VCL MULTI-COMPARTMENT S.A., Compartment VCL 26

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1 VCL MULTICOMPARTMENT S.A., Compartment VCL 26 CREDIT OPINION New Issue ABS Auto Lease securitisation in Germany by Volkswagen Leasing GmbH Closing Date Capital Structure 25/04/2018 TABLE OF CONTENTS Capital Structure Summary Credit Strengths Credit Challenges Key Characteristics Asset Description Asset Analysis Securitization Structure Description Securitisation Structure Analysis Methodology and Monitoring Parameter Sensitivities Modeling Assumptions Appendix 1: Summary of Originator's Underwriting Policies and Procedures Appendix 2: Summary of Servicer's Collection Procedures Moody's Related Publications Contacts Stanislav Nastassine VPSenior Analyst stanislav.nastassine@moodys.com CLIENT SERVICES Americas Asia Pacific Japan EMEA Exhibit 1 Definitive Ratings Series Rating Amount (million) % of Assets Legal Final Maturity Coupon Subordination(*) Reserve Fund(**) Total Credit Enhancement (***) A Aaa (sf) 1, Feb mE + 0.4% 6.00% 1.20% 7.20% B A1 (sf) Feb mE + 0.4% 3.90% 1.20% 5.10% NR , SubLoan Tot al Liabilit y Overcollateralisation Tot al Port folio , The ratings address the expected loss posed to investors by the legal final maturity. In our opinion the structure allows for timely payment of interest and ultimate payment of principal at par on or before the rated final legal maturity date. Our ratings address only the credit risks associated with the transaction. Other noncredit risks have not been addressed, but may have a significant effect on yield to investors. * At closing. ** As of initial outstanding discounted portfolio balance. *** No benefit attributed to excess spread. Summary VCL MultiCompartment S.A., Compartment VCL 26 is a static cash securitisation of auto lease receivables extended to obligors in Germany by Volkswagen Leasing GmbH ( VW Leasing, A3 / Stable Outlook), owned by Volkswagen Financial Services AG ( VW FS, A3 / P2 / Stable Outlook). The servicer is VW Leasing. Our analysis focused, amongst other factors, on (i) an evaluation of the underlying portfolio of receivables; (ii) historical performance information of the total book and past ABS transactions; (iii) the credit enhancement provided by subordination and cash reserve; (iv) the liquidity support available in the transaction by way of principal to pay interest and the cash reserve, and (v) the legal and structural aspects of the transaction. Our cumulative losses expectation for the asset pool is 1.25%, and portfolio credit enhancement (PCE) is 6.5%. At the time the rating was assigned, the model output indicated that Class A would have achieved a Aaa rating even if the cumulative expected losses had been as high as 1.75%, and the PCE remained at 6.5% (all other factors being constant).

2 Credit Strengths» Granular portfolio composition: The securitised portfolio is highly granular with the largest and 20 largest lessees representing 0.03% and 0.50% of the pool, respectively. The portfolio also benefits from a good geographic diversification. (See Asset Description Assets at Closing Pool Characteristics )» Static structure: The structure does not include a revolving period during which additional portfolios may be sold to the SPV. This feature limits portfolio performance volatility caused by additional portfolio purchase» Financial strength of Volkswagen Leasing GmbH: Volkswagen Leasing GmbH is rated (A3/P2) and is acting as originator and servicer in the transaction. The leasing company's sound credit profile limits deal exposure to operational issues: specifically likelihood of interruption in the portfolio servicing during the lifetime of the deal is limited. Furthermore, VW Leasing represents the largest captive leasing company in Europe and has a long experience in the origination and servicing of leasing portfolios.» Securitisation experience: Volkswagen Financial Services AG has gained securitisation experience over the last 22 years from its subsidiary VW Leasing and former subsidiary VW Bank GmbH.» Credit Enhancement: The transaction benefits from several sources of credit enhancement provided through (i) subordination of the notes, (ii) a subordinated loan (iii) initial overcollateralisation, (iv) building up of additional overcollateralisation if net loss triggers are in breach. The reserve fund provides limited additional credit enhancement as it is only available to pay interest and senior fees until the legal final maturity.» Performance of previous transactions: The previous VCL transactions rated by Moody's perform generally in line with or better than expectations. This publication does not announce a credit rating action. For any credit ratings referenced in this publication, please see the ratings tab on the issuer/entity page on for the most updated credit rating action information and rating history. 2

