<PAGE>   1
                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549


                                    FORM 10-Q


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

                For the Quarterly Period Ended SEPTEMBER 30, 1997

                         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 BLVD., SUITE 201
                           BEVERLY HILLS, CALIF. 90211

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


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


                                    Yes  X    No
                                       ----     ----

<PAGE>   2

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

                               INDEX TO FORM 10-Q

                    FOR THE QUARTER ENDED SEPTEMBER 30, 1997

<TABLE>
<CAPTION>

PART I.  FINANCIAL INFORMATION

<S>            <C>                                                                          <C>
      Item 1.  Financial Statements and Notes to Financial Statements

                  Balance Sheets, September 30, 1997 and December 31, 1996 .................1

                  Statements of Operations,
                        Nine and Three Months Ended September 30, 1997 and 1996.............2

                  Statement of Partners' Capital (Deficiency)
                        Nine Months Ended September 30, 1997 ...............................3

                  Statements of Cash Flows
                        Nine Months Ended September 30, 1997 and 1996.......................4

                  Notes to Financial Statements ............................................5

      Item 2.     Management's Discussion and Analysis of Financial
                        Condition and Results of Operations ...............................14


PART II.  OTHER INFORMATION

      Item 1.     Legal Proceedings........................................................15

      Item 6.     Exhibits and Reports on Form 8-K.........................................17

      Signatures ..........................................................................18

</TABLE>



<PAGE>   3
 
                  CENTURY HILLCRESTE APARTMENTS INVESTORS, L.P.
                       (a California limited partnership)
 
                                 BALANCE SHEETS
 
                    SEPTEMBER 30, 1997 AND DECEMBER 31, 1996
 
                              ASSETS
<TABLE>
<CAPTION>
                                              1997         1996
                                         (Unaudited)    (Audited)
                                          ----------    ----------
<S>                                      <C>           <C>        
RENTAL PROPERTY (Notes 1, 2 and 3)       $34,189,715   $34,337,025

CASH AND CASH EQUIVALENTS (Note 1)         3,749,814     3,490,463

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

OTHER ASSETS (Note 5)                         75,871        54,598
                                          ----------    ----------

                                         $38,174,100   $38,040,786
                                         ===========   ===========


              LIABILITIES AND PARTNERS' CAPITAL

ACCOUNTS PAYABLE AND ACCRUED
      LIABILITIES (Note 4)               $   359,009   $   413,457

PREPAID RENT                                  33,350        75,583

SECURITY DEPOSITS                            302,682       315,244
                                          ----------    ----------

                                             695,041       804,284

COMMITMENTS AND CONTINGENCIES (Note 5)

PARTNERS' CAPITAL (Note 1)                37,479,059    37,236,502
                                          ----------    ----------

                                         $38,174,100   $38,040,786
                                         ===========   ===========
</TABLE>


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


                                        1

<PAGE>   4
 
                  CENTURY HILLCRESTE APARTMENTS INVESTORS, L.P.
                       (a California limited partnership)
 
                              STATEMENTS OF INCOME
 
             NINE AND THREE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
 
                                   (Unaudited)
 
 
<TABLE>
<CAPTION>
                                          NINE MONTHS   THREE MONTHS    NINE MONTHS    THREE MONTHS
                                              ENDED        ENDED           ENDED          ENDED
                                        Sept. 30, 1997  Sept. 30, 1997  Sept. 30, 1996 Sept. 30, 199
                                        --------------  --------------  -------------  -------------
<S>                                       <C>            <C>            <C>            <C>       
REVENUES
     Rental income                        $4,364,707     $1,508,091     $3,966,912     $1,364,743
     Interest and other income (Note         200,428         69,306        178,793         46,967
                                           ---------      ---------      ---------      ---------
                                           4,565,135      1,577,397      4,145,705      1,411,710
                                           ---------      ---------      ---------      ---------

