Chesapeake Funding II LLC
Asset Backed Notes
Specified Procedures
Report To:
Element Fleet Management Corp.
October 2, 2019
Element Fleet Management Corp.
Re: Chesapeake Funding II LLC, Asset Backed
Notes (the “Notes”)
Specified Procedures
We have performed the procedures enumerated in Attachment A, which were agreed to by Element Fleet Management Corp. (the “Sponsor”) and by the financial
institution(s) identified to us in our engagement letter(s) with the Sponsor (together with the Sponsor, the “Specified Parties”), solely to assist Chesapeake Funding II LLC (the “Issuer”) in evaluating the accuracy of certain information with
respect to a pool of vehicle leases and loans and vehicles subject to, or anticipated to be subject to, those leases and loans (the “Receivables”) relating to the Chesapeake Funding II LLC securitization transaction(s). This specified procedures
(“Specified Procedures”) engagement was conducted in accordance with Section 9100 of the Chartered Professional Accountants of Canada (CPA Canada) Handbook – Assurance. The sufficiency of the procedures is solely the responsibility of the Specified
Parties. Consequently, we make no representation regarding the sufficiency of the procedures described below, either for the purpose for which this report has been requested or for any other purpose.
For the purpose of the specified procedures described in this report, representatives of the Sponsor, on behalf of the Issuer ("representatives of the
Sponsor"), provided us with:
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a.
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Electronic data files labeled “CII SUBI 2 - GFT_Active_2019.06.30_FINAL.xlsb” from the Sponsor’s asset management system (the “Provided Data Tape”) and “06.2019 FinServ Chase Fund.xlsx” from the Sponsor’s
financial services asset management system (“Fin Serv Chase Fund file”), which representatives of the Sponsor indicated contains information as of June 30, 2019 on a pool of leases and loans and vehicles that are subject to, or anticipated
to be subject to, those leases and loans from the Sponsor’s asset management system and that representatives of the Sponsor indicated are expected to be representative of the Receivables,
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b.
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Imaged copies of:
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i.
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For each of the Sample Receivables (as defined in Attachment A) identified as Lease Sample Receivables or Loan Sample Receivables (as defined in Attachment A), certain printed screen shots of the of the
Asset Management System Inquiry Screen ("ACFI Screen"), the Asset Management Physical Information Inquiry Screen ("AAMI Screen"), the Asset Management Closed-End Inquiry Screen ("ACEI Screen"), the Asset Management Audit History Screen
(“AAAI Screen”), and the Client Organization Screen ("CCOI Screen") from the Sponsor’s asset management system (collectively and as applicable, the “Automobile Lease Documents”),
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ii.
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For each of the Sample Receivables identified as Financial Services Leases (as defined in Attachment A), certain printed screen shots of the financial services asset management system and the CCOI Screen
from the Sponsor’s asset management system (collectively and as applicable, the “Financial Lease Documents”),
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iii.
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For each of the Sample Receivables, excluding those that representatives of the Sponsor have informed us are equipment leases, either (a) a copy of the certificate of title or online registration title
approval from state-approved service providers including Dealertrack, PDP Group, Inc., Metro Title or other similar providers, or (b) evidence that a certificate of title has been applied for and all required fees to obtain such
certificate of title have been paid (any of the foregoing, a “Certificate of Title”),
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iv.
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For each of the Sample Receivables, the Master Lease Agreement, Operating Lease Agreement,
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Assumption Agreement, Purchase Agreement, Letter of Intent, the Fleet Loan Agreement or Promissory Note Agreement, including the Funding Documentation (as defined in Attachment A) (collectively and as
applicable, the “Master Lease Agreement”),
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v.
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For each of the Sample Receivables, the credit file and any amendments thereto (collectively, the “Credit File”), and
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vi.
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For each of the Sample Receivables, the Certificate of Insurance Coverage, an insurance binder signed by the applicable insurer, or, in the case of a self-insured obligor, evidence from the applicable state
insurance authorities verifying the self-insured status of such obligor certificate indicating insurance coverage (any of the foregoing, the “Insurance Coverage File” and together with the Automobile Lease Documents, Financial Lease
Documents, Title, Master Lease Agreement, Funding Documentation and Credit File, the “Source Documents”).
