<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 MARCH 31, 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 MARCH 31, 1997



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

        Item 1.  Financial Statements and Notes to Financial Statements

                      Balance Sheets, March 31, 1997 and December 31, 1996 .....................................1

                      Statements of Operations,
                              Three Months Ended March 31, 1997 and 1996........................................2

                      Statement of Partners' Capital (Deficiency)
                              Three Months Ended March 31, 1997 ................................................3

                      Statements of Cash Flows
                              Three Months Ended March 31, 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
                      MARCH 31, 1997 AND DECEMBER 31, 1996


                                     ASSETS

<TABLE>
<CAPTION>
                                                                           1997            1996
                                                                        (Unaudited)      (Audited)
                                                                        -----------     -----------
<S>                                                                     <C>             <C>        
RENTAL PROPERTY (Notes 1, 2 and 3)                                      $34,350,022     $34,337,025

CASH AND CASH EQUIVALENTS (Note 1)                                        3,673,028       3,490,463

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

OTHER ASSETS (Note 5)                                                        16,680          54,598
                                                                        -----------     -----------

                                                                        $38,198,430     $38,040,786
                                                                        ===========     ===========


                                  LIABILITIES AND PARTNERS' CAPITAL

ACCOUNTS PAYABLE AND ACCRUED
      LIABILITIES (Note 4)                                              $   479,468     $   413,457

PREPAID RENT                                                                 17,571          75,583

SECURITY DEPOSITS                                                           309,086         315,244
                                                                        -----------     -----------

                                                                            806,125         804,284

COMMITMENTS AND CONTINGENCIES (Note 5)

PARTNERS' CAPITAL (Note 1)                                               37,392,305      37,236,502
                                                                        -----------     -----------

                                                                        $38,198,430     $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
                   THREE MONTHS ENDED MARCH 31, 1997 AND 1996

                                   (Unaudited)



<TABLE>
<CAPTION>
                                                1997           1996
                                             ----------     ----------
<S>                                          <C>            <C>       
REVENUES
     Rental income                           $1,419,028     $1,262,662
     Interest and other income (Note 1)          66,564         63,403
                                             ----------     ----------

                                              1,485,592      1,326,065
                                             ----------     ----------

EXPENSES
     Operating (Note 4)                         332,608        273,189
     Property taxes                              66,902         71,022
     Management fee - (Note 4)                   41,294         39,058
     General and administrative (Note 4)        124,499        110,405
     Depreciation                               176,389        177,639
                                             ----------     ----------

                                                741,692        671,313
                                             ----------     ----------

NET INCOME                                   $  743,900     $  654,752
                                             ==========     ==========

NET INCOME PER DEPOSITORY UNIT               $     0.10     $     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)
                        THREE MONTHS ENDED MARCH 31, 1997

                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                                        Special Limited
                                               General               Limited                Partner
                                               Partners              Partners               (Note 1)                 Total
                                            --------------       ----------------       ----------------        ---------------
<S>                                         <C>                  <C>                    <C>                     <C>            
DEPOSITORY UNITS,
       March 31, 1997                                                   7,258,000
                                                                 ================

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

Distributions                                       (5,881)              (582,216)                                     (588,097)

Net income for the three months
ended March 31, 1997                                 7,439                736,461                   -                   743,900
                                            --------------       ----------------       ----------------        ---------------

BALANCE, March 31, 1997                     $     (276,607)      $     37,668,912       $           -           $    37,392,305
                                            ===============      ================       ================        ===============
</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
                   THREE MONTHS ENDED MARCH 31, 1997 AND 1996

                                   (Unaudited)


<TABLE>
<CAPTION>
                                                                                1997             1996
                                                                            -----------      -----------
<S>                                                                         <C>              <C>        
CASH FLOWS FROM OPERATING ACTIVITIES:
     Net  income                                                            $   743,900      $   654,752
     Adjustments to reconcile net income to net
        cash provided by operating activities:
           Depreciation                                                         176,389          177,639
           Decrease in other assets                                              37,918            5,720
           Derease due to related parties                                           -           (183,095)
           Increase in accounts payable and
               accrued liabilities                                               66,011          133,494
           Increase (decrease) in due to general partner                            -            (60,000)
           Decrease in security deposits                                         (6,158)          (1,588)
           Decrease in prepaid rent                                             (58,012)          (2,693)
                                                                            -----------      -----------