EXPENSES
     Operating (Note 4)                      909,943        202,535        859,409        333,754
     Property taxes                          270,128        134,551        312,340        178,818
     Management fee - (Note 4)               130,169         59,805        150,550         71,038
     General and administrative (Note        725,343        100,711        325,400         90,870
     Depreciation                            529,167        176,389        529,166        176,389
                                           ---------        -------      ---------        -------

                                           2,564,750        673,991      2,176,865        850,869
                                           ---------        -------      ---------        -------

NET INCOME                                 2,000,385     $  903,406     $1,968,840     $  560,841
                                           =========     ==========     ==========     ==========

NET INCOME PER DEPOSITORY UNIT                  0.28     $     0.12     $     0.27     $     0.08
                                           =========     ==========     ==========     ==========
</TABLE>

 
 
    The accompanying notes are an integral part of these financial statement

                                        2
 
<PAGE>   5
 
                  CENTURY HILLCRESTE APARTMENTS INVESTORS, L.P.
                       (a California limited partnership)
 
                   STATEMENT OF PARTNERS' CAPITAL (DEFICIENCY)
 
                      NINE MONTHS ENDED SEPTEMBER 30, 1997
 
                                   (Unaudited)
 
<TABLE>
<CAPTION>
                                                                  SPECIAL LIMITED
                                     GENERAL           LIMITED        PARTNER
                                     PARTNERS          PARTNERS       (NOTE 1)       TOTAL
                                   ------------     ------------- ---------------- -----------
 
<S>                                <C>              <C>               <C>         <C>         
DEPOSITORY UNITS,
   September 30, 1997                                  7,258,000
                                                    ============

BALANCE, January 1, 1997           $  (278,165)     $ 37,514,667      $     -     $ 37,236,502

Distributions                          (17,578)       (1,740,250)                  (1,757,828)

Net income for the nine months
ended September 30, 1997                20,004         1,980,381            -        2,000,385
                                   -----------         ---------      -------        ---------

BALANCE, September 30, 19          $  (275,739)     $ 37,754,798      $     -     $ 37,479,059
                                   ===========      ============      =======     ============
</TABLE>



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


                                        3

<PAGE>   6
 
                  CENTURY HILLCRESTE APARTMENTS INVESTORS, L.P.
                       (a California limited partnership)
 
                            STATEMENTS OF CASH FLOWS
 
                  NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
 
                                   (Unaudited)
 
<TABLE>
<CAPTION>
                                                                             1997            1996
                                                                         -----------      -----------
<S>                                                                      <C>              <C>        
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net  income                                                            $ 2,000,385      $ 1,968,840
  Adjustments to reconcile net income to net
     cash provided by operating activities:
        Depreciation                                                         529,167          529,166
        Increase in other assets                                             (21,273)         (77,410)
        Decrease in accounts payable and accrued liabilities                 (54,448)         219,773
        Decrease in due to general partner                                        --         (150,000)
        (Decrease) increase in security deposits                             (12,562)          18,427
        (Decrease) increase in prepaid rent                                  (42,233)          23,480
                                                                         -----------      -----------

               Net cash provided by operating activities                   2,399,036        2,532,276
                                                                         -----------      -----------

CASH FLOWS FROM INVESTING ACTIVITIES:

  Payments receivable pursuant to the minimum distribution guarantee              --          175,000
  Increase in rental property                                               (381,857)        (180,000)
                                                                         -----------      -----------

              Net cash used in investing activities                         (381,857)          (5,000)
                                                                         -----------      -----------

CASH FLOWS FROM FINANCING ACTIVITIES:

  Distributions to partners                                               (1,757,828)      (1,668,326)
                                                                         -----------      -----------

NET INCREASE IN CASH AND CASH EQUIVALENTS                                    259,351          858,950

CASH AND CASH EQUIVALENTS, beginning of period                             3,490,463        2,738,045
                                                                         -----------      -----------

CASH AND CASH EQUIVALENTS, end of period                                 $ 3,749,814      $ 3,596,995
                                                                         ===========      ===========
</TABLE>


