Deutsche Bank 2nd Annual Australia Transport Conference 27 May 2003 Sydney Paul Little Managing Director Toll Holdin

1. Topic The future of the logistics market: The future of intermodal traffic � problems and opportunities; Opportunities for, and financial implications of, further integration of customers� supply chains Presentation Overview Toll cover slide Intro & agenda Snapshot Toll Holdings Sector participation Toll�s acquisitions Australian logistics industry Supply chain integration Factory gate pricing Intermodal Outlook Topic The future of the logistics market: The future of intermodal traffic � problems and opportunities; Opportunities for, and financial implications of, further integration of customers� supply chains Presentation Overview Toll cover slide Intro & agenda Snapshot Toll Holdings Sector participation Toll�s acquisitions Australian logistics industry Supply chain integration Factory gate pricing Intermodal Outlook

2. Agenda Toll Holdings overview Australian logistics market Supply chain integration Factory gate pricing Intermodal Outlook Introduction Good afternoon and thanks to Jeremy Larkin and Deutsche Bank for inviting me here today. As one of the major operators in the transport and logistics industry I�m delighted to talk to about the future of the logistics market in Australia, with people who have a vested interest in its success. Since speaking here last year, Toll has continued to strengthen its position in the Australian and regional transport and logistics markets. However, there have been ongoing developments in the industry, which are worth discussing. So the agenda for today's presentation is: A brief overview of Toll Holdings A quick look at the Australian logistics market And then a discussion about one of the the main issues concerning logistics companies today, that is the continued sophistication and evolution of supply chain management, including a focus on intermodal logisticsIntroduction Good afternoon and thanks to Jeremy Larkin and Deutsche Bank for inviting me here today. As one of the major operators in the transport and logistics industry I�m delighted to talk to about the future of the logistics market in Australia, with people who have a vested interest in its success. Since speaking here last year, Toll has continued to strengthen its position in the Australian and regional transport and logistics markets. However, there have been ongoing developments in the industry, which are worth discussing. So the agenda for today's presentation is: A brief overview of Toll Holdings A quick look at the Australian logistics market And then a discussion about one of the the main issues concerning logistics companies today, that is the continued sophistication and evolution of supply chain management, including a focus on intermodal logistics

3. Toll Holdings Firstly a snapshot of Toll Holdings Currently we have: Turnover $2.4 billion Employees 15,000 Sites 370 W/house capacity 1.5million m2 Equipment 26,500 Net assets $630 million Annual volumes over 15 million tonnes *Excludes Pacific National Toll is Australia�s largest transport and logistics provider with approximately 10% market share and has experienced dynamic growth over the past 12 years. We operate in all major transport and logistics sectors throughout Australia and are growing our capabilities within South East Asia and New Zealand. Firstly a snapshot of Toll Holdings Currently we have: Turnover $2.4 billion Employees 15,000 Sites 370 W/house capacity 1.5million m2 Equipment 26,500 Net assets $630 million Annual volumes over 15 million tonnes *Excludes Pacific National Toll is Australia�s largest transport and logistics provider with approximately 10% market share and has experienced dynamic growth over the past 12 years. We operate in all major transport and logistics sectors throughout Australia and are growing our capabilities within South East Asia and New Zealand.

4. Sector participation We participate in five major industry sectors: Food, Beverage & Retail 45% Industrial 19% Automotive 11% Ports & Resources 19% Relocation 6% The diversity of our customer base has allowed us to be somewhat insulated from issues such as: Competition, both local and global Drought; A slowing local economy; War and fluctuating oil prices; And other global events effecting our customers.We participate in five major industry sectors: Food, Beverage & Retail 45% Industrial 19% Automotive 11% Ports & Resources 19% Relocation 6% The diversity of our customer base has allowed us to be somewhat insulated from issues such as: Competition, both local and global Drought; A slowing local economy; War and fluctuating oil prices; And other global events effecting our customers.