3 Credit Challenges» Limited historical information: Although historical net loss data provided by Volkswagen reaches from 01/2007 to 12/2017 it does not include any information about recoveries. We have factored this when deriving our modeling assumptions as further explained under Asset Analysis.» High degree of linkage to VW Leasing: VW Leasing is acting as originator and servicer of the transaction. There is no backup servicer facilitator or backup servicer in place before a servicer termination event like servicer insolvency. Additionally, VW Leasing's role as seller in the transaction and its ability to honor its commitments under the repurchase obligation upon a breach of warranties and guarantees made under the sale of receivables introduces credit linkage to VW Leasing.» Commingling risk: Commingling risk on collections is mitigated by (i) the rating of the servicer at closing, (ii) monthly sweep of collections to the Issuer account, and (iii) automatic termination of collection authority upon servicer insolvency. See section Additional Structure Analysis.» Compliance with German insolvency code: According to Sec. 108 (1)(2) InsO, lease receivables have to be refinanced within a short period of time after origination to remain valid and enforceable for the Issuer in case of an originator insolvency. Legal risk increases due to the fact that the maximum interim period exceeds three months at the pool cutoff date by up to approx. 21 days to complete the portfolio transfer for the initial secured refinancing of lease receivables in the securitised portfolio. The risk is mitigated by (i) the clear limit and the short additional period of time; (ii) the obvious intension of the originator to use securitisation for lease refinancing; and (iii) the relatively high rating of the originator VW Leasing. See section Additional Structure Analysis.» Service components in lease contracts: A significant portion of lease contracts in the securitised pool (69.1%) have standard service components attached to it. Although cash flows for services are not securitised, this may lead to lessee contract termination risk or lessee setoff risk in case services are not provided. However, we believe that this risk is mitigated by a number of factors, including the strong incentive to continue services also in a servicer insolvency due to a post German insolvency restructuring scenario. In addition, enforcement of such lessee rights is uncertain. See section Additional Structure Analysis.» Negative interest rate on Issuer Account Bank: The interest rate on the bank account where collections, the reserve fund and the risk reserve are held is not floored at 0%. Hence, given the negative interest rate environment the account could yield a fee to be paid to the account bank. We have modeled stressed scenarios of negative interest rates and assessed its impact on the ratings on the notes (see section Asset Analysis ).» Exposure to Diesel Cars: The majority of the pool 74.4% are leasing contracts for diesel cars; however only 0.5% are for cars with model year before 2016 which potentially do not meet the EURO 6 standard. The public and political debate about the future of diesel engines has heated up in recent months due to new proposals restricting diesel cars in various metropolitan areas in Europe. It is generally regarded that diesel engines, especially engine types older than EURO 6, are failing to improve the air quality in metropolitan areas under actual on the road driving conditions.1 As a consequence, diesel car registrations are continuing their negative trend and the residual value premium of diesel over petrol cars is declining, which puts pressure on residual values. Transaction cash flows can be impacted in two ways: (1) Banning diesel cars in urban areas can diminish cars attractiveness to its users, putting pressure on diesel car prices and subsequently reducing recoveries and residual value cash flows.2 We are closely monitoring developments, but at this time believe that such risks are reflected in our rating assumptions, i.e. recovery rates. (2) Obligors whose cars are banned from residential or daily commuting areas could try to challenge finance contracts. We view, at this time, the risk of customer setoff rights and/or early termination rights in case diesel cars are banned to be marginal, as long as there is no evidence that manufacturers have illegally manipulated emission levels. Even in this case, the risk would only materialise for investors if not remedied by the seller under the transaction's representations and warranties. According to the transaction documents, a repurchase obligation by the seller of the lease receivables is triggered following opening of the action by the lessee (in a lower court in Germany) to withhold payments on the related installments. According to the leasing terms and conditions, the lessee may refuse payment of the lease installments (among others) in case of material defects of the leased vehicle. 3

4 Key Characteristics The exhibit below describes the main asset characteristics of the securitized portfolio. WA and WAL stand for weighted average and weighted average life, respectively. Exhibit 2 Asset Characteristics Seller/Originator: 4 Volkswagen Leasing GmbH (A3 Backed Senior Unsecured / P2; Stable Outlook) ("VW Leasing") Servicer(s): VW Leasing Receivables: Leases granted to retail and corporate costumers resident in Germany to finance the purchase of new and used vehicles Total Amount: EUR 1,595,754,013 Length of Revolving Period in years: Static Number of Contracts: 168,630 Number of Lessees: New Vehicle (as % of total pool): 95.31% Used Vehicle (as % of total pool): 2.41% Demo Vehicle (as % of total pool): 2.29% Type of Obligors (as % of total pool): Retail: 69.49%; Corporate: 30.51% WA Remaining Term in years: 2.53 WA Seasoning in months: 8.79 WAL of Portfolio in Years (excl. prepayments): 1.34 WA Portfolio Interest Rate: Delinquency Status: All lease receivables are current as of cutoff date Loss Rate Observed Whole book cumulative average vintage default value between : 1.08% Recovery Rate Observed: Not Provided Delinquencies: Whole book delinquency ratio between : 0.46% (6190days) Cumulative Loss rate (modelled): 1.25% in line with Peer Group in the EMEA Auto ABS market Recovery rate (modelled): Aaa Portfolio Credit Enhancement (PCE): 6.5% lower than Peer Group in the EMEA Auto ABS market (equals a coefficient of variation of 47.4%)

5 The exhibit below shows the counterparties associated with the transaction. stands for those counterparties that do not apply to the transaction. Exhibit 3 Securitization Structure Characteristics Transaction Parties At Closing Issuer: VCL MultiCompartment S.A., Compartment VCL 26 Backup Servicer(s): None Backup Servicer Facilitator(s): None Cash Manager: The Bank of New York Mellon, Frankfurt Branch Backup Cash Manager: None Calculation Agent/Computational Agent: The Bank of New York Mellon, Frankfurt Branch Backup Calculation/Computational Agent: None Swap Counterparty: DZ BANK AG Deutsche ZentralGenossenschaftsbank (Aa1 (cr) / P1 (cr)) Issuer Account Bank: The Bank of New York Mellon, Frankfurt Branch Collection Account Bank: Volkswagen Bank GmbH (A3 Senior Unsecured, Aa3(cr)) Paying Agent: The Bank of New York Mellon, London Branch Security Trustee: Intertrust Trustees GmbH (NR) Issuer Administrator: Corporate Servicer Provider: Circumference FS (Luxembourg) S.A. (NR) Arranger: Merrill Lynch International Lead Manager(s): CoManagers: Merrill Lynch International, Commerzbank AG Crédit Agricole, RBC Europe Limited, The Bank of Nova Scotia Custodian: The Bank of New York Mellon, London Branch Liabilities, Credit Enhancement and Liquidity Annualized Excess Spread at Closing: 0.00% Credit Enhancement/Reserves: Amortising reserve fund representing 1.2% of Initial discounted portfolio (floored at 1% of initial discounted portfolio balance) Initial overcollateralization Subordination of the notes Cash Reserve, principal to pay interest mechanism Form of Liquidity: Number of Interest Payments Covered by Liquidity: 9 months Interest Payments: Monthly in arrears on each payment date Principal Payments: Passthrough on each payment date Payment Dates: 21st calendar day of each month First payment date: 21st May, 2018 Fixedtofloating rate swap Hedging Arrangements: 5

