<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, 1997

                             Commission File Number
                                    033-22857

                  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
(collectively, 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.

NAPICO is a wholly owned subsidiary of Casden Investment Corporation ("CIC"),
which is wholly owned by Alan I. Casden. The current members of NAPICO's Board
of Directors are Charles H. Boxenbaum, Bruce E. Nelson, Alan I. Casden and Henry
C. Casden. 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
$177,002, $177,320, and $181,375 in 1997, 1996 and 1995, 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 were 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 ("Everest"), an affiliate of
Everest Century Investors, LLC, 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.

A real estate investment trust organized by an affiliate of NAPICO has advised
the Partnership that it intends to make a proposal to purchase from the
Partnership the real estate assets of the Partnership for $52,500,000.

The Partnership received from an unrelated entity a proposal, dated March 26,
1998, to purchase the property owned by the Partnership for $54,500,000.

<PAGE>   4


The following is a schedule of the occupancy status of the Property as of
December 31, 1997:


<TABLE>
                                   No. of            Units       Percentage of
     Name & Location               Units            Occupied      Total Units
     ---------------               -----            --------      -----------
<S>                                <C>              <C>          <C>
HillCreste Apartments
  Los Angeles, California           315              312             99%
</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 Partnership, NAPICO, and several of NAPICO's officers, directors and
affiliates consented to the entry, on June 25, 1997, of an administrative cease
and desist order by the U.S. Securities and Exchange Commission (the
"Commission"), without admitting or denying any of the findings made by the
Commission. The order concerns, in part, the treatment of Partnership funds
deposited between September 1991 and July 1993 in a master disbursement account
used by the Partnership's previous property management company. The Commission
found that those funds should have been recorded on the Partnership's books and
reported in its financial statements as related party accounts receivable rather
than as cash as done so by the Partnership's auditors. Although the Commission
found that this misclassification of current assets violated federal securities
laws, the Commission did not find that these violations were intentional nor did
the Commission find that limited partners had suffered any loss or damage as a
result of these violations. Moreover, the Commission's order does not impose any
cost, burden or penalty on the Partnership and does not impact NAPICO's ability
to serve as the Partnership's Managing General Partner.

The events that gave rise to the Commission's order occurred in or before 1993.
Subsequent corrective action by the Partnership and its general partners
precludes any recurrence of the cash management issues described in the
Commission's order.

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").

By order dated November 25, 1997, the Los Angeles Superior Court dismissed the
J/B Lawsuit with prejudice. No appeal has been taken.

The J/B Lawsuit was 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 was named as a
"nominal



<PAGE>   5

defendant." The complaint in the J/B Lawsuit contained 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 related
to the following issues:

1.      J/B alleged 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 (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 alleged that the Defendants 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 alleged that the Defendants 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 alleged 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 contended 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
        stated that the Limited Partners were 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
        asserted that the Everest Proposal cannot be implemented as proposed
        because it is beyond the Limited Partners' authority under the
        Partnership Agreement. Consequently, J/B claimed 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 could not under the Partnership Agreement be fulfilled,
        and, therefore, no such Right of First Refusal could be exercised.

        J/B was seeking 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.

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, 1997, there were 6,670 registered holders of units
in the Partnership.



<PAGE>   6



ITEM 6.          SELECTED FINANCIAL DATA:



<TABLE>
<CAPTION>
                                                                 Year Ended December 31,
                                 ---------------------------------------------------------------------------------------
                                     1997               1996               1995              1994               1993
                                 -----------        -----------        -----------        -----------        -----------
<S>                              <C>                <C>                <C>                <C>                <C>        
Rental revenues                  $ 5,960,474        $ 5,410,156        $ 5,394,552        $ 5,390,358        $ 5,109,914

Interest and other income            189,377            218,216            287,523             81,885            131,332
                                 -----------        -----------        -----------        -----------        -----------

Total revenues                   $ 6,149,851        $ 5,628,372        $ 5,682,075        $ 5,472,243        $ 5,241,246
                                 ===========        ===========        ===========        ===========        ===========

