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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549





FORM 10-K



|x | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ------------------------------------------------------------------------------------

For the fiscal year ended December 31, 2007

or



| ̈ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ----------------------------------------------------------------------------------------

For the transition period from  to

Commission file number: 333-118754





Language Line Holdings, Inc.

(Exact name of registrant as specified in its charter)



|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|Delaware                                                       |  | 20-0997806                          
|(State or other jurisdiction of incorporation or organization) |  | (IRS Employer Identification Number)

One Lower Ragsdale Drive

Monterey, California 93940

(Address, including zip code, of registrants
principal executive offices)

(877) 886-3885

(Registrants telephone number, including area code)





Indicate by check mark if the
registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes   ̈     No  x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the
Act.    Yes   ̈    No  x

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.    Yes  x    No   ̈

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.     ̈

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer or a small reporting company. See definition of large accelerated filer, accelerated
filer and smaller reporting company in Rule 12b-2 of the Exchange Act. (Check one):



|                           |  |                             
|-------------------------- |  | ----------------------------
| ̈  Large accelerated filer |  |  ̈  Accelerated file         
|                           | 
|x  Non-accelerated filer   |  |  ̈  Smaller reporting company

Indicate by check mark if the registrant is a shell company (as defined in Rule 12b-2 of the
Exchange Act).    Yes   ̈    No  x

As of December 31, 2007, there were 1,000 shares of the registrants common stock, $.01 par value, which is the only class of common stock of the registrant. There is no market for the registrants
common stock, all of which is held by Language Line Holdings, LLC.

Documents Incorporated by Reference

None









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TABLE OF CONTENTS



|                                                                                                                     |  |     
|-------------------------------------------------------------------------------------------------------------------- |  | ----
|                                                                                                                     |  | PAGE
|PART 1                                                                                                               |  | 1   
|                                                                                                                     | 
|ITEM 1: BUSINESS                                                                                                     |  | 1   
|                                                                                                                     | 
|ITEM 1A: RISK FACTORS                                                                                                |  | 6   
|                                                                                                                     | 
|ITEM 1B: UNRESOLVED STAFF COMMENTS                                                                                   |  | 8   
|                                                                                                                     | 
|ITEM 2: PROPERTIES                                                                                                   |  | 8   
|                                                                                                                     | 
|ITEM 3: LEGAL PROCEEDINGS                                                                                            |  | 9   
|                                                                                                                     | 
|ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                                                          |  | 9   
|                                                                                                                     | 
|PART II                                                                                                              |  | 9   
|                                                                                                                     | 
|ITEM 5: MARKET FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES |  | 9   
|                                                                                                                     | 
|ITEM 6: SELECTED CONSOLIDATED FINANCIAL DATA                                                                         |  | 9   
|                                                                                                                     | 
|ITEM 7: MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS                        |  | 11  
|                                                                                                                     | 
|ITEM 7A: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                                                  |  | 19  
|                                                                                                                     | 
|ITEM 8: FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA                                                                  |  | 20  
|                                                                                                                     | 
|ITEM 9: CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE                         |  | 20  
|                                                                                                                     | 
|ITEM 9A: CONTROLS AND PROCEDURES                                                                                     |  | 20  
|                                                                                                                     | 
|ITEM 9B: OTHER INFORMATION                                                                                           |  | 21  
|                                                                                                                     | 
|PART III                                                                                                             |  | 21  
|                                                                                                                     | 
|ITEM 10: DIRECTORS, EXECUTIVE OFFICERS OF THE REGISTRANT, AND CORPORATE GOVERNANCE                                   |  | 21  
|                                                                                                                     | 
|ITEM 11: EXECUTIVE COMPENSATION                                                                                      |  | 23  
|                                                                                                                     | 
|ITEM 12: SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS              |  | 32  
|                                                                                                                     | 
|ITEM 13: CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE                                   |  | 33  
|                                                                                                                     | 
|ITEM 14: PRINCIPAL ACCOUNTANT FEES AND SERVICES                                                                      |  | 35  
|                                                                                                                     | 
|PART IV                                                                                                              |  | 36  
|                                                                                                                     | 
|ITEM 15: EXHIBITS AND FINANCIAL STATEMENT SCHEDULES                                                                  |  | 36  



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FORWARD-LOOKING STATEMENTS

This Annual Report on Form 10-K contains statements that involve expectations, plans or intentions (such as those relating to future business or financial results, new features or services, or management
strategies). These statements are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and are subject to risks and uncertainties, so actual results may vary materially. You can identify
these forward-looking statements by words such as may, will, should, expect, anticipate, believe, estimate, intend, plan and other similar
expressions. You should consider our forward-looking statements in light of the risks and uncertainties that could cause Language Line Holdings, Inc.s (the Company) actual results to differ materially from those which are
managements current expectations or forecasts. These risks and uncertainties include, but are not limited to, industry based factors such as the level of competition in the outsourced over-the-phone interpretation services market, continued
demand from the primary industries the Company serves, the availability of telephone services, as well as factors more specific to the Company such as restrictions imposed by the Companys debt including financial covenants and limitations on
the Companys ability to incur additional indebtedness, the Companys future capital requirements, and risk associated with economic conditions generally. See Item 1A  Risk Factors for further discussion. We assume no
obligation to update any forward-looking statements.



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PART 1



|ITEM 1: | BUSINESS
|------- | --------

History

Language Line Holdings, Inc. (the Predecessor) was a Delaware corporation formed in December 1999 as a holding company for Language Line, LLC
(LLC) and its subsidiaries. LLC was incorporated during February 1999 as a Delaware limited liability company. The Predecessor was acquired on June 11, 2004 by Language Line, Inc. (LLI) in a transaction accounted for
under the purchase method of accounting (the Merger). LLI, a wholly-owned subsidiary of Language Line Acquisition, Inc., is a Delaware corporation formed in April 2004. LLI had no significant operations prior to the acquisition of
Predecessor. Subsequent to the Merger, Language Line Acquisition, Inc., an indirect wholly-owned subsidiary of Language Line Holdings, LLC, was renamed Language Line Holdings, Inc. (LLHI, we, Successor, or the
Company). The Company is incorporated under the laws of the State of Delaware.

The Merger, Escrow Settlement and Financing Transactions

On June 11, 2004, LLI, an indirect subsidiary of ABRY Partners (ABRY) acquired the Predecessor in a transaction
accounted for under the purchase method of accounting (the Merger). The aggregate purchase price was $718.1 million. The merger agreement contains customary representations and warranties and covenants. At closing, $30.0 million of the
Merger consideration was deposited into an escrow account on behalf of the stockholders and optionholders of the Predecessor to secure their potential indemnity obligations to LLI and payment of any post-closing adjustment to the Merger
consideration to LLI. Since the Merger, periodic payments from the escrow account have been paid to the stockholders and optionholders of the Predecessor according to a pre-determined payment schedule. Final settlement of the escrow account was
reached with the previous owners on July 25, 2006. In final settlement of the escrow account, the Company received $795,000 for potential tax liabilities. As the Company had already recorded these additional tax liabilities subsequent to the
Merger and concluded there is not a clear and direct link to the original purchase price, the settlement amount of $795,000 was recorded as other income in the third quarter of 2006.

Concurrently with the Merger, we consummated certain related financing transactions, including the issuance of
approximately $109.0 million of 141/8% senior
discount notes due 2013, by LLHI, the issuance by LLI of $165.0 million aggregate principal amount at maturity of 111/8% senior subordinated notes due 2012 (the Notes) and the entrance into senior credit facilities in the amount of $325.0 million by LLI.

Company Overview

We are a global provider of over-the-phone
interpretation (OPI) services from English into more than 170 different languages, 24 hours a day, seven days a week. Our specially-trained, proprietary base of interpreters perform value-added OPI services which facilitate critical
business transactions and delivery of emergency and government services between our customers and limited English proficiency (LEP) speakers throughout the world. In 2007, we helped more than 28 million people communicate across
linguistic and cultural barriers. We offer our customers a high-quality, cost-effective alternative to staffing in-house multilingual employees or using face-to-face interpretation. Through our OPI services, we improve our customers revenue
potential, customer service and competitiveness by enhancing their ability to effectively serve the growing population of current and prospective LEP speakers.



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Products and Services

We offer over-the-phone interpretation services. A majority of our volume comes from subscribed interpretation, which is designed for business customers with frequent interpretation needs. The remainder of our volume is derived from
personal interpretation, designed for individuals or businesses which require infrequent interpretation services. Usage for the majority of customers is billed in one-minute increments. Price per billed minute is typically based on the language
requested and time of day, subject to discounts related to billed minute volume pricing arrangements with certain customers.

We have a number of
complementary services that allow us to provide a full service language solution to our customers. Included among those services are document translation, Video Interpretation services, American Sign Language, and face-to-face interpretation.

We offer our customers a wide range of applications across a variety of industries. For example, our insurance industry customers use our services to
process claims more quickly, improve claim investigations, evaluate borderline claims, enhance help desk service and explain benefits. We assist healthcare customers by facilitating emergency room and critical care situations, accelerating triage
and medical advice, simplifying patient admission processes, improving billing and increasing collections. Our customers in the financial services sector use our services to resolve credit card problems, increase collections, open new accounts,
provide home buyer education and produce credit reports. Call centers use our services to enhance customer service centers, support personnel, facilitate billing, support multicultural marketing and bolster direct mail and telemarketing efforts.

We offer OPI services to our customers in over 170 different languages. Our top 10 languages accounted for over 90% of our billed minutes in 2007, with
Spanish-language OPI accounting for approximately 72% of our total billed minutes in 2007.

Customers

Four industries: insurance, financial services, healthcare and government, accounted for approximately 72% of our revenues in 2007. In 2007, the health care industry
accounted for 31% of our revenues, the financial industry accounted for 19%, and our largest customer accounted for approximately 4% of our revenues, while our largest 100 customers represented 56% of our revenues.

Interpreters

We have assembled and organized our interpreters to
deliver superior service quality in a cost-effective manner. As of December 31, 2007, we managed a total of 2,078 interpreters. Interpreters for our high volume languages are typically scheduled, receive extensive, company-designed training;
and are supplemented by independent contractors for peak call volumes and for lower-volume languages. The majority of our interpreters work from home in the United States, with an increasing number of interpreters located in global interpretation
centers.

We employ a rigorous qualification and testing program for our interpreters, with only very highly skilled applicants being selected for hire. We
continually train and test all of our employees and agency interpreters in their interpretation skills. In addition, we employ industry experts to develop industry-specific training programs for our employee and agency interpreters, including
initial and ongoing specialized training in medical, insurance and finance terminology, as well as police, emergency and 911 procedures. As a result, we believe that our interpreters complete calls more quickly and more accurately than the industry
average.



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Technical Overview

We and the Predecessor have made significant capital investments in proprietary technology over the past six years to network globally, create more efficient processes, provide business continuity and systems redundancy, allow more
stability in the systems and make available a scalable technology platform for future expansion.

Our proprietary call routing system enables us to
efficiently handle significantly more call volume than our OPI competitors. Our proprietary call-handling system, Telephone Interpretation Technology and Networking (TITAN), allows us to efficiently handle hundreds of simultaneous calls.
This allows us to quickly connect our interpreters to our customers.

We rely upon a fully integrated scheduling program, Prime Time Enterprise
(PTE), that generates monthly forecasts of volume by language against planned interpreter attendance to produce a schedule for the following month. PTE also captures historical transaction records (e.g., hours worked by interpreter) from
the database servers and provides linkage to the payroll system. PTE has been modified by us to incorporate over ten years of historical call volume data in fifteen minute increments and analyze patterns of total call volume, language usage,
industry distribution and customer distribution in order to optimize the time our interpreters are occupied. PTE enables us to forecast and optimize interpreter occupancy for twelve months into the future.

Our systems are comprised of an Avaya Call Manager with ESS (Enterprise business continuity/survivability feature), Conversant and Voice Portal IVR systems, and
redundant computer-telephony (CTI) servers. We also utilize multiple database servers. We maintain multiple systems and servers in order to provide valuable redundancy in the event of an interruption in service.

Sales and Marketing

We have expanded our sales and marketing team
professionals who have been trained to serve current customers and target new customer accounts. Our professionals have detailed customer and industry analysis at their disposal. In the United States, we pursue significant revenue opportunities from
new accounts within our targeted industry segments. The Company operates as a single segment.

We have deployed sales and marketing resources in the United
Kingdom and Canada, and have begun to demonstrate our ability to leverage our United States infrastructure to penetrate these two markets. Similar to our United States strategy, we have begun to penetrate established industry segments by increasing
our presence with current customers and acquiring new high-value OPI customers in our target industries. We are utilizing our cost advantages, industry experience and increase the interpreter pool to provide the best product and competitive pricing
in these markets.

Competition

We believe that we are
the leading outsourced OPI provider in the U.S. with greater scale, scope, expertise and technical capabilities than our other outsourced OPI competitors.

We believe that our most significant United States competitors include Network Omni (Thousand Oaks, CA), Lionbridge Technologies, Inc. (Waltham, MA) and Pacific Interpreters (Portland, OR). We believe that our largest competitor in the
United Kingdom is Lionbridge Technologies, Inc., and we believe that our largest competitor in Canada is CanTalk.

We believe the following attributes are
important to our customers; connection speeds, reliability, breadth of languages and quality of interpreters that our performance compared to the performance of our competitors is more desirable to our customers. We believe these service attributes
are key considerations in the purchase decisions for our customers. This is particularly true for organizations concerned with compliance with Title VI of the Civil Rights Act of 1964 which requires companies to have interpretation services for LEP
speakers in order to qualify for federal funding.



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The primary alternatives to OPI include:



| |  |  | Customer-provided language service through bilingual agents (in-house) and face-to-face interpreters;
| | - |  | -------------------------------------------------------------------------------------------------------



| |  |  | Customer relationship management (CRM) providers with foreign language capabilities; and
| | - |  | ------------------------------------------------------------------------------------------



| |  |  | Technology such as web self-service, interactive voice response (IVR) units and machine translation.
| | - |  | ------------------------------------------------------------------------------------------------------

When deciding whether to use a language alternative to OPI, we believe our customers primary selection criteria are the levels of customer service, the critical
nature of a call (e.g., emergency 911 or hospital emergency room), the cost to service the transaction, and the availability of bi-lingual resources.

Customer-Provided Language Service

While in-house bilingual agents can potentially offer better customer service at a lower cost than OPI
service, these benefits are often not realized due to inefficiencies resulting from the need to manage internal productivity levels. Moreover, managing these agents can be a significant distraction in light of the relative minor usage by the LEP
client base. As for service quality, customers are typically inexperienced in recruiting, testing, training and managing an ethnically diverse workforce and often lack the resources to service customers in more than 170 languages, 24 hours a day,
seven days a week. Face-to-face interpreters can deliver more personal service, although interpreters represent a fixed cost that may become expensive if not managed efficiently. Moreover, face-to-face interpreters generally are not available on
demand when needed and cannot assist in call center applications.

CRM Providers

Many third party CRM providers offer language solutions as part of their larger outsourcing offering. Generally, the number of languages offered are limited (in many cases, only one). These offerings are usually
focused on program-specific, scripted sales offers and lack the flexibility OPI provides to customer service and other critical applications. Many companies choose not to outsource critical customer relationships to third party CRM providers.

Technology

Web and IVR technology provide low cost
language alternatives, although the use of these technologies currently is limited to simple transactions and lacks the flexibility OPI provides for typical customer service and other critical applications. Moreover, customers still need to provide
a zero out option when LEP speakers cannot continue with menus provided or require additional assistance beyond the basic applications. Machine translation has evolved to handle simple transactions with accuracy in the range of 80% to
90%. Similar to CRM providers and IVR technology, machine translation lacks the flexibility desired by customers for interactions with their own customers.

Legislation

Several measures have been introduced in Congress aimed at discouraging the transfer of U.S. jobs to foreign countries
including a bill that would deny federal contracts to companies with offshore operations and a bill that would require notification of workers when companies plan to outsource and require the Department of Labor to compile statistics on the trend.
These legislative proposals are being challenged in state court. It is not clear whether these or similar legislative proposals will eventually become law and what, if any, impact they would have on our business and operations.

Employees

Employees are classified as those who are remunerated on a
salaried or an hourly basis, and receive corporate benefits from us. Agency employees are also paid on an hourly basis, but are employed by a staffing agency and are eligible for benefits from the staffing agency. Independent contractors are defined
as those interpreters that are paid by the minute of interpretation and do not receive any corporate benefits or direction from us. Employee and agency employee interpreters



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are scheduled and non scheduled and generally handle our high-volume languages, receive training and are supplemented by
independent contractor interpreters for peak volumes and for lower-volume languages. The majority of our interpreters work from home in the United States, with an increasing number of interpreters located in global interpretation centers which are
mainly located in Central America. Our employees are non-unionized.

As of December 31, 2007, we employed or contracted for 2,249
workers as follows:



|                       |  |           |  |                 |  |                        |  |      
|---------------------- |  | --------- |  | --------------- |  | ---------------------- |  | -----
|Function               |  | Employees |  | AgencyEmployees |  | IndependentContractors |  | Total
|Interpreters           |  | 964       |  | 893             |  | 221                    |  | 2,078
|Operations             |  | 51        |  | 11              |  |                       |  | 62   
|Sales & Marketing      |  | 36        |  | 0               |  | 5                      |  | 41   
|Customer Care          |  | 15        |  | 1               |  |                       |  | 16   
|Information Technology |  | 17        |  | 1               |  |                       |  | 18   
|Finance                |  | 11        |  |                |  |                       |  | 11   
|Administrative         |  | 19        |  | 2               |  | 2                      |  | 23   
|                       |  |           |  |                 |  |                        |  |      
|Total                  |  | 1,113     |  | 908             |  | 228                    |  | 2,249
|                       |  |           |  |                 |  |                        |  |      

Available Information

Our website is located at http://www.languageline.com. Our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and any amendments to those reports filed or furnished pursuant to Section 12(a)
or 15(d) of the Securities Exchange Act of 1934, as amended, are available free of charge on the Securities and Exchange Commission (SEC) website (http://www.sec.gov) as soon as reasonably practicable after we electronically file
or furnish the reports. The SEC website also contains reports and other information that we filed with the SEC. You may read and copy any materials filed with the SEC at the SECs Public Reference Room at 100 F Street, N.E., Washington, D.C.
20549. Please call the SEC at 1-800-SEC-0330 for further information about the public reference room.



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|ITEM 1A: | RISK FACTORS
|-------- | ------------

You should carefully consider the following factors,
in addition to the other information in this Annual Report on Form 10-K, in evaluating our Company and our business.

If we are unable to
successfully implement our business strategy, our business, financial condition and results of operations could be adversely affected.

The
implementation of our business strategy will place significant demands on our senior management and operational, financial and marketing resources. The successful implementation of our business strategy involves the following principal risks which
could materially adversely affect our business, financial condition and results of operations:



| |  |  | the operation of our business may place significant or unachievable demands on our management team;
| | - |  | ---------------------------------------------------------------------------------------------------



| |  |  | we may be unable to increase our penetration of the OPI market at average rates per billed minute of service which are acceptable to us;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------



| |  |  | we may be unable to continue to achieve cost reductions on a per billed minute basis consistent with our low-cost provider strategy; and
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------



| |  |  | we may be unable to recruit a sufficient number of qualified interpreters.
| | - |  | --------------------------------------------------------------------------

Our continued success depends on continued demand from the primary industries we serve.

Our success depends
upon continued demand for our services from our customers within the industries we serve. A significant downturn in the insurance, healthcare, financial services or government industries, which together accounted for a majority of our net revenues
in 2007, or a trend in any of these industries to reduce or eliminate their use of OPI services may negatively impact our results of operations.

Our
continued success depends on our customers trend toward outsourcing OPI services.

Our business depends on the continued need for outsourced
OPI services as driven by general economic and public policy factors. These trends may not continue, as businesses and organizations may either elect to perform OPI services in-house or discontinue OPI services, both of which would have a negative
effect on our revenues. Additionally, Spanish-English interpretation services accounted for the majority of our total OPI billed minutes in 2007. A decision by our customers to conduct an increasing amount of OPI services in-house, especially for
the rapidly growing Spanish-speaking community, could have an adverse effect on our business, financial condition and results of operations.

The OPI
services market in which we compete is highly competitive and our failure to compete effectively could erode our market share.

Our failure to
compete effectively in the outsourced OPI services market that we serve could erode our market share and negatively impact our ability to service the notes. We expect that our existing competitors will strive to improve their outsourced OPI services
and introduce new services with competitive price and customer service characteristics. From time to time we may lose customers as a result of competition. Certain of our potential competitors may attempt to leverage their existing infrastructure to
compete with us. For example, a large call center company may have the requisite scale to enter into the OPI services market. If this were to occur, the outsourced OPI industry may become more competitive and may force us to decrease our profit
margins in order to maintain our market position.



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Our average revenue per minute has been declining.

We have undertaken a strategy to manage pricing per billed minute as a strategic tool to encourage our customers to purchase more billed minutes and to optimize our
market share. In furtherance of this strategy, we have decreased the per minute amount that we charge our customers, resulting in decreased average revenue per billed minute. If we are unable to attract sufficient volume to offset lower per minute
charges or if average rates per billed minute decrease beyond our expectations, we may be unable to generate revenue growth or maintain current revenue levels in the future.

Our business could be adversely affected by a variety of factors related to doing business internationally.

We currently conduct operations internationally, and we anticipate that operations outside the United States may represent an increasing portion of our total operations in the future. Although our OPI services constitute generally accepted
business practices in the United States, such practices may not be accepted in certain international markets. To the extent there is consumer, business or government resistance to the use of OPI services in international markets we target, our
international growth prospects could be affected. In addition, our international operations are subject to numerous inherent challenges and risks, including the difficulties associated with operating in multilingual and multicultural environments,
varying and potentially burdensome regulatory requirements, fluctuations in currency exchange rates, political and economic conditions in various jurisdictions, tariffs and other trade barriers, longer accounts receivable collection cycles, barriers
to the repatriation of earnings and potentially adverse tax consequences. Moreover, expansion into new geographic regions will require considerable management and financial resources and, as a result, may negatively impact our results of operations.

Our continued success depends on our ability to attract and retain qualified personnel.

Our business is labor intensive and places significant importance on our ability to recruit and retain a qualified base of interpreters and technical and professional
personnel. We continuously recruit and train replacement personnel as a result of our changing and expanding work force. A higher turnover rate among our personnel would increase our hiring and training costs and decrease operating efficiencies and
productivity. We may not be successful in attracting and retaining the personnel that we require to conduct our operations successfully.

Our
continued success depends on our ability to retain senior management.

Our success is largely dependent upon the efforts, direction, and guidance of
our senior management. Our continued growth and success also depends in part on our ability to attract and retain qualified managers and on the ability of our executive officers and key employees to manage our operations successfully. The loss of
Dennis Dracup, Chief Executive Officer, Louis Provenzano, President and Chief Operating Officer, or Michael Schmidt, Chief Financial Officer, or our inability to attract, retain or replace key management personnel in the future could have a material
adverse effect on our business.

Our business is highly dependent on the availability of telephone service.

Our business is highly dependent upon telephone service provided by various local and long distance telephone companies. Any significant disruption in telephone service
could adversely affect our business. Additionally, limitations on the ability of telephone companies to provide us with increased capacity in the future could adversely affect our growth prospects. Rate increases imposed by these telephone companies
would have the effect of increasing our operating expenses. In addition, our operation of global interpretation centers causes us to rely on the availability of telephone service outside the United States. Any significant disruption in telephone
service in the countries where we operate global interpretation centers could adversely affect our business.

Our business could be adversely
affected by an emergency interruption of our operations.

Our operations are dependent upon our ability to protect our OPI interpretation centers
against damage that may be caused by fire, power failure, telecommunications failures, unauthorized intrusion, computer viruses and other emergencies. We have taken precautions to protect ourselves and our customers from events that could interrupt
delivery of our services. These precautions include fire protection and physical security systems, rerouting of telephone calls to one or more of our other OPI interpretation centers in the event of an emergency, backup power generators and a
disaster recovery plan. We



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also maintain business interruption insurance in amounts that we consider adequate. Notwithstanding such precautions, a fire, natural disaster, human error,
equipment malfunction or inadequacy, or other event could result in a prolonged interruption in our ability to provide support services to our customers.