5. 35 acquisitions in 14 years You�re probably aware that Toll has a pretty aggressive acquisition strategy� And this is because our core focus has always been to become a truly integrated logistics provider and tailor our services to achieve supply chain excellence. At the time of our management buy-out in 1986, we recognised that Toll needed to quickly grow its scale and range of service offerings, to generate an integrated capability along the total supply chain. Each of the acquisitions listed on this slide have aided Toll�s business model and its ability to provide a fully integrated service. Whilst growth by acquisition remains the major avenue of expansion for the group, new contracts and expansion of our existing customer base remain very important avenues in their own right. You�re probably aware that Toll has a pretty aggressive acquisition strategy� And this is because our core focus has always been to become a truly integrated logistics provider and tailor our services to achieve supply chain excellence. At the time of our management buy-out in 1986, we recognised that Toll needed to quickly grow its scale and range of service offerings, to generate an integrated capability along the total supply chain. Each of the acquisitions listed on this slide have aided Toll�s business model and its ability to provide a fully integrated service. Whilst growth by acquisition remains the major avenue of expansion for the group, new contracts and expansion of our existing customer base remain very important avenues in their own right.

6. Australian logistics industry Consolidation continuing Integrated solution / partnering model sought after Strong organic growth rates Industry based solutions Looking now to the Australian Logistics Industry� The total value of the Australian logistics industry is estimated to be $54 billion, with $31 billion performed in-house, $7 billion handled by major providers such as Toll and $16 billion by a range of other smaller providers. The total domestic freight task increased by more than 70% over the past two decades[1], and forecasts predict that Australia's freight task will double by the year 2020 with exports growing 50 per cent by 2010[2]. Toll is still small in context of overall market and many opportunities for further consolidation exist. We are finding that our major customers now see supply chain improvements, as vital to the success of their businesses. Major logistics providers such as Toll are now securing significant contracts, as the complexity and scale of the supply chain increases. Coupled with this, is the move towards industry-based solutions and with industry participants adopting a more collaborative approach. [1] http://www.dotars.gov.au/transinfra/auslink/chapter1.htm#2 [2] http://afr.com/specialreports/report1/2002/08/22/FFXII5JP25D.htmlLooking now to the Australian Logistics Industry� The total value of the Australian logistics industry is estimated to be $54 billion, with $31 billion performed in-house, $7 billion handled by major providers such as Toll and $16 billion by a range of other smaller providers. The total domestic freight task increased by more than 70% over the past two decades[1], and forecasts predict that Australia's freight task will double by the year 2020 with exports growing 50 per cent by 2010[2]. Toll is still small in context of overall market and many opportunities for further consolidation exist. We are finding that our major customers now see supply chain improvements, as vital to the success of their businesses. Major logistics providers such as Toll are now securing significant contracts, as the complexity and scale of the supply chain increases. Coupled with this, is the move towards industry-based solutions and with industry participants adopting a more collaborative approach. [1] http://www.dotars.gov.au/transinfra/auslink/chapter1.htm#2 [2] http://afr.com/specialreports/report1/2002/08/22/FFXII5JP25D.html

7. Supply chain development in Australia So let�s now just take a moment to look at the evolution of the supply chain in Australia� Australian supply chains were based around traditional European models, where vendors marketed and distributed their own products. Considerable value was attached to dedicated supply chains and company branded vehicles. � In Europe many manufacturers have let go of this traditional model, due to a more widespread acceptance of outsourcing, and the associated economies of scale that population density brings. In Australia however, acceptance of the outsourcing model has been slower. Many vendors still see distribution as their domain of differentiation, preferring to distribute their own product through stand-alone networks. Possibly the key question is now, given continued rationalisation in the retail and wholesale sector, does it make sense for vendors to continue their stand-alone distribution model? The answer in the Australian market is undoubtedly no.So let�s now just take a moment to look at the evolution of the supply chain in Australia� Australian supply chains were based around traditional European models, where vendors marketed and distributed their own products. Considerable value was attached to dedicated supply chains and company branded vehicles. � In Europe many manufacturers have let go of this traditional model, due to a more widespread acceptance of outsourcing, and the associated economies of scale that population density brings. In Australia however, acceptance of the outsourcing model has been slower. Many vendors still see distribution as their domain of differentiation, preferring to distribute their own product through stand-alone networks. Possibly the key question is now, given continued rationalisation in the retail and wholesale sector, does it make sense for vendors to continue their stand-alone distribution model? The answer in the Australian market is undoubtedly no.

