<PAGE>

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

                                   FORM 10-K

(MARK ONE)

X    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
     EXCHANGE ACT OF 1934 [FEE REQUIRED]-


FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998

                                       OR

_    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
     SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]

COMMISSION FILE NUMBER 33-86780



                          PRUCO LIFE INSURANCE COMPANY

                                 IN RESPECT OF

              PRUCO LIFE VARIABLE  CONTRACT REAL PROPERTY ACCOUNT
              ------------------------------------------------------
              (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)


          ARIZONA                                    22-1944557
-------------------------------             --------------------------------
(STATE OR OTHER JURISDICTION OF             (IRS EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)




            213 WASHINGTON STREET, NEWARK,  NEW JERSEY 07102-2992
            -----------------------------------------------------
             (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)

                            (800) 445-4571
            -----------------------------------------------------
             (REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)


       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
                                                                   ---    ---
<PAGE>

                            PRUCO LIFE VARIABLE  CONTRACT
                                REAL PROPERTY ACCOUNT
                                    (REGISTRANT)
<TABLE>
<CAPTION>

                                                   INDEX
ITEM                                               -----                                                  PAGE
 NO.                                                                                                       NO.
----                                                                                                      ----
<S>    <C>                                                                                              <C>
         COVER PAGE

         INDEX                                                                                             2

PART I

   1.    BUSINESS                                                                                          3

   2.    PROPERTIES                                                                                        4

   3.    LEGAL PROCEEDINGS                                                                                 4

   4.    SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                                               4

PART II

   5.    MARKET FOR THE REGISTRANT'S INTERESTS AND RELATED SECURITY HOLDER MATTERS                         5

   6.    SELECTED FINANCIAL DATA                                                                           5

   7.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION  AND RESULTS OF OPERATIONS            6

   7A.   QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                                       15

   8.    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA                                                      16

   9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
           AND FINANCIAL DISCLOSURE                                                                       16

PART III

   10.   DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT                                               17

   11.   EXECUTIVE COMPENSATION                                                                           18

   12.   SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT                                   18

   13.   CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS                                                   18

PART IV

   14.   EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K                                 19

         EXHIBIT INDEX                                                                                    19

         SIGNATURES                                                                                       21
</TABLE>

                                                     2
<PAGE>

                                                   PART I
                                                   ------


ITEM 1. BUSINESS
----------------

Pruco Life Variable Contract Real Property Account (the "Real Property 
Account"), the Registrant, was established on August 27, 1986 and commenced 
business September 5, 1986. Pursuant to Arizona law, the Real Property 
Account was established as a separate investment account of Pruco Life 
Insurance Company ("Pruco Life"). The Real Property Account was established 
to provide a real estate investment option offered in connection with the 
funding of benefits under certain variable life insurance and variable 
annuity contracts (the "Contracts") issued by Pruco Life.

The assets of the Real Property Account are invested in The Prudential 
Variable Contract Real Property Partnership (the "Partnership"). The 
Partnership, a general partnership organized under New Jersey law on April 
29, 1988, was formed through agreement among The Prudential Insurance Company 
of America, Pruco Life Insurance Company, and Pruco Life Insurance Company of 
New Jersey, to provide a means for assets allocated to the real estate 
investment option under certain variable life insurance and variable annuity 
contracts issued by the respective companies to be invested in a commingled 
pool.

The Partnership has an investment policy of investing at least 65% of its 
assets in direct ownership interests in income-producing real estate and 
participating mortgage loans. The largest portion of these real estate 
investments are direct ownership interests in income-producing real estate, 
such as office buildings, agricultural land, shopping centers, hotels, 
apartments, or industrial properties. Approximately 10% of the Partnership's 
assets are generally held in cash or invested in liquid instruments and 
securities, although the Partners reserve discretion to increase this amount 
to meet partnership liquidity requirements. The remainder of the 
Partnership's assets are invested in other types of real estate-related 
investments, including conventional, non participating mortgage loans or real 
estate investment trusts.

         Office Properties - The Partnership owns office properties in Lisle and
         Oakbrook Terrace, IL; Morristown, NJ; Nashville and Brentwood, TN; and
         Beaverton, OR. Total square footage owned is approximately 567,000 of
         which 97% or 549,000 square feet are leased between 1 and 10 years.

         Apartment Complexes - The Partnership owns apartment complexes in
         Atlanta, GA and Raleigh, NC. There are a total of 490 apartment units
         available of which 95% or 463 units are leased. Lease agreements range
         from month to month to one year.

         Retail Property - The Partnership owns a shopping center in Roswell,
         GA. The property is located approximately 22 miles north of downtown
         Atlanta on a 30 acre site. The square footage is approximately 297,000
         of which 98% or 289,000 square feet is leased between 1 and 11 years.

         Industrial Properties - The Partnership owns warehouses and
         distribution centers in Bolingbrook, IL; Aurora, CO; and Salt Lake
         City, UT. Total square footage owned is approximately 685,000 of which
         60% or 413,719 square feet are leased between 2 and 6 years.

         Investment in Real Estate Trust - The Partnership owns 506,894 shares
         of Meridian Industrial Trust, Inc. Meridian is a self-administered and
         self-managed equity real estate investment trust (REIT) engaged in
         owning, operating, and leasing high quality, modern industrial
         properties nationwide.

The Partnership's investments are maintained so as to meet the 
diversification requirements set forth in Treasury Regulations issued 
pursuant to Section 817(h) of the Internal Revenue Code relating to the 
investments of variable life insurance and variable annuity separate 
accounts. Section 817(h), requires among other things that the partnership 
will have no more than 55% of the assets invested in any one investment, no 
more than 70% of the assets will be invested in any two investments, no more 
than 80% of the assets will be invested in any three investments, and no more 
than 90% of the assets will be invested in any four investments. To comply 
with requirements of the State of Arizona, the Partnership will limit 
additional investments in any one parcel or related parcels to an amount not 
exceeding 10% of the Partnership gross assets as of the prior fiscal year.

For information regarding the Partnership's investments, operations, and 
other significant events, see Item 7, Management's Discussion and Analysis of 
Financial Condition and Results of Operations, and Item 8, Financial 
Statements and Supplementary Data.


                                     3
<PAGE>

ITEM 2.  PROPERTIES

Not Applicable.

ITEM 3.  LEGAL PROCEEDINGS

None.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS

Contract owners participating in the Real Property Account have no voting rights
with respect to the Real Property Account.



                                     4
<PAGE>

                                     PART II


ITEM 5.  MARKET FOR THE REGISTRANT'S INTERESTS AND RELATED SECURITY
         HOLDER MATTERS

Owners of the Contracts may participate by allocating all or part of the net 
premiums or purchase payments to the Real Property Account. Contract values 
will vary with the performance of the Real Property Account's investments 
through the Partnership. Participating interests in the Real Property Account 
are not traded in any public market, thus a discussion of market information 
is not relevant.

As of March 9, 1999, there were approximately 42,402 contract owners of 
record investing in the Real Property Account.

ITEM 6.  SELECTED FINANCIAL DATA

<TABLE>
<CAPTION>

                                                                          Year Ended December 31,

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

                                            1998              1997               1996               1995               1994
                                      -----------------  ----------------   ----------------   ----------------   ----------------
<S>                                   <C>                <C>                <C>                <C>                <C>
RESULTS OF OPERATIONS:

Net investment income                     $ 15,833,513      $ 13,789,747       $  15,419,518      $ 14,720,271       $ 12,848,199
Net realized and unrealized gain
  (loss) on investment in Partnership        4,795,111         8,485,232         (4,784,583)           661,623          1,339,443
                                      -----------------  ----------------   ----------------   ----------------   ----------------
NET INCREASE IN NET ASSETS RESULTING
  FROM OPERATIONS                         $ 20,628,624      $ 22,274,979       $ 10,634,935       $ 15,381,894       $ 14,187,642
                                      -----------------  ----------------   ----------------   ----------------   ----------------
                                      -----------------  ----------------   ----------------   ----------------   ----------------
</TABLE>

<TABLE>
<CAPTION>

FINANCIAL POSITION:

                                                                            December 31,
                                      --------------------------------------------------------------------------------------------
                                            1998              1997               1996               1995               1994
                                      -----------------  ----------------   ----------------   ----------------   ----------------
<S>                                   <C>                <C>                <C>                <C>                <C>
Total Assets                              $244,249,272      $222,745,135       $204,156,040       $196,993,758       $183,119,986
                                      -----------------  ----------------   ----------------   ----------------   ----------------
                                      -----------------  ----------------   ----------------   ----------------   ----------------

Long-Term Lease Obligation                $          0      $          0       $  4,072,677        $ 3,882,421       $  3,804,836
                                      -----------------  ----------------   ----------------   ----------------   ----------------
                                      -----------------  ----------------   ----------------   ----------------   ----------------
</TABLE>

                                     5
<PAGE>

ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
         AND RESULTS OF OPERATIONS

All of the assets of Pruco Life Variable Contract Real Property Account (the 
"Account") are invested in the Prudential Variable Contract Real Property 
Partnership (the "Partnership"). Correspondingly, the liquidity, capital 
resources and results of operations for the Real Property Account are 
contingent upon the Partnership. Therefore, all of management's discussion of 
these items is at the Partnership level. The partners in the Partnership are 
The Prudential Insurance Company of America, Pruco Life Insurance Company, 
and Pruco Life Insurance Company of New Jersey (collectively, the "Partners").

The following analysis of the liquidity and capital resources and results of 
operations of the Partnership should be read in conjunction with the audited 
financial statements and the accompanying footnotes and other financial 
information included elsewhere herein.

(a)      LIQUIDITY AND CAPITAL RESOURCES


As of December 31, 1998, the Partnership's liquid assets consisting of cash, 
cash equivalents and marketable securities were $73.5 million, an increase of 
$46.7 million from December 31, 1997. This increase was due to net proceeds 
from the sales of the Partnership's industrial property located in Pomona, CA 
and an apartment complex located in Farmington Hills, MI. In addition, 
continuing operations from the Partnership's investment properties 
contributed $20.6 million to cash during 1998. Sources of liquidity include 
net cash flow from property operations, interest from short-term investments, 
and dividends from REIT shares.

The Partnership generally holds approximately 10% of its assets in cash or 
invested in liquid instruments and securities, however, its investment policy 
allows up to 30% investment in cash and short-term obligations. At December 
31, 1998, 30% of the Partnership's assets consisted of cash, cash equivalents 
and marketable securities.

Prudential has committed to fund up to $100 million to enable the Partnership 
to acquire real estate investments. Contributions to the Partnership under 
this commitment are utilized for property acquisitions, and returned to 
Prudential on an ongoing basis from contract owners' net contributions and 
other available cash. The amount of the commitment is reduced by $10 million 
for every $100 million in current value net assets of the Partnership. As of 
December 31, 1998, Prudential's equity interest in the Partnership under this 
commitment was $51 million. At the present time, Prudential does not intend 
to make further contributions during the 1999 fiscal year.

The Partners made no withdrawals during 1998; however, on February 1, 1999, 
the Partners made a $30 million withdrawal from excess cash. Additional 
withdrawals may be made by the Partners during 1999 based upon the percentage 
of assets invested in short-term obligations, and taking into consideration 
anticipated cash needs of the Partnership including potential property 
acquisitions, property dispositions and capital expenditures. Management 
anticipates that its current liquid assets and ongoing cash flow from 
operations will satisfy the Partnership's needs over the next twelve months 
and the foreseeable future.

During 1998, the Partnership spent $5.7 million in capital expenditures for 
tenant alterations, and improvements in land and buildings. The majority of 
the capital expenditures were made to reconfigure the Lisle, IL office 
building for multi-tenant capability as it was previously occupied by a 
single tenant.

                                     6
<PAGE>

(b)      RESULTS OF OPERATIONS

The following is a brief discussion of the Partnership's results of 
operations for the years ended December 31, 1998, 1997 and 1996.

1998 VS. 1997


The following table presents a comparison of the Partnership's property 
results of operations, and realized and unrealized gains or losses by 
investment type, for the twelve months ended December 31, 1998 and December 
31, 1997.

<TABLE>
<CAPTION>

                                                YEAR ENDED DECEMBER 31,
                                               1998                 1997
                                         ------------------   -----------------
<S>                                      <C>                  <C>
NET INVESTMENT INCOME:

Office properties                              $ 7,269,613         $ 5,499,107
Apartment complexes                              4,493,384           3,891,465
Retail property                                  2,702,234           2,856,357
Industrial properties                            1,325,320           2,138,111
Income from interest in properties                  33,462             435,296
Dividend income from real
  estate investment trust                          669,100             158,184
Other (including interest income,
  investment management fee, etc.)               (659,600)         (1,188,773)

                                         ------------------   -----------------
TOTAL NET INVESTMENT INCOME                   $ 15,833,513        $ 13,789,747
                                         ------------------   -----------------
</TABLE>

<TABLE>
<CAPTION>

                                                YEAR ENDED DECEMBER 31,
                                               1998                 1997
                                         ------------------   -----------------
<S>                                      <C>                  <C>
REALIZED AND UNREALIZED GAIN(LOSS)
  ON INVESTMENTS:

Office properties                              $ 3,034,542          $1,897,749
Apartment complexes                              2,387,054           1,053,061
Retail property                                 (1,312,296)          1,109,099
Industrial properties                            1,563,429           1,616,942
Interest in properties                              91,538             284,581
Real estate investment trust                      (969,156)          2,523,800
                                         ------------------   -----------------
TOTAL NET REALIZED AND UNREALIZED GAIN
ON INVESTMENTS                                 $ 4,795,111          $8,485,232
                                         ------------------   -----------------
</TABLE>

The Partnership's net investment income for 1998 was $15.8 million, an 
increase of $2.0 million from the prior year. This increase was primarily 
the result of increased revenues from real estate and improvements partially 
offset by increased operating expenses.

