, 2003.

22     Canadian Pacific Railway

PENSION PLANS

As at December 31, 2003, CPR maintained a contributory defined benefit Basic Pension Plan pursuant to which pensions are paid to eligible officers and employees of CPR at retirement. Under the Basic Pension Plan, the amount of an individual’s pension is based on 2% of the average of the best five consecutive years or final 60 months of pensionable earnings multiplied by credited years of service up to a maximum of 35, inclusive of pensions under the Canada Pension Plan or Quebec Pension Plan. The normal retirement age under the Basic Pension Plan is 65. The pension is payable for the lifetime of the former Basic Pension Plan member and continues to the surviving spouse at rates set forth in the Basic Pension Plan. A portion of the pension is indexed at 50% of the change in the Consumer Price Index. Under the Basic Pension Plan, the pension benefit is limited to the maximum amount prescribed under the Income Tax Act.

CPR also maintained a non-contributory Supplemental Pension Plan in which Executive Officers participate. The Supplemental Pension Plan provides pension benefits in excess of the maximum permitted under the Basic Pension Plan. Annual incentive plan awards and notional awards approved by the Compensation Committee are included in the calculation of pensionable earnings (the best five-year average of such awards is limited to the individual’s target level at retirement). Members of the Supplemental Pension Plan may retire with an unreduced pension at age 60. The Supplemental Pension Plan also provides additional benefits for executives who join the Basic Pension Plan in mid-career.

A defined contribution (“DC”) pension option was introduced in both the Basic Pension Plan and Supplemental Pension Plan effective January 1, 2001. Management employees and officers were given the opportunity at that time to participate in the DC pension option and to convert past service defined benefit entitlements as an initial deposit to their DC account. All newly-hired management employees and officers have the option to participate in either the defined benefit or DC pension option.

The following table shows the aggregate annual retirement benefits payable under the Basic Pension Plan and the Supplemental Pension Plan upon retirement at age 65, based upon the defined benefit pension provisions in effect during 2003 (exclusive of the amounts paid under the Canada Pension Plan or Quebec Pension Plan).

The respective years of credited service for pension plan purposes as of December 31, 2003 and at age 65 for the Named Executive Officers are:

Mr. Ritchie, 33.5 and 35 years; Mr. Dodge, 34.8 and 35 years; Mr. Waites, 6.8 and 21.7 years; Mr. Foot, 28.8 and 35 years; Mr. Green, 25.6 and 35 years.

Canadian Pacific Railway     23

SEVERANCE AGREEMENTS

Each Named Executive Officer is entitled to receive, pursuant to the terms of their severance agreements, certain severance benefits if a change in control of CPR occurs. For each Named Executive Officer, these benefits are triggered if, within the three-year period following the change in control, the individual’s employment is terminated other than for cause, disability, retirement or death, or by the individual for certain defined reasons such as a change in responsibilities or a reduction in salary or benefits. In the case of the CEO, the benefits are also triggered if, within the three-year period following the change in control, the CEO resigns, provided he remains in his role for the first six months if so required by the acquiring company.

Each Named Executive Officer will receive a lump sum severance payment equal to the base salary that such Named Executive Officer would have earned through the end of the applicable severance period (36 months for the CEO and 24 months for the other Named Executive Officers). Each severance agreement also provides that the Named Executive Officer is entitled to certain benefits, including payments under CPR’s compensation plans and the continuation of certain insurance plan benefits for the duration of the severance period.

CPR entered into a retirement agreement with Mr. Dodge effective December 2, 2003, which provides that Mr. Dodge will retire from his employment with CPR effective March 1, 2004. Under the terms of the retirement agreement Mr. Dodge will receive a lump-sum retirement allowance in the amount of $600,000 and post-retirement benefits, which are generally available to all retirees. The retirement agreement includes a non-competition covenant, which is effective for a period of time after the date of his retirement.

PERFORMANCE GRAPH

The following performance graph illustrates the cumulative total shareholder return on CPRL Shares (assuming reinvestment of dividends) compared with the cumulative total return of the S&P/TSX Composite Index from the period beginning October 3, 2001, the date on which CPRL Shares began to publicly trade, and ending December 31, 2003.

