<PAGE>
 
                                 UNITED STATES
                      SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D. C. 20549

                                   FORM 10-K

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

For the 53 weeks ended January 31, 1998          Commission file number 1-4947-1
                       J. C. Penney Funding Corporation
            ------------------------------------------------------
            (Exact name of registrant as specified in its charter)

            DELAWARE                                       51-0101524
     ------------------------                            --------------
     (State of incorporation)                       (I.R.S. Employer ID No.)
 
6501 LEGACY DRIVE, PLANO, TEXAS                               75024-3698
----------------------------------------                      ----------
(Address of principal executive offices)                      (Zip Code)
 
Registrant's telephone number, including area code:           (972) 431-1000
-----------------------------------------------------         --------------

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

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

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

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

      State the aggregate market value of the voting and non-voting common
equity held by non-affiliates of the registrant:  None
                                                  ----

      Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of the latest practicable date:  500,000 shares of
Common Stock of $100 par value, as of March 31, 1998.


                      DOCUMENTS INCORPORATED BY REFERENCE
                      -----------------------------------

      Portions of Registrant's 1997 Annual Report ("1997 Annual Report") are
incorporated into Parts I, II, and IV.  Portions of J. C. Penney Company, Inc.'s
1997 Annual Report to Stockholders ("JCPenney's 1997 Annual Report") are
incorporated into Part I.

     THE REGISTRANT MEETS THE CONDITIONS SET FORTH IN GENERAL INSTRUCTION
I(1)(a) AND (b) OF FORM 10-K AND IS THEREFORE FILING THIS FORM WITH THE REDUCED
DISCLOSURE FORMAT.
<PAGE>
 
                                    PART I
                                    ------

1.   BUSINESS.

     J. C. Penney Funding Corporation ("Funding"), which was incorporated in
Delaware in 1964, is a wholly-owned subsidiary of J. C. Penney Company, Inc.
("JCPenney"), also incorporated in Delaware.  Funding's executive offices are
located in JCPenney's offices in Plano, Texas.  Its business consists of
financing a portion of JCPenney's operations through loans to JCPenney, the
purchase of customer receivable balances that arise from the retail credit sales
of JCPenney, or a combination of both.  No receivables have been purchased by
Funding since 1985.

     JCPenney, a company founded by James Cash Penney in 1902 and incorporated
in 1924, is a major retailer operating over 1,200 JCPenney department stores in
all 50 states, Puerto Rico, Mexico, and Chile.  The major portion of JCPenney's
business consists of providing merchandise and services to consumers through
department stores that include catalog departments.  JCPenney stores market
predominantly family apparel,  jewelry, shoes, accessories, and home
furnishings.  In addition, JCPenney, through its wholly-owned subsidiary, Eckerd
Corporation, operates a chain of approximately 2,780 drugstores located
predominantly throughout the northeast, southeast, and Sunbelt regions of the
United States.  JCPenney also has several direct marketing insurance
subsidiaries, which market life, health, accident and credit insurance, as well
as a growing portfolio of non-insurance products.  JCPenney's total revenues for
the 53 weeks ended January 31, 1998 were $30.5 billion and net income was $566
million.  Pursuant to the terms of financing agreements between Funding and
JCPenney, payments from JCPenney to Funding are designed to produce earnings
sufficient to cover Funding's fixed charges, principally interest on borrowings,
at a coverage ratio mutually agreed upon between Funding and JCPenney.  (See
"Loan Agreement" and "Receivables Agreement", below.)  The earnings to fixed
charges coverage ratio has historically been, and in fiscal 1997 was, at least
1.5 to 1.

     Operations of Funding.  To finance the operations of JCPenney as described
under "Business" above, Funding sells its short-term notes (commercial paper) to
investors through dealer-placed programs.  The short-term notes are guaranteed
on a subordinated basis by JCPenney.  Funding has, from time to time, issued
long-term debt in public and private markets in the United States and abroad.
Prior to April 3, 1992, Funding issued commercial paper and master notes to
investors on a direct issue basis.  Funding  also has in place arrangements for
short-term bank borrowings.  Short-term debt in fiscal 1997 averaged $2,247
million compared to $2,041 million in fiscal 1996 and $2,145 million in fiscal
1995.  Short-term debt rates averaged 5.6 percent in fiscal 1997, compared to
5.5 percent in fiscal 1996 and 5.9 percent in fiscal 1995.  Interest expense
increased in fiscal 1997 compared to fiscal 1996

                                       2
<PAGE>
 
due to higher borrowing levels and higher short-term interest rates.  Interest
expense decreased in fiscal 1996 as compared to fiscal 1995 due to lower
borrowing levels and lower short-term interest rates.