                                     7
<PAGE>

Revenue from real estate and improvements was $24.6 million in 1998, an 
increase of $3.0 million, or 13.9%, from 1997. This increase was primarily 
due to higher occupancy at the Lisle, IL office building and the Aurora, CO 
distribution center coupled with increased rental rates on other properties. 

Interest on short-term investments decreased $0.4 million from 1997. This was 
primarily due to lower average cash and cash equivalent balances during 1998 
compared to the prior year. Cash and cash equivalents through the third 
quarter of 1998 averaged approximately $30.0 million, but increased 
significantly in the last quarter of 1998 due to the sale of two properties 
in Pomona, CA and Farmington Hills, MI.

Property operating expenses increased $0.8 million, or 23.5%, from 1997. This 
increase was due primarily to a full year's operating costs (i.e. 
electricity, repair and maintenance, water, etc.) for one of the Brentwood, 
TN properties which was acquired in late 1997, in addition to operating 
expenses incurred by the Partnership on vacant properties.

Administrative expenses decreased $0.3 million or 16.1%. This decrease was 
due primarily to a reduction in legal expenses.

There was no interest expense during 1998 due to the Partnership's exercise 
of its purchase option under the capital lease obligation.

OFFICE PROPERTIES

In 1998, net investment income from property operations for the office 
properties increased $1.8 million, or 32.2%, from prior year. This increase 
was primarily due to a full year's net investment income for one of the 
Brentwood, TN properties which was acquired in late 1997, as well as the 
leasing of vacant space in the Lisle, IL office property.

Office properties experienced a net unrealized gain of $3.0 million in 1998 
due to improving office market conditions in most of the geographical areas 
where the Partnership has office properties, particularly, the Oakbrook 
Terrace, IL office property in suburban Chicago.

Occupancy at the Beaverton, OR; Oakbrook Terrace, IL; and Brentwood, TN 
properties remained at 100% as of December 31, 1997 while occupancy at the 
Lisle, IL office property increased from 37% to 96% at December 31, 1998. 
Occupancy at the Morristown, NJ property decreased from 99% to 86%.

APARTMENT COMPLEXES

Net investment income from property operations for the apartment complexes 
increased $0.6 million, or 15.5%, from 1997. The majority of this increase 
was due to increased rental rates at the Atlanta, GA apartment complex.

Holdings in the Partnership's two apartment complexes experienced a net 
unrealized gain of $0.6 million during 1998. The Atlanta, GA property was the 
largest contributor to the gain as it appreciated $0.4 million. The gain was 
attributable to increased rental rates at the property. The Raleigh, NC 
property experienced a net unrealized gain of $0.2 million due to increased 
occupancy rates. The Farmington Hills, MI property was sold on October 7, 
1998 for a price of $16.9 million, which resulted in a realized gain of $1.7 
million.

At the end of December 31, 1998, occupancy at the Atlanta, GA and Raleigh, NC 
apartment complex was 96% and 93%, respectively.

RETAIL PROPERTIES

In 1998, the retail center experienced a net unrealized loss of $1.3 million, 
which is a reflection of lower rents. Occupancy at the shopping center was 
98% at December 31, 1998, which was an increase of 2% from the prior year.

INDUSTRIAL PROPERTIES

Net investment income from property operations for the industrial properties 
decreased $0.8 million, or 38.0%, from 1997. The decrease was attributable to 
the sale of Pomona Industrial Park, which accounted for 82% of the decrease.

                                     8
<PAGE>

The three industrial properties experienced a net unrealized gain of $0.3 
million during 1998. The Pomona, CA property was sold on December 17, 1998 
for $21.4 million, which resulted in a realized gain of $1.2 million.

Occupancy at the Bolingbrook, IL property remained unchanged at 100%. 
Occupancy at the Salt Lake City, UT and Aurora, CO property increased to 
33.6% and 46%, respectively from prior year.

REAL ESTATE INVESTMENT TRUST

On September 24, 1997 the Partnership acquired 506,894 shares of Meridian 
Industrial REIT. Dividend income from the REIT increased $0.5 million from 
1997.

The Partnership held 506,894 shares of Meridian Industrial REIT throughout 
1998. As of December 31, 1998, the REIT shares experienced an unrealized loss 
of $1.0 million. The Valuation Unit of Prudential applies a 3% discount to 
the market value of the REIT shares. This discount is applied because of the 
restriction which limits the number of shares that can be publicly traded 
during any six month period to 30% of the total shares originally acquired.

OTHER

Other net investment loss, which includes interest income from short-term 
investments, investment management fees, and expenses not related to property 
activities, narrowed by $0.5 million. The improved result was due to 
increased investment management fee in addition to a reduction in 
administrative expenses.

1997 VS. 1996

The following table presents a comparison of the Partnership's property 
results of operations, and realized and unrealized gains or losses by 
investment type, for the twelve months ended December 31, 1997 and December 
31, 1996.

<TABLE>
<CAPTION>

                                                YEAR ENDED DECEMBER 31,
                                              1997                  1996
                                        ------------------    ------------------
<S>                                      <C>                  <C>
NET INVESTMENT INCOME:

Office properties                             $ 5,499,107           $ 5,817,497
Apartment complexes                             3,891,465             3,925,750
Retail property                                 2,856,357             3,129,390
Industrial properties                           2,138,111             3,188,769
Income from interest in properties                435,296               606,558
Dividend income from real
  estate investment trust                         158,184                     -
Other (including interest income,
  investment management fee, etc.)            (1,188,773)           (1,248,446)

                                        ------------------    ------------------
TOTAL NET INVESTMENT INCOME                  $ 13,789,747          $ 15,419,518
                                        ------------------    ------------------

                                     9
<PAGE>

REALIZED AND UNREALIZED GAIN
  ON INVESTMENTS:
Office properties                              $1,897,749          ($1,654,344)
Apartment complexes                             1,053,061             1,209,970
Retail property                                 1,109,099           (3,786,554)
Industrial properties                           1,616,942             (553,655)
Interest in properties                            284,581                     -
Real estate investment trust                    2,523,800                     -
                                        ------------------    ------------------
TOTAL NET REALIZED AND UNREALIZED                              
GAIN ON INVESTMENTS                           $ 8,485,232          ($4,784,583)
                                        ------------------    ------------------
</TABLE>


The Partnership's net investment income for 1997 was $13.8 million, a 
decrease of $1.6 million from 1996. This decrease was primarily the result of 
market conditions in the industrial properties.

Income from interest in properties relates to the Partnership's 50% 
co-investment in several warehouse properties (the unit warehouses). Income 
from this source was $0.4 million in 1997, a decrease of 28.2% from 1996. 
This decrease was attributable to the sale of the Partnership's interest in 
these properties on September 30, 1997.

Administrative expenses on the Statement of Operations include both those 
related to property operations and the administration of the Partnership. 
Property administrative expenses in 1997 were $2.0 million, an increase of 
$0.4 million, or 21.5%, from 1996. This increase was primarily due to the 
acquisition of three new properties as well as a full year of administrative 
expenses for a property acquired at the end of 1996. Administrative expenses 
related to the Partnership were $0.3 million in 1997, an increase of $0.1 
million, or 49.7%, from 1996. Increased legal reserves relating to potential 
litigation contributed to the majority of the variance.

Property operating expenses for 1997 were $3.3 million, an increase of $0.4 
million, or 13.5%, from 1996. This increase was primarily due to a full year 
of ownership in 1997 of the office property in Beaverton, OR, and expenses 
incurred in 1997 for new acquisitions, such as, the industrial buildings in 
Salt Lake City, UT and Aurora, CO. Together these three properties 
contributed $0.3 million to the increased operating expenses. The acquisition 
of the office building in Brentwood, TN contributed $0.1 million to the 
increase.

OFFICE PROPERTIES

Net investment income from property operations for the office properties in 
1997 was $5.5 million. This was a decrease of $0.3 million or 5.5% from 1996.

The office properties experienced a net unrealized gain of $1.9 million in 
1997. The office property in Oakbrook Terrace, IL experienced the largest 
unrealized gain that was attributable to the improving office market 
conditions in suburban Chicago. In addition, the Morristown, NJ and 
Brentwood, TN office properties also experienced net unrealized gains of $0.5 
million and $0.6 million, respectively.

The Partnership acquired a second office property in Brentwood, TN. The 
97,378 square foot suburban office building was acquired on September 15, 
1997 for $9.5 million. Occupancy at the time of acquisition, was at maximum 
capacity.

Occupancy at the Beaverton, OR; Oakbrook Terrace, IL; and Brentwood, TN 
properties remained unchanged from December 31, 1996 at 100%. Occupancy at 
the Morristown, NJ property increased from 93% to 100% while occupancy at the 
Lisle, IL office property dropped from 100% to 37% in 1997.

APARTMENT COMPLEXES


In 1997, net investment income from apartment property operations was $3.9 
million which was unchanged from the prior year.

                                     10
<PAGE>

The three apartment communities experienced a net unrealized gain of $1.0 
million during 1997. The Atlanta, GA property was the largest contributor to 
the gain as it appreciated $1.3 million. This gain was attributable to 
increased rental rates and occupancy at the property. The Raleigh, NC 
community had a net unrealized loss of $0.4 million due to the appraisal 
assumptions concerning above market rentals expiring and subsequently 
renewing at lower market rates.

Weighted average occupancy at the Partnership's residential communities 
increased from 93.1% to 94.3% from December 31, 1996. Occupancy at the 
Atlanta, GA and Farmington Hills, MI communities improved from 93% and 89%, 
respectively, as of December 31, 1996 to 99% and 93%, respectively, at year 
end 1997. Occupancy at the Raleigh, NC community decreased from 97% to 91% in 
1997.

RETAIL PROPERTIES

Net investment income for the Partnership's retail property decreased by $0.3 
million, or 8.7%, to $2.9 million in 1997. This decrease was primarily the 
result of decreased occupancy at the shopping center earlier in the year. The 
shopping center was 96% occupied as of December 31, 1997, unchanged from the 
prior year.

The retail center experienced an unrealized gain of $1.1 million. This was a 
result of changes in the assumed capital needs of the property and the 
leasing of vacant spaces in the third and fourth quarters which stabilized 
future cash flows and brought occupancy back up to 96%.

INDUSTRIAL PROPERTIES

In 1997, net investment income from industrial property operations was $2.1 
million, a decrease of $1.0 million, or 32.9%, in 1996. The decline was 
attributable to the sale of the industrial complex in Azusa, CA, in April 
1996, which accounted for $0.6 million of the decrease. The sale of the 
Partnership's investment in the Jacksonville, FL industrial properties, in 
September 1997, also contributed to the decline in net investment income. For 
properties held for comparable periods in 1997 and 1996, net investment 
income was $2.0 million and $1.9 million, respectively.

The Partnership acquired three industrial properties in 1997. The first 
acquisition was a 182,500 square foot building in Salt Lake City, UT for $5.4 
million. The second acquisition was a two building 277,500 square foot 
facility in Aurora, CO for $8.5 million. As of December 31, 1997, both 
properties were vacant. The third acquisition was the land under the 
Partnership's existing Pomona CA, industrial complex. The Partnership 
acquired the land under a purchase option for $3.5 million.

The industrial properties (including the recently purchased land) had $1.9 
million of net unrealized appreciation in 1997. The largest single gain of 
$1.7 million was attributable to the purchase of the land under the Pomona, 
CA property. The Salt Lake City, UT and Aurora, CO properties experienced 
negative net appreciation as a result of softer market conditions.

As of December 31, 1997 occupancy at the Partnership's Pomona, CA and 
Bolingbrook, IL industrial properties remained unchanged from December 
31,1996 at 100%. As of December 31, 1997, both the Salt Lake City, UT and 
Aurora, CO properties were 100% vacant.

The partnership sold its interest in the Jacksonville, FL warehouses for net 
sales proceeds of $6.3 million, resulting in a gain of $0.3 million.

REAL ESTATE INVESTMENT TRUST

Dividend income from REITs totaled $0.1 million in 1997. The Partnership 
acquired 506,894 shares Meridian for $10.0 million on September 24, 1997. 
Meridian is a self-administered and self-managed equity real estate 
investment trust engaged in owning, operating, and leasing high quality, 
modern industrial properties nationwide. As of December 31, 1997, these 
shares experienced a $2.5 million net unrealized gain.

