Notice of
1999
Annual Meeting
of Stockholders
and
Proxy Statement

Montgomery Street
Income Securities, Inc. MONTGOMERY [LOGO]

101 California Street, Suite 4100 MONTGOMERY STREET
INCOME SECURITIES, INC.
San Francisco, California 94111
(415) 981-8191

MSFCM-PS-99

MONTGOMERY [LOGO]

MONTGOMERY STREET 101 California Street, Suite 4100
INCOME SECURITIES, INC. San Francisco, CA 94111

May 28, 1999

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 8, 1999 at the offices of the Company, 101 California Street, Suite 4100,
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 the Company's
independent auditors and consider the approval of the continuance of the
Management and Investment Advisory Agreement between the Company and Scudder
Kemper Investments, Inc. ("Scudder Kemper" or the "Investment Manager"). 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

- --------------------------------------------------------------------------------
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
offices of the Company, 101 California Street, Suite 4100, San Francisco,
California on Thursday, July 8, 1999 at 10:00 a.m., pacific time, for the
following purposes:

(1) To elect five 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 the Company's independent auditors for
the fiscal year ending December 31, 1999.

(3) To approve or disapprove the continuance of the Management and
Investment Advisory Agreement between the Company and Scudder Kemper.

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 13, 1999 are entitled to vote at the meeting or any
adjournments thereof.

By order of the Board of Directors,
May 28, 1999 Maureen E. Kane, 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 13, 1999 MAILING DATE: May 28, 1999

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 at the offices of the
Company, 101 California Street, Suite 4100, San Francisco, California on
Thursday, July 8, 1999 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 Kemper
Investments, Inc. ("Scudder Kemper" or 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:

o written notice to the Company, c/o State Street Bank and Trust Company,
P.O. Box 8200, Boston, MA 02266-8200,
Attn: Manager, Proxy Department;
o written notice to the Company at the address set forth under the above
letterhead;
o giving a later proxy; or
o 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 that are returned marked to abstain from or withhold voting, as well as
proxies returned by brokers or others who have not received voting instructions
on some matters and do not have discretion to vote for their clients on those
matters ("broker non-votes"), will be counted towards this majority of shares.
Withheld votes, abstentions and broker non-votes will not be counted in favor
of, but will have no other effect on, the vote for proposals

(1) and (2). Abstentions will, and broker non-votes may, have the effect of a
"no" vote for proposal (3). 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 8, 1999, 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 13, 1999 at 5:00 p.m., eastern time (the "Record
Date").

As of the Record Date, there were issued and outstanding 10,282,989 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, 1999, each Director, and all Directors and Officers as a group,
beneficially owned shares of the Company's common stock as follows:

Shares
Position Owned^(1)
-------- ---------

James C. Van Horne ...................... Chairman of the Board 2,500
and Director
John T. Packard ......................... President 500
John C. Atwater ......................... Director 2,100
Richard J. Bradshaw^(2) ................. Director 2,240
Maryellie K. Moore ...................... Director 2,360
Wendell G. Van Auken .................... Director 10,440
All Directors and Officers as a
group (12 in number)^(3) ............ 24,440

-------------------

(1) The information as to beneficial ownership is based on statements
furnished to the Company by each person named. Unless otherwise indicated,
each person has sole voting and investment power over the shares reported.
As a group, the Directors and Officers owned less than 1/4 of 1% of the
shares of the Fund.

(2) Shared investment and voting power over the shares reported.

(3) The total for the group includes 18,900 shares held with sole investment
and voting power and 5,540 shares held with shared investment and voting
power.

To the best of the Company's knowledge, as of March 31, 1999, no person
owned beneficially more than 5% of the Company's outstanding shares.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Securities Exchange Act of 1934, as amended, and
Section 30(h) of the Investment Company Act of 1940, as amended (the "1940
Act"), as applied to a fund, require the fund's Officers and Directors,
Investment Manager, affiliates of the Investment Manager, and persons who
beneficially own more than ten percent of a registered class of the fund's
outstanding securities ("reporting persons"), to file reports of ownership of
the fund's securities 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 fund with copies of all such
filings.

