eastman2006_11k.htm


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C.  20549

FORM 11-K


(Mark
One)
  
[X]
ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
 
For the fiscal year ended December 30, 2006
 
OR
[  ]
TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
 
For the transition period from _____________ to ______________

Commission file number 1-12626
A. Full Title of the plan and the address of the plan, if different from that of the issuer named below:
EASTMAN INVESTMENT AND EMPLOYEE STOCK OWNERSHIP PLAN
B. Name of issuer of the securities held pursuant to the plan and the address of its principal executive office:
EASTMAN CHEMICAL COMPANY
200 S. Wilcox Drive
Kingsport, Tennessee  37660
 







Eastman Investment and Employee Stock Ownership Plan

Table of Contents

Report of Independent Registered Public Accounting Firm
3
   
Basic Financial Statements:
  
   
Statements of Net Assets Available for Benefits
4
Statements of Changes in Net Assets Available for Benefits
5
Notes to Financial Statements
6 – 18
   
Additional Information (Note A):
20
   
Schedule of Assets (Held at End of Year)
  
   
Signatures
41
   
Exhibits
42

Note A:
Other supplemental schedules required by Section 2520.10310 of the Department of Labor’s Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974 (“ERISA”) have been omitted because they are not applicable.



Report of Independent Registered Public Accounting Firm


To the Participants and Administrator of
Eastman Investment and Employee Stock Ownership Plan

In our opinion, the accompanying statements of net assets available for benefits and the related statements of changes in net assets available for benefits present fairly, in all material respects, the net assets available for benefits of Eastman Investment and Employee Stock Ownership Plan (the “Plan”) at December 30, 2006 and 2005, and the changes in net assets available for benefits for the years then ended in conformity with accounting principles generally accepted in the United States of America.  These financial statements are the responsibility of the Plan’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 1, effective for plan years ended after December 15, 2006, FASB Staff Position Nos. AAG INV-1 and SOP 94-4-1, Reporting of Fully Benefit-Responsive Investment Contracts Held by Certain Investment Companies Subject to AICPA Investment Company Audit Guide and Defined Contribution Health and Welfare and Pension Plans, was required to be implemented. Therefore the presentation of the 2005 and 2006 financial statement amounts include the presentation of fair value with an adjustment to contract value for such investments.

Our audits were conducted for the purpose of forming an opinion on the basic financial statements taken as a whole.  The supplemental Schedule of Assets (Held at End of Year) is presented for the purpose of additional analysis and is not a required part of the basic financial statements but is supplementary information required by the Department of Labor's Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974.  This supplemental schedule is the responsibility of the Plan's management.  The supplemental schedule has been subjected to the auditing procedures applied in the audits of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole.

/s/ PricewaterhouseCoopers LLP 
PricewaterhouseCoopers LLP
 Philadelphia, Pennsylvania
 June 21, 2007



3
      
        Eastman Investment and Employee Stock Ownership Plan      
      
        Statements of Net Assets Available for Benefits      
      
        December 30, 2006 and 2005      
      
        (in thousands)      
      
        
      
    



                         
                         
       
2006
          
2005
    
       
Non-
          
Non-
    
   
Participant
  
participant
      
Participant
  
participant
    
   
Directed
  
Directed
  
Total
  
Directed
  
Directed
  
Total
                         
Assets
                        
                         
                         
Investments at fair value
$
1,379,245
$
102,961
$
1,482,206
$
1,336,472
$
103,426
$
1,439,898
                         
                         
Receivables:
                        
                         
Sponsor contributions
  
31,009
  
3,382
  
34,391
  
29,152
  
3,647
  
32,799
                         
Other
  
1,394
  
802
  
2,196
  
1,791
  
897
  
2,688
                         
Total assets
  
1,411,648
  
107,145
  
1,518,793
  
1,367,415
  
107,970
  
1,475,385
                         
                         
Liabilities
                        
                         
                         
Accrued expenses
  
13
  
16
  
  29
  
14
  
15
  
29
                         
Other liabilities
  
545
  
879
  
1,424
  
26
  
954
  
980
                         
Total liabilities
  
558
  
895
  
1,453
  
40
  
969
  
1,009
                         
Adjustment from fair value to contract value for fully benefit-responsive investment contracts
  
 
5,554
  
--
  
5,554
  
6,701
  
--
  
6,701
                         
Net assets available
                        
for plan benefits
$
1,416,644
$
        106,250
$
1,522,894
$
1,374,076
$
107,001
$
1,481,077
                         


The accompanying notes are an integral part of these financial statements.

4
      
        Eastman Investment and Employee Stock Ownership Plan      
      
        Statements of Changes in Net Assets Available for Benefits      
      
        For the Years Ended December 30, 2006 and 2005      
      
        (in thousands)      
      
        
      
    



       
2006
          
2005
    
       
Non-
          
Non-
    
   
Participant
  
participant
      
Participant
  
participant
    
   
Directed
  
Directed
  
Total
  
Directed
  
Directed
  
Total
                         
Additions to net assets:
                        
                         
Investment income (loss)
                        
Interest
$
26,592
  
$
--
  
$
26,592
$
28,253
$
--
$
28,253
Dividends
  
58,845
  
3,324
  
62,169
  
20,766
  
3,781
  
24,547
Net appreciation (depreciation) in fair value of
                        
investments
  
27,345
  
14,469
  
41,814
  
26,930
  
(12,407)
  
14,523
Net investment gain (loss)
  
112,782
  
17,792
  
130,575
  
75,949
  
(8,626)
  
67,323
Participant contributions
  
69,396
  
--
  
69,396
  
67,917
  
--
  
67,917
Plan Sponsor contributions
  
31,009
  
3,382
  
34,391
  
29,152
  
3,647
  
32,799
Interfund transfers
  
17,269
  
(17,269)
  
--
  
15,882
  
(15,882)
  
--
Total additions
  
230,456
  
3,906
  
234,362
  
188,900
  
(20,861)
  
168,039
                         
Deductions from net assets:
                        
                         
Distributions to and withdrawals
                        
by participants
  
187,168
  
5,213
  
192,381
  
108,313
  
5,487
  
113,800
Loan transfers, net
  
556
  
(556)
  
--
  
364
  
(364)
  
--
Administrative expenses
  
164
  
--
  
164
  
137
  
--
  
137
                         
Total deductions
  
187,888
  
4,657
  
192,545
  
108,814
  
5,123
  
113,937
                         
Net increase (decrease) in net assets
  
42,568
  
(751)
  
41,817
  
80,086
  
(25,984)
  
54,102
Net assets available for plan
                        
benefits at beginning of year
  
1,374,076
  
107,001
  
1,481,077
  
1,293,990
  
132,985
  
1,426,975
Net assets available for plan
                        
benefits at end of year
$
1,416,644
$
106,250
$
1,522,894
$
1,374,076
$
107,001
$
1,481,077

The accompanying notes are an integral part of these financial statements.

5
Eastman Investment and Employee Stock Ownership Plan 
Notes to Financial Statements 


1.  
DESCRIPTION OF PLAN

The Eastman Investment and Employee Stock Ownership Plan (the “Plan”) is a defined contribution plan of a controlled group of corporations consisting of Eastman Chemical Company and certain of its wholly-owned subsidiaries operating in the United States (“Eastman”, the “Company” or the "Plan Sponsor”).  The Plan is organized pursuant to Sections 401(a) and (k) and Section 4975(e) (7) of the Internal Revenue Code.  All United States employees of Eastman, with the exception of certain limited service and special program employees, and employees covered by a collective bargaining agreement with the Company, unless the collective bargaining agreement or the Plan specifically provides for participation, are eligible to participate in the Plan on their first day of employment with Eastman.  The Plan was adopted by Eastman, the Plan Sponsor, on January 1, 1994 and is subject to the Employee Retirement Income Security Act of 1974 (“ERISA”).  The Plan is administered by the Investment Plan Committee (“IPCO”), which is the Plan Administrator and is comprised of Eastman employees.  The Plan has trusts which are administered by the Fidelity Management Trust Company (the “Trustee”).  The trusts include the Eastman Chemical Trust and the ESOP Trust.  Since the inception of the Plan, money in the forfeiture account has been used both to offset future Company contributions and for various administrative expenses of the Plan. The balance of the forfeiture account at December 30, 2006 and 2005 was immaterial.

For additional information regarding the Plan, see the complete Plan documents.

Contributions and vesting

Contributions to the Plan are made through two separate provisions: (a) deferral of qualifying compensation and (b) contributions by the Plan Sponsor of cash or its common stock to the ESOP Fund as determined by the Compensation and Management Development Committee of the Board of Directors of Eastman.

The Plan includes a salary reduction provision allowing eligible employees to defer up to 40% of qualifying compensation, as defined in the Plan, up to the statutory limit of $15,000 and $14,000 for 2006 and 2005, respectively, as permitted by the Internal Revenue Code.  For the catch-up salary deferral, an eligible employee who has attained age 50 before the close of the calendar year was allowed to defer up to 35% of qualifying compensation, as defined in the Plan, for 2006 and 2005 up to certain Internal Revenue Code limitations.  Plan Sponsor contributions are also subject to certain other limitations.  Participants’ salary deferrals are contributed to the Plan by Eastman on behalf of the participants.  The Plan’s Trustee invests amounts contributed to the Plan, as designated by the participant, in common stock of Eastman, various growth and income mutual funds, and/or interest in a guaranteed investment contract fund (see Note 5).  Generally, participants may transfer amounts among the funds on any business day.  Additionally, participants may diversify amounts from their ESOP Fund account within the Plan (see Note 8).  Each participant is at all times 100% vested in their account, with the exception of amounts transferred from other plans, which continue to be subject to the former plans’ vesting requirements.  The Plan requires for the Retirement Savings Contribution (“RSC”) to be contributed either to the ESOP Fund for employees’ first five RSC contributions or into other Plan funds, as directed by the participant, for participants with more than five RSC contributions.  For participants with more than five RSC contributions, the RSC is allocated to participant-directed funds in accordance with each participant’s investment elections at such time as the RSC is made.

6
Eastman Investment and Employee Stock Ownership Plan 
Notes to Financial Statements 
 
Plan Sponsor contributions may be paid at any time during the plan year and subsequent to such plan year through the due date for filing the Company's federal income tax return, including any extensions. Contributions may be paid to the ESOP Fund in cash or shares of Eastman common stock and are deposited in the Company contribution account.  Allocations to the participants' accounts from the Company contribution account will be made each plan year to participants who are eligible employees on the date designated by the Company.  Participants are not permitted to make contributions to the ESOP Fund and are 100% vested in their account balance at all times.

Employees may elect to transfer, into any of the Plan's fund options, balances received from (1) lump sum payouts from the Eastman Retirement Assistance Plan, a qualified defined benefit plan also sponsored by Eastman Chemical Company, (2) a former employer’s 401(a) and 401(k) plan, or (3) an employee’s individual retirement account containing amounts received from a qualified defined contribution plan under Section 401(a) and 401(k) of the Internal Revenue Code.  All rollover contributions into the Plan must meet the applicable Internal Revenue Service requirements.

Loans

The Investment Plan Committee ("IPCO") may grant a loan of at least $1,000 to a participant provided that the aggregate of the participants’ loans outstanding does not exceed the lesser of (i) $50,000 reduced by the excess, if any, of (a) the participant’s highest outstanding loan balance from the preceding 12 months over (b) the outstanding total loan balance of loans from the Plan on the date on which the loan was made, or (ii) 50% of the non-forfeitable portion of the participant’s account, excluding amounts in a participant’s ESOP Fund account.  In accordance with the Plan provisions, the rate of interest on new participant loans approximates current market rates.  The term of any loan is determined by IPCO and shall not exceed five years.  Loans transferred to the Plan from the Hercules Incorporated Savings and Investment Plan, the ABCO Industries, Inc. 401(k) Profit Sharing Plan, and the Eastman Resins, Inc. Employees’ Growth Sharing Plan carry terms applicable under those Plans.  At December 30, 2006, $29.5 million in loans were outstanding for terms of 3 to 122 months and interest rates ranging from 4% to 10.50%.   At December 30, 2005, $28.9 million in loans were outstanding for terms from 3 to 123 months and interest rates ranging from 4% to 10.50%.

Distributions

Distributions from the Plan require the approval of IPCO or its designee and are made under the following circumstances:

·  
Upon attaining age 59½, a participant may elect to receive a lump sum cash distribution of their total or partial account value while still actively employed.

·  
Upon separation of service from Eastman for any reason except death, the full value of a participant’s account is distributed in a lump sum payment for those participants who are not retirement-eligible and the participant account value is less than or equal to $1,000.  Separated participants with accounts in excess of $1,000 or who are retirement-eligible may elect either (i) to defer distribution until a later date but, in no event, later than April 1 of the calendar year following the year a participant attains age 70½ or (ii) immediate lump-sum distribution of the participant’s account or, at the election of the participant, distributions in monthly or annual installments.  Participants in the Eastman Stock Fund or ESOP Fund may elect a lump sum distribution in Eastman common stock.

7
Eastman Investment and Employee Stock Ownership Plan 
Notes to Financial Statements 
 
·  
In the event of death, the value of a participant’s account is paid in a lump sum if the designated beneficiary is not the surviving spouse or if the account value is less than or equal to $5,000.  If the beneficiary is a surviving spouse and the participant account value exceeds $5,000, payment will be made in a either lump-sum amount or, at the election of the surviving spouse, in monthly or annual installments.

·  
Distributions to participants shall commence in the year following the year a participant attains age 70½, unless the participant has terminated his or her service with the Company.

·  
Approval of hardship withdrawals will only be granted in order to meet obligations relating to the payment of substantial out-of-pocket medical expenses, the purchase of a primary residence, the payment of tuition or other post-secondary educational expenses, or payments to prevent eviction or foreclosure.  Hardship withdrawals may not exceed the value of the participant’s accounts in the Plan on the date of withdrawal.

·  
The Trustee is authorized to honor qualified domestic relation orders issued and served in accordance with Section 414(p) of the Internal Revenue Code.

·  
Effective March 28, 2005 the Plan was amended to lower the involuntary cash out limit from $5,000 to $1,000 for the majority of plan participants.

Dividends attributable to the ESOP Fund

IPCO may direct that Eastman common stock dividends attributable to the non-participant directed ESOP Fund be (a) allocated to the accounts of participants, (b) paid in cash to the participants on a nondiscriminatory basis, or (c) paid by the Company directly to participants.  Alternatively, dividends received from Eastman common stock maintained in the Loan Suspense Account may be applied to reduce the related loan balance.

Investment of ESOP Fund Assets

ESOP Fund assets are invested primarily in Eastman common stock. However, at IPCO's discretion, funds may also be invested in other securities or held in cash.

Investment assets can be acquired by the ESOP Fund in three ways:

·  
The Company may make a direct contribution of cash to the ESOP Fund, which would then be used to purchase Eastman common stock or other securities.
 
·  
The Company may contribute shares of Eastman common stock directly to the ESOP Fund.
 
·  
The Company may direct the Trustee to obtain a loan to purchase securities (i.e., leveraged ESOP).  Until the loan is repaid, securities acquired with the respective loan process are not available to be allocated to participants' accounts and are maintained in a "Loan Suspense Account".  On the last day of each plan year, a proportionate share of securities relating to loan amounts which have been repaid will be transferred out of the Loan Suspense Account and allocated to the accounts of ESOP Fund participants.  The ESOP Fund currently is not a leveraged ESOP.


8
Eastman Investment and Employee Stock Ownership Plan 
Notes to Financial Statements 


Allocations to participants' ESOP Fund accounts

Separate participant accounts are established to reflect each participant's interest in the ESOP Fund and are maintained under the unit value method of accounting.  The ESOP Fund account maintained for each participant consists of:

·  
Plan Sponsor contributions made or invested in shares of Eastman common stock.
 