                                     11
<PAGE>

(c)      PER SHARE INFORMATION

Following is an analysis of the Partnership's net investment income and net 
realized and unrealized gain (loss) on investments, presented on a per share 
basis:

<TABLE>
<CAPTION>

                                                       01/01/98             01/01/97         01/01/96
                                                          TO                   TO               TO
                                                       12/31/98             12/31/97         12/31/96
                                                       --------             --------         --------
<S>                                                    <C>                  <C>              <C>
Revenue from real estate and improvements              $ 2.0739             $ 1.8216         $ 1.9173
Income from interest in properties                     $ 0.0028             $ 0.0367         $ 0.0510
Dividend income from real estate investment
 trusts                                                $ 0.0565             $ 0.0134         $ 0.0000
Interest on short-term investments                     $ 0.1594             $ 0.1946         $ 0.1795
                                                       --------             --------         --------

TOTAL INVESTMENT INCOME                                $ 2.2926             $ 2.0663         $ 2.1478
                                                       --------             --------         --------

Investment management fee                              $ 0.2448             $ 0.2229         $ 0.2097
Real estate taxes                                      $ 0.2031             $ 0.1864         $ 0.1991
Administrative expense                                 $ 0.1647             $ 0.1963         $ 0.1569
Operating expense                                      $ 0.3437             $ 0.2782         $ 0.2442
Interest expense                                       $ 0.0000             $ 0.0186         $ 0.0412
                                                       --------             --------         --------
TOTAL INVESTMENT EXPENSES                              $ 0.9563             $ 0.9024         $ 0.8511
                                                       --------             --------         --------

NET INVESTMENT INCOME                                  $ 1.3363             $ 1.1639         $ 1.2967
                                                       --------             --------         --------


Net gain (loss) realized on real estate
 investments sold                                      $ 0.2575             $ 0.0258         $(0.1323)
Change in unrealized gain (loss) on real
 estate investments sold                               $ 0.1472             $ 0.6903         $(0.2695)
                                                       --------             --------         --------

NET REALIZED AND UNREALIZED
  GAIN (LOSS) ON INVESTMENTS                           $ 0.4047             $ 0.7162         $(0.4018)
                                                       --------             --------         --------
                                                       --------             --------         --------

Net change in share value                              $ 1.7410             $ 1.8800         $ 0.8949

Share value at beginning of period                     $18.5286             $16.6486         $15.7537
                                                       --------             --------         --------
Share value at end of period                           $20.2696             $18.5286         $16.6486
                                                       --------             --------         --------
                                                       --------             --------         --------

Ratio of expenses to average net assets                    4.99%                5.16%            5.26%

Ratio of net investment income to
 average net assets                                        6.97%                6.66%            8.01%

Number of shares outstanding at
 end of period (000's)                                   11,848               11,848           11,848

</TABLE>

ALL CALCULATIONS ARE BASED ON AVERAGE MONTH-END SHARES OUTSTANDING WHERE
APPLICABLE.

                                     12
<PAGE>

(d)      THE YEAR 2000 ISSUE

The Partnership utilizes many of the same business applications, 
infrastructure and business partners as Prudential. Prudential has addressed 
the Year 2000 issue on an enterprise-wide basis. Therefore, it is not 
possible to differentiate the Partnership's Year 2000 issue from that of 
Prudential. The accompanying discussion of the Year 2000 issue reflects steps 
taken by Prudential to mitigate the Year 2000 risks.

Many computer systems are programmed to recognize only the last two digits in 
a date. As a result, any computer system that has date-sensitive programming 
may recognize a date using "00" as the year 1900 rather than the year 2000. 
This problem can affect non-information technology systems that include 
embedded technology, such as microprocessors included in "infrastructure" 
equipment used for telecommunications and other services as well as computer 
systems. If this anomaly is not corrected, the year "00" could cause systems 
to perform date comparisons and calculations incorrectly, which could in turn 
affect the accuracy and compromise the integrity of business records. 
Business operations could be interrupted when companies are unable to process 
transactions, send invoices, or engage in similar normal business activities.

Prudential established a Company-wide Program Office (CPO) to develop and 
coordinate an operating framework for the Year 2000 compliance activities. 
Prudential's CPO structured the Year 2000 program into three major 
components: Business Applications, Infrastructure and Business Partners. The 
CPO also established quality assurance procedures including a certification 
process to monitor and evaluate enterprise-wide progress of each component of 
Prudential's program for conversion and upgrading of systems for Year 2000 
compliance.

BUSINESS APPLICATIONS

The scope of the Business Applications component includes a wide range of 
computer systems that directly support Prudential's business operations and 
accounting systems. The entire application portfolio was analyzed in 1996 to 
determine appropriate Year 2000 readiness strategies (i.e., renovate, replace 
or retire). Rigorous testing standards have been employed for all 
applications that will not be retired, including those that are newly 
developed or purchased. Application replacement and renovation projects 
follow a similar path toward Year 2000 compliance. The key project phases 
include Year 2000 analysis and design, programming activities, testing, and 
implementation. Replacement projects are also tracked until the existing 
applications are removed from production.

Of Prudential's total application portfolio, approximately 70% of the 
applications are being renovated, 13% are being replaced by Year 2000 
compliant systems, and the remaining 17% are being retired from production. 
At December 31, 1998, the percentage of business applications (based on 
application count) in the implementation phase for Year 2000 compliance for 
renovation, replacement and retirement are 99%, 96% and 99%, respectively. 
The overall completion date for Business Applications is June 1999.

INFRASTRUCTURE

The scope of Prudential's Year 2000 Infrastructure initiatives include 
mainframe computer system hardware and operating system software, mid-range 
systems and servers, telecommunications equipment, buildings and facilities 
systems, personal computers, and vendor hardware and software.

Although there are minor differences among these various components, the 
approach to Year 2000 readiness for Infrastructure generally involves phases 
identified as inventory, assessment, remediation activities (e.g., upgrading 
hardware or software), testing and implementation. The overall completion 
date for Infrastructure is June 1999.

BUSINESS PARTNERS

Prudential's approach to business partner readiness includes classification 
of each partner's status as "highly critical" or "less critical" and the 
development of contingency plans to address the potential that a business 
partner could experience a Year 2000 failure. Approximately 30% of our 
business partners have been identified as highly critical and the remaining 
70% as less critical. Project phases include inventory, risk assessment, and 
contingency planning 

                                     13
<PAGE>

activities. All project phases for highly critical business partner readiness 
were achieved in December 1998; we have an overall completion date for less 
critical business partner readiness of June 1999.

The Cost of Year 2000 Readiness

Prudential is funding the Year 2000 program from operating cash flows. Some 
of the expenses of Prudential's Year 2000 readiness are allocated across its 
various businesses and subsidiaries, including the Partnership. Expenses 
related to the Year 2000 initiatives allocated to the Partnership are part of 
systems overhead costs and are included in the Partnership's general and 
administrative expenses. The Year 2000 costs allocated to the Partnership to 
date are not material to its operations and financial conditions. Moreover, 
the forecasted allocated Year 2000 costs are not expected to have a material 
impact on the Partnership's ability to meet its contractual commitments.

Year 2000 Risks and Contingency Planning

The major portion of Prudential's transactions are of such volume that they 
can only be effectively processed through the use of automated systems. 
Therefore, substantially all of Prudential's contingency plans include the 
ultimate resolution of any causative technology failures that may be 
encountered.

Prudential believes that the Business Application, Infrastructure and 
Business Partners components of the Year 2000 project are substantially on 
schedule. While management expects a small number of the projects may not 
meet their targeted completion date, it is anticipated that these projects 
will be completed by September 1999 so that any delays, if experienced, would 
not have a significant impact on the timing of the project as a whole. During 
the course of the Year 2000 program, some discretionary technology projects 
have been delayed in favor of the completion of Year 2000 projects. However, 
this impact has been minimized by Prudential's strategic decision to 
outsource most of the Year 2000 renovation work.

While Prudential and its subsidiaries believe that they are well positioned 
to mitigate its Year 2000 issue, this issue, by its nature contains inherent 
uncertainties, including the uncertainty of Year 2000 readiness of third 
parties. Consequently, the Partnership is unable to determine at this time 
whether the consequences of Year 2000 failures will have a material adverse 
effect on the Partnership's results of operations, liquidity or financial 
condition. In the worst case, it is possible that any technology failure, 
including an internal or external Year 2000 failure, could have a material 
impact on the Partnership results of operations, liquidity, or financial 
position.

Prudential is enhancing existing business contingency plans to mitigate Year 
2000 risk. Current contingency plans include planned responses to the failure 
of specific business applications or infrastructure components. These 
responses are being reviewed and expected to be finalized by June 1999 to 
ensure that they are workable under the special conditions of a Year 2000 
failure. The plans are also being updated to reduce the level of uncertainty 
about the Year 2000 problem including readiness of Prudential's Business 
Partners.

The discussion of the Year 2000 Issue herein, and in particular Prudential's 
plans to remediate this issue and the estimated costs thereof, are 
forward-looking in nature. See cautionary statement below relating to 
forward-looking statements.

(e)      INFORMATION CONCERNING FORWARD-LOOKING STATEMENTS

Certain of the statements contained in Management's Discussion and Analysis 
may be considered forward-looking statements. Words such as "expects," 
"believes," "anticipates," "intends," "plans," or variations of such words 
are generally part of forward-looking statements. Forward-looking statements 
are made based upon management's current expectations and beliefs concerning 
future developments and their potential effects upon the Company. There can 
be no assurance that future developments affecting the Company will be those 
anticipated by management. There are certain important factors that could 
cause actual results to differ materially from estimates or expectations 
reflected in such forward-looking statements including without limitation, 
changes in general economic conditions, including the performance of 
financial markets and interest rates; market acceptance of new products and 
distribution channels; 

                                     14
<PAGE>

competitive, regulatory or tax changes that affect the 
cost or demand for the Company's products; and adverse litigation results. 
While the Company reassesses material trends and uncertainties affecting its 
financial condition and results of operations, it does not intend to review 
or revise any particular forward-looking statement referenced in this 
Management's Discussion and Analysis in light of future events. The 
information referred to above should be considered by readers when reviewing 
any forward-looking statements contained in this Management's Discussion and 
Analysis.

ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Account and the Partnership are not subject to significant exposure to 
market rate risk for changes in interest rates because the Partnership's 
financial instruments consist primarily of short-term fixed rate commercial 
paper and neither the Account nor the Partnership use derivative financial 
instruments. Further, by policy, the Partnership places its investments with 
high quality debt security issuers, limits the amount of credit exposure to 
any one issuer, limits duration by restricting the term, and holds 
investments to maturity except under rare circumstances.

                                     15
<PAGE>

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA


The financial statements and supplementary data are listed in the 
accompanying Index to the Financial Statements and Supplementary Data on F-1.

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


None.

                                     16
<PAGE>

                                                          PART III


ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

<TABLE>
<CAPTION>


Name                                                 Position                                    Age
----                                                 --------                                    ---
<S>                                         <C>                                                  <C>
James J. Avery, Jr.                         Chairman of the Board and Director                   47

I. Edward Price                             Vice Chairman of the Board and Director              56

Esther H. Milnes                            President and Director                               48

James C. Drozanowski                        Senior Vice President                                56

Frank P. Marino                             Senior Vice President                                54

Edward A. Minogue                           Senior Vice President                                56

Hwei-Chung Shao                             Senior Vice President and Chief Actuary              44

Dennis G. Sullivan                          Principal Financial Officer and
                                            Chief Accounting Officer                             43

David A. Nachman                            Vice President and Comptroller                       51

Imants Saksons                              Vice President                                       48

William M. Bethke                           Director                                             51

Ira J. Kleinman                             Director                                             51

Mendel A. Melzer                            Director                                             38

Kiyofumi Sakaguchi                          Director                                             55

----------------------------------------------------------------------------------------------
</TABLE>

James J. Avery, Jr., age 47 was elected Chairman of the Board of Directors of 
the Company on June 27, 1997. Mr. Avery joined The Prudential Insurance 
Company of America in 1988 and has served as the Senior Vice President, CFO 
and Chief Actuary for The Prudential Individual Insurance Group since 1997.

I. Edward Price, age 56, has been Senior Vice President and Actuary of 
Prudential Individual Insurance since 1995. From 1994 to 1995, he was Chief 
Executive Officer of Prudential International Insurance. From 1993 to 1994, 
he was President of Prudential International Insurance. Prior to 1993, he was 
Senior Vice President and Company Actuary of Prudential.

Esther H. Milnes, age 48, has been Vice President and Actuary of Prudential 
Individual Insurance Group since 1996. From 1993 to 1995, she was Senior Vice 
President and Chief Actuary of Prudential Insurance and Financial Services. 
Prior to 1993, she was Vice President and Associate Actuary of Prudential.

James C. Drozanowski, age 56, has been Vice President and Operations 
Executive, Prudential Individual Insurance Group since 1996. From 1995 to 
1996, he was President and Chief Executive Officer of Chase Manhattan Bank. 
From 1993 to 1995, he was Vice President of North America Customer Services, 
Chase Manhattan Bank. Prior to 1993, he was Operations Executive of Global 
Securities Services, Chase Manhattan Bank.

Frank P. Marino, age 54, has been Vice President of Policyowner Relations 
Department, Prudential Individual Insurance Group since 1996. Prior to 1996, 
he was Senior Vice President of Prudential Mutual Fund Services.

                                     17
<PAGE>

Edward A. Minogue, age 56, was elected a Senior Vice President of the Company 
on September 1, 1997. Mr. Minogue has been a Vice President of The Prudential 
Insurance Company of America since July, 1997. Prior to 1997, Mr. Minogue was 
a director of Merrill Lynch, Pierce & Smith, Inc.

Hwei-Chung Shao, age 44, is Vice President and Associate Actuary, Prudential.

Dennis G. Sullivan, age 43, was elected Principal Financial Officer and Chief 
Accounting Officer of the Company in March, 1999. Mr. Sullivan has been Vice 
President and Deputy Controller of Prudential since November, 1998. Prior 
thereto, from January 1998, Mr. Sullivan was Vice President and Controller of 
ContiFinancial Corporation. From 1997 to 1998, Mr. Sullivan was Deputy 
Corporate Controller of Salomon Brothers, Inc. Prior to 1997, he was a 
director at Salomon Brothers, Inc.

David A. Nachman, age 51, was elected Vice President and Comptroller of the 
Company in March, 1999. Mr. Nachman joined The Prudential Insurance Company 
of America in 1973, and has served as Vice President, Accounting of Prudential
since 1992.

Imants Saksons, age 48, was elected a Vice President of the Company in 
January 1, 1999. Mr. Saksons has been a Vice President, Compliance of 
Prudential Individual Financial Services since 1998. Prior to 1998, he was 
Vice President of Market Conduct, U.S. Operations of Manulife Financial.

William M. Bethke, age 51, has been President, Prudential Capital Markets 
Group since 1992.

Ira J. Kleinman, age 51, has been Chief Marketing and Product Development 
Officer of Prudential Individual Insurance Group since 1995. From 1993 to 
1995, he was President of Prudential Select. From 1992 to 1993, he was Senior 
Vice President of Prudential. Prior to 1992, he was Vice President of 
Prudential.

