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

                                          FORM 10-K

     [X]  Annual  Report  Pursuant  to  Section  13 or 15(d)  of the  Securities
          Exchange Act of 1934

                         For the fiscal year ended December 31, 1999

                                              or

     [ ]  Transition  Report  Pursuant to Section 13 or 15(d) of the  Securities
          Exchange Act of 1934

<TABLE>
<CAPTION>

                                                                      I.R.S Employer
 Commission File          Registrant, State of Incorporation,         Identification
      Number                 Address and Telephone Number                 Number
-------------------   --------------------------------------------   -----------------

<S>   <C>                                                               <C>
      1-7297          Nicor Inc.                                        36-2855175
                      (An Illinois Corporation)
                      1844 Ferry Road
                      Naperville, Illinois 60563-9600
                      (630) 305-9500
</TABLE>

Securities registered pursuant to Section 12(b) of the Act:

                                                       Name of each exchange on
               Title of each class                          which  registered
    Common  Stock,  par value $2.50 per share,         New York Stock Exchange
    including Preference Stock purchase rights         Chicago Stock Exchange

Securities registered pursuant to Section 12(g) of the Act:  None

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months and (2) has been subject to such filing requirements for
the past 90 days. Yes [X] No [ ]

Indicate by check mark if disclosure of delinquent  filers  pursuant to Item 405
of Regulation  S-K is not contained  herein,  and will not be contained,  to the
best of registrant's  knowledge,  in definitive proxy or information  statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]

As of  February  29,  2000,  46,707,099  common  shares  were  outstanding.  The
aggregate  market  value of  voting  securities  held by  non-affiliates  of the
registrant was approximately $1.4 billion.

                             DOCUMENTS INCORPORATED BY REFERENCE

Portions of the company's 2000 Annual Meeting Definitive Proxy Statement,  dated
March 8, 2000, are incorporated by reference into Part III.



<PAGE>


Nicor Inc.                                                                Page i

Table of Contents

  Item No.

      Part I
 1.   Business ............................................................  1
 2.   Properties ..........................................................  5
 3.   Legal Proceedings....................................................  5
 4.   Submission of Matters to a Vote of Security Holders..................  5
      Executive Officers of the Registrant.................................  6

      Part II
 5.   Market for Registrant's Common Equity and Related Stockholder Matters  7
 6.   Selected Financial Data .............................................  8
 7.   Management's Discussion and Analysis of Financial
        Condition and Results of Operations................................  9
 7A.  Quantitative and Qualitative Disclosures about Market Risk........... 18
 8.   Financial Statements and Supplementary Data ......................... 19
 9.   Changes in and Disagreements with Accountants on
        Accounting and Financial Disclosure................................ 35

      Part III
 10.  Directors and Executive Officers of the Registrant................... 35
 11.  Executive Compensation............................................... 35
 12.  Security Ownership of Certain Beneficial Owners and Management....... 35
 13.  Certain Relationships and Related Transactions....................... 35

      Part IV
 14.  Exhibits, Financial Statement Schedules, and Reports on Form 8-K..... 36
      Signatures........................................................... 38
      Exhibit Index........................................................ 39



Glossary

Degree day........The  extent to which the daily average  temperature
                  falls below 65 degrees  Fahrenheit.  Normal  weather for Nicor
                  Gas' service territory is about 6,100 degree days.
FERC..............Federal Energy Regulatory Commission, the agency that
                  regulates the interstate transportation of natural gas, oil
                  and electricity.
HVAC..............Heating, ventilating and air conditioning.
ICC...............Illinois Commerce Commission, the agency that regulates
                  investor-owned Illinois utilities.
Mcf, MMcf, Bcf ...Thousand cubic feet, million cubic feet, billion cubic feet.
PBR...............Performance-based rate, a plan that provides economic
                  incentives based on performance.
TEU...............Twenty-foot equivalent unit, a measure of volume in
                  containerized shipping equal to one 20-foot-long container.



<PAGE>



Nicor Inc.                                                                Page 1

PART I

Item 1.    Business

Nicor Inc.  (Nicor),  incorporated in 1976, is a holding company.  Its principal
subsidiaries  are  Northern  Illinois Gas Company  (doing  business as Nicor Gas
Company),  one of the nation's largest distributors of natural gas, and Tropical
Shipping, a leading transporter of containerized  freight in the Caribbean.  Gas
distribution is Nicor's primary business,  representing approximately 90 percent
of  consolidated   operating   income  and  assets.   Nicor  also  owns  several
energy-related  subsidiaries  and is a partner in Nicor  Energy,  a provider  of
unregulated  energy  products  and  services.   Nicor  had  approximately  3,400
employees at year-end 1999.

Financial information on Nicor's major business segments is included in Business
Segment and  Geographic  Information  beginning on page 31.  Certain  terms used
herein are defined in the glossary on page i.


GAS DISTRIBUTION

General

Nicor Gas, a regulated  natural gas distribution  utility,  serves more than 1.9
million customers,  in a service territory that encompasses most of the northern
third  of  Illinois,  excluding  the  city of  Chicago.  The  company's  service
territory  is  diverse  and has grown  steadily  over the years,  providing  the
company with a  well-balanced  mix of  residential,  commercial  and  industrial
customers.  In 1999,  residential  customers  accounted  for about 41 percent of
natural gas deliveries,  while commercial and industrial customers accounted for
about 24 percent  and 35  percent,  respectively.  Nicor Gas' large  residential
customer base provides  relative  stability  during weak  economic  periods.  In
addition,  the  company's  industrial  and  commercial  customer  base  is  well
diversified,  lessening the impact of industry-specific economic swings. See Gas
Distribution  Statistics  on  page 15 for  operating  revenues,  deliveries  and
customers by customer classification.

Gas  deliveries  are seasonal  since about  one-half are used for space heating.
Typically,  about 70 percent  of  deliveries  and  revenues  occur from  October
through  March.  Fluctuations  in  weather  can  have a  significant  impact  on
year-to-year   comparisons  of  operating  income  and  cash  flow.  To  provide
protection  from the  financial  impact of  unusually  warm  weather,  Nicor Gas
purchased a weather  insurance  policy which will protect 2000 earnings and cash
flow if weather for the year is more than 6.5 percent warmer than normal.

Nicor Gas maintains franchise agreements with most of the communities it serves,
allowing it to construct,  operate and maintain distribution facilities in those
communities.  Franchise  agreement terms range up to 50 years.  Currently,  less
than 5 percent of the agreements will expire within five years.  The company has
approximately 2,300 employees.

Customer Services

In  addition  to  gas  sales  to  all  customer  classes,   Nicor  Gas  provides
transportation service to commercial and industrial customers who purchase their
own gas supplies.  Beginning in 1999, the company's Customer Select(R) voluntary
pilot program  allowed  residential  customers in certain  communities to choose
their  natural gas  supplier.  Nicor Gas supports  full  customer  choice and is
presently evaluating providing all customers the ability to choose their natural
gas supplier. Additional information on the program is

<PAGE>


Nicor Inc.                                                                Page 2

Item 1.    Business (continued)

presented  in  Factors  Affecting  Business  Performance  beginning  on page 13.
Transportation  customers  have options  that  include the use of the  company's
storage  system,  the choice of individual or group billing,  and the ability to
choose varying supply backup levels and service options.  The company receives a
margin generally  comparable to gas sales for  transportation  service with full
supply backup.

In recent years, Nicor Gas has been pursuing several nontraditional  activities.
These activities  include finding innovative ways to utilize its physical assets
by providing natural gas storage and transmission-related services to marketers,
other gas distribution companies and electric power generation facilities.

Sources of Gas Supply

Nicor Gas purchases gas supplies on a deregulated  basis directly from producers
and  marketers.  Pipeline  transportation  and  purchased  storage  services are
contracted  for at rates  regulated  by the FERC.  Firm  pipeline  capacity  and
purchased  storage  services held by the company that are temporarily not needed
can be released in the secondary  market under  FERC-mandated  capacity  release
provisions,  with  proceeds  reducing  the  company's  cost  of gas  charged  to
customers.

The company's peak day requirements are met through utilization of company-owned
storage facilities, firm pipeline capacity, purchased storage services and other
supply  arrangements.  Nicor Gas has been able to obtain sufficient  supplies of
natural gas to meet  customer  requirements.  The company  believes  natural gas
supply availability will be sufficient to meet market demands in the foreseeable
future.

Gas supply. Nicor Gas maintains a diversified portfolio of gas supply contracts.
Firm gas  supply  contracts  are  diversified  by  supplier,  producing  region,
quantity and available  transportation.  Contract  pricing is generally  tied to
published  price  indices  so as  to  approximate  current  market  prices.  The
contracts  also  generally  provide for the payment of fixed  demand  charges to
ensure  the  availability  of  supplies  on any  given  day  and  are  generally
negotiated annually.

The company also purchases gas supplies on the spot market to fulfill its supply
requirements  or to take  advantage of favorable  short-term  pricing.  Spot gas
purchases  accounted for about one-half of the company's  total gas purchases in
the last three years.

Customers  served under the company's  transportation  service tariffs  purchase
their own gas supplies.  About one-half of the gas that the company delivered in
1999 was  purchased by  transportation  customers  directly  from  producers and
marketers rather than from the company.

Pipeline  transportation.  Nicor Gas is  directly  connected  to six  interstate
pipelines  which  provide  access to most of the  major  natural  gas  producing
regions in North America.  The company's primary firm  transportation  contracts
are with:  Natural Gas  Pipeline  Company of America,  which  accounts for about
two-thirds of the contracted  capacity,  Midwestern Gas Transmission Company and
Northern Natural Gas Company.  Nearly all of the contracted capacity will expire
by 2004.

Storage.  Nicor Gas owns and operates seven underground gas storage  facilities.
This storage system is one of the largest in the gas  distribution  industry and
is designed to meet about 55 percent of the company's  peak day  deliveries  and
approximately  30 percent of its normal winter  deliveries.  On an annual basis,
about 130 Bcf of gas is cycled through the company's storage fields. In addition
to the  company-owned  facilities,  Nicor Gas purchases  about 40 Bcf of storage
service. Storage provides supply


<PAGE>


Nicor Inc.                                                                Page 3

Item 1.    Business (continued)

flexibility,  improves  reliability  of  deliveries  and allows  the  company to
maintain rates that are among the lowest in the nation.

Competition/Demand

Nicor Gas is one of the largest utility energy suppliers in Illinois, delivering
about one-third of all utility energy consumed in the state. About 97 percent of
all single-family  homes in Nicor Gas' service territory are heated with natural
gas.  The  company's  gas services  compete with other forms of energy,  such as
electricity  and oil, based on such factors as price,  service and  reliability.
Significant factors that impact demand for natural gas include weather, economic
conditions and the price of gas relative to competitive fuels.

The energy  industry  has  undergone  fundamental  changes over the past several
years.  In  1997,  Illinois  adopted   legislation   directing  the  process  of
deregulating  the  state's  electric  utility  industry.   Although  Nicor  Gas'
traditional  pricing advantage compared to electricity may decrease as the price
of electricity declines,  the company expects to maintain a pricing advantage in
the foreseeable future.

Additional  information  on  competition  and  demand is  presented  in  Factors
Affecting Business Performance beginning on page 13.

Regulation

Nicor Gas is regulated by the ICC, which  establishes  the rules and regulations
governing utility rates and services in Illinois.  Rates are generally  designed
to allow the company to recover its costs and provide an  opportunity  to earn a
fair  return for its  investors.  Changes in the  regulatory  environment  could
affect the longer-term performance of Nicor Gas.

The cost of gas the company  purchases  for  customers  is  recovered  through a
monthly gas supply  charge,  which  accounts for  approximately  70 percent of a
typical residential  customer's annual bill. The company's cost of gas is passed
on to the customer without markup.

On January 1, 2000, Nicor Gas' performance-based rate (PBR) plan for natural gas
costs went into effect. Under the PBR, Nicor Gas' total gas supply costs will be
compared to a benchmark tied to a market index.  Savings and losses  relative to
the benchmark  will be shared equally with  customers.  At the end of two years,
the plan will be subject to ICC review.  Additional  information  on the plan is
presented in Factors Affecting Business Performance beginning on page 13.

Customer  Select,  a voluntary  pilot program that offers  customers a choice of
natural gas  suppliers,  is in its third  year.  Additional  information  on the
program is presented in Factors Affecting Business Performance beginning on page
13.

Properties

The gas  distribution,  transmission  and storage system includes  approximately
30,000 miles of steel, plastic and cast iron main; approximately 27,000 miles of
steel,  plastic/aluminum  composite,  plastic and copper service pipe connecting
the mains to customers' premises; and seven underground storage fields.

<PAGE>


Nicor Inc.                                                                Page 4

Item 1.    Business (concluded)

Other properties include buildings,  land, motor vehicles,  meters,  regulators,
compressors,   construction   equipment,   tools,   communication  and  computer
equipment, software and office equipment.

The principal real properties are held under easements,  permits, licenses or in
fee. Land in fee is owned for  essentially  all  administrative  offices and for
certain  transmission  mains and underground  storage fields.  Substantially all
properties are subject to the lien of the indenture securing the company's first
mortgage bonds.