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The procedures in Attachment A were limited to comparing or observing certain information that is further described in Attachment A. The Issuer is
responsible for the Provided Data Tape, Source Documents, and the determination of the procedures, assumptions and methodologies that are described herein. We were not requested to perform and we have not performed any further Specified Procedures
other than those listed in Attachment A with respect to the preparation or verification of any of the information set forth on the Provided Data Tape. We have not verified, and we make no representation as to the accuracy, completeness or
reasonableness of the information on the Source Documents or any other information provided to us by the Sponsor, on behalf of the Issuer, upon which we relied in forming our findings. Accordingly, we make no representation and express no opinion as
to (a) the existence of the Receivables or Statistical Receivables, (b) questions of legal or tax interpretation and (c) the accuracy, completeness or reasonableness of any procedures, assumptions and methodologies provided to us by the Sponsor, on
behalf of the Issuer, that are described in this report. We undertake no responsibility to update this report for events and circumstances occurring after the date hereof.
We were not engaged to, and did not, conduct an examination to express an opinion or a review to express a conclusion in accordance with auditing standards established by CPA
Canada on any of the items referred to herein. Accordingly, we do not express such an opinion or conclusion. Had we performed additional procedures, other matters might have come to our attention that would have been reported to you.
The Specified Procedures described in this report were not conducted for the purpose of:
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a.
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Satisfying any criteria for due diligence published by a nationally recognized statistical rating organization (a “rating agency”) or
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b.
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Making any findings with respect to:
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i.
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Whether the origination of the Receivables conformed to, or deviated from, stated underwriting or credit extension guidelines, standards, criteria, or other requirements,
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ii.
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The value of the collateral securing the Receivables,
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iii.
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Whether the originator of the Receivables complied with federal, state or local laws or regulations, or
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iv.
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Any other factor or characteristic of the Receivables that would be material to the likelihood that the Issuer will pay interest on and principal of the Notes in accordance with applicable terms and
conditions.
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This report is intended solely for the use of the Specified Parties and is not intended to be and should not be used by anyone other than the Specified
Parties. It is not intended to be and should not be used by any other person or entity, including investors and rating agencies, who are not identified in the report as Specified Parties but who may have access to this report as required by law or
regulation.
Sincerely,
/s/ Ernst & Young LLP
October 2, 2019
Attachment A
Procedures performed and our associated findings
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Specified Procedures
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Results
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Vehicle Lease Review Procedures
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1.1
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Representatives of the Sponsor will provide us with the Provided Data Tape containing certain characteristics of the Receivables which are expected to be representative of the Receivables. We will randomly
select 150 Receivables from the Provided Data Tape (the “Sample Receivables”). The information on the Provided Data Tape is as of June 30, 2019 (the “Cut-off Date”). Except as described below, we will not perform any procedures to determine
the accuracy, completeness or reasonableness of the information on the Provided Data Tape. Procedures described below will be performed as of the Cut-off Date.
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1.1
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Representatives of the Sponsor provided us with the Provided Data Tape containing certain characteristics of the Receivables which are expected to be representative of the Receivables. The information on the
Provided Data Tape was as at June 30, 2019 (the “Cut-Off Date”). We randomly selected 150 Sample Receivables.
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Representatives of the Sponsor will also provide us with a Fin Serv Chase Fund file containing certain characteristics of the Financial Services Leases which are expected to be representative of the financial
services leases. The information on the Fin Serv Chase Fund file is as of the Cut-off Date. Except as described below, we will not perform any procedures to determine the accuracy, completeness or reasonableness of the information on the Fin
Serv Chase Fund file. Procedures described below will be performed as of the Cut-off Date.
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Representatives of the Sponsor provided us with a Fin Serv Chase Fund file containing certain characteristics of the Financial Services Leases which are expected to be representative of the
financial services leases. The information on the Fin Serv Chase Fund file was as of the Cut-off Date.
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a)
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For each Sample Receivable, we will compare certain characteristics (the "Characteristics") set forth on the Provided Data Tape to the asset management system as indicated in the table below:
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All Sample Receivables selected were identified as Lease Sample Receivables and Loan Sample Receivables by representatives of the Sponsor, identified by having “FA” in the CORP_CD field and
identifier
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Attachment A
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Specified Procedures
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Results
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i.
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Unit number
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“LS”, “OE”, “CE” or “LN” in the CONTRACT_CD field in the Provided Data Tape. For each of the Sample Receivables selected in Specified
Procedure 1.1, we compared the following characteristics per the Provided Data Tape to the Automobile Lease Documents:
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Client number |
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Legal name of the obligor |
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iv.
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Vehicle make
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i.
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Unit number – All information was in agreement.
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v.
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Vehicle model
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ii.
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Client number – All information was in agreement.
