~~Table~~Form of10-K ~~Contents~~

~~CONFORMED~~SECURITIES ~~COPY~~ AND EXCHANGE COMMISSION

~~Form 10-K~~ Washington, D.C. 20549

~~SECURITIES~~(Mark ~~AND~~One) ~~EXCHANGE COMMISSION~~

~~Washington,~~x D.ANNUAL C.REPORT ~~20549~~PURSUANT TO SECTION 13 OR 15(d) OF THE

(Mark One)
x		ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
		For the fiscal year ended January 25, 2003
		or
o		TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

SECURITIES EXCHANGE ACT OF 1934

For the ~~transition~~fiscal ~~period~~year ~~from to~~ ended January 31, 2004

~~Commission~~or ~~File No. 1-4947-1~~

J.¨ C.TRANSITION ~~PENNEY~~REPORT ~~FUNDING~~PURSUANT ~~CORPORATION~~ TO SECTION 13 or 15(d) OF THE

~~(Exact~~SECURITIES ~~name~~EXCHANGE ofACT ~~registrant~~OF ~~as specified in its charter)~~1934

~~Delaware~~For ~~(State~~the ortransition ~~other jurisdiction of incorporation or organization) 51-0101524 (I.R.S. Employer Identification No.)~~period from to

~~6501~~Commission ~~Legacy~~File ~~Drive,~~No. ~~Plano, Texas 75024~~1-~~3698 (Address~~4947-1 ~~of principal executive offices) (Zip Code)~~

~~(972) 431-1000 (Registrant’s~~J. ~~telephone~~C. ~~number,~~PENNEY ~~including~~FUNDING ~~area~~CORPORATION ~~code)~~

~~Securities~~(Exact ~~registered~~name ~~pursuant~~of toregistrant ~~Section 12(b)~~as ofspecified ~~the~~in ~~Act:~~ its charter)

None (Title of class)

Delaware

51-0101524

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

~~Securities~~6501 ~~registered~~Legacy ~~pursuant~~Drive, Plano, toTexas ~~section~~75024-3698 ~~12(g) of the Act:~~

~~None~~ (~~Title~~Address of ~~class~~principal executive offices)

~~Indicate by check mark whether the registrant~~ (~~1) has~~Zip ~~field all reports required to be filed by Section 13 or 15(d~~Code) 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.

x(972) ~~Yes~~431-1000 ~~o No~~

~~TABLE~~(Registrant’s OFtelephone ~~CONTENTS~~number, including area code)

PART I
	Item 1. Business.
	Item 2. Properties.
	Item 3. Legal Proceedings.
	Item 5. Market for and Dividends on Registrant’s Common Equity and Related Stockholder Matters.
PART II
	Item 6. Selected Financial Data.
	Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
	Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
	Item 8. Financial Statements and Supplementary Data.
	Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.
PART III
	Item 14. Controls and Procedures.
PART IV
	Item 15. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.
SIGNATURES
CERTIFICATIONS
EXHIBIT INDEX
EX-23 Independent Auditors' Consent
EX-99.(a) Excerpt from JCPenny's Annual Report
EX-99.(b) Certification Pursuant to 18 USC 1350
EX-99.(c) Certification Pursuant to 18 USC 1350

(Former name, former address and former fiscal year, if changed since last report)

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

~~Indicate~~None by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. x

~~Indicate by check mark whether the registrant is an accelerated filer~~ (~~as defined~~Title ~~in Rule 12b-2~~ of ~~the Act~~class)~~. Yes No X~~

~~State~~Securities ~~the~~registered ~~aggregate~~pursuant ~~market~~to ~~value~~section of12(g) ~~the voting and non-voting common equity held by non-affiliates~~ of the ~~registrant~~Act: ~~None~~

~~Indicate~~None ~~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 50 cents par value, as of April 1, 2003.~~

~~DOCUMENTS~~(Title ~~INCORPORATED~~of BYclass) ~~REFERENCE~~

Documents from which portions		Parts of the Form 10-K
are incorporated by reference		into which incorporated
J. C. Penney Company, Inc. 2002 Annual Report to Stockholders		Part I

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. x Yes ¨ No

~~THE~~Indicate ~~REGISTRANT~~by ~~MEETS~~check ~~THE~~mark ~~CONDITIONS~~if ~~SET~~disclosure ~~FORTH~~of INdelinquent ~~GENERAL~~filers ~~INSTRUCTION I(1)(a)~~pursuant ~~AND~~to ~~(b)~~Item OF405 ~~FORM~~of 10Regulation S-K ~~AND~~(§229.405 ISof ~~THEREFORE~~this chapter) ~~FILING~~is ~~THIS~~not ~~FORM~~contained ~~WITH~~herein, ~~THE~~and ~~REDUCED DISCLOSURE~~will ~~FORMAT.~~not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. x

~~Table~~Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of ~~Contents~~the Act). Yes ¨ No x

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

~~Item 1.~~Indicate ~~Business~~the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

~~J. C. Penney Funding Corporation (“Funding”)~~500,000 ~~which~~shares ~~was~~of ~~incorporated~~Common ~~in Delaware~~Stock ~~in 1964, is a wholly owned subsidiary~~ of J.100 C.dollars ~~Penney~~par ~~Corporation~~value, ~~Inc.~~ ~~(“JCPenney”),~~as ~~also~~of ~~incorporated~~April ~~in Delaware. Funding’s executive offices are located in JCPenney’s offices in Plano~~1, ~~Texas~~2004. ~~Its business consists of~~ ~~financing a portion of JCPenney’s operations through loans to JCPenney.~~

~~JCPenney,~~DOCUMENTS aINCORPORATED ~~company~~BY ~~founded~~REFERENCE by James Cash Penney in 1902 and incorporated in 1924, is a major retailer operating 1,049 domestic and international JCPenney department stores located in 49 states, Puerto Rico, and Mexico. In addition, JCPenney operates 54 department stores in Brazil under the Renner name. JCPenney’s Department Stores and Catalog business consists of providing merchandise and services to consumers through department stores, catalog and the Internet. JCPenney sells family apparel, jewelry, shoes, accessories and home furnishings. In addition, JCPenney operates a chain of 2,686 drugstores, under the Eckerd name, located throughout the Southwest, Southeast, Sunbelt and Northeast regions of the United States.

JCPenney’s total revenues for the 52 weeks ended January 25, 2003, were approximately $32 billion and net income was $405 million. Pursuant to the terms of financing agreements between Funding and JCPenney, payments from JCPenney to Funding are set 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” below.) The earnings to fixed charges coverage ratio has historically been at least 1.5 to 1.

