NOTES TO FINANCIAL STATEMENTS
December 31, 1997
Note A--SIGNIFICANT ACCOUNTING POLICIES. Montgomery Street Income Securities, Inc. (the
"Fund") is registered under the Investment Company Act of 1940, as amended, as a closed-end diversified
management investment company. The Fund's financial statements are prepared in accordance with generally
accepted accounting principles which require the use of management estimates.
Significant accounting policies are summarized as follows:
Valuation of Investments--Portfolio debt securities with original maturities greater than sixty days upon purchase
are valued by pricing agents approved by the Officers of the Fund, which prices reflect broker/dealer-supplied
valuations and electronic data processing techniques. If the pricing agents are unable to provide such quotations,
or if the Adviser does not believe that the value supplied by the pricing agent represents fair market value, the
most recent bid quotation supplied by a bona fide market maker shall be used. Money market investments
purchased with an original maturity of sixty days or less are valued at amortized cost. Securities for which market
quotations are not available are valued as determined in good faith by or under the direction of the Board of
Directors of the Fund.
Foreign Currency Translations--The books and records of the Fund are maintained in U.S. dollars. Foreign
currency transactions are translated into U.S. dollars on the following basis:
(i) market value of investment securities, other assets and liabilities at the daily rates of exchange, and
(ii) purchases and sales of investment securities, interest income and certain expenses at the rates of exchange
prevailing on the respective dates of such transactions.
The Fund does not isolate that portion of gains and losses on investments which is due to changes in foreign
exchange rates from that which is due to changes in market prices of the investments. Such fluctuations are
included with the net realized and unrealized gain