<PAGE>

                                                                (Conformed Copy)


                      SECURITIES AND EXCHANGE COMMISSION
                               Washington, D.C.
                                     20549

                                  ___________

                                   FORM 10-Q

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

                                  __________

For the 13 week and 39 week periods             Commission File Number 1-4947-1
ended October 28, 2000

                       J. C. PENNEY FUNDING CORPORATION
    -----------------------------------------------------------------------
            (Exact name of registrant as specified in its charter)


                 Delaware                                  51-0101524
    -----------------------------------------------------------------------
       (State or other jurisdiction of                 (I.R.S. Employer
        incorporation or organization)               Identification 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
                                                         ------------------

                              -------------------

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 the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.

500,000 shares of Common Stock of $100 par value, as of October 28, 2000.

THE REGISTRANT MEETS THE CONDITIONS SET FORTH IN GENERAL INSTRUCTION H(1) (a)
AND (b) OF FORM 10-Q AND IS THEREFORE FILING THIS FORM WITH THE REDUCED
DISCLOSURE FORMAT.

                                       1
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PART I - FINANCIAL INFORMATION

ITEM 1 - FINANCIAL STATEMENTS
         --------------------

The following interim financial information of J. C. Penney Funding Corporation
("Funding"), a wholly owned subsidiary of J. C. Penney Company, Inc.
("JCPenney"), is unaudited; however, in the opinion of Funding, it includes all
adjustments, consisting only of normal recurring accruals, necessary for a fair
presentation.  The financial information should be read in conjunction with the
audited financial statements included in Funding's Annual Report on Form 10-K
for the 52 weeks ended January 29, 2000.


Statements of Income and Reinvested Earnings
(Dollars in millions)


<TABLE>
<CAPTION>
                                                                   13 weeks ended                  39 weeks ended
                                                               ------------------------         -----------------------
                                                                Oct. 28,        Oct 30,         Oct. 28,        Oct 30,
                                                                  2000           1999             2000           1999
                                                                ------          ------          -------         ------
<S>                                                            <C>             <C>             <C>             <C>
Interest earned from
   JCPenney and affiliates                                      $   23          $   63          $   28           $  156

Interest expense                                                     8              41              11              102
                                                                ------          ------          ------           ------

Income before income taxes                                          15              22              17               54

Income taxes                                                         5               7               6               19
                                                                ------          ------          ------           ------

Net income                                                          10              15              11               35

Reinvested earnings at                                           1,089           1,062           1,088            1,042
    beginning of period                                         ------          ------          ------           ------

Reinvested earnings at
   end of period                                                $1,099          $1,077          $1,099           $1,077
                                                                ======          ======          ======           ======
</TABLE>

                                       2
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Balance Sheets
(Dollars in millions)


<TABLE>
                                                                Oct. 28,          Oct. 30,             Jan. 29,
                                                                  2000              1999                 2000
                                                                 ------            ------               ------
<S>                                                           <C>                <C>               <C>
ASSETS
Cash                                                             $    -            $    1               $    -
Loans to JCPenney and affiliates                                 $1,632            $4,481               $1,588
                                                                 ------            ------               ------

                                                                 $1,632            $4,482               $1,588
                                                                 ======            ======               ======

LIABILITIES AND EQUITY OF JCPENNEY

Short-term debt                                                  $  357            $3,222               $  330

Due to JCPenney                                                      31                38                   25
                                                                 ------            ------               ------
Total liabilities                                                $  388            $3,260               $  355

Equity of JCPenney:
    Common stock (including contributed capital),
     par value $100:
    Authorized, 750,000 shares                                   $  145            $  145               $  145
    Issued, 500,000 shares

Reinvested earnings                                              $1,099            $1,077               $1,088
                                                                 ------            ------               ------

Total equity of JCPenney                                         $1,244            $1,222               $1,233
                                                                 ------            ------               ------
                                                                 $1,632            $4,482               $1,588
                                                                 ======            ======               ======
</TABLE>