                  Net cash provided by operating activities                     960,048          724,229
                                                                            -----------      -----------

CASH FLOWS FROM INVESTING ACTIVITIES:

     Payments receivable pursuant to the minimum distribution guarantee             -            175,000
     Increase in rental property                                               (189,386)             -
                                                                            -----------      -----------

                 Net cash (used in) provided by  investing activities          (189,386)         175,000
                                                                            -----------      -----------

CASH FLOWS FROM FINANCING ACTIVITIES:

     Distributions to partners                                                 (588,097)        (543,336)
                                                                            -----------      -----------

NET INCREASE IN CASH AND CASH EQUIVALENTS                                       182,565          355,893

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD                                3,490,463        2,738,045
                                                                            -----------      -----------

CASH AND CASH EQUIVALENTS, END OF PERIOD                                    $ 3,673,028      $ 3,093,938
                                                                            ===========      ===========
</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

                                 MARCH 31, 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 March 31, 1997, and the results of operations and changes in cash
         flows for the three 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% special limited partnership interest in the Partnership
         for $6,855,000 and became the Special Limited Partner of the
         Partnership.

         Among other things, the Partnership Agreement provides that the 10%
         special limited partnership interest 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)

                                 MARCH 31, 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:

                     Buildings                                    35 years
                     Furniture and equipment                       5 years

         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)

                                 MARCH 31, 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%) 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
         March 31, 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                             634,636             445,250
                                             ------------        ------------
                                               45,374,038          45,184,652

         Less accumulated depreciation        (11,024,016)        (10,847,627)
                                             ------------        ------------

                                             $ 34,350,022        $ 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)

                                 MARCH 31, 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 and (b) a non-binding proposal from one of the four prior
         offerees proposing to increase its offer to purchase the Property to
         $47.4 million.

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

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

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> 
                   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)

                                 MARCH 31, 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 1990 reimbursement was accrued and is included in accounts
                  payable and accrued liabilities at March 31, 1997 and December
                  31, 1996. The Non-Managing General partner has requested
                  reimbursement for expenses for 1990 through 1997, however, the
                  Managing General Partner has refused to pay such
                  reimbursements and so none have been paid or accrued from 1991
                  through March 31, 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% 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)

                                 MARCH 31, 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. The final resolution
                  vacating the streets and alleys was approved by the City on
                  December 31, 1994. Landscape and construction of the perimeter
                  fencing and related improvements, including a guardhouse at
                  the Ambassador Street entrance and a directory/trellis at the
                  Peerless Street location is nearing completion.

                  As a condition to its approval of the proposed
                  "privatization", the City of Los Angeles required the
                  construction of a storm drain and related improvements, for
                  which an improvement agreement and guarantee in the amount
                  $158,700 has been filed with the City of Los Angeles. The
                  Partnership has pledged a Certificate of Deposit in such
                  amount to the City to secure the improvement guarantee.
                  Contracts in the amount of $683,000 and $49,975 have been
                  awarded to construct the wrought iron security fencing and to
                  construct a storm drain and related improvements,
                  respectively, for which construction work commenced in
                  September 1996 and is to be completed in May, 1997. As of
                  March 31, 1997, $634,636 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 of management and 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)      Securities and Exchange Commission

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


                                       10


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

                    NOTES TO FINANCIAL STATEMENTS (CONTINUED)

                                 MARCH 31, 1997


NOTE 5 - COMMITMENTS AND CONTINGENCIES (CONTINUED)

         (d)      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.