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vi.
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Vehicle type
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iii.
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Legal name of the obligor – All information was in agreement.
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vii.
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Contract type
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iv.
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Vehicle make – All information was in agreement.
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viii.
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Lease term
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v.
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Vehicle model – All information was in agreement.
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ix.
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Vehicle index (loans and floating rate leases only)
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vi.
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Vehicle type – All information was in agreement.
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x.
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Vehicle spread rate (loans and floating rate leases only)
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vii.
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Contract type – All information was in agreement.
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xi.
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Fixed benchmark rate (fixed rate leases only)
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viii.
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Lease term – All information was in agreement.
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xii.
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Fixed spread rate (fixed rate leases only)
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ix.
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Vehicle index – All information was in agreement.
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xiii.
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Vehicle capitalized cost
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x.
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Vehicle spread rate – All information was in agreement.
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xiv.
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Initial bill date
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xi.
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Fixed benchmark rate – All information was in agreement.
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xv.
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Vehicle residual value (for closed-end leases only)
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xii.
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Fixed spread rate – All information was in agreement.
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Current book value as of the Cut-off Date |
xiii. | Vehicle capitalized cost – For 2 Sample Receivables (Unit numbers 20190531 and 161875) the Vehicle capitalized costs per the Provided Data Tape were not in agreement with the Automobile Lease Documents, which representatives of the Sponsor informed us is due to adjustments made to the Vehicle capitalized cost subsequent to the Cut-off Date. For the remaining Sample Receivables, all information was in agreement. | |||
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With respect to the Sample Receivables identified as vehicle management services leases (“Lease Sample Receivables”) by the Sponsor (in
the Provided Data Tape, the Sponsor, on behalf of the Issuer, has indicated to us that this is noted by the identifier “FA” in the CORP_CD field and identifier “LS, “OE” or “CE” in the CONTRACT_CD field), we will compare the
Characteristics noted above to the corresponding information set forth on or derived from the Automobile Lease Documents obtained from the asset management system. Any discrepancies will be included as an exception within our report.
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xiv. |
Initial bill date – All information was in agreement.
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| xv. | Vehicle residual value (for closed-end leases only) – All information was in agreement. | |||||
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With respect to the Sample Receivables identified as vehicle
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Attachment A
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Specified Procedures
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Results
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management services loans (“Loan Sample Receivables”) by the Sponsor (in the Provided Data Tape, the Sponsor, on behalf of the Issuer, has indicated to us that this is noted by the identifier “LN” in the
CONTRACT_CD field), we will compare the Characteristics noted above to the corresponding information set forth on or derived from the Automobile Lease Documents obtained from the asset management system. Any discrepancies will be included
as an exception within our report.
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xvi
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Current book value as of the Cut-off date – For 2 Sample Receivables (Unit numbers 20190531 and 161875) the Current book value per the Provided Data Tape were not in agreement with the Automobile Lease
Documents, which representatives of the Sponsor informed us is due to adjustments made to the Vehicle capitalized costs subsequent to the Cut-off Date. For the remaining Sample Receivables, all information was in agreement.
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With respect to the Sample Receivables that have an Initial bill date after the Cut-off Date, we will compare Characteristic xvi. to the Vehicle capitalized cost in the ACFI Screen.
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With respect to the Sample Receivables identified as financial services leases (“Financial Services Leases”) by the Sponsor (in the Provided Data Tape, the Sponsor, on behalf of the Issuer, has indicated to
us that this is noted by "FinServ" in the Corp Code field), we will compare the Characteristics i, ii, vi through viii, xi through xiii and xv to the corresponding information set forth on or derived from an obtained copy (“print screens”)
from the financial services asset management system. We will compare Characteristic iii to the CCOI Screen from the asset management system. We will compare Sample Characteristic xvi to a system generated report from the financial services
asset management system. For Sample Characteristics iv, v, and xiv, we will compare the information set forth in the Fin Serv Chase Fund file to print screens from the financial services asset management system. Any discrepancies will be
included as an exception within our report.
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Attachment A
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Specified Procedures
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Results
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b)
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For Lease Sample Receivables, excluding those Sample Receivables that representatives of the Sponsor have informed us are equipment leases, we will obtain the Certificate of Title, from representatives of the
Sponsor and we will observe whether (i) the title owner is D.L. Peterson Trust or D.L. Peterson Trust LSR and (ii) the lien holder is either Chesapeake Funding LLC, ELE Funding LLC or Raven Funding LLC (for vehicles acquired prior to June
30, 2006); or whether (i) the title owner is Gelco Fleet Trust or Gelco Fleet Trust LSR and (ii) the lien holder is GE Capital Bank, GE Title Agent, Chesapeake Funding LLC, or ELE Funding, LLC in all cases unless otherwise specified. Any
other title owner or lien holder will be identified as an exception within our report.
