Enbridge Income Fund’s growth continues to exceed our expectations.

In 2006, Enbridge Income Fund delivered another year of strong financial results. The Fund generated earnings of $18.6 million (excluding the one-time benefit of $16.7 million of future tax recoveries resulting from future tax changes) and cash available for distribution of $74.3 million. On the strength of steady organic growth, distributions to unitholders were increased by 4.5%. Since the Fund’s inception in 2003, the per unit distribution has increased by more than 16%, exceeding expectations for longer-term growth at the time the Fund was established.

Our business model is centered on long-lived, high quality assets that provide stable and sustainable cash flows. Our assets include a 50% interest in the Canadian portion of the Alliance natural gas pipeline and the Enbridge Saskatchewan crude oil gathering and feeder pipeline system, both of which are underpinned by regulatory and contractual arrangements that support the Fund’s business model.

In 2006, we completed the acquisition of additional energy infrastructure assets with the purchase of three wind power projects from Enbridge Inc. These assets are an excellent fit for the Fund as they are underpinned by long term contractual arrangements with creditworthy counterparties and are expected to provide incremental, stable and sustainable cash flow.

We have assessed other acquisition opportunities, but with acquisition multiples at or close to historic highs, and the impact of the federal government’s proposed changes to income trust taxation, it may be difficult to secure opportunities that meet our stringent investment criteria. We are not prepared to sacrifice our low-risk value proposition to pursue growth for growth’s sake.

In the near term, we expect growth will come from the several attractive organic growth opportunities we have in front of us. During the past year, we made progress on the following organic growth initiatives:

	NRGreen began operations of its non-regulated waste heat recovery facility at Kerrobert, Saskatchewan on December 29, 2006 and is constructing three additional facilities in Loreburn, Estlin and Alameda, Saskatchewan which are expected to commence commercial operations in mid-2008. These facilities convert the waste heat produced at Alliance Canada’s compressor stations as a result of normal operations into electricity, which is then sold under long-term power purchase agreements with Saskatchewan Power Corporation. NRGreen is currently assessing the potential for other waste heat recovery sites along the Alliance pipeline.
	The Saskatchewan System is constructing an expansion of the Westspur and Weyburn systems which is anticipated to be in service by the end of 2007. This is expected to eventually result in an increase in capacity of as much as 40% on the Westspur system.
	Alliance Canada is working on a number of additional asset optimization projects and is also proposing a project to increase receipt capacity in Northeastern British Columbia. In the longer term, Alliance also has some very low cost expansion capability which provides potential upside related to Northern gas development.

On October 31, 2006, the Government of Canada announced proposed changes to the taxation of income trusts. Under the proposed rules, the taxable portion of an income trust’s distribution would be subject to tax similar to the treatment of taxable income within a corporation. Existing trusts would not be subject to the new tax regime until 2011 as long as they limit their expansion to “normal growth” prior to that year. During the four-year period prior to 2011, a trust would be able to issue equity to finance growth in an amount not to exceed the October 31, 2006 value of its equity market capitalization (subject to annual limits). On December 21, 2006, the Government released draft legislation for comment. The timing for enactment of the proposed legislation by Parliament is uncertain.

These developments have resulted in considerable uncertainty in the capital markets regarding the trust sector. Like all other income trusts, our market valuation has been adversely affected. We are continuing to monitor the proposed legislation and its potential impact on the business and financial outlook of the Fund with a view to developing strategies that will mitigate the impact of the proposed legislation on value to our unitholders going forward. At the same time, we will also continue to focus on maximizing the cash flow, firstly by ensuring existing operations are optimized, and secondly through continuing to pursue the near-term organic opportunities noted above, which we believe can be readily executed within the limitations imposed by the proposed new tax rules.

Enbridge Income Fund’s portfolio of low risk energy infrastructure assets remains a solid foundation on which to build value for investors. The Fund’s assets are high quality, long-lived assets with strong underlying contractual and regulatory arrangements that provide predictable and sustainable cash flow. In addition, the Fund is aligned with the strategic objectives of its sponsor, Enbridge Inc., a company with a demonstrated history of delivering a low-risk asset management value proposition. We will continue to build on our achievements to deliver to our investors an attractive cash return and moderate growth in a low-risk investment.

Gordon G. Tallman, Chair of the Board of Trustees February 24, 2006	James A. Schultz, President, Enbridge Management Services Inc.