Net income                       $ 3,010,909        $ 2,675,170        $ 2,498,336        $ 1,224,739        $ 1,848,761
                                 ===========        ===========        ===========        ===========        ===========

Net income per
   depository unit               $      0.41        $      0.37        $      0.34        $      0.17        $      0.25
                                 ===========        ===========        ===========        ===========        ===========


Rental property owned at
   cost less accumulated
   depreciation                  $34,013,326        $34,337,025        $34,772,331        $35,660,385        $36,424,447
                                 ===========        ===========        ===========        ===========        ===========

Total assets                     $38,311,564        $38,040,786        $37,684,178        $38,577,456        $41,344,209
                                 ===========        ===========        ===========        ===========        ===========
</TABLE>



<PAGE>   7

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. Through 1994 the special limited partner funded $13,130,998
pursuant to the Guarantee Agreement. Commencing in 1994, distributions to the
partners are being made from cash flow from operations.

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.

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 now complete at a cost to
the partnership of $870,107.

RESULTS OF OPERATIONS

Occupancy averaged 95 percent for the year ended December 31, 1997, as compared
to an average of 95 percent for the year ended December 31, 1996, and an average
of 94 percent for 1995. The Property was 95 percent occupied as of December 31,
1997 and 1996, respectively. Rental income was generally consistent for 1996 and
1995. Rental income increased in 1997 as a result of the increase in occupancy
and an increase in rental charges per unit. Included in the interest and other
income is interest income earned on cash and cash equivalents of $176,000,
$135,000 and $143,000 in 1997, 1996 and 1995, respectively. Interest income
increased in 1997 as compared to 1996 as a result of the increase in cash and
cash equivalents from $3,490,463 at December 31, 1996 to $4,100,537 at December
31, 1997. The Partnership has its cash and cash equivalents on deposit primarily
with one money market mutual fund. 



<PAGE>   8

On January 17, 1994, the rental property sustained damage due to the 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 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. The Partnership recorded a provision for earthquake loss of $36,662 and
$1,141,615 in 1995 and 1994, respectively.

Since the investigation and recommendation of the staff of the Securities and
Exchange Commission (the "Commission") (see "Legal Proceedings," Item 3, for
further discussion) concerned 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 and $120,431 for 1996 and 1995, 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. Legal fees primarily account for the decrease in general and
administrative expenses in 1996, compared to 1995. Included in general and
administrative expenses for 1997 is $350,000 in expense reimbursements to the
Non-Managing General Partner. In accordance with the Partnership Agreement,
partnership expense reimbursements, not to exceed $50,000 annually, are payable
to the Non-Managing General Partner. The expense reimbursements for 1991 through
1996 in the amount of $300,000, which were previously disputed, were expensed
and paid in 1997. In addition, $50,000 has been paid and expensed for the year
ended December 31, 1997. This accounts for the increase in general and
administrative expenses in 1997 as compared to 1996.

The Partnership has assessed the potential impact of the Year 2000 computer
systems issue on its operations. The Partnership believes that no significant
actions are required to be taken by the Partnership to address the issue and
that the impact of the Year 2000 computer systems issue will not materially
affect the Partnership's future operating results or financial condition.

A real estate investment trust ("REIT") organized by an affiliate of NAPICO
has advised the Partnership that it intends to make a proposal to purchase 
the property by the Partnership.

The REIT proposes to purchase such property for cash, which it plans to raise in
connection with a private placement of its equity securities. The purchase is
subject to, among other things, (i) consummation of such private placement by
the REIT; (ii) the consent of the limited partners to the sale of the property;
and (iii) the consummation of a minimum number of purchase transactions with
other Casden affiliated partnerships. 

A proxy is contemplated to be sent to the limited partners setting forth the
terms and conditions of the purchase of the property for investment by the
Partnership, together with certain amendments to the Partnership Agreement and
other disclosures of various conflicts of interest in connection with the
transaction.


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>   9



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

                              FINANCIAL STATEMENTS,
                          FINANCIAL STATEMENT SCHEDULES
                   AND INDEPENDENT PUBLIC ACCOUNTANTS' REPORTS
                                DECEMBER 31, 1997





<PAGE>   10



                    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 Calfornia limited partnership) as of December 31, 1997 and
1996, and the related statements of income, partners' capital (deficiency) and
cash flows for each of the three years in the period ended December 31, 1997.
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, 1997 and 1996, and the results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1997 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
April 6, 1998



<PAGE>   11


                  CENTURY HILLCRESTE APARTMENTS INVESTORS, L.P.
                       (A CALIFORNIA LIMITED PARTNERSHIP)

                                 BALANCE SHEETS

                           DECEMBER 31, 1997 AND 1996

                                     ASSETS

<TABLE>
<CAPTION>
                                                          1997               1996
                                                      -----------        -----------
<S>                                                   <C>                <C>
RENTAL PROPERTY (Notes 1, 2 and 3)                    $34,013,326        $34,337,025

CASH AND CASH EQUIVALENTS (Note 1)                      4,100,537          3,490,463

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

OTHER ASSETS (Note 5)                                      39,001             54,598
                                                      -----------        -----------

                                                      $38,311,564        $38,040,786
                                                      ===========        ===========


                        LIABILITIES AND PARTNERS' CAPITAL

ACCOUNTS PAYABLE AND ACCRUED
LIABILITIES (Note 4)                                  $   367,529        $   413,457

SECURITY DEPOSITS                                         297,622            315,244

PREPAID RENT                                               16,866             75,583
                                                      -----------        -----------

                                                          682,017            804,284


COMMITMENTS AND CONTINGENCIES (Note 5)

PARTNERS' CAPITAL (Note 1)                             37,629,547         37,236,502
                                                      -----------        -----------

                                                      $38,311,564        $38,040,786
                                                      ===========        ===========
</TABLE>




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


<PAGE>   12



                  CENTURY HILLCRESTE APARTMENTS INVESTORS, L.P.
                       (A CALIFORNIA LIMITED PARTNERSHIP)

                              STATEMENTS OF INCOME
              FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995


<TABLE>
<CAPTION>
                                                               1997              1996              1995
                                                            ----------        ----------        ----------
<S>                                                         <C>               <C>               <C>       
REVENUES
     Rental income                                          $5,960,474        $5,410,156        $5,394,552
     Interest and other income (Note 3)                        189,377           218,216           287,523
                                                            ----------        ----------        ----------
                                                             6,149,851         5,628,372         5,682,075
                                                            ----------        ----------        ----------

EXPENSES
     Operating (Note 4)                                      1,255,071         1,165,010         1,178,744
     Property taxes                                            514,306           537,717           422,121
     Management fee - related party in 1995 (Note 4)           177,002           177,320           181,375
     General and administrative (Note 4)                       758,946           367,599           651,783
     Depreciation                                              705,556           705,556           713,054
     Provision for earthquake loss (Note 5)                         --                --            36,662
                                                            ----------        ----------        ----------

                                                             3,410,881         2,953,202         3,183,739
                                                            ----------        ----------        ----------

NET INCOME                                                  $2,738,970        $2,675,170        $2,498,336
                                                            ==========        ==========        ==========

NET INCOME PER DEPOSITORY UNIT                              $     0.38        $     0.37        $     0.34
                                                            ==========        ==========        ==========
</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 PARTNERS' CAPITAL (DEFICIENCY)
              FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995


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

<S>                                           <C>                <C>              <C>                 <C>        
      BALANCE, JANUARY 1, 1995                   $(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

      DISTRIBUTIONS (Note 7)                       (23,459)        (2,322,466)           -              (2,345,925)

      NET INCOME FOR 1997                           27,390          2,711,580            -               2,738,970
                                              -------------      -------------      -------------     -------------

      BALANCE, DECEMBER 31, 1997                 $(274,234)       $37,903,781       $    -             $37,629,547
                                              =============      =============      =============     =============
</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 CASH FLOWS
              FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995


<TABLE>
<CAPTION>
                                                              1997                1996                1995
                                                          -----------         -----------         -----------
<S>                                                       <C>                 <C>                 <C>        
CASH FLOWS FROM OPERATING ACTIVITIES:
     Net  income                                          $ 2,738,970         $ 2,675,170         $ 2,498,336
    Adjustments to reconcile net income to net
    cash provided by operating activities:
    Depreciation                                              705,556             705,556             713,054
    Provision for earthquake loss                                  --                  --              36,662
    Decrease (increase) in other assets                        15,597             (39,496)            317,783
    Increase (decrease) in accounts payable and
    accrued liabilities                                       (45,928)             54,098             (54,664)
    Increase (decrease) in due to general partners                  0            (150,000)             58,669
    Increase (decrease) in security deposits                  (17,622)              5,145             (10,241)
    Increase (decrease) in prepaid rent                       (58,717)             28,618              24,233
                                                          -----------         -----------         -----------

    Net cash provided by operating activities               3,337,856           3,583,832           3,583,832
                                                          -----------         -----------         -----------

CASH FLOWS FROM INVESTING ACTIVITIES:
    Payments received pursuant to the minimum
    distribution guarantee                                         --             175,000             175,000
    Increase in rental property                              (381,857)           (445,250)                 --
    Earthquake loss payments                                       --                  --          (1,128,385)
                                                          -----------         -----------         -----------

    Net cash used in investing activities                    (381,857)           (270,250)           (953,385)
                                                          -----------         -----------         -----------

CASH FLOWS FROM FINANCING ACTIVITIES:
    Distributions to partners                              (2,345,925)         (2,256,423)         (2,317,888)
                                                          -----------         -----------         -----------


NET INCREASE IN CASH AND CASH
     EQUIVALENTS                                              610,074             752,418             312,559

CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR                3,490,463           2,738,045           2,425,486
                                                          -----------         -----------         -----------

CASH AND CASH EQUIVALENTS, END OF YEAR                    $ 4,100,537         $ 3,490,463         $ 2,738,045
                                                          ===========         ===========         ===========
</TABLE>



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


<PAGE>   15

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

                          NOTES TO FINANCIAL STATEMENTS

              FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995

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 (collectively, 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>   16


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

                    NOTES TO FINANCIAL STATEMENTS (CONTINUED)

              FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995

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>   17


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

                    NOTES TO FINANCIAL STATEMENTS (CONTINUED)
              FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995

2.   RENTAL PROPERTY

     At December 31, 1997 and 1996, rental property consists of the following:

<TABLE>
<CAPTION>
                                                   1997                  1996
                                                -----------          -----------
<S>                                             <C>                  <C>        
Land                                            $16,175,000          $16,175,000
Buildings                                        24,694,402           24,694,402
Furniture and equipment                           3,870,000            3,870,000
Improvements                                        827,107              445,250
                                                -----------          -----------
                                                 45,566,509           45,184,652
Less:  Accumulated depreciation                  11,553,183           10,847,627
                                                -----------          -----------
                                                $34,013,326          $34,337,025
                                                ===========          ===========
</TABLE>

            In December 1996, Everest HillCreste Investors, LLC ("Everest"), an
            affiliate of Everest Century Investors, LLC, 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 
            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>   18

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

                    NOTES TO FINANCIAL STATEMENTS (CONTINUED)
              FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995

2.    RENTAL PROPERTY (Continued)

      A real estate investment trust organized by an affiliate of NAPICO has
      advised the Partnership that it intends to make a proposal to purchase
      from the Partnership the real estate assets of the Partnership for
      $52,500,000.

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 and other
     income.

     Through December 31, 1997, 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:




                                       8

<PAGE>   19

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

                    NOTES TO FINANCIAL STATEMENTS (CONTINUED)
              FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995


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

     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 1997, 1996 and 1995.

     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 year
            ended December 31, 1995 were $181,375. On January 1, 1996, property
            management was 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 years ended December
            31,1997 and 1996 were $177,002 and $177,320, respectively.
            Additionally, the Partnership paid approximately $41,700 for the
            year ended December 31, 1995 to an affiliate of the Managing General
            Partner for maintenance services.

     c.     Partnership expense reimbursements, not to exceed $50,000 annually,
            are paid to the Non-Managing General Partner. The Non-Managing
            General Partner expense reimbursements for 1990 through 1996 in the
            amount of $350,000, which were previously disputed, were paid in the
            year ended December 31, 1997. Of this amount, $50,000 was expensed
            in 1990 and was included in accounts payable and accrued liabilities
            at December 31, 1996. The balance of $300,000 was expensed and
            included in general and administrative expenses for 1997. In
            addition $50,000 has been paid and expensed for the year ended
            December 31, 1997.

     d.     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, 1997, 1996 and 1995
            were $23,459, $17,131 and $27,262, respectively.

     e.     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.

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. The
            provision for earthquake loss for 1994 is net of an insurance
            settlement of $355,448.





                                       9

<PAGE>   20


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

                    NOTES TO FINANCIAL STATEMENTS (CONTINUED)
              FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995


5.   COMMITMENTS AND CONTINGENCIES (Continued)

     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 $767,000 and $60,685 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, 1997, $827,107
            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:

     d.     The Partnership, NAPICO, and several of NAPICO's officers, directors
            and affiliates consented to the entry, on June 25, 1997, of an
            administrative cease and desist order by the U.S. Securities and
            Exchange Commission, (the "Commission"), without admitting or
            denying any of the findings made by the Commission. The order
            concerns, in part, the treatment of Partnership funds deposited
            between September 1991 and July 1993 in a master disbursement
            account used by the Partnership's previous property management
            company. The Commission found that those funds should have been
            recorded on the Partnership's books and reported in its financial
            statements as related party accounts receivable rather than as cash
            as done so by the Partnership's auditors. Although the Commission
            found that this misclassification of current assets violated federal
            securities laws, the Commission did not find that these violations
            were intentional nor did the Commission find that limited partners
            had suffered any loss or damage as a result of these violations.
            Moreover, the Commission's order does not impose any cost, burden or
            penalty on the Partnership and does not impact NAPICO's ability to
            serve as the Partnership's Managing General Partner.

            The events that gave rise to the Commission's order occurred in or
            before 1993. Subsequent corrective action by the Partnership and its
            general partners precludes any recurrence of the cash management
            issues described in the Commission's order.





                                       10

<PAGE>   21

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

                    NOTES TO FINANCIAL STATEMENTS (CONTINUED)
              FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995


5.   COMMITMENTS AND CONTINGENCIES (Continued)

     e.     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"). By order dated November 25, 1997, the Los Angeles
            Superior Court dismissed the J/B Lawsuit with prejudice. No appeal
            has been taken.

            The J/B Lawsuit was 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 was named as a "nominal defendant." The complaint in the
            J/B Lawsuit contained 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 related to the following issues:

            1.     J/B alleged 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 (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 alleged
                   that the Defendants 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 alleged that the Defendants 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 alleged 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 contended 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 stated that the Limited
                   Partners were not authorized, by
 



                                       11

<PAGE>   22

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

                    NOTES TO FINANCIAL STATEMENTS (CONTINUED)
              FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995


5.   COMMITMENTS AND CONTINGENCIES (Continued)

                   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 asserted that the Everest
                   Proposal could not 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 was seeking 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.

            f.     The Partnership has assessed the potential impact of the Year
                   2000 computer systems issue on its operations. The
                   Partnership believes that no significant actions are required
                   to be taken by the Partnership to address the issue and that
                   the impact of the Year 2000 computer systems issue will not
                   materially affect the Partnership's future operating results
                   or financial condition.

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 1998, the Partnership distributed $601,022 to the General and
     Limited Partners related to 1997.



                                       12

<PAGE>   23



                                                                    SCHEDULE III


                  CENTURY HILLCRESTE APARTMENT INVESTORS, L.P.
                    REAL ESTATE AND ACCUMULATED DEPRECIATION
                                DECEMBER 31, 1997


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, 1997 is
                      approximately $51,706,119.

                3.    Investment in rental property:


<TABLE>
<CAPTION>
                                                        Buildings,
                                                        Furniture
                                                           and
                                       Land             Equipment               Total
                                   ------------        ------------         ------------
<S>                                <C>                 <C>                  <C>         
Balance, January 1, 1995           $ 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

Additions:  Improvements                     --             381,857              381,857
                                   ------------        ------------         ------------

Balance, December 31, 1997         $ 16,175,000        $ 29,391,509         $ 45,566,509
                                   ============        ============         ============
</TABLE>



<PAGE>   24


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, 68, 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, 46, 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, 52, 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>   25

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, 54, 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.

BOB SCHAFER, 56, Senior Vice President of Finance.

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.

PATRICIA W. TOY, 68, 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, 37, 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.

NAPICO and several of its officers, directors and affiliates Charles H.
Boxenbaum, Bruce E. Nelson and Alan I. Casden, consented to the entry, on
June 25, 1997, of an administrative cease and desist order by the U.S.
Securities and Exchange Commission (the "Commission"), without admitting or
denying any of the findings made bu the Commission. The Commission found that
NAPICO and others had violated certain federal securities laws in connection
with transactions unrelated to the Partnership.  The Commission's order did not
impose any cost, burden or penalty on any partnership managed by NAPICO and does
not impact NAPICO's ability to serve as the Partnership's Managing General
Partner.



<PAGE>   26




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 1997, 1996 and 1995.

(b)   Partnership expense reimbursements of $50,000 annually are paid to the
      Non-Managing General Partner. The Non-Managing General Partner expense
      reimbursements for 1990 through 1996 in the amount of $350,000, which were
      previously disputed, were paid in the year ended December 31, 1997. Of
      this mount, $50,000 was expensed in 1990 and was included in accounts
      payable and accrued liabilities at December 31, 1996. The balance of
      $300,000 was expensed and included in general and administrative expenses
      for 1997. In addition $50,000 has been paid and expensed for the year
      ended December 31, 1997.

(c)   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 were $181,375. 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.

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

(e)   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 is 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>   27



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 below:

(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)   Partnership expense reimbursements of $50,000 annually are paid to the
      Non-Managing General Partner. The Non-Managing General Partner expense
      reimbursements for 1990 through 1996 in the amount of $350,000, which were
      previously disputed, were paid in the year ended December 31, 1997. Of
      this amount, $50,000 was expensed in 1990 and was included in accounts
      payable and accrued liabilities at December 31, 1996. The balance of
      $300,000 was expensed and included in general and administrative expenses
      for 1997. In addition $50,000 has been paid and expensed for the year
      ended December 31, 1997.

(c)   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
      year ended December 31, 1995 were $181,375. 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 for the years ended December 31, 1995 to an
      affiliate of the Managing General Partner for maintenance services.

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

(e)   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 is subordinated to certain preferred
      returns to the Limited Partners.

A real estate investment trust organized by an affiliate of NAPICO has advised
the Partnership that it intends to make a proposal to purchase from the
Partnership the real estate assets of the Partnership for $52,500,000.

<PAGE>   28



PART IV.

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

FINANCIAL STATEMENTS

Report of Independent Public Accountants.

Balance Sheets as of December 31, 1997 and 1996.

Statements of Income for the years ended December 31, 1997, 1996 and 1995.

Statements of Partners' Capital (Deficiency) for the years ended December 31,
1997, 1996 and 1995.

Statements of Cash Flows for the years ended December 31, 1997, 1996 and 1995.

Notes to Financial Statements.

FINANCIAL STATEMENT SCHEDULE:

Schedule III - Real Estate and Accumulated Depreciation, December 31, 1997.

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.

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>   29



                                   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 General Partner



/s/ CHARLES H. BOXENBAUM
--------------------------------------
Charles H. Boxenbaum
Chairman of the Board of Directors
and Chief Executive Officer


/s/ BRUCE E. NELSON
--------------------------------------
Bruce E. Nelson
Director and President


/s/ ALAN I. CASDEN
--------------------------------------
Alan I. Casden
Director


/s/ HENRY C. CASDEN
--------------------------------------
Henry C. Casden
Director


/s/ BOB E. SCHAFER
--------------------------------------
Bob E. Schafer
Senior Vice President of Finance