SHIPPING

Tropical  Shipping is one of the  largest  containerized  cargo  carriers in the
Caribbean,   a  region   characterized  by  modest  market  growth  and  intense
competition. Tropical Shipping's financial results can be significantly affected
by general  economic  conditions  in the United  States and the  Caribbean.  The
company's  shipments  consist  primarily  of  southbound  cargo such as building
materials,  food  and  other  necessities  for  developers,   manufacturers  and
residents in the Caribbean,  as well as  tourist-related  shipments intended for
use in hotels  and  resorts,  and on  cruise  ships.  The  balance  of  Tropical
Shipping's cargo consists of northbound  shipments of agricultural  products and
apparel, and interisland shipments. The company also provides additional related
services including inland transportation and cargo insurance.

Tropical Shipping's owned fleet consists of 13 vessels with a container capacity
totaling  approximately  3,100  TEUs.  In 1999,  Tropical  Shipping  ordered the
construction of two vessels to replace chartered capacity and to support growth.
In addition, the company owns containers,  container-handling equipment, chassis
and other equipment.  Real property,  a significant  portion of which is leased,
includes office buildings,  cargo handling  facilities and warehouses located in
the United States, as well as in some of the ports served.

Additional  information  about  Tropical  Shipping's  business is  presented  in
Factors Affecting Business Performance beginning on page 13.


OTHER NICOR VENTURES

Nicor is continually  looking for opportunities to provide products and services
that will meet customers'  energy needs.  Additional  information  pertaining to
these ventures is presented in Factors Affecting Business Performance  beginning
on page 13.


ENVIRONMENTAL MATTERS

For information on environmental matters, see Contingencies on page 34.




<PAGE>


Nicor Inc.                                                                Page 5

Item 2.    Properties

Information   with  respect  to  this  item  concerning   Nicor  and  its  major
subsidiaries'  properties is included in Item 1, Business,  beginning on page 1,
and is incorporated herein by reference. These properties are suitable, adequate
and utilized in the company's operations.

Item 3.    Legal Proceedings

On December 20, 1995,  Nicor Gas filed suit in the Circuit  Court of Cook County
against certain  insurance  carriers seeking  recovery of environmental  cleanup
costs of certain former  manufactured  gas plant sites.  Nicor Gas has reached a
settlement with one of the insurance carriers. On February 10, 2000, the Circuit
Court of Cook County dismissed the company's case on summary  judgement  motions
by certain defendants. The company plans to appeal. For further information, see
Contingencies on page 34, which is incorporated herein by reference.

Item 4.    Submission of Matters to a Vote of Security Holders

None.




<PAGE>


Nicor Inc.                                                                Page 6

Executive Officers of the Registrant

Executive  officers  of  the  company  are  elected  annually  by the  Board  of
Directors.

       Name             Age              Current Position and Background
--------------------   -----     -----------------------------------------------

Thomas L. Fisher        55       Chairman, Nicor and Nicor Gas (since 1996);
                                 Chief Executive Officer, Nicor (since 1995)
                                 and Nicor Gas (since 1988); and President,
                                 Nicor (since 1994) and Nicor Gas (since
                                 1988).

Philip S. Cali          52       Executive Vice President Operations, Nicor
                                 and Nicor Gas (since 1999); Senior Vice
                                 President Operations, Nicor Gas (1995-1999);
                                 and Vice President Engineering, Codes and
                                 Environmental Affairs, Nicor Gas (1994-1995).

Kathleen L. Halloran    47       Executive Vice President Finance and
                                 Administration, Nicor and Nicor Gas (since
                                 1999); Senior Vice President Administration,
                                 Nicor Gas (1998-1999); Senior Vice President
                                 Information Services, Rates and Human
                                 Resources, Nicor Gas (1996-1998); Vice
                                 President Information Services, Rates and
                                 Human Resources, Nicor Gas (1995-1996); and
                                 Vice President Information Services and
                                 Rates, Nicor Gas (1994-1995).

David L. Cyranoski      56       Senior Vice President, Nicor and Nicor Gas
                                 (since 1995); Secretary, Nicor (since 1992)
                                 and Nicor Gas (since 1993); Treasurer, Nicor
                                 and Nicor Gas (since 1998); Controller, Nicor
                                 (since 1999, 1992-1998) and Nicor Gas (since
                                 1999, 1984-1998); and Vice President, Nicor
                                 (1992-1995) and Nicor Gas (1984-1995).

George M. Behrens       44       Vice President Administration, Nicor Gas
                                 (since 1999); Vice President and Controller,
                                 Nicor and Nicor Gas (1998-1999); Vice
                                 President Accounting, Nicor Gas (1996-1998);
                                 and Vice President and Treasurer, Tropical
                                 Shipping (1991-1996).

Claudia J. Colalillo    50       Vice President Human Resources and Corporate
                                 Communications, Nicor and Nicor Gas (since
                                 1998); Senior Vice President Organizational
                                 Development, May & Speh, Inc. (provider of
                                 technology-based information management
                                 services) (1995-1998); and Vice President
                                 Human Resources, May & Speh, Inc. (1992-1995).



<PAGE>


Nicor Inc.                                                                Page 7

Executive Officers of the Registrant (concluded)

       Name              Age              Current Position and Background
---------------------   -----     ----------------------------------------------

Daniel R. Dodge          46       Vice President Business Development, Nicor
                                  and Nicor Gas (since 1998); and Vice
                                  President Business and Asset Development,
                                  MidCon Corp. (diversified energy company with
                                  gas pipeline and power marketing operations)
                                  (1994-1998).


PART II

Item 5.    Market for Registrant's Common Equity and Related Stockholder Matters

Nicor common  stock is listed on the New York and Chicago  Stock  Exchanges.  At
February  29, 2000,  there were  approximately  31,500  common  stockholders  of
record. On March 16, 2000, the Board of Directors  declared a quarterly dividend
on  its  common  stock  of  41.5  cents  per  share,  payable  May 1,  2000,  to
stockholders of record March 31, 2000. This payment represents an annual rate of
$1.66 per share.

                           Stock price              Dividends
                  -------------------------------
    Quarter            High            Low          declared
----------------  --------------- ---------------   ----------

1999
    First         $     42-15/16  $     34-11/16    $     .39
    Second              39-1/2          34-1/8            .39
    Third               40              35-11/16          .39
    Fourth              39-3/8          31-3/16           .39

1998
    First         $     43-3/8    $     38-7/8      $     .37
    Second              43-3/16         37-1/2            .37
    Third               41-15/16        37-1/8            .37
    Fourth              44-7/16         40-3/8            .37


<PAGE>


Nicor Inc.                                                              Page 8
-------------------------------------------------------------------------------

Item 6.  Selected Financial Data

                                          Year ended December 31
                            ---------------------------------------------------
(millions, except per
    share data)                1999       1998      1997       1996      1995
                            ---------  --------- ---------  --------- ---------

Operating revenues         $ 1,615.2  $ 1,465.1 $ 1,992.6  $ 1,850.7 $ 1,480.1

Operating income             $ 212.0    $ 208.6   $ 229.8    $ 233.1   $ 189.8

Net income
   Continuing operations     $ 124.4    $ 116.4   $ 127.9    $ 121.2    $ 99.8
   Discontinued operations         -          -         -       15.0         -
                            ---------  --------- ---------  --------- ---------
                             $ 124.4    $ 116.4   $ 127.9    $ 136.2    $ 99.8
                            =========  ========= =========  ========= =========

Basic earnings per common
  share
   Continuing operations      $ 2.63     $ 2.43    $ 2.62     $ 2.42    $ 1.96
   Discontinued operations         -          -         -        .30         -
                            ---------  --------- ---------  --------- ---------
                              $ 2.63     $ 2.43    $ 2.62     $ 2.72    $ 1.96
                            =========  ========= =========  ========= =========

Diluted earnings per common
  share
   Continuing operations      $ 2.62     $ 2.42    $ 2.61     $ 2.41    $ 1.96
   Discontinued operations         -          -         -        .30         -
                            ---------  --------- ---------  --------- ---------
                              $ 2.62     $ 2.42    $ 2.61     $ 2.71    $ 1.96
                            =========  ========= =========  ========= =========

Dividends declared per
   common share               $ 1.56     $ 1.48    $ 1.40     $ 1.32    $ 1.28

Property, plant and
  equipment
   Gross                   $ 3,483.1  $ 3,379.8 $ 3,267.7  $ 3,192.7 $ 3,110.4
   Net                       1,735.2    1,731.8   1,735.8    1,771.9   1,779.3

Total assets               $ 2,451.8  $ 2,364.6 $ 2,394.6  $ 2,438.6 $ 2,259.1

Capitalization
   Long-term debt, net of
       current maturities    $ 436.1    $ 557.3   $ 550.2    $ 518.0   $ 468.7
   Redeemable preferred stock    6.3        6.3       6.4        7.5       8.9
   Common equity               787.7      759.0     744.0      729.6     687.6
                           ---------  --------- ---------  --------- ---------
                           $ 1,230.1  $ 1,322.6 $ 1,300.6  $ 1,255.1 $ 1,165.2
                           =========  ========= =========  ========= =========





Nicor Inc.                                                                Page 9

Item 7.    Management's Discussion and Analysis of Financial Condition
           and Results of  Operations

The purpose of this financial review is to explain changes in Nicor's  operating
results  and  financial  condition  from 1997 to 1999,  and to discuss  business
trends and uncertainties that might affect Nicor.  Certain terms used herein are
defined in the glossary on page i.


SUMMARY

Nicor's two major business segments are gas distribution and shipping,  with gas
distribution  representing  approximately  90 percent of consolidated  operating
income and assets.

Nicor's 1999 diluted  earnings per common share  increased to $2.62 from $2.42 a
year ago, due primarily to a positive  contribution from nonoperating  items and
improved gas distribution  operating results. Net income increased $8 million to
$124.4 million.  Nicor's 1998 diluted earnings per common share were $2.42, down
from $2.61 in 1997, as lower operating  results in the gas distribution  segment
were partially offset by improved operating results in the shipping segment. Net
income of $116.4 million decreased $11.5 million from 1997. Per share results in
both years also benefited from the company's common stock repurchase programs.

Operating income. Operating income (loss) by major business segment is presented
below:

(millions)                                1999         1998         1997
                                       ------------ ------------ ------------
Gas distribution                       $    191.7   $    185.5   $    210.1
Shipping                                     22.5         27.6         25.3
Corporate and other                          (2.2)        (4.5)        (5.6)
                                       ------------ ------------ ------------
                                       $    212.0   $    208.6   $    229.8
                                       ============ ============ ============

The  following  summarizes  operating  income  comparisons  for  major  business
segments:

o   Gas  distribution  operating  income  increased  $6.2 million in 1999 due to
    higher  deliveries  related  primarily  to 9  percent  colder  weather.  The
    positive  impact of higher  deliveries  was  partially  offset by  increased
    operating  and  maintenance   expenses  and   depreciation.   In  1998,  gas
    distribution  operating  income decreased $24.6 million due to the impact of
    weather that was 23 percent warmer than the prior year,  partially offset by
    a 4 percent reduction in operating and maintenance expenses.

o   Shipping  operating  income  decreased  $5.1  million  in  1999,  reflecting
    increased  pressures on pricing,  higher operating expenses and a decline in
    charter  revenues.  These factors more than offset the  additional  revenues
    generated from record volumes shipped.  In 1998,  shipping  operating income
    rose $2.3 million to a record $27.6  million due to a 4 percent  increase in
    volumes shipped and higher average rates.

o   Corporate and other operating income was up $2.3 million in 1999 due to
    better results at Nicor's unregulated energy ventures.

Nonoperating  items.  In 1999,  other  income  increased  $7.7  million to $23.2
million as several positive factors,  including interest benefits on tax-related
matters  and a gain on the sale of  Nicor's  interest  in an  electronic  energy
trading  system,  more  than  offset a  decline  in real  estate  sales  and the
write-off of

<PAGE>


Nicor Inc.                                                               Page 10

Item 7.    Management's Discussion and Analysis of Financial Condition
           and Results of  Operations (continued)

software  development  costs.  Nicor's retail energy services joint venture also
contributed to the improvement.

Interest  expense  decreased 3 percent in 1999 to $45.1 million and 5 percent in
1998 to $46.6 million due primarily to  refinancing  at lower interest rates and
reduced average borrowing levels.


RESULTS OF OPERATIONS

Details of various  financial and operating  information by segment can be found
in the tables throughout this review.  The following  discussion  summarizes the
major items impacting Nicor's results of operations.

Operating  revenues.  Operating revenues by major business segment are presented
below:

(millions)                          1999         1998         1997
                                 ------------ ------------ ------------
Gas distribution                 $  1,326.2   $  1,229.0   $  1,730.5
Shipping                              229.9        224.5        213.1
Corporate and other                    59.1         11.6         49.0
                                 ------------ ------------ ------------
                                 $  1,615.2   $  1,465.1   $  1,992.6
                                 ============ ============ ============

Nicor's  operating  revenues  increased $150.1 million in 1999. Gas distribution
revenues  increased  $97.2 million due to higher  deliveries of natural gas, and
higher  natural  gas prices  which are  passed  directly  through to  customers.
Partially  offsetting  this increase was the impact of customers  switching from
sales to transportation  service.  Shipping revenues rose by $5.4 million as the
impact of record volumes  shipped more than offset a decline in charter  revenue
and  lower  average  prices.  Revenues  generated  from  Nicor's  wholesale  gas
marketing  business  accounted  for the  increase  in the  corporate  and  other
category.