Documents from which portions

are incorporated by reference

Parts of the Form 10-K

into which incorporated

J. C. Penney Company, Inc.

2003 Annual Report to Stockholders

Part I

~~Holding~~THE ~~Company~~REGISTRANT ~~Establishment. Effective January 27, 2002, J. C. Penney~~MEETS ~~Company,~~THE ~~Inc.~~CONDITIONS ~~changed~~SET ~~its~~FORTH ~~corporate~~IN ~~structure~~GENERAL toINSTRUCTION ~~a holding company format. As part of this structure, J. C. Penney Company, Inc. changed its name to J. C. Penney Corporation, Inc.~~ I(~~JCPenney~~1) ~~and became a wholly owned subsidiary of a newly formed affiliated holding company~~ (Holding Company). The new Holding Company assumed the name J. C. Penney Company, Inc. The Holding Company has no subsidiaries other than JCPenney. The Holding Company has no independent assets or operations. All outstanding shares of common and preferred stock were automatically converted into the identical number and type of shares in the new holding company. Stockholders’ ownership interests in the business did not change as a ~~result of the new structure. Shares of the Company remain publicly traded under the same symbol (JCP~~) on the New York Stock Exchange. The Holding Company is a co-obligor (or guarantor, as appropriate) regarding the payment of principal and interest on JCPenney’s outstanding debt securities. The guarantee by the Holding Company of certain of JCPenney’s outstanding debt securities is full and unconditional.

~~Operations~~AND ~~of Funding. To assist in financing the operations of JCPenney as described under “Business” above, Funding from time to time sells its short-term notes~~ (~~commercial paper~~b) toOF ~~investors~~FORM ~~through dealer~~10-~~placed programs.~~K ~~The~~AND ~~short-term~~IS ~~notes~~THEREFORE ~~are~~FILING ~~guaranteed~~THIS onFORM aWITH ~~subordinated~~THE ~~basis by~~REDUCED ~~JCPenney.~~DISCLOSURE ~~Historically, Funding has issued long-term debt in public and private markets in the United States and abroad~~FORMAT. In 2001, JCPenney sold the assets of J. C. Penney Direct Marketing Services, Inc. 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. Therefore, Funding has not produced any revenue or income. In addition, with Funding’s current credit ratings, it is assumed that Funding would have little or no current access to commercial paper borrowing. Funding had no short-term debt outstanding as of January 25, 2003 nor as of January 26, 2002.

2 PART I

~~Table~~Item of1. ~~Contents~~Business.

~~Liquidity~~J. ~~of JCPenney~~C. ~~JCPenney’s~~Penney ~~financial~~Funding ~~condition~~Corporation ~~and~~(“Funding”), ~~liquidity continued~~which towas ~~strengthen~~incorporated ~~during~~in ~~2002.~~Delaware ~~Cash~~in ~~flow~~1964, ~~from~~is ~~operating~~a ~~activities~~wholly ~~was $1.4 billion~~owned insubsidiary ~~2002~~of ~~compared with $1~~J.~~0 billion~~ ~~in 2001 and $1~~C.~~5 billion~~ inPenney ~~2000~~Corporation, Inc. ~~Free cash flow~~(“JCPenney”), ~~defined~~also asincorporated ~~cash~~in ~~flow~~Delaware. ~~from~~Funding’s ~~operating~~executive ~~activities~~offices ~~after subtracting~~are ~~capital~~located ~~expenditures,~~in ~~net~~JCPenney’s ofoffices ~~proceeds~~in ~~from the sale of assets~~Plano, ~~and dividends,~~Texas. ~~exceeded~~Its ~~$500 million~~business ~~for~~consists ~~the~~of ~~year~~financing ~~compared~~a toportion ~~$200 million~~ of ~~free cash~~JCPenney’s ~~flow~~operations ~~generated~~through loans into ~~2001~~JCPenney.

~~In June 2001,~~ JCPenney ~~closed on the sale of its J. C. Penney Direct Marketing Services~~, ~~Inc.~~a ~~(“DMS”)~~company ~~assets,~~founded ~~including~~by ~~its~~James ~~J. C.~~ Cash Penney ~~Life~~in ~~Insurance subsidiaries~~1902 and ~~related~~incorporated ~~businesses~~in ~~to a U. S. subsidiary of AEGON~~1924, N.has ~~V. (“AEGON”).~~grown ~~JCPenney~~to ~~received~~be ~~cash~~a atmajor ~~closing~~retailer ofoperating ~~approximately $~~1~~.3 billion ($1.1 billion after tax). Concurrent with the closing~~,020 JCPenney ~~entered~~department ~~into~~stores ~~a 15-year~~in ~~strategic~~49 ~~licensing~~states and ~~marketing~~Puerto ~~services arrangement with AEGON designed to offer an expanded range of financial and membership services products to JCPenney customers~~Rico. ~~Over~~In ~~the term of this arrangement~~addition, JCPenney ~~will~~ ~~receive~~operates ~~fee~~58 ~~income~~Renner ~~related~~department tostores ~~marketing~~in ~~and sale of certain financial products and membership services~~Brazil. ~~Such~~In ~~amounts~~November ~~will~~2003 ~~be recognized as earned in~~ JCPenney’s ~~financial statements. JCPenney’s financial statements are presented~~closed ~~to reflect DMS as a discontinued operation. DMS was reflected as a discontinued operation for 2000 with an estimated net loss on~~ the sale of ~~$296 million.~~its ~~Because~~six ~~the~~Mexico ~~transaction~~department ~~closed~~stores. ~~earlier~~A ~~than~~major ~~anticipated~~portion ~~in 2001, income from DMS operations was over a shorter time period, and an additional $16 million loss was recorded on the sale~~ of ~~discontinued operations.~~ JCPenney ~~recorded~~’s abusiness ~~$34 million~~consists ~~gain in 2002 on the sale~~ of ~~discontinued~~providing ~~operations. This~~merchandise ~~gain~~and ~~primarily~~services ~~relates~~ to ~~additional~~consumers ~~capital~~through ~~loss~~department ~~deductions~~stores, ~~that~~catalog ~~JCPenney is~~and ~~entitled to as a result of a 2002 tax regulation change~~Internet. ~~The~~JCPenney ~~final~~markets ~~federal tax~~family ~~liability~~apparel, onjewelry, ~~the transaction was determined in an agreement between~~shoes, ~~JCPenney~~accessories and ~~the~~home ~~Internal Revenue Service~~furnishings.

AtPursuant ~~year-end~~to ~~2002~~the terms of financing agreements between Funding and JCPenney, payments from JCPenney’s ~~cash~~to ~~and~~Funding ~~short-term~~are ~~investments~~set ~~were~~to ~~approximately $2.5 billion.~~produce Inearnings ~~addition~~sufficient to cover Funding’s fixed charges, ~~JCPenney~~principally ~~established~~interest on borrowings, at a ~~new~~coverage ~~three-year~~ratio ~~$1.5 billion~~mutually agreed upon between ~~revolving~~Funding ~~credit~~and ~~facility~~JCPenney. on(See ~~May,~~“Loan ~~31,~~Agreement” ~~2002~~below.) The earnings to ~~further~~fixed ~~increase~~charges ~~JCPenney’s liquidity~~coverage ~~and~~ratio ~~financial~~has ~~flexibility~~historically been at least 1. 5 to 1.