·  
Shares of Eastman common stock purchased with assets transferred to the ESOP Fund pursuant to the spin-off from Eastman Kodak Company and/or acquired with the proceeds of a loan released from the Loan Suspense Account.
 
·  
An allocable share of short-term interest and money market funds held in the ESOP Fund for purposes of payment of expenses and similar purposes.
 
·  
After-tax contributions transferred to the ESOP Fund pursuant to the spin-off from Eastman Kodak Company (such after-tax contributions are no longer permitted under the ESOP provisions).
 
The number of units allocated to a participant's account in any year is based on the ratio of the participant's compensation to the total compensation of all eligible employees entitled to share in the allocation for that plan year.  In any year in which a Company contribution is made, a participant's allocation will not be less than one share of stock.
 
Federal law limits the total annual contributions that may be made on a participant's behalf to all defined contribution and defined benefit plans offered by the Company.  Participants will be notified if their total annual contribution is limited by this legal maximum.
 
Actions taken in connection with the completion of certain corporate transactions
 
On or about August 1, 2004, the Company completed the sale of certain businesses and product lines in its coatings, adhesives, specialty polymers and inks ("CASPI") segment, including ABCO Industries, Inc. ("ABCO") and Eastman Resins, Inc. ("Resins") to Apollo Management, L.P. ("Apollo"), a private investment firm.  In connection with this sale, on August 1, 2004, the Company fully vested each participant employed by (i) ABCO in his ABCO Employer Contribution Account, and (ii) Resins in his Resins Profit Sharing Account.  The ABCO Employer Contribution Account and the Resins Profit Sharing Accounts held assets transferred to the Plan in connection with prior plan mergers.  In February 2005, the Company made a contribution to the account of each participant, whose employment was terminated in connection with the sale of certain portions of the CASPI segment to Apollo, equal to 5% of the compensation paid to each participant for the period January 1, 2004 through July 31, 2004.
 
During 2005, the Company closed the operations of Cendian Corporation. The subsidiary's 401(k) plan was merged into the Plan on October 25, 2005. The assets of Cendian plan are included in the contributions total to the sum of $5.1 million.
 

9
Eastman Investment and Employee Stock Ownership Plan 
Notes to Financial Statements 

In the fourth quarter of 2006, the Company sold its Batesville, Arkansas manufacturing facility and related assets in its performance chemicals and intermediates segment and also its polyethylene-related assets at the Longview, Texas facility in the performance polymers and CASPI segment. In February 2007, the Company made a discretionary contribution to the account of each participant whose employment was terminated in connection with these sales equal to 5% of the compensation paid to each participant for the period January 1, 2006 to the dates of the respective sales.
 
On or after January 1, 2007, each eligible employee hired by the Company will, in addition to the RSC, be automatically enrolled as a participant in the Eastman Investment Plan ("EIP") portion of the Plan. The participants will be deemed to have elected to defer 3% of their qualifying compensation to the EIP portion of the Plan, unless they affirmatively decline or they elect to contribute a percentage other than 3%. Each participant will also be eligible to receive a matching contribution from the Company equal to 50% of the first 7% of their pay that they contribute to the Plan.
 
New accounting pronouncements
 
As of December 30, 2006, the Plan adopted Financial Accounting Standards Board ("FASB") Staff Position FSP AAG INV-1 and Statement of Position No. 94-4-1, Reporting of Fully Benefit-Responsive Investment Contracts Held by Certain Investment Companies Subject to the AICPA Investment Company Guide and Defined-Contribution Health and Welfare and Pension Plans ("the FSP"). The FSP requires the Statement of Net Assets Available for Benefits present the fair value of the Plan's investments as well as the adjustment from fair value to contract value for the fully benefit-responsive investment contracts. The Statement of Changes in Net Assets Available for Benefits is prepared on a contract value basis for the fully benefit-responsive investment contracts. The FSP was applied retroactively to the prior period presented on the Statement of Net Assets Available for Benefits as of December 30, 2005.
 
In September 2006, the FASB issued Statement of Financial Accounting Standards No.157 ("SFAS 157"), Fair Value Measurements. SFAS 157 establishes a single authoritative definition of fair value, sets out a framework for measuring fair value, and requires additional disclosures about fair value measurement. SFAS 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007. The Plan does not believe the adoption of SFAS 157 will have a material impact on the financial statements.
 
2.  
SUMMARY OF ACCOUNTING POLICIES

The following accounting policies, which conform to accounting principles generally accepted in the United States of America, have been used consistently in the preparation of the Plan’s financial statements, other than the adoption of the FSP described in Note 1.

Basis of accounting

The Plan’s financial statements are prepared on the accrual basis of accounting.

10
Eastman Investment and Employee Stock Ownership Plan 
Notes to Financial Statements 


Use of estimates

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 and liabilities and changes therein, and disclosures of contingent assets and liabilities.  Actual results could differ from those estimates.

Investment policy and valuation

For investments in the ESOP fund and the Eastman Stock Fund, the Trustee may keep any portion of participant and Plan Sponsor contributions temporarily in cash or liquid investments as it may deem advisable.  All dividends, interest or gains derived from investment in each fund are reinvested in the respective fund by the Trustee.

The Trustee has determined the market values of each fund as of December 30, 2006 and 2005.  Such market values equal the aggregate of the closing prices of the securities held in each fund on December 30, 2006 and 2005 as reported by national exchanges, if available, or otherwise in good faith by the Trustee, plus cash, interest, dividends and such other sums received and accrued but not yet invested.

The Managed Income Fund is reported at fair value as determined by the contract issuers.  The Managed Income Fund is comprised of synthetic guaranteed investment contracts that include interests in commingled trusts or individual fixed income securities that are held in trust for the Plan.  The Plan then enters into a benefit responsive wrapper contract with a third party such as a financial institution or an insurance company which guarantees the Plan a specific value and rate of return.  The underlying securities are valued at quoted market prices.  The wrap contracts are valued using the market value method. (See Note 6)

The Plan presents in the statement of changes in net assets available for benefits the net appreciation (depreciation) in the fair value of its investments which consists of the realized gains or losses and the unrealized appreciation (depreciation) on those investments.

Purchases and sales of investments are recorded on a trade-date basis. Interest income is accrued when earned.  Dividend income is recorded at the ex-dividend date.

Risks and Uncertainties

Investment securities are exposed to various risks, such as interest rate risk, market risk, and credit risk. Due to the level of risk associated with certain investment securities, it is at least reasonably possible that changes in the values of investment securities will occur in the near term and that such changes could materially affect participant account balances and the amounts reported in the financial statements.

Payments to participants

Benefits payments to participants are recorded when paid.



11
Eastman Investment and Employee Stock Ownership Plan 
Notes to Financial Statements 

3.  
CONTRIBUTIONS

Participant contributions represent qualifying compensation and other qualifying employee bonuses withheld from participating employees by Eastman and contributed to the Plan.
Contributions are invested in the Plan’s funds as directed by the participants, with the exception of the ESOP Fund, subject to ERISA funding limitations.  The Plan has accrued sponsor contributions for participant-directed funds of $31.0 million and $29.1 million, and for the non-participant-directed ESOP Fund of $3.4 million and $3.6 million at December 30, 2006 and 2005, respectively.

4.  
LOANS TO PARTICIPANTS

The Plan Trustee makes loans to participants in accordance with Plan provisions.  Loans made are accounted for as a transfer from the fund directed by the participant to the Loan Fund.  The principal portion of loan repayments reduces the Loan Fund receivable.  The principal and interest repaid are directed to funds to which the participant’s current contributions are directed; the principal is accounted for as a transfer and the interest accounted for as income in the fund to which the participant’s current contributions are directed.  The Loan Fund’s net assets and other
changes in net assets are included in the participant-directed funds in the Statements of Net Assets and Changes in Net Assets Available for Benefits, respectively.

Unless otherwise specified by the participant, loan proceeds will be withdrawn from the investment funds on a pro-rata basis.  Outstanding loans at December 30, 2006 and 2005 were approximately $29.5 million and $28.9 million, respectively.  Interest income earned on loans to participants is credited directly to the participants' accounts and was approximately $2.0 million and $1.6 million for 2006 and 2005.

5.  
INVESTMENTS

At December 30, 2006 and 2005, the Plan's assets were invested in an investment contract fund (see Note 6), mutual funds, and in Eastman Chemical Company common stock.  Subject to certain limitations, participants are provided the option of directing their contributions among these investment options. The Plan also holds an interest in the non-participant directed Eastman ESOP Fund, which invests in Eastman Chemical Company common stock and short-term interest funds. The Trustee manages investments in all funds.  The following investment options, which invest primarily in common stock of the Plan sponsor, were available to participants in both 2006 and 2005:

Eastman Stock Fund

This participant-directed fund consists primarily of Eastman Class A common stock. Purchases and sales of Eastman stock are generally made on the open market on behalf of and as elected by Plan participants. During 2006, the Trustee purchased 1,087,600 shares of Eastman stock for the fund at an average price of $51.71 per share, and sold 1,552,000 shares of Eastman stock for the fund at an average price of $54.80 per share. During 2005, the Trustee purchased 1,460,100 shares of Eastman stock for the fund at an average price of $54.03 per share and sold 1,315,900 shares at an average price of $55.98 per share. Dividends paid from the Eastman Stock Fund totaled $2.5 million and $2.7 million in 2006 and 2005, respectively.


12
Eastman Investment and Employee Stock Ownership Plan 
Notes to Financial Statements 


Eastman ESOP Fund
 
This non-participant directed fund consists primarily of Eastman Class A common stock.  Purchases and sales of Eastman stock are generally made on the open market, on behalf of its participants and as directed by the Plan’s guidelines. During 2006, the Trustee purchased 63,800 shares of Eastman stock for the fund at an average price of $50.90 per share, and sold 311,700 shares of Eastman stock for the fund at an average price of $55.52 per share.  During 2005, the Trustee purchased 74,000 shares of Eastman stock for the fund at an average price of $56.48 per share, and sold 290,400 shares at an average price of $55.85 per share.

At December 30, 2006 and 2005, the following investments represented 5% or greater of ending net assets, (in thousands):

     
2006
     
Shares
  
Fair value
           
Eastman Chemical Company Common Stock,
    
7,316
$
102,961
Non Participant Directed
          
Fidelity Magellan® Fund
    
908
  
81,298
Fidelity Contrafund
    
2,005
  
130,694
           
     
2005
     
Shares
  
Fair value
           
Eastman Chemical Company Common Stock,
    
8,420
$
103,426
Non Participant Directed
          
Eastman Chemical Company Common Stock,
    
6,642
  
78,752
Participant Directed
          
Fidelity Magellan® Fund
    
824
  
87,740
Fidelity Contrafund
    
1,881
  
121,797

During 2006 and 2005, the Plan’s investments (including investments bought, sold and held during the year) appreciated in value by $41.8 million and $14.5 million, respectively, as follows (in thousands):

   
Net Appreciation
(Depreciation)
   
   
2006
  
2005
         
Eastman Chemical Company Common Stock, Non Participant Directed
$
                      14,469
$
                    (12,407)
Eastman Chemical Company Common Stock, Participant Directed
  
 13,930
  
                      31,481
Mutual Funds
  
                      13,415
  
                      (4,551)
Total
$
                      41,814
$
                      14,523



13
Eastman Investment and Employee Stock Ownership Plan 
Notes to Financial Statements 

6.  
INSURANCE CONTRACTS

The Plan holds an interest in the Managed Income Fund (the "Fund"), which invests in guaranteed investment contracts ("GICs"), which are contracts between an insurance company and the Fund that provide for guaranteed returns on principal amounts invested over various periods of time. This participant-directed fund also invests in synthetic GICs.  The term “synthetic” investment contract is used to describe a variety of investment contracts under which a Plan retains ownership of the invested assets, or owns units of an account or trust which holds the invested assets. A “synthetic” investment contract, also referred to as a “wrap” contract, is negotiated with an independent financial institution. Under the terms of these investment contracts, the contract issuer ensures the Plan’s ability to pay eligible employee benefits at book value. The investment performance of a synthetic investment contract may be a function of the investment performance of the invested assets.

A wrap contract is an agreement by another party, such as a bank or insurer, to make payments to the Fund in certain circumstances. Wrap contracts are designed to allow a stable value fund, such as the Fund, to maintain a constant net asset value ("NAV") and to protect the Fund in extreme circumstances. In a typical wrap contract, the wrap issuer agrees to pay the Fund the difference between the contract value and the market value of the covered assets once the market value has been totally exhausted. Though relatively unlikely, this could happen if the Fund experiences significant redemptions (redemption of most of the Fund’s shares) during a time when the market value of the Fund’s covered assets is below their contract value, and market value is ultimately reduced to zero. If that occurs, the wrap issuer agrees to pay the Fund an amount sufficient to cover shareholder redemptions and certain other payments (such as fund expenses), provided all the terms of the wrap contract have been met. Purchasing wrap contracts is similar to buying insurance, in that the Fund pays a relatively small amount to protect against a relatively unlikely event (the redemption of most of the shares of the Fund). Fees the Fund pays for wrap contracts are a component of the Fund’s expenses.
 
In selecting wrap issuers, Fidelity Management Trust Company (“FMTC”), as investment manager of all or a portion of the Fund, analyzes the proposed terms of the wrap contract and the credit quality of the wrap issuer. Other factors, including the availability of wrap contracts under certain market or competitive conditions, may affect the number of wrap issuers and the terms of the wrap contracts held by the Fund. The Fund may agree to additional limitations on its investments as a condition of the wrap contracts. These may include maximum duration limits, minimum credit standards, and diversification requirements. Generally, as long as the Fund is in compliance with the conditions of its wrap contracts, it may buy and sell covered assets without impacting the contract value of the covered assets. However, a wrap issuer may require that the Fund invest entirely in cash or cash equivalents under certain conditions.
 
FMTC normally purchases wrap contracts from issuers rated in the top three long-term categories (A- or the equivalent and above) by any one of the nationally recognized statistical rating organizations. Although FMTC typically enters into wrap contracts with multiple parties, it may have a single wrap issuer for all of the Fund’s covered assets. FMTC may terminate and replace wrap contracts under various circumstances, including when there is a default by the wrap issuer.


14
Eastman Investment and Employee Stock Ownership Plan 
Notes to Financial Statements 

FMTC purchases wrap contracts for the Fund with the aim of maintaining the contract value of the Fund’s bond investments. FMTC invests the Fund’s assets consistent with the terms of the wrap contracts and the Fund’s investment guidelines. As a target, FMTC expects a substantial percentage (up to 99%) of the Fund’s assets to be covered by wrap contracts, although FMTC may change this target from time to time. Assets not covered by wrap contracts will generally be invested in money market instruments and cash equivalents to provide necessary liquidity for participant withdrawals and exchanges.
 
Wrap contracts accrue interest using a formula called the “crediting rate.” Wrap contracts use the crediting rate formula to convert market value changes in the covered assets into income distributions in order to minimize the difference between the market and contract value of the covered assets over time. Using the crediting rate formula, an estimated future market value is calculated by compounding the Fund’s current market value at the Fund’s current yield to maturity for a period equal to the Fund’s duration.  The crediting rate is the discount rate that equates that estimated future market value with the Fund’s current contract value. Crediting rates are reset quarterly. The wrap contracts provide a guarantee that the crediting rate will not fall below 0%.

The crediting rate, and hence the Fund’s return, may be affected by many factors, including purchases and redemptions by shareholders. The precise impact on the Fund depends on whether the market value of the covered assets is higher or lower than the contract value of those assets. If the market value of the covered assets is higher than their contract value, the crediting rate will ordinarily be higher than the yield of the covered assets. Under these circumstances, cash from new investors will tend to lower the crediting rate and the Fund’s return, and redemptions by existing shareholders will tend to increase the crediting rate and the Fund’s return.