     The accompanying notes are an integral part of these financial statemen


                                       4

<PAGE>   7

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

                          NOTES TO FINANCIAL STATEMENTS

                               SEPTEMBER 30, 1997


NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

        GENERAL

        The information contained in the following notes to the financial
        statements is condensed from that which would appear in the annual
        financial statements; accordingly, the financial statements included
        herein should be reviewed in conjunction with the financial statements
        and related notes thereto contained in the Annual Report for the year
        ended December 31, 1996 prepared by Century HillCreste Apartment
        Investors, L.P. (the "Partnership"). Accounting measurements at interim
        dates inherently involve greater reliance on estimates than at year end.
        The results of operations for the interim periods presented are not
        necessarily indicative of the results for the entire year.

        In the opinion of NAPICO, the accompanying unaudited financial
        statements contain all adjustments (consisting primarily of normal
        recurring accruals) necessary to present fairly the financial position
        as of September 30, 1997, and the results of operations for the nine and
        three months then ended and changes in cash flows for the nine months
        then ended.

        ORGANIZATION

        The Partnership, a California limited partnership, was 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. 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 luxury 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 percent 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
        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, an affiliate of the Seller, owns 100
        percent of the outstanding common stock of the Managing General Partner.



                                       5
<PAGE>   8

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

                    NOTES TO FINANCIAL STATEMENTS (CONTINUED)

                               SEPTEMBER 30, 1997

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

        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.

        MINIMUM DISTRIBUTION GUARANTEE

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

        DEPRECIATION

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

<TABLE>
<S>                                                                  <C>     
                             Buildings                               35 years
                             Furniture and equipment                  5 years
</TABLE>

        CASH AND CASH EQUIVALENTS

        Cash and cash equivalents consists 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 as such taxes, if any, are the liability of the
        individual partners.



                                       6
<PAGE>   9

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

                    NOTES TO FINANCIAL STATEMENTS (CONTINUED)

                               SEPTEMBER 30, 1997

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

        NET INCOME PER DEPOSITORY UNIT

        Net income per depository unit was computed by dividing the limited
        partners' share of net income (99 percent) by the number of depository
        units outstanding during the year. The number of depository units was
        7,258,000 for the periods presented.

        IMPAIRMENT OF LONG-LIVED ASSETS

        The Partnership adopted Statement of Financial Accounting Standards No.
        121, Accounting for the Improvement of Long-Lived Assets and for
        Long-Lived Assets To Be Disposed Of as of January 1, 1996 without a
        significant effect on its financial statements. 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.

NOTE 2 - RENTAL PROPERTY

        Rental property is carried at cost and consists of the following at
        September 30, 1997 and December 31, 1996:

<TABLE>
<CAPTION>
                                       1997              1996
                                  ------------      ------------
<S>                               <C>               <C>         
Land                              $ 16,175,000      $ 16,175,000
Building                            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      (11,376,794)      (10,847,627)
                                  ------------      ------------

                                  $ 34,189,715      $ 34,337,025
                                  ============      ============
</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



                                       7
<PAGE>   10

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

                    NOTES TO FINANCIAL STATEMENTS (CONTINUED)

                               SEPTEMBER 30, 1997

NOTE 2 - RENTAL PROPERTY (CONTINUED)

        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,
        (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, and (c)
        a fifth non-binding purchase offer from an affiliate of the current
        property manager for $48 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.

NOTE 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>                                    <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.



                                       8
<PAGE>   11

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

                    NOTES TO FINANCIAL STATEMENTS (CONTINUED)

                               SEPTEMBER 30, 1997

NOTE 3 - MINIMUM DISTRIBUTION GUARANTEE RECEIVABLE FROM PARTNER (CONTINUED)

        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. This amount has been reflected as a reduction in the
        carrying amount of the property. The period covered by the Guarantee
        Agreement expired on December 31, 1993. Except with respect to the
        payments made in 1995 and 1996 pursuant to the Memorandum of
        Understanding, commencing in 1994, distributions to the Partners have
        been made from cash flow from operations.