In 1998,  Nicor's operating revenues decreased to $1,465.1 million from $1,992.6
million  as gas  distribution  revenues  were down  significantly  from 1997 due
principally  to lower  natural gas prices and lower  deliveries  of natural gas.
Shipping  revenues rose 5 percent in 1998 due to additional  volumes shipped and
higher  average  rates.  Corporate and other  revenues  decreased in 1998 as the
company's  retail energy  services  business  became part of a 50-percent  owned
joint venture that is accounted for under the equity method.

Gas distribution margin. Gas distribution margin,  defined as operating revenues
less cost of gas and revenue taxes,  which are both passed  directly  through to
customers, and margin per Mcf delivered are shown in the following table:

                                       1999         1998         1997
                                    ------------ ------------ ------------
Margin (millions)                   $    487.2   $    469.4   $    496.0
Margin per Mcf delivered                   .96          .96          .91

Weather was the largest factor  impacting the  fluctuation in margin during 1999
and 1998,  and margin per Mcf  delivered in 1998.  Margin per Mcf  delivered was
unchanged  in  1999  as the  impact  of a  reduction  in  lower-margin  electric
generation deliveries offset the effect of weather.


<PAGE>


Nicor Inc.                                                               Page 11

Item 7.    Management's Discussion and Analysis of Financial Condition
           and Results of  Operations (continued)

Operating and maintenance. In 1999, operating and maintenance expenses increased
$18 million to $356 million due to higher  volume-related  costs in the shipping
segment and higher costs in the gas  distribution  segment  caused,  in part, by
higher information technology spending levels. The $2.3 million decrease in 1998
to $338  million  was despite 5 percent  higher  costs in the  shipping  segment
related to an increase in volumes shipped.  Lower  retirement-benefits  costs in
the gas distribution segment,  resulting principally from favorable pension fund
investment  returns,  contributed  to the  overall  decrease  in  operating  and
maintenance expenses in 1998.

Depreciation.  Depreciation  increased 3 percent in 1999 to $140.3 million and 4
percent in 1998 to $136.5 million due primarily to gas plant additions.


FINANCIAL CONDITION AND LIQUIDITY

The company  believes it has access to adequate  resources to meet its needs for
capital expenditures, debt and stock redemptions,  dividend payments and working
capital. These resources include net cash flow from operating activities, access
to capital markets, lines of credit and short-term investments.

Operating  cash flows.  Net cash flow provided  from  operating  activities  was
$205.7  million,  $368.4  million  and $211.1  million  in 1999,  1998 and 1997,
respectively.  Year-to-year  changes in operating  cash flow result largely from
fluctuations in working capital items occurring  mainly in the gas  distribution
segment because of factors  including  weather,  the price of gas, the timing of
collections from customers and gas purchasing  practices.  The company generally
relies on short-term  financing to meet temporary  increases in working  capital
needs.

Capital  expenditures.  Capital  expenditures  by  major  business  segment  are
presented below:

                            Estimated
(millions)                    2000         1999         1998         1997
                           ------------ ------------ ------------ ------------
Gas distribution           $      135   $    127.4   $    112.6   $    101.8
Shipping                           45         26.0         23.3         10.9
Corporate and other                 -           .6           .3           .3
                           ------------ ------------ ------------ ------------
                           $      180   $    154.0   $    136.2   $    113.0
                           ============ ============ ============ ============

The following  summarizes  capital  expenditure  comparisons  for major business
segments:

o  Gas  distribution   capital  expenditures  rose  in  1999  due  primarily  to
enhancements to the company's  operating  system.  In 1998, the increase was due
largely to expenditures for information technology.

o Shipping segment capital expenditures increased in 1999 due, in part, to costs
for the replacement of a warehouse which is expected to be completed in 2000. In
1998,  the increase in  expenditures  related  primarily to the  replacement  of
leased freight equipment with owned equipment. In both periods, expenditures for
information technology also contributed to the increase. The higher expenditures
expected in 2000 are related to the warehouse construction and progress payments
for the construction of two vessels.  These vessels are expected to be delivered
in late 2001 and early 2002 at a total cost of about $40 million.


<PAGE>


Nicor Inc.                                                               Page 12

Item 7.    Management's Discussion and Analysis of Financial Condition
           and Results of  Operations (continued)

Other  investments.  Nicor  invested $12 million,  $15 million and $8 million in
1999, 1998 and 1997,  respectively,  in a cargo container leasing business.  The
company also  invested $2 million,  $8 million and $7 million in 1999,  1998 and
1997, respectively, in affordable housing tax credit funds.

Financing activities.  Nicor has earned the highest long-term debt ratings given
in the gas distribution  industry and maintains  relatively low debt percentages
and high interest coverage ratios.

                                                1999         1998        1997
                                             ------------ ----------- ----------
Long-term debt, net of current maturities,
    as a percent of capitalization                35.5%       42.1%       42.3%
Times interest earned, before income taxes         5.2         4.8         5.0

Long-term  debt.  Nicor Gas has $250 million of First Mortgage  Bonds  remaining
available for issuance  under a December  1998 shelf  registration  filing.  Net
proceeds  from  securities  issued are  typically  used for the  refinancing  of
certain  outstanding  First Mortgage  Bonds,  for  construction  programs to the
extent not  provided by  internally  generated  funds and for general  corporate
purposes.

In January 2000, Nicor Gas issued $50 million of adjustable rate unsecured notes
due in 2001 at an initial rate of 6.11% to fund the redemption of $50 million of
unsecured notes at 5.065% due in 2000.

During 1999,  Nicor Gas issued $50 million of First  Mortgage Bonds at 5.37% due
in 2009 and $50 million of unsecured notes at 5.065% due in 2000. Redemptions of
First Mortgage  Bonds during 1999 were as follows:  $50 million at 5.875% due in
2000, $50 million at 7.375% due in 2023 and $50 million at 8.25% due in 2024.

In 1998, Nicor Gas issued First Mortgage Bonds as follows:  $50 million at 5.75%
due in 2003 and $50 million at 6.58% due in 2028.  Redemptions of First Mortgage
Bonds  during  1998 were as  follows:  $25  million at 5.875%  due in 1998,  $25
million at 6.25% due in 1999 and $75 million at 8.25% due in 2022.

During 1997,  Nicor Gas issued First Mortgage  Bonds as follows:  $50 million at
6.75% due in 2002 and $50  million at 7.375% due in 2027.  Redemptions  of First
Mortgage Bonds during 1997 were as follows:  $25 million at 5.5% due in 1997 and
$50 million at 9% due in 2019.

Short-term debt. Nicor and Nicor Gas maintain  short-term credit agreements with
major domestic and foreign banks. At December 31, 1999, these agreements,  which
serve as backup for the issuance of commercial  paper,  totaled $342.5  million.
The  company  had  $342.5  million  and  $234.5  million  of  commercial   paper
outstanding at year-end 1999 and 1998, respectively.

Common stock.  In the second  quarter of 1999,  Nicor  completed the $50 million
common stock repurchase program initiated in June 1997 and announced another $50
million common stock repurchase program. Purchases under these programs are made
as market conditions  permit through open market  transactions and to the extent
cash flow from operations is available after other investment opportunities. The
company  purchased and retired .6 million,  .7 million and 1.3 million shares in
1999, 1998 and 1997, respectively, at a cost of $23 million, $28 million and $45
million. At December 31, 1999, approximately $32 million remained authorized for
the repurchase of common stock under the existing program. Over the past decade,
the company has repurchased over 20 percent of its outstanding stock.


<PAGE>


Nicor Inc.                                                               Page 13

Item 7.    Management's Discussion and Analysis of Financial Condition
           and Results of  Operations (continued)

Nicor  increased  its  quarterly  common stock  dividend rate during 1999 by 5.4
percent, which was the twelfth consecutive year of an increase. The company paid
dividends  of $72.9  million,  $70 million and $67.5  million in 1999,  1998 and
1997, respectively.

Other.  Restrictions imposed by regulatory agencies and loan agreements limiting
the amount of  subsidiary  net assets that can be  transferred  to Nicor are not
expected  to have a material  impact on the  company's  ability to meet its cash
obligations.


FACTORS AFFECTING BUSINESS PERFORMANCE

The following  factors can impact  year-to-year  comparisons  and may affect the
future performance of Nicor's businesses.

Gas  distribution.  Nicor Gas, a  regulated  natural gas  distribution  utility,
serves more than 1.9 million  customers in a service  territory that encompasses
most of the  northern  third of  Illinois,  excluding  the city of Chicago.  The
region's  economy is diverse and has grown  steadily  over the years,  providing
Nicor Gas with a  well-balanced  mix of  residential,  commercial and industrial
customers. In 1999,  residential,  commercial and industrial customers accounted
for about 41  percent,  24 percent  and 35 percent  of natural  gas  deliveries,
respectively.

Since about one-half of gas deliveries are used for space heating,  fluctuations
in  weather  can  have a  significant  impact  on  year-to-year  comparisons  of
operating income and cash flow. To provide  protection from the financial impact
of unusually warm weather,  Nicor Gas purchased a weather insurance policy which
will  protect  2000  earnings and cash flow if weather for the year is more than
6.5 percent warmer than normal.

In  addition  to the  impact of  weather,  significant  changes in gas prices or
economic conditions can impact gas usage. However,  Nicor Gas' large residential
customer base provides relative  stability during weak economic  periods.  Also,
the industrial and commercial  customer base is well diversified,  lessening the
impact of industry-specific economic swings.

Nicor Gas competes with other energy  suppliers  based on such factors as price,
service  and  reliability.  The  company  is well  positioned  to deal  with the
possibility  of fuel  switching by  customers  because it has rates and services
designed to compete against  alternative  fuels and because of its competitively
priced  supply  of  gas.  In  addition,  the  company  has a rate  which  allows
negotiation with potential bypass customers,  and no customer has bypassed since
the  rate  became  effective  in 1987.  Nicor  Gas also  offers  commercial  and
industrial  customers   flexibility  and  alternatives  in  rates  and  service,
increasing its ability to compete in these markets.

Direct connection to six interstate pipelines and extensive  underground storage
capacity  allow the company to  maintain  rates that are among the lowest in the
nation, while also providing  transportation customers with direct access to gas
supplies  and  storage  services.  In  addition,  in an effort to ensure  supply
reliability,  the company purchases gas from several different producing regions
under varied contract terms.


<PAGE>


Nicor Inc.                                                               Page 14

Item 7.    Management's Discussion and Analysis of Financial Condition
           and Results of  Operations (continued)

Nicor Gas' growth in deliveries  has  traditionally  come from a combination  of
customer additions and increased usage among existing  commercial and industrial
customers.  Deliveries to power  generation  facilities have also contributed to
growth.   While  the  company   anticipates   continued   growth  in  deliveries
attributable  to these  factors,  a partial  offset is  expected  by  customers'
installation of more energy-efficient equipment.

On January 1, 2000, Nicor Gas' performance-based rate (PBR) plan for natural gas
costs went into effect. Under the PBR, Nicor Gas' total gas supply costs will be
compared to a benchmark tied to a market index.  Savings and losses  relative to
the benchmark will be shared equally with  customers.  Transportation  customers
who are responsible for their own gas supplies are not affected by the PBR plan.
Assuming  a  benchmark  of $1  billion,  each  one-percent  deviation  from  the
benchmark would affect net income by about $3 million.  At the end of two years,
the plan will be subject to ICC review.

In another regulatory  development,  Nicor Gas received approval from the ICC in
1999 to expand  Customer  Select(R),  a  voluntary  pilot  program  that  offers
customers a choice of natural  gas  suppliers.  Customer  Select is in its third
year and now all  commercial  and  industrial  customers,  as well as more  than
250,000 residential customers in 16 communities, are eligible to participate. In
the program's first two years,  about 30 percent of eligible business  customers
and 20  percent  of  eligible  residential  customers  signed  up. The choice of
another  natural gas  commodity  supplier has no impact on Nicor Gas'  operating
income,  and in all cases,  Nicor Gas continues to deliver the natural gas, read
meters,  maintain its distribution system,  ensure safety and respond to service
and emergency  calls.  Nicor Gas supports full customer  choice and is presently
evaluating  providing  all  customers  the ability to choose  their  natural gas
supplier.

In order to generate additional  contributions to earnings growth, Nicor Gas has
been pursuing several nontraditional  activities.  The Chicago area has become a
major   market   hub   for   natural   gas,   and   demand   for   storage   and
transmission-related services by marketers, other gas distribution companies and
for  electric  power  generation  is  expected  to  increase  significantly.  In
addition, the company continues to assess its nonstrategic real estate holdings,
and is  evaluating  the  potential  to  maximize  the value from these  holdings
through additional property sales or development over the next several years.

Nicor Gas is regulated by the ICC, which  establishes  the rules and regulations
governing utility rates and services in Illinois.  Rates are generally  designed
to allow the company to recover its costs and provide an  opportunity  to earn a
fair return for its investors.  Further  changes in the  regulatory  environment
could affect the longer-term performance of Nicor Gas.