                  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

                                       11


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

                    NOTES TO FINANCIAL STATEMENTS (CONTINUED)

                                 MARCH 31, 1997


NOTE 5 - COMMITMENTS AND CONTINGENCIES (CONTINUED)

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

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

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

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

                         The Special Limited Partnership has advised the
                         Managing General Partner and the Non-Managing General
                         Partner that the Right of First Refusal was a material
                         inducement to the Special Limited Partner's sale of the
                         Property to the Partnership, its purchase of a
                         subordinated special limited partnership interest in
                         the Partnership for $6,855,000, and its agreement to
                         provide the Partnership with a Minimum Distribution
                         Guarantee pursuant to which the Special Limited Partner
                         paid a total of approximately $13,130,000 to the
                         Partnership to support distributions to the Limited
                         Partners. If, as

                                       12


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

                    NOTES TO FINANCIAL STATEMENTS (CONTINUED)

                                 MARCH 31, 1997


NOTE - 5 COMMITMENTS AND CONTINGENCIES (CONTINUED)

                         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.

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

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

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)

                                 MARCH 31, 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 March 31, 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. The final resolution vacating the streets and alleys was
        approved on December 31, 1994. Landscape and construction of the
        perimeter fencing and related improvements, including a guardhouse at
        the Ambassador Street entrance and a directory/trellis at the Peerless
        Street location is complete.

        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 storm
        drain and related improvements is to be completed in May, 1997 (and the
        City will release the Certificate of Deposit after completion of
        inspection.

        Occupancy averaged 97 percent and 94 percent for the three months ended
        March 31, 1997 and 1996, respectively. Operating expenses increased
        primarily due to an increase in insurance expense in 1997.

                                       14


<PAGE>   17
                  CENTURY HILLCRESTE APARTMENT INVESTORS, L.P.
                       (A CALIFORNIA LIMITED PARTNERSHIP)

                                 MARCH 31, 1997


PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

As of March 31, 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 staff of the Securities and Exchange Commission (the "Commission") informed
the Partnership and NAPICO in August, 1995 that it intends to recommend that the
Commission institute a civil action and/or administrative proceeding against the
Partnership, NAPICO and others that would be based, in part, on allegations that
certain of the Partnership's financial statements in 1991, 1992 and 1993 should
have characterized certain current assets deposited in the master disbursement
account of the Partnership's property management company as accounts receivable
from a related party rather than as cash. The Partnership and NAPICO strenuously
disagree with the staff's contentions, which have not yet been considered by the
Commission. Moreover, in the opinion of NAPICO, any action that might result
from the staff's recommendation is not likely to have a material adverse effect
on the Partnership.

J/B Lawsuit

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

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

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

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


                                       15


<PAGE>   18
                  CENTURY HILLCRESTE APARTMENT INVESTORS, L.P.
                       (A CALIFORNIA LIMITED PARTNERSHIP)

                                 MARCH 31, 1997


ITEM 1.       LEGAL PROCEEDINGS (CONTINUED)

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

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

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

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

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

         The Special Limited Partnership has advised the Managing General
         Partner and the Non-Managing General Partner that the Right of First
         Refusal was a material inducement to the Special Limited Partner's sale
         of the Property to the Partnership, its purchase of a subordinated
         special limited partnership interest in the Partnership for $6,855,000,
         and its agreement to provide the Partnership with a Minimum
         Distribution Guarantee pursuant to which the Special Limited Partner
         paid a total of approximately $13,130,000 to the Partnership to support
         distributions to the Limited Partners. If, as a result of the J/B
         Lawsuit or otherwise, the Special Limited Partner is not entitled to
         exercise the Right of First Refusal with respect to the Everest
         Proposal or in response to other similar situations, the

                                       16


<PAGE>   19
                  CENTURY HILLCRESTE APARTMENT INVESTORS, L.P.
                       (A CALIFORNIA LIMITED PARTNERSHIP)

                                 MARCH 31, 1997


ITEM 1. LEGAL PROCEEDINGS (CONTINUED)

        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.

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

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


ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

         (a)      No reports on Form 8-K were filed during the quarter ended
                  March 31, 1997.

                                       17


<PAGE>   20
                  CENTURY HILLCRESTE APARTMENT INVESTORS, L.P.
                       (A CALIFORNIA LIMITED PARTNERSHIP)

                                 MARCH 31, 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


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



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


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



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


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



                                       18