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This document is solely for the use of NetLogistik.

No part of it may be circulated, quoted, or


reproduced for distribution without prior written approval from NetLogistiK.

Este plan de negocios fue donado por NetLogistik a Endeavor México

CONFIDENTIAL

Business Plan- Draft

May 28, 2000

This report is confidential. No part of it may be circulated, quoted, or


reproduced for distribution without prior written approval from Emerald
Internet Ventures.
Confidential - Emerald Internet Ventures

CONTENT

Executive Summary

1. Industry overview

• Business concept

• NETLogistiK product offering

• Competitive landscape

• Financials

• Implementation

Appendix

1
Confidential - Emerald Internet Ventures

EXECUTIVE SUMMARY

What is the Business Concept?

NETLogistiK is an electronic logistics marketplace


Ù NETLogistiK will develop an Internet based B2B logistics marketplace in Latin America with the objective of allowing shippers t o
manage and contract their freight transportation needs more efficiently. NETLogistiK will focus on the medium/large cargo
market. The line of service will range from single to multiple truckload shipments.

What is the opportunity?

The market is attractive – large, fragmented and inefficient


Ù The Latin American for-hire transportation market is calculated at $50-60 billion
Ù NETLogistiK will originally focus on trucking, which represents around 80% of the market
Ù Preliminary estimates show that NETLogistiK could generate revenues in the range of $250 million by 2003/4
Ù The industry is highly fragmented. Top 10 players have less than 2% market share
Ù Shippers have to rely on several carriers to fulfill their shipping needs. The average medium/large-size company in Latin
America interacts with over 15 carriers
Ù Currently there is no efficient way to contract and compare shipping services

The marketplace solution is attractive to both shippers and carriers


Ù Shippers will benefit in terms of transportation cost and service by extending the choice of carriers and reducing purchasing
costs
Ù Carriers will benefit from expanding their customer reach and the opportunity to optimize back haul loads (return trip)

The development of e-commerce will fuel the size of the market further
Ù The surge of electronic commerce will add to the number of shipments by promoting trade across geographies
Ù Additionally, the frequency of shipments will increase as a result of more coordination and communication across companies.

2
Confidential - Emerald Internet Ventures

EXECUTIVE SUMMARY (Cont.)

How will NETLogistiK business model work?

Main revenue will come as a percentage of transactions


Ù NETLogistiK will derive most of its revenues from transaction commissions (e.g., 2.5 -3.5%1) and cargo insurance referral.
Additionally, it will generate reven
ues from other products/services such as customs advisory, warehousing and cargo
management, and clearing services
Ù Once NETLogistiK captures a critical mass of trucks in the system, it will offer a vertical market of spare-parts for trucks (e.g. tire s
and purchasing aggregation servicesfor gas and lubricants

High-margin business
Ù This web-enabled intermediary model willbenefit from lowcapital intensity andhigh operational leverage. Resulting in high
operating margins (50%) similar to those of other virtual marketplaces (e.g. Ebay, CommerceOne, etc)

Success will be based on early alliances and partnerships with key players
Ù To begin operations NETLogistiK will develop alliances and partnerships with key forwarders, carriers
and shippers using stock
options
Ù Shipper acquisition will be through joint marketing agreements with B2B verticals and through targeted sales efforts focused o
leading brick and mortar companies.

Operations will focus on main Latin American markets


Ù Operations would first start in Mexico, Argentina and Brazil, to then expand to other attractive markets
Ù We expect to achieve economies of scale by sharing the technology across several markets

Is this a proven model?

Similar models are working in the U.S- Latin America is still up for grabs!
Ù Similar business models are already working in the U.S (e.g.,
CarrierPoint, Celarix, NTE,). Investors seem to have great
confidence in this business model. US players have received
over $50 million in funding. Successful IPO’s may follow.
Ù The European market has seen some sites coming to market. However, it is behind the U.S. and still in a very early stage.
Ù Latin America is largely untapped. There is no competitor that has entered this region capable of rationalizing the transportatio
market yet.

1 in line with industry standards(e.g.,cargowerks charges 2.5%, carrierpoint charges4.0%, and an average forwarder marginsis 12%) 3
Confidential - Emerald Internet Ventures

EXECUTIVE SUMMARY (Cont.)

Strengths of the management team


Ù Diverse top notch management expertise (consulting, operations,-commerce)
e
Ù Combination of local business management with US -work experience
Ù Contacts with local players and governmental authorities
Ù Network of professionals/MBAs throughout Latin America
Ù Access to US business networks (e.g., McKinsey, Morgan Stanley, CSFB, etc)

What have we done so far?

Strategic alliance with CarrierPoint


Established alliance with leadingUS transportation marketplace. CarrierPoint will license its software solution and share its industry
know-how. Both companies will work together to solve inefficiencies of shipments between Mexico and the US (largest trading bo
in the world). This event was reported in newswires and in the cover page of Wall Street Journal Americas.