If the market value of the covered assets is lower than their contract value, the crediting rate will ordinarily be lower than the yield of the covered assets. When market value is lower than contract value, the Fund will have, for example, less than $10.00 in cash and bonds for every $10.00 in NAV. Under these circumstances, cash from new investors will tend to increase the market value attributed to the covered assets and to increase the crediting rate and the Fund’s return. Redemptions by existing shareholders will have the opposite effect, and will tend to reduce the market value attributed to remaining covered assets and to reduce the crediting rate and the Fund’s return. Generally, the market value of covered assets will tend to be higher than contract value after interest rates have fallen due to higher bond prices. Conversely, the market value of covered assets will tend to be lower than their contract value after interest rates have risen due to lower bond prices.
 
If the Fund experiences significant redemptions when the market value is below the contract value, the Fund’s yield may be reduced significantly, to a level that is not competitive with other investment options. This may result in additional redemptions, which would tend to lower the crediting rate further. If redemptions continued, the Fund’s yield could be reduced to zero. If redemptions continued thereafter, the Fund might have insufficient assets to meet redemption requests, at which point the Fund would require payments from the wrap issuer to pay further shareholder redemptions.
 
The Fund and the wrap contracts purchased by the Fund are designed to pay all participant-initiated transactions at contract value. Participant-initiated transactions are those transactions allowed by the underlying defined contribution plan (typically this would include withdrawals for benefits, loans, or transfers to non-competing funds within the Plan). However, the wrap contracts limit the ability of the Fund to transact at contract value upon the occurrence of certain events. These events include:
 
15
Eastman Investment and Employee Stock Ownership Plan 
Notes to Financial Statements 
 
·  
The Plan’s failure to qualify under Section 401(a) or Section 401(k) of the Internal Revenue Code.
·  
The establishment of a defined contribution plan that competes with the Plan for employee contributions.
·  
Any substantive modification of the Plan or the administration of the Plan that is not consented to by the wrap issuer.
·  
Complete or partial termination of the Plan.
·  
Any change in law, regulation or administrative ruling applicable to the Plan that could have a material adverse effect on the Fund's cash flow.
·  
Merger or consolidation of the Plan with another plan, the transfer of Plan assets to another plan, or the sale, spin-off or merger of a subsidiary or division of the Plan Sponsor.
·  
Any communication given to participants by the Plan Sponsor or any other Plan fiduciary that is designed to induce or influence participants not to invest in the Fund or to transfer assets out of the Fund.
·  
Exclusion of a group of previously eligible employees from eligibility in the Plan.
·  
Any early retirement program, group termination, group layoff, facility closing, or similar program.
·  
Any transfer of assets from the Fund directly to a competing option.

At this time, the occurrence of any of these events is not considered probable by IPCO.

The Fund is unlikely to be able to maintain a stable NAV if, for any reason, it cannot obtain or maintain wrap contracts covering its entire short-term bond portfolio. This could result from the Fund’s inability to promptly find a replacement wrap contract with comparable terms following termination of a wrap contract. FMTC will attempt to assess the credit quality of wrap issuers, but there is no guarantee as to the financial condition of a wrap issuer. Wrap contracts are nontransferable and have no trading market. There are a limited number of wrap issuers. The Fund may lose the benefit of wrap contracts on any portion of its assets that are in default in excess of a certain percentage of Fund assets (e.g., 5%). In the event that wrap contracts fail to perform as intended, the Fund’s NAV may decline if the market value of its covered assets is lower than their contract value.
 
A wrap issuer may terminate a wrap contract at any time. In the event that the market value of the Fund’s covered assets is below their contract value at the time of such termination, FMTC may elect to keep the wrap contract in place until such time as the market value of the Fund’s covered assets is equal to their contract value. A wrap issuer may also terminate a wrap contract if FMTC’s investment management authority over the Fund is limited or terminated as well as if all of the terms of the wrap contract fail to be met. In the event that the market value of the Fund’s covered assets is below their contract value at the time of such termination, the terminating wrap provider would not be required to make a payment to the Fund.
 


Average yields:
  
December 30, 2006
  
December 30, 2005
         
Based on actual earnings
  
4.96%
  
4.90%
Based on interest rate credited to participants
  
4.37%
  
4.04%
         

16
Eastman Investment and Employee Stock Ownership Plan 
Notes to Financial Statements 
 
The weighted average crediting interest rate for the fund was 4.32% and 3.95% at December 30, 2006 and 2005 respectively.

The value of the Fund reflected in these financial statements is based upon the principal invested and the interest credited. The fair value of the Fund, by investment type, as of December 30, 2006 and 2005 was as follows:

(in thousands)
  
December 30, 2006
  
December 30, 2005
         
Security backed investments:
        
Underlying assets at fair value
$
601,724
$
623,499
Wrap contracts
  
5,554
  
6,701
Total contract value
$
607,278
$
630,200


7.  
OTHER RECEIVABLES

Other receivables in the amount of $2.2 million and $2.7 million at December 30, 2006 and 2005, respectively represent interest and dividends receivable, as well as receivables from the sale of stock.

8.  
DIVERSIFICATION FROM ESOP FUND

Active or retired employees of the Company are eligible to diversify funds held in their ESOP Fund account.  Effective July 2003, a participant may direct that all or any portion of his ESOP Fund account be transferred to other funds in the Plan without restrictions. During 2006 and 2005, $13.9 million and $12.1 million, respectively, were transferred from the ESOP Fund within the Plan in connection with this program.

9.  
PLAN TERMINATION

Although it has not expressed any intent to do so, the Company has the right under the Plan to discontinue its contributions at any time and to terminate the Plan subject to the provisions of ERISA.  In the event of termination, participant accounts will be distributed to individual participants in accordance with the Plan document and ERISA provisions.

10.  
FEDERAL INCOME TAX STATUS

The Plan obtained its latest determination letter in May 2003, in which the Internal Revenue Service stated that the Plan is in compliance with the applicable requirements of the Internal Revenue Code.  The Plan Administrator believes the Plan qualifies and operates in compliance with the applicable requirements of the Internal Revenue Code.  Therefore, no provision for income taxes has been included in the Plan’s financial statements.


17
Eastman Investment and Employee Stock Ownership Plan 
Notes to Financial Statements 

11.  
PLAN EXPENSES

Reasonable expenses of administering the Plan, unless paid by the Company, shall be paid by the Plan.  For both 2006 and 2005, trustee fees associated with the Eastman Stock Fund and the Eastman ESOP Fund were paid with assets of those individual funds. Brokerage fees, transfer taxes, investment fees and other expenses incident to the purchase and sale of securities and investments shall be included in the cost of such securities or investments or deducted from the sales proceeds, as the case may be. Loan administration fees are deducted quarterly from the accounts of participants with outstanding loan balances.  Loan origination fees are deducted from the participants account at the inception of the loan.  For 2006 and 2005, the Company paid all other expenses of the Plan related to plan oversight and administration, including auditing fees.

12.  
RELATED PARTIES

Certain plan investments are shares of mutual funds managed by Fidelity Management Trust Company, (“FMTC”).  FMTC is the trustee as defined by the Plan and, therefore, these transactions qualify as party-in-interest transactions, which are exempt from prohibited transaction rules.  The Plan also invests in the common stock of the Plan Sponsor as well as loans to Plan participants, both of which qualify as parties-in-interest to the Plan and are exempt from prohibited transaction rules.

13.  
RECONCILIATION OF FINANCIAL STATEMENTS TO FORM 5500


(in thousands)
  
December 30, 2006
  
December 30, 2005
         
Investments at fair value
$
1,482,206
$
1,439,898
Adjustment from fair value to contract value for full benefit-responsive investment contracts
  
5,554
  
6,701
Total investments per Form 5500
$
1,487,760
$
1,446,599






18






Supplemental Schedule





19
      
        Eastman Investment and Employee Stock Ownership Plan      
      
        Schedule H, Line 4 (i) – Schedule of Assets (Held at End of Year)      
      
        December 30, 2006      
      
        (in thousands)      
    

(a)
(b) Identity of issue, borrower, lessor, or similar party
(c) Description of investment, including maturity date, rate of interest, collateral, par or maturity value
(d) Historical cost
(e) Current Value
*
Eastman Chemical Company
Common stock, Participant directed,
4,515 shares
**
61,077
*
Fidelity Management Trust Company
Interest Bearing Cash, Participant directed
**
806
*
Eastman Chemical Company
Common stock,  Non Participant directed, 7,316 shares
90,099
101,667
*
Fidelity Management Trust Company
Interest Bearing Cash, Non Participant directed
1,294
1,294
*
Fidelity Fund
Registered Investment Company, 1,264 shares
**
45,297
*
Fidelity Puritan Fund
Registered Investment Company, 2,841 shares
**
56,727
*
Fidelity Magellan Fund
Registered Investment Company, 908 shares
**
81,298
*
Fidelity Contrafund
Registered Investment Company, 2,005 shares
**
130,694
*
Fidelity Spartan U.S. Equity Index Portfolio
Registered Investment Company, 783 shares
**
39,286
*
Fidelity International Discovery Fund
Registered Investment Company, 1,592 shares
**
60,385
*
Fidelity Blue Chip Growth Fund
Registered Investment Company, 320 shares
**
14,195
*
Fidelity Freedom Income Fund
Registered Investment Company, 171 shares
**
1,969
*
Fidelity Freedom 2000 Fund
Registered Investment Company, 114 shares
**
1,418
*
Fidelity Freedom 2010 Fund
Registered Investment Company, 824 shares
**
12,053
*
Fidelity Freedom 2020 Fund
Registered Investment Company, 1,006 shares
**
15,631
*
Fidelity Freedom 2030 Fund
Registered Investment Company, 611 shares
**
9,802
*
Fidelity Freedom 2040 Fund
Registered Investment Company, 482 shares
**
4,573
*
Fidelity Spartan Extended Market Index Portfolio
Registered Investment Company, 389 shares
**
14,970
*
Fidelity Spartan International Index Fund
Registered Investment Company, 405 shares
**
17,891
*
Participant Loans
Participant Loan Fund with terms ranging from 3-122 months and rates ranging from 4% to 10.5%
**
29,467
*
PIMCO Total Return Fund
Registered Investment Company, 2,456 shares
**
25,493
*
Franklin Small Mid Cap Growth Fund
Registered Investment Company, 648 shares
**
24,844
*
Neuberger and Berman Genesis Instl Cl
Registered Investment Company, 1,239 shares
**
56,663
*
Templeton Foreign Fund
Registered Investment Company, 905 shares
**
12,294
*
Fidelity Retirement Money Market
Registered Investment Company, 71 share
**
71
*
Clipper Fund
Registered Investment Company, 145 shares
**
13,333
*
TCW Galileo Select Equities Fund
Registered Investment Company, 114 shares
**
2,184
*
WFA Small Cap Val Z
Registered Investment Company, 1,177 shares
**
36,655



20
      
        Eastman Investment and Employee Stock Ownership Plan      
      
        Schedule H, Line 4 (i) – Schedule of Assets (Held at End of Year)      
      
        December 30, 2006      
      
        (in thousands)      
    

(a)
(b) Identity of issue, borrower, lessor, or similar party
(c)  Description of investment, including maturity date, rate of interest, collateral, par or maturity value
(d) Historical cost
(e) Current Value
 *
Fidelity short term cash fund
CASH
**
17,099
 
Accredited  Mortgage Loan Trust ACCR 03-2 A1
**
367
 
Accredited  Mortgage Loan Trust ACCR 03-3 A1
Mortgage backed security 4.46% 12/33
**
348
 
ACE Securities Corp.   ACE 03-NC1 M1
Mortgage backed security 1ML+78 7/33
**
171
 
ACE Securities Corp.   ACE 02-HE1 M1
Mortgage backed security 1ML+65 6/32
**
200
 
ACE Securities Corp.   ACE 03-HS1 M1
Mortgage backed security 1ML+75 6/33
**
75
 
ACE Securities Corp.   ACE 03-HS1 M2
Mortgage backed security 1ML+175 6/3
**
101
 
ACE Securities Corp.   ACE 03-HE1 M1
Mortgage backed security 1ML+65 11/32
**
189
 
ACE Securities Corp.   ACE 04-FM1 M1
Mortgage backed security 1ML+60 9/33
**
152
 
AEGON
Synthetic GIC Global Wrap – 4.45%
**
1,389
 
Aesop Funding II LLC ESOP 05-1A A1
Mortgage backed security  3.95% 4/08
**
985
 
AIFUL Corporation
Corporate Bond 4.45% 2/16/10 144A
**
3,264
 
AIFUL Corporation
Corporate Bond 5%  8/10/10 144A
**
381
 
AIFUL Corporation
Corporate Bond 6%  12/12/11 144A
**
20
 
Alabama Power Co
Corporate Bond 3.5%  11/15/07
**
559
 
Altria Group Inc
Corporate Bond 7.2% 2/01/07
**
928
 
America Movil SAB DE CV
Corporate Bond 4.125%  3/1/09
**
1,283
 
American General Finance Corp
Corporate Bond 2.75% 6/15/08
**
507
 
American General Finance Corp
Corporate Bond 4.625%  5/15/09
**
1,119
 
American General Finance Corp
Corporate Bond 3.875% 10/1/09
**
433
 
American General Finance Corp
Corporate Bond 4.875%  5/15/10
**
1,045
 
American Honda Finance Corp
Corporate Bond 4.5%   5/26/09 144A
**
1,185
 
American Honda Finance Corp
Corporate Bond 4.25%  3/11/08 144A
**
1,865
 
AmeriCredit Automobile Receivables Trust AMCAR 04-CA A4
Mortgage backed security 3.61% 5/11
**
295
 
AmeriCredit Automobile Receivables Trust AMCAR 04-1 B
Mortgage backed security 3.7% 1/09
**
42
 
AmeriCredit Automobile Receivables Trust AMCAR 04-1 C
Mortgage backed security 4.22% 7/09
**
80
 
AmeriCredit Automobile Receivables Trust AMCAR 04-DF A4
Mortgage backed security 3.43 7/11
**
767
 
AmeriCredit Automobile Receivables Trust AMCAR 06-BG A4
Mortgage backed security 5.21% 9/13
**
715
 
AmeriCredit Automobile Receivables Trust AMCAR 06-1 B
Mortgage backed security 5.2% 3/11
**
70
 
AmeriCredit Automobile Receivables Trust AMCAR 06-BG A3
Mortgage backed security 5.21% 10/11
**
356
 
AmeriCredit Automobile Receivables Trust AMCAR 05-CF A4
Mortgage backed security 4.63% 6/12
**
1,397
 
AmeriCredit Automobile Receivables Trust AMCAR 06-1 A3
Mortgage backed security 5.11% 10/10
**
561
 
Ameriquest Mortgage Securities Inc AMSI 04-R2 M1
Mortgage backed security 1ML+43 4/34
**
125
 
Ameriquest Mortgage Securities Inc AMSI 04-R2 M2
Mortgage backed security 1ML+48 4/34
**
100
 
Ameritech Capital Funding
Corporate Bond 6.25% 5/18/09
**
851

21
      
        Eastman Investment and Employee Stock Ownership Plan      
      
        Schedule H, Line 4 (i) – Schedule of Assets (Held at End of Year)      
      
        December 30, 2006      
      
        (in thousands)      
    


(a)
(b) Identity of issue, borrower, lessor, or similar party
(c) Description of investment, including maturity date, rate of interest, collateral, par or maturity value
(d) Historical cost
(e) Current Value
 
Amortizing Residential Collateral   ARC 02-BC1 M2
Mortgage backed security 1ML+110 1/3
**
43
 
ANZ National London Inc
Corporate Bond 4.265% 5/16/08 144A
**
1,802
 
ARG Funding Corp   ARGF 05/1A A1
Mortgage Backed Security 4.02% 4/09
**
1,628
 
ARG Funding Corp   ARGF 05-2A A1
Mortgage Backed Security 4.54% 5/09
**
1,270
 
Asset Backed Securities Corp Home Equity ABSHE 03-HE6 M1
Mortgage backed security 1ML+65 11/33
**
378
 