     Credit Operations of JCPenney.  Virtually all types of merchandise and
services sold by JCPenney in the United States, Puerto Rico, Mexico, and Chile
may be purchased on JCPenney's revolving credit card.  In addition, JCPenney
accepts American Express, Diners Club (Mexico only), Discover (United States and
Puerto Rico only), MasterCard, and Visa at JCPenney stores, catalog, and
drugstores throughout the 50 states, Puerto Rico, Mexico, and Chile.  For
additional information regarding the credit card operations of JCPenney, see
"Net Interest Expense and Credit Operations" (page 16), which appears in the
section of JCPenney's 1997 Annual Report entitled "Management's Discussion and
Analysis of Financial Condition and Results of Operations", and "Pre-tax cost of
JCPenney credit card", "Credit sales", and "Key JCPenney credit card
information" (page 33), which appear in the section of JCPenney's 1997 Annual
Report entitled "Supplemental Data (Unaudited)", on the pages indicated in the
parenthetical references, which are incorporated by reference herein.

     Funding has never incurred any losses from JCPenney's retail credit
operation since, pursuant to the Receivables Agreement, JCPenney itself
administers the customer receivables when sold to Funding, receives all finance
charge revenue on those customer receivables, and bears all related costs.

     Loan Agreement.  Funding and JCPenney are parties to a Loan Agreement,
dated as of January 28, 1986, as amended ("Loan Agreement"), which provides for
unsecured loans to be made from time to time by Funding to JCPenney for the
general business purposes of JCPenney, subject to the terms and conditions of
the Loan Agreement.  The loans may be either senior loans or subordinated loans,
at the election of JCPenney, provided that, without the consent of the Board of
Directors of Funding, the principal amount of loans outstanding at any time
under the Loan Agreement may not exceed specified limits.  Currently such limits
may not exceed $8 billion in the aggregate for all loans and $1 billion in the
aggregate for all subordinated loans.  The terms of each loan under the Loan
Agreement shall be as agreed upon at the time of such loan by Funding and
JCPenney, provided that Funding may require upon demand that any loan be paid,
and JCPenney may prepay without premium any loan, in whole or in part at any
time.  Under the terms of the Loan Agreement, JCPenney and Funding agree from
time to time upon a mutually-acceptable earnings coverage of Funding's interest
and other fixed charges.  If at the end of each fiscal quarter during which a
loan is outstanding, the earnings coverage of Funding's interest and other fixed
charges is less than the agreed upon ratio, JCPenney will pay to Funding an
additional amount sufficient to provide for such coverage to be not less than
the agreed upon ratio.  In the event that JCPenney and Funding have

                                       3
<PAGE>
 
not agreed upon a mutually acceptable ratio for any fiscal quarter, the
applicable quarterly payment with respect to such period will include an amount
equal to the excess, if any, of one and one-half percent of the daily average of
the aggregate principal amount outstanding on all loans during such period, over
the aggregate amount of interest accrued on all such loans during such period.

     Receivables Agreement.  Since December 1, 1985, JCPenney has not sold an
undivided interest in any of its customer receivables to Funding.  The
Receivables Agreement between Funding and JCPenney, as amended ("Receivables
Agreement"), continues to be in full force and effect and while no purchases of
JCPenney customer receivables by Funding are presently contemplated, JCPenney
may again commence sales of its customer receivables to Funding.

     The Receivables Agreement sets forth the terms and provisions governing
sales of customer receivables (other than specified types of customer
receivables immaterial in amount) by JCPenney to Funding.  At the end of each
monthly accounting period, JCPenney may sell to Funding an undivided interest in
its undefaulted customer receivables which are not sold or contracted to be sold
by JCPenney to anyone other than Funding.  Settlements are made as of the end of
each such monthly accounting period with respect to collections, defaults, and
other adjustments to customers' accounts occurring during that month.

