<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, 1996

                        Commission File Number 33-22857

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

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

                         9090 WILSHIRE 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, 1996



<TABLE>
<S>                                                                                                        <C>
PART I.  FINANCIAL INFORMATION

       Item 1.  Financial Statements and Notes to Financial Statements

                     Balance Sheets, September 30, 1996 and December 31, 1995   . . . . . . . . . . . . . . 1

                     Statements of Operations,
                            Nine and Three Months Ended September 30, 1996 and 1995   . . . . . . . . . . . 2

                     Statement of Partners' Capital (Deficiency)
                            Nine Months Ended September 30, 1996    . . . . . . . . . . . . . . . . . . . . 3

                     Statements of Cash Flows
                            Nine Months Ended September 30, 1996 and 1995   . . . . . . . . . . . . . . . . 4

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

       Item 2.       Management's Discussion and Analysis of Financial
                            Condition and Results of Operations   . . . . . . . . . . . . . . . . . . . .  11


PART II.  OTHER INFORMATION

       Item 1.       Legal Proceedings  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  13

       Item 6.       Exhibits and Reports on Form 8-K   . . . . . . . . . . . . . . . . . . . . . . . . .  13

       Signatures   . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  14
</TABLE>
<PAGE>   3
                 CENTURY HILLCRESTE APARTMENTS INVESTORS, L.P.
                       (A CALIFORNIA LIMITED PARTNERSHIP)

                                 BALANCE SHEETS

                    SEPTEMBER 30, 1996 AND DECEMBER 31, 1995


                                     ASSETS

<TABLE>
<CAPTION>
                                                            1996              1995
                                                         (Unaudited)        (Audited)  
                                                        -------------     -------------
<S>                                                     <C>               <C>
RENTAL PROPERTY (Notes 1, 2 and 3)                      $  34,248,165     $  34,772,331

CASH AND CASH EQUIVALENTS (Note 1)                          3,596,995         2,738,045

RESTRICTED CASH (Notes 1 and 4)                               158,700           158,700

OTHER ASSETS (Note 5)                                          92,512            15,102

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

                                                        $  38,096,372     $  37,684,178 
                                                        =============     =============


                         LIABILITIES AND PARTNERS' CAPITAL

ACCOUNTS PAYABLE AND ACCRUED
      LIABILITIES (Note 3)                              $     579,132     $     359,359

DUE TO GENERAL PARTNER (Note 3)                                 -               150,000

PREPAID RENT                                                   70,445            46,965

SECURITY DEPOSITS                                             328,526           310,099 
                                                        -------------     -------------

                                                              978,103           866,423

COMMITMENTS AND CONTINGENCIES (Note 4)

PARTNERS' CAPITAL (Note 1)                                 37,118,269        36,817,755 
                                                        -------------     -------------

                                                        $  38,096,372     $  37,684,178 
                                                        =============     =============
</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, 1996  AND 1995

                                  (Unaudited)

<TABLE>
<CAPTION>
                                                               Nine months      Three months       Nine months      Three months
                                                                  ended             ended             ended             ended
                                                             Sept. 30, 1996    Sept. 30, 1996    Sept. 30, 1995    Sept. 30, 1995 
                                                             ---------------   ---------------   ---------------   ---------------
<S>                                                          <C>               <C>               <C>               <C>
REVENUES
     Rental income                                           $     3,966,912   $     1,364,743   $     4,045,047   $     1,353,957
     Interest and other income (Notes 1 and 3)                       178,793            46,967           368,163           177,432 
                                                             ---------------   ---------------   ---------------   ---------------

                                                                   4,145,705         1,411,710         4,413,210         1,531,389 
                                                             ---------------   ---------------   ---------------   ---------------


EXPENSES
     Operating (Note 3)                                              859,409           333,754           993,132           288,079
     Property taxes                                                  312,340           178,818           408,076           134,741
     Management fee - related party
         in 1995 (Note 3)                                            150,550            71,038           142,543            41,026
     General and administrative (Note 3)                             325,400            90,870           440,256           226,788
     Depreciation                                                    529,166           176,389           536,667           178,889
     Earthquake loss                                                  -                 -                 25,000            25,000 
                                                             ---------------   ---------------   ---------------   ---------------

                                                                   2,176,865           850,869         2,545,674           894,523 
                                                             ---------------   ---------------   ---------------   ---------------

NET INCOME                                                   $     1,968,840   $       560,841   $     1,867,536   $       636,866 
                                                             ===============   ===============   ===============   ===============

NET INCOME PER LIMITED
     PARTNERSHIP INTEREST                                    $          0.27   $          0.08   $          0.26   $          0.09 
                                                             ===============   ===============   ===============   ===============
</TABLE>


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





                                       2
<PAGE>   5
                 CENTURY HILLCRESTE APARTMENTS INVESTORS, L.P.
                       (A CALIFORNIA LIMITED PARTNERSHIP)

