<PAGE>   1
                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

                                    FORM 10-K

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

                   For the Fiscal Year Ended December 31, 1996

                         Commission File Number 33-22857

                  CENTURY HILLCRESTE APARTMENT INVESTORS, L.P.

                        A CALIFORNIA LIMITED PARTNERSHIP

                  I.R.S. Employer Identification No. 95-4166241

       9090 WILSHIRE BOULEVARD, SUITE 201, BEVERLY HILLS, CALIFORNIA 90211

       Registrant's Telephone Number, Including Area Code (310) 278-2191

      Securities Registered Pursuant to Section 12(b) or 12(g) of the Act:

                                      NONE

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed with the Commission by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding twelve months (or such shorter period
that the registrant was required to file such reports), and (2) has been subject
to such filing requirements for the past 90 days.

                                 Yes [X]   No [ ]

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


<PAGE>   2



PART I.

ITEM 1. BUSINESS:

Century HillCreste Apartment Investors, L.P. (the "Partnership") is a California
limited partnership formed on June 6, 1988, with National Partnership
Investments Corp. ("NAPICO", or the "Managing General Partner") and HillCreste
Properties Inc. (the "Non-Managing General Partner") as the General Partners.
The business of the Partnership is conducted primarily by the Managing General
Partner as the Partnership has no employees of its own. The Partnership issued
7,258,000 depository units (each depository unit being entitled to the
beneficial interest of a limited partnership interest) on October 26, 1988 to
investors (the "Limited Partners") for a total amount raised of $72,580,000,
through a public offering.

Concurrent with the issuance of the depository units, the Partnership purchased
a 315-unit luxury apartment complex in the Century City area of Los Angeles (the
"Property") from an affiliate of the Managing General Partner for a purchase
price of $68,548,000. In order to complete the purchase of the Property, the
seller, an affiliate of the Managing General Partner (the "Seller" or the
"Special Limited Partner") purchased a 10 percent special limited partnership
interest in the Partnership for $6,855,000. The Partnership Agreement provides
that the 10 percent special limited partnership interest is subordinate to the
other Limited Partners' specified priority return in the case of distributions
of net cash flow from operations, plus the other Limited Partners' return of
capital in the case of net sales or refinancing distribution proceeds.

Casden Investment Corporation ("CIC"), an affiliate of the Seller, owns all of
the outstanding common stock of NAPICO. The current members of NAPICO's Board of
Directors are Charles H. Boxenbaum, Bruce E. Nelson, Alan I. Casden, Henry C.
Casden and Brian D. Goldberg. DA Group Holdings Inc. owns all of the stock of
HillCreste Properties, Inc.

Mayer Management Inc., an affiliate of the Managing General Partner, managed the
Property from the date of its purchase through December 31, 1995. For the period
through January 31, 1995, Mayer Management Inc. was paid a fee of 5 percent of
the collected revenues of the Property for its management services and, for the
period from February 1, 1995 through December 31, 1995, the fee payable to Mayer
Management Inc. was reduced to 3 percent of the Property's revenues. On January
1, 1996, property management was transferred to an unaffiliated property
management agent, who manages the Property for a fee of 3 percent of rental
revenues. The management fee paid to the applicable property manager was
$177,320, $181,375, and $273,130 in 1996, 1995 and 1994, respectively.

The Partnership is subject to all of the risks incident to ownership of real
estate and interests therein, many of which relate to the lack of liquidity for
this type of investment. These risks include, without limitation, changes in
general economic conditions, adverse local market conditions due to
over-building or a decrease in employment or neighborhood values, changes in
supply or demand of competing properties in the area, changes in interest rates
and the availability and terms of permanent mortgage funds which may render the
sale or refinancing of the Property difficult or unattractive, changes in real
estate and zoning laws, increases in real property tax rates, federal or local
economic or rent controls, and the occurrence of uninsured losses, such as
earthquakes, floods or riots (however, the Property is partially insured for
losses from earthquakes), or other factors beyond the control of the General
Partners. The lack of liquidity of real estate investments generally will impair
the ability of the Partnership to respond promptly to changing circumstances. In
addition, these risks are magnified as the Partnership has only one rental
property and is not able to spread these risks over different geographic
regions.

The Property suffered substantial damage as a result of the January 17, 1994
Northridge Earthquake. The repair work required as a result of the earthquake
damage was completed in 1995. Additionally, certain improvements are being made
to the Property, including the privatization of certain streets and alleys
providing access to the Property and the installation of security fencing with
controlled entrances. See Item 7 below for more detailed information.

The Partnership's principal objectives are to (i) provide quarterly cash
distributions, (ii) preserve and protect capital, and (iii) achieve long-term
appreciation in the value of the Property for distribution upon sale. In
addition, although the



<PAGE>   3



Partnership acquired the Property for an all-cash purchase price, the
Partnership may seek to obtain mortgage financing for the Property. Such
financing, if accomplished, could permit the Partnership to distribute to the
Limited Partners a substantial portion of their invested capital. There can be
no assurance that any of these objectives will be achieved.

On April 25, 1996, Everest Century Investors, LLC commenced a tender offer for
up to 355,650 of the Partnership's outstanding units for $2.75 per unit.
Following the tender offer, certain other investors contacted the Limited
Partners and offered to purchase units at prices up to $4.25 per unit. The
Partnership has not made any recommendation with regard to the tender offers.

In December 1996, Everest HillCreste Investors, LLC, an affiliate of Everest
Century Investors, LLC, ("Everest") commenced a proxy solicitation of the
Limited Partners seeking to obtain sufficient votes in order to (a) authorize
Everest to notify the General Partners on behalf of Limited Partners to call for
a special meeting of the Limited Partners, and (b) adopt a resolution at such
meeting approving Everest's proposal to purchase the Property for $40 million
subject to certain material conditions. On January 9, 1997, the Managing General
Partner advised the limited partners that the proposed purchase price was less
than the Property 's appraised value of $46.9 million as of February 1996, and
that four other, non-binding purchase proposals had been received for prices
ranging from $40.2 million to $44.7 million, each subject to various
contingencies and conditions. The Managing General Partner also informed the
limited partners that Casden Properties, an affiliate of the Managing General
Partner and the Special Limited Partner of the Partnership, has under the terms
of the Amended and Restated Agreement of Limited Partnership (the "Partnership
Agreement"), a right of first refusal to acquire the Property for the proposed
sales price and terms (the "Right of First Refusal").

Subsequently, Everest has increased its offer by $7 million to $47 million (the
"Everest Proposal"). Additionally, the Partnership has since received (a) a
report from an independent real estate appraisal firm that the Property's
current market value is approximately $47 million and (b) a non-binding proposal
from one of the four prior offerees proposing to increase its offer to purchase
the Property to $47.4 million.

The Managing General Partner makes no recommendation as to the Everest Proposal.

The Managing General Partner has been informed that its affiliate, the Special
Limited Partner, plans, subject to obtaining reasonable financing, to exercise
the aforementioned Right of First Refusal in the event the Everest Proposal is
approved.





<PAGE>   4





The following is a schedule of the occupancy status of the Property as of
December 31, 1996:


<TABLE>
<CAPTION>
                                                                       No. of               Units            Percentage of
     Name & Location                                                   Units               Occupied           Total Units
     ---------------                                                   ------              --------          -------------
<S>                                                                    <C>                 <C>               <C>
HillCreste Apartments
  Los Angeles, California                                               315                  299                 95%
</TABLE>


ITEM 2. PROPERTIES:

The Partnership holds an interest in one real estate property. See Item 1 above
and Schedule for additional information pertaining to this Property.

ITEM 3. LEGAL PROCEEDINGS:

The Managing General Partner, NAPICO, is a plaintiff or defendant in several
lawsuits, which are unrelated to the Partnership. In addition, the Partnership
is involved in the actions described below:

Securities and Exchange Commission

The staff of the Securities and Exchange Commission (the "Commission") informed
the Partnership and NAPICO in August, 1995 that it intends to recommend that the
Commission institute a civil action and/or administrative proceeding against the
Partnership, NAPICO and others that would be based, in part, on allegations that
certain of the Partnership's financial statements in 1991, 1992 and 1993 should
have characterized certain current assets deposited in the master disbursement
account of the Partnership's property management company as accounts receivable
from a related party rather than as cash. The Partnership and NAPICO strenuously
disagree with the staff's contentions, which have not yet been considered by the
Commission. Moreover, in the opinion of NAPICO, any action that might result
from the staff's recommendation is not likely to have a material adverse effect
on the Partnership.