6 Asset Description The securitised assets are made up of monthly paying auto leases that Volkswagen Leasing GmbH has granted, mainly to retail customers (69.49%), and to corporate lessees (30.51%) resident in Germany. 69.1% of contracts include a servicing package. These service packages may include maintenance and repair services, fuel cards, insurance and other client services. Assets as of Cutoff Date POOL CHARACTERISTICS The portfolio balance of the final portfolio amounts to 1,596 million for a total of 168,630 contracts. The portfolio is collateralised by 95.31% new cars, 2.41% used cars, and 2.29% demonstration vehicles, whereby the vast majority of vehicles relate to the VW brands. Portfolio cash flows result from 100% fixed lease installment cash flows. Two broad contract types have been securitised: closed calculation contracts (99.13%) and open calculation contracts (0.87%). Closed calculation contracts allow the lessee to use the car and an agreed service package for a fixed price. The lessee will not receive any profit from lower actual service costs or if the vehicle sells at contract termination for a higher value than expected. Open calculation contracts include a possible refund component, if the actual cost of running the fleet is lower than the initially estimated costs. Maintenance service costs and actual vehicle sale proceeds are incorporated into the refund calculation at the end of a lease contract. As is common for German auto lease contracts, the seller, as the lessor, assigns the security title registration of the vehicle to the issuer, the vehicle is registered under the name of the lessor/seller. Further characteristics can be summarised as follows:» The lease agreement provides for the payment of fixed equal monthly instalments;» Maximum maturity up to 60 months; generally, the maturity is between 13 and 36 months. Extensions are generally not allowed.» Prepayments are possible; a prepayment penalty will be applied.» A grace period of a maximum of three months can be granted once during the lifetime of the contract provided that (i) contract has a seasoning of at least six months; (ii) updated credit bureau information is received with no negative records; and (iii) a new credit quality check has been performed and is positive. In these cases, the maturity is extended by the applied grace period. The exhibit below summarizes additional information of the portfolio. Exhibit 4 Additional Information on Asset Characteristics Average Outstanding Lease Principal Discounted Balance EUR 9,463 Number of Dealers Geographic Concentration Largest region North RhineWestphalia (21.66%) 2nd largest region Bavaria (17.65%) 3rd largest region BadenWuerttemberg (15.71%) Manufacturer Distribution 1st largest Manufaturer Audi (33.82%) 2nd largest Manufactuer VW (33.14%) 3rd largest Manufacturer VW LCV (15.87%) Obligor Concentration 6 Single obligor (group) concentration 0.03% Top 5 obligor (group) concentration 0.14% Top 10 obligor (group) concentration 0.26% Top 20 obligor (group) concentration 0.50%

7 The exhibits below describe the distribution of the portfolio's Initial and Outstanding balance. Exhibit 5 Exhibit 6 Portfolio Breakdown by Payment Type Portfolio Breakdown by Outstanding Discounted Balance 40.0% Others 6% 35.0% 30.0% 25.0% 20.0% 15.0% 10.0% 5.0% Direct borrower account debit 94% 0.0% 0, ,00 Source: VW Leasing GmbH 5.000, , , , ,01 > , , , , , ,00 Source:VW Leasing GmbH The exhibits below show the breakdown by remaining term and seasoning. Exhibit 7 Exhibit 8 Portfolio Breakdown by Remaining Term in Months Portfolio Breakdown by Seasoning in Months 60.0% 80.0% 70.0% 50.0% 60.0% 40.0% 50.0% 30.0% 40.0% 30.0% 20.0% 20.0% 10.0% 10.0% 0.0% 0.0% 0012 Source: VW Leasing GmbH Source: VW Leasing GmbH

8 The exhibits below show the portfolio breakdown by car brand and customer type. Exhibit 9 Exhibit 10 Portfolio Breakdown by Car Brand Portfolio Breakdown by Customer Type Other brands Skoda 0% 13% Seat 4% Corporate 31% VW 33% Audi 34% Retail 69% VW LCV 16% Source: VW Leasing GmbH Source: VW Leasing GmbH The exhibits below show the geographic distribution of the securitised assets and by industry sector. Exhibit 11 Exhibit 12 Portfolio Breakdown by Regions Portfolio Breakdown by Industry Sector 25.0% 20.0% 15.0% 10.0% 5.0% 0.0% Source: VW Leasing GmbH % 18.0% 16.0% 14.0% 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% 0.0% Source: VW Leasing GmbH

9 The exhibits below show the breakdown of the portfolio by vehicle status and contract type. Exhibit 13 Exhibit 14 Portfolio Breakdown by Vehicle Status Portfolio Breakdown by Contract Type Used vehicles 2.4% Open end lease contract 1% Demonstration vehicles 2.3% New vehicles 95.3% Closed end contract 99% Source: VW Leasing GmbH Source: VW Leasing GmbH Eligibility Criteria The key eligibility criteria are as follows:» The Purchased Lease Receivables are denominated, payable in Euro and assignable, and the Lease Contracts require monthly payments.» Receivables are free of defences, whether preemptory or otherwise for the agreed term of the Lease Contract as well as free from rights of third parties and that the Lessees in particular have no setoff claim.» Acquisition of the Leased Vehicles by VW Leasing is financed in compliance with the requirements of section 108 (1), 2nd sentence of the German Insolvency Code (Insolvenzordnung).» No insolvency proceedings according to the Applicable Insolvency Law have been initiated against any of the Lessees during the term of the Lease Contracts up to the last day of the month preceding the Closing Date.» Lease Contracts shall be governed by the laws of Germany.» Lessees are corporate entities with a registered office in Germany or private individuals and have their residence in Germany.» Total amount of Purchased Lease Receivables assigned hereunder resulting from Lease Contracts with one and the same Lessee will not exceed 0.5% of the total amount of discounted receivables at closing in respect of any single Lessee.» None of the Lessees is an Affiliate of Volkswagen AG, Familie Porsche Stuttgart und Familie Piech Salzburg Gruppe.» Status and enforceability of the purchased lease receivables is not impaired due to warranty claims or any other rights of the lessee;» Terminations of the lease contracts have not occurred and are not pending.» As of the CutOff Date at least two (2) lease instalments have been paid in respect of each of the Lease Contracts and that the Lease Contracts require substantially equal monthly payments to be made within 1260 months of the date of origination of the Lease Contract.» No purchased lease receivable was overdue at the last day of the month preceding the closing date.» More than 95% of the Leased Vehicles are Volkswagen, Audi, SEAT, Skoda or Volkswagen Nutzfahrzeuge vehicles.» No lease receivables contain lease contracts with kilometer settlement issued to private individuals prior to October

