Montgomery Street
Income Securities, Inc.
101 California Street, Suite 4100
San Francisco, California 94111
(415) 981-8191

Notice of
1995
Annual Meeting
of Stockholders
and
Proxy Statement

Montgomery Street
Income Securities, Inc.

101 California Street, Suite 4100
San Francisco, CA 94111
(415) 981-8191
May 25, 1995

To the Stockholders:

The Annual Meeting of Stockholders of Montgomery Street Income Securities,
Inc. (the "Company") is to be held at 10:00 a.m., pacific time, on Thursday,
July 13, 1995 at the Golden Gate University Auditorium, 536 Mission Street,
Second Floor, San Francisco, California. A Proxy Statement regarding the
meeting, a proxy card for your vote at the meeting and an envelope--postage
prepaid--in which to return your proxy are enclosed.

At the Annual Meeting the stockholders will elect the Company's Directors,
consider the ratification of the selection of Ernst & Young LLP as independent
auditors, and consider the approval of the continuance of the Management and
Investment Advisory Agreement between the Company and Scudder, Stevens & Clark,
Inc. In addition, the stockholders present will hear a report on the Company.
There will be an opportunity to discuss matters of interest to you as a
stockholder.

Your Directors recommend that the stockholders vote in favor of each of the
foregoing matters.

Respectfully,

/s/James C. Van Horne /s/John T. Packard
James C. Van Horne John T. Packard
Chairman of the Board President

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STOCKHOLDERS ARE URGED TO SIGN THE PROXY CARD AND MAIL IT IN THE ENCLOSED
POSTAGE-PREPAID ENVELOPE SO AS TO ENSURE A QUORUM AT THE MEETING. THIS IS
IMPORTANT WHETHER YOU OWN FEW OR MANY SHARES.
- --------------------------------------------------------------------------------

MONTGOMERY STREET INCOME SECURITIES, INC.

Notice of Annual Meeting of Stockholders

To the Stockholders of
Montgomery Street Income Securities, Inc.:

Please take notice that the Annual Meeting of Stockholders of Montgomery
Street Income Securities, Inc. (the "Company") has been called to be held at the
Golden Gate University Auditorium, 536 Mission Street, Second Floor, San
Francisco, California on Thursday, July 13, 1995 at 10:00 a.m., pacific time,
for the following purposes:

(1) To elect six Directors of the Company to hold office until the
next Annual Meeting or until their respective successors shall have been
duly elected and qualified.

(2) To ratify or reject the action taken by the Board of Directors
in selecting Ernst & Young LLP as independent auditors for the fiscal year
ending December 31, 1995.

(3) To approve or disapprove the continuance of the Management and
Investment Advisory Agreement between the Company and Scudder, Stevens &
Clark, Inc.

Those present and the appointed proxies will also transact such other
business as may properly come before the meeting or any adjournments thereof.

Holders of record of the shares of common stock of the Company at 5:00
p.m., eastern time, on May 18, 1995 are entitled to vote at the meeting or any
adjournments thereof.

By order of the Board of Directors,
May 25, 1995 Thomas F. McDonough, Secretary

- --------------------------------------------------------------------------------
IMPORTANT--We urge you to sign and date the enclosed proxy card and return it in
the enclosed addressed envelope which requires no postage and is intended for
your convenience. Your prompt return of the enclosed proxy card may save the
Company the necessity and expense of further solicitations to ensure a quorum at
the Annual Meeting. If you can attend the meeting and wish to vote your shares
in person at that time, you will be able to do so.
- --------------------------------------------------------------------------------

Montgomery Street Income Securities, Inc.
101 California Street, Suite 4100
San Francisco, California 94111
(415) 981-8191

PROXY STATEMENT

RECORD DATE: May 18, 1995 MAILING DATE: May 25, 1995

Introduction

The Board of Directors of Montgomery Street Income Securities, Inc. (the
"Company") is soliciting proxies for use at the Annual Meeting of Stockholders
(the "Annual Meeting"). The Annual Meeting will be held in the Golden Gate
University Auditorium, 536 Mission Street, Second Floor, San Francisco,
California on Thursday, July 13, 1995 at 10:00 a.m., pacific time. The Board of
Directors is also soliciting proxies for use at any adjournment of the Annual
Meeting. This Proxy Statement is furnished in connection with that solicitation.