Asset Backed Securities Corp Home Equity ABSHE 04-HE3 M1
Mortgage backed security 1ML+54 6/34
**
151
 
Associates Corp of North America
Corporate Bond  6.875%11/15/08
**
124
 
Associates Corp of North America
Corporate Bond 6.25% 11/01/08
**
805
 
AT&T Corp
Corporate Bond 6% 3/15/09 DTC
**
196
 
AT&T Inc/SBC Communications
Corporate Bond 6.25% 3/15/11
**
426
 
AT&T Inc/SBC Communications
Corporate Bond 4.125% 9/15/09
**
2,331
 
Avon Products Inc
Corporate Bond 5.125% 1/15/11
**
193
 
AXA Financial Inc
Corporate Bond  7.75% 8/01/10
**
1,037
 
Banc of America Commercial Mortgage Inc BACM 05-4 XP
Interest only strip CSTR 7/45
**
82
 
Banc of America Commercial Mortgage Inc BACM 2006-5 XP
Interest only strip 0.832% 9/47
**
338
 
Banc of America Commercial Mortgage Inc BACM 04-2 A2
Mortgage backed security 3.52% 11/38
**
1,079
 
Banc of America Commercial Mortgage Inc BACM 04-5 XP
Interest only strip CSTR 11/41
**
183
 
Banc of America Commercial Mortgage Inc BACM 05-3 A3B
Mortgage backed security CSTR 7/43
**
945
 
Banc of America Commercial Mortgage Inc BACM 05-4 A1
Mortgage backed security 4.432 % 7/45
**
744
 
Banc of America Commercial Mortgage Inc BACM 04-6 XP
Interest only strip CSTR 12/42
**
123
 
Banc of America Commercial Mortgage Inc BACM 05-3 XP
Interest only strip CSTR 7/43
**
286
 
Banc of America Commercial Mortgage Inc BACM 2003-2 A2
Mortgage backed security 4.342%  3/41
**
1,310
 
Banc of America Commercial Mortgage Inc BACM 06-5 A1
Mortgage backed security  5.185% 7/11
**
332
 
Banc of America Commercial Mortgage Inc BACM 05-5 A1
Mortgage backed security 4.716%  8/10
**
994
 
Banc of America Commercial Mortgage Inc BACM 06-6 XP
Interest only strip CSTR 10/45
**
394
 
Banc of America Commercial Mortgage Inc BACM 05-6 A1
Mortgage backed security  5.001% 9/47
**
611
 
Banc of America Commercial Mortgage Inc BACM 04-4 A3
Mortgage backed security 4.128% 7/42
**
668

22
      
        Eastman Investment and Employee Stock Ownership Plan      
      
        Schedule H, Line 4 (i) – Schedule of Assets (Held at End of Year)      
      
        December 30, 2006      
      
        (in thousands)      
    


(a)
(b)  Identity of issue, borrower, lessor, or similar party
(c) Description of investment, including maturity date, rate of interest, collateral, par or maturity value
(d) Historical cost
(e) Current Value
 
Banc of America Commercial Mortgage Inc BACM 05-1 A2
Mortgage backed security 4.64% 11/42
**
1,443
 
Banc of America Large Loan BALL 05-ESHA X1
Interest only strip CSTR 7/20
**
50
 
Banc of America Mortgage Security Inc BOAMS 05-E 2A7
Mortgage backed security CSTR 6/35
**
656
 
Banc of America Mortgage Security Inc  BOAMS 05-J 2A4
Mortgage backed security 12ML 11/35
**
2,085
 
Bank of America Corporation
Corporate Bond  6.25% 4/01/08
**
241
 
Bank of New York Inc
Corporate Bond  4.25%/3ML 9/4/12
**
604
 
Bank of New York Inc
Corporate Bond 3.4/3ML+148 3/15/13
**
2,109
 
Bank One Corporation
Corporate Bond 6%  8/01/08 D
**
1,048
 
Bank One Corporation
Corporate Bond 2.625% 6/30/08
**
2,145
 
Bank One Issuance Trust   BOIT 04-B2 B2
Mortgage backed security  4.37% 4/12
**
1,366
 
Bank One Texas
Corporate Bond 6.25% 2/15/08
**
620
 
Bayview Commercial Asset Trust BAYC 04-3 M1
Mortgage backed security  1ML+50 1/35
**
110
 
Bayview Commercial Asset Trust BAYC 04-2 A
Mortgage backed security  1ML+43 8/34
**
493
 
Bayview Commercial Asset Trust BAYC 04-2 M1
Mortgage backed security 1ML+58 8/34
**
158
 
Bayview Commercial Asset Trust BAYC 04-3 M2
Mortgage backed security 1ML+100 1/35
**
73
 
Bayview Financial Acquisition Trust  BAYV 04-C A1
Mortgage backed security 1ML+42 5/44
**
459
 
BBVA Bancomer SA
Corporate Bond 5.3795% 7/22/15 144A
**
506
 
Bear Stearns Asset Backed Securities  BSARM 05-6 1A1
Mortgage backed security CSTR 8/35
**
1,262
 
Bear Stearns Asset Backed Securities  BSABS 04-BO1 M4
Mortgage backed security 1ML+120 9/34
**
225
 
Bear Stearns Asset Backed Securities  BSABS 04-BO1 M3
Mortgage backed security 1ML+105 9/34
**
264
 
Bear Stearns Commercial Mortgage Securities BSCMS 04-ESA A3
Mortgage backed security 4.741% 5/16
**
1,116
 
Bear Stearns Commercial Mortgage Securities BSCMS 04-ESA D
Mortgage backed security  4.986% 5/16
**
140
 
Bear Stearns Commercial Mortgage Securities BSCMS 2006-T24 X2
Interest only strip CSTR 10/41
**
225
 
Bear Stearns Commercial Mortgage Securities BSCMS 04-ESA C
Mortgage backed security 4.937% 5/16
**
388
 
Bear Stearns Commercial Mortgage Securities BSCMS 04-ESA F
Mortgage backed security 5.182%  5/16
**
105
 
Bear Stearns Commercial Mortgage Securities BSCMS 04-PWR5 A2
Mortgage backed security 4.254%  7/42
**
631
 
Bear Stearns Commercial Mortgage Securities BSCMS 04-T16 A3
Mortgage backed security 4.03%  2/46
**
1,514

23
      
        Eastman Investment and Employee Stock Ownership Plan      
      
        Schedule H, Line 4 (i) – Schedule of Assets (Held at End of Year)      
      
        December 30, 2006      
      
        (in thousands)      
    


(a)
(b) Identity of issue, borrower, lessor, or similar party
(c)  Description of investment, including maturity date, rate of interest, collateral, par or maturity value
(d) Historical cost
(e)  Current Value
 
Bear Stearns Commercial Mortgage Securities BSCMS 03-PWR2 A3
Mortgage backed security 4.83%  5/39
**
420
 
Bear Stearns Commercial Mortgage Securities BSCMS 06-PW13 X2
Interest only strip CSTR 9/41
**
223
 
Bear Stearns Commercial Mortgage Securities BSCMS 03-T12 X2
Interest only strip CSTR 8/39
**
49
 
Bear Stearns Commercial Mortgage Securities BSCMS 04-PWR5 X2
Interest only strip CSTR 7/42
**
163
 
Bear Stearns Commercial Mortgage Securities BSCMS 05-PWR9 A1
Mortgage backed security  4.498%  9/42
**
1,162
 
Bear Stearns Commercial Mortgage Securities BSCMS 06-PW13 A1
Mortgage backed security 5.294%  09/41
**
1,327
 
Bear Stearns Commercial Mortgage Securities BSCMS 04-ESA B
Mortgage backed security 4.888% 5/16
**
343
 
Bear Stearns Commercial Mortgage Securities BSCMS 05-T20 A1
Mortgage backed security  4.94%  10/4
**
1,073
 
Bear Stearns Commercial Mortgage Securities BSCMS 04-ESA E
Mortgage backed security  5.064% 5/16
**
439
 
Bear Stearns Commercial Mortgage Securities BSCMS 04-PWR6 X2
Interest only strip CSTR 11/41
**
104
 
BellSouth Corp
Corporate Bond 4.2% 9/15/09 DT
**
852
 
Bank of Tokyo-Mitsubishi
Corporate Bond 8.4% 4/15/10
**
1,183
 
Brazos Higher Education Authority BRHEA 06-A A2R
Mortgage backed security  5.03% 12/41
**
1,568
 
British Telecommunications  PLC
Corporate Bond  12/10 DT
**
1,366
 
BTM (Curacao) Holdings NV
Corporate Bond 4.76% 7/21/15 144A
**
415
 
Canadian Imperial Bank Comm. NY CIBC# YCD
Certificate of Deposit 4.375%  7/28/2008
**
815
 
Capital Auto Receivables Asset Trust CARAT 2006-SN1A C
Mortgage backed security 5.77%  5/10
**
95
 
Capital Auto Receivables Asset Trust CARAT 2006-SN1A A3
Mortgage backed security 5.31%  10/09
**
947
 
Capital Auto Receivables Asset Trust CARAT 2006-SN1A B
Mortgage backed security  5.5%  4/10
**
100
 
Capital Auto Receivables Asset Trust CARAT 06-1 A3
Mortgage backed security 5.03% 10/09
**
240
 
Capital Auto Receivables Asset Trust CARAT 2006-SN1A A4A
Mortgage backed security 5.32%  3/10
**
1,078
 
Capital Auto Receivables Asset Trust CARAT 06-1 B
Mortgage backed security  5.26%  10/10
**
230
 
Capital One Auto Finance Trust COAFT 2006-CA
Mortgage backed security 5.07%  7/11
**
892
 
Capital One Auto Finance Trust COAFT 05-BSS C
Mortgage backed security  4.48% 12/10
**
956
 
Capital One Auto Finance Trust COAFT 05-C A4A
Mortgage backed security 4.71%  6/12
**
2,916
 
Capital One Bank
Corporate Bond 4.875% 5/15/08
**
800
 
Capital One Bank
Corporate Bond 4.25%  12/01/08
**
492
 
Capital One Bank
Corporate Bond  5%  6/15/09
**
324

24
      
        Eastman Investment and Employee Stock Ownership Plan      
      
        Schedule H, Line 4 (i) – Schedule of Assets (Held at End of Year)      
      
        December 30, 2006      
      
        (in thousands)      
    


(a)
(b) Identity of issue, borrower, lessor, or similar party
(c) Description of investment, including maturity date, rate of interest, collateral, par or maturity value
(d) Historical cost
(e) Current Value
 
Capital One Multi-Asset Execution Trust COMET 2003-B3 B3
Mortgage backed security  4.5%  6/11
**
1,847
 
Capital One Multi-Asset Execution Trust COMET 04-B6 B6
Mortgage backed security 4.155%  7/12
**
1,128
 
Capital One Prime Auto Receivables Trust COPAR 2006-2 B
Mortgage backed security  5.05% 6/13
**
334
 
Capital One Prime Auto Receivables Trust  COPAR 06-2 A4
Mortgage backed security  4.94% 7/12
**
778
 
Capital Trust Re CDO Ltd   CTCDO 04-1A C
Mortgage backed security  1ML+110 7/39
**
207
 
Capital Trust Re CDO Ltd   CTCDO 04-1A A2
Mortgage backed security 1ML+45 7/39
**
301
 
Capital Trust Re CDO Ltd   CTCDO 04-1A B
Mortgage backed security 1ML+75 7/39
**
162
 
CDC Mortgage Capital Trust   CDCMC 03-HE3 M1
Mortgage backed security 1ML+70 11/33
**
215
 
Cendant Timeshares Receivables Funding CDTIM 05-1A A1
Mortgage backed security  4.67%  5/17
**
290
 
Chase Commercial Mortgage Securities Corp CCMSC 99-2 A1
Mortgage backed security  7.032%  1/32
**
5
 
Chase Issuance Trust    CHAIT 05-B2 B2
Mortgage backed security 4.52 12/10
**
6,308
 
Chubb Corporation
Corporate Bond  5.472%  8/16/08
**
611
 
CIT Equipment Collateral    CITEC 05-VT1 A4
Mortgage backed security 4.36 11/12
**
213
 
CIT Group Inc
Corporate Bond 3.375%  4/01/09
**
504
 
CIT Group Inc
Corporate Bond 5%  11/24/08
**
1,010
 
Citibank Credit Card Issuance Trust CCCIT 05-B1 B1
Mortgage backed security 4.4%  9/10
**
3,469
 
Citibank Credit Card Issuance Trust CCCIT 06-B2 B2
Mortgage backed security 5.15% 3/11
**
1,364
 
Citigroup Commercial Mortgage Trust CGCMT 05-EMG A2
Mortgage backed security 4.2211%  9/51
**
475
 
Citigroup Commercial Mortgage Trust CGCMT 04-C2 XP
Interest only strip CSTR 10/41
**
167
 
Citigroup  Inc.
Corporate Bond 3.625%  2/09/09
**
1,841
 
Citigroup/Deutschebank Comm.    CD 06-CD3 XP
Interest only strip CSTR 10/48
**
776
 
CNH Equipment Trust   CNH 05-B B
Mortgage backed security  4.57%  7/12
**
395
 
CNH Equipment Trust   CNH 05-B A3
Mortgage backed security  4.27%  1/10
**
1,407
 
Commercial Mortgage Acceptance Corp    CMAC 98-C2 B
Mortgage backed security CSTR 9/30
**
1,713
 
Commercial Mortgage Asset Trust   CMAT 99-C1 A3
Mortgage backed security  6.64%  1/32
**
345
 
Commercial Mortgage Pass Through COMM 99-1 A2
Mortgage backed security  6.455% 5/32
**
1,089
 
Commercial Mortgage Pass Through COMM 06-C8 A1
Mortgage backed security  5.11% 12/46
**
707
 
Commercial Mortgage Pass Through COMM 04-HTL1 D
Mortgage backed security  1ML+55 7/16
**
6
 
Commercial Mortgage Pass Through COMM 06-CN2A D
Mortgage backed security  5.52861%  2/19
**
187
 
Commercial Mortgage Pass Through COMM 04-HTL1 E
Mortgage backed security  1ML+75 7/16
**
4
 
Commercial Mortgage Pass Through COMM 04-HTL1 F
Mortgage backed security 1ML+80 7/16
**
24
 
Commercial Mortgage Pass Through COMM 06-CN2A E
Mortgage backed security CSTR 2/19
**
355
 
Commercial Mortgage Pass Through COMM 04-HTL1 B
Mortgage backed security 1ML+45 7/16
**
3

25
      
        Eastman Investment and Employee Stock Ownership Plan      
      
        Schedule H, Line 4 (i) – Schedule of Assets (Held at End of Year)      
      
        December 30, 2006      
      
        (in thousands)      
    


(a)
(b) Identity of issue, borrower, lessor, or similar party
(c) Description of investment, including maturity date, rate of interest, collateral, par or maturity value
(d) Historical cost
(e) Current Value
 
Commercial Mortgage Pass Through COMM 06-CN2A CFX
Mortgage backed security 5.47945%  2/19
**
117
 
Commercial Mortgage Pass Through COMM 06-CN2A F
Mortgage backed security  CSTR 2/19
**
81
 
Commercial Mortgage Pass Through COMM 04-LB4A XP
Interest only strip CSTR 10/37
**
305
 
Commercial Mortgage Pass Through COMM 05-LP5 A2
Mortgage backed security 4.63%  5/43
**
1,307
 
Commercial Mortgage Pass Through COMM 05-LP5 XP
Interest only strip CSTR 5/43
**
121
 
Commercial Mortgage Pass Through COMM 06-C8 XP
Interest only strip CSTR 12/46
**
1,044
 
Commercial Mortgage Pass Through COMM 06-CN2A BFX
Mortgage backed security  5.537% 2/19
**
274
 
Commercial Mortgage Pass Through COMM 05-C6 XP
Interest only strip CSTR 6/44
**
129
 