The dollar amounts indicated in the graph above and in the chart below are as of October 3, 2001, December 31, 2001, December 31, 2002 and December 31, 2003.

24     Canadian Pacific Railway

INDEBTEDNESS OF DIRECTORS AND EXECUTIVE OFFICERS

As at December 31, 2003 there was no indebtedness outstanding by, or any guarantees, support agreements, letters of credit or other similar arrangements provided by CPR to, any of the directors or Executive Officers or any of their associates.

ADDITIONAL ITEMS

DIRECTORS’ AND OFFICERS’ LIABILITY INSURANCE

CPRL carries on its own behalf, and on behalf of its subsidiaries, a directors’ and officers’ liability insurance policy. This policy has an annual aggregate coverage limit of $125,000,000 US subject to deductibles of $1,000,000 US in cases where a director or officer is reimbursed by CPR for any loss covered by the policy. The approximate amount of the premium, including corporate reimbursement coverage, paid by CPR in 2003 in respect of its directors as a group and its officers as a group was $488,582 US and $1,021,582 US, respectively. The aggregate amount of the premiums paid by the directors and officers of CPR in respect of the year 2003 was approximately $100 and $383, respectively.

CORPORATE GOVERNANCE

The Corporation and its board of directors believe that good corporate governance practices are essential to the effective management of CPR and to the protection of its investors, employees and other stakeholders.

As in 2002, significant developments in corporate governance have occurred during 2003. In the United States, the SOA, signed into law on July 30, 2002, introduced sweeping changes in corporate governance requirements for United States public companies, as well as for foreign private issuers, such as the Corporation, whose securities trade on United States stock exchanges. Subsequent rules of the SEC promulgated under the SOA have introduced additional changes. New governance standards were also brought into force in the United States through the NYSE Standards, which were approved by the SEC in 2003.

Canadian securities regulators have also been engaged in a review of corporate governance matters, and changes in governance standards and requirements are pending in 2004. In April and November of 2002, the TSX proposed changes to the TSX Guidelines, although these have not been brought into force. The Ontario Securities Commission has since indicated that it will shortly assume direct oversight of corporate governance standards for TSX-listed companies. In the meantime, such companies have been advised that they may disclose their corporate governance practices against the TSX Guidelines, although they may, at their discretion, provide additional disclosure in reference to the Proposed TSX Guidelines.

As developments in corporate governance have occurred in Canada and the United States, the Corporation has been, and continues to be, engaged in an ongoing review and updating of its governance practices to ensure that they are of the highest standard and in compliance with all applicable requirements.

Appendix 1 to this Circular contains the Corporation’s disclosure addressing the TSX Guidelines and includes commentary in reference to some of the Proposed TSX Guidelines.

Code of Business Ethics

The Corporation revised its general Code of Business Ethics in 2003, in part to update and clarify certain provisions and also to ensure that it was in compliance with the new NYSE Standards. The revised Code, approved by the board in December 2003, applies to all directors, officers and employees, both unionized and non-unionized, of the Corporation and its subsidiaries in Canada, the United States and elsewhere, and forms part of the terms and conditions of employment of

Canadian Pacific Railway     25

all such individuals. Contractors engaged on behalf of the Corporation or its subsidiaries must undertake, as a condition of their engagement, to adhere to principles and standards of business conduct consistent with those set forth in the revised Code. The revised Code is available on CPR’s web site at www.cpr.ca and in print to any shareholder who requests it. All amendments to the revised Code, and all waivers of the revised Code with respect to any director or executive officer, will be posted on CPR’s web site and provided in print to any shareholder who requests them.

Code of Ethics for Chief Executive Officer and Senior Financial Officers

The Corporation adopted a Code of Ethics for Chief Executive Officer and Senior Financial Officers, in compliance with Section 406 of the SOA. This code applies to the CEO, the Executive Vice-President and Chief Financial Officer and the Vice-President and Comptroller. It is available on CPR’s web site at www.cpr.ca and in print to any shareholder who requests it. 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 the CPR’s web site and provided in print to any shareholder who requests them.

