UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549  FORM 10-K   xANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2008  or  oTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ____ to _____   Commission file number 000-51105  ALCO, INC. (Exact name of registrant as specified in its charter)  Nevada11-3644700(State or other jurisdiction of incorporation)(IRS Employer Identification Number)  Suite 501, Bank of America Tower
12 Harcourt Road, Central
Hong Kong(Address of principal executive office)Registrants telephone number, including area code:  852-2521-0373 Securities registered pursuant to Section 12(b) of the Act:  Title of each className of each exchange on which registeredN/AN/A  Securities to be registered under Section 12(g) of the Act:  Common Stock (Title of Class)  Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  o Yes     x No  Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Exchange Act.  o Yes     x No  Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  x Yes   o No   1    Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrants knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  x  Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act.  Large accelerated filer
oAccelerated filer
oNon-accelerated filer
o
(Do not check if a smaller reporting company)Smaller reporting company
x  Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o  No x  State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrants most recently completed second fiscal quarter:  0  APPLICABLE ONLY TO CORPORATE REGISTRANTS  Indicate the number of shares outstanding of each of the registrants classes of common stock, as of the latest practicable date.  As of December 31, 2008, there were 10,150,000 shares of the registrants common stock, $0.001 par value, outstanding.  DOCUMENTS INCORPORATED BY REFERENCE  List hereunder the following documents if incorporated by reference and the Part of the Form 10-K (e.g., Part I, Part II, etc.) into which the document is incorporated: (1) Any annual report to security holders; (2) Any proxy or information statement; and (3) Any prospectus filed pursuant to Rule 424(b) or (c) under the Securities Act of 1933.  The listed documents should be clearly described for identification purposes (e.g., annual report to security holders for fiscal year ended December 24, 1980).   2    INDEX PART I 4 ITEM 1. BUSINESS 4 BACKGROUND 4 PRINCIPAL PRODUCTS AND SERVICES 4 DESCRIPTION OF INDUSTRY 6 GOVERNMENT REGULATION 7 CUSTOMERS AND MARKETING 7 COMPETITION 7 EMPLOYEES 7 REPORTS TO SECURITY HOLDERS 7 ITEM 1A. RISK FACTORS 8 ITEM 1B. UNRESOLVED STAFF COMMENTS 8 ITEM 2. PROPERTIES 8 ITEM 3. LEGAL PROCEEDINGS 8 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 8 PART II 9 ITEM 5. MARKET FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES9 ITEM 6. SELECTED FINANCIAL DATA 9 ITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 9 ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS 13 ITEM 8. FINANCIAL STATEMENTS 13 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE 33 ITEM 9A(T). CONTROLS AND PROCEDURES 33 ITEM 9B. OTHER INFORMATION 34 PART III 34 ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE 34 ITEM 11. EXECUTIVE COMPENSATION 35 ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS36 ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE 38 ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES 38 ITEM 15. EXHIBITS 39    3    PART I  DISCLAIMER REGARDING FORWARD-LOOKING STATEMENTS  Certain statements in this report, including statements in the following discussion, are what are known as forward-looking statements, which are basically statements about the future.  For that reason, these statements involve risk and uncertainty since no one can accurately predict the future.  Words such as plans, intends, will, hopes, seeks, anticipates, expects, and the like, often identify such forward-looking statements, but are not the only indication that a statement is a forward-looking statement.  Such forward-looking statements include statements concerning our plans and objectives with respect to the present and future operations of the Company, and statements which express or imply that such present and future operations will or may produce revenues, income or profits.  Numerous factors and future events could cause the Company to change such plans and objectives, or fail to successfully implement such plans or achieve such objectives, or cause such present and future operations to fail to produce revenues, income or profits.  Therefore, the reader is advised that the following discussion should be considered in light of the discussion of risks and other factors contained in this report on Form 10-K and in the Companys other filings with the Securities and Exchange Commission.  No statements contained in the following discussion should be construed as a guarantee or assurance of future performance or future results.   ITEM 1. BUSINESS    BACKGROUND  ALCO  ALCO, Inc. (ALCO, we, us, the Company) was incorporated under the laws of the State of Nevada on June 7, 1999 under the name Sea Horse, Inc.  On September 20, 2004, we changed our name to Lotus Capital Corp.  On February 13, 2006, we changed our name to ALCO, Inc.  ALCO was formed as a "blind pool" or "blank check" company whose business plan was to acquire one or more properties or businesses and to pursue other related activities intended to enhance shareholder value.  From the date of its incorporation until December 9, 2005, ALCOs only business activities were organizational activities directed at developing its business plan, raising its initial capital and registering under the Securities Exchange Act of 1934.  On November 22, 2005, ALCO entered into an Agreement for Share Exchange with AL Marine Holdings (BVI) Ltd (AL Marine) and the individual shareholders of AL Marine pursuant to which it agreed to acquire all of the issued and outstanding stock of AL Marine in exchange for the issuance of 9,766,480 shares of ALCOs common stock.  The closing under the Agreement for Share Exchange was completed on December 9, 2005, and upon completion of the closing, AL Marine became a wholly-owned subsidiary of ALCO.  AL Marine  AL Marine was incorporated under the laws of the British Virgin Islands on May 30, 2005 for the sole purpose of acting as a holding company for interests in several affiliated operating businesses.  On July 15, 2005, AL Marine acquired 100% of the outstanding shares of Andrew Liu & Company Limited (ALC), a Hong Kong corporation, 85% of the outstanding shares of EduShip Asia, Ltd. (ESA), a Hong Kong corporation, and 60% of the outstanding shares of Chang An Consultants Limited (CAC), a Hong Kong corporation.  The business of ALCO is now carried on through AL Marine and its subsidiaries.     PRINCIPAL PRODUCTS AND SERVICES  ALCO operates through its subsidiaries: ALC, CAC and ESA.  These subsidiaries operate primarily in Hong Kong and China.  ALC  4     ALCO is principally engaged in the marine insurance brokerage business though its wholly owned subsidiary, ALC, which was incorporated in 1989 as an insurance brokerage firm specializing in marine hull protection and indemnity insurance.  ALC began operations in Hong Kong and moved into China in 1991.  ALC expanded its operations in South Korea in 1995.  Under Hong Kong regulations, a person who acts as an insurance broker must have authorization from the Insurance Authority or be a member of a body of insurance brokers approved by the Insurance Authority.  The Hong Kong Confederation of Insurance Brokers (HKCIB) is such a body that has been approved by the Insurance Authority.  ALC became a member of the HKCIB in 1993.  In order to be admitted to the Confederation, an insurance broker must meet minimum requirements in regard to qualifications and experience; capital and net assets; professional indemnity insurance; keeping of separate records; and the keeping of proper books and accounts.  These requirements are determined by the Insurance Authority.  If an insurance broker does not meet these standards, the Confederation can withdrawal the insurance brokers membership.  Insurance brokers represent the insured in negotiating and placing insurance coverage with insurers, as well as handling claims when they occur.  Insurance brokers generate revenue from commissions and fees on insurance premiums and earn interest on premiums held before remittance to the insurers.  Brokers do not issue the policies themselves; they only find and place policies with insurance carriers on behalf of their clients and act as a liaison between the insurer and the client during the claims process.  ALC works in placing insurance coverage with both hull and machinery coverage (H&M) providers and protection and indemnity coverage (P&I) providers.  H&M covers the physical loss of or damage to the vessel arising from accidents, while P&I covers liabilities, losses, expenses and costs incurred in relation to injury or death on board.  Business from China-based clients accounts for 95% of the business of ALC.  While ALC deals directly with most of its clients, it also engages a sub-broker, Jiangsu Oriental Navigators Insurance Brokers, in China.  The percentage of business of ALC generated by the sub-broker is approximately 0.9%.  ALC does not have any written agreements with this sub-broker, and the relationship with them could be terminated at any time without cause.  However, ALC could replace this sub-broker, if needed, so it would not suffer a material adverse effect if the relationship is terminated.  ALC places insurance coverages with approximately twenty different insurance providers.  For P&I insurance, the company places insurance with The West of England Ship Owners Insurance Association, American P&I Club, and The South of England Protection & Indemnity Association (Bermuda) Ltd., among others.  For H&M coverage, ALC places coverages with Spectrum Marine, Pierre Leblanc & Associations A.S.S., and Lloyds Underwriters, among others.  ALC does not have any written agreements with these insurance providers.   Strike Club  In 2002, the Strike Club appointed ALC as its exclusive representative in China.  The Strike Club is an international insurer that was formed to cover losses that could occur in the marine industry, such as lost profits from labor strikes, which were not typically covered by other insurance.  The Strike Club is owned by its members and is a mutual insurer.  The Strike Club covers vessels loss of work resulting from delay due to strikes or other circumstances that are outside the control of the operator.  As the exclusive representative of the Strike Club in China, ALC is the only channel through which any shipowner, charterer or insurance broker in China may place insurance with the Strike Club.  For each policy placed through it, ALC takes 20% of the premium as its commission.  ALC cannot place any business with any other company offering the same coverage as the Strike Club during the term of the agreement.  We do not pay Strike Club for this representation.  Our written contract with the Strike Club expired in 2004, and no new agreement has been created.  However, we continue to operate as if the 2004 contract were still in effect.  Either party may terminate the relationship at any time, without cause.  