----

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| [X      ] | ANNUAL      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THESECURITIES |
|-----------|---------------------------------------------------------------------|
|      | EXCHANGE      ACT OF 1934                                           |

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

| Illinois                                      |   | 36-2855175                                 |
|-----------------------------------------------|--------|--------------------------------------------|
| (State      of Incorporation)                 |   | (I.R.S.      Employer                      |
|                                          |   | Identification      Number)                |
| 1844      Ferry Road                          |   |                                       |
| Naperville,      Illinois 60563-9600          |   | (630)      305-9500                        |
| (Address      of principal executive offices) |   | (Registrant’s      telephone number) |

| Title      of each class                     |   | Name      of each exchange on which registered |
|----------------------------------------------|--------|------------------------------------------------|
| Common      Stock, par value $2.50 per share |   | New      York Stock Exchange                   |
|                                         |   | Chicago      Stock Exchange                    |

| Large      accelerated filer [X] | Accelerated      filer [  ] | Non-accelerated      filer [  ] |
|----------------------------------|---------------------------------------|-------------------------------------------|

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| Table of Contents |   |        |                                                                                                |
|-------------------|--------|-------------|-----------------------------------------------------------------------------------------------------|
|              |   |        |                                                                                                |   |   |
| Item      No.     |   | Description |                                                                                                | Page      No. |   |
|              |   |        |                                                                                                |   |   |
|              |   | Glossary    |                                                                                                | ii |   |
|              |   |        |                                                                                                |   |   |
|              |   | Part      I |                                                                                                |   |   |
|              | 1.     |        | Business                                                                                            |   |   | 1 |   |
|              | 1A.    |        | Risk Factors                                                                                        |   |   | 6 |   |
|              | 1B.    |        | Unresolved Staff    Comments                                                                        |   |   | 11 |   |
|              | 2.     |        | Properties                                                                                          |   |   | 11 |   |
|              | 3.     |        | Legal Proceedings                                                                                   |   |   | 11 |   |
|              | 4.     |        | Submission of Matters to a Vote of Security      Holders                                            |   |   | 11 |   |
|              |   |        | Executive Officers of the Registrant                                                                |   |   | 12 |   |
|              |   |        |                                                                                                |   |   |   |   |
|              |   |        | Part      II                                                                                        |   |   |   |   |
|              | 5.     |        | Market for Registrant’s Common Equity,      Related Stockholder Matters and                   |   |   |   |   |
|              |   |        |  Issuer Purchases of Equity      Securities                                                    |   |   | 13 |   |
|              | 6.     |        | Selected Financial Data                                                                             |   |   | 15 |   |
|              | 7.     |        | Management’s Discussion and Analysis of Financial Condition      and Results of Operations    |   |   | 16  |   |
|              | 7A.    |        | Quantitative and Qualitative Disclosures about      Market Risk                                     |   |   | 36 |   |
|              | 8.     |        | Financial Statements and Supplementary      Data                                                    |   |   | 38 |   |
|              | 9.     |        | Changes in and Disagreements with Accountants on Accounting      and Financial Disclosure           |   |   | 73 |   |
|              | 9A.    |        | Controls and Procedures                                                                             |   |   | 74 |   |
|              | 9B.    |        | Other Information                                                                                   |   |   | 75 |   |
|              |   |        |                                                                                                |   |   |   |   |
|              |   |        | Part      III                                                                                       |   |   |   |   |
|              | 10.    |        | Directors, Executive Officers and Corporate      Governance                                         |   |   | 76 |   |
|              | 11.    |        | Executive Compensation                                                                              |   |   | 76 |   |
|              | 12.    |        | Security Ownership of Certain Beneficial Owners and      Management and Related Stockholder Matters |   |   | 76 |   |
|              | 13.    |        | Certain Relationships and Related Transactions, and      Director Independence                      |   |   | 77 |   |
|              | 14.    |        | Principal Accountant Fees and Services                                                              |   |   | 77 |   |
|              |   |        |                                                                                                |   |   |   |   |
|              |   |        | Part      IV                                                                                        |   |   |   |   |
|              | 15.    |        | Exhibits and Financial Statement Schedules                                                          |   |   | 78 |   |
|              |   |        | Signatures                                                                                          |   |   | 80 |   |
|              |   |        | Exhibit Index                                                                                       |   |   | 81 |   |

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Glossary

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| Item      1. | Business |
|--------------|----------|

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|                                       |   | Availability |    | Contract      Expiration |
|--------------------------------------------|--------|--------------|---------|--------------------------|
| Natural      Gas Pipeline Company (NGPL)   |   |         | 968,000 |                     | Various      dates through March 2012 |
| Horizon      Pipeline                      |   |         | 300,000 |                     | May      2012 |
| Tennessee      Gas Pipeline Company (TGPC) |   |         | 203,000 |                     | October      2009 |
| Midwestern      Gas Transmission Company   |   |         | 247,000 |                     | October      2009 |
| Northern      Natural Gas Company          |   |         | 206,000 |                     | October      2011 |
| ANR      Pipeline                          |   |         | 125,000 |                     | Various      dates through October 2012 |
| Texas      Gas                             |   |         | 47,000  |                     | March      2009 |

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| ·   | Base      rates, which are set by the ICC, are designed to allow the company an      opportunity to recover its costs and earn a fair return for      investors.  In the fourth quarter of 2005, the company received      approval from the ICC for a base rate increase.  For additional      information about the rate order, see Item 7 – Management’s Discussion and      Analysis of Financial Condition and Results of Operations and Item 8 –      Notes to the Consolidated Financial Statements – Note 19 – Rate      Proceeding. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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| ·   | The      company’s ICC-approved tariffs provide that the cost of natural gas      purchased for customers will be fully charged to customers without      markup.  Therefore, the company does not profit from the sale of      natural gas.  Rather, the company earns income from fixed      monthly charges and from variable transportation charges for delivering      natural gas to customers.  Annually, the ICC initiates a review      of the company’s natural gas purchasing practices for prudence, and may      disallow the pass-through of costs considered  imprudent. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | As      with the cost of natural gas, the company has a tariff that provides for      the pass-through of prudently incurred environmental costs related to      former manufactured gas plant sites.  This pass-through is also      subject to annual ICC review. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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RiskFactors

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Unresolved Staff Comments

| Item      2. | Properties |
|--------------|------------|

| Item      3. | Legal  Proceedings |
|--------------|--------------------|

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

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Executive Officers of the Registrant

| Name                                      |   | Age    |   | Current      Position and Background                                                                                                                                                                                                                                                                                                                                                                                                    |
|-------------------------------------------|--------|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                      |   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                    |
| Russ      M. Strobel                      |   | 55     |   | Chairman,      Nicor and Nicor Gas (since 2005); Chief Executive Officer, Nicor (since      2005); Chief Executive Officer, Nicor Gas (since 2003); President, Nicor      and Nicor Gas (since 2002).                                                                                                                                                                                                                                   |
|                                      |   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                    |
| Richard      L. Hawley                    |   | 58     |   | Executive      Vice President and Chief Financial Officer, Nicor and Nicor Gas (since      2003).                                                                                                                                                                                                                                                                                                                                       |
|                                      |   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                    |
| Rocco      J. D’Alessandro          |   | 49     |   | Executive      Vice President Operations, Nicor Gas (since 2006); Senior Vice President      Operations, Nicor Gas (2002-2006).                                                                                                                                                                                                                                                                                                         |
|                                      |   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                    |
| Daniel      R. Dodge                      |   | 54     |   | Executive      Vice President Diversified Ventures, Nicor (since November 2007); Senior      Vice President Diversified Ventures and Corporate Planning, Nicor and      Nicor Gas (2002-2007).                                                                                                                                                                                                                                          |
|                                      |   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                    |
| Claudia      J. Colalillo                 |   | 58     |   | Senior      Vice President Human Resources and Corporate Communications, Nicor and      Nicor Gas (since 2002).                                                                                                                                                                                                                                                                                                                         |
|                                      |   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                    |
| Paul      C. Gracey, Jr.                  |   | 48     |   | Senior      Vice President, General Counsel and Secretary, Nicor and Nicor Gas (since      2006); Vice President, General Counsel and Secretary, Nicor and Nicor Gas      (2002-2006).                                                                                                                                                                                                                                                  |
|                                      |   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                    |
| Gerald      P. O’Connor   |   | 56     |   | Senior      Vice President Finance and Strategic Planning, Nicor and Nicor Gas (since      October 2007); Senior Vice President Finance and Treasurer, Nicor and      Nicor Gas (2006-2007); Vice President Administration and Finance, Nicor      and Nicor Gas (2004-2006); Temporary General Manager - Internal Audit,      Nicor and Nicor Gas (2003-2004); Partner, Tatum Partners L.L.C.,      professional services (2003-2004). |
|                                      |   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                    |
| Douglas      M. Ruschau                   |   | 49     |   | Vice      President and Treasurer, Nicor and Nicor Gas (since October 2007); Vice      President Finance and Treasurer, Peoples Energy    (2002-2007).                                                                                                                                                                                                                                                                                  |
|                                      |   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                    |
| Karen      K. Pepping                     |   | 43     |   | Vice      President and Controller, Nicor and Nicor Gas (since 2006); Assistant Vice      President and Controller, Nicor and Nicor Gas (2005-2006); Assistant      Controller, Nicor and Nicor Gas (2003-2005); Assistant Corporate      Controller, Wallace Computer Services, Inc., commercial printing      (2002-2003).                                                                                                            |
|                                      |   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                    |
| Rick      Murrell                         |   | 61     |   | Chairman      and President, Tropical Shipping and Construction Company Limited (since      2006); President and CEO, Tropical Shipping and Birdsall Inc.      (1987-2005).                                                                                                                                                                                                                                                             |
|                                      |   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                    |

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| Item      5. | Market for Registrant’s Common Equity, Related      Stockholder Matters and Issuer Purchases of Equity      Securities |
|--------------|------------------------------------------------------------------------------------------------------------------------------|

|    |   | Stock      price |   |   | Dividends |   |
|---------|--------|------------------|--------|--------|-----------|--------|
| Quarter |   | High             |   |   | Low       |   |   | Declared |   |
|    |   |             |   |   |      |   |   |   |   |
| 2007    |   |             |   |   |      |   |   |   |   |
| First   |   | $                | 49.76  |   |      | $      | 44.46 |   |   | $ | .465 |   |
| Second  |   |             | 53.66  |   |      |   | 42.17 |   |   |   | .465 |   |
| Third   |   |             | 48.20  |   |      |   | 37.80 |   |   |   | .465 |   |
| Fourth  |   |             | 45.16  |   |      |   | 39.18 |   |   |   | .465 |   |
|    |   |             |   |   |      |   |   |   |   |   |   |   |
| 2006    |   |             |   |   |      |   |   |   |   |   |   |   |
| First   |   | $                | 43.12  |   |      | $      | 39.25 |   |   | $ | .465 |   |
| Second  |   |             | 42.29  |   |      |   | 38.72 |   |   |   | .465 |   |
| Third   |   |             | 44.40  |   |      |   | 41.01 |   |   |   | .465 |   |
| Fourth  |   |             | 49.92  |   |      |   | 42.38 |   |   |   | .465 |   |
|    |   |             |   |   |      |   |   |   |   |   |   |   |

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|                   | 2003      |   | 2004      |   | 2005            |   | 2006            |   | 2007      |
|------------------------|-----------|--------|-----------|--------|-----------------|--------|-----------------|--------|-----------|
|                   |      |   |      |   |            |   |            |   |      |
| Nicor                  | $106      |   | $121      |   | $135            |   | $168            |   | $158      |
| S&P      Utilities |  126 |   |  157 |   |        183 |   |        221 |   |  264 |
| S&P      500       |  129 |   |  143 |   |        150 |   |        173 |   |  183 |

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|        Nicor Inc.                                                                                                                    |   |                    |    |                        |    |   |    |    |    |   |    |    |    |   |    |    |    |
|-------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------|---------|-----------------------------|---------|--------|---------|---------|---------|--------|---------|---------|---------|--------|---------|---------|---------|
|                                                                                                                                      |   |                    |    |                        |    |   |    |    |    |   |    |    |    |   |    |    |    |
|        Item      6.                                                                                                                  |   | Selected Financial Data |    |                        |    |   |    |    |    |   |    |    |    |   |    |    |    |
| (in      millions, except per share data)                                                                                                 |   |                    |    |                        |    |   |    |    |    |   |    |    |    |   |    |    |
|                                                                                                                                      |   |                    |    |                        |    |   |    |    |    |   |    |    |    |   |    |    |    |
|                                                                                                                                      |   |                    |    | Year      ended December 31 |    |
|                                                                                                                                      |   |                    |    | 2007                        |    |   | 2006    |    |    | 2005   |    |    | 2004    |   |    | 2003    |    |
|                                                                                                                                      |   |                    |    |                        |    |   |    |    |    |   |    |    |    |   |    |    |    |
| Operating      revenues                                                                                                                   |   | $                       | 3,176.3 |                        |    | $      | 2,960.0 |    |    | $      | 3,357.8 |    |    | $      | 2,739.7 |    |    | $ | 2,662.7 |   |
|                                                                                                                                      |   |                    |    |                        |    |   |    |    |    |   |    |    |    |   |    |    |    |   |   |   |   |   |
| Operating      income                                                                                                                     |   | $                       | 206.5   |                        |    | $      | 202.5   |    |    | $      | 201.7   |    |    | $      | 137.7   |    |    | $ | 189.4 |   |
|                                                                                                                                      |   |                    |    |                        |    |   |    |    |    |   |    |    |    |   |    |    |    |   |   |   |   |   |
| Income      before cumulative effect of                                                                                                   |   |                    |    |                        |    |   |    |    |    |   |    |    |    |   |    |    |    |   |   |   |
|            accounting change                                                                                     |   | $                       | 135.2   |                        |    | $      | 128.3   |    |    | $      | 136.3   |    |    | $      | 75.1    |    |    | $ | 109.8 | * |
|                                                                                                                                      |   |                    |    |                        |    |   |    |    |    |   |    |    |    |   |    |    |    |   |   |   |   |   |
| Net      income                                                                                                                           |   |                    | $       | 135.2                       |    |   | $       | 128.3   |    |   | $       | 136.3   |    |   | $       | 75.1    |    |   | $ | 105.3 |   |
|                                                                                                                                      |   |                    |    |                        |    |   |    |    |    |   |    |    |    |   |    |    |    |   |   |   |   |   |
| Earnings      per common share                                                                                                            |   |                    |    |                        |    |   |    |    |    |   |    |    |    |   |    |    |    |   |   |   |
|            Basic                                                                                                 |   |                    |    |                        |    |   |    |    |    |   |    |    |    |   |    |    |    |   |   |   |   |
|               Before cumulative effect of                                                         |   |                    |    |                        |    |   |    |    |    |   |    |    |    |   |    |    |    |   |   |   |
|                  accounting change                                                 |   | $                       | 2.99    |                        |    | $      | 2.88    |    |    | $      | 3.08    |    |    | $      | 1.71    |    |    | $ | 2.49 |   |
|               Basic earnings per share                                                            |   |                    | 2.99    |                        |    |   | 2.88    |    |    |   | 3.08    |    |    |   | 1.71    |    |    |   | 2.39 |   |
|                                                                                                                                      |   |                    |    |                        |    |   |    |    |    |   |    |    |    |   |    |    |    |   |   |   |   |   |
|            Diluted                                                                                               |   |                    |    |                        |    |   |    |    |    |   |    |    |    |   |    |    |    |   |   |   |   |
|          Before      cumulative effect of                                                    |   |                    |    |                        |    |   |    |    |    |   |    |    |    |   |    |    |    |   |   |   |
|                  accounting change                                                 |   | $                       | 2.99    |                        |    | $      | 2.87    |    |    | $      | 3.07    |    |    | $      | 1.70    |    |    | $ | 2.48 |   |
|               Diluted earnings per share                                                          |   |                    | 2.99    |                        |    |   | 2.87    |    |    |   | 3.07    |    |    |   | 1.70    |    |    |   | 2.38 |   |
|                                                                                                                                      |   |                    |    |                        |    |   |    |    |    |   |    |    |    |   |    |    |    |   |   |   |   |   |
| Dividends      declared per common share                                                                                                  |   | $                       | 1.86    |                        |    | $      | 1.86    |    |    | $      | 1.86    |    |    | $      | 1.86    |    |    | $ | 1.86 |   |
|                                                                                                                                      |   |                    |    |                        |    |   |    |    |    |   |    |    |    |   |    |    |    |   |   |   |   |   |
| Property,      plant and equipment                                                                                                        |   |                    |    |                        |    |   |    |    |    |   |    |    |    |   |    |    |    |   |   |   |
|               Gross                                                                               |   |                    | $       | 4,611.7                     |    |   | $       | 4,479.7 |    |   | $       | 4,351.3 |    |   | $       | 4,143.6 |    |   | $ | 3,999.5 |   |
|               Net                                                                                 |   |                    |    | 2,757.3                     |    |   |    | 2,714.7 |    |   |    | 2,659.1 |    |   |    | 2,549.8 |    |   |   | 2,484.2 |   |
|                                                                                                                                      |   |                    |    |                        |    |   |    |    |    |   |    |    |    |   |    |    |    |   |   |   |   |   |
| Total      assets                                                                                                                         |   | $                       | 4,252.0 |                        |    | $      | 4,090.1 |    |    | $      | 4,391.2 |    |    | $      | 3,975.2 |    |    | $ | 3,797.2 |   |
|                                                                                                                                      |   |                    |    |                        |    |   |    |    |    |   |    |    |    |   |    |    |    |   |   |   |   |   |
| Capitalization                                                                                                                            |   |                    |    |                        |    |   |    |    |    |   |    |    |    |   |    |    |    |   |   |   |
|               Long-term debt, net of                                                              |   |                    |    |                        |    |   |    |    |    |   |    |    |    |   |    |    |    |   |   |   |
|                  unamortized discount                                              |   | $                       | 422.8   |                        |    | $      | 497.5   |    |    | $      | 485.8   |    |    | $      | 495.3   |    |    | $ | 495.1 |   |
|               Mandatorily redeemable preferred stock                                              |   |                    | .6      |                        |    |   | .6      |    |    |   | .6      |    |    |   | 1.6     |    |    |   | 1.8 |   |
|               Common equity                                                                       |   |                    | 945.2   |                        |    |   | 876.1   |    |    |   | 814.8   |    |    |   | 752.6   |    |    |   | 758.1 | ** |
|                                                                                                                                      |   |                    |    | $                           | 1,368.6 |   |    | $       | 1,374.2 |   |    | $       | 1,301.2 |   |    | $       | 1,249.5 |   |   | $ | 1,255.0 |   |
|                                                                                                                                      |   |                    |    |                        |    |   |    |    |    |   |    |    |    |   |    |    |    |   |   |   |   |   |
|                                                                                                                                      |   |                    |    |                        |    |   |    |    |    |   |    |    |    |   |    |    |    |   |   |   |   |   |
| See      Item 1A - Risk Factors and Item 7 - Management's Discussion and Analysis      of Financial Condition and Results                 |   |
| of      Operations for factors that can impact year-to-year comparisons and may      affect the future performance of Nicor's             |   |
| business.                                                                                                                                 |   |                    |    |                        |    |   |    |    |    |   |    |    |    |   |    |    |    |   |   |   |   |
|                                                                                                                                      |   |                    |    |                        |    |   |    |    |    |   |    |    |    |   |    |    |    |   |   |   |   |   |
|                                                                                                                                      |   |                    |    |                        |    |   |    |    |    |   |    |    |    |   |    |    |    |   |   |   |   |   |
| *      The change in accounting method relates to a rescission of Emerging Issues      Task Force Consensus No. 98-10,                    |   |
| Accounting for Contracts      Involved in Energy Trading and Risk Management Activities, which      disallowed the                        |   |
| recording      of inventory at fair value. Effective January 1, 2003, Nicor’s      wholesale natural gas marketing business,   |   |
| Nicor      Enerchange, began applying accrual accounting rather than fair value      accounting to gas in storage and                     |   |
| certain      energy-related contracts, such as storage and transportation      agreements.  Effective with the change, Nicor    |   |                    |    |                        |    |   |
| recorded      a $4.5 million cumulative effect loss from the change in accounting      principle, which was net of $3.0 million           |   |
| in      income tax benefits.                                                                                                              |   |                    |    |                        |    |   |    |    |    |   |    |    |    |   |    |    |    |   |   |   |
|                                                                                                                                      |   |                    |    |                        |    |   |    |    |    |   |    |    |    |   |    |    |    |   |   |   |   |   |
| **      Pursuant to FSP No. AUG AIR-1, Accounting for Planned Major      Maintenance Activities, one of Nicor'ssubsidiaries,              |   |
| Tropical      Shipping, changed its accounting method for planned major maintenance to      the direct expensing method                   |   |
| effective      January 1, 2007, and retrospectively increased retained earnings by $3.5      million as of the earliest period presented. |   |