The Company may solicit proxies by mail, telephone, telegram, and personal
interview. In addition, the Company may request personnel of Scudder, Stevens &
Clark, Inc. (the "Investment Manager") to assist in the solicitation of proxies
by mail, telephone, telegram, and personal interview for no separate
compensation. It is anticipated that the Company will request brokers,
custodians, nominees, and fiduciaries who are record owners of stock to forward
proxy materials to their principals and obtain authorization for the execution
of proxies. The Company will pay the cost of soliciting proxies. Upon request,
the Company will reimburse the brokers, custodians, nominees, and fiduciaries
for their reasonable expenses in forwarding proxy materials to their principals.

You may revoke the enclosed proxy at any time insofar as not yet exercised
by the appointed proxies. You may do so by:

* written notice to the Company, c/o The First National Bank of Boston,
Shareholder Services Division, P.O. Box 644, Boston, MA 02102-0644,
Attn: Manager, Proxy Department;

* written notice to the Company at the address set forth under the above
letterhead;

* giving a later proxy; or

* attending the Annual Meeting and voting your shares in person.

In order to hold the Annual Meeting, a majority of the shares entitled to
be voted must have been received by proxy or be present at the Annual Meeting.
Proxies which are returned marked to abstain from or withhold voting, as well as
proxies returned by brokers or others who have not received voting instructions
and do not have discretion to vote for their clients, will be counted towards
this majority of shares. Withheld votes and broker non-votes will not be counted
in favor of, but will have no other effect on, the vote for proposal (1) which
requires the approval of a plurality of shares voting at the Annual Meeting.
Abstentions and broker non-votes will have the effect of a "no" vote for

proposals (2) and (3) which require the approval of a specified percentage of
the outstanding shares of the Company or of such shares present at the Annual
Meeting. Stockholders who hold their shares through a broker or other nominee
are urged to forward their voting instructions.

In the event that sufficient votes in favor of any proposal are not
received by July 13, 1995, the persons named as proxies on the enclosed proxy
card may propose one or more adjournments of the meeting to permit further
solicitation of proxies. Any such adjournment will require the affirmative vote
of the holders of a majority of the shares present in person or by proxy at the
session of the Annual Meeting to be adjourned. The persons named as proxies on
the enclosed proxy card will vote in favor of such adjournment those proxies
which they are entitled to vote in favor of the proposal for which further
solicitation of proxies is to be made. They will vote against any such
adjournment those proxies required to be voted against such proposal. The costs
of any such additional solicitation and of any adjourned session will be borne
by the Company.

The record date for determination of stockholders entitled to receive
notice of the Annual Meeting and to vote at the Annual Meeting or any
adjournments thereof, was May 18, 1995 at 5:00 p.m., eastern time (the "Record
Date").

As of the Record Date, there were issued and outstanding 10,041,290 shares
of common stock of the Company, constituting all of the Company's then
outstanding securities. Each share of common stock is entitled to one vote. As
of March 31, 1995, each Director, and all Directors and Officers as a group,
beneficially owned shares of the Company's common stock as follows:

Shares Percent of Total
Owned(1) Outstanding Shares
-------- -------------------
John C. Atwater 100 less than 1/4 of 1%
Richard J. Bradshaw(2) 1,660 less than 1/4 of 1%
Otto W. Butz(2) 304 less than 1/4 of 1%
Maryellie K. Moore 2,360 less than 1/4 of 1%
Wendell G. Van Auken 8,000 less than 1/4 of 1%
James C. Van Horne 1,500 less than 1/4 of 1%
John A. White(2)(3) 500 less than 1/4 of 1%
All Directors and Officers as a
group (15 in number)(4) 21,351 less than 1/4 of 1%
- --------------------------------------------------------------------------------
(1) Unless otherwise indicated, each person has sole voting and investment
power over the shares reported.
(2) Shared investment and voting power over the shares reported.
(3) Honorary Director.
(4) The total for the group includes 13,460 shares held with sole
investment and voting power and 7,891 shares held with shared
investment and voting power.
- --------------------------------------------------------------------------------

Section 30(f) of the Investment Company Act of 1940, as amended (the "1940
Act"), requires the Company's Officers, Directors, Investment Manager,
affiliates of the Investment Manager, and persons who beneficially own more than
ten percent of the Company's common stock ("Reporting Persons"), to file reports
of ownership of the Company's common stock and changes in such ownership with
the Securities and Exchange Commission (the "SEC") and the New York Stock

Exchange. Such persons are required by SEC regulations to furnish the Company
with copies of all such filings.