Partnerships with carriers


Established partnerships/ initial participation agreement with key carriers in Mexico and Argentina.

Partnerships with shippers


Established initial participation agreement with shippers in Mexico and Argentina

Launched main offices


Established presence in Mexico, Buenos Aires and Sao Paulo.

People
Structured initial phase teams for Mexico and Argentina. In the process of recruiting more
logistics/ transportation industry experts. In
conversation with key people in Brazil.

Advisory Board.
In the process of structuring an advisory board with industry experts and influential business people
e.g.( CEOs of leading
companies, Industry experts, etc.)

4
Confidential - Emerald Internet Ventures

CONTENT

Executive Summary

1. Industry overview

• Business concept

• NETLogistiK product offering

• Competitive landscape

• Financials

Appendix

5
Confidential - Emerald Internet Ventures

ESTIMATE

WORLWIDE COMMERCIAL FREIGHT TRANSPORTATION REVENUES- BY SEGMENT


$ Billions

Worldwide Transportation Revenues Trucking revenue breakdown


Percentage
Pipeline
Air
100% •Movement of cargo within
Rail 4% 4% countries is dominated by trucking
6%
(77%)

Ship
9% •Within this mode large size
73% shipments (LTL and TL) account
Trucking for 87% of the revenue

•NETLogistiK will initially focus on


77% these two segments
14%
13%

Parcel/ Less Than Full Total


100%= $900 bn truckload Truckload
Small
packages (LTL) (TL)

Source:S&P, Journal of Commerce, McKinsey & Company, SCT, GEIPOT, US Department of Commerce

6
Confidential - Emerald Internet Ventures

ESTIMATE

WORLWIDE COMMERCIAL FREIGHT TRANSPORTATION REVENUES- BY REGION


$ Billions

Latin America

55 US

The U.S. and European markets account for


240 most of the transportation industry. However,
Asia 350 the size of the market is so big that even Latin
America’s 6% share represents a very
attractive market ($55 billion)

255

Europe

100%= $900 bn*

*Standard & Poor’s. Does not include shipping across regions

Source:S&P, Journal of Commerce, McKinsey & Company, SCT, GEIPOT, US Department of Commerce Source:

7
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WHAT IS THE OPPORTUNITY IN LATIN AMERICA?

Industry revenues It’s a large market, …


$ Billions • Latin America spends 3-4% of its GDP in cargo transportation*
• This $55 billion market represents a very attractive opportunity, even
relative to many other industries in the US
100

70
55 … the industry is highly fragmented,...
• Top 10 players have less than 2 % of market share
• Shippers have to rely on several carriers to fulfill their shipping needs

26
12

…and the purchasing process is very inefficient.


Latin American
U.S. U.S. U.S. books U.S. electronics • No price transparency
Transportation
prescription Alcoholic • Average medium/large-size company in Latin America interacts with
market*
drugs Beverages over 15 carriers by channels such as phone and fax
• There is no efficient way to contract and compare shipping services

* Includes commercial transportation in all modes; does not include inter-regional transportation
Source: Standard & Poor’s; Med Ad News; Goldman Sachs; IMT; SCT; IBGE; GEIPOT

8
Confidential - Emerald Internet Ventures

ESTIMATE

LATIN AMERICAN COMMERCIAL FREIGHT TRANSPORTATION REVENUES


$ Billions; 1999

50-60

8-10 •The largest Latin American


transportation markets are Brazil,
10-11 Mexico, and Argentina

•Freight transportation represents a


14-19 centerpiece of these countries
economic output (3-4% of GDP)

18-20
•Additional transparency and
reduction of inefficiencies may have a
dramatic impact on these countries
productivity
Brazil Mexico Argentina Others* Total
•Therefore, support from local
governments is expected

* Venezuela, Chile, Colombia


Source: Goldman Sachs, IMT,SCI, GEIPOT, Subsecretaria de Programacion Economica (Argentina)

9
Confidential - Emerald Internet Ventures

NUMBER OFCOMMERCIAL TRUCKS* FOR THE MAIN LATIN AMERICAN MARKETS


ESTIMATE

Number of trucks
700,000

•The market is highly


fragmented. Top10 carriers
own less than 2%of the trucks

350,000 •This environment provides an


ideal opportunity for a solution
300,000
like NETlogistik, which
improves information and
200,000 provides liquidity to the system

•The number of trucks in the


system was used to build a
bottom-up revenue model (see
financials)

Brazil Mexico Argentina Other •Over time NETLogistiK


% of the expects to have at least 5% of
trucks owned < 2.0% 1.5% 1.6% TBD the trucks registered and
by top 10 operating in its electronic
carriers marketplace

Source: Instituto Mexicano de Transporte, Comision Nacional del transporte terrestre (Argentina), GEIPOT(Brazil), Interviews