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| Item      7. | Management’s Discussion and Analysis of Financial Condition and      Results of Operations |
|--------------|--------------------------------------------------------------------------------------------------|

|                                   |   | 2007   |   |   | 2006   |   |   | 2005   |   |
|----------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
|                                   |   |   |   |   |   |   |   |   |   |
| Net      income                        |   | $      | 135.2  |   |   | $      | 128.3  |   |   | $ | 136.3 |   |
|                                   |   |   |   |   |   |   |   |   |   |   |   |   |
| Diluted      earnings per common share |   | $      | 2.99   |   |   | $      | 2.87   |   |   | $ | 3.07 |   |

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|                            |   | 2007   |   |   | 2006   |   |   | 2005   |   |
|---------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
|                            |   |   |   |   |   |   |   |   |   |
| Gas      distribution           |   | $      | 128.7  |   |   | $      | 123.9  |   |   | $ | 116.9 |   |
| Shipping                        |   |   | 45.4   |   |   |   | 47.5   |   |   |   | 40.4 |   |
| Other      energy ventures      |   |   | 34.0   |   |   |   | 26.6   |   |   |   | 14.1 |   |
| Corporate      and eliminations |   |   | (1.6   | )      |   |   | 4.5    |   |   |   | 30.3 |   |
|                            |   | $      | 206.5  |   |   | $      | 202.5  |   |   | $ | 201.7 |   |

| ·   | Gas      distribution operating income for 2007 increased $4.8 million as compared      with 2006 due primarily to the positive effects of higher gas distribution      margin ($8.1 million increase) and mercury-related recoveries ($4.4      million increase), partially offset by the negative impacts of higher      depreciation expense ($5.5 million increase), operating and maintenance      expenses ($1.3 million increase) and lower gains on property sales ($1.3      million decrease). |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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| ·   | Shipping      operating income for 2007 decreased $2.1 million as compared with 2006 as      higher operating revenues ($5.6 million increase) were more than offset by      higher operating costs ($7.7 million increase).  Higher      operating revenues were attributable to higher volumes shipped ($6.8      million increase).  Higher operating costs were due primarily to      higher transportation-related costs ($7.1 million increase) which includes      fuel. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Operating      income from Nicor’s other energy ventures for 2007 increased $7.4 million      as compared with 2006 due to higher operating income at Nicor’s      energy-related products and services businesses ($3.9 million increase)      and higher operating income at Nicor Enerchange ($3.5 million      increase).  Improved operating results at Nicor’s energy-related      products and services businesses were due to higher operating revenues      ($6.3 million increase) partially offset by higher operating expenses      ($2.4 million increase).  Improved operating results at Nicor      Enerchange were due primarily to the favorable costing of physical sales      activity and improved results from the company’s risk management      activities associated with hedging the product risks of the utility-bill      management contracts offered by Nicor’s energy-related products and      services businesses, partially offset by lower positive fair value      adjustments on derivative instruments used to hedge purchases and sales of      natural gas inventory. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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| ·   | “Corporate      and eliminations” operating income for 2007, 2006 and 2005 was impacted by      the following items: |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------|

|                            |   | 2007   |    |   | 2006   |   |    | 2005   |   |
|---------------------------------|--------|--------|---------|--------|--------|--------|---------|--------|--------|
|                            |   |   |    |   |   |   |    |   |   |
| Gas      distribution           |   | $      | 2,627.5 |   |   | $      | 2,452.3 |   |   | $ | 2,909.6 |   |
| Shipping                        |   |   | 403.9   |   |   |   | 398.3   |   |   |   | 378.5 |   |
| Other      energy ventures      |   |   | 244.5   |   |   |   | 215.9   |   |   |   | 157.0 |   |
| Corporate      and eliminations |   |   | (99.6   | )      |   |   | (106.5  | )      |   |   | (87.3 | ) |
|                            |   | $      | 3,176.3 |   |   | $      | 2,960.0 |   |   | $ | 3,357.8 |   |

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|                           |   | 2007   |     |   | 2006   |   |     | 2005   |   |
|--------------------------------|--------|--------|----------|--------|--------|--------|----------|--------|--------|
|                           |   |   |     |   |   |   |     |   |   |
| Gas      distribution revenues |   | $      | 2,627.5  |   |   | $      | 2,452.3  |   |   | $ | 2,909.6 |   |
| Cost      of gas               |   |   | (1,906.5 | )      |   |   | (1,743.7 | )      |   |   | (2,212.4 | ) |
| Revenue      tax expense       |   |   | (148.7   | )      |   |   | (144.4   | )      |   |   | (152.0 | ) |
| Gas      distribution margin   |   | $      | 572.3    |   |   | $      | 564.2    |   |   | $ | 545.2 |   |

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| Nicor      Inc.                                                                                                       |   |   |    |   |   |   |    |   |   |
|-----------------------------------------------------------------------------------------------------------------------|--------|--------|---------|--------|--------|--------|---------|--------|--------|
|                                                                                                                  |   |   |    |   |   |   |    |   |   |
|                                                                                                                  |   |   |    |   |   |   |    |   |   |
| Gas      Distribution Statistics                                                                                      |   |   |    |   |   |   |    |   |   |
|                                                                                                                  |   | 2007   |    |   | 2006   |   |    | 2005   |   |
|                                                                                                                  |   |   |    |   |   |   |    |   |   |
| Operating revenues      (millions)                                                                                    |   |   |    |   |   |   |    |   |   |
|          Sales                                                                                         |   |   |    |   |   |   |    |   |   |
| Residential                                                                                                           |   | $      | 1,791.4 |   |   | $      | 1,671.1 |   |   | $ | 2,031.4 |   |
| Commercial                                                                                                            |   |   | 426.2   |   |   |   | 373.9   |   |   |   | 453.5 |   |
| Industrial                                                                                                            |   |   | 47.6    |   |   |   | 42.8    |   |   |   | 61.8 |   |
|                                                                                                                  |   |   | 2,265.2 |   |   |   | 2,087.8 |   |   |   | 2,546.7 |   |
| Transportation                                                                                                        |   |   |    |   |   |   |    |   |   |   |   |   |
| Residential                                                                                                           |   |   | 31.1    |   |   |   | 32.0    |   |   |   | 27.9 |   |
| Commercial                                                                                                            |   |   | 76.7    |   |   |   | 82.1    |   |   |   | 73.1 |   |
| Industrial                                                                                                            |   |   | 37.5    |   |   |   | 41.0    |   |   |   | 39.2 |   |
|              Other                                                                 |   |   | 10.6    |   |   |   | 3.7     |   |   |   | 11.7 |   |
|                                                                                                                  |   |   | 155.9   |   |   |   | 158.8   |   |   |   | 151.9 |   |
| Other      revenues                                                                                                   |   |   |    |   |   |   |    |   |   |   |   |   |
| Revenue      taxes                                                                                                    |   |   | 149.6   |   |   |   | 147.7   |   |   |   | 156.4 |   |
| Environmental      cost recovery                                                                                      |   |   | 10.9    |   |   |   | 11.6    |   |   |   | 21.0 |   |
| Chicago      Hub                                                                                                      |   |   | 19.0    |   |   |   | 26.4    |   |   |   | 11.5 |   |
|              Other                                                                 |   |   | 26.9    |   |   |   | 20.0    |   |   |   | 22.1 |   |
|                                                                                                                  |   |   | 206.4   |   |   |   | 205.7   |   |   |   | 211.0 |   |
|                                                                                                                  |   | $      | 2,627.5 |   |   | $      | 2,452.3 |   |   | $ | 2,909.6 |   |
|                                                                                                                  |   |   |    |   |   |   |    |   |   |   |   |   |
| Deliveries      (Bcf)                                                                                                 |   |   |    |   |   |   |    |   |   |   |   |   |
|          Sales                                                                                         |   |   |    |   |   |   |    |   |   |   |   |   |
| Residential                                                                                                           |   |   | 201.8   |   |   |   | 185.9   |   |   |   | 200.2 |   |
| Commercial                                                                                                            |   |   | 48.7    |   |   |   | 41.8    |   |   |   | 44.7 |   |
| Industrial                                                                                                            |   |   | 5.7     |   |   |   | 5.0     |   |   |   | 6.3 |   |
|                                                                                                                  |   |   | 256.2   |   |   |   | 232.7   |   |   |   | 251.2 |   |
| Transportation                                                                                                        |   |   |    |   |   |   |    |   |   |   |   |   |
| Residential                                                                                                           |   |   | 19.7    |   |   |   | 17.0    |   |   |   | 18.9 |   |
| Commercial                                                                                                            |   |   | 84.6    |   |   |   | 80.4    |   |   |   | 87.5 |   |
| Industrial                                                                                                            |   |   | 107.8   |   |   |   | 108.6   |   |   |   | 113.0 |   |
|                                                                                                                  |   |   | 212.1   |   |   |   | 206.0   |   |   |   | 219.4 |   |
|                                                                                                                  |   |   | 468.3   |   |   |   | 438.7   |   |   |   | 470.6 |   |
|                                                                                                                  |   |   |    |   |   |   |    |   |   |   |   |   |
| Year-end customers      (thousands) (1)                                                                               |   |   |    |   |   |   |    |   |   |   |   |   |
|          Sales                                                                                         |   |   |    |   |   |   |    |   |   |   |   |   |
| Residential                                                                                                           |   |   | 1,789   |   |   |   | 1,807   |   |   |   | 1,796 |   |
| Commercial                                                                                                            |   |   | 128     |   |   |   | 123     |   |   |   | 120 |   |
| Industrial                                                                                                            |   |   | 7       |   |   |   | 7       |   |   |   | 8 |   |
|                                                                                                                  |   |   | 1,924   |   |   |   | 1,937   |   |   |   | 1,924 |   |
| Transportation                                                                                                        |   |   |    |   |   |   |    |   |   |   |   |   |
| Residential                                                                                                           |   |   | 191     |   |   |   | 166     |   |   |   | 157 |   |
| Commercial                                                                                                            |   |   | 54      |   |   |   | 57      |   |   |   | 58 |   |
| Industrial                                                                                                            |   |   | 5       |   |   |   | 6       |   |   |   | 6 |   |
|                                                                                                                  |   |   | 250     |   |   |   | 229     |   |   |   | 221 |   |
|                                                                                                                  |   |   | 2,174   |   |   |   | 2,166   |   |   |   | 2,145 |   |
|                                                                                                                  |   |   |    |   |   |   |    |   |   |   |   |   |
| Other      statistics                                                                                                 |   |   |    |   |   |   |    |   |   |   |   |   |
| Degree      days                                                                                                      |   |   | 5,756   |   |   |   | 5,174   |   |   |   | 5,783 |   |
| Warmer      than normal (2)                                                                                           |   |   | (1%)    |   |   |   | (11%)   |   |   |   | (1%) |   |
| Average      gas cost per Mcf sold                                                                                    |   | $      | 7.36    |   |   | $      | 7.44    |   |   | $ | 8.74 |   |
|                                                                                                                  |   |   |    |   |   |   |    |   |   |   |   |   |
| (1)      The company redefined the customer count methodology in 2006 in      conjunction with its new                |   |
| customer      care and billing system.                                                                                |   |   |    |   |   |   |    |   |   |   |   |   |
|                                                                                                                  |   |   |    |   |   |   |    |   |   |   |   |   |
| (2)      Normal weather for Nicor Gas' service territory, for purposes of this      report, is considered to be 5,830 |   |
| degree      days per year.                                                                                            |   |   |    |   |   |   |    |   |   |   |   |   |

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| Shipping      Statistics                         |   | 2007   |   |   | 2006   |   |   | 2005   |   |
|--------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
|                                             |   |   |   |   |   |   |   |   |   |
|          TEUs shipped (thousands) |   |   | 206.6  |   |   |   | 203.1  |   |   |   | 214.2 |   |
|          Average revenue per TEU  |   | $      | 1,955  |   |   | $      | 1,961  |   |   | $ | 1,764 |   |
|                                             |   |   |   |   |   |   |   |   |   |   |   |   |
|          At end of period         |   |   |   |   |   |   |   |   |   |   |   |   |
|    Ports      served                   |   |   | 26     |   |   |   | 27     |   |   |   | 25 |   |
|    Vessels      operated               |   |   | 19     |   |   |   | 18     |   |   |   | 18 |   |

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|                       |   | Estimated |   |   |   |   |   |   |   |   |   |   |
|----------------------------|--------|-----------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
|                       |   | 2008      |   |   | 2007   |   |   | 2006   |   |   | 2005   |   |
|                       |   |      |   |   |   |   |   |   |   |   |   |   |
| Gas      distribution      |   | $         | 225    |   |   | $      | 159    |   |   | $      | 164    |   |   | $ | 186 |   |
| Shipping                   |   |      | 19     |   |   |   | 14     |   |   |   | 17     |   |   |   | 11 |   |
| Other      energy ventures |   |      | 5      |   |   |   | 4      |   |   |   | 6      |   |   |   | 3 |   |
|                       |   | $         | 249    |   |   | $      | 177    |   |   | $      | 187    |   |   | $ | 200 |   |

| ·   | Investing      activities in 2007 as compared to 2006 reflect the release of the $10.0      million from escrow associated with the settlement of the company’s SEC      inquiry and the net increase in 2007 of $32.8 million in other short-term      investments primarily at the company’s shipping  segment. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Investing      activities in 2006 as compared to 2005 reflect the absence of proceeds      from the 2005 sale of various investments, the 2006 $10.0 million funding      of an escrow account associated with the settlement of the company’s SEC      inquiry and net proceeds of $7.0 million associated with the company’s      sale of an equity investment. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                         |  Standard                     |   |            |   |      |   |
|------------------------------|------------------------------------|--------|-----------------|--------|-----------|--------|
|                         | &      Poor’s            |   | Moody’s   |   | Fitch     |   |
| Nicor      Inc.              |                               |   |            |   |      |   |
| Commercial      Paper        |           A-1+ |   |   P-2 |   |  F-1 |   |
| Senior      Unsecured Debt   |         AA-              |   |   n/a |   |  A   |   |
| Corporate      Credit Rating |  AA                           |   |   n/a |   |  n/a |   |

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|                         | Standard &      Poor’s |   | Moody’s |   | Fitch           |   |
|------------------------------|---------------------------------------|--------|---------------|--------|-----------------|--------|
| Nicor      Gas               |                                  |   |          |   |            |   |
| Commercial      Paper        |           A-1+    |   |  P-1     |   |   F-1 |   |
| Senior      Secured Debt     |  AA                              |   |  A1      |   |  AA-       |   |
| Senior      Unsecured Debt   |         AA-                 |   |  A2      |   |   A+  |   |
| Corporate      Credit Rating |  AA                              |   |  n/a     |   |  n/a       |   |

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|                                      |   |  Payments      due by period |    |
|-------------------------------------------|--------|-----------------------------------|---------|
|                                      |   | Lessthan      1year               |    |   | 1-3years |   |   | 3-5years |   |   | Morethan      5years |   |   |  Total |   |
|                                      |   |                              |    |   |   |   |   |   |   |   |   |   |   |   |   |
| Purchase      obligations                 |   | $                                 | 1,079.4 |   |   | $ | 289.3 |   |   | $ | 33.9 |   |   | $ | 2.9 |   |   | $ | 1,405.5 |   |
| Long-term      debt                       |   |                              | 75.0    |   |   |   | 50.0 |   |   |   | 75.0 |   |   |   | 300.0 |   |   |   | 500.0 |   |
| Fixed      interest onlong-term      debt |   |                              | 29.0    |   |   |   | 47.4 |   |   |   | 37.6 |   |   |   | 284.1 |   |   |   | 398.1 |   |
| Operating      leases                     |   |                              | 31.7    |   |   |   | 23.0 |   |   |   | 8.4 |   |   |   | 15.4 |   |   |   | 78.5 |   |
| Other      long-term obligations          |   |                              | 1.1     |   |   |   | .3 |   |   |   | .1 |   |   |   | .6 |   |   |   | 2.1 |   |
|                                      |   | $                                 | 1,216.2 |   |   | $ | 410.0 |   |   | $ | 155.0 |   |   | $ | 603.0 |   |   | $ | 2,384.2 |   |

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Quantitative and Qualitative Disclosures about MarketRisk

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|                                |   |                 |   |   | Maturity                  |   |
|-------------------------------------|--------|----------------------|--------|--------|---------------------------|--------|
|  Source      of Fair Value     |   | TotalFair      Value |   |   | Less      than1      Year |   |   | 1      to 3Years |   |   | 3      to 5Years |   |
|  Prices      actively quoted   |   | $                    | 0.97   |   |                      | $      | 0.71 |   |   | $ | 0.26 |   |   | $ | - |   |
| Prices      based on pricing models |   |                 | 0.09   |   |                      |   | 0.09 |   |   |   | - |   |   |   | - |   |
| Total                               |   | $                    | 1.06   |   |                      | $      | 0.80 |   |   | $ | 0.26 |   |   | $ | - |   |

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| Item      8. | Financial Statements and Supplementary      Data |
|--------------|--------------------------------------------------|

|                                                                         |   | Page   |   |
|------------------------------------------------------------------------------|--------|--------|--------|
|                                                                         |   |   |   |
| Report of Independent Registered Public Accounting      Firm                 |   |   | 39     |   |
|                                                                         |   |   |   |   |
| Financial      Statements:                                                   |   |   |   |   |
|                                                                         |   |   |   |   |
|     Consolidated Statements of    Operations             |   |   | 41     |   |
|                                                                         |   |   |   |   |
|     Consolidated Statements of Cash    Flows             |   |   | 42     |   |
|                                                                         |   |   |   |   |
|     Consolidated Balance Sheets                          |   |   | 43     |   |
|                                                                         |   |   |   |   |
|     Consolidated Statements of      Capitalization       |   |   | 44     |   |
|                                                                         |   |   |   |   |
|     Consolidated Statements of Common      Equity        |   |   | 45     |   |
|                                                                         |   |   |   |   |
|     Consolidated Statements of Comprehensive      Income |   |   | 45     |   |
|                                                                         |   |   |   |   |
|     Notes to the Consolidated Financial      Statements  |   |   | 46     |   |