Based solely upon its review of the copies of such reports received by it
and written representations from certain Reporting Persons that no year-end
reports were required for those persons, the Company believes that during the
fiscal year ended December 31, 1994, all filing requirements applicable to its
Reporting Persons were satisfied, except that a Form 3 on behalf of Margaret D.
Hadzima and Richard A. Holt, Managing Directors of Scudder, Stevens & Clark,
Inc., and one Form 4 on behalf of Richard J. Bradshaw and James C. Van Horne,
were filed late.

The Company provides periodic reports to all stockholders which highlight
relevant information, including investment results and a review of portfolio
strategy. You may receive an additional copy of the annual report for the fiscal
year ended December 31, 1994, without charge, by calling 1-800-552-2556 or
writing the Company at 101 California Street, Suite 4100, San Francisco, CA
94111.

PROPOSAL 1--ELECTION OF DIRECTORS

Six Directors are to be elected at the Annual Meeting as the six Directors
of the Company. They are to be elected to hold office until the next annual
meeting or until their successors are elected and qualified. The persons named
on the accompanying proxy card, if granted authority to vote in the election of
Directors, intend to vote at the Annual Meeting for the election of the nominees
named below as the six Directors of the Company. In the unanticipated event that
any nominee for Director cannot be a candidate at the Annual Meeting, the
appointed proxies will vote their proxy in favor of the remainder of the
nominees and, in addition, in favor of such substitute nominee(s) (if any) as
the Board of Directors shall designate. Alternatively, the proxies may vote in
favor of a resolution reducing the number of Directors to be elected at the
Annual Meeting. Each of the nominees is now a Director of the Company and each
was elected to serve as a Director at the 1994 Annual Meeting of Stockholders.
All nominees have consented to be nominated and to serve if elected.

Information Concerning Nominees

The following table sets forth certain information concerning each of the
nominees as a Director of the Company.

Year First
Principal Occupation or Employment Became a
Nominee (Age) and Directorships in Publicly Held Companies Director
------------- -------------------------------------------- --------

John C. Atwater (34) Mr. Atwater is Managing Partner of Prime Property Capital, Inc. 1994
(real estate investment firm). He also serves as a Director of SNK
Oaks Development, Inc.

Richard J. Bradshaw Mr. Bradshaw is currently Executive Director of Orrick, Herrington 1991
(46)* & Sutcliffe (law firm), a position he has held since October 1992.
From January 1988 to September 1992, he was Chief
Financial Officer of Morrison & Foerster (law firm).

Year First
Principal Occupation or Employment Became a
Nominee (Age) and Directorships in Publicly Held Companies Director
------------- -------------------------------------------- --------
Otto W. Butz (72) Dr. Butz retired as President of Golden Gate University in July 1975
1992, a position he had held since November 1970. Golden Gate
University is a private, accredited university, located in San
Francisco, California specializing in the areas of
management, public administration, and law.

Maryellie K. Moore Ms. Moore is an international shipping consultant and has been a 1989
(59) Director of London and Overseas Freighters, Ltd. since January
1989. Prior to 1989, she served as Treasurer of Alexander and
Baldwin, Inc. (shipping company) and Matson Navigation Company,
Inc. (containerized freight service). She has been a Trustee of
the University of San Francisco since 1992.

Wendell G. Van Auken Mr. Van Auken is a General Partner of Mayfield Fund (venture 1994
(50) capital enterprise). He also serves as a Director of Auspex
Systems, Inc. (network file server products).

James C. Van Horne Dr. Van Horne is an A.P. Giannini Professor of Finance, Graduate 1985
(59) School of Business, at Stanford University, a position he has held
from September 1965 to August 1975 and from September 1976 to
present. He also serves as a Director of the Sanwa Bank California
and Bailard, Biehl & Kaiser International Fund Group, Inc. and as
a Trustee of the Bailard, Biehl & Kaiser Fund Group (both
registered investment companies).

* Director considered by the Company to be an "interested person" of the Company, as defined in the
1940 Act. Mr. Bradshaw is deemed to be an "interested person" because of his affiliation with
Orrick, Herrington & Sutcliffe, counsel to the Company.

Honorary Director

John A. White serves as an Honorary Director of the Company. Honorary
Directors are invited to attend all Board meetings and to participate in Board
discussions, but are not entitled to vote on any matter presented to the Board.
Mr. White became a Director of the Company in 1973 and retired as a Director in
1991 in accordance with the Board of Directors' retirement policy.

