<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 JUNE 30, 1997

                         Commission File Number 33-22857

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

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

                         9090 WILSHIRE BLVD., SUITE 201
                           BEVERLY HILLS, CALIF. 90211

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


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


                                 Yes  X  No
                                    ----   ----  



<PAGE>   2

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

                               INDEX TO FORM 10-Q

                       FOR THE QUARTER ENDED JUNE 30, 1997

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

        Item 1.  Financial Statements and Notes to Financial Statements

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

                      Statements of Operations,
                              Six and Three Months Ended June 30, 1997 and 1996.................................2

                      Statement of Partners' Capital (Deficiency)
                              Six Months Ended June 30, 1997 ...................................................3

                      Statements of Cash Flows
                              Six Months Ended June 30, 1997 and 1996...........................................4

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

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


PART II.  OTHER INFORMATION

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

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

        Signatures ............................................................................................18
</TABLE>








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

                                 BALANCE SHEETS

                       JUNE 30, 1997 AND DECEMBER 31, 1996


                                     ASSETS

<TABLE>
<CAPTION>
                                                                       1997                  1996
                                                                    (Unaudited)            (Audited)
                                                                   -----------          -----------
<S>                                                                <C>                  <C>        
RENTAL PROPERTY (Notes 1, 2 and 3)                                 $34,338,781          $34,337,025

CASH AND CASH EQUIVALENTS (Note 1)                                   3,211,119            3,490,463

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

OTHER ASSETS (Note 5)                                                   14,126               54,598
                                                                   -----------          -----------

                                                                   $37,722,726          $38,040,786
                                                                   ===========          ===========


                        LIABILITIES AND PARTNERS' CAPITAL

ACCOUNTS PAYABLE AND ACCRUED LIABILITIES (Note 4)                  $   240,215          $   413,457

PREPAID RENT                                                            21,344               75,583

SECURITY DEPOSITS                                                      297,418              315,244
                                                                   -----------          -----------

                                                                       558,977              804,284

COMMITMENTS AND CONTINGENCIES (Note 5)

PARTNERS' CAPITAL (Note 1)                                          37,163,749           37,236,502
                                                                   -----------          -----------

                                                                   $37,722,726          $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

                SIX AND THREE MONTHS ENDED JUNE 30, 1997 AND 1996

                                   (Unaudited)



<TABLE>
<CAPTION>
                                                Six months         Three months         Six months         Three months
                                                  ended               ended                ended              ended
                                              June  30, 1997      June  30, 1997      June  30, 1996      June  30, 1996
                                              --------------      --------------      --------------      -------------- 
<S>                                               <C>                 <C>                 <C>                 <C>       
REVENUES
     Rental income                                $2,898,813          $1,458,217          $2,602,169          $1,339,507
     Interest and other income (Note 1)               88,925              43,929             131,826              68,423
                                                  ----------          ----------          ----------          ----------

                                                   2,987,738           1,502,146           2,733,995           1,407,930
                                                  ----------          ----------          ----------          ----------

EXPENSES
     Operating (Note 4)                              707,408             374,800             525,655             252,466
     Property taxes                                  135,578              68,676             133,522              62,500
     Management fee - (Note 4)                        70,364              29,070              79,512              40,454
     General and administrative (Note 4)             624,632             500,133             234,530             124,125
     Depreciation                                    352,778             176,389             352,777             175,138
                                                  ----------          ----------          ----------          ----------

                                                   1,890,760           1,149,068           1,325,996             654,683
                                                  ----------          ----------          ----------          ----------

NET INCOME                                        $1,096,978          $  353,078          $1,407,999          $  753,247
                                                  ==========          ==========          ==========          ==========

NET INCOME PER DEPOSITORY UNIT                    $     0.15          $     0.05          $     0.19          $     0.10
                                                  ==========          ==========          ==========          ==========
</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)

                         SIX MONTHS ENDED JUNE 30, 1997


                                                 (Unaudited)


<TABLE>
<CAPTION>
                                                                                   Special Limited
                                          General                Limited               Partner
                                         Partners               Partners               (Note 1)                   Total
                                       ------------           ------------           ------------           ------------
<S>                                    <C>                   <C>                     <C>                   <C>          
DEPOSITORY UNITS,
     June 30, 1997                                               7,258,000            $       --
                                                              ============ 

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

Distributions                               (11,697)            (1,158,034)                                   (1,169,731)

Net income for the six months
ended June 30, 1997                          10,970              1,086,008                   --                1,096,978
                                       ------------           ------------           ------------           ------------
BALANCE, June 30, 1997                 $   (278,892)          $ 37,442,641                   --             $ 37,163,749
                                       ============           ============           ============           ============
</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

