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<PAGE> PAGE 2
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<PAGE> PAGE 4
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<PAGE> PAGE 6
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SIGNATURE THOMAS F. MCDONOUGH
TITLE VICE PRESIDENT
Exhibit 77(Q2)
Form of Section 16(a) Disclosure For Proxy Statement
and Form 10-K (pursuant to Item 405 of Regulation S-K)
Section 30(f) of the Investment Company Act of 1940, as amended
(the "1940 Act"), as applied to a fund, requires 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,
1994, all filing requirements applicable to its reporting persons
were complied with except that Form 3 on behalf of Margaret
Hadzima and Richard Holt, and Form 4 on behalf of Maryellie Moore
and James Van Horne were filed late.
To the Board of Directors
Montgomery Street Income Securities, Inc.
In planning and performing our audit of the financial statements
of Montgomery Street Income Securities, Inc. for the year ended
December 31, 1994, we considered its internal control structure,
including procedures for safeguarding securities, in order to
determine our auditing procedures for the purpose of expressing
our opinion on the financial statements and to comply with the
requirements of Form N-SAR, not to provide assurance on the
internal control structure.
The management of Montgomery Street Income Securities, Inc. is
responsible for establishing and maintaining an internal control
structure. In fulfilling this responsibility, estimates and
judgments by management are required to assess the expected
benefits and related costs of internal control structure policies
and procedures. Two of the objectives of an internal control
structure are to provide management with reasonable, but not
absolute, assurance that assets are safeguarded against loss from
unauthorized use or disposition and that transactions are
executed in accordance with management's authorization and
recorded properly to permit preparation of financial statements
in conformity with generally accepted accounting principles.
Because of inherent limitations in any internal control
structure, errors or irregularities may occur and may not be
detected. Also, projection of any evaluation of the structure to
future periods is subject to the risk that it may become
inadequate because of changes in conditions or that the
effectiveness of the design and operation may deteriorate.
Our consideration of the internal control structure would not
necessarily disclose all matters in the internal control
structure that might be material weaknesses under standards
established by the American Institute of Certified Public
Accountants. A material weakness is a condition in which the
design or operation of the specific internal control structure
elements does not reduce to a relatively low level the risk that
errors or irregularities in amounts that would be material in
relation to the financial statements being audited may occur and
not be detected within a timely period by employees in the normal
course of performing their assigned functions. However, we noted
no matters involving the internal control structure, including
procedures for safeguarding securities, that we consider to be
material weaknesses as defined above at December 31, 1994.
This report is intended solely for the information and use of
management and the Securities and Exchange Commission.
/s/ERNST & YOUNG LLP
ERNST & YOUNG LLP
Boston, Massachusetts
January 20, 1995
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the
Montgomery Street Income Securities Annual Report for the fiscal year ended
December 31, 1994 and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<SERIES>
<NUMBER> 0
<NAME> MONTGOMERY STREET INCOME SECURITIES
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-01-1994
<PERIOD-END> DEC-31-1994
<INVESTMENTS-AT-COST> 188,155,494
<INVESTMENTS-AT-VALUE> 175,280,562
<RECEIVABLES> 26,473,757
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 201,754,319
<PAYABLE-FOR-SECURITIES> 23,889,992
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 182,055
<TOTAL-LIABILITIES> 24,072,047
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 196,263,920
<SHARES-COMMON-STOCK> 10,024,589
<SHARES-COMMON-PRIOR> 9,958,150
<ACCUMULATED-NII-CURRENT> 93,446
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (5,799,766)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (12,875,328)
<NET-ASSETS> 177,682,272
<DIVIDEND-INCOME> 25,550
<INTEREST-INCOME> 15,034,282
<OTHER-INCOME> 0
<EXPENSES-NET> 1,345,628
<NET-INVESTMENT-INCOME> 13,714,204
<REALIZED-GAINS-CURRENT> (5,045,581)
<APPREC-INCREASE-CURRENT> (19,015,182)
<NET-CHANGE-FROM-OPS> (10,346,559)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 13,575,510
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 66,439
<NET-CHANGE-IN-ASSETS> (22,815,444)
<ACCUMULATED-NII-PRIOR> 43,613
<ACCUMULATED-GAINS-PRIOR> (843,043)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 920,799
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,345,628
<AVERAGE-NET-ASSETS> 188,395,257
<PER-SHARE-NAV-BEGIN> 20.13
<PER-SHARE-NII> 1.37
<PER-SHARE-GAIN-APPREC> (2.42)
<PER-SHARE-DIVIDEND> 1.36
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 17.72
<EXPENSE-RATIO> 0.71
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
Exhibit 77(D)
Change In Investment Policy
The Fund may enter into forward foreign currency sale
contracts to hedge portfolio positions, provided, among
other things, that such contracts have a maturity of one
year or less and at the time of purchase, the Fund's
obligations under such contracts may not exceed either the
market value of portfolio securities denominated in the
foreign currency or 15% of the Fund's total assets.