Corporate Governance Guidelines

The Corporation has adopted corporate governance guidelines regarding such matters as, but not limited to: director qualification standards and responsibilities; access by directors to management and independent advisors; director compensation; director orientation and continuing education; management succession; and annual performance evaluations of the board. The guidelines are available on CPR’s web site at www.cpr.ca and in print to any shareholder upon request.

Director Independence

The board has adopted the criteria for director independence and unrelatedness: (a) prescribed by the SOA, Section 10A(m)(3) of the Exchange Act and Rule 10A-3(b)(1) promulgated thereunder, for members of public company audit committees; and (b) set forth in the NYSE Standards and the Proposed TSX Guidelines in respect of public company directors. The criteria are explicitly set forth in Appendix 2 to this Circular. The board also conducted a comprehensive assessment of each of its members as against these criteria and determined that all current directors, except R.J. Ritchie, have no material relationship with the Corporation and are independent and unrelated. Mr. Ritchie is not independent or unrelated by virtue of the fact that he is the President and CEO of the Corporation.

Executive Sessions of Non-Management Directors

The Governance Committee of the board is comprised of all the non-management directors on the board and meets prior to every board meeting. It is chaired by Mr. J.E. Newall. Interested parties may communicate directly with Mr. Newall by writing to him at the following address, and all communications received at this address will be forwarded to him:

Office of the Corporate Secretary
Canadian Pacific Railway
Suite 2000, 401 – 9^th Avenue S.W.
Calgary, Alberta
Canada T2P 4Z4

26     Canadian Pacific Railway

Audit Committee Financial Experts

The following individuals comprise the entire membership of the Audit Committee, which has been established in accordance with Section 3(a)(58)(A) of the Exchange Act:

S.E. Bachand
J.E. Cleghorn
R. Phillips
M.W. Wright

Each of the aforementioned directors has been determined by the board to meet the audit committee financial expert criteria prescribed by the SEC and has been designated as an audit committee financial expert for the Audit Committee. Each of the aforementioned directors has also been determined by the board to be independent within the criteria referred to above under the subheading “Director Independence”.

Financial Literacy of Audit Committee Members

The board has determined that all members of the Audit Committee have “accounting or related financial management expertise” within the meaning of the NYSE Standards and “accounting or related financial expertise” within the meaning of the Proposed TSX Guidelines. The board has also adopted the definition of “financial literacy” contained in the practice notes of the Proposed TSX Guidelines and has determined that all members of the Audit Committee are financially literate within that definition.

Service of Audit Committee Members on More Than Three Audit Committees

Two members of the Audit Committee, J.E. Cleghorn and R. Phillips, each serve on a total of four public company audit committees, including CPRL’s Audit Committee. The board does not limit the number of public company audit committees on which the members of the Audit Committee serve.

The board has determined that the service of Messrs. Cleghorn and Phillips on more than three public company audit committees does not impair their ability to effectively serve on the Audit Committee, for the following reasons:

Pre-Approval of Audit and Non-Audit Services by Independent Auditors

The Audit Committee pre-approves all audit services to be provided to CPR by its independent auditors. The Audit Committee’s policy regarding the pre-approval of non-audit services to be provided to CPR by its independent auditors is that all such services shall be pre-approved by the Audit Committee as a whole or by the Chairman of the Audit Committee, who must report all such pre-approvals to the Audit Committee at its next meeting following the granting

Canadian Pacific Railway     27

thereof. Non-audit services that are prohibited to be provided to CPR by its independent auditors may not be pre-approved. In addition, prior to the granting of any pre-approval, the Audit Committee or its Chairman, as the case may be, must be satisfied that the performance of the services in question will not compromise the independence of the independent auditors.

Comparison of Corporate Governance Practices with NYSE Standards

There are no significant differences between the Corporation’s corporate governance practices and those set forth in the NYSE Standards.

CEO’s Certification Regarding Compliance with NYSE Standards

The CEO intends to provide to the NYSE a certificate indicating that he is not aware of any violation by the Corporation of the NYSE Standards at the time and in the format required by the NYSE. In addition, the certifications of the CEO and CFO of each of CPRL and CPRC required by Section 302 of the SOA and the rules promulgated by the SEC thereunder have been filed with the SEC as an exhibit to the Corporation’s annual report on Form 40-F.

