Fund Vision and Objective
Enbridge Income Fund (the Fund) is an unincorporated open-ended trust established by a trust indenture under the laws of the Province of Alberta. The Fund commenced operations on June 30, 2003 and is administered by Enbridge Management Services Inc. (EMSI), a wholly owned subsidiary of Enbridge Inc (Enbridge). EMSI also serves as the manager of Enbridge Commercial Trust (ECT), a subsidiary of the Fund. The Fund owns the Saskatchewan System, a 50% interest in Alliance Pipeline Limited Partnership (Alliance Canada), a 50% interest in NRGreen Power Limited Partnership (NRGreen) and interests in three wind power projects in Western Canada.

The Fund’s objectives are to provide a stable and sustainable flow of distributable cash and to increase, where prudent, distributions of distributable cash on a per unit basis.

Strategy
In order to further achieve these growth and stability objectives, the Manager will pursue a business strategy for the Fund, which involves:

i. maximizing the efficiency and profitability of its existing assets through representation on the boards and/or management committees of the Fund’s assets;

ii. pursuing organic growth and expansion opportunities through its existing assets and asset acquisitions; and

iii. pursuing opportunities to acquire energy infrastructure investments or other related assets from Enbridge or third parties that meet the Fund’s acquisition and investment guidelines.

To successfully pursue this strategy, the Fund must mitigate certain business risks. These risks, and the Fund’s strategies for managing them, are described under Risk Factors.

Core Business Activities
The Fund’s activities are carried out through three operating segments:

	Alliance Canada includes the Fund’s 50% interest in the Canadian portion of the larger Alliance System. The Alliance System, comprised of Alliance Canada and Alliance US, transports natural gas from supply areas in Northwestern Alberta and Northeastern British Columbia to delivery points near Chicago, Illinois;
	Saskatchewan System, which owns and operates crude oil and liquids pipelines systems primarily connecting producing fields in Southern Saskatchewan and Southwestern Manitoba with Enbridge’s mainline pipeline, for transportation to the United States; and
	Green Power includes entities that produce electricity via alternative energy sources and consists of a 50% interest in each of NRGreen and the SunBridge wind project as well as a 33% interest in each of the Magrath and Chin Chute wind projects.

Alliance Canada
Alliance Canada consists of approximately 1560 kilometres of the Alliance System’s mainline beginning near Gordondale, Alberta and connecting to Alliance US at the Canada/US border near Carnduff, Saskatchewan. In addition, Alliance Canada includes the Alliance System’s lateral pipelines, which connect the mainline to a number of upstream receipt points, primarily at natural gas processing facilities in Northwestern Alberta and Northeastern British Columbia, and related infrastructure.

The Alliance System is designed to transport 1,325 million cubic feet per day (mmcf/d) of natural gas from supply areas in Northwestern Alberta and Northeastern British Columbia to delivery points near Chicago, Illinois. Shippers have executed transportation service agreements (TSAs) with each of Alliance Canada and Alliance US, which have an initial 15-year term expiring in November 2015 and provide for 98.5% (2005 – 100%) of the Alliance System’s available firm transportation capacity. Additional transportation capacity, referred to as Authorized Overrun Service (AOS), is available to shippers for no additional cost other than the cost of the associated fuel requirements. Beginning December 2010, each TSA may be renewed upon five years’ notice for successive one-year terms beyond the initial 15-year term, at the option of the shipper. During 2006, 1.5% (20 mmcf/d) of the firm capacity was contracted to shippers on a short-term basis to March 2007.

Tolls and tariffs for Alliance Canada are regulated by the National Energy Board (NEB) in Canada. Alliance Canada is entitled to recover its cost of service by collecting monthly charges from shippers. Alliance Canada’s TSAs are designed to provide toll revenues sufficient to recover prudently incurred costs of service, including operating and maintenance costs, costs of indebtedness, an allowance for income, large corporations and provincial capital taxes, depreciation and an allowed return on equity based on a deemed 70/30 debt-to-equity ratio. Each shipper’s charges are proportionate to the shipper’s contracted capacity. Toll adjustments, based on variances from the cost of service, are made annually with tolls being submitted to shippers and filed with the regulator.

Saskatchewan System
The Saskatchewan System operates crude oil and liquids pipelines systems comprised of the Saskatchewan Gathering, Westspur, Weyburn and Virden pipeline systems. Collectively referred to as the Saskatchewan System, these crude oil and liquids pipeline systems comprise approximately 328 kilometres of trunk line and 1900 kilometres of gathering pipeline and related terminals and storage facilities. The capacity of each of the Saskatchewan Gathering and the Westspur Systems is 190,000 barrels per day (bpd) and the capacity of the Weyburn and Virden Systems is 39,000 bpd and 37,000 bpd, respectively.