J/B Lawsuit

On February 13, 1997, J/B Investment Partners ("J/B") filed an action in the Los
Angeles Superior Court (the "J/B Lawsuit"), against the Managing General Partner
and its directors, and Casden Properties and certain of its affiliates
(collectively, the "Defendants").

The J/B Lawsuit is styled as a class action brought against the Defendants on
behalf of all limited partners of the Partnership, and a derivative action
brought on behalf of the Partnership itself. The Partnership is named as a
"nominal defendant." The complaint in the J/B Lawsuit contains four causes of
action: (a) breach of fiduciary duty; (b) breach of contract; (c) unjust
enrichment; and (d) equitable relief.

The alleged wrongdoing of the Defendants as set forth in the J/B Lawsuit relates
to the following issues:

1.       J/B alleges misappropriation and misuse of Partnership funds which were
         the subject of a previous lawsuit (the "Prior Lawsuit") filed in the
         Los Angeles Superior Court in June 1995 by HillCreste Properties, Inc.,
         the non-managing general partner of the Partnership (the "Non-Managing
         General Partner"). The Managing General Partner vigorously denied these
         allegations, and without admission of any wrongdoing the Prior Lawsuit
         was settled by a Memorandum of Understanding executed in August 1995,
         with final settlement documentation executed in




<PAGE>   5



         April 1996, at which time the Prior Lawsuit was dismissed with
         prejudice as to all defendants. Additionally, J/B alleges that the
         Defendants have wrongfully caused the Partnership to pay legal fees on
         behalf of the Managing General Partner or certain of its affiliates
         relating to a regulatory investigation discussed above.

2.       J/B alleges that the Defendants have failed to explore transactions
         that would maximize the value of the limited partners' investment in
         the Partnership, including the four unsolicited offers to purchase the
         Property, implementation of an auction process regarding the potential
         sale of the Property and obtaining financing with respect to the
         Property.

3        J/B alleges that the January 1997 letter from the Managing General
         Partner to the Limited Partners contained misleading statements about
         the original Everest proxy solicitation and about the Special Limited
         Partner's Right of First Refusal. Specifically, J/B contends that the
         January letter failed to disclose the Managing General Partner's advice
         and opinions regarding the response of the Limited Partners to the
         original Everest offer and contained misstatements about certain
         provisions of the Partnership Agreement pertaining to actions permitted
         or required to be taken by the Limited Partners of the Partnership. J/B
         states that the Limited Partners are not authorized, by vote of a
         majority-in-interest or otherwise, to bind, compel, or require the
         Partnership to enter into any contract for the sale of the Property,
         including the proposed sales contract with Everest. In other words, J/B
         asserts that the Everest Proposal cannot be implemented as proposed
         because it is beyond the Limited Partners' authority under the
         Partnership Agreement. Consequently, J/B claims that the conditions to
         the Special Limited Partner's Right of First Refusal to purchase the
         Property for a price and on terms equal to those contained in the
         Everest Proposal cannot under the Partnership Agreement be fulfilled,
         and, therefore, no such Right of First Refusal could be exercised.

         J/B seeks damages in the J/B Lawsuit in a unspecified amount and
         equitable relief, including, among other things, a declaration judgment
         as to whether or not there exists a Right of First Refusal.

         The Managing General Partner strenuously disputes all of the
         accusations of wrongdoing against it and its affiliates alleged in the
         J/B Lawsuit, and defends the existence and integrity of the Right of
         First Refusal, which was an integral and material part of the financial
         structure of the Partnership and was disclosed to the Limited Partners,
         in the prospectus at the time of the original sale of units in the
         Partnership. The Managing General Partner further intends to vigorously
         defend the settlement of the Prior Lawsuit.

         It appears that J/B purchased or was assigned certain rights with
         respect to 200 units in the Partnership in or about 1995. It is not yet
         known whether J/B or plaintiff's class action counsel is connected
         with, directly or indirectly, parties sponsoring the original Everest
         proxy or the revised Everest Proposal, or other third parties who have
         expressed interest in acquiring the Property.

         The Special Limited Partnership has advised the Managing General
         Partner and the Non-Managing General Partner that the Right of First
         Refusal was a material inducement to the Special Limited Partner's sale
         of the Property to the Partnership, its purchase of a subordinated
         special limited partnership interest in the Partnership for $6,855,000,
         and its agreement to provide the Partnership with a Minimum
         Distribution Guarantee pursuant to which the Special Limited Partner
         paid a total of approximately $13,130,000 to the Partnership to support
         distributions to the Limited Partners. If, as a result of the J/B
         Lawsuit or otherwise, the Special Limited Partner is not entitled to
         exercise the Right of First Refusal with respect to the Everet Proposal
         or in response to other similar situations, the Special Limited Partner
         believes that it would be entitled to return of its investment and all
         sums paid under the Minimum Distribution Guarantee, together with
         interest thereon. Moreover, the settlement of the Prior Lawsuit was
         reached after extensive negotiations with the Non-Managing General
         Partner which negotiated on behalf of the Partnership a binding and
         conclusive settlement. If, as a result of the J/B Lawsuit or otherwise,
         the settlement of the Prior Lawsuit is set aside, the Managing General
         Partner and its affiliates would seek a return of all funds paid to the
         Partnership as a result of such settlement.




<PAGE>   6


         The Defendants believe the allegations of wrongdoing in the J/B Lawsuit
         lack merit, and intend to contest them vigorously. The Defendants
         believe a number of the claims asserted in the J/B Lawsuit are bared by
         the settlement and dismissal with prejudice of the Prior Lawsuit.

         The J/B Lawsuit could result in delaying, complicating, or preventing
         any significant transactions with respect to the sale of the Property,
         and diminishing future distributions to the Limited Partners until such
         case is resolved. In addition, the Partnership is expected to incur
         significant legal fees and expense to the extent of its
         responsibilities to indemnify and hold the Defendants harmless under
         certain provisions in the Partnership Agreement.


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

As discussed above under Item 1, Everest commenced the solicitation of proxies
in December 1996 regarding the sale of the property. The General Partners are
unaware of the results of that solicitation, as amended, and to date no Special
Meeting of the Limited Partners has been called.


PART II.

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

The Partnership's units are not traded on a public exchange. It is not
anticipated that any public market will develop for the purchase and sale of any
units. Depository units may be transferred only if certain requirements are
satisfied. As of December 31, 1996, there were 6,670 registered holders of units
in the Partnership.





<PAGE>   7




ITEM 6. SELECTED FINANCIAL DATA:


<TABLE>
<CAPTION>

                                                   Year Ended December 31,
                             -----------------------------------------------------------------------

                                1996           1995           1994           1993           1992
                             -----------    -----------    -----------    -----------    -----------
<S>                          <C>            <C>            <C>            <C>            <C> 
Rental revenues              $ 5,410,156    $ 5,394,552    $ 5,390,358    $ 5,109,914    $ 4,984,986

Interest and other income        218,216        287,523         81,885        131,332        137,813
                             -----------    -----------    -----------    -----------    -----------

Total revenues               $ 5,628,372    $ 5,682,075    $ 5,472,243    $ 5,241,246    $ 5,122,799
                             ===========    ===========    ===========    ===========    ===========

Net income                   $ 2,675,170    $ 2,498,336    $ 1,224,739    $ 1,848,761    $   972,848
                             ===========    ===========    ===========    ===========    ===========

Net income per
   depository unit           $      0.37    $      0.34    $      0.17    $      0.25    $      0.13
                             ===========    ===========    ===========    ===========    ===========

Rental property owned at
   cost less accumulated
   depreciation              $34,337,025    $34,772,331    $35,660,385    $36,424,447    $41,001,958
                             ===========    ===========    ===========    ===========    ===========

Total assets                 $38,040,786    $37,684,178    $38,577,456    $41,344,209    $44,340,806
                             ===========    ===========    ===========    ===========    ===========

</TABLE>

<PAGE>   8

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

CAPITAL RESOURCES AND LIQUIDITY

The Partnership raised proceeds of $72,580,000 from the sale of depository
units, pursuant to a public offering and received additional capital
contributions from the General Partners of $1,050 and from the Special Limited
Partner of $6,855,000. Currently, the only sources of Partnership income consist
of income from rental operations at the Property and interest earned on
Partnership reserves.