10
Confidential - Emerald Internet Ventures

CONTENT

Executive Summary

1. Industry overview

• Business concept

• NETLogistiK product offering

• Competitive landscape

• Financials

Appendix

11
Confidential - Emerald Internet Ventures

BUSINESS CONCEPT

Carriers/
Shippers/ Transportation
Senders Companies

B2B Logistics Marketplace


• NETLogistiK will develop a Latin Americas Internet B2B
marketplace that will allow shippers to compare shipping
options and contract transportation services online

Manufacturing Medium/Large Cargo Market


companies • The line of service will range from single to multiple
truckload shipments

Services/Products
• Spot contracts marketplace
Warehouses • Excess capacity auctions
• Multiple/ complex shipment negotiation tools
• Cargo insurance
• Customs and tax advisory
• Warehousing and cargo management
NETLogistiK • Infrastructure hosting
Freight intermediaries and • Clearing and payment options
consolidators* • Others (vertical market of spare parts)

Latin American
B2B Verticals
B2B Logistics
Marketplace

* Forwarders, Third Party Logistics (3PL), Others


12
Confidential - Emerald Internet Ventures
INTERNET WILL CHANGE THE BUSINESS DYNAMICS

Today Future

Forwarders
Warehouses

Forwarders

Warehouses

Shippers Carriers
B2B Verticals Shippers B2B Verticals Carriers

From... To...
• Many layers of intermediaries • One-stop-shop option
• Manual/ time-consuming purchasing process • Simpler /automated purchasing process
• Lack of price transparency • Liquidity reduces prices and costs
• Sub-optimal truck utilization (e.g., trucks return • Wide access to network of shippers/carriers
empty from destination)

13
Confidential - Emerald Internet Ventures

BENEFITS FOR SHIPPERS AND CARRIERS WILL DRIVE MODEL ADOPTION

Benefits Forces against adoption

For Shippers From shippers

•Access to a larger base of carriers •Fear of changing current practices


•Lower prices and more transparency •Fear of doing transactions over the internet
•Simplified purchasing process •Lack of internet access
•Access to standardized transaction information
•Access state-of-the-art technology Although it might
take some time,
benefits will clearly
For Carriers outweigh the forces From Carriers
against adoption
•Improve truck capacity utilization (return trips) •Fear of losing control
•Access to a larger customer base •Fear of competition
•Low-cost sales channel •Lack of trust in the system
•Simplified selling process
•Access to state-of-the-art technology

14
Confidential - Emerald Internet Ventures

THIS BUSINESS MODEL IS ALREADY WORKING IN THE U.S. AND EUROPE

Players Concept Key partnerships Funds raised


CarrierPoint* Dynamic marketplace for trucking IXL, UPS, $20+ million in
services . It has a rating system Tiredex,com second round
that enables shippers and ChemConnect.com,
carriers to evaluate potential etc
partners

NTE Real time exchange that focus on Ariba, HP, $50 million
using transportation capacity Resource Link, in fourth round •This is a proven business in
efficiently. NTE acts as a broker , SAP, Manugistics the US and Europe
setting minimum prices
• Investors already bought-into
the concept, investing over
$50MM in some of these
companies

Celarix • IPOs may follow, providing


Web-based logistics solutions for Retail.com, L.L. $59 million
more publicity for the model
shippers. It includes a real time Bean, RossetaNet
neutral exchange

(GF-X) Global Freight Exchange is an American Airlines, $45 million


Internet-based market to buy and British Airways, in first round
sell air cargo capacity DHL, Circle
International,
Panalpina

* Although it started in mid 1999, CarrierPoint seems to be the company that is developing at the fastest pace
Source: Webpages, press clippings, interviews
15
Confidential - Emerald Internet Ventures

CONTENT

Executive Summary

1. Industry overview

• Business concept

• NETLogistiK product offering

• Competitive landscape

• Financials

Appendix

16
Confidential - Emerald Internet Ventures

NETLOGISTIK FUNCTIONALITY

Shipper Carrier
• Origin/Destination
• Cargo specifications • Rates
Post • Routes Upload rates
• Dates
requirements • Others • Services and availability

•Preferred carriers $
•Highly rated carriers Define price discrimination
Select
structure
audience
• ________ ¬¬ • ________ ¬¬
• ________ ¬¬ • ________ ¬¬
Receive list of • ________ ¬¬ • ________ ¬¬ Receive notification of
• ________ ¬¬ • ________ ¬¬
quotes and select shipper's request for
best option service

Negotiate and close NETLogistiK Negotiate and close


transaction on-line transaction on-line

Complete FORMS FORMS Complete


paperwork on-line paperwork on-line

•Electronic scheduling
Settle
on-line
$ •Intelligent search capabilities
•Neutral one-stop-shop
Upload tracking status of
shipments
•Capacity, availability and pricing
•Data, information and news
Track
shipment
$ Settle
on-line