                     SIX MONTHS ENDED JUNE 30, 1997 AND 1996

                                   (Unaudited)


<TABLE>
<CAPTION>
                                                                                   1997                   1996
                                                                                -----------           -----------
<S>                                                                             <C>                   <C>        
CASH FLOWS FROM OPERATING ACTIVITIES:
    Net income                                                                  $ 1,096,978           $ 1,407,999
    Adjustments to reconcile net income to net
       cash provided by operating activities:
          Depreciation                                                              352,778               352,777
          Decrease (increase) in other assets                                        40,472               (17,824)
          Decrease in accounts payable and
              accrued liabilities                                                  (173,242)              (53,058)
          Decrease in due to general partner                                           --                (150,000)
          Decrease (increase) in security deposits                                  (17,826)                2,446
          Decrease (increase) in prepaid rent                                       (54,239)               19,524
                                                                                -----------           -----------

                 Net cash provided by operating activities                        1,244,921             1,561,864
                                                                                -----------           -----------

CASH FLOWS FROM INVESTING ACTIVITIES:

    Payments receivable pursuant to the minimum distribution guarantee                 --                 175,000
    Increase in rental property                                                    (354,534)                 --
                                                                                -----------           -----------

                Net cash (used in) provided by investing activities                (354,534)              175,000
                                                                                -----------           -----------

CASH FLOWS FROM FINANCING ACTIVITIES:

    Distributions to partners                                                    (1,169,731)           (1,080,229)
                                                                                -----------           -----------

NET (DECREASE) INCREASE IN CASH AND CASH
    EQUIVALENTS                                                                    (279,344)              656,635

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

CASH AND CASH EQUIVALENTS, END OF PERIOD                                        $ 3,211,119           $ 3,394,680
                                                                                ===========           ===========
</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

                                  JUNE 30, 1997


NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

         GENERAL

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

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

 ORGANIZATION

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

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

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

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




                                       5
<PAGE>   8

                  CENTURY HILLCRESTE APARTMENT INVESTORS, L.P.

                       (A CALIFORNIA LIMITED PARTNERSHIP)

                    NOTES TO FINANCIAL STATEMENTS (CONTINUED)

                                  JUNE 30, 1997


NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

         USE OF ESTIMATES

         The preparation of financial statements in conformity with generally
         accepted accounting principles requires management to make estimates
         and assumptions that affect the reported amounts of assets and
         liabilities and disclosure of contingent assets and liabilities at the
         date of the financial statements and reported amounts of revenues and
         expenses during the reporting period. Actual results could differ from
         those estimates.

         MINIMUM DISTRIBUTION GUARANTEE

         The minimum distribution guarantee payments from the seller have been
         reflected as a reduction in the carrying amount of the Property. For
         its contribution of $6,855,000, the Seller has rights to receive an
         allocation of the Partnership's net cash from operations after the
         Limited Partners receive a specified priority return.

         DEPRECIATION

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

                       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)

                                  JUNE 30, 1997


NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

         NET INCOME PER DEPOSITORY UNIT

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

         IMPAIRMENT OF LONG-LIVED ASSETS

         The Partnership adopted Statement of Financial Accounting Standards No.
         121, Accounting for the Improvement of Long-Lived Assets and for
         Long-Lived Assets To Be Disposed Of as of January 1, 1996 without a
         significant effect on its financial statements. The Partnership reviews
         long-lived assets to determine if there has been any permanent
         impairment whenever events or changes in circumstances indicate that
         the carrying amount of the asset may not be recoverable. If the sum of
         the expected future cash flows is less than the carrying amount of the
         assets, the Partnership recognizes an impairment loss.

NOTE 2 - RENTAL PROPERTY

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

<TABLE>
<CAPTION>
                                                     1997                    1996
                                                 ------------           ------------
          <S>                                   <C>                    <C>         
          Land                                   $ 16,175,000           $ 16,175,000
          Building                                 24,694,402             24,694,402
          Furniture and equipment                   3,870,000              3,870,000
          Improvements                                799,784                445,250
                                                 ------------           ------------
                                                   45,539,186             45,184,652
          
          Less accumulated depreciation           (11,200,405)           (10,847,627)
                                                 ------------           ------------
          
                                                 $ 34,338,781           $ 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)

                                  JUNE 30, 1997


NOTE 2 - RENTAL PROPERTY (CONTINUED)

         Partner and the Special Limited Partner of the Partnership, has under
         the terms of the Amended and Restated Agreement of limited partnership
         (the "Partnership Agreement"), a right of first refusal to acquire the
         Property for the proposed sales price and terms (the "Right of First
         Refusal").