Constellation Energy Grp.
Corporate Bond 6.35%  4/01/07
**
1,221
 
Constellation Energy Grp.
Corporate Bond 6.125%  9/01/09
**
561
 
Continental Airlines Inc    CONTL AIR 98-3A2
Mortgage backed security  6.32%  11/1/08
**
194
 
Continental Airlines Inc    CONTL AIR 991A
Mortgage backed security 6.545%  2/02
**
962
 
Countrywide Asset Backed Certificates CWL 03-SD3 A1
Mortgage backed security 1ML+42 12/32
**
15
 
Countrywide Asset Backed Certificates CWL 04-3 M1
Mortgage backed security 1ML+50 6/34
**
151
 
Countrywide Asset Backed Certificates CWL 04-4 A
Mortgage backed security 1ML+37.5 8/34
**
56
 
Countrywide Home Loans    CWHL 02-25 2A1
Mortgage backed security  5.5% 11/17
**
240
 
CPS Auto Trust    CPS 06-C A3
Mortgage backed security  5.14% 1/11
**
336
 
Credit Suisse Mortgage Capital   CSMC 06-C4 ASP
Interest only strip CSTR 9/39
**
1,493
 
Credit Suisse Mortgage Capital   CSMC 06-C5 ASP
Interest only strip CSTR 12/39
**
849
 
Crown Castle Towers LLC   CCI 05-1A B
Mortgage backed security  4.878% 6/35
**
524
 
Crown Castle Towers LLC   CCI 05-1A C
Mortgage backed security  5.074% 6/35
**
477
 
CS First Boston Mortgage Securities Corp CSFB 97-C2 A3
Mortgage backed security  6.55% 1/35
**
566
 
CS First Boston Mortgage Securities Corp CSFB 04-C4 ASP
Interest only strip CSTR 10/39
**
165
 
CS First Boston Mortgage Securities Corp CSFB 05-C1 ASP
Interest only strip CSTR 2/38
**
138
 
CS First Boston Mortgage Securities Corp CSFB 99-C1 A2
Mortgage backed security  7.29%  9/41
**
2,744
 
CS First Boston Mortgage Securities Corp CSFB 01-CK3 A3
Mortgage backed security 6.4%  6/34
**
431
 
CS First Boston Mortgage Securities Corp CSFB 03-C4 A3
Mortgage backed security CSTR 8/36
**
561
 
CS First Boston Mortgage Securities Corp CSFB 03-C5 A3
Mortgage backed security  4.429% 12/36
**
952
 
CS First Boston Mortgage Securities Corp CSFB 04-C1 A3
Mortgage backed security 4.321%  1/37
**
509
 
CS First Boston Mortgage Securities Corp CSFB 05-C4 ASP
Interest only strip CSTR 8/38
**
337
 
CS First Boston Mortgage Securities Corp CSFB 2004-C1 A2
Mortgage backed security  3.516 % 1/37
**
1,437
 
CS First Boston Mortgage Securities Corp CSFB 05-C2 ASP
Interest only strip CSTR 4/37
**
186
 
CW Capital Cobalt    CWCI 06-C1 A2
Mortgage backed security 5.122%  8/15/48
**
1,045

26
      
        Eastman Investment and Employee Stock Ownership Plan      
      
        Schedule H, Line 4 (i) – Schedule of Assets (Held at End of Year)      
      
        December 30, 2006      
      
        (in thousands)      
    


(a)
(b) Identity of issue, borrower, lessor, or similar party
(c) Description of investment, including maturity date, rate of interest, collateral, par or maturity value
(d) Historical cost
(e) Current Value
 
Daimler Chrysler Auto Trust DCAT 2006-C A4
Mortgage backed security 4.98%  11/11
**
1,011
 
Daimler Chrysler Auto Trust DCAT 2006-C B
Mortgage backed security  5.11% 4/13
**
847
 
Daimler Chrysler NA Holding Corp
Corporate Bond 5.75%  8/10/09
**
2,995
 
Deutsche Telekom  Int. Fin.
Corporate Bond 5.375%  3/23/11
**
1,866
 
Diversified Reit Trust  DRT 00-1A A2
Mortgage backed security  6.971% 3/10
**
521
 
DLJ Commercial Mortgage Corp DLJCM 00-CF1 A1B
Mortgage backed security 7.62%  6/33
**
904
 
DLJ Commercial Mortgage Corp DLJCM 99-CG1 A1B
Mortgage backed security 6.46%  3/32
**
1,015
 
DLJ Commercial Mortgage Corp DLJCM 1999-CG1 A3
Mortgage backed security 6.77%  3/32
**
1,396
 
RR Donnelley & Sons Co.
Corporate Bond 3.75%  4/1/09
**
1,871
 
Drive Auto Receivables Trust DRIVE 05-3 A3
Mortgage backed security  4.99%  10/10
**
1,297
 
Drive Auto Receivables Trust DRIVE 06-2 A-2
Mortgage backed security  5.3%  7/11
**
882
 
Drive Auto Receivables Trust DRIVE 06-2 A-3
Mortgage backed security  5.33%  4/14
**
1,130
 
DriveTime Auto Owner Trust DRVT 2006-A A3
Mortgage backed security  5.501% 11/11
**
801
 
DriveTime Auto Owner Trust DRVT 2006-B A2
Mortgage backed security 5.32%  3/10
**
1,398
 
DriveTime Auto Owner Trust DRVT 2006-B A3
Mortgage backed security  5.23% 8/12
**
792
 
Exelon Generation Co.Inc
Corporate Bond 6.95%  6/15/11
**
1,337
 
Fannie Mae
FNMA  7.00%  6/08 #050751
**
202
 
Fannie Mae
FNMA  7.00%  1/13 #251428
**
8
 
Fannie Mae
FNMA  7.00%  8/08 #252068
**
26
 
Fannie Mae
FNMA ARM 4.25%  2/35 255658
**
92
 
Fannie Mae
FNMA  6.50%  11/13 #323755
**
342
 
Fannie Mae
FNMA  7.00%  8/14 #323877
**
62
 
Fannie Mae
FNMA  6.00% 3/14 #487614
**
40
 
Fannie Mae
FNMA  6.50%  9/14 #514373
**
2
 
Fannie Mae
FNMA  7.00%  11/14 #522277
**
31
 
Fannie Mae
FNMA  6.50%  10/13 #535234
**
615
 
Fannie Mae
FNMA  7.00%  6/16 #545122
**
21
 
Fannie Mae
FNMA ARM 4.305%  8/33 555696
**
153
 
Fannie Mae
FNMA  7.00%  2/16 #569915
**
58
 
Fannie Mae
FNMA  6.00%  10/16 #589129
**
40
 
Fannie Mae
FNMA  7.00%  8/16 #599602
**
84
 
Fannie Mae
FNMA  7.00%  4/17 #636135
**
295
 
Fannie Mae
FNMA  6.50%  4/17 #637244
**
203
 
Fannie Mae
FNMA ARM 4.710%  10/32 648938
**
11
 
Fannie Mae
FNMA ARM 4.732%  10/32 668509
**
22
 
Fannie Mae
FNMA  6.00%  11/17 #671380
**
190
 
Fannie Mae
FNMA  6.00%  11/17 #672789
**
58
 
Fannie Mae
FNMA  6.00%  12/17 #673965
**
70
 
Fannie Mae
FNMA ARM 4.925% 12/32 677026
**
8
 
Fannie Mae
FNMA  6.00%  2/18 #684153
**
18
 
Fannie Mae
FNMA ARM 3.828% 4/33 688969
**
234
 
Fannie Mae
FNMA ARM 4.646%  1/33 689554
**
51
 
Fannie Mae
FNMA  7.00% 2/18 #693327
**
223

27
      
        Eastman Investment and Employee Stock Ownership Plan      
      
        Schedule H, Line 4 (i) – Schedule of Assets (Held at End of Year)      
      
        December 30, 2006      
      
        (in thousands)      
    


(a)
(b)  Identity of issue, borrower, lessor, or similar party
(c) Description of investment, including maturity date, rate of interest, collateral, par or maturity value
(d) Historical cost
(e) Current Value
 
Fannie Mae
FNMA ARM 4.708%  2/33 693344
**
15
 
Fannie Mae
FNMA ARM 4.318%  3/33 694530
**
37
 
Fannie Mae
FNMA ARM 4.801%  2/33 695019
**
112
 
Fannie Mae
FNMA ARM 4.292%  3/33 701296
**
88
 
Fannie Mae
FNMA ARM 3.984%  5/33 703915
**
23
 
Fannie Mae
FNMA ARM 4.079%  4/33 708221
**
27
 
Fannie Mae
FNMA ARM 4.351%  6/33 720921
**
42
 
Fannie Mae
FNMA ARM 3.878%  6/33 723633
**
303
 
Fannie Mae
FNMA ARM 3.836% 6/33 723760
**
59
 
Fannie Mae
FNMA ARM 5.12%  1/34 725109
**
62
 
Fannie Mae
FNMA ARM 4.862%  9/34 725855
**
135
 
Fannie Mae
FNMA ARM 4.832%  8/34 725858
**
74
 
Fannie Mae
FNMA ARM 4.409%  10/34 725968
**
419
 
Fannie Mae
FNMA  4.00%  8/18 #727438
**
1,272
 
Fannie Mae
FNMA ARM 5.229%  8/33 735030
**
105
 
Fannie Mae
FNMA ARM 4.115%  2/35 735343
**
44
 
Fannie Mae
FNMA ARM 4.162%  2/35 735345
**
116
 
Fannie Mae
FNMA ARM 4.587%  2/35 735355
**
1,132
 
Fannie Mae
FNMA ARM 4.493% 8/34 735360
**
231
 
Fannie Mae
FNMA ARM 4.62%  2/35 735433
**
309
 
Fannie Mae
FNMA ARM 4.53%  3/35 735448
**
260
 
Fannie Mae
FNMA ARM 4.319% 5/35 735538
**
95
 
Fannie Mae
FNMA ARM 4.177%  3/35 735545
**
335
 
Fannie Mae
FNMA ARM 4.763%  6/35 735689
**
658
 
Fannie Mae
FNMA ARM 4.402%  10/34 735934
**
750
 
Fannie Mae
FNMA ARM 4.898%  10/35 745060
**
210
 
Fannie Mae
FNMA ARM 4.99%  11/35 745064
**
4,413
 
Fannie Mae
FNMA ARM 4.858%  10/35 745231
**
303
 
Fannie Mae
FNMA ARM 3.941%  6/34 745335
**
508
 
Fannie Mae
FNMA ARM 5.541%  11/36 745972
**
582
 
Fannie Mae
FNMA ARM 3.753%  10/33 746320
**
71
 
Fannie Mae
FNMA ARM 4.155%  7/34 747270
**
336
 
Fannie Mae
FNMA ARM 4.055%  10/18 749296
**
60
 
Fannie Mae
FNMA ARM 4.358%  10/33 754672
**
32
 
Fannie Mae
FNMA ARM 3.752%  10/33 755148
**
70
 
Fannie Mae
FNMA ARM 4.294%  1/34 759264
**
95
 
Fannie Mae
FNMA ARM 3.750%  1/34 761058
**
76
 
Fannie Mae
FNMA ARM 3.826% 10/33 763199
**
897
 
Fannie Mae
FNMA ARM 4.250% 1/34 765659
**
116
 
Fannie Mae
FNMA ARM 4.25%  2/34 765660
**
90
 
Fannie Mae
FNMA ARM 4.30%  1/34 766886
**
512
 
Fannie Mae
FNMA ARM 4.057% 5/34 768224
**
30
 
Fannie Mae
FNMA ARM 4.368%  2/34 769940
**
175
 
Fannie Mae
FNMA ARM 3.83% 1/35 773220
**
65

28
      
        Eastman Investment and Employee Stock Ownership Plan      
      
        Schedule H, Line 4 (i) – Schedule of Assets (Held at End of Year)      
      
        December 30, 2006      
      
        (in thousands)      
    


(a)
(b)  Identity of issue, borrower, lessor, or similar party
(c)  Description of investment, including maturity date, rate of interest, collateral, par or maturity value
(d) Historical cost
(e) Current Value
 
Fannie Mae
FNMA ARM 3.98%  1/35 773221
**
79
 
Fannie Mae
FNMA ARM 4.12% 2/35 773243
**
120
 
Fannie Mae
FNMA ARM 4.455%  3/35 773281
**
115
 
Fannie Mae
FNMA 15YR 6.00% 1/22 #TBA
**
28
 
Fannie Mae
FNMA ARM 3.939% 10/34 781549
**
88
 
Fannie Mae
FNMA ARM 3.786%  12/34 781576
**
86
 
Fannie Mae
FNMA ARM 3.827%  12/34 781580
**
12
 
Fannie Mae
FNMA ARM 3.791% 6/34 783545
**
376
 
Fannie Mae
FNMA ARM 4.351%  1/35 783580
**
97
 
Fannie Mae
FNMA ARM 4.499%  3/35 783587
**
264
 
Fannie Mae
FNMA ARM 4.4% 2/35 #783588
**
126
 
Fannie Mae
FNMA ARM 4.876%  7/34 785318
**
335
 
Fannie Mae
FNMA ARM 5.019%  9/34 790458
**
115
 
Fannie Mae
FNMA ARM 4.658%  9/34 790618
**
28
 
Fannie Mae
FNMA ARM 5.106%  9/34 790762
**
82
 
Fannie Mae
FNMA ARM 4.748%  7/34 793028
**
228
 
Fannie Mae
FNMA ARM 4.82% 8/34 793420
**
348
 
Fannie Mae
FNMA ARM 4.74% 10/34 794794
**
281
 
Fannie Mae
FNMA ARM 4.96% 8/34 796987
**
708
 
Fannie Mae
FNMA ARM 3.737%  1/35 797416
**
108
 
Fannie Mae
FNMA ARM 4.202%  1/35 797418
**
163
 
Fannie Mae
FNMA ARM 4.67%  11/34 799727
**
242
 
Fannie Mae
FNMA ARM 4.85%  11/34 799812
**
207
 
Fannie Mae
FNMA ARM 5.064% 11/34 800067
**
22
 
Fannie Mae
FNMA ARM 4.825%  12/34 800297
**
191
 
Fannie Mae
FNMA ARM 4.845%  12/34 800335
**
68
 
Fannie Mae
FNMA ARM 5.00%  9/34 801341
**
982
 
Fannie Mae
FNMA ARM 5.05%  7/34 801635
**
37
 
Fannie Mae
FNMA ARM 4.23% 11/34 803591
**
29
 
Fannie Mae
FNMA ARM 4.029% 1/35 806167
**
31
 
Fannie Mae
FNMA ARM 4.127%  1/35 806519
**
126
 
Fannie Mae
FNMA ARM 4.048%  1/35 806711
**
49
 
Fannie Mae
FNMA ARM 4.118%  1/35 807221
**
131
 
Fannie Mae
FNMA ARM 3.913%  12/34 809113
**
60
 
Fannie Mae
FNMA ARM 4.5%  2/35 #809429
**
827
 
Fannie Mae
FNMA ARM 5.029%  2/35 809463
**
27
 
Fannie Mae
FNMA ARM 4.625% 2/35 809931
**
230
 
Fannie Mae
FNMA ARM 4.145%  2/35 810415
**
157
 
Fannie Mae
FNMA ARM 4.872%  1/35 810896
**
1,366
 
Fannie Mae
FNMA ARM 4.57% 2/35 811803
**
74
 
Fannie Mae
FNMA ARM 4.052%  2/35 812091
**
60
 
Fannie Mae
FNMA ARM 4.118% 2/35 813114
**
44
 
Fannie Mae
FNMA ARM 4.151%  1/35 813170
**
217
 
Fannie Mae
FNMA ARM 4.694%  11/34 813184
**
281

29
      
        Eastman Investment and Employee Stock Ownership Plan      
      
        Schedule H, Line 4 (i) – Schedule of Assets (Held at End of Year)      
      
