PHY Prospect ST HI New

Prospect Street High Income Portfolio Inc. (the �Fund�) (NYSE:PHY) announced today that its Board of Directors approved the full redemption of the Fund�s outstanding Series W Auction Rate Cumulative Preferred Shares pursuant to their terms. The redemption date will be July 17, 2008 and the redemption price will be $25,000 per share, which is equal to the liquidation preference per share. Highland Capital Management, L.P. (�Highland�), the Fund�s investment adviser, is a leading alternative investment management firm specializing in credit and structured products, with approximately $37.3 billion in assets under management as of April 30, 2008. Headquartered in Dallas, Texas, Highland manages assets on behalf of investors around the world with offices in New York and London. About Prospect Street� High Income Portfolio Inc. Prospect Street� High Income Portfolio Inc. is a diversified, closed-end management investment company. The Fund�s investment objective is to provide high current income, while seeking to preserve stockholders� capital. The Fund seeks to primarily invest in fixed-income securities rated in the lower categories by established rating agencies (rated �BB� or lower by S&P and �Ba� or lower by Moody�s) or nonrated fixed-income securities deemed by the Fund�s investment adviser to be of comparable quality. Highland Capital Management, L.P. (�Highland�) has served as the Fund�s investment adviser since 2000. The Fund�s shares are listed on the NYSE under the symbol �PHY�. An investment in the Fund is not appropriate for all investors. No assurance can be given that the Fund will achieve its investment objectives. Shares of closed-end investment companies frequently trade at a discount to net asset value. The price of the Fund�s shares is determined by a number of factors, several of which are beyond the control of the Fund. Therefore, the Fund cannot predict whether its shares will trade at, below or above net asset value. Statements made in this release that look forward in time involve risks and uncertainties and are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such risks and uncertainties include, without limitation, the adverse effect from a decline in the securities markets or a decline in the Fund�s performance, a general downturn in the economy, competition from other closed-end investment companies, changes in government policy or regulation, inability of the Fund�s investment adviser to attract or retain key employees, inability of the Fund to implement its investment strategy, inability of the Fund to manage rapid expansion and unforeseen costs and other effects related to legal proceedings or investigations of governmental and self-regulatory organizations. Past performance does not guarantee future results.