10 Originator and Servicer In March 2018, we met with VW Leasing, a wholly owned subsidiary of Volkswagen Financial Services AG. VW Leasing acts as servicer in the VCL MultiCompartment S.A., Compartment VCL 26 transaction. VW Leasing is responsible for the leasing business of the Volkswagen Group in Germany, having five branches in Braunschweig (Audi Leasing, Seat Leasing, Skoda Leasing, Ducati Leasing and AutoEuropa Leasing), one branch in Warsaw, Poland, and three branches in Italy (Milan, Verona and Bolzano). VW Leasing cooperates with the approximately 3,800 dealerships of the Volkswagen Group. In terms of 6090 day delinquencies, the historical performance of VCL transactions rated between 2012 and 2017 compares positively to its peer group German auto lease ABS transactions, with 6090 day delinquencies peaking at approximately 0.75% of current pool balance and losses at approximately 0.18% of original pool balance at around 2 years after closing. The origination process is highly automated. A scoring system is in place to assess the borrower's credit risk, which considers amongst other things (i) external credit bureau information, in some cases from two different bureaus, (ii) internal payment behaviour if a repeat customer; (iii) the customer's debt history; and (iv) fraud information. The underwriting process is in line with the market standard. Both private retail customers and commercial retail customers are scored by a numeric system of 16 risk classes, going from 01 to 15 and D as the worst score. For customers who are classified as 'major customers', i.e. customers who have entered into a master framework agreement with VW Leasing, the leasing application will be manually assessed by at least two credit officers. Collection management is organised centrally from an internal collection centre. Collection procedures rely almost exclusively on direct debit, which accounts for approximately 99% of payments. The collection process and early arrears management are highly automated. Repossessed leased vehicles are sold to dealers, or through the used vehicles centre of Volkswagen Financial Services AG. VW Leasing GmbH is subject to regular internal and external audits by Pricewaterhouse Coopers Aktiengesellschaft Wirtschaftsprüfungsgesellschaft. The exhibit below summarizes the main characteristics of the originator's background. Exhibit 15 Originator Profile, Servicer Profile and Operating Risks Date of Operations Review: 29Mar18 Originator Background Rating: A3 Financial Institution Group Outlook for Sector: Stable Ownership Structure: Wholly owned by Volkswagen Financial Services AG Asset Size: 32.2 Billion Euros (as per Dec17) % of Total Book Securitized (excl. this transaction): Not available Transaction as % of Total Book: Not available % of Transaction Retained: 5.00% Servicer Background Rating: A3 Regulated by: German Supervisory Authority for Banking Business (BaFin) Total number of Receivables Serviced: million (as per Dec17) Number of Staff: 750 (as per Dec17) The originator provided us with performance data on its whole leasing portfolio. However, we have not received recovery data. Default data span over a period from January 2007 to December Dynamic delinquency data have also been provided from January 2010 up to December In our view, the quantity and quality of data received is adequate compared to transactions that have achieved 10

11 high investmentgrade ratings in this sector in other European countries. The weighted average remaining term of the leases is about months, with a maximum of 58 months. The exhibit below shows cumulative net losses since origination for the Originator's whole book. The historical data provided shows a mean loss rate of approximately 0.58% extrapolating loss vintage data for 60 months (maximum contract maturity). Exhibit 16 Annual Vintage Average Loss Curves Auto Lease Book VW Leasing (January 2007 to December 2017) % Cumulative net loss ratio 1.00% 0.80% 0.60% 0.40% 0.20% % Age of contract in months Source: VW Leasing GmbH, Moody's calculations 11

12 Asset Analysis Primary Asset Analysis Our analysis of the credit quality of the assets includes an examination of the lease loss distribution of the securitised pool, based on our assumptions and historical data. LEASES LOSS DISTRIBUTION The first step in the analysis was to define a loss distribution of the pool of leases to be securitised. Because of the large number of leases, we used a continuous distribution to approximate the loss distribution: the lognormal distribution. The probability loss distribution associates a probability with each potential future loss scenario for the portfolio. This distribution has hence been applied to numerous loss scenarios on the asset side to derive the level of losses on the Notes. Two main parameters determine the shape of the loss distribution: the mean loss and the portfolio credit enhancement ( PCE ). The expected loss captures our expectations of performance considering the current economic outlook, while PCE captures the loss we expect the portfolio to suffer in the event of a severe recession scenario. We generally derive these parameters from the historical data; we may make adjustments based on further analytical elements such as performance trends, differences in portfolio composition or changes in servicing practices among others. DERIVATION OF LEASE LOSS RATE EXPECTATION Portfolio expected loss of 1.25% is in line with the EMEA auto lease ABS average and is based on our assessment of the lifetime expectation for the pool. We primarily based our analysis on the historical cohort performance data that the originator provided for a portfolio that is representative of the securitised portfolio. We also evaluated (1) other European market trends, (2) benchmark lease transactions, and (3) other qualitative considerations. We stressed the results from the historical data analysis to account for (1) the fact that the provided historical data does not allow an analysis of recovery performance in an economic distressed environment 2) the possible consequence on pool performance in a declining economic climate. DERIVATION OF PORTFOLIO CREDIT ENHANCEMENT (PCE) The PCE of 6.5% is lower than the EMEA auto leases average. The PCE has been defined following analysis of the data variability, as well as by benchmarking this portfolio with past and similar transactions. Factors that affect the potential variability of a pool s credit losses are: (i) historical data variability, (ii) quantity, quality and relevance of historical performance data, (iii) originator and servicer quality, (iv) certain pool characteristics, such as asset concentration, and (v) certain structural features, such as prefunding and revolving periods. COMMINGLING RISK VW Leasing collects all payments under the leases in this pool into a collection account under its name. In the event of a servicer bankruptcy, commingling losses may arise. Commingling risk on collections is mitigated by (i) the rating of the servicer at closing, (ii) monthly sweep of collections to the Issuer account, and (iii) automatic termination of collection authority upon servicer insolvency. SETOFF RISK There is no setoff risk from customer deposits or employees in the transaction. VW Leasing does not have deposit business and employee contracts are not eligible for the transaction. A significant portion of lease contracts in the securitised pool have standard service components attached to it. Although cash flows for services are not securitised this may lead to lessee setoff risk in case services are not provided. We assume, however, in an insolvency scenario a restructuring scenario for the servicer in Germany and see a strong incentive to continue services also in a servicer insolvency. In addition, enforcement of such lessee rights is uncertain. NEGATIVE INTEREST RATE ON ISSUER ACCOUNT BANK RISK The interest rate on the bank account where collections, the reserve fund and the Risk Reserve are held is not floored at 0%. Hence given the negative interest rate environment the account could yield a fee to be paid to the account bank. We have directly modelled this risk and assessed its impact on the ratings on the notes. 12