8. Traditional grocery supply chain To understand the impact of this answer, I want to take a moment to take a look at the largest single logistics market globally � grocery. The grocery market in Australia is really a two-horse race. The domination of Coles and Woolworths has forced many vendors to let go of their independence and comply with the retailer�s logistics requirements. Few vendors still enjoy the perceived benefit of direct store delivery and the supplier who traditionally delivered high volume fast moving consumer goods direct to store, now delivers to a central warehouse or distribution centre. Coles and Woolworths now control most of the distribution to domestic grocery markets via company fleets, either owned by them or outsourced to logistics providers like Toll. To understand the impact of this answer, I want to take a moment to take a look at the largest single logistics market globally � grocery. The grocery market in Australia is really a two-horse race. The domination of Coles and Woolworths has forced many vendors to let go of their independence and comply with the retailer�s logistics requirements. Few vendors still enjoy the perceived benefit of direct store delivery and the supplier who traditionally delivered high volume fast moving consumer goods direct to store, now delivers to a central warehouse or distribution centre. Coles and Woolworths now control most of the distribution to domestic grocery markets via company fleets, either owned by them or outsourced to logistics providers like Toll.

9. New grocery supply chain What has this done to the traditional distribution chain? The traditional distribution chain, has then changed from, independent vendors delivering their own goods to the back of retailers stores in fleets of small trucks, to single point delivery to retailer�s distribution centres in semi trailers. Products are then delivered to store in consolidated loads by the retailer�s fleet. The exception to this is regional areas where logistics companies often provide �integrated� delivers for a variety of vendors in common markets due to the economies of the region. Here, the truck delivering New Balance sports shoes is probably also delivering Nike�s. � The outsourcing of logistics within Australia will continue to be evaluated on its ability to deliver �true value� to vendors and retailers alike. However it is no longer good enough to simply view logistics costs in the same manner as transactional freight, where customers traditionally sought to obtain the lowest cost by function. Price commoditisation of logistics services does not benefit anyone. The only way to gain maximum value from the supply chain is to view it as an integrated, inter-dependent whole.What has this done to the traditional distribution chain? The traditional distribution chain, has then changed from, independent vendors delivering their own goods to the back of retailers stores in fleets of small trucks, to single point delivery to retailer�s distribution centres in semi trailers. Products are then delivered to store in consolidated loads by the retailer�s fleet. The exception to this is regional areas where logistics companies often provide �integrated� delivers for a variety of vendors in common markets due to the economies of the region. Here, the truck delivering New Balance sports shoes is probably also delivering Nike�s. � The outsourcing of logistics within Australia will continue to be evaluated on its ability to deliver �true value� to vendors and retailers alike. However it is no longer good enough to simply view logistics costs in the same manner as transactional freight, where customers traditionally sought to obtain the lowest cost by function. Price commoditisation of logistics services does not benefit anyone. The only way to gain maximum value from the supply chain is to view it as an integrated, inter-dependent whole.

