FORM 4
[ ] Check this box if no longer subject to Section 16. Form 4 or Form 5 obligations may continue. See Instruction 1(b).         
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

STATEMENT OF CHANGES IN BENEFICIAL OWNERSHIP OF SECURITIES
                                                                                  
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Filed pursuant to Section 16(a) of the Securities Exchange Act of 1934, Section 17(a) of the Public
Utility Holding Company Act of 1935 or Section 30(f) of the Investment Company Act of 1940
                      

1. Name and Address of Reporting Person *

DONDERO JAMES D 		2. Issuer Name and Ticker or Trading Symbol

PROSPECT STREET INCOME SHARES INC [ CNN ] 		5. Relationship of Reporting Person(s) to Issuer (Check all applicable)

_____ Director                      _____ 10% Owner
__ X __ Officer (give title below)      _____ Other (specify below)
President
(Last)          (First)          (Middle)

13455 NOEL ROAD 		3. Date of Earliest Transaction (MM/DD/YYYY)

7/18/2008
(Street)

DALLAS, TX 75240
(City)        (State)        (Zip)
4. If Amendment, Date Original Filed (MM/DD/YYYY)

 
6. Individual or Joint/Group Filing (Check Applicable Line)

___ Form filed by One Reporting Person
_ X _ Form filed by More than One Reporting Person

Table I - Non-Derivative Securities Acquired, Disposed of, or Beneficially Owned
1.Title of Security
(Instr. 3) 		2. Trans. Date 2A. Deemed Execution Date, if any 3. Trans. Code
(Instr. 8) 		4. Securities Acquired (A) or Disposed of (D)
(Instr. 3, 4 and 5) 		5. Amount of Securities Beneficially Owned Following Reported Transaction(s)
(Instr. 3 and 4) 		6. Ownership Form: Direct (D) or Indirect (I) (Instr. 4) 7. Nature of Indirect Beneficial Ownership (Instr. 4)
Code V Amount (A) or (D) Price
Common Stock   7/18/2008     D (1)    1006209   D $5.13   0   I   (2) (3) see footnotes (2)(3)  

Table II - Derivative Securities Beneficially Owned ( e.g. , puts, calls, warrants, options, convertible securities)
1. Title of Derivate Security
(Instr. 3) 		2. Conversion or Exercise Price of Derivative Security 3. Trans. Date 3A. Deemed Execution Date, if any 4. Trans. Code
(Instr. 8) 		5. Number of Derivative Securities Acquired (A) or Disposed of (D)
(Instr. 3, 4 and 5) 		6. Date Exercisable and Expiration Date 7. Title and Amount of Securities Underlying Derivative Security
(Instr. 3 and 4) 		8. Price of Derivative Security
(Instr. 5) 		9. Number of derivative Securities Beneficially Owned Following Reported Transaction(s) (Instr. 4) 10. Ownership Form of Derivative Security: Direct (D) or Indirect (I) (Instr. 4) 11. Nature of Indirect Beneficial Ownership (Instr. 4)
Code V (A) (D) Date Exercisable Expiration Date Title Amount or Number of Shares

Explanation of Responses:
( 1)  Disposed of pursuant to an Agreement and Plan of Reorganization between the issuer and Highland Credit Strategies ("HCF") in exchange for 370,808 shares of HCF common stock having a net asset value of $13.93 per share on the effective date of the reorganization plus cash for fractional shares.
( 2)  HCMLP was the investment adviser for CNN. HCMLP maintains the 401(k) Plan, the Option Plan and the Retirement Plan and Trust for the benefit of its employees. Mr. Dondero is the President of HCMLP and the trustee of Canis Major, Get Good Non-Exempt, the 401(k) Plan and the Retirement Plan and Trust, as well as a participant in the 401(k) Plan and Retirement Plan and Trust. Each of CDO, HEFF and PCMG are controlled by HCMLP. Each of the Option Plan, the 401(k) Plan and Retirement Plan and Trust expressly disclaims beneficial ownership of the securities reported herein. Each of CDO, HEFF, PCMG, Canis Major, Get Good Non-Exempt, HCMLP and Mr. Dondero expressly disclaims beneficial ownership of the securities reported herein, except to the extent of their pecuniary interests therein.
( 3)  The amount shown includes shares held by the Highland CDO Opportunity Fund, Ltd. ("CDO"), (ii) The Canis Major Trust ("Canis Major"), (iii) The Get Good Non-Exempt Trust No. 2 ("Get Good Non-Exempt"), (iv) Highland Capital Management, L.P. ("HCMLP"), (v) PCMG Trading Partners XXIII, LP ("PCMG"), (vi) Highland Equity Focus Fund, L.P. ("HEFF"), (vii) the Option Plan, (viii) the HCMLP 401(k) Plan and (ix) Highland Capital Management L.P. Retirement Plan and Trust (the "Retirement Plan and Trust").

Reporting Owners
Reporting Owner Name / Address
Relationships
Director 10% Owner Officer Other
DONDERO JAMES D
13455 NOEL ROAD
DALLAS, TX 75240

President
HIGHLAND CAPITAL MANAGEMENT LP
13455 NOEL ROAD
DALLAS, TX 75240


Investment Adviser

Signatures
/s/James D. Dondero 7/22/2008
** Signature of Reporting Person Date

James D. Dondero 7/22/2008
** Signature of Reporting Person Date


Reminder: Report on a separate line for each class of securities beneficially owned directly or indirectly.
* If the form is filed by more than one reporting person, see Instruction 4(b)(v).
** Intentional misstatements or omissions of facts constitute Federal Criminal Violations. See 18 U.S.C. 1001 and 15 U.S.C. 78ff(a).
Note: File three copies of this Form, one of which must be manually signed. If space is insufficient, see Instruction 6 for procedure.
Persons who respond to the collection of information contained in this form are not required to respond unless the form displays a currently valid OMB control number.
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