~~Until~~Holding ~~such~~Company ~~time~~Establishment. asEffective ~~JCPenney~~January ~~regains~~27, an2002, ~~investment~~J. ~~grade~~C. ~~level~~Penney ~~credit rating~~Company, ~~access~~ toInc. ~~short-term~~changed ~~commercial~~its ~~paper~~corporate ~~markets~~structure isto ~~limited.~~a holding company format. As apart ~~result~~of this structure, ~~JCPenney’s~~ ~~liquidity~~J. ~~goal~~C. isPenney toCompany, ~~maintain~~Inc. ~~sufficient~~changed ~~cash~~its ~~investments~~name to ~~cover peak~~J. ~~inventory~~C. ~~requirements~~Penney Corporation, Inc. (JCPenney) and ~~scheduled~~became ~~debt~~a ~~maturities~~wholly owned subsidiary of a newly formed affiliated holding company (Holding Company). The ~~cash~~new ~~investment~~Holding Company assumed ~~balance~~the isname ~~comprised~~J. ofC. ~~cash~~Penney ~~flow~~Company, ~~generated~~Inc. ~~from~~The ~~2000~~Holding toCompany ~~2002~~has no direct subsidiaries other than JCPenney. The Holding Company has no independent assets or operations. All outstanding shares of common and ~~proceeds~~preferred ~~from~~stock were automatically converted into the ~~2001~~identical ~~sale~~number and type of shares in the ~~assets~~new holding company. Stockholders’ ownership interests in the business did not change as a result of ~~DMS~~the new structure. Shares of the Company remain publicly traded under the same symbol (JCP) on the New York Stock Exchange. The Holding Company is a co-obligor (or guarantor, as appropriate) regarding the payment of principal and interest on JCPenney’s outstanding debt securities. The guarantee by the Holding Company of certain of JCPenney’s outstanding debt securities is full and unconditional.

~~Also~~Operations of Funding. To assist in financing the operations of JCPenney as described under “Business” above, ~~due~~Funding from time to time 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. Historically, Funding has issued long-term debt in public and private markets in the United States and abroad. In 2001, JCPenney sold the assets of J. C. Penney Direct Marketing Services, Inc. to an unrelated third party. The result of this transaction coupled with JCPenney’s ~~strong~~other sources of liquidity ~~position~~eliminated the need for Funding to issue commercial paper for short-term borrowing requirements. Therefore, itFunding ishas not ~~anticipated~~produced ~~that~~ any ~~external~~revenue ~~financing~~or ~~will~~income. beIn ~~required~~addition, inwith ~~2003~~Funding’s tocurrent ~~fund~~credit ~~operating~~ratings, ~~cash~~it ~~needs~~is assumed that Funding would have little or no current access to commercial paper borrowing. Funding had no short-term debt outstanding as of January 31, 2004, nor as of January 25, 2003.

~~Loan~~2 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

3Loan 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 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.

~~Table~~Employment. ofFunding ~~Contents~~has had no employees since April 30, 1992.

~~earnings~~Significant ~~coverage~~Transactions ofSince ~~Funding’s~~January ~~interest~~31, ~~and~~2004. ~~other~~On ~~fixed~~April ~~charges.~~4, If2004, at the ~~end~~ Company and certain of ~~each~~its ~~fiscal~~subsidiaries ~~quarter~~signed definitive ~~during~~agreements ~~which~~with aThe ~~loan~~Jean isCoutu ~~outstanding~~Group (PJC) Inc. (“Coutu”), and CVS Corporation and CVS Pharmacy, Inc. (“CVS”) for the ~~earnings coverage~~sale of ~~Funding~~the Company’s ~~interest~~Eckerd ~~and~~drugstore ~~other~~for ~~fixed~~a ~~charges~~total isof ~~less~~$4.525 ~~than~~billion in cash. In the ~~agreed~~Coutu ~~upon~~transaction, ~~ratio~~the Company and indirect wholly-owned subsidiary, ~~JCPenney~~TDI Consolidated Corporation, will ~~pay~~sell tothe ~~Funding~~stock anof ~~additional~~Eckerd ~~amount~~Corporation ~~sufficient~~(“Eckerd”), toGenovese Drug Stores, Inc. (“Genovese”), and Thrift Drug, Inc. ~~provide~~(“Thrift”) for ~~such~~$2.375 ~~coverage~~billion. toCoutu bewill ~~not~~acquire ~~less~~Eckerd ~~than~~drugstores and support facilities located in thirteen Northeast and mid-Atlantic states, as well as the ~~agreed~~Eckerd ~~upon~~Home ~~ratio~~Office located in thirteen Northeast and mid-Atlantic states, as well as the Eckerd Home Office located in Florida. In the ~~event~~ ~~that~~CVS ~~JCPenney~~the Company, Eckerd, Genovese, Thrift, and ~~Funding~~Eckerd ~~have~~Fleet, ~~not~~Inc. ~~agreed~~will ~~upon~~sell aEckerd ~~mutually~~drugstores ~~acceptable ratio~~and ~~for~~support ~~any~~facilities ~~fiscal~~located ~~quarter,~~in the ~~applicable~~remaining ~~quarterly~~southern ~~payment~~states, ~~with~~principally ~~respect~~Florida toand Texas, ~~such~~and ~~period~~Eckerd’s ~~will~~pharmacy ~~include~~benefits anmanagement, ~~amount~~mail ~~equal~~and tospecialty ~~the~~pharmacy ~~excess~~businesses, ifto ~~any~~CVS for $2.150 billion. After closing adjustments, oftaxes, ~~one~~fees and ~~one-half~~ ~~percent~~other ofexpenses relating to the ~~daily~~transactions, ~~average~~the Company expects to generate approximately $3.5 billion in cash proceeds. Closing of the ~~aggregate~~transactions, ~~principal~~which ~~amount outstanding~~are onsubject ~~all~~to ~~loans~~normal ~~during~~and ~~such~~customary ~~period~~regulatory approvals, ~~over~~anticipated ~~the~~to ~~aggregate~~occur ~~amount~~by ~~of interest~~the ~~accrued~~end onof ~~all~~the ~~such~~fiscal ~~loans~~second ~~during~~quarter ~~such~~of ~~period~~2004.

~~Employment~~In the fourth quarter of 2003, JCPenney classified Eckerd as a discontinued operation and recorded an adjustment to reflect the estimated fair value of its investment in Eckerd. ~~Funding~~The ~~has~~Company ~~had~~also norecorded ~~employees~~the ~~since~~estimated ~~April 30,~~tax ~~1992~~liability that would be due upon the closing of a transaction. Additional fair value and tax liability adjustments related to the sale, if any, will be recorded in the first quarter of 2004.

Forward-Looking Statements.

This Annual Report on Form 10-K may contain forward-looking statements within the ~~meaning of the Private Securities Litigation Reform Act of 1995.~~ Such forward-looking statements, which reflect Funding’s current views of future events and financial performance, involve known and unknown risks and uncertainties that may cause Funding’s actual results to be materially different from planned or expected results. Those risks and uncertainties include, but are not limited to, competition, consumer demand, seasonality, economic conditions, and government activity, with respect to both JCPenney and Funding. Investors should take such risks into account when making investment decisions.

~~Item 2.~~3 ~~Properties.~~

meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements, which reflect Funding’s ~~owns~~current noviews ~~physical~~of ~~properties~~future events and financial performance, involve known and unknown risks and uncertainties that may cause Funding’s actual results to be materially different from planned or expected results. Those risks and uncertainties include, but are not limited to, competition, consumer demand, seasonality, economic conditions, and government activity, with respect to both JCPenney and Funding. Investors should take such risks into account when making investment decisions.