Nicor Inc.                                                             Page 15
-------------------------------------------------------------------------------

Item 7.    Management's Discussion and Analysis of Financial Condition
           and Results of Operations (continued)

Gas Distribution Statistics

                                                 1999        1998       1997
                                               ---------   ---------  ---------

Operating revenues (millions)
   Sales
     Residential                                $ 899.8     $ 813.6  $ 1,126.0
     Commercial                                   172.3       189.4      314.8
     Industrial                                    24.5        27.5       56.8
                                               ---------   ---------  ---------
                                                1,096.6     1,030.5    1,497.6
                                               ---------   ---------  ---------
   Transportation
     Residential                                    1.7           -          -
     Commercial                                    70.3        57.2       55.3
     Industrial                                    43.7        39.2       48.3
     Other                                          4.2         1.6         .1
                                               ---------   ---------  ---------
                                                  119.9        98.0      103.7
                                               ---------   ---------  ---------
   Revenue taxes and other                        109.7       100.5      129.2
                                               ---------   ---------  ---------
                                              $ 1,326.2   $ 1,229.0  $ 1,730.5
                                               =========   =========  =========

Deliveries (Bcf)
   Sales
     Residential                                  209.0       192.4      233.2
     Commercial                                    39.8        44.3       65.2
     Industrial                                     6.1         7.1       12.9
                                               ---------   ---------  ---------
                                                  254.9       243.8      311.3
                                               ---------   ---------  ---------
   Transportation
     Residential                                     .9           -          -
     Commercial                                    82.1        67.5       66.0
     Industrial                                   170.2       175.7      168.0
                                               ---------   ---------  ---------
                                                  253.2       243.2      234.0
                                               ---------   ---------  ---------
                                                  508.1       487.0      545.3
                                               =========   =========  =========

Year-end customers (thousands)
   Sales
     Residential                                1,753.0     1,737.6    1,710.0
     Commercial                                   108.9       127.9      143.0
     Industrial                                     7.4         9.1       11.1
                                               ---------   ---------  ---------
                                                1,869.3     1,874.6    1,864.1
                                               ---------   ---------  ---------
   Transportation
     Residential                                   16.2           -          -
     Commercial                                    57.2        35.9       18.7
     Industrial                                     6.6         5.0        3.0
                                               ---------   ---------  ---------
                                                   80.0        40.9       21.7
                                               ---------   ---------  ---------
                                                1,949.3     1,915.5    1,885.8
                                               =========   =========  =========

Other statistics
   Degree days (normal 6,116)                     5,272       4,834      6,254
   Colder (warmer) than normal                      (14)%       (21)%        2%
   Average gas cost per Mcf sold                 $ 2.93      $ 2.76     $ 3.54




<PAGE>


Nicor Inc.                                                               Page 16

Item 7.    Management's Discussion and Analysis of Financial Condition
           and Results of  Operations (continued)

Shipping.  Tropical Shipping is one of the largest  containerized cargo carriers
in the  Caribbean,  a region  characterized  by modest market growth and intense
competition.  Tropical Shipping has a reputation for providing quality,  on-time
delivery service--a  reputation that has helped the company establish a dominant
position in many of the markets it serves,  which  include the  Bahamas,  Cayman
Islands,  Dominican Republic,  Virgin Islands and Eastern Caribbean. The company
is the top carrier of U.S. exports from the East Coast to the Caribbean.

Tropical Shipping's  financial results can be significantly  affected by general
economic  conditions  in the United  States  and the  Caribbean.  The  company's
shipments consist primarily of southbound cargo such as building materials, food
and  other  necessities  for  developers,  manufacturers  and  residents  in the
Caribbean,  as well as tourist-related  shipments intended for use in hotels and
resorts,  and on cruise ships. The balance of Tropical Shipping's cargo consists
of northbound  shipments of agricultural  products and apparel,  and interisland
shipments.

The Caribbean  marketplace is very  competitive  with global  carriers  recently
establishing  a presence  in several  markets  that  Tropical  Shipping  serves.
Additionally, the Ocean Shipping Reform Act, which allows confidential contracts
between  shipping  companies  and their  customers,  created the  potential  for
further  price  competition  when it went  into  effect  during  1999.  Tropical
Shipping is continuing to meet these challenges by focusing on superior customer
service,  controlling  costs,  and  maximizing  the  efficiency and value of its
vessel  fleet  and  shore  assets.  In  1999,   Tropical  Shipping  ordered  the
construction of two vessels to replace chartered capacity and to support growth.
The  vessels  are  expected to be  delivered  in late 2001 and early  2002.  The
company is also  replacing its Miami  warehouse  with a larger and more flexible
facility.  The company's strategy for growth includes pursuing  opportunities to
increase  volumes  in markets  it  already  serves and to expand  geographically
within the region.  Tropical  Shipping's  expansion  efforts  could also include
strategic acquisitions of other shipping companies.

Shipping Statistics
                                       1999         1998         1997
                                    ------------ ------------ ------------
TEUs shipped (thousands)
    Southbound                          126.5         119.4        110.0
    Northbound                           17.6          16.1         14.5
    Interisland                           8.3           8.7         14.0
                                    ------------ ------------ ------------
                                        152.4         144.2        138.5
                                    ============ ============ ============

Other statistics
    Revenue per TEU                 $   1,508    $    1,526   $    1,488
    Ports served                           23            23           26
    Vessels owned                          13            13           14




<PAGE>


Nicor Inc.                                                               Page 17

Item 7.    Management's Discussion and Analysis of Financial Condition
           and Results of  Operations (continued)

Other Nicor  ventures.  Nicor is involved in several  unregulated  ventures that
leverage the company's  reputation,  location,  assets and expertise  into other
income-producing  opportunities.  These ventures include retail energy services,
natural  gas  supply  services,   pipeline  projects  and  other  energy-related
opportunities. An update on Nicor's unregulated ventures follows:

Retail energy  services.  Nicor Energy,  a 50-percent  owned joint venture,  was
formed in 1997 to offer natural gas,  electricity and related retail services to
customers  throughout the Midwest as markets are  deregulated.  The company is a
leading  retail  natural gas marketer in the Midwest,  supplying  natural gas to
more than 50,000  customers  in Illinois  and  Indiana.  The company  also began
selling electricity to Illinois customers in 1999 as part of a statewide program
that allows business customers to switch electricity suppliers.

Gas supply services.  Nicor's system  flexibility and location on the interstate
pipeline grid have allowed the company to develop several business ventures that
provide  services to interstate  pipelines,  other gas  distribution  companies,
electric  power  generators,  and  gas  marketers  and  brokers.  Through  Nicor
Enerchange,  the company is  building a niche  wholesale  natural gas  marketing
business and  providing  hub  management  services.  Nicor has also utilized its
supply assets as part of the nontraditional  activities within its regulated gas
distribution business.

Pipeline projects. In January 2000, Nicor signed an agreement to become an equal
partner in the planned  Horizon  Pipeline  with Natural Gas Pipeline  Company of
America,  a subsidiary of Kinder Morgan,  Inc. The proposed $75 million  natural
gas pipeline will  originate in Joliet,  Illinois and extend 74 miles to McHenry
County in  northern  Illinois.  Subject to FERC  approval,  construction  of the
pipeline will begin in spring of 2001, with completion  anticipated in 2002. The
strategic  location of the pipeline will enable Nicor to  accommodate  growth in
its traditional gas distribution  business,  and it will also put the company in
excellent  position to supply natural gas for the new electric power  generation
projects being proposed in northern Illinois.

Power  generation  opportunities.  Nicor plans to  participate in the market for
electric power  generation  needs.  An important  requirement of any large power
generation  project  is  managing  daily  gas  supply  needs  and  Nicor is well
positioned  to provide  the  necessary  storage and  supply-related  services in
northern  Illinois.  In the  mid-size  market,  Nicor is well  established  as a
contractor for power generation projects.

Other  ventures.  In  addition,  Nicor  has a  number  of  other  energy-related
businesses  engaged in activities  such as developing the market for natural gas
vehicles,  offering  residential  and  commercial  HVAC service  contracts,  and
providing  product  testing,  development  and  commercialization.   Nicor  will
continue to explore these and other opportunities to build upon its expertise in
the energy industry.

Market risk.  The company is exposed to market risk in the normal  course of its
business operations,  including the risk of loss arising from adverse changes in
natural gas commodity prices and interest rates.

Commodity  price risk.  The  company has  established  policies  and  procedures
governing  the  management  of commodity  price risks and the use of  derivative
commodity  instruments  to hedge its exposure to such risks.  A risk  management
committee exists to oversee compliance with such policies and procedures.



<PAGE>


Nicor Inc.                                                               Page 18

Item 7.    Management's Discussion and Analysis of Financial Condition
           and Results of  Operations (concluded)

Nicor's  regulated  utility,  Nicor Gas, is generally not exposed to market risk
caused by changes in  commodity  prices.  This is due to current  Illinois  rate
regulation  governing the recovery of all prudently  incurred natural gas supply
costs from customers. Although the company has a PBR plan for natural gas costs,
the plan does not expose the company to commodity  price risk because actual gas
costs are compared to a market-based  benchmark as opposed to a fixed benchmark.
Additional information about the PBR plan is presented on page 14.

Nicor's unregulated energy businesses are subject to natural gas commodity price
risk, arising primarily from fixed price purchase and sale agreements and gas in
storage inventories.  Derivative commodity instruments such as futures, options,
forwards and swaps may be used to hedge this risk. Open positions are restricted
by policy to an  immaterial  amount.  To manage the credit risk  inherent in the
company's commodity price risk management  programs,  the company contracts with
creditworthy counterparties and limits its exposure to any one counterparty.

Interest  rate risk.  The company is also exposed to changes in interest  rates,
primarily as a result of its short- and long-term  debt. The company manages its
interest rate risk primarily by issuing  long-term  fixed-rate debt with varying
maturities  and  refinancing  certain debt. For further  information  about debt
securities,  interest rates and fair values,  see the Consolidated  Statement of
Capitalization  on page 24 and  Short-  and  Long-Term  Debt and  Fair  Value of
Financial Instruments on page 27.

New accounting pronouncements.  In June 1999, the Financial Accounting Standards
Board  approved an amendment to defer the  effective  date of Statement No. 133,
Accounting for Derivative Instruments and Hedging Activities.  The company plans
to adopt  this  statement  on  January  1, 2001 and does not expect it to have a
material impact on its financial condition or results of operations. For further
information, see New Accounting Pronouncements beginning on page 26.

Year 2000  rollover.  Nicor's  preparation  for the  rollover to January 1, 2000
proved  successful as no interruptions in service to customers or disruptions of
normal business  operations were  experienced.  Since inception of the company's
efforts in 1996,  about $6 million has been  incurred  for hardware and software
modifications  and  replacements,   internal  information  technology  resources
devoted  solely to the Year 2000 effort and outside  consultants.  Although  the
company does not anticipate any issues  relating to the year 2000 to arise,  the
company  maintains  contingency  plans to address  scenarios  that  could  still
emerge.

Other  contingencies.  The  company  is  involved  in  legal  or  administrative
proceedings  before various courts and agencies with respect to rates, taxes and
other   matters.   In  addition,   the  company  is   conducting   environmental
investigations and remedial  activities at former  manufactured gas plant sites.
Although  unable to  determine  the outcome of these  contingencies,  management
believes that  appropriate  accruals have been  recorded.  Final  disposition of
these  matters  is not  expected  to have a  material  impact  on the  company's
financial  condition  or results of  operations.  For further  information,  see
Contingencies on page 34.

Item 7A.   Quantitative and Qualitative Disclosures about Market Risk

For  disclosures  about market risk, see Market Risk beginning on page 17, which
is incorporated herein by reference.


<PAGE>


Nicor Inc.                                                               Page 19

Item 8.    Financial Statements and Supplementary Data


                                                                           Page

Report of Independent Public Accountants..................................  20

Financial Statements:

    Consolidated Statement of Income......................................  21

    Consolidated Statement of Cash Flows..................................  22

    Consolidated Balance Sheet............................................  23

    Consolidated Statement of Capitalization..............................  24

    Consolidated Statement of Common Equity...............................  25

    Notes to the Consolidated Financial Statements........................  26


<PAGE>


Nicor Inc.                                                               Page 20

Report of Independent Public Accountants


To the Shareholders and Board of Directors of Nicor Inc.:

We have audited the  accompanying  consolidated  balance  sheet and statement of
capitalization of Nicor Inc. (an Illinois  corporation) and subsidiary companies
as of December 31, 1999 and 1998,  and the related  consolidated  statements  of
income,  common  equity and cash flows for each of the three years in the period
ended December 31, 1999. These financial statements and the schedule referred to
below are the responsibility of the company's management.  Our responsibility is
to express an opinion on these  financial  statements  and the schedule based on
our audits.

We  conducted  our  audits  in  accordance  with  generally   accepted  auditing
standards.  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.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion,  the financial  statements  referred to above present fairly, in
all material  respects,  the  financial  position of Nicor Inc.  and  subsidiary
companies  as of December 31, 1999 and 1998,  and the results of its  operations
and its cash flows for each of the three years in the period ended  December 31,
1999, in conformity with generally accepted accounting principles.