     The purchase price for the customer receivables acquired by Funding from
JCPenney is equal to the aggregate dollar amount of such customer receivables.
JCPenney pays to Funding at the end of each monthly accounting period a discount
in an amount agreed upon from time to time.  In the event of a failure to agree
as to the amount of the discount, the amount to be paid is one-half of one
percent of the average daily closing balance of conveyed customer receivables
held by Funding during such monthly accounting period less the average daily
closing balance of the Contract Reserve Account during such period.

     In addition, at the time of purchase of customer receivables from JCPenney,
Funding withholds from the purchase price, and adds to the Contract Reserve
Account, the lesser of (i) five percent of the amount of customer receivables
then being purchased, or (ii) the amount, if any, by which the amount in the
Contract Reserve Account is less than five percent of the total amount of
customer receivables then owned by Funding.  If the amount in the Contract
Reserve Account should exceed five percent of the total amount of customer
receivables owned by Funding at the end of any monthly accounting period, such
excess is to be paid to JCPenney in accordance with the Receivables Agreement.
If any portion of a customer receivable becomes more than 180 days past due or
if the customer is, in the judgment of JCPenney, unable to make further payment,
such customer receivable is considered to be in default for the purposes of the
Receivables Agreement and is charged against the Contract Reserve Account.
Collections with respect to

                                       4
<PAGE>
 
any such defaulted customer receivable are credited to the Contract Reserve
Account.  As described above, all bad debts written off to date have been
covered by the Contract Reserve Account.

     Funding acquires all of JCPenney's right, title, and interest in and to the
undivided portion of the customer receivables being conveyed to it.  All sales
of customer receivables to Funding are without recourse to JCPenney.  However,
in the event of returned, rejected, or repossessed merchandise to which any
previously conveyed undefaulted customer receivable relates, or in the event of
a breach of a warranty made by JCPenney in the Receivables Agreement to which
any previously conveyed undefaulted customer receivable relates, JCPenney is
obligated to pay to Funding the amount by which Funding has been damaged.
Either party has the right at any time to terminate the further sale or
purchase, as the case may be, of customer receivables under the Receivables
Agreement.

     Certain state laws provide for recording or other notice formalities in
connection with the assignment of accounts receivable.  Funding does not deem it
appropriate to utilize such procedures in connection with customer receivables
purchased from JCPenney.  In the event of the bankruptcy or receivership of
JCPenney, it is possible that creditors of JCPenney might be deemed to have
superior rights to some or all of the customer receivables previously purchased
by Funding.

     Committed Bank Credit Facilities.  Committed bank credit facilities
available to Funding and JCPenney as of January 31, 1998 amounted to $3.0
billion.  In 1997, Funding and JCPenney amended and restated the two existing
syndicated revolving credit facilities with a group of domestic and
international banks.  These facilities, which support commercial paper borrowing
arrangements, include a $1.5 billion, 364-day revolver and a $1.5 billion, five-
year revolver. The 364-day revolver includes a $750 million seasonal credit line
for the August to January period, thus allowing JCPenney to match its seasonal
borrowing requirements. (See page 2 of Funding's 1997 Annual Report which is
incorporated herein by reference.)

     Employment.  Funding has had no employees since April 30, 1992.

     General.  Legislation regulating consumer credit has been enacted in all
states and federally.  Funding's operations have not been affected by such
legislation since Funding does not deal directly with consumers.

                                       5
<PAGE>
 
2.   PROPERTIES.

     Funding owns no physical properties.

3.   LEGAL PROCEEDINGS.

     Funding has no material legal proceedings pending against it.


                                    PART II
                                    -------


5.   MARKET FOR REGISTRANT'S COMMON EQUITY
     AND RELATED STOCKHOLDER MATTERS.
  
     JCPenney owns all of Funding's outstanding common stock.  Funding's common
stock is not traded, and no dividends have been, or are currently intended to
be, declared by Funding on its common stock.