NOTE 4 - FEES PAID TO GENERAL PARTNERS AND AFFILIATES

        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 payable to the Managing General
               Partner of $50,000 annually. The fee is included in general and
               administrative expenses.

        (b)    Partnership expense reimbursements, payable to the Non-Managing
               General Partner, not to exceed $50,000 annually. 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 nine months ended September 30, 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, $37,500 has been accrued for the
               nine months ended September 30, 1997.

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

        (d)    The Managing General Partner is entitled to receive 1 percent of
               distributions (as defined in the Partnership Agreement). This is
               paid quarterly by the Partnership to the Managing General
               Partner.

        (e)    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 actual amount paid
               in 1996 was $90,000, with the balance reversed against expenses.



                                       9
<PAGE>   12

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

                    NOTES TO FINANCIAL STATEMENTS (CONTINUED)

                               SEPTEMBER 30, 1997

NOTE 5 - COMMITMENTS AND CONTINGENCIES

        (a)    Construction Contracts

               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. 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 were 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 and was to be
               completed in October, 1997. As of September 30, 1997, $827,107
               has been paid to the contractor.

        (b)    Litigation

               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 the Managing General Partner, the claims
               are not expected to result in any material liability to the
               Partnership. In addition, the Partnership is involved in the
               actions described below:

        (c)    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 subject to
               certain material conditions. 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.



                                       10
<PAGE>   13

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

                    NOTES TO FINANCIAL STATEMENTS (CONTINUED)

                               SEPTEMBER 30, 1997

NOTE 5 - COMMITMENTS AND CONTINGENCIES (CONTINUED)

        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 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.



                                       11
<PAGE>   14

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

                    NOTES TO FINANCIAL STATEMENTS (CONTINUED)

                               SEPTEMBER 30, 1997

NOTE 5 - COMMITMENTS AND CONTINGENCIES (CONTINUED)

                    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.

                    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 Everest 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.

                    On April 1, 1997, Defendants filed pleadings with the Court
                    in which they challenged J/B's standing to pursue the J/B
                    Lawsuit as well as the legal sufficiency of the complaint in
                    the J/B Lawsuit. Prior to the hearing on those pleadings,
                    J/B filed an amended complaint. In the amended complaint,
                    J/B dismissed the J/B Lawsuit against six of the nine
                    defendants, but asserted claims against the Managing General
                    Partner, Casden Properties and an individual.



                                       12
<PAGE>   15

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

                    NOTES TO FINANCIAL STATEMENTS (CONTINUED)

                               SEPTEMBER 30, 1997

NOTE 5 - COMMITMENTS AND CONTINGENCIES (CONTINUED)

                    On June 27, 1997, the remaining Defendants again filed
                    pleadings in which they challenged J/B's standing to pursue
                    the J/B Lawsuit as well as the legal sufficiency of the
                    amended complaint in the J/B Lawsuit. On August 7, 1997, the
                    Court conducted a hearing on, among other things,
                    Defendants' assertion that J/B lacks standing to pursue the
                    J/B Lawsuit. The Court recognized that it appeared that
                    under California law, a limited partner but not a unitholder
                    has standing to pursue a class and derivative action, and
                    that J/B had not clearly alleged whether it was a limited
                    partner or a unitholder. The Court ordered J/B to file a
                    second amended complaint in which it alleges whether it is a
                    substitute limited partner or a unitholder, as those terms
                    are defined in the partnership agreement and under
                    California law. The Managing General Partner does not
                    believe that J/B has been admitted as a substitute limited
                    partner. J/B has until October 6, 1997 to file a second
                    amended complaint.

                    J/B failed to file a second amended complaint. Accordingly,
                    the remaining defendants have filed a motion to dismiss the
                    case which is set for hearing on November 25, 1997.