Based solely upon its review of the copies of such forms received by it and
written representations from certain Reporting Persons that no year-end reports
were required for those persons, the Fund believes that during the fiscal year
ended December 31, 1998, its Reporting Persons complied with all applicable
filing requirements.

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, 1998, 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

Five Directors are to be elected at the Annual Meeting as the five
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 five 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 1998 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. Mr. Atwater is Managing Partner of Prime Property Capital, Inc. 1994
Atwater (38) (real estate investment firm). He also serves as a Director of SNK
Oaks Development, Inc.

Richard J. Mr. Bradshaw is currently Executive Director of Cooley Godward LLP 1991
Bradshaw (50) (law firm). From October 1992 to April 1997, he was Executive
Director of Orrick, Herrington & Sutcliffe (law firm).

Maryellie K. Ms. Moore is an international shipping consultant. From 1989 to 1989
Moore (63) 1998, she was a Director of London and Overseas Freighters, Ltd.
(oil tanker operator). Prior to 1989, she served as Treasurer of
Alexander and Baldwin, Inc. (shipping and property development)
and Matson Navigation Company, Inc. (containerized freight
service). She has been a Trustee of the University of San
Francisco since 1992.

Wendell G. Van Mr. Van Auken is a General Partner of several venture capital 1994
Auken (54) funds affiliated with Mayfield Fund. He also serves as a Director
of Advent Software (portfolio software company).

James C. Van Dr. Van Horne is the A.P. Giannini Professor of Finance, Graduate 1985
Horne (63) 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).

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 1998, the Board of Directors held six 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 in 1998.

Audit Committee

The Audit Committee held one meeting during 1998. The 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 1998. The members of this
committee are Messrs. Atwater and Van Horne 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 2000 annual meeting, submission should be made by
January 21, 2000.

Officers of the Company

The following persons are Officers of the Company:

Year First
Present Office with the Company; Became an
Name (Age) Principal Occupation or Employment (1) Officer (2)
---------- -------------------------------------- -----------

Bruce H. Goldfarb (34) Vice President and Assistant Secretary; Senior 1998
Vice President of Scudder Kemper; prior to
February 1997 practiced law with the law firm of
Cravath, Swaine & Moore

John R. Hebble (40) Treasurer; Senior Vice President of Scudder 1998
Kemper

Maureen E. Kane (37) Vice President and Secretary; Vice President 1999
of Scudder Kemper since December 1997;
formerly, Assistant Vice President of State
Street Bank and Trust Company (an unaffiliated
investment management firm) (1997); prior
thereto Associate Staff Attorney of FMR Corp
(an unaffiliated investment management firm)
(1996-1997); Associate, Peabody & Arnold (law
firm) (1993-1995).

John T. Packard (65) President; Advisory Managing Director of 1988
Scudder Kemper

Daniel Pierce (65) Vice President; Managing Director of Scudder 1988
Kemper

Kathryn L. Quirk (46) Vice President and Assistant Secretary; 1988
Managing Director of Scudder Kemper

Stephen A. Wohler (50) Vice President; Managing Director of Scudder 1988
Kemper

- -------------------
(1) Unless otherwise stated, all Officers have been associated with the
Investment Manager for more than five years, although not necessarily in
the same capacity. All Officers, except Mr. Packard, are also officers or
directors of other funds managed by the Investment Manager. All Officers,
except Ms. Kane, own securities of the Investment Manager.
(2) All Officers are appointed annually by, and serve at the discretion of, the
Board of Directors.

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
(except the Chairman of the Board who is not compensated for serving on the
Nominating Committee) as well as any related expenses. For the fiscal year ended
December 31, 1998, total compensation (including reimbursement of expenses) for
all Directors as a group was $74,398.