Our  audits  were  made for the  purpose  of  forming  an  opinion  on the basic
financial  statements taken as a whole. The financial statement schedule on page
37 is  presented  for  purposes of complying  with the  Securities  and Exchange
Commission's  rules  and is not part of the  basic  financial  statements.  This
schedule has been subjected to the auditing  procedures applied in the audits of
the  basic  financial  statements  and,  in our  opinion,  fairly  states in all
material  respects  the  financial  data  required  to be set forth  therein  in
relation to the basic financial statements taken as a whole.




ARTHUR ANDERSEN LLP
Arthur Andersen LLP
Chicago, Illinois
January 27, 2000


<PAGE>



Nicor Inc.                                                             Page 21
-------------------------------------------------------------------------------

Consolidated Statement of Income
(millions, except per share data)


                                                   Year ended December 31
                                               --------------------------------
                                                 1999        1998       1997
                                               ---------   ---------  ---------

Operating revenues                            $ 1,615.2   $ 1,465.1  $ 1,992.6
                                               ---------   ---------  ---------

Operating expenses
   Cost of gas                                    802.3       682.7    1,164.2
   Operating and maintenance                      356.0       338.0      340.3
   Depreciation                                   140.3       136.5      131.2
   Taxes, other than income taxes                 104.6        99.3      127.1
                                               ---------   ---------  ---------
                                                1,403.2     1,256.5    1,762.8
                                               ---------   ---------  ---------

Operating income                                  212.0       208.6      229.8

Other income (expense), net                        23.2        15.5       16.2
                                               ---------   ---------  ---------

Income before interest on debt and income taxes   235.2       224.1      246.0

Interest on debt, net of amounts capitalized       45.1        46.6       49.1
                                               ---------   ---------  ---------

Income before income taxes                        190.1       177.5      196.9

Income taxes                                       65.7        61.1       69.0
                                               ---------   ---------  ---------

Net income                                        124.4       116.4      127.9

Dividends on preferred stock                         .3          .3         .4
                                               ---------   ---------  ---------

Earnings applicable to common stock             $ 124.1     $ 116.1    $ 127.5
                                               =========   =========  =========

Average shares of common stock
   Basic                                           47.3        47.9       48.8
   Diluted                                         47.4        48.1       48.9

Earnings per average share of common stock
   Basic                                         $ 2.63      $ 2.43     $ 2.62
   Diluted                                         2.62        2.42       2.61


The accompanying notes are an integral part of this statement.










Nicor Inc.                                                             Page 22
-------------------------------------------------------------------------------

Consolidated Statement of Cash Flows
(millions)


                                                   Year ended December 31
                                               --------------------------------
                                                 1999        1998       1997
                                               ---------   ---------  ---------
Operating activities
   Net income                                   $ 124.4     $ 116.4    $ 127.9
   Adjustments to reconcile net income to net
    cash flow
     provided from operating activities:
       Depreciation                               140.3       136.5      131.2
       Deferred income tax expense (benefit)       14.4        18.6      (14.3)
       Changes in assets and liabilities:
         Receivables, less allowances             (95.8)       90.6      (14.6)
         Gas in storage                            74.5        22.3        3.8
         Deferred/accrued gas costs               (45.8)        4.8       76.2
         Accounts payable                          12.1        28.4      (92.0)
         Postretirement benefits                  (16.5)      (19.2)      (7.9)
         Other                                     (1.9)      (30.0)        .8
                                               ---------   ---------  ---------
   Net cash flow provided from operating
     activities                                   205.7       368.4      211.1
                                               ---------   ---------  ---------

Investing activities
   Capital expenditures                          (154.0)     (136.2)    (113.0)
   Short-term investments                          26.1       (35.6)      (7.5)
   Other                                           (7.4)      (19.9)      (5.7)
                                               ---------   ---------  ---------
   Net cash flow used for investing activities   (135.3)     (191.7)    (126.2)
                                               ---------   ---------  ---------

Financing activities
   Net proceeds from issuing long-term debt       101.5       107.3      106.3
   Disbursements to retire long-term debt        (156.9)     (129.9)     (77.6)
   Short-term borrowings (repayments), net        109.7       (44.4)     (13.1)
   Dividends paid                                 (73.2)      (70.3)     (67.8)
   Disbursements to reacquire stock               (23.1)      (33.4)     (49.4)
   Other                                            1.1         1.8        1.4
                                               ---------   ---------  ---------
   Net cash flow used for financing activities    (40.9)     (168.9)    (100.2)
                                               ---------   ---------  ---------

Net increase (decrease) in cash and cash
   equivalents                                     29.5         7.8      (15.3)

Cash and cash equivalents, beginning of year       13.0         5.2       20.5
                                               ---------   ---------  ---------

Cash and cash equivalents, end of year           $ 42.5      $ 13.0      $ 5.2
                                               =========   =========  =========

Supplemental information
   Income taxes paid, net of refunds             $ 46.2      $ 42.9     $ 66.6
   Interest paid, net of amounts capitalized       45.5        49.1       50.5


The accompanying notes are an integral part of this statement.


Nicor Inc.                                                             Page 23
-------------------------------------------------------------------------------

Consolidated Balance Sheet
(millions)

                                                             December 31
                                                       ------------------------
                                                          1999         1998
                                                       -----------   ----------
                        Assets

Current assets
   Cash and cash equivalents                               $ 42.5       $ 13.0
   Short-term investments, at cost which approximates
     market                                                  29.7         55.8
   Receivables, less allowances of $7.1 and $6.3,
     respectively                                           359.8        264.0
   Gas in storage                                            31.0        105.5
   Deferred gas costs                                        15.9            -
   Other                                                     29.1         26.4
                                                       -----------   ----------
                                                            508.0        464.7
                                                       -----------   ----------

Property, plant and equipment, at cost
   Gas distribution                                       3,200.3      3,119.7
   Shipping                                                 280.8        258.9
   Other                                                      2.0          1.2
                                                       -----------   ----------
                                                          3,483.1      3,379.8
   Less accumulated depreciation                          1,747.9      1,648.0
                                                       -----------   ----------
                                                          1,735.2      1,731.8
                                                       -----------   ----------

Other assets                                                208.6        168.1
                                                       -----------   ----------

                                                        $ 2,451.8    $ 2,364.6
                                                       ===========   ==========

            Liabilities and capitalization

Current liabilities
   Long-term obligations due within one year               $ 74.2        $ 1.2
   Short-term borrowings                                    344.2        234.5
   Accounts payable                                         282.4        270.3
   Accrued gas costs                                            -         29.9
   Other                                                     44.9         43.0
                                                       -----------   ----------
                                                            745.7        578.9
                                                       -----------   ----------

Deferred credits and other liabilities
   Deferred income taxes                                    266.6        238.9
   Regulatory income tax liability                           74.8         78.6
   Unamortized investment tax credits                        42.7         44.1
   Other                                                     91.9        101.5
                                                       -----------   ----------
                                                            476.0        463.1
                                                       -----------   ----------

Capitalization
   Long-term debt                                           436.1        557.3
   Preferred stock                                            6.3          6.3
   Common equity                                            787.7        759.0
                                                       -----------   ----------
                                                          1,230.1      1,322.6
                                                       -----------   ----------

                                                        $ 2,451.8    $ 2,364.6
                                                       ===========   ==========


The accompanying notes are an integral part of this statement.

Nicor Inc.                                                              Page 24
-------------------------------------------------------------------------------

Consolidated Statement of Capitalization
(millions, except share data)


                                                      December 31
                                          -------------------------------------
                                                1999               1998
                                          ------------------  -----------------

First Mortgage Bonds
   Maturity  Interest rate
   --------  ---------
     2000     5.875%                       $     -             $ 50.0
     2001     6.45                            75.0               75.0
     2002     6.75                            50.0               50.0
     2003     5.75                            50.0               50.0
     2009     5.37                            50.0                  -
     2021     8.875                           50.0               50.0
     2023     7.375                              -               50.0
     2024     8.25                               -               50.0
     2025     7.26                            50.0               50.0
     2027     7.375                           50.0               50.0
     2028     6.58                            50.0               50.0
                                          ---------           --------
                                             425.0              525.0
   Less:  Unamortized debt discount,
            net of premium                     3.3                4.2
                                          ---------           --------
                                             421.7   34.3 %     520.8   39.4 %
                                          ---------           --------

Other long-term debt
   Notes payable due 2000, 6.83%              22.5               22.5
   Notes payable due 2000, 5.065%             50.0                  -
   Other                                      16.1               15.2
                                          ---------           --------
                                              88.6               37.7
   Less:  Amount due within one year          74.2                1.2
                                          ---------           --------
                                              14.4    1.2        36.5    2.7
                                          ---------           --------

Preferred and preference stock
   Cumulative, $50 par value, 1,600,000
     preferred shares authorized; and
     cumulative, without par value,
     20,000,000 preference shares
     authorized
       Redeemable preferred stock, 4.48%
         and 5.00% series, 125,223
         shares outstanding                    6.3     .5         6.3     .5
                                          ---------           --------

Common equity
   Common stock, $2.50 par value,
     160,000,000 shares authorized
     (4,822,428 and 4,854,542  shares
     reserved for conversion and other
     purposes and 46,890,301 and
     47,513,714 shares outstanding,
     respectively)                           117.2              118.8
   Retained earnings                         670.5              640.2
                                          ---------           --------
                                             787.7   64.0       759.0   57.4
                                          --------- ------- ---------- ------
                                          $1,230.1  100.0 % $ 1,322.6  100.0%
                                          ========= ======= ========== ======


The accompanying notes are an integral part of this statement.

Nicor Inc.                                                             Page 25
-------------------------------------------------------------------------------

Consolidated Statement of Common Equity
(millions, except per share data)


                                                   Year ended December 31
                                               --------------------------------
                                                 1999        1998       1997
                                               ---------   ---------  ---------
Common stock
   Balance at beginning of year                 $ 118.8     $ 120.5    $ 123.7
   Issued and converted stock                        .1          .3         .2
   Reacquired and cancelled stock                  (1.7)       (2.0)      (3.4)
                                                ---------   ---------  ---------
   Balance at end of year                         117.2       118.8      120.5
                                               ---------   ---------  ---------

Paid-in capital
   Balance at beginning of year                       -           -       23.8
   Issued and converted stock                       1.2         3.0        2.9
   Reacquired and cancelled stock                  (1.2)       (3.0)     (26.7)
                                               ---------   ---------  ---------
   Balance at end of year                             -           -          -
                                               ---------   ---------  ---------

Retained earnings
   Balance at beginning of year                   640.2       623.5      582.1
   Net income                                     124.4       116.4      127.9
   Dividends on common stock ($1.56, $1.48
     and $1.40 per share, respectively)           (73.6)      (70.6)     (68.0)
   Dividends on preferred stock                     (.3)        (.3)       (.4)
   Reacquired and cancelled stock                 (20.2)      (28.8)     (18.1)
                                               ---------   ---------  ---------
    Balance at end of year                        670.5       640.2      623.5
                                               ---------   ---------  ---------
                                                $ 787.7     $ 759.0    $ 744.0
                                               =========   =========  =========


The accompanying notes are an integral part of this statement.



Nicor Inc.                                                              Page 26

Notes to the Consolidated Financial Statements

ACCOUNTING POLICIES

Consolidation.  The consolidated  financial  statements  include the accounts of
Nicor  and  its  subsidiaries.   All  significant   intercompany   balances  and
transactions have been eliminated.

Use  of  estimates.   The  preparation  of  the  financial  statements  requires
management to make estimates that affect reported amounts.  Actual results could
differ from those estimates.

Reclassifications. Certain reclassifications have been made to conform the prior
years' financial statements to the current year's presentation.

Regulation.  Nicor Gas is regulated by the ICC which  establishes  the rules and
regulations  governing  utility  rates and  services  in  Illinois.  The company
applies  accounting  standards  that  recognize  the  economic  effects  of rate
regulation and, accordingly, has recorded regulatory assets and liabilities. The
company had net  regulatory  liabilities  at December 31, 1999 and 1998 of about
$40 million and $95 million, respectively.

Operating  revenues and gas costs. Gas  distribution  revenues are recorded when
gas is delivered to customers. The cost of gas purchased, adjusted for inventory
activity,  is reflected in volumetric  charges to customers through operation of
the Uniform  Purchased Gas Adjustment  Clause (PGA). Any difference  between PGA
revenues and  recoverable  gas costs is deferred or accrued with a corresponding
decrease or increase  to cost of gas.  This  difference  is  amortized  as it is
collected from or refunded to customers through the PGA.

In the shipping segment, revenues and related delivery costs are recorded at the
time vessels depart from port.

Depreciation.  Property,  plant and equipment  are  depreciated  over  estimated
useful  lives  on  a  straight-line   basis.  The  gas  distribution   composite
depreciation rate is 4.1 percent.

Income  taxes.  Deferred  income taxes are provided  for  temporary  differences
between the tax basis of an asset or liability  and its  reported  amount in the
financial  statements.  Although  the  federal  investment  tax  credit has been
eliminated,  Nicor Gas continues to amortize  prior  deferred  amounts to income
over the lives of the applicable properties.

Cash and cash equivalents.  The company considers  investments  purchased with a
maturity of three months or less to be cash equivalents.