Item 3 2. ~~Legal Proceedings~~Properties.

Funding ~~has~~owns no ~~material~~physical ~~legal proceedings pending against it, nor were any proceedings terminated during the fourth quarter of the fiscal year covered by this report~~properties.

~~PART~~Item II 3. Legal Proceedings.

~~Item 5.~~Funding ~~Market~~has ~~for~~no ~~and~~material ~~Dividends~~legal onproceedings ~~Registrant’s~~pending ~~Common~~against ~~Equity~~it, ~~and~~nor ~~Related~~were ~~Stockholder~~any ~~Matters.~~proceedings terminated during the fourth quarter of the fiscal year covered by this report.

~~JCPenney~~4 ~~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.~~

4 PART II

~~Table~~Item of5. ~~Contents~~Market for and Dividends on Registrant’s Common Equity and Related Stockholder Matters.

~~Item 6.~~JCPenney ~~Selected~~owns ~~Financial~~all ~~Data~~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.

~~Five~~Item ~~Year~~6. Selected Financial ~~Summary ($in millions) (Unaudited) J~~Data. ~~C. Penney Funding Corporation~~

				2002		2001		2000			1999			1998
At Year End
Capitalization
	Short-term debt Commercial paper			$	—	$	—	$	—		$	330		$	1,924
		Credit line advance			—		—		—			—			—
			Total short term debt		—		—		—			330			1,924
	Equity held by JCPenney				1,238		1,238		1,238			1,233			1,187
Total capitalization				$	1,238	$	1,238	$	1,238		$	1,563		$	3,111
Committed bank credit facilities (1)				$	—	$	1,500	$	1,500		$	3,000		$	3,000
For the Year
Income				$	—	$	—	$	20		$	208		$	160
Expenses				$	—	$	—	$	13		$	137		$	106
Net income				$	—	$	—	$	5		$	46		$	35
Fixed charges — times earned					—		—		1.52			1.52			1.52
Peak short-term debt				$	—	$	—	$	842		$	3,582		$	3,117
Average debt				$	—	$	—	$	193		$	2,475		$	1,938
Average interest rates					—		—		6.7	%		5.5	%		5.5	%


Five Year Financial Summary		J. C. Penney Funding Corporation
($ in millions) (Unaudited)

(1) In May 2002, J. C. Penney Corporation, Inc. and J. C. Penney Company, Inc. executed a new three-year $1.5 billion revolving credit agreement (credit facility) which replaced a $1.5 billion revolving credit facility and $630 million letter of credit facility.


	2003		2002		2001		2000			1999
At Year End

Capitalization
Short-term debt
Commercial paper	$	—	$	—	$	—	$	—		$	330
Credit line advance		—		—		—		—			—

Total short term debt		—		—		—		—			330

Equity held by JCPenney		1,238		1,238		1,238		1,238			1,233

Total capitalization	$	1,238	$	1,238	$	1,238	$	1,238		$	1,563

Committed bank credit facilities ⁽¹⁾	$	—	$	—	$	1,500	$	1,500		$	3,000

For the Year

Income	$	—	$	—	$	—	$	20		$	208
Expenses	$	—	$	—	$	—	$	13		$	137
Net income	$	—	$	—	$	—	$	5		$	46
Fixed charges - times earned		—		—		—		1.52			1.52

Peak short-term debt	$	—	$	—	$	—	$	842		$	3,582

Average debt	$	—	$	—	$	—	$	193		$	2,475

Average interest rates		—		—		—		6.7	%		5.5	%

~~Item 7~~(1) In May 2002, J. ~~Management’s~~C. ~~Discussion~~Penney Corporation, Inc. and ~~Analysis~~J. ofC. ~~Financial~~Penney ~~Condition~~Company, Inc. executed a new three-year $1.5 billion revolving credit agreement (credit facility) which replaced a $1.5 billion revolving credit facility and ~~Results~~$630 million letter of ~~Operations~~credit facility.

~~J. C.~~Item ~~Penney Funding Corporation (“Funding”) is a wholly owned subsidiary of J~~7. C. ~~Penney Corporation, Inc. (“JCPenney”). The business of Funding consists of financing a portion of JCPenney~~Management’s ~~operations~~Discussion ~~through loans to JCPenney. The loan agreement between Funding~~ and ~~JCPenney~~Analysis ~~provides~~of ~~for~~Financial ~~unsecured~~Condition ~~loans to be made by Funding to JCPenney. Each loan is evidenced by a revolving promissory note~~ and isResults ~~payable upon demand in whole or in part as may be required by Funding. Copies~~ of ~~Funding’s loan agreement with JCPenney are available upon request~~Operations.

5J. C. Penney Funding Corporation (“Funding”) is a wholly owned subsidiary of J. C. Penney Corporation, Inc. (“JCPenney”). The business of Funding consists of financing a portion of JCPenney’s operations through loans to JCPenney. The loan agreement between Funding and

~~Table~~5 ~~of Contents~~

To JCPenney ~~assist~~provides infor ~~financing~~unsecured ~~the~~loans ~~operations~~to ofbe ~~JCPenney,~~made by Funding ~~from time~~ to ~~time issues commercial paper through Credit Suisse First Boston Corporation, J~~JCPenney.~~P. Morgan~~ ~~Securities~~Each ~~Inc.,~~loan ~~Merrill~~is ~~Lynch~~evidenced ~~Money~~by ~~Markets~~a ~~Inc.,~~revolving ~~and~~promissory ~~Morgan~~note ~~Stanley Dean Witter to corporate~~ and ~~institutional~~is ~~investors~~payable inupon ~~the~~demand ~~domestic market.~~in Nowhole ~~commercial~~or ~~paper~~in ~~was~~part ~~issued~~as ~~during~~may ~~2002.~~be ~~The~~required ~~commercial paper is guaranteed~~ by ~~JCPenney on a subordinated basis~~Funding. ~~The~~Copies ~~commercial~~of ~~paper was rated “A3” by Standard & Poor~~Funding’s ~~Ratings~~loan ~~Services,~~agreement ~~“Not~~with ~~Prime”~~JCPenney byare ~~Moody’s~~available ~~Investors~~upon ~~Service, Inc~~request., ~~and “B” by Fitch Ratings as of March 21, 2003.~~

To assist in financing the operations of JCPenney, Funding ~~had~~from notime ~~short-term~~to ~~debt~~time ~~outstanding~~issues ascommercial ofpaper ~~January 25~~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. No commercial paper has been issued or outstanding during 2003 ~~nor~~or 2002. The commercial paper program was rated “Not Prime” by Moody’s Investors Service, Inc. and “B” by Fitch Ratings as of ~~January 26~~ March 16, ~~2002~~2004. Standard & Poor’s Rating Services does not rate the program.

~~Income~~Funding ishad ~~derived~~no ~~primarily~~short-term ~~from~~debt ~~earnings~~outstanding onas ~~loans~~of ~~to JCPenney and is designed~~January to31, ~~produce~~2004, ~~earnings~~nor ~~sufficient~~as ~~to cover interest expense at a coverage ratio~~ of at ~~least~~January ~~one~~25, ~~and one-half times~~2003.

