EDMONTON, ALBERTA–(EMWNews – Aug. 6, 2008) – XS Cargo Income Fund (the “Fund”) (TSX:XSC.UN) today announced its results for the 2008 second quarter. The Fund’s interim financial statements and Management’s Discussion and Analysis (“MD&A”) can be found on XS Cargo’s website at www.xscargo.com and on SEDAR at www.sedar.com.

For the 2008 second quarter, the Fund reported sales of $25.1 million, EBITDA (1) of $2.1 million, and net earnings of $0.248 million, or $0.04 per unit outstanding.

We continue to rationalize our product mix in response to the high cost of transportation. This has resulted in reduced sales, however gross margins have increased significantly, from 34.3% in the second quarter of 2007 to 41.9% in the second quarter of 2008, more than offsetting the impact of the sales decline. This compares with a year-to-date gross margin of 41.2%, up from 32.6% for the six months ending June 30, 2007.

In addition, the Fund’s EBITDA(1) has increased from $1.4 million for the 2007 second quarter to $2.1 million for the second quarter of 2008, compared with a year-to-date increase of $1.9 million from $0.6 million to $2.5 million.

The second quarter saw continued improvement in all aspects of our supply chain management. Freight management efforts have resulted in a decrease in freight as a percentage of sales from 9.2% in the second quarter of 2007 to 8.0% in the second quarter of 2008 despite much higher fuel costs.

Continued improvements in our merchandise management system have contributed to increased labor efficiencies and lower wage expense in both distribution centers. Management is confident that system problems which seriously impacted 2007 results are rectified. We believe the necessary procedures are in place to handle the increased volumes in the fourth quarter of 2008.

Michael McKenna, President and Chief Executive Officer of the Fund commented, “We are pleased with the progress we’ve made toward returning to our historical level of profitability.”

The Fund is not in compliance with certain of its financial covenants as at June 30, 2008 and continues to work with its lenders to resolve these breaches and negotiate mutually acceptable terms as quickly as possible.

Highlights for the second quarter:

– Gross margin percentage increased to 41.9% compared to 34.3% for the second quarter of 2007.

– Freight costs, which are included in cost of goods sold, were 8.0% of sales compared to 9.2% for the second quarter of 2007.

– Administrative and operating expenses for the quarter decreased by $300,000 from $8.7 million to $8.4 million.

– Earnings from operations of $2.1 million, up $0.7 million from the second quarter of 2007.

– Second quarter sales of $25.1 million, down 15.0% from the second quarter of 2007.

– Same and new store sales are down $3.1 million or 11.2% from the second quarter of 2007.

Business of the Fund

The Fund owns a 51% indirect interest in XS Cargo LP which operates 40 closeout retail stores in Alberta, British Columbia, Manitoba, Saskatchewan, Ontario, Newfoundland, Nova Scotia and New Brunswick.

(1) Non-GAAP Measures

References to “EBITDA” are to earnings before interest, income taxes, depreciation and amortization and references to “distributable cash” are to cash available for distribution to Unitholders in accordance with the distribution policies of the Fund. EBITDA is calculated as Net Earnings (loss) plus non-controlling interest, plus future income tax expense, plus impairment of goodwill, plus impairment of intangible assets, plus interest on term, subordinated and operating loans, plus amortization of intangible assets and amortization of property and equipment. Management believes that, in addition to income or loss, EBITDA is a useful supplemental measure of performance and cash available for distribution before debt service, changes in working capital, capital expenditures and income taxes. Distributable cash of the Fund is a measure generally used by open-ended trusts as an indicator of financial performance. As one of the factors that may be considered relevant by prospective investors is the cash distributed by the Fund relative to the price of the Units, management believes that distributable cash of the Fund is a useful supplemental measure that may assist prospective investors in assessing an investment in the Fund.

Earnings from operations have been derived by adding interest expense, amortization of property and equipment and intangible assets, future income taxes, impairment of goodwill and intangible assets, foreign exchange gain or loss, unit-based compensation and non-controlling interest to net earnings for the period.

EBITDA, distributable cash, earnings from operations and payout ratio are not earnings measures recognized by GAAP and do not have standardized meanings prescribed by GAAP. Investors are cautioned that EBITDA, distributable cash and earnings from operations should not replace net income or loss (as determined in accordance with GAAP) as an indicator of the Fund’s performance, of its cash flows from operating, investing and financing activities or as a measure of its liquidity and cash flows. The Fund’s methods of calculating EBITDA, distributable cash, earnings from operations and payout may differ from the methods used by other issuers and may not be comparable to similar measures presented by other issuers.

FORWARD LOOKING STATEMENTS

This press release contains forward-looking statements. All statements other than statements of historical fact contained in this press release are forward-looking statements. You can identify many of these statements by looking for words such as “believe”, “expects”, “will”, “intends”, “projects”, “anticipates”, “estimates”, “continues” or similar words or the negative thereof. These forward-looking statements include statements with respect to the amount and timing of the payment of distributions of the Fund. There can be no assurance that the plans, intentions or expectations upon which these forward-looking statements are based will occur. Forward-looking statements are subject to risks, uncertainties and assumptions, including, but not limited to, those discussed elsewhere in the press release. There can be no assurance that such expectations will prove to be correct.

Some of the factors that could affect future results and could cause results to differ materially from those expressed in the forward-looking statements contained herein include, but are not limited to, those discussed under “Risk Factors” in the Fund’s MD&A and in the Fund’s Annual Information Form.

The forward-looking statements contained herein are expressly qualified in their entirety by this cautionary statement. The forward-looking statements included in this press release are made as of the date of this press release and, except as required by law, the Fund assumes no obligation to update or revise them to reflect new events or circumstances.