17
Confidential - Emerald Internet Ventures

PRODUCT OFFERING

Description Revenue Source


One time contract for specific transportation needs. Shippers post their requirements and NETLogistiK 2.5-3.5% of transaction value
1. Spot contracts will electronically channel the RFQ to selected carriers and/or match their requests with carrierÕ
s rates,
marketplace schedules and availability information. Giving

Allow carriers to auction their excess capacity in order to optimize truck utilization (return trips) 2.5-3.5% of transaction value
2. Excess capacity
auctions

Real-time marketplace for spot contracts between a pre-selected network of carriers. The users will be 2.5-3.5% of transaction value
able to optimize their fleets and leverage their sales force
3. Intra-carrier exchange

4. Multiple or complex Longer term and/or special contracts that require price and conditions negotiation tools. Specially 2.5-3.5% of transaction value
targeted to large shippers (e.g. Coca Cola, Xerox, etc)
shipments negotiation
tools

Offer the possibility of buying cargo insurance online. This product can contribute substantially to 15% of Insurance premium
revenues as insurance premiums are usually 1% of the cargo value and standard commissions for
5. Cargo Insurance
insurance brokers are 10-15%

Offered through a referral network of experts that will have alliances with NETLogistiK. The company TBD
6. Customs & tax will charge a flat fee for each referral to its partners
advisory services

Offered through a network that will operate similarly to the one for Customs and tax services. 15% of referral value
7. Warehousing and
cargo management

18
Confidential - Emerald Internet Ventures

CONTENT

Executive Summary

1. Industry overview

• Business concept

• NETLogistiK product offering

• Competitive landscape

• Financials

Appendix

19
Confidential - Emerald Internet Ventures

COMPETITIVE LANDSCAPE – INTERNET PLAYERS

U.S. Europe Latin America

Multimodal

• The U.S. market is becoming highly


competitive; there is no dominant player
NETLogistiK
yet
Truck
• Europe is emerging

• Latin America is still largely untapped

Air/Ocean

20
Confidential - Emerald Internet Ventures
COMPETITIVE LANDSCAPE

USA EUROPE LATIN AMERICA

Manugistics From 2 Celarix FreightGate LSXS


FreightGate Trade Matrix
Multimodal
NETLogistiK***

FreeCargo OpenShip CarrierPoint EuroTrans BidFreight


Truckstop BidFreight NTE FreeCargo
Truck
Transplace NETLogistiK

Freightonline Ctransport
Ocean or CargoNet GoCargo
rA
i PriceContainer eraterequest
Oceanwide GF-X**
CargoWerks **

Low High Low High Low High


Level of Development (*) Level of Development (*) Level of Development (*)

• Although the competitive landscape is very • The European market has seen some sites • Despite its attractiveness, the Latin American
populated, there are not many players that coming to the market market is not competitive yet
provide full service and end-to-end transaction
solution • However, it is behind the U.S. and still in a very • The opportunity is open to the first player that can
early development stage offer a robust solution
• We believe that the industry leaders at this point
are: Celarix, CarrierPoint, NTE andGo Cargo, in • No player has taken a dominant position in the
their respective segments market yet

* Low level of Development: Info Aggregators, Searchable bulletin boards. Limited amount of value added services.
High Level of Development: Dynamic, deep exchange .Value added services. High transaction capabilities
** Air
*** Future Development 21
Source: WebPages, NETLogistiK team analysis
Confidential - Emerald Internet Ventures
Low

Medium

High

COMPETITIVE LANDSCAPE – SUMMARY TABLE*

Current Range of Transaction Service


Player Comment Focus services capability focus

Celarix.com A more robust service; includes more than one mode; plus other logistic management software tools U
S Multimodal
Tradematrix.com Part of a family of other web-enabled B2B services; sourcing, procurement, etc. U
S Multimodal
Manugistics.com Not an exchange; provides logistics and supply chain mgmt. applications U
S Multimodal
from 2 Shipping solutions for online purchasing. Proprietary tax and customs calculators U
S Multimodal
lsxs.com Basically a searchable database, with customizable pages and automatic messaging EUR Multimodal
Freightgate.com Tracking, news, and some useful tools E
U
U
RS
/ Multimodal
CarrierPoint.com A robust dynamic matching and pricing marketplace; has payment processing and on-line insurance U
S Truck
NTE Focused on carriers; freight posted has a minimum price; robust tracking and payment processing services U
S Truck
OpenShip.com A pure auction service for truck space; offers some tracking capabilities U
S Truck
BidFreight.com A pure auction service for truck space; offers some tracking capabilities E
U
U
RS
/ Truck
FreeCargo.com Searchable database for available equipment and loads E
U
U
RS
/ Truck
Truckstop.com A load and truck availability posting service U
S Truck
Eurotrans.com Searchable database by routes; for truckers; not many other services EUR Truck
NetEnvios.com A website that focus on providing services for small package/parcel shipments in Latin America. Not Cargo LAT Truck
Transplace.com A web-based supermarket for the transportation industry created by incumbents U
S Truck
GoCargo.com A pure auction service for container shipping space U
S Ocean
Eraterequest.com Carriers bid on shippers postings; limited to ocean shipping U
S Ocean
Freight-on-line.com On-line quotation system EUR Ocean
Cargonet.com Marine towing industry; a database to advertise shipping needs and space/equipment availability U
S Ocean
Pricecontainer.com Acts as intermediary; only ocean containers U
S Ocean
Oceanwide.com Offers information services; quotes, schedules; facilitates document exchange U
S Ocean
etransport.com Exchange and tools for negotiating contracts and checking rates; software solutions for industrial transportation industry U
S Ocean
Cargowerks.com RFQ service; arrangement all made outside the exchange U
S Air
Global Freight Exchange Focused on transactional issues; for air carriers and forwarders E
U
U
RS
/ Air