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTINGFIRM

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| Nicor      Inc.                                                                                           |   |                        |    |   |   |   |    |   |   |
|-----------------------------------------------------------------------------------------------------------|--------|-----------------------------|---------|--------|--------|--------|---------|--------|--------|
|                                                                                                      |   |                        |    |   |   |   |    |   |   |
| Consolidated Statements ofOperations                                                                      |   |                        |    |   |   |   |    |   |   |
| (millions,      except per share data)                                                                    |   |                        |    |   |   |   |    |   |   |
|                                                                                                      |   |                        |    |   |   |   |    |   |   |
|                                                                                                      |   | Year      ended December 31 |    |
|                                                                                                      |   | 2007                        |    |   | 2006   |   |    | 2005   |   |
| Operating      revenues                                                                                   |   |                        |    |   |   |   |    |   |   |
|           Gas distribution  (includes revenue taxes of    $149.6,           |   |                        |    |   |   |   |    |   |   |
|                 $147.7, and $156.4, respectively)            |   | $                           | 2,627.5 |   |   | $      | 2,452.3 |   |   | $ | 2,909.6 |   |
|           Shipping                                                                    |   |                        | 403.9   |   |   |   | 398.3   |   |   |   | 378.5 |   |
|           Other energy ventures                                                       |   |                        | 244.5   |   |   |   | 215.9   |   |   |   | 157.0 |   |
|           Corporate and eliminations                                                  |   |                        | (99.6   | )      |   |   | (106.5  | )      |   |   | (87.3 | ) |
|           Total operating revenues                                                    |   |                        | 3,176.3 |   |   |   | 2,960.0 |   |   |   | 3,357.8 |   |
|                                                                                                      |   |                        |    |   |   |   |    |   |   |   |   |   |
| Operating      expenses                                                                                   |   |                        |    |   |   |   |    |   |   |   |   |   |
|           Gas distribution                                                            |   |                        |    |   |   |   |    |   |   |   |   |   |
|                 Cost of gas                                  |   |                        | 1,906.5 |   |   |   | 1,743.7 |   |   |   | 2,212.4 |   |
|                 Operating and maintenance                    |   |                        | 269.8   |   |   |   | 268.5   |   |   |   | 254.8 |   |
|                 Depreciation                            |   |                        | 165.6   |   |   |   | 160.1   |   |   |   | 154.5 |   |
|                 Taxes, other than income taxes          |   |                        | 166.9   |   |   |   | 163.0   |   |   |   | 171.0 |   |
|                 Mercury-related costs (recoveries), net |   |                        | (8.0    | )      |   |   | (3.6    | )      |   |   | .4 |   |
|                 Property sale gains                     |   |                        | (2.0    | )      |   |   | (3.3    | )      |   |   | (.4 | ) |
|           Shipping                                                                    |   |                        | 358.5   |   |   |   | 350.8   |   |   |   | 338.1 |   |
|           Other energy ventures                                                       |   |                        | 210.5   |   |   |   | 189.3   |   |   |   | 142.9 |   |
|           Litigation charges (recoveries), net                                        |   |                        | -       |   |   |   | 10.0    |   |   |   | (29.9 | ) |
|           Other corporate expenses and eliminations                                   |   |                        | (98.0   | )      |   |   | (121.0  | )      |   |   | (87.7 | ) |
|      Total      operating expenses                                               |   |                        | 2,969.8 |   |   |   | 2,757.5 |   |   |   | 3,156.1 |   |
|                                                                                                      |   |                        |    |   |   |   |    |   |   |   |   |   |
| Operating      income                                                                                     |   |                        | 206.5   |   |   |   | 202.5   |   |   |   | 201.7 |   |
| Interest      expense, net of amounts capitalized                                                         |   |                        | 37.9    |   |   |   | 49.1    |   |   |   | 46.8 |   |
| Equity      investment income, net                                                                        |   |                        | 6.3     |   |   |   | 11.1    |   |   |   | 9.3 |   |
| Interest      income                                                                                      |   |                        | 8.8     |   |   |   | 9.0     |   |   |   | 6.0 |   |
| Other      income, net                                                                                    |   |                        | .6      |   |   |   | .6      |   |   |   | .8 |   |
|                                                                                                      |   |                        |    |   |   |   |    |   |   |   |   |   |
| Income      before income taxes                                                                           |   |                        | 184.3   |   |   |   | 174.1   |   |   |   | 171.0 |   |
| Income      tax expense, net of benefits                                                                  |   |                        | 49.1    |   |   |   | 45.8    |   |   |   | 34.7 |   |
|                                                                                                      |   |                        |    |   |   |   |    |   |   |   |   |   |
| Net      income                                                                                           |   | $                           | 135.2   |   |   | $      | 128.3   |   |   | $ | 136.3 |   |
|                                                                                                      |   |                        |    |   |   |   |    |   |   |   |   |   |
| Average      shares of common stock outstanding                                                           |   |                        |    |   |   |   |    |   |   |   |   |   |
|                 Basic                                   |   |                        | 45.2    |   |   |   | 44.6    |   |   |   | 44.2 |   |
|                 Diluted                                 |   |                        | 45.3    |   |   |   | 44.7    |   |   |   | 44.4 |   |
|                                                                                                      |   |                        |    |   |   |   |    |   |   |   |   |   |
| Earnings      per average share of common stock                                                           |   |                        |    |   |   |   |    |   |   |   |   |   |
|                 Basic                                   |   | $                           | 2.99    |   |   | $      | 2.88    |   |   | $ | 3.08 |   |
|                 Diluted                                 |   | $                           | 2.99    |   |   | $      | 2.87    |   |   | $ | 3.07 |   |
|                                                                                                      |   |                        |    |   |   |   |    |   |   |   |   |   |
| The      accompanying notes are an integral part of these    statements.                                  |   |                        |    |   |   |   |    |   |   |

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| Nicor Inc.                                                                                                                          |                                                                                                            |   |                        |   |   |   |   |   |   |
|-------------------------------------------------------------------------------------------------------------------------------------|-----------------------------------------------------------------------------------------------------------------|--------|-----------------------------|--------|--------|--------|--------|--------|--------|
|                                                                                                                                |                                                                                                            |   |                        |   |   |   |   |   |   |   |
| Consolidated Statements of Cash Flows                                                                                               |                                                                                                            |   |                        |   |   |   |   |   |   |
| (millions)                                                                                                                          |                                                                                                            |   |                        |   |   |   |   |   |   |
|                                                                                                                                |                                                                                                            |   | Year      ended December 31 |   |
|                                                                                                                                |                                                                                                            |   | 2007                        |   |   | 2006   |   |   | 2005   |   |
| Operating      activities                                                                                                           |                                                                                                            |   |                        |   |   |   |   |   |   |
|                                                                                                                                | Net      income                                                                                                 |   | $                           | 135.2  |   |   | $      | 128.3  |   |   | $ | 136.3 |   |
|                                                                                                                                | Adjustments      to reconcile net income to net cash flow                                                       |   |                        |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                                |           provided from operating activities:                                               |   |                        |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                                |     Depreciation                                                                            |   |                        | 184.2  |   |   |   | 178.1  |   |   |   | 172.4 |   |
|                                                                                                                                |     Deferred income      tax benefit                                                        |   |                        | (4.6   | )      |   |   | (44.5  | )      |   |   | (102.1 | ) |
|                                                                                                                                |     Net      (gain) loss on sale of property, plant and equipment                           |   |                        | (1.8   | )      |   |   | (3.3   | )      |   |   | .3 |   |
|                                                                                                                                |     Gain on      sale of equity investment                                                  |   |                        | -      |   |   |   | (2.4   | )      |   |   | - |   |
|                                                                                                                                |     Changes      in assets and liabilities:                                                 |   |                        |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                                |         Receivables,      less allowances                               |   |                        | (100.5 | )      |   |   | 325.6  |   |   |   | (305.9 | ) |
|                                                                                                                                |         Gas in      storage                                             |   |                        | 32.0   |   |   |   | 75.3   |   |   |   | (40.6 | ) |
|                                                                                                                                |         Deferred/accrued      gas costs                                 |   |                        | .1     |   |   |   | (173.2 | )      |   |   | 154.9 |   |
|                                                                                                                                |         Pension      benefits                                           |   |                        | (54.5  | )      |   |   | 26.6   |   |   |   | (6.1 | ) |
|                                                                                                                                |         Regulatory      postretirement asset                            |   |                        | 44.1   |   |   |   | (113.5 | )      |   |   | - |   |
|                                                                                                                                |         Other      assets                                               |   |                        | (16.3  | )      |   |   | 21.1   |   |   |   | 13.9 |   |
|                                                                                                                                |         Accounts      payable and customer credit balances and deposits |   |                        | 100.6  |   |   |   | (93.7  | )      |   |   | 155.3 |   |
|                                                                                                                                |         Health      care and other postretirement benefits              |   |                        | 4.7    |   |   |   | 89.1   |   |   |   | 12.6 |   |
|                                                                                                                                |         Litigation      charge                                          |   |                        | (10.0  | )      |   |   | -      |   |   |   | - |   |
|                                                                                                                                |         Other      liabilities                                          |   |                        | (72.7  | )      |   |   | 53.8   |   |   |   | 9.2 |   |
|                                                                                                                                |     Other      items                                                                        |   |                        | 11.7   |   |   |   | (20.3  | )      |   |   | 6.0 |   |
|                                                                                                                                | Net      cash flow provided from operating activities                                                           |   |                        | 252.2  |   |   |   | 447.0  |   |   |   | 206.2 |   |
|                                                                                                                                |                                                                                                            |   |                        |   |   |   |   |   |   |   |   |   |   |
| Investing      activities                                                                                                           |                                                                                                            |   |                        |   |   |   |   |   |   |   |   |   |
|                                                                                                                                | Additions      to property, plant & equipment                                                               |   |                        | (173.2 | )      |   |   | (187.4 | )      |   |   | (201.9 | ) |
|                                                                                                                                | Release      of (additions to) restricted short-term investments                                                |   |                        | 10.0   |   |   |   | (10.0  | )      |   |   | - |   |
|                                                                                                                                | Purchase      of equity investments                                                                             |   |                        | (1.7   | )      |   |   | (2.7   | )      |   |   | (2.3 | ) |
|                                                                                                                                | Purchases      of available-for-sale securities                                                                 |   |                        | (218.9 | )      |   |   | -      |   |   |   | - |   |
|                                                                                                                                | Purchases      of held-to-maturity securities                                                                   |   |                        | (1.6   | )      |   |   | (2.6   | )      |   |   | (2.9 | ) |
|                                                                                                                                | Proceeds      from sales or maturities of available-for-sale securities                                         |   |                        | 218.9  |   |   |   | -      |   |   |   | 15.1 |   |
|                                                                                                                                | Proceeds      from sales or maturities of held-to-maturity securities                                           |   |                        | 2.3    |   |   |   | 1.5    |   |   |   | 3.6 |   |
|                                                                                                                                | Net      (increase) decrease in other short-term investments                                                    |   |                        | (32.8  | )      |   |   | (7.9   | )      |   |   | 29.7 |   |
|                                                                                                                                | Net      proceeds from sale of property, plant and equipment                                                    |   |                        | 1.2    |   |   |   | 3.9    |   |   |   | 1.0 |   |
|                                                                                                                                | Proceeds      from sale of equity investment                                                                    |   |                        | -      |   |   |   | 7.0    |   |   |   | - |   |
|                                                                                                                                | Other      investing activities                                                                                 |   |                        | 1.9    |   |   |   | 6.0    |   |   |   | 3.0 |   |
|                                                                                                                                | Net      cash flow used for investing activities                                                                |   |                        | (193.9 | )      |   |   | (192.2 | )      |   |   | (154.7 | ) |
|                                                                                                                                |                                                                                                            |   |                        |   |   |   |   |   |   |   |   |   |   |
| Financing      activities                                                                                                           |                                                                                                            |   |                        |   |   |   |   |   |   |   |   |   |
|                                                                                                                                | Proceeds      from issuing long-term debt                                                                       |   |                        | -      |   |   |   | 50.0   |   |   |   | 39.9 |   |
|                                                                                                                                | Disbursements      to retire long-term obligations                                                              |   |                        | -      |   |   |   | (90.0  | )      |   |   | (1.2 | ) |
|                                                                                                                                | Net      issuances (repayments) of commercial paper with maturities                                             |   |                        |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                                |           of 90 days or less                                                                |   |                        | 19.0   |   |   |   | (236.0 | )      |   |   | 96.0 |   |
|                                                                                                                                | Dividends      paid                                                                                             |   |                        | (84.1  | )      |   |   | (82.9  | )      |   |   | (82.1 | ) |
|                                                                                                                                | Proceeds      from exercise of stock options                                                                    |   |                        | 8.2    |   |   |   | 22.6   |   |   |   | 1.4 |   |
|                                                                                                                                | Other      financing activities                                                                                 |   |                        | .3     |   |   |   | 3.7    |   |   |   | .5 |   |
|                                                                                                                                | Net      cash flow provided from (used for) financing activities                                                |   |                        | (56.6  | )      |   |   | (332.6 | )      |   |   | 54.5 |   |
|                                                                                                                                |                                                                                                            |   |                        |   |   |   |   |   |   |   |   |   |   |
| Net      increase (decrease) in cash and cash equivalents                                                                           |                                                                                                            |   | 1.7                         |   |   |   | (77.8  | )      |   |   | 106.0 |   |
|                                                                                                                                |                                                                                                            |   |                        |   |   |   |   |   |   |   |   |   |   |
| Cash      and cash equivalents, beginning of year                                                                                   |                                                                                                            |   | 41.1                        |   |   |   | 118.9  |   |   |   | 12.9 |   |
|                                                                                                                                |                                                                                                            |   |                        |   |   |   |   |   |   |   |   |   |   |
| Cash      and cash equivalents, end of year                                                                                         |                                                                                                            | $      | 42.8                        |   |   | $      | 41.1   |   |   | $ | 118.9 |   |
|                                                                                                                                |                                                                                                            |   |                        |   |   |   |   |   |   |   |   |   |   |
| Supplemental      information                                                                                                       |                                                                                                            |   |                        |   |   |   |   |   |   |   |   |   |
|                                                                                                                                | Income      taxes paid, net                                                                                     |   | $                           | 77.9   |   |   | $      | 86.1   |   |   | $ | 99.6 |   |
|                                                                                                                                | Interest      paid, net of amounts capitalized                                                                  |   |                        | 38.3   |   |   |   | 40.3   |   |   |   | 39.1 |   |
|                                                                                                                                |                                                                                                            |   |                        |   |   |   |   |   |   |   |   |   |   |
| Supplemental      schedule of noncash investing and financing activities:                                                           |                                                                                                            |   |                        |   |   |   |   |   |   |   |   |   |
|                                                                                                                                |                                                                                                            |   |                        |   |   |   |   |   |   |   |   |   |   |
| During      2005, the escrow arrangement with Nicor's D&O insurance carrier was      terminated and the full amount of the      |                                                                                                            |
| escrow      of $29.0 million plus the earnings thereon of $0.4 million, was      distributed to the company and recorded in income. |                                                                                                            |
| The      release of the amount from escrow and the change in the obligation related      to the restricted investment are netted    |                                                                                                            |
| in      Investing activities above.                                                                                                 |                                                                                                            |   |                        |   |   |   |   |   |   |   |   |   |
|                                                                                                                                |                                                                                                            |   |                        |   |   |   |   |   |   |   |   |   |   |
| The      accompanying notes are an integral part of these    statements.                                                            |                                                                                                            |   |                        |   |   |   |   |   |   |   |   |   |