This disclosure statement on corporate governance, including Appendices 1, 2 and 3, has been prepared by the Governance Committee of the board and has been approved by the board of directors.

SHAREHOLDER PROPOSALS

Any shareholder proposals to be included in the Circular to be issued in respect of the 2005 annual meeting of shareholders must be received by the Corporate Secretary (at the address set forth below) by November 21, 2004.

AVAILABILITY OF DOCUMENTS

Copies of the following documents are available on written request to the Office of the Corporate Secretary at Suite 2000, Gulf Canada Square, 401 – 9^th Avenue S.W., Calgary, Alberta, T2P 4Z4: the 2003 Annual Information Form (which Form is filed with the SEC as part of a Form 40-F), the 2003 Annual Report to Shareholders containing the comparative consolidated financial statements for the year ended December 31, 2003, together with the auditors’ report thereon and MD&A of financial condition and results of operations (which is also filed with the SEC as part of the Form 40-F), the interim financial statements for periods subsequent to December 31, 2003, and this Circular.

DIRECTORS’ APPROVAL

The contents of this Circular and its distribution to each director, to each shareholder entitled to receive the Notice, and to the auditors of the Corporation have been approved by the directors of CPRL.

Robert V. Horte		Calgary, Alberta
Corporate Secretary		February 19, 2004

28     Canadian Pacific Railway

APPENDIX 1    STATEMENT OF CORPORATE GOVERNANCE PRACTICES

Canadian Pacific Railway     29

APPENDIX 1    STATEMENT OF CORPORATE GOVERNANCE PRACTICES

30     Canadian Pacific Railway

APPENDIX 1 STATEMENT OF CORPORATE GOVERNANCE PRACTICES

Canadian Pacific Railway     31

APPENDIX 1 STATEMENT OF CORPORATE GOVERNANCE PRACTICES

32     Canadian Pacific Railway

APPENDIX 1    TATEMENT OF CORPORATE GOVERNANCE PRACTICES

Canadian Pacific Railway     33

APPENDIX 1    STATEMENT OF CORPORATE GOVERNANCE PRACTICES

34     Canadian Pacific Railway

APPENDIX 1    STATEMENT OF CORPORATE GOVERNANCE PRACTICES

Canadian Pacific Railway     35

APPENDIX 2    DIRECTOR INDEPENDENCE

A. INDEPENDENCE/UNRELATEDNESS CRITERIA

The following criteria of director independence/unrelatedness have been adopted by the board of directors of the Corporation:

NYSE Independence Criteria

No director qualifies as “independent” unless the board of directors affirmatively determines that the director has no material relationship with the Corporation (either directly or as a partner, shareholder or officer of an organization that has a relationship with the Corporation).

1. In addition:

Additional Independence Criteria for Audit Committee Members

In addition to the foregoing independence standards, the members of the Audit Committee must satisfy the audit committee independence requirements prescribed by the SOA, Section 10A(m)(3) of the Securities Exchange Act of 1934, as amended, and Rule 10A-3(b)(1) promulgated thereunder. In particular:

36     Canadian Pacific Railway

Note: An “affiliated person” is someone who directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, the Corporation, including a significant shareholder. A person who is neither an executive officer nor a shareholder owning, directly or indirectly, more than 10% or more of any class of voting equity securities of the Corporation will not be deemed to control the Corporation.

TSX Unrelatedness Criteria for Directors

The board shall be constituted with a majority of individuals who qualify as unrelated directors. “Unrelated director” shall mean a director who is independent of management and is free from any interest and any business or other relationship which could, or could reasonably be perceived to, materially interfere with the director’s ability to act with a view to the best interests of the Corporation, other than interests and relationships arising from shareholding.