~~Because~~At noyear-end ~~commercial paper was issued or outstanding in 2002 or 2001~~2003, ~~no earnings~~the ~~coverage~~balance ~~was~~of ~~required resulting in no income or expense for both~~the ~~years.~~Loan Into ~~2000,~~JCPenney ~~net income~~ was $~~5 million~~1,238 ~~interest~~million ~~expense~~unchanged ~~was~~from ~~$13 million, and~~the ~~interest~~balance ~~earned~~at ~~from~~the ~~JCPenney~~end ~~was~~of ~~$20 million~~the prior year.

~~Also~~Item in7A. ~~2000,~~Quantitative ~~commercial paper borrowings averaged $193 million,~~ and ~~the average~~Qualitative ~~interest~~Disclosures ~~rate~~about onMarket ~~commercial paper was 6~~Risk.~~7%.~~

AtFunding ~~year-end~~had ~~2002,~~no ~~the~~investments ~~balance~~as of ~~the~~January ~~Loan~~31, to2004, ~~JCPenney~~and ~~was~~January $125,~~238 million~~ 2003. If it had short-term investments they would be in short-term financial ~~unchanged~~instruments ~~from~~with ~~the~~original ~~balance~~maturities atof three months or less. Such investments are subject to interest rate risk and may have a small decline in value if interest rates increase. Since the ~~end~~financial instruments are of ~~the~~short ~~prior~~duration, ~~year.~~a change of 100 basis points in interest rates would not have a material effect on Funding’s financial condition.

~~JCPenney’s~~As financial condition and liquidity continued to strengthen during 2002. Cash flow from operating activities was $1.4 billion in 2002 compared with $1.0 billion in 2001 and $1.5 billion in 2000. Free cash flow, defined as cash flow from operating activities after subtracting capital expenditures, net of ~~proceeds~~January ~~from the sale of assets~~31, ~~and dividends~~2004, ~~exceeded~~Funding ~~$500 million~~had ~~for the~~no ~~year~~long-term ~~compared to $200 million of free cash flow generated in 2001~~debt.

AtItem ~~year-end 2002, JCPenney’s cash and short-term investments were approximately $2~~8.~~5 billion.~~ InFinancial ~~addition,~~Statements ~~JCPenney established a new three-year $1.5 billion revolving credit facility on May 31, 2002 to further increase JCPenney’s liquidity~~ and ~~financial~~Supplementary ~~flexibility~~Data.

Until such time as JCPenney regains an investment grade level credit rating, access to short-term commercial paper markets is limited compared to prior years. As a result, JCPenney’s liquidity goal is to maintain sufficient cash investments to cover peak inventory requirements and scheduled debt maturities. The ~~cash~~financial ~~investment~~statements ~~balance is comprised~~ of ~~cash~~Funding, ~~flow~~including ~~generated~~the ~~from~~notes ~~2000~~ to ~~2002~~ ~~and~~all ~~proceeds~~such ~~from~~statements ~~the~~are ~~2001~~included ~~sale~~in ofthis ~~the~~report ~~assets~~beginning ofon J.page CF-1. ~~Penney Direct Marketing Services, Inc.~~

~~Also,~~Item ~~due~~9. toChanges ~~JCPenney’s~~in ~~strong~~and ~~liquidity~~Disagreements ~~position,~~With itAccountants ison ~~not~~Accounting ~~anticipated~~and ~~that~~Financial ~~any external financing will be required in 2003 to fund operating cash needs~~Disclosure.

~~Item 7A~~None. ~~Quantitative and Qualitative Disclosures About Market Risk.~~

AsItem ~~of January 25, 2003, Funding had no investments~~9A. IfDisclosure ~~it had short-term investments they would be in short-term financial instruments with original maturities of three months or less~~Controls. ~~Such investments are subject to interest rate risk and may have a small decline in value if interest rates~~

6Based on their evaluation of Funding’s disclosure controls and procedures (as defined in Rules 13a-15 and 15d-15 under the Securities Exchange Act of 1934 (the “Exchange Act”)) as of the end of the period covered by this Annual Report on Form 10-K, Funding’s principal executive officer and principal financial officer have concluded that Funding’s disclosure controls and procedures are effective for the purpose of ensuring that material information required to be in this Annual Report on Form 10-K is made known to them by others on a timely basis.

~~Table~~6 ~~of Contents~~

~~increase.~~There ~~Since~~were ~~the~~no ~~financial~~significant ~~instruments~~changes ~~are~~in ofFunding’s ~~short~~internal ~~duration,~~controls aor ~~change of~~in ~~100~~other ~~basis~~factors ~~points~~that incould ~~interest~~significantly ~~rates~~affect these ~~would~~controls ~~not~~subsequent ~~have~~to athe ~~material~~date ~~effect~~of ~~on Funding’s~~their ~~financial~~most ~~condition~~recent evaluation.

AsPART ofIV ~~January 25, 2003, Funding had no long-term debt.~~

Item 8 15. Exhibits, Financial ~~Statements~~Statement Schedules, and ~~Supplementary~~Reports ~~Data~~on Form 8-K.

~~The~~(a) ~~financial~~1. ~~statements~~and ~~of Funding, including the notes to all such statements are included in this report beginning on page F-1~~2.

~~Item 9.~~See ~~Changes~~financial instatements ~~and Disagreements With Accountants~~ on ~~Accounting~~pages ~~and~~F-1 ~~Financial~~through ~~Disclosure~~F-5.

~~None~~(a) 3. Exhibits.

~~PART~~See ~~III~~ separate Exhibit Index on pages G-1 through G-3.

~~Item 14.~~(b) ~~Controls~~Reports ~~and~~on ~~Procedures~~Form 8-K filed during the fourth quarter of fiscal 2003.

(a) Based on their evaluation of Funding’s disclosure controls and procedures (as defined in Rules 13a-14 and 15d-14 under the Securities Exchange Act of 1934 (the “Exchange Act”)) as of a date within 90 days of the filing date of this Annual Report on Form 10-K, Funding’s principal executive officer and principal financial officer have concluded that Funding’s disclosure controls and procedures are effective for the purpose of ensuring that material information required to be in this Annual Report on Form 10-K is made known to them by others on a timely basisNone.

(bc) ~~There~~ ~~were~~Management nocontracts ~~significant~~or ~~changes~~compensatory inplans ~~Funding’s internal controls~~ or ~~in other~~arrangements ~~factors~~required ~~that~~to ~~could~~be ~~significantly~~filed ~~affect~~as ~~these~~exhibits ~~controls subsequent~~ to ~~the date~~this ~~of their most recent evaluation~~report.

~~PART~~None. IV

~~Item 15.~~(d) ~~Exhibits,~~Other Financial Statement Schedules~~, and Reports on Form 8-K~~.

(a) 1. and 2. See financial statements on pages F-1 through F-5. (a) 3. Exhibits. See separate Exhibit Index on pages G-1 through G-3. (b) Reports on Form 8-K filed during the fourth quarter of fiscal 2002. None.