Mendel A. Melzer, age 38, has been Chief Investment Officer of Mutual Funds 
and Annuities, Prudential Investments since 1996. From 1995 to 1996, he was 
Chief Financial Officer of the Money Management Group of Prudential. From 
1993 to 1995, he was Senior Vice President and Chief Financial Officer of 
Prudential Preferred Financial Services. Prior to 1993, he was Managing 
Director, Prudential Investment Corporation.

Kiyofumi Sakaguchi, age 55, has been President, Prudential International 
Insurance Group since 1995. From 1994 to 1995, he was Chairman and Chief 
Executive Officer of The Prudential Life Insurance Co., Ltd. Prior to 1994, 
he was President and Chief Executive Officer of Asia Pacific 
Region-Prudential International Insurance, and President of The Prudential 
Life Insurance Co., Ltd.

ITEM 11.  EXECUTIVE COMPENSATION

The Real Property Account does not pay any fees, compensation or 
reimbursement to any Director or Officer of the Registrant.

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

Not applicable.

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

See Related Party Transactions in Note 5 of Notes to Financial Statements on 
page F - 18.

                                     18
<PAGE>

                                                     PART IV

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

(a)     The following documents are filed as part of this report:

        1.     Financial Statements

               See the Index to Financial Statements and Supplementary Data on
               page F-1.

        2.     Financial Statement Schedules

               The following financial statement schedules of The Prudential
               Variable Contract Real Property Partnership should be read in
               conjunction with the financial statements in Item 8 of this
               Annual Report on Form 10-K:

               Schedule III.  Real Estate Owned: Properties
               Schedule III.  Real Estate Owned: Interest in Properties

               See the Index to Financial Statements and Supplementary Data on
               page F-1.

        3.     Documents Incorporated by Reference

               See the following list of exhibits.

        4.     Exhibits

               See the following list of exhibits.

(b)     None.

(c)     The following is a list of Exhibits to the Registrant's Annual Report on
        Form 10-K for the fiscal year ended December 31, 1998. The Registrant
        will furnish a copy of any Exhibit listed below to any security holder
        of the Registrant who requests it upon payment of a fee of 15 cents per
        page. All Exhibits are either contained in this Annual Report on Form
        10-K or are incorporated by reference as indicated below.

        3.1    Amended Articles of Incorporation of Pruco Life Insurance Company
               filed as Exhibit 1.A.(6)(a) to Form N-8B-2, File No. 2-80513,
               filed November 22, 1982, and incorporated herein by reference.

        3.2    Amended By-Laws of Pruco Life Insurance Company, filed as Exhibit
               1.A.(6)(b) to Post-Effective Amendment No. 13 to Form S-6, File
               No. 2-89558, filed March 2, 1989, and incorporated herein by
               reference.

        3.3    Resolution of the Board of Directors establishing the Pruco Life
               Variable Contract Real Property Account, filed as Exhibit (3C) to
               Form S-1, Registration Statement No. 33-8698, filed September 12,
               1986, and incorporated herein by reference.

        4.1    Variable Life Insurance Contract, filed as Exhibit 1.A.(5)(a) to
               Pre-Effective Amendment No. 1 to Form S-6, Registration
               Statement No. 2-80513, filed February 17, 1983, and incorporated
               herein by reference.

        4.2    Revised Variable Appreciable Life Insurance Contract with fixed
               death benefit, filed as Exhibit 1.A.(5)(f) to Post-Effective
               Amendment No. 5 to Form S-6, Registration Statement No. 2-89558,
               filed July 10, 1986, and incorporated herein by reference.

        4.3    Revised Variable Appreciable Life Insurance Contract with
               variable death benefit, filed as Exhibit 1.A.(5)(g) to
               Post-Effective Amendment No. 5 to Form S-6, Registration
               Statement No. 2-89558, filed July 10, 1986, and incorporated
               herein by reference.

        4.4    Single Premium Variable Annuity Contract, filed as Exhibit 4(i)
               to Form N-4, Registration Statement No. 2-

                                     19
<PAGE>

               99616, filed August 13, 1985, and incorporated herein by 
               reference.


        4.5    Flexible Premium Variable Life Insurance Contract, filed as
               Exhibit 1.A.(5) to Form S-6, Registration Statement No. 2-99260,
               filed July 29, 1985, and incorporated herein by reference.

        9.     None.

        10.1   Investment Management Agreement between The Prudential Insurance
               Company of America and The Prudential Variable Contract Real
               Property Partnership filed as Exhibit (10A) to Post- Effective
               Amendment No. 4 to Form S-1, Registration Statement No. 33-8698,
               filed May 2, 1988, and incorporated herein by reference.

        10.2   Service Agreement between The Prudential Insurance Company of
               America and The Prudential Investment Corporation, filed as
               Exhibit (10B) to Form S-1, Registration Statement No. 33-8698,
               filed September 12, 1986, and incorporated herein by reference.

        10.3   Partnership Agreement of The Prudential Variable Contract Real 
               Property Partnership filed as Exhibit (10C) to Post-Effective
               Amendment No. 4 to Form S-1, Registration Statement No. 33-8698,
               filed May 2, 1988, and incorporated herein by reference.

        11.    Not applicable.

        12.    Not applicable.

        13.    None.

        18.    None.

        21.    Not applicable.

        22.    Not applicable.

        23.    None.

        24.    Powers of Attorney: W. Bethke, I. Kleinman, M. Melzer and I. 
               Price incorporated by reference to Form 10-K, Registration No.
               33-86780, filed March 27, 1996 on behalf of the Pruco Life 
               Variable Contract Real Property Account. J. Avery incorporated by
               reference to Post-Effective Amendment No. 2 to Form S-6, 
               Registration No. 333-07451, filed June 25, 1997 on behalf of
               the Pruco Life Variable Appreciable Account. K. Sakaguchi
               incorporated by reference to Pre-Effective Amendment No. 1 to
               Form N-4, Registration No. 333-06701, filed September 12, 1996
               on behalf of the Pruco Life Flexible Premium Variable Annuity
               Account.

        27.    Not applicable.


                                     20
<PAGE>

                                       SIGNATURES

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

                         PRUCO LIFE INSURANCE COMPANY
                                IN RESPECT OF
                            PRUCO LIFE VARIABLE
                        CONTRACT REAL PROPERTY ACCOUNT
                        ------------------------------
                                (REGISTRANT)



Date:  March 29, 1999                  By: /s/ Esther H. Milnes
     ------------------                    ----------------------
                                             Esther H. Milnes
                                             President

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

 
SIGNATURE                       TITLE                          DATE
---------                       -----                          ----

*                               Chairman of the Board          March 29, 1999
 -----------------------        and Director
James J. Avery, Jr.

*                               Vice Chairman of the Board     March 29, 1999
 -----------------------        and Director
I. Edward Price

 /s/ Esther H. Milnes           President and Director         March 29, 1999
 ----------------------- 
Esther H. Milnes

 /s/ Dennis G. Sullivan         Principal Financial Officer    March 29, 1999
 -----------------------        and Chief Accounting Officer
Dennis G. Sullivan

*                               Director                       March 29, 1999
 -----------------------
William Bethke

*                               Director                       March 29, 1999
 -----------------------
Ira J. Kleinman

*                               Director                       March 29, 1999
 -----------------------
Mendel A. Melzer

*                               Director                       March 29, 1999
 -----------------------
Kiyofumi Sakaguchi


                                *By: /s/ Thomas C. Castano
                                     -----------------------
                                 Thomas C. Castano
                                 (Attorney-in-Fact)


                                     21
<PAGE>

<TABLE>
<CAPTION>
                             PRUCO LIFE VARIABLE CONTRACT REAL PROPERTY ACCOUNT
                                               (REGISTRANT)

                                                 INDEX

                                                                                                       PAGE
                                                                                                       ----
<S>                                                                                                    <C>
A. PRUCO LIFE VARIABLE  CONTRACT  REAL PROPERTY ACCOUNT

   Financial Statements:

       Reports of Independent Accountants                                                              F-2

       Statement of Net Assets - December 31, 1998 and 1997                                            F-3

       Statement of Operations and Changes in Net Assets -
       Years Ended December 31, 1998, 1997 and 1996                                                    F-3

       Notes to Financial Statements                                                                   F-4

B. THE PRUDENTIAL VARIABLE  CONTRACT  REAL PROPERTY PARTNERSHIP

      Financial Statements:

       Reports of Independent Accountants                                                              F-8

       Statements of Assets and Liabilities - December 31, 1998 and 1997                               F-9

       Statements of Operations - Years Ended December 31, 1998, 1997 and 1996                         F-10

       Statements of Changes in Net Assets - Years Ended December 31, 1998, 1997 and 1996              F-11

       Statements of Cash Flows - Years Ended December 31, 1998, 1997 and 1996                         F-12

       Schedule of Investments - December 31, 1998 and 1997                                            F-13

       Notes to Financial Statements                                                                   F-16

       Financial Statement Schedules:

       For the period ended December 31, 1998

       Schedule III - Real Estate Owned: Properties                                                    F-19

       Schedule III - Real Estate Owned: Interest in Properties                                        F-20

All other schedules are omitted because they are not applicable, or because the required information is 
included in the financial statements or notes thereto.

</TABLE>

                                       F-1
<PAGE>

                          REPORT OF INDEPENDENT ACCOUNTANTS


To the Contract Owners of the 
Pruco Life Variable Contract Real Property Account 
and the Board of Directors of 
Pruco Life Insurance Company


In our opinion, the accompanying statements of net assets and the related 
statements of operations and changes in net assets present fairly, in all 
material respects, the financial position of Pruco Life Variable Contract 
Real Property Account at December 31, 1998 and 1997, and the results of its 
operations and the changes in its net assets for the three years in the 
period ended December 31, 1998, in conformity with generally accepted 
accounting principles.  These financial statements are the responsibility of 
Pruco Life Insurance Company's management; our responsibility is to express 
an opinion on these financial statements based on our audits.  We conducted 
our audits of these financial statements in accordance with generally 
accepted auditing standards which 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, 
assessing the accounting principles used and significant estimates made by 
management, and evaluating the overall financial statement presentation.  We 
believe that our audits, which included confirmation of shares owned in The 
Prudential Variable Contract Real Property Partnership at December 31, 1998 
and 1997, provide a reasonable basis for the opinion expressed above.

PricewaterhouseCoopers LLP
New York, New York
March 19, 1999


                                      F-2
<PAGE>

                            FINANCIAL STATEMENTS OF
            PRUCO LIFE VARIABLE CONTRACT REAL PROPERTY ACCOUNT

<TABLE>
<CAPTION>
                                 STATEMENTS OF NET ASSETS

                                                                                                        DECEMBER 31,
                                                                                        -----------------------------------------
                                                                                               1998                   1997
                                                                                        -------------------      ----------------
<S>                                                                                    <C>                       <C>
Investment in The Prudential Variable Contract
  Real Property Partnership (Note 3)                                                     $      119,784,179       $   109,495,293
                                                                                        -------------------      ----------------
                                                                                        -------------------      ----------------

NET ASSETS,  representing:
Equity of Contract Owners (Note 4)                                                       $       86,732,546       $    86,228,329
Equity of Pruco Life Insurance Company (Note 2D)                                                 33,051,633            23,266,964
                                                                                        -------------------      ----------------
                                                                                         $      119,784,179       $   109,495,293
                                                                                        -------------------      ----------------
                                                                                        -------------------      ----------------
</TABLE>

<TABLE>
<CAPTION>
                                       STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS

                                                                                            YEAR ENDED DECEMBER 31,
                                                                       ----------------------------------------------------------
                                                                              1998                   1997                1996
                                                                       ------------------    ------------------   ---------------
<S>                                                                    <C>                   <C>                  <C>
INVESTMENT INCOME:

Net Investment Income from Partnership Operations                      $       7,897,240     $       6,877,876    $    7,717,055

EXPENSES:

Charges to Contract Owners for Assuming Mortality Risk and
     Expense Risk and for Administration (Note 5)                                540,830               542,738           555,553
                                                                       ------------------    ------------------   ---------------

NET INVESTMENT INCOME                                                          7,356,410             6,335,138         7,161,502
                                                                       ------------------    ------------------   ---------------

Net Change in Unrealized Gain (Loss) on Investments in Partnership               869,718             4,079,515       (1,609,406)
Net Realized Gain (Loss) on Sale of Investments in Partnership                 1,521,928               152,643         (787,318)
                                                                       ------------------    ------------------   ---------------

NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS                           9,748,056            10,567,296         4,764,778
                                                                       ------------------    ------------------   ---------------

CAPITAL TRANSACTIONS:

Net Withdrawals by Contract Owners (Note 7)                                   (6,634,732)           (8,564,665)       (6,242,414)

Net Contributions by Pruco Life Insurance Company                              7,175,562             9,107,403         3,797,967
                                                                       ------------------    ------------------   ---------------

NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM CAPITAL TRANSACTIONS                                              540,830               542,738       (2,444,447)
                                                                       ------------------    ------------------   ---------------


TOTAL INCREASE IN NET ASSETS                                                  10,288,886            11,110,034         2,320,331


NET ASSETS:
Beginning of period                                                          109,495,293            98,385,259        96,064,928
                                                                       ------------------    ------------------   ---------------
End of period                                                          $     119,784,179     $     109,495,293    $   98,385,259
                                                                       ------------------    ------------------   ---------------
                                                                       ------------------    ------------------   ---------------
</TABLE>


             SEE NOTES TO FINANCIAL STATEMENTS ON PAGES F-4 THROUGH F-7


                                      F-3
<PAGE>

                     NOTES TO THE FINANCIAL STATEMENTS OF
             PRUCO LIFE VARIABLE CONTRACT REAL PROPERTY ACCOUNT
                              DECEMBER 31, 1998


NOTE 1:  GENERAL

Pruco Life Variable Contract Real Property Account (the "Real Property 
Account") was established on August 27, 1986 and commenced business September 
5, 1986. Pursuant to Arizona law, the Real Property Account was established 
as a separate investment account of Pruco Life Insurance Company ("Pruco 
Life"), a wholly-owned subsidiary of The Prudential Insurance Company of 
America ("Prudential"). The assets of the Real Property Account are 
segregated from Pruco Life's other assets. The Real Property Account is used 
to fund benefits under certain variable life insurance and variable annuity 
contracts issued by Pruco Life. These products are Appreciable Life ("VAL"), 
Variable Life ("VLI"), Discovery Plus ("SPVA"), and Discovery Life Plus 
("SPVL").