        December 30, 2006      
      
        (in thousands)      
    


(a)
(b) Identity of issue, borrower, lessor, or similar party
(c) Description of investment, including maturity date, rate of interest, collateral, par or maturity value
(d) Historical cost
(e) Current Value
 
Fannie Mae
FNMA ARM 3.87%  1/35 813713
**
131
 
Fannie Mae
FNMA ARM 3.84%  1/35 813714
**
212
 
Fannie Mae
FNMA ARM 4.023%  2/35 813737
**
67
 
Fannie Mae
FNMA ARM 5.01% 4/35 814954
**
204
 
Fannie Mae
FNMA ARM 4.790% 1/35 815323
**
282
 
Fannie Mae
FNMA ARM 4.293%  3/35 815586
**
67
 
Fannie Mae
FNMA ARM 4.653%  3/35 816322
**
34
 
Fannie Mae
FNMA ARM 4.857%  1/35 816356
**
11
 
Fannie Mae
FNMA ARM 4.573%  2/35 816591
**
475
 
Fannie Mae
FNMA ARM 4.639%  2/35 816599
**
46
 
Fannie Mae
FNMA ARM 4.934%  3/35 819648
**
171
 
Fannie Mae
FNMA ARM 4.928% 2/35 820356
**
740
 
Fannie Mae
FNMA ARM 4.372%  4/35 820407
**
44
 
Fannie Mae
FNMA ARM 4.725%  3/35 820598
**
587
 
Fannie Mae
FNMA ARM 4.5%  5/35 #820996
**
62
 
Fannie Mae
FNMA ARM 4.597%  6/35 821487
**
224
 
Fannie Mae
FNMA ARM 4.575%  7/35 822002
**
208
 
Fannie Mae
FNMA ARM 4.302% 1/35 827592
**
97
 
Fannie Mae
FNMA ARM 5.8170%  5/35 827781
**
471
 
Fannie Mae
FNMA ARM 5.10%   5/35 827782
**
209
 
Fannie Mae
FNMA ARM 5.208% 5/35 827783
**
1,781
 
Fannie Mae
FNMA ARM 5.180%  5/35 827785
**
269
 
Fannie Mae
FNMA ARM 4.520%  8/35 829603
**
186
 
Fannie Mae
FNMA ARM 4.409% 5/35 829985
**
223
 
Fannie Mae
FNMA ARM 5.203%  6/35 830605
**
334
 
Fannie Mae
FNMA ARM 4.555%  7/35 832099
**
271
 
Fannie Mae
FNMA ARM 5.344%  7/35 834917
**
40
 
Fannie Mae
FNMA ARM 5.101%  7/35 841837
**
347
 
Fannie Mae
FNMA ARM 5.349%  12/34 843013
**
105
 
Fannie Mae
FNMA ARM 5.280%  3/35 843014
**
31
 
Fannie Mae
FNMA ARM 5.43%  11/35 844168
**
131
 
Fannie Mae
FNMA ARM 4.893%  10/35 847787
**
156
 
Fannie Mae
FNMA ARM 5.32%  1/36 850852
**
652
 
Fannie Mae
FNMA ARM 5.409% 2/36 865319
**
105
 
Fannie Mae
FNMA ARM 5.84%  3/36 865958
**
888
 
Fannie Mae
FNMA ARM 5.98% 4/36 868793
**
486
 
Fannie Mae
FNMA ARM 5.839%  1/36 879146
**
598
 
Fannie Mae
FNMA ARM 3.854%  10/33 879906
**
1,793
 
Fannie Mae
FNMA ARM 6.21%  4/36 891332
**
328
 
Fannie Mae
FNMA ARM 6.08%  4/36 895834
**
145
 
Fannie Mae
FNMA ARM 5.50%  5/36 896475
**
442
 
Fannie Mae
FNMA ARM 6.63%  9/36 898175
**
1,309
 
Fannie Mae
FNMA ARM 6.60%  9/36 898177
**
732
 
Fannie Mae
FNMA ARM 6.62%  9/36 898178
**
702

30
      
        Eastman Investment and Employee Stock Ownership Plan      
      
        Schedule H, Line 4 (i) – Schedule of Assets (Held at End of Year)      
      
        December 30, 2006      
      
        (in thousands)      
    


(a)
(b)  Identity of issue, borrower, lessor, or similar party
(c)  Description of investment, including maturity date, rate of interest, collateral, par or maturity value
(d) Historical cost
(e) Current Value
 
Fannie Mae
FNMA ARM 6.65%  9/36 898179
**
704
 
Fannie Mae
FNMA ARM 6.62% 9/36 898180
**
693
 
Fannie Mae
FNMA ARM 5.26% 11/36 901494
**
276
 
Fannie Mae FNR 03-24 PB
Mortgage backed security  4.5% 12/12
**
897
 
Fannie Mae FNR 02-18 PE
Mortgage backed security  5.5%  6/16
**
1,981
 
Fannie Mae FNR 03-23 AB
Mortgage backed security  4% 3/17
**
1,000
 
Fifth Third Auto Trust     FITAT 04-A A3
Mortgage backed security 3.19%  2/08
**
2
 
First Investors Auto Owners Trust FIAOT 06A A3
Mortgage backed security  4.93% 2/15/11
**
588
 
First Union – Lehmann Brothers Inc FULB 97-C2 A3
Mortgage backed security 6.65%  11/29
**
261
 
Fleet Financial Group
Corporate Bond 7.375%  12/01/09
**
918
 
FleetBoston Financial Corp.
Corporate Bond 3.85% 2/15/08
**
400
 
Ford Credit Auto Owner Trust FORDO 05-C A4
Mortgage backed security  4.36%  6/10
**
715
 
Ford Credit Auto Owner Trust FORDO 06-C A4A
Mortgage backed security  5.15% 2/12
**
1,493
 
Ford Credit Auto Owner Trust FORDO 2005-A B
Mortgage backed security  3.88%  1/10
**
290
 
Ford Credit Auto Owner Trust FORDO 2006-C B
Mortgage backed security  5.3% 6/12
**
361
 
Ford Credit Auto Owner Trust FORDO 05-A A4
Mortgage backed security 3.72% 10/09
**
296
 
Ford Credit Auto Owner Trust FORDO 2006-B B
Mortgage backed security  5.43% 2/12
**
785
 
FPL Group Capital Inc
Corporate Bond 5.551% 2/16/08
**
746
 
Franklin Auto Trust FRNK 06-1 A4
Mortgage backed security 5.03% 7/14
**
2,075
 
Franklin Auto Trust FRNK 06-1 B1
Mortgage backed security  5.14% 7/14
**
135
 
Franklin Resources Inc
Corporate Bond  3.7%  4/15/08
**
1,510
 
Freddie Mac
FHLG  5.00%  5/14 #E76434
**
22
 
Freddie Mac
FHLG  5.00%  6/14 #E77224
**
79
 
Freddie Mac
FHLM ARM 4.889%  3/33 847126
**
39
 
Freddie Mac
FHLM ARM 4.314% 12/34 1B2670
**
107
 
Freddie Mac
FHLM ARM 4.106%  12/34 1B2699
**
84
 
Freddie Mac
FHLM ARM 4.22% 2/35 1B2747
**
682
 
Freddie Mac
FHLM ARM 4.63% 3/35 1B2811
**
470
 
Freddie Mac
FHLM ARM 4.497%  6/35 1B2907
**
133
 
Freddie Mac
FHLM ARM 4.307%  5/35 847408
**
171
 
Freddie Mac
FHLM ARM 4.55%  2/35 1G0068
**
188
 
Freddie Mac
FHLM ARM 4.401%  2/35 1G0103
**
327
 
Freddie Mac
FHLM ARM 4.37%  3/35 1G0125
**
174
 
Freddie Mac
FHLM ARM 4.444%  3/35 1G0133
**
118
 
Freddie Mac
FHLM ARM 4.504%  3/35 1G0145
**
127
 
Freddie Mac
FHLM ARM 4.941% 11/35 1J1228
**
453
 
Freddie Mac
FHLM ARM 5.26% 1/36 1J1274
**
453
 
Freddie Mac
FHLM ARM 4.93% 9/35 1K1215
**
419
 
Freddie Mac
FHLM ARM 5.034%  4/35 1N0002
**
545
 
Freddie Mac
FHLM ARM 5.62% 12/35 1N0117
**
720
 
Freddie Mac
FHLM ARM 6.53%  8/36 1N0187
**
1,685
 
Freddie Mac
FHLM ARM 6.67%  10/36 1G2538
**
571
 
Freddie Mac
FHLM ARM 5.34%  6/35 1L0097
**
318

31
      
        Eastman Investment and Employee Stock Ownership Plan      
      
        Schedule H, Line 4 (i) – Schedule of Assets (Held at End of Year)      
      
        December 30, 2006      
      
        (in thousands)      
    


(a)
(b)  Identity of issue, borrower, lessor, or similar party
(c)  Description of investment, including maturity date, rate of interest, collateral, par or maturity value
(d) Historical cost
(e)  Current Value
 
Freddie Mac
FHLM ARM 4.40%  8/35 1L1225
**
1,848
 
Freddie Mac
FHLM ARM 5.885%  6/35 1L1275
**
216
 
Freddie Mac
FHLM ARM 5.676%  4/32 789284
**
15
 
Freddie Mac
FHLM ARM 4.819%  10/32 1B0610
**
16
 
Freddie Mac
FHLM ARM 4.441%  2/34 781229
**
100
 
Freddie Mac
FHLM ARM 4.13%  12/34 782916
**
116
 
Freddie Mac
FHLM ARM 4.232%  1/35 782988
**
309
 
Freddie Mac
FHLM ARM 4.434%  2/35 783032
**
215
 
Freddie Mac
FHLM ARM 4.307%  3/35 783067
**
99
 
Freddie Mac FHR 1644 IA
Mortgage backed security  6.75%  8/23
**
61
 
Freddie Mac FHR 2292 QT
Mortgage backed security  6.5% 5/30
**
11
 
Fremont Home Loan Trust FHLT 04-1 M3
Mortgage backed security  1ML+55 2/34
**
100
 
Fremont Home Loan Trust FHLT 04-1 M2
Mortgage backed security 1ML+50 2/34
**
100
 
Fremont Home Loan Trust FHLT 04-1 M1
Mortgage backed security 1ML+45 2/34
**
31
 
Fremont Home Loan Trust FHLT 04-A M1
Mortgage backed security  1ML+55 1/34
**
451
 
GCO Slims Trust  GCOSL 06-1A NOTE
Mortgage backed security  5.72%  3/22
**
620
 
GE Capital Commercial Mortgage Group GECMC 04-C3 A2
Mortgage backed security 4.433%  7/39
**
1,931
 
GE Capital Commercial Mortgage Group GECMC 02-2A A2
Mortgage backed security 4.97% 8/36
**
1,571
 
GE Capital Commercial Mortgage Group GECMC 04-C2 A2
Mortgage backed security  4.119 3/40
**
506
 
General Electric Capital Corp.
Corporate Bond 7.5%  6/15/09
**
1,158
 
General Electric Capital Corp.
Corporate Bond 4% 6/15/09
**
1,156
 
General Electric Capital Corp.
Corporate Bond 5.25%  10/27/09
**
4,556
 
Global Signal Trust  TOWER 06-1 C
Mortgage backed security  5.707% 2/36
**
424
 
Global Signal Trust  TOWER 06-1 B
Mortgage backed security  5.588% 2/36
**
343
 
GMAC Commercial Mortgage Securities Inc GMACC 04-C2 A2
Mortgage backed security  CSTR 8/38
**
1,449
 
GMAC Commercial Mortgage Securities Inc GMACC 97-C1 A3
Mortgage backed security  6.869%  7/29
**
178
 
GMAC Commercial Mortgage Securities Inc GMACC 2003-C2 A1
Mortgage backed security  4.576%  5/40
**
2,315
 
GMAC Commercial Mortgage Securities Inc GMACC 97-C2 A3
Mortgage backed security  6.566%  4/29
**
51
 
GMAC Commercial Mortgage Securities Inc GMACC 06-C1 A1
Mortgage backed security  4.975%  11/45
**
722
 
GMAC Commercial Mortgage Securities Inc GMACC 2002-C1 A1
Mortgage backed security  5.785%  11/39
**
1,316
 
GMAC Commercial Mortgage Securities Inc GMACC 2004-C3 A3
Mortgage backed security  CSTR 12/41
**
1,237
 
GMAC Commercial Mortgage Securities Inc  GMACC 05-C1 X2
Interest only strip CSTR 5/43
**
203

32
      
        Eastman Investment and Employee Stock Ownership Plan      
      
        Schedule H, Line 4 (i) – Schedule of Assets (Held at End of Year)      
      
        December 30, 2006      
      
        (in thousands)      
    


(a)
(b) Identity of issue, borrower, lessor, or similar party
(c)  Description of investment, including maturity date, rate of interest, collateral, par or maturity value
(d) Historical cost
(e) Current Value
 
GMAC Commercial Mortgage Securities Inc GMACC 06-C1 XP
Interest only strip CSTR 11/45
**
100
 
GMAC Commercial Mortgage Securities Inc GMACC 05-C1 A2
Interest only strip CSTR 5/43
**
731
 
GMAC Commercial Mortgage Securities Inc  GMACC 04-C3 X2
Interest only strip CSTR 12/41
**
136
 
GMAC Mortgage Corporation Loan GMACM 05-AR5 1A1
Mortgage backed security  CSTR 9/35
**
358
 
Government National Mortgage Assoc GNII ARM
GNII ARM  3.750%  1/3 08/08/17
**
471
 
Greenpoint Financial Corp.
Corporate Bond 3.2%  6/06/08
**
1,650
 
Greenwich Capital Commercial Funding Corp GCCFC 03-C1 A2
Mortgage backed security  3.285% 7/35
**
868
 
Greenwich Capital Commercial Funding Corp GCCFC 04-GG1 A4
Mortgage backed security 4.755%  6/36
**
931
 
Greenwich Capital Commercial Funding Corp GCCFC 05-GG3 A2
Interest only strip CSTR 8/42
**
669
 
Greenwich Capital Commercial Funding Corp GCCFC 05-GG3 XP
Interest only strip CSTR 8/42
**
738
 
Greenwich Capital Commercial Funding Corp GCCFC 05-GG5
Interest only strip CSTR 4/37
**
624
 
GS Auto Loan Trust     GSALT 05-1 B
Mortgage backed security  4.62%  11/13
**
78
 
GS Auto Loan Trust     GSALT 05-1 A3
Mortgage backed security  4.45%  5/10
**
964
 
GS Mortgage Securities Corp GSMS 03-C1 A2A
Mortgage backed security 3.59% 1/40
**
758
 
GS Mortgage Securities Corp GSMS 98-GLII A2
Mortgage backed security  6.562% 4/31
**
762
 
GS Mortgage Securities Corp GSMS 04-C1 A1
Mortgage backed security  3.659%  10/28
**
1,565
 
GS Mortgage Securities Corp GSMS 05-GG4 XP
Interest only strip CSTR 7/39
**
611
 
GSAMP Trust   GSAMP 04-FM2 M3
Mortgage backed security  1ML+130 1/34
**
47
 
GSAMP Trust  GSAMP 04-FM2 M2
Mortgage backed security  1ML+110 1/34
**
111
 
Hartford Financial Services Group
Corporate Bond 5.55%  8/16/08
**
394
 
Halifax and Bank of Scotland Treasury Services  PLC
Corporate Bond 3.75%  9/30/08 144A
**
914
 
Heinz (H.J.) Co.
Corporate Bond 6.428% 12/01/08 144A
**
757
 
Honda Auto Receivables Trust    HAROT 05-4 A4
Mortgage backed security  4.6% 11/10
**
1,200
 
Host Marriott Pool Trust     HMPT 99-HMTA D
Mortgage backed security  7.97%  8/15
**
213
 