* Note: This page contains information that may become outdated shortly due to the speed at which these companies are evolving.
Source: WebPages, NETLogistiK team analysis
22
Confidential - Emerald Internet Ventures

CONTENT

Executive Summary

1. Industry overview

• Business concept

• NETLogistiK product offering

• Competitive landscape

• Financials

Appendix

23
Confidential - Emerald Internet Ventures

KEY STATISTICS

Latin America
MEXICO VENEZUELA
•GDP*: $475bn •GDP*: $104bn
•GDP Per capita $4826 •GDP Per capita $4394
•Transport. Rev: $14-19bn •Transport. Rev: TBD

COLOMBIA BRAZIL
•GDP*: $92bn
•GDP*: $509bn**
•GDP Per capita $2438
•GDP Per capita $3105
•Transport. Rev: TBD
Transport. Rev: $18-20bn

CHILE ARGENTINA
•GDP*: $69bn •GDP*: $287bn
•GDP Per capita $4587 •GDP Per capita $7947
•Transport. Rev: TBD •Transport, Rev. $10-11 bn

* 1999 US$ Nominal GDP


** Brazil 1999 GDP value in US$ is smaller than the 1997 figures due to the recent currency devaluation
Source: Goldman Sachs, Team Analysis

24
Confidential - Emerald Internet Ventures

PRELIMINARY ESTIMATES SHOW THAT NETLOGISTIK HAS A HIGH REVENUE POTENTIAL PRELIMINARY

Revenue Potential
$ Millions 400
•Preliminary estimates show that NETLogistiK could generate between
$150-$400 million in revenue after 3 years of operations (see details in
following pages)

250
•These revenue numbers do not include other potential revenue sources
(option value) that could become available once NETLogistiK captures a
significant number of players on its network (Net effect).

•These additional revenue sources could come from:


150
_Vertical market for truck-related products

_Partnerships with automotive/truck producers to provide fleet


renovation plans

_Purchasing aggregation services for small carriers to buy


products such as combustible and lubricants
Low-end Base Case Upper-end
Scenario Scenario _Extension of services to a multimodal solution (rail, ocean, air)
Penetration Penetration Penetration
3% 5% 8%

Source: NETLogistik Team Analysis

25
Confidential - Emerald Internet Ventures

POTENTIAL REVENUE TREE- ALL COUNTRIES


$ Millions
Amount charged per trip by the carrier ($)
Value of transactions 325
per truck.year ($) *
65,000
# Trips per year***
Value of transactions 200 This bottom-up model
Processed ($Millions) illustrates the revenue
Revenue from 5,200
potential after 3-4
commissions ($Millions) # trucks in the market TRANSPORTATIONINDUSTRYDATA
156 # of trucks captured by 1,600,000 Country # trucks by market
years of operations.
Commissions % NETLogistiK's system Brazil 700,000 (for detail on how
3% 80,000 Mexico 350,000 revenues drivers are
Penetration Argentina 300,000 expected to evolve
5% Other 250,000 over time see
Total 1,600,000
financial statements
# of trucks captured by
NETLogistiK's system
pages)
80,000
No. of Transactions per year
# of transactions insured 16,000,000
Total Revenue ($ Millions) on-line # of Trips per year
253 Revenue from 2,400,000 200
insurance referral ($Millions) % insured online
34 15%
Referral fee $ per transaction**
14
TOTAL REVENUE SENSITIVITY MATRIX
$ Millions
# of trucks captured by NETLogistiK's system
3.0% 4.0% 5.0% 6.0% 8.0% <-- Penetration
253 48,000 64,000 80,000 96,000 128,000
Other Revenues Warehousing services Value of 45,000 113 151 189 227 302
($Millions) Transactions 55,000 132 177 221 265 353
63 Custom Services per truck ($)* 65,000 152 202 253 303 404
75,000 171 228 285 342 456
25% Infrastructure services, others 85,000 190 253 317 380 507
of Total Revenue

* Revenue generated by the carrier per truck. Consistent with range obtained during interviews with carriers ($65,000-100,000)
** Assuming that referral fee is 10% of the insurance premium. Insurance premium ($140) = Value of cargo ($14,000)*Insurance rate (1%)
*** We assumed that after 3-4 years NETLogistiK is able to capture 200 of the 250 trips that a truck makes per year
Source: Economy Ministry, Interviews, NETLogistiK Team Analysis.