The Compensation Table below provides in tabular form the following data:

Column (1) All Directors who receive compensation from the Company.
Column (2) Aggregate compensation received by a Director from the
Company.
Column (3) Total compensation received by a Director from the Company, the
Investment Manager and from all other funds managed by the Investment
Manager. No member of the Board serves as a Director or Trustee for any
other fund in the complex of funds managed by the Investment Manager nor
does any Director receive any pension or retirement benefits from the
Company.

Compensation Table
for the year ended December 31, 1998
------------------------------------------------------------------------
(1) (2) (3)
Total Compensation
Aggregate From the Company and
Name of Person, Compensation Fund Complex
Position from the Company Paid to Director
------------------------------------------------------------------------

John C. Atwater
Director $10,750 $10,750

Richard J. Bradshaw
Director 10,750 10,750

Otto W. Butz*
Director 7,578 7,578

Maryellie K. Moore
Director 10,500 10,500

Wendell G. Van Auken
Director 10,750 10,750

James C. Van Horne
Chairman 26,000 26,000

-------------------
* In accordance with the Board of Directors' retirement policy, Mr. Butz did
not stand for re-election in 1998.

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 votes cast in person or by proxy at the
Annual Meeting.

PROPOSAL 2 -- RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS

At a meeting held on April 9, 1999, 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, 1999, 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 not be
present at the Annual Meeting but will be available by conference telephone 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 votes cast in person or 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 KEMPER

Scudder Kemper, 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 September 7, 1998 (the "Agreement"). The Agreement was
approved by a vote of the Board of Directors on July 9, 1998 and of the
stockholders on December 11, 1998 in connection with the combination of the
businesses of Zurich Insurance Company, the then indirect majority owner of
Scudder Kemper, and the financial services businesses of B.A.T Industries p.l.c.
The Agreement is effective by its terms until July 31, 1999 and will continue
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 Manager, 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, 1998 the Company paid the
Investment Manager an aggregate fee of $1,009,881.

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 11/2% 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 ended December 31, 1998, the Company's expenses did not
exceed these limitations.

Investment Manager

The Investment Manager, majority owned by a member of the Zurich Financial
Services Group ("Zurich"), is one of the largest and most experienced investment
management firms in the United States. Scudder, Stevens & Clark, Inc.
("Scudder") was established in 1919 as a partnership and was restructured as a
Delaware corporation in 1985. Scudder launched its first fund in 1928. Zurich
Kemper Investments, Inc. ("Kemper") launched its first fund in 1948. On December
31, 1997 the businesses of Scudder and Kemper were combined ("the Scudder-Zurich
Transaction"). Since December 31, 1997, Scudder Kemper has served as investment
adviser to both Scudder and Kemper funds. As of January 1, 1999, Scudder Kemper
had more than $280 billion in assets under management. The principal source of
Scudder Kemper's income is professional fees received from providing continuing
investment advice. Scudder Kemper provides investment counsel for many
individuals and institutions, including insurance companies, endowments,
industrial corporations and financial and banking organizations.

Founded in 1872, Zurich is a multinational, public corporation organized
under the laws of Switzerland. Its home office is located at Mythenquai 2, 8002
Zurich, Switzerland. Historically, Zurich's earnings have resulted from its
operations as an insurer as well as from its ownership of its subsidiaries and
affiliated companies. Zurich provides an extensive range of insurance and
financial products and services and has branch offices and subsidiaries in more
than 40 countries throughout the world. Zurich owns approximately 70% of the
Investment Manager, with the balance owned by the Investment Manager's officers
and employees.