During 2008, ALC received US$146,902 in commission income due to this agreement with the Strike Club.  ESA   5    AL Marine owns 85% of ESA.  In 2004, ESA was appointed as an exclusive agent by the Institute of Chartered Shipbrokers (UK) ("ICS") to set up ICS's first distant learning center in Shanghai, China.  ICS is an internationally recognized professional body representing shipbrokers, managers, and agents throughout the world.  ICS has approximately 3,500 members in over 60 countries.  We believe that many students in China will take advantage of the ICS training being offered in their country because they will not be required to travel overseas.  As the exclusive agent of ICS in China, ALCO plans to provide delivery of courses in accordance with the syllabus of ICS, promotion of membership in ICS, and management of the examination center.  ICS is the only internationally recognized professional and vocational qualification in the shipping industry.  Pursuant to its contract with ICS, ESA is required to provide seminars, review sessions, revision workshops and other assistance to the students who enroll in the learning center.  Students will be charged GBP180 (approximately US$272), of which GBP135 (approximately US$204) will be paid to ICS.  The fees may be revised in the future upon the agreement of both parties.  ESA is responsible for paying the set up and maintenance for the center.  ESA has limited assets and its operations to date have not been significant.  As of December 31, 2008, EduShip Asia had net assets of $(38,498) with a cash balance of $34,798, accounts receivable of $698, due to related parties of $54,189 and accounts payable of $19,088.  During the 2008 fiscal year, ESA received $6,410 from enrollment fees from this arrangement.  It spent approximately $23,878 setting up and maintaining the learning center. CAC  AL Marine owns 60% of CAC which participates in a joint venture with a large state-owned shipping group in China, the China Chanjiang Shipping Corporation (the "CSC Group").  CAC, which was incorporated in Hong Kong in March 1999, acts as an in-house insurance brokerage firm and general consultant for the CSC Group.  CAC looks for business opportunities for the CSC Group and uses the CSC Groups connections in China to create business opportunities for other foreign shipping interests.  The CSC Group owns a substantial and growing fleet of ships, advertising space, and seafarers schools in China.  The CSC Group has a large share of the market in logistics, cruising, shipbuilding and other related businesses along the Changjang region in China and has expanded its businesses all over the country.  The CSC Groups other business activities include shipbuilding, crane manufacturing, cruising, advertising, and seafarers training.  CAC has no formal agreement with the CSC Group.  In 2007, about 5.2% of ALCOs revenue was generated from CAC.     DESCRIPTION OF INDUSTRY  Marine Insurance Brokerage  Marine insurance is a mature industry, which is diverse in terms of types of coverage and insurers.  These different options are intended to suit the risk profile and requirements of different types of vessels, voyages, shipowners, and charterers.  Within marine insurance, the two most common forms of insurance are hull and machinery (H&M) and protection and indemnity (P&I).  H&M covers the physical loss of or damage to the vessel arising from accidents, while P&I covers liabilities, losses, expenses and costs incurred in relation to injury or death.  Various insurers differ significantly in the coverages and options they provide.  Most shipowners and charterers rely on professional insurance brokers for advice to make an informed decision on the choice of insurer and coverage that will suit their needs.  Insurance brokers represent the insured in negotiating and placing insurances with the insurers.  Brokers generate revenue primarily from commissions and fees on insurance calls and premiums.  Revenue is also generated from interest on calls and premiums held before remittance to the insurers and on claims held before payment to the insured.  Commission revenue varies based on the calls and premiums on the policies that are placed on behalf of clients.  When call and premium rates in the market rise, revenue for brokers increases, and revenue declines when call and premium rates decline.  The standard rate of commission for an insurance broker is approximately 10% on the call or premium of the insurance placed.   6    In addition, as part of the brokerage service, the brokers have a duty to make claims for their clients.  In doing so, they appraise the merits of the claim, devise a strategy for the claim and submit it to the insurer at the right place and in the correct form.     GOVERNMENT REGULATION  ALCOs subsidiaries, ALC and CAC, as members of HKCIB, must comply with the minimum requirements specified by the Insurance Authority under Section 70(2) of the Insurance Companies Ordinance of Hong Kong.  The minimum requirements specified by the Insurance Authority (IA) under Section 70(2) of the Insurance Companies Ordinance are:  (a) To maintain paid up share capital or minimum net assets of HK$100,000 (b) To maintain adequate accounting records to reflect the transactions of its business (c) To maintain client accounts in accordance with the minimum requirements specified by the IA under Section 70(2) of the Ordinance (d) To maintain a professional indemnity insurance policy in accordance with the minimum requirements specified by the IA under Section 70(2) of the ordinance.  These restrictions and other laws with which we must comply are subject to change.  Any change in these laws may cause our cost of doing business to increase or cause a change in the demand for our services.     CUSTOMERS AND MARKETING  While members of the senior management regularly appear at industry-targeted functions and speak at seminars organized for the shipping industry, ALCO believes that the best marketing channel is by word-of-mouth and clients referrals based on quality of service and results in providing a solution to difficult claims.  The very close-knit nature of the Chinese shipping community places ALCO in a good position.  This strategy has so far proven to be effective.  Historically, ALCO has had a customer retention rate around 80% for 2008.  We anticipate that we will maintain this retention rate in the future because we have been able to maintain this rate for the last three years.  In 2008, ALCO had over 200 customers, and its customers were mainly from China.  ALCO obtains new clients through the channels of existing clients or sub-broker.     COMPETITION  ALCOs major competitors are large US insurance brokers such as Aon, Marsh and Willis, who provide a wide range of insurances and are not focused on marine insurance.  These competitors are much larger than ALCO and have access to significantly more financial resources than ALCO.  However, these competitors are international companies who focus on many different types of insurance.  We believe that ALCO is one of the few insurance providers that specializes in the marine insurance business.  Competition for business is intense in all of ALCOs business lines and in every insurance market, and other providers of global risk management services have substantially greater market shares than ALCO does.  Competition on premium rates has also exacerbated the pressures caused by a continuing reduction in demand in some classes of business.  Additional competitive pressures arise from the entry of new market participants, such as banks, accounting firms and insurance carriers themselves, offering risk management or transfer services.     EMPLOYEES  At the time of this report, ALCO had 36 employees, including 24 in operations and 12 in supporting and administrative functions.  35 employees are full time and 1 employee is part time.    REPORTS TO SECURITY HOLDERS  ALCO is subject to the reporting requirements of the Exchange Act and the rules and regulations promulgated thereunder, and, accordingly, files reports, information statements or other information with the Securities and Exchange Commission,  7    including quarterly reports on Form 10-Q, annual reports on Form 10-K, reports of current events on Form 8-K, and proxy or information statements with respect to shareholder meetings.  Although ALCO may not be obligated to deliver an annual report to its shareholders, we will voluntarily provide electronic or paper copies of the companys filings free of charge upon request.  The public may read and copy any materials ALCO files with the SEC at the SECs Public Reference Room at 450 Fifth Street, N.W. Washington, D.C. 20549.  The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330.  The SEC maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC.  The address is http://www.sec.gov.   ITEM 1A. RISK FACTORS  N/A   ITEM 1B. UNRESOLVED STAFF COMMENTS  N/A ITEM 2. PROPERTIES  ALCO rents a portion of its facilities from companies owned by the directors of ALCO and rents a portion of its facilities from third parties. As of December 31, 2008, ALCO leased approximately 5,020 square feet of office space for its operations.  Its current leased properties are:  LocationSizeDescriptionCentral, Hong Kong2,996 sq. ftHeadquartersShanghai, China2,024 sq. ftOffice  The Hong Kong office is leased from Fortune Ocean Ltd., whose directors and shareholders are Andrew Liu, John Liu, and Madam Yap.  Starting from December 2007, another flat at the existing building of the Hong Kong Office is leased from a third party for office expansion.  Before September 2007, the Shanghai office was leased from Fortune Ocean Ltd.  In September 2007, the lease was ceased and another office in Shanghai is leased from a third party.  ALCOs current total monthly rental payment for its facilities is approximately US$21,971.  We intend to renew both of these leases upon their expiration.   ITEM 3. LEGAL PROCEEDINGS  ALCO is not a party to any pending legal proceedings, and no such proceedings are known to be contemplated.  None of ALCOs directors, officers or affiliates, and no owner of record or owner of more than five percent (5%) of its securities, or any associate of any such directors, officer or security holder is a party adverse to ALCO or has a material interest adverse to it in reference to pending litigation.   ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS  No matters were submitted to the shareholders for a vote during the fourth quarter of the fiscal year ended December 31, 2008.    8    PART II  ITEM 5. MARKET FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES  Our shares are approved for trading on the OTC Bulletin Board under the symbol ALCQ, but there has been no trading activity in the shares and no trading market has been established.  There is no assurance as to when, or whether, an active trading market in our shares will be established.  None of ALCOs common equities are subject to any outstanding options, warrants to purchase, or securities convertible into, common stock.  ALCO filed a registration statement on Form SB-2 to register a total of 500,000 shares for resale on behalf of certain selling shareholders.  The registration statement was declared effective on November 13, 2006.  