In conjunction with the acquisition of the Property, the Partnership received a
guarantee from the Special Limited Partner, (now an affiliate of the Managing
General Partner), which guarantee agreement (the "Guarantee Agreement") required
the Special Limited Partner to make payments as provided in the Guarantee
Agreement, if and when necessary, in an amount sufficient to enable the
Partnership to provide the Limited Partners with minimum distributions through
December 1993.

Pursuant to a Memorandum of Understanding entered into on August 11, 1995, the
Special Limited Partner agreed to pay to the Partnership the sum of $350,000 in
two equal installments of $175,000 each; the first such $175,000 payment was
made in August 1995 and the second payment was made in May 1996. These payments
represent the amount of a real estate tax refund received in 1994 for
overpayment of prior year taxes which had previously been offset against amounts
receivable from the Special Limited Partner under the Guarantee Agreement.

Through December 31, 1996, the Special Limited Partner has funded $13,130,998
directly to the Partnership for distributions to the Limited Partners pursuant
to the Guarantee Agreement, which includes the $350,000 payments referred to
above. Commencing in 1994, distributions to the partners are being made from
cash flow from operations. In addition, during 1995 the Partnership made a
special distribution to the Limited Partners in the amount of $135,000. (See
"Results of Operations" for further discussion.)

Approvals from the City of Los Angeles were obtained to "privatize" the streets
and alleys providing access to the Property and to construct wrought iron
security fencing with controlled entrances into the Property. The final
resolution vacating the streets and alleys was approved on December 31, 1994.
Landscaping, and the construction of the perimeter fencing and related
improvements, including a guardhouse at the Ambassador Street entrance and a
directory/trellis at the Peerless Street location is nearing completion.

As a condition to its approval of the proposed "privatization", the City of Los
Angeles required the construction of a storm drain and related improvements, for
which an improvement agreement and guarantee in the amount $158,000 has been
filed with the City of Los Angeles. The Partnership has pledged a certificate of
deposit in such amount to the City to secure the improvement guarantee.
Contracts in the amount of $683,000 and $49,975 have been awarded to construct
the wrought iron security fencing and to construct a storm drain and related
improvements, respectively, for which construction work commenced in September
1996. As of December 31, 1996, $445,250 has been paid to the contractor.

RESULTS OF OPERATIONS

Occupancy averaged 95 percent for the year ended December 31, 1996, as compared
to an average of 94 percent for the year ended December 31, 1995, and an average
of 96 percent for 1994. The Property was 95 percent and 90 percent occupied as
of December 31, 1996 and 1995, respectively. Gross revenues were generally
consistent for 1996, 1995 and 1994. Operating expenses were approximately the
same for all three years presented , with the exception of the provision for
earthquake loss for 1995 and 1994. In 1996 a substantial decrease in legal
expense was reflected in general and administrative expenses.

On January 17, 1994, the rental property sustained damage due to the Northridge
Earthquake (Earthquake). In 1994, a total of $405,340 was spent to repair damage
caused by the Earthquake. Substantially all of the repairs ($376,000) were
performed on an emergency basis by Mayer Property Services, Inc., an affiliate
of the Managing General Partner, and the Special Limited Partner upon the
instruction and authorization of the building's property management company,
Mayer Management, Inc. In


<PAGE>   9


1995, the Partnership paid approximately $1,125,000 to an unaffiliated
contractor to fully repair the remaining damage suffered by the Property as a
result of the Earthquake.

Based on a determination by the building's insurance carrier that the loss
suffered by the Property as a result of the Earthquake was $1,537,718, the
Partnership received in August 1994 a net insurance settlement in the amount of
$355,448. This amount was determined by reducing the gross amount of the
Property's loss by: (a) the deductible provided for in the policy in the amount
of $1,071,808; (b) the $34,095 paid to the independent public adjuster that
processed the building's claim; and (c) the insurance company's holdback of
$76,367.

Since the investigation and recommendation of the staff of the Securities and
Exchange Commission (the "Commission") (see "Legal Proceedings," Item 3, for
further discussion) concerning the Partnership's financial statements and
Commission filings, a portion of the legal fees incurred by NAPICO in responding
to the staff has been allocated to and charged to the Partnership by NAPICO.
These fees were $2,583, $120,431 and $113,331 for 1996, 1995 and 1994,
respectively, and are included in general and administrative expenses. In
addition, $150,000 in professional fees was estimated and accrued in 1995
related to the Memorandum of Understanding. The actual amount paid in 1996 was
$90,000, with the balance reversed against expenses. Legal fees primarily
account for the increase in general and administrative expenses in 1995,
compared to 1996 and 1994. In the opinion of the Managing General Partner, any
action that might result from the Commission staff's investigation is not likely
to have a material adverse effect on the Partnership.


ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA:

The Financial Statements and Supplementary Data are listed under Item 14.


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

Not applicable.



<PAGE>   10



                  CENTURY HILLCRESTE APARTMENT INVESTORS, L.P.
                       (a California Limited Partnership)

                              FINANCIAL STATEMENTS,
                          FINANCIAL STATEMENT SCHEDULES
                   AND INDEPENDENT PUBLIC ACCOUNTANTS' REPORTS
                                DECEMBER 31, 1996





<PAGE>   11





                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS


To the Partners of
Century HillCreste Apartment Investors, L.P.
(A California limited partnership)

We have audited the accompanying balance sheets of Century HillCreste Apartment
Investors, L.P. (a California limited partnership) as of December 31, 1996 and
1995, and the related statements of income, partners' capital (deficiency) and
cash flows for each of the three years in the period ended December 31, 1996.
Our audits also included the financial statement schedule listed in the index at
Item 14. These financial statements and financial statement schedule are the
responsibility of the management of the Partnership. Our responsibility is to
express an opinion on these financial statements and financial statement
schedule based on our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Century HillCreste Apartment
Investors, L.P. as of December 31, 1996 and 1995, and the results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1996 in conformity with generally accepted accounting principles.
Also, in our opinion, such financial statement schedule, when considered in
relation to the basic financial statements taken as a whole, presents fairly in
all material respects the information set forth therein.




 
 


DELOITTE & TOUCHE LLP

Los Angeles, California
March 26, 1997



<PAGE>   12


                  CENTURY HILLCRESTE APARTMENTS INVESTORS, L.P.
                       (a California limited partnership)

                                 BALANCE SHEETS

                           DECEMBER 31, 1996 AND 1995

                                     ASSETS
<TABLE>
<CAPTION>

                                                      1996              1995
                                                   -----------       -----------

<S>                                                <C>               <C> 
RENTAL PROPERTY (Notes 1, 2 and 3)                   $34,337,025     $34,772,331

CASH AND CASH EQUIVALENTS (Note 1)                     3,490,463       2,738,045

RESTRICTED CASH (Notes 1 and 5)                          158,700         158,700

OTHER ASSETS (Note 5)                                     54,598          15,102
                                                     -----------     -----------

                                                     $38,040,786     $37,684,178
                                                     ===========     ===========


          LIABILITIES AND PARTNERS' CAPITAL

     ACCOUNTS PAYABLE AND ACCRUED
           LIABILITIES (Note 4)                      $   413,457     $   359,359

     DUE TO GENERAL PARTNER (Note 4)                        --           150,000

     SECURITY DEPOSITS                                   315,244         310,099

     PREPAID RENT                                         75,583          46,965
                                                     -----------     -----------

                                                         804,284         866,423


     COMMITMENTS AND CONTINGENCIES (Note 5)

     PARTNERS' CAPITAL (Note 1)                       37,236,502      36,817,755
                                                     -----------     -----------

                                                     $38,040,786     $37,684,178
                                                     ===========     ===========
</TABLE>


   The accompanying notes are an integral part of these financial statements.
<PAGE>   13


                  CENTURY HILLCRESTE APARTMENTS INVESTORS, L.P.
                       (a California limited partnership)

                              STATEMENTS OF INCOME
              FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994

<TABLE>
<CAPTION>

                                                           1996          1995          1994
                                                        ----------    ----------    ----------
<S>                                                     <C>           <C>           <C>       
REVENUES
     Rental income                                      $5,410,156    $5,394,552    $5,390,358
     Interest and other income (Note 3)                    218,216       287,523        81,885
                                                        ----------    ----------    ----------
                                                         5,628,372     5,682,075     5,472,243
                                                        ----------    ----------    ----------