13 ANCILLARY LEGAL RISK Trade tax risk: There remains some uncertainty about trade tax obligations for the lease receivables in the securitised portfolio. The Risk Reserve which covers a number of claims the Issuer may have against VW Leasing has been sized to cover the maximum estimated tax risk exposure arising under German Trade Tax and VAT tax risk. We analysed various stressed scenarios and assessed its impact on the Risk Reserve. As the sizeable Risk Reserve is fully funded and nonamortising, the impact of the legal risks is deemed not material with view of the run off of risks the Risk Reserve is sized to cover. Comparables PRIOR TRANSACTIONS Precedent transaction performance: The performance of the originator s precedent transactions in this sector are within or better than our expectations. The exhibits below show the performance of precedent transactions originated by VW Leasing GmbH. Exhibit Days Delinquency trend by deal VCL MultiCompartment S.A, Compartment VCL 17 VCL MultiCompartment S.A., Compartment Private VCL VCL MULTICOMPARTMENT S.A., Compartment VCL 22 VCL MultiCompartment S.A., Compartment VCL 25 VCL MultiCompartment S.A.,Compartment VCL 14 VCL MultiCompartment S.A.,Compartment VCL 16 VCL MultiCompartment S.A, Compartment VCL 18 VCL MultiCompartment S.A., Compartment VCL 19 VCL MULTICOMPARTMENT S.A., Compartment VCL 23 VCL MultiCompartment S.A.,Compartment VCL 13 VCL MultiCompartment S.A.,Compartment VCL 15 EMEA overal trend Delinquency 60+ [% of CB] Source: Moody's Investors Service, periodic investor/servicer reports 13

14 Exhibit Days Delinquency trend by deal Delinquency 90+ [% of CB] VCL MultiCompartment S.A, Compartment VCL 17 VCL MultiCompartment S.A., Compartment Private VCL VCL MULTICOMPARTMENT S.A., Compartment VCL 22 VCL MultiCompartment S.A., Compartment VCL 25 VCL MultiCompartment S.A.,Compartment VCL 14 VCL MultiCompartment S.A.,Compartment VCL 16 VCL MultiCompartment S.A, Compartment VCL 18 VCL MultiCompartment S.A., Compartment VCL 19 VCL MULTICOMPARTMENT S.A., Compartment VCL 23 VCL MultiCompartment S.A.,Compartment VCL 13 VCL MultiCompartment S.A.,Compartment VCL 15 EMEA Overall Trend Source: Moody's Investors Service, periodic investor/servicer reports Exhibit 19 Cumulative Losses [% of OB + Cum Add. + Cum Repl.] Losses Seasoning by deal VCL MultiCompartment S.A, Compartment VCL 17 VCL MultiCompartment S.A., Compartment Private VCL VCL MULTICOMPARTMENT S.A., Compartment VCL 22 VCL MultiCompartment S.A., Compartment VCL 25 VCL MultiCompartment S.A.,Compartment VCL 14 VCL MultiCompartment S.A.,Compartment VCL 16 VCL MultiCompartment S.A, Compartment VCL 18 VCL MultiCompartment S.A., Compartment VCL 19 VCL MULTICOMPARTMENT S.A., Compartment VCL 23 VCL MultiCompartment S.A.,Compartment VCL 13 VCL MultiCompartment S.A.,Compartment VCL 15 Overall Trend EMEA Months Since Closing Source: Moody's Investors Service, periodic investor/servicer reports 14

15 TRANSACTIONS OF OTHER SELLER/SERVICERS For benchmarking purposes the charts below include cumulative losses in German auto lease ABS that we rate. Please note, however, that the performance shown can be affected by several factors, such as the seasoning of the securitised leases, the age of the transaction, poolspecific characteristics as well as the length of the revolving period. The exhibits below show the performance of comparable transactions among originators in Europe. Exhibit 20 EMEA Auto Loans and Auto Leases ABS Losses trend by domicile France Germany Italy Netherlands Nordic Others South Africa Spain UK Index Losses (Cum) [% of OB + Cum Repl] Source: Moody's Investors Service, periodic investor/servicer reports Exhibit 21 German Auto Loans and Auto Leases ABS Losses seasoning by originators Banque PSA Germany RCI Banque BDK Bank GMAC Bank Santander Consumer Bank BMW Bank MercedesBenz Bank Volkswagen FCE Bank Other Originators Losses (Cum) [% of OB + Cum Repl] Months since closing Source: Moody's Investors Service, periodic investor/servicer reports 15