Other than the 500,000 shares registered for resale on behalf of certain selling shareholders,  there are no common equities of ALCO that are being, or have been proposed to be, publicly offered by ALCO, the offering of which could have a material effect on the market price of its common stock.  As of December 31, 2008, ALCO had 10,150,000 shares of common stock issued and outstanding.  The shares are held by 30 stockholders of record.  ALCO currently has no securities authorized for issuance under any equity compensation plans.  ALCO has never declared any cash dividends on its common stock and does not anticipate declaring dividends in the foreseeable future.   ITEM 6. SELECTED FINANCIAL DATA  N/A     ITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS PLAN OF OPERATIONS  Because of the recent worldwide financial turmoil, volume of international trade is dramatically reduced leading a declining volume on the shipping industry.  In addition, exceeding tonnage supply to the shipping market will lead to a large volume of layup and some poorly funded owners and operators will face severe financial problems.  In order to deal with this very unique financial and shipping turmoil of this century, our plan for 2009 consists of improvement of our cost competitiveness, enhancement of credit control and marketing function.  For the improvement of cost competitiveness, we will review our existing operating processes and procedures to identify rooms for improvement and revise them where necessary to ensure the efficiency and effectiveness.  For the enhancement of credit control, we are closely monitoring the aging of client premium receivable and aiming to increase the receivable turnover.  For the enhancement of marketing function, we will allocate more resource to this function such as allotting more manpower and time in promoting the companys business, expanding our market share in the marine insurance business and enhancing the level of service that we provide to our customers.  We do have a plan to hire additional employees in the next twelve months to enhance our marking and consultancy service functions.  However, this plan will depend largely on the availability of working capital, which we may not have or be able to raise.  Because there is no assurance that working capital will be available to us, there is also no assurance regarding the extent to which we will be able to implement our plan of operations within the foreseeable future.  We do not have any material off-balance sheet arrangements.   9     RESULTS OF OPERATIONS  Year ended December 31, 2008 compared with 2007  Revenue: Revenue for the year ended December 31, 2008 was $4,890,097 as compared to $4,564,790 for the same period in 2007.  The increase of $325,307 or approximately 7.1% was mainly due to increases of commission income fee from the existing clients, website advertising and enrollment fees income.  These increases were partially offset by a decrease in consulting income.  Commission income is based on a percentage premium paid by the insured.  Because of increase of insurance call and premium rates in the market, commission income increased by $416,956 or 9.7%.  Website advertising and enrollment frees for the year ended December 31, 2008 were $17,083 and $6,410 respectively, as compared to $10,917 and $3,227 for the same period of 2007.  The increases were mainly due to increases of customers demand and enrollment.  On the other hand, consulting income for the year ended December 31, 2008 was decreased to $146,923 from $247,921 in 2007.  The decrease of $100,998 or 40.7% was because demand for consulting services decreased.  Net Income before tax and minority interest: Net income before tax and minority interest for the year ended December 31, 2008 was $2,006,912 compared to $1,989,887 for the whole year of 2007.  The increase of $17,025 or 0.9% was mainly due to an increase of revenue during the year.  The increase was partially offset by an increase in operating expenses which will be discussed in the section below and a decrease in other income.  For the other income, the decrease was mainly due to the interest rate cut in the market resulting interest income decreased.  Operating expenses: Total operating expenses were $3,033,687 for year ended December 31, 2008, as compared to $2,805,196 for the same period in 2007.  The increase of $228,491 or 8.1% was mainly due to increase of staff cost, rent, depreciation, exchange loss and other general and administrative expenses during the year.  The reasons for the increase in the major items are as follows:  · Salaries  increased by $223,043 or 16.9% from $1,317,347 in 2007 to $1,540,390 in 2008.  The increase was mainly due to increases in headcounts and pay rates during the year of 2008. · Rent  increased by $12,507 or 2.7% from $468,307 in 2007 to $480,814 in 2008.  The increase was mainly because of the increase of rental rate and an additional flat at the existing building of the Hong Kong Office is leased for office expansion. · Depreciation  increased by $12,888 or 69.4% from $18,568 in 2007 to $31,456 in 2008.  The increase was primarily due to the addition of fixed assets during the year of 2008. · Exchange loss  increased by $11,930 or 337.4% from $3,536 in 2007 to $15,466 in 2008.  The increase was mainly due to the difference between the book rate and actual transaction rate increased during the year of 2008. · Other general and administrative expenses  increased by $8,507 or 1.7% from $489,015 in 2007 to $497,522 in 2008.  The increase was associated with building management, consumable store, medical, newspapers, periodicals and books, staff training, storage, subscriptions & membership fees, motor vehicle expenses, printing, post & stationery, repair & maintenance and telecommunication.  LIQUIDITY AND CAPITAL RESOURCES  Cash flow  For the year ended December 31, 2008, cash provided by operating activities totaled $1,504,573 compared to $1,322,756 for the fiscal year ended December 31, 2007.  The receipt of funds was primarily due to net income for the year plus increases in commissions receivable, restricted cash, other receivable, accounts payable, claims payable, other payable, accrued expenses, deferred income as well as decreases in enrolment fee receivable, deposit and prepayment, and income taxes payable.  For the year ended December 31, 2008, cash used in investing activities amounted to $238,781 compared to $18,816 for the fiscal year ended December 31, 2007.  The use of funds was for the purchase of office equipment and equity investment for long term investment purpose.   10    For the year ended December 31, 2008, cash used by financing activities amounted to $42,560, compared to $76,438 for the fiscal year ended December 31, 2007.  The decrease was due to the decrease in overdraft from bank, repayment of amount due to director partially offset by an increase in repayment of obligations under finance leases and loan of amount due to director.  Assets and liabilities  For the year ended December 31, 2008, the Groups balance sheet reflects total current assets of $5,925,703 and total current liabilities of $1,852,906.  These items increased by $1,304,804 (28.2%) and $1,225,976 (195.6%) respectively as compared to the year ended December 31, 2007.  The increase of total current assets was mainly due to increases of cash and cash equivalents and commission receivable which partially offset by enrolment fees receivable.  The increase of total current liabilities was mainly due to increases of trade accounts payable, claim payable, other payable, accrued expenses, amount due to directors, deferred revenue partially offset by a decrease of income tax payable.  As of December 31, 2008, commission receivable was $360,757 as compared to $277,130 for the same period in 2007, while trade accounts payable and claims payable were $1,425,946 and $99,652 respectively, as compared to December 31, 2007 balances of $278,222 and $90,332.  Each of these changes was due to the timing of commissions received from customers and the timing of making payments to insurers and claimants in relation to the year end.  In addition, because the rate of insurance premium paid by customers to insurers was raised, commissions receivable as well as the related balance sheet items such as restricted cash, other receivable, and trade accounts payable significantly increased during the year ended December 31, 2008.  In addition, because certain claims were received from insurers on behalf of customers, the claims payable significantly increased as compared to the year end of 2007.  As of December 31, 2008, there was $1,917 deferred revenue included in the liabilities.  This item is in relation to the income received in advance for the website advertising.  Because the interest rate is maintained at a low level in the recent years, the company purchased publicly traded equity securities with high dividend yield in the last quarter of 2008 for long term investment purpose.  As of December 31, 2008, the market value of the equity securities was $143,621.  The Company has bank and cash equivalents of approximately $5,564,247 as at December 31, 2008.  The Company has sufficient funds to satisfy its financial commitments and working capital requirements for the next twelve months.  During the year end, the Company had $0 of commitments for capital expenditures and off-balance sheet arrangements as well as lease commitments of $261,135.   CRITICAL ACCOUNTING POLICIES  Estimates And Assumptions  In preparing financial statements that conform to generally accepted accounting principles, management makes estimates and assumptions that may affect the reported amount of assets and liabilities.  Actual results could differ from these estimates.  Particularly, the areas requiring the use of management estimates relate to the valuation of accounts receivable and payable, equipment, accrued liabilities, and the useful lives for amortization and depreciation.  Earnings (Loss) Per Share  The Earnings/ (loss) per share is determined by dividing the net earnings (loss) by the weighted average number of outstanding shares during that period.  Currency  ALCO uses the Hong Kong dollar as its currency.  The exchange rate for HK$ to US dollars has varied by very little during 2007, 2006, 2005, 2004, 2003 and 2002.  Thus, the consistent exchange rate used has been 7.80 HK$ per each US dollar.  Since there have been no greater fluctuations in the exchange rate, there is no gain or loss from foreign currency translation and no resulting other comprehensive income or loss.  There were no material gains or losses recognized as a result of translating foreign currencies to the U.S. or Hong Kong dollar.  No assurance can be given as to the future value of foreign currency and how fluctuations in such value could affect ALCOs earnings.  11     The balance sheets of ALC and Chang were translated at year-end exchange rates.  Income and expenses were translated at exchange rates in effect during the year, substantially the same as the year-end rates.  Revenue Recognition  Commission revenue is recognized as of the effective date of the insurance policy or the date the customer is billed, whichever is later.  At that date, the earnings process has been completed, and the Company can reliably estimate the impact of policy cancellations based upon historical cancellation experience adjusted by known circumstances.  