EXPENSES
     Operating (Note 4)                                  1,165,010     1,178,744     1,076,682
     Property taxes                                        537,717       422,121       525,867
     Management fee - related party in 1995 and 1994
         (Note 4)                                          177,320       181,375       273,130
     General and administrative (Note 4)                   367,599       651,783       513,638
     Depreciation                                          705,556       713,054       716,572
     Provision for earthquake loss (Note 5)                   --          36,662     1,141,615
                                                        ----------    ----------    ----------

                                                         2,953,202     3,183,739     4,247,504
                                                        ----------    ----------    ----------

NET INCOME                                              $2,675,170    $2,498,336    $1,224,739
                                                        ==========    ==========    ==========

NET INCOME PER DEPOSITORY UNIT                          $     0.37    $     0.34    $     0.17
                                                        ==========    ==========    ==========

</TABLE>



   The accompanying notes are an integral part of these financial statements.
<PAGE>   14


                  CENTURY HILLCRESTE APARTMENTS INVESTORS, L.P.
                       (a California limited partnership)

                  STATEMENTS OF PARTNERS' CAPITAL (DEFICIENCY)
              FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994



<TABLE>
<CAPTION>
                                                              Special Limited
                                General           Limited         Partner
                                Partners          Partners        (Note 1)           Total 
                              ------------       ----------   ---------------    ------------

<S>                           <C>                <C>          <C>                <C>         
BALANCE, JANUARY 1, 1994      $   (198,855)      40,615,556             --         40,416,701

DISTRIBUTIONS (Note 7)             (98,899)      (4,905,234)            --         (5,004,133)

NET INCOME FOR 1994                 12,247        1,212,492             --          1,224,739
                              ------------       ----------          -----       ------------

BALANCE, DECEMBER 31, 1994        (285,507)      36,922,814             --         36,637,307

DISTRIBUTIONS (Note 7)             (27,262)      (2,290,626)                       (2,317,888)

NET INCOME FOR 1995                 24,983        2,473,353             --          2,498,336
                              ------------       ----------          -----       ------------

BALANCE, DECEMBER 31, 1995        (287,786)      37,105,541             --         36,817,755

DISTRIBUTIONS (Note 7)             (17,131)      (2,239,292)                       (2,256,423)

NET INCOME FOR 1996                 26,752        2,648,418             --          2,675,170
                              ------------       ----------          -----       ------------

BALANCE, DECEMBER 31, 1996    $   (278,165)      37,514,667          $  --       $ 37,236,502
                              ============       ==========          =====       ============


</TABLE>





   The accompanying notes are an integral part of these financial statements.

<PAGE>   15
                  CENTURY HILLCRESTE APARTMENTS INVESTORS, L.P.
                       (a California limited partnership)

                            STATEMENTS OF CASH FLOWS
              FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994

<TABLE>
<CAPTION>
                                                                         1996            1995            1994
                                                                      -----------     -----------     -----------
<S>                                                                   <C>             <C>             <C>        
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net  income                                                         $ 2,675,170     $ 2,498,336     $ 1,224,739
  Adjustments to reconcile net income to net
     cash provided by operating activities:
        Depreciation                                                      705,556         713,054         716,572
        Provision for earthquake loss                                        --            36,662       1,141,615
        Decrease (increase) in other assets                               (39,496)        317,783         324,066
        Increase (decrease) in accounts payable and
            accrued liabilities                                            54,098         (54,664)       (396,000)
        Increase (decrease) in due to general partners                   (150,000)         58,669          91,331
        Increase (decrease) in security deposits                            5,145         (10,241)        (13,430)
        Increase (decrease) in prepaid rent                                28,618          24,233         (30,465)
                                                                      -----------     -----------     -----------

               Net cash provided by operating activities                3,279,091       3,583,832       3,058,428
                                                                      -----------     -----------     -----------

CASH FLOWS FROM INVESTING ACTIVITIES:
  Redemption of short term investments                                       --              --         1,451,600
  Increase in restricted cash                                                --              --          (158,700)
  Payments received pursuant to the minimum
     distribution guarantee                                               175,000         175,000       2,992,712
  Increase in rental property                                            (445,250)           --              --
  Insurance proceeds for earthquake loss                                     --              --           355,448
  Earthquake loss payments                                                   --        (1,128,385)       (405,340)
                                                                      -----------     -----------     -----------

              Net cash (used in) provided by  investing activities       (270,250)       (953,385)      4,235,720
                                                                      -----------     -----------     -----------

CASH FLOWS FROM FINANCING ACTIVITIES:
  Distributions to partners                                            (2,256,423)     (2,317,888)     (5,004,133)
                                                                      -----------     -----------     -----------


NET INCREASE IN CASH AND CASH
  EQUIVALENTS                                                             752,418         312,559       2,290,015

CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR                            2,738,045       2,425,486         135,471
                                                                      -----------     -----------     -----------

CASH AND CASH EQUIVALENTS, END OF YEAR                                $ 3,490,463     $ 2,738,045     $ 2,425,486
                                                                      ===========     ===========     ===========


</TABLE>








   The accompanying notes are an integral part of these financial statements.
<PAGE>   16
                  CENTURY HILLCRESTE APARTMENT INVESTORS, L.P.
                       (a California Limited Partnership)

                          NOTES TO FINANCIAL STATEMENTS

              FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994

1.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

         Organization

         Century HillCreste Apartment Investors, L.P. (the "Partnership"), a
         California limited partnership, was formed on June 6, 1988, with
         National Partnership Investments Corp. (the "Managing General
         Partner"), and HillCreste Properties Inc. (the "Non-Managing General
         Partner") as the general partners. On October 26, 1988, the Partnership
         issued to investors (the "Limited Partners") 7,258,000 depositary units
         (each depositary unit being entitled to the beneficial interest of a
         limited partnership interest), for a total amount raised of
         $72,580,000, through a public offering.

         Concurrent with the issuance of the depositary units, the Partnership
         purchased a 315-unit apartment complex in the Century City area of Los
         Angeles, California (the "Property") from Casden Properties (the
         "Seller"). To complete the purchase of the Property, the Seller
         purchased a 10% special limited partnership interest in the Partnership
         for $6,855,000 and became the Special Limited Partner of the
         Partnership.

         Among other things, the Partnership Agreement provides that the 10%
         special limited partnership interest be subordinate to the other
         Limited Partners' specified priority return in the case of
         distributions of net cash flow from operations, plus the other Limited
         Partners' return of capital in the case of net sales or refinancing
         distribution proceeds.

         Casden Investment Corporation, an affiliate of the Seller, owns 100% of
         the outstanding common stock of the Managing General Partner.

         Use of Estimates

         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 and disclosure of contingent assets and liabilities at the
         date of the financial statements and reported amounts of revenues and
         expenses during the reporting period. Actual results could differ from
         those estimates.

         Depreciation

         Depreciation is reported using the straight-line method over the
         estimated useful lives of the buildings and equipment as follows:

                     Buildings                          35 years
                     Furniture and equipment             5 years

         Minimum Distribution Guarantee

         The minimum distribution guarantee payments from the Seller have been
         reflected as a reduction in the carrying amount of the Property.


                                        5

<PAGE>   17
                  CENTURY HILLCRESTE APARTMENT INVESTORS, L.P.
                       (a California Limited Partnership)

                    NOTES TO FINANCIAL STATEMENTS (CONTINUED)

              FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994


1.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

         For its contribution of $6,855,000, the Seller has rights to receive an
         allocation of the Partnership's net cash from operations after the
         Limited Partners receive a specified priority return.

         Cash and Cash Equivalents

         Cash and cash equivalents consist of cash and bank certificates of
         deposit with an original maturity of three months or less. The
         Partnership has its cash and cash equivalents on deposit primarily with
         one money market mutual fund. Such cash and cash equivalents are
         uninsured.

         Restricted Cash

         Restricted cash consists of bank certificates of deposits assigned to
         the City of Los Angeles in lieu of purchasing a subdivision improvement
         bond to effectuate the privatization of city streets located within the
         Property's perimeter (see Note 5).

         Income Taxes

         No provision has been made for income taxes in the accompanying
         financial statements since such taxes, if any, are the liability of the
         partners.

         Net Income Per Depository Unit

         Net income per depository unit was computed by dividing the Limited
         Partners' share of net income (99%) by the number of depository units
         outstanding during the year. The number of depository units was
         7,258,000 for all years presented.

         Impairment of Long-Lived Assets

         The Partnership reviews long-lived assets to determine if there has
         been any permanent impairment whenever events or changes in
         circumstances indicate that the carrying amount of the asset may not be
         recoverable. If the sum of the expected future cash flows is less than
         the carrying amount of the assets, the Partnership recognizes an
         impairment loss.