                                       3
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Consolidated Statements of Cash Flows
(Dollars in millions)



<TABLE>
<CAPTION>
                                                                                39 weeks ended
                                                                         -------------------------------
<S>                                                                      <C>                    <C>
                                                                         Oct. 28,               Oct. 30,
                                                                           2000                   1999
                                                                         --------              ---------

Operating Activities
   Net Income                                                             $  11                $    35
   (Increase) Decrease in loans to
   JCPenney                                                                 (44)                (1,353)
   (Decrease) Increase in amount due
   to JCPenney                                                                6                     20
                                                                          -----                -------
                                                                            (27)                (1,298)
                                                                          -----                -------

Financing Activities
   Increase (Decrease) in short-term
   Debt                                                                      27                  1,298
                                                                          -----                -------


Increase (Decrease) in cash                                                 -0-                    -1-

Cash at beginning of year                                                   -0-                    -0-
                                                                          -----                -------

Cash at end of third quarter                                              $ -0-                $   -1-
                                                                          =====                =======
</TABLE>

                                       4
<PAGE>

ITEM 2.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
          RESULTS OF OPERATIONS.

Funding derives earnings on loans to JCPenney under the terms of the Loan
Agreement which provides for unsecured loans to be made by Funding to JCPenney.
Additionally, in order to maintain Funding's income at defined coverage ratios,
Funding's income is supplemented by charges to JCPenney. The income of Funding
is designed to cover Funding's fixed charges (interest expense) at a coverage
ratio mutually agreed upon by Funding and JCPenney. The earnings to fixed
charges coverage ratio has historically been at least one and one-half times.

Funding issues commercial paper through Credit Suisse First Boston Corporation,
J.P. Morgan Securities Inc., Merrill Lynch Money Markets Inc., and Morgan
Stanley Dean Witter to corporate and institutional investors in the domestic
market.  The commercial paper is guaranteed by JCPenney on a subordinated basis.
The commercial paper is rated: "A3" by Standard and Poor's Corporation, and "P3"
by Moody's Investor's Service.

Funding's borrowing levels have been substantially reduced as a result of loan
repayments by JCPenney in connection with the sale of JCPenney's credit card
receivables and credit facilities to General Electric Capital Corporation (GECC)
on December 6, 1999.  JCPenney used a part of the proceeds to repay a portion of
its loan from Funding.  Funding in turn used the proceeds to pay down its short
term commercial paper debt.

For the third quarter of 2000, income, expenses, and provision for taxes
decreased as compared with the third quarter of 1999 as a result of lower
average borrowing levels. Borrowing levels averaged $426 million during the 2000
third quarter as compared with $2,923 million during the comparable 1999 period.
At the end of the third quarter of 2000, borrowing levels were $357 million as
compared with $3,222 million at the end of the third quarter of 1999. Average
interest rates for the third quarter of 2000 increased 140 basis points as
compared with the third quarter of 1999. For the nine-month period ended October
28, 2000, income, expenses, and provision for taxes decreased as compared to the
1999 comparable period. These decreases were a result of lower borrowing levels.
Borrowing levels averaged $215 million for the first nine months of 2000 as
compared with $2,549 million in the comparable 1999 period due to a decrease in
JCPenney's general capital needs. For the nine-month period in 2000, average
interest rates increased 136 basis points as compared with the same period in
1999.

                                       5
<PAGE>

PART II - OTHER INFORMATION


  Item 6.  Exhibits and Reports on Form 8-K.
           --------------------------------


      (a)  Exhibits
           --------

           The following document is filed as an exhibit to this
           report:

           27  Financial Data Schedule for the nine months ended
               Oct. 28, 2000.

      (b)  Reports on Form 8-K
           -------------------

           None.

                                       6
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                                  SIGNATURES
                                  ----------


Pursuant to the requirements 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


                                By: /s/ W. J. Alcorn
                                    -----------------------------------
                                     W. J. Alcorn
                                     Controller
                                     (Principal Accounting Officer)


Date: December 11, 2000

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