         Subsequently, Everest has increased its offer by $7 million to $47
         million (the "Everest Proposal"). Additionally, the Partnership has
         just received (a) a report from an independent real estate appraisal
         firm that the Property's current market value is approximately $47
         million, (b) a non-binding proposal from one of the four prior offerees
         proposing to increase its offer to purchase the Property to $47.4
         million, and (c) a fifth non-binding purchase offer from an affiliate
         of the current property manager for $48 million.

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

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

NOTE 3 - MINIMUM DISTRIBUTION GUARANTEE RECEIVABLE FROM PARTNER

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

<TABLE>
<CAPTION>
                Years Ended December 31,            Annual Return on Investment
                ------------------------            ---------------------------
                         <S>                          <C>            
                          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)

                                  JUNE 30, 1997



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

         Through December 31, 1996, the Seller has funded a total of $13,130,998
         directly to the Partnership for distributions to the Limited Partners
         pursuant to the Guarantee Agreement, which includes the $350,000,
         referred to above. This amount has been reflected as a reduction in the
         carrying amount of the property. The period covered by the Guarantee
         Agreement expired on December 31, 1993. Except with respect to the
         payments made in 1995 and 1996 pursuant to the Memorandum of
         Understanding, commencing in 1994, distributions to the Partners have
         been made from cash flow from operations.

NOTE 4 - FEES PAID TO GENERAL PARTNERS AND AFFILIATES

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

         (a)      A Partnership management fee payable to the Managing General
                  Partner of $50,000 annually.  The fee is included in general 
                  and administrative expenses.

         (b)      Partnership expense reimbursements, payable to the
                  Non-Managing General Partner, not to exceed $50,000 annually.
                  The Non-Managing General Partner expense reimbursements for
                  1990 through 1996 in the amount of $350,000, which were
                  previously disputed, were expensed and paid on June 30, 1997
                  and included in general and administrative expenses. In
                  addition, $25,000 has been accrued for the six months ended
                  June 30, 1997.

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

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

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




                                       9

<PAGE>   12

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

                    NOTES TO FINANCIAL STATEMENTS (CONTINUED)

                                  JUNE 30, 1997


NOTE 5 - COMMITMENTS AND CONTINGENCIES

         (a)      Construction Contracts

                  Approvals from the City of Los Angeles were obtained to
                  "privatize" the streets and alleys providing access to the
                  Property and to construct wrought iron security fencing with
                  controlled entrances into the Property. As a condition to its
                  approval of the proposed "privatization", the City of Los
                  Angeles required the construction of a storm drain and related
                  improvements, for which an improvement agreement and guarantee
                  in the amount $158,700 has been filed with the City of Los
                  Angeles. The Partnership has pledged a Certificate of Deposit
                  in such amount to the City to secure the improvement
                  guarantee.

                  Contracts in the amount of $767,000 and $60,685 were awarded
                  to construct the wrought iron security fencing and to
                  construct a storm drain and related improvements,
                  respectively, for which construction work commenced in
                  September 1996 and is to be completed in October, 1997. As of
                  June 30, 1997, $799,784 has been paid to the contractor.

         (b)      Litigation

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

         (c)      J/B Lawsuit

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

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





                                       10

<PAGE>   13

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

                    NOTES TO FINANCIAL STATEMENTS (CONTINUED)

                                  JUNE 30, 1997


NOTE 5 - COMMITMENTS AND CONTINGENCIES (CONTINUED)

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

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

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

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

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







                                       11
<PAGE>   14


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

                    NOTES TO FINANCIAL STATEMENTS (CONTINUED)

                                  JUNE 30, 1997


NOTE 5 - COMMITMENTS AND CONTINGENCIES (CONTINUED)

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

                         It appears that J/B purchased or was assigned certain
                         rights with respect to 200 units in the Partnership in
                         or about 1995. 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 Special Limited Partner believes that
                         it would be entitled to return of its investment and
                         all sums paid under the Minimum Distribution Guarantee,
                         together with interest thereon. Moreover, the
                         settlement of the Prior Lawsuit was reached after
                         extensive negotiations with the Non-Managing General
                         Partner which negotiated on behalf of the Partnership a
                         binding and conclusive settlement. If, as a result of
                         the J/B Lawsuit or otherwise, the settlement of the
                         Prior Lawsuit is set aside, the Managing General
                         Partner and its affiliates would seek a return of all
                         funds paid to the Partnership as a result of such
                         settlement.