16 The exhibit below shows a benchmark table including portfolio characteristics of comparable transactions in Germany. Exhibit 22 Comparable Transactions Characteristics Deal Name Country Closing Date or Rating Review Date (dd/mm/yyyy) Currency of Rated Issuance Rated Notes Volume (excluding NR and Equity) Originator/Servicer Captive finance company? Longterm/Short Term Rating Securitised pool balance ("Total pool") Average principal balance Compartment VCL 25 Compartment VCL 23 Globaldrive Auto Receivables 2017A B.V. Germany Germany Germany Germany 25/04/ /11/ /04/ /09/2017 EUR EUR EUR EUR 1,533,500,000 1,534,500, ,700, ,500,000 Volkswagen Leasing GmbH Yes Volkswagen Leasing GmbH Yes Volkswagen Leasing GmbH Yes FCE Bank plc, German Branch Yes 750,013, ,783,357 A3/P2 A3/P2 1,595,754,013 1,595,750,127 Baa2/P2 9,463 9,628 10,190 16,541 WA loan to value ("LTV") Not disclosed Not disclosed 99.00% 84.91% Share of total pool >90% LTV Not disclosed Not disclosed 94.80% 52.77% 0.00% 0.00% 0.00% % % % % 0.00% % % % 24.90% Auto loan receivables % Auto lease receivables % RV receivables % Portion of (fully) amortising contracts % Portion of bullet / balloon contracts % 0.00% 0.00% 0.00% 75.10% Portion of pure bullet / balloon payments % 47.26% Direct Debit (minimum payment) 99.00% WA initial yield (Total Pool) Minimum yield for additional portfolios p.a. WAL of Total Pool initially (in years) WA original term (in years) WA seasoning (in years) WA remaining term (in years) No. of contracts No. of obligors 1.98%/Discount yield: 3.25% Static , ,743 73,605 41,399 39,698 Single obligor (group) concentration % 0.03% 0.02% 0.05% 0.11% Top 5 obligor (group) concentration % 0.14% 0.11% 0.21% 0.28% Top 10 obligor (group) concentration % 0.26% 0.22% 0.41% 0.39% Top 20 obligor (group) concentration % 0.50% 0.42% 0.70% 0.59% 69.49% 71.86% 73.74% 88.00% Private obligors % Name largest manufacturer / brand Audi Audi Audi Ford 2nd largest manufacturer / brand Volkswagen Volkswagen Volkswagen NonFord 3rd largest manufacturer / brand Volkswagen Light Commercial Vehicle 33.82% Volkswagen Light Commercial Vehicle 36.07% Volkswagen Light Commercial Vehicle 36.46% 99.88% 2nd largest manufacturer / brand 32.14% 33.12% 35.60% NonFord 3rd largest manufacturer / brand 15.87% 16.01% 16.35% 95.31% 95.31% 95.53% 81.55% Size % largest manufacturer / brand New vehicles % Name largest region North RhineWestphalia North RhineWestphalia North RhineWestphalia NordrheinWestfalen 2nd largest region Bavaria Bavaria Bavaria BadenWürttemberg 3rd largest region BadenWuerttemberg BadenWuerttemberg BadenWürttemberg Bayern 21.66% 22.23% 22.02% 28.71% 2nd largest region 17.65% 17.95% 17.44% 13.57% 3rd largest region 15.71% 15.26% 15.58% 12.35% Size % largest region 16 Compartment VCL 26

17 Exhibit 23 Comparable Transactions Asset Assumptions Deal Name Gross default / Net loss definition in this deal Compartment VCL 26 Compartment VCL 25 Globaldrive Auto Receivables 2017A B.V. Compartment VCL 23 Final writeoff (app. 180 days) Final writeoff (app. 180 Final writeoff (app. 180 days) days) 6 months Default Definition captured by data? Yes Yes Yes Data available for each subpool? Yes Type of default / loss distribution Lognormal Lognormal Lognormal Lognormal Model running on defaults/losses Period Covered by Vintage data (in years) Losses Losses Losses Defaults Mean gross default/net loss rate initial pool 2.40% Mean gross default/net loss rate replenished pool 1.25% 1.25% 1.25% 1.99% Mean net loss rate (calculated or modelled) CoV (implied) Default timing curve Mean recovery rate 47.4% 47.4% 47.6% 46.3% Sine (62236) Sine (62236) Sine (62236) Sine (61444) % WA recovery lag of 1.6 years Recovery lag (in months) Aaa PCE Prepayment Rate Seasoning as modelled (in months) 6.50% 6.50% 6.50% 2.5% (18 months) / 7.5% 2.5% (18 months) / 7.5% 2.5% (18 months) / 7.5% thereafter thereafter thereafter 9.50% 7.5% (18 months) / 12.5% thereafter 1.03% 1.03% 1.03% 1.00% outstanding balance Assumed Portfolio Yield p.a. initial pool 1.30% 3.30% Assumed Portfolio Yield p.a. additional pool Index Rate assumed in 1st period 0.00% No No No No Stressed Fees modelled RV risk modelled? RV Haircut (Aaa (sf)) ORIGITOR/SERVICER QUALITY The main strengths of the servicer in this transaction are Volkswagen Leasing GmbH experience as an originator in the Germany car leasing market and its role as a market leader in its home market. In addition, Volkswagen Leasing GmbH is the captive originator of a strong vehicle manufacturer. 17

18 Securitization Structure Description The Issuer is a special purpose vehicle incorporated under the laws of Luxembourg as a limited liability company ( société anonyme ). The compartment is in all legal aspects relevant for the transaction separate from all other compartments of the special purpose vehicle. Interest on the Notes is paid monthly. Structural Diagram Below is a structural diagram for the transaction, illustrating the relationship between the issuer, VCL MultiCompartment S.A., Compartment VCL 26, and the other transaction parties. Exhibit 24 Transaction Structure Source: VW Leasing GmbH 18