Our level of indebtedness could adversely affect our ability to raise additional capital to fund our operations, limit our ability to react to changes in the economy or our industry

At December 31, 2007 we had $470.7 million of outstanding debt. Our degree of leverage could have important consequences, including the following:



| |  |  | It may limit our ability to obtain additional debt or equity financing for working capital, capital expenditures, debt service requirements, acquisitions, and
general corporate or other purposes;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | A substantial portion of our cash flows form operations will be dedicated to the payment of principal and interest on our indebtedness and will not be available for
other purposes, including our operations, capital expenditures and future business opportunities;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Certain of our borrowings, including our term loan and credit revolver facility are at variable rates of interest, exposing us to the risk of increased interest
rate;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | We may from time to time fail to be in compliance with covenants under our term loan facility, which will require us to seek waivers from our banks.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------

We cannot predict the outcome of various measures in Congress aimed at limiting the transfer of U.S. jobs overseas.

An increasing number of our interpreters are located in global interpretation centers outside of the United States. Although hourly wages for our
off-shore interpreters are often above the average wage rate in their respective countries, these off-shore interpreters are paid less than comparable U.S.-based interpreters, and the global interpretation centers have a meaningful cost advantage
over our domestic interpretation centers. Several measures have been introduced in Congress aimed at prohibiting, or at least limiting, the transfer of U.S. jobs to foreign countries. It is not clear whether these legislative proposals will
eventually become law or what impact they may have on our business.



|ITEM 1B: | UNRESOLVED STAFF COMMENTS
|-------- | -------------------------

Not applicable.

*        *        *



|ITEM 2: | PROPERTIES
|------- | ----------

Together with our subsidiaries, we
presently operate the following facilities:



|                      |  |                                        |  |               |  |           |  |                             
|--------------------- |  | -------------------------------------- |  | ------------- |  | --------- |  | ----------------------------
|Location              |  | Purpose                                |  | Sq Ft         |  | Lease/Own |  | Expiration                  
|                      |  |                                        |  |              
|Monterey, CA          |  | Headquarters and Interpretation Center |  | 28,020        |  | Leased    |  | December 2010               
|                      |  |                                        |  |              
|Elk Grove, Illinois   |  | Interpretation Center                  |  | 5,026         |  | Leased    |  | November 2011               
|                      |  |                                        |  |              
|Dominican Republic    |  | Interpretation Center                  |  | 16,527        |  | Leased    |  | October 2009                
|                      |  |                                        |  |              
|Panama (2 leases)     |  | Interpretation Center                  |  | 10,076/12,273 |  | Leased    |  | November 2011 and April 2008
|                      |  |                                        |  |              
|Costa Rica (2 leases) |  | Interpretation Center                  |  | 11,153/11,190 |  | Leased    |  | April 2010 and 2008         



8



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##### Table of Contents

The Company believes its facilities are adequate for its current and reasonably anticipated future needs.



|ITEM 3: | LEGAL PROCEEDINGS
|------- | -----------------

We are party to various lawsuits arising in the
normal course of business. While the amount of liability that may result from these matters cannot be determined, we believe the ultimate liability will not materially affect our financial position, results of operations, or cash flows.



|ITEM 4: | SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
|------- | ---------------------------------------------------

Not
applicable.

PART II



|ITEM 5: | MARKET FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
|------- | ------------------------------------------------------------------------------------------------------------

Not applicable.



|ITEM 6: | SELECTED CONSOLIDATED FINANCIAL DATA
|------- | ------------------------------------

The selected historical
consolidated financial data presented below should be read in conjunction with Item 7Managements Discussion and Analysis of Financial Condition and Results of Operations, the Companys audited consolidated financial
statements contained in Item 15  Exhibits and Financial Statement Schedules. Historical operating results in the following table are not necessarily indicative of the results of operations to be expected in the future.



9



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##### Table of Contents

Selected Consolidated Financial Data



|                                        |  |                          |         |      |                            |         |      |                          |   |                         |   |      |   |         |   |  |   |         |  |   |         |  
|--------------------------------------- |  | ------------------------ | ------- | ---- | -------------------------- | ------- | ---- | ------------------------ | - | ----------------------- | - | ---- | - | ------- | - |  | - | ------- |  | - | ------- | -
|                                        |  |                          |         |      | Predecessor                |        
|                                        |  | Years Ended December 31, |         |      | June 12toDecember 31, 2004 |         |      | January 1toJune 11, 2004 |   | Years EndedDecember 31, |  
|                                        |  | 2007                     |         | 2006 |                            |         | 2005 |                          |   |                         |   | 2003 |  
|Statement of Operations Data:           |  |                          |         |      |                            |         |      |                          |   |                         |   |      |   |         |   |  |   |         |  |   |         |  
|Revenues                                |  | $                        | 183,188 |      | $                          | 163,294 |      |                          | $ | 144,878                 |   |      | $ | 80,284  |   |  | $ | 64,692  |  | $ | 140,641 |  
|Costs of services                       |  |                          | 64,767  |      |                            | 57,916  |      |                          |   | 49,275                  |   |      |   | 25,973  |   |  |   | 21,512  |  |   | 47,928  |  
|Other expenses:                         |  |                          |         |      |                            |         |      |                          |   |                         |   |      |   |         |   |  |   |         |  |   |         |  
|Selling, general and administrative (2) |  |                          | 32,410  |      |                            | 28,807  |      |                          |   | 24,635                  |   |      |   | 12,441  |   |  |   | 10,423  |  |   | 24,221  |  
|Interest                                |  |                          | 52,910  |      |                            | 54,161  |      |                          |   | 50,117                  |   |      |   | 25,685  |   |  |   | 6,031   |  |   | 12,025  |  
|Merger related expenses                 |  |                          |        |      |                            |        |      |                          |   |                        |   |      |   | 104     |   |  |   | 9,848   |  |   |        |  
|Depreciation and amortization           |  |                          | 31,290  |      |                            | 36,409  |      |                          |   | 39,217                  |   |      |   | 21,709  |   |  |   | 1,735   |  |   | 3,612   |  
|                                        |  |                          |         |      |                            |         |      |                          |   |                         |   |      |   |         |   |  |   |         |  |   |         |  
|Total other expenses                    |  |                          | 116,610 |      |                            | 119,377 |      |                          |   | 113,969                 |   |      |   | 59,939  |   |  |   | 28,037  |  |   | 39,858  |  
|                                        |  |                          |         |      |                            |         |      |                          |   |                         |   |      |   |         |   |  |   |         |  |   |         |  
|Other income:                           |  |                          |         |      |                            |         |      |                          |   |                         |   |      |   |         |   |  |   |         |  |   |         |  
|Interest                                |  |                          | 915     |      |                            | 798     |      |                          |   | 285                     |   |      |   | 287     |   |  |   | 49      |  |   |        |  
|Escrow settlement (1)                   |  |                          |        |      |                            | 795     |      |                          |   |                        |   |      |   |        |   |  |   |        |  |   |        |  
|Other                                   |  |                          | 313     |      |                            |        |      |                          |   |                        |   |      |   |        |   |  |   |        |  |   |        |  
|                                        |  |                          |         |      |                            |         |      |                          |   |                         |   |      |   |         |   |  |   |         |  |   |         |  
|Total other income                      |  |                          | 1,228   |      |                            | 1,593   |      |                          |   | 285                     |   |      |   | 287     |   |  |   | 49      |  |   |        |  
|                                        |  |                          |         |      |                            |         |      |                          |   |                         |   |      |   |         |   |  |   |         |  |   |         |  
|Income (loss) before taxes on income    |  |                          | 3,039   |      |                            | (12,406 | )    |                          |   | (18,081                 | ) |      |   | (5,341  | ) |  |   | 15,192  |  |   | 52,855  |  
|Taxes (benefit) on income (loss)        |  |                          | 2,048   |      |                            | (2,895  | )    |                          |   | (8,465                  | ) |      |   | (1,614  | ) |  |   | 5,968   |  |   | 20,467  |  
|                                        |  |                          |         |      |                            |         |      |                          |   |                         |   |      |   |         |   |  |   |         |  |   |         |  
|Net income (loss)                       |  | $                        | 991     |      | $                          | (9,511  | )    |                          | $ | (9,616                  | ) |      | $ | (3,727  | ) |  | $ | 9,224   |  | $ | 32,388  |  
|                                        |  |                          |         |      |                            |         |      |                          |   |                         |   |      |   |         |   |  |   |         |  |   |         |  
|Balance Sheet Data at end of period:    |  |                          |         |      |                            |         |      |                          |   |                         |   |      |   |         |   |  |   |         |  |   |         |  
|Cash and cash equivalents               |  | $                        | 13,898  |      | $                          | 20,236  |      |                          | $ | 13,991                  |   |      | $ | 12,164  |   |  | $ | 11,475  |  | $ | 4,571   |  
|Total assets                            |  |                          | 811,676 |      |                            | 843,966 |      |                          |   | 869,731                 |   |      |   | 904,688 |   |  |   | 263,566 |  |   | 263,425 |  
|Total long-term debt (3)                |  |                          | 470,703 |      |                            | 476,097 |      |                          |   | 484,380                 |   |      |   | 499,644 |   |  |   | 224,890 |  |   | 239,081 |  
|Stockholders equity (deficit)          |  |                          | 183,872 |      |                            | 204,283 |      |                          |   | 213,420                 |   |      |   | 222,770 |   |  |   | 8,740   |  |   | (6,578  | )



|(1) | On June 11, 2004 as part of the Merger, $30.0 million of the Merger consideration was deposited into an escrow account on behalf of the stockholders and optionholders of the
Predecessor to secure their potential indemnity obligations to LLI. Since the Merger, periodic payments from the escrow account have been paid to the stockholders and optionholders of the Predecessor according to a pre-determined payment schedule.
Final settlement of the escrow account was reached with the previous owners on July 25, 2006. In final settlement of the escrow account, the Company received $795,000 for potential tax liabilities. As the Company had already recorded these
additional tax liabilities subsequent to the Merger and concluded there is not a clear and direct link to the orginal purchase price, the settlement amount of $795,000 was recorded into other income in the third quarter of 2006.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(2) | Effective January 1, 2006, the Company adopted the provisions of Financial Accounting Standards Board Statement of Financial Accounting Standard (SFAS)
No. 123( R), Share-Based Payment,, which establishes the accounting for employee stock-based awards. The Company adopted SFAS No. 123( R) and as a result, periods prior to January 1, 2006 have not been restated. The
Company recognized stock-based compensation of $0.4 million for grants of its Holdings Class C restricted stock units in Selling, General and Administrative for 2006, consistent with compensation recorded for all employees who had previously
received grants since the Merger date. See further discussion in Note 7, Stock-Based Compensation in our Consolidated Financial Statements.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(3) | Note that total long-term debt includes the current portion of long-term debt.
|--- | ------------------------------------------------------------------------------



10



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##### Table of Contents

|ITEM 7: | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|------- | -------------------------------------------------------------------------------------

The following discussion of our financial condition and results of operations should be read in conjunction with the Selected Consolidated Financial Data, and the consolidated financial statements and the
related notes thereto included elsewhere in this document. This discussion contains forward-looking statements about our markets, the demand for our products and services and our future results. We based these statements on assumptions that we
consider reasonable. Actual results may differ materially from those suggested by our forward-looking statements for various reasons including those discussed in the Risk Factors and Forward-Looking Statements sections of
this Annual Report on Form 10-K.

Introduction

We
believe we are the leading global provider of OPI services from English into more than 170 different languages, 24 hours a day, seven days a week. Our specially-trained, proprietary base of interpreters perform value-added OPI services which
facilitate critical business transactions and delivery of emergency and government services between our customers and LEP speakers throughout the world. In 2007, we helped more than 28 million people communicate across linguistic and cultural
barriers by providing OPI services to our customers. We offer our customers a high-quality, cost-effective alternative to staffing in-house multilingual employees or using face-to-face interpretation. Through our OPI services, we improve our
customers revenue potential, customer service and competitiveness by enhancing their ability to effectively serve the growing population of current and prospective LEP speakers.

Overview of Operations

Our operating revenues are derived primarily from per minute fees charged to our customers
for our interpretation services. Generally, customers are charged based on actual billed minutes of service and the customers contractual rate per billed minute of service. In addition, the Company generates revenue from complementary services
such as document translation, Video Interpretation services, American Sign Language, and face-to-face interpretation. We recognize revenues when the services have been performed.

Expenses consist primarily of costs of services, selling, general and administrative expenses, depreciation and amortization and interest expense. Costs of services primarily include the cost of our interpreters, call
agents and telecommunications costs.

Critical Accounting Policies and Estimates

Our significant accounting policies summarized in Note 1Organization and Summary of Significant Accounting Policies in the Notes to Consolidated Financial Statements included in Item 15, have
been prepared in accordance with Accounting Principles Generally Accepted in the United States of America (GAAP). In preparing the consolidated financial statements, GAAP requires management to select and apply accounting policies that
involve estimates and judgment. The following accounting policies may require a higher degree of judgment or involve amounts that could have a material impact on the consolidated financial statements.

Revenue Recognition

Our revenues are primarily generated from
over-the-phone interpretation services and fees. We recognize revenues when the services have been performed and all four of the following revenue recognition criteria have been met (i) persuasive evidence of an arrangement exists,
(ii) delivery has occurred or services have been rendered, (iii) the sellers price to the buyer is fixed or determinable and (iv) collectibility is reasonably assured.



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Allowance for Doubtful Accounts

We maintain an allowance for doubtful accounts for estimated losses resulting from the failure of customers to make payment. We determine the allowance based upon an evaluation of individual accounts, aging of the
portfolio, issues raised by customers that may suggest non-payment, historical experience and/or the current economic environment. While our bad debt losses have historically been within our expectations and the allowance established, we might not
continue to experience the same loss rates that we have in the past. If the financial condition of individual customers or the general worldwide economy were to vary materially from the estimates and assumptions made by us, the allowance may require
adjustment in the future. We evaluate the adequacy of the allowance on a regular basis, modifying, as necessary, its assumptions, updating its record of historical experience and adjusting reserves as appropriate.

Goodwill and Other Intangible Assets

We assess the impairment of
goodwill at least annually or when events or changes in circumstances indicate that the carrying value of the goodwill may not be recoverable, which involves our judgment. Application of the goodwill impairment test requires significant judgments in
estimating the fair value of the reporting unit including estimating future cash flows, and determining appropriate discount rates, growth rates and other assumptions. Changes in these estimates and assumptions could materially affect the
determination of fair value which could trigger impairment. See Note 2  Business Combinations, Escrow Settlement, Goodwill and Intangible Assets in the consolidated financial statements for additional information. Based on our 2007
impairment test, no impairment charge of goodwill was recognized in 2007.

We amortize other intangible assets over their estimated useful lives. Customer
relationships, internally developed technology, trade names and trademarks are our most significant other intangible assets. We record an impairment charge on these assets if we determine that their carrying value may not be recoverable. The carry
value is not recoverable if it exceeds the undiscounted cash flows resulting from the use of the asset and its eventual disposition. Our estimates of future cash flows attributable to our other intangible assets require significant judgment based on
our historical and anticipated results and are subject to many factors. Different assumptions and judgments could materially affect the calculation of the fair value of our other intangible assets which could trigger impairment.

Stock-Based Compensation

We account for stock-based compensation in
accordance with Statement of Financial Accounting Standards (SFAS) No. 123(R), Share Based Payment. Under SFAS 123(R), the Company determines the fair value of its Language Line Holdings, LLC (Holdings) Class C
restricted stock units pursuant to the probability-weighted expected return method. Under this method, the value of an enterprises common stock is estimated from an analysis of the future values for the Company assuming various possible future
liquidity events. SFAS 123(R) requires that the Company recognize compensation expense for only the portion of restricted stock units that are expected to vest, rather than recording forfeitures when they occur, as previously permitted. If the
actual number of forfeitures differs from those estimated by management, additional adjustments to compensation expense may be required in future periods.

Income Taxes

In preparing our consolidated financial statements, we are required to estimate our income taxes in each of the jurisdictions
in which we operate. This process involves estimating actual current tax exposures together with assessing tax credits and temporary differences resulting from differing treatment of certain items for tax and accounting purposes. These differences
result in deferred tax assets and liabilities, which are included within the consolidated balance sheet. We then assess the likelihood of additional tax exposure, and to the extent we believe that additional tax exposure may be likely, we must
record a liability for such matters. To the extent we increase this liability in a period; we include an expense within the tax provision in our consolidated statement of operations.

Significant management judgment is required in determining our provision for income taxes, income tax credits, deferred tax assets and liabilities. The recording of a liability based on additional tax exposure is
based on estimates of taxable income by the jurisdictions in which we operate and the period over which amounts would be recoverable. In the event that actual results differ from these estimates or we adjust these estimates in future periods, we may
need to adjust our income tax liability, which could impact our financial position and results of operations.



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##### Table of Contents

Claims and Legal Proceedings

In the normal course of business, we are party to various claims and legal proceedings. We record a reserve for these matters when an adverse outcome is probable and we can reasonably estimate our potential liability. Although the outcome
of these matters is currently not determinable, we do not believe that the resolution of these matters in a manner adverse to our interest will have a material effect upon our financial condition, results of operations or cash flows for any interim
or annual period.



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##### Table of Contents

Historical Performance

Results of Operations

The following table sets forth the percentages of revenue that certain items of operating data constitute for the
periods indicated:



|                                    |  |                            |   |  |                            |    |  |                            |   
|----------------------------------- |  | -------------------------- | - |  | -------------------------- | -- |  | -------------------------- | --
|                                    |  | Year EndedDecember 31,2007 |   |  | Year EndedDecember 31,2006 |    |  | Year EndedDecember 31,2005 |   
|Statement of Operations Data:       |  |                            |   |  |                            |    |  |                            |   
|Revenues                            |  | 100.0                      | % |  | 100.0                      | %  |  | 100.0                      | % 
|Costs of services                   |  | 35.3                       | % |  | 35.5                       | %  |  | 34.0                       | % 
|Other expenses:                     |  |                            |   |  |                            |    |  |                            |   
|Selling, general and administrative |  | 17.7                       | % |  | 17.6                       | %  |  | 17.0                       | % 
|Interest                            |  | 28.9                       | % |  | 33.2                       | %  |  | 34.6                       | % 
|Merger related expenses             |  |                           |   |  |                           |    |  |                           |   
|Depreciation and amortization       |  | 17.1                       | % |  | 22.3                       | %  |  | 27.1                       | % 
|                                    |  |                            |   |  |                            |    |  |                            |   
|Total other expenses                |  | 63.7                       | % |  | 73.1                       | %  |  | 78.7                       | % 
|                                    |  |                            |   |  |                            |    |  |                            |   
|Other income:                       |  |                            |   |  |                            |    |  |                            |   
|Interest                            |  | 0.5                        | % |  | 0.5                        | %  |  | 0.2                        | % 
|Escrow settlement                   |  |                           |   |  | 0.5                        | %  |  |                           |   
|Other                               |  | 0.2                        | % |  |                           |    |  |                           |   
|                                    |  |                            |   |  |                            |    |  |                            |   
|Total other income                  |  | 0.7                        | % |  | 1.0                        | %  |  | 0.2                        | % 
|                                    |  |                            |   |  |                            |    |  |                            |   
|Income (loss) before income taxes   |  | 1.7                        | % |  | (7.6                       | %) |  | (12.5                      | %)
|Income tax provision (benefit)      |  | 1.1                        | % |  | (1.8                       | %) |  | (5.8                       | %)
|                                    |  |                            |   |  |                            |    |  |                            |   
|Net income (loss)                   |  | 0.6                        | % |  | (5.8                       | %) |  | (6.7                       | %)
|                                    |  |                            |   |  |                            |    |  |                            |   

Year Ended December 31, 2007 Compared to Year Ended December 31, 2006.

Revenues for the year ended December 31, 2007 were $183.2 million as compared to $163.3 million for the year ended December 31, 2006, an increase of $19.9
million or 12.2%. The majority of this increase in revenue is driven by a 19.2% increase in OPI billed minutes, partially offset by an 5.9% decline in the average rate per billed minute.

For the year ended December 31, 2007, total costs of services was $64.8 million as compared to $57.9 million for the year ended December 31, 2006, an increase of $6.9 million or 11.9%. This increase was
primarily due to increased interpretation minutes, partially offset by efficiencies gained from continued business process improvements.

Selling, general
and administrative expenses for the year ended December 31, 2007 were $32.4 million as compared to $28.9 million for the year ended December 31, 2006, an increase of $3.5 million or 12.1%. This increase was primarily due to higher
interpreter support and recruiting costs coupled with an increase in sales and marketing initiatives

Interest expense for the year ended December 31,
2007 was $52.9 million as compared to $54.2 million for the year ended December 31, 2006, a decrease of $1.3 million or 2.4%. This decrease was primarily due to a decrease in the interest rate in 2007 versus 2006 on our term loan combined with
a reduction in the principle balance of our term loan.



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##### Table of Contents

Depreciation and amortization was $31.3 million for the year ended December 31, 2007 as compared to $36.4 million
for the year ended December 31, 2006, a decrease of $5.1 million or 14.0%. This decrease was principally attributable to intangible assets becoming fully amortized in 2007 and 2006.

Interest income for the year ended December 31, 2007 was $0.9 million as compared to $0.8 million for the year ended December 31, 2006, an increase of $0.1 million or 12.5%. This increase was the result of
higher interest rates.

Escrow settlement of $795,000 for the year ended December 31, 2006 was a result of final settlement of the escrow account
related to the Merger. Final settlement of the escrow account was reached with the previous owners on July 25, 2006. In final settlement of the escrow account, the Company received $795,000 for potential tax liabilities. As the Company had
already recorded these additional tax liabilities subsequent to the Merger and concluded there is not a clear and direct link to the original purchase price, the settlement amount of $795,000 was recorded into other income in the third quarter of
2006.

Tax expense on income for the year ended December 31, 2007 was $2.0 million compared to $2.9 million of tax benefit on loss for the year ended
December 31, 2006, a change of $4.9 million, primarily due to a $15.4 million change in pretax results of operations, from a loss before income taxes of $12.4 million in 2006 to income before income taxes of $3.0 million in 2007. The effective
tax rate for the year ended December 31, 2007 was 67.4% as compared to a 23.3% tax benefit for the year ended December 31, 2006. The change in the effective rate is primarily due to expenses not deductible for tax purposes (principally
nondeductible interest related to senior discount notes and expenses related to a deferred stock compensation plan), which increase the effective rate of tax expense on income and decrease the effective rate of benefit on loss.

Other income for the year ended December 31, 2007 was $0.3 million. This amount is the interest charged to our customers for overdue balances on their account.

As a result of the factors described above, net income was $1.0 million for the year ended December 31, 2007 as compared to a net loss of $9.5
million for the year ended December 31, 2006, an increase of $10.5 million or 110.5%.

Year Ended December 31, 2006 Compared to Year Ended
December 31, 2005.

Revenues for the year ended December 31, 2006 were $163.3 million as compared to $144.9 million for the year ended
December 31, 2005, an increase of $18.4 million or 12.7%. The majority of this increase in revenue is driven by a 18.7% increase in OPI billed minutes, offset by an 5.0% decline in the average rate per billed minute driven by our pricing
strategy. Our pricing strategy is designed to increase revenues by opportunistically reducing average rate per minute pricing in order to stimulate growth in billed minute volume.

For the year ended December 31, 2006, total costs of services was $57.9 million as compared to $49.3 million for the year ended December 31, 2005, an increase of $8.6 million or 17.4%. This increase was
primarily due to increased interpretation minutes, partially offset by efficiencies gained from continued business process improvements.

Selling, general
and administrative expenses for the year ended December 31, 2006 were $28.8 million as compared to $24.6 million for the year ended December 31, 2005, an increase of $4.2 million or 17.1%. This increase was primarily due to the results of
an increase in sales initiatives, in addition to increased audit and tax related fees.

Interest expense for the year ended December 31, 2006 was
$54.2 million as compared to $50.1 million for the year ended December 31, 2005, an increase of $4.1 million or 8.2%. This increase was the result of an increase in interest expense for our senior discount note along with higher LIBOR interest
rates.

Depreciation and amortization was $36.4 million for the year ended December 31, 2006 as compared to $39.2 million for the year ended
December 31, 2005, a decrease of $2.8 million or 7.1%. This decrease was principally attributable to an intangible asset being fully amortized in 2006.

Interest income for the year ended December 31, 2006 was $0.8 million as compared to $0.3 million for the year ended December 31, 2005, an increase of $0.5 million or 166.7%. This increase was the result of higher interest rates
and higher cash balances throughout the year.



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##### Table of Contents

Escrow settlement of $795,000 for the year ended December 31, 2006 was a result of final settlement of the escrow
account related to the Merger. Final settlement of the escrow account was reached with the previous owners on July 25, 2006. In final settlement of the escrow account, the Company received $795,000 for potential tax liabilities. As the Company
had already recorded these additional tax liabilities subsequent to the Merger and concluded there is not a clear and direct link to the original purchase price, the settlement amount of $795,000 was recorded into other income in the third quarter
of 2006.