The assets of the Real Property Account are invested in The Prudential 
Variable Contract Real Property Partnership (the "Partnership"). The 
Partnership is organized under New Jersey law and is registered under the 
Securities Act of 1933. The Partnership is the investment vehicle for assets 
allocated to the real estate investment option under certain variable life 
insurance and annuity contracts. The Real Property Account, along with The 
Prudential Variable Contract Real Property Account and the Pruco Life of New 
Jersey Variable Contract Real Property Account, are the sole investors in the 
Partnership.

The Partnership has a policy of investing at least 65% of its assets in 
direct ownership interests in income-producing real estate and participating 
mortgage loans.

New sales of the VAL, VLI and SPVA products have been discontinued.

NOTE 2:  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

A.  BASIS OF ACCOUNTING

The accompanying financial statements are prepared in conformity with 
generally accepted accounting principles ("GAAP"). The preparation of the 
financial statements in conformity with GAAP requires management to make 
estimates and assumptions that affect the reported amounts and disclosures. 
Actual results could differ from those estimates.

B.  INVESTMENT IN PARTNERSHIP INTEREST

The investment in the Partnership is based on the Real Property Account's 
proportionate interest of the Partnership's market value. At December 31, 
1998 and 1997 the Real Property Account's interest in the Partnership was 
49.9% or 5,909,534 shares.

C.  INCOME RECOGNITION

Net investment income and realized and unrealized gains and losses are 
recognized daily. Amounts are based upon the Real Property Account's 
proportionate interest in the Partnership.

D.  EQUITY OF PRUCO LIFE INSURANCE COMPANY

Pruco Life maintains a position in the Real Property Account for property 
acquisitions and capital expenditure funding needs. The position is also 
utilized for liquidity purposes including unit purchases and redemptions, 
Partnership share transactions, and expense processing. The position does not 
have an effect on the contract owner's account or the related unit value.


                                      F-4
<PAGE>

NOTE 3:  INVESTMENT INFORMATION FOR THE PRUDENTIAL VARIABLE CONTRACT REAL 
         PROPERTY PARTNERSHIP

The number of shares held by the Real Property Account in the Partnership, 
the Partnership share value and the aggregate cost of investments in the Real 
Property Accounts' shares held at December 31, 1998 and 1997 were as follows:

<TABLE>
<CAPTION>
                                   1998               1997
                                   -----              ----
<S>                            <C>                <C>

SHARES OUTSTANDING:             5,909,534          5,909,534
SHARE VALUE:                      $20.27             $18.53
COST:                          $63,772,990        $63,772,990
</TABLE>

NOTE 4:  CONTRACT OWNER UNIT INFORMATION

Outstanding contract owner units, unit values and total value of contract 
owner equity at December 31, 1998 and 1997, by product, were as follows:

<TABLE>
<CAPTION>

1998:
-----
                                              VAL             VLI             SPVA            SPVL           TOTAL
                                              ---             ---             ----            ----           -----
<S>                                       <C>              <C>               <C>           <C>            <C>
CONTRACT OWNER UNITS OUTSTANDING:           40,077,133       2,653,867          534,598      2,923,554    
UNIT VALUE:                               $    1.88513     $   1.94314       $  1.74229    $   1.74229
                                          ------------     -----------       ----------    -----------
TOTAL CONTRACT OWNER EQUITY:              $ 75,550,606     $ 5,156,836       $  931,425    $ 5,093,679    $ 86,732,546
                                          ------------     -----------       ----------    -----------    ------------
                                          ------------     -----------       ----------    -----------    ------------

<CAPTION>

1997:
-----
                                              VAL             VLI             SPVA            SPVL           TOTAL
                                              ---             ---             ----            ----           -----
<S>                                       <C>              <C>              <C>            <C>            <C>
CONTRACT OWNER UNITS OUTSTANDING:           43,201,206       2,762,300          744,092      3,231,823
UNIT VALUE:                               $    1.73358     $   1.78248      $   1.61267    $   1.61267
                                          ------------     -----------       ----------    -----------
TOTAL CONTRACT OWNER EQUITY:              $ 74,892,746     $ 4,923,744      $ 1,199,975    $ 5,211,864    $ 86,228,329
                                          ------------     -----------       ----------    -----------    ------------
                                          ------------     -----------       ----------    -----------    ------------
</TABLE>

NOTE 5:  CHARGES AND EXPENSES

A.  MORTALITY RISK AND EXPENSE RISK CHARGES

Mortality risk and expense risk charges are determined daily using an 
effective annual rate of 0.6%, 0.35%, 0.9% and 0.9% for VAL, VLI, SPVA and 
SPVL, respectively. Mortality risk is that life insurance and annuity 
contract owners may not live as long as estimated or annuitants may live 
longer than estimated and expense risk is that the cost of issuing and 
administering the policies may exceed related charges by Pruco Life.

B.  ADMINISTRATIVE CHARGES

Administrative charges are determined daily using an effective annual rate of 
0.35% applied daily against the net assets representing equity of contract 
owners held in each subaccount for SPVA and SPVL. Administrative charges 
include costs associated with issuing the contract, establishing and 
maintaining records, and providing reports to contract owners.

C.  COST OF INSURANCE CHARGES

Contract owner contributions are subject to certain deductions prior to being 
invested in the Real Property Account. The deductions for VAL and VLI are (1) 
state premium taxes; (2) sales charges which are deducted in order to 
compensate Pruco Life for the cost of selling the contract and (3) 
transaction costs, applicable to VAL, are deducted from each premium payment 
to cover premium collection and processing costs. Contracts are also subject 
to monthly charges for the costs of administering the contract and to 
compensate Pruco Life for the guaranteed minimum death benefit risk.


                                      F-5
<PAGE>

D.  DEFERRED SALES CHARGE

A deferred sales charge is imposed upon the surrender of certain variable 
life insurance contracts to compensate Pruco Life for sales and other 
marketing expenses. The amount of any sales charge will depend on the number 
of years that have elapsed since the contract was issued. No sales charge 
will be imposed after the sixth and tenth year of the contract for SPVL and 
VAL, respectively. No sales charge will be imposed on death benefits.

E.  PARTIAL WITHDRAWAL CHARGE

A charge is imposed by Pruco Life on partial withdrawals of the cash 
surrender value for VAL. A charge equal to the lesser of $15 or 2% will be 
made in connection with each partial withdrawal of the cash surrender value 
of a contract.

NOTE 6:  TAXES

Pruco Life is taxed as a "life insurance company" as defined by the Internal 
Revenue Code and the results of operations of the Real Property Account form 
a part of Prudential's consolidated federal tax return. Under current federal 
law, no federal income taxes are payable by the Real Property Account. As 
such, no provision for the tax liability has been recorded in these financial 
statements.

NOTE 7:  NET  WITHDRAWALS BY CONTRACT OWNERS

Contract owner activity for the real estate investment option in Pruco Life's 
variable insurance and variable annuity products for the years ended 
December 31, 1998 and 1997, were as follows:

<TABLE>
<CAPTION>

1998:
-----
                                                    VAL            VLI           SPVA            SPVL            TOTAL
                                                    ---            ---           ----            ----            -----
<S>                                            <C>              <C>           <C>             <C>            <C>
CONTRACT OWNER NET PAYMENTS:                    $   5,904,685    $  480,512      $       0       $       0      $ 6,385,197
POLICY LOANS:                                      (2,370,550)     (105,592)             0        (188,675)      (2,664,817)
POLICY LOAN REPAYMENTS AND INTEREST:                1,807,322        81,893              0         219,707        2,108,922
SURRENDERS, WITHDRAWALS, AND DEATH BENEFITS:       (4,498,494)     (335,108)      (350,787)       (391,714)      (5,576,103)
NET TRANSFERS FROM (TO) OTHER SUBACCOUNTS
     OR FIXED RATE OPTIONS:                        (2,987,279)     (130,821)         7,921        (106,815)      (3,216,994)
ADMINISTRATIVE AND OTHER CHARGES:                  (3,441,506)     (191,621)          (383)        (37,427)      (3,670,937)
                                              ---------------- ------------- --------------  --------------  ---------------
NET WITHDRAWALS BY CONTRACT OWNERS              $  (5,585,822)   $ (200,737)     $(343,249)      $(504,924)     $(6,634,732)
                                              ---------------- ------------- --------------  --------------  ---------------
                                              ---------------- ------------- --------------  --------------  ---------------

<CAPTION>

1997:
-----
                                                    VAL            VLI           SPVA            SPVL            TOTAL
                                                    ---            ---           ----            ----            -----
<S>                                            <C>              <C>           <C>             <C>            <C>
CONTRACT OWNER NET PAYMENTS:                    $  7,135,438     $ 547,314      $    (363)      $   2,354      $ 7,684,743
POLICY LOANS:                                     (2,744,920)     (127,090)             0        (133,268)      (3,005,278)
POLICY LOAN REPAYMENTS AND INTEREST:               2,059,190        78,708              0         120,176        2,258,074
SURRENDERS, WITHDRAWALS, AND DEATH BENEFITS:      (4,877,439)     (403,603)      (563,563)       (345,999)      (6,190,604)
NET TRANSFERS FROM (TO) OTHER SUBACCOUNTS
     OR FIXED RATE OPTIONS:                       (4,465,593)     (170,032)       (73,121)       (184,688)      (4,893,434)
ADMINISTRATIVE AND OTHER CHARGES:                 (4,187,469)     (195,020)             0         (35,677)      (4,418,166)
                                              ---------------- ------------- --------------  --------------  ---------------
NET WITHDRAWALS BY CONTRACT OWNERS              $ (7,080,793)   $ (269,723)     $(637,047)      $(577,102)     $(8,564,665)
                                              ---------------- ------------- --------------  --------------  ---------------
                                              ---------------- ------------- --------------  --------------  ---------------
</TABLE>


                                      F-6
<PAGE>

NOTE 8:  UNIT ACTIVITY

Transactions in units for the years ended December 31, 1998, 1997 and 1996 were
as follows:

<TABLE>
<CAPTION>

1998:
-----
                                           VAL                 VLI               SPVA               SPVL
                                           ---                 ---               ----               ----
<S>                                     <C>                 <C>                <C>                <C>
CONTRACT OWNER CONTRIBUTIONS:            4,541,673           315,299             13,026            154,339
CONTRACT OWNER REDEMPTIONS:             (7,665,746)         (423,732)          (222,520)          (462,608)

<CAPTION>

1997:
-----
                                           VAL                 VLI               SPVA               SPVL
                                           ---                 ---               ----               ----
<S>                                     <C>                 <C>                <C>                <C>
CONTRACT OWNER CONTRIBUTIONS:            5,838,667           382,652              3,449            109,432
CONTRACT OWNER REDEMPTIONS:            (10,155,002)         (542,173)          (415,989)          (490,928)

<CAPTION>

1996:
-----
                                           VAL                 VLI               SPVA               SPVL
                                           ---                 ---               ----               ----
<S>                                     <C>                 <C>                <C>                <C>
CONTRACT OWNER CONTRIBUTIONS:            8,645,307           458,123                 39            206,239
CONTRACT OWNER REDEMPTIONS:            (12,105,073)         (505,822)          (242,466)          (596,341)
</TABLE>

NOTE 9:  PURCHASES AND SALES OF INVESTMENTS

There were no purchases or sales of investments in the Partnership for the year
ended December 31, 1998.


                                      F-7
<PAGE>

                        REPORT OF INDEPENDENT ACCOUNTANTS


To the Partners of Prudential 
Variable Contract Real Property Partnership

In our opinion, the financial statements listed in the accompanying index 
present fairly, in all material respects, the financial position of 
Prudential Variable Contract Real Property Partnership (the "Partnership") at 
December 31, 1998 and 1997, and the results of its operations and its cash 
flows for each of the three years in the period ended December 31, 1998, in 
conformity with generally accepted accounting principles.  These financial 
statements are the responsibility of the management of Prudential Insurance 
Company of America; our responsibility is to express an opinion on these 
financial statements based on our audits.  We conducted our audits of these 
statements in accordance with generally accepted auditing standards which 
require that we plan and perform the audits 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, assessing the accounting 
principles used and significant estimates made by management, and evaluating 
the overall financial statement presentation.  We believe that our audits 
provide a reasonable basis for the opinion expressed above.