Committees of the Board--Board Meetings

The Board of Directors, in addition to an Executive Committee, has an Audit
Committee and a Nominating Committee.

In 1994, the Board of Directors held four meetings and the Executive
Committee did not meet. Each Director attended at least 75% of the total number
of meetings of the Board of Directors and of all committees of the Board on
which he or she served during his or her tenure as a Director of the Company.

Audit Committee

The Audit Committee held two meetings during 1994. The current members of
the Audit Committee are Messrs. Van Auken and Bradshaw and Ms. Moore. One of the
Audit Committee's responsibilities is to approve the scope of the audit of the
books and accounts of the Company to be conducted by its independent auditors,
including all services performed, whether audit or non-audit related. Another
responsibility is to meet with the independent auditors and receive their
reports on audits. The Audit Committee, or one of its members, in carrying out
the Audit Committee's responsibilities, is empowered to meet and confer with, or
receive the written reports of, Officers and employees of the Company, the
custodian of its assets, and the Investment Manager.

Nominating Committee

The Nominating Committee held one meeting in 1994. The current members of
this committee are Messrs. Atwater and Butz and Ms. Moore. The responsibilities
of this committee are to recommend possible candidates to fill vacancies on the
Board of Directors, to review the qualifications of candidates recommended by
others, to recommend to the Board the slate of Director candidates to be
proposed for election by stockholders at the annual meeting, and to recommend to
the Board policies and criteria regarding retirement from the Board. The
Nominating Committee will consider nominees recommended by stockholders. Those
wishing to submit the name of any individual should submit in writing a brief
description of the proposed nominee's business experience and other information
relevant to the qualifications of the individual to serve as a Director. In
order to be considered at the 1996 annual meeting, submission should be made by
January 26, 1996.

Officers of the Company

John T. Packard (age 61), Daniel Pierce (age 61), Stephen A. Wohler (age
46) and Kathryn L. Quirk (age 42), who are President, Vice President and
Assistant Treasurer, Vice President and Vice President and Assistant Secretary
of the Company, respectively, are Managing Directors of the Investment Manager.
In addition, the following officers, employees or stockholders of the Investment
Manager are Officers of the Company in the following capacities: Mark S.
Boyadjian (age 30), Vice President; Thomas F. McDonough (age 48), Vice President
and Secretary; Pamela A. McGrath (age 41), Vice President and Treasurer; and
Edward J. O'Connell (age 50), Vice President. Messrs. McDonough and O'Connell
and Ms. McGrath are Principals of the Investment Manager. Mr. Boyadjian is a
Vice President of the Investment Manager. All of the Officers have been employed
by the Investment Manager for the past five years, although perhaps not in the
same capacity during that time period. All Officers, except Messrs. Packard,
Wohler and Boyadjian, are also officers or Directors of other funds managed by
the Investment Manager.

Remuneration of Directors and Officers

Each Director receives remuneration from the Company for his or her
services. The Company does not compensate its Officers or employees, since the
Investment Manager makes these individuals available to the Company to serve
without compensation from the Company. Remuneration to Directors consists of
Directors' fees composed in each case of a quarterly retainer of $2,000 (except
the Chairman of the Board, whose quarterly retainer is $6,000) and a fee of $500

for each Board meeting attended and $250 for each committee meeting attended as
well as any related expenses. Honorary Directors each receive a fee of $500 for
each Board meeting attended and reimbursement of expenses, but no quarterly
retainer.

For the fiscal year ended December 31, 1994, each Director or Honorary
Director received the following compensation from the Company: John C. Atwater
$7,846; Richard J. Bradshaw $10,500; Otto W. Butz $10,250; Fred Drexler $1,500
(Mr. Drexler retired as an Honorary Director on December 31, 1994); Maryellie K.
Moore $10,250; Wendell G. Van Auken $8,096; James C. Van Horne $26,000; and John
A. White $1,000. There are currently no retirement benefits or pension plans in
place for the Board. In addition, no member of the Board serves as a Director or
Trustee for any other fund in the complex of funds managed by Scudder, Stevens &
Clark, Inc. For the fiscal year ended December 31, 1994, total compensation
(including reimbursement of expenses) for all Directors and Honorary Directors
as a group was $77,551.

Recommendation and Required Vote

The Board of Directors recommends a vote FOR election of each of the
nominees for Director. Election of the nominees for Director requires the
affirmative vote of a plurality of the shares present or represented by proxy at
the Annual Meeting.