~~Table~~SIGNATURES ~~of Contents~~

~~(c)~~Pursuant ~~Management~~to ~~contracts~~the orrequirements ~~compensatory~~of ~~plans~~Section 13 or ~~arrangements~~15(d) ~~required~~of tothe beSecurities ~~filed~~Exchange asAct ~~exhibits~~of to1934, the registrant has duly caused this report. ~~None.~~to ~~(d)~~be ~~Other~~signed ~~Financial~~on its ~~Statement~~behalf ~~Schedules.~~by ~~None~~the undersigned, thereunto duly authorized.

8 J. C. PENNEY FUNDING CORPORATION (Registrant) By: /s/ M. P. Dastugue M. P. Dastugue Chairman of the Board

~~Table~~Dated: ofApril ~~Contents~~8, 2004

~~SIGNATURES~~ 8

Pursuant to the requirements of ~~Section 13 or 15(d) of~~ the Securities Exchange Act of 1934, ~~the~~this ~~registrant~~report has ~~duly~~been ~~caused~~signed ~~this~~below ~~report~~by the tofollowing bepersons ~~signed~~ on ~~its~~ behalf byof the ~~undersigned,~~registrant ~~thereunto~~and ~~duly~~in ~~authorized~~the capacities and on the dates indicated.

J. C. PENNEY FUNDING CORPORATION (Registrant) By: /s/ M. P. Dastugue M. P. Dastugue Chairman of the Board


Signatures	Title	Date
/s/ M. P. Dastugue M. P. Dastugue	Chairman of the Board (principal executive officer); Director	April 8, 2004

/s/ M. D. Porter M. D. Porter	President (principal financial officer)	April 8, 2004

/s/ W. J. Alcorn W. J. Alcorn	Vice President and Controller (principal accounting officer)	April 8, 2004

~~Dated:~~9 ~~April 10, 2003~~

9 Statements of Income J. C. Penney Funding Corporation ($ in millions)


	2003		2002		2001
For the Year
Interest income from JCPenney	$	—	$	—	$	—

Interest expense		—		—		—

Income before income taxes		—		—		—
Income taxes		—		—		—

Net income	$	—	$	—	$	—


Statements of Reinvested Earnings
($ in millions)
	2003		2002		2001
Balance at beginning of year	$	1,093	$	1,093	$	1,093

Net income		—		—		—

Balance at end of year	$	1,093	$	1,093	$	1,093

~~Pursuant~~See notes to ~~the~~Financial ~~requirements~~Statements ~~of the Securities Exchange Act of 1934, this report has been signed below by the following persons~~ on ~~behalf of the~~ ~~registrant~~pages ~~and~~F-4 ~~in the capacities~~ and ~~on the dates indicated~~F-5.

Signatures	Title	Date
/s/ M. P. Dastugue M. P. Dastugue	Chairman of the Board (principal executive officer); Director	April 10, 2003
/s/ M. D. Porter M. D. Porter	President (principal financial officer)	April 10, 2003
/s/ W. J. Alcorn W. J. Alcorn	Vice President and Controller (principal accounting officer)	April 10, 2003

F-1

10 Balance Sheets J. C. Penney Funding Corporation ($ in millions except share data)


	2003		2002
Assets
Loans to JCPenney	$	1,238	$	1,238

Liabilities and Equity held by JCPenney
Liabilities		—		—

Equity held by JCPenney
Common stock (including contributed capital), par value $100 per share:
Authorized, 750,000 shares - issued and outstanding, 500,000 shares		145		145
Reinvested earnings		1,093		1,093

Total Equity held by JCPenney		1,238		1,238

Total Liabilities and Equity held by JCPenney	$	1,238	$	1,238

~~CERTIFICATIONS~~See notes to Financial Statements on pages F-4 and F-5.

I,F-2 ~~Michael P. Dastugue, Chairman, certify that:~~

1.Statements Iof ~~have~~Cash ~~reviewed~~Flows ~~this annual report on Form 10-K of~~ J. C. Penney Funding Corporation; 2. Based on my knowledge, this annual 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 annual report; 3. Based on my knowledge, the financial statements, and other financial information included in this annual 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 annual report; 4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as$ ~~defined~~ in ~~Exchange Act Rules 13a-14 and 15d-14~~millions) ~~for the registrant and have:~~

a) designed such disclosure controls and procedures to ensure that material information relating to the, registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared; b) evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the “Evaluation Date”); and c) presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;


	2003		2002		2001
Operating Activities
Net income	$	—	$	—	$	—
Decrease in loans to JCPenney		—		—		2
Decrease in amount due to JCPenney		—		—		(2	)

	$	—	$	—	$	—

Financing Activities
Decrease in short-term debt	$	—	$	—	$	—

Supplemental Cash Flow Information
Interest paid	$	—	$	—	$	—
Income taxes paid	$	—	$	—	$	2

5.See ~~The~~notes ~~registrant’s~~to ~~other~~Financial ~~certifying~~Statements ~~officers and I have disclosed, based~~ on pages ~~our~~F-4 ~~most recent evaluation, to the registrant’s auditors~~ and ~~the~~F-5. ~~audit committee of registrant’s board of directors (or persons performing the equivalent functions):~~

a)F-3 all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and

6.Independent ~~The registrant~~Auditors’s ~~other~~Report ~~certifying~~J. ~~officers~~C. ~~and~~Penney IFunding ~~have~~Corporation ~~indicated~~To ~~in this annual report whether there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to~~ the ~~date~~Board of ~~our~~Directors ~~most~~of ~~recent~~J. ~~evaluation,~~C. ~~including~~Penney ~~any~~Funding ~~corrective actions with regard to significant deficiencies and material weaknesses.~~Corporation:

~~April~~We 10have audited the accompanying balance sheets of J. C. Penney Funding Corporation as of January 31, 2004 and January 25, 2003, ~~/s/~~and ~~Michael~~the P.related ~~Dastugue~~statements ~~Michael~~of P.income, ~~Dastugue~~reinvested ~~Chairman~~earnings, and cash flows for each of the ~~Board~~years J.in Cthe three-year period ended January 31, 2004. ~~Penney~~These financial ~~Funding~~statements are the responsibility of the Corporation’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

~~Table~~We conducted our audits in accordance with auditing standards generally accepted in the United States of ~~Contents~~America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

~~CERTIFICATIONS~~In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of J. C. Penney Funding Corporation as of January 31, 2004 and January 25, 2003, and the results of its operations and its cash flows for each of the years in the three-year period ended January 31, 2004, in conformity with accounting principles generally accepted in the United States of America.

