X0303 4 2008-07-18 0 0000021178 PROSPECT STREET INCOME SHARES INC CNN 0001288593 Dougherty Raymond Joseph 13455 NOEL ROAD SUITE 800 DALLAS TX 75225 1 1 0 0 Senior Vice President Common Stock 2008-07-18 4 D 0 16189 5.13 D 0 D Disposed of pursuant to an Agreement and Plan of Reorganization between the issuer and Highland Credit Strategies ("HCF") in exchange for 5,965 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 a fractional share. /s/Raymond J. Dougherty 2008-07-22