PROPOSAL 2--RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS

At a meeting held on April 7, 1995, a majority of the Directors who were
not "interested persons," as defined in the 1940 Act ("Interested Persons") of
the Company, selected Ernst & Young LLP as the Company's independent auditors,
for the fiscal year ending December 31, 1995, to examine the Company's books and
accounts and to certify the Company's financial statements. Under the 1940 Act,
this selection must be submitted to the stockholders for ratification or
rejection at the Annual Meeting. If the selection of Ernst & Young LLP is not
ratified by stockholders, the Board of Directors will consider the selection of
another accounting firm.

It is anticipated that a representative of Ernst & Young LLP will be
present at the Annual Meeting and will be available to respond to appropriate
questions. The representative will be given an opportunity to make any desired
statement.

Recommendation and Required Vote

The Board of Directors recommends a vote FOR the ratification of the
selection of Ernst & Young LLP as the Company's independent auditors. The
ratification of the selection of Ernst & Young LLP requires the affirmative vote
of a majority of the shares present or represented by proxy at the Annual
Meeting.

PROPOSAL 3--APPROVAL OR DISAPPROVAL OF THE CONTINUANCE OF THE MANAGEMENT AND
INVESTMENT ADVISORY AGREEMENT BETWEEN THE COMPANY AND SCUDDER,
STEVENS & CLARK, INC.

Scudder, Stevens & Clark, Inc., 345 Park Avenue, New York, New York, acts
as investment adviser to and manager for the Company pursuant to a Management
and Investment Advisory Agreement dated July 8, 1993 (the "Agreement"). The
Agreement was approved by a vote of the stockholders on July 8, 1993. The only
differences between the Agreement and the former agreement with the Investment

Manager dated October 6, 1988 were that the Agreement provided for a reduced
annual fee payable on assets in excess of $200 million and that the Agreement
would remain in effect, subject to earlier termination, until July 8, 1995. At a
meeting held on April 8, 1994, the Board of Directors, including a majority of
the Directors who were not Interested Persons of the Company or the Investment
Manager, approved the continuance of the Agreement. The Agreement continues in
effect by its terms until July 8, 1995 and will continue in effect from year to
year thereafter provided its continuance is specifically approved at least
annually by the vote of a majority of the Directors who are not parties to the
Agreement or Interested Persons of the Company or the Investment Manager cast in
person at a meeting called for the purpose of voting on such approval, and by
the vote of either the Board of Directors or a majority of the Company's
outstanding voting securities. The Agreement may be terminated on 60 days'
written notice, without penalty, by a majority vote of the Board of Directors,
by the vote of a majority of the Company's outstanding voting securities, or by
the Investment Manger, and automatically terminates in the event of its
assignment.

Services Provided

The Agreement requires the Investment Manager to provide investment
management and advisory services to the Company. It provides that the Investment
Manager will provide statistical and research facilities and services, supervise
the composition of the Company's portfolio, determine the nature and timing of
changes therein and the manner of effectuating such changes and cause the
purchase and sale of portfolio securities, subject to control by the Company's
Board of Directors. In addition to providing investment management and advisory
services, the Investment Manager pays for office space, all necessary office
facilities, basic business equipment, supplies, utilities, property casualty
insurance, telephone services and the costs of keeping the Company's books and
records. The Agreement requires the Investment Manager to arrange, if desired by
the Board of Directors of the Company, for officers or employees of the
Investment Manager to serve, with or without compensation from the Company, as
Officers, Directors or employees of the Company.

The Agreement provides that the Investment Manager will not be liable for
any acts or omissions of any predecessor adviser and neither the Investment
Manager nor any director, officer, agent or employee of the Investment Manager
will be liable or responsible to the Company or its stockholders except for
willful misfeasance, bad faith, gross negligence or reckless disregard of their
respective duties or breach of fiduciary duty. The Agreement also provides that
the Company will hold the Investment Manager harmless from judgments against it
resulting from acts or omissions in the performance of its obligations under the
Agreement which are specifically the result of written instructions of the
President, any Vice President or a majority of the Board of Directors of the
Company. There must, however, be an express finding that such acts or omissions
did not constitute willful misfeasance, bad faith, gross negligence or reckless
disregard of duties.

Fees and Expenses

The Agreement provides that the Investment Manager be paid an annual fee,
payable monthly, equal to .50 of 1% of the value of the net assets of the
Company up to and including $150 million, .45 of 1% of the value of the net
assets of the Company over $150 million and up to and including $200 million,
and .40 of 1% of the value of the net assets of the Company over $200 million.