PricewaterhouseCoopers LLP
New York, New York
February 22, 1999


                                      F-8
<PAGE>

               THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP

                       STATEMENTS OF ASSETS AND LIABILITIES

<TABLE>
<CAPTION>
                                                                                  DECEMBER 31, 1998       DECEMBER 31, 1997
                                                                                 ------------------      ------------------
<S>                                                                              <C>                     <C>
ASSETS

REAL ESTATE INVESTMENTS - At estimated market value:
  Real estate and improvements
   (cost:  12/31/98 -- $170,045,055; 12/31/97 -- $201,670,248)                   $     155,374,462       $     181,317,624
  Real estate investment trust (cost:  12/31/98 -- $10,000,005;                                       
   12/31/97 -- $10,000,005)                                                             11,554,649              12,523,805
                                                                                  ------------------      ------------------
                                                                                                      
         Total real estate investments                                                 166,929,111             193,841,429
                                                                                                      
MARKETABLE SECURITIES - At estimated market value                                                     
   (cost: 12/31/98 -- $14,967,236; 12/31/97 -- $13,971,421)                             14,950,525              13,929,296
                                                                                                      
CASH AND CASH EQUIVALENTS                                                               58,578,848              12,880,560
                                                                                                      
DIVIDEND RECEIVABLE                                                                        167,275                 146,999
                                                                                                      
OTHER ASSETS (net of allowance for uncollectible                                                      
  accounts:  12/31/98 -- $66,000; 12/31/97 -- $68,000)                                   3,623,513               1,946,851
                                                                                 ------------------      ------------------
                                                                                                      
         Total assets                                                            $     244,249,272       $     222,745,135
                                                                                 ------------------      ------------------
                                                                                 ------------------      ------------------
                                                                                                      
LIABILITIES AND PARTNERS' EQUITY                                                                       
                                                                                                      
ACCOUNTS PAYABLE AND ACCRUED EXPENSES                                            $       1,985,400       $       1,842,027
                                                                                                      
DUE TO AFFILIATES                                                                        1,598,535                 832,922
                                                                                                      
OTHER LIABILITIES                                                                          504,940                 538,413
                                                                                 ------------------      ------------------
                                                                                                      
         Total liabilities                                                               4,088,875               3,213,362
                                                                                                      
COMMITMENTS 

PARTNERS' EQUITY                                                                       240,160,397             219,531,773
                                                                                 ------------------      ------------------
                                                                                                      
TOTAL LIABILITIES AND PARTNERS' EQUITY                                           $     244,249,272       $     222,745,135
                                                                                 ------------------      ------------------
                                                                                 ------------------      ------------------
                                                                                                      
NUMBER OF SHARES OUTSTANDING AT END OF PERIOD                                           11,848,275              11,848,275
                                                                                 ------------------      ------------------
                                                                                 ------------------      ------------------
                                                                                                      
SHARE VALUE AT END OF PERIOD                                                     $           20.27          $        18.53
                                                                                 ------------------      ------------------
                                                                                 ------------------      ------------------
</TABLE>

                   SEE NOTES TO FINANCIAL STATEMENTS ON PAGE F-16


                                      F-9
<PAGE>

           THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP

                           STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                                                YEAR ENDED DECEMBER 31,
                                                          --------------------------------------------------------------------
                                                                  1998                    1997                   1996
                                                          ---------------------   ---------------------  ---------------------
<S>                                                       <C>                     <C>                    <C>
INVESTMENT INCOME:
 Revenue from real estate and improvements                     $    24,572,642         $    21,582,968        $    22,799,694
 Income from interest in properties                                     33,462                 435,296                606,558
 Dividend income from real estate investment trust                     669,100                 158,184                      0
 Interest on short-term investments                                  1,888,348               2,305,364              2,134,386
                                                          ---------------------   ---------------------  ---------------------

         Total investment income                                    27,163,552              24,481,812             25,540,638
                                                          ---------------------   ---------------------  ---------------------

EXPENSES:
 Investment management fee                                           2,900,445               2,640,470              2,494,229
 Real estate taxes                                                   2,406,624               2,208,972              2,367,404
 Administrative expense                                              1,951,235               2,326,155              1,865,433
 Operating expense                                                   4,071,735               3,296,350              2,904,620
 Interest expense                                                            0                 220,118                489,434
                                                          ---------------------   ---------------------  ---------------------

         Total investment expenses                                  11,330,039              10,692,065             10,121,120
                                                          ---------------------   ---------------------  ---------------------

NET INVESTMENT INCOME                                               15,833,513              13,789,747             15,419,518
                                                          ---------------------   ---------------------  ---------------------

REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
 Net proceeds from real estate investments  sold                    37,443,762               6,297,422             20,497,789
 Less:  Cost of real estate investments sold                        37,361,533               6,274,539             26,610,932
        Realization of prior years' unrealized
        gain on real estate investments sold                        (2,969,150)               (283,157)            (4,539,996)
                                                          ---------------------   ---------------------  ---------------------

 Net gain (loss) realized on real estate
        investments sold                                             3,051,379                 306,040             (1,573,147)
                                                          ---------------------   ---------------------  ---------------------


 Change in unrealized gain (loss) on real estate
  investments                                                        1,743,732               8,179,192             (3,211,436)
                                                          ---------------------   ---------------------  ---------------------

NET REALIZED AND UNREALIZED GAIN
 (LOSS) ON INVESTMENTS                                               4,795,111               8,485,232             (4,784,583)
                                                          ---------------------   ---------------------  ---------------------

NET INCREASE IN NET ASSETS RESULTING
 FROM OPERATIONS                                               $    20,628,624         $    22,274,979        $    10,634,935
                                                          ---------------------   ---------------------  ---------------------
                                                          ---------------------   ---------------------  ---------------------
</TABLE>

                   SEE NOTES TO FINANCIAL STATEMENTS ON PAGE F-16


                                      F-10
<PAGE>

            THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP

                       STATEMENTS OF CHANGES IN NET ASSETS

<TABLE>
<CAPTION>
                                                                                 YEAR ENDED DECEMBER 31,
                                                          -----------------------------------------------------------------------
                                                                  1998                     1997                     1996
                                                          ---------------------    ---------------------    ---------------------
<S>                                                       <C>                      <C>                      <C>
NET INCREASE IN NET ASSETS RESULTING 
  FROM OPERATIONS:
Net investment income                                          $    15,833,513          $    13,789,747          $    15,419,518
Net gain (loss) realized on real estate
  investments sold                                                   3,051,379                  306,040               (1,573,147)
Net unrealized gain (loss) from real estate
  investments                                                        1,743,732                8,179,192               (3,211,436)
                                                          ---------------------    ---------------------    ---------------------

         Net increase in net assets resulting from
           operations                                               20,628,624               22,274,979               10,634,935
                                                          ---------------------    ---------------------    ---------------------

NET DECREASE IN NET ASSETS RESULTING
  FROM CAPITAL TRANSACTIONS:
Withdrawals by partners
(Shares: 1998 -- 0; 1997 -- 0; 1996 -- 188,409 shares, 
  respectively)                                                              0                        0               (3,000,000)
                                                          ---------------------    ---------------------    ---------------------

         Net decrease in net assets resulting from
          capital transactions                                               0                        0               (3,000,000)
                                                          ---------------------    ---------------------    ---------------------

NET INCREASE IN NET ASSETS                                          20,628,624               22,274,979                7,634,935

NET ASSETS -  Beginning of year                                    219,531,773              197,256,794              189,621,859
                                                          ---------------------    ---------------------    ---------------------

NET ASSETS -  End of year                                      $   240,160,397          $   219,531,773          $   197,256,794
                                                          ---------------------    ---------------------    ---------------------
                                                          ---------------------    ---------------------    ---------------------
</TABLE>

                   SEE NOTES TO FINANCIAL STATEMENTS ON PAGE F-16


                                      F-11
<PAGE>

           THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP

                             STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                                     YEAR ENDED DECEMBER 31,
                                                                 ----------------------------------------------------------------
                                                                        1998                  1997                   1996
                                                                 -------------------   -------------------    -------------------
<S>                                                              <C>                   <C>                    <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net increase in net assets resulting from operations                  $  20,628,624         $  22,274,979          $  10,634,935
Adjustments to reconcile net increase in net assets
   resulting from operations to net cash provided by
   operating activities:
     Net realized and unrealized (gain) loss on
        investments                                                      (4,795,111)           (8,485,232)             4,784,583
     Bad Debt Expense                                                        28,264                99,929                 14,201
      (Increase) decrease in:
         Dividend receivable                                                (20,276)             (146,999)                     0
         Other assets                                                    (1,704,926)               20,136               (337,812)
      (Decrease) increase in:
         Obligation under capital lease                                           0               (72,677)               190,256
         Accounts payable and accrued expenses                              143,373               201,667               (502,254)
         Due to affiliates                                                  765,613               113,722                 36,405
         Other liabilities                                                 (33,473)                71,404               (197,060)
                                                                 -------------------   -------------------    -------------------

  Net cash flows from operating activities                               15,012,088            14,076,929             14,623,254
                                                                 -------------------   -------------------    -------------------

CASH FLOWS FROM INVESTING ACTIVITIES:
  Net proceeds from real estate investments
    sold                                                                 37,443,762             6,297,422             20,497,789
  Acquisition of real estate property                                             0           (23,417,474)           (10,713,722)
  Acquisition of real estate investment trust                                     0           (10,000,005)                     0
  Improvements and additional costs on prior purchases:
    Additions to real estate owned                                       (5,736,333)           (1,311,864)              (997,893)
    Additions to real estate partnerships                                         0                     0                      0
  Sale (purchase) of marketable securities, net                          (1,021,229)           10,497,348            (13,894,489)
                                                                 -------------------   -------------------    -------------------

  Net cash flows from investing activities                               30,686,200           (17,934,573)            (5,108,315)
                                                                 -------------------   -------------------    -------------------

CASH FLOWS FROM FINANCING ACTIVITIES:
 Withdrawals by partners                                                          0                     0             (3,000,000)
 Principal payments on capital lease obligation                                   0            (4,000,000)                     0
                                                                 -------------------   -------------------    -------------------

  Net cash flows from financing activities                                        0            (4,000,000)            (3,000,000)
                                                                 -------------------   -------------------    -------------------

NET CHANGE IN CASH AND CASH
  EQUIVALENTS                                                            45,698,288            (7,857,644)             6,514,939

CASH AND CASH EQUIVALENTS - Beginning of year                            12,880,560            20,738,204             14,223,265
                                                                 -------------------   -------------------    -------------------

CASH AND CASH EQUIVALENTS - End of year                               $  58,578,848         $  12,880,560          $  20,738,204
                                                                 -------------------   -------------------    -------------------
                                                                 -------------------   -------------------    -------------------

SUPPLEMENTAL INFORMATION:
  Cash paid during the year for interest                              $           0          $    220,118           $    376,450
                                                                 -------------------   -------------------    -------------------
                                                                 -------------------   -------------------    -------------------
</TABLE>

                   SEE NOTES TO FINANCIAL STATEMENTS ON PAGE F-16


                                      F-12
<PAGE>

             THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP

                            SCHEDULE OF INVESTMENTS
<TABLE>
<CAPTION>
                                                             DECEMBER 31, 1998                          DECEMBER 31, 1997
                                                      ------------------------------------      --------------------------------
                                                                          ESTIMATED                              ESTIMATED
                                                                            MARKET                                 MARKET
                                                            COST            VALUE                COST              VALUE
                                                      --------------------------------------------------------------------------
<S>                                                   <C>                 <C>                 <C>                <C>
REAL ESTATE AND IMPROVEMENTS (PERCENT OF NET ASSETS)                               64.7%                                  82.6%

Location                    Description
--------------------------------------------------------------------------------------------------------------------------------
Lisle, IL                   Office Building               $  21,634,707    $  14,123,742      $   17,916,983     $   10,278,959
Atlanta, GA                 Garden Apartments                15,601,495       15,651,216          15,446,293         15,100,000
Roswell, GA                 Retail Shopping Center           32,272,627       28,649,176          31,858,198         29,547,042
Pomona, CA                  Warehouse                                 0                0          23,637,049         19,504,612
Morristown, NJ              Office Building                  19,409,490       11,596,138          18,931,914         10,805,918
Bolingbrook, IL             Warehouse                         8,948,028        7,000,000           8,948,028          7,100,000
Farmington Hills, MI        Garden Apartments                         0                0          13,641,971         14,805,258
Raleigh, NC                 Garden Apartments                15,822,682       16,804,570          15,804,860         16,525,751
Nashville, TN               Office Building                   8,448,026       10,152,399           8,613,828          9,611,329
Oakbrook Terrace, IL        Office Complex                   12,945,366       15,750,000          12,725,366         14,100,000
Beaverton, OR               Office Complex                   10,728,618       11,200,000          10,728,285         10,700,000
Salt Lake City, UT          Industrial Building               5,388,134        5,450,000           5,388,134          5,350,000
Aurora, CO                  Industrial Building               9,304,171        9,497,221           8,540,585          8,400,000
Brentwood, TN               Office Complex                    9,541,711        9,500,000           9,488,754          9,488,755
                                                      --------------------------------------------------------------------------
                                                          $ 170,045,055   $  155,374,462      $  201,670,248     $  181,317,624
                                                      --------------------------------------------------------------------------
                                                      --------------------------------------------------------------------------


REAL ESTATE INVESTMENT TRUST (Percent of Net Assets)                                4.8%                                   5.7%

--------------------------------------------------------------------------------------------------------------------------------
Meridian REIT Shares (506,894 shares)                     $  10,000,005    $  11,554,649      $   10,000,005     $   12,523,805
                                                      --------------------------------------------------------------------------
                                                      --------------------------------------------------------------------------

<CAPTION>

                                                             DECEMBER 31, 1998                          DECEMBER 31, 1997
                                                      ------------------------------------      --------------------------------
                                                                          ESTIMATED                              ESTIMATED
                                                                            MARKET                                 MARKET
                                                            COST            VALUE                COST              VALUE
                                                      --------------------------------------------------------------------------
<S>                                                   <C>                 <C>                 <C>                <C>

MARKETABLE SECURITIES (PERCENT OF NET ASSETS)                                       6.2%                                   6.3%
(See pages F-14 to F-15 for details)
Description
--------------------------------------------------------------------------------------------------------------------------------
Marketable Securities                                     $  14,967,236    $  14,950,525      $   13,971,421     $   13,929,296
                                                      --------------------------------------------------------------------------
                                                      --------------------------------------------------------------------------