B. BOARD DETERMINATION OF DIRECTOR INDEPENDENCE/UNRELATEDNESS

The board has conducted, through a combination of questionnaires, biographical reviews and discussion, a comprehensive assessment of all business and other relationships and interests of each director vis-à-vis the Corporation and its subsidiaries, as against the aforementioned criteria and has determined that each director, except R.J. Ritchie, is independent and unrelated to the Corporation in accordance with the criteria for independence/unrelatedness established for all directors by the NYSE Standards and the Proposed TSX Guidelines, and that each member of the Audit Committee, in addition, meets the additional independence criteria established for audit committee members under the SOA, Section 10A(m)(3) of the Securities Exchange Act of 1934, as amended, and Rule 10A-3(b)(1) promulgated thereunder.

Mr. Ritchie is not independent or unrelated by virtue of the fact that he is the President and Chief Executive Officer of the Corporation.

Canadian Pacific Railway     37

APPENDIX 3 TERMS OF REFERENCE – BOARD COMMITTEES

CANADIAN PACIFIC RAILWAY LIMITED AND CANADIAN PACIFIC RAILWAY COMPANY
AUDIT, FINANCE AND RISK MANAGEMENT COMMITTEE TERMS OF REFERENCE

The term “Corporation” herein shall refer to each of Canadian Pacific Railway Limited (“CPRL”) and Canadian Pacific Railway Company (“CPRC”), and the terms “Board”, “Directors”, “Board of Directors” and “Committee” shall refer to the Board, Directors, Board of Directors, or Committee of CPRL or CPRC, as applicable.

A. Committee and Procedures

1. Purpose

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

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

The Corporation’s external auditors are ultimately accountable to the Board of Directors and the Committee as representatives of the shareholders, and shall report directly to the Committee.

2. Composition of Committee

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

3. Appointment of Committee Members

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

4. Committee Chair

The Board shall appoint a Chair for the Committee.

5. Absence of Committee Chair

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

6. Secretary of Committee

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

7. Meetings

The Committee shall meet separately with management, the external auditors and the internal auditors at least once every quarter and shall meet at such other times during each year as it deems appropriate. In addition, the Chair of the Committee may call a special meeting of the Committee at any time.

38     Canadian Pacific Railway

8. Quorum

Three members of the Committee shall constitute a quorum.

9. Notice of Meetings

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

10. Attendance of Others at Meetings

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

11. Procedure, Records and Reporting

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

12. Delegation

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

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

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

14. Report to Shareholders

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

15. Guidelines to Exercise of Responsibilities

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

16. Use of Outside Legal, Accounting or Other Advisors; Appropriate Funding

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

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

17. Remuneration of Committee Members

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

B. Mandate

18. Management is responsible for preparing the interim and annual financial statements of the Corporation and for maintaining a system of risk assessment and internal controls to provide reasonable assurance that assets are safeguarded and that transactions are authorized, recorded and reported properly. The Committee is responsible, among other things, for reviewing management’s actions.

Canadian Pacific Railway     39

Audit

The Committee shall:

Annual Audit

Annual Financial Statements, AIF, MD&A, Annual Report

Interim Financial Statements and MD&A

Earnings Releases, Earnings Guidance

Material Litigation, Tax Assessments, Etc.

40     Canadian Pacific Railway

Oversight of External Auditors

Rotation of External Auditors Audit Partners

External Auditors’ Internal Quality-Control

External Auditors’ Independence

Policies Regarding Hiring of External Auditors’ Employees, Former Employees

Pre-Approval of Audit and Non-Audit Services Provided by External Auditors

Oversight of Internal Audit

Canadian Pacific Railway     41

Review of Internal Controls and Financial Reporting Processes

Complaints Processes

Separate Meetings with External Auditors, Internal Audit, Management

Finance

The Committee shall:

Risk Management

The Committee shall:

Other

December 10, 2003

42     Canadian Pacific Railway

CANADIAN PACIFIC RAILWAY LIMITED AND CANADIAN PACIFIC RAILWAY COMPANY
CORPORATE GOVERNANCE AND NOMINATING COMMITTEE TERMS OF REFERENCE

The term “Corporation” herein shall refer to each of Canadian Pacific Railway Limited (“CPRL”) and Canadian Pacific Railway Company (“CPRC”), and the terms “Board”, “Directors”, “Board of Directors” and “Committee” shall refer to the Board, Directors, Board of Directors, or Committee of CPRL or CPRC, as applicable.