The Company keeps a policy cancellation reserve fund to use if policies are cancelled.  Subsequent commission adjustments are recognized upon notification from the insurance companies.  Fee income is recognized as services are rendered.  Income Taxes  Income tax expense is based on reported income before income taxes.  Deferred income taxes reflect the effect of temporary differences between assets and liabilities that are recognized for financial reporting purposes and the amounts that are recognized for income tax purposes.  In accordance with Statement of Financial Accounting Standard (SFAS) No. 109, "Accounting for Income Taxes", these deferred taxes are measured by applying currently enacted tax laws.    12    ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS N/A   ITEM 8. FINANCIAL STATEMENTS   13          ALCO, INC. FINANCIAL STATEMENTS AT DECEMBER 31, 2008    INDEX  REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM 15 CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31, 2008 AND 2007 16 CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 2008 AND 2007 17 CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEAR ENDED DECEMBER 31, 2008 AND 2007 18 CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY FOR THE YEARS ENDED DECEMBER 31, 2008 AND 200719 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 20             14    KEMPISTY & COMPANY CERTIFIED PUBLIC ACCOUNTANTS, P.C. 15 MAIDEN LANE  SUITE 1003  NEW YORK, NY 10038  TEL (212) 406-7272  FAX (212) 513-1930    REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM   Board of Directors ALCO, Inc.    We have audited the accompanying consolidated balance sheets of ALCO, Inc. as of December 31, 2008 and 2007, and the related statements of operations, changes in stockholders equity and comprehensive income, and cash flows for each of the years in the two years ended December 31, 2008.  These financial statements are the responsibility of the Companys management.  Our responsibility is to express an opinion on these financial statements based on our audits.  We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).  Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.  The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.  Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Companys internal control over financial reporting.  Accordingly, we express no such opinion.  An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.  We believe that our audits provide a reasonable basis for our opinion.  In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of ALCO, Inc. at December 31, 2008 and 2007, and the results of its operations and cash flows for each of the years in the two years ended December 31, 2008 in conformity with accounting principles generally accepted in the United States of America.  [alco10k2008ver06final001.jpg]    Kempisty & Company Certified Public Accountants, P.C. New York, New York March 2, 2009     15    ALCO, INC   CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31, 2008 AND 2007 December 31,20082007ASSETSCurrent Assets:Cash and cash equivalents (Note 3)$5,564,247$4,341,015Commissions receivable, net (Note 5)360,757277,130Enrolment fee receivable6992,754Total current assets5,925,7034,620,899Property, plant and equipment, net (Note 6)128,93471,237Other assets:Deposit and prepayments71,04684,637Restricted Cash (Note 4)1,444,178486,217Equity investment (Note 7)143,621-Other receivable436,64824,675Total other assets2,095,493595,529Total Assets$8,150,130$5,287,665LIABILITIES AND STOCKHOLDERS' EQUITYCurrent Liabilities:Trade accounts payable1,425,946278,222Claim payable99,65290,332Other payable208,293132,720Accrued expenses58,02246,882Due to directors (Note 9)15,49614,946Due to Minority shareholders (Note 8)40,83340,833Income tax payable40520,910Deferred revenue1,917-Current portion of obligation from Hire Purchase lease (Note 10)2,3422,085Total Current Liabilities1,852,906626,930Long term portion of obligation from hire purchases lease (Note 10)3,2845,626Minority interest28,76312,572Commitments and contingencies (Note 15)--Stockholders' Equity:Preferred stock, par value $0.01, 5,000,000 shares authorized;no shares issued and outstanding--Common stock, par value $0.001, 50,000,000 shares authorized;10,150,000 shares issued and outstanding as of December 31, 2008 and2007 (Note 14)10,15010,150Additional Paid-in capital60,36360,363Accumulated other comprehensive income(5,943)-Retained earnings6,200,6074,572,024Stockholders' Equity6,265,1774,642,537Total Liabilities and Stockholders' Equity$8,150,130$5,287,665See Notes to Financial Statements  16      ALCO, INC  CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 2008 AND 2007 For the Year ended
December 31,20082007RevenuesCommission income$4,719,681$4,302,725Consulting income146,923247,921Website advertising17,08310,917Enrollment fee income6,4103,227Total revenues4,890,0974,564,790Operating ExpensesSalaries1,540,3901,317,347Travel expenses303,686309,048Rents480,814468,307Bad debt expenses164,353199,375Depreciation31,45618,568Exchange loss15,4663,536Other general and administrative497,522489,015Total Operating Expenses3,033,6872,805,196Income (Loss) from Operations1,856,4101,759,594Other Income (Expense)Interest income63,307123,730Other Income86,841109,492Investment income (Note 7)1,008-Interest expense(654)(2,929)Total Other Income150,502230,293Income before provisionfor Income Taxes and Minority Interest2,006,9121,989,887Provision for Income Taxes (Note 12)321,113346,944Income before Minority Interest1,685,7991,642,943Minority Interest(57,216)(40,885)Net Income$1,628,583$1,602,058Other Comprehensive Income- Net unrealized losses on investments(5,943)-Comprehensive Income$1,622,640$1,602,058Basic and Fully Diluted Earnings per Share$0.16$0.16Weighted average shares outstanding$10,150,000$10,028,767See Notes to Financial Statements  17    ALCO, INC  CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEAR ENDED DECEMBER 31, 2008 AND 2007 For the Year EndedDecember 31,20082007Operating ActivitiesNet income$1,628,583$1,602,058Adjustments to reconcile net income tonet cash provided by operating activities:Depreciation31,45618,568Insurance of shares for financial service-50,000Minority interest (income)57,21640,885Fixed asset written off64-Changes in operating assets and liabilities:(Increase)/Decrease in commission receivable (net)(83,627)(45,526)(Increase)/Decrease in restricted cash(957,961)1,117,727(Increase)/Decrease in enrolment fee receivable2,055(2,754)(Increase)/Decrease in deposit and prepayment13,591(28,508)(Increase)/Decrease in other receivable(411,973)7,417Increase/(Decrease) in accounts payable1,147,724(235,524)Increase/(Decrease) in claims payable9,320(1,211,254)Increase/(Decrease) in other payable75,573132,225Increase/(Decrease) in accrued expenses11,140(109,706)Increase/(Decrease) in deferred income1,917(1,917)Increase/(Decrease) in income tax payable(20,505)(10,935)Net cash (used) / provided by operating activities1,504,5731,322,756Investing ActivitiesPurchase of fixed assets(89,217)(18,816)Purchase of equity investment(149,564)-Net cash (used) by investing activities(238,781)(18,816)Financing ActivitiesOverdraft from bank-(43,292)Dividend paid to minority shareholders(41,025)(41,026)Repayment of obligations under finance leases(2,085)(1,827)Loan of amount due to minority shareholders-10,256Repayment of amount due to director-(549)Loan of amount due to director550-Net cash provided / (used) by financing activities(42,560)(76,438)Increase in cash1,223,2321,227,502Cash at beginning of period4,341,0153,113,513Cash at end of period$5,564,247$4,341,015Supplemental Disclosures of Cash Flow Information:Cash paid (receive) during year for:Interest$654$2,929Income taxes$341,618$357,878See Notes to Financial Statements  18    ALCO, INC  CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY FOR THE YEARS ENDED DECEMBER 31, 2008 AND 2007 AccumulatedCommon StockAdditionalRetainedOther$0.001  Par ValuePaid-inEarningsComprehensiveSharesAmountCapital(Deficit)IncomeTotalBalances at December 31, 200610,000,000$10,000$10,513$2,969,966$-$2,990,479Common stock issued foracquisition of corporatefinance service150,00015049,850--50,000Net income---1,602,058-1,602,058$1,602,058Balances at December 31, 200710,150,00010,15060,3634,572,024-4,642,5371,602,058Net income1,628,583-1,628,5831,625,583Net unrealized losseson investments----(5,943)(5,943)(5,943)Balances at December 31, 200810,150,000$10,150$60,363$6,200,607$(5,943)$6,265,177$1,622,640See Notes to Financial Statements        19    ALCO, INC.   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2008  Note 1  ORGANIZATION AND OPERATIONS  Description of Business  ALCO, Inc. (ALCO, we, us, the Company) was incorporated under the laws of the State of Nevada on June 7, 1999 as Seahorse, Inc. and changed its name to Lotus Capital Corp. (Lotus) on September 20, 2004.  The Company changed its name to ALCO, Inc. on February 13, 2006.  The Company is principally engaged in the marine insurance brokerage business in the Asia Pacific region, through its wholly owned subsidiary, AL Marine Holdings (BVI), Ltd., a British Virgin Islands corporation ("AL Marine").  Under the terms of the Agreement for the Share Exchange, Lotus has agreed to acquire all of the issued and outstanding stock of AL Marine and $50,000 in a share exchange transaction, in return for the issuance of 9,766,480 shares of stock of Lotus.  Upon closing under the Agreement for Share Exchange, AL Marine would become a wholly-owned subsidiary of Lotus.  AL Marine is the 100% owner of Andrew Liu and Co., Ltd., a corporation principally engaged in the business of marine insurance brokerage in Asia.  AL Marine owns 60% of Chang An Consultants Ltd., a joint venture with China Changjiang National Shipping Corporation (CSC Group) that serves as a vehicle for the provision of marine insurance brokerage and other marine business services by AL Marine.  AL Marine owns 85% of EdushipAsia Ltd.  In 2005 and 2004, EdushipAsia Ltd was appointed as an exclusive agent by the Institute of Chartered Shipbrokers (UK) (ICS) to set up ICSs first distant learning centre in Shanghai, PRC.  As a result of the Agreement, the transaction was treated for accounting purposes as a capital transaction and reverse merger by the accounting acquirer (AL Marine) and as a reorganization of the accounting acquiree (Lotus).  Accordingly, the financial statements include the following:  n The balance sheet consists of the net assets of the acquirer at historical cost and the net assets of the acquiree at historical cost; and  n The statements of operations include the operations of the acquirer for the years presented and the operations of the acquiree from the date of the merger.  ALCO, Inc. and AL Marine are hereafter referred to as the Company.  Control by Principal Stockholders  The directors, executive officers, their affiliates and related parties own, beneficially and in the aggregate, the majority of the voting power of the outstanding share capital of the Company.  Accordingly, directors, executive officers and their affiliates, if they voted their shares uniformly, would have the ability to control the approval of most corporate actions, including approving significant expenses, increasing the authorized capital stock and the dissolution, merger or sale of the Company's assets.  