CASH AND CASH EQUIVALENTS (PERCENT OF NET ASSETS)                                  24.4%                                   5.9%
(See pages F-14 to F-15 for details)
Description
--------------------------------------------------------------------------------------------------------------------------------
Commercial Paper and Cash                                 $  58,578,848    $  58,578,848      $   12,880,560     $   12,880,560
                                                      --------------------------------------------------------------------------
                                                      --------------------------------------------------------------------------
</TABLE>

                   SEE NOTES TO FINANCIAL STATEMENTS ON PAGE F-16


                                      F-13
<PAGE>

            THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP

                           SCHEDULE OF INVESTMENTS

<TABLE>
<CAPTION>
                                                                                          DECEMBER 31, 1998
                                                                     ------------------------------------------------------------
                                                                                                                NET ESTIMATED
                                                                        FACE AMOUNT             COST             MARKET VALUE
                                                                     -------------------  ------------------  -------------------
<S>                                                                  <C>                  <C>                 <C>
MARKETABLE SECURITIES (PERCENT OF NET ASSETS)                                                                               6.2%
General Motors Acceptance Corp., 5.26%, January 26, 1999                   $    830,000        $    817,556         $    817,556
American Express Credit Corp., 7.375%, February 1, 1999                         325,000             329,342              325,418
Canadian Imperial Bank of Commerce, 5.55%, February 10, 1999                  1,000,000             999,520              999,947
Federal National Mortgage Assoc., 5.33%, February 12, 1999                      100,000              99,703               99,703
Salomon Smith Barney Holdings, Inc., 5.38%, February 16, 1999                 1,720,000           1,695,137            1,695,397
General Motors Acceptance Corp., 5.29 %,  February 17, 1999                     650,000             641,501              641,501
Chrysler Financial Company LLC , 5.26%, February 22, 1999                     2,400,000           2,365,700            2,365,700
International Lease Finance Corp., 7.50% March 1, 1999                          500,000             508,250              501,367
Federal Home Loan Mortgage Corp., 5.505%, March 12, 1999                      1,000,000           1,000,856            1,000,630
General Motors Acceptance Corp., 6.04%, March 19, 1999                        1,000,000           1,003,480            1,000,707
Merrill Lynch & Co. Inc., 5.23%, March 19, 1999                               1,790,000           1,758,820            1,758,820
Canadian Wheat Board, 5.14%, April 1, 1999                                    2,000,000           1,962,406            1,962,406
International Lease Finance Corp., 6.625%,  April 1, 1999                       375,000             377,419              375,721
CIT Group Holdings, Inc., 6.375%, May 21, 1999                                  400,000             402,120              400,873
Federal National Mortgage Assoc., 6.07%, July 1, 1999                         1,000,000           1,005,426            1,004,779
                                                                     -------------------  ------------------  -------------------
TOTAL MARKETABLE SECURITIES                                               $  15,090,000       $  14,967,236        $  14,950,525
                                                                     -------------------  ------------------  -------------------
                                                                     -------------------  ------------------  -------------------
CASH AND CASH EQUIVALENTS (PERCENT OF NET ASSETS)                                                                          24.4%
Countrywide Home Loans, 5.403%, January 4, 1999                           $   1,000,000        $    999,400         $    999,400
Fortune Brands Inc., 5.05%, January 4, 1999                                   3,463,000           3,461,057            3,461,057
Xerox Capital (Europe) PLC,  5.303%, January 4, 1999                          3,483,000           3,480,949            3,480,949
Federal National Mortgage Assoc., 5.77%, January 5, 1999                     10,401,000          10,000,000           10,000,000
Ford Motor Credit Co.,   5.454%, January 5, 1999                                500,000             499,622              499,622
Pioneer Hi-BRED International, 5.665%, January 7, 1999                        1,000,000             997,332              997,332
Ford Motor Credit Co., 6.11%, January 8, 1999                                   167,000             166,717              166,717
Deere & Co., 5.372 %,  January 13, 1999                                       2,520,000           2,509,514            2,509,514
E.I. Du Pont De Nemours & Co. Inc., 5.277%, January 13, 1999                    648,000             644,598              644,598
Household Finance Corp., 5.356 %, January 13, 1999                              175,000             174,119              174,119
Household Finance Corp., 5.355% , January 15, 1999                            2,343,000           2,331,899            2,331,899
Potomac Electric Power Co., 5.569%, January 15, 1999                          3,122,000           3,110,930            3,110,930
Chrysler Financial Corp., 5.537%, January 25, 1999                            1,164,000           1,158,121            1,158,121
Eastman Kodak Co., 5.232%, January 26, 1999                                   2,518,000           2,502,360            2,502,360
Cigna Corp., 5.559%, January 27, 1999                                         1,819,000           1,809,220            1,809,220
Cigna Group Holdings, Inc.  5.334%, January 27, 1999                          1,851,000           1,835,496            1,835,496
Countrywide Home Loan, Inc. 5.506%, January 27, 1999                          1,342,000           1,333,028            1,333,028
Countrywide Home Loan, Inc. 5.587%, January 27, 1999                          1,177,000           1,169,197            1,169,197
General RE Corp., 5.187% , January 29, 1999                                     542,000             538,046              538,046
PNC Funding Corp., 5.728%, January 29, 1999                                   2,500,000           2,487,729            2,487,729
GTE Funding, Inc.,  5.211%, February 1, 1999                                  2,526,000           2,506,048            2,506,048
Norwest Financial, Inc., 5.536%, February 3, 1999                             3,563,000           3,539,593            3,539,593
CIGNA Corp., 5.233%, February 4, 1999                                         1,745,000           1,730,660            1,730,660
General Electric Capital Corp., 5.537%, February 4, 1999                      3,563,000           3,539,049            3,539,049
Associates First Capital Corp., 5.241%, February 8, 1999                      2,519,000           2,498,988            2,498,988
GTE Funding, Inc., 5.304%, February 11, 1999                                  1,000,000             993,413              993,413
                                                                     -------------------  ------------------  -------------------
TOTAL CASH EQUIVALENTS                                                       56,651,000          56,017,086           56,017,086
CASH                                                                          2,561,762           2,561,762            2,561,762
                                                                     -------------------  ------------------  -------------------
TOTAL CASH AND CASH EQUIVALENTS                                           $  59,212,762       $  58,578,848        $  58,578,848
                                                                     -------------------  ------------------  -------------------
                                                                     -------------------  ------------------  -------------------
</TABLE>

                   SEE NOTES TO FINANCIAL STATEMENTS ON PAGE F-16


                                      F-14
<PAGE>

             THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP

                            SCHEDULE OF INVESTMENTS
<TABLE>
<CAPTION>
                                                                                       DECEMBER 31, 1997
                                                                 --------------------------------------------------------------
                                                                       FACE                                  NET ESTIMATED
                                                                      AMOUNT                 COST            MARKET VALUE
                                                                 ------------------    ------------------    ------------------
<S>                                                              <C>                   <C>                   <C>
MARKETABLE SECURITIES (PERCENT OF NET ASSETS)                                                                             6.3%

International Lease Finance Corp., 5.92%, January 15, 1998            $    500,000          $    499,083          $    499,956
Smith Barney Holding Inc., 5.70%, January 28, 1998                       1,304,000             1,285,475             1,285,475
Suntrust Banks, 8.875%, February 1, 1998                                 1,500,000             1,517,880             1,503,553
Chase Manhattan Bank, 5.75%, February 10, 1998                           2,000,000             2,000,000             2,000,000
Beneficial Corp., 9.125%, February 15, 1998                                700,000               705,948               702,456
Citicorp, 10.15%, February 15, 1998                                        200,000               207,324               200,969
General Motors Acceptance Corp., 5.9%, February 19, 1998                   985,000               994,545               986,218
General Motors Acceptance Corp., 5.9875%, February 23, 1998              1,300,000             1,299,363             1,299,894
American General Finance Corp., 7.25%, March 1, 1998                       500,000               507,880               501,217
Commercial Credit Co., 5.7%, March 1, 1998                                 375,000               375,199               375,031
Associates Corp. of North America, 7.3%, March 15, 1998                    400,000               406,635               401,242
International Lease Finance Corp., 5.75%, March 15, 1998                   400,000               399,940               399,988
Morgan Guaranty Trust Co., 5.85%, March 16, 1998                           500,000               499,855               499,971
Royal Bank of Canada, 5.91%, June 17, 1998                               2,000,000             1,998,853             1,999,475
FCC National Bank, 5.75281%, July 2, 1998                                1,025,000             1,024,202             1,024,602
General Mills Inc., 5.38%, July 8, 1998                                    250,000               249,238               249,249
                                                                 ------------------    ------------------    ------------------

TOTAL MARKETABLE SECURITIES                                          $  13,939,000         $  13,971,421         $  13,929,296
                                                                 ------------------    ------------------    ------------------
                                                                 ------------------    ------------------    ------------------

CASH AND CASH EQUIVALENTS (PERCENT OF NET ASSETS)                                                                         5.9%

Barnett Bank, Inc., 6.70%, January 2, 1998                           $   1,235,000         $   1,234,540         $   1,234,540
American Greetings Corp., 6.26%, January 5, 1998                         1,250,000             1,247,179             1,247,179
Xerox Capital, 5.85%, January 6, 1998                                    1,000,000               995,775               995,775
Nike Inc., 6.10%, January 8, 1998                                        1,215,000             1,213,353             1,213,353
Paccar Financial Corp., 5.85%, January 9, 1998                           1,000,000               996,100               996,100
Pitney Bowes Credit Corp., 6.00%, January 13, 1998                         750,000               747,375               747,375
Merrill Lynch & Co., Inc. 5.85%, January 15, 1998                        1,000,000               994,313               994,313
Bank of Montreal, 5.90%, January 16, 1998                                1,000,000             1,000,000             1,000,000
Countrywide Home Loan, Inc., 5.85%, January 22, 1998                     1,000,000               993,175               993,175
General Electric Capital Corp., 5.74%, February 9, 1998                  1,000,000               990,593               990,593
                                                                 ------------------    ----------------------------------------

TOTAL CASH EQUIVALENTS                                                  10,450,000            10,412,402            10,412,402

CASH                                                                     2,468,158             2,468,158             2,468,158
                                                                 ------------------    ------------------    ------------------

TOTAL CASH AND CASH EQUIVALENTS                                      $  12,918,158         $  12,880,560         $  12,880,560
                                                                 ------------------    ------------------    ------------------
                                                                 ------------------    ------------------    ------------------
</TABLE>

                   SEE NOTES TO FINANCIAL STATEMENTS ON PAGE F-16


                                      F-15
<PAGE>

                       NOTES TO FINANCIAL STATEMENTS OF
              PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP
                    FOR YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996


NOTE 1:  ORGANIZATION

On April 29, 1988, Prudential Variable Contract Real Property Partnership 
(the "Partnership"), a general partnership organized under New Jersey law, 
was formed through an agreement among The Prudential Insurance Company of 
America ("Prudential"), Pruco Life Insurance Company ("Pruco Life"), and 
Pruco Life Insurance Company of New Jersey ("Pruco Life of New Jersey"). The 
Partnership was established as a means by which assets allocated to the real 
estate investment option under certain variable life insurance and variable 
annuity contracts issued by the respective companies could be invested in a 
commingled pool. The partners in the Partnership are Prudential, Pruco Life 
and Pruco Life of New Jersey.

The Partnership's policy is to invest at least 65% of its assets in direct 
ownership interests in income-producing real estate and participating 
mortgage loans. Although it is the Partnership's policy to adhere to the 
aforementioned percentage, at December 31, 1998, the Partnership's direct 
investment in real estate, as described above, temporarily fell to 64.7%. On 
February 1, 1999, a distribution of cash brought the Partnership back into 
compliance with the 65% policy by increasing the Partnership's direct 
investment in real estate to 79.2%. (See Note 6: Subsequent Events). The 
estimated market value of the Partnership's shares is determined daily, 
consistent with the Partnership Agreement. On each day during which the New 
York Stock Exchange is open for business, the net asset value of the 
Partnership is estimated using the estimated market value of its assets, as 
described in Notes 2A and 2B, reduced by any liabilities of the Partnership. 
The periodic adjustments to property values described in Notes 2A and 2B and 
other adjustments to previous estimates are made on a prospective basis. 
There can be no assurance that all such adjustments to estimates will be made 
timely.

Shares of the Partnership are held by Prudential Variable Contract Real 
Property Account, Pruco Life Variable Contract Real Property Account and 
Pruco Life of New Jersey Variable Contract Real Property Account (the "Real 
Property Accounts") and may be purchased and sold at the then current share 
value of the Partnership's net assets. Share value is calculated by dividing 
the estimated market value of net assets of the Partnership as determined 
above by the number of shares outstanding. A contract owner participates in 
the Partnership through interests in the Real Property Accounts.

NOTE 2:  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

         A:   REAL ESTATE  OWNED AND  INTEREST IN  PROPERTIES - The  
              Partnership's investments in real estate owned and  interests 
              in properties are initially valued at their  purchase  price.  
              Real estate investments are reported at their estimated market 
              values based upon appraisal reports prepared by independent 
              real estate appraisers (members of the Appraisal Institute or 
              an equivalent organization),  within a reasonable amount of 
              time following acquisition of the real estate and no less 
              frequently than annually  thereafter.  The Chief Appraiser of 
              Prudential Comptroller's Department Valuation Unit (Valuation 
              Unit) is responsible to assure that the valuation process 
              provides independent and accurate market value estimates.  In 
              the interest of maintaining and monitoring the independence and 
              accuracy  of the appraisal process, the Comptroller of 
              Prudential has appointed a third party firm to act as the 
              Appraisal Management Firm.  The Appraisal Management Firm, 
              among other responsibilities, approves the selection and 
              scheduling of external appraisals; engages all external  
              appraisers; reviews and provides comments on all external  
              appraisals; prepares all quarterly update appraisals;  assists 
              in developing policies and  procedures and assists in the  
              evaluation  of the  performance and competency of external 
              appraisers.

