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 26 week periods              Commission File Number 1-4947-1
ended July 27, 2002

                        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 July 27, 2002.

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.

<page>


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  Corporation,  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 26, 2002.


Statements of Income and Reinvested Earnings
(Dollars in millions)
<table>
      <c>                                                            <c>               <c>               <c>              <c>
                                                                     13 weeks ended                     26 weeks ended
                                                                         --------------                     --------------
                                                                   July 27,         July 28,          July 27,          July 28,
                                                                     2002             2001              2002              2001
                                                                     ----             ----              ----              ----
Interest earned from
       JCPenney and affiliates                                     $   0            $   0             $   0             $   0

Interest expense                                                       0                0                 0                 0
                                                                    -----            -----             -----             -----

Income before income taxes                                             0                0                 0                 0

Income taxes                                                           0                0                 0                 0
                                                                    -----            -----             -----             -----

Net income                                                             0                0                 0                 0

Reinvested earnings at                                                 1,093            1,093         1,093                 1,093
        beginning of period                                         -------           -------        -------              -------

Reinvested earnings at
        end of period                                                 $1,093           $1,093        $1,093                $1,093
                                                                    ======             ======        =======              =======
</table>
                                      -2-
<page>

Balance Sheets
(Dollars in millions)
 <table>
                                                                     <c>                      <c>                    <c>
                                                                        July 27,              July 28,               Jan.26,
                                                                           2002                   2001                  2002
                                                                        --------              --------                ------
ASSETS
Loans to JCPenney and affiliates                                          $1,238                $1,240                $1,238
                                                                          ------                ------                ------

                                                                          $1,238                $1,240                $1,238
                                                                          ======                ======                ======

LIABILITIES AND EQUITY OF JCPENNEY

Short-term debt                                                           $    0                $    0                $    0

Due to JCPenney                                                                0                     2                     0
                                                                          ------                ------                ------
Total liabilities                                                         $    0                $    2                $    0

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

Reinvested earnings                                                       $1,093                $1,093                $1,093
                                                                          ------                ------                ------

Total equity of JCPenney                                                  $1,238                $1,238                $1,238
                                                                          ------                ------                ------
                                                                          $1,238                $1,240                $1,238
                                                                          ======                ======                ======

</table>
                                      -3-
<page>


Consolidated Statements of Cash Flows
(Dollars in millions)
<table>


                                                                                   <c>          <c>          <c>

                                                                                          26 weeks ended
                                                                                    --------------------
                                                                                 July 27,                 July 28,
                                                                                     2002                     2001
                                                                                 --------                 --------

Operating Activities
       Net Income                                                                 $     0                  $     0
       (Increase) decrease in loans to
       JCPenney
                                                                                        0                        0
       (Decrease) increase in amount due
       to JCPenney                                                                      0                        0
                                                                                    -----                    -----
                                                                                        0                        0
                                                                                    -----                    -----

Financing Activities
       Increase (decrease) in short-term
       Debt                                                                             0                        0
                                                                                    -----                    -----


Increase (decrease) in cash                                                             0                        0

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

Cash at end of second quarter                                                      $    0                  $     0
                                                                                  =======                  =======


</table>
                                      -4-
<page>


Notes to the Unaudited Interim Financial Statements

1) Background

     Historically,  Funding has  provided  short-term  financing  for  JCPenney.
Principally,  Funding  issued  commercial  paper to finance  JCPenney's  working
capital needs. In 1999,  JCPenney sold its credit card operation and the related
accounts  receivable to an unrelated third party. The result of this transaction
coupled  with  JCPenney's  other  sources of liquidity  eliminated  the need for
Funding to issue  commercial  paper for short-term  borrowing  requirements.  In
addition,  with  Funding's  current credit  ratings,  it is assumed that Funding
would have little or no current access to commercial paper borrowing.


                                      -5-

<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 from time to time 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 & Poor's
Ratings Services and "Not Prime" by Moody's Investors Service, Inc.

Funding had no short-term  debt  outstanding  as of July 27, 2002 nor as of July
28, 2001.

After paying off $920 million of debt that matured in the first half of 2002,
JCPenney's liquidity remains strong with approximately $2.0 billion in cash and
short-term investments as of July 27, 2002.

Given JCPenney's  current favorable  liquidity  position,  it is not anticipated
that there is a need for short-term  borrowing during fiscal 2002. If a need for
short-term  funding  were to arise,  JCPenney has access to funding via its $1.5
billion  revolving  credit facility  maturing in May 2005. No borrowings,  other
than the issuance of trade and stand-by  letters of credit,  which  totaled $323
million as of the end of the second  quarter  2002,  have been made under either
the new or previous credit facilities.


                                      -6-
<page>


PART II - OTHER INFORMATION


     Item 6. Exhibits and Reports on Form 8-K

          (a) Exhibits

              None.

          (b) Reports on Form 8-K

              None.




                                       -7-
<page>
                                   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: September 6, 2002





                                      -8-

<PAGE>



CERTIFICATIONS

I, Michael P. Dastugue, Chairman of the Board, certify that:

1.   I have reviewed this quarterly  report on Form 10-Q of J. C. Penney Funding
     Corporation;

2.   Based on my knowledge,  this  quarterly  report does not contain any untrue
     statement of a material fact or omit to state a material fact  necessary to
     make the statements  made, in light of the  circumstances  under which such
     statements  were made, not misleading with respect to the period covered by
     this quarterly report; and

3.   Based on my  knowledge,  the  financial  statements,  and  other  financial
     information  included  in this  quarterly  report,  fairly  present  in all
     material respects the financial  condition,  results of operations and cash
     flows of the  registrant  as of, and for,  the  periods  presented  in this
     quarterly report.

Date:  September 6, 2002.
                                                /s/ Michael P. Dastugue
                                                ---------------------------
                                                Michael P. Dastugue
                                                Chairman of the Board
                                                J. C. Penney Funding Corporation




CERTIFICATIONS

I, William J. Alcorn, Controller, certify that:

1.   I have reviewed this quarterly  report on Form 10-Q of J. C. Penney Funding
     Corporation;

2.   Based on my knowledge,  this  quarterly  report does not contain any untrue
     statement of a material fact or omit to state a material fact  necessary to
     make the statements  made, in light of the  circumstances  under which such
     statements  were made, not misleading with respect to the period covered by
     this quarterly report; and

3.   Based on my  knowledge,  the  financial  statements,  and  other  financial
     information  included  in this  quarterly  report,  fairly  present  in all
     material respects the financial  condition,  results of operations and cash
     flows of the  registrant  as of, and for,  the  periods  presented  in this
     quarterly report.

Date:  September 6, 2002.
                                                 /s/ William J. Alcorn
                                                ---------------------------
                                                William J. Alcorn
                                                Controller
                                                J. C. Penney Funding Corporation



                                      -9-