20    ALCO, INC.  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2008  Note 2  SIGNIFICANT ACCOUNTING POLICIES  Economic and Political Risks  The Company faces a number of risks and challenges since its assets are located in Hong Kong, a Special Administrative Region of the People's Republic of China ("PRC"), and its revenues are derived from its operations therein.  The PRC is a developing country with an early stage market economic system, overshadowed by the state.  Its political and economic systems are very different from the more developed countries and are in a state of change.  The PRC also faces many social, economic and political challenges that may produce major shocks and instabilities and even crises, in both its domestic arena and in its relationships with other countries, including the United States.  Such shocks, instabilities and crises may in turn significantly and negatively affect the Company's performance.  Basis of Presentation  The consolidated financial statements include the accounts of the Company and all its majority-owned subsidiaries which require consolidation.  Inter-company transactions have been eliminated in consolidation.  The accompanying financial statements are prepared in accordance with generally accepted accounting principles in the United States of America ("US GAAP").  This basis of accounting differs from that used in the statutory accounts of the Company, which are prepared in accordance with the "Hong Kong Accounting Standard" ("HKAS").  The consolidated financial statements have been prepared in accordance with US GAAP and the instructions to Form 10-K and Regulation S-K.  In the opinion of management, all adjustments (which include normal recurring adjustments) considered necessary to present fairly the financial position, results of operations and cash flows at December 31, 2008 and 2007 for all periods presented have been made.  Certain accounting principles, which are stipulated by US GAAP, are not applicable in the HKAS.  The difference between HKAS accounts of the Company and its US GAAP financial statements is immaterial.  The Company maintains its books and accounting records in Hong Kong dollar ("HK$"), which is determined as the functional currency.  Assets and liabilities of the Company are translated at the prevailing exchange rate at each year end.  Contributed capital accounts are translated using the historical rate of exchange when capital is injected.  Income statement accounts are translated at the average rate of exchange during the year.  Translation adjustments arising from the use of different exchange rates from period to period are included in the cumulative translation adjustment account in shareholders' equity.  Gain and losses resulting from foreign currency transactions are included in operations.  21    ALCO, INC.  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2008  Note 2  SIGNIFICANT ACCOUNTING POLICIES (continued)  Concentration of Credit Risk  Financial instruments which subject the Company to concentrations of credit risk consist principally of accounts receivable and cash.  Exposure to losses on receivables is dependent on each customer's financial condition.  The Company controls its exposure to credit risk through a process of credit approvals, credit limits and monitoring procedures, establishing allowances for anticipated losses.  Use of Estimates  The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reporting period.  Actual results, when ultimately realized could differ from those estimates.  Significant Estimates  Several areas require significant management estimates relating to uncertainties for which it is reasonably possible that there will be a material change in the near term.  The more significant areas requiring the use of management estimates relate to the valuation of accounts receivable and payable, equipment, accrued liabilities, and the useful lives for amortization and depreciation.  Revenue Recognition  Commission revenue is recognized as of the effective date of the insurance policy or the date the customer is billed, whichever is later.  At that date, the earnings process has been completed and the Company can reliably estimate the impact of policy cancellations based upon historical cancellation experience adjusted by known circumstances.  The policy cancellation reserve is periodically evaluated and adjusted as necessary.  Subsequent commission adjustments are recognized upon notification from the insurance companies.  Commission revenues are reported net of commissions paid to sub-brokers.  Fee income is recognized as services are rendered.  Cash and Cash Equivalents  The Company invests idle cash primarily in money market accounts, certificates of deposit and short-term commercial paper.  Money market funds and all highly liquid debt instruments with an original maturity of three months or less are considered cash equivalents.   22    ALCO, INC.  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2008  Note 2  SIGNIFICANT ACCOUNTING POLICIES (continued)  Commissions and Other Receivables  Commissions and other receivables are recognized and carried at original invoice amount less an allowance for any uncollectible amounts.  An estimate for doubtful accounts is made when collection of the full amount becomes questionable.  We made allowance for doubtful accounts based on a review of all outstanding amounts on a monthly basis.  We analyze the aging of receivable balances, historical bad debts, customer concentrations, customer credit-worthiness, current economic trends and changes in our customer payment terms.  Significant changes in customer concentration or payment terms, deterioration of customer credit-worthiness or weakening in economics trends could have a significant impact on the collectibility of receivables and the allowance.  If the financial condition of our customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances will be made.  Allowances are applied to commissions and other receivables where events or changes in circumstance indicate that the balances may not be collectible.  The identification of doubtful debts requires the use of judgment and estimates as mentioned above.  Where the expectation on or the actual recoverability of commissions and other receivables is different from the original estimate, such difference will impact the carrying value of commissions and other receivables and doubtful debts expenses in the periods in which such estimate is changed or the receivable are collected.  Property, Plant and Equipment  Property, plant and equipment are carried at cost.  The cost of repairs and maintenance is expensed as incurred; major replacements and improvements are capitalized.  When assets are retired or disposed of, the cost and accumulated depreciation are removed from the accounts, and any resulting gains or losses are included in the income statement in the year of disposition.  Depreciation is calculated on a straight-line basis over the estimated useful life of the assets.  The annual percentages applied are:  Motor vehicles 20% Furniture and fixtures 15% Office equipment 15% Leasehold improvements 20%   Accounts Payable and Claims Payable  In its capacity as an insurance agent or broker, the Company collects premiums from customers and, after deducting its commissions, remits the premiums to the respective insurers; the Company also collects claims or refunds from insurers on behalf of customers.  Unremitted insurance premiums and claims are held in a fiduciary capacity.  The obligation to remit premiums is recorded as accounts payable and the obligation to remit claims and refunds is recorded as claims payable on the balance sheet.   23    ALCO, INC.  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2008  Note 2  SIGNIFICANT ACCOUNTING POLICIES (continued)  Pension Costs  Mandatory contributions are made to the Hong Kong's Mandatory Provident Fund (MPF), based on a percentage of the employees' basic salaries.  The cost of these payments are charged to the profit and loss accounts as they become payable in accordance with the rule of the MPF Scheme.  The employer contributions vest fully with the employees when contributed into the MPF Scheme.  Income Taxes  Income tax expense is based on reported income before income taxes.  Deferred income taxes reflect the effect of temporary differences between assets and liabilities that are recognized for financial reporting purposes and the amounts that are recognized for income tax purposes.  In accordance with Statement of Financial Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes, these deferred taxes are measured by applying currently enacted tax laws.  The effective tax rate was 17.5% in 2007 and 16.5% in 2008.  The Company did not provide any current or deferred income tax provision or benefit for any period presented to date because book income is substantially equal to taxable income, with only minor timing differences with regard to the depreciation of fixed assets.  Management has determined that any deferred tax asset or liability is inconsequential, and not material to the financial statements.  Fair Value of Measurements  The Company adopted Statement of Financial Accounting Standards No. 157, Fair Value Measurements (SFAS 157), effective January 1, 2008.  The provisions of SFAS 157 are to be applied prospectively.  SFAS 157 clarifies that fair value is an estimate of the exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants (i.e., the exit price at the measurement date).  Under SFAS 157, fair value measurements are not adjusted for transaction cost.  SFAS 157 provides for use of a fair value hierarchy that prioritizes inputs to valuation techniques used to measure fair value into three levels:  Level 1: Unadjusted quoted prices in active markets for identical assets or liabilities  Level 2: Input other than quoted market prices that are observable, either directly or indirectly, and reasonably available.  Observable inputs reflect the assumptions market participants would use in pricing the asset or liability and are developed based on market data obtained from sources independent of the Company.  Level 3: Unobservable inputs.  Unobservable inputs reflect the assumptions that the Company develops based on available information about what market participants would use in valuing the asset or liability.  An asset or liabilitys level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement.  Availability of observable inputs can vary and is affected by a variety of factors.  The Company uses judgment in determining fair value of assets and liabilities and Level 3 assets and liabilities involve greater judgment than Level 1 and Level 2 assets or liabilities.    24    ALCO, INC.  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2008  Note 2  SIGNIFICANT ACCOUNTING POLICIES (continued)  Valuation of Long-Lived assets  The Company accounts for impairment of plant and equipment and amortizable intangible assets in accordance with SFAS No. 144, Accounting for Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed Of, which requires the Company to evaluate a long-lived asset for recoverability when there is event or circumstance that indicate the carrying value of the asset may not be recoverable.  