              The purpose of an appraisal is to estimate the market value of 
              real estate as of a specific date. Market value has been 
              defined as the most probable price for which the appraised real 
              estate will sell in a competitive market under all conditions 
              requisite to fair sale, with the buyer and seller each acting 
              prudently, knowledgeably, and for self interest, and assuming 
              that neither is under undue duress.

              The estimate of market value generally is a correlation of 
              three approaches, all of which require the exercise of 
              subjective judgment. The three approaches are: (1) current cost 
              of reproducing the real estate less


                                      F-16
<PAGE>

                       NOTES TO FINANCIAL STATEMENTS OF
              PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP
                    FOR YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996


              deterioration and functional and economic obsolescence; (2) 
              discounting of a series of income streams and reversion at a 
              specified yield or by directly capitalizing a single year 
              income estimate by an appropriate factor; and (3) value 
              indicated by recent sales of comparable properties in the 
              market place. In the reconciliation of these three approaches, 
              the one most heavily relied upon is the one then recognized as 
              the most appropriate by the independent appraiser for the type 
              of real estate in the market.

              As described above, the estimated market value of real estate 
              and real estate related assets is determined through an 
              appraisal process. These estimated market values may vary 
              significantly from the prices at which the real estate 
              investments would sell since market prices of real estate 
              investments can only be determined by negotiation between a 
              willing buyer and seller. Although the estimated market values 
              represent subjective estimates, management believes these 
              estimated market values are reasonable approximations of market 
              prices and the aggregate value of investments in real estate is 
              fairly presented as of December 31, 1998 and 1997.

         B:   INVESTMENT IN REAL ESTATE  INVESTMENT  TRUSTS  (REITS) - Shares 
              of REITs are generally valued at their quoted market price.  
              These values may be adjusted for discounts resulting from 
              restrictions, if  any, on the future sale of these shares, such 
              as lockout periods or limitations on the number of shares which 
              may be sold in a given time period.  Any such discounts are 
              determined by the Valuation Unit.  The Valuation Unit of 
              Prudential applied a 3% discount to the market value of the 
              REIT shares at December 31,  1998.  This discount is being 
              applied because of the restriction which limits the number of 
              shares that can be publicly traded during any six month period 
              to 30% of the total shares originally acquired.

         C:   REVENUE RECOGNITION - Rent from real estate is recognized when 
              billed. Revenue from certain real estate investments is net of 
              all or a portion of related real estate expenses and taxes. 
              Since real estate is stated at estimated market value, net 
              income is not reduced by depreciation and amortization expense. 
              Dividend income is accrued at the ex-dividend date.

         D:   CASH AND CASH EQUIVALENTS - For purposes of the Statement of 
              Cash Flows, all short-term investments with an original 
              maturity of three months or less are considered to be cash 
              equivalents.

              Cash of $114,745 and $128,089 at December 31, 1998 and 1997, 
              respectively, was maintained by the properties for tenant 
              security deposits and is included in Other Assets on the 
              Statements of Assets and Liabilities.

         E:   MARKETABLE SECURITIES - Marketable securities are highly liquid 
              investments with maturities of more than three months when 
              purchased and are carried at estimated market value.

         F:   FEDERAL INCOME TAXES - The Partnership is not a taxable entity 
              under the provisions of the Internal Revenue Code. The income 
              and capital gains and losses of the Partnership are attributed, 
              for federal income tax purposes, to the Partners in the 
              Partnership. The Partnership may be subject to state and local 
              taxes in jurisdictions in which it operates.

         G:   MANAGEMENT'S USE OF ESTIMATES IN THE FINANCIAL STATEMENTS -The 
              preparation of financial statements in conformity with 
              generally accepted accounting principles requires management to 
              make estimates and assumptions that affect the reported amounts 
              of assets and liabilities at the date of the financial 
              statements and the reported amounts of revenues and expenses 
              during the reporting period. Actual results could differ from 
              those estimates.

         H:   RECLASSIFICATIONS  - Certain 1997 amounts in the financial  
              statements have been  reclassified to conform with the 1998 
              presentation.


                                      F-17
<PAGE>

                       NOTES TO FINANCIAL STATEMENTS OF
              PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP
                    FOR YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996


NOTE 3:  LEASING ACTIVITY

The Partnership leases space to tenants under various operating lease 
agreements. These agreements, without giving effect to renewal options, have 
expiration dates ranging from 1999 to 2009. At December 31, 1998, the 
aggregate future minimum base rental payments under non-cancelable operating 
leases by year are:

<TABLE>
<CAPTION>
                  Year Ending
                  December 31,                               (000's)
                  ------------                              --------
                  <S>                                       <C>
                          1999                              $ 11,037
                          2000                                 9,907
                          2001                                 9,104
                          2002                                 7,576
                          2003                                 4,573
                          Thereafter                          10,753
                                                            --------
                          Total                             $ 52,950
                                                            --------
                                                            --------
</TABLE>


NOTE 4:  COMMITMENT FROM PARTNER

Prudential has committed to fund up to $100 million to enable the Partnership 
to acquire real estate investments. Contributions to the Partnership under 
this commitment are utilized for property acquisitions, and returned to 
Prudential on an ongoing basis from contract owners' net contributions and 
other available cash. The amount of the commitment is reduced by $10 million 
for every $100 million in current value net assets of the Partnership. As of 
December 31, 1998, Prudential's equity interest in the Partnership under this 
commitment was $51 million. At the present time, Prudential does not intend 
to make further contributions during the 1999 fiscal year.

NOTE 5:  RELATED PARTY TRANSACTIONS

Pursuant to an investment management agreement, Prudential charges the 
Partnership a daily investment management fee at an annual rate of 1.25% of 
the average daily gross asset valuation of the Partnership. For the years 
ended December 31, 1998, 1997 and 1996 management fees incurred by the 
Partnership were $2.9 million; $2.6 million; and $2.5 million, respectively.

The Partnership also reimburses Prudential for certain administrative 
services rendered by Prudential. The amounts incurred for the years ended 
December 31, 1998, 1997 and 1996 were $116,128; $115,346; and $116,818, 
respectively, and are classified as administrative expenses in the Statements 
of Operations.

The Partnership owned a 50% interest in four warehouse/distribution buildings 
in Jacksonville, FL (the unit warehouses). The remaining 50% interest was 
owned by Prudential and one of its subsidiaries. In September 1997, the unit 
warehouses were sold as part of an industrial package for cash of $12.5 
million. The Partnership's share of the proceeds was $6.3 million.

NOTE 6:  SUBSEQUENT EVENTS

On February 1, 1999, $30 million was distributed to the Real Property 
Accounts.


                                      F-18
<PAGE>

<TABLE>
<CAPTION>
                           THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP
                                   SCHEDULE III - REAL ESTATE OWNED: PROPERTIES
                                           DECEMBER 31, 1998

                                              INTIAL COSTS TO THE PARTNERSHIP
                               ----------------------------------------------------------------------            COSTS     
                                                                                                              CAPITALIZED
                                                                                     BUILDING &              SUBSEQUENT TO
         DESCRIPTION               ENCUMBRANCES                  LAND               IMPROVEMENTS              ACQUISITION          
----------------------------   ---------------------      -------------------    --------------------    ----------------------    
<S>                            <C>                        <C>                    <C>                     <C>
Properties:

Office Building
Lisle, IL                              None                        1,780,000              15,743,881                4,110,826

Garden Apartments
Atlanta, GA                            None                        3,631,212              11,168,904                  801,379

Warehouse
Pomono, CA                             None                        3,412,636              19,091,210                1,133,203     

Retail Shopping Center
Roswell, GA                            None                        9,454,622              21,513,677                1,304,328

Office Building
Morristown, NJ                         None                        2,868,660              12,958,451                3,582,379

Office/Warehouse
Bolingbrook, IL                        None                        1,373,199               7,302,518                  272,311

Garden Apartments
Farmington Hills, MI                   None                        1,550,000              11,744,571                  347,400     

Garden Apartments
Raleigh, NC                            None                        1,623,146              14,135,553                   63,983

Office Building
Nashville, TN                          None                        1,797,000               6,588,451                   62,575

Office Park
Oakbrook Terrace, IL                   None                        1,313,310              11,316,883                  315,173

Office Building
Beaverton, OR                          None                          816,415               9,897,307                   14,896

Industrial Building
Salt Lake City, UT                     None                          582,457               4,805,676                        0     

Industrial Building             
Aurora, CO                             None                        1,338,175               7,202,411                        0     

Office Complex
Brentwood, TN                          None                        2,425,000               7,063,755                        0     

                                                          -------------------    --------------------    ----------------------    
                                                                  33,965,832             160,533,248               12,008,454
                                                          -------------------    --------------------    ----------------------    
                                                          -------------------    --------------------    ----------------------    

<CAPTION>

                                                                GROSS AMOUNT AT WHICH
                                                               CARRIED AT CLOSE OF YEAR
                         ---------------------------------------------------------------------------------------------------------

                                            BUILDING &          1998                                YEAR OF             DATE
         DESCRIPTION          LAND         IMPROVEMENTS         SALES            TOTAL            CONSTRUCTION        ACQUIRED
------------------------ -------------  ---------------- -----------------  ----------------    ------------------ ---------------
<S>                      <C>            <C>              <C>                <C>                 <C>                <C>
Properties:                            
                                       
Office Building                        
Lisle, IL                   1,780,000      19,854,707                          21,634,707             1985           Apr., 1988
                                                                                                     
Garden Apartments                                                                                    
Atlanta, GA                 3,631,212      11,970,283                          15,601,495             1987           Apr., 1988
                                                                                                     
Warehouse                                                                                            
Pomono, CA                  4,545,839      19,248,659      (23,794,498)                 0             1987           Apr., 1988
                                                                                                     
Retail Shopping Center                                                                               
Roswell, GA                 9,479,089      22,793,538                          32,272,627             1988           Jan., 1989
                                                                                                     
Office Building                                                                                      
Morristown, NJ              2,868,660      16,540,830                          19,409,490             1981           Aug., 1988
                                                                                                     
Office/Warehouse                                                                                     
Bolingbrook, IL             1,373,199       7,574,829                           8,948,028             1989           Feb., 1990
                                                                                                     
Garden Apartments                                                                                    
Farmington Hills, MI        1,897,400      11,761,183      (13,658,583)                 0             1989           Feb., 1990
                                                                                                     
Garden Apartments                                                                                    
Raleigh, NC                 1,623,146      14,199,536                          15,822,682             1995           Jun., 1995
                                                                                                     
Office Building                                                                                      
Nashville, TN               1,797,327       6,650,699                           8,448,026             1982           Oct., 1995
                                                                                                     
Office Park                                                                                          
Oakbrook Terrace, IL        1,313,821      11,631,545                          12,945,366             1988           Dec., 1995
                                                                                                     
Office Building                                                                                      
Beaverton, OR                 816,415       9,912,203                          10,728,618             1995           Dec., 1996
                                                                                                     
Industrial Building                                                                                  
Salt Lake City, UT            582,457       4,805,676                           5,388,133             1997           Jul., 1997
                                                                                                     
Industrial Building                                                                                  
Aurora, CO                  1,338,175       7,965,996                           9,304,171             1997           Sep., 1997
                                                                                                     
Office Complex                                                                                       
Brentwood, TN               2,425,000       7,116,711                           9,541,711             1987           Oct., 1997
                                       
                         -------------  --------------   ---------------    --------------
                           35,471,740     172,026,396      (37,453,081)       170,045,055
                         -------------  --------------   ---------------    --------------
                         -------------  --------------   ---------------    --------------

<CAPTION>

                                                                   1998                       1997                    1996        
                                                            --------------------    ----------------------     -------------------
<S>                                                         <C>                     <C>                        <C>    
(a)       Balance at beginning of year                              201,670,248               177,082,291             191,981,608 
            Additions:                                                                                            
             Acquistions                                                      0                23,417,474              10,713,722 
             Improvements, etc.                                       5,827,888                 1,170,483                 550,050 
            Deletions:                                                                                                            
             Sale                                                   (37,453,081)                        0            (26,163,089) 
                                                            --------------------    ----------------------     -------------------
                                                            --------------------    ----------------------     -------------------
          Balance at end of year                                    170,045,055               201,670,248             177,082,291 
                                                            --------------------    ----------------------     -------------------
                                                            --------------------    ----------------------     -------------------
(b)       Net of $1,000,000 settlement received from lawsuit.
</TABLE>


                                      F-19
<PAGE>

<TABLE>
<CAPTION>
                                           THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY PARTNERSHIP
                                            SCHEDULE III - REAL ESTATE OWNED: INTEREST IN PROPERTIES
                                                           DECEMBER 31, 1998
                                   -------------------------------------------------------------------------
                                        1998                         1997                         1996
                                   ---------------              ---------------               --------------
<S>                                <C>                          <C>                           <C>
Balance at beginning of year                   $0                   $6,133,157                   $6,133,157
  Additions:
   Acquistions                                  0                            0                            0
   Improvements, etc.                           0                            0                            0
  Deletions:
   Sale                                         0                  (6,133,157)                            0

                                   ---------------              ---------------               --------------
                                   ---------------              ---------------               --------------
Balance at end of year                         $0                           $0                   $6,133,157
                                   ---------------              ---------------               --------------
                                   ---------------              ---------------               --------------
</TABLE>


                                      F-20