Tax benefit on loss for the year ended December 31, 2006 was $2.9 million compared to $8.5 million of tax benefit on loss for the year ended
December 31, 2005, a decrease of $5.6 million, primarily due to a decrease in loss before income taxes. The effective tax rate for the year ended December 31, 2006 was 23.3% as compared to 46.8% for the year ended December 31, 2005.
The decrease in the effective rate of the tax benefit is primarily due to (1) the effects of a change in the estimated state tax rate on deferred taxes in 2005, (2) an increase in accruals for unresolved tax issues in 2006, and (3) an
increase in the amount of expenses not deductible for tax purposes (principally nondeductible interest related to senior discount notes and expenses related to a deferred stock compensation plan) in conjunction with a decrease in loss before income
taxes.

As a result of the factors described above, net loss was $9.5 million for the year ended December 31, 2006 as compared to net loss of $9.6
million for the year ended December 31, 2005, a decrease of $0.1 million or 1.0%.

Liquidity and Capital Resources

Operating Activities. Net cash provided by operating activities was $33.8 million for the year ended December 31, 2007 compared to $30.1 million for the year
ended December 31, 2006, an increase of $3.7 million or 12.3%. This increase was mainly attributable to reporting net income in 2007 as compared to a net loss in 2006 offset by an increase in cash tax payments of $5.0 million. Net cash provided
by operating activities was $30.1 million for the year ended December 31, 2006 compared to $27.0 million for the year ended December 31, 2005, an increase of $3.1 million or 11.5%. This increase was mainly attributable to a smaller net
loss in 2006 offset by an increase in cash interest payments of $7.3 million and an increase in cash tax payments of $1.5 million.

Investing
Activities. Net cash used for investing activities was $2.9 million for the year ended December 31, 2007 and December 31, 2006. There was no change due to a decrease in capital expenditures offset by an acquisition of an intangible
asset. Net cash used for investing activities was $2.9 million for the year ended December 31, 2006, compared to $1.6 million for the year ended December 31, 2005, an increase of $1.3 million or 81.3%. This increase was attributable to
capital expenditures spending.

Financing Activities. Net cash used by financing activities for the year ended December 31, 2007 was $37.3
million, compared to net cash used of $21.0 million for the year ended December 31, 2006, an increase of $16.3 million or 77.6%. This increase was primarily attributable to a dividend distribution in the amount of $20.00 million to Language
Line Holding II, Inc. an affiliated non-consolidated entity under the ultimate parent, Language Line Holdings, LLC. Net cash used by financing activities for the year ended December 31, 2006 was $21.0 million, compared to net cash used of $23.6
million for the year ended December 31, 2005. The decrease of $2.6 million is the result of lower debt repayments, offset by payments related to loan fees and financing costs.

Our principal sources of liquidity are cash flow from operations and borrowings available under our revolver credit facility. We believe that these funds will provide us with sufficient liquidity and capital resources
for us to meet our financial obligations for the next 12 months, including our scheduled principal and interest payments, as well as to provide funds for working capital, capital expenditures, and other needs. Our principal uses of cash are debt
service requirements, capital expenditures, and working capital requirements.

Debt Service. As of December 31, 2007, we had total indebtedness
of $470.7 million and $40.0 million of borrowings available under our revolver credit facility, as defined in our loan agreement of which $0 is outstanding.



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The senior secured credit facilities consist of a six-year $40.0 million revolving credit facility and a seven-year
amortizing $285.0 million term loan facility. Borrowings under the senior credit facilities generally bear interest based on a margin over, at our option, the base rate or the reserve-adjusted LIBOR. The applicable margin for revolving credit loans
will vary based upon our senior leverage ratio as defined in the senior credit facilities. The senior credit facilities are collateralized by first priority interests in, and mortgages on, substantially all of our tangible and intangible assets and
first priority pledges of all the equity interest owned by us in our existing and future domestic subsidiaries.

On June 11, 2004 Language Line, Inc.
issued $165 million of 11 1/8% Senior Subordinated Notes (the Notes) for net proceeds of $160.8 million. Interest is payable on June 15 and December 15 of each year. The Notes will mature on June 15, 2012. LLI may
redeem some or all of the notes at any time on or after June 15, 2008 at the redemption prices set forth. In addition, before June 15, 2007, LLI may redeem up to 35% of the notes with the net proceeds of one or more equity offerings. The
notes are unsecured and are subordinated to all existing and future senior indebtedness. Each of LLIs domestic subsidiaries guarantee the notes on a senior subordinated basis.

On June 11, 2004 the Company issued approximately $109.0 million of 14 1/8% Senior Discount Notes for net proceeds of approximately $55.0 million. No cash interest will accrue on the senior discount notes
prior to June 15, 2009. Thereafter, cash interest on the senior discount notes will accrue at a rate of 14 1/8% per annum and be payable semi-annually in arrears on June 15 and December 15 of each year, beginning on
December 15, 2009. The senior discount notes are unsecured senior obligations, rank equally with all of the Companys future senior indebtedness and rank senior to all subordinated indebtedness. The senior discount notes are subordinated
to all of the Companys subsidiaries existing and future obligations and are due June 15, 2013.

Capital Expenditures. We expect to
spend approximately $3.0 million in 2008 to fund our capital expenditures as well as normal investments in telecommunications and company equipment. We plan to fund these expenditures through net cash flows from operations.

We believe that the cash generated from operations will be sufficient to meet our debt service, capital expenditures and working capital requirements for the next twelve
months. Subject to restrictions in our senior secured credit facilities and the indentures governing the notes, we may incur more debt for working capital, capital expenditures, acquisitions and for other purposes. In addition, we may require
additional financing if our plans materially change in an adverse manner or prove to be materially inaccurate. There can be no assurance that such financing, if permitted under the terms of our debt agreements, will be available on terms acceptable
to us or at all.

Contractual Obligations

The
following table sets forth our long-term contractual cash obligations as of December 31, 2007 (dollars in thousands):



|                                   |  |                           |         |      |   |        |  |      |        |      |   |        |  |            |         |  |   |         |  |   |        
|---------------------------------- |  | ------------------------- | ------- | ---- | - | ------ |  | ---- | ------ | ---- | - | ------ |  | ---------- | ------- |  | - | ------- |  | - | -------
|                                   |  | Years Ending December 31,
|                                   |  | Total                     |         | 2008 |   | 2009   |  | 2010 |        | 2011 |   | 2012   |  | Thereafter
|Senior secured credit facilities   |  | $                         | 219,181 |      | $ | 17,730 |  | $    | 12,630 |      | $ | 12,630 |  | $          | 176,191 |  | $ |        |  | $ |       
|Senior subordinated notes          |  |                           | 165,000 |      |   |       |  |      |       |      |   |       |  |            |        |  |   | 165,000 |  |   |       
|Senior discount notes              |  |                           | 108,993 |      |   |       |  |      |       |      |   |       |  |            |        |  |   |        |  |   | 108,993
|Interest payments                  |  |                           | 202,080 |      |   | 36,322 |  |      | 42,834 |      |   | 49,454 |  |            | 41,199  |  |   | 24,573  |  |   | 7,698  
|Unrecognized tax benefits          |  |                           | 3,463   |      |   |       |  |      |       |      |   |       |  |            |        |  |   |        |  |   | 3,463  
|Operating leases                   |  |                           | 4,866   |      |   | 2,757  |  |      | 1,106  |      |   | 858    |  |            | 145     |  |   |        |  |   |       
|                                   |  |                           |         |      |   |        |  |      |        |      |   |        |  |            |         |  |   |         |  |   |        
|Total cash contractual obligations |  | $                         | 703,583 |      | $ | 56,809 |  | $    | 56,570 |      | $ | 62,942 |  | $          | 217,535 |  | $ | 189,573 |  | $ | 120,154
|                                   |  |                           |         |      |   |        |  |      |        |      |   |        |  |            |         |  |   |         |  |   |        

Interest payments with respect to the senior secured credit facilities assume a variable rate of 8.34%, which
represents the most recent rate applicable to these facilitities. Both the senior subordinated notes issued by Language Line, Inc. and the senior discount notes are 11 1/8% and 14 1/8% fixed rate notes, respectively. The senior discount note cash
interest payments start in December 2009.



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Recent Accounting Pronouncements

September 2006, the FASB issued SFAS No. 157, Fair Value Measurements (SFAS 157), which clarifies that fair value estimates should be based on the assumptions market participants would use
when pricing an asset or liability and establishes a fair value hierarchy that prioritizes the information used to develop those assumptions. Under SFAS 157, fair value measurements would be separately disclosed by level within the fair value
hierarchy. SFAS 157 is effective for fiscal years beginning after November 15, 2007. On February 12, 2008, the FASB delayed the effective date of SFAS 157 for nonfinancial assets and liabilities, except for items that are
recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually), to fiscal years beginning after November 15, 2008. We do not expect the adoption of SFAS 157 to have a material impact on our
consolidated results of operations or financial condition.

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 (SFAS 159). SFAS No. 159 permits an entity to elect fair value as the initial and subsequent
measurement attribute for many financial assets and liabilities. Entities electing the fair value option would be required to recognize changes in fair value in earnings. Entities electing the fair value option are required to distinguish,
on the face of the statement of financial position, the fair value of assets and liabilities for which the fair value option has been elected and similar assets and liabilities measured using another measurement attribute. SFAS 159 is
effective for fiscal years beginning after November 15, 2007. The adjustment to reflect the difference between the fair value and the carrying amount would be accounted for as a cumulative-effect adjustment to retained earnings as of the
date of initial adoption. We do not expect the adoption of SFAS 159 to have a material impact on our consolidated results of operations or financial condition.

In December 2007, the FASB issued SFAS No. 141(R), Business Combinations (SFAS 141(R)), which replaces SFAS 141. SFAS 141(R) establishes principles and
requirements for how an acquirer in a business combination recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, and any controlling interest; recognizes and measures the goodwill acquired in
the business combination or a gain from a bargain purchase; and determines what information to disclose to enable users of the financial statements to evaluate the nature and financial effects of the business
combination. FAS 141(R) is to be applied prospectively to business combinations for which the acquisition date is on or after an entitys fiscal year that begins after December 15, 2008. We will assess the impact of
SFAS 141(R) if and when a future acquisition occurs, however the application of SFAS 141(R) will result in a significant change in accounting for future acquisitions after the effective date.

In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statementsan amendment of Accounting
Research Bulletin No. 51(SFAS No. 160). SFAS No. 160 establishes accounting and reporting standards for ownership interests in subsidiaries held by parties other than the parent, the amount of consolidated net income
attributable to the parent and to the noncontrolling interest, changes in a parents ownership interest, and the valuation of retained, noncontrolling equity investments when a subsidiary is deconsolidated. SFAS No. 160 also establishes
disclosure requirements that clearly identify and distinguish between the interests of the parent and the interests of the noncontrolling owners. SFAS No. 160 is effective for fiscal years beginning after December 15, 2008. The Company is
in the process of analyzing the impact of SFAS No. 160 on its Financial Statements.

Escrow Settlement

On June 11, 2004 as part of the Merger, $30.0 million of the Merger consideration was deposited into an escrow account on behalf of the stockholders
and optionholders of the Predecessor to secure their potential indemnity obligations to LLI. Since the Merger, periodic payments from the escrow account have been paid to the stockholders and optionholders of the Predecessor according to a
pre-determined payment schedule. Final settlement of the escrow account was reached with the previous owners on July 25, 2006. In final settlement of the escrow account, the Company received $795,000 for potential tax liabilities. As the
Company had already recorded these additional tax liabilities subsequent to the Merger and concluded there is not a clear and direct link to the original purchase price, the settlement amount of $795,000 was recorded into other income in the third
quarter of 2006.



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Debt Refinancing

On November 14, 2006, the Company entered into an Amended and Restated Credit Agreement (the Agreement) which amends and restates the Original Credit Agreement dated as of June 11, 2004 and
amended as of November 3, 2005, among LLI, the Company, the subsidiary guarantors party thereto.

The Agreement effects a refinancing
and replacement of the Tranche B Term Loans currently outstanding under the Original Credit Agreement with a new class of Term Loans designated as Tranche B-1 Term Loans. The aggregate principal amount of the modified loan is equal to
the aggregate principal amount of original loan under the Original Credit Agreement. The modified loan has terms, rights and obligations materially identical to the original loan except that the Applicable Margin for borrowings under the modified
loan is 3.25% in the case of Eurodollar loans and 2.25% in the case of Alternate Base Rate Loans. In addition, the Agreement amended related definitions and contained immaterial modifications to various other provisions of the Original Credit
Agreement

Off-Balance Sheet Arrangements

We do not
have any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, which would have been established for the purpose of facilitating off-balance sheet
arrangements or other contractually narrow or limited purposes.



|ITEM 7A: | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|-------- | ----------------------------------------------------------

We are
exposed to certain market risks as part of our ongoing business operations. Primary exposure will include changes in interest rates, as borrowings under our senior secured credit facilities bear interest at floating rates based on LIBOR or the base
rate, in each case plus an applicable borrowing margin. We will manage our interest rate risk by balancing our amount of fixed-rate and floating-rate debt. For fixed-rate debt, interest rate changes do not affect our earnings or cash flows.
Conversely, for floating-rate debt, interest rate changes generally impact our earnings and cash flows, assuming other factors are held constant.

As of
December 31, 2007, we had $274.0 million principal amount of fixed-rate debt and $259.2 million of available floating-rate debt (of which we borrowed $219.2 million). Based on the amounts outstanding under the revolver credit facility and the
term loan, a hypothetical increase of one percentage point would cause an increase to interest expense of approximately $2.2 million on an annual basis on the floating rate debt.

Changes in economic conditions could result in higher interest rates, thereby increasing our interest expense and other operating expenses and reducing our funds available for capital investment, operations or other
purposes. In addition, a substantial portion of our cash flow must be used to service debt, which may affect our ability to make future acquisitions or capital expenditures. We may from time to time use interest rate protection agreements to
minimize our exposure to interest rate fluctuation. However, there can be no assurance that hedges will achieve the desired effect. We may experience economic loss and a negative impact on earnings or net assets as a result of interest rate
fluctuations.



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|ITEM 8: | FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
|------- | -------------------------------------------

The information
required by Item 8 is incorporated by reference herein from Part IV, Item 15(a)(1) and (2).



|ITEM 9: | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
|------- | ------------------------------------------------------------------------------------

Not applicable.



|ITEM 9A: | CONTROLS AND PROCEDURES
|-------- | -----------------------

Disclosure Controls and Procedures

Evaluation of Disclosure Controls and Procedures

The
Companys management, with the participation of the Companys principal executive officer and principal financial officer, has evaluated the effectiveness of the Companys disclosure controls and procedures (as such term is defined in
Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this report. Based on such evaluation, the Companys principal executive officer and principal financial officer have concluded that, as of the
end of such period, the Companys disclosure controls and procedures were effective.

Managements 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 Exchange Act. Under the supervision and with the participation of the Companys management, including its principal executive officer and principal financial officer, the Company conducted an
evaluation of the effectiveness of its internal control over financial reporting based on criteria established in the framework in Internal Control  Integrated Frameworkissued by the Committee of Sponsoring Organizations of the
Treadway Commission. Based on this evaluation, the Companys management concluded that its internal control over financial reporting was effective as of December 31, 2007.

Because of its inherent limitations, 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 risks
that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

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.

Restatement of Previously Issued Condensed Consolidated Financial Statements

On September 13, 2007, we filed an amendment on Form 10-Q/A to our quarterly report on Form 10-Q for the three months ended March 31, 2007 to restate our unaudited Condensed Consolidated financial statements for the three months
ended March 31, 2007.

Changes in Internal Control Over Financial Reporting

As previously disclosed in our Form 10-Q/A for the three months ended March 31, 2007, and our Form 10-Qs for the three months ended June 30, 2007 and September 30, 2007, management concluded that
our internal control over financial reporting was not effective as of March 31, 2007, June 30, 2007 and September 30, 2007. Management identified the material weakness related to the lack of sufficient complement of personnel
with an appropriate level of accounting and financial reporting experience commensurate with our financial reporting requirements.

To address and
remediate the material weakness in our internal control over financial reporting, we implemented the following measures during 2007 to change or enhance the design and operating effectiveness of our internal control over financial reporting.



| |  |  | We hired a Chief Financial Officer with previous experience as the Chief Financial Officer of SEC registrants.
| | - |  | --------------------------------------------------------------------------------------------------------------



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| |  |  | We implemented policies and processes to increase communication by and among senior management, external advisors, and other third parties relevant to the
disclosure process, including: (1) additional analysis supporting our financial estimates and (2) a formal review of the supporting assumptions, calculations, and analysis prepared by the companys external advisors.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | We implemented enhanced training of accounting personnel to familiarize them with our accounting policies.
| | - |  | ----------------------------------------------------------------------------------------------------------

We have concluded that the above measures have effectively remediated the material weaknesses that were previously identified in our Form 10-Q/A for the three months
ended March 31, 2007, and our Form 10-Qs for the three months ended June 30, 2007 and September 30, 2007.

Other than the remedial
measures described above, there were no other changes in our internal control over financial reporting that have materially affected, or are likely to materially affect our internal control over financial reporting during the three months ended
December 31, 2007.



|ITEM 9B: | OTHER INFORMATION
|-------- | -----------------

Not applicable.

PART III



|ITEM 10: | DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
|-------- | ------------------------------------------------------

Our Board
of Directors is divided into two classes, employees and non-employees, with the non-employee directors represented by ABRY Partners, LLC (ABRY). Directors in each class have no designated term limits. Decisions regarding directors terms
are made at the discretion of the ABRY directors. There are no family relationships among the directors and executive officers. The following table sets forth certain information regarding our directors and executive officers as of March 24,
2008.



|                    |  |     |  |                                                                       
|------------------- |  | --- |  | ----------------------------------------------------------------------
|Name                |  | Age |  | Position                                                              
|Dennis G. Dracup    |  | 54  |  | Chief Executive Officer and Director                                  
|                    |  |    
|Louis F. Provenzano |  | 48  |  | President, Chief Operating Officer and Director                       
|                    |  |    
|Michael F. Schmidt  |  | 45  |  | Chief Financial Officer, Senior Vice President of Finance and Director
|                    |  |    
|James L. Moore Jr.  |  | 62  |  | Chief Information Officer                                             
|                    |  |    
|Yung-Chung Heh      |  | 45  |  | Vice President of Global Operations                                   
|                    |  |    
|Karen Gilhooly      |  | 49  |  | Senior Vice President of Sales                                        
|                    |  |    
|Jeffrey M. Johnson  |  | 42  |  | Vice President of Business Development                                
|                    |  |    
|C.J. Brucato        |  | 34  |  | Director                                                              
|                    |  |    
|Peggy Koenig        |  | 51  |  | Director                                                              
|                    |  |    
|Azra Nanji          |  | 27  |  | Director                                                              



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Dennis G. Dracupjoined us in 2001 as President and Chief Executive Officer. Prior to joining us and since
1996, Mr. Dracup was the Chief Executive Officer of Gemkey.com and the President of Pitney Bowes Software Solutions. Mr. Dracup earned his Executive Management Certificate from Northwestern University, M.S. in Information Systems from
Roosevelt University, M.B.A. from State University of New York at Buffalo and B.A. in English from Canisius College.

Louis F. Provenzano has
served as the Companys President, Chief Operating Officer since October 2006 and as Executive Vice President of Sales and Marketing since October 1, 2005. Mr. Provenzano joined us in November 2004 as Senior Vice President of Sales.
Prior to joining us and since December 2002, Mr. Provenzano was Vice President of Worldwide Sales and Account Management for Metavante, a subsidiary of M&I Bank. Prior to that and since 1989, Mr. Provenzano held positions of Vice
President of Worldwide Sales for Alysis Technologies (acquired by Pitney Bowes) and Senior Vice President of Loan Pricing Corporation (acquired by Reuters). Mr. Provenzano earned a B.A. degree from Boston College.

Michael F. Schmidt has served as the Companys Senior Vice President of Finance since July 23, 2007 and Chief Financial Officer since
August 15, 2007. Prior to joining us and since April 2004, Mr. Schmidt was Chief Financial Officer and Executive Vice President of Autobytel. From April 2002 to April 2004, Mr. Schmidt was Chief Financial Officer at Telephia Inc., a
leading provider of performance information for the mobile telecommunications industry. From December 2000 to August 2001, Mr. Schmidt was Chief Financial Officer of Autoweb.com, Inc., an automotive marketing services company. From May 2000 to
October 2000, Mr. Schmidt was Chief Operating Officer and Chief Financial Officer at MizBiz, an internet startup. From September 1999 to May 2000, Mr. Schmidt was Director of Finance at Pacificare Health Systems, a health care company.
From 1988 to March 1999, Mr. Schmidt held various senior level finance and operational positions at IMS Health, a worldwide provider of information services. Mr. Schmidt began his career as a certified public accountant with
Ernst & Whinney. Mr. Schmidt received a Bachelors of Business Administration and Accounting from Cleveland State University.

James L.
Moore Jr. joined us in 2000 as Chief Information Officer. Prior to joining us and since 1998, Mr. Moore was the Chief Information Officer of Borland Software Corporation and Director of Information Systems of Softbank Content Services
Inc. Mr. Moore earned his M.S. and B.A. in Engineering from California State University Northridge.

Yung-Chung Hehjoined the Company
in 1989. Prior to her current position as Vice President, Global Operations, she was Vice President of International Sales. Prior to that, she was Director of Marketing and Sales and Director of Operations. Ms. Heh has an A.A. degree in
Accounting, and a B.A. in English. She earned her M.A. in Translation and Interpretation (Chinese/English) from the Monterey Institute of International Studies.

Karen Gilhoolyjoined the Company in September 2006. Prior to joining the Company, Ms. Gilhooly was with Citigroup where she served as Managing Director of the Global Transactions group in the Corporate Investment Bank.
In this capacity, Ms. Gilhooly led the North America sales effort for international payments and product franchising. Though the majority of Ms. Gilhoolys career was spent with Citigroup in a variety of business management roles, she
also held senior leadership positions in companies engaged in the emerging online bill payment technologies including Metavante, Intelidata and Princeton eCom. Ms Gilhooly attended the University of Illinois where she majored in History and English.
She is a certified expert in several sales and business management disciplines.

Jeffrey M. Johnson has served as Vice President, Business
Development since July, 2006. Mr. Johnson joined Language Line Services in 2002 in a Market Management position and in 2004 held the Director of Marketing position. Prior to Language Line Services, Mr. Johnson held senior Operations and
Marketing positions at Pitney Bowes. Mr. Johnson holds an MBA with distinction from Northwestern Universitys J.L. Kellogg Graduate School of Management, and a Bachelor of Science degree with honors from California Polytechnic State
University

C.J. Brucato became a Director in June 2004. Mr. Brucato is a Partner of ABRY Partners, LLC, which he joined in 1996. Prior
to joining ABRY, Mr. Brucato was a member of the Media, Telecommunications and Entertainment Investment Banking Group at Prudential Securities, Inc. He is presently a director (or the equivalent) of CapRock Holdings, Inc., CommerceConnect Media
Holdings, Inc., Consolidated Theatres, LLC, Fanfare Media Works Holdings, Inc. and Hispanic Yellow Pages Network, LLC. Mr. Brucato earned his B.S.E. from Princeton University.



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Peggy Koenig became a Director in June 2004. Ms. Koenig is a Managing Partner of ABRY Partners, LLC,
which she joined in 1993. From 1988 to 1992, Ms. Koenig was a Vice President, Partner and member of the board of directors of Sillerman Communication Management Corporation, a merchant bank, which made investments principally in the radio
industry and was responsible for the formation of the public radio company, SFX Broadcasting, Inc. From 1986 to 1988, Ms. Koenig was the Director of Finance for Magera Management, an independent motion picture financing company for Columbia and
Tri-Star Pictures. She is presently a director (or the equivalent) of Commerce Connect Media Holdings, Inc., Fanfare Media Works Holdings, Inc., Hispanic Yellow Pages Network, LLC, Psychological Services, Inc. and ftw Publications. Ms. Koenig
received her undergraduate degree from Cornell University and an M.B.A. from the Wharton School of the University of Pennsylvania.

Azra
Nanji became a Director in June 2004. Ms. Nanji is a Vice President at ABRY Partners, LLC, which she joined in 2003. From 2001 to 2003, Ms. Nanji was an analyst in the Communications, Media, and Entertainment group at Goldman
Sachs. She is presently a director of Country Road Communications and PSI. Ms. Nanji received her undergraduate degree from Duke University.