Receivable credit risk.  Nicor's major  subsidiaries  have diversified  customer
bases and prudent credit policies which mitigate risk.

NEW ACCOUNTING PRONOUNCEMENTS

In June 1998, the Financial  Accounting  Standards Board (FASB) issued Statement
No. 133, Accounting for Derivative  Instruments and Hedging Activities.  In June
1999,  the FASB issued  Statement No. 137,  which deferred the effective date of
FASB Statement No. 133.  Statement No. 133 requires that an entity recognize all
derivatives  as either  assets or  liabilities  on the balance sheet and measure
those instruments

<PAGE>


Nicor Inc.                                                               Page 27

Notes to the Consolidated Financial Statements (continued)

at fair value.  Gains or losses  resulting  from  changes in the values of those
derivatives  are to be accounted for depending on the use of the  derivative and
whether it  qualifies  for hedge  accounting.  Statement  No.  133,  as amended,
requires  adoption no later than the first quarter of the company's  2001 fiscal
year and must be  adopted  as a  cumulative  effect  of a change  in  accounting
principle.  The  company  plans to adopt  this  statement  on  January  1, 2001.
Implementation  is not  expected  to have a  material  impact  on the  company's
financial condition or results of operations.

GAS IN STORAGE

The gas  distribution  segment's  inventory  is  carried  at cost on a  last-in,
first-out  (LIFO) basis.  Based on the average cost of gas purchased in December
1999 and 1998, the estimated  replacement cost of inventory at December 31, 1999
and  1998,  exceeded  the  LIFO  cost by  $172.4  million  and  $159.1  million,
respectively.

Nicor's wholesale gas marketing  business carries its inventory at market value.
At December 31, 1999, the market value of the inventory was $8.9 million.

FAIR VALUE OF FINANCIAL INSTRUMENTS

The  recorded  amount  of  short-term   investments  and  short-term  borrowings
approximates fair value because of the short maturity of the instruments.  Based
on  quoted  market  interest  rates,  the  recorded  amount  of  long-term  debt
outstanding, including current maturities, also approximates fair value.

SHORT- AND LONG-TERM DEBT

The company  maintains  short-term  credit  agreements  with major  domestic and
foreign  banks.  These  agreements,  which  serve as backup for the  issuance of
commercial paper,  totaled $342.5 million at December 31, 1999.  Commitment fees
of up to .08 percent per annum were paid on these lines.  All credit  agreements
have variable interest rate options tied to short-term markets.

The  company  had  $342.5  million  and  $234.5  million  of  commercial   paper
outstanding with a weighted average interest rate of 5.9 percent and 5.6 percent
at December 31, 1999 and 1998, respectively.

Bank cash  balances  averaged  about $3 million  during  1999,  which  partially
compensated  for the cost of  maintaining  accounts and other banking  services.
Such demand balances may be withdrawn at any time.

First mortgage bonds are secured by liens on substantially  all gas distribution
property.



<PAGE>


Nicor Inc.                                                               Page 28

Notes to the Consolidated Financial Statements (continued)

INCOME TAXES

The components of income tax expense are presented below:

(millions)                            1999         1998         1997
                                   ------------ ------------ ------------
Current
    Federal                        $     44.3   $     36.4   $     71.3
    State                                 8.2          7.9         14.1
                                   ------------ ------------ ------------
                                         52.5         44.3         85.4
                                   ------------ ------------ ------------
Deferred
    Federal                              13.9         16.6         (8.4)
    State                                  .5          2.0         (5.9)
                                   ------------ ------------ ------------
                                         14.4         18.6        (14.3)
                                   ------------ ------------ ------------

Amortization of investment
    tax credits, net                     (1.5)        (2.1)        (2.2)
Foreign taxes                              .3           .3           .1
                                   ------------ ------------ ------------
Income tax expense                 $     65.7   $     61.1   $     69.0
                                   ============ ============ ============

The temporary  differences  which gave rise to the net deferred tax liability at
December 31, 1999 and 1998, are as follows:

(millions)                                        1999         1998
                                               -----------  -----------
Deferred tax liabilities
    Property, plant and equipment              $    222.9   $    231.7
    Investment in foreign subsidiaries               43.8         43.5
    Investment in partnerships                       24.5          8.5
    Other                                            31.9         15.5
                                               ------------ ------------
                                                    323.1        299.2
                                               ------------ ------------
Deferred tax assets
    Unamortized investment tax credits               27.8         29.0
    Regulatory income tax liability                  18.6         19.7
    Other                                            20.2         23.4
                                               ------------ ------------
                                                     66.6         72.1
                                               ------------ ------------
Net deferred tax liability                     $    256.5   $    227.1
                                               ============ ============

The effective combined federal and state income tax rate was 34.6 percent,  34.4
percent  and 35.1  percent  in 1999,  1998 and 1997,  respectively.  Differences
between  federal  income taxes  computed  using the statutory  rate and reported
income tax expense are shown below:

(millions)                              1999         1998         1997
                                     ------------ ------------ ------------
Federal income taxes using
  statutory rate                     $     66.5   $     62.1   $     68.9
State income taxes, net                     6.3          6.7          5.6
Other, net                                 (7.1)        (7.7)        (5.5)
                                     ------------ ------------ ------------
Income tax expense                   $     65.7   $     61.1   $     69.0
                                     ============ ============ ============



<PAGE>


Nicor Inc.                                                               Page 29

Notes to the Consolidated Financial Statements (continued)

STOCK-BASED COMPENSATION

Nicor has a long-term incentive  compensation plan which permits the granting of
stock options, restricted stock and alternate stock rights to key executives and
managerial  employees,  as well as an employee  stock purchase plan. The company
does not recognize compensation expense for these plans. If compensation expense
for these  plans had been  recognized  based on the fair  value of awards at the
grant dates, the impact on the company's net income and earnings per share would
not have been material.

Long-term  incentive  compensation plan. The company may grant options for up to
3.5  million  shares and has  granted  options  on 1.7  million  shares  through
December 31, 1999.  The stock option  exercise  price equals the stock's  market
price on the date of grant.  Options are vested after one year, generally become
exercisable after three years and expire after ten years.

A summary of stock option activity is presented below:

                                                                Weighted
                                                                 average
                                                  Number of     exercise
                                                    shares        price
                                                  ------------ ------------
Options outstanding at:
December 31, 1996                                    627,500   $    26.41
                                                  ------------
    Granted                                          134,400        32.25
    Exercised                                        (63,500)       24.77
    Cancelled                                        (25,500)       28.29
                                                  ------------
December 31, 1997                                    672,900        27.70
                                                  ------------
    Granted                                          113,500        40.56
    Exercised                                       (158,100)       26.05
    Cancelled                                         (4,500)       40.63
                                                  ------------
December 31, 1998                                    623,800        30.37
                                                  ------------
   Granted                                           149,000        38.06
   Exercised                                          (3,500)       28.25
   Cancelled                                          (7,500)       38.06
                                                  ------------
December 31, 1999                                    761,800        31.81
                                                  ------------

Options exercisable at:
December 31, 1997                                    212,000   $    27.71
December 31, 1998                                    264,500        26.25
December 31, 1999                                    383,900        26.87

Stock options outstanding at December 31, 1999, had exercise prices ranging from
$19.63 to $40.69  and a weighted  average  remaining  contractual  life of seven
years.

The weighted average fair value of options granted in 1999 and 1998 is $3.52 and
$4.52, respectively.  The fair value of each option was estimated on the date of
grant  using  the   Black-Scholes   option-pricing   model  with  the  following
assumptions  used for grants in 1999 and 1998,  respectively:  dividend yield of
4.6 percent  and 3.9  percent;  volatility  of 14.7  percent  and 14.5  percent;
risk-free  interest  rate of 5.2 percent and 5.6 percent;  and expected  periods
outstanding of three years for both years.

There were no shares of restricted  stock or alternate stock rights  outstanding
at December 31, 1999.


Nicor Inc.                                                               Page 30

Notes to the Consolidated Financial Statements (continued)

Employee  stock  purchase  plan.  Under the employee  stock  purchase  plan, the
company may sell up to 1.5 million  shares of common stock to its  employees and
has sold about 858,000 shares through December 31, 1999. Under the terms of this
plan, eligible employees may purchase shares at 90 percent of the stock's market
price.  The company sold about 28,400  shares and 19,900  shares to employees in
1999 and 1998, respectively. The weighted average market value of shares sold in
1999 and 1998 was $36.71 and $42.88, respectively.

POSTRETIREMENT BENEFITS

Nicor Gas maintains  noncontributory  defined  benefit  pension  plans  covering
substantially  all employees  hired prior to January 1, 1998 and provides health
care  and  life  insurance  benefits  to  eligible  retired  employees.  Certain
employees'  postretirement  health care  benefits  have been capped to a defined
annual per capita medical cost. The following table sets forth the components of
the  changes in the plans'  benefit  obligations  and assets for the years ended
October 1 and  reconciles  the October 1 funded status to the prepaid  (accrued)
benefit cost recorded in the financial statements at December 31:

<TABLE>
<CAPTION>

                                        Pension benefits             Other benefits
                                    --------------------------  -------------------------
(millions)                              1999         1998          1999         1998
                                    ------------- ------------  ------------ ------------
Change in benefit obligation
<S>                                 <C>           <C>           <C>          <C>
Benefit obligation at beginning of
    period                          $    242.3    $   223.9     $    118.3   $    115.0
Service cost                               6.4          6.7            1.3          1.3
Interest cost                             15.7         16.0            7.7          8.3
Actuarial (gain) loss                    (25.8)        18.5           (1.0)          .9
Participant contributions                    -            -             .6           .7
Benefits paid                            (23.8)       (22.8)         (10.8)        (7.9)
                                    ------------- ------------  ------------ ------------
Benefit obligation at end of period      214.8        242.3          116.1        118.3
                                    ------------- ------------  ------------ ------------

Change in plan assets
Fair value of plan assets at
    beginning of period                  401.7        422.6           16.6         16.6
Actual return on plan assets              67.1          1.5            2.8            -
Employer contributions                      .3           .4           10.2          7.2
Participant contributions                    -            -             .6           .7
Benefits paid                            (23.8)       (22.8)         (10.8)        (7.9)
                                    ------------- ------------  ------------ ------------
Fair value of plan assets at end of
    period                               445.3        401.7           19.4         16.6
                                    ------------- ------------  ------------ ------------

Funded status                            230.5        159.4          (96.7)      (101.7)
Unrecognized net actuarial (gain)
    loss                                (119.0)       (61.7)           3.9          6.4
Unrecognized transition (asset)
    obligation                            (8.6)       (12.5)          40.2         43.2
Unrecognized prior service cost            3.0          3.3              -            -
Other                                      4.7          3.2           (1.1)          .8
                                    ------------- ------------  ------------ ------------
Prepaid (accrued) benefit cost      $    110.6    $    91.7     $    (53.7)  $    (51.3)
                                    ============= ============  ============ ============

Assumptions used in the computations included the following:

                                         Pension benefits              Other benefits
                                    ---------------------------  ---------------------------
                                        1999          1998           1999          1998
                                    ------------- -------------  -------------  ------------
Discount rate                             7.50%         6.75%          7.50%         6.75%
Expected return on plan assets            9.00          9.00           9.00          9.00
Rate of compensation increase             4.00          4.00           4.00          4.00
</TABLE>

Nicor Inc.                                                               Page 31

Notes to the Consolidated Financial Statements (continued)

For  measurement  purposes,  the health  care cost  trend rate for  pre-Medicare
benefits  was assumed to be 7 percent for 2000,  declining  to 5 percent by 2004
and  remaining  at that level  thereafter.  The health  care cost trend rate for
post-Medicare benefits was assumed to be 5 percent.

Net periodic benefit cost (credit) included the following components:
<TABLE>
<CAPTION>

                                       Pension benefits               Other benefits
                                 ----------------------------- -----------------------------
(millions)                         1999      1998      1997      1999      1998      1997
                                 --------- --------- --------- --------- --------- ---------
<S>                              <C>       <C>       <C>       <C>       <C>       <C>
Service cost                     $   6.4   $   6.7   $   6.5   $  1.3    $  1.3    $  1.7
Interest cost                       15.7      16.0      17.6      7.7       8.3       8.3
Expected return on plan
    assets                         (35.3)    (35.1)    (31.6)    (1.6)     (1.4)     (1.2)
Recognized net actuarial gain       (1.8)     (4.7)     (1.6)       -         -         -
Amortization of unrecognized
    transition (asset) obligation   (3.8)     (3.8)     (3.8)     3.1       3.1       3.3
Amortization of prior service
    cost                              .3        .4        .4        -         -         -
                                 --------- --------- --------- --------- --------- ---------
Net periodic benefit cost
    (credit)                     $ (18.5)  $ (20.5)  $ (12.5)  $ 10.5    $ 11.3    $ 12.1
                                 ========= ========= ========= ========= ========= =========
</TABLE>

Assumed  health  care  cost  trend  rates can have a  significant  effect on the
amounts reported for the health care plans. A one-percentage-point change in the
assumed health care cost trend rates would have the following effects:

                                                    One-percent
                                              -------------------------
(millions)                                     Increase     Decrease
                                              ------------ ------------
Effect on total of service and
   interest cost components                   $      1.1   $      (.9)
Effect on benefit obligation                        12.0        (10.1)


BUSINESS SEGMENT AND GEOGRAPHIC INFORMATION

Nicor is a holding company that through its wholly owned subsidiaries, Nicor Gas
and Tropical Shipping,  operates in two separately managed reportable  segments:
gas distribution and shipping.  The gas distribution segment,  Nicor's principal
business,  serves more than 1.9 million  customers in a service  territory  that
encompasses  most of the  northern  third  of  Illinois,  excluding  the city of
Chicago. The shipping segment transports  containerized  freight between Florida
and the Caribbean.  Other Nicor ventures include energy-related  businesses that
participate  in the following  activities:  wholesale  marketing of natural gas;
natural gas supply services; power generation;  product testing, development and
commercialization  for the natural gas industry;  and providing  residential and
commercial HVAC service contracts.