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Table of Contents

| Nicor      Inc.                                                          |                                                                                                                  |                                                                                      |                                                                                                                             |    |                                                                                            |                                                                                                                             |
|--------------------------------------------------------------------------|-----------------------------------------------------------------------------------------------------------------------|-------------------------------------------------------------------------------------------|----------------------------------------------------------------------------------------------------------------------------------|---------|-------------------------------------------------------------------------------------------------|----------------------------------------------------------------------------------------------------------------------------------|
|                                                                     |                                                                                                                  |                                                                                      |                                                                                                                             |    |                                                                                            |                                                                                                                             |   |
| Consolidated Balance Sheets                                              |                                                                                                                  |                                                                                      |                                                                                                                             |    |                                                                                            |                                                                                                                             |
| (millions)                                                               |                                                                                                                  |                                                                                      |                                                                                                                             |    |                                                                                            |                                                                                                                             |
|                                                                     |                                                                                                                  |                                                                                      | December      31                                                                                                                 |    |
|                                                                     |                                                                                                                  |                                                                                      | 2007                                                                                                                             |    |                                                                                            | 2006                                                                                                                             |   |
| Assets                                                                   |                                                                                                                  |                                                                                      |                                                                                                                             |    |  *      As Adjusted                                                                        |                                                                                                                             |
| Current      assets                                                      |                                                                                                                  |                                                                                      |                                                                                                                             |    |                                                                                            |                                                                                                                             |
|                                                                     | Cash      and cash equivalents                                                                                        | $                                                                                         | 42.8                                                                                                                             |    | $                                                                                          |               41.1                                         |   |
|                                                                     | Restricted      short-term investments                                                                                |                                                                                      |  -                                                                                                                          |    |                                                                                            |                  10.2                       |   |
|                                                                     | Short-term      investments, at cost which approximates market                                                        |                                                                                      |                 49.1                             |    |                                                                                            |                  16.3                       |   |
|                                                                     | Receivables,      less allowances of $35.1 and $33.4, respectively                                                    |                                                                                      |               664.0                                        |    |                                                                                            |                563.5                                  |   |
|                                                                     | Gas      in storage                                                                                                   |                                                                                      |               154.0                                        |    |                                                                                            |                186.0                                  |   |
|                                                                     | Deferred      income taxes                                                                                            |                                                                                      |                 37.5                             |    |                                                                                            |                  39.1                       |   |
|                                                                     | Other                                                                                                                 |                                                                                      |                 76.4                             |    |                                                                                            |                  54.5                       |   |
|                                                                     | Total      current assets                                                                                             |                                                                                      |            1,023.8                                                        |    |                                                                                            |                910.7                                  |   |
|                                                                     |                                                                                                                  |                                                                                      |                                                                                                                             |    |                                                                                            |                                                                                                                             |   |
| Property,      plant and equipment, at cost                              |                                                                                                                  |                                                                                      |                                                                                                                             |    |                                                                                            |                                                                                                                             |
|                                                                     | Gas      distribution                                                                                                 |                                                                                      |            4,279.7                                                        |    |                                                                                            |             4,157.1                                                  |   |
|                                                                     | Shipping                                                                                                              |                                                                                      |               309.2                                        |    |                                                                                            |                302.9                                  |   |
|                                                                     | Other                                                                                                                 |                                                                                      |                 22.8                             |    |                                                                                            |                  19.7                       |   |
|                                                                     |                                                                                                                  |                                                                                      |            4,611.7                                                        |    |                                                                                            |             4,479.7                                                  |   |
|                                                                     | Less      accumulated depreciation                                                                                    |                                                                                      |            1,854.4                                                        |    |                                                                                            |             1,765.0                                                  |   |
|                                                                     | Total      property, plant and equipment, net                                                                         |                                                                                      |            2,757.3                                                        |    |                                                                                            |             2,714.7                                                  |   |
|                                                                     |                                                                                                                  |                                                                                      |                                                                                                                             |    |                                                                                            |                                                                                                                             |   |
| Pension      benefits                                                    |                                                                                                                  |               215.5 |                                                                                                                             |    |                161.0 |                                                                                                                             |
| Long-term      investments                                               |                                                                                                                  |               132.9 |                                                                                                                             |    |                134.7 |                                                                                                                             |
| Other      assets                                                        |                                                                                                                  |               122.5 |                                                                                                                             |    |                169.0 |                                                                                                                             |
|                                                                     |                                                                                                                  |                                                                                      |                                                                                                                             |    |                                                                                            |                                                                                                                             |   |
| Total      assets                                                        | $                                                                                                                     | 4,252.0                                                                                   |                                                                                                                             | $  |         4,090.1                                         |                                                                                                                             |
|                                                                     |                                                                                                                  |                                                                                      |                                                                                                                             |    |                                                                                            |                                                                                                                             |   |
| Liabilities and      Capitalization                                      |                                                                                                                  |                                                                                      |                                                                                                                             |    |                                                                                            |                                                                                                                             |
| Current      liabilities                                                 |                                                                                                                  |                                                                                      |                                                                                                                             |    |                                                                                            |                                                                                                                             |
|                                                                     | Long-term      debt due within one year                                                                               | $                                                                                         | 75.0                                                                                                                             |    | $                                                                                          |                    -              |   |
|                                                                     | Short-term      debt                                                                                                  |                                                                                      |               369.0                                        |    |                                                                                            |                350.0                                  |   |
|                                                                     | Accounts      payable                                                                                                 |                                                                                      |               428.2                                        |    |                                                                                            |                364.2                                  |   |
|                                                                     | Customer      credit balances and deposits                                                                            |                                                                                      |               234.5                                        |    |                                                                                            |                197.9                                  |   |
|                                                                     | Accrued      gas costs                                                                                                |                                                                                      |                 50.1                             |    |                                                                                            |                  50.0                       |   |
|                                                                     | Dividends      payable                                                                                                |                                                                                      |                 21.0                             |    |                                                                                            |                  20.9                       |   |
|                                                                     | Obligations      related to restricted investments                                                                    |                                                                                      |  -                                                                                                                          |    |                                                                                            |                  10.0                       |   |
|                                                                     | Other                                                                                                                 |                                                                                      |                 98.6                             |    |                                                                                            |                147.0                                  |   |
|                                                                     | Total      current liabilities                                                                                        |                                                                                      |            1,276.4                                                        |    |                                                                                            |             1,140.0                                                  |   |
|                                                                     |                                                                                                                  |                                                                                      |                                                                                                                             |    |                                                                                            |                                                                                                                             |   |
| Deferred      credits and other liabilities                              |                                                                                                                  |                                                                                      |                                                                                                                             |    |                                                                                            |                                                                                                                             |
|                                                                     | Regulatory      asset retirement cost liability                                                                       |                                                                                      |               720.7                                        |    |                                                                                            |                676.7                                  |   |
|                                                                     | Deferred      income taxes                                                                                            |                                                                                      |               400.4                                        |    |                                                                                            |                399.6                                  |   |
|                                                                     | Health      care and other postretirement benefits                                                                    |                                                                                      |               185.1                                        |    |                                                                                            |                181.6                                  |   |
|                                                                     | Asset      retirement obligation                                                                                      |                                                                                      |               177.5                                        |    |                                                                                            |                169.3                                  |   |
|                                                                     | Regulatory      income tax liability                                                                                  |                                                                                      |                 49.5                             |    |                                                                                            |                  53.8                       |   |
|                                                                     | Unamortized      investment tax credits                                                                               |                                                                                      |                 27.5                             |    |                                                                                            |                  29.6                       |   |
|                                                                     | Other                                                                                                                 |                                                                                      |                 46.3                             |    |                                                                                            |                  65.3                       |   |
|                                                                     | Total      deferred credits and other liabilities                                                                     |                                                                                      |            1,607.0                                                        |    |                                                                                            |             1,575.9                                                  |   |
|                                                                     |                                                                                                                  |                                                                                      |                                                                                                                             |    |                                                                                            |                                                                                                                             |   |
| Commitments      and contingencies                                       |                                                                                                                  |                                                                                      |                                                                                                                             |    |                                                                                            |                                                                                                                             |
|                                                                     |                                                                                                                  |                                                                                      |                                                                                                                             |    |                                                                                            |                                                                                                                             |   |
| Capitalization                                                           |                                                                                                                  |                                                                                      |                                                                                                                             |    |                                                                                            |                                                                                                                             |
|                                                                     | Long-term      obligations                                                                                            |                                                                                      |                                                                                                                             |    |                                                                                            |                                                                                                                             |   |
|                                                                     |           Long-term      debt, net of unamortized discount                                        |                                                                                      |               422.8                                        |    |                                                                                            |                497.5                                  |   |
|                                                                     |           Mandatorily      redeemable preferred stock                                             |                                                                                      |                      .6 |    |                                                                                            |                      .6 |   |
|                                                                     |      Total      long-term obligations                                                        |                                                                                      |               423.4                                        |    |                                                                                            |                498.1                                  |   |
|                                                                     | Common      equity                                                                                                    |                                                                                      |               945.2                                        |    |                                                                                            |                876.1                                  |   |
|                                                                     |                                                                                                                  |                                                                                      |                                                                                                                             |    |                                                                                            |                                                                                                                             |   |
| Total      capitalization                                                |                                                                                                                  |            1,368.6                 |                                                                                                                             |    |             1,374.2                 |                                                                                                                             |
|                                                                     |                                                                                                                  |                                                                                      |                                                                                                                             |    |                                                                                            |                                                                                                                             |   |
| Total      liabilities and capitalization                                | $                                                                                                                     | 4,252.0                                                                                   |                                                                                                                             | $  |        4,090.1                                               |                                                                                                                             |
|                                                                     |                                                                                                                  |                                                                                      |                                                                                                                             |    |                                                                                            |                                                                                                                             |   |
| *                                                                        | Pursuant      to FSP No. AUG AIR-1, Accounting for Planned Major      Maintenance Activities, one of Nicor's          |                                                                                      |                                                                                                                             |    |                                                                                            |                                                                                                                             |   |
|                                                                     | subsidiaries,      Tropical Shipping, changed its accounting method for planned major      maintenance to the direct  |                                                                                      |                                                                                                                             |    |                                                                                            |                                                                                                                             |   |
|                                                                     | expensing      method effective January 1, 2007, and retrospectively increased retained      earnings by $3.5 million |                                                                                      |                                                                                                                             |    |                                                                                            |                                                                                                                             |   |
|                                                                     | for      the earliest period presented.                                                                               |                                                                                      |                                                                                                                             |    |                                                                                            |                                                                                                                             |   |
|                                                                     |                                                                                                                  |                                                                                      |                                                                                                                             |    |                                                                                            |                                                                                                                             |   |
| The      accompanying notes are an integral part of these    statements. |                                                                                                                  |                                                                                      |                                                                                                                             |    |                                                                                            |                                                                                                                             |

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Table of Contents

| Nicor Inc.                                                               |                                                                                                                  |                                                             |    |             |   |   |   |   |   |               |    |   |
|--------------------------------------------------------------------------|-----------------------------------------------------------------------------------------------------------------------|------------------------------------------------------------------|---------|------------------|--------|--------|--------|--------|--------|--------------------|---------|--------|
|                                                                     |                                                                                                                  |                                                             |    |             |   |   |   |   |   |               |    |   |   |   |
| Consolidated Statements of      Capitalization                           |                                                                                                                  |                                                             |    |             |   |   |   |   |   |               |    |
| (millions,      except share data)                                       |                                                                                                                  |                                                             |    |             |   |   |   |   |   |               |    |   |
|                                                                     |                                                                                                                  |                                                             |    |             |   |   |   |   |   |               |    |   |   |   |
|                                                                     |                                                                                                                  |                                                             |    | December      31 |   |
|                                                                     |                                                                                                                  |                                                             |    | 2007             |   |   | 2006   |   |
|                                                                     |                                                                                                                  |                                                             |    |             |   |   |   |   |   |               |    |   |   |   |
|                                                                     |                                                                                                                  |                                                             |    |             |   |   |   |   |   | *      As Adjusted |    |
| First      Mortgage Bonds                                                |                                                                                                                  |                                                             |    |             |   |   |   |   |   |               |    |   |
|                                                                     | 5.875%      Series due 2008                                                                                           |                                                             | $       | 75.0             |   |   |   |   |   | $                  | 75.0    |   |   |   |   |
|                                                                     | 5.37%      Series due 2009                                                                                            |                                                             |    | 50.0             |   |   |   |   |   |               | 50.0    |   |   |   |   |
|                                                                     | 6.625%      Series due 2011                                                                                           |                                                             |    | 75.0             |   |   |   |   |   |               | 75.0    |   |   |   |   |
|                                                                     | 7.20%      Series due 2016                                                                                            |                                                             |    | 50.0             |   |   |   |   |   |               | 50.0    |   |   |   |   |
|                                                                     | 5.80%      Series due 2023                                                                                            |                                                             |    | 50.0             |   |   |   |   |   |               | 50.0    |   |   |   |   |
|                                                                     | 6.58%      Series due 2028                                                                                            |                                                             |    | 50.0             |   |   |   |   |   |               | 50.0    |   |   |   |   |
|                                                                     | 5.90%      Series due 2032                                                                                            |                                                             |    | 50.0             |   |   |   |   |   |               | 50.0    |   |   |   |   |
|                                                                     | 5.90%      Series due 2033                                                                                            |                                                             |    | 50.0             |   |   |   |   |   |               | 50.0    |   |   |   |   |
|                                                                     | 5.85%      Series due 2036                                                                                            |                                                             |    | 50.0             |   |   |   |   |   |               | 50.0    |   |   |   |   |
|                                                                     |                                                                                                                  |                                                             |    |             | 500.0  |   |   |   |   |               |    | 500.0  |   |   |   |   |
|                                                                     |                                                                                                                  |                                                             |    |             |   |   |   |   |   |               |    |   |   |   |   |   |
|                                                                     | Less:                                                                                                                 | Amount      due within one year                                  |    |             | 75.0   |   |   |   |   |               |    | -      |   |   |   |   |
|                                                                     |                                                                                                                  | Unamortized      debt discount, net of premium                   |    |             | 2.2    |   |   |   |   |               |    | 2.5    |   |   |   |   |
|                                                                     | Total      long-term debt                                                                                             |                                                             |    | 422.8            |   |   |   | 30.9%  |   |               |    | 497.5  |   |   |   | 36.2% |   |
|                                                                     |                                                                                                                  |                                                             |    |             |   |   |   |   |   |               |    |   |   |   |   |   |   |   |
| Mandatorily      redeemable 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              |    |             |   |   |   |   |   |               |    |   |   |   |   |   |   |   |
|                                                                     |                                                                                                                  | (11,581      and 11,681 shares of redeemable preferred           |    |             |   |   |   |   |   |               |    |   |   |   |   |   |   |   |
|                                                                     |                                                                                                                  |  stock,      4.48% series, outstanding at December 31, 2007 |    |             |   |   |   |   |   |               |    |   |   |   |   |   |   |   |
|                                                                     |                                                                                                                  | and      2006, respectively)                                     |    |             | .6     |   |   |   | -      |               |    |   | .6 |   |   |   | - |   |
|                                                                     |                                                                                                                  |                                                             |    |             |   |   |   |   |   |               |    |   |   |   |   |   |   |   |
| Common      equity                                                       |                                                                                                                  |                                                             |    |             |   |   |   |   |   |               |    |   |   |   |   |   |
|                                                                     | Common      stock, $2.50 par value, 160,000,000 shares                                                                |                                                             |    |             |   |   |   |   |   |               |    |   |   |   |   |   |   |
|                                                                     |                                                                                                                  | authorized      (2,976,963 and 1,715,263 shares reserved         |    |             |   |   |   |   |   |               |    |   |   |   |   |   |   |   |
|                                                                     |                                                                                                                  | for      share-based awards and other purposes, and 45,129,889   |    |             |   |   |   |   |   |               |    |   |   |   |   |   |   |   |
|                                                                     |                                                                                                                  | and      44,901,454 shares outstanding, respectively)            |    |             | 112.8  |   |   |   |   |               |    |   | 112.3 |   |   |   |   |   |
|                                                                     | Paid-in      capital                                                                                                  |                                                             |    | 44.8             |   |   |   |   |   |               |    | 34.1   |   |   |   |   |   |
|                                                                     | Retained      earnings                                                                                                |                                                             |    | 795.5            |   |   |   |   |   |               |    | 743.0  |   |   |   |   |   |
|                                                                     | Accumulated      other comprehensive loss, net                                                                        |                                                             |    |             |   |   |   |   |   |               |    |   |   |   |   |   |   |
|                                                                     |                                                                                                                  | Cash      flow hedges                                            |    |             | (6.0   | )      |   |   |   |               |    |   | (10.3 | ) |   |   |   |   |
|                                                                     |                                                                                                                  | Postretirement      benefit plans (includes SFAS No. 158         |    |             |   |   |   |   |   |               |    |   |   |   |   |   |   |   |
|                                                                     |                                                                                                                  |         transition amount of $2.9 recorded in 2006)    |    |             | (1.7   | )      |   |   |   |               |    |   | (3.1 | ) |   |   |   |   |
|                                                                     |                                                                                                                  | Foreign      currency translation adjustment                     |    |             | (.2    | )      |   |   |   |               |    |   | .1 |   |   |   |   |   |
|                                                                     |                                                                                                                  | Total      accumulated other comprehensive loss                  |    |             | (7.9   | )      |   |   |   |               |    |   | (13.3 | ) |   |   |   |   |
|                                                                     | Total      common equity                                                                                              |                                                             |    | 945.2            |   |   |   | 69.1   |   |               |    | 876.1  |   |   |   | 63.8 |   |
|                                                                     |                                                                                                                  |                                                             |    |             |   |   |   |   |   |               |    |   |   |   |   |   |   |   |
| Total      capitalization                                                |                                                                                                                  | $                                                                | 1,368.6 |             |   |   | 100.0% |   |   | $                  | 1,374.2 |   |   |   | 100.0% |   |
|                                                                     |                                                                                                                  |                                                             |    |             |   |   |   |   |   |               |    |   |   |   |   |   |   |   |
| *                                                                        | Pursuant      to FSP No. AUG AIR-1, Accounting for Planned Major      Maintenance Activities, one of Nicor's          |                                                             |    |             |   |   |
|                                                                     | subsidiaries,      Tropical Shipping, changed its accounting method for planned major      maintenance to the direct  |                                                             |    |             |   |   |
|                                                                     | expensing      method effective January 1, 2007, and retrospectively increased retained      earnings by $3.5 million |                                                             |    |             |   |   |
|                                                                     | for      the earliest period presented.                                                                               |                                                             |    |             |   |   |   |   |   |               |    |   |   |   |   |   |   |
|                                                                     |                                                                                                                  |                                                             |    |             |   |   |   |   |   |               |    |   |   |   |   |   |   |   |
| The      accompanying notes are an integral part of these    statements. |                                                                                                                  |                                                             |    |             |   |   |   |   |   |               |    |   |   |   |   |   |

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| Nicor      Inc.                                                          |                                                                                                                  |   |                        |   |   |                        |   |   |               |
|--------------------------------------------------------------------------|-----------------------------------------------------------------------------------------------------------------------|--------|-----------------------------|--------|--------|-----------------------------|--------|--------|--------------------|
|                                                                     |                                                                                                                  |   |                        |   |   |                        |   |   |               |   |   |   |   |
| Consolidated Statements of Common      Equity                            |                                                                                                                  |   |                        |   |   |                        |   |   |               |   |   |   |
| (millions,      except per share data)                                   |                                                                                                                  |   |                        |   |   |                        |   |   |               |
|                                                                     |                                                                                                                  |   |                        |   |   |                        |   |   |               |   |   |   |   |
|                                                                     |                                                                                                                  |   |                        |   |   | Year      ended December 31 |   |
|                                                                     |                                                                                                                  |   |                        |   |   | 2007                        |   |   | 2006               |   |   | 2005 |   |
|                                                                     |                                                                                                                  |   |                        |   |   |                        |   |   | *      As Adjusted |   |   | *      As Adjusted |   |
| Common      stock                                                        |                                                                                                                  |   |                        |   |   |                        |   |   |               |
|                                                                     | Balance      at beginning of year                                                                                     |   | $                           | 112.3  |   |                        | $      | 110.5  |               |   | $ | 110.2 |   |
|                                                                     | Issued      and converted stock, net of cancellations                                                                 |   |                        | .5     |   |                        |   | 1.8    |               |   |   | .3 |   |
|                                                                     | Balance      at end of year                                                                                           |   |                        | 112.8  |   |                        |   | 112.3  |               |   |   | 110.5 |   |
|                                                                     |                                                                                                                  |   |                        |   |   |                        |   |   |               |   |   |   |   |
| Paid-in      capital                                                     |                                                                                                                  |   |                        |   |   |                        |   |   |               |   |   |   |
|                                                                     | Balance      at beginning of year                                                                                     |   |                        | 34.1   |   |                        |   | 8.0    |               |   |   | 5.6 |   |
|                                                                     | Issued      and converted stock                                                                                       |   |                        | 11.4   |   |                        |   | 26.6   |               |   |   | 2.8 |   |
|                                                                     | Reacquired      and cancelled stock                                                                                   |   |                        | (.7    | )      |                        |   | (.5    | )                  |   |   | (.4 | ) |
|                                                                     | Balance      at end of year                                                                                           |   |                        | 44.8   |   |                        |   | 34.1   |               |   |   | 8.0 |   |
|                                                                     |                                                                                                                  |   |                        |   |   |                        |   |   |               |   |   |   |   |
| Retained      earnings                                                   |                                                                                                                  |   |                        |   |   |                        |   |   |               |   |   |   |
|                                                                     | Balance      at beginning of year                                                                                     |   |                        | 743.0  |   |                        |   | 698.0  |               |   |   | 643.8 |   |
|                                                                     | Net      income                                                                                                       |   |                        | 135.2  |   |                        |   | 128.3  |               |   |   | 136.3 |   |
|                                                                     | Cumulative      effect of change in accounting principle - FIN No. 48                                                 |   |                        | 1.4    |   |                        |   | -      |               |   |   | - |   |
|                                                                     | Dividends      on common stock ($1.86 per share for 2007                                                              |   |                        |   |   |                        |   |   |               |   |   |   |   |
|                                                                     |           to      2005)                                                                           |   |                        | (84.1  | )      |                        |   | (83.3  | )                  |   |   | (82.1 | ) |
|                                                                     | Balance      at end of year                                                                                           |   |                        | 795.5  |   |                        |   | 743.0  |               |   |   | 698.0 |   |
|                                                                     |                                                                                                                  |   |                        |   |   |                        |   |   |               |   |   |   |   |
| Unearned      compensation                                               |                                                                                                                  |   |                        |   |   |                        |   |   |               |   |   |   |
|                                                                     | Balance      at beginning of year                                                                                     |   |                        | -      |   |                        |   | (.1    | )                  |   |   | (.2 | ) |
|                                                                     | Restricted      stock amortization                                                                                    |   |                        | -      |   |                        |   | .1     |               |   |   | .1 |   |
|                                                                     | Balance      at end of year                                                                                           |   |                        | -      |   |                        |   | -      |               |   |   | (.1 | ) |
|                                                                     |                                                                                                                  |   |                        |   |   |                        |   |   |               |   |   |   |   |
| Accumulated      other comprehensive loss                                |                                                                                                                  |   |                        |   |   |                        |   |   |               |   |   |   |
|                                                                     | Balance      at beginning of year                                                                                     |   |                        | (13.3  | )      |                        |   | (1.6   | )                  |   |   | (6.8 | ) |
|                                                                     | Other      comprehensive income (loss)                                                                                |   |                        | 5.4    |   |                        |   | (8.8   | )                  |   |   | 5.2 |   |
|                                                                     | SFAS      No. 158 transition amount                                                                                   |   |                        | -      |   |                        |   | (2.9   | )                  |   |   | - |   |
|                                                                     | Balance      at end of year                                                                                           |   |                        | (7.9   | )      |                        |   | (13.3  | )                  |   |   | (1.6 | ) |
|                                                                     |                                                                                                                  |   |                        |   |   |                        |   |   |               |   |   |   |   |
| Total      common equity                                                 |                                                                                                                  | $      | 945.2                       |   |   | $                           | 876.1  |   |               | $ | 814.8 |   |
|                                                                     |                                                                                                                  |   |                        |   |   |                        |   |   |               |   |   |   |   |
|                                                                     |                                                                                                                  |   |                        |   |   |                        |   |   |               |   |   |   |   |
| Consolidated Statements of Comprehensive      Income                     |                                                                                                                  |   |                        |   |   |                        |   |   |               |   |   |   |
| (millions)                                                               |                                                                                                                  |   |                        |   |   |                        |   |   |               |   |   |   |
|                                                                     |                                                                                                                  |   | Year      ended December 31 |   |
|                                                                     |                                                                                                                  |   | 2007                        |   |   | 2006                        |   |   | 2005               |   |
|                                                                     |                                                                                                                  |   |                        |   |   |                        |   |   |               |   |   |   |   |
| Net      income                                                          |                                                                                                                  | $      | 135.2                       |   |   | $                           | 128.3  |   |               | $ | 136.3 |   |
| Other      comprehensive income (loss)                                   |                                                                                                                  |   |                        |   |   |                        |   |   |               |   |   |   |
|                                                                     | Gain      (loss) on cash flow hedges (net of income tax of $(1.0),                                                    |   |                        |   |   |                        |   |   |               |   |   |   |   |
|                                                                     |           $(7.4)      and $4.8, respectively)                                                     |   |                        | (2.0   | )      |                        |   | (11.6  | )                  |   |   | 6.8 |   |
|                                                                     | Loss      on available-for-sale securities                                                                            |   |                        | -      |   |                        |   | -      |               |   |   | (.1 | ) |
|                                                                     | Reclassifications      of hedge (gains) losses to net income (net                                                     |   |                        |   |   |                        |   |   |               |   |   |   |   |
|                                                                     |           of      income tax of $3.8, $1.6 and $(2.2), respectively)                              |   |                        | 6.3    |   |                        |   | 3.0    |               |   |   | (2.7 | ) |
|                                                                     | Postretirement      gains (net of income tax of $0.9 in                                                               |   |                        |   |   |                        |   |   |               |   |   |   |   |
|                                                                     |           2007)                                                                                   |   |                        | 1.4    |   |                        |   | -      |               |   |   | - |   |
|                                                                     | Decrease      to minimum pension liability (net of income tax of                                                      |   |                        |   |   |                        |   |   |               |   |   |   |   |
|                                                                     |      $0.9      in 2005)                                                                      |   |                        | -      |   |                        |   | -      |               |   |   | 1.3 |   |
|                                                                     | Foreign      currency translation adjustment                                                                          |   |                        | (.3    | )      |                        |   | (.2    | )                  |   |   | (.1 | ) |
| Other      comprehensive income (loss), net of tax                       |                                                                                                                  |   | 5.4                         |   |   |                        | (8.8   | )      |               |   | 5.2 |   |
|                                                                     |                                                                                                                  |   |                        |   |   |                        |   |   |               |   |   |   |   |
| Comprehensive      income                                                |                                                                                                                  | $      | 140.6                       |   |   | $                           | 119.5  |   |               | $ | 141.5 |   |
|                                                                     |                                                                                                                  |   |                        |   |   |                        |   |   |               |   |   |   |   |
| *                                                                        | Pursuant      to FSP No. AUG AIR-1, Accounting for Planned Major      Maintenance Activities, one of Nicor's          |   |
|                                                                     | subsidiaries,      Tropical Shipping, changed its accounting method for planned major      maintenance to the direct  |   |
|                                                                     | expensing      method effective January 1, 2007, and retrospectively increased retained      earnings by $3.5 million |   |
|                                                                     | for      the earliest period presented.                                                                               |   |                        |   |   |                        |   |   |               |   |   |   |   |   |   |   |   |
|                                                                     |                                                                                                                  |   |                        |   |   |                        |   |   |               |   |   |   |   |   |   |   |   |
| The      accompanying notes are an integral part of these    statements. |                                                                                                                  |   |                        |   |   |                        |   |   |               |

