SEC FORM 4

SEC Form 4

FORM 4

UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

STATEMENT OF CHANGES IN BENEFICIAL OWNERSHIP

Filed pursuant to Section 16(a) of the Securities Exchange Act of 1934
or Section 30(h) of the Investment Company Act of 1940

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Check this box if no longer subject to Section 16. Form 4 or Form 5 obligations may continue. See Instruction 1(b).

1. Name and Address of Reporting Person^*

DONDERO JAMES D

(Last)

(First)

(Middle)

13455 NOEL ROAD, STE 800

(Street)

DALLAS

75240

(City)

(State)

(Zip)

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
Officer (give title below)	X	Other (specify below)
		Affiliate - Investment Advisor

3. Date of Earliest Transaction (Month/Day/Year)
03/21/2007

4. If Amendment, Date of Original Filed (Month/Day/Year)

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

X	Form filed by One Reporting Person
	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. Transaction Date (Month/Day/Year)	2A. Deemed Execution Date, if any (Month/Day/Year)	3. Transaction 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)
1. Title of Security (Instr. 3)	2. Transaction Date (Month/Day/Year)	2A. Deemed Execution Date, if any (Month/Day/Year)	Code	V	Amount	(A) or (D)	Price		6. Ownership Form: Direct (D) or Indirect (I) (Instr. 4)	7. Nature of Indirect Beneficial Ownership (Instr. 4)
Common Stock	03/21/2007		P⁽¹⁾		4,200	A	$6.22	915,218.02	I	See Footnote⁽²⁾⁽³⁾
Common Stock	03/22/2007		P⁽¹⁾		100	A	$6.22	915,318.02	I	See Footnote⁽²⁾⁽³⁾

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

Explanation of Responses:

1. Shares purchased by the Highland 401(k) Plan ("the 401(k) Plan").

2. Includes (i) 291,400 shares held by the Highland CDO Opportunity Fund, Ltd. ("CDO"), (ii) 200,816 shares held by The Canis Major Trust ("Canis Major"), (iii) 108,799.020 shares held by the HCM Services Option Plan (the "Option Plan") and (iv) 314,323 shares held by the 401(k) Plan.

3. Highland Capital Management, LP ("HCMLP") is the investment advisor for Prospect Street Income Shares, Inc. HCMLP maintains the 401(k) Plan and the Option Plan for the benefit of its employees. Mr. Dondero is the President of HCMLP and the trustee of Canis Major and the 401(k) Plan, as well as a participant in the 401(k) Plan. CDO is controlled by HCMLP. The 401(k) Plan expressly disclaims beneficial ownership of the securities reported herein. Each of the CDO, Canis Major, HCMLP, the Option Plan and Mr. Dondero expressly disclaims beneficial ownership of the securities reported herein, except to the extent of their pecuniary interest therein.

Remarks:

	/s/ James Dondero	03/22/2007
	** 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.
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