For purposes of computing the monthly fee, the value of net assets of the
Company is determined as of the close of business on the last business day of
each month. For the fiscal year ended December 31, 1994 the Company paid the
Investment Manager an aggregate fee of $920,799.

The Agreement provides that the Company bear all expenses incurred in the
operation of the Company--except those that the Investment Manager expressly
assumes in the Agreement. Such expenses borne by the Company include (a) all
costs and expenses incident to: (i) the registration of the Company under the
1940 Act, or (ii) any public offering of shares of the Company, for cash or
otherwise, including those costs and expenses relating to the registration of
shares under the Securities Act of 1933, as amended (the "Securities Act"), the
qualification of shares of the Company under state securities laws, the printing
or other reproduction and distribution of any registration statement (and all
amendments thereto) under the Securities Act, the preliminary and final
prospectuses included therein, and any other necessary documents incident to any
public offering, the advertising of shares of the Company and the review by the
National Association of Securities Dealers, Inc. of any underwriting
arrangements; (b) the charges and expenses of any registrar or any custodian
appointed by the Company for the safekeeping of its cash, portfolio securities
and other property; (c) the charges and expenses of auditors (including the
preparation of tax returns); (d) the charges and expenses of any stock transfer,
dividend agent or registrar appointed by the Company; (e) broker's commissions
chargeable to the Company in connection with portfolio securities transactions
to which the Company is a party; (f) all taxes, including securities issuance
and transfer taxes, and corporate fees payable by the Company to federal, state
or other governmental agencies; (g) the cost and expense of engraving or
printing stock certificates representing shares of the Company; (h) fees
involved in registering and maintaining registrations of the Company and of its
shares with the SEC and various states and other jurisdictions; (i) all expenses
of stockholders' and Directors' meetings and of preparing, printing and mailing
proxy statements and quarterly, semiannual and annual reports to stockholders;
(j) fees and travel expenses of Directors of the Company who are not directors,
officers or employees of the Investment Manager or its "affiliates" (as defined
in the 1940 Act); (k) all fees and expenses incident to any dividend or
distribution reinvestment program; (l) charges and expenses of outside legal
counsel in connection with matters relating to the Company, including without
limitation, legal services rendered in connection with the Company's corporate
and financial structure and relations with its stockholders, issuance of Company
shares, and registrations and qualifications of securities under federal, state
and other laws; (m) association dues; (n) interest payable on Company
borrowings; (o) fees and expenses incident to the listing of Company shares on
any stock exchange; (p) costs of information obtained from sources other than
the Investment Manager or its "affiliates" (as defined in the 1940 Act) relating
to the valuation of portfolio securities; and (q) postage.

Expense Limitations

The Agreement provides that if expenses of the Company (including the
advisory fee but excluding interest, taxes, brokerage commissions and
extraordinary expenses) in any fiscal year exceed a specified expense
limitation, the Investment Manager will pay the excess to the Company. The
specified limitation is 1 1/2% of the first $30 million of the Company's average
net assets plus 1% of the Company's average net assets in excess of $30 million.

The Agreement provides that extraordinary expenses, such as litigation expenses
and the cost of issuing new shares, are excluded expenses for purposes of the
expense limitations described in this paragraph and the immediately succeeding
paragraph and that the Investment Manager will not be obligated to pay any
amount to the Company during any fiscal year in excess of the amount of the
advisory fee for such fiscal year.

The Agreement also provides for a second expense limitation, relating to
the Company's gross income (including gains from the sale of securities without
offset for losses, unpaid interest on debt securities in the Company's
portfolio, and dividends declared but not paid on equity securities in the
Company's portfolio). This limitation provides that if, for any fiscal year, the
expenses of the Company described in the preceding paragraph--less any amount
payable by the Investment Manager to the Company on account of the first expense
limitation--exceed 25% of the Company's gross income for the year, the
Investment Manager will promptly pay the excess to the Company.

For the fiscal year ending December 31, 1994, the Company's expenses did
not exceed these limitations.

Investment Manager

The Investment Manager is a Delaware corporation. Daniel Pierce* is the
Chairman of the Board, and Edmond D. Villani# is the President, of the
Investment Manager. Stephen R. Beckwith#, Lynn S. Birdsong#, Nicholas Bratt#,
Linda C. Coughlin#, Margaret D. Hadzima*, Jerard K. Hartman#, Richard A. Holt@,
Dudley H. Ladd*, Douglas M. Loudon#, John T. Packard+, Juris Padegs# and
Cornelia M. Small# are the other members of the Board of Directors of the
Investment Manager. The principal occupation of each of the above named
individuals is serving as a Managing Director of the Investment Manager.