                                        6
<PAGE>   18
                  CENTURY HILLCRESTE APARTMENT INVESTORS, L.P.
                       (a California Limited Partnership)

                    NOTES TO FINANCIAL STATEMENTS (CONTINUED)

              FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994


2.       RENTAL PROPERTY

         At December 31, 1996 and 1995, rental property consists of the
         following:

<TABLE>
<CAPTION>
                                           1996               1995
                                       -----------        -----------
<S>                                    <C>                <C>        
Land                                   $16,175,000        $16,175,000
Buildings                               24,694,402         24,869,402
Furniture and equipment                  3,870,000          3,870,000
Improvements                               445,250                 --
                                       -----------        -----------
                                        45,184,652         44,914,402

Less:  Accumulated depreciation         10,847,627         10,142,071
                                       -----------        -----------
                                       $34,337,025        $34,772,331
                                       ===========        ===========
          </TABLE>

         In December 1996, Everest HillCreste Investors, LLC, an affiliate of
         Everest Century Investors, LLC, ("Everest"), commenced a proxy
         solicitation of the Limited Partners seeking to obtain sufficient votes
         in order to (a) authorize Everest to notify the General Partners on
         behalf of Limited Partners to call for a special meeting of the Limited
         Partners, and (b) adopt a resolution at such meeting approving
         Everest's proposal to purchase the Property for $40 million subject to
         certain material conditions. On January 9, 1997, the Managing General
         Partner advised the limited partners that the proposed purchase price
         was less than the Property 's appraised value of $46.9 million as of
         February 1996, and that four other, non-binding purchase proposals had
         been received for prices ranging from $40.2 million to $44.7 million,
         each subject to various contingencies and conditions. The Managing
         General Partner also informed the limited partners that Casden
         Properties, an affiliate of the Managing General Partner and the
         Special Limited Partner of the Partnership, has under the terms of the
         Amended and Restated Agreement of limited partnership (the "Partnership
         Agreement"), a right of first refusal to acquire the Property for the
         proposed sales price and terms (the "Right of First Refusal").

         Subsequently, Everest has increased its offer by $7 million to $47
         million (the "Everest Proposal"). Additionally, the Partnership has
         just received (a) a report from an independent real estate appraisal
         firm that the Property's current market value is approximately $47
         million and (b) a non-binding proposal from one of the four prior
         offerees proposing to increase its offer to purchase the Property to
         $47.4 million.

         The Managing General Partner makes no recommendation as to the Everest
         Proposal.

         The Managing General Partner has been informed that its affiliate, the
         Special Limited Partner, plans, subject to obtaining reasonable
         financing, to exercise the aforementioned Right of First Refusal in the
         event the Everest Proposal is approved.


                                        7
<PAGE>   19
                  CENTURY HILLCRESTE APARTMENT INVESTORS, L.P.
                       (a California Limited Partnership)

                    NOTES TO FINANCIAL STATEMENTS (CONTINUED)

              FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994


3.       MINIMUM DISTRIBUTION GUARANTEE RECEIVABLE FROM PARTNER

         The Minimum Distribution Guarantee Agreement (the "Guarantee
         Agreement") required the Seller, who is also the Special Limited
         Partner, to make payments to the Partnership, if and when necessary, in
         an amount sufficient to enable the Partnership to provide the Limited
         Partners with distributions sufficient to achieve a minimum annual
         return upon the Limited Partners' investment in the Partnership,
         through December 31, 1993, as follows:

<TABLE>
<CAPTION>
             Years Ended December 31,        Annual Return on Investment
             ------------------------        ---------------------------
             <S>                             <C>
                       1988                             8.0%
                       1989                             8.0%
                       1990                             8.5%
                       1991                             9.0%
                       1992                             9.0%
                       1993                             9.0%
</TABLE>

         Pursuant to a Memorandum of Understanding entered into on August 11,
         1995, the Seller agreed to pay to the Partnership the sum of $350,000
         in two equal installments of $175,000 each; the first such $175,000
         payment was made in August 1995 and the second payment was made in May
         1996. These payments represent the amount of a real estate tax refund
         received in 1994 for overpayment of prior year taxes which had
         previously been offset against amounts receivable from the Seller under
         the Guarantee Agreement. In addition, in August 1995, the Seller made
         an additional payment of $135,000 pursuant to the Memorandum of
         Understanding representing interest on late guarantee payments. This
         has been included in interest income.

         Through December 31, 1996, the Seller has funded a total of $13,130,998
         directly to the Partnership for distributions to the Limited Partners
         pursuant to the Guarantee Agreement, which includes the $350,000,
         referred to above. The period covered by the Guarantee Agreement
         expired on December 31, 1993. Except with respect to the payments made
         or to be made pursuant to the Memorandum of Understanding, commencing
         in 1994, distributions, if any, to the Partners are made from cash flow
         from operations.

4.       FEES PAID TO GENERAL PARTNERS AND AFFILIATES

         In accordance with the Partnership and other agreements, certain fees
         and reimbursements have been paid to the general partners and their
         affiliates as follows:

         a.       A partnership management fee of $50,000 annually is paid to
                  the Managing General Partner. This fee is included in general
                  and administrative expenses for 1996, 1995 and 1994.

         b.       Prior to February 1, 1995, a property management fee equal to
                  5% of collected revenues was paid to an affiliate of the
                  Managing General Partner. Effective February 1, 1995, the
                  property management fee payable to the Managing General
                  Partner's affiliate was reduced to 3%. The property management
                  fees paid to the affiliate for the years ended December 31,
                  1995 and 1994 were $181,375 and $273,130, respectively. On
                  January 1, 1996, property management was


                                        8


<PAGE>   20
                  CENTURY HILLCRESTE APARTMENT INVESTORS, L.P.
                       (a California Limited Partnership)

                    NOTES TO FINANCIAL STATEMENTS (CONTINUED)

              FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994


4.       FEES PAID TO GENERAL PARTNERS AND AFFILIATES (CONTINUED)

         transferred to an unaffiliated agent, who manages the property for a
         fee of 3% of rental revenues. The property management fees paid to the
         unaffiliated agent for the year ended December 31, 1996 were $177,320.
         Additionally, the Partnership paid approximately $41,700 and $21,200
         for the years ended December 31, 1995 and 1994, respectively, to an
         affiliate of the Managing General Partner for maintenance services.

         c.       Through December 1990, partnership expense reimbursements, not
                  to exceed $50,000 annually, were paid to the Non-Managing
                  General Partner. The 1990 reimbursement has not been paid but
                  has been accrued and is included in accounts payable and
                  accrued liabilities at December 31, 1996 and 1995. The
                  Non-Managing General Partner has requested reimbursement for
                  expenses for 1990 through 1996, however, the Managing General
                  Partner has refused to pay such reimbursements and none have
                  been paid or accrued for the period from 1991 through 1996.

         d.       Payments in the amount of approximately $376,000 were made to
                  an affiliate of the Managing General Partner, in connection
                  with earthquake related repairs during the year ended December
                  31, 1994 (see Note 5). These amounts were included in the
                  provision for earthquake damage.

         e.       The Managing General Partner is entitled to receive 1% of
                  distributions (as defined in the Partnership Agreement) which
                  are made by the Partnership. The distributions received by the
                  Managing General Partner for the years ended December 31,
                  1996, 1995 and 1994 were $17,131, $27,262 and $98,899,
                  respectively.

         f.       The Partnership is obligated to pay certain fees to the
                  Managing General Partner or its affiliates upon sale of the
                  Property. The payment of such fees is subordinated to certain
                  preferred returns to the Limited Partners.

         g.       At December 31, 1995, $150,000 was estimated as due to the
                  Non-Managing General Partner for reimbursement of professional
                  fees paid on behalf of the Partnership in connection with
                  issues raised in the Memorandum of Understanding. The amount
                  paid in 1996 was $90,000, with the balance reversed against
                  expenses.

5.       COMMITMENTS AND CONTINGENCIES

         a.       On January 17, 1994, the Property sustained damage due to the
                  earthquake in the Los Angeles area (the "Northridge
                  Earthquake"). For the years ended December 31, 1995 and 1994,
                  approximately $37,000, and $1,142,000, respectively, has been
                  provided for repairing the damage caused by the Northridge
                  Earthquake.