26
PRELIMINARY REVENUE FORECAST- BY REGION Confidential - Emerald Internet Ventures
$ Millions; No. of Trucks

ESTIMATE
REVENUE-ARGENTINA TRUCKSCAPTURED-
ARGENTINA

4
7
. 00051

2
3
3
. 00501

0
0
06
0
1
0
. 0
0
03
00
. 22
. 0
3

0
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0
02 2
0
02 3
0
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0
02 0
0
02 1
0
02 2
0
02 3
0
02 4
0
02

REVENUE-BRAZIL TRUCKSCAPTURED-BRAZIL
00053
61
.
0

00542
4
7
7
.

00041
Total Revenues
4
2
3
. 0
0
07
82
.
5
52
. 0
7
01
.

01
.
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7 0
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REVENUE-MEXIC0 TRUCKSCAPTURED-MEXC
IO
4
9
.
2
1
0
.
01
.
3
5
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. 00571
0
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. 05221

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.

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REVENUE-OTHER TRUCKSCAPTURED-OTHER

00521

5
3
9
.
0
0
57
7
2
3
.
0
0
52
00
. 02
. 42
. 0 0
5
2

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0
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0
02 0
0
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0
02 2
0
02 3
0
02 4
0
02

27
Confidential - Emerald Internet Ventures

FINANCIAL STATEMENTS
Units; Percentages

OPERATING RATIOS & FORECAST ASSUMPTIONS


2000 2001 2002 2003 2004
Transaction Revenue Assumptions
No of trucks in the market ( assumed fix for simplicity at this point of the analysis)
Argentina 300,000 300,000 300,000 300,000 300,000
Brazil 700,000 700,000 700,000 700,000 700,000
Mexico 350,000 350,000 350,000 350,000 350,000
Others 250,000 250,000 250,000 250,000 250,000
Total 1,600,000 1,600,000 1,600,000 1,600,000 1,600,000
Penetration
Argentina 0.1% 1.0% 2.0% 3.5% 5.0%
Brazil 0.1% 1.0% 2.0% 3.5% 5.0% •This page shows a conservative
Mexico 0.1% 1.0% 2.0% 3.5% 5.0% scenario where the maximum
Others 0.1% 1.0% 3.0% 5.0% penetration is 5%, and the number of
transactions per truck per year, do not
No of trucks captured by NETlogistiK's system reach their maximum until year 2003
Argentina 300 3,000 6,000 10,500 15,000
Brazil 700 7,000 14,000 24,500 35,000
•For illustrative purposes we assumed
Mexico 350 3,500 7,000 12,250 17,500
that over time (after major customer
Others - 250 2,500 7,500 12,500 acquisition expenses flattens)
Total 1,350 13,750 29,500 54,750 80,000 operating margins increase until they
reach a 50% level. Similar to that
No of transactions per year per truck 10 60 120 200 200 forecasted by analyst for other virtual
Average value of a transaction ($) 325 325 325 325 325 marketplaces (Ebay, CommerceOne,
Commission % charged by NETlogistiK 3% 3% 3% 3% 3% etc)
Insurance Revenue Assumptions
%transactions processed that are insured online 5% 10% 15% 15% 15%
Insurance referral fee ($) 14 14 14 14 14
Other Revenue Assumptions
Other revenues (*) as % of total revenues 5% 10% 15% 25% 25%
Other Operating Assumptions
Operating Costs (w/o depreciation) % Rev. n.a. -150.0% 90.0% 60.0% 50.0%
Depreciation Years 5 5 5 5 5
Other Assumptions
FCF perpetuity growth % 6%

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NETLOGISTIK EXPECTS TO HAVE HIGH LONG-TERM OPERATING MARGINS SIMILAR TO THOSE


OF OTHER VIRTUAL MARKETPLACES
Percent

45%-50%
40%-50%
35%-45%
NETLogistiK web-enabled
intermediary model will benefit
from low capital intensity and
high operational leverage.
Resulting in high operating
margins similar to that of other
virtual marketplaces,

Ebay* CommerceOne** I2 Technologies

*Projected operating margins for stable stage (where customer acquisition cost flattens)
** Based on analyst reports (Morgan Stanley Dean Witter,BancBoston)
*** Operating margins excluding software margins
Source: Analyst reports

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FINANCIAL STATEMENTS (CONT)