Host Marriott Pool Trust     HMPT 99-HMTA B
Mortgage backed security  7.3% 8/15
**
252
 
Household Automotive Trust    HAT 05-1 A4
Mortgage backed security  4.35% 6/12
**
1,522
 
Household Automotive Trust    HAT 2006-3 A3
Mortgage backed security  5.38% 9/11
**
1,909
 
Household Automotive Trust    HAT 04-1 A4
Mortgage backed security  3.93%  7/11
**
561
 
HSBC Finance Corp
Corporate Bond 4.125%  3/11/08
**
1,494
 
HSBC Finance Corp
Corporate Bond 5.875%  2/1/09 DT
**
312
 
HSBC Finance Corp
Corporate Bond  4.125%  12/15/08
**
1,272
 
HSBC Finance Corp
Corporate Bond  4.75%  5/15/09
**
767
 
HSBC Finance Corp
Corporate Bond 4.125%  11/16/09
**
776
 
Hutchison Whampoa International  03/33
Corporate Bond 5.45% 11/24/10 144H
**
1,714
 
Hutchison Whampoa International  01/11
Corporate Bond 7%  2/16/11 144A
**
652

33
      
        Eastman Investment and Employee Stock Ownership Plan      
      
        Schedule H, Line 4 (i) – Schedule of Assets (Held at End of Year)      
      
        December 30, 2006      
      
        (in thousands)      
    


(a)
(b)  Identity of issue, borrower, lessor, or similar party
(c) Description of investment, including maturity date, rate of interest, collateral, par or maturity value
(d) Historical cost
(e) Current Value
 
Hyundai Auto Receivables Trust HART 06-1 C
Mortgage backed security  5.34% 11/12
**
100
 
Hyundai Auto Receivables Trust HART 06-1 A-3
Mortgage backed security  5.13%  6/10
**
1,426
 
Hyundai Auto Receivables Trust HART 05-A C
Mortgage backed security  4.22%  2/12
**
94
 
Hyundai Auto Receivables Trust HART 06-1 B
Mortgage backed security 5.29% 11/12
**
75
 
International Lease Finance Corp
Corporate Bond  5.9/VR  144A
**
2,469
 
Impac  CMB Trust    IMM 05-1 M4
Mortgage backed security  1ML+75 4/35
**
50
 
Impac  CMB Trust    IMM 05-1 M5
Mortgage backed security 1ML+77 4/35
**
50
 
Impac  CMB Trust    IMM 05-1 M6
Mortgage backed security  1ML+82 4/35
**
74
 
International Lease Finance Corp
Corporate Bond 4.625%  6/02/08
**
298
 
John Deere Capital Corp
Corporate Bond 4.375%  3//14/08
**
971
 
John Deere Capital Corp
Corporate Bond 4.875%  3/16/09
**
804
 
John Hancock Global Funding II
Corporate Bond 3.75%  9/30/08
**
796
 
JP Morgan Auto Receivables Trust JPMART 2006-A A-3
Mortgage backed security 5.18%  12/10
**
1,042
 
JP Morgan Auto Receivables Trust JPMRT 2006-A A4
Mortgage backed security  5.14%  12/14
**
827
 
JP Morgan Auto Receivables Trust JPMART 2006-A B
Mortgage backed security  5.36 % 12/14
**
231
 
JP Morgan Chase Commercial Mortgage JPMCC 03-PM1A A2
Interest only strip  CSTR 8/40
**
1,762
 
JP Morgan Chase Commercial Mortgage JPMCC 04-C3 A2
Mortgage backed security  4.223%  1/42
**
810
 
JP Morgan Chase Commercial Mortgage JPMCC 05-LDP2 A2
Mortgage backed security  4.575%  7/42
**
732
 
JP Morgan Chase Commercial Mortgage JPMCC 04-CB9 A2
Interest only strip  CSTR 6/41
**
1,508
 
JP Morgan Chase Commercial Mortgage JPMCC 2001-C1 A2
Mortgage backed security  5.464% 10/35
**
768
 
JP Morgan Chase Commercial Mortgage JPMCC 2006-CB17 A3
Mortgage backed security  5.45%  12/43
**
748
 
JP Morgan Chase Commercial Mortgage JPMCC 05-LDP4 A1
Interest only strip  CSTR 10/42
**
796
 
JP Morgan Chase Commercial Mortgage JPMCC 2006-LDP9 A1
Interest only strip  CSTR 5/47
**
656
 
JP Morgan Chase Commercial Mortgage JPMCC 04-CB8 A2
Mortgage backed security  3.837%  1/39
**
1,222
 
JP Morgan Chase Commercial Mortgage JPMCC 05-LDP5 A1
Mortgage backed security  5.035%  12/44
**
1,053
 
JP Morgan Chase Commercial Mortgage JPMCC 03-CB7 X2
Interest Only Strip CSTR 1/38
**
47
 
JP Morgan Chase Commercial Mortgage JPMCC 04-CBX X2
Interest Only Strip  CSTR 1/37
**
412
 
JP Morgan Chase Commercial Mortgage JPMCC 05-LDP4 X2
Interest Only Strip CSTR 10/42
**
472
 
JP Morgan Chase Commercial Mortgage JPMC 99-C8 A2
Mortgage backed security  7.4% 7/31
**
783

34
      
        Eastman Investment and Employee Stock Ownership Plan      
      
        Schedule H, Line 4 (i) – Schedule of Assets (Held at End of Year)      
      
        December 30, 2006      
      
        (in thousands)      
    


(a)
(b) Identity of issue, borrower, lessor, or similar party
(c) Description of investment, including maturity date, rate of interest, collateral, par or maturity value
(d) Historical cost
(e) Current Value
 
JP Morgan Mortgage Trust JPMMT 05-A8 2A3
Mortgage backed security  CSTR 11/35
**
190
 
JP Morgan Chase & Co.
Corporate Bond 3.625%  5/1/08
**
393
 
JP Morgan Chase & Co.
Synthetic GIC Global Wrap – 4.46%
**
1,389
 
Korea Development Bank
Corporate Bond 3.875%  3/02/09
**
738
 
Korea Development Bank
Corporate Bond 4.75%  7/20/09
**
600
 
Kraft Foods Inc
Corporate Bond 4% 10/1/08
**
761
 
LB Commercial Conduit Mortgage Trust LBCMT 98-C4 A1B
Mortgage backed security  6.21%  10/35
**
1,328
 
LB Commercial Conduit Mortgage Trust LBCMT 99-C1 A2
Mortgage backed security  6.78%  6/31
**
1,325
 
LB-UBS Commercial Mortgage Trust LBUBS 00-C3 A2
Mortgage backed security  7.95%  1/10
**
1,004
 
LB-UBS Commercial Mortgage Trust LBUBS 04-C6 A2
Mortgage backed security  4.187%  8/29
**
683
 
LB-UBS Commercial Mortgage Trust  LBUBS 00-C5 A1
Mortgage backed security  6.41%  12/19
**
625
 
LB-UBS Commercial Mortgage Trust LBUBS 04-C4 A2
Interest only strip  CSTR 6/29
**
895
 
LB-UBS Commercial Mortgage Trust LBUBS 00-C5 A2
Mortgage backed security  6.51%  12/26
**
482
 
LB-UBS Commercial Mortgage Trust LBUBS 04-C2 A3
Mortgage backed security  3.973%  3/29
**
679
 
LB-UBS Commercial Mortgage Trust LBUBS 05-C1 AAB
Interest only strip  CSTR 2/30
**
547
 
LB-UBS Commercial Mortgage Trust LBUBS 06-C1A A1
Mortgage backed security  5.018%  2/31
**
517
 
LB-UBS Commercial Mortgage Trust LBUBS 03-C3 A2
Mortgage backed security  3.086%  5/27
**
647
 
LB-UBS Commercial Mortgage Trust LBUBS 03-C5 A2
Mortgage backed security  3.478%  7/27
**
1,457
 
LB-UBS Commercial Mortgage Trust LBUBS 03-C7 A3
Interest only strip  CSTR 9/27
**
803
 
LB-UBS Commercial Mortgage Trust LBUBS 05-C5 XCP
Interest only strip CSTR 9/40
**
626
 
LB-UBS Commercial Mortgage Trust LBUBS 04-C8 XCP
Interest only strip CSTR 12/39
**
98
 
LB-UBS Commercial Mortgage Trust LBUBS 206-C1A XCP
Interest only strip CSTR 2/41
**
525
 
LB-UBS Commercial Mortgage Trust LBUBS 05-C7 XCP
Interest only strip CSTR 11/40
**
384
 
Legg Mason Inc
Corporate Bond 6.75% 7/02/08
**
337
 
Lehman Brothers Holdings
Corporate Bond  7% 2/1/08
**
2,197
 
Lehman Brothers Holdings
Corporate Bond 4.25% 1/27/10
**
1,220

35
      
        Eastman Investment and Employee Stock Ownership Plan      
      
        Schedule H, Line 4 (i) – Schedule of Assets (Held at End of Year)      
      
        December 30, 2006      
      
        (in thousands)      
    


(a)
(b)  Identity of issue, borrower, lessor, or similar party
(c) Description of investment, including maturity date, rate of interest, collateral, par or maturity value
(d) Historical cost
(e) Current Value
 
Long Beach Auto Receivables Trust LBART 2006-B A3
Mortgage backed security  5.17%  8/11
**
506
 
Long Beach Auto Receivables Trust LBART 2006-B A4
Mortgage backed security 5.18%  9/13
**
902
 
Louis Dreyfus Nat Gas
Corporate Bond 6.875%  12/01/07
**
412
 
M&I Auto Loan Trust MILT 05-1 B
Mortgage backed security 5.02% 7/12
**
1,076
 
Marshall & Ilsley Corp
Corporate Bond 4.5%  8/25/08
**
1,927
 
Manufacturers & Traders Trust Company
Corporate Bond 3.85%  4/01/13
**
1,985
 
Marriott Vacation Club Owner Trust MVCOT 05-2 A
Mortgage backed security 4.6% 10/27
**
468
 
Marriott Vacation Club Owner Trust MVCOT 06-2A A
Mortgage backed security  5.417%  10/28
**
557
 
Marriott Vacation Club Owner Trust MVCOT 06-2A B
Mortgage backed security  5.467%  10/28
**
94
 
Marriott Vacation Club Owner Trust MVCOT 06-2A C
Mortgage backed security  5.766 % 10/28
**
42
 
Master Adjustable Rate Mortgages Trust MARM 04-11 1A4
Mortgage backed security  1ML+49 11/34
**
64
 
Master Adjustable Rate Mortgages Trust  MARM 04-11 2A2
Mortgage backed security  1ML+44 11/34
**
41
 
Master Seasoned Securities Trust  MSSTR 04-1 1A1
Interest only strip  CSTR 8/17
**
484
 
MBNA Capital
Corporate Bond 8.278% 12/01/26
**
577
 
MBNA Credit Card Master Note Trust MBNAS 05-B4 B4
Mortgage backed security  4.9% 3/11
**
1,371
 
MERITAGE Mortgage Loan Trust  MMLT 04-1 M1
Mortgage backed security  1ML+50 7/34
**
213
 
Merrill Lynch & Co Inc
Corporate Bond 4.125%  1/15/09
**
849
 
Merrill Lynch & Co Inc
Corporate Bond 4.831%  10/27/08
**
1,583
 
Merrill Lynch Mortgage Trust MLMT 04-BPC1 XP
Interest Only Strip CSTR 9/41
**
445
 
Merrill Lynch Mortgage Trust MLMT 05-GGP1 B
Mortgage backed security  4.146% 11/10
**
322
 
Merrill Lynch Mortgage Trust MLMT 05-LC1 A1
Mortgage backed security  5.017%  1/44
**
492
 
Merrill Lynch Mortgage Trust MLMT 05-GGP1 A
Mortgage backed security  4.099%  11/10
**
1,967
 
Merrill Lynch Mortgage Trust MLMT 05-GGP1 F
Mortgage backed security  4.35%  11/10
**
149
 
Merrill Lynch Mortgage Trust MLMT 04-MKB1 A2
Mortgage backed security  4.353%  2/42
**
4,772
 
Merrill Lynch Mortgage Trust MLMT 05-MCP1 A2
Mortgage backed security  4.556%  6/43
**
1,120
 
Merrill Lynch Mortgage Trust MLMT 05-MCP1 XP
Interest only strip CSTR 6/43
**
201
 
Merrill Lynch Mortgage Trust MLMT 05-GGP1 D
Mortgage backed security  4.291%  11/10
**
84
 
Merrill Lynch Mortgage Trust MLMT 05-GGP1 E
Mortgage backed security  4.33%  11/10
**
119
 
Merrill Lynch Mortgage Trust MLMT 05-GGP1 G
Mortgage backed security  4.374% 11/10
**
124
 
Merrill Lynch Mortgage Trust MLMT 04-KEY2 A2
Mortgage backed security 4.166%  8/39
**
1,190
 
Merrill Lynch Mortgage Trust MLMT 05-GGP1 C
Mortgage backed security  4.208% 11/10
**
273
 
Merrill Lynch Mortgage Trust MLMT 05-MKB2 XP
Interest only strip CSTR 9/42
**
44
 
Merrill Lynch/Countrywide Comm. MLCFC 06-3 XP
Interest only strip CSTR 7/46
**
563
 
Merrill Lynch/Countrywide Comm. MLCFC 2006-4 XP
Interest only strip CSTR 12/4
**
1,756
 
Mizuho Finance Cayman
Corporate Bond  8.625%  4/15/ 144A
**
1,273
 
Monumental Global Funding II
Corporate Bond 2.8 % 7/08 144A
**
2,147
 
Morgan JP & Co
Corporate Bond  6.00%  1/15/09
**
422
 
Morgan JP & Co
Corporate Bond 6.25%  1/15/09
**
1,618

36
      
        Eastman Investment and Employee Stock Ownership Plan      
      
        Schedule H, Line 4 (i) – Schedule of Assets (Held at End of Year)      
      
        December 30, 2006      
      
        (in thousands)      
    


(a)
(b) Identity of issue, borrower, lessor, or similar party
(c) Description of investment, including maturity date, rate of interest, collateral, par or maturity value
(d) Historical cost
(e) Current Value
 
Morgan Stanley
Corporate Bond 5.625%  1/09/12
**
3,116
 
Morgan Stanley Capital I MSAC 03-NC7 M1
Mortgage backed security  1ML+70 6/33
**
185
 
Morgan Stanley Capital I MSC 98-HF2 A2
Mortgage backed security  6.48%  11/30
**
1,206
 
Morgan Stanley Capital I MSC 99-CAM1 A4
Mortgage backed security  7.02%  3/32
**
383
 
Morgan Stanley Capital I MSC 04-HQ3 A2
Mortgage backed security  4.05%  1/41
**
526
 
Morgan Stanley Capital I MSC 2006-HQ10 X2
Interest only strip CSTR 11/41
**
548
 
Morgan Stanley Capital I MSC 03-IQ5 A2
Mortgage backed security  4.09%  4/38
**
301
 
Morgan Stanley Capital I MSC 03-IQ5 A3
Mortgage backed security  4.71%  4/38
**
615
 
Morgan Stanley Capital I MSC 04-HQ4 X2
Interest only strip CSTR 4/40
**
113
 
Morgan Stanley Capital I MSC 05-IQ9 X2
Interest only strip  CSTR 7/56
**
272
 
Morgan Stanley Capital I MSC 2006-HQ9 A1
Mortgage Backed Security  5.49% 7/44
**
1,150
 
Morgan Stanley Capital I MSC 98-XL2 A2
Mortgage backed security 6.17% 10/34
**
591
 
Morgan Stanley Capital I MSC 06-T21 A1
Mortgage backed security  4.925%  10/52
**
753
 