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Notes to theConsolidated Financial Statements

|                                                               |   | 2007   |   |   | 2006   |   |
|--------------------------------------------------------------------|--------|--------|--------|--------|--------|--------|
| Regulatory      assets                                             |   |   |   |   |   |   |
| Regulatory      postretirement asset – current               |   | $      | 5.2    |   |   | $      | 8.8 |   |
| Regulatory      postretirement asset – noncurrent            |   |   | 64.2   |   |   |   | 104.7 |   |
| Deferred      environmental costs                                  |   |   | 9.5    |   |   |   | 16.0 |   |
| Unamortized      losses on reacquired debt                         |   |   | 16.5   |   |   |   | 17.6 |   |
| Deferred      rate case costs                                      |   |   | 2.6    |   |   |   | 3.0 |   |
| Other                                                              |   |   | .1     |   |   |   | 1.0 |   |
|                                                               |   | $      | 98.1   |   |   | $      | 151.1 |   |
|                                                               |   |   |   |   |   |   |   |   |
| Regulatory      liabilities                                        |   |   |   |   |   |   |   |   |
| Regulatory      asset retirement cost liability – current    |   | $      | 8.0    |   |   | $      | 8.0 |   |
| Regulatory      asset retirement cost liability – noncurrent |   |   | 720.7  |   |   |   | 676.7 |   |
| Accrued      gas costs                                             |   |   | 50.1   |   |   |   | 50.0 |   |
| Regulatory      income tax liability                               |   |   | 49.5   |   |   |   | 53.8 |   |
| Other                                                              |   |   | 1.1    |   |   |   | - |   |
|                                                               |   | $      | 829.4  |   |   | $      | 788.5 |   |

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|                         |   | 2007   |   |   | 2006   |   |
|------------------------------|--------|--------|--------|--------|--------|--------|
| Held-to-maturity             |   |   |   |   |   |   |
| Corporate      bonds         |   | $      | 6.5    |   |   | $      | 7.7 |   |
| Certificates      of deposit |   |   | 1.7    |   |   |   | 1.3 |   |
| Other                        |   |   | 1.2    |   |   |   | 1.1 |   |
|                         |   | $      | 9.4    |   |   | $      | 10.1 |   |

| Lessthan      1year |   |   | 1-5years |   |   | 5-10years |   |   | Morethan      10years |   |   |  Total |   |
|---------------------|--------|--------|----------|--------|--------|-----------|--------|--------|-----------------------|--------|--------|-------------|--------|
|                |   |   |     |   |   |      |   |   |                  |   |   |        |   |
| $                   | 3.6    |   |     | $      | 5.8    |      |   | $      | -                     |   |   | $           | -      |   |   | $ | 9.4 |   |

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|                                        |   | 2007   |   |   | 2006   |   |
|---------------------------------------------|--------|--------|--------|--------|--------|--------|
| Beginning      of period                    |   | $      | 170.6  |   |   | $      | 164.8 |   |
| Liabilities      incurred during the period |   |   | 2.3    |   |   |   | 2.2 |   |
| Liabilities      settled during the period  |   |   | (3.2   | )      |   |   | (3.2 | ) |
| Accretion                                   |   |   | 9.7    |   |   |   | 9.5 |   |
| Revision      in estimated cash flows       |   |   | -      |   |   |   | (2.7 | ) |
| End      of period                          |   | $      | 179.4  |   |   | $      | 170.6 |   |

|                  |   | 2007   |   |   | 2006   |   |
|-----------------------|--------|--------|--------|--------|--------|--------|
|                  |   |   |   |   |   |   |
| Nicor      Gas        |   | $      | 112.9  |   |   | $      | 153.0 |   |
| Nicor      Enerchange |   |   | 41.1   |   |   |   | 33.0 |   |
|                  |   | $      | 154.0  |   |   | $      | 186.0 |   |

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|                              |   | 2007   |   |   | 2006   |   |
|-----------------------------------|--------|--------|--------|--------|--------|--------|
|                              |   |   |   |   |   |   |
| Current      other assets         |   | $      | 2.7    |   |   | $      | 5.3 |   |
| Noncurrent      other assets      |   |   | .7     |   |   |   | .5 |   |
|                              |   | $      | 3.4    |   |   | $      | 5.8 |   |
|                              |   |   |   |   |   |   |   |   |
| Current      other liabilities    |   | $      | 6.2    |   |   | $      | 51.3 |   |
| Noncurrent      other liabilities |   |   | .2     |   |   |   | 1.2 |   |
|                              |   | $      | 6.4    |   |   | $      | 52.5 |   |

|                                             | 2007   |   | 2006   |   | 2005   |
|--------------------------------------------------|--------|--------|--------|--------|--------|
| Current                                          |   |   |   |   |   |   |   |   |   |   |   |
| Federal                                          | $      | 47.8   |   |   | $      | 73.6 |   |   | $ | 116.3 |   |
| State                                            |   | 7.4    |   |   |   | 18.2 |   |   |   | 22.1 |   |
|                                             |   | 55.2   |   |   |   | 91.8 |   |   |   | 138.4 |   |
| Deferred                                         |   |   |   |   |   |   |   |   |   |   |   |
| Federal                                          |   | (5.3   | )      |   |   | (22.4 | ) |   |   | (87.7 | ) |
| State                                            |   | .7     |   |   |   | (22.1 | ) |   |   | (14.4 | ) |
|                                             |   | (4.6   | )      |   |   | (44.5 | ) |   |   | (102.1 | ) |
|                                             |   |   |   |   |   |   |   |   |   |   |   |
| Amortization      of investment tax credits, net |   | (2.1   | )      |   |   | (2.1 | ) |   |   | (2.1 | ) |
| Foreign      taxes                               |   | .6     |   |   |   | .6 |   |   |   | .5 |   |
| Income      tax expense, net                     | $      | 49.1   |   |   | $      | 45.8 |   |   | $ | 34.7 |   |

|                               | 2007   |   | 2006   |   |
|------------------------------------|--------|--------|--------|--------|
| Deferred      tax liabilities      |   |   |   |   |   |   |
| Property,      plant and equipment | $      | 288.9  |   | $      | 291.2 |   |
| Investment      in partnerships    |   | 117.8  |   |   | 120.8 |   |
| Other                              |   | 32.0   |   |   | 35.0 |   |
|                               |   | 438.7  |   |   | 447.0 |   |
| Deferred      tax assets           |   |   |   |   |   |   |
| Other                              |   | 75.8   |   |   | 86.5 |   |
| Net      deferred tax liability    | $      | 362.9  |   | $      | 360.5 |   |

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|                                                      | 2007   |   | 2006   |   | 2005   |
|-----------------------------------------------------------|--------|--------|--------|--------|--------|
|                                                      |   |   |   |   |   |   |   |   |   |   |
| Federal      statutory rate                               | 35.0%  |   |   |   | 35.0%  |   |   |   | 35.0% |   |
| Foreign      earnings repatriation                        | -      |   |   |   | -      |   |   |   | (9.9) |   |
| State      income taxes, net                              | 3.1    |   |   |   | 2.8    |   |   |   | 3.1 |   |
| Tax      credits                                          | (2.8)  |   |   |   | (3.1)  |   |   |   | (3.1) |   |
| Amortization      of regulatory income tax liability      | (.9)   |   |   |   | (.9)   |   |   |   | (1.1) |   |
| Undistributed      foreign earnings                       | (6.9)  |   |   |   | (6.0)  |   |   |   | (3.3) |   |
| Reorganization      of certain shipping operations        | -      |   |   |   | (2.7)  |   |   |   | - |   |
| SEC      tentative settlement                             | -      |   |   |   | 2.0    |   |   |   | - |   |
| Other,      net                                           | (.9)   |   |   |   | (.8)   |   |   |   | (.4) |   |
| Effective      combined federal and state income tax rate | 26.6%  |   |   |   | 26.3%  |   |   |   | 20.3% |   |

| Balance      at January 1, 2007                                   |   | $      | 4.8 |   |
|-------------------------------------------------------------------|--------|--------|-----|--------|
| Additions      based on tax positions related to the current year |   |   | 1.4 |   |
| Additions      for tax positions of prior years                   |   |   | .1  |   |
| Reductions      for tax positions of prior years                  |   |   | (.3 | )      |
| Settlements                                                       |   |   | (.3 | )      |
| Balance      at December 31, 2007                                 |   | $      | 5.7 |   |

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|                                           |   | Pension      benefits |   |   | Health      care andother      benefits |   |
|------------------------------------------------|--------|-----------------------|--------|--------|-----------------------------------------|--------|
|                                           |   | 2007                  |   |   | 2006                                    |   |   | 2007 |   |   | 2006 |   |
| Change      in benefit obligation              |   |                  |   |   |                                    |   |   |   |   |   |   |   |
| Benefit      obligation at beginning of period |   | $                     | 271.3  |   |                                    | $      | 284.4 |   |   | $ | 193.7 |   |   | $ | 192.5 |   |
| Service      cost                              |   |                  | 9.1    |   |                                    |   | 9.4 |   |   |   | 2.3 |   |   |   | 2.4 |   |
| Interest      cost                             |   |                  | 15.1   |   |                                    |   | 14.9 |   |   |   | 10.9 |   |   |   | 10.3 |   |
| Actuarial      (gain) loss                     |   |                  | (15.2  | )      |                                    |   | (9.7 | ) |   |   | 1.3 |   |   |   | .4 |   |
| Participant      contributions                 |   |                  | -      |   |                                    |   | - |   |   |   | 1.1 |   |   |   | .7 |   |
| Medicare      Part D reimbursements            |   |                  | -      |   |                                    |   | - |   |   |   | 1.2 |   |   |   | - |   |
| Benefits      paid                             |   |                  | (17.1  | )      |                                    |   | (27.7 | ) |   |   | (13.6 | ) |   |   | (12.6 | ) |
| Benefit      obligation at end of period       |   |                  | 263.2  |   |                                    |   | 271.3 |   |   |   | 196.9 |   |   |   | 193.7 |   |

| Change      in plan assets                            |   |   |   |   |   |   |   |   |   |   |   |   |
|-------------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
| Fair      value of plan assets at beginning of period |   |   | 432.3  |   |   |   | 424.0  |   |   |   | 1.2    |   |   |   | 6.9 |   |
| Actual      return on plan assets                     |   |   | 63.5   |   |   |   | 36.0   |   |   |   | -      |   |   |   | .2 |   |
| Employer      contributions                           |   |   | -      |   |   |   | -      |   |   |   | 11.3   |   |   |   | 6.0 |   |
| Participant      contributions                        |   |   | -      |   |   |   | -      |   |   |   | 1.1    |   |   |   | .7 |   |
| Benefits      paid                                    |   |   | (17.1  | )      |   |   | (27.7  | )      |   |   | (13.6  | )      |   |   | (12.6 | ) |
| Fair      value of plan assets at end of period       |   |   | 478.7  |   |   |   | 432.3  |   |   |   | -      |   |   |   | 1.2 |   |
|                                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Funded      status                                    |   |   | 215.5  |   |   |   | 161.0  |   |   |   | (196.9 | )      |   |   | (192.5 | ) |
| Contributions      made after the measurement date    |   |   | -      |   |   |   | -      |   |   |   | 2.3    |   |   |   | 3.0 |   |
| Other                                                 |   |   | -      |   |   |   | -      |   |   |   | (.9    | )      |   |   | (1.2 | ) |
| Postretirement      benefit asset (liability)         |   | $      | 215.5  |   |   | $      | 161.0  |   |   | $      | (195.5 | )      |   | $ | (190.7 | ) |

|                        |   | Pension      benefits |   |   | Health      care andother      benefits |   |
|-----------------------------|--------|-----------------------|--------|--------|-----------------------------------------|--------|
|                        |   | 2007                  |   |   | 2006                                    |   |   | 2007 |   |   | 2006 |   |
|                        |   |                  |   |   |                                    |   |   |   |   |   |   |   |
| Noncurrent      assets      |   | $                     | 215.5  |   |                                    | $      | 161.0 |   |   | $ | - |   |   | $ | - |   |
| Current      liabilities    |   |                  | -      |   |                                    |   | - |   |   |   | (10.4 | ) |   |   | (9.1 | ) |
| Noncurrent      liabilities |   |                  | -      |   |                                    |   | - |   |   |   | (185.1 | ) |   |   | (181.6 | ) |
|                        |   | $                     | 215.5  |   |                                    | $      | 161.0 |   |   | $ | (195.5 | ) |   | $ | (190.7 | ) |

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|                                                  |   | Net      regulatory assets |   |   | Accumulated      other comprehensive      income |   |   | Total                 |   |
|-------------------------------------------------------|--------|----------------------------|--------|--------|--------------------------------------------------|--------|--------|-----------------------|--------|
|                                                  |   | Pensionbenefits            |   |   | Healthcare      and otherbenefits           |   |   | Pension      benefits |   |   | Healthcare      andotherbenefits |   |   | Pensionbenefits |   |   | Healthcare      andotherbenefits |   |
|                                                  |   |                       |   |   |                                             |   |   |                  |   |   |   |   |   |   |   |   |   |   |
| January      1, 2007                                  |   | $                          | 34.6   |   |                                             | $      | 78.2   |                  |   | $ | 1.8 |   |   | $ | 4.2 |   |   | $ | 36.4 |   |   | $ | 82.4 |   |
| Arising      during period:                           |   |                       |   |   |                                             |   |   |                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net actuarial (gain)      loss                        |   |                       | (40.5  | )      |                                             |   | 1.3    |                  |   |   | (2.1 | ) |   |   | - |   |   |   | (42.6 | ) |   |   | 1.3 |   |
| Amortized      to net periodic benefit cost (credit): |   |                       |   |   |                                             |   |   |                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net actuarial    loss                                 |   |                       | -      |   |                                             |   | (4.5   | )                     |   |   | - |   |   |   | (.2 | ) |   |   | - |   |   |   | (4.7 | ) |
| Net prior service (cost)      benefit                 |   |                       | (.5    | )      |                                             |   | .1     |                  |   |   | - |   |   |   | - |   |   |   | (.5 | ) |   |   | .1 |   |
| December      31, 2007                                |   | $                          | (6.4   | )      |                                             | $      | 75.1   |                  |   | $ | (.3 | ) |   | $ | 4.0 |   |   | $ | (6.7 | ) |   | $ | 79.1 |   |

|                                  |   | Net      regulatory assets |   |   | Accumulated      other comprehensive income |    |   | Total                 |   |
|---------------------------------------|--------|----------------------------|--------|--------|---------------------------------------------|---------|--------|-----------------------|--------|
|                                  |   | Pension      benefits      |   |   | Health      care and other benefits         |    |   | Pension      benefits |   |   | Health      care and other benefits |   |   | Pension      benefits |   |   | Health      care and other benefits |   |
|                                  |   |                       |   |   |                                        |    |   |                  |   |   |   |   |   |   |   |   |   |   |
| Net      actuarial loss               |   | $                          | -      |   |                                        | $       | 4.4    |                  |   | $ | - |   |   | $ | .2 |   |   | $ | - |   |   | $ | 4.6 |   |
| Net      prior service cost (benefit) |   |                       | .4     |   |                                        |    | (.1    | )                     |   |   | - |   |   |   | - |   |   |   | .4 |   |   |   | (.1 | ) |
|                                  |   | $                     | .4     |   |                                        | $  | 4.3    |                  |   | $  |  - |   |   | $  | .2 |   |   | $  |  .4 |   |   | $  |  4.5 |   |

|                                          |   | Pension      benefits |        |    | Health      care andother      benefits |    |
|-----------------------------------------------|--------|-----------------------|-------------|---------|-----------------------------------------|---------|
|                                          |   | 2007                  |        |    | 2006                                    |    |   | 2005 |   |   | 2007 |   |   | 2006 |   |   | 2005 |   |
|                                          |   |                  |        |    |                                    |    |   |   |   |   |   |   |   |   |   |   |   |   |
| Service      cost                             |   | $                     | 9.1         |    |                                    | $       | 9.4 |   |   | $ | 9.3 |   |   | $ | 2.3 |   |   | $ | 2.4 |   |   | $ | 2.7 |   |
| Interest      cost                            |   |                  | 15.1        |    |                                    |    | 14.9 |   |   |   | 15.6 |   |   |   | 10.9 |   |   |   | 10.3 |   |   |   | 10.3 |   |
| Expected      return on plan assets           |   |                  | (36.0       | )       |                                    |    | (34.8 | ) |   |   | (33.2 | ) |   |   | - |   |   |   | (.2 | ) |   |   | (.9 | ) |
| Recognized      net actuarial loss            |   |                  | -           |    |                                    |    | .2 |   |   |   | 1.6 |   |   |   | 4.7 |   |   |   | 5.0 |   |   |   | 4.9 |   |
| Amortization      of prior service cost       |   |                  | .5          |    |                                    |    | .5 |   |   |   | .6 |   |   |   | (.1 | ) |   |   | (.1 | ) |   |   | (.1 | ) |
| Net      periodic benefit cost (credit)  |   | $                |  (11.3 | )  |                                    | $  |  (9.8 | )  |   | $  |  (6.1 | )  |   | $  |  17.8 |   |   | $  |  17.4 |   |   | $  |  16.9 |   |