19 Detailed Description of the Structure The transaction structure is a senior subordinated structure with a reserve fund. Additionally, notes issued by the issuer benefit from overcollateralisation (as pool amount is greater than aggregated funded liabilities). CREDIT ENHANCEMENT Credit enhancement in the transaction includes an amortising cash reserve, subordination of the notes and overcollateralisation. ALLOCATION OF PAYMENTS/WATERFALL On each payment date, the issuer s available funds (i.e. interest and principal on the lease receivables, available amounts from the reserve fund account except reserve amortization amounts and net swap receipts under the Class A and Class B interest rate swaps) will be applied in the following simplified order of priority: 1. Senior expenses/tax; 2. Swap payments; 3. Accrued and unpaid interest on Class A; 4. Accrued and unpaid interest on Class B; 5. Cash collateral account until required reserve amount is reached; 6. Principal payments in modified pro rata order (subject to cumulative net loss triggers) until repaid in full to Class A and Class B; 7. Following a Swap Termination Event, all amounts due and payable under the swap agreement; 8. Reduction of the subordinated loan until complete repayment; 9. Remaining excess to VW Leasing. Cash collateral account amortisation amounts will only be applied to the priority of payments and repay the notes, if one of the CE triggers has been breached. Otherwise these amounts will directly repay the subloan. CASH RESERVE» at close: 1.20% of original portfolio balance;» amortising to to the greater of (a) 1.2% of the current pool balance and (b) the lesser of (i) EUR 16 million and (ii) the outstanding balance of classes A and B, effectively with no hard floor level in place.» the cash reserve will be available for liquidity during the life of the transaction;» the reserve fund will be replenished after the interest payment of the Class A and B notes using the available funds in the cash flow waterfall;» the cash reserve is not available to cover principal losses at any time. Moreover, prior to the legal final maturity date and unless credit enhancement triggers are breached or there is a servicer insolvency event, the cash reserve amortisation amounts flow directly to the sponsor and cannot be used to cover any payment shortfalls;» reserve fund amortisation in absence of a floor exposes Class B to credit losses in certain portfolio loss scenarios. Once the portfolio is nearly fully amortised, the reserve fund might not be sufficient to cover senior fees and/or note coupon payments. Such shortfalls would next be drawn from the remaining principal receipts, potentially leading to creditlosses on Class B. We have taken this into account in our cash flow modelling. 19

20 OVERCOLLATERALISATION» The transaction benefits from overcollateralization.» Overcollateralisation is created by defining a lower portfolio purchase price than the net present value of the auto lease receivables portfolio.» Class A and Class B notes will amortise on a sequential basis until the target collateralisation levels (subordination + overcollateralisation) of 12.25% for Class A and 7.5% for Class B are reached.» Target collateralisation levels increase upon portfolio performance triggers (see performance trigger section below).» Once target collateralisation levels are reached, both classes of notes will amortise on a pro rata basis to keep target collateralisation levels. Amortisation will switch back to being on a sequential basis if target collateralisation levels have changed due to trigger breach. LIQUIDITY» Principal to pay interest mechanism.» The reserve fund is a further source of liquidity. PERFORMANCE TRIGGERS Class A and Class B required OC levels increase to 14.0% and 8.25% respectively if Level 1 Credit Enhancement Increase Condition is breached. Level 1 Credit Enhancement Increase Condition will be in effect if:» the Cumulative Net Loss Ratio exceeds (i) 0.5% on any Payment Date before and including the Payment Date falling in July 2019 or (ii) 1.15% on any Payment Date after but excluding the Payment Date July 2019 until and including the Payment Date falling in April Waterfall switches to sequential until full redemption of Class A if Level 2 Credit Enhancement Increase Condition is breached. Level 2 Credit Enhancement Increase Condition will be in effect if:» the Cumulative Net Loss Ratio exceeds 1.6% on any Payment Date. ORIGITOR/SERVICER/CASH MAGER RELATED TRIGGERS The appointment of the servicer is terminated if the following events occur:» Insolvency of the servicer;» Failure to perform material obligations, if not remedied;» Failure to deliver the servicer report, if not remedied;» Failure to make payments due, if not remedied within three Business Days. The appointment of the cash manager is terminated if the following events occur:» Downgrade of the ShortTerm Bank Deposit Rating falls P1 or Long Term Bank Deposit Rating below Baa1;» Insolvency of the cash manager;» Failure to perform material obligations that is not remedied within the grace period. OTHER COUNTERPARTY RATING TRIGGERS The issuer account bank will be replaced if its ShortTerm Bank Deposit Rating falls below P1 or its Long Term Bank Deposit Rating falls below Baa1. 20

21 EXCESS SPREAD All assigned receivables have been purchased at a discounted rate of 5.70%. However, part of the resulting portfolio yield 4.50% (the Buffer Release Rate) will be paid directly to VW and will not be available for the transaction priority of payments leaving the transaction with a portfolio yield of circa 1.19% during the first payment period. The Buffer Release Rate will be recalculated on a monthly basis such that the transaction will target nil excess spread after payment having deducted senior fees (estimates of ongoing servicing costs) plus spreads on the rated notes and swap rate. INTEREST RATE MISMATCH At closing, the pool consists of 100% fixed rate lease receivables, whereas the notes are floating interest rate liabilities. As a result, the Issuer is subject to fixedfloating interest rate mismatch (i.e. the risk that the interest rate on the notes differs from the interest rate payable on this portion of the portfolio). To mitigate the fixedfloating rate mismatch, the Issuer has entered into interest rate swap agreements for Class A and Class B. Under the swap agreement:» The Issuer pays a fixed rate on Class A and on Class B.» The swap counterparty pays 1month EURIBOR plus spread of Class A and Class B respectively.» The notional is the outstanding note balance of Class A respectively Class B.» The swap framework is ISDA and is in line with Moody s swap criteria. ASSET TRANSFER/TRUE SALE/BANKRUPTCY REMOTENESS The purchase of the lease asset portfolio is financed by the issuance of (i) Class A and B Notes and (ii) a subordinated loan. The purchase is a true sale of the lease receivables under German law, dealer residual value receivables, vehicles and ancillary rights to the issuer for the benefit of the note holders. The Issuer is a special purpose vehicle incorporated under the laws of Luxembourg as a limited liability company ( société anonyme ). CASH MAGER Bank of New York Mellon, acts as independent cash manager in the transaction. The cash manager's main responsibilities are the preparation of the investor report, making payments according to the waterfall and drawing on the cash reserve and other sources of liquidity. The cash manager will make cash flow calculations on each monthly payment date including the yearly interest payment dates. Events that could lead to termination of the cash manager include insolvency and a failure to perform that the cash manager does not remedy within the grace period. There is no backup cash manager appointed at closing. REPLACEMENT OF THE SERVICER There is no backup servicer or backup servicer facilitator appointed at closing. 21