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For the Lease Sample Receivables, excluding those Sample Receivables that representatives of the Sponsor have informed us are equipment leases, we obtained the Certificate of Title and
observed whether (i) the title owner is D.L. Peterson Trust or D.L. Peterson Trust LSR and (ii) the lien holder is either Chesapeake Funding LLC, ELE Funding LLC or Raven Funding LLC (for vehicles acquired prior to June 30, 2006); or
whether (i) the title owner is Gelco Fleet Trust or Gelco Fleet Trust LSR and (ii) the lien holder is GE Capital Bank, GE Title Agent, Chesapeake Funding LLC, or ELE Funding, LLC. For 1 Lease Sample Receivable (Unit number KC573158) we did
not obtain the Certificate of Title, which representatives of the Sponsor informed us is because the title is out for correction. Except for this item, we noted no other exceptions.
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For the Loan Sample Receivables, we will obtain the Certificate of Title from representatives of the Sponsor and we will observe whether the lien holder is either Gelco Corporation or Element Fleet
Corporation. Any other lien holder will be identified as an exception within our report.
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For the Loan Sample Receivables, we obtained the Certificate of Title from representatives of the Sponsor and observed whether the lien holder is either Gelco Corporation or Element Fleet
Corporation. No exceptions were noted.
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c)
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For each of the Sample Receivables, we will obtain a copy of the Master Lease Agreement from representatives of the Sponsor to observe that:
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For each of the Sample Receivables, we obtained a copy of the Master Lease Agreement from representatives of the Sponsor and observed whether:
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i.
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there was a signature included in the area required to be signed by a representative of the Sponsor or e-signature;
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i.
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there was a signature included in the area required to be signed by a representative of the Sponsor or e-signature;
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ii.
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either, a LIBOR/CP flex program supplement, cost of funds, interest rate swap supplement, treasury note,
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ii.
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the Funding Documentation is included.
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We noted the following:
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Attachment A
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Specified Procedures
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Results
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fixed rate note, closed-end rate schedule, vehicle requisition, schedule A/vehicle record, equipment schedule, or rate schedule (the "Funding Documentation") is included.
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•
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For 1 Sample Receivable (Unit number 172015), the spread rate in the Funding Documentation provided did not agree to the spread rate in the Provided Data Tape.
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An omission of a signature, e-signature or Funding Documentation will be identified as an exception in our report.
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•
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For 1 Sample Receivable (Unit number 00172076), we did not obtain the Funding Documentation from representatives of the Sponsor.
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For 1 Sample Receivable, the legal name of the obligor per the Provided Data Tape did not agree with the Master Lease Agreement. Per representatives of the Sponsor, this was due to an error in the asset
management system which has since been corrected.
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Except for these items, we noted no other exceptions.
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d)
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With respect to each "active" obligor (as identified by representatives of the Sponsor) of the Sample Receivables, we will obtain a copy of the Credit File from representatives of the Sponsor to observe that
the Credit File contains either a line of credit authorization form or addendum to the line of credit authorization form that:
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With respect to each "active" obligor (as identified by representatives of the Sponsor) of the Sample Receivables, we obtained the Credit File from representatives of the Sponsor to observe whether the Credit File contains either a line of credit authorization form or addendum to the line of credit authorization form that:
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i.
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has an electronic or physical signature in the area where an approval signature is required, and;
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i.
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has an electronic or physical signature in the area where an approval signature is required, and;
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ii.
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has not expired as at June 30, 2019.
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ii.
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has not expired as at June 30, 2019.
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Pursuant to the Sponsor’s credit policies, for clients approved through the Sponsor’s automatic scoring process, we will observe evidence that the files passed the approval tests and that the expiration date
is after June 30, 2019. For clients whose latest Credit Files have expired prior to June 30, 2019 and were not
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Pursuant to the Sponsor’s credit policies, for Sample Receivables of clients who are approved through the Sponsor’s automatic scoring process, we observed evidence that the files passed the approval tests and
that the expiration date is after June 30, 2019.