                  STATEMENT OF PARTNERS' CAPITAL (DEFICIENCY)

                      NINE MONTHS ENDED SEPTEMBER 30, 1996

                                  (Unaudited)

<TABLE>
<CAPTION>
                                                                                   Special Limited
                                                General            Limited             Partner
                                               Partners           Partners            (Note 1)              Total    
                                             -------------      -------------      ---------------      -------------
<S>                                          <C>                <C>                <C>                  <C>
PARTNERSHIP INTERESTS,
   September 30, 1996                                               7,258,000 
                                                                =============

BALANCE, January 1, 1996                     $    (287,786)     $  37,105,541      $        -           $  36,817,755

Distributions                                      (11,250)        (1,657,076)              -              (1,668,326)

Net income for the nine months
ended September 30, 1996                            19,688          1,949,152               -               1,968,840 
                                             -------------      -------------      ---------------      -------------

BALANCE, September 30, 1996                  $    (279,348)     $  37,397,617      $        -           $  37,118,269 
                                             =============      =============      ================     =============
</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, 1996 AND 1995

                                  (Unaudited)


<TABLE>
<CAPTION>
                                                                        1996              1995   
                                                                    ------------     ------------
<S>                                                                 <C>              <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net  income                                                       $  1,968,840     $  1,867,536
  Adjustments to reconcile net income to net
     cash provided by operating activities:
        Depreciation                                                     529,166          536,667
        (Increase) decrease in other assets                              (77,410)         289,098
        Increase (decrease) in accounts payable and
            accrued liabilities                                          219,773         (575,688)
        Decrease in due to general partner                              (150,000)         (91,331)
        Increase (decrease)  in security deposits                         18,427           (3,808)
        Increase (decrease) in prepaid rent                               23,480           (6,251)
                                                                    ------------     ------------

               Net cash provided by operating activities               2,532,276        2,016,223 
                                                                    ------------     ------------

CASH FLOWS FROM FINANCING ACTIVITIES:
  Increase in fixed assets                                              (180,000)          -
  Payments pursuant to the minimum distribution guarantee                175,000          175,000
  Distributions to partners                                           (1,668,326)      (1,628,576)
                                                                    ------------     ------------

NET INCREASE IN CASH AND CASH EQUIVALENTS                                858,950          562,647

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD                         2,738,045        2,425,486 
                                                                    ------------     ------------

CASH AND CASH EQUIVALENTS, END OF PERIOD                            $  3,596,995     $  2,988,133 
                                                                    ============     ============
</TABLE>



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





                                       4
<PAGE>   7
                  CENTURY HILLCRESTE APARTMENT INVESTORS, L.P.
                       (A CALIFORNIA LIMITED PARTNERSHIP)

                         NOTES TO FINANCIAL STATEMENTS

                               SEPTEMBER 30, 1996


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, 1995 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, 1996, 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  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 West Los Angeles,
         California (the "Property") from Casden Properties (hereinafter
         referred to as the "Seller"), an affiliate of the Managing General
         Partner.  To complete the purchase of the Property, the Seller
         purchased a 10% special limited partnership interest in the
         Partnership for $6,855,000.  For its contribution, 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, all as more particularly set forth in the Partnership
         Agreement.

         Among other provisions, the Partnership Agreement provides that the
         10% 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
         proceeds.

         Casden Investment Corporation, an affiliate of the Seller, owns all of
         the outstanding common stock of NAPICO.  DA Group Holdings Inc.  owns
         100% of the stock of HillCreste Properties Inc.





                                       5
<PAGE>   8
                  CENTURY HILLCRESTE APARTMENT INVESTORS, L.P.
                       (A CALIFORNIA LIMITED PARTNERSHIP)

                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)

                               SEPTEMBER 30, 1996

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 Agreement (the "Guarantee
         Agreement") required the Seller, who is also the special limited
         partner of the Partnership, to make certain 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 based 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.

         Through September 30, 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 amount
         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 pursuant to the Memorandum of Understanding,
         commencing in 1994, distributions, if any, to the Partners are made
         from cash flow from operations.  The minimum distribution guarantee
         payments from the Seller have been reflected as a reduction in the
         carrying amount of the Property.

         In addition, in August 1995, the Seller made an additional payment of
         $135,000 to the Partnership pursuant to the Memorandum of
         Understanding, which amount represents interest on late payments to
         the Partnership made pursuant to the Guarantee Agreement covering the
         period from the second quarter of 1991 to the fourth quarter of 1993.





                                       6
<PAGE>   9
                  CENTURY HILLCRESTE APARTMENT INVESTORS, L.P.
                       (A CALIFORNIA LIMITED PARTNERSHIP)

                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)

                               SEPTEMBER 30, 1996

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

         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.