Nicor evaluates  segment  performance  based on operating  income.  Intercompany
billing among segments is based on direct and indirect costs incurred. Financial
data by business segment is presented on the following page:


Nicor Inc.                                                             Page 32
-------------------------------------------------------------------------------

Notes to the Consolidated Financial Statements (continued)

                                                Other     Corporate
                            Gas                 Nicor       and        Consol-
                       distribution Shipping   ventures  eliminations  idated
-------------------------------------------------------------------------------

(millions)
Operating revenues
   1999                  $1,326.2    $ 229.9     $ 61.0      $ (1.9) $ 1,615.2
   1998                   1,229.0      224.5       11.6           -    1,465.1
   1997                   1,730.5      213.1       58.7        (9.7)   1,992.6

Operating income (loss)
   1999                   $ 191.7     $ 22.5      $ 1.3      $ (3.5)   $ 212.0
   1998                     185.5       27.6       (1.9)       (2.6)     208.6
   1997                     210.1       25.3       (1.0)       (4.6)     229.8

Interest on debt, net
   1999                    $ 40.4      $ 1.3       $ .2       $ 3.2     $ 45.1
   1998                      43.4        1.3         .2         1.7       46.6
   1997                      45.9        1.9         .2         1.1       49.1

Income taxes
   1999                    $ 55.9      $ 8.3      $ 2.6      $ (1.1)    $ 65.7
   1998                      55.3       10.2        (.9)       (3.5)      61.1
   1997                      64.7        9.1        (.5)       (4.3)      69.0

Property, plant and
  equipment, net
   1999                 $ 1,610.7    $ 123.2      $ 1.3     $     -  $ 1,735.2
   1998                   1,617.8      113.3         .7           -    1,731.8
   1997                   1,629.9      105.6         .3           -    1,735.8

Capital expenditures
   1999                   $ 127.4     $ 26.0       $ .6     $     -    $ 154.0
   1998                     112.6       23.3         .3           -      136.2
   1997                     101.8       10.9         .3           -      113.0

Depreciation
   1999                   $ 123.9     $ 16.1       $ .3     $     -    $ 140.3
   1998                     120.8       15.4         .3           -      136.5
   1997                     116.6       14.2         .4           -      131.2

See  Gas  Distribution  Statistics  on  page  15 for  disclosure  of  sales  and
transportation revenues in the gas distribution segment.

Tropical  Shipping's  vessels are under foreign  registry and its containers are
considered  instruments  of  international  trade.  Although the majority of its
long-lived  assets are foreign  owned and its  revenues are derived from foreign
operations, the functional currency is generally the U.S. dollar.




<PAGE>


Nicor Inc.                                                               Page 33

Notes to the Consolidated Financial Statements (continued)

DISCONTINUED OPERATIONS

The company  maintains a reserve for the remaining costs related to discontinued
contract  drilling,  oil and gas  exploration,  inland  barging  and  extractive
operations.  The reserve will continue to be evaluated as the remaining  medical
benefit,  legal, tax and other contingencies are resolved.  Due to the long-term
nature of the  medical  benefit  obligation,  no  adjustment  to the  reserve is
anticipated in the near future.

COMMON STOCK

Shareholder  rights plan. In 1997,  the company's  Board of Directors  adopted a
shareholder rights plan. Under the plan, shareholders of record on September 30,
1997,  were  assigned one right for each share of Nicor  common stock held.  The
rights will be  exercisable  only if a person  acquires,  or  announces a tender
offer that would result in,  ownership  of 10 percent or more of Nicor's  common
stock.  If a person  acquires  beneficial  ownership  of 10  percent  or more of
Nicor's common stock, all holders of rights other than the acquiring person will
be entitled to purchase  Nicor  common stock at a 50 percent  discount  from the
market  price.  Nicor may redeem the rights at $.01 per right at any time before
someone becomes a 10 percent  beneficial  owner.  The rights expire on September
30, 2007.

Changes in common shares.  Changes in common shares  outstanding  are summarized
below:

(millions)                            1999         1998         1997
                                   ------------ ------------ ------------
Beginning of year                        47.5         48.2         49.5
Issued and converted                        -           .1           .1
Reacquired and cancelled                  (.6)         (.8)        (1.4)
                                   ------------ ------------ ------------
End of year                              46.9         47.5         48.2
                                   ============ ============ ============

Through  common stock  repurchase  programs,  Nicor has purchased and retired .6
million, .7 million and 1.3 million shares in 1999, 1998 and 1997, respectively.

REGULATORY MATTERS

On January 1, 2000, Nicor Gas' performance-based rate (PBR) plan for natural gas
costs went into effect. Under the PBR, Nicor Gas' total gas supply costs will be
compared to a benchmark tied to a market index.  Savings and losses  relative to
the benchmark  will be shared equally with  customers.  At the end of two years,
the plan will be subject to ICC review.

COMMITMENTS

The company has committed about $40 million for the construction of two vessels.
Payments are scheduled as construction progresses over the next three years.


<PAGE>


Nicor Inc.                                                               Page 34

Notes to the Consolidated Financial Statements (concluded)

CONTINGENCIES

The company is involved in legal or  administrative  proceedings  before various
courts and agencies with respect to rates, taxes and other matters.

Current  environmental  laws may require cleanup of certain former  manufactured
gas plant sites.  To date,  Nicor Gas has identified more than 40 properties for
which it may, in part, be responsible.  The majority of these properties are not
presently owned by the company.  Information  regarding preliminary site reviews
has been  presented  to the  Illinois  Environmental  Protection  Agency,  which
oversees the  company's  investigations  and  remedial  actions.  More  detailed
investigations  and  remedial  activities  have  either been  completed,  are in
progress or are being  planned at many of these sites.  The results of continued
testing and analysis should determine to what extent  additional  remediation is
necessary and may provide a basis for  estimating  any  additional  future costs
which, based on industry  experience,  could be significant.  In accordance with
ICC  authorization,  the  company  has  been  recovering  these  costs  from its
customers.

On December 20, 1995,  Nicor Gas filed suit in the Circuit  Court of Cook County
against certain  insurance  carriers seeking  recovery of environmental  cleanup
costs of certain former  manufactured  gas plant sites.  Nicor Gas has reached a
settlement with one of the insurance carriers. In January 2000, the court stated
it would  dismiss  the  company's  case on summary  judgment  motions by certain
defendants.  If  dismissed  by  written  order,  the  company  plans to  appeal.
Management  cannot  predict  the outcome of the  lawsuit  against the  remaining
insurance carriers. Any recoveries will be refunded to the company's customers.

Although  unable to  determine  the outcome of these  contingencies,  management
believes that  appropriate  accruals have been  recorded.  Final  disposition of
these  matters  is not  expected  to have a  material  impact  on the  company's
financial condition or results of operations.

QUARTERLY RESULTS (UNAUDITED)

Quarterly  results  fluctuate  due  mainly  to the  seasonal  nature  of the gas
distribution business.
<TABLE>
<CAPTION>

                                                        Quarter ended
                                      ---------------------------------------------------
(millions, except per share data)       Mar. 31      June 30     Sept. 30      Dec. 31
                                      ------------ ------------ ------------ ------------

1999
<S>                                   <C>          <C>          <C>          <C>
    Operating revenues                $    576.4   $    271.8   $    227.3   $    539.7
    Operating income                        65.4         44.5         38.1         64.0
    Net income                              39.0         26.5         19.8         39.1
    Earnings per common share
        Basic                                .82          .56          .42          .83
        Diluted                              .82          .56          .42          .83

1998
    Operating revenues                $    562.3   $    271.3   $    203.2   $    428.2
    Operating income                        64.9         48.9         38.9         55.8
    Net income                              36.2         28.5         20.6         31.1
    Earnings per common share
        Basic                                .75          .59          .43          .65
        Diluted                              .75          .59          .43          .65
</TABLE>


Nicor Inc.                                                               Page 35

Item 9.    Changes in and Disagreements with Accountants on Accounting and
           Financial Disclosure

None.


PART III

Items 10. and 11.     Directors and Executive Officers of the Registrant and
                      Executive Compensation

Information  on  directors,   Section  16(a)  Beneficial   Ownership   Reporting
Compliance and executive  compensation  is contained on pages 2 through 6, 8 and
14 through 19 of the  Definitive  Proxy  Statement,  dated March 8, 2000, and is
incorporated herein by reference. Information relating to the executive officers
of the registrant is provided on pages 6 and 7 in Part I of this document.

Item 12.       Security Ownership of Certain Beneficial Owners and Management

Information about shares  beneficially owned by directors and executive officers
is contained on pages 7 and 8 of the Definitive Proxy Statement,  dated March 8,
2000, and is incorporated herein by reference.

Item 13.       Certain Relationships and Related Transactions

None.




<PAGE>


Nicor Inc.                                                               Page 36

PART IV

Item 14.       Exhibits, Financial Statement Schedules, and Reports on Form 8-K

(a)   1)  Financial Statements:

          See Item 8, Financial  Statements and  Supplementary  Data, on page 19
          filed herewith, for a list of financial statements.

      2)  Financial Statement Schedules:

          Schedule
           Number                                                       Page

                      Report of Independent Public Accountants            20
              II      Valuation and Qualifying Accounts                   37

          Schedules  other than those  listed are omitted  because  they are not
           applicable.

      3)  Exhibits Filed:

          See Exhibit Index beginning on page 39 filed herewith.

(b) The company  did not file a report on Form 8-K during the fourth  quarter of
1999.



<PAGE>


Nicor Inc.                                                             Page 37
-------------------------------------------------------------------------------

Schedule II

VALUATION AND QUALIFYING ACCOUNTS
(millions)

                                        Additions
                                   --------------------
                       Balance at  Charged to  Charged to              Balance
                       beginning   costs and    other                  at end
   Description         of period   expenses    accounts    Deductions  of period
-------------------    --------    --------    --------    --------    --------

1999
-------

   Allowance
     for uncollectible
     accounts  receivable $ 6.3      $ 12.5         $ -      $ 11.7 (a)   $ 7.1
   Reserve for estimated
     future costs related
     to discontinued
     businesses (b)         6.3           -          .1 (c)       -         6.4


1998
-------

   Allowance
     for uncollectible
     accounts  receivable $ 8.6      $ 13.6         $ -      $ 15.9 (a)   $ 6.3
   Reserve for estimated
     future costs related
     to discontinued
     businesses (b)        11.7           -           -         5.4 (c)     6.3


1997
-------

   Allowance
     for uncollectible
     accounts  receivable $ 7.7      $ 16.0         $ -      $ 15.1 (a)   $ 8.6
   Reserve for estimated
     future costs related
     to discontinued
     businesses (b)        14.5           -           -         2.8 (c)    11.7


(a) Accounts receivable written off, net of recoveries.
(b) Excludes the related reserve for federal and state income taxes.
(c)  Net receipts, expenditures,  operating results, gains and losses related to
     discontinued businesses credited or charged to reserve.




Nicor Inc.                                                               Page 38

Signatures

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

                                         Nicor Inc.

Date       March 20, 2000                By       DAVID L. CYRANOSKI
      -------------------------              -----------------------------
                                                     David L. Cyranoski
                                                     Senior Vice President,
                                                     Secretary, Treasurer and
                                                     Controller

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following  persons on behalf of the  registrant and
in the capacities indicated on March 20, 2000.

                 Signature                                    Title
---------------------------------------------        ---------------------------

              THOMAS L. FISHER
---------------------------------------------
              Thomas L. Fisher                       Chairman, President and
       (Principal Executive Officer)                 Chief Executive Officer

            KATHLEEN L. HALLORAN
---------------------------------------------
            Kathleen L. Halloran                     Executive Vice President
       (Principal Financial Officer)                 Finance and Administration

             DAVID L. CYRANOSKI
---------------------------------------------
             David L. Cyranoski                      Senior Vice President,
       (Principal Accounting Officer)                Secretary,Treasurer and
                                                     Controller

ROBERT M. BEAVERS, JR.*                              Director

BRUCE P. BICKNER*                                    Director

JOHN H. BIRDSALL, III*                               Director

THOMAS A. DONAHOE*                                   Director

DENNIS J. KELLER*                                    Director

CHARLES S. LOCKE*                                    Director

WILLIAM A. OSBORN*                                   Director

SIDNEY R. PETERSEN*                                  Director

JOHN RAU*                                            Director

PATRICIA A. WIER*                                    Director

                                                  *  By       MARIANNE T. LORENZ
                                                              Marianne T. Lorenz
                                                              (Attorney-in-fact)

Nicor Inc.                                                               Page 39


Exhibit Index

Exhibit
Number                                      Description of Document

3.01 * Articles of Incorporation of the company.  (File No. 2-55451,  Form S-14,
Nicor Inc., Exhibit 1-03 and Exhibit B of Amendment No. 1 thereto.)