Scudder Kemper is a Delaware corporation. Rolf Huppi* is the Chairman of
the Board and Director, Edmond D. Villani# is the President, Chief Executive
Officer and Director, Stephen R. Beckwith# is the Treasurer and Chief Financial
Officer, Kathryn L. Quirk# is the General Counsel, Chief Compliance Officer and
Secretary, Lynn S. Birdsong# is a Corporate Vice President and Director,
Cornelia M. Small# is a Corporate Vice President, Chief Investment Officer and
Director, Laurence Cheng* is a Director, Gunther Gose* is a Director and William
H. Bolinder[ is a Director of the Investment Manager. The principal occupation
of each of Edmond D. Villani, Stephen R. Beckwith, Kathryn L. Quirk, Lynn S.
Birdsong and Cornelia M. Small is serving as a Managing Director of the
Investment Manager; the principal occupation of Rolf Huppi is serving as an
officer of Zurich; the principal occupation of Laurence Cheng is serving as a
senior partner of Capital Z Partners, an investment fund; the principal
occupation of Gunther Gose is serving as the Chief Financial Officer of Zurich;
the principal occupation of William H. Bolinder is serving as a member of the
Group Executive Board of Zurich.

- ------------------------
* Mythenquai 2, Zurich, Switzerland
# 345 Park Avenue, New York, New York
[ 1400 American Lane, Schaumburg, Illinois

On September 7, 1998, the businesses of the Zurich Group (including
Zurich's 70% interest in Scudder Kemper) and the financial services businesses
of B.A.T Industries p.l.c. ("B.A.T") were combined to form a new global
insurance and financial services company known as Zurich Financial Services
Group. Zurich Financial Services Group is 57% owned by Zurich Allied AG, a
listed Swiss holding company, and 43% owned by Allied Zurich p.l.c., a listed
U.K. holding company. The home offices of Zurich Financial Services Group and
Zurich Allied AG are located at Mythenquai 2, 8002 Zurich, Switzerland, and the
home office of Allied Zurich p.l.c. is located at 22 Arlington Street, London,
England SW1A 1RW, United Kingdom.

The outstanding voting securities of the Investment Manager are held of
record 36.63% by Zurich Holding Company of America ("ZHCA"), a subsidiary of
Zurich; 32.85% by ZKI Holding Corp. ("ZKIH") a subsidiary of Zurich; 20.86% by
Stephen R. Beckwith, Lynn S. Birdsong, Kathryn L. Quirk, Cornelia M. Small and
Edmond D. Villani in their capacity as representatives (the "Management
Representatives") of the Investment Manager's management holders and retiree
holders pursuant to a Second Amended and Restated Security Holders Agreement
(the "Security Holders Agreement") among the Investment Manager, Zurich, ZHCA,
ZKIH, the Management Representatives, the management holders, the retiree
holders and Edmond D. Villani, as trustee of Scudder Kemper Investments, Inc.
Executive Defined Contribution Plan Trust (the "Trust"); and 9.66% by the Trust.
There are no outstanding non-voting securities of the Investment Manager.

Pursuant to the Security Holders Agreement (which was entered into in
connection with the Scudder-Zurich Transaction), the Board of Directors of the
Investment Manager consists of four directors designated by ZHCA and ZKIH and
three directors designated by the Management Representatives.

The Security Holders Agreement requires the approval of a majority of the
Scudder-designated directors for certain decisions, including changing the name
of Scudder Kemper, effecting an initial public offering before April 15, 2005,
causing Scudder Kemper to engage substantially in non-investment management and
related business, making material acquisitions or divestitures, making material
changes in Scudder Kemper's capital structure, dissolving or liquidating Scudder
Kemper, or entering into certain affiliated transactions with Zurich. The
Security Holders Agreement also provides for various put and call rights with
respect to Scudder Kemper stock held by persons who were employees of Scudder at
the time of the Scudder-Zurich Transaction, limitations on Zurich's ability to
purchase other asset management companies outside of Scudder Kemper, rights of
Zurich to repurchase Scudder Kemper stock upon termination of employment of
Scudder Kemper personnel, and registration rights for stock held by stockholders
of Scudder continuing after the Scudder-Zurich Transaction.