LOGO

IDallas, ~~William~~Texas ~~J. Alcorn, Vice President and Controller, certify that:~~

1.February ~~I have reviewed this annual report on Form 10-K of J. C. Penney Funding Corporation; 2. Based on my knowledge~~26, ~~this~~2004 annual 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 annual report; 3. Based on my knowledge, the financial statements, and other financial information included in this annual 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 annual report; 4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

a)F-4 designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared; b) evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the “Evaluation Date”); and c) presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5.Notes ~~The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation,~~ to ~~the~~Financial ~~registrant’s~~Statements ~~auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):~~

a)Nature ~~all significant deficiencies in the design or operation~~ of ~~internal~~Operations controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and

6J. C. Penney Funding Corporation (“Funding”) is a wholly owned subsidiary of J. C. Penney Corporation, Inc. (“JCPenney”). The ~~registrant~~principal business of Funding consists of financing a portion of JCPenney’s ~~other~~operations ~~certifying~~through ~~officers~~loans ~~and~~to IJCPenney. ~~have~~To ~~indicated~~finance its operations, Funding issues commercial paper, which is guaranteed by JCPenney on a subordinated basis, to corporate and institutional investors in ~~this~~the ~~annual~~domestic ~~report~~market. ~~whether~~Historically, ~~there~~Funding ~~were~~has ~~significant~~issued ~~changes~~long-term debt in ~~internal~~public ~~controls~~and orprivate markets in ~~other~~the ~~factors~~United ~~that~~States ~~could~~and ~~significantly~~abroad. ~~affect~~In ~~internal~~2001, ~~controls~~JCPenney ~~subsequent~~sold the assets of J. C. Penney Direct Marketing Services, Inc. to ~~the~~an ~~date~~unrelated third party. The result of ~~our~~this ~~most~~transaction ~~recent~~coupled ~~evaluation~~with JCPenney’s other sources of liquidity eliminated the need for Funding to issue commercial paper for short-term borrowing requirements. Therefore, ~~including~~Funding has not produced any ~~corrective~~revenue ~~actions~~or income. In addition, with ~~regard~~Funding’s tocurrent ~~significant~~credit ~~deficiencies~~ratings, ~~and~~it ~~material~~is ~~weaknesses~~assumed that Funding would have little or no current access to commercial paper borrowing.

~~April~~Definition ~~10,~~of ~~2003~~Fiscal ~~/s/~~Year ~~William J. Alcorn William J. Alcorn Vice President and Controller J. C. Penney Funding Corporation~~

~~Table~~Funding’s offiscal ~~Contents~~year ends on the last Saturday in January. Fiscal 2003 ended January 31, 2004, fiscal 2002 ended January 25, 2003, and fiscal 2001 ended January 26, 2002. Fiscal 2003 was a 53 week year; all other years presented are 52 weeks.

~~Statements~~Commercial ofPaper ~~Income~~Placement ~~($ in millions) J. C. Penney Funding Corporation~~

		2002		2001		2000
For the Year
Interest income from JCPenney		$	—	$	—	$	20
Interest expense			—		—		13
Income before income taxes			—		—		7
	Income taxes		—		—		2
Net income		$	—	$	—	$	5

Funding places commercial paper solely through dealers. No commercial paper was issued or outstanding during 2003 or 2002.

~~Statements~~Summary ofOf ~~Reinvested~~Accounting ~~Earnings ($~~Policies ~~in millions)~~

	2002		2001		2000
Balance at beginning of year	$	1,093	$	1,093	$	1,088
Net income		—		—		5
Balance at end of year	$	1,093	$	1,093	$	1,093

Income Taxes

~~See~~Funding’s ~~notes~~taxable toincome ~~Financial~~is ~~Statements~~included onin ~~pages~~the consolidated ~~F-4~~federal ~~and~~income ~~F-5~~tax return of JCPenney. Income taxes in Funding’s statements of income are computed as if Funding filed a separate federal income tax return.

~~F-1~~ Use of Estimates

~~Table~~Funding’s offinancial ~~Contents~~statements have been prepared in conformity with generally accepted accounting principles.

~~Balance~~Loans ~~Sheets~~to ($JCPenney ~~in millions except share data) J. C. Penney Funding Corporation~~

			2002		2001
Assets
Loans to JCPenney			$	1,238	$	1,238
Liabilities and Equity held by JCPenney
Liabilities				—		—
Equity held by JCPenney
Common stock (including contributed capital), par value $100 per share:
	Authorized, 750,000 shares -
	issued and outstanding, 500,000 shares			145		145
Reinvested earnings				1,093		1,093
		Total Equity held by JCPenney		1,238		1,238
		Total Liabilities and Equity held by JCPenney	$	1,238	$	1,238

Funding and JCPenney are parties to a Loan Agreement which provides for unsecured loans, payable on demand, 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. Under the terms of the Loan Agreement, Funding and JCPenney agree upon a mutually acceptable earnings coverage of Funding’s interest and other fixed charges. The earnings to fixed charges ratio has historically been at least one and one-half times.

~~See~~Fair ~~notes~~Value toof Financial ~~Statements~~Instruments ~~on pages F-4 and F-5.~~

~~F-2~~The fair value of loans to JCPenney at January 31, 2004, and January 25, 2003, approximates the amount reflected on the balance sheets because the loan is payable on demand.

~~Table~~F-5 ~~of Contents~~

~~Statements~~EXHIBIT ofINDEX ~~Cash Flows ($ in millions) J. C. Penney Funding Corporation~~

	2002		2001			2000
Operating Activities
Net income	$	—	$	—		$	5
Decrease in loans to JCPenney		—		2			348
Decrease in amount due to JCPenney		—		(2	)		(23	)
	$	—	$	—		$	330
Financing Activities
Decrease in short-term debt	$	—	$	—		$	(330	)
Supplemental Cash Flow Information
Interest paid	$	—	$	—		$	13
Income taxes paid	$	—	$	2		$	25

Exhibit

~~See~~3. ~~notes~~(i) toArticles ~~Financial~~of ~~Statements~~Incorporation ~~on pages F-4 and F-5.~~

F-3


(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*).

~~Table~~ (ii) Bylaws ~~of Contents~~

~~Independent~~(a ~~Auditors’~~) ~~Report~~Bylaws Toof ~~the~~Funding, ~~Board~~as ofamended ~~Directors~~to ofMay J.19, C.1995 ~~Penney~~(incorporated ~~Funding~~by ~~Corporation:~~reference J.to C.Exhibit ~~Penney~~3(ii) to Funding’s ~~Corporation~~Quarterly Report on Form 10-Q for the 13 and 39 weeks ended October 26, 1996*).

~~We have audited the accompanying balance sheets of J~~4. C.Instruments ~~Penney~~defining ~~Funding Corporation as of January 25, 2003 and January 26, 2002, and~~ the ~~related~~rights ~~statements~~ of ~~income,~~security ~~reinvested earnings~~holders, ~~and~~including ~~cash~~indentures flows for each of the years in the three-year period ended January 25, 2003. These financial statements are the responsibility of the Corporation’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.


(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 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	)	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

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of J. C. Penney Funding Corporation as of January 25, 2003 and January 26, 2002, and the results of its operations and its cash flows for each of the years in the threeG-~~year~~1 ~~period ended January 25, 2003, in conformity with accounting principles generally accepted in the United States of America.~~

~~Dallas,~~EXHIBIT ~~Texas February 20,~~INDEX ~~2003~~

~~Notes~~Exhibit ~~to Financial Statements~~

Nature of Operations


		Manhattan Bank, Citibank, N.A., Credit Suisse First Boston, and NationsBank of Texas, N.A., as Managing Agents (incorporated by reference to Exhibit 4(g) to Funding’s Annual Report on Form 10-K for the 53 weeks ended January 31, 1998*).

(e	)	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*).

(f	)	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*).