8.   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

     The Balance Sheets of Funding as of January 31, 1998 and January 25, 1997,
and the related statements of income, reinvested earnings, and cash flows for
each of the years in the three-year period ended January 31, 1998, appearing on
pages 3 through 5 of Funding's 1997 Annual Report, together with the related
notes and the Independent Auditors' Report of KPMG Peat Marwick LLP, independent
certified public accountants, appearing on page 6 of Funding's 1997 Annual
Report, the "Management's Discussion and Analysis of Financial Condition and
Results of Operations" appearing on page 2 thereof, the section of Funding's
1997 Annual Report entitled "Five Year Financial Summary" appearing on page 7
thereof, and the unaudited quarterly financial highlights ("Quarterly Data")
appearing on page 8 thereof, are incorporated herein by reference in response to
Item 8 of Form 10-K.

9.   CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
     ON ACCOUNTING AND FINANCIAL DISCLOSURE.

     Funding has had no change in or disagreements with its independent
certified public accountants on accounting or auditing matters or on financial
statement disclosure.

                                       6
<PAGE>
 
                                    PART IV
                                    -------


14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND
     REPORTS ON FORM 8-K.


     (a)(1)    All Financial Statements.

          See Item 8 of this Form 10-K for financial statements incorporated by
          reference to Funding's 1997 Annual Report.

     (a)(2)    Financial Statement Schedules.

          All schedules have been omitted as they are inapplicable or not
          required under the rules, or the information has been submitted in the
          financial statements or in the notes to the financial statements
          incorporated by reference to Funding's 1997 Annual Report.

     (a)(3)    Exhibits.

          See separate Exhibit Index on pages G-1 through G-5.

     (b)  Reports on Form 8-K filed during the fourth quarter of fiscal 1997.

          None.

                                       7
<PAGE>
 
                                  SIGNATURES
                                  ----------

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

                               J. C. PENNEY FUNDING CORPORATION
                               --------------------------------
                                          (Registrant)


                               By /s/ R. B. Cavanaugh
                                 ------------------------------
                                  R. B. Cavanaugh
                                  Chairman of the Board
Dated: April 30, 1998

                                       8
<PAGE>
 
     Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.


     SIGNATURES               TITLE                         DATE
     ----------               -----                         ----

/s/ R. B. Cavanaugh 
---------------------
R. B. Cavanaugh         Chairman of the Board           April 30, 1998
                        (principal executive
                        officer); Director
 
S. F. Walsh*
---------------------
S. F. Walsh             President                       April 30, 1998
                        (principal financial
                        officer); Director
 
W. J. Alcorn*
---------------------
W. J. Alcorn            Controller (principal           April 30, 1998
                        accounting officer)
 
D. A. McKay*
---------------------
D. A. McKay             Director                        April 30, 1998
 


*By /s/ R. B. Cavanaugh
   --------------------
    R. B. Cavanaugh
    Attorney-in-fact

                                       9
<PAGE>
 
                                 EXHIBIT INDEX

 
             Exhibit
             -------

3. (i) Articles of Incorporation

   (a)  Certificate of Incorporation of Funding, effective April 13, 1964
        (incorporated by reference to Exhibit 3(a) to Funding's Annual Report on
        Form 10-K for the 52 weeks ended January 29, 1994*).

   (b)  Certificate of Amendment of Certificate of Incorporation, effective
        January 1, 1969 (incorporated by reference to Exhibit 3(b) to Funding's
        Annual Report on Form 10-K for the 52 weeks ended January 29, 1994*).

   (c)  Certificate of Amendment of Certificate of Incorporation, effective
        August 11, 1987 (incorporated by reference to Exhibit 3(c) to Funding's
        Annual Report on Form 10-K for the 52 weeks ended January 29, 1994*).
 
   (d)  Certificate of Amendment of Certificate of Incorporation, effective
        April 10, 1988 (incorporated by reference to Exhibit 3(d) to Funding's
        Annual Report on Form 10-K for the 52 weeks ended January 29, 1994*).

   (ii) Bylaws

   (a)  Bylaws of Funding, as amended to May 19, 1995 (incorporated by reference
        to Exhibit 3(ii) to Funding's Quarterly Report on Form 10-Q for the 13
        and 39 weeks ended October 26, 1996*).
 
4. Instruments defining the rights of security holders, including indentures

   (a)  Issuing and Paying Agency Agreement dated as of March 16, 1992, between
        J. C. Penney Funding Corporation and Morgan Guaranty Trust Company of
        New York (incorporated by reference to Exhibit 4(a) to Funding's Current
        Report on Form 8-K, Date of Report - April 3, 1992*).