In
connection with the purchase of a significant portion of the senior discount notes offered by us or equity securities of our ultimate parent company, certain third-parties obtained a right to designate observers to our board of directors.

Audit Committee

Our Board has a separately-designated
standing Audit Committee. The members of the Audit Committee are C.J. Brucato, Peggy Koenig and Azra Nanji. Since our equity is not currently listed on or with a national securities exchange or national securities association, we are not required to
have an audit committee and therefore have not designated any of our Audit Committee members as an audit committee financial expert.

Code of Business
Conduct and Ethics

Our Company has adopted a Code of Business Conduct and Ethics (the Code) applicable to our Companys directors,
officers (including the Chief Executive Officer, Chief Financial Officer, Controller and persons performing similar functions), employees, agents and consultants. Our Code satisfies the requirements of a code of ethics within the meaning
of Section 406 of the Sarbanes-Oxley Act of 2002 and the rules issued by the Securities and Exchange Commission thereunder. Amendments to, or waivers from, a provision of our Code that apply to our Companys directors or executive
officers, including the Chief Executive Officer, Chief Financial Officer, Controller and persons performing similar functions, may be made only by the Companys board of directors. Our Company has not amended the Code and has filed the Code as
an exhibit to this Annual Report on Form 10-K.



|ITEM 11: | EXECUTIVE COMPENSATION
|-------- | ----------------------

COMPENSATION COMMITTEE
REPORT

Because affiliates of ABRY own more than 50% of the voting common stock of Language Line Holdings, LLC (Holdings), we would be a
controlled company within the meaning of Rule 4350(c)(5) of the Nasdaq Marketplace rules. As a controlled company, we would qualify for exemptions from certain corporate governance rules of The Nasdaq Stock Market LLC,
including the requirement that executive compensation be determined by a majority of independent directors or a compensation committee comprised solely of independent directors. Our Compensation Committee is comprised solely of non-employee
directors, consisting of Peggy Koenig, C.J. Brucato and Azra Nanji, with Peggy Koenig acting as the chairperson.

The Compensation Committee has reviewed
and discussed the Compensation Discussion and Analysis with management and, based upon its review and discussions, the Compensation Committee recommended to the board of directors that the Compensation Discussion and Analysis be included in the
Annual Report on Form 10-K.



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##### Table of Contents

This report has been provided by the Compensation Committee of the Board of Directors of the Company.

Peggy Koenig, Chairperson of the Compensation Committee

C.J. Brucato

Azra Nanji

COMPENSATION DISCUSSION AND ANALYSIS

Our Compensation Committee is responsible for reviewing and approving the compensation of our named executive officers, as well as reviewing and
approving our incentive plans. The review and approval of compensation and incentives to be awarded by the Compensation Committee to the named executive officers is typically undertaken on an annual basis as part of the Companys budget review
process. Once the Compensation Committee has completed its review and approval process, the Compensation Committee submits its recommendations to the board of directors for the board of directors for further review, discussion and final approval.

Compensation Objectives

We believe that our
compensation program must support our strategy, be competitive, and provide both significant rewards for outstanding performance and clear financial consequences for underperformance. We also believe that a significant portion of the named executive
officers compensation should be at risk in the form of annual and long-term incentive awards that are paid, if at all, based upon individual and company performance. The compensation awarded to our named executive officers for
fiscal 2007, as well as prior years, was intended:



| |  |  | To encourage and reward strong performance; and
| | - |  | -----------------------------------------------



| |  |  | To motivate our named executive officers by providing them with a meaningful equity stake in the company.
| | - |  | ---------------------------------------------------------------------------------------------------------

The accounting and cost implications of our compensation program are considered in program design; however, the main driver of design is alignment with our business
needs.

Role of the Compensation Committee and Executive Officers

Following an evaluation of each executive officers performance and expectations for the coming year, including our named executive officers, our chief executive officer makes compensation recommendations to the
Compensation Committee that are generally, with minor adjustments, approved by the Compensation Committee. Our chief executive officer also recommends to the Compensation Committee the amount of any equity compensation to be awarded to our executive
officers, including our named executive officers. Once the Compensation Committee has approved the chief executive officers recommendations, the Compensation Committee submits its recommendations to the board of directors for final approval.
The board of directors approves all compensation and equity awards to our executive officers, including our chief executive officer, chief financial officer and president/chief operating officer.

Elements of our Compensation Program

Base Salary

Base salary is intended to provide cash compensation to the named executive officers for their performance of core duties that contributed to our success as measured
by the element of corporate performance mentioned above. The Compensation Committee reviews and approves base salary recommendations as presented by the chief executive officer. Base salary recommendations are intended to approximate the market
value of a position, based upon analysis of similar positions with essentially the same job responsibilities. Market data is provided to the Company by nationally recognized compensation consulting firms and executive search firms.



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Annual Incentives

Annual incentives in the form of the Companys Bonus Plan are intended to tie a significant portion of each of the named executive officers compensation to our annual performance. Additionally, the annual incentive
allows us to recognize an individuals performance in relation to special or strategic projects. The annual incentives paid in 2008 for 2007 were based primarily upon the performance of the Company in 2007. The Bonus Plan is tied to both
revenue and EBITDA growth over the prior year. In 2007, revenue and EBITDA growth over the prior year were approximately 12% and 12%, respectively, resulting in bonuses earned by our named executive officers ranging from 46% to 57% of their
respective base salaries.

The Company does not utilize any other non-equity incentive compensation plans.

Long-Term Incentives

We believe that our long term success depends
upon aligning executives and ownerships interests. To support this objective, we provide our executives with means to become significant equityholders in the business of the Company through the issuance of Class C restricted stock units
of our ultimate parent, Holdings, which we believe support the long-term retention of executives and reinforce our longer-term goals.

Equity Ownership.The Class C restricted stock units of Holdings vest according to a specified schedule and will be expensed to compensation over the five year vesting period. Vesting will accelerate upon a change of control of
Holdings, (as such term is defined in the applicable incentive unit agreement) and upon certain types of sales of the Company. Vesting will cease if the individual ceases to be employed by Holdings or any of its subsidiaries. If the individual
ceases to be employed by Holdings, or any of its subsidiaries, Holdings, will have the option to purchase all or any portion of the vested and/or the unvested Class C restricted stock units. The aggregate purchase price for all unvested units will
be $1.00, and the purchase price for each vested unit will be the fair market value for such unit as of the date of individuals termination. If, however, the Company terminates the individuals employment for cause, the aggregate purchase
price of all vested units will be $1.00. Holdings right to repurchase the individuals units will terminate upon a change of control, provided that the individual is employed by Holdings, or any of its subsidiaries at the time of the
change of control.

Historically, the date upon which restricted stock unit awards have been granted has not been fixed. If we do grant restricted stock
unit awards in the future, they will be presented to the both Compensation Committee and Board of Directors for review and approval before being granted.

Option Awards.We do not currently utilize options as part of our executive compensation program.

Compensation
Determination

In determining compensation amounts awarded, the Compensation Committee focused primarily on both revenue and EBITDA growth during fiscal
year 2007 in addition to adjusting base salaries as deemed appropriate.

Supplemental Benefits, Deferred Compensation and Perquisites

We do not provide supplemental benefits and perquisites for executives. None of our named executive officers have deferred any portion of their compensation, except for
401(k) contributions and medical benefits paid.

Our Benefit Plans

We also provide a variety of standard welfare benefits to our employees, such as medical, dental, vision, short-term and long-term disability, and life insurance and accidental death and dismemberment benefits. A
flexible spending plan, an employee assistance program and incentive compensation is also provided to employees.



25



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##### Table of Contents

Employment Agreements

Generally, we do not favor employment agreements unless they are required to attract or retain an executive to the Company. We have entered into an employment agreement with our Chief Executive Officer, Dennis G. Dracup, as described in the
narrative accompanying the Summary Compensation Table. The employment agreement with Mr. Dracup was essential to attract and/or retain his services. The remaining named executive officers are employed on an at will basis and do not
have an employment agreement with the Company.

In addition, the balance of the named officers have executed offer letters setting forth their beginning
base salary and their eligibility to participate in the Companys Bonus Plan. There is no length of employment provisions in any of their respective offer letters.

Summary Compensation Table

The following table sets forth the total compensation earned by each of the named
executive officers for the fiscal year ended December 31, 2007.



|                                       |  |      |  |            |         |       |   |                    |  |                                          |         |                              |   |           |  |   |        |  |   |        
|-------------------------------------- |  | ---- |  | ---------- | ------- | ----- | - | ------------------ |  | ---------------------------------------- | ------- | ---------------------------- | - | --------- |  | - | ------ |  | - | -------
|Name and Principal Position            |  | Year |  | Salary ($) |         | Bonus |   | StockAwards(6) ($) |  | Non-EquityIncentive PlanCompensation (7) |         | All OtherCompensation(8) ($) |   | Total ($)
|Dennis G. Dracup                       |  | 2007 |  | $          | 395,526 |       | $ |                   |  | $                                        | 253,135 |                              | $ | 192,938   |  | $ | 22,647 |  | $ | 864,246
|Chief Executive Officer                |  | 2006 |  | $          | 377,708 |       | $ |                   |  | $                                        | 247,315 |                              | $ | 192,938   |  | $ | 20,132 |  | $ | 838,093
|Louis F. Provenzano (1)                |  | 2007 |  | $          | 254,375 |       | $ |                   |  | $                                        | 73,038  |                              | $ | 107,125   |  | $ | 13,937 |  | $ | 448,475
|President and Chief Operating Officer  |  | 2006 |  | $          | 216,667 |       | $ |                   |  | $                                        | 14,251  |                              | $ | 131,813   |  | $ | 12,910 |  | $ | 375,641
|Michael F. Schmidt (2)                 |  | 2007 |  | $          | 110,208 |       | $ |                   |  | $                                        | 4,679   |                              | $ |          |  | $ |       |  | $ | 114,887
|Chief Financial Officer &SVP Finance   |  | 2006 |  | $          |        |       | $ |                   |  | $                                        |        |                              | $ |          |  | $ |       |  | $ |       
|James L. Moore Jr.                     |  | 2007 |  | $          | 199,041 |       | $ |                   |  | $                                        | 15,926  |                              | $ | 88,245    |  | $ | 10,166 |  | $ | 313,378
|Chief Information Officer              |  | 2006 |  | $          | 194,100 |       | $ |                   |  | $                                        | 15,708  |                              | $ | 113,245   |  | $ | 19,337 |  | $ | 342,390
|Karen Gihooly (3)                      |  | 2007 |  | $          | 185,000 |       | $ |                   |  | $                                        | 16,112  |                              | $ | 27,473    |  | $ | 558    |  | $ | 229,143
|Senior Vice President of Sales         |  | 2006 |  | $          | 61,667  |       | $ | 65,000             |  | $                                        | 1,208   |                              | $ |          |  | $ |       |  | $ | 127,875
|Solange Jerolimov (4)                  |  | 2007 |  | $          | 136,875 |       | $ |                   |  | $                                        | 2,836   |                              | $ | 8,550     |  | $ | 9,646  |  | $ | 157,907
|Former Interim Chief Financial Officer |  | 2006 |  | $          | 51,004  |       | $ |                   |  | $                                        | 178     |                              | $ |          |  | $ | 2,481  |  | $ | 53,663 
|Jeffrey C. Grace (5)                   |  | 2007 |  | $          | 110,618 |       | $ |                   |  | $                                        | 7,089   |                              | $ | 50,000    |  | $ | 7,835  |  | $ | 175,542
|Former Chief Financial Officer         |  | 2006 |  | $          | 171,372 |       | $ |                   |  | $                                        | 3,810   |                              | $ | 62,500    |  | $ | 11,121 |  | $ | 248,803



|(1) | Mr. Provenzano was appointed President and Chief Operating Officer in October 2006. Amounts earned during the year ended December 31, 2006 includes $154,617 earned as
Executive Vice President of Sales and marketing, and $62,500 earned as President and Chief Operating Officer, where his annualized salary was $250,000.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(2) | Mr. Schmidt joined the company on July 23, 2007. He was appointed Senior Vice President of Finance on July 23, 2007 and Chief Financial Officer on August 15,
2007. Mr. Schmidts salary is $250,000 per annum.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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##### Table of Contents

|(3) | Ms. Gilhooly joined the Company on September 1, 2006 as Vice President of Sales. Ms. Gilhooly received a signing bonus of $65,000 upon joining the Company.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------



|(4) | Ms. Jerolimov was the acting Chief Financial Officer of the Company for the period June 16, 2007 through August 14, 2007. Ms. Jerolimov is the Companys
current Controller.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(5) | Mr. Grace was appointed Chief Financial Officer in December 2006. Amounts earned during the year ended December 31, 2006 include $159,961 earned as Controller, where his
annualized salary was $172,300, and $11,411 earned as Chief Financial Officer were his annualized salary was $212,300. Mr. Grace resigned as Chief Financial Officer of the Company effective June 15, 2007.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(6) | The amounts of the stock awards shown in the table represent the expense reported for financial reporting purposes in 2007 and 2006 for the fair value of Holdings Class C restricted
stock units granted in 2007 as well as prior fiscal years in accordance with SFAS No. 123(R). For additional information, refer to the Share-Based Compensation section of Note 7 of the Notes to Consolidated Financial
Statements.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(7) | Amounts included in this column include amounts paid as annual incentive compensation (bonus).
|--- | ----------------------------------------------------------------------------------------------



|(8) | Represents matching contributions to the employees respective Company 401(k) account, medical benefits paid by the Company and life insurance premiums paid by the company,
respectively, for the following individuals in 2007: Mr. D. Dracup - $8,493, $12,936 and $1,218; Mr. L. Provenzano - $8,925, $4,235 and $777; Mr. J. Moore - $7,962, $1,598 and $606; Ms. K. Gihooly - $0, $0, and $558; Ms. S.
Jerolimov $0, $9,160, and $386; and Mr. J. Grace - $4,425, $3,099 and $311. In 2006 the following amounts were paid: : Mr. D. Dracup - $8,407, $10,661 and $1,065; Mr. L. Provenzano - $8,667, $3,554 and $690; Mr. J. Moore -
$7,764, $11,029 and $544; Ms. K. Gihooly - $0, $0, and $0; Ms. S. Jerolimov $0, $0, and $0; and Mr. J. Grace - $6,855, $3,677 and $588.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Mr. Dracups Employment Agreement

In 2004, we entered into an employment agreement with Mr. Dracup.
The employment agreement for Mr. Dracup provides for an initial term of five years with automatic one-year renewals unless otherwise terminated earlier or either party gives notice not to renew. Under the employment agreement, Mr. Dracup
is paid a base salary of $350,000 per year. The base salary will increase by 5% on each anniversary of the employment agreement. In the event Mr. Dracups employment is terminated due to (i) his resignation without good
reason, (ii) death, disability or other incapacity or (iii) by the Company with cause (as each such term is defined in the employment agreement), Mr. Dracup is entitled to certain benefits but no
severance payments. If Mr. Dracups employment is terminated by the Company without cause or he resigns for good reason (as each such term is defined in the employment agreement), Mr. Dracup is entitled to
severance payments and certain benefits for a period of twelve months from the date of termination. Mr. Dracup will be required to sign a release as a condition to receiving any severance payments. The employment agreement also contains
noncompete provisions, which restrict Mr. Dracup from being involved in any business which is in competition with us for a period of one from the date of termination of employment.

The remaining named executive officers are employed on an at will basis and do not have an employment agreement with the Company. The remaining named executive officers offer letters contain noncompete
provisions, which restrict them from being involved in any business which is in competition with us for a period of one year from the date of termination of employment.

Termination, Change of Control and Change of Responsibility Payments

Mr. Grace resigned as Chief Financial
Officer of the Company effective June 15, 2007. Mr. Graces compensation is included in the Summary Compensation Table above. No additional compensation is due to Mr. Grace.



27



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##### Table of Contents

The table below reflects the amount of compensation to Mr. Dracup in the event of a termination or, if applicable,
upon a change of control. The amounts shown assume that such a termination or change of control was effective as of December 31, 2007, and thus includes amounts earned through such time and are estimates of the amounts which would be paid upon
termination or change of control. The actual amounts to be paid can only be determined at the time of Mr. Dracups separation from us or the change of control.



|                                          |  |                      |         |     |          |   |              |  |                     |        |  |   |           |    
|----------------------------------------- |  | -------------------- | ------- | --- | -------- | - | ------------ |  | ------------------- | ------ |  | - | --------- | ---
|Reason for termination                    |  | Severancepayment (1) |         |     | SERP (3) |   | Benefits (4) |  | Stock AwardPayments |       
|Death                                     |  | $                    |        |     |          | $ |             |  | $                   | 11,077 |  | $ | 842,546   | (5)
|Disability                                |  | $                    |        |     |          | $ |             |  | $                   | 11,077 |  | $ | 842,546   | (5)
|Termination by us without cause           |  | $                    | 607,829 |     |          | $ |             |  | $                   | 11,077 |  | $ | 842,546   | (5)
|Termination by us with cause              |  | $                    |        |     |          | $ |             |  | $                   | 11,077 |  | $ | 1         |    
|Termination by Mr. Dracup for good reason |  | $                    | 607,829 |     |          | $ |             |  | $                   | 11,077 |  | $ | 842,546   | (5)
|Change of control                         |  | $                    | 607,829 | (2) |          | $ |             |  | $                   | 11,077 |  | $ | 1,909,091 | (6)
|Termination by Mr. Dracup without cause   |  | $                    |        |     |          | $ |             |  | $                   | 11,077 |  | $ | 842,546   | (5)



|(1) | Amounts reflect the equivalent of twelve months salary of $405,180, plus the equivalent bonus paid in 2007 of $192,938, plus the equivalent of twelve months Group Life
Insurance of $1,218, plus the equivalent of twelve months 401(K) match of $8,493. The severance payment would be paid in twelve equal monthly installments.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(2) | This amount will be reduced by the value paid in cash or marketable securities with respect to Language Line Holdings, LLC restricted stock unit gains.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------



|(3) | This is not applicable since there is no Supplemental Executive Retirement Plan (SERP) with respect to Mr. Dracups employment contract.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------



|(4) | Represents rates currently in effect for COBRA insurance benefits for twelve months totalling $11,077.
|--- | ------------------------------------------------------------------------------------------------------



|(5) | Represents 6,018,182 vested Class C restricted stock units at the current fair value of $0.14 per unit plus $1.00 in aggregate for unvested units.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------



|(6) | Represents 13,636,364 Class C units at the current fair value of $0.14 per unit.
|--- | --------------------------------------------------------------------------------

2007 Grants of Awards Table

The following table describes the Holdings Class C restricted stock units granted to our named executive
officers during the year ended December 31, 2007. There are no outstanding or exercisable options with respect to any stock incentive plans at December 31, 2007. The Company currently has no stock option incentive plans.



28



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##### Table of Contents

2007 GRANTS OF AWARDS TABLE



|                    |  |            |              |              |           |                                                                |            |                                                |         |                                    |   |                                            |  |         |  |   |  |   |       
|------------------- |  | ---------- | ------------ | ------------ | --------- | -------------------------------------------------------------- | ---------- | ---------------------------------------------- | ------- | ---------------------------------- | - | ------------------------------------------ |  | ------- |  | - |  | - | ------
|Name (1)            |  | Grant Date |              | ApprovalDate |           | Estimated Future Payouts UnderNon-Equity Incentive Plan
Awards |            | All Other StockAwards:Number ofStock Units
(#) |         | Base Price ofStockAwards ($
/unit) |   | Grant DateFair Value ofStock Awards($) (2)
|                    |  |            | Threshold($) |              | Target($) |                                                                | Maximum($) |                                                |         |                                   
|Dennis G. Dracup    |  |           |              |             |           |                                                               |            | $                                              | 202,590 |                                    | $ | 405,180                                    |  |        |  |  |  | $ |      
|Louis F. Provenzano |  | 8/31/07    |              | 8/9/07       |           |                                                               |            | $                                              | 129,375 |                                    | $ | 258,750                                    |  | 250,000 |  |  |  | $ | 35,000
|Michael F. Schmidt  |  | 8/31/07    |              | 8/9/07       |           |                                                               |            | $                                              | 125,000 |                                    | $ | 250,000                                    |  | 500,000 |  |  |  | $ | 70,000
|James L. Moore Jr.  |  |           |              |             |           |                                                               |            | $                                              | 100,992 |                                    | $ | 201,983                                    |  |        |  |  |  | $ |      
|Karen Gilhooly      |  | 8/31/07    |              | 8/9/07       |           |                                                               |            | $                                              | 92,500  |                                    | $ | 185,000                                    |  | 125,000 |  |  |  | $ | 17,500
|Solange Jerolimov   |  | 8/31/07    |              | 8/9/07       |           |                                                               |            | $                                              | 38,625  |                                    | $ | 77,250                                     |  | 75,000  |  |  |  | $ | 10,500



|(1) | Mr. Dracup and Mr. Moore were not granted any stock awards during 2007.
|--- | -----------------------------------------------------------------------



|(2) | The amounts of the stock awards shown in the table represent the expense reported for financial reporting purposes
|--- | ------------------------------------------------------------------------------------------------------------------

Incentive Unit Agreements

The named executives are party to
incentive unit agreements pursuant to which our ultimate parent, Holdings, issued Class C restricted stock units. The units will vest annually over a five year period on the anniversary date of the grant as follows; (a) first anniversary 10%
vested (b) second anniversary 30% vested (c) third anniversary 50% vested (d) fourth anniversary 75% vested and (e) fifth anniversary 100% vested. Vesting will accelerate upon a change of control of Holdings and upon certain
types of sales of the Company. Vesting will cease if the named executive ceases to be employed by Holdings or any of its subsidiaries. If the named executive ceases to be employed by Holdings or any of its subsidiaries, Holdings will have the option
to purchase all or any portion of the vested and/or the unvested Class C restricted stock units. The aggregate purchase price for all unvested units is $1.00, and the purchase price for each vested unit will be the fair market value for such unit as
of the date of termination. If, however, we terminate the named executives employment for cause, the aggregate purchase price for all vested units will be $1.00. Holdings right to repurchase a named executives units will terminate upon a
change of control (as such term is defined in the incentive share unit agreement), provided that the named executive is employed by Holdings or any of its subsidiaries at the time of the change of control.



29



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##### Table of Contents

Outstanding Equity Awards at 2007 Year-End

The following table sets forth for each of the named executive officers information concerning outstanding stock units as of December 31, 2007.

2007 OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END TABLE - STOCK AWARDS



|                    |  |                                                             |     |  |                                                                  |           |                                                                                  |   |                                                                                        |   |  
|------------------- |  | ----------------------------------------------------------- | --- |  | ---------------------------------------------------------------- | --------- | -------------------------------------------------------------------------------- | - | -------------------------------------------------------------------------------------- | - | -
|Name                |  | Number of RestrictedStock Units That HaveNot Vested (#) (1) |     |  | Market Value ofRestricted Stock UnitsThat Have Not Vested($) (8) |           | Equity IncentivePlan Awards;Number ofUnearned StockUnits That HaveNot Vested (#) |   | Equity IncentivePlan Awards;Market Value ofUnearned StockUnits That HaveNot Vested
($)
|Dennis G. Dracup    |  | 7,618,182                                                   | (2) |  | $                                                                | 1,066,545 |                                                                                  |  |                                                                                        | $ | 
|Louis F. Provenzano |  | 1,400,000                                                   | (3) |  | $                                                                | 196,000   |                                                                                  |  |                                                                                        | $ | 
|Michael F. Schmidt  |  | 500,000                                                     | (4) |  | $                                                                | 70,000    |                                                                                  |  |                                                                                        | $ | 
|James L. Moore Jr.  |  | 458,075                                                     | (5) |  | $                                                                | 64,131    |                                                                                  |  |                                                                                        | $ | 
|Karen Gihooly       |  | 597,500                                                     | (6) |  | $                                                                | 83,650    |                                                                                  |  |                                                                                        | $ | 
|Solange Jerolimov   |  | 142,500                                                     | (7) |  | $                                                                | 19,950    |                                                                                  |  |                                                                                        | $ | 



|(1) | Unvested as of December 31, 2007.
|--- | ---------------------------------



|(2) | Represent Holdings Class C restricted stock units, which vest as follows: 3/1/08 - 400,000; 7/1/08 - 2,909,091; 3/1/09 - 400,000; 7/1/09 - 2,909,091; 3/1/10 - 500,000; 3/1/11 -
500,000.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(3) | Represent Holdings Class C restricted stock units, which vest as follows: 3/1/08 - 40,000; 7/1/08 - 125,000; 9/1/08 - 25,000; 12/1/08 - 160,000; 3/1/09 - 40,000; 7/1/09 - 125,000;
9/1/09 - 50,000; 12/1/09 - 160,000; 3/1/10 - 50,000; 9/1/10 - 50,000; 12/1/10 - 200,000; 3/1/11 - 50,000; 9/1/11 - 62,500; 12/1/11 - 200,000; 9/1/12 - 62,500.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(4) | Represent Holdings Class C restricted stock units, which vest as follows: 9/1/08 - 50,000; 9/1/09 - 100,000; 9/1/10 - 100,000; 9/1/11 - 125,000; and 9/1/12 - 125,000.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(5) | Represent Holdings Class C restricted stock units, which vest as follows: 3/1/08 - 15,000; 7/1/08 - 195,287; 3/1/09 - 15,000; 7/1/09 - 195,287; 3/1/10 - 18,750; and 3/1/11 - 18,751.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(6) | Represent Holdings Class C restricted stock units, which vest as follows: 9/1/08 - 12,500; 12/1/08 - 105,000; 9/1/09 - 25,000; 12/1/09 - 105,000; 9/1/10 - 25,000; 12/1/10 - 131,250;
9/1/11 - 31,250; 12/1/11 - 131,250; 9/1/12 - 31,250.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(7) | Represent Holdings Class C restricted stock units, which vest as follows: 9/1/08 - 7,500; 12/1/08 - 15,000; 9/1/09 - 15,000; 12/1/09 - 15,000; 9/1/10 - 15,000; 12/1/10 - 18,750;
9/1/11 - 18,750; 12/1/11 - 18,750; 9/1/12 - 18,750.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(8) | The Company determines the fair value of its Holdings Class C restricted stock units from the probability-weighted expected return method. Under this method, the value of an
enterprises common stock is estimated from an analysis of the future values for the Company assuming various possible future
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



30



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##### Table of Contents

2007 Stock Vested Table

The following table sets forth for each of the named executive officers certain information concerning stock units vested during the fiscal year 2007.

