February 20, 2007

CLOSING MEMORANDUM

$311,160,000
CITY OF SAN ANTONIO, TEXAS
WATER SYSTEM REVENUE REFUNDING BONDS, SERIES 2007

Preclosing: Wednesday, February 21, 2007

Fulbright & Jaworski L.L.P.
Harris Conference Room, 20th Floor
300 Convent Street
San Antonio, Texas 78205
Phone: (210) 224-5575
Fax: (210) 270-7205

Documents will be available for review at 3:00 PM

Date of Closing: Thursday, February 22, 2007

Time of Closing: 10:00 A.M., Central Time

Location of Closing: Fulbright & Jaworski L.L.P.

Harris Conference Room, 20th Floor
300 Convent Street
San Antonio, Texas 78205
Phone: (210) 224-5575
Fax: (210) 270-7205

1) Prior to 9:00 A.M., Central Time, on Thursday, February 22, 2007, the San Antonio Water System
(“SAWS”) will wire-transfer $28,488,763.47 representing SAWS’ cash contribution towards accrued interest
on the commercial paper notes and the redemption of the Series 1997 and Series 2002-A bonds to be paid or
redeemed with certain proceeds of the $311,160,000 City of San Antonio, Texas Water System Revenue
Refunding Bonds, Series 2007 (the “Bonds”) to U.S. Bank National Association, Houston, Texas (the “Bank”),
the paying agent/registrar and escrow agent, pursuant to the wiring instructions in #2 below.

2) Prior to 9:00 A.M., Central Time, on Thursday, February 22, 2007, UBS Securities LLC, as
representative for the underwriters (the “Underwriters”) will pay the City of San Antonio, Texas (the
“Issuer”), $317,260,334.48, for the benefit of SAWS, in immediately available funds for its $311,160,000 City
of San Antonio, Texas Water System Revenue Refunding Bonds, Series 2007, computed as follows:

Principal Amount of Bonds $311,160,000.00

Plus: Original Issue Premium 8,305,479.65
Accrued Interest 1,498,357.01
Less: Original Issue Discount (2,231,034.80)
Underwriters’ Discount (1,472,467.38)

Total Paid by the Underwriters $317,260,334.48

The amount of $317,260,334.48, will be wire-transferred to U.S. Bank National Association,

Houston, Texas, ABA #091000022, BNF USBANK CT Wire CLRG, Beneficiary Account No. A/C
180121167365, Beneficiary Acct Address: 777 E. Wisconsin Avenue, Milwaukee, WI 53202-5300, OBI
SAWS Senior Lien, Ref Attn: Engelbert Niba (713) 235-9209, for deposit to the various accounts and
disbursements as described herein.
Closing Memorandum
February 20, 2007
Page 2

3) Upon receipt of the funds, the Bank will perform the following:

A) The Bank will make available $27,375,344.00 to the Division of Special Investments via
Fedwire funds for the purchase of SLGS, which will be placed in Escrow Account B of the
Escrow Agreement related to the Bonds (the “Escrow Fund”) for the payment of the
Series 2002-A Bonds.

B) The Bank will deposit $1.18 in cash in the Escrow Account B of the Escrow Fund
representing the beginning cash balance.

C) The Bank will make available $167,712,893.00 to the Division of Special Investments via
Fedwire funds for the purchase of SLGS, which will be placed in the Escrow Account A of
the Escrow Fund for the payment of the Series A Notes, as described in Exhibit A, and
the Series 1997 Bonds.

D) The Bank will deposit $146,966,957.34 in Escrow Account A of the Escrow Fund to be
applied towards the purchase of securities, delivery vs. payment, listed in Exhibit B for
the redemption of the Series A Notes, as described in Exhibit B, and the Series 1997
Bonds.

E) The Bank will deposit $942.22 in cash in the Escrow Account A of the Escrow Fund
representing the beginning cash balance.

F) The Bank will wire transfer to FGIC, the bond insurer and surety bond provider, pursuant to
the following wiring instructions, the amount of $1,515,852.18 which represents $915,007.68
premium for bond insurance and $600,844.50 representing the premium for the reserve fund
surety policy:

JPMorgan Chase Bank

Routing/Transit No. 021000021
Branch and Account No. 904951812
For Credit to Financial Guaranty Insurance Company Premium Account
FGIC Policy No: 07010037 and 07010038
Attn: Ethel Hunt, (212) 312-2783

G) The Bank will wire transfer to JPMorgan Chase Bank, SAWS’ depository bank, pursuant to
the following wiring instructions, the amount of $1,498,357.01 as accrued interest for deposit
into the Revenue Bond, Interest and Sinking Fund:

JPMorgan Chase Bank

ABA #111000614
Account #656523990
City of San Antonio, Texas Water System
Interest & Sinking Fund
Attn: Lloyd Pruski (210) 841-5845

H) The Bank will retain $2,800.00 representing the first year fees for Paying Agent and Escrow
Agent services.
Closing Memorandum
February 20, 2007
Page 3

I) The Bank will wire transfer to JPMorgan Chase Bank, SAWS’ depository bank, pursuant to
the following wiring instructions, the amount of $675,951.02 to the Project Fund which
represents the costs of issuance:

JPMorgan Chase Bank

ABA #111000614
Account #656524022
City of San Antonio, Texas
Project Fund
Attn: Lloyd Pruski (210) 841-5845

Reconciliation:

Sources
Amount Received from Underwriters $317,260,334.48
SAWS Contribution 28,488,763.47
Total $345,749,097.95

Uses
Deposit to the Escrow Fund $342,056,137.74
Deposit to the Debt Service Fund 1,498,357.01
Deposit to the Project Fund 675,951.02
Insurance and Surety Bond Premiums (FGIC) 1,515,852.18
Paying Agent and Escrow Agent Fees 2,800.00
Total $345,749,097.95

The Good Faith Check will be returned after the closing of the transaction.

If there are any questions regarding the above information, please do not hesitate to call Raul Villaseñor or
Anne Burger Entrekin at (210) 308-2200.

RV/vam
Enclosure
 EXHIBIT A

Redemption of Commercial Paper Notes

Dealer: Goldman Sachs & Co.

Issue Date Maturity Date Principal Amount Coupon Redemption Amount

12/11/2006 3/1/2007 $ 25,000,000.00 3.57% $ 25,195,616.44
1/9/2007 3/7/2007 2,200,000.00 3.52% 2,212,093.37
1/11/2007 3/12/2007 2,000,000.00 3.55% 2,011,671.23
12/11/2006 3/14/2007 17,700,000.00 3.57% 17,861,002.11
1/16/2007 3/15/2007 4,000,000.00 3.58% 4,022,755.07
12/14/2006 4/5/2007 2,250,000.00 3.58% 2,274,716.71
12/15/2006 4/5/2007 11,155,000.00 3.58% 11,276,445.86
2/6/2007 5/15/2007 10,805,000.00 3.65% 10,910,889.00
1/8/2007 5/15/2007 4,000,000.00 3.58% 4,049,825.75
1/8/2007 5/15/2007 11,000,000.00 3.58% 11,137,020.82
2/1/2007 5/15/2007 1,000,000.00 3.54% 1,009,989.59

Dealer: J.P. Morgan Securities Inc.

Issue Date Maturity Date Principal Amount Coupon Redemption Amount

1/5/2007 3/2/2007 $ 7,000,000.00 3.50% $ 7,037,598.04
1/16/2007 3/6/2007 15,000,000.00 3.61% 15,072,694.52
12/6/2006 3/6/2007 6,800,000.00 3.50% 6,858,684.93
11/16/2006 3/7/2007 5,000,000.00 3.60% 5,054,739.73
12/8/2006 3/13/2007 16,700,000.00 3.55% 16,854,303.42
1/10/2007 4/5/2007 8,125,000.00 3.55% 8,192,170.38
1/16/2007 4/9/2007 14,400,000.00 3.57% 14,516,900.38
1/9/2007 4/11/2007 3,000,000.00 3.52% 3,026,616.99
2/6/2007 5/15/2007 5,375,000.00 3.62% 5,427,242.05
2/14/2007 5/15/2007 4,500,000.00 3.68% 4,540,832.88
2/12/2007 5/15/2007 6,000,000.00 3.67% 6,055,502.47
2/1/2007 5/15/2007 10,000,000.00 3.62% 10,102,153.42

Dealer: Ramirez & Co., Inc.

Issue Date Maturity Date Principal Amount Coupon Redemption Amount

12/13/2006 3/8/2007 $ 44,600,000.00 3.57% $ 44,970,790.96
 Exhibit B
Purchase of Securities for the Escrow Fund

Date Type Amount Price Cost

3/1/2007 T-BILL $ 50,000,000.00 99.925528% $ 49,962,763.89

3/1/2007 T-BILL 11,431,000.00 99.925528% 11,422,487.08

3/8/2007 T-BILL 50,000,000.00 99.842500% 49,921,250.00

3/8/2007 T-BILL 31,698,000.00 99.842500% 31,648,075.65

3/15/2007 T-BILL 4,022,000.00 99.760833% 4,012,380.72

$ 147,151,000.00 $ 146,966,957.34