The Saskatchewan System transports crude oil from producing fields in Southern Saskatchewan and Southwestern Manitoba, as well as natural gas liquids from the Steelman gas processing plant, to Cromer, Manitoba where the liquids enter Enbridge’s mainline pipeline to be transported to the United States.

The Saskatchewan Gathering System and the Westspur System are regulated by Saskatchewan Industry and Resources (SIR) and the NEB, respectively. Both systems follow the principles for establishing tolls outlined in agreements with shippers, signed in 1985, expired in 1995, and now monitored on a customer complaint basis. The Saskatchewan Gathering System and the Westspur System tolling agreements are based on a cost of service methodology and are designed to provide toll revenues sufficient to recover operating costs, depreciation, deemed interest expense, income tax and to provide an administrative expense allowance as well as a return on rate base.

The Weyburn and Virden Systems are regulated by the SIR and Manitoba Science, Technology, and Mines (MEM), respectively. Rates are established based on historical precedence and/or signed agreements with customers and are updated to reflect changing market conditions when warranted.

The SIR and the NEB exercise statutory authority over various matters such as construction, operations and may, when necessary, exercise authority over rates and ratemaking agreements with customers and underlying accounting principles. The regulators do not regularly review or approve the rates established by the pipeline systems comprising the Saskatchewan System. However, in the event of a customer complaint, the regulator would review and provide a ruling on the rates in question. There have been no customer toll complaints filed to date for any of the systems comprising the Saskatchewan System.

Green Power
Wind Power
On October 1, 2006, the Fund purchased Enbridge’s interests in three wind power projects including a 50% interest in the SunBridge project at Gull Lake, Saskatchewan, and a 33% interest in each of the Magrath and Chin Chute projects in Southern Alberta for $42.1 million. This acquisition is consistent with the Fund’s objective to prudently increase cash available for distribution to unitholders through acquisitions of low-risk energy infrastructure. The acquisition was financed through the existing credit facility.

Collectively referred to as Wind Power, the SunBridge, Magrath, and Chin Chute wind turbines have the capacity to generate 71 megawatts (MW) of power in total. SunBridge is located southeast of Gull Lake and consists of 17 0.66-MW wind turbines that generate 11 MW of electricity which is sold to Saskatchewan Power Corporation (SaskPower) for distribution through the Saskatchewan power grid. The Magrath and Chin Chute wind projects located in Southern Alberta each consist of 20 1.5-MW wind turbines. The power generated is sold to the Alberta Power Pool at the spot price; however, the Fund has long-term fixed-price Power Purchase Agreements (PPA) with Enbridge Pipelines Inc. and another counterparty in order to fix the power prices on the Magrath and Chin Chute projects. The Magrath and Chin Chute PPAs expire on November 30, 2024 and December 31, 2017, respectively.

The Fund entered into a contract with Enbridge to sell all available emission reduction credits generated by the Fund’s interest in the Chin Chute and Magrath projects. The contract has an initial 20-year term ending October 1, 2026 and provides for a fixed price of $5 per tonne, based on a negotiated rate of converting megawatts generated to tonnes of emissions reduced, plus applicable taxes.

In addition, since it is uncertain whether the federal government’s Wind Power Production Incentive (WPPI) or similar successor incentive program will be reinstated, Enbridge has agreed to pay the Fund $10 per megawatt hour (MWh) of power produced by the Fund’s interest in Chin Chute for a period ending on the earlier of 10 years or when the WPPI program or similar successor incentive program is reinstated. The Fund intends to monitor and investigate announcements and developments relating to funding or incentives applicable to wind power projects, such as the recent January 19, 2007 announcement from the Prime Minister’s office of $1.5 billion in alternative energy funding, with a view to identifying any opportunities for the Chin Chute project and the Fund.

NRGreen
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. Electricity is generated by harnessing the waste heat produced by Alliance Canada’s gas turbines at its compressor stations and by converting this waste heat to electrical energy. SaskPower, pursuant to a 10-year PPA, ending December 29, 2016, purchases the power generated from the 5.0 MW Kerrobert facility. NRGreen may elect to issue two successive renewal notices, each extending the PPA for an additional five-year period. In addition, on August 22, 2006 NRGreen signed PPAs with SaskPower for the future power generated by NRGreen’s three additional waste heat recovery facilities currently under construction upon commencement of operations, which is expected in mid-2008.

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