MANAGEMENT’S DISCUSSION AND ANALYSIS Net Income, Funds Flow and Net Cash from Operating Activities (1) Funds flow from operations is an additional GAAP measure under IFRS. See commentary in “Basis of Analysis  in this MD&A, Non-Standard and Additional GAAP Items”. $Millions 2013 2012 Change % Change Net income 26.5 28.8 (2.3) (8%) Funds flow from operations  (1) 57.6 59.4 (1.8) (3%) Net income attributable to shareholders decreased to $26,515,000 or $1.48 (basic) per Class A Non-Voting  and Class B Common share ($1.47 - diluted) for 2013 from $28,755,000 or $1.60 per share (basic and  diluted) in 2012. Funds flow from operations decreased to $57,619,000 in 2013 from $59,412,000 in 2012. The net income decline in 2013 compared to 2012 was attributable to higher depreciation expense as a result  of an increase in the number of pad drilling rigs in AKITA’s fleet as well as having reduced “other income”,  particularly as it related to gains on sales of non-core or obsolete assets. By contrast to net income, the $1,793,000 reduction in funds flow in 2013 compared to 2012 resulted from  a significant decline in the portion of income taxes that are deferred to future periods, which was affected by  reduced capital expenditures compared to 2012. The following table reconciles funds flow from operations and net cash from operating activities:  The following table summarizes rig changes that occurred in 2013: Fleet and Utilization Fleet Changes during 2013 $Millions 2013 2012 Change % Change Funds flow from operations  (1) 57.6 59.4 (1.8) (3%) Change in non-cash working capital 0.3 0.0 0.3 N/A Equity income from joint ventures (18.8) (14.2) (4.6) (32%) Current income tax expense 5.4 3.0 2.4 80% Income tax paid (4.9) (6.2) 1.3 21% Other 0.0 (0.1) 0.1 N/A Net cash from operating activities 39.6 41.9 (2.3) (5%) (1) Funds flow from operations is an additional GAAP measure under IFRS. See commentary in “Basis of Analysis  in this MD&A, Non-Standard and Additional GAAP Items”. Utilization rates are a key statistic for the drilling industry since they measure revenue volume and influence  pricing. During 2013, AKITA achieved 6,073 operating days, which corresponded to a utilization rate of 43.4%  compared to an industry average utilization rate of 40.3% during the same period. During the comparative  13 AKITA DRILLING LTD.  ANNUAL REPORT Gross Net Number of rigs at December 31, 2012 39 35.875 Decommissioning of two rigs during the year (2) (2.000) New rig completed during the year 1 0.850 Number of rigs at December 31, 2013 38 34.725