                  Based on a determination by the building's insurance carrier
                  that the loss suffered by the Property as a result of the
                  Northridge Earthquake was $1,537,718, the Partnership received
                  in August 1994 a net insurance settlement in the amount of
                  $355,448. This amount was determined by reducing the gross
                  amount of the loss by: (a) the deductible provided for in the
                  policy in the


                                        9
<PAGE>   21
                  CENTURY HILLCRESTE APARTMENT INVESTORS, L.P.
                       (a California Limited Partnership)

                    NOTES TO FINANCIAL STATEMENTS (CONTINUED)

              FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994


5.       COMMITMENTS AND CONTINGENCIES (CONTINUED)

         amount of $1,071,808; (b) the $34,095 paid to the independent public
         adjuster that processed the building's claim; and (c) the insurance
         company's holdback of $76,367. The insurance settlement of $355,448 has
         been offset against the provision for earthquake loss.

         b.       Approvals from the City of Los Angeles were obtained to
                  "privatize" the streets and alleys providing access to the
                  Property and to construct wrought iron security fencing with
                  controlled entrances into the Property. The final resolution
                  vacating the streets and alleys was approved on December 31,
                  1994. Landscape and the construction of the perimeter fencing
                  and related improvements, including a guardhouse at the
                  Ambassador Street entrance and a directory/trellis at the
                  Peerless Street location is nearing completion.

                  As a condition to its approval of the proposed
                  "privatization", the City of Los Angeles required the
                  construction of a storm drain and related improvements, for
                  which an improvement agreement and guarantee in the amount
                  $158,700 has been filed with the City of Los Angeles. The
                  Partnership has pledged a certificate of deposit in such
                  amount to the City to secure the improvement guarantee.
                  Contracts in the amount of $683,000 and $49,975 have been
                  awarded to construct the wrought iron security fencing and to
                  construct a storm drain and related improvements,
                  respectively, for which construction work commenced in
                  September 1996. As of December 31, 1996, $445,250 has been
                  paid to the contractor.

         c.       The Managing General Partner of the Partnership is a plaintiff
                  in various lawsuits and has also been named as a defendant in
                  other lawsuits arising from transactions in the ordinary
                  course of business. In the opinion of management and the
                  Managing General Partner, the claims will not result in any
                  material liability to the Partnership. In addition, the
                  Partnership is involved in the actions described below:

         Securities and Exchange Commission

         The staff of the Securities and Exchange Commission (the "Commission")
         informed the Partnership and NAPICO in August, 1995 that it intends to
         recommend that the Commission institute a civil action and/or
         administrative proceeding against the Partnership, NAPICO and others
         that would be based, in part, on allegations that certain of the
         Partnership's financial statements in 1991, 1992 and 1993 should have
         characterized certain current assets deposited in the master
         disbursement account of the Partnership's property management company
         as accounts receivable from a related party rather than as cash. The
         Partnership and NAPICO strenuously disagree with the staff's
         contentions, which have not yet been considered by the Commission.
         Moreover, in the opinion of NAPICO, any action that might result from
         the staff's recommendation is not likely to have a material adverse
         effect on the Partnership.


                                       10
<PAGE>   22
                  CENTURY HILLCRESTE APARTMENT INVESTORS, L.P.
                       (a California Limited Partnership)

                    NOTES TO FINANCIAL STATEMENTS (CONTINUED)

              FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994


5.       COMMITMENTS AND CONTINGENCIES (CONTINUED)

         J/B Lawsuit

         On February 13, 1997, J/B Investment Partners ("J/B") filed an action
         in the Los Angeles Superior Court (the "J/B Lawsuit"), against the
         Managing General Partner and its directors, and Casden Properties and
         certain of its affiliates (collectively, the "Defendants").

         The J/B Lawsuit is styled as a class action brought against the
         Defendants on behalf of all limited partners of the Partnership, and
         commenced a proxy solicitation of the Limited Partners seeking to
         obtain sufficient votes in order to (a) authorize Everest to notify the
         General Partners on behalf of Limited Partners to call for a special
         meeting of the Limited Partners, and (b) adopt a resolution at such
         meeting approving Everest's proposal to purchase the Property for $40
         million derivative action brought on behalf of the Partnership itself.
         The Partnership is named as a "nominal defendant." The complaint in the
         J/B Lawsuit contains four causes of action: (a) breach of fiduciary
         duty; (b) breach of contract; (c) unjust enrichment; and (d) equitable
         relief.

         The alleged wrongdoing of the Defendants as set forth in the J/B
         Lawsuit relates to the following issues:

         1.  J/B alleges misappropriation and misuse of Partnership funds which
             were the subject of a previous lawsuit (the "Prior Lawsuit") filed
             in the Los Angeles Superior Court in June 1995 by HillCreste
             Properties, Inc., the non-managing general partner of the
             Partnership (the "Non- Managing General Partner"). The Managing
             General Partner vigorously denied these allegations, and without
             admission of any wrongdoing the Prior Lawsuit was settled by a
             Memorandum of Understanding executed in August 1995, with final
             settlement documentation executed in April 1996, at which time the
             Prior Lawsuit was dismissed with prejudice as to all defendants.
             Additionally, J/B alleges that the Defendants have wrongfully
             caused the Partnership to pay legal fees on behalf of the Managing
             General Partner or certain of its affiliates relating to a
             regulatory investigation discussed above.

         2.  J/B alleges that the Defendants have failed to explore transactions
             that would maximize the value of the limited partners' investment
             in the Partnership, including the four unsolicited offers to
             purchase the Property, implementation of an auction process
             regarding the potential sale of the Property and obtaining
             financing with respect to the Property.

         3.  J/B alleges that the January 1997 letter from the Managing General
             Partner to the Limited Partners contained misleading statements
             about the original Everest proxy solicitation and about the Special
             Limited Partner's Right of First Refusal. Specifically, J/B
             contends that the January letter failed to disclose the Managing
             General Partner's advice and opinions regarding the response of the
             Limited Partners to the original Everest offer and contained
             misstatements about certain provisions of the Partnership Agreement
             pertaining to actions permitted or required to be taken by the
             Limited Partners of the Partnership. J/B states that the Limited
             Partners are not authorized, by vote of a majority-in-interest or
             otherwise, to bind, compel, or require the Partnership to enter
             into any contract for the sale of the Property, including the
             proposed sales


                                       11

<PAGE>   23
                  CENTURY HILLCRESTE APARTMENT INVESTORS, L.P.
                       (a California Limited Partnership)

                    NOTES TO FINANCIAL STATEMENTS (CONTINUED)

              FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994


5.       COMMITMENTS AND CONTINGENCIES (CONTINUED)

         contract with Everest. In other words, J/B asserts that the Everest
         Proposal cannot be implemented as proposed because it is beyond the
         Limited Partners' authority under the Partnership Agreement.
         Consequently, J/B claims that the conditions to the Special Limited
         Partner's Right of First Refusal to purchase the Property for a price
         and on terms equal to those contained in the Everest Proposal cannot
         under the Partnership Agreement be fulfilled, and, therefore, no such
         Right of First Refusal could be exercised.

         J/B seeks damages in the J/B Lawsuit in a unspecified amount and
         equitable relief, including, among other things, a declaration judgment
         as to whether or not there exists a Right of First Refusal.

         The Managing General Partner strenuously disputes all of the
         accusations of wrongdoing against it and its affiliates alleged in the
         J/B Lawsuit, and defends the existence and integrity of the Right of
         First Refusal, which was an integral and material part of the financial
         structure of the Partnership and was disclosed to the Limited Partners,
         in the prospectus at the time of the original sale of units in the
         Partnership. The Managing General Partner further intends to vigorously
         defend the settlement of the Prior Lawsuit.

         It appears that J/B purchased or was assigned certain rights with
         respect to 200 units in the Partnership in or about 1995. It is not yet
         known whether J/B or plaintiff's class action counsel is connected
         with, directly or indirectly, parties sponsoring the original Everest
         proxy or the revised Everest Proposal, or other third parties who have
         expressed interest in acquiring the Property.