* Two International Place, Boston, Massachusetts
# 345 Park Avenue, New York, New York
+ 101 California Street, San Francisco, California
@ Two Prudential Plaza, 180 North Stetson, Suite 5400, Chicago, Illinois

All of the outstanding voting and non-voting securities of the Investment
Manager are held of record by Stephen R. Beckwith, Juris Padegs, Daniel Pierce
and Edmond D. Villani in their capacity as representatives (the
"Representatives") of the beneficial owners of such securities, pursuant to a
Security Holders' Agreement among the Investment Manager, the beneficial owners
of securities of the Investment Manager, and the Representatives. Pursuant to
the Security Holders' Agreement, the Representatives have the right to
reallocate shares among the beneficial owners from time to time. Such
reallocation will be at net book value in cash transactions. All Managing
Directors of the Investment Manager own voting and non-voting stock; all
Principals own non-voting stock.

The Investment Manager or an affiliate manages in excess of $90 billion in
assets for individuals, funds and other organizations. The following are open-
or closed-end funds with investment objectives similar to the Company, for whom
the Investment Manager provides investment management:

Total Net Assets
as of Management Compensation
April 30, 1995 on an Annual Basis Based on the
Name (000 omitted) Value of Average Daily Net Assets
---- ------------- ---------------------------------

AARP High Quality Bond Fund $ 523,300 0.49 of 1%.*
Managed Intermediate Government Fund $ 11,400 0.65 of 1%.
Scudder Income Fund $ 496,600 0.65 of 1%; 0.60 of 1% on net assets in
excess of $200 million; 0.55 of 1% on net
assets in excess of $500 million.
Scudder Variable Life Investment $ 139,300 0.475 of 1%.
Fund - Bond Portfolio
- -------------
* Consists of an Individual Fund Fee Rate of 0.19 of 1% plus an Annual Base
Fee in proportion to the ratio of the daily net assets of the fund to the
daily net assets of all of the funds (the "AARP Funds") in the AARP
Investment Program from Scudder (the "Program"). The Annual Base Fee Rate
is: 0.35 of 1% on net assets of the Program up to and including $2 billion;
0.33 of 1% on net assets of the Program in excess of $2 billion up to and
including $4 billion; 0.30 of 1% on net assets of the Program in excess of
$4 billion up to and including $6 billion; 0.28 of 1% on net assets of the
Program in excess of $6 billion up to and including $8 billion; 0.26 of 1%
on net assets of the Program in excess of $8 billion up to and including
$11 billion; 0.25 of 1% on net assets of the Program in excess of $11
billion up to and including $14 billion; and 0.24 of 1% on net assets of
the Program in excess of $14 billion.

From time to time, directors, officers and employees of the Investment
Manager may have transactions with various banks, including the Company's
custodian bank. It is the Investment Manager's opinion that the terms and
conditions of those transactions that have occurred were not influenced by
existing or potential custodial or other Company relationships.

Investment and Brokerage Discretion

The Investment Manager has primary responsibility for the selection of
brokers and dealers (including futures commission merchants) through which the
Company's portfolio transactions are executed, subject to periodic review by the
Company's Board of Directors. To the maximum extent feasible, the Investment
Manager places orders for portfolio transactions through Scudder Investor
Services, Inc. (a corporation registered as a broker/dealer and a wholly-owned
subsidiary of the Investment Manager), which in turn will place orders on behalf
of the Company with the issuer, underwriters or other brokers and dealers.
Scudder Investor Services, Inc. receives no commissions, fees or other
remuneration from the Company for this service. Allocation of trades will be
supervised by the Investment Manager.

Recommendation and Required Vote

At a meeting held on April 7, 1995, the Board of Directors, including a
majority of the Directors who were not Interested Persons of the Company or the
Investment Manager, approved the continuance of the Agreement until July 8, 1996
and recommended that the stockholders approve its continuance at the Annual
Meeting.