         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 streets located
         within the Property's perimeter (see Note 4).

         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.

         NET INCOME PER LIMITED PARTNERSHIP UNIT

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

         RECLASSIFICATIONS

         Certain reclassifications have been made in the 1995 financial
         statements to conform to the 1996 presentation.





                                       7
<PAGE>   10
                  CENTURY HILLCRESTE APARTMENT INVESTORS, L.P.
                       (A CALIFORNIA LIMITED PARTNERSHIP)

                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)

                               SEPTEMBER 30, 1996


NOTE 2 - RENTAL PROPERTY

         At September 30, 1996 and December 31, 1995, the rental property
         consists of the following:

<TABLE>
<CAPTION>
                                                                  1996              1995     
                                                              ------------      ------------
         <S>                                                  <C>               <C>
         Land                                                 $ 16,175,000      $ 16,175,000
         Building                                               24,694,402        24,869,402
         Furniture and equipment                                 3,870,000         3,870,000
         Exterior improvements in progress                         180,000             -    
                                                              ------------      ------------
                                                                44,919,412        44,914,402

         Less accumulated depreciation                         (10,671,237)       10,142,071
                                                              ------------      ------------

                                                              $ 34,248,165      $ 34,772,331
                                                              ============      ============
</TABLE>

         Payments made pursuant to the Guarantee Agreement have been reflected
         as a reduction in the carrying value of the Property (see Note 1).

NOTE 3 - 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)     Through December 31, 1995, the Property was managed by an
                 affiliate of the Managing General Partner for a fee of 3% of
                 rental revenue (5% prior to February 1, 1995).  The property
                 management was transferred to an unaffiliated agent, on
                 January 1, 1996, who manages the property for a management fee
                 of 3% of rental revenue.

         (c)     Partnership expense reimbursements, payable to the
                 Non-Managing General Partner, not to exceed $50,000 annually.
                 The 1990 reimbursement has been accrued and is included in
                 accounts payable and accrued liabilities at September 30, 1996
                 and December 31, 1995.  The Non-Managing General partner has
                 requested reimbursement for expenses for 1991 through
                 September 30, 1996, however, the Managing General Partner is
                 disputing such reimbursement and none have been accrued.

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

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





                                       8
<PAGE>   11
                  CENTURY HILLCRESTE APARTMENT INVESTORS, L.P.
                       (A CALIFORNIA LIMITED PARTNERSHIP)

                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)

                               SEPTEMBER 30, 1996


NOTE 3 - FEES PAID TO GENERAL PARTNERS AND AFFILIATES (CONTINUED)

         (f)     Due to the complexity of the storm drain work (Note 4), an
                 affiliate of the Operating General Partner is providing
                 construction supervision of the storm drain improvements at a
                 cost not to exceed $1,820.

         (g)     Pursuant to the Memorandum of Understanding entered into on
                 August 11, 1995, the previously affiliated management company
                 paid to the Partnership $8,095 in interest on May 1, 1996,
                 related to funds it maintained in a master disbursement
                 account, and the Seller made payments to the Partnership in
                 the amount of $485,000, as more particularly described above.
                 In addition, the Partnership on May 1, 1996 reimbursed the
                 Non-Managing General Partner $90,000 for professional fees,
                 which were estimated to have been paid on behalf of the
                 Partnership in connection with issues raised in the Memorandum
                 of Understanding.

NOTE 4 - COMMITMENTS AND CONTINGENCIES

         a.      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 by the City on
                 December 31, 1994.  Landscape and architectural drawings have
                 been prepared for 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.  These plans were approved and a
                 building permit was issued by the City of Los Angeles on June
                 20, 1995.  This permit was to expire on December 20, 1995,
                 however, an extension to December 31, 1996 was approved.

                 As a condition to its approval of the proposed
                 "privatization", the City of Los Angeles requires the
                 construction of a storm drain and related improvements, for
                 which an improvement agreement and guarantee in the amount
                 $158,000 has been filed with the City of Los Angeles.  The
                 Partnership has pledged a Certificate of Deposit in such
                 amount to the City to secure the improvement guarantee.
                 Contracts in the amount of $683,000 and $49,975 have been
                 awarded to construct the wrought iron security fencing and to
                 construct a storm drain and related improvements,
                 respectively, for which construction work has commenced in
                 September 1996.  As of September 30, 1996, $180,000 has been
                 paid to the contractor.

         b.      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 will not result in any material liability
                 to the Partnership.





                                       9
<PAGE>   12
                  CENTURY HILLCRESTE APARTMENT INVESTORS, L.P.
                       (A CALIFORNIA LIMITED PARTNERSHIP)

                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)

                               SEPTEMBER 30, 1996


NOTE 5 - 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.