         The Special Limited Partnership has advised the Managing General
         Partner and the Non- Managing General Partner that the Right of First
         Refusal was a material inducement to the Special Limited Partner's sale
         of the Property to the Partnership, its purchase of a subordinated
         special limited partnership interest in the Partnership for $6,855,000,
         and its agreement to provide the Partnership with a Minimum
         Distribution Guarantee pursuant to which the Special Limited Partner
         paid a total of approximately $13,130,000 to the Partnership to support
         distributions to the Limited Partners. If, as a result of the J/B
         Lawsuit or otherwise, the Special Limited Partner is not entitled to
         exercise the Right of First Refusal with respect to the Everet Proposal
         or in response to other similar situations, the Special Limited Partner
         believes that it would be entitled to return of its investment and all
         sums paid under the Minimum Distribution Guarantee, together with
         interest thereon. Moreover, the settlement of the Prior Lawsuit was
         reached after extensive negotiations with the Non-Managing General
         Partner which negotiated on behalf of the Partnership a binding and
         conclusive settlement. If, as a result of the J/B Lawsuit or otherwise,
         the settlement of the Prior Lawsuit is set aside, the Managing General
         Partner and its affiliates would seek a return of all funds paid to the
         Partnership as a result of such settlement.


                                       12

<PAGE>   24
                  CENTURY HILLCRESTE APARTMENT INVESTORS, L.P.
                       (a California Limited Partnership)

                    NOTES TO FINANCIAL STATEMENTS (CONTINUED)

              FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994


5.       COMMITMENTS AND CONTINGENCIES (CONTINUED)

                  The Defendants believe the allegations of wrongdoing in the
                  J/B Lawsuit lack merit, and intend to contest them vigorously.
                  The Defendants believe a number of the claims asserted in the
                  J/B Lawsuit are bared by the settlement and dismissal with
                  prejudice of the Prior Lawsuit.

                  The J/B Lawsuit could result in delaying, complicating, or
                  preventing any significant transactions with respect to the
                  sale of the Property, and diminishing future distributions to
                  the Limited Partners until such case is resolved. In addition,
                  the Partnership is expected to incur significant legal fees
                  and expense to the extent of its responsibilities to indemnify
                  and hold the Defendants harmless under certain provisions in
                  the Partnership Agreement.

6.       FAIR VALUE OF FINANCIAL INSTRUMENTS

         Statement of Financial Accounting Standards No. 107, "Disclosure about
         Fair Value of Financial Instruments," requires disclosure of fair value
         information about financial instruments. The carrying amount of assets
         and liabilities reported on the balance sheets that require such
         disclosure approximates fair value due to their short-term maturity.

7.       SUBSEQUENT EVENT

         In January 1997, the Partnership distributed $588,097 to the General
         and Limited Partners related to 1996.


                                       13
<PAGE>   25
                                                                    SCHEDULE III

                  CENTURY HILLCRESTE APARTMENT INVESTORS, L.P.
                    REAL ESTATE AND ACCUMULATED DEPRECIATION
                                DECEMBER 31, 1996

NOTES:   1.       Rental property is stated at cost. Depreciation is provided
                  for on the straight-line method over the estimated useful
                  lives of the assets. Substantially all of the apartments are
                  leased on a month-to-month basis.

         2.       The total cost of land, buildings, and equipment for federal
                  income tax purposes at December 31, 1996 is approximately
                  $51,324,040.

         3.       Investment in rental property: 

<TABLE>
<CAPTION>
                                                       Buildings,
                                                       Furniture 
                                                          and    
                                      Land             Equipment               Total
                                      ----             ---------               -----
<S>                                <C>                <C>                  <C>         
Balance, January 1, 1994           $16,175,000        $ 28,961,892         $ 45,136,892

Less:  minimum distribution
  guarantee amounts funded
  in 1994                                   --             (47,490)             (47,490)
                                   -----------        ------------         ------------

Balance, December 31, 1994          16,175,000          28,914,402           45,089,402

Less:  minimum distribution
  guarantee amounts funded
  in 1995                                   --            (175,000)            (175,000)
                                   -----------        ------------         ------------

Balance, December 31, 1995          16,175,000          28,739,402           44,914,402

Less:  minimum distribution
  guarantee amounts funded
  in 1996                                   --            (175,000)            (175,000)

Additions:  Improvements                    --             445,250              445,250
                                   -----------        ------------         ------------

Balance, December 31, 1996         $16,175,000        $ 29,009,652         $ 45,184,652
                                   ===========        ============         ============
</TABLE>


<PAGE>   26
                                                                    SCHEDULE III
                                                                     (CONTINUED)

                  CENTURY HILLCRESTE APARTMENT INVESTORS, L.P.
                    REAL ESTATE AND ACCUMULATED DEPRECIATION
                                DECEMBER 31, 1996


<TABLE>
<CAPTION>
                                        Buildings,
                                        Furniture
                                           and
                                        Equipment
                                        ---------
<S>                                    <C>   
Accumulated Depreciation:

Balance, January 1, 1994               $ 8,712,445

Provision for the year ended
December 31, 1994                          716,572
                                       -----------

Balance, December 31, 1994               9,429,017

Provision for the year ended
December 31, 1995                          713,054
                                       -----------

Balance, December 31, 1995              10,142,071

Provision for the year ended
December 31, 1996                          705,556
                                       -----------

Balance, December 31, 1996             $10,847,627
                                       ===========
</TABLE>


<PAGE>   27
PART III.

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT:

CENTURY HILLCRESTE APARTMENT INVESTORS, L.P. (the "Partnership") has no
directors or executive officers of its own.

National Partnership Investments Corp. ("NAPICO" or the "Managing General
Partner") is a wholly-owned subsidiary of Casden Investment Corporation, an
affiliate of The Casden Company. The following biographical information is
presented for the directors and executive officers of NAPICO with principal
responsibility for the Partnership's affairs.

CHARLES H. BOXENBAUM, 67, Chairman of the Board of Directors and Chief Executive
Officer of NAPICO.

Mr. Boxenbaum has been associated with NAPICO since its inception. He has been
active in the real estate industry since 1960, and prior to joining NAPICO was a
real estate broker with the Beverly Hills firm of Carl Rhodes Company.

Mr. Boxenbaum has been a guest lecturer at national and state realty
conventions, certified properties exchanger's seminars, Los Angeles Town Hall,
National Association of Home Builders, International Council of Shopping
Centers, Society of Conventional Appraisers, California Real Estate Association,
National Institute of Real Estate Brokers, Appraisal Institute, various mortgage
banking seminars, and the North American Property Forum held in London, England.
In 1963, he was the winner of the Snyder Award, the highest annual award offered
by the National Association of Real Estate Boards for Best Exchange. He is one
of the founders and a past director of the First Los Angeles Bank, organized in
November 1974. Mr. Boxenbaum was a member of the Board of Directors of the
National Housing Council. Mr. Boxenbaum received his Bachelor of Arts degree
from the University of Chicago.

BRUCE E. NELSON, 45, President and a director of NAPICO.

Mr. Nelson joined NAPICO in 1980 and became President in February 1989. He is
responsible for the operations of all NAPICO sponsored limited partnerships.
Prior to that he was primarily responsible for the securities aspects of the
publicly offered real estate investment programs. Mr. Nelson is also involved in
the identification, analysis, and negotiation of real estate investments.

From February 1979 to October 1980, Mr. Nelson held the position of Associate
General Counsel at Western Consulting Group, Inc., private residential and
commercial real estate syndicators. Prior to that time, Mr. Nelson was engaged
in the private practice of law in Los Angeles. Mr. Nelson received his Bachelor
of Arts degree from the University of Wisconsin and is a graduate of the
University of Colorado School of Law. He is a member of the State Bar of
California and is a licensed real estate broker in California and Texas.

ALAN I. CASDEN, 51, Chairman of The Casden Company, an affiliate of Casden
Properties (formerly CoastFed Properties), a director and member of the audit
committee of NAPICO, and chairman of the Executive Committee of NAPICO.

Mr. Casden is Chairman of the Board, Chief Executive Officer and sole
shareholder of The Casden Company and Casden Investment Corp. Prior to that, he
was the president and chairman of Mayer Group, Inc., which he joined in 1975. He
is also chairman of Mayer Management, Inc., a real estate management firm. Mr.
Casden has been involved in approximately $3 billion of real estate financings
and sales and has been responsible for the development and construction of more
than 12,000 apartment units and 5,000 single-family homes and condominiums.


<PAGE>   28
Mr. Casden is a member of the American Institute of Certified Public Accountants
and of the California Society of Certified Public Accountants. Mr. Casden is a
member of the advisory board of the National Multi-Family Housing Conference,
the Multi-Family Housing Council, and the President's Council of the California
Building Industry Association. He also serves on the advisory board to the
School of Accounting of the University of Southern California. He holds a
Bachelor of Science degree from the University of Southern California.