2007 RESTRICTED STOCK UNIT VESTED TABLE - STOCK AWARDS



|                    |  |                                            |  |                              |        
|------------------- |  | ------------------------------------------ |  | ---------------------------- | -------
|Name                |  | Number of RestrictedStock Units Vested (1) |  | Value Realized onVesting ($)
|Dennis G. Dracup    |  | 2,327,273                                  |  | $                            | 325,818
|Louis F. Provenzano |  | 200,000                                    |  | $                            | 28,000 
|Michael F. Schmidt  |  |                                           |  | $                            |       
|James L. Moore Jr.  |  | 163,730                                    |  | $                            | 22,922 
|Karen Gihooly       |  | 52,500                                     |  | $                            | 7,350  
|Solange Jerolimov   |  | 7,500                                      |  | $                            | 1,050  



|(1) | Represents Holdings Class C restricted stock units which vested during the fiscal year 2007.
|--- | --------------------------------------------------------------------------------------------

Compensation of Directors

Directors who are officers of, or employed by, the Company or any of its subsidiaries do
not receive addition compensation for service on the board of directors or its committees. In addition, members of the Compensation Committee do not receive additional compensation for service on the committee because of their affiliation with the
principal equity holder of the Company.



31



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##### Table of Contents

|ITEM 12: | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
|-------- | --------------------------------------------------------------

Our ultimate parent, Language Line Holdings, LLC (Holdings) indirectly owns 100% of our capital stock. The following table sets forth certain information with respect to the beneficial ownership of
Holdings equity interests as of December 31, 2007, by (i) each person or entity who owns of record or beneficially 5% or more of any class of Holdings voting securities; (ii) each named executive officer and director of Language Line,
Inc.; and (iii) all of the directors and named executive officers of Language Line, Inc. as a group. Except as noted below, the address for each of the directors and named executive officers is c/o Language Line, Inc., 1 Lower Ragsdale Drive,
Monterey, California 93940.



|                                                           |  |                                                    |  |                                                       |  
|---------------------------------------------------------- |  | -------------------------------------------------- |  | ----------------------------------------------------- | -
|Name and Address of Beneficial Holder(1)                   |  | Number of VotingEquity InterestsBeneficially Owned |  | Percentage ofTotal Voting EquityInterests Outstanding |  
|Principal Equityholders:                                   |  |                                                    |  |                                                       |  
|ABRY Partners IV, L.P. (1) (2) (3)                         |  | 116,597,073                                        |  | 83.5                                                  | %
|ABRY Mezzanine Partners, L.P. (1) (4)                      |  | 8,980,395                                          |  | 4.3                                                   | %
|Executive Officers and Directors:                          |  |                                                    |  |                                                       |  
|Dennis G. Dracup                                           |  | 2,277,778                                          |  | 1.6                                                   | %
|Louis F. Provenzano                                        |  |                                                   |  |                                                      |  
|Michael F. Schmidt                                         |  |                                                   |  |                                                      |  
|James L. Moore Jr.                                         |  | 650,000                                            |  | *                                                     |  
|Yung-Chung Heh                                             |  | 118,208                                            |  | *                                                     |  
|Jeffrey M. Johnson                                         |  |                                                   |  |                                                      |  
|Karen Gilhooly                                             |  |                                                   |  |                                                      |  
|Peggy Koenig (6)                                           |  |                                                   |  |                                                      |  
|C.J. Brucato (5)                                           |  |                                                   |  |                                                      |  
|Azra Nanji                                                 |  |                                                   |  |                                                      |  
|All Executive Officers & Directors as a group (10 persons) |  | 3,045,986                                          |  | 2.2                                                   | %



|* | Less than 1%
|- | ------------

|(1) | Beneficial ownership generally means any person who, directly or indirectly, has or shares voting or investment power with respect to a security or has the right to
acquire such power within 60 days. Unless otherwise indicated, we believe that each holder has sole voting and investment power with regard to the equity interests listed as beneficially owned.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Royce Yudkoff exercises voting and investment control of the equity interests held by ABRY Partners IV, L.P. and ABRY Mezzanine Partners, L.P. The address of both is 111 Huntington
Avenue, 30th Floor, Boston, MA 02199.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | Royce Yudkoff is the sole member of ABRY Capital Partners, LLC which is the sole general partner of ABRY Capital Partners, L.P. which is the sole general partner of ABRY Partners
IV, L.P.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) | Royce Yudkoff is the sole member of ABRY Mezzanine Holdings, LLC which is the sole general partner of ABRY Mezzanine Investors, L.P. which is the sole general partner of ABRY
Mezzanine Partners, L.P.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(5) | Mr. Brucato is a limited partner of ABRY Capital Partners, L.P., the sole general partner of ABRY Partners IV, L.P., and ABRY Mezzanine Investors, L.P., the sole general
partner of ABRY Mezzanine Partners, L.P. and disclaims beneficial ownership of any equity interests held by either entity. Mr. Brucatos address is c/o ABRY Partners IV, L.P., 111 Huntington Avenue, 30th Floor, Boston, MA 02199.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(6) | Ms. Koenig is a limited partner of ABRY Capital Partners, L.P., the sole general partner of ABRY Partners IV, L.P., and ABRY Mezzanine Investors, L.P., the sole general partner
of ABRY Mezzanine Partners, L.P. and disclaims beneficial ownership of any equity interests held by either entity. Ms. Koenigs address is c/o ABRY Partners IV, L.P., 111 Huntington Avenue, 30th Floor, Boston, MA 02199.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



32



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##### Table of Contents

|ITEM 13: | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE
|-------- | ------------------------------------------------------------------------

Members Agreement

In connection with the Merger, the members of Holdings entered into a Members Agreement. Pursuant to the Members
Agreement, such members agreed to vote their equity interests in Holdings so that the following directors are elected to the board of managers of Holdings: (i) three directors designated by ABRY Partners IV, L.P., (ii) the then current
chief executive officer of Holdings, who shall initially be Dennis G. Dracup and (iii) the then current chief financial officer of Holdings, who shall be Michael F. Schmidt. The Members Agreement also contains:



| |  |  | tag-along sale rights exercisable by all investors in the event of sales of equity interests by ABRY Partners, LLC to unaffiliated third parties;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | drag-along sale rights exercisable by the board of managers of Holdings and holders of a majority of the then outstanding voting equity interests in the
event of an Approved Sale, as defined in the Members Agreement;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | preemptive rights; and
| | - |  | ----------------------



| |  |  | restrictions on transfers of membership interests by management and other key employees absent written authorization of the Board of Directors, except in certain
circumstances.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

In 2007, concurrent with the resignation of the Chief Financial Officer, Jeffrey Grace, Mr. Schmidt was appointed
the Companys new Chief Financial Officer, and also replaced Mr. Graces director role.

The voting restrictions and
tag-along, drag-along and transfer restrictions will terminate upon consummation of the first to occur of a Qualified Public Offering, as defined in the Members Agreement, or an Approved Sale.

Indemnification

Holdings Amended and Restated Limited
Liability Company Agreement, dated as of June 11, 2004, provides for indemnification of directors and officers, including advancement of reasonable attorneys fees and other expenses, in connection with all claims, liabilities and expenses
arising out of the management of Holdings affairs. Such indemnification obligations are limited to the extent that Holdings assets are sufficient to cover such obligations. Holdings carries directors and officers insurance that covers such exposure
for indemnification up to certain limits. While Holdings may be subject to various proceedings in the ordinary course of business that involve claims against directors and officers, we believe that such claims are routine in nature and incidental to
the conduct of Holdings business. None of such claims, if determined adversely against such directors and officers, would have a material adverse effect on Holdings consolidated financial condition or results of operations. As of the closing of the
Merger, Holdings had not accrued any amounts to cover indemnification obligations arising from such claims.

Loans

In 2001, the Predecessor loaned $995,000 to an officer in exchange for a note receivable (Note A). Note A was collateralized by the officers primary
residence. In 2002, the Predecessor loaned $100,000 to another officer in exchange for a note receivable (Note B). Note B is collateralized by Holdings common stock. In connection with the Merger, which occurred on June 11, 2004,
both of these loans were modified to extend their maturities. These modifications were made when LLI was a private company not subject to the Sarbanes-Oxley Act of 2002 (the Act). In September, 2004, LLI became subject to the Act and as
a result the loans may not have been compliant with the Act. To address this matter, on April 13, 2005, $1,095,000 was distributed from LLI in the form of a dividend to its parent, LLHI. LLHI then distributed in the form of a dividend that same
amount to its parent, Language Line Holdings III, Inc. (the Parent). Parent then made new loans to the executives in the same amount as the loans held by LLI. The loans held by LLI were simultaneously repaid in full by the officers. Each
of the dividends and loans mentioned above that occurred on April 13, 2005 were affected in non-cash transactions. This action required a waiver from the lenders party to LLIs credit agreement, which was obtained on April 13, 2005.
On May 18, 2005, a capital contribution in the amount of $995,000 was made by the Parent to LLHI when the one officer liable for Note A repaid his loan to the Parent.



33



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##### Table of Contents

Registration Rights Agreement

In connection with the Merger, the members of Language Line Holdings, LLC entered into a Registration Rights Agreement. Pursuant to the Registration Rights Agreement, the holders of a majority of the Investor Registrable Securities, as
defined therein, have the ability to cause us to register securities of the Company held by parties to the Registration Rights Agreement and to participate in registrations by us of our Registrable Securities, as defined in the Registration Rights
Agreement. All holders of Registrable Securities are subject to customary lock-up arrangements in connection with public offerings.

Reimbursement
Agreement

In connection with the Merger, we entered into a Reimbursement Agreement. Pursuant to the Reimbursement Agreement, we agreed to reimburse
ABRY for all out-of-pocket expenses incurred in connection with the Merger and related transactions or their ownership of equity interests of Language Line Holdings, LLC.

Transactions

On January 10, 2008 our ultimate parent completed its acquisition of Coto Holdings, LLC.
Transactions such as administrative and sales support services between the Company and Coto Holdings, LLC started on January 10, 2008. The Company believes that the terms and nature of the transactions are no less favorable than those available
with unrelated parties.

Board of Directors

The board
is currently composed of six directors, none of whom is likely to qualify as an independent director based on the definition of independent director set forth in Rule 4200(a)(15) of the Nasdaq Marketplace rules. Because affiliates of ABRY
own more than 50% of the voting common stock of Holdings, we would be a controlled company within the meaning of Rule 4350(c)(5) of the Nasdaq Marketplace rules, which would qualify us for exemptions from certain corporate governance
rules of The Nasdaq Stock Market LLC, including the requirement that the board of directors be composed of a majority of independent directors.



34



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##### Table of Contents

|ITEM 14: | PRINCIPAL ACCOUNTANT FEES AND SERVICES
|-------- | --------------------------------------

During the fiscal years
ended December 31, 2007 and December 31, 2006, fees for services provided by PricewaterhouseCoopers LLP and Deloitte & Touche LLP, were as follows (in thousands):



|           |  |                        |       |      |   |      
|---------- |  | ---------------------- | ----- | ---- | - | -----
|           |  | Year EndedDecember 31,
|           |  | 2007                   |       | 2006
|Audit Fees |  | $                      | 863   |      | $ | 765  
|Tax Fees   |  |                        | 290   |      |   | 311  
|           |  |                        |       |      |   |      
|Total      |  | $                      | 1,153 |      | $ | 1,076
|           |  |                        |       |      |   |      

Audit Fees consisted of fees billed for services rendered for the audit of our Companys annual
financial statements, review of financial statements included in our Companys quarterly reports on Form 10-Q, and other services normally provided in connection with statutory and regulatory filings. Tax Fees consisted of fees
billed for tax payment planning and tax preparation services.

Audit Committee Pre-Approval Policy

Our Board has a separately-designated standing Audit Committee. The members of the Audit Committee are C.J. Brucato, Peggy Koenig and Azra Nanji. Prior to engaging our
principal accountants to render audit or non-audit services, the engagement as well as charges for such services is approved by our Audit Committee.



35



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##### Table of Contents

PART IV



|ITEM 15: | EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
|-------- | ------------------------------------------

(a) The following
documents are filed as part of this Annual Report on Form 10-K.



|1. | Consolidated Financial Statements:
|-- | ----------------------------------



|                                                                                                                                                |  |     
|----------------------------------------------------------------------------------------------------------------------------------------------- |  | ----
|                                                                                                                                                |  | Page
|Report of Independent Registered Public Accounting Firm                                                                                         |  | 38  
|                                                                                                                                                | 
|Report of Independent Registered Public Accounting Firm                                                                                         |  | 39  
|                                                                                                                                                | 
|Consolidated Balance Sheets at December 31, 2007 and 2006                                                                                       |  | 40  
|                                                                                                                                                | 
|Consolidated Statements of Operations for the years ended December 31, 2007, 2006, and 2005                                                     |  | 41  
|                                                                                                                                                | 
|Consolidated Statements of Stockholders Equity (Deficit) and Comprehensive Income (loss) for the years ended December 31, 2007, 2006, and 2005 |  | 42  
|                                                                                                                                                | 
|Consolidated Statements of Cash Flows for the years ended December 31, 2007, 2006, and 2005                                                     |  | 43  
|                                                                                                                                                | 
|Notes to Consolidated Financial Statements                                                                                                      |  | 44  



|2. | Financial Statement Schedule:
|-- | -----------------------------



|                                                |  |     
|----------------------------------------------- |  | ----
|                                                |  | Page
|Schedule II  Valuation and Qualifying Accounts |  | 59  

All other schedules have been omitted because the information required to be set forth therein is not applicable
or is shown in the financial statements or notes thereto.



|3. | Exhibits
|-- | --------



|     |  |                                                                                                                                                                                                                                                                                                                                       
|---- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|     | 
|3.1  |  | Certification of Incorporation of Language Line Holdings, Inc. (f/k/a Language Line Acquisition, Inc.).*                                                                                                                                                                                                                              
|     | 
|3.2  |  | By-Laws of Language Line Holdings, Inc. (f/k/a Language Line Acquisition, Inc.).*                                                                                                                                                                                                                                                     
|     | 
|4.1  |  | Indenture, dated as of June 11, 2004 among Language Line Holdings, Inc. (f/k/a Language Line Acquisition, Inc.) and The bank of New York.*                                                                                                                                                                                            
|     | 
|4.2  |  | Registration Rights Agreement, dated as of June 11, 2004, by and among Language Line Holdings, Inc. (f/k/a Language Line acquisition, Inc.), MLPFS and each other Initial Purchases set forth on
Schedule B. *                                                                                                                        
|     | 
|4.3  |  | Joinder Agreement, dated June 11, 2004, among Language Line Holdings, Inc., Language Line, LLC, Envok, LLC, On Line Interpreters, Inc., Language Line Services, Inc., Language Line Dominican
Republic LLC, Language Line Panama, LLC and Language Line Costa Rica, LLC. *                                                            
|     | 
|4.4  |  | First Supplemental Indenture, dated as of June 11, 2004, among Language Line, Inc., Language Line, LLC, Envok, LLC, On Line Interpreters, Inc., Language Line Services, Inc., Language Line
Dominican Republic LLC, Language Line Panama, LLC, Language Line Costa Rica, LLC, Language Line Holdings, Inc. and the Bank of New York. *
|     | 
|4.5  |  | Form of Note (included in Exhibit 4.1). *                                                                                                                                                                                                                                                                                             
|     | 
|10.1 |  | Agreement and Plan of Merger, dated April 14, 2004 by and among Language Line Holdings, Inc., Language Line Acquisition, Inc. and Language, Inc. *                                                                                                                                                                                    
|     | 
|10.2 |  | Preferred Securities Purchase Agreement, dated as of June 11, 2004 by and among Language Line Holdings, LLC and the purchasers named in the Purchaser Schedule. *                                                                                                                                                                     
|     | 
|10.3 |  | Registration Rights Agreement, dated June 11, 2004, by and among Language Line Holdings, LLC and the members and Language Line Holdings, LLCs members. *                                                                                                                                                                             
|     | 
|10.4 |  | Executive Employment Agreement, dated June 11, 2004, by and between Language Line, Inc and Dennis Dracup. *                                                                                                                                                                                                                           



36



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##### Table of Contents

|      |  |                                                                                                                                                                                                                                                                                                               
|----- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|      | 
|10.5  |  | Executive Employment Agreement, dated June 11, 2004, by and between Language Line, Inc. and Matthew Gibbs. *                                                                                                                                                                                                  
|      | 
|10.6  |  | Non-competition, Non-solicitation Agreement, dated June 11, 2004, by and among Language Line Acquisition, Inc, Language Line, Inc. and Dennis Dracup. *                                                                                                                                                       
|      | 
|10.7  |  | Non-competition, Non-solicitation Agreement, dated June 11, 2004, by and among Language Line Acquisition, Inc, Language Line, Inc. and Matthew Gibbs. *                                                                                                                                                       
|      | 
|10.8  |  | Incentive Securities Agreement, dated June 11, 2004, by and among Language Line Holdings, LLC, Dennis G. Dracup Declaration of Trust and Christine L. Dracup Declaration of Trust.
*                                                                                                                          
|      | 
|10.9  |  | Incentive Securities Agreement, dated June 11, 2004, by and between Language Line Holdings, LLC and Matthew Gibbs. *                                                                                                                                                                                          
|      | 
|10.10 |  | Incentive Units Agreement, dated July 14, 2004, by and between Language Line Holdings, LLC and Jeanne Anderson. *                                                                                                                                                                                             
|      | 
|10.11 |  | Incentive Units Agreement, dated July 14, 2004, by and between Language Line Holdings, LLC and Dennis Bailey. *                                                                                                                                                                                               
|      | 
|10.12 |  | Incentive Units Agreement, dated July 14, 2004, by and between Language Line Holdings, LLC and Phil Speciale. *                                                                                                                                                                                               
|      | 
|10.13 |  | Investor Securities Purchase Agreement, dated June 11, 2004, by and among Language Line Holdings, LLC and the persons listed on Schedule A. *                                                                                                                                                                 
|      | 
|10.14 |  | Credit Agreement, dated as of June 11, 2004, by and among Language Line, Inc., Language Line Acquisition, Inc., Merrill Lynch & Co. and MLPFS. *                                                                                                                                                              
|      | 
|10.15 |  | Security Agreement, dated as of June 11, 2004, by and among Language Line, Inc., Language Line Holdings, Inc., the Subsidiary Guarantors party thereto and Merrill Lynch Capital Corporation. *                                                                                                               
|      | 
|10.16 |  | Guarantee, dated June 11, 2004 by and among Language Line Holdings, Inc. in favor of Merrill Lynch Capital Corporation.*                                                                                                                                                                                      
|      | 
|10.17 |  | Trademark Security Agreement, dated as of June 11, 2004 by and among Language Line Inc., each of the Guarantors listed on Schedule II thereto and in favor of Merrill Lynch Capital Corporation. *                                                                                                            
|      | 
|10.18 |  | Amended and Restated Promissory Note in the principal amount of $100,000 from Matthew T. Gibbs II and Kathy Gibbs in favor of Language Line, Inc., dated June 11, 2004. *                                                                                                                                     
|      | 
|10.19 |  | Amended and Restated Promissory Note in the principal amount of $995,000 from Dennis G. Dracup in favor of Language Line, Inc., dated June 11, 2004. *                                                                                                                                                        
|      | 
|10.20 |  | Amendment to the Deed of Trust and Assignment of Rents, dated June 11, 2004, by and between Dennis G. Dracup and Christine L. Dracup as Trustor, in favor of Old Republic Title
Company as trustee in trust for Language Line, Inc. *                                                                       
|      | 
|10.21 |  | Amended and Restated Unit Pledge Agreement, dated June 1, 2004 by and between Language Line, Inc., Matthew T. Gibbs, II and Kathy Gibbs. *                                                                                                                                                                    
|      | 
|10.22 |  | Intercompany Services Agreement, dated January 19, 2006 between Language Line, LLC and Language Line Ltd. (incorporated herein by reference to Exhibit 10.22 of Form 10-K for the Year Ended
December 31, 2005 filed with the SEC on April 12, 2006).                                                         
|      | 
|10.23 |  | Credit Agreement dated as of June 11, 2004 as amended and restated on November 14, 2006, by and among Language Line Inc., Language Line Holdings Inc., Merrill Lynch, and MLPFS (incorporated
herein by reference to Exhibit 10.23 to the Current Report filed on Form 8-K with the SEC on November 20, 2006).
|      | 
|10.24 |  | Release between Language Line, Inc. and Matthew Gibbs dated December 8, 2006 (incorporated herein by reference to Exhibit 10.24 of Form 8-K of the Current Report filed on Form 8-K with the SEC
on December 11, 2006).                                                                                       
|      | 
|10.25 |  | Repurchase Notice by Language Line Holdings, LLC to Matthew Gibbs dated December 11, 2006 (incorporated herein by reference to Exhibit 10.24 of Form 8-K of the Current Report filed on Form 8-K
with the SEC on December 11, 2006).                                                                          
|      | 
|10.26 |  | Offer Letter to Jeffrey Grace dated December 8, 2006 (incorporated herein by reference to Exhibit 10.24 of Form 8-K of the Current Report filed on Form 8-K with the SEC on December 11, 2006).                                                                                                               
|      | 
|10.27 |  | Repurchase Notice by Language Line Holdings, LLC to Jeffrey Grace dated June 15, 2007 (incorporated by reference to Exhibit 10.27 of the Current Report filed on Form 8-K with the SEC on June 15,
2007).                                                                                                     
|      | 
|10.28 |  | Offer Letter to Michael Schmidt dated June 5, 2007 (incorporated by reference to Exhibit 10.28 of the Current Report filed on Form 8-K with the SEC on June 15, 2007).                                                                                                                                        
|      | 
|12.1  |  | Statement regarding computation of ratio of earnings to fixed charges (incorporated herein by reference to Exhibit 12.1 of Form 10-K for the Year Ended December 31, 2005 filed with the SEC on
April 15, 2006).                                                                                              
|      | 
|14.1  |  | Code of Business Conduct and Ethics (incorporated herein by reference to Exhibit 14.1 of Form 10-K for the Year Ended December 31, 2004 filed with the SEC on April 15, 2005).                                                                                                                                
|      | 
|21.1  |  | Subsidiaries of Language Line Holdings, Inc. *                                                                                                                                                                                                                                                                
|      | 
|31.1  |  | Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. **                                                                                                                                                                                                    
|      | 
|31.2  |  | Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. **                                                                                                                                                                                                    
|      | 
|32.1  |  | Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. **                                                                                                                                                                                                        
|      | 
|32.2  |  | Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. **                                                                                                                                                                                                        



|* | Incorporated by reference to the Registration Statement on Form S-4 (File No. 333-118754).
|- | ------------------------------------------------------------------------------------------



|** | Filed herewith.
|-- | ---------------



37



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##### Table of Contents

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders of Language Line
Holdings, Inc.:

In our opinion, the accompanying consolidated financial statements listed in the index appearing under Item 15 (a) (1) present fairly, in
all material respects, the financial position of Language Line Holdings, Inc. and subsidiaries at December 31, 2007 and 2006, and the results of their operations and their cash flows for each of the two years in the period ended December 31, 2007 in
conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion, the financial statement schedule listed in the index appearing in Item 15 (a)(2) presents fairly, in all material respects, the
information set forth therein when read in conjunction with the related consolidated financial statements. These financial statements and financial statement schedules 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 of these statements 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. An audit 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, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

As discussed in Note 5 to the consolidated financial statements, in 2007 the Company adopted a new accounting standard that required a change in the manner in which it
accounts for uncertain tax positions. As discussed in Note 7 to the consolidated financial statements, in 2006 the Company adopted a new accounting standard that required it to change the manner in which it accounts for share-based compensation.

