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                     U.S. SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-KSB

     (Mark One)
               [X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE
                 SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]

                   For the fiscal year ended December 31, 1996

             [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
                SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]

         For the transition period from...............to...............

                         Commission file number 0-16575

                           ENEX INCOME AND RETIREMENT
                              FUND - Series 3, L.P.
                 (Name of small business issuer in its charter)

                New Jersey 76-0222818
      (State or other jurisdiction of            (I.R.S. Employer
      incorporation or organization)            Identification No.)

            800 Rockmead Drive
           Three Kingwood Place
              Kingwood, Texas                          77339
 (Address of principal executive offices)           (Zip Code)

         Issuer's telephone number, including area code: (713) 358-8401

       Securities registered under Section 12(b) of the Exchange Act: None

         Securities registered under Section 12(g) of the Exchange Act:

                          Limited Partnership Interest

         Check whether the issuer (1) filed all reports  required to be filed by
Section 13 or 15(d) of the  Exchange  Act during the past 12 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

         Check if there is no  disclosure  of  delinquent  filers in response to
Item 405 of Regulation S-B is not contained in this form, and no disclosure will
be contained,  to the best of the registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB.[x]

       State issuer's revenues for its most recent fiscal year. $ 118,862

         State  the  aggregate   market  value  of  the  voting  stock  held  by
non-affiliates  computed by  reference to the price at which the stock was sold,
or the average bid and asked prices of such stock as of a specified  date within
the past 60 days (See  definition  of  affiliate  in Rule 12b-2 of the  Exchange
Act):

                                 Not Applicable

                      Documents Incorporated By Reference:

                                      None


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<PAGE>



                                TABLE OF CONTENTS

                            FORM 10-KSB ANNUAL REPORT
                      FOR THE YEAR ENDED DECEMBER 31, 1996
                ENEX INCOME AND RETIREMENT FUND - SERIES 3, L.P.


Item No.                           Part I                             Page
-------                           --------                           ------



       1     Description of Business                                 I-1

       2     Description of Property                                 I-3

       3     Legal Proceedings                                       I-5

       4     Submission of Matters to a Vote
             of Security Holders                                     I-5


                                   Part II
                                   ---------


       5     Market for Common Equity and
             Related Security Holder Matters                        II-1

       6     Management's Discussion and Analysis
             or Plan of Operation                                   II-2

       7     Financial Statements and Supplementary
             Data                                                   II-4

       8     Changes In and Disagreements With Accountants
             on Accounting and Financial Disclosure                 II-14


                                  Part III
                                 -----------


       9     Directors, Executive Officers, Promoters and
             Control Persons; Compliance with Section 16(a)
             of the Exchange Act                                    III-1

      10     Executive Compensation                                 III-3

      11     Security Ownership of Certain
             Beneficial Owners and Management                       III-4

      12     Certain Relationships and Related
             Transactions                                           III-4

      13     Exhibits and Reports on Form 8-K                       III-4


             Signatures                                              S-1


<PAGE>



                                     PART I

Item 1.        Description of Business

General

               Enex Income and Retirement  Fund - Series 3, L.P. (the "Company")
was formed under the New Jersey Uniform Limited Partnership Act (1976) on August
29,  1985  and  commenced   operations  on  December  30,  1987  with  aggregate
subscriptions  of $1,493,792,  $1,478,854 of which was received from 142 limited
partners,  including  investors whose  distributions  from earlier  partnerships
sponsored by the Company's general partner, Enex Resources Corporation ("Enex"),
were automatically invested in the Company.

               The  Company is engaged in the oil and gas  business  through the
ownership of  non-operating  interests in producing oil and gas  properties,  as
detailed in Item 2, below.  A  non-operating  interest  typically  entitles  the
holder to receive a specified share of such  production,  without  obligation to
develop or operate such property,  or bear any  development  or operating  costs
(such  obligations  being  assumed by the owner of the  working  interest in the
property).

               The Company's  non-operating  interests are net profits royalties
or  other  royalty  interests  which  entitle  the  Company  to a share of gross
revenues  from  producing  oil  and  gas  properties  measured  by  a  specified
percentage of the net profits  realized by the owners of the underlying  working
interests in such properties,  after deducting  operating costs,  geological and
engineering  costs,  property,  severance  and other  taxes,  and certain  other
specified  expenses.  If such taxes,  operating  costs or other expenses  exceed
gross revenues in any specified  measuring  period, a net profits royalty holder
will not be liable for payment of any portion of such  excess,  but a percentage
of such excess equal to the specified  percentage of net profits  (together with
interest  thereon)  will be carried over to  subsequent  periods and will reduce
future amounts accruing to the holder.  The Company's net profits  royalties and
other  non-operating  interests are generally  derived from working interests in
oil and gas properties owned by other affiliates of Enex .

               The  Company  owns  royalty  interests  in  certain  oil  and gas
properties.  A "royalty  interest" is an interest  retained by the lessor in the
lease and payable out of 100% of proceeds before  deducting any other interests.
The  Company  also owns  overriding  royalty  interests  in certain  oil and gas
properties.  An "overriding royalty interest" is an interest in a property which
was