HENRY C. CASDEN, 53, President, Chief Operating Officer and Secretary of The
Casden Company and a director and secretary of NAPICO.

Mr. Casden has been President and Chief Operating Officer of The Casden Company,
as well as a director of NAPICO since February 1988. He became secretary of both
companies in late 1994. From 1982 to 1988, Mr. Casden was of counsel and a
partner in the Los Angeles law firm of Troy, Casden & Gould. From 1978 to 1981,
he was of counsel and a partner in the Los Angeles law firm of Loeb & Loeb. From
1972 to 1978, Mr. Casden was a member of the Beverly Hills law firm of Fink &
Casden, Professional Corporation.

Mr. Casden received his Bachelor of Arts degree from the University of
California at Los Angeles, and is a graduate of the University of San Diego Law
School. Mr. Casden is a member of the State Bar of California and has numerous
professional affiliations.

BRIAN D. GOLDBERG, 33, Chief Financial Officer of The Casden Company and a
director of NAPICO.

Mr. Goldberg joined The Casden Company in 1990 as Vice President of Finance and
became Chief Financial Officer in March 1991. Prior to joining The Casden
Company, Mr. Goldberg was with Arthur Andersen & Co., an international public
accounting firm, from August 1985 until July 1990 in their Los Angeles office.
He received his bachelor of science degree in Accounting from the University of
Denver. Mr. Goldberg is a member of the American Institute of Certified Public
Accountants and the California Society of Certified Public Accountants.

SHAWN HORWITZ, 37, Executive Vice President and Chief Financial Officer.

Mr. Horwitz joined NAPICO in 1990 and is responsible for the financial affairs
of NAPICO and the limited partnerships sponsored by NAPICO. Prior to joining
NAPICO, Mr. Horwitz was President for approximately one year of Star Sub Shops,
Inc., a corporation engaged in the business of selling fast food franchises, was
an audit manager in the real estate industry group for Altschuler, Melvoin &
Glasser for six years, and was an auditor with Arthur Young & Co. for three
years.

Mr. Horwitz received his Bachelor of Commerce degree in accounting from Rhodes
University in South Africa and is a member of the Illinois Society of Certified
Public Accountants, the American Institute of Certified Public Accountants and
the South African Institute of Chartered Accountants.

BOB SCHAFER, 55, Senior Vice President and Corporate Controller.

Mr. Schafer joined NAPICO in 1984 and is the Corporate Controller responsible
for the financial reporting function of the company. Prior to this, he was a
Group and Division Controller at Bergen Brunswig for over eight years,
Controller at a Flintkote subsidiary for over four years, and Assistant
Controller at an electronics subsidiary of General Electric for two years. Mr.
Schafer is a member of the California Society of Certified Public Accountants.
He holds a Bachelor of Science degree in accounting from Woodbury University,
Burbank, California.


<PAGE>   29
PATRICIA W. TOY, 67, Senior Vice President - Communications and Assistant
Secretary

Mrs. Toy joined NAPICO in 1977, following her receipt of an MBA from the
Graduate School of Management, UCLA. From 1952 to 1956, Mrs. Toy served as a
U.S. Naval Officer in communications and personnel assignments. She holds a
Bachelor of Arts Degree from the University of Nebraska.

MARK L. WALTHER, 36, Executive Vice President, General Counsel and Assistant
Secretary.

Mr. Walther joined NAPICO in 1987 and is responsible for the legal affairs of
the NAPICO sponsored limited partnerships. Prior to joining NAPICO, Mr. Walther
worked in the San Francisco law firm of Browne and Kahn which specialized in
construction litigation. Mr. Walther received his Bachelor of Arts Degree in
Political Science from the University of California, Santa Barbara and is a
graduate of the University of California, Davis, School of Law. He is a member
of the State Bar of Hawaii.


<PAGE>   30
ITEM 11. MANAGEMENT REMUNERATION AND TRANSACTIONS:

In accordance with the Partnership Agreement, certain fees and reimbursements
are paid to the general partners and their affiliates as follows:

(a)      A partnership management fee of $50,000 annually is paid to the
         Managing General Partner. This fee is included in general and
         administrative expenses for 1996, 1995 and 1994.

(b)      A property management fee equal to 3% (5% prior to February 1, 1995) of
         collected revenues was paid to an affiliate of the Managing General
         Partner through December 31, 1995. The property management fees for the
         years ended December 31, 1995 and 1994 were $181,375 and $273,130,
         respectively. On January 1, 1996, property management was transferred
         to an unaffiliated agent, who manages the property for a fee of 3% of
         rental revenues. Additionally, the Partnership paid approximately
         $41,700 and $21,200 for the years ended December 31, 1995 and 1994,
         respectively, to an affiliate of the Managing General Partner for
         maintenance services.

(c)      Payments in the amount of approximately $376,000 were made to an
         affiliate of the Managing General Partner, in connection with
         earthquake related repairs during the year ended December 31, 1994.
         These amounts have been included in provision for earthquake damage for
         the year ended December 31, 1994.

(d)      1% of distributions (as defined in the Partnership Agreement) is
         payable to the Managing General Partner.

(e)      In addition, the Partnership is obligated to pay fees to the Managing
         General Partner or its affiliates upon sale of the Property based upon
         the form of such sale. The payment of such fees are subordinated to
         certain preferred returns to the Limited Partners.

ITEM 12. SECURITY OF OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
         MANAGEMENT:

(a)      Security of Ownership of Certain Beneficial Owners

         The General Partners own all of the outstanding general partnership
         interests of the Partnership; no person is known to own beneficially in
         excess of 5% of the outstanding limited partnership interests.


<PAGE>   31
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS:

The Partnership has no officers, directors, or employees of its own. All of its
affairs are managed by the Managing General Partner. The transactions with the
Managing General Partner are primarily in the form of fees paid by the
Partnership to the General Partners or their affiliates for services rendered to
the Partnership, as discussed in Item 11 and in the notes to the accompanying
financial statements.

PART IV.

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

FINANCIAL STATEMENTS

Report of Independent Public Accountants.

Balance Sheets as of December 31, 1996 and 1995.

Statements of Income for the years ended December 31, 1996, 1995 and 1994.

Statements of Partners' Capital (Deficiency) for the years ended December 31,
1996, 1995 and 1994.

Statements of Cash Flows for the years ended December 31, 1996, 1995 and 1994.

Notes to Financial Statements.

FINANCIAL STATEMENT SCHEDULE:

Schedule III - Real Estate and Accumulated Depreciation, December 31, 1996.

The remaining schedules are omitted because any required information is included
in the financial statements and notes thereto, or they are not applicable or not
required.

EXHIBITS

(3)      Articles of incorporation and bylaws: The registrant is not
         incorporated. The Partnership Agreement was filed with Form S-11
         Registration #33-22857 incorporated herein by reference.

(10)     Material contracts: The registrant is not party to any material
         contracts, other than the Amended and Restated Certificate and
         Agreement of Limited Partnership dated September 8, 1988 and the
         contracts representing the Partnership's acquisition of its apartment
         project as previously filed at the Securities Exchange Commission, File
         #33-22857 which is hereby incorporated by reference.

(13)     Annual report to security holders Pages ___ to ___.

REPORTS ON FORM 8-K

A report on Form 8-K dated December 10, 1996, was filed with the Securities and
Exchange Commission. This Form 8-K disclosed that the registrant became aware of
an entity conducting a tender offer for up to 320,000 units in the registrant
for $4.25 per unit. The general partners on behalf of the registrant, by letter,
mailed on or about December 10, 1996, advised the limited partners that the
general partners recommended rejecting the offer because they believed that it
did not reflect the true value of the units.


<PAGE>   32
                                   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 in the City of Los Angeles,
State of California.


CENTURY HILLCRESTE APARTMENT INVESTORS, L.P.

By:           NATIONAL PARTNERSHIP INVESTMENTS CORP.
              The Managing General Partner


__________________________________
Charles H. Boxenbaum
Chairman of the Board of Directors
and Chief Executive Officer


__________________________________
Bruce E. Nelson
Director and President


__________________________________
Alan I. Casden
Director


__________________________________
Henry C. Casden
Director


__________________________________
Brian D. Goldberg
Director


__________________________________
Shawn D. Horwitz
Executive Vice President and
Chief Financial Officer


__________________________________
Bob E. Schafer
Senior Vice President and Corporate Controller