/s/ PricewaterhouseCoopers LLP

San Francisco, CA

March 25, 2008



38



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##### Table of Contents

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of

Language Line Holdings, Inc.

Monterey, California

We have audited the accompanying consolidated statements of operations, stockholders equity and comprehensive loss, and cash flows of Language Line Holdings,
Inc. and subsidiaries (the Company) for the year ended December 31, 2005. Our audit also included the financial statement schedule for the year ended December 31, 2005 listed in the Table of Contents at Item 15. These financial
statements and the financial statement schedule are the responsibility of the Companys management. Our responsibility is to express an opinion on the financial statements and financial statement schedule based on our audit.

We conducted our audit 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 was not required to have, nor were we engaged to perform, an audit of its internal control over financial
reporting as of December 31, 2005. 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 audit provides a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all material respects, the results of the Companys operations and its cash flows for
the year ended December 31, 2005, in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, such financial statement schedule for the year ended December 31, 2005, when considered in relation
to the basic consolidated financial statements taken as a whole, presents fairly in all material respects the information set forth therein.

/s/ Deloitte
& Touche LLP

San Jose California

April 11, 2006



39



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##### Table of Contents

LANGUAGE LINE HOLDINGS, INC. AND SUBSIDIARIES

(An Indirect Wholly-Owned Subsidiary of Language Line
Holdings, LLC)

Consolidated Balance Sheets

(In thousands, except share and par value amounts)



|                                                                                                  |  |              |         |   |      |   |         |  
|------------------------------------------------------------------------------------------------- |  | ------------ | ------- | - | ---- | - | ------- | -
|                                                                                                  |  | December 31, |        
|                                                                                                  |  | 2007         |         |   | 2006 |  
|Assets                                                                                            |  |              |         |   |      |   |         |  
|Current assets:                                                                                   |  |              |         |   |      |   |         |  
|Cash and cash equivalents                                                                         |  | $            | 13,898  |   |      | $ | 20,236  |  
|Accounts receivable - net of allowance for doubtful accounts of $1,300 in 2007 and $1,503 in 2006 |  |              | 28,696  |   |      |   | 24,321  |  
|Prepaid expenses and other current assets                                                         |  |              | 1,965   |   |      |   | 1,461   |  
|Deferred taxes on income                                                                          |  |              | 1,382   |   |      |   | 1,013   |  
|                                                                                                  |  |              |         |   |      |   |         |  
|Total current assets                                                                              |  |              | 45,941  |   |      |   | 47,031  |  
|Property and equipment, net                                                                       |  |              | 5,913   |   |      |   | 5,385   |  
|Goodwill                                                                                          |  |              | 408,793 |   |      |   | 408,793 |  
|Intangible assets - net of accumulated amortization of $120,053 in 2007 and $90,961 in 2006       |  |              | 340,222 |   |      |   | 369,139 |  
|Deferred financing costs - net of accumulated amortization of $8,243 in 2007 and $5,556 in 2006   |  |              | 10,566  |   |      |   | 13,253  |  
|Other assets                                                                                      |  |              | 241     |   |      |   | 365     |  
|                                                                                                  |  |              |         |   |      |   |         |  
|Total assets                                                                                      |  | $            | 811,676 |   |      | $ | 843,966 |  
|                                                                                                  |  |              |         |   |      |   |         |  
|Liabilities and Stockholders Equity                                                              |  |              |         |   |      |   |         |  
|Current liabilities                                                                               |  |              |         |   |      |   |         |  
|Accounts payable                                                                                  |  | $            | 1,603   |   |      | $ | 515     |  
|Accrued interest                                                                                  |  |              | 2,339   |   |      |   | 3,485   |  
|Accrued compensation and interpreter costs                                                        |  |              | 5,930   |   |      |   | 4,850   |  
|Other accrued liabilities                                                                         |  |              | 2,339   |   |      |   | 2,325   |  
|Dividends payable                                                                                 |  |              | 1,000   |   |      |   |        |  
|Income taxes payable                                                                              |  |              | 300     |   |      |   | 3,008   |  
|Current portion of long-term debt                                                                 |  |              | 17,730  |   |      |   | 17,251  |  
|                                                                                                  |  |              |         |   |      |   |         |  
|Total current liabilities                                                                         |  |              | 31,241  |   |      |   | 31,434  |  
|Other Liabilities                                                                                 |  |              | 3,463   |   |      |   |        |  
|Long-term debt                                                                                    |  |              | 201,451 |   |      |   | 219,181 |  
|Senior subordinated notes                                                                         |  |              | 162,185 |   |      |   | 161,725 |  
|Senior discount notes                                                                             |  |              | 89,338  |   |      |   | 77,940  |  
|Deferred taxes on income                                                                          |  |              | 140,126 |   |      |   | 149,403 |  
|                                                                                                  |  |              |         |   |      |   |         |  
|Total liabilities                                                                                 |  |              | 627,804 |   |      |   | 639,683 |  
|                                                                                                  |  |              |         |   |      |   |         |  
|Commitments and contingencies (notes 8 and 10)                                                    |  |              |         |   |      |   |         |  
|Stockholders equity                                                                              |  |              |         |   |      |   |         |  
|Common stock, $.01 par value per share and 1,000 shares authorized, issued and outstanding        |  |              |        |   |      |   |        |  
|Additional paid-in capital                                                                        |  |              | 206,538 |   |      |   | 227,137 |  
|Accumulated deficit                                                                               |  |              | (22,666 | ) |      |   | (22,854 | )
|                                                                                                  |  |              |         |   |      |   |         |  
|Total stockholders equity                                                                        |  |              | 183,872 |   |      |   | 204,283 |  
|                                                                                                  |  |              |         |   |      |   |         |  
|Total liabilities and stockholders equity                                                        |  | $            | 811,676 |   |      | $ | 843,966 |  
|                                                                                                  |  |              |         |   |      |   |         |  

See notes to consolidated financial statements.



40



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##### Table of Contents

LANGUAGE LINE HOLDINGS, INC. AND SUBSIDIARIES

(An Indirect Wholly-Owned Subsidiary of Language Line
Holdings, LLC)

Consolidated Statements of Operations

(In thousands)



|                                    |  |                            |         |                            |   |         |                            |  |   |         |  
|----------------------------------- |  | -------------------------- | ------- | -------------------------- | - | ------- | -------------------------- |  | - | ------- | -
|                                    |  | YearEndedDecember 31, 2007 |         | YearEndedDecember 31, 2006 |   |         | YearEndedDecember 31, 2005 | 
|Revenues                            |  | $                          | 183,188 |                            | $ | 163,294 |                            |  | $ | 144,878 |  
|Costs of services                   |  |                            | 64,767  |                            |   | 57,916  |                            |  |   | 49,275  |  
|Other expenses:                     |  |                            |         |                            |   |         |                            |  |   |         |  
|Selling, general and administrative |  |                            | 32,410  |                            |   | 28,807  |                            |  |   | 24,635  |  
|Interest                            |  |                            | 52,910  |                            |   | 54,161  |                            |  |   | 50,117  |  
|Depreciation and amortization       |  |                            | 31,290  |                            |   | 36,409  |                            |  |   | 39,217  |  
|                                    |  |                            |         |                            |   |         |                            |  |   |         |  
|Total other expenses                |  |                            | 116,610 |                            |   | 119,377 |                            |  |   | 113,969 |  
|                                    |  |                            |         |                            |   |         |                            |  |   |         |  
|Other income:                       |  |                            |         |                            |   |         |                            |  |   |         |  
|Interest                            |  |                            | 915     |                            |   | 798     |                            |  |   | 285     |  
|Escrow settlement                   |  |                            |        |                            |   | 795     |                            |  |   |        |  
|Other                               |  |                            | 313     |                            |   |        |                            |  |   |        |  
|                                    |  |                            |         |                            |   |         |                            |  |   |         |  
|Total other income                  |  |                            | 1,228   |                            |   | 1,593   |                            |  |   | 285     |  
|                                    |  |                            |         |                            |   |         |                            |  |   |         |  
|Income (loss) before income taxes   |  |                            | 3,039   |                            |   | (12,406 | )                          |  |   | (18,081 | )
|Income tax provision (benefit)      |  |                            | 2,048   |                            |   | (2,895  | )                          |  |   | (8,465  | )
|                                    |  |                            |         |                            |   |         |                            |  |   |         |  
|Net income (loss)                   |  | $                          | 991     |                            | $ | (9,511  | )                          |  | $ | (9,616  | )
|                                    |  |                            |         |                            |   |         |                            |  |   |         |  

See notes to consolidated financial statements.



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##### Table of Contents

LANGUAGE LINE HOLDINGS, INC. AND SUBSIDIARIES

(An Indirect Wholly-Owned Subsidiary of Language Line
Holdings, LLC)

Consolidated Statements of Stockholders Equity (Deficit) and Comprehensive Income (Loss)

(In thousands except share amounts)



|                                                   |  |              |  |        |   |                           |   |         |                    |  |   |                            |                |  |        |        |        |  |                                    |  |   |                            |  |   |         |   |  |   |        |  
|-------------------------------------------------- |  | ------------ |  | ------ | - | ------------------------- | - | ------- | ------------------ |  | - | -------------------------- | -------------- |  | ------ | ------ | ------ |  | ---------------------------------- |  | - | -------------------------- |  | - | ------- | - |  | - | ------ | -
|                                                   |  | Common Stock |  |        |   |                           |   |         |                    |  |   |                            | Treasury Stock |  |        |        |        |  |                                   
|                                                   |  | Shares       |  | Amount |   | AdditionalPaid-in Capital |   |         | AccumulatedDeficit |  |   | Deferred StockCompensation |                |  | Shares |        | Amount |  | TotalStockholdersEquity (Deficit) |  |   | ComprehensiveIncome (Loss) | 
|BALANCES, January 1, 2005                          |  | 1,000        |  |        |  |                           |   | 228,158 |                    |  |   | (3,727                     | )              |  |        | (1,661 | )      |  |                                   |  |   |                           |  |   | 222,770 |   |  |   |        |  
|                                                   |  |              |  |        |   |                           |   |         |                    |  |   |                            |                |  |        |        |        |  |                                    |  |   |                            |  |   |         |   |  |   |        |  
|Dividend distribution to Parent                    |  |             |  |        |  |                           |   | (1,095  | )                  |  |   |                           |                |  |        |       |        |  |                                   |  |   |                           |  |   | (1,095  | ) |  |   |        |  
|Capital contribution from Parent                   |  |             |  |        |  |                           |   | 995     |                    |  |   |                           |                |  |        |       |        |  |                                   |  |   |                           |  |   | 995     |   |  |   |        |  
|Repurchase of class C common shares from employees |  |             |  |        |  |                           |   | (43     | )                  |  |   |                           |                |  |        | 43     |        |  |                                   |  |   |                           |  |   |        |   |  |   |        |  
|Deferred stock based compensation expense          |  |             |  |        |  |                           |   |        |                    |  |   |                           |                |  |        | 366    |        |  |                                   |  |   |                           |  |   | 366     |   |  |   |        |  
|Net income (loss)                                  |  |             |  |        |  |                           |   |        |                    |  |   | (9,616                     | )              |  |        |       |        |  |                                   |  |   |                           |  |   | (9,616  | ) |  |   | (9,616 | )
|                                                   |  |              |  |        |   |                           |   |         |                    |  |   |                            |                |  |        |        |        |  |                                    |  |   |                            |  |   |         |   |  |   |        |  
|BALANCES, December 31, 2005                        |  | 1,000        |  |        |  |                           |   | 228,015 |                    |  |   | (13,343                    | )              |  |        | (1,252 | )      |  |                                   |  |   |                           |  |   | 213,420 |   |  |   |        |  
|                                                   |  |              |  |        |   |                           |   |         |                    |  |   |                            |                |  |        |        |        |  |                                    |  |   |                            |  |   |         |   |  |   |        |  
|Repurchase of class C common shares from employee  |  |             |  |        |  |                           |   | (41     | )                  |  |   |                           |                |  |        |       |        |  |                                   |  |   |                           |  |   | (41     | ) |  |   |        |  
|Deferred stock based compensation expense          |  |             |  |        |  |                           |   | 415     |                    |  |   |                           |                |  |        |       |        |  |                                   |  |   |                           |  |   | 415     |   |  |   |        |  
|Adoption of SFAS 123R                              |  |             |  |        |  |                           |   | (1,252  | )                  |  |   |                           |                |  |        | 1,252  |        |  |                                   |  |   |                           |  |   |        |   |  |   |        |  
|Net income (loss)                                  |  |             |  |        |  |                           |   |        |                    |  |   | (9,511                     | )              |  |        |       |        |  |                                   |  |   |                           |  |   | (9,511  | ) |  | $ | (9,511 | )
|                                                   |  |              |  |        |   |                           |   |         |                    |  |   |                            |                |  |        |        |        |  |                                    |  |   |                            |  |   |         |   |  |   |        |  
|BALANCES, December 31, 2006                        |  | 1,000        |  | $      |  |                           | $ | 227,137 |                    |  | $ | (22,854                    | )              |  | $      |       |        |  |                                   |  | $ |                           |  | $ | 204,283 |   |  |   |        |  
|                                                   |  |              |  |        |   |                           |   |         |                    |  |   |                            |                |  |        |        |        |  |                                    |  |   |                            |  |   |         |   |  |   |        |  
|Adoption of FIN 48                                 |  |             |  |        |  |                           |   |        |                    |  |   | (803                       | )              |  |        |       |        |  |                                   |  |   |                           |  |   | (803    | ) |  |   |        |  
|Dividend distribution to Parent                    |  |             |  |        |  |                           |   | (21,000 | )                  |  |   |                           |                |  |        |       |        |  |                                   |  |   |                           |  |   | (21,000 | ) |  |   |        |  
|Repurchase of class C common shares from employee  |  |             |  |        |  |                           |   | (15     | )                  |  |   |                           |                |  |        |       |        |  |                                   |  |   |                           |  |   | (15     | ) |  |   |        |  
|Deferred stock based compensation expense          |  |             |  |        |  |                           |   | 416     |                    |  |   |                           |                |  |        |       |        |  |                                   |  |   |                           |  |   | 416     |   |  |   |        |  
|Net income (loss)                                  |  |             |  |        |  |                           |   |        |                    |  |   | 991                        |                |  |        |       |        |  |                                   |  |   |                           |  |   | 991     |   |  | $ | 991    |  
|                                                   |  |              |  |        |   |                           |   |         |                    |  |   |                            |                |  |        |        |        |  |                                    |  |   |                            |  |   |         |   |  |   |        |  
|BALANCES, December 31, 2007                        |  | 1,000        |  | $      |  |                           | $ | 206,538 |                    |  | $ | (22,666                    | )              |  | $      |       |        |  |                                   |  | $ |                           |  | $ | 183,872 |   |  |   |        |  
|                                                   |  |              |  |        |   |                           |   |         |                    |  |   |                            |                |  |        |        |        |  |                                    |  |   |                            |  |   |         |   |  |   |        |  

See notes to consolidated financial statements.



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LANGUAGE LINE HOLDINGS, INC. AND SUBSIDIARIES

(An Indirect Wholly-Owned Subsidiary of Language Line
Holdings, LLC)

Consolidated Statements of Cash Flows

(In thousands)

|                                                                   |  |                            |         |   |                            |   |         |                            |  |   |         |  
|------------------------------------------------------------------ |  | -------------------------- | ------- | - | -------------------------- | - | ------- | -------------------------- |  | - | ------- | -
|                                                                   |  | YearEndedDecember 31, 2007 |         |   | YearEndedDecember 31, 2006 |   |         | YearEndedDecember 31, 2005 | 
|Cash flows from operating activities:                              |  |                            |         |   |                            |   |         |                            |  |   |         |  
|Net income (loss)                                                  |  | $                          | 991     |   |                            | $ | (9,511  | )                          |  | $ | (9,616  | )
|Adjustments to reconcile net income (loss) to net cash provided by |  |                            |         |   |                            |   |         |                            |  |   |         |  
|operating activities:                                              |  |                            |         |   |                            |   |         |                            |  |   |         |  
|Depreciation and amortization                                      |  |                            | 31,290  |   |                            |   | 36,408  |                            |  |   | 39,217  |  
|Amortization of deferred financing costs                           |  |                            | 2,687   |   |                            |   | 2,244   |                            |  |   | 2,136   |  
|Deferred taxes on income                                           |  |                            | (9,040  | ) |                            |   | (10,632 | )                          |  |   | (13,902 | )
|Stock based compensation expense                                   |  |                            | 416     |   |                            |   | 415     |                            |  |   | 366     |  
|Loss on disposal of property                                       |  |                            | 3       |   |                            |   |        |                            |  |   | 9       |  
|Loss (gain) from derivative instruments                            |  |                            |        |   |                            |   |        |                            |  |   | 4       |  
|Accretion of discount on long-term debt                            |  |                            | 11,858  |   |                            |   | 10,354  |                            |  |   | 9,043   |  
|Effect of changes in operating assets and liabilities:             |  |                            |         |   |                            |   |         |                            |  |   |         |  
|Accounts receivable                                                |  |                            | (4,375  | ) |                            |   | (1,992  | )                          |  |   | (2,703  | )
|Prepaid expenses and other current assets                          |  |                            | (504    | ) |                            |   | 1,220   |                            |  |   | (1,025  | )
|Other assets                                                       |  |                            | 124     |   |                            |   | (269    | )                          |  |   | 137     |  
|Accounts payable                                                   |  |                            | 1,088   |   |                            |   | 1,143   |                            |  |   | 746     |  
|Income taxes payable                                               |  |                            | 63      |   |                            |   | 667     |                            |  |   | (110    | )
|Accrued interest and other liabilities                             |  |                            | (817    | ) |                            |   | 86      |                            |  |   | 2,710   |  
|                                                                   |  |                            |         |   |                            |   |         |                            |  |   |         |  
|Net cash provided by operating activities                          |  |                            | 33,784  |   |                            |   | 30,133  |                            |  |   | 27,012  |  
|                                                                   |  |                            |         |   |                            |   |         |                            |  |   |         |  
|Cash flows from investing activities:                              |  |                            |         |   |                            |   |         |                            |  |   |         |  
|Purchases of property and equipment                                |  |                            | (2,681  | ) |                            |   | (2,885  | )                          |  |   | (1,584  | )
|Acquisition of intangible asset                                    |  |                            | (175    | ) |                            |   |        |                            |  |   |        |  
|                                                                   |  |                            |         |   |                            |   |         |                            |  |   |         |  
|Net cash used in investing activities                              |  |                            | (2,856  | ) |                            |   | (2,885  | )                          |  |   | (1,584  | )
|                                                                   |  |                            |         |   |                            |   |         |                            |  |   |         |  
|Cash flows from financing activities:                              |  |                            |         |   |                            |   |         |                            |  |   |         |  
|Long-term debt repayments                                          |  |                            | (17,251 | ) |                            |   | (18,637 | )                          |  |   | (24,305 | )
|Revolving line of credit borrowings                                |  |                            | 11,000  |   |                            |   |        |                            |  |   |        |  
|Revolving line of credit repayments                                |  |                            | (11,000 | ) |                            |   |        |                            |  |   |        |  
|Loan fees and other financing costs                                |  |                            |        |   |                            |   | (2,324  | )                          |  |   | (291    | )
|Repurchase of restricted stock units                               |  |                            | (15     | ) |                            |   | (42     | )                          |  |   |        |  
|Dividend paid to parent company                                    |  |                            | (20,000 | ) |                            |   |        |                            |  |   |        |  
|Capital contribution from Parent                                   |  |                            |        |   |                            |   |        |                            |  |   | 995     |  
|                                                                   |  |                            |         |   |                            |   |         |                            |  |   |         |  
|Net cash used in financing activities                              |  |                            | (37,266 | ) |                            |   | (21,003 | )                          |  |   | (23,601 | )
|                                                                   |  |                            |         |   |                            |   |         |                            |  |   |         |  
|Net increase (decrease) in cash and cash equivalents               |  |                            | (6,338  | ) |                            |   | 6,245   |                            |  |   | 1,827   |  
|Cash and cash equivalents - beginning of period                    |  |                            | 20,236  |   |                            |   | 13,991  |                            |  |   | 12,164  |  
|                                                                   |  |                            |         |   |                            |   |         |                            |  |   |         |  
|Cash and cash equivalents - end of period                          |  | $                          | 13,898  |   |                            | $ | 20,236  |                            |  | $ | 13,991  |  
|                                                                   |  |                            |         |   |                            |   |         |                            |  |   |         |  
|Additional cash flow information:                                  |  |                            |         |   |                            |   |         |                            |  |   |         |  
|Cash paid for interest                                             |  | $                          | 39,312  |   |                            | $ | 42,611  |                            |  | $ | 35,343  |  
|                                                                   |  |                            |         |   |                            |   |         |                            |  |   |         |  
|Cash paid for income taxes                                         |  | $                          | 12,072  |   |                            | $ | 7,070   |                            |  | $ | 5,549   |  
|                                                                   |  |                            |         |   |                            |   |         |                            |  |   |         |  
|Non-cash dividend distribution                                     |  | $                          |        |   |                            | $ |        |                            |  | $ | 1,095   |  
|                                                                   |  |                            |         |   |                            |   |         |                            |  |   |         |  

See notes to consolidated financial statements.



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Notes to Consolidated Financial Statements

1. Organization and Summary of Significant Accounting Policies

OrganizationLanguage Line Holdings, Inc. (the Predecessor) was a Delaware corporation formed in December 1999 as a holding company for
Language Line, LLC (LLC) and its subsidiaries. LLC was incorporated during February 1999 as a Delaware limited liability company. The Predecessor was acquired on June 11, 2004 by Language Line, Inc. (LLI) in a
transaction accounted for under the purchase method of accounting (the Merger). LLI, a wholly-owned subsidiary of Language Line Acquisition, Inc., is a Delaware corporation formed in April 2004. LLI had no significant operations prior to
the acquisition of Predecessor. Subsequent to the Merger, Language Line Acquisition, Inc., an indirect wholly-owned subsidiary of Language Line Holdings, LLC (Holdings), was renamed Language Line Holdings, Inc. (LLHI, the
Registrant, or the Company).

The Company provides over-the-phone interpretation services, from English into over
170 different languages, 24 hours a day, seven days a week. Such services are provided mainly to the non-English speaking business population in the U.S. and Canada covering various industries such as insurance, healthcare, financial, utilities
and government, providing a cost effective alternative to staffing in-house multilingual capabilities or using face-to-face interpretation.

Principles of ConsolidationThe condensed consolidated financial statements include the accounts of LLHI, LLI, LLC and LLCs wholly-owned subsidiaries as of December 31, 2007 and December 31, 2006. All
significant intercompany accounts and transactions have been eliminated in consolidation.

Fiscal YearThe Companys fiscal year
end is December 31.

Cash equivalentsCash equivalents are short-term, highly liquid investments with original or remaining
maturities of three months or less when purchased.

Accrued compensation and interpreter costsAccrued compensation and interpreter
costs are current compensation obligations due to internal employees and agency interpreters. This includes components of known costs due to agency interpreters as well as accrued estimates for internal employees and agency interpreters.

Reclassification For the consolidated statement of operations, approximately $0.1 million of selling, general and administrative expenses for
costs related to sign language services have been reclassified to cost of services for 2006 to conform to the 2007 presentation.

For the Consolidated
Balance Sheet, the Company combined the previous lines accrued payroll and related benefits with accrued cost of interpreters into the new line titled accrued compensation and interpreter costs. In addition, portions of accounts payable have been
reclassified to accrued compensation and interpreter costs.