An impairment loss is recognized when the carrying amount of a long-lived asset or asset group is not recoverable (when carrying amount exceeds the gross, undiscounted cash flows from use and disposition) and is measured as the excess of the carrying amount over the assets (or asset groups) fair value.  Related Party Transactions  The captions "Due from directors" and "Due from related companies" represent loans receivable that are unsecured, non-interest bearing and have no fixed terms of repayment, and therefore are not considered current assets.  The related companies are owned by directors of the Company.  The captions "Due to director" and "Due to related company" represent loans payable that are unsecured, non-interest bearing and have no fixed terms of repayment, therefore, deemed payable on demand.  The related company is a development company owned by directors of the Company.  The Company rents office space in Hong Kong and quarter in Shanghai from a company owned by directors of the Company.  Foreign Currency and Other Comprehensive Income  The accompanying financial statements are presented in United States (US) dollars.  The functional currency is the Hong Kong dollar (HK$).  The financial statements are translated into US dollars from HK$ at year-end exchange rates for assets and liabilities, and weighted average exchange rates for revenues and expenses.  Capital accounts are translated at their historical exchange rates when the capital transactions occurred.  The Hong Kong Monetary Authority (HKMA), Hong Kong's central bank, maintains a Linked Exchange Rate System since 1983.  The HKMA operates Convertibility Undertakings on both the strong side and the weak side of the Linked Rate of US$1: HK$7.8.  In fact, the exchange rate for HK$ to US dollars has varied by only 100ths during 2008 and 2007.  Thus, the consistent exchange rate used has been 7.80 HK$ per each US dollar.  Since there have been no greater fluctuations in the exchange rate, there is no gain or loss from foreign currency translation and no resulting other comprehensive income or loss.  Foreign currency transactions are those that required settlement in a currency other than HK$.  Gain or loss from foreign currency transactions, or exchange loss, are recognized in income in the period they occur.      25    ALCO, INC.  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2008  Note 2  SIGNIFICANT ACCOUNTING POLICIES (continued)  Earnings (Loss) Per Share  Basic earnings (loss) per share is computed by dividing income (loss) available to common shareholders by the weighted-average number of common shares outstanding during the period.  Diluted earnings per share is computed similar to basic earnings per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive.  Since the Companys common stock currently does not trade, the dilutive effect of any warrants or convertible notes outstanding cannot be determined.  Recently Adopted Accounting Principles  In September 2006, the Financial Accounting Standards Board (FASB) issued SFAS No. 157, "Fair Value Measurements".  SFAS No. 157 defines fair value, establishes a framework and gives guidance regarding the methods used for measuring fair value, and expands disclosures about fair value measurements.  In February 2008, the FASB issued FASB Staff Position 157-1, "Application of FASB Statement No. 157 to FASB Statement No. 13 and Other Accounting Pronouncements That Address Fair Value Measurements for Purposes of Lease Classification or Measurement under Statement 13" ("FSP 157-1") and FASB Staff Position 157-2, "Effective Date of FASB Statement No. 157" ("FSP 157-2").  FSP 157-1 amends SFAS No. 157 to remove certain leasing transactions from its scope.  FSP 157-2 delays the effective date of SFAS No. 157 for all non-financial assets and non-financial liabilities, except for items that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually), until fiscal years beginning after November 15, 2008.  SFAS No. 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years.  The Company adopted SFAS No. 157 effective January 1, 2008 for all financial assets and liabilities as required.  The adoption of SFAS No. 157 was not material to the Company's financial statements or results of operations.  In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities  Including an Amendment of FASB Statement No. 115, which is effective for fiscal years beginning after November 15, 2007.  SFAS No. 159 is an elective standard which permits an entity to choose to measure many financial instruments and certain other items at fair value at specified election dates.  Subsequent unrealized gains and losses on items for which the fair value option has been elected will be reported in earnings.  The Company has not elected the fair value option for any assets or liabilities under SFAS No. 159.    Recent Accounting Pronouncements  On December 4, 2007, the FASB issued SFAS No. 160, Noncontrolling interest in Consolidated Financial Statements.  SFAS No. 160 requires all entities to report noncontrolling (minority) interests in subsidiaries as equity in the consolidated financial statements.  The statement establishes a single method of accounting for changes in a parents ownership interest in a subsidiary that do not result in deconsolidation and expands disclosures in the consolidated financial statements.  SFAS No. 160 is effective for fiscal years beginning after December 15, 2008 and interim periods within those fiscal years.  We have not yet determined the impact of the adoption of SFAS No. 160 on our consolidated financial statements and footnote disclosures.   26    ALCO, INC.  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2008  Note 2  SIGNIFICANT ACCOUNTING POLICIES (continued)  On December 4, 2007, the FASB issued SFAS No.141R, Business Combinations.  SFAS No. 141R requires the acquiring entity in a business combination to recognize all the assets acquired and liabilities assumed, establishes the acquisition date fair value as the measurement objective for all assets acquired and liabilities assumed, and requires the acquirer to expand disclosures about the nature and financial effect of the business combination.  SFAS No. 141R is effective for business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008.  We have not yet determined the impact of the adoption of SFAS No. 141R on our consolidated financial statements and footnote disclosures.  In March 2008, the FASB issued SFAS No. 161, Disclosures about Derivative Instruments and Hedging Activities.  The new standard is intended to improve financial reporting about derivative instruments and hedging activities by requiring enhanced disclosures to enable investors to better understand their effects on an entitys financial position, financial performance, and cash flows.  It is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008, with early application encouraged.  The Company is currently evaluating the impact of adopting SFAS No. 161 on its consolidated financial statements.  In April 2008, the FASB issued Staff Position FAS 142-3, Determination of the Useful Life of Intangible Assets (FSP FAS 142-3) which amends the factors an entity should consider in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under FAS No. 142, Goodwill and Other Intangible Assets (FAS No. 142).  FSP FAS 142-3 applies to intangible assets that are acquired individually or with a group of assets and intangible assets acquired in both business combinations and asset acquisitions.  It removes a provision under FAS No. 142, requiring an entity to consider whether a contractual renewal or extension clause can be accomplished without substantial cost or material modifications of the existing terms and conditions associated with the asset.  Instead, FSP FAS 142-3 requires that an entity consider its own experience in renewing similar arrangements.  An entity would consider market participant assumptions regarding renewal if no such relevant experience exists.  FSP FAS 142-3 is effective for year ends beginning after December 15, 2008 with early adoption prohibited.  We have not yet determined the effect, if any, of the adoption of this statement on our financial condition or results of operations.  In June 2008, the FASB issued FSP No. EITF 03-6-1, Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities (FSP EITF 03-6-1).  FSP EITF 03-6-1 concludes that unvested share-based payment awards that contain rights to receive non-forfeitable dividends or dividend equivalents are participating securities, and thus, should be included in the two-class method of computing earnings per share (EPS).  FSP EITF 03-6-1 is effective for fiscal years beginning after December 15, 2008, and interim periods within those years.  Early application of EITF 03-6-1 is prohibited.  It also requires that all prior-period EPS data be adjusted retrospectively.  We have not yet determined the effect, if any, of the adoption of this statement on our financial condition or results of operations.    27    ALCO, INC.  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2008  Note 3  CASH December 31,December 31,Cash consist of the following:20082007Cash in hand$6,991$6,436Cash in bank - Saving & CheckingChina Construction Bank (Asia) (formerly known as Bank of America (Asia))3,014,9601,816,445United Overseas Bank5,6575,459Bank of China5,2545,331Cash in bank - Fixed Deposit2,531,3852,507,344$5,564,247$4,341,015  Cash balances are held principally at one financial institution and are not insured.  The Company believes it mitigates its risk by investing in or through major financial institutions.  Recoverability is dependent upon the performance of the institution.  Although the cash balances are not insured, however, starting in September 2006, cash balances (except accounts with overdraft facilities) are protected by the Deposit Protection Scheme which is maintaining by the Hong Kong Deposit Protection Board, an independent statutory body established under the Deposit Protection Scheme Ordinance (Cap. 581).  Under the scheme, compensation up to a limit of HK$100,000 (approximately US$12,821) will be paid from the scheme to depositor if the bank with which the depositor holds his/her eligible deposits fails.  In addition, on October 14, 2008, the Hong Kong Government announced that they would use the Exchange Fund to guarantee the repayment of all customer deposits held in authorized institutions in Hong Kong, following the principles of the Deposit Protection Scheme.  This action began on October 14, 2008 and will remain in force until the end of 2010.  Note 4  RESTRICTED CASH  Restricted cash are cash balances held by a bank, mainly consisting of premiums collected from customers and payable to insurers, and claims received from insurers and payable to policyholders.  When the Company receives a premium from a customer, it debits the lump sum amount into one bank account and establishes a schedule to keep track of the amount of premium payable to the insurer.  At the monthly closing, the Company reclassifies the amount of premium payable to insurers as restricted cash.  Also, when the Company receives a claim on behalf of a policyholder, it debits restricted cash and credits claims payable and other payables, if necessary.  The restricted cash balance for December 31, 2008 and 2007 are as follows:  December 31,December 31,20082007Restricted cash$1,444,178$486,217   28    ALCO, INC.  