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Table of Contents

|                               | Pension      benefits |       |        Health      care andother      benefits |   |
|------------------------------------|-----------------------|------------|-----------------------------------------------------|--------|
|                               | 2007                  |       |                                                | 2006   |   |   |        2007 |   |   |        2006 |   |   |
|                               |                  |       |                                                |   |   |   |   |   |   |   |   |   |   |
| Discount      rate            |                  |  6.25 | %                                              |   | 5.75 | %  |   |  6.25 | %  |   |  5.75 | %  |   |
| Rate      of compensation increase |                  |  3.75 |                                                |   |  3.75 |   |   |   3.75 |   |   |  3.75 |   |   |

|                               |   | Pension      benefits |   |   | Health      care and other benefits |   |
|------------------------------------|--------|-----------------------|--------|--------|-------------------------------------|--------|
|                               |   | 2007                  |   |   | 2006                                |   |   | 2005 |   |   | 2007 |   |   | 2006 |   |   | 2005 |   |
|                               |   |                  |   |   |                                |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Discount      rate                 |   |                  | 5.75   | %      |                                |   | 5.50 | % |   |   | 5.75 | % |   |   | 5.75 | % |   |   | 5.50 | % |   |   | 5.75 | % |
| Expected      return on assets     |   |                  | 8.50   |   |                                |   | 8.50 |   |   |   | 8.50 |   |   |   | 8.50 |   |   |   | 8.50 |   |   |   | 8.50 |   |
| Rate      of compensation increase |   |                  | 3.75   |   |                                |   | 3.75 |   |   |   | 4.00 |   |   |   | 3.75 |   |   |   | 3.75 |   |   |   | 4.00 |   |

|                                                                                  |   | 2007   |   |   | 2006   |   |
|---------------------------------------------------------------------------------------|--------|--------|--------|--------|--------|--------|
| Health      care cost trend rate                                                      |   |   | 9.0    | %      |   |   | 9.5 | % |
| Rate      to which the cost trend rate is assumed to decline (the ultimate      rate) |   |   | 5.0    | %      |   |   | 5.0 | % |
| Years      to reach ultimate rate                                                     |   |   | 6      |   |   |   | 5 |   |

|                                                                                  | 2007 |    | 2006   |   |    | 2005   |   |
|---------------------------------------------------------------------------------------|------|---------|--------|--------|---------|--------|--------|
| Health      care cost trend rate                                                      | 9.5  | %  |   | 9.5    | %       |   | 9.5    | % |
| Rate      to which the cost trend rate is assumed to decline (the ultimate      rate) | 5.0  | %  |   | 5.0    | %  |   | 5.0    | %  |
| Years      to reach ultimate rate                                                     | 5    |    |   | 5      |    |   | 4      |   |

|                                                         |   | One-percent |   |
|--------------------------------------------------------------|--------|-------------|--------|
|                                                         |   | Increase    |   |   | Decrease |   |
|                                                         |   |        |   |   |   |   |
| Effect      on total of service and interest cost components |   | $           | 1.1    |   |   | $ | (1.0 | ) |
| Effect      on benefit obligation                            |   |        | 18.3   |   |   |   | (15.6 | )  |

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Table of Contents

|                   |   | Target     |   |   | Percentage      of plan assetsat      October 1 |   |
|------------------------|--------|------------|--------|--------|-------------------------------------------------|--------|
| Asset      category    |   | allocation |   |   | 2007                                            |   |   | 2006 |   |
|                   |   |       |   |   |                                            |   |   |   |   |
| Equity      securities |   |       | 69     | %      |                                            |   | 69 | % |   |   | 69 | % |
| Debt      securities   |   |       | 31     |   |                                            |   | 31 |   |   |   | 31 |   |
|                   |   |       | 100    | %      |                                            |   | 100 | % |   |   | 100 | % |

|  Twelve      months ending October 1 |   | Pension      benefits |   |   | Health      careand      other benefits |   |   | Expected      Medicare subsidy |   |
|-------------------------------------------|--------|-----------------------|--------|--------|-----------------------------------------|--------|--------|--------------------------------|--------|
|                                      |   |                  |   |   |                                    |   |   |                           |   |
| 2008                                      |   | $                     | 17.9   |   |                                    | $      | 11.7   |                           |   | $ | (1.3 | ) |
| 2009                                      |   |                  | 18.5   |   |                                    |   | 12.6   |                           |   |   | (1.4 | ) |
| 2010                                      |   |                  | 18.9   |   |                                    |   | 13.5   |                           |   |   | (1.6 | ) |
| 2011                                      |   |                  | 20.1   |   |                                    |   | 14.3   |                           |   |   | (1.6 | ) |
| 2012                                      |   |                  | 21.3   |   |                                    |   | 15.0   |                           |   |   | (1.7 | ) |
| 2013-2017                                 |   |                  | 136.7  |   |                                    |   | 84.2   |                           |   |   | (9.8 | ) |

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Table of Contents

|                                   |   | 2007   |   |   | 2006   |   |   | 2005   |   |
|----------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
|                                   |   |   |   |   |   |   |   |   |   |
| Operating      and maintenance expense |   | $      | 1.7    |   |   | $      | 3.4    |   |   | $ | 2.9 |   |
| Income      tax benefits               |   |   | .7     |   |   |   | 1.4    |   |   |   | 1.2 |   |

|                                             |   | 2007   |   |   | 2006   |   |
|--------------------------------------------------|--------|--------|--------|--------|--------|--------|
|                                             |   |   |   |   |   |   |
| Proceeds      from the exercise of stock options |   | $      | 8.2    |   |   | $      | 22.6 |   |
| Associated      income tax benefits realized     |   |   | .9     |   |   |   | 2.8 |   |

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Table of Contents

|                                |   |           |   |   | Weighted-            |   |
|-------------------------------------|--------|----------------|--------|--------|----------------------|--------|
|                                |   | Number      of |   |   | average      grant-  |   |
|                                |   | shares         |   |   | date      fair value |   |
|                                |   |           |   |   |                 |   |
| Nonvested      at January 1, 2007   |   |           | 37,199 |   |                 | $      | 41.58 |   |
| Granted                             |   |           | 39,620 |   |                 |   | 48.82 |   |
| Vested                              |   |           | (2,999 | )      |                 |   | 41.11 |   |
| Nonvested      at December 31, 2007 |   |           | 73,820 |   |                 |   | 45.48 |   |

|                   |   | 2007   |   |   | 2006   |   | 2005   |
|------------------------|--------|--------|--------|--------|--------|--------|--------|
|                   |   |   |   |   |   |   |   |   |   |   |   |
| Beginning      of year |   | 44.9   |   |   |   | 44.2   |   |   |   | 44.1 |   |
| Issued                 |   | .2     |   |   |   | .7     |   |   |   | .1 |   |
| End      of year       |   | 45.1   |   |   |   | 44.9   |   |   |   | 44.2 |   |

----

Table of Contents

|               |   | 2007   |    |   | 2006   |   |    | 2005   |   |
|--------------------|--------|--------|---------|--------|--------|--------|---------|--------|--------|
|               |   |   |    |   |   |   |    |   |   |
| Bundled      sales |   | $      | 2,265.2 |   |   | $      | 2,087.8 |   |   | $ | 2,546.7 |   |
| Transportation     |   |   | 155.9   |   |   |   | 158.8   |   |   |   | 151.9 |   |
| Revenue      taxes |   |   | 149.6   |   |   |   | 147.7   |   |   |   | 156.4 |   |
| Other              |   |   | 56.8    |   |   |   | 58.0    |   |   |   | 54.6 |   |
|               |   | $      | 2,627.5 |   |   | $      | 2,452.3 |   |   | $ | 2,909.6 |   |

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Table of Contents

| ·   | During      2006 and 2005, the company recognized $5.2 million and $2.8 million,      respectively, of insurance recoveries related to previously incurred legal      expenses associated with the securities class      action and shareholder derivative lawsuit settlements.  For more      information, see Note 21 – Contingencies –  Other. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | During      2006, the company recorded a $10 million charge (non-deductible for tax      purposes) associated with the company’s SEC inquiry.  During      2005, the company recorded $29.9 million of net insurance recoveries and      earnings thereon related to the securities class action and derivative      lawsuit settlements.  For more information on these items, see      Note 21 – Contingencies. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Benefits      associated with Nicor’s other energy ventures’ utility-bill management      contracts attributable to warmer than normal weather in 2006 and recorded      in corporate and eliminations was $9.5 million.  The weather      impact of these contracts generally serves to partially offset the gas      distribution segment’s weather risk.  This benefit is recorded      primarily at the corporate level as a result of an agreement between the      parent company and certain of its subsidiaries.  In 2006,      related costs of approximately $0.7 million were recognized within other      energy ventures. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | The      income tax benefit for 2006 includes a net income tax benefit of $7.0      million from the elimination of certain deferred income taxes associated      with the January 2006 reorganization of certain shipping and related      operations and $0.5 million in current income tax expense related to the      repatriation of foreign earnings in2005. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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| Nicor Inc.                                |   |         |    |   |     |   |   |     |   |   |         |   |   |         |   |
|-------------------------------------------|--------|--------------|---------|--------|----------|--------|--------|----------|--------|--------|--------------|--------|--------|--------------|--------|
|                                      |   |         |    |   |     |   |   |     |   |   |         |   |   |         |   |
|                                      |   |         |    |   |     |   |   |     |   |   |         |   |   |         |   |
|                                      |   |         |    |   |     |   |   | Other    |   |   | Corporate    |   |   |         |   |
|                                      |   | Gas          |    |   |     |   |   | energy   |   |   | and          |   |   |         |   |
|                                      |   | distribution |    |   | Shipping |   |   | ventures |   |   | eliminations |   |   | Consolidated |   |
|                                      |   |         |    |   |     |   |   |     |   |   |         |   |   |         |   |
| Operating      revenues                   |   |         |    |   |     |   |   |     |   |   |         |   |   |         |   |
| 2007                                      |   |         |    |   |     |   |   |     |   |   |         |   |   |         |   |
| External      customers                   |   | $            | 2,557.4 |   |     | $      | 403.9  |     |   | $      | 215.0        |   |   | $            | -      |   |   | $ | 3,176.3 |   |
| Intersegment                              |   |         | 70.1    |   |     |   | -      |     |   |   | 29.5         |   |   |         | (99.6  | ) |   |   | - |   |
|                                      |   |         | 2,627.5 |   |     |   | 403.9  |     |   |   | 244.5        |   |   |         | (99.6  | ) |   |   | 3,176.3 |   |
| 2006                                      |   |         |    |   |     |   |   |     |   |   |         |   |   |         |   |   |   |   |   |   |
| External      customers                   |   |         | 2,370.9 |   |     |   | 398.3  |     |   |   | 190.8        |   |   |         | -      |   |   |   | 2,960.0 |   |
| Intersegment                              |   |         | 81.4    |   |     |   | -      |     |   |   | 25.1         |   |   |         | (106.5 | ) |   |   | - |   |
|                                      |   |         | 2,452.3 |   |     |   | 398.3  |     |   |   | 215.9        |   |   |         | (106.5 | ) |   |   | 2,960.0 |   |
| 2005                                      |   |         |    |   |     |   |   |     |   |   |         |   |   |         |   |   |   |   |   |   |
| External      customers                   |   |         | 2,824.5 |   |     |   | 378.5  |     |   |   | 154.8        |   |   |         | -      |   |   |   | 3,357.8 |   |
| Intersegment                              |   |         | 85.1    |   |     |   | -      |     |   |   | 2.2          |   |   |         | (87.3  | ) |   |   | - |   |
|                                      |   |         | 2,909.6 |   |     |   | 378.5  |     |   |   | 157.0        |   |   |         | (87.3  | ) |   |   | 3,357.8 |   |
|                                      |   |         |    |   |     |   |   |     |   |   |         |   |   |         |   |   |   |   |   |   |
| Operating      income (loss)              |   |         |    |   |     |   |   |     |   |   |         |   |   |         |   |   |   |   |   |   |
| 2007                                      |   | $            | 128.7   |   |     | $      | 45.4   |     |   | $      | 34.0         |   |   | $            | (1.6   | ) |   | $ | 206.5 |   |
| 2006                                      |   |         | 123.9   |   |     |   | 47.5   |     |   |   | 26.6         |   |   |         | 4.5    |   |   |   | 202.5 |   |
| 2005                                      |   |         | 116.9   |   |     |   | 40.4   |     |   |   | 14.1         |   |   |         | 30.3   |   |   |   | 201.7 |   |
|                                      |   |         |    |   |     |   |   |     |   |   |         |   |   |         |   |   |   |   |   |   |
| Equity      investment income (loss), net |   |         |    |   |     |   |   |     |   |   |         |   |   |         |   |   |   |   |   |   |
| 2007                                      |   | $            | (.1     | )      |     | $      | -      |     |   | $      | 3.5          |   |   | $            | 2.9    |   |   | $ | 6.3 |   |
| 2006                                      |   |         | (.1     | )      |     |   | -      |     |   |   | 7.1          |   |   |         | 4.1    |   |   |   | 11.1 |   |
| 2005                                      |   |         | -       |   |     |   | -      |     |   |   | 3.3          |   |   |         | 6.0    |   |   |   | 9.3 |   |
|                                      |   |         |    |   |     |   |   |     |   |   |         |   |   |         |   |   |   |   |   |   |
| Interest      income                      |   |         |    |   |     |   |   |     |   |   |         |   |   |         |   |   |   |   |   |   |
| 2007                                      |   | $            | 5.3     |   |     | $      | 2.1    |     |   | $      | 1.3          |   |   | $            | .1     |   |   | $ | 8.8 |   |
| 2006                                      |   |         | 6.3     |   |     |   | 1.1    |     |   |   | 1.3          |   |   |         | .3     |   |   |   | 9.0 |   |
| 2005                                      |   |         | 4.3     |   |     |   | 2.9    |     |   |   | .8           |   |   |         | (2.0   | ) |   |   | 6.0 |   |
|                                      |   |         |    |   |     |   |   |     |   |   |         |   |   |         |   |   |   |   |   |   |
| Other      income (expense), net          |   |         |    |   |     |   |   |     |   |   |         |   |   |         |   |   |   |   |   |   |
| 2007                                      |   | $            | .5      |   |     | $      | .2     |     |   | $      | .1           |   |   | $            | (.2    | ) |   | $ | .6 |   |
| 2006                                      |   |         | .6      |   |     |   | .2     |     |   |   | .1           |   |   |         | (.3    | ) |   |   | .6 |   |
| 2005                                      |   |         | (.5     | )      |     |   | .3     |     |   |   | -            |   |   |         | 1.0    |   |   |   | .8 |   |
|                                      |   |         |    |   |     |   |   |     |   |   |         |   |   |         |   |   |   |   |   |   |
| Interest      expense, net of             |   |         |    |   |     |   |   |     |   |   |         |   |   |         |   |   |   |   |   |   |
|   amounts      capitalized      |   |         |    |   |     |   |   |     |   |   |         |   |   |         |   |   |   |   |   |   |
| 2007                                      |   | $            | 34.0    |   |     | $      | .6     |     |   | $      | 1.8          |   |   | $            | 1.5    |   |   | $ | 37.9 |   |
| 2006                                      |   |         | 44.3    |   |     |   | 2.3    |     |   |   | 2.5          |   |   |         | -      |   |   |   | 49.1 |   |
| 2005                                      |   |         | 42.1    |   |     |   | 1.2    |     |   |   | 1.2          |   |   |         | 2.3    |   |   |   | 46.8 |   |
|                                      |   |         |    |   |     |   |   |     |   |   |         |   |   |         |   |   |   |   |   |   |
| Income      tax expense (benefit), net    |   |         |    |   |     |   |   |     |   |   |         |   |   |         |   |   |   |   |   |   |
| 2007                                      |   | $            | 34.2    |   |     | $      | 3.5    |     |   | $      | 14.1         |   |   | $            | (2.7   | ) |   | $ | 49.1 |   |
| 2006                                      |   |         | 27.8    |   |     |   | 9.0    |     |   |   | 12.9         |   |   |         | (3.9   | ) |   |   | 45.8 |   |
| 2005                                      |   |         | 26.1    |   |     |   | (7.5   | )        |   |   | 6.8          |   |   |         | 9.3    |   |   |   | 34.7 |   |
|                                      |   |         |    |   |     |   |   |     |   |   |         |   |   |         |   |   |   |   |   |   |
| Property,      plant and                  |   |         |    |   |     |   |   |     |   |   |         |   |   |         |   |   |   |   |   |   |
|   equipment,      net           |   |         |    |   |     |   |   |     |   |   |         |   |   |         |   |   |   |   |   |   |
| 2007                                      |   | $            | 2,624.1 |   |     | $      | 120.0  |     |   | $      | 13.7         |   |   | $            | (.5    | ) |   | $ | 2,757.3 |   |
| 2006                                      |   |         | 2,580.7 |   |     |   | 121.3  |     |   |   | 13.2         |   |   |         | (.5    | ) |   |   | 2,714.7 |   |
| 2005                                      |   |         | 2,530.1 |   |     |   | 119.9  |     |   |   | 9.3          |   |   |         | (.2    | ) |   |   | 2,659.1 |   |
|                                      |   |         |    |   |     |   |   |     |   |   |         |   |   |         |   |   |   |   |   |   |
| Capital      expenditures                 |   |         |    |   |     |   |   |     |   |   |         |   |   |         |   |   |   |   |   |   |
| 2007                                      |   | $            | 159.0   |   |     | $      | 14.5   |     |   | $      | 3.9          |   |   | $            | (.1    | ) |   | $ | 177.3 |   |
| 2006                                      |   |         | 164.5   |   |     |   | 16.9   |     |   |   | 5.9          |   |   |         | (.2    | ) |   |   | 187.1 |   |
| 2005                                      |   |         | 186.4   |   |     |   | 10.7   |     |   |   | 3.4          |   |   |         | (.1    | ) |   |   | 200.4 |   |
|                                      |   |         |    |   |     |   |   |     |   |   |         |   |   |         |   |   |   |   |   |   |
| Depreciation                              |   |         |    |   |     |   |   |     |   |   |         |   |   |         |   |   |   |   |   |   |
| 2007                                      |   | $            | 165.6   |   |     | $      | 15.4   |     |   | $      | 3.4          |   |   | $            | (.2    | ) |   | $ | 184.2 |   |
| 2006                                      |   |         | 160.1   |   |     |   | 15.7   |     |   |   | 2.3          |   |   |         | -      |   |   |   | 178.1 |   |
| 2005                                      |   |         | 154.5   |   |     |   | 16.2   |     |   |   | 1.7          |   |   |         | -      |   |   |   | 172.4 |   |