A. Committee and Procedures

1. Purpose

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

2. Composition of Committee

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

3. Appointment of Committee Members

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

4. Vacancies

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

5. Committee Chair

The Board shall appoint a Chair for the Committee.

6. Absence of Committee Chairman

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

7. Secretary of Committee

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

8. Meetings

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

9. Quorum

Three members of the Committee shall constitute a quorum.

10. Notice of Meetings

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

Canadian Pacific Railway     43

11. Attendance of Others at Meetings

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

12. Procedure, Records and Reporting

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

13. Review of Terms of Reference

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

B. Mandate of Committee

14. The Committee shall:

Board Composition, Director Criteria and Director Nominations, Etc.

Orientation and Education of Directors

Directors’ Compensation

Effectiveness of Board, Committees and Directors

Committees and Mandates

44     Canadian Pacific Railway

Corporate Governance

CEO Performance Evaluations and Compensation

Public Policy Review

Engagement of External Advisors

Miscellaneous

October 31, 2003

CANADIAN PACIFIC RAILWAY LIMITED
ENVIRONMENTAL AND SAFETY COMMITTEE TERMS OF REFERENCE

A. Establishment of Committee and Procedures

1. Composition of Committee

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

2. Appointment of Committee Members

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

3. Vacancies

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

Canadian Pacific Railway     45

4. Committee Chair

The Board shall appoint a Chair for the Committee.

5. Absence of Committee Chair

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

6. Secretary of Committee

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

7. Meetings

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

8. Quorum

Three members of the Committee shall constitute a quorum.

9. Notice of Meetings

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

10. Attendance of Others at Meetings

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

11. Procedure, Records and Reporting

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

12. Review of Terms of Reference

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

B. Mandate of Committee

13. The Committee shall:

46     Canadian Pacific Railway

October 28, 2002

CANADIAN PACIFIC RAILWAY LIMITED AND CANADIAN PACIFIC RAILWAY COMPANY
MANAGEMENT RESOURCES AND COMPENSATION COMMITTEE TERMS OF REFERENCE

The term “Corporation” herein shall refer to each of Canadian Pacific Railway Limited (“CPRL”) and Canadian Pacific Railway Company (“CPRC”), and the terms “Board”, “Directors”, “Board of Directors” and “Committee” shall refer to the Board, Directors, Board of Directors, or Committee of CPRL or CPRC, as applicable.

A. Committee and Procedures

1. Purpose

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

The Committee shall also produce an annual report on executive compensation for inclusion in the Corporation’s annual management proxy circular, in accordance with applicable rules and regulations.

2. Composition of Committee

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

3. Appointment of Committee Members

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

4. Vacancies

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

5. Committee Chair

The Board shall appoint a Chair for the Committee.

6. Absence of Committee Chair

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

7. Secretary of Committee

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

8. Meetings

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

Canadian Pacific Railway     47

9. Quorum

Three members of the Committee shall constitute a quorum.

10. Notice of Meetings

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

11. Attendance of Others at Meetings

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

12. Procedure, Records and Reporting

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

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

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

B. Mandate of Committee

October 31, 2003

48     Canadian Pacific Railway

CANADIAN PACIFIC RAILWAY LIMITED
PENSION TRUST FUND COMMITTEE TERMS OF REFERENCE

A. Background

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

The governance structure for the Plans is as follows:

B. Role of the Board

C. Establishment of PTFC and Procedures

1. Composition of PTFC

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

2. Appointment of PTFC Members

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

3. Vacancies

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

4. PTFC Chair

The Board shall appoint a Chair for the PTFC.

5. Absence of PTFC Chair

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

Canadian Pacific Railway     49

6. Secretary of PTFC

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

7. Meetings

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

8. Quorum

Two members of the PTFC shall constitute a quorum.

9. Notice of Meetings

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

10. Attendance of Others at Meetings

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

11. Procedure, Records and Reporting

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

12. Review of Terms of Reference

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

D. Mandate of PTFC

13. The PTFC shall:

50     Canadian Pacific Railway

July 21, 2003

Canadian Pacific Railway     51