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We noted the following:
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Attachment A
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Specified Procedures
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Results
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renewed, or the client no longer passes the automatic scoring process, we will obtain a print screen from the asset management system and verify that the origination date (“in service date”) of the Sample
Receivable(s) is prior to the expiration date of the client’s last Credit File. Any discrepancies will be included as exceptions within our report.
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For 1 obligor of the Sample Receivables (Client number 2494), the Credit File was approved subject to the receipt of an updated credit rating from the parent.
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For 2 obligors of the Sample Receivables (Client numbers 337 and 9049), the Credit Files expired prior to June 30, 2019. The Credit File for Client number 337 was subsequently renewed after the Cut-off
Date.
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For 7 obligors of Sample Receivables (Client numbers 7325, 7245, 18624, 2536, 5905, 2164, and 18682), the Credit Files were approved by the Credit & Risk Committee and representatives of the Sponsor
provided us with meeting minutes to evidence the approval of each of the Credit Files.
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Other than these items, no further exceptions were noted.
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e)
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With respect to each obligor of the Lease Sample Receivables, we will obtain the Insurance Coverage File to note that the Servicer (either Element Vehicle Management Services Group LLC, Gelco Corporation,
or Element Fleet Corporation) and either D.L. Peterson Trust or Gelco Fleet Trust are identified as an additional insured or loss payee either (i) directly, by being named in such evidence of insurance, or (ii) indirectly, (a) by
acknowledgment contained in the Certificate of Insurance or the signed insurance binder that the coverage as an Additional Insured extends to “lessors” generally, or (b) by acknowledgment contained in the Certificate of Insurance or the
signed insurance binder that additional insured coverage (or loss payee status) is extended to parties when required by written contract and in accordance with the policy provisions of the underlying policy or policies (or language of
substantially
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We obtained a copy of the Insurance Coverage File for each of the Lease Sample Receivables and verified that the Servicer and either D.L.
Peterson Trust or Gelco Fleet Trust are identified as an additional insured or loss payee either (i) directly, by being named in such evidence of insurance, or (ii) indirectly, (a) by acknowledgment contained in the Certificate of
Insurance or the signed insurance binder that the coverage as an Additional Insured extends to “lessors” generally, or (b) by acknowledgment contained in the Certificate of Insurance or the signed insurance binder that additional
insured coverage (or loss payee status) is extended to parties when required by written contract and in accordance with the policy provisions of the underlying policy or policies (or language of substantially equivalent effect). In
instances where coverage as an additional insured or status as a loss payee was evidenced by a statement that such coverage is extended to parties when required by written contract, we confirmed
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Attachment A
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Specified Procedures
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Results
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equivalent effect). In instances where coverage as an additional insured or status as a loss payee is evidenced by a statement that such coverage is extended to parties when required by written contract, we
will confirm that the applicable lease agreement requires the obligor of the Lease Sample Receivables to maintain insurance coverage that 1) requires the Servicer and D.L. Peterson Trust or Gelco Fleet Trust be named as additional insured
or loss payee, or 2) requires the obligor to name parties as loss payee or additional insured as directed by the lessor thereunder, or 3) requires the obligor to name the lessor thereunder as additional insured or loss payee, where the
“lessor” status is freely assignable to the Servicer, affiliates of the Servicer, or titling trusts per the terms of the applicable lease agreement. The Insurance Coverage File obtained will be in the name of the obligor or the guarantor
of the obligor per the Credit File. Any discrepancies will be included as an exception within our report.
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that the applicable lease agreement requires the obligor of the Lease Sample Receivables to maintain insurance coverage that 1) requires the
Servicer and D.L. Peterson Trust or Gelco Fleet Trust be named as additional insured or loss payee, or 2) requires the obligor to name parties as loss payee or additional insured as directed by the lessor thereunder, or 3) requires the
obligor to name the lessor thereunder as additional insured or loss payee, where “lessor” status is freely assignable to the Servicer, affiliates of the Servicer, or titling trusts per the terms of the applicable lease agreement. The
Insurance Coverage Files obtained were in the name of the obligor or the guarantor of the obligor per the Credit File, except for the Lease Sample Receivables noted below.
For 6 obligors of the Lease Sample Receivables (Client numbers 18571, 1054, 17971, 9687, 3671 and 7327), representatives of the Sponsor
provided us with Certificates of Insurance in the name of a parent, subsidiary or other entity. We confirmed that the applicable Master Lease Agreements required the obligors to maintain insurance coverage that named the Servicer and D.L.
Peterson Trust or Gelco Fleet Trust per the terms of the agreements.
Other than these items, no further exceptions were noted.
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