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|                                |   | 2007   |   |   | 2006   |   |   | 2005   |   |
|-------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
|                                |   |   |   |   |   |   |   |   |   |
| Triton                              |   | $      | 5.1    |   |   | $      | 5.8    |   |   | $ | 7.4 |   |
| Adkins      Energy                  |   |   | -      |   |   |   | 3.8    |   |   |   | .7 |   |
| Horizon      Pipeline               |   |   | 1.6    |   |   |   | 1.8    |   |   |   | 1.7 |   |
| EN      Engineering                 |   |   | 1.9    |   |   |   | 1.5    |   |   |   | .7 |   |
| Affordable      housing investments |   |   | (2.3   | )      |   |   | (1.8   | )      |   |   | (1.3 | ) |
| Other                               |   |   | -      |   |   |   | -      |   |   |   | .1 |   |
|                                |   | $      | 6.3    |   |   | $      | 11.1   |   |   | $ | 9.3 |   |

|            |   | Purchase      obligations |   |   | Operatingleases |   |   | Other      long-termobligations |   |
|-----------------|--------|---------------------------|--------|--------|-----------------|--------|--------|---------------------------------|--------|
|            |   |                      |   |   |            |   |   |                            |   |
| 2008            |   | $                         | 15.7   |   |            | $      | 31.7   |                            |   | $ | 1.1 |   |
| 2009            |   |                      | 11.7   |   |            |   | 15.2   |                            |   |   | .2 |   |
| 2010            |   |                      | 11.7   |   |            |   | 7.8    |                            |   |   | .1 |   |
| 2011            |   |                      | 11.7   |   |            |   | 5.4    |                            |   |   | .1 |   |
| 2012            |   |                      | 5.3    |   |            |   | 3.0    |                            |   |   | - |   |
| After      2012 |   |                      | 3.0    |   |            |   | 15.4   |                            |   |   | .6 |   |
|            |   | $                         | 59.1   |   |            | $      | 78.5   |                            |   | $ | 2.1 |   |

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|                           |   | Quarter      ended |    |
|--------------------------------|--------|--------------------|---------|
|                           |   | Mar.      31       |    |   | June      30 |   |   | Sept.      30 |   |   | Dec.      31 |   |
| 2007                           |   |               |    |   |   |   |   |   |   |   |   |   |
| Operating      revenues        |   | $                  | 1,334.7 |   |   | $ | 556.9 |   |   | $ | 365.2 |   |   | $ | 919.5 |   |
| Operating      income          |   |               | 76.6    |   |   |   | 29.9 |   |   |   | 22.8 |   |   |   | 77.2 |   |
| Net      income                |   |               | 47.2    |   |   |   | 18.0 |   |   |   | 14.5 |   |   |   | 55.5 |   |
| Earnings      per common share |   |               |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Basic                          |   |               | 1.05    |   |   |   | .40 |   |   |   | .32 |   |   |   | 1.23 |   |
| Diluted                        |   |               | 1.04    |   |   |   | .40 |   |   |   | .32 |   |   |   | 1.22 |   |
|                           |   |               |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| 2006                           |   |               |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Operating      revenues        |   | $                  | 1,319.4 |   |   | $ | 451.3 |   |   | $ | 351.1 |   |   | $ | 838.2 |   |
| Operating      income          |   |               | 66.1    |   |   |   | 16.9 |   |   |   | 28.5 |   |   |   | 91.0 |   |
| Net      income                |   |               | 43.9    |   |   |   | 8.5 |   |   |   | 17.6 |   |   |   | 58.3 |   |
| Earnings      per common share |   |               |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Basic                          |   |               | .99     |   |   |   | .19 |   |   |   | .39 |   |   |   | 1.30 |   |
| Diluted                        |   |               | .99     |   |   |   | .19 |   |   |   | .39 |   |   |   | 1.29 |   |

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

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| Item      9A. | Controls andProcedures |
|---------------|------------------------|

| 1.   | Pertain      to the maintenance of records that in reasonable detail accurately and      fairly reflect the transactions and dispositions of the assets of the      company; |
|----------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 2.   | Provide      reasonable assurance that transactions are recorded as necessary to permit      preparation of financial statements in accordance with generally accepted      accounting principles, and that receipts and expenditures of the company      are being made only in accordance with authorizations of management and      directors of the company; and |
|----------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 3.   | Provide      reasonable assurance regarding prevention or timely detection of      unauthorized acquisition, use or disposition of the company’s assets that      could have a material effect on the financial  statements. |
|----------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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OtherInformation

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| Item      10. | Directors, Executive Officers and Corporate      Governance |
|---------------|-------------------------------------------------------------|

| Item      11. | ExecutiveCompensation |
|---------------|-----------------------|

| Item      12. | Security Ownership of Certain Beneficial Owners and Management      and Related StockholderMatters |
|---------------|----------------------------------------------------------------------------------------------------|

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|        Plan      category                              | (a)   Number      of securities to be      issued upon exercise of      outstanding options, warrants,      and rights | (b)   Weighted-average exercise      price of outstanding      options, warrants,      and rights | (c) Number      of securities remaining      available for future      issuance under equity   compensation      plans (excluding      securities reflected      in column (a)) |
|-------------------------------------------------------------------------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  Equity      compensation plans      approved by security      holders     |   675,599                                                                                                                                            | $36.48                                                                                                                          | 2,255,365       (1)                                                                                                                                                                                           |
|  Equity      compensation plans      not approved by security      holders |   -                                                                                                                                                  |   -                                                                                                                        |   -                                                                                                                                                                        |
|       Total                                                 | 675,599                                                                                                                                                   | $36.48                                                                                                                          | 2,225,365                                                                                                                                                                                 |

| (1)   | This      number includes 381,837 shares issuable under the 1997 Long-Term Incentive      Plan, as amended.  These shares can be used for awards under the      Stock Deferral Plan, which allows eligible key executives and managerial      employees to convert up to 50 percent of their cash awards from annual and      long-term incentive plans into Nicor common stock, the receipt of which is      deferred.  Also      included are 413,148 shares issuable under the Nicor Employee Stock      Purchase Plan.  The remaining 1,460,380 shares are issuable      under the 2006 Long-Term Incentive Program.  These shares can be      used for restricted stock, stock options and performance award units,      including awards under the Stock Deferral  Plan. |
|-----------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Item      13. | Certain      Relationships and Related Transactions, and Director      Independence |
|---------------|-------------------------------------------------------------------------------------|

| Item      14. | Principal Accountant Fees and    Services |
|---------------|-------------------------------------------|

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| Item      15. | Exhibits and Financial Statement      Schedules |
|---------------|-------------------------------------------------|

|   | 1) | Financial      Statements: |
|--------|----|----------------------------|

Financial Statements and SupplementaryData

|   | 2) | Financial      Statement Schedules: |
|--------|----|-------------------------------------|

| Schedule |                                                         |   |   |   |
|----------|--------------------------------------------------------------|--------|--------|--------|
| Number   |                                                         |   | Page   |   |
|     | Report of Independent Registered Public Accounting      Firm |   |   | 39     |   |
| II       | Valuation and Qualifying Accounts                            |   |   | 79     |   |

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

|   | 3) | Exhibits      Filed: |
|--------|----|----------------------|

Exhibit Index

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|  Nicor      Inc.                                                                               |   |            |   |            |   |            |   |   |   |       |   |   |   |           |   |
|-----------------------------------------------------------------------------------------------------|--------|-----------------|--------|-----------------|--------|-----------------|--------|--------|--------|------------|--------|--------|--------|----------------|--------|
|                                                                                                |   |            |   |            |   |            |   |   |   |       |   |   |   |           |   |
| 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 |   |
|                                                                                                |   |            |   |            |   |            |   |   |   |       |   |   |   |           |   |
|  2007                                                                                          |   |            |   |            |   |            |   |   |   |       |   |   |   |           |   |
|                                                                                                |   |            |   |            |   |            |   |   |   |       |   |   |   |           |   |
| Allowance      for doubtful                                                                         |   |            |   |            |   |            |   |   |   |       |   |   |   |           |   |
|    accounts      receivable                                                          |   | $               | 33.4   |            | $      | 57.6            |   | $      | -      |       |   |   | $      | 55.9           |   | (a) |   | $ | 35.1 |   |
|                                                                                                |   |            |   |            |   |            |   |   |   |       |   |   |   |           |   |   |   |   |   |   |
| Accrued      mercury-related costs                                                                  |   |            | 13.2   |            |   | -               |   |   | -      |       |   |   |   | 10.4           |   | (b) |   |   | 2.8 |   |
|                                                                                                |   |            |   |            |   |            |   |   |   |       |   |   |   |           |   |   |   |   |   |   |
| Accrued      manufactured gas plant                                                                 |   |            |   |            |   |            |   |   |   |       |   |   |   |           |   |   |   |   |   |   |
|   environmental      costs                                                                |   |            | 19.9   |            |   | -               |   |   | 4.5    |       | (c)    |   |   | 9.2            |   | (b) |   |   | 15.2 |   |
|                                                                                                |   |            |   |            |   |            |   |   |   |       |   |   |   |           |   |   |   |   |   |   |
|  2006                                                                                     |   |            |   |            |   |            |   |   |   |       |   |   |   |           |   |   |   |   |   |   |
|                                                                                                |   |            |   |            |   |            |   |   |   |       |   |   |   |           |   |   |   |   |   |   |
| Allowance      for doubtful                                                                         |   |            |   |            |   |            |   |   |   |       |   |   |   |           |   |   |   |   |   |   |
|    accounts      receivable                                                          |   | $               | 31.5   |            | $      | 41.7            |   | $      | -      |       |   |   | $      | 39.8           |   | (a) |   | $ | 33.4 |   |
|                                                                                                |   |            |   |            |   |            |   |   |   |       |   |   |   |           |   |   |   |   |   |   |
| Accrued      mercury-related costs                                                                  |   |            | 17.5   |            |   | -               |   |   | -      |       |   |   |   | 4.3            |   | (b) |   |   | 13.2 |   |
|                                                                                                |   |            |   |            |   |            |   |   |   |       |   |   |   |           |   |   |   |   |   |   |
| Accrued      manufactured gas plant                                                                 |   |            |   |            |   |            |   |   |   |       |   |   |   |           |   |   |   |   |   |   |
|   environmental      costs                                                                |   |            | 19.5   |            |   | -               |   |   | 12.7   |       | (c)    |   |   | 12.3           |   | (b) |   |   | 19.9 |   |
|                                                                                                |   |            |   |            |   |            |   |   |   |       |   |   |   |           |   |   |   |   |   |   |
|  2005                                                                                     |   |            |   |            |   |            |   |   |   |       |   |   |   |           |   |   |   |   |   |   |
|                                                                                                |   |            |   |            |   |            |   |   |   |       |   |   |   |           |   |   |   |   |   |   |
| Allowance      for doubtful                                                                         |   |            |   |            |   |            |   |   |   |       |   |   |   |           |   |   |   |   |   |   |
|    accounts      receivable                                                          |   | $               | 21.9   |            | $      | 44.1            |   | $      | -      |       |   |   | $      | 34.5           |   | (a) |   | $ | 31.5 |   |
|                                                                                                |   |            |   |            |   |            |   |   |   |       |   |   |   |           |   |   |   |   |   |   |
| Accrued      mercury-related costs                                                                  |   |            | 20.2   |            |   | -               |   |   | -      |       |   |   |   | 2.7            |   | (b) |   |   | 17.5 |   |
|                                                                                                |   |            |   |            |   |            |   |   |   |       |   |   |   |           |   |   |   |   |   |   |
| Accrued      manufactured gas plant                                                                 |   |            |   |            |   |            |   |   |   |       |   |   |   |           |   |   |   |   |   |   |
|   environmental      costs                                                                |   |            | 36.8   |            |   | -               |   |   | 0.6    |       | (c)    |   |   | 17.9           |   | (b) |   |   | 19.5 |   |
|                                                                                                |   |            |   |            |   |            |   |   |   |       |   |   |   |           |   |   |   |   |   |   |
| (a)      Accounts receivable written off, net of recoveries.                                        |   |            |   |            |   |            |   |   |   |       |   |   |   |           |
| (b)      Expenditures, other adjustments.                                                           |   |            |   |            |   |            |   |   |   |       |   |   |   |           |   |   |   |
| (c)      Accrual of estimated future remediation costs that are deferred as      regulatory assets. |   |            |   |            |   |            |

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Signatures

|                                                                                                                                                                                                                                  |   | Nicor      Inc.                                      |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------------------------------------------|
|                                                                                                                                                                                                                                  |   |                                                 |
| Date  February 25,      2008                                                                                                                                                                                                |   | /s/ KAREN K.      PEPPING                            |
|                                                                                                                                                                                                                                  |   | Karen      K. Pepping                                |
|                                                                                                                                                                                                                                  |   | Vice      President and Controller                   |
|                                                                                                                                                                                                                                  |   | (Principal      Accounting Officer and               |
|                                                                                                                                                                                                                                  |   | Duly      Authorized Officer)                        |
|                                                                                                                                                                                                                                  |   |                                                 |
| 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 February 25, 2008. |
| Signature                                                                                                                                                                                                                             |   | Title                                                |
|                                                                                                                                                                                                                                  |   |                                                 |
| /s/ RUSS M.      STROBEL                                                                                                                                                                                                              |   |                                                 |
| Russ      M. Strobel                                                                                                                                                                                                                  |   | Chairman,      President and                         |
| (Principal      Executive Officer)                                                                                                                                                                                                    |   | Chief      Executive Officer                         |
|                                                                                                                                                                                                                                  |   |                                                 |
| /s/ RICHARD L.      HAWLEY                                                                                                                                                                                                            |   |                                                 |
| Richard      L. Hawley                                                                                                                                                                                                                |   | Executive      Vice President and                    |
| (Principal      Financial Officer)                                                                                                                                                                                                    |   | Chief      Financial Officer                         |
|                                                                                                                                                                                                                                  |   |                                                 |
| /s/ KAREN K.      PEPPING                                                                                                                                                                                                             |   |                                                 |
| Karen      K. Pepping                                                                                                                                                                                                                 |   | Vice      President and Controller                   |
| (Principal      Accounting Officer)                                                                                                                                                                                                   |   |                                                 |
|                                                                                                                                                                                                                                  |   |                                                 |
| ROBERT      M. BEAVERS, JR.*                                                                                                                                                                                                          |   | Director                                             |
|                                                                                                                                                                                                                                  |   |                                                 |
| BRUCE      P. BICKNER*                                                                                                                                                                                                                |   | Director                                             |
|                                                                                                                                                                                                                                  |   |                                                 |
| JOHN      H. BIRDSALL, III*                                                                                                                                                                                                           |   | Director                                             |
|                                                                                                                                                                                                                                  |   |                                                 |
| NORMAN      R. BOBINS*                                                                                                                                                                                                                |   | Director                                             |
|                                                                                                                                                                                                                                  |   |                                                 |
| THOMAS      A. DONAHOE*                                                                                                                                                                                                               |   | Director                                             |
|                                                                                                                                                                                                                                  |   |                                                 |
| BRENDA      J. GAINES*                                                                                                                                                                                                                |   | Director                                             |
|                                                                                                                                                                                                                                  |   |                                                 |
| RAYMOND      A. JEAN*                                                                                                                                                                                                                 |   | Director                                             |
|                                                                                                                                                                                                                                  |   |                                                 |
| DENNIS      J. KELLER*                                                                                                                                                                                                                |   | Director                                             |
|                                                                                                                                                                                                                                  |   |                                                 |
| R.      EDEN MARTIN*                                                                                                                                                                                                                  |   | Director                                             |
|                                                                                                                                                                                                                                  |   |                                                 |
| GEORGIA      R. NELSON*                                                                                                                                                                                                               |   | Director                                             |
|                                                                                                                                                                                                                                  |   |                                                 |
| JOHN      RAU*                                                                                                                                                                                                                        |   | Director                                             |
|                                                                                                                                                                                                                                  |   |                                                 |
| JOHN      F. RIORDAN*                                                                                                                                                                                                                 |   | Director                                             |
|                                                                                                                                                                                                                                  |   |                                                 |
|                                                                                                                                                                                                                                  | *      | By    /s/ RICHARD L.      HAWLEY |
|                                                                                                                                                                                                                                  |   | Richard      L. Hawley                               |

|   |   | (Attorney-in-fact)  |
|--------|--------|--------------------------|

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Exhibit Index

| Exhibit |   |                                                                                                                                                                                                                                                 |
|---------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Number  |   | Description of      Document                                                                                                                                                                                                                         |
|    |   |                                                                                                                                                                                                                                                 |
| 3.01    | *      | Restated      Articles of Incorporation of the company.  (File No. 1-7297,      Form 8-K for July 26, 2006, Nicor Inc.)                                                                                                                    |
|    |   |                                                                                                                                                                                                                                                 |
| 3.02    | *      | Nicor      Inc. Amended and Restated By-laws effective as of December 1,      2007.  (File No. 1-7297, Form 8-K for November 29, 2007, Nicor      Inc., Exhibit 3.1.)                                                                      |
|    |   |                                                                                                                                                                                                                                                 |
| 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 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.) |
|    |   |                                                                                                                                                                                                                                                 |
| 4.04    | *      | 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.)  |

| 4.05   | *      | Supplemental      Indenture, dated February 1, 2001, of Nicor Gas to BNY Midwest Trust      Company, Trustee, under Indenture dated as of January 1,      1954.  (File No. 1-7296, Form 10-K for 2000, Nicor Gas, Exhibit      4.17.)          |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                                     |
| 4.06   | *      | Supplemental      Indenture, dated May 15, 2001, of Nicor Gas to BNY Midwest Trust Company,      Trustee, under Indenture dated as of January 1, 1954.  (File No.      1-7296, Form 10-Q for June 2001, Nicor Gas, Exhibit  4.01.)             |
|   |   |                                                                                                                                                                                                                                                     |
| 4.07   | *      | Supplemental      Indenture, dated August 15, 2001, of Nicor Gas to BNY Midwest Trust      Company, Trustee, under Indenture dated as of January 1,      1954.  (File No. 1-7296, Form 10-Q for September 2001, Nicor      Gas, Exhibit 4.01.) |
|   |   |                                                                                                                                                                                                                                                     |
| 4.08   | *      | Supplemental      Indenture, dated December 1, 2003, of Nicor Gas to BNY Midwest Trust      Company, Trustee, under Indenture dated as of January 1,      1954.  (File No. 1-7297, Form 10-K for 2003, Nicor Inc., Exhibit      4.10.)         |
|   |   |                                                                                                                                                                                                                                                     |
| 4.09   | *      | Supplemental      Indenture, dated December 1, 2003, of Nicor Gas to BNY Midwest Trust      Company, Trustee, under Indenture dated as of January 1,      1954.  (File No. 1-7297, Form 10-K for 2003, Nicor Inc., Exhibit      4.11.)         |
|   |   |                                                                                                                                                                                                                                                     |
| 4.10   | *      | Supplemental      Indenture, dated December 1, 2003, of Nicor Gas to BNY Midwest Trust      Company, Trustee, under Indenture dated as of January 1,      1954.  (File No. 1-7297, Form 10-K for 2003, Nicor Inc., Exhibit      4.12.)         |
|   |   |                                                                                                                                                                                                                                                     |

| 4.11 | * | Supplemental      Indenture, dated December 1, 2006, of Nicor Gas to BNY Midwest Trust      Company, Trustee, under Indenture dated as of January 1,      1954.  (File No. 1-7297, Form 10-K for 2006, Nicor Inc., Exhibit      4.11.) |
|------|---|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