The following are open- or closed-end funds with investment objectives
similar to those of the Company, for whom the Investment Manager provides
investment management services:

Total Net Assets
as of Management Compensation
April 30, 1999 on an Annual Basis Based on the
Name (000 omitted) Value of Average Daily Net Assets
---- ------------- ---------------------------------

AARP Bond Fund for Income $221,100 0.55 of 1%.*

Kemper Income and Capital $710,520 0.55 of 1%; 0.52 of 1% on net assets in excess of $250
Preservation Fund million; 0.50 of 1% on net assets in excess of $1 billion;
0.48 of 1%on net assets in excess of $2.5 billion; 0.45 of
1% on net assets in excess of $5 billion; 0.43 of 1% on net
assets in excess of $7.5 billion; 0.41 of 1% on net assets
over $10 billion; 0.40 of 1% on net assets over $12.5
billion.

Scudder Income Fund $791,600 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 $107,200 0.475 of 1%.
Fund -- Bond Portfolio

- ------------------------
* Consists of an Individual Fund Fee Rate of 0.28 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. Until January 31, 2000, the
Investment Manager has agreed to waive all or a portion of its management
fee and other expenses for the fund to the extent necessary so that the
total annualized expenses of the fund do not exceed 0.50% of average daily
net assets.

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.

The information set forth in this Proxy Statement concerning the Investment
Manager and its affiliates has been provided by the Investment Manager.

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 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. In selecting
brokers and dealers with which to place portfolio transactions

for the Company, Scudder Kemper will not consider sales of shares of funds
advised by Scudder Kemper, although it may place such transactions with brokers
and dealers that sell shares of funds advised by Scudder Kemper. 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 9, 1999, 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 31,
2000 and recommended that the stockholders approve its continuance at the Annual
Meeting. Although approval by stockholders of the continuance of the Agreement
is not required by the terms of the Agreement or by applicable law, it has been
the Company's custom to submit this matter to the stockholders at the Annual
Meeting.The Company may discontinue this practice in the future in its
discretion.

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 cost 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; possible indirect benefits to the Investment Manager from serving as
adviser of the Company; and the effects of the Scudder-Zurich Transaction and
the combination between the Zurich Group and B.A.T.

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 independent investment consultant
engaged by the Board of Directors 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 of the Agreement 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 2000. If continuance is not approved at the
Annual Meeting, the Board of Directors will make such arrangements for the
management of the Company, including continuance of the Agreement, as it
believes appropriate and in the best interests of the Company.

STOCKHOLDER PROPOSALS FOR 2000 PROXY STATEMENT

Stockholders wishing to submit proposals for inclusion in a proxy statement
for the 2000 meeting of stockholders of the Fund, should send their written
proposals to the Fund, at 101 California Street, Suite 4100, San Francisco,
California 94111, by January 21, 2000. The timely submission of a proposal does
not guarantee its inclusion.

The Fund may exercise discretionary voting authority with respect to
stockholder proposals for the 2000 meeting of stockholders which are not
included in the proxy statement and form of proxy, if notice of such proposals
is not received by the Fund at the above address on or before April 6, 2000.
Even if timely notice is received, the Fund may exercise discretionary voting
authority in certain other circumstances. Discretionary voting authority is the
ability to vote proxies that stockholders have executed and returned to the Fund
on matters not specifically reflected on the form of proxy.

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.

Maureen E. Kane
May 28, 1999 Secretary

PROXY MONTGOMERY STREET INCOME SECURITIES, INC. PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS

Annual Meeting of Stockholders -- July 8, 1999

The undersigned hereby appoints Bruce H. Goldfarb, John T. Packard and John R. Hebble, 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 offices of the Company, 101 California Street, Suite 4100, San Francisco, California, on Thursday,
July 8, 1999 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.

1. The election of five Directors.

Nominees: J.C. Atwater, R.J. Bradshaw, 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 Advisory FOR / / AGAINST / / ABSTAIN / /
Agreement between the Company and Scudder Kemper.

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 hereon.
When signing as attorney, executor, administrator, trustee
or guardian, please give your full title as such.

Signature......................Date.............................