Concentration of Credit RiskFinancial instruments which potentially
subject the Company to concentrations of credit risk consist of cash and accounts receivable. Risks associated with cash are mitigated by banking with creditworthy institutions. Concentration of credit risk with respect to trade receivables is
limited due to the significant number of customers and their geographic dispersion. During fiscal 2007, 2006 and 2005, no customer represented more than 10% of revenues or accounts receivable. Accounts receivable are generally unsecured.



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##### Table of Contents

Property and equipment The useful life for property and equipment is within the following range:



|                       |  |                                                    
|---------------------- |  | ---------------------------------------------------
|                       |  | Useful Lives                                       
|Equipment              |  | 4-5 years                                          
|Software               |  | 3 years                                            
|Furniture and fixtures |  | 5 years                                            
|Leasehold improvements |  | The shorter of useful life or initial term of lease

As required by SOP 98-1, the Company capitalizes the costs for software developed in-house. Computer software
developed or obtained for internal use is amortized using the straight-line method over the estimated useful life of the software, generally three years.

Long Lived AssetsThe Company follows Statement of Financial Accounting Standards (SFAS) No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets. The Company has assessed the
recoverability of long-lived assets, including intangible assets other than goodwill, by determining whether the carrying value of such assets will be recovered through undiscounted future cash flows according to the guidance of SFAS No. 144.
The Company assesses whether it will recognize the future benefit of long-lived assets including intangibles in accordance with the provisions of SFAS No. 144. For assets to be held and used, including acquired intangibles, the Company
initiates its review whenever events or changes in circumstances indicate that the carrying amount of a long-lived asset may not be recoverable. Recoverability of an asset is measured by comparison of its carrying amount to the expected future
undiscounted cash flows (without interest charges) that the asset is expected to generate. Any impairment to be recognized is measured by the amount by which the carrying amount of the asset exceeds its fair value. Significant management judgment is
required in the forecasting of future operating results which are used in the preparation of projected discounted cash flows and should different conditions prevail, material write downs of net intangible assets and/or goodwill could occur.

Goodwill and Other Intangible AssetsThe Company accounts for goodwill and other intangible assets in accordance with SFAS
No. 142, Goodwill and Other Intangible Assets. This statement requires that goodwill resulting from a business combination be tested for impairment annually at the reporting unit level or whenever events or changes in circumstances
indicate that goodwill might be impaired. The Company completed the annual test of impairment for goodwill as of December 31, 2007, October 1, 2006 and 2005, respectively. These tests resulted in no impairment being recognized. Other
intangible assets are generally amortized on a straight-line basis over their useful life which is based on historic experience and plans for utilization of the assets by the Company subsequent to the business combination.

Deferred financing costsThe Company amortizes deferred financing costs using the straight-line method which approximates the effective interest rate
method over the terms of the related debt agreements and the corresponding amortization expense is included in interest expense on the accompanying consolidated statements of operations.

Segment InformationThe Company follows the provisions of SFAS No. 131, Disclosures about Segments of an Enterprise and Related Information, Financial Reporting for Segments of a
Business. This statement establishes standards for reporting information about operating segments, products and services, geographic areas and major customers in annual and interim financial statements. The Company manages and operates its
business as one operating segment. Operating results are regularly reviewed by the Companys chief operating decision maker regarding decisions about the allocation of resources and to assess performance.

RevenuesWe recognize revenue when the services have been performed and all of the following four revenue recognition criteria have been met:



| |  |  | Persuasive evidence of an arrangement exists,
| | - |  | ---------------------------------------------



| |  |  | The service has been rendered,
| | - |  | ------------------------------



| |  |  | The price is fixed or determinable, and
| | - |  | ---------------------------------------



| |  |  | Collection is reasonably assured.
| | - |  | ---------------------------------

Revenue from
interpretation services are recognized as interpretation services are performed based on actual time that is tracked for each call at the negotiated rate per minute for the customer.



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##### Table of Contents

Foreign CurrencyThe functional currency of our operations located outside the U.S. is the U.S.
Dollar. Transaction and remeasurement gains and losses were not significant for the periods presented. The Company also perform services for Canadian and United Kingdom customers which are billed in local currencies. Transaction gains and losses are
reported in the statement of operations as they are incurred. During 2007, 2006 and 2005 such gains and losses were not significant and are included in selling, general and administrative expense.

Costs of servicesThese costs are primarily; (1) direct costs of personnel serving as interpreters and call agents and
(2) telecommunications expenses for long-distance calls related to providing service to customers.

Income TaxesIncome taxes are
accounted for using an asset and liability approach. Deferred income taxes reflect the net effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax
purposes, and operating loss and tax credit carry forwards measured by applying currently enacted tax laws. A valuation allowance is provided to reduce net deferred tax assets to an amount that is more likely than not to be realized.

Comprehensive Income (Loss)SFAS No. 130, Reporting Comprehensive Income (Loss), requires that the Company report comprehensive income
(loss), which includes net income (loss) as well as other changes in assets and liabilities recorded directly to equity, in its financial statements. There were no components of comprehensive income (loss) other than net income (loss) for all
periods presented.

Stock-Based Compensation We account for stock-based compensation in accordance with Statement of Financial
Accounting Standards (SFAS) No. 123(R), Share Based Payment. Under SFAS 123(R), the Company determines the fair value of its Holdings Class C restricted stock units from the probability-weighted expected return method. Under
this method, the value of an enterprises common stock is estimated from an analysis of the future values for the Company assuming various possible future liquidity events. SFAS 123(R) requires that the Company recognize compensation expense
for only the portion of restricted stock units that are expected to vest, rather than recording forfeitures when they occur, as previously permitted. If the actual number of forfeitures differs from those estimated by management, additional
adjustments to compensation expense may be required in future periods.

Fair Value of Financial InstrumentsThe carrying amount for
cash, accounts receivable, accounts payable, accrued compensation and interpreter costs and other accrued liabilities approximated fair value at December 31, 2007 and 2006. The fair value of debt instruments is disclosed in Note 4.

Use of Estimates in the Preparation of Financial StatementsThe preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses. Such management estimates include the allowance for doubtful
accounts receivables, the useful life of intangible assets, impairment of goodwill and intangible assets, income taxes, and claims and legal proceedings. Actual results could differ from those estimates.

Recently Issued Accounting Pronouncements September 2006, the FASB issued SFAS No. 157, Fair Value Measurements (SFAS
157), which clarifies that fair value estimates should be based on the assumptions market participants would use when pricing an asset or liability and establishes a fair value hierarchy that prioritizes the information used to develop those
assumptions. Under SFAS 157, fair value measurements would be separately disclosed by level within the fair value hierarchy. SFAS 157 is effective for fiscal years beginning after November 15, 2007. On February 12, 2008, the
FASB delayed the effective date of SFAS 157 for nonfinancial assets and liabilities, except for items that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually), to fiscal years beginning
after November 15, 2008. We do not expect the adoption of SFAS 157 to have a material impact on our consolidated results of operations or financial condition.



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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 (SFAS 159). SFAS No. 159 permits an entity to elect fair value as the initial and subsequent measurement attribute for many financial
assets and liabilities. Entities electing the fair value option would be required to recognize changes in fair value in earnings. Entities electing the fair value option arerequired to distinguish, on the face of the statement of financial
position, the fair value of assets and liabilities for which the fair value option has been elected and similar assets and liabilities measured using another measurement attribute. SFAS 159 is effective for fiscal years beginning after
November 15, 2007. The adjustment to reflect the difference between the fair value and the carrying amount would be accounted for as a cumulative-effect adjustment to retained earnings as of the date of initial adoption. We do not
expect the adoption of SFAS 159 to have a material impact on our consolidated results of operations or financial condition.

In December 2007, the
FASB issued SFAS No. 141(R), Business Combinations (SFAS 141(R)), which replaces SFAS 141. SFAS 141(R) establishes principles and requirements for how an acquirer in a business combination recognizes
and measures in its financial statements the identifiable assets acquired, the liabilities assumed, and any controlling interest; recognizes and measures the goodwill acquired in the business combination or a gain from a bargain purchase; and
determines what information to disclose to enable users of the financial statements to evaluate the nature and financial effects of the business combination. FAS 141(R) is to be applied prospectively to business combinations for which
the acquisition date is on or after an entitys fiscal year that begins after December 15, 2008. We will assess the impact of SFAS 141(R) if and when a future acquisition occurs, however the application of SFAS
141(R) will result in a significant change in accounting for future acquisitions after the effective date.

In December 2007, the FASB issued SFAS
No. 160, Noncontrolling Interests in Consolidated Financial Statementsan amendment of Accounting Research Bulletin No. 51(SFAS No. 160). SFAS No. 160 establishes accounting and reporting standards for
ownership interests in subsidiaries held by parties other than the parent, the amount of consolidated net income attributable to the parent and to the noncontrolling interest, changes in a parents ownership interest, and the valuation of
retained, noncontrolling equity investments when a subsidiary is deconsolidated. SFAS No. 160 also establishes disclosure requirements that clearly identify and distinguish between the interests of the parent and the interests of the
noncontrolling owners. SFAS No. 160 is effective for fiscal years beginning after December 15, 2008. The Company is in the process of analyzing the impact of SFAS No. 160 on its Financial Statements

2. Business Combinations, Escrow Settlement, Goodwill and Intangible Assets

Business Combinations On June 11, 2004, LLI, an indirect subsidiary of ABRY Partners (ABRY) acquired the Predecessor in a transaction accounted for under the purchase method of accounting (the
Merger). The aggregate purchase price was $718.1 million. The merger agreement contains customary representations and warranties and covenants. At closing, $30.0 million of the Merger consideration was deposited into an escrow account on
behalf of the stockholders and optionholders of the Predecessor to secure their potential indemnity obligations to LLI and payment of any post-closing adjustment to the Merger consideration to LLI. Since the Merger, periodic payments from the escrow
account have been paid to the stockholders and optionholders of the Predecessor according to a pre-determined payment schedule. Final settlement of the escrow account was reached with the previous owners on July 25, 2006. In final settlement of
the escrow account, the Company received $795,000 for potential tax liabilities. As the Company had already recorded these additional tax liabilities subsequent to the Merger and concluded there is not a clear and direct link to the original
purchase price, the settlement amount of $795,000 was recorded into other income in the third quarter of 2006.



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Goodwill and Intangible Assets As of December 31, 2007 and 2006, the Companys acquired
intangible assets are being amortized on a straight-line basis as follows (in thousands):



|                              |  |                     |         |                         |                   |                   |  |                                   |         |  |                     |   |                         |   |                   |  |                                   |        |  |   |         |  |        |  
|----------------------------- |  | ------------------- | ------- | ----------------------- | ----------------- | ----------------- |  | --------------------------------- | ------- |  | ------------------- | - | ----------------------- | - | ----------------- |  | --------------------------------- | ------ |  | - | ------- |  | ------ | -
|                              |  | December 31, 2007   |         |                         | December 31, 2006 |                  
|                              |  | GrossCarryingAmount |         | AccumulatedAmortization |                   | NetCarryingAmount |  | WeightedAverageAmorization Period |         |  | GrossCarryingAmount |   | AccumulatedAmortization |   | NetCarryingAmount |  | WeightedAverageAmorization Period |       
|                              |  |                     |         |                         |                   |                   |  |                                   |         |  | (years              | ) |                         |   |                   |  |                                   |        |  |   |         |  | (years | )
|Customer relationships        |  |                     | 401,400 |                         |                   | 71,304            |  |                                   | 330,096 |  | 20                  |   |                         |   | 401,400           |  |                                   | 51,234 |  |   | 350,166 |  | 20     |  
|Customer List                 |  |                     | 175     |                         |                   | 35                |  |                                   | 140     |  | 5                   |   |                         |   |                  |  |                                   |       |  |   |        |  |        |  
|Trademark and tradename       |  |                     | 34,500  |                         |                   | 24,514            |  |                                   | 9,986   |  | 5                   |   |                         |   | 34,500            |  |                                   | 17,614 |  |   | 16,886  |  | 5      |  
|Internally developed software |  |                     | 14,000  |                         |                   | 14,000            |  |                                   |        |  | 3                   |   |                         |   | 14,000            |  |                                   | 11,913 |  |   | 2,087   |  | 3      |  
|Covenants-not-to-compete      |  |                     | 10,200  |                         |                   | 10,200            |  |                                   |        |  | 2                   |   |                         |   | 10,200            |  |                                   | 10,200 |  |   |        |  | 2      |  
|                              |  |                     |         |                         |                   |                   |  |                                   |         |  |                     |   |                         |   |                   |  |                                   |        |  |   |         |  |        |  
|                              |  | $                   | 460,275 |                         | $                 | 120,053           |  | $                                 | 340,222 |  | 18                  |   |                         | $ | 460,100           |  | $                                 | 90,961 |  | $ | 369,139 |  | 18     |  
|                              |  |                     |         |                         |                   |                   |  |                                   |         |  |                     |   |                         |   |                   |  |                                   |        |  |   |         |  |        |  

The expected future amortization of the acquired intangible assets at December 31, 2007 is as follows (in
thousands):



|                        |  |   |        
|----------------------- |  | - | -------
|Year Ending December 31 |  |   |        
|2008                    |  | $ | 27,005 
|2009                    |  |   | 23,191 
|2010                    |  |   | 20,105 
|2011                    |  |   | 20,105 
|2012                    |  |   | 20,070 
|Thereafter              |  |   | 229,746
|                        |  |   |        
|Total                   |  | $ | 340,222
|                        |  |   |        

Amortization of acquired intangible assets for the year end December 31, 2007, December 31, 2006 and
December 31, 2005 was $120,053,000, $90,961,000 and $57,044,000, respectively.



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3. Property and equipment

Property and equipment consists of the following (in thousands):



|                                          |  |                   |        |   |                   |   |        |  
|----------------------------------------- |  | ----------------- | ------ | - | ----------------- | - | ------ | -
|                                          |  | December 31, 2007 |        |   | December 31, 2006 |  
|Equipment                                 |  | $                 | 8,806  |   |                   | $ | 7,044  |  
|Software                                  |  |                   | 1,935  |   |                   |   | 981    |  
|Leasehold improvements                    |  |                   | 1,783  |   |                   |   | 1,798  |  
|Furniture and fixtures                    |  |                   | 867    |   |                   |   | 877    |  
|                                          |  |                   |        |   |                   |   |        |  
|Subtotal                                  |  |                   | 13,391 |   |                   |   | 10,700 |  
|Construction in progress                  |  |                   | 85     |   |                   |   | 109    |  
|                                          |  |                   |        |   |                   |   |        |  
|Total                                     |  |                   | 13,476 |   |                   |   | 10,809 |  
|Accumulated depreciation and amortization |  |                   | (7,563 | ) |                   |   | (5,424 | )
|                                          |  |                   |        |   |                   |   |        |  
|Property and equipment- net               |  | $                 | 5,913  |   |                   | $ | 5,385  |  
|                                          |  |                   |        |   |                   |   |        |  

Depreciation and amortization of property and equipment for the year ended December 31,
2007, December 31, 2006 and December 31, 2005 was $ 2,198,000, $2,491,000, and $2,480,000, respectively.

4. Long-Term Debt

Long-term debt consists of the following (in thousands):



|                                   |  |                   |         |                   |   |        
|---------------------------------- |  | ----------------- | ------- | ----------------- | - | -------
|                                   |  | December 31, 2007 |         | December 31, 2006
|Current portion of long-term debt: |  |                   |         |                   |   |        
|Term loan                          |  | $                 | 17,730  |                   | $ | 17,251 
|Long-term debt (non-current):      |  |                   |         |                   |   |        
|Term loan                          |  |                   | 201,451 |                   |   | 219,181
|Senior subordinated notes          |  |                   | 162,185 |                   |   | 161,725
|Senior discount notes              |  |                   | 89,338  |                   |   | 77,940 
|                                   |  |                   |         |                   |   |        
|Total debt                         |  | $                 | 470,704 |                   | $ | 476,097
|                                   |  |                   |         |                   |   |        

As of December 31, 2004 the Company originally had a $40.0 million reducing revolver credit facility and a
$277.5 million term loan under a bank loan agreement dated June 11, 2004 (the 2004 Loans). The reducing revolver credit facility is due June 11, 2010 and the term loan is due June 10, 2011. Under the terms of the loan
agreement, the Company may elect either a variable rate of interest (equal to the lenders base rate plus an applicable margin) or an interest rate fixed for a specified period of one, two, three or six months (equal to LIBOR plus
an applicable margin) for the revolver and one, two, or three months for the term loan. The applicable margins used to calculate these interest rates are determined based on the Companys ratio of total debt less excess cash to earnings before
interest, taxes, depreciation and amortization (EBITDA), as defined in the loan agreements. The senior credit facilities are collateralized by first priority interests in, and mortgages on, substantially all of our tangible and
intangible assets and first priority pledges of all the equity interest owned by us in our existing and future domestic subsidiaries.

At December 31,
2007 the maximum amount available under the revolving credit facility was $40.0 million and no balance is outstanding. This amount is available for the entire term per the loan agreement. At December 31, 2007 the 2004 Loans consisted of a
$219.2 million term loan. The term loan is automatically and permanently reduced at the end of each calendar quarter based on a predetermined schedule. In addition to such predetermined reductions, the maximum



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amount available under the loan agreement will be permanently reduced by (1) beginning June 11, 2004, a portion
of an annual excess cash flow amount, as defined in the loan agreement, (2) a portion of net proceeds from the Companys issuance of equity securities, as defined, (3) a portion of net proceeds from the Companys
disposition of assets, as defined, and (4) by voluntary reductions requested at the option of the Company. The Companys average interest rate for the term loan was 8.53%, 9.32% and 7.50% for 2007, 2006 and 2005, respectively. At
December 31, 2007, the interest rate in effect was 8.34% through January 30, 2008 for the term loan. The fair value of the term loan approximates carrying value because of the nature of the variable rate of interest.

On November 5, 2005, the Company entered into an amendment to the 2004 Loans, pursuant to which both the total leverage and the senior leverage covenants were
increased by 0.25% to provide additional leverage availability, beginning with the period ended December 31, 2005 and ending with the period ended December 31, 2006.

On November 14, 2006, the Company entered into an Amended and Restated Credit Agreement (the Agreement) which amends and restates the Credit Agreement dated as of June 11, 2004 and amended as of
November 3, 2005, among Language Line, Inc., the Company and the subsidiary guarantors party thereto.

The Agreement effects a refinancing and
replacement of the Tranche B Term Loans currently outstanding under the Original Credit Agreement with a new class of Term Loans designated as Tranche B-1 Term Loans. The aggregate principal amount of the modified loan is equal to the
aggregate principal amount of original loan under the Original Credit Agreement. The modified loan has terms, rights and obligations materially identical to the original loan except that the Applicable Margin for borrowings under the modified loan
is 3.25 % in the case of Eurodollar loans and 2.25 % in the case of Alternate Base Rate Loans. In addition, the Agreement amended related definitions and contained immaterial modifications to various other provisions of the Original Credit
Agreement

On June 11, 2004 LLI issued $165 million of 11 1/8% Senior Subordinated Notes (the Notes) for net proceeds of $160.8
million. Interest is payable on June 15 and December 15 of each year. The Notes will mature on June 15, 2012. LLI may redeem some or all of the notes at any time on or after June 15, 2008 at the redemption prices set forth. In
addition, before June 15, 2007, LLI may redeem up to 35% of the notes with the net proceeds of one or more equity offerings. The notes are unsecured and are subordinated to all existing and future senior indebtedness. Each of LLIs
domestic subsidiaries guarantee the notes on a senior subordinated basis.

Based on quoted market prices and/or the borrowing rates currently available to
the Company for long-term debt with similar terms and maturities, the fair value of the Notes is approximately $171.8 million as of December 31, 2007.

On June 11, 2004 the Company issued approximately $109.0 million of 14 1/8% Senior Discount Notes for net proceeds of approximately $55.0 million. No cash interest will accrue on the senior discount notes prior to June 15,
2009. Thereafter, cash interest on the senior discount notes will accrue at a rate of 14 1/8% per annum and be payable semi-annually in arrears on June 15 and December 15 of each year, beginning on December 15, 2009. The
senior discount notes are unsecured senior obligations, rank equally with all of the Companys future senior indebtedness and rank senior to all subordinated indebtedness. The senior discount notes are subordinated to all of the Companys
subsidiaries existing and future obligations and are due June 15, 2013.

Based on quoted market prices and/or the borrowing rates currently
available to the Company for long-term debt with similar terms and maturities, the fair value of the $109.0 million of the 14 1/8% senior discount notes is approximately $68.3 million as of December 31, 2007.

The indenture governing both the Senior Discount Notes and the Senior Subordinated Notes contain covenants limiting, among other things, the Companys ability and
the ability of its subsidiaries to incur additional indebtedness, make restricted payments, make investments, create certain liens, sell assets, restrict payments by the Companys subsidiaries, guarantee indebtedness, enter into transactions
with affiliates, and merge or consolidate or transfer and sell assets. These covenants are subject to important exceptions and qualifications as contained in the indenture. As of December 31, 2007, the Company was in compliance with all
covenants as set forth in the indenture.



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As of December 31, 2007, principal payments are due approximately as follows (in thousands):



|                         |  |           |         |                         |   |                     |  |       |         |  |   |        
|------------------------ |  | --------- | ------- | ----------------------- | - | ------------------- |  | ----- | ------- |  | - | -------
|Year Ending December 31, |  | TermLoans |         | SeniorSubordinatedNotes |   | SeniorDiscountNotes |  | Total
|2008                     |  |           | 17,730  |                         |   |                    |  |       |        |  |   | 17,730 
|2009                     |  |           | 12,630  |                         |   |                    |  |       |        |  |   | 12,630 
|2010                     |  |           | 12,630  |                         |   |                    |  |       |        |  |   | 12,630 
|2011                     |  |           | 176,191 |                         |   |                    |  |       |        |  |   | 176,191
|2012                     |  |           |        |                         |   | 165,000             |  |       |        |  |   | 165,000
|Thereafter               |  |           |        |                         |   |                    |  |       | 108,993 |  |   | 108,993
|                         |  |           |         |                         |   |                     |  |       |         |  |   |        
|Total                    |  | $         | 219,181 |                         | $ | 165,000             |  | $     | 108,993 |  | $ | 493,174
|                         |  |           |         |                         |   |                     |  |       |         |  |   |        

5. Income Taxes

The provision (benefit) for income taxes consists of the following (in thousands):



|               |  |                            |        |   |                            |   |         |                            |  |   |         |  
|-------------- |  | -------------------------- | ------ | - | -------------------------- | - | ------- | -------------------------- |  | - | ------- | -
|               |  | YearEndedDecember 31, 2007 |        |   | YearEndedDecember 31, 2006 |   |         | YearEndedDecember 31, 2005 | 
|Current:       |  |                            |        |   |                            |   |         |                            |  |   |         |  
|Federal        |  | $                          | 9,953  |   |                            | $ | 6,372   |                            |  | $ | 4,236   |  
|State          |  |                            | 1,135  |   |                            |   | 1,365   |                            |  |   | 1,202   |  
|               |  |                            |        |   |                            |   |         |                            |  |   |         |  
|Total current  |  |                            | 11,088 |   |                            |   | 7,737   |                            |  |   | 5,438   |  
|               |  |                            |        |   |                            |   |         |                            |  |   |         |  
|Deferred:      |  |                            |        |   |                            |   |         |                            |  |   |         |  
|Federal        |  |                            | (7,944 | ) |                            |   | (9,258  | )                          |  |   | (8,006  | )
|State          |  |                            | (1,096 | ) |                            |   | (1,374  | )                          |  |   | (5,897  | )
|               |  |                            |        |   |                            |   |         |                            |  |   |         |  
|Total deferred |  |                            | (9,040 | ) |                            |   | (10,632 | )                          |  |   | (13,903 | )
|               |  |                            |        |   |                            |   |         |                            |  |   |         |  
|Total          |  | $                          | 2,048  |   |                            | $ | (2,895  | )                          |  | $ | (8,465  | )
|               |  |                            |        |   |                            |   |         |                            |  |   |         |  



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The amount of income tax recorded differs from the amount using the statutory federal income tax rate (35%) for the
following reasons (in thousands):



|                                                |  |                            |       |   |                            |   |        |                            |  |   |        |  
|----------------------------------------------- |  | -------------------------- | ----- | - | -------------------------- | - | ------ | -------------------------- |  | - | ------ | -
|                                                |  | YearEndedDecember 31, 2007 |       |   | YearEndedDecember 31, 2006 |   |        | YearEndedDecember 31, 2005 | 
|Federal statutory tax expense (benefit)         |  | $                          | 1,064 |   |                            | $ | (4,341 | )                          |  | $ | (6,328 | )
|Expiration of uncertain tax positions liability |  |                            | (470  | ) |                            |   |       |                            |  |   |       |  
|State tax expense (benefit)                     |  |                            | 169   |   |                            |   | 29     |                            |  |   | (2,985 | )
|Nondeductible expense                           |  |                            | 1,374 |   |                            |   | 1,186  |                            |  |   | 1,021  |  
|Other                                           |  |                            | (89   | ) |                            |   | 231    |                            |  |   | (173   | )
|                                                |  |                            |       |   |                            |   |        |                            |  |   |        |  
|Total                                           |  | $                          | 2,048 |   |                            | $ | (2,895 | )                          |  | $ | (8,465 | )
|                                                |  |                            |       |   |                            |   |        |                            |  |   |        |  

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and
liabilities at December 31 are as follows (in thousands):



|                                                        |  |         |       |             |                  |          |   |         |   |             |                  |  |   |       |  |   |          |   |  |   |          |  
|------------------------------------------------------- |  | ------- | ----- | ----------- | ---------------- | -------- | - | ------- | - | ----------- | ---------------- |  | - | ----- |  | - | -------- | - |  | - | -------- | -
|                                                        |  | 2007    |       |             | December 31,2007 |          |   | 2006    |   |             | December 31,2006 | 
|                                                        |  | Current |       | Non Current |                  |          |   | Current |   | Non Current |                  | 
|Deferred tax assets (liabilities):                      |  |         |       |             |                  |          |   |         |   |             |                  |  |   |       |  |   |          |   |  |   |          |  
|Allowance for uncollectible accounts receivable         |  | $       | 517   |             | $                |         |   |         | $ | 517         |                  |  | $ | 601   |  | $ |         |   |  | $ | 601      |  
|State income taxes                                      |  |         | 630   |             |                  | 6,095    |   |         |   | 6,725       |                  |  |   | 348   |  |   | 6,805    |   |  |   | 7,153    |  
|Depreciation and amortization                           |  |         |      |             |                  | 56       |   |         |   | 56          |                  |  |   |      |  |   | (63      | ) |  |   | (63      | )
|Acquired intangibles                                    |  |         |      |             |                  | (156,012 | ) |         |   | (156,012    | )                |  |   |      |  |   | (162,687 | ) |  |   | (162,687 | )
|Accretion of interest on High Yield Discount Obligation |  |         |      |             |                  | 9,734    |   |         |   | 9,734       |                  |  |   |      |  |   | 6,542    |   |  |   | 6,542    |  
|Other                                                   |  |         | 235   |             |                  | 1        |   |         |   | 236         |                  |  |   | 64    |  |   |         |   |  |   | 64       |  
|                                                        |  |         |       |             |                  |          |   |         |   |             |                  |  |   |       |  |   |          |   |  |   |          |  
|Net deferred tax liability                              |  | $       | 1,382 |             | $                | (140,126 | ) |         | $ | (138,744    | )                |  | $ | 1,013 |  | $ | (149,403 | ) |  | $ | (148,390 | )
|                                                        |  |         |       |             |                  |          |   |         |   |             |                  |  |   |       |  |   |          |   |  |   |          |  

Undistributed earnings of the Companys foreign subsidiaries of approximately $2.7 million at
December 31, 2007 and $2.4 million at December 31, 2006, are considered to be indefinitely reinvested and, accordingly, no provision for federal and state income taxes has been provided thereon. Upon distribution of those earnings in the
form of dividends or otherwise, the Company would be subject to both U.S. income taxes (subject to an adjustment for foreign tax credits) and withholding taxes payable to various foreign countries.