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2008  Note 5  COMMISSIONS RECEIVABLE December 31,December 31,Commissions receivable consist of the following:20082007Commissions receivable$663,649$490,651Less: allowances for doubtful accounts302,892213,521$360,757$277,130    Note 6  PROPERTY, PLANT AND EQUIPMENT December 31,December 31,Property, Plant and Equipment consists of the following:20082007Furniture and fixtures$164,403$157,836Office equipment153,803117,533Leasehold improvements97,59593,255Motor Vehicle41,787-457,588368,624Less: Accumulated depreciation328,654297,387$128,934$71,237  Depreciation expense for the years ended December 31, 2008 and 2007 was $31,456 and $18,568 respectively.   Note 7  FAIR VALUE OF INVESTMENTS AND INVESTMENT INCOME  The following are the Companys investments owned and securities sold short by level within the fair value hierarchy at December 31, 2008:  Fair valueAssetsFair valueHierarchyStocks$143,621Level 1  At December 31, 2008, unrealized losses of $5,943 are related to investments listed in Hong Kong Stock Exchange.  December 31,December 31,Investment Income20082007Dividend from the publicly traded equity securities$1,008$-    29    ALCO, INC.  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2008  Note 8  DUE TO MINORITY SHAREHOLDERS December 31,December 31,Due to shareholders consist of the following:20082007CSC Enterprises Development (HK) Co Ltd$41,025$41,025Chiang Wei Heng Henry(128)(128)Chin Tsu- Kuang(64)(64)$40,833$40,833    Note 9  DUE TO DIRECTORS December 31,December 31,Due to directors consist of the following:20082007Andrew Liu Fu Kang$15,496$14,946    Note 10  CAPITAL LEASE  On April 27, 2006, the Company entered into a lease agreement with Hitachi Credit (HK) Ltd.  The related contractual obligations are summarized as follows:  200920102011TotalPayment Due$2,738$2,738$685$6,161Less: Interest3961390535Principle$2,342$2,599$685$5,626  The term of the lease is 60 months with $228 as its monthly payment.  The leased property was capitalized as office equipment in 2006 by the amount of the total principal, $10,739 and the related depreciation expense in 2008 is $1,611 with the same amount in 2007.  The principal due within one year is the current portion of long term debt and classified as current liability.    30    ALCO, INC.  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2008  Note 11  RELATED PARTY TRANSACTION  The Company rents office space in Hong Kong and Shanghai from companies owned by directors of the Company.  The relevant rent expenses consist of following:  December 31,December 31,20082007LocationLandlordHK Office Room 501 & 502AFortune Ocean Ltd$143,077$143,077HK Office Room 502BFortune Ocean Ltd46,15446,154Shanghai Office and quarterFortune Ocean and Andrew Liu Fu Kang30,76951,282Director (Andrew) quarterFirst Pacific Development Ltd20,00020,000$240,000$260,513   Note 12  INCOME TAXES  The Company's effective tax rate for the year ended December 31, 2008 and 2007 was 16.50% and 17.50%, respectively.  The provisions for income taxes for the year ended December 31, 2008 and 2007 are summarized as follows:   Hong Kong only:20082007Current$321,113$346,944Deferred--$321,113$346,944      31    ALCO, INC.  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2008  Note 13  OPERATION LEASE  Future minimum lease payments for operating leases for the succeeding years consists of following:  20092010TotalCarmel Hill, Hong Kong (Director Quarter)$138,462$69,231$207,692Room 1618A, Bank of America Tower, Hong Kong (Hong Kong Office)34,981-34,981Union Building, Shanghai, China (Shanghai Office)18,462-18,462$191,904$69,231$261,135  The Company has three material operating lease commitments for its facilities.  The initial term of the lease arrangement for Director Quarter is 2 years beginning July 19, 2008 with a minimum lease commitment of $207,692.  The initial term of the lease arrangement for the Hong Kong Office is 2 years beginning November 30, 2007 with a minimum lease commitment of $34,981.  For the Shanghai Office, the initial term of the lease is 2 years beginning July 3, 2007 with a minimum lease commitment of $18,462.  All the lease arrangements mentioned above have no renewal option and rent holiday.   Note 14  COMMON STOCK  During the year ended December, 2007, the Company issued 150,000 shares of common stock in reliance upon exemptions from registration under the Securities Act of 1933.  The shares were issued to the Brean Murray, Carret & Co. on or about October 23, 2007, for total consideration of $50,000, or $0.33 per share.  The consideration was made for payment of services valued at $50,000 in conjunction with developing with the Company a program to introduce the Company to institutional investors, providing general financial advice and undertaking specific investment banking transactions and/or advisory assignment.  The shares were issued in reliance upon an exemption from registration provided by Section 4(2) under the Securities Act of 1933.   Note 15  COMMITMENTS AND CONTINGENCIES  The Company's business operations exist solely in the PRC and are subject to significant risks not typically associated with companies in North America and Western Europe.  These include risks associated with, among others, the political, economic and legal environments and foreign currency limitations.  The Company's results may thus be adversely affected by changes in the political and social conditions in the PRC, and by changes in governmental policies, laws, regulations, anti-inflationary measures, currency conversion and remittance limitation, and rates and methods of taxation, among other things.   32    ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE  None.   ITEM 9A(T). CONTROLS AND PROCEDURES  Management's Annual Report on Internal Control over Financial Reporting  The Companys management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934.  The Companys internal control over financial reporting is designed to provide reasonable assurance for the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles.  Because of its inherent limitations (further discussed in next paragraphs below), internal control over financial reporting may not prevent or detect misstatements.  Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.  The Companys management assessed the effectiveness of the Companys internal control over financial reporting as of December 31, 2008.  In this assessment, the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework were used.  Based on our assessment, management believes that the Company maintained effective internal control over financial reporting as of December 31, 2008.  Inherent Limitations in Control Systems  A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met.  Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs.  Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected.  These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake.  Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control.  The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.  Over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate.  Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.  As a result, our management, including the Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls and procedures, or our internal control over financial reporting, will prevent all error and all fraud.  Evaluation of Disclosure on Controls and Procedures  The Company's management, with the participation of the chief executive officer and the chief financial officer, carried out an evaluation of the effectiveness of the design and operation of the Company's "disclosure, controls and procedures" (as defined in the Exchange Act Rules 13a-15(3) and 15-d-15(3) as of the end of the period covered by this annual report (the "Evaluation Date").  Based upon that evaluation, the chief executive officer and the chief financial officer concluded that, as of the Evaluation Date, the Company's disclosure controls and procedures are designed to provide reasonable assurance of achieving the objectives of timely alerting them to material information required to be included in our periodic SEC reports and of ensuring that such information is recorded, processed, summarized and reported within the time periods specified.  Our chief executive officer and chief financial officer also concluded that our disclosure controls and procedures were effective as of December 31, 2008 to provide reasonable assurance of the achievement of these objectives.   33    This annual report does not include an attestation report of the company's registered public accounting firm regarding internal control over financial reporting.  Management's report was not subject to attestation by the company's registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the company to provide only management's report in this annual report.   Changes in Internal Control over Financial Reporting  There have not been any changes in our internal control over financial reporting (as such term is defined in Rule 13a-15(f) under the Exchange Act) or any other factors during the quarter of the fiscal year ended December 31, 2008, that have materially affected, or are reasonably likely to materially affect our internal control over financial reporting.    ITEM 9B. OTHER INFORMATION  None   PART III   ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE  DIRECTORS AND OFFICERS  The directors and executive officers currently serving ALCO are as follows:  NameAgePositionDirector/Officer SinceAndrew Liu Fu Kang48President and Chairman of the Board2005John Liu Shou Kang49Director2005Colman Au Kwok Wai42Chief Financial Officer, Secretary2008  BIOGRAPHICAL INFORMATION  Mr. Andrew Liu Fu Kang, is the founder and Chairman of AL Marine and has been the Chairman and Chief Executive Officer of the Company since December 9, 2005.  He is responsible for the overall management, development, and strategic planning of AL Marine.  He also oversees certain key client accounts and is frequently consulted on insurance claims of a more complex nature.  Before establishing AL Marine, he worked for Richard Hogg International Adjusters in London and Stevens Elmslie & Co. in Hong Kong for a total of 6 years handling all aspects of shipowners rights under the hull policy and vis-a-vis third parties, such as general average and salvage, legal defense work and arbitrations.  He was awarded an honors degree in Naval Architecture & Shipbuilding from the University of Newcastle Upon Tyne, U.K, a Masters degree in Marine Law from Cardiff University, U.K and a Diploma in International Trade Law from the City of London Polytechnic.  He passed the Common Professional Exams in Law from Manchester Polytechnic.  He is a member of the Chartered Insurance Institute and the Chartered Institute of Shipbrokers.  He is the brother of John Liu Shou Kang.  Mr. John Liu Shou Kang is a Director of AL Marine and has been a Director and Vice President of the Company since December 9, 2005.  He is responsible for the overall management of AL Marine, in particular, human resources and operational activities.  Prior to joining AL Marine in 1990, he worked in Sembawang Shipyard, Singapore for 2 years and was in charge of the supervision of all aspects of ship repairs including, design, conversion and costing.  