3.02 * Amendment to Articles of Incorporation  of the company.  (Proxy Statement
dated April 20, 1979, Nicor Inc., Item 3 thereto.)

3.03 * Amendment to Articles of Incorporation of the company. (File No. 2-68777,
Form S-16, Nicor Inc., Exhibit 2-01.)

3.04 * Amendment to Articles of Incorporation of the company.  (File No. 1-7297,
Form 10-K for 1985, Nicor Inc., Exhibit 3-03.)

3.05 * Amendment to Articles of Incorporation  of the company.  (Proxy Statement
dated March 12, 1987, Nicor Inc., Exhibit A and Exhibit B thereto.)

3.06 * Amendment to Articles of Incorporation of the company.  (File No. 1-7297,
Form 10-K for 1992, Nicor Inc., Exhibit 3-06.)

3.07 * Amendments to Articles of Incorporation of the company.  (Proxy Statement
dated March 9, 1994, Nicor Inc., Exhibit A-1 and Exhibit B thereto.)

3.08 * Amendment to Articles of Incorporation  of the company.  (Proxy Statement
dated March 6, 1998, Nicor Inc., Item 2 thereto.)

3.09 * By-Laws of the company as amended by the company's  board of Directors on
May 3, 1995.  (File No. 1-7297,  Form 10-Q for March 1995,  Nicor Inc.,  Exhibit
3(ii).01.)

4.01 * Indenture of Commonwealth Edison Company to Continental Illinois National
Bank and Trust Company of Chicago,  Trustee,  dated as of January 1, 1954. (File
No. 1-7296, Form 10-K for 1995, Nicor Gas, Exhibit 4.01.)

4.02 * Indenture of Adoption of Nicor Gas to Continental  Illinois National Bank
and Trust Company of Chicago, Trustee, dated February 9, 1954. (File No. 1-7296,
Form 10-K for 1995, Nicor Gas, Exhibit 4.02.)

4.03 * Supplemental  Indenture,  dated June 1, 1963, of Nicor Gas to Continental
Illinois  National Bank and Trust Company of Chicago,  Trustee,  under Indenture
dated as of January 1, 1954.  (File No.  2-21490,  Form S-9, Nicor Gas,  Exhibit
2-8.)

4.04 *  Supplemental  Indenture,  dated May 1, 1966, of Nicor Gas to Continental
Illinois  National Bank and Trust Company of Chicago,  Trustee,  under Indenture
dated as of January 1, 1954.  (File No.  2-25292,  Form S-9, Nicor Gas,  Exhibit
2-4.)





<PAGE>


Nicor Inc.                                                               Page 40


Exhibit Index (continued)

Exhibit
Number                                      Description of Document

4.05 * Supplemental  Indenture,  dated June 1, 1971, of Nicor Gas to Continental
Illinois  National Bank and Trust Company of Chicago,  Trustee,  under Indenture
dated as of January 1, 1954.  (File No.  2-44647,  Form S-7, Nicor Gas,  Exhibit
2-03.)

4.06 *  Supplemental  Indenture,  dated April 30, 1976,  between the company and
Continental Illinois National Bank and Trust Company of Chicago,  Trustee, under
Indenture dated as of January 1, 1954.  (File No. 2-56578,  Form S-9, Nicor Gas,
Exhibit 2-25.)

4.07 * Supplemental Indenture, dated April 30, 1976, of Nicor Gas to Continental
Illinois  National Bank and Trust Company of Chicago,  Trustee,  under Indenture
dated as of January 1, 1954.  (File No.  2-56578,  Form S-9, Nicor Gas,  Exhibit
2-21.)

4.08  *  Supplemental  Indenture,  dated  August  15,  1991,  of  Nicor  Gas  to
Continental Bank,  National  Association,  Trustee,  under Indenture dated as of
January 1, 1954. (File No. 1-7296,  Form 8-K for August 1991, Nicor Gas, Exhibit
4-01.)

4.09 * Supplemental  Indenture,  dated October 15, 1995, of Nicor Gas to Bank of
America  Illinois,  Trustee,  under Indenture dated as of January 1, 1954. (File
No. 1-7296, Form 10-Q for September 1995, Nicor Gas, Exhibit 4.01.)

4.10 * Supplemental Indenture,  dated May 10, 1996, of Nicor Gas to Harris Trust
and Savings Bank,  Trustee,  under Indenture dated as of January 1, 1954.  (File
No. 1-7296, Form 10-Q for June 1996, Nicor Gas, Exhibit 4.01.)

4.11 *  Supplemental  Indenture,  dated  August 1, 1996,  of Nicor Gas to Harris
Trust and Savings Bank,  Trustee,  under  Indenture dated as of January 1, 1954.
(File No. 1-7296, Form 10-Q for June 1996, Nicor Gas, Exhibit 4.02.)

4.12 * Supplemental Indenture,  dated June 1, 1997, of Nicor Gas to Harris Trust
and Savings Bank,  Trustee,  under Indenture dated as of January 1, 1954.  (File
No. 1-7296, Form 10-Q for June 1997, Nicor Gas, Exhibit 4.01.)

4.13 *  Shareholder  Rights  Agreement,  dated  September  9, 1997,  between the
company and Harris Trust and Savings Bank, as Rights  Agent.  (File No.  1-7297,
Form 8-K for September 1997, Nicor Inc., Exhibit 1.)

4.14 *  Supplemental  Indenture,  dated October 15, 1997, of Nicor Gas to Harris
Trust and Savings Bank,  Trustee,  under  Indenture dated as of January 1, 1954.
(File No. 1-7296, Form 10-Q for September 1997, Nicor Gas, Exhibit 4.01.)

4.15 * Supplemental  Indenture,  dated February 15, 1998, of Nicor Gas to Harris
Trust and Savings Bank,  Trustee,  under  Indenture dated as of January 1, 1954.
(File No. 1-7296, Form 10-K for 1997, Nicor Gas, Exhibit 4.19.)




<PAGE>


Nicor Inc.                                                               Page 41

Exhibit Index (continued)

Exhibit
Number                                      Description of Document

4.16 * Supplemental Indenture,  dated June 1, 1998, of Nicor Gas to Harris Trust
and Savings Bank,  Trustee,  under Indenture dated as of January 1, 1954.  (File
No. 1-7296, Form 10-Q for June 1998, Nicor Gas, Exhibit 4.01.)

4.17 *  Supplemental  Indenture,  dated February 1, 1999, of Nicor Gas to Harris
Trust and Savings Bank,  Trustee,  under  Indenture dated as of January 1, 1954.
(File No. 1-7296, Form 10-K for 1998, Nicor Gas, Exhibit 4.19.)

Other debt instruments are omitted in accordance with Item  601(b)(4)(iii)(A) of
Regulation  S-K.  Copies of such  agreements will be furnished to the Commission
upon request.

10.01 * 1984 Nicor Officers' Capital Accumulation Plan Participation  Agreement.
(File No. 1-7297, Form 10-K for 1988, Nicor Inc., Exhibit 10-10.)

10.01(a)  *  1985  Nicor  Officers'  Capital   Accumulation  Plan  Participation
Agreement. (File No. 1-7297, Form 10-K for 1988, Nicor Inc., Exhibit 10-10(a).)

10.02 * 1984 Nicor Directors' Capital Accumulation Plan Participation Agreement.
(File No. 1-7297, Form 10-K for 1983, Nicor Inc., Exhibit 10-13.)

10.02(a)  *  1985  Nicor  Directors'  Capital  Accumulation  Plan  Participation
Agreement. (File No. 1-7297, Form 10-K for 1984, Nicor Inc., Exhibit 10-13(a).)

10.03 * Directors'  Deferred  Compensation Plan. (File No. 1-7297, Form 10-K for
1983, Nicor Inc., Exhibit 10-16.)

10.04 * Directors'  Pension Plan.  (File No. 1-7297,  Form 10-K for 1985,  Nicor
Inc., Exhibit 10-18.)

10.05 * Flexible  Spending Account for Executives.  (File No. 1-7297,  Form 10-K
for 1986, Nicor Inc., Exhibit 10-20.)

10.06 * Amendment and Restatement of the Nicor Gas Incentive  Compensation Plan.
(File No. 1-7297, Form 10-K for 1986, Nicor Inc., Exhibit 10-21.)

10.07 * Nicor Inc. 1989 Long-Term  Incentive Plan.  (Filed with Nicor Inc. Proxy
Statement, dated April 20, 1989, Exhibit A.)

10.08 * Nicor Gas Supplementary Retirement Plan. (File No. 1-7297, Form 10-K for
1989, Nicor Inc., Exhibit 10-24.)

10.09 * Nicor Gas  Supplementary  Savings Plan. (File No. 1-7297,  Form 10-K for
1989, Nicor Inc., Exhibit 10-25.)


Nicor Inc.                                                               Page 42

Exhibit Index (continued)

Exhibit
Number                                      Description of Document

10.10 * Nicor Salary Deferral Plan. (File No. 1-7297,  Form 10-K for 1989, Nicor
Inc., Exhibit 10-29.)

10.11 * Nicor  Inc.  Stock  Deferral  Plan.  (File  No.  1-7297,  Form  10-Q for
September 1996, Nicor Inc., Exhibit 10.01.)

10.12 * Amendment to Nicor Inc. Stock Deferral Plan. (File No. 1-7297, Form 10-K
for 1997, Nicor Inc., Exhibit 10.22.)

10.13 * Nicor Inc. 1995 Directors' Stock Plan.  (File No. 1-7297,  Form 10-Q for
September 1996, Nicor Inc., Exhibit 10.02.)

10.14 * 1995 Long-Term Incentive Program.  (File No. 1-7297, Form 10-K for 1994,
Nicor Inc., Exhibit 10.17.)

10.15 * 1997 Long-Term Incentive Program.  (File No. 1-7297, Form 10-Q for March
1997, Nicor Inc., Exhibit 10.01.)

10.16 * Nicor Inc. 1997 Long-Term  Incentive Plan.  (Filed as an appendix to the
Nicor Inc. Proxy Statement, dated March 6, 1997.)

10.17 * 1998 Long-Term Incentive Program.  (File No. 1-7297, Form 10-K for 1997,
Nicor Inc., Exhibit 10.25.)

10.18 * 1999 Nicor Incentive  Compensation Plan. (File No. 1-7297, Form 10-K for
1998, Nicor Inc. , Exhibit 10.24.)

10.19 * 1999 Nicor Gas Incentive  Compensation Plan. (File No. 1-7297, Form 10-K
for 1998, Nicor Inc., Exhibit 10.25.)

10.20 * 1999 Long-Term Incentive Program.  (File No. 1-7297, Form 10-K for 1998,
Nicor Inc. Exhibit 10.26.)

10.21 2000 Nicor Incentive Compensation Plan.

10.22 2000 Nicor Gas Incentive Compensation Plan.

10.23 2000 Long-Term Incentive Program.

10.24 Security Payment Plan.

10.25 Letter Agreement,  executed January 19, 2000,  between Mr. Nardi and Nicor
Inc.




Nicor Inc.                                                               Page 43

Exhibit Index (concluded)

Exhibit
Number                                      Description of Document

10.26 Resolutions adopted by the Board of Directors on December 7, 1999 amending
the Nicor Inc.  Stock  Deferral  Plan and amending the  definition  of change in
control in the Long-Term  Incentive  Plan,  Salary Deferral Plan and the Capital
Accumulation Plan.

10.27  Summary of proposed  change in control  agreements  between Nicor and Mr.
Fisher,  Mr.  Cali and Ms.  Halloran  (incorporated  by  reference  to the third
paragraph under "Change in Control  Arrangements"  of Nicor Inc. Proxy Statement
dated March 8, 2000, Nicor Inc., File No. 1-7297.)


Exhibits 10.01 through 10.27  constitute  management  contracts and compensatory
plans and arrangements required to be filed as exhibits to this Form pursuant to
Item 14(c) of Form 10-K.

21.01 * Subsidiaries.  (File No. 69-228,  Form U-3A-2 for 1999, Nicor Inc., Item
1.)

23.01 Consent of Independent Public Accountants.

24.01 Powers of Attorney.

27.01 Financial Data Schedule.

99.01 * Form of Letter to Shareholders relating to Shareholder Rights Agreement.
(File No. 1-7297, Form 8-K for September 1997, Nicor Inc., Exhibit 2.)

*   These exhibits have been  previously  filed with the Securities and Exchange
    Commission as exhibits to  registration  statements or to other filings with
    the Commission  and are  incorporated  herein as exhibits by reference.  The
    file number and exhibit number of each such exhibit,  where applicable,  are
    stated, in parentheses, in the description of such exhibit.

Upon  written  request,  the company  will  furnish free of charge a copy of any
exhibit.  Requests  should  be  sent  to  Investor  Relations  at the  corporate
headquarters.