(g	)	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*).

(h	)	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*).

(i	)	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).*

~~J. C.~~Instruments ~~Penney Funding Corporation (“Funding”) is a wholly owned subsidiary of J.~~evidencing C.long-term ~~Penney Corporation~~debt, ~~Inc.~~previously ~~(“JCPenney”).~~issued ~~The~~but ~~principal~~now ~~business~~fully ~~of Funding consists of financing a portion of JCPenney’s operations through loans to JCPenney. To finance its operations~~prepaid, ~~Funding~~have ~~issues~~not ~~commercial~~been ~~paper,~~filed ~~which~~as ~~is guaranteed~~exhibits byhereto ~~JCPenney~~because onnone aof ~~subordinated basis, to corporate and institutional investors in~~ the ~~domestic~~debt ~~market.~~authorized ~~Historically,~~under ~~Funding~~any ~~has~~such ~~issued~~instrument ~~long-term debt~~exceeded in10 ~~public~~percent ~~and~~of ~~private markets in~~ the ~~United~~total ~~States~~assets ~~and~~of ~~abroad. In 2001, JCPenney sold~~ the ~~assets of J~~Registrant. C.The ~~Penney~~Registrant ~~Direct~~agrees ~~Marketing Services, Inc.~~ to ~~an unrelated third party. The~~furnish ~~result~~a copy of ~~this~~any ~~transaction coupled with JCPenney’s other sources~~ of ~~liquidity eliminated~~its ~~the need for Funding to issue commercial paper for short~~long-term ~~borrowing~~ ~~requirements.~~debt ~~Therefore,~~instruments ~~Funding~~to ~~has~~the ~~not~~Securities ~~produced~~and ~~any~~Exchange ~~revenue~~Commission ~~or income.~~upon ~~In addition, with Funding’s current credit ratings, it is assumed that Funding would have little or no current access to commercial paper borrowing~~request.

~~Definition~~10. ofMaterial ~~Fiscal~~Contracts ~~Year~~

Funding’s ~~fiscal~~has ~~year~~no ~~ends~~compensatory onplans ~~the~~or ~~last~~arrangements ~~Saturday~~required into ~~January.~~be ~~Fiscal~~filed ~~2002~~as ~~ended January 25,~~exhibits ~~2003,~~to ~~fiscal~~this ~~2001~~Report ~~ended~~pursuant ~~January 26,~~to ~~2002,~~Item ~~and~~14(c) ~~fiscal~~of ~~2000~~this ~~ended January 27, 2001~~Report. ~~All three years contained 52 weeks.~~

Commercial Paper Placement


(a	)	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*).

(b	)	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*).

~~Funding~~G-2 ~~places commercial paper solely through dealers. The average interest rate on commercial paper was 6.7% for fiscal 2000. No commercial paper was issued during fiscal 2001 and 2002.~~

~~Summary~~EXHIBIT OfINDEX ~~Accounting Policies~~

~~Income~~Exhibit ~~Taxes~~

~~Funding’s~~(c ~~taxable~~) ~~income~~Amendment isNo. ~~included~~2 into ~~the~~Loan ~~consolidated~~Agreement ~~federal~~dated ~~income~~as ~~tax return~~ of ~~JCPenney~~January 28, 1986 between J. ~~Income~~C. ~~taxes~~Penney inCompany, Inc. and J. C. Penney Funding’s ~~statements~~Corporation of(incorporated ~~income~~by ~~are computed~~reference asto ifExhibit 10(e) to Funding’s ~~filed~~Annual aReport ~~separate~~on ~~federal~~Form ~~income~~10-K ~~tax~~for ~~return~~the 52 weeks ended January 25, 1997*).

~~F-4~~ 23. Independent Auditors’ Consent

~~Table~~31.1 Certification by Michael P. Dastugue pursuant to 15 U. S. C. 78m (a) or 78o (d), as adopted pursuant to Section 302 of ~~Contents~~the Sarbanes-Oxley Act of 2002.

~~Use~~31.2 Certification by William J. Alcorn pursuant to 15 U. S. C. 78m (a) or 78o (d), as adopted pursuant to Section 302 of ~~Estimates~~ the Sarbanes-Oxley Act of 2002.

~~Funding’s~~32.1 ~~financial~~Certification ~~statements~~by ~~have~~Michael ~~been prepared in conformity with generally accepted accounting principles~~P. ~~Certain~~Dastugue ~~amounts~~pursuant ~~included in the financial statements are estimated based on currently available information and management’s judgment as~~ to ~~the~~18 ~~outcome~~U. ofS. ~~future conditions and circumstances~~C. ~~While~~ ~~every~~Section ~~effort~~1350, isas ~~made~~adopted pursuant to ~~ensure~~Section ~~the~~906 ~~integrity~~ of ~~such estimates, including~~ the ~~use~~Sarbanes-Oxley Act of ~~third party specialists where appropriate, actual results could differ from these estimates~~2002.

~~Loans~~32.2 Certification by William J. Alcorn pursuant to ~~JCPenney~~ 18 U. S. C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

Funding and JCPenney are parties to a Loan Agreement which provides for unsecured loans, payable on demand, 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 Agreement99. ~~Under~~Additional the terms of the Loan Agreement, Funding and JCPenney agree upon a mutually acceptable earnings coverage of Funding’s interest and other fixed charges. The earnings to fixed charges ratio has historically been at least one and one-half times. Exhibits

~~Fair~~Excerpt ~~Value~~from ofJCPenney’s ~~Financial~~2003 ~~Instruments~~ Annual Report to Stockholders.

~~The~~* ~~fair~~SEC ~~value~~file ofnumber ~~loans to JCPenney at January 25, 2003, and January 26, 2002 approximates the amount reflected on the balance sheets because the loan is payable on demand.~~ 1-4947-1

F** Funding has entered into identical Commercial Paper Dealer Agreements dated February 7, 1997, with each of Merrill Lynch 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-5 K. Funding agrees to furnish a copy of any of such agreements to the Securities and Exchange Commission upon request.

~~Table~~G-3 ~~of Contents~~

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 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) 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-1

EXHIBIT INDEX

Exhibit

Manhattan Bank, Citibank, N.A., Credit Suisse First Boston, and NationsBank of Texas, N.A., as Managing Agents (incorporated by reference to Exhibit 4(g) to Funding’s Annual Report on Form 10-K for the 53 weeks ended January 31, 1998*). (e) 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*). (f) 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*). (g) 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*). (h) 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*). (i) 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*).**

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.

10. Material Contracts

Funding has no compensatory plans or arrangements required to be filed as exhibits to this Report pursuant to Item 14(c) of this Report.

	(a)		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*).
	(b)		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*).

G-2

EXHIBIT INDEX

Exhibit

(c) 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*).

23. Independent Auditors’ Consent

99. Additional Exhibits

(a) Excerpt from JCPenney’s 2002 Annual Report to Stockholders. (b) Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (c) Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

*		SEC file number 1-4947-1
**		Funding has entered into identical Commercial Paper Dealer Agreements dated February 7, 1997, with each of Merrill Lynch 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.

G-3

Table of Contents

Table of Contents

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Filing Compare · PENNEY J C FUNDING CORP