$ Thousands

FINANCIAL STATEMENT FORECAST


2000 2001 2002 2003 2004 TV

Revenue from transactions commissions($ 000's)


Argentina 29 1,755 7,020 20,475 29,250 •This page illustrates a scenario where
Brazil 68 4,095 16,380 47,775 68,250 the $250 million potential is captured
Mexico 34 2,048 8,190 23,888 34,125 by 2004
Others 0 146 2,925 14,625 24,375
Total 132 8,044 34,515 106,763 156,000
Revenue from insurance referal •These revenue numbers do not
Argentina 2 252 1,512 4,410 6,300 include other potential revenue
Brazil 5 588 3,528 10,290 14,700 sources (option value) that could
Mexico 2 294 1,764 5,145 7,350 become available once NETLogistiK
Others 0 21 630 3,150 5,250 captures a significant number of
Total 9 1,155 7,434 22,995 33,600 players on its network (Net effect).
Other Revenues
Argentina 2 223 1,506 8,295 11,850 •These additional revenue sources
Brazil 4 520 3,513 19,355 27,650 could come from:
Mexico 2 260 1,757 9,678 13,825
Others 0 19 627 5,925 9,875 _ Vertical market for truck-related
Total 7 1,022 7,403 43,253 63,200 products
Total Revenues
Argentina 33 2,230 10,038 33,180 47,400 _ Partnerships with automotive/truck
Brazil 77 5,203 23,421 77,420 110,600 producers to provide fleet renovation
Mexico 39 2,602 11,711 38,710 55,300 plans
Others 0 186 4,182 23,700 39,500
Total Revenues 149 10,221 49,352 173,010 252,800 _ Purchasing aggregation services for
Operating Costs (w/o depreciation) (1,800) (15,331) (44,417) (103,806) (126,400) small carriers to buy products such
Depreciation 0 (100) (700) (1,500) (2,500) as combustible and lubricants
Operating profit (1,652) (5,210) 4,235 67,704 123,900
_ Extension of services to a
Interest expense
multimodal solution (rail, ocean, air)
Other income/expense
Income Before Taxes (1,652) (5,210) 4,235 67,704 123,900
Taxes 0 0 (1,482) (23,696) (43,365)
Net Income (1,652) (5,210) 2,753 44,008 80,535
% of Sales -1112.1% -51.0% 5.6% 25.4% 31.9%
Add back: Depreciation 0 100 700 1,500 2,500
Capital Expenditures -500 -3,000 -4,000 -5,000 -5,000
Add back: Interests * (1-tax)
Change in WC -36 444 1,565 4,946 3,192
Terminal value 717,502
Free Cash Flow (2,187) (7,666) 1,018 45,454 81,227 717,502

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CONTENT

Executive Summary

1. Industry overview

• Business concept

• NETLogistiK product offering

• Business development

• Competitive landscape

• Financials

Appendix

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TARGET MARKET- MEXICO

• The Mexican commercial transportation industry amounted to US$13-14 billion in 19981.

• Truck transport dominates the movement of goods. Of all modes of transport, trucks captured over 80% of the
value generated by the sector.

• The market was deregulated in the early 90’s and remains highly fragmented. The capacity of the Mexican market
is composed of 330,000 trucks. Of these, around 40,000 are owner-operated trucks and 290,000 are distributed
among the close to 6,000 registered firms2.

• The top 50 carrier firms in Mexico amass a capacity of over 12,000 trucks, representing only 3.7% of the total.
These are firms with at least 120 units each and an average of 250 units for the group.

• Because of this fragmentation, most medium to large firms deal with many carriers; 15-30 for the largest firms3.

• Purchasing of local logistic and transportation is very inefficient, as shippers have to contact carriers individually,
usually by phone. Large logistics intermediaries (e.g. CH Robinson, Danzas) have limited penetration and have
focused on international movement of goods and not local distribution.

• NetLogistiK estimates that in the Mexican market alone it can attain a capacity of close to 17,500 trucks
participating in the exchange. This implies getting 10-15 of the top 50 carrier firms to participate and 300 medium
sized firms out of the universe of 6,000 that exist today.

1/ Source: Instituto Mexicano del Transporte


2/ Source: Transportation Technical Services, SCT
3/ Source: McKinsey & Co. 32
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POTENTIAL REVENUE TREE - MEXICO