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




                                       12
<PAGE>   15

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

                    NOTES TO FINANCIAL STATEMENTS (CONTINUED)

                                  JUNE 30, 1997


NOTE 5 - COMMITMENTS AND CONTINGENCIES (CONTINUED)

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

                         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)

                                  JUNE 30, 1997


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

        CAPITAL RESOURCES AND LIQUIDITY

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

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

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

        Through June 30, 1997, the Special Limited Partner has funded
        $13,130,998 directly to the Partnership for distributions to the Limited
        Partners pursuant to the Guarantee Agreement, which includes the
        $350,000 referred to above. In addition, during 1995 the Partnership
        made a special distribution to the Limited Partners in the amount of
        $135,000 representing interest on late guarantee payments. Commencing in
        1994, except with respect to the $350,000 and $135,000 described above,
        contributions to the partners have been made from cash flow from
        operations.

        Approvals from the City of Los Angeles were obtained to "privatize" the
        streets and alleys providing access to the Property and to construct
        wrought iron security fencing with controlled entrances into the
        Property. As a condition to its approval of the proposed
        "privatization", the City of Los Angeles required the construction of a
        storm drain and related improvements, for which an improvement agreement
        and guarantee in the amount $158,000 has been filed with the City of Los
        Angeles. The Partnership has pledged a Certificate of Deposit in such
        amount to the City to secure the improvement guarantee. The construction
        of the wrought iron security fencing, storm drain and related
        improvements commenced in September 1996 and is to be completed in
        October, 1997. The City of Los Angeles will release the Certificate of
        Deposit after completion of inspection.

        Occupancy averaged 97 percent and 94 percent for the six months ended
        June 30, 1997 and 1996, respectively, which explains the increase in
        rental income in 1997. Expenses in 1997 increased primarily due to an
        increase in insurance expense of $174,000, which is included in
        operating expenses, and expense reimbursements of $375,000 to the
        Non-Managing General partner, which is included in general and
        administrative expenses.








                                       14
<PAGE>   17


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

                                  JUNE 30, 1997


PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

As of June 30, 1997, NAPICO, the Managing General Partner, was a plaintiff or
defendant in several lawsuits, which are unrelated to the Partnership. In
addition, the Partnership is involved in the actions described below:

Securities and Exchange Commission

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

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

J/B Lawsuit

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

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

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

1.      J/B alleges misappropriation and misuse of Partnership funds which were
        the subject of a previous lawsuit (the "Prior Lawsuit") filed in the Los
        Angeles Superior Court in June 1995 by HillCreste Properties, Inc., the
        non-managing general partner of the Partnership (the "Non-Managing
        General Partner"). The Managing General Partner vigorously denied these
        allegations, and without admission of any wrongdoing the Prior Lawsuit
        was settled by a Memorandum of Understanding executed in August 1995,
        with final settlement documentation executed in April 1996, at which
        time the Prior




                                       15

<PAGE>   18

                  CENTURY HILLCRESTE APARTMENT INVESTORS, L.P.

                       (A CALIFORNIA LIMITED PARTNERSHIP)

                                  JUNE 30, 1997


ITEM 1. LEGAL PROCEEDINGS (CONTINUED)


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

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

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

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

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

        It appears that J/B purchased or was assigned certain rights with
        respect to 200 units in the Partnership in or about 1995. 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










                                       16

<PAGE>   19

                  CENTURY HILLCRESTE APARTMENT INVESTORS, L.P.

                       (A CALIFORNIA LIMITED PARTNERSHIP)

                                  JUNE 30, 1997


ITEM 1. LEGAL PROCEEDINGS (CONTINUED)


        approximately $13,130,000 to the Partnership to support distributions to
        the Limited Partners. If, as a result of the J/B Lawsuit or otherwise,
        the Special Limited Partner is not entitled to exercise the Right of
        First Refusal with respect to the Everest Proposal or in response to
        other similar situations, the Special Limited Partner believes that it
        would be entitled to return of its investment and all sums paid under
        the Minimum Distribution Guarantee, together with interest thereon.
        Moreover, the settlement of the Prior Lawsuit was reached after
        extensive negotiations with the Non-Managing General Partner which
        negotiated on behalf of the Partnership a binding and conclusive
        settlement. If, as a result of the J/B Lawsuit or otherwise, the
        settlement of the Prior Lawsuit is set aside, the Managing General
        Partner and its affiliates would seek a return of all funds paid to the
        Partnership as a result of such settlement.

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

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

        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 June 30,
        1997.








                                       17
<PAGE>   20
                  CENTURY HILLCRESTE APARTMENT INVESTORS, L.P.

                       (A CALIFORNIA LIMITED PARTNERSHIP)

                                  JUNE 30, 1997


                                   SIGNATURES


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



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


                                  By:   National Partnership Investments Corp.
                                        Managing General Partner



                                        _________________________________
                                        Bruce Nelson
                                        President


                                  Date:_________________________________



                                        _________________________________
                                        Charles H. Boxenbaum
                                        Chief Executive Officer


                                  Date:_________________________________










                                       18