He later worked in Sembawang Shipping Co., Singapore for another 4 years as manager in charge of operations including charter parties, litigation and Hull and P&I claims.  He  34    was awarded an honors degree in Naval Architecture & Shipbuilding from the University of Newcastle Upon Tyne, U.K and a Masters degree in International Shipping from Plymouth University, U.K.  He is the brother of Andrew Liu Fu Kang.  Mr. Colman Au Kwok Wai is the newly appointed on January 7, 2008 as Financial Controller of AL Marine and the Chief Financial Officer and Secretary of the Company.  He has worked for an accounting firm and a number of listed companies and multi-national corporations in Hong Kong and China and has over 15 years' experience in internal auditing, statutory auditing and accounting.  From September 2002 to November 2004, he was the Internal Audit Manager of Huawei Technology Co., Ltd, a China based multi-national corporation specializing in development, production and sales of communication equipment and solutions for telecom carriers, where he was responsible for performing risk assessments, preparing audit plans and conducing audit reviews on the operations of Huawei in China, Hong Kong and overseas.  From November 2004 to January 2008, he was the Senior Internal Audit Manager of Esquel Enterprises Limited, a Hong Kong based Multi-national corporation with production facilities in China, Hong Kong and overseas producing premium cotton shirts for high-end brand names, where he was responsible for overseeing the internal audit function of the operations of Esquel in China and Hong Kong.  He obtained a Bachelor of Commerce degree in Accounting from the Curtin University of Technology in 1999 and a Master degree in Professional Accounting from the Hong Kong Polytechnic University in 2002.  He is a fellow member of the Association of Chartered Certified Accountants, a member of Hong Kong Institute of Certified Public Accountants, a certified information system auditor (CISA) of the Information Systems Audit and Control Association and a certified internal auditor (CIA) of the Institute of Internal Auditors.   COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT  Section 16(a) of the Securities Exchange Act of 1934, as amended, requires each of our officers and directors and each person who owns more than 10% of a registered class of our equity securities to file with the SEC an initial report of ownership and subsequent reports of changes in such ownership.  Such persons are further required by SEC regulation to furnish us with copies of all Section 16(a) forms (including Forms 3, 4 and 5) that they file.  Based solely on our review of the copies of such forms received by us with respect to fiscal year 2008, or written representations from certain reporting persons, we believe all of our directors and executive officers met all applicable filing requirements.    ITEM 11. EXECUTIVE COMPENSATION  The following table provides summary information concerning compensation awarded to, earned by, or paid to any of ALCOs officers and directors for all services rendered to ALCO and its consolidated subsidiaries, in all capacities for the fiscal years ended December 31, 2006, 2007 and 2008.  Name and Principal PositionYearSalary ($)Bonus  ($)Stock Awards ($)Option Awards ($)Non-equity Incentive Plan Compensation ($)Change in Pension Value and Nonqualified Deferred Compensation EarningsAll Other Compensation ($)Total Compensation ($)Andrew Liu, CEO2006$151,474$53,689--------$21,538 (1)$226,7012007$169,488$39,103--------$52,099 (2)$260,6902008$207,194$47,976--------$55,948 (3)$311,118Yip Kam Ming, ex-CFO2006$66,848$8,333--------$17,333 (4)$92,5142007$75,692$6,564--------$18,153 (5)$100,4092008----------------  35     Colman Au, CFO2006----------------2007----------------2008$90,947$7,566--------$1,538 (6)$100,051 (1) Includes expense reimbursement of $20,000 and Mandatory Provident Fund contributions of $1,538. (2) Includes expense reimbursement of $50,561 and Mandatory Provident Fund contributions of $1,538. (3) Includes expense reimbursement of $54,410 and Mandatory Provident Fund contributions of $1,538. (4) Includes expense reimbursement of $15,795 and Mandatory Provident Fund contributions of $1,538. (5) Includes expense reimbursement of $16,615 and Mandatory Provident Fund contributions of $1,538. (6) Being Mandatory Provident Fund contributions of $1,538.  The Mandatory Provident Fund is a compulsory savings/retirement scheme for the residents of Hong Kong.  Most employees and employers are required to contribute monthly to schemes provided by government approved private organizations.  Contributions are based on a percentage of an employees salaries.  The contribution vests fully with the employee immediately upon payment into the scheme.  Director Compensation  The following table provides summary information concerning compensation awarded to, earned by, or paid to any of our directors for all services rendered to the Company in all capacities for the fiscal year ended December 31, 2008.  NameSalary/Fees Earned or Paid in Cash ($)Stock Awards ($)Option Awards ($)Non-Equity Incentive Plan Compensation ($)Change in Pension Value and Nonqualified Deferred Compensation EarningsAll Other Compensation ($)Total CompensationAndrew Liu$255,170--------$55,947$311,117John Liu$145,867--------$ 52,847 (1)$198,714 (1) Includes expense reimbursement of $51,309 and Mandatory Provident Fund contributions of $1,538  Our subsidiary, Andrew Liu & Company, has entered into written employment agreements with Andrew Liu and John Liu.  The agreements remain in effect until terminated by either party with three (3) months notice.  The agreement sets out the duties of the officers, their compensation (as stated above), and their benefits (20 days of vacation time, health insurance, 2 days of sick time per month, etc.).  Pursuant to the agreement, the officers cannot conduct marine insurance brokering or any other business conducted by the Company in the Hong Kong area for a period of two years after the termination of the employment agreement.    ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS  The following table sets forth, as of the date of this report, the stock ownership of each executive officer of ALCO, of all the executive officers and directors of ALCO as a group, and of each person known by ALCO to be a beneficial owner of 5% or more of its Common Stock.  Except as otherwise noted, each person listed below is the sole beneficial owner of the shares and has sole investment and voting power as to such shares.  No person listed below has any options, warrant or other right to acquire additional securities of ALCO, except as may be otherwise noted.  NameNo. of sharesPercent of ClassAndrew Liu, President and Chairman (1)
Flat 3, 24/F., Blk A, Viking Garden
42 Hing Fat Street, Hong Kong6,203,66861.12%  36     John Liu, Director (1)
House No. 12, Carmel Hill, Stanley, Hong Kong2,553,93525.16%Colman Au, Chief Financial Officer, Secretary (1)
Room 1618A, Bank of America Tower
12 Harcourt Road, Central, Hong Kong00%All Officers and Directors as a group (3 in number)8,757,60386.28% (1) The person named is an officer, director, or both.     37    ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE  No officer, director, promoter, or affiliate of ALCO has, or proposes to have, any direct or indirect material interest in any asset proposed to be acquired by ALCO through security holdings, contracts, options, or otherwise.    ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES  Audit-Related Fees  (1) The aggregate fees billed by Kempisty & Co, CPA for audit of the Companys annual financial statements were $38,500 and $40,000 for the fiscal year ended December 31, 2007 and December 31, 2008 respectively.  The aggregate fees billed by Kempisty & Co, CPA for the reviews of the Companys financial statements included in its quarterly reports on Form 10-Q/10-QSB during 2008 and 2007 were $11,700 and $10,500 respectively.  (2) Kempisty & Co, CPA did not bill the Company any amounts for assurance and related services that were related to its audit or review of the Companys financial statements during the fiscal years ending 2008.  Tax Fees  (3) The aggregate fees billed by Kempisty & Co, CPA for tax compliance, tax advice and tax planning were $2,500 for the fiscal year ended December 31, 2007.  The aggregate fees accrued but not yet billed were $2,500 for the fiscal year ended December 31, 2008.  All Other Fees  (4) Kempisty & Co, CPA did not bill the Company for any products and services other than the foregoing during the fiscal year ended December 31, 2008.  Audit Committees Pre-approval policies and procedures  (5) ALCO, which is not yet publicly traded, does not have an audit committee.  The current board of directors functions as the audit committee.     38    ITEM 15. EXHIBITS  The Exhibits listed below are filed as part of this Annual Report.  2.1 Agreement for Share Exchange dated November 22, 2005, by and among LOTUS CAPITAL CORP., a Nevada corporation, AL MARINE HOLDINGS LTD., a British Virgin Islands corporation, and the Shareholders of AL MARINE (herein incorporated by reference from report on Form 8-K for report dated November 22, 2005 and filed with the Securities and Exchange Commission on December 9, 2005).  3.1 Articles of Incorporation (herein incorporated by reference from Registration Statement on Form 10-SB filed with the Securities and Exchange Commission on January 6, 2005).  3.2 Bylaws (herein incorporated by reference from Registration Statement on Form 10-SB filed with the Securities and Exchange Commission on January 6, 2005).  10.1 Exclusive representative agreement between ALC and The Strike Club (herein incorporated by reference from the Registration Statement on Form SB-2 filed with the Securities and Exchange Commission on June 5, 2006).  10.2 Agreement between EduShipAsia Ltd. and the Institute of Chartered Shipbrokers appointing EduShipAsia Ltd. as ICSs exclusive agent in China (herein incorporated by reference from the Registration Statement on Form SB-2 filed with the Securities and Exchange Commission on June 5, 2006).  10.3 Employment Agreement between Andrew Liu & Company, Ltd. and Andrew Liu.  (herein incorporated by reference from the Registration Statement on Form SB-2 filed with the Securities and Exchange Commission on September 14, 2006)  10.4 Employment Agreement between Andrew Liu & Company, Ltd. and John Liu.  (herein incorporated by reference from the Registration Statement on Form SB-2 filed with the Securities and Exchange Commission on September 14, 2006)  31.1 Certification pursuant to Rule 13a-14(a) or 15d-14(a) under the Securities Exchange Act of 1934, as amended.  31.2 Certification pursuant to Rule 13a-14(a) or 15d-14(a) under the Securities Exchange Act of 1934, as amended.  32.1 Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.  32.2 Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.     39    SIGNATURES  Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. ALCO, INC.(Registrant)  By: /s/ Andrew Liu, CEO and Chairman Date: March 27, 2009   Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.  By: /s/ Andrew Liu, CEO and Chairman Date:  March 27, 2009  By: /s/ Colman Au, Chief Financial Officer Date:  March 27, 2009  By: /s/ John Liu, Director Date:  March 27, 2009   40