22 Securitisation Structure Analysis Primary Analysis We base our primary analysis of the transaction structure on the loss distribution of the portfolio in order to derive our cash flow model. TRANCHING OF THE NOTES We used a lognormal distribution to describe the loss distribution of the portfolio. We used this distribution in the cash flow model to ultimately derive the level of losses on the notes under each default scenario. We considered the allocation to each of the parties within the transaction of the cash flows that the collateral generates, and the extent to which the structural features of the transaction might themselves provide additional credit protection to investors, or alternatively act as a further source of risk in addition to the intrinsic risk of the lease assets. We have analysed the strength of triggers to reduce the exposure of the portfolio to the originator/servicer bankruptcy. As a first step towards determining the theoretical rating of the notes, we used an expected loss methodology that reflects the probability of default for the notes multiplied by the severity of the loss expected for the notes. In order to allocate losses to the notes in accordance with their priority of payment and relative size, we used a cashflow model (ABSROM) that reproduces most of the dealspecific characteristics. We have already described above the main input parameters of the model. The result of weighting each severity of loss output (the result of inputting each default scenario into ABSCore) with the probability of occurrence, is both the expected loss for the notes as well as the expected average life. We then compare both values to Moody s Idealised Expected Loss table. Under a second step, we calculated losses from residual value risk under an Aaa scenario and incorporated those losses into the quantitative analysis. The exhibit below shows the lognormal loss distribution of the portfolio (green line). The blue line in the exhibit represents each loss scenario on the loss distribution curve for the loss suffered by the Class A notes (in our modelling). For default scenarios up to 6.71%, the line is flat at zero, hence the Class A notes are not suffering any loss. 6.71% is the first default scenario under which the Class A notes suffer a loss. The steepness of the curve then indicates the speed of the increase of losses suffered by the Class A. Exhibit 25 Lognormal Loss Distribution Class A Loss % 4.0% % 3.0% % 2.0% % 1.0% % 0.0% 0.0% Loss Scenario Probability Scenario Probability 5.0% 2.0% 4.0% 6.0% 8.0% 10.0% % 12.0% Loss Scenario Source: Moody s Investors Service TIMING OF LOSSES In the base case scenario, the timing of losses curve assumed is sinus, with first loss occurring with 6month lag (according to transaction definition), a peak at month 22 and last loss at month

23 LOSS DEFINITION The definition of a written off lease receivable in this transaction is one which has been reduced by recoveries and finally written off by VWL in its capacity as Servicer in accordance with its customary accounting practice in effect from time to time. Upon termination of a contract, the delinquent debtor has 14 days to render the payment of the entire claim amount or, alternatively, to deliver the vehicle to the premises of a Volkswagen Group dealer. This process is supported by an outbound team contacting the defaulted debtors and trying to agree with them either to pay the entire claim amount or to retransfer the vehicle to VW Leasing or a Volkswagen Group dealer. In the event of noncompliance, a vehiclerepossession request is issued to an external repossession company. Repossession of the vehicle usually occurs around the 91th day after the first unpaid installment was due. After repossession of the vehicle it takes on average around 30 days until the vehicle is sold. Thus, generally around 121 days pass between the date on which payment of the first unpaid installment is due and the date on which of the debtor s account is settled. If the recoveries from the sale of the vehicle are not sufficient to satisfy the outstanding claim against the lessee an execution of a levy on property is initiated on approximately the 177th day. If such levy on property should prove unsuccessful, i.e. if a settlement of outstanding claims should not be achieved, the claim is written off as irrecoverable. Exhibit 26 Comparable Transactions Structural Features Deal Name Compartment VCL 26 Compartment VCL 25 Compartment VCL 23 Static Static Static Static Size of credit RF ongoing (as % of rated notes) 1.2% 1.2% 1.2% 0.75% no effective floor nonamortising 1.00% nonamortising No No Yes No RF amortisation floor (as % of initial total pool) Setoff risk? Setoff mitigant Commingling Risk? Commingling mitigant Backup servicer appointed if servicer rated below Backup Servicer name Backup Servicer facilitator No No No Yes Cash advancing Cash advancing Cash advancing Reserve at closing No BUS No BUS No BUS No No No Deutsche International Trust Company N.V. Swap in place? Yes Yes Yes Yes Swap counterparty Longterm Rating Aa1 Aa1 Aa1 Aa3(cr) Shortterm Rating Type of Swap Size of Aaa(sf) rated class P1 P1 P1 P1(cr) Fixedfloating Fixedfloating Fixedfloating Fixedfloating 94.00% 94.00% 93.60% 92.00% Aa2(sf) rated class 3.00% Aa3(sf) rated class 2.10% 2.16% 2.49% Baa(sf) rated class Ba(sf) rated class B(sf) rated class 5.00% Equity 3.00% 2.94% 2.91% Initial Overcollateralisation 0.90% 0.90% 1.00% Reserve fund as % of inital total pool 1.20% 1.20% 1.20% 0.71% Annualised net excess spread as modelled 0.00% 0.00% 0.00% 1.60% A(sf) rated class NR class 23 Globaldrive Auto Receivables 2017A B.V. Revolving Period (in years)