In approving the continuance of the Agreement, the Board of Directors,
considering the best interests of the stockholders of the Company, took into
account a number of factors. Among such factors were: the long-term investment
record of the Investment Manager in advising the Company; the experience and
research capabilities of the Investment Manager in fixed-income instruments,
including mortgage-related securities and private placements; the relatively low
expenses and expense ratio of the Company; the Investment Manager's access to
quality service providers at reasonable costs due to the size of its assets
under management; the quality of the administrative services to the Company; the
experience of the Investment Manager in administering other open- and closed-end
funds; the availability and responsiveness of the Investment Manager and its
attention to internal controls and procedures; the extent and quality of
information provided to the Board of Directors and stockholders; the continuity
in the Company's investment and administrative personnel; the financial
resources of the Investment Manager and its ability to retain capable personnel;
the Investment Manager's financial condition, profitability and assets under
management; and possible indirect benefits to the Investment Manager from
serving as adviser of the Company.

In reviewing the continuance of the Agreement, the Board of Directors
reviewed, among other information, extensive written and oral reports and
compilations from the Investment Manager, including comparative data from
independent sources as to investment performance, advisory fees and other
expenses. The Board of Directors also received a separate written and oral
report from Gifford Fong Associates, an investment consultant specializing in
quantitative fixed-income investment analysis.

Approval by stockholders requires the affirmative vote of the holders of a
majority of the Company's outstanding shares. In this context, "majority" means
the lesser of two votes: (1) 67% of the Company's outstanding shares present at
a meeting if the holders of more than 50% of the outstanding shares are present
in person or by proxy, or (2) more than 50% of all of the Company's outstanding
shares. If continuance is approved at the Annual Meeting, the Agreement will
continue until annual review of the question of continuance by the Board or the
stockholders in 1996. If annual continuance of the Agreement is not approved at
the Annual Meeting, the Board of Directors, notwithstanding its approval of
annual continuance at the April 7, 1995 meeting, will make such arrangements for
the management of the Company as it believes appropriate and in the best
interests of the Company.

STOCKHOLDER PROPOSALS FOR 1996 PROXY STATEMENT

A rule of the SEC provides for a deadline by which stockholders must submit
any proposals to be considered for inclusion in the Company's proxy statement
for next year's annual meeting. Unless you are otherwise notified, the deadline
for receiving stockholders' proposals for that meeting is January 26, 1996.

OTHER MATTERS

The Board of Directors does not know of any matters to be presented at the
Annual Meeting other than those mentioned in this Proxy Statement. The appointed
proxies will vote on any other business that comes before the Annual Meeting or
any adjournments thereof in accordance with their best judgment.

Please complete and sign the enclosed proxy card and return it in the
envelope provided so that the Annual Meeting may be held and action may be taken
on the matters described in this Proxy Statement with the greatest possible
number of shares participating. This will not preclude your voting in person if
you attend the Annual Meeting.

Thomas F. McDonough
May 25, 1995 Secretary

PROXY MONTGOMERY STREET INCOME SECURITIES, INC. PROXY

THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS

Annual Meeting of Stockholders--July 13, 1995

The undersigned hereby appoints Thomas F. McDonough, John T. Packard and Daniel Pierce, each with the power of substitution, as
proxies for the undersigned, to vote all shares of Montgomery Street Income Securities, Inc. (the "Company") which the undersigned
is entitled to vote at the Annual Meeting of Stockholders of the Company to be held at the Golden Gate University Auditorium, 536
Mission Street, Second Floor, San Francisco, California, on Thursday, July 13, 1995 at 10:00 a.m., pacific time, and at any
adjournments thereof.

Unless otherwise specified in the squares provided, the undersigned's vote will be cast FOR Proposals 1, 2 and 3 below.

1. The election of six Directors.

Nominees: J.C. Atwater, R.J. Bradshaw, O.W. Butz, M.K. Moore, W.G. Van Auken, J.C. Van Horne

FOR ALL NOMINEES [] WITHHELD FROM ALL NOMINEES []

[] _________________________________________________________
For all nominees except as noted above

2. Ratification of the selection of Ernst & Young LLP as the Company's FOR [] AGAINST [] ABSTAIN []
independent auditors.

3. Approval of the continuance of the Management and Investment FOR [] AGAINST [] ABSTAIN []
Advisory Agreement between the Company and Scudder, Stevens & Clark,
Inc.;

In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the Annual Meeting.

PLEASE MARK, SIGN, DATE AND RETURN THE PROXY
CARD PROMPTLY USING THE ENCLOSED ENVELOPE.
NO POSTAGE IS REQUIRED

Please sign exactly as your name or names appear here-
on. When signing as attorney, executor, administrator,
trustee or guardian, please give your full title as such.

Signature __________________________________Date_________