$ Millions
Amount charged per trip by the carrier ($)
Value of transactions 325
per truck.year ($) *
65,000
# Trips per year***
Value of transactions 200 This bottom-up model
Processed ($Millions) illustrates the revenue
Revenue from 1,138
potential after 3-4
commissions ($Millions) # trucks in the market
34 # of trucks captured by 350,000
years of operations.
Commissions % NETLogistiK's system (for detail on how
3% 17,500 revenues drivers are
Penetration expected to evolve
5% over time see
financial statements
# of trucks captured by
pages)
NETLogistiK's system
17,500
No. of Transactions per year
# of transactions insured 3,500,000
Total Revenue ($ Millions) on-line # of Trips per year
55 Revenue from 525,000 200
insurance referral ($Millions) % insured online
7 15%
Referral fee $ per transaction**
14
TOTAL REVENUE SENSITIVITY MATRIX
$ Millions
# of trucks captured by NETLogistiK's system
3.0% 4.0% 5.0% 6.0% 8.0% <-- Penetration
55 10,500 14,000 17,500 21,000 28,000
Other Revenues Warehousing services Value of 45,000 25 33 41 50 66
($Millions) Transactions 55,000 29 39 48 58 77
14 Custom Services per truck ($)* 65,000 33 44 55 66 88
75,000 37 50 62 75 100
25% Infrastructure services, others 85,000 42 55 69 83 111
of Total Revenue

* Revenue generated by the carrier per truck. Consistent with range obtained during interviews with carriers ($65,000-100,000)
** Assuming that referral fee is 10% of the insurance premium. Insurance premium ($140) = Value of cargo ($14,000)*Insurance rate (1%)
*** We assumed that after 3-4 years NETLogistiK is able to capture 200 of the 250 trips that a truck makes per year
Source: Economy Ministry, Interviews, NETLogistiK Team Analysis.

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LARGEST CARRIERS- MEXICO

Capacity
Carrier Tractors Trucks Tractors+Trucks Trailers
1 Transportadora Nacional 530 270 800 530
2 Transportes Julian de Obregon 250 300 550 250
3 Auto Lineas Regiomontanas 450 30 480 550
4 Transportes Castores de Baja California 450 15 465 450
5 Transportes Cuahutemoc 450 0 450 550
6 MYM 0 450 450 0
7 Autotransportes de Carga Tres Guerras 400 20 420 400
8 Transportistas Unidos Mexicanos 348 69 417 420
9 Autolineas Mexicanas 156 200 356 240
Compania Fletera del Caribe 250 75 325 150
10
11 Fletes Mexico Chihuahua 300 20 320 600
•NetLogistiK will initially target larger carrier firms to
12 Express Tres Fronteras 285 6 291 545 provide the exchange with greater liquidity
13 Trans. Esp. Antonio de la Torre e Hijos 290 0 290 396
Express Sinaloa Division Ensenada 130 148 278 200
14
15 Transportes de Nuevo Laredo 275 0 275 549 •To acquire some of these initial “key” carriers
16 Bravo Logistics 267 0 267 500 NetLogistiK will:
17 Transportes COR 176 80 256 445
• Offer preferential treatment (e.g. sorting
18 Autolineas America 250 0 250 800
19 Express Anahuac 250 0 250 450 priority)
20 Nafta Express 250 0 250 300 •Offer stock options for early enrolment (as
Transportadora Hercel 250 0 250 200
21
Transportadora Egoba 240 0 240 320
UOL did)
22
23 Cia de Transportes de Mar de Cortes 205 8 213 0 •Offer option to purchase stock in first
24 Fletes Sotelo 200 12 212 1,200 round of financing
Transportes Aguila de Cd Juarez 175 36 211 120
25
26 Auto Express Perla 204 0 204 296
•Capture large shippers (e.g. Xerox, Coca-
27 Transportes Quintanilla 200 0 200 514 Cola, etc) as an incentive to bring large
28 Servicio de Transportes Jaguar 200 0 200 400 carriers
29 Comercial Intern de Transportes y Carga 200 0 200 200
30 Express Santa Fe 200 0 200 200 •Use non-cash incentives such as
31 Fletes Maya del Sureste 100 100 200 100 advertising
32 Jose Antonio de Luna Diaz de Leon 100 100 200 100
33 Transportes Sotres 80 120 200 100
34 Autotransportes de Carga Fremo 80 120 200 80 • Medium size-carrier firms are expected to be
35 Transervicios 186 10 196 450 attracted through participating shippers (i.e.
Central de Fletes Monterrey 192 0 192 345
36
37 Transportes Monterrey 130 60 190 80
shippers will promote the use of NetLogistiK with
38 Transportes Pitic 160 22 182 315 their traditional carrier firms).
39 Ryder Capital 150 20 170 300
40 Transportes Gonzalez 150 15 165 380
41 Integradora de Transportes Golfo Istmo 150 0 150 150
42 Transportes Unidos Tampiquenos 150 0 150 150
43 Fletes Pegaso 150 0 150 141
44 Transportes del Golfo y Noreste 133 0 133 178
45 Auto Express Mercurio 132 0 132 157
46 Servi Transporte Viga 130 0 130 175
47 Aguilas de Occidente 100 30 130 100
48 Transportes Mon-Ro 125 0 125 450
49 Transportes El Ola 125 0 125 170
50 Auto Fletes Regionales 120 0 120 150

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