10. Future challenges Collaborating with vendors and customers Exploiting information technology Optimising costs of extended enterprise 100% availability of products The move in overseas logistics markets is clearly towards the vertical integration of services, rather than individual companies bundling their requirements with a single 4PL provider. The vertical integration of services, seeks to extract the best total value across a range of functions taking into consideration customer requirements, expectation and cost. So in summary, the future challenges for the logistics industry and companies such as Toll are: Collaborating with vendors and customers in planning, forecasting and replenishment; Exploiting the value of information technology; Optimising the costs of the extended enterprise; Ensuring 100% availability of quality products in the market. All of these areas require a greater integration and synchronisation of the supply chain.The move in overseas logistics markets is clearly towards the vertical integration of services, rather than individual companies bundling their requirements with a single 4PL provider. The vertical integration of services, seeks to extract the best total value across a range of functions taking into consideration customer requirements, expectation and cost. So in summary, the future challenges for the logistics industry and companies such as Toll are: Collaborating with vendors and customers in planning, forecasting and replenishment; Exploiting the value of information technology; Optimising the costs of the extended enterprise; Ensuring 100% availability of quality products in the market. All of these areas require a greater integration and synchronisation of the supply chain.

11. Factory gate pricing Staying with the grocery example, one of the most topical logistics issues currently is primary distribution and factory gate pricing� Factory gate pricing is a retailer driven supply chain initiative, that changes the way primary transportation is managed � that is, it changes the way suppliers supply into retailer distribution centres. The retailer assumes responsibility for planning, scheduling, and which carrier will move the load. The cost of transport is segregated out of the suppliers� product price. The key goals of factory gate pricing are to: Reduce the direct cost of primary transportation by leveraging scale; Increase control over deliveries into retailers distribution centres, in terms of frequency and timing to enable other supply chain initiatives; Create distribution centre operational efficiencies, by streamlining the flow of products.Staying with the grocery example, one of the most topical logistics issues currently is primary distribution and factory gate pricing� Factory gate pricing is a retailer driven supply chain initiative, that changes the way primary transportation is managed � that is, it changes the way suppliers supply into retailer distribution centres. The retailer assumes responsibility for planning, scheduling, and which carrier will move the load. The cost of transport is segregated out of the suppliers� product price. The key goals of factory gate pricing are to: Reduce the direct cost of primary transportation by leveraging scale; Increase control over deliveries into retailers distribution centres, in terms of frequency and timing to enable other supply chain initiatives; Create distribution centre operational efficiencies, by streamlining the flow of products.

12. Who�s involved? So who�s involved with factory gate pricing? Locally, Woolworths and Coles Myer have announced supply chain re-engineering activities chiefly targeting factory gate pricing. Progressive foods in New Zealand have commenced a review of the model. And leading the way in this area in the UK is Tesco and Sainsbury�s. What impact does factory gate pricing have for Toll? While the major retailers strive for greater visibility and control of the supply chain, they do not want to own or run the transport fleets or logistics infrastructure necessary for the task. Recognising this shift, Toll is very well positioned to be an active participant in this change. Additionally Toll has access to the latest technology required to achieve supply chain efficiencies, assisting major retailers in solving the complex problems, surrounding their supply chains.So who�s involved with factory gate pricing? Locally, Woolworths and Coles Myer have announced supply chain re-engineering activities chiefly targeting factory gate pricing. Progressive foods in New Zealand have commenced a review of the model. And leading the way in this area in the UK is Tesco and Sainsbury�s. What impact does factory gate pricing have for Toll? While the major retailers strive for greater visibility and control of the supply chain, they do not want to own or run the transport fleets or logistics infrastructure necessary for the task. Recognising this shift, Toll is very well positioned to be an active participant in this change. Additionally Toll has access to the latest technology required to achieve supply chain efficiencies, assisting major retailers in solving the complex problems, surrounding their supply chains.

13. I think that�s enough theory! Let�s now look at some of the real operational issues which effect the viability and success of further supply chain integration. One of the main challenges faced by the logistics industry is the increased capacity and efficiency of intermodal transport throughout Australia. I think that�s enough theory! Let�s now look at some of the real operational issues which effect the viability and success of further supply chain integration. One of the main challenges faced by the logistics industry is the increased capacity and efficiency of intermodal transport throughout Australia.