   (b)  Issuing and Paying Agency Agreement dated as of February 3, 1997,
        between J. C. Penney Funding Corporation and The Chase Manhattan Bank
        (incorporated by reference to Exhibit 4(b) to

                                      G-1
<PAGE>
 
                                 EXHIBIT INDEX

 
             Exhibit
             -------

        Funding's Annual Report on Form 10-K for the 52 weeks ended January 25,
        1997*).

   (c)  Guaranty dated as of February 17, 1997, executed by J. C. Penney
        Company, Inc.(incorporated by reference to Exhibit 4(c) to Funding's
        Annual Report on Form 10-K for the 52 weeks ended January 25, 1997*).

   (d)  Amended and Restated 364-Day Revolving Credit Agreement dated as of
        December 3, 1996, among J. C. Penney Company, Inc., J. C. Penney Funding
        Corporation, the Lenders party thereto, Morgan Guaranty Trust Company of
        New York, as Agent for the Lenders, and Bank of America Illinois,
        Bankers Trust Company, The Chase Manhattan Bank, Citibank, N.A., Credit
        Suisse, and NationsBank of Texas, N.A., as Co-Agents for the Lenders
        (incorporated by reference to Exhibit 4(d) to Funding's Annual Report on
        Form 10-K for the 52 weeks ended January 25, 1997*).
 
   (e)  Amended and Restated Five-Year Revolving Credit Agreement dated as of
        December 3, 1996, among J. C. Penney Company, Inc., J. C. Penney Funding
        Corporation, the Lenders party thereto, Morgan Guaranty Trust Company of
        New York, as Agent for the Lenders, and Bank of America Illinois,
        Bankers Trust Company, The Chase Manhattan Bank, Citibank, N.A., Credit
        Suisse, and NationsBank of Texas, N.A., as Co-Agents for the Lenders
        (incorporated by reference to Exhibit 4(e) to Funding's Annual Report on
        Form 10-K for the 52 weeks ended January 25, 1997*).

   (f)  Amendment and Restatement Agreement to 364-Day Revolving Credit
        Agreement, dated as of November 21, 1997, among J. C. Penney Company,
        Inc., J. C. Penney Funding Corporation, the Lenders party thereto,
        Morgan Guaranty Trust Company of New York, as Agent, and Bank of
        America, National Trust and Savings Association, Bankers Trust Company,
        The Chase Manhattan Bank, Citibank, N.A., Credit Suisse First Boston,
        and NationsBank of Texas, N.A., as Managing Agents.

   (g)  Amendment and Restatement Agreement to Five-Year Revolving Credit
        Agreement, dated as of November 21, 1997, among J. C. Penney Company,
        Inc., J. C. Penney Funding Corporation, the Lenders party thereto,
        Morgan Guaranty Trust Company of New York, as Agent, and Bank of America
        National Trust and Savings Association, Bankers Trust Company, The Chase

                                      G-2
<PAGE>
 
                                 EXHIBIT INDEX

 
             Exhibit
             -------

        Manhattan Bank, Citibank, N.A., Credit Suisse First Boston, and
        NationsBank of Texas, N.A., as Managing Agents.

   (h)  Commercial Paper Dealer Agreement dated March 16, 1992 between J. C.
        Penney Funding Corporation and J.P. Morgan Securities Inc. (incorporated
        by reference to Exhibit 10(a) to Funding's Current Report on Form 8-K,
        Date of Report-April 3, 1992*).

   (i)  Commercial Paper Dealer Agreement dated March 16, 1992 between J. C.
        Penney Funding Corporation and The First Boston Corporation
        (incorporated by reference to Exhibit 10(b) to Funding's Current Report
        on Form 8-K, Date of Report- April 3, 1992*).


   (j)  Commercial Paper Dealer Agreement dated May 3, 1994 between J. C. Penney
        Funding Corporation and Merrill Lynch Money Markets Inc. (incorporated
        by reference to Exhibit 4(g) to Funding's Annual Report on Form 10-K for
        the 52 weeks ended January 28, 1995*).

   (k)  Commercial Paper Dealer Agreement dated January 25, 1995 between J. C.
        Penney Funding Corporation and Morgan Stanley & Co. Incorporated
        (incorporated by reference to Exhibit 4(h) to Funding's Annual Report on
        Form 10-K for the 52 weeks ended January 28, 1995*).