                                       10
<PAGE>   13
                  CENTURY HILLCRESTE APARTMENT INVESTORS, L.P.
                       (A CALIFORNIA LIMITED PARTNERSHIP)

                               SEPTEMBER 30, 1996


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
         limited partnership interests, 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, all of
         which funds were previously expended.  Currently, the only sources of
         Partnership revenue consist of income from rental operations at the
         Property and interest earned on Partnership reserves.

         Concurrent with the issuance of depositary units to the Limited
         Partners, the Partnership received the Guarantee Agreement from the
         Seller, (an affiliate of the Managing General Partner), which required
         the Seller to make payments or loans as provided therein, 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 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.

         Through June 30, 1996, the Seller 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.

         Concurrent with the execution of the Memorandum of Understanding on
         August 11, 1995, the Partnership received the sum of $135,000 from the
         Seller as compensation for late distribution payments under the
         Guarantee Agreement.   This amount was distributed pro rata to the
         Limited Partners and represents interest on such late payments
         calculated at the rate of approximately five percent (5%) per annum,
         from the date that each such distribution was required to be made to
         Limited Partners to the date such distribution was actually made.
         This payment primarily accounts for the decrease in interest income in
         1996, as compared to 1995.

         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 by the City on December 31, 1994.  Landscape and
         architectural drawings have been prepared for 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.  These plans were approved and a building permit was
         issued by the City of Los Angeles on June 20, 1995.  This permit was
         to expire on December 20, 1995,  however, an extension to December 31,
         1996 was approved.  Contract in the amount of $683,000 and $49,975
         have been awarded to construct the wrought iron security fencing and
         to construct storm





                                       11
<PAGE>   14
                  CENTURY HILLCRESTE APARTMENT INVESTORS, L.P.
                       (A CALIFORNIA LIMITED PARTNERSHIP)

                                 JUNE 30, 1995


ITEM 2.  MANAGEMENT'S ANALYSIS AND DISCUSSION OF FINANCIAL POSITION AND RESULTS
         OF OPERATIONS (CONTINUED)

         drain and related improvements, respectively, for which construction
         work has commenced in 1996.  As of September 30, 1996, $180,000 has
         been paid to the contractor.  Due to the complexity of the storm drain
         work, an affiliate of the Operating General Partner is providing
         construction supervision of the storm drain improvements at a cost not
         to exceed $1,800.

         As a condition to its approval of the proposed "privatization", the
         City of Los Angeles requires 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.

         RESULTS OF OPERATIONS

         Occupancy averaged 95% for the nine months ended September 30, 1996
         and 1995.  Operating expenses decreased primarily due to reduced
         repairs and maintenance expense in 1996.

         Since the investigation and recommendation of the staff of the
         Securities and Exchange Commission (the "Commission") (see "Legal
         Proceedings" for further discussion) concerning the Partnership's
         financial statements and Commission filings, a portion of the legal
         fees incurred in responding to the staff have been allocated to and
         charged to the Partnership by the Managing General Partner.  These
         legal fees  primarily account for the decrease in general and
         administrative expenses in 1996.  In the opinion of the Managing
         General Partner, any action that might result from the Commission
         staff's investigation is not likely to have a material adverse effect
         on the Partnership.





                                       12
<PAGE>   15
                  CENTURY HILLCRESTE APARTMENT INVESTORS, L.P.
                       (A CALIFORNIA LIMITED PARTNERSHIP)

                               SEPTEMBER 30, 1996


PART II - OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

As of September 30, 1996, NAPICO was a plaintiff or defendant in several
lawsuits.  None of these suits are related to the Partnership.

The staff of the Securities and Exchange Commission (the "Commission") informed
the Partnership and  NAPICO in August 1995 that it intended to recommend that
the Commission institute a civil proceeding against the Partnership, NAPICO and
others that would be based, in part, on allegations that certain of the
Partnership's financial statements in 1991, 1992 and 1993 should have
characterized certain current assets deposited in the master disbursement
account of the Partnership's property management company as accounts receivable
from a related party rather than as cash.  The Partnership and NAPICO have
strongly disagreed with the staff's contentions, which have not yet been
considered by the Commission.  During the past several months there have been
discussions with the Commission staff to determine whether the staff's concerns
might be resolved by an administrative consent order.  Those discussions are
still underway.  In the opinion of NAPICO, any action that might result from
the staff's recommendation, including any consent order that might resolve the
staff's concerns, is not likely to have a material adverse effect on the
Partnership.


ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

         (a)     No reports on Form 8-K were filed during the quarter ended
                 September 30, 1996.





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

                               SEPTEMBER 30, 1996

                                   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


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



                              By:                                            
                                   ----------------------------------------
                                   Bruce Nelson
                                   President



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



                              By:                                            
                                   ----------------------------------------
                                   Shawn Horwitz
                                   Executive Vice President and
                                   Chief Financial Officer





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