Morgan Stanley Capital I MSC 05-HQ5 X2
Interest only strip CSTR 1/42
**
103
 
Morgan Stanley Capital I MSC 05-TOP17 X2
Interest only strip CSTR 12/4
**
141
 
Morgan Stanley Capital I MSC 98-WF2 A2
Mortgage backed security  6.54% 7/30
**
469
 
Morgan Stanley Dean Witter Capital I  MSDWC 01-NC1 M2
Mortgage backed security 1ML+107 10/31
**
9
 
Mortgage Capital Funding Inc MCFI 98-MC2 A2
Mortgage backed security  6.423%  6/30
**
1,193
 
National Collegiate Student Loan Trust  NCSLT 05-2 AIO
Interest only strip 7.73% 3/12
**
144
 
National Collegiate Student Loan Trust  NCSLT 04-2 AIO
Interest only strip 9.75% 10/14
**
359
 
National Collegiate Student Loan Trust NCSLT 06-1 A-IO
Interest only strip 5.5%  4/11
**
142
 
National Collegiate Student Loan Trust NCSLT 05-1 AIO
Interest only strip 6.75% 12/0
**
84
 
National Collegiate Student Loan Trust NCSLT 05-3W AIO1
Interest only strip 4.8%  7/12
**
309
 
National Collegiate Student Loan Trust NCSLT 06-4 AIO
Interest only strip 6.35%  02/12
**
394
 
National Collegiate Student Loan Trust  NCSLT 2006-3 AIO
Interest only strip 7.1%  1/12
**
564
 
National Rural Utilities Cooperative Finance
Corporate Bond 5.75%  8/28/09
**
423
 
Nationslink Funding Corp.    NLFC 99-1 C
Mortgage backed security 6.571%  1/31
**
533
 
Navistar Financial Corp Owner Trust  NAVOT 04-B A3
Mortgage backed security  3.13%  5/09
**
427
 
Navistar Financial Corp Owner Trust  NAVOT 05-A A3
Mortgage backed security  4.22%  2/10
**
2,777
 
Navistar Financial Corp Owner Trust  NAVOT 05-A A4
Mortgage backed security  4.43%  1/14
**
561
 
Cingular Wireless SV/AT&T Wireless
Corporate Bond 7.875%  3/01/11
**
776
 
Cingular Wireless SV/AT&T Wireless
Corporate Bond  8.125% 5/1/12
**
803
 
Nextel Communications
Corporate Bond 5.95%  SER F 3/14
**
596
 
Nissan Auto Receivables Owner Trust. NAROT 05-A A4
Mortgage backed security  3.82% 7/10
**
570

37
      
        Eastman Investment and Employee Stock Ownership Plan      
      
        Schedule H, Line 4 (i) – Schedule of Assets (Held at End of Year)      
      
        December 30, 2006      
      
        (in thousands)      
    


(a)
(b) Identity of issue, borrower, lessor, or similar party
(c)  Description of investment, including maturity date, rate of interest, collateral, par or maturity value
(d) Historical cost
(e) Current Value
 
Northstar Education Finance Inc. NEF 05-1 A5
Mortgage backed security 4.74%  10/45
**
819
 
Novastar Home Equity Loan NHEL 04-1 M1
Mortgage backed security  1ML+45 6/34
**
151
 
Onyx Acceptance Grantor Trust ONYX 05-B A4
Mortgage backed security  4.34% 5/12
**
453
 
ORIX Corp
Corporate Bond 5.48% 11/22/11
**
1,104
 
Park Place Securities Inc PPSI 04-WCW1 M1
Mortgage backed security  1ML+63 9/34
**
319
 
Peco Energy Co
Corporate Bond 3.5% 5/01/08
**
1,483
 
Petroleum Export/Cayman
Corporate Bond 4.623% 6/15/10 144A
**
571
 
Petroleum Export/Cayman
Corporate Bond 4.633%  6/15/10 144A
**
341
 
Pinnacle Capital Asset Trust PCAT 2006-A B
Mortgage backed security  5.51%  9/09
**
330
 
Pinnacle Capital Asset Trust PCAT 2006-A C
Mortgage backed security  5.77%  5/10
**
305
 
PNC Funding Corp
Corporate Bond 4.2% 3/10/08
**
1,049
 
Prime Property Funding
Corporate Bond 5.6%  6/15/11
**
532
 
Principal Life Global
Corporate Bond 3.625%  4/30/08
**
1,473
 
Providian Master Note Trust PMNT 06-B1A B1
Mortgage backed security  5.35% 3/13
**
1,133
 
Providian Master Note Trust PMNT 05-2 B2
Mortgage backed security  5.1%  11/12
**
1,036
 
Prudential Financial Inc
Corporate Bond 3.75%  5/01/08
**
594
 
Prudential Securities Secured Financing Corp PSSF 98-C1 A1B
Mortgage backed security  6.506% 7/08
**
502
 
Rabobank Nederland
Synthetic GIC Global Wrap – 4.46%
**
1,388
 
Republic of Chile
Foreign Bond 6.875%  4/28/09 DT
**
42
 
Residential Asset Mortgage Products Inc RAMP 04-SL2 A1I
Mortgage backed security  6.5% 10/16
**
83
 
Residential Asset Mortgage Products Inc  RAMP 04-RS6 MII2
Mortgage backed security  1ML+130 6/34
**
250
 
Residential Asset Mortgage Products Inc RAMP 03-RZ2 A1
Mortgage backed security  3.6%  4/33
**
159
 
Residential Asset Mortgage Products Inc  RAMP 03-SL1 A31
Mortgage backed security  7.125% 4/31
**
307
 
Salomon Brothers Mortgage Securities VII  SBM7 00-C1 A2
Mortgage backed security  7.52 %  12/09
**
974
 
Salomon Brothers Mortgage Securities VII SBM7 00-C3 A2
Mortgage backed security  6.592%  12/33
**
888
 
Banco Santander
Corporate Bond 5.805/VAR 6/20/16
**
758
 
Banco Santander
Corporate Bond 4.75%  10/21/08 144A
**
2,299
 
SBA CMBS Trust   SBAC 05-1A A
Mortgage backed security  5.369%  11/35
**
347
 
SBA CMBS Trust   SBAC 05-1A B
Mortgage backed security  5.565%  11/35
**
242
 
Securitized Asset Backed Receivables LLC SABR 04-NC1 M1
Mortgage backed security  1ML+52 2/34
**
291
 
Sempra Energy
Corporate Bond 7.95% 3/01/10
**
764
 
Sempra Energy
Corporate Bond 4.621%  5/17/07
**
1,914
 
Sempra Energy
Corporate Bond 4.75% 5/15/09
**
253
 
Simon Property Group LP
Corporate Bond 4.875% 8/15/10
**
377
 
Simon Property Group LP
Corporate Bond  5.6%  9/1/11
**
858
 
SLM Corp
Corporate Bond 4% 1/15/09
**
1,420

38
      
        Eastman Investment and Employee Stock Ownership Plan      
      
        Schedule H, Line 4 (i) – Schedule of Assets (Held at End of Year)      
      
        December 30, 2006      
      
        (in thousands)      
    


(a)
(b) Identity of issue, borrower, lessor, or similar party
(c) Description of investment, including maturity date, rate of interest, collateral, par or maturity value
(d) Historical cost
(e) Current Value
 
SLM Corp
Corporate Bond 4.5% 7/26/10
**
655
 
SLM Student Loan Trust   SLMA 05-7 A3
Mortgage backed security  4.41%  7/25
**
1,217
 
SLM Student Loan Trust   SLMA 04-A B
Mortgage backed security  3ML+58 6/33
**
203
 
Southwest Airlines
Corporate Bond 7.875%  9/01/07
**
559
 
SP Powerassets Ltd
Corporate Bond 3.8%  10/22/08 144S
**
1,277
 
Sprint Capital Corp
Corporate Bond 7.625%  1/30/11
**
1,340
 
Starwood Commercial Mortgage Trust STARW 99-C1A B
Mortgage backed security  6.92%  2/14
**
193
 
Structured Asset Securities Corp. SASC 04-NP1 A
Mortgage backed security  1ML+40 9/33
**
114
 
Structured Asset Securities Corp. SASC 04-GEL1 A
Mortgage backed security  1ML+36 2/34
**
36
 
SVO VOI Mortgage Corp      SVOVM 05-A A
Mortgage backed security  5.25%  2/21
**
447
 
Telecom Italia  Capital SA
Corporate Bond 4%  11/15/08
**
992
 
Telecom Italia  Capital SA
Corporate Bond 4%  1/15/10
**
1,825
 
Telecom Italia  Capital SA
Corporate Bond 4.875%  10/01/10
**
454
 
Telefonos de Mexico SA
Corporate Bond 4.5%  11/19/08
**
425
 
Telefonos de Mexico SA
Corporate Bond 4.75%  1/27/10
**
2,924
 
Textron Financial Corp
Corporate Bond 4.125%  3/3/08
**
419
 
Travelers Property Casualty Corp
Corporate Bond  3.75%  3/15/08
**
850
 
Triad Auto Receivables Owner Trust   TAROT 06-A A3
Mortgage backed security  4.77% 1/11
**
608
 
Triad Auto Receivables Owner Trust   TAROT 06-A A4
Mortgage backed security 4.88%  4/13
**
711
 
Triad Auto Receivables Owner Trust   TAROT 2006-C A4
Mortgage backed security  5.31%  5/13
**
567
 
UBS AG
Synthetic GIC Global Wrap – 4.46%
**
1,388
 
Unicredito Luxembourg Fin.
Corporate Bond 5.584/VAR 1/13/17
**
1,117
 
US Bancorp
Corporate Bond 5.3%  4/28/09
**
1,062
 
US Bank NA
Corporate Bond 4.4%  8/15/08
**
3,969
 
US Treasury Note/Bond
USTN 4.375% 12/15/10
**
140,340
 
Verizon Global Funding Corp
Corporate Bond 7.25%  12/1/10
**
659
 
Verizon New York Inc
Corporate Bond 6.875%  4/01/12
**
2,250
 
Vodaphone Group PLC
Corporate Bond 5.5%  6/15/11
**
362
 
Wachovia Auto Loan Owner Trust WALOT 06-2 B
Mortgage backed security  5.29% 6/12
**
332
 
Wachovia Auto Loan Owner Trust WALOT 06-2 C
Mortgage backed security 5.34% 10/12
**
377
 
Wachovia Auto Loan Owner Trust WALOT 06-1 A-3
Mortgage backed security 5.1%  7/11
**
690
 
Wachovia Auto Loan Owner Trust WALOT 06-1B
Mortgage backed security  5.15% 7/12
**
435
 
Wachovia Auto Loan Owner Trust WAOT 05-B A3
Mortgage backed security  4.79% 4/10
**
887
 
Wachovia Bank Commercial Mortgage Trust WBCMT 03-C7 A1
Mortgage backed security  4.241%  10/3
**
1,111
 
Wachovia Bank Commercial Mortgage Trust WBCMT 03-C6 A2
Mortgage backed security  4.498%  8/35
**
862
 
Wachovia Bank Commercial Mortgage Trust WBCMT 05-C16 APB
Mortgage backed security  4.692%  10/41
**
488
 
Wachovia Bank Commercial Mortgage Trust WBCMT 2004-C15 A2
Mortgage backed security  4.039%  10/41
**
1,345

39
      
        Eastman Investment and Employee Stock Ownership Plan      
      
        Schedule H, Line 4 (i) – Schedule of Assets (Held at End of Year)      
      
        December 30, 2006      
      
        (in thousands)      
    


(a)
(b) Identity of issue, borrower, lessor, or similar party
(c) Description of investment, including maturity date, rate of interest, collateral, par or maturity value
(d) Historical cost
(e) Current Value
 
Wachovia Bank Commercial Mortgage Trust WBCMT 05-C16 A2
Mortgage backed security  4.38 % 10/41
**
2,401
 
Wachovia Bank Commercial Mortgage Trust WBCMT 03-C8 A3
Mortgage backed security 4.445%  11/35
**
1,799
 
Wachovia Bank Commercial Mortgage Trust WBCMT 04-C14 A2
Mortgage backed security  4.368%  8/41
**
1,518
 
Wachovia Bank Commercial Mortgage Trust WBCMT 05-C22 A1
Mortgage backed security  4.98%  12/44
**
672
 
Wachovia Bank Commercial Mortgage Trust WBCMT 06-C24 XP
Interest only strip  CSTR 3/45
**
183
 
Wachovia Bank Commercial Mortgage Trust WBCMT 04-C15 XP
Interest only strip CSTR 10/41
**
657
 
Wachovia Bank Commercial Mortgage Trust WBCMT 05-C18 XP
Interest only strip CSTR 4/42
**
169
 
Wachovia Capital Trust V
Corporate Bond 7.965%  6/1/27 144A
**
342
 
Wachovia Corporation
Corporate Bond 6.15% 3/15/09
**
316
 
Wachovia Corporation
Corporate Bond  6.375%  1/15/09
**
626
 
Wachovia Corporation
Corporate Bond 3.5%  8/15/08
**
764
 
Wachovia Mortgage Loan Trust WMLT 05-B 2A4
Mortgage backed security CSTR 10/35
**
150
 
Washington Mutual Bank
Corporate Bond 4.5%  8/25/08
**
1,158
 
Washington Mutual MSC Mortgage Pass-Through  WAMMS 03-MS9 2A1
Mortgage backed security  7.5% 12/33
**
88
 
Wells Fargo & Company
Corporate Bond 4%  9/10/12
**
470
 
Wells Fargo & Company
Corporate Bond 4%  8/15/08
**
1,089
 
Wells Fargo Mortgage Backed Securities Trust WFMBS 06-AR8 2A6
Interest only strip   CSTR 4/36
**
1,532
 
Wells Fargo Mortgage Backed Securities Trust WFMBS 05-AR2 2A2
Mortgage backed security  4.57% 3/35
**
957
 
Wells Fargo Mortgage Backed Securities Trust WFMBS 5-AR9 2A1
Interest only strip   CSTR 5/35
**
1,425
 
Wells Fargo Mortgage Backed Securities Trust WFMBS 05-AR10 2A2
Interest only strip  CSTR 6/35
**
929
 
Wells Fargo Mortgage Backed Securities Trust WFMBS 05-AR4 A2
Interest only strip  CSTR 4/35
**
1,673
 
Western Union Co.
Corporate Bond 5.4%  11/17/11 144A
**
1,529
 
WFS Financial Owner Trust WESTO 04-4 A4
Mortgage backed security 3.44%  5/12
**
1,208
 
WFS Financial Owner Trust WESTO 05-3 A4
Mortgage backed security  4.39%  5/13
**
817
 
WFS Financial Owner Trust WESTO 05-3 C
Mortgage backed security  4.54%  5/13
**
411
 
WFS Financial Owner Trust WESTO 05-3 B
Mortgage backed security  4.50%  5/13
**
322
 
World Omni Auto Receivables Trust WOART 06-A A3
Mortgage backed security  5.01%  10/10
**
4,463
 
World Omni Auto Receivables Trust WOART 04-A A4
Mortgage backed security  3.96%  7/11
**
1,021
 
Sub-total Managed Income Fund
    
 607,278
 
Self Directed Brokerage Account
8,445 shares
**
8,445
 
Total Investments
 
 
$ 1,487,760



*   Represents a party-in-interest to the Plan.

** Historical cost is omitted because the investment is participant-directed.

40
      
           

SIGNATURES

The Plan.  Pursuant to the requirements of the Securities Exchange Act of 1934, the trustees (or other persons who administer the employee benefit plan) have duly caused this annual report to be signed by the undersigned thereunto duly authorized.

Eastman Investment and Employee
Stock Ownership Plan

Date:  June 28, 2007
By: /s/ Scott V. King _
 
Scott V. King
 
Controller


41
      
      
    

Eastman Investment and Employee Stock Ownership Plan
Exhibit Index



Exhibit
Number
Description
Sequential
Page Number
     
23.01
Consent of Independent Registered Public Accounting Firm
43
     

42