14. Intermodal investment Intermodal traffic is: The Transportation of full container loads via a range of transport modes, between all capital�cities and major regional locations. It�s interesting to look at the split of our investments in net assets across the across the major modes of:Intermodal traffic is: The Transportation of full container loads via a range of transport modes, between all capital�cities and major regional locations. It�s interesting to look at the split of our investments in net assets across the across the major modes of:

15. Intermodal issues Capacity to handle large container ships & longer trains Road, rail and sea terminal size & interfacing issues Short haul corridor competitiveness Keeping pace with road transport reform Just in time service levels Some of the problems and restrictions around intermodal transport include: Capacity to handle large container ships and longer trains; Road, rail and sea terminal size and efficiency and modal interfacing issues; Short haul corridor competitiveness, where smaller volumes impact economies of scale; Keeping pace with road transport reform (i.e. weight and height capacity increases); Improved transit schedules required with �just in time� service levels, such as later cut offs and earlier arrivals, will place pressure on road and rail linehaul. Some of the problems and restrictions around intermodal transport include: Capacity to handle large container ships and longer trains; Road, rail and sea terminal size and efficiency and modal interfacing issues; Short haul corridor competitiveness, where smaller volumes impact economies of scale; Keeping pace with road transport reform (i.e. weight and height capacity increases); Improved transit schedules required with �just in time� service levels, such as later cut offs and earlier arrivals, will place pressure on road and rail linehaul.

16. Intermodal observations Duty of care for owner drivers Shortage of drivers Road rates up Investment in specialised rolling stock Increase in landbridging New infrastructure IT solutions Other observations effecting intermodal traffic are: The road sector is under pressure as owner driver operators diminish. Duty of care and legal requirements continue to tighten, and volumes are estimated to grow significantly over the next 10 years; Road transport will continue to be affected by a shortfall of quality labour, as drivers are increasingly harder to find; Supply and demand will push road rates up and create modal transfer on most major corridors; High capital investment is needed with specialised rolling stock to service new markets e.g. automotive (cars), bulk liquids, dry bulk; Landbridging for the shipping industry is set to increase with faster ship turnaround, draft issues with larger ships and generally importers expectation; New infrastructure will create better services i.e. Melbourne-Brisbane / Adelaide-Darwin rail networks. IT solutions will allow better inventory management and supply chain transparency. Other observations effecting intermodal traffic are: The road sector is under pressure as owner driver operators diminish. Duty of care and legal requirements continue to tighten, and volumes are estimated to grow significantly over the next 10 years; Road transport will continue to be affected by a shortfall of quality labour, as drivers are increasingly harder to find; Supply and demand will push road rates up and create modal transfer on most major corridors; High capital investment is needed with specialised rolling stock to service new markets e.g. automotive (cars), bulk liquids, dry bulk; Landbridging for the shipping industry is set to increase with faster ship turnaround, draft issues with larger ships and generally importers expectation; New infrastructure will create better services i.e. Melbourne-Brisbane / Adelaide-Darwin rail networks. IT solutions will allow better inventory management and supply chain transparency.

17. Outlook Impact overseas trends Intermodal interface New supply chain initiatives Flexibility of asset mix Looking forward� The Australian logistics industry will continue to be influenced by overseas developments in supply chain management practices. And as the supply chain becomes increasingly sophisticated, we will experience greater pressure on getting our intermodal interfaces operating more efficiently to meet growing service demands. From our perspective, Toll remains totally committed to the challenges that lie ahead. We continue to sharply focus on designing supply chain management solutions that meet the requirements of our customers. That means maintaining flexibility, creating the right asset base and maximising supply chain value.Looking forward� The Australian logistics industry will continue to be influenced by overseas developments in supply chain management practices. And as the supply chain becomes increasingly sophisticated, we will experience greater pressure on getting our intermodal interfaces operating more efficiently to meet growing service demands. From our perspective, Toll remains totally committed to the challenges that lie ahead. We continue to sharply focus on designing supply chain management solutions that meet the requirements of our customers. That means maintaining flexibility, creating the right asset base and maximising supply chain value.

18. Paul LittleManaging DirectorToll Holdings Limited <End><End>