   (l)  Commercial Paper Dealer Agreement dated February 7, 1997 between J. C.
        Penney Funding Corporation and Credit Suisse First Boston Corporation
        (incorporated by reference to Exhibit 4(l) to Funding's Annual Report on
        Form 10-K for the 52 weeks ended January 25, 1997*).**

   (m)  Guaranty dated as of December 3, 1996, executed by J. C. Penney Company,
        Inc. with respect to the Amended and Restated 364-Day and Five Year
        Revolving Credit Agreements, each dated as of December 3, 1996
        (incorporated by reference to Exhibit 4(m) to Funding's Annual Report on
        Form 10-K for the 52 weeks ended January 25, 1997*).

   Instruments evidencing long-term debt, previously issued but now fully
   prepaid, have not been filed as exhibits hereto because none of the debt
   authorized under any such instrument exceeded 10 percent of the total assets
   of the Registrant.  The Registrant agrees to furnish a copy of any of its
   long-term debt instruments to the Securities and Exchange Commission upon
   request.

                                      G-3
<PAGE>
 
                                 EXHIBIT INDEX


             Exhibit
             -------

10.     Material Contracts

        THE CORPORATION HAS NO COMPENSATORY PLANS OR ARRANGEMENTS REQUIRED TO BE
        FILED AS EXHIBITS TO THIS REPORT PURSUANT TO ITEM 14(c) OF THIS REPORT.

   (a)  Amended and Restated Receivables Agreement dated as of January 29, 1980
        between J. C. Penney Company, Inc. and J. C. Penney Financial
        Corporation (incorporated by reference to Exhibit 10(a) to Funding's
        Annual Report on Form 10-K for the 52 weeks ended January 29, 1994*).

   (b)  Amendment No. 1 to Amended and Restated Receivables Agreement dated as
        of January 25, 1983 between J. C. Penney Company, Inc. and J. C. Penney
        Financial Corporation (incorporated by reference to Exhibit 10(b) to
        Funding's Annual Report on Form 10-K for the 52 weeks ended January 29,
        1994*).

   (c)  Loan Agreement dated as of January 28, 1986 between J. C. Penney
        Company, Inc. and J. C. Penney Financial Corporation (incorporated by
        reference to Exhibit 1 to Funding's Current Report on Form 8-K, Date of
        Report -January 28, 1986*).

   (d)  Amendment No. 1 to Loan Agreement dated as of January 28, 1986 between
        J. C. Penney Company, Inc. and J. C. Penney Financial Corporation
        (incorporated by reference to Exhibit 1 to Funding's Current Report on
        Form 8-K, Date of Report -December 31, 1986*).
        
   (e)  Amendment No. 2 to Loan Agreement dated as of January 28, 1986 between
        J. C. Penney Company, Inc. and J. C. Penney Funding Corporation
        (incorporated by reference to Exhibit 10(e) to Funding's Annual Report
        on Form 10-K for the 52 weeks ended January 25, 1997*).

   (f)  Line of Credit Agreement dated as of July 1, 1994, between J. C. Penney
        Funding Corporation and J. C. Penney Chile, Inc. (incorporated by
        reference to Exhibit 10(e) to Funding's Annual Report on Form 10-K for
        the 52 weeks ended January 28, 1995*).

   *    SEC file number 1-4947-1

   **   Funding has entered into identical Commercial Paper Dealer Agreements
        dated February 7, 1997 with each of Merrill Lynch 

                                      G-4
<PAGE>
 
                                 EXHIBIT INDEX

 
             Exhibit
             -------
 
        Money Markets Inc., J.P. Morgan Securities Inc., and Morgan Stanley &
        Co. Incorporated, which agreements are omitted pursuant to Instruction 2
        to Item 601 of Regulation S-K. Funding agrees to furnish a copy of any
        of such agreements to the Securities and Exchange Commission upon
        request.

13.     Annual Report to Security Holders

        Excerpt from Funding's 1997 Annual Report.

23.     Consent of Independent Certified Public Accountants

24.     Power of Attorney

27.     Financial Data Schedule

        Financial Data Schedule for the 53 week period ended January 31, 1998.

99.     Additional Exhibits

        Excerpt from JCPenney's 1997 Annual Report to Stockholders.
 

                                      G-5