Table of Contents

|  Exhibit |   |                         |
|---------------|--------|------------------------------|
| Number        |   | Description of      Document |

| 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' Captial Accumulation Plan Participation Agreement.       (File No. 1-7297, Form 10-K for 1984, Nicor Inc., Exhibit      10-13(a).)  |
|     |    |                                                                                                                                                                     |
| 10.03    | *  | Directors'      Pension Plan.  (File No. 1-7297, Form 10-K for 1985, Nicor Inc.,      Exhibit 10-18.)                                                          |
|     |    |                                                                                                                                                                     |
| 10.04    | *  | Flexible      Spending Account for Executives.  (File No. 1-7297, Form 10-K for      1986, Nicor Inc., Exhibit 10-20.)                                         |
|     |    |                                                                                                                                                                     |
| 10.05    | *       | Amendment      and Restatement of the Nicor Gas Incentive Compensation      Plan.  (File No. 1-7297, Form 10-K for 1986, Nicor Inc., Exhibit      10-21.)      |
|     |    |                                                                                                                                                                     |
| 10.06    | *       | Nicor      Inc. Stock Deferral Plan.  (File No. 1-7297, Form 10-Q for      September 1996, Nicor Inc., Exhibit 10.01.)                                         |
|     |    |                                                                                                                                                                     |
| 10.07    | *       | Amendment      to Nicor Inc. Stock Deferral Plan.  (File No. 1-7297, Form 10-K      for 1997, Nicor Inc., Exhibit 10.22.)                                      |
|     |    |                                                                                                                                                                     |
| 10.08    | *       | Nicor      Inc. 1997 Long-Term Incentive Plan.  (Filed as appendix to the      Nicor Inc. Proxy Statement, dated March 6, 1997.)                               |
|     |    |                                                                                                                                                                     |
| 10.09    | *       | Security      Payment Plan.  (File No. 1-7297, Form 10-K for 1999, Nicor Inc.,      Exhibit 10.24.)                                                       |
|     |    |                                                                                                                                                                     |
| 10.10    | *       | Amendment      and Restatement of Nicor Gas Supplementary Retirement      Plan.  (File No. 1-7297, Form 10-Q for March 2000, Nicor Inc.,      Exhibit 10.01.)  |
|     |    |                                                                                                                                                                     |
| 10.11    | *       | Amendment      and Restatement of Nicor Gas Supplementary Savings Plan.  (File      No. 1-7297, Form 10-Q for March 2000, Nicor Inc., Exhibit      10.02.)     |

|   |   |                                                                                                                                                                                                                                              |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 10.12  | *      | First      Amendment to Agreements Restating 1984 and 1985 Nicor Capital Accumulation      Plan Participation Agreements for Officers and Directors.  (File      No. 1-7297, Form 10-Q for March 2000, Nicor Inc., Exhibit      10.04.) |
|   |   |                                                                                                                                                                                                                                              |

| 10.13  | *      | First      Amendment to Nicor 1989 Long-Term Incentive Plan.  (File No.      1-7297 Form 10-Q for March 2000, Nicor Inc., Exhibit    10.05.)  |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                    |
| 10.14  | *      | First      Amendment to Nicor 1997 Long-Term Incentive Plan.  (File No.      1-7297, Form 10-Q for March 2000, Nicor Inc., Exhibit    10.06.) |

|   |   |                                                                                                                                       |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------|
| 10.15  | *      | Second      Amendment to Nicor Stock Deferral Plan.  (File No. 1-7297, Form      10-Q for March 2000, Nicor Inc., Exhibit10.07.) |

----

Table of Contents

| Exhibit |   |                                                                                                                                                                      |
|---------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Number  |   | Description of      Document                                                                                                                                              |
|    |   |                                                                                                                                                                      |
| 10.16   | *      | Second      Amendment and Restatement to Nicor Salary Deferral Plan.  (File      No. 1-7297, Form 10-Q for September 30, 2002, Nicor Inc., Exhibit      10.01.) |

| 10.17  | *      | Supplemental      Retirement Benefit Agreement between Nicor Inc. and Mr. Strobel. (File No.      1-7297, Form 10-K for 2001, Nicor Inc., Exhibit 10.32.)    |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                         |
| 10.18  | *      | Nicor      Inc. Supplemental Senior Officer Retirement Plan.  (File No.      1-7297, Form 10-K for 2002, Nicor Inc., Exhibit 10.28.)               |
|   |   |                                                                                                                                                         |
| 10.19  | *      | Nicor      Inc. Stock Deferral Plan Election Form.  (File No. 1-7297, Form      8-K for December 17, 2004, Nicor Inc., Exhibit 99.1.)              |
|   |   |                                                                                                                                                         |
| 10.20  | *      | Nicor      Inc. Salary Deferral Plan Election Form.  (File No. 1-7297, Form      8-K for December 17, 2004, Nicor Inc., Exhibit 99.2.)             |
|   |   |                                                                                                                                                         |
| 10.21  | *      | Nicor      Gas Supplementary Savings Plan Enrollment Form.  (File No.      1-7297, Form 8-K for December 27, 2004, Nicor Inc., Exhibit      99.1.) |
|   |   |                                                                                                                                                         |
| 10.22  | *      | Stock      Payment Election Stock Deferral Plan Form.  (File No. 1-7297,      Form 8-K for February 15, 2005, Nicor Inc., Exhibit  99.1.)          |
|   |   |                                                                                                                                                         |
| 10.23  | *      | Non-Qualified      Stock Option Agreement Form.  (File No. 1-7297, Form 8-K for      March 17, 2005, Nicor Inc., Exhibit 10.01.)                   |
|   |   |                                                                                                                                                         |
| 10.24  | *      | Performance      Cash Unit Agreement Form.  (File No. 1-7297, Form 8-K for March      17, 2005, Nicor Inc., Exhibit 10.02.)                        |
|   |   |                                                                                                                                                         |
| 10.25  | *      | 2005      Long-Term Incentive Program.  (File No. 1-7297, Form 8-K for      March 17, 2005, Nicor Inc., Exhibit10.03.)                             |

|   |   |                                                                                                                                                                                                              |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 10.26  | *      | Stipulation      and Agreement of Settlement of Shareholder Derivative Litigation dated as      of February 16, 2005.  (File No. 1-7297, Form 10-Q for March 31,      2005, Nicor Inc., Exhibit 10.06.) |
|   |   |                                                                                                                                                                                                              |
| 10.27  | *      | Final      Judgment and Order of Dismissal dated as of March 29,      2005.  (File No. 1-7297 Form 10-Q for March 31, 2005, Nicor      Inc., Exhibit 10.07.)                                            |

|   |   |                                                                                                                                                                                       |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 10.28  | *      | 5-Year      Credit Agreement dated as of September 13, 2005.  (File No.      1-7297, Form 10-Q for September 30, 2005, Nicor Inc., Exhibit      10.03.)                          |
|   |   |                                                                                                                                                                                       |
| 10.29  | *      | First      Amendment to the Nicor Inc. Salary Deferral Plan.  (File No.      1-7296, Form 10-K for 2005, Nicor Inc., Exhibit 10.46.)                                             |
|   |   |                                                                                                                                                                                       |
| 10.30  | *      | First      Amendment to the Northern Illinois Gas Company Supplemental Retirement      Plan.  (File No. 1-7296, Form 10-K for December 31, 2005, Nicor      Gas, Exhibit 10.05.) |
|   |   |                                                                                                                                                                                       |
| 10.31  | *      | Deferred      Restricted Stock Agreement under the Nicor Inc. 1997 Long-Term Incentive      Plan.  (File No. 1-7297, Form 8-K for March 17, 2006, Nicor      Inc.)               |
|   |   |                                                                                                                                                                                       |

----

Table of Contents

|  Exhibit |   |                                                                                                                                                                             |
|---------------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Number        |   | Description of      Document                                                                                                                                                     |
|          |   |                                                                                                                                                                             |
| 10.32         | *      | Restricted      Stock Agreement Form under the Nicor Inc. 1997 Long-Term Incentive      Plan.  (File No. 1-7297, Form 8-K for March 17, 2006, Nicor      Inc.)         |
|          |   |                                                                                                                                                                             |
| 10.33         | *      | Performance      Cash Unit Agreement Form under the Nicor Inc. 2006 Long-Term Incentive      Program.  (File No. 1-7297, Form 8-K for March 17, 2006, Nicor      Inc.) |
|          |   |                                                                                                                                                                             |
| 10.34         | *      | 2006      Long-Term Incentive Program.  (File No. 1-7297, Form 8-K for      March 17, 2006, Nicor Inc.)                                                                |
|          |   |                                                                                                                                                                             |
| 10.35         | *      | Third      Amendment to Nicor Inc. 1997 Long-Term Incentive Plan.  (File      No. 1-7297, Form 8-K for March 17, 2006, Nicor Inc.)                                     |
|          |   |                                                                                                                                                                             |
| 10.36         | *      | 2006      Nicor Annual Incentive Compensation Plan for Officers.  (File      No. 1-7297, Form 8-K for March 17, 2006, Nicor Inc.)                                      |
|          |   |                                                                                                                                                                             |
| 10.37         | *      | 2006      Nicor Gas Annual Compensation Plan for Officers.  (File No.      1-7297, Form 8-K for March 17, 2006, Nicor Inc.)                                            |
|          |   |                                                                                                                                                                             |

| 10.38  | *      | Non-Qualified      Stock Option Agreement Form under the Nicor Inc. 1997 Long-Term Incentive      Plan.  (File No. 1-7297, Form 10-Q for March 31, 2006, Nicor      Inc., Exhibit 10.10.)             |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                            |
| 10.39  | *      | 1993      Interim Cooperative Agreement between Commonwealth Edison Company and      Northern Illinois Gas Company.  (File No. 1-7297, Form 10-Q for      March 31, 2006, Nicor Inc., Exhibit 10.11.) |
|   |   |                                                                                                                                                                                                            |
| 10.40  | *      | Amendment      No. 1 to the 1993 Interim Cooperative Agreement.  (File No.      1-7297, Form 10-Q for March 31, 2006, Nicor Inc., Exhibit      10.12.)                                                |
|   |   |                                                                                                                                                                                                            |
| 10.41  | *      | Amendment      No. 2 to the 1993 Interim Cooperative Agreement.  (File No.      1-7297, Form 10-Q for March 31, 2006, Nicor Inc., Exhibit      10.13.)                                                |
|   |   |                                                                                                                                                                                                            |
| 10.42  | *      | Amendment      No. 3 to the 1993 Interim Cooperative Agreement.  (File No.      1-7297, Form 10-Q for March 31, 2006, Nicor Inc., Exhibit      10.14.)                                                |
|   |   |                                                                                                                                                                                                            |
| 10.43  | *      | 2006      Long Term Incentive Plan (File No. 1-7297, Form 8-K for April 20, 2006,      Nicor Inc.)                                                                                                              |
|   |   |                                                                                                                                                                                                            |
| 10.44  | *      | Second      Amendment to the 5-Year Credit Agreement dated as of October 26,      2006.  (File No. 1-7297, Form 10-Q for September 20, 2006, Nicor      Inc., Exhibit 10.02.)                         |
|   |   |                                                                                                                                                                                                            |
| 10.45  | *      | 2007      Nicor Annual Incentive Compensation Plan for Officers.  (File      No. 1-7297, Form 8-K for February 28, 2007, Nicor Inc., Exhibit      10.1.)                                              |

|   |   |                                                                                                                                                                        |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 10.46  | *      | 2007      Nicor Gas Annual Incentive Compensation Plan for      Officers.  (File No. 1-7297, Form 8-K for February 28, 2007,      Nicor Inc., Exhibit 10.2.)      |
|   |   |                                                                                                                                                                        |
| 10.47  | *      | Restricted      Stock Unit Agreement between Nicor Inc. and Russ M.      Strobel.  (File No. 1-7297, Form 8-K for March 26, 2007, Nicor      Inc., Exhibit 10.1.) |

|   |   |   |
|--------|--------|--------|
|   |   |   |

----

Table of Contents

|  Exhibit |   |                                                                                                                                                                                                                             |
|---------------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Number        |   | Description of      Document                                                                                                                                                                                                     |
|          |   |                                                                                                                                                                                                                             |
| 10.48         | *      | Restricted      Stock Unit Agreement Form.  (File No. 1-7297, Form 8-K for March      26, 2007, Nicor Inc., Exhibit 10.2.)                                                                                             |
|          |   |                                                                                                                                                                                                                             |
| 10.49         | *      | Performance      Cash Unit Agreement Form.  (File No. 1-7297, Form 8-K for March      26, 2007, Nicor Inc., Exhibit 10.3.)                                                                                             |
|          |   |                                                                                                                                                                                                                             |
| 10.50         | *      | 2007      Long-Term Incentive Program.  (File No. 1-7297, Form 8-K for      March 26, 2007, Nicor Inc., Exhibit 10.4.)                                                                                                 |
|          |   |                                                                                                                                                                                                                             |
| 10.51         | *      | Letter      Agreement between Nicor Inc. and Richard L. Hawley.  (File No.      1-7297, Form 8-K for March 26, 2007, Nicor Inc., Exhibit      10.5.)                                                                   |
|          |   |                                                                                                                                                                                                                             |
| 10.52         | *      | Nicor      Gas Directors’ Deferred Compensation Plan, as amended and restated      effective January 1, 2008.  (File No. 1-7297, Form 10-Q for June      30, 2007, Nicor Inc., Exhibit 10.01.)                   |
|          |   |                                                                                                                                                                                                                             |
| 10.53         | *      | Nicor      Directors’ Deferred Compensation Plan, as amended and restated effective      January 1, 2008.  (File No. 1-7297, Form 10-Q for June 30, 2007,      Nicor Inc., Exhibit 10.02.)                       |
|          |   |                                                                                                                                                                                                                             |
| 10.54         | *      | Nicor      Directors’ Stock Value Plan, as amended and restated effective January 1,      2008.  (File No. 1-7297, Form 10-Q for June 30, 2007, Nicor      Inc., Exhibit 10.03.)                                 |
|          |   |                                                                                                                                                                                                                             |
| 10.55         | *      | Memorandum      of Understanding between Nicor Gas and Commonwealth Edison      Company.  (File No. 1-7297, Form 10-Q for June 30, 2007, Nicor      Inc., Exhibit 99.01.)                                              |
|          |   |                                                                                                                                                                                                                             |
| 10.56         | *      | 210-Day      Credit Agreement dated as of October 18, 2007.  (File No.      1-7297, Form 10-Q for September 30, 2007, Nicor Inc., Exhibit      10.01.)                                                                 |
|          |   |                                                                                                                                                                                                                             |
| 10.57         | *      | Nicor      Annual Incentive Compensation Plan for Officers.  (File No.      1-7297, Form 8-K for November 29, 2007, Nicor Inc., Exhibit      10.1.)                                                                    |
|          |   |                                                                                                                                                                                                                             |
| 10.58         | *      | Nicor      Gas Annual Incentive Compensation Plan for Officers.  (File No.      1-7297, Form 8-K for November 29, 2007, Nicor Inc., Exhibit      10.2.)                                                                |
|          |   |                                                                                                                                                                                                                             |
| 10.59         | *      | Amended      and Restated Change-in-Control Agreement dated as of December 18, 2007      between Nicor Inc. and Russ M. Strobel.  (File No. 1-7297, Form      8-K for December 19, 2007, Nicor Inc., Exhibit 10.1.)    |
|          |   |                                                                                                                                                                                                                             |
| 10.60         | *      | Amended      and Restated Change-in-Control Agreement dated as of December 18, 2007      between Nicor Inc. and Richard L. Hawley.  (File No. 1-7297,      Form 8-K for December 19, 2007, Nicor Inc., Exhibit  10.2.) |
|          |   |                                                                                                                                                                                                                             |
| 10.61         | *      | Amended      and Restated Change-in-Control Agreement dated as of December 18, 2007      between Nicor Inc. and Daniel R. Dodge.  (File No. 1-7297, Form      8-K for December 19, 2007, Nicor Inc., Exhibit 10.3.)    |
|          |   |                                                                                                                                                                                                                             |

| 10.62 | * | Amended      and Restated Change-in-Control Agreement dated as of December 18, 2007      between Nicor Inc. and Paul C. Gracey, Jr.  (File No. 1-7297,      Form 8-K for December 19, 2007, Nicor Inc., Exhibit  10.4.) |
|-------|---|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

Table of Contents

| Exhibit |   |                                                                                                                                                                                                                                |
|---------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Number  |   | Description of      Document                                                                                                                                                                                                        |
|    |   |                                                                                                                                                                                                                                |
| 10.63   | *      | Amended      and Restated Change-in-Control Agreement dated as of December 18, 2007      between Nicor Inc. and Claudia J. Colalillo.  (File No. 1-7297,      Form 8-K for December 19, 2007, Nicor Inc., Exhibit  10.5.) |
|    |   |                                                                                                                                                                                                                                |
| 10.64   |   | Final Allocation Agreement between      Nicor Gas and Commonwealth Edison Company dated as of January 3,      2008.                                                                                                                 |
|    |   |                                                                                                                                                                                                                                |
| 10.65   |   | Amended and Restated Change-in-Control      Agreement dated as of February 7, 2008 between Tropical Shipping and      Construction Company Limited and Rick Murrell.                                                                |
|    |   |                                                                                                                                                                                                                                |
| 10.66   |   | Tropical Shipping Company      Long-Term Performance Incentive Plan dated as of January 1,      1995.                                                                                                                               |
|    |   |                                                                                                                                                                                                                                |
| 10.67   |   | The Tropical Companies      U.S./Satellites/Vessels Incentive Compensation Plan dated as of May 1,      2007.                                                                                                                       |
|    |   |                                                                                                                                                                                                                                |
| 21.01   |   | Subsidiaries.                                                                                                                                                                                                                       |
|    |   |                                                                                                                                                                                                                                |
| 23.01   |   | Consent of Independent Registered      Public Accounting Firm.                                                                                                                                                                      |
|    |   |                                                                                                                                                                                                                                |
| 24.01   |   | Powers of Attorney.                                                                                                                                                                                                                 |
|    |   |                                                                                                                                                                                                                                |
| 31.01   |   | Rule 13a-14(a)/15d-14(a)      Certification.                                                                                                                                                                                        |
|    |   |                                                                                                                                                                                                                                |
| 31.02   |   | Rule 13a-14(a)/15d-14(a)      Certification.                                                                                                                                                                                   |
|    |   |                                                                                                                                                                                                                                |
| 32.01   |   | Section 1350    Certification.                                                                                                                                                                                                      |
|    |   |                                                                                                                                                                                                                                |
| 32.02   |   | Section 1350    Certification.                                                                                                                                                                                                      |

| *   | 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. |
|---------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|