The operations of Language Line Holdings, Inc and subsidiaries are included in the consolidated federal and state income tax returns of its parent, Language Line
Holdings, II Inc. Language Line Holdings Inc. and subsidiaries manage the respective tax payments and refunds for Language Line Holdings, II Inc. Income taxes payable at December 31, 2007 and 2006 includes $1,727,000 and $807,000, respectively,
representing amounts due to Language Line Holdings, II Inc. for tax benefits reflected on the consolidated tax returns resulting from operating losses generated by Language Line Holdings, II Inc.



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The Company adopted FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes(FIN
48) on January 1, 2007. FIN 48 prescribes a recognition threshold and measurement attribute criteria for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. The
interpretation also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. As a result of the adoption of FIN 48, the Company recorded a $4.2 million increase in other
liabilities, a $2.8 million decrease in income tax payable, a $0.6 million decrease in deferred tax liabilities, and a cumulative adjustment of $0.8 million to opening accumulated deficit at January 1, 2007.

The following table illustrates the incremental effect of applying FIN 48 on individual line items on the condensed consolidated balance sheet as of January 1,
2007.



|                                           |  |                            |         |   |                            |   |        |                           |  |   |         |  
|------------------------------------------ |  | -------------------------- | ------- | - | -------------------------- | - | ------ | ------------------------- |  | - | ------- | -
|                                           |  | Beforeapplicationof FIN 48 |         |   | Effect ofFIN 48application |   |        | AfterApplicationof FIN 48 | 
|                                           |  | (thousands)                |        
|Deferred taxes                             |  | $                          | 1,013   |   |                            | $ | (3     | )                         |  | $ | 1,010   |  
|Total assets                               |  |                            | 843,966 |   |                            |   | (3     | )                         |  |   | 843,963 |  
|Income taxes payable                       |  |                            | 3,008   |   |                            |   | (2,772 | )                         |  |   | 236     |  
|Other liabilities                          |  |                            |        |   |                            |   | 4,181  |                           |  |   | 4,181   |  
|Deferred taxes                             |  |                            | 149,403 |   |                            |   | (609   | )                         |  |   | 148,794 |  
|Total liabilities                          |  |                            | 639,683 |   |                            |   | 800    |                           |  |   | 640,483 |  
|Accumulated deficit                        |  |                            | (22,854 | ) |                            |   | (803   | )                         |  |   | (23,657 | )
|Total stockholders equity                 |  |                            | 204,283 |   |                            |   | (803   | )                         |  |   | 203,480 |  
|Total liabilities and stockholders equity |  | $                          | 843,966 |   |                            | $ | (3     | )                         |  | $ | 843,963 |  

At January 1, 2007, the Company had approximately $4.2 million in total unrecognized tax benefits. At
December 31, 2007, the Company had approximately $3.5 million in total unrecognized tax benefits. A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:



|                                                       |  |   |       |  
|------------------------------------------------------ |  | - | ----- | -
|Unrecognized tax benefits balance at January 1, 2007   |  | $ | 4,181 |  
|Gross increase for tax positions of prior years        |  |   | 97    |  
|Gross decrease for tax positions of prior years        |  |   |      |  
|Gross increase for tax positions of current year       |  |   |      |  
|Gross decrease for tax positions of current year       |  |   |      |  
|Settlements                                            |  |   | (345  | )
|Lapse of statue of limitations                         |  |   | (470  | )
|                                                       |  |   |       |  
|Unrecognized tax benefits balance at December 31, 2007 |  | $ | 3,463 |  
|                                                       |  |   |       |  

The total unrecognized tax benefits as of December 31, 2007 totaled $3.5 million and, if recognized, would
impact the Companys effective tax rate. As of December 31, 2007, we had liabilities for uncertain tax positions of $3.5 million, of which $3.5 million was non-current and $0 million was current. The current portion of these liabilities at
December 31, 2007 is expected to be settled in cash in the next twelve months, while the timing of the resolution of the non-current portion is uncertain. The resolution of these items may result in additional or reduced income tax expense. We
anticipate that our liabilities for uncertain tax positions will increase during the year for items that arise in the ordinary course of business. These amounts will be reflected as an increase in the liabilities and an increase to the current
period tax expense. Our expectations of these amounts are contemplated in our annual effective tax rate. The entire liability for uncertain tax positions, if recognized, would affect our effective tax rate. Possible releases of liabilities due to
expirations of statutes of limitations will have the effect of decreasing our income tax expense and effective tax rate if and when they occur.



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The Company recognizes interest and penalties relating to unrecognized tax benefits as part of its income tax expense.
Total accrued interest and penalties as of December 31, 2007 were $0.7 million and $0.2 million, respectively.

The Company files income tax returns
in U.S. federal jurisdiction along with various state and foreign jurisdictions, and is subject to ongoing audits from various taxing authorities in the jurisdictions in which it does business. With certain exceptions, the Company is no longer
subject to examinations from taxing authorities for years prior to 2003. The Franchise Tax Board (FTB) of the State of California is currently examining the Companys California income tax returns for 2003 and 2004. The Company has
agreed with certain FTB findings and will make income tax settlement payments on tax positions of at least $0.3 million within the next 12 months. The Company is currently disputing a FTB finding with an estimated income tax effect of $0.2 million.

6. Retirement Plans

The Company has a 401(k)
retirement plan under which employees may elect to make tax deferred contributions, to a maximum established annually by the IRS. For employees meeting a six-month service requirement, the Company matches 66.7% of the employees contributions
up to a maximum of 6% of the employees contributions. Contributions vest after three years of service. Company contributions were approximately $433,000, $445,000 and $413,000 for the years ended December 31, 2005, December 31,
2006 and December 31, 2007, respectively.

7. Stock-Based Compensation

Under the Companys Holdings Class C restricted stock unit plan, officers, employees and outside directors have received or may receive grants of Holdings Class C restricted stock units. Effective January 1,
2006, the Company adopted the provisions of Financial Accounting Standards Board Statement of Financial Accounting Standard (SFAS) No. 123(R), Share-Based Payment, which establishes the accounting for employee
stock-based awards. Under the provisions of SFAS No. 123(R), stock-based compensation is measured at the grant date, based on the calculated fair value of the award, and is recognized as an expense over the requisite employee service period
(generally the vesting period of the grant). The Company adopted SFAS No. 123(R) using the modified prospective method and, as a result, periods prior to January 1, 2006 have not been restated. Additionally, no modifications were made to
outstanding Holdings Class C restricted stock units prior to the adoption of SFAS No. 123(R), and no cumulative adjustments were recorded in the Companys financial statements.

Prior to January 1, 2006, the Company accounted for the plans under the measurement and recognition provisions of Accounting Principles Board (APB) Opinion No. 25, Accounting for Stock Issued to
Employees (APB 25), and related Interpretations as permitted by SFAS No. 123 (SFAS 123), Accounting for Stock Based Compensation. Under APB 25, the Company recorded stock-based compensation expense for its Holdings Class
C restricted stock units in its Financial Statements.

Under both SFAS 123 and SFAS 123(R), the Company determines the fair value of its Holdings Class C
restricted stock units from the probability-weighted expected return method. Under this method, the value of an enterprises common stock is estimated from an analysis of the future values for the Company assuming various possible future
liquidity events. SFAS 123(R) requires that the Company recognize compensation expense for only the portion of restricted stock units that are expected to vest, rather than recording forfeitures when they occur, as previously permitted. If the
actual number of forfeitures differs from those estimated by management, additional adjustments to compensation expense may be required in future periods.



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On January 1, 2006, deferred compensation related to awards issued prior to the adoption of SFAS 123(R) was reduced
to zero with a corresponding decrease to capital surplus. SFAS 123(R) requires the Company to reflect the tax savings



|                               |  |                      |   |  |                                      |      |                                           |    
|------------------------------ |  | -------------------- | - |  | ------------------------------------ | ---- | ----------------------------------------- | ---
|                               |  | Number ofUnits (000) |   |  | WeightedAverage GrantDate Fair Value |      | Weighted AverageRemainingContractual Term
|Outstanding, December 31, 2006 |  | 21,099               |   |  | $                                    | 0.09 |                                           |    
|Granted                        |  | 1,750                |   |  | $                                    | 0.14 |                                           |    
|Repurchased                    |  | (110                 | ) |  | $                                    | 0.09 |                                           |    
|Forfeited                      |  | (790                 | ) |  | $                                    | 0.13 |                                           |    
|                               |  |                      |   |  |                                      |      |                                           |    
|Outstanding, December 31, 2007 |  | 21,949               |   |  | $                                    | 0.09 |                                           | 3.0
|                               |  |                      |   |  |                                      |      |                                           |    

resulting from tax deductions in excess of expense reflected in its Financial Statements as a financing cash flow,
which will impact the Companys future reported cash flows from operating activities.

Stock-based compensation expense related to Holdings Class C
restricted stock units, recognized under SFAS 123(R) for the years ended December 31, 2007 and 2006 was $416,821 and $415,409. As of December 31, 2007, total unrecognized compensation cost, net of estimated forfeitures, was $1.0 million
related to its restricted stock units. The unrecognized compensation cost is expected to be recognized over a weighted-average period of 3.0 years.

The
Holdings Class C restricted stock units will vest according to a specified schedule and will be expensed to compensation over the vesting period of five years. Vesting will accelerate upon a change of control of Holdings and upon certain types of
sales. Vesting will cease if the individual ceases to be employed by Holdings or any of its subsidiaries. If the individual ceases to be employed by Holdings or any of its subsidiaries, Holdings will have the option to purchase all or any portion of
the vested and/or the unvested restricted stock units. The aggregate purchase price for all unvested units will be $1.00, and the purchase price for each vested unit will be the fair market value for such unit as of the date of individuals
termination. If, however, the Company terminates the individuals employment for cause, the aggregate purchase price of all vested units will be $1.00. Holdings right to repurchase the individuals units will terminate upon a change
of control (as such term is defined in their incentive unit agreement), provided that the individual is employed by Holdings or any of its subsidiaries at the time of the change of control.

As of December 31, 2007 there are 13,359,331 outstanding unvested Holdings Class C restricted stock units, which were granted as restricted stock since
June 12, 2004. The company terminated all stock option incentive plans on June 11, 2004 and the plans were not replaced. There are no outstanding or exercisable options with respect to any stock option incentive plans with the Company as
of December 31, 2007.

The following table reflects activity under the restricted stock unit plan from December 31, 2006 through
December 31, 2007 (in thousands, except per share amounts):

A summary of the status of the Companys nonvested shares as of
December 31, 2007 and changes during the period is presented below:



|                               |  |                      |   |  |                                      |     
|------------------------------ |  | -------------------- | - |  | ------------------------------------ | ----
|Nonvested Units                |  | Number ofUnits (000) |   |  | WeightedAverage GrantDate Fair Value
|Outstanding, December 31, 2006 |  | 15,771               |   |  | $                                    | 0.09
|Granted                        |  | 1,750                |   |  | $                                    | 0.14
|Vested                         |  | (3,372               | ) |  | $                                    | 0.09
|Forfeited                      |  | (790                 | ) |  | $                                    | 0.13
|                               |  |                      |   |  |                                      |     
|Outstanding, December 31, 2007 |  | 13,359               |   |  | $                                    | 0.10
|                               |  |                      |   |  |                                      |     



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Holdings Class C restricted stock units granted vest over a 5 year cliff vesting schedule. During the
year ended December 31, 2007, 3.4 million units vested. Recipients of restricted stock units do not pay any cash consideration for the units, do not have the right to vote, and do not receive dividends with respect to such units.
Compensation expense for restricted stock units is recognized on a straight-line basis over the vesting period, using the restricted stock units fair value on the grant date.

8. Lease Commitments

The Company leases its operating facilities in the following locations:



|                      |  |                              |  |                                              
|--------------------- |  | ---------------------------- |  | ---------------------------------------------
|Location              |  | Expiration                   |  | Option to Extend                             
|                      |  |                             
|Monterey, California  |  | December 2010                |  | None                                         
|                      |  |                             
|Elk Grove, Illinois   |  | November 2011                |  | None                                         
|                      |  |                             
|Dominican Republic    |  | October 2009                 |  | None                                         
|                      |  |                             
|Panama (2 leases)     |  | November 2011 and April 2008 |  | Upon mutual agreement/One period of two years
|                      |  |                             
|Costa Rica (2 leases) |  | April 2010 and 2008          |  | None/None                                    

Future minimum annual lease payments at December 31, 2007 are as follows (in thousands):



|                        |  |                 |      
|----------------------- |  | --------------- | -----
|Year Ending December 31 |  | OperatingLeases
|2008                    |  | $               | 2,757
|2009                    |  |                 | 1,106
|2010                    |  |                 | 858  
|2011                    |  |                 | 145  
|2012                    |  |                 | 0    
|                        |  |                 |      
|Total                   |  | $               | 4,866
|                        |  |                 |      

Rent expense for all operating leases the year ended December 31, 2007, December 31, 2006 and
December 31, 2005 was $1,100,000, $1,069,000, and $1,048,000, respectively.



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9. Related Party Transactions

In 2001, the Predecessor loaned $995,000 to an officer in exchange for a note receivable (Note A). Note A was collateralized by the officers primary residence. In 2002, the Predecessor loaned $100,000 to another officer in
exchange for a note receivable (Note B). Note B is collateralized by Language Line Holdings, LLC common stock. In connection with the Merger, which occurred on June 11, 2004, both of these loans were modified to extend their
maturities. These modifications were made when LLI was a private company not subject to the Sarbanes-Oxley Act of 2002 (the Act). In September, 2004, LLI became subject to the Act and as a result the loans may not have been compliant
with the Act. To address this matter, on April 13, 2005, $1,095,000 was distributed from LLI in the form of a dividend to its parent, LLHI. LLHI then distributed in the form of a dividend that same amount to its parent, Language Line Holdings
III, Inc. (the Parent). Parent then made new loans to the executives in the same amount as the loans held by LLI. The loans held by LLI were simultaneously repaid in full by the officers. Each of the dividends and loans mentioned above
that occurred on April 13, 2005 were affected in non-cash transactions. This action required a waiver from the lenders party to LLIs credit agreement, which was obtained on April 13, 2005. On May 18, 2005, a capital contribution
in the amount of $995,000 was made by the Parent to LLHI when the one officer liable for Note A repaid his loan to the Parent.

The Company paid Language
Line Holdings, LLC, the Companys ultimate parent, a consulting fee of $157,000 for the year ended December 31, 2005.

On January 19, 2006
the Companys ultimate parent, Language Line Holdings, LLC, completed its acquisition of the unaffiliated U.K. based company Language Line, Limited (Language Line UK). Language Line UKs business operations are independent of
the Company and are not included in the accompanying consolidated financial statements. The Company incurred $257,000 of acquisition related costs in 2005 which were reported as a loan to Language Line UK on the Companys balance sheet as of
December 31, 2005. Subsequently the Company received a full amount of settlement on January 20, 2006 when the acquisition was completed. The company has a contract to provide administrative and sales support services to Language Line UK
for a fixed monthly fee. The Company recognized revenue of approximately $234,000 and $480,000 for the year ended December 31, 2007 and December 31, 2006 for administrative and sales support services it rendered to Language Line UK.

The operations of Language Line Holdings, Inc and subsidiaries are included in the consolidated federal and state income tax returns of its parent,
Language Line Holdings, II Inc. Language Line Holdings Inc. and subsidiaries manage the respective tax payments and refunds for Language Line Holdings, II Inc. Income taxes payable at December 31, 2007 and 2006 includes $1,727,000 and $807,000,
respectively, representing amounts due to Language Line Holdings, II Inc. for tax benefits reflected on the consolidated tax returns resulting from operating losses generated by Language Line Holdings, II Inc.

10. Contingencies

The Company is party to certain legal actions
arising in the ordinary course of business. Although the ultimate outcome is not presently determinable, management believes that the resolution of such matters will not have a material adverse effect on the Companys financial position or
results of operations or cash flows.

11. Guarantor Subsidiaries

The Companys outstanding public debt (the Senior Subordinated Notes) is jointly and severally, fully and unconditionally guaranteed by the Company and its subsidiaries (the Guarantor
Subsidiaries). The Company or Parent Company has no independent assets or operations. The subsidiaries are 100% owned by the Company. At December 31, 2007, a total of approximately $162.2 million of Senior Subordinated Notes were
outstanding. The Guarantor Subsidiaries are direct or indirect wholly-owned subsidiaries of the Company. Separate financial statements of the Company and each of the Guarantor Subsidiaries are not presented because the guarantees are full and
unconditional and the Guarantor Subsidiaries are jointly and severally liable.



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There are no current restrictions on the ability of the Guarantor Subsidiaries to make payments under the
guarantees referred to above. The obligations of each guarantor under its guarantee are limited to the maximum amount permitted under Bankruptcy Law, the Uniform Fraudulent Conveyance Act, the Uniform Fraudulent Transfer Act, or any similar Federal
or state law (e.g. laws requiring adequate capital to pay dividends) respecting fraudulent conveyance or fraudulent transfer.

12. Quarterly Information
(Unaudited)

The following tables present certain unaudited consolidated quarterly financial information for each of the eight quarters, in the years
ended December 31, 2007 and 2008. This quarterly information has been prepared on the same basis as the Consolidated Financial Statements and includes all adjustments necessary to state fairly the information for the periods presented. The
results of operations for any quarter are not necessarily indicative of results for the full year or for any future period. The Company operates as a single segment.

Quarterly Financial Data

(unaudited, in thousands)



|                             |  |               |        |   |         |   |        |              |  |             |        |  |   |       
|---------------------------- |  | ------------- | ------ | - | ------- | - | ------ | ------------ |  | ----------- | ------ |  | - | ------
|                             |  | Quarter Ended
|2007                         |  | March 31      |        |   | June 30 |   |        | September 30 |  | December 31
|Revenues                     |  | $             | 45,266 |   |         | $ | 45,473 |              |  | $           | 46,177 |  | $ | 46,272
|Income (loss) before taxes   |  | $             | 279    |   |         | $ | (243   | )            |  | $           | 1,013  |  | $ | 1,990 
|Income tax (benefit) expense |  | $             | 397    |   |         | $ | 297    |              |  | $           | 603    |  | $ | 751   
|Net income (loss)            |  | $             | (118   | ) |         | $ | (540   | )            |  | $           | 410    |  | $ | 1,239 



|                             |  |               |        |   |         |   |        |              |  |   |             |   |  |   |        |  
|---------------------------- |  | ------------- | ------ | - | ------- | - | ------ | ------------ |  | - | ----------- | - |  | - | ------ | -
|                             |  | Quarter Ended |       
|2006                         |  | March 31      |        |   | June 30 |   |        | September 30 |  |   | December 31 |  
|Revenues                     |  | $             | 40,046 |   |         | $ | 40,116 |              |  | $ | 41,039      |   |  | $ | 42,093 |  
|Income (loss) before taxes   |  | $             | (4,075 | ) |         | $ | (4,317 | )            |  | $ | (1,515      | ) |  | $ | (2,499 | )
|Income tax (benefit) expense |  | $             | (1,297 | ) |         | $ | (1,382 | )            |  | $ | (291        | ) |  | $ | 75     |  
|Net income (loss)            |  | $             | (2,778 | ) |         | $ | (2,935 | )            |  | $ | (1,224      | ) |  | $ | (2,574 | )



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LANGUAGE LINE HOLDINGS, INC. AND SUBSIDIARIES

FINANCIAL STATEMENT SCHEDULE

The Financial Statement Schedule II-VALUATION AND QUALIFYING ACCOUNTS



|                                |  |                              |  |                            |   |  |                         |  |                                       |   |  |                        
|------------------------------- |  | ---------------------------- |  | -------------------------- | - |  | ----------------------- |  | ------------------------------------- | - |  | -----------------------
|Allowance for Doubtful Accounts |  | Balance atBeginning ofPeriod |  | Charge toCosts andExpenses |   |  | Chargedto OtherAccounts |  | Deductions Write-offs,Net ofRecovery |   |  | Balance at Endof Period
|Year ended December 31, 2007    |  | $1,503                       |  | ($59                       | ) |  | $0                      |  | ($143                                 | ) |  | $1,300                 
|Year ended December 31, 2006    |  | 738                          |  | 1,254                      |   |  | 0                       |  | (489                                  | ) |  | 1,503                  
|Year ended December 31, 2005    |  | 474                          |  | 435                        |   |  | 0                       |  | (171                                  | ) |  | 738                    



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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Dated: March 26, 2008



LANGUAGE LINE HOLDINGS, INC.By:

/s/    MICHAEL F. SCHMIDTMichael F. SchmidtCHIEF FINANCIAL OFFICER,SENIOR VICE PRESIDENT, SECRETARYAND DIRECTOR


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 indicated on March 26, 2007.



|                                             |  |                                                                                                                    
|-------------------------------------------- |  | -------------------------------------------------------------------------------------------------------------------
|SIGNATURE                                    |  | CAPACITY                                                                                                           
|                                             | 
|/s/    DENNIS G. DRACUP Dennis G. Dracup     |  | President, Chief Executive Officer and Director (Principal Executive Officer)                                      
|                                             | 
|/s/    MICHAEL F. SCHMIDT Michael F. Schmidt |  | Chief Financial Officer, Senior Vice President, Secretary and Director (Principal Financial and Accounting Officer)



II-1