                    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.

NOTE 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.



                                       13
<PAGE>   16

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

                               SEPTEMBER 30, 1997


ITEM 2.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL POSITION 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 the 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 September 30, 1997, 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
      referred to above. In addition, during 1995 the Partnership made a special
      distribution to the Limited Partners in the amount of $135,000
      representing interest on late guarantee payments. Commencing in 1994,
      except with respect to the $350,000 and $135,000 described above,
      contributions to the partners have been made from cash flow from
      operations.

      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.
      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. The construction of the wrought
      iron security fencing, storm drain and related improvements commenced in
      September 1996 and completed in October, 1997. The City of Los Angeles
      will release the Certificate of Deposit after completion of inspection.

      Occupancy averaged 97 percent and 95 percent for the nine months ended
      September 30, 1997 and 1996, respectively, which explains the increase in
      rental income in 1997. Expenses in 1997 increased primarily due to an
      increase in bad debt and commission expense of $51,000, which is included
      in operating expenses, and expense reimbursements of $387,500 to the
      Non-Managing General partner, which is included in general and
      administrative expenses.



                                       14
<PAGE>   17

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

                               SEPTEMBER 30, 1997


PART II - OTHER INFORMATION

ITEM 1.    LEGAL PROCEEDINGS

As of September 30, 1997, NAPICO, the Managing General Partner, was 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").

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 April 1996, at which time the
      Prior



                                       15
<PAGE>   18

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

                               SEPTEMBER 30, 1997


ITEM 1.    LEGAL PROCEEDINGS (CONTINUED)

      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.

      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 



                                       16
<PAGE>   19

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

                               SEPTEMBER 30, 1997


ITEM 1.    LEGAL PROCEEDINGS (CONTINUED)

      of First Refusal with respect to the Everest 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.

      On April 1, 1997, Defendants filed pleadings with the Court in which they
      challenged J/B's standing to pursue the J/B Lawsuit as well as the legal
      sufficiency of the complaint in the J/B Lawsuit. Prior to the hearing on
      those pleadings, J/B filed an amended complaint. In the amended complaint,
      J/B dismissed the J/B Lawsuit against six of the nine defendants, but
      asserted claims against the Managing General Partner, Casden Properties
      and an individual.

      On June 27, 1997, the remaining Defendants again filed pleadings in which
      they challenged J/B's standing to pursue the J/B Lawsuit as well as the
      legal sufficiency of the amended complaint in the J/B Lawsuit. On August
      7, 1997, the Court conducted a hearing on, among other things, Defendants'
      assertion that J/B lacks standing to pursue the J/B Lawsuit. The Court
      recognized that it appeared that under California law, a limited partner
      but not a unitholder has standing to pursue a class and derivative action,
      and that J/B had not clearly alleged whether it was a limited partner or a
      unitholder. The Court ordered J/B to file a second amended complaint in
      which it alleges whether it is a substitute limited partner or a
      unitholder, as those terms are defined in the partnership agreement and
      under California law. The Managing General Partner does not believe that
      J/B has been admitted as a substitute limited partner. J/B has until
      October 6, 1997 to file a second amended complaint.

      J/B failed to file a second amended complaint. Accordingly, the remaining
      defendants have filed a motion to dismiss the case which is set for
      hearing on November 25, 1997.

      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 6.    EXHIBITS AND REPORTS ON FORM 8-K

      (a) No reports on Form 8-K were filed during the quarter ended September
30, 1997.



                                       17
<PAGE>   20

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

                               SEPTEMBER 30, 1997

                                   SIGNATURES


Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.


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


                                    By: National Partnership Investments Corp.
                                        Managing General Partner


                                        ----------------------------------
                                        Bruce Nelson
                                        President


                                      Date:
                                           ---------------------------------


                                        ------------------------------------
                                        Charles H. Boxenbaum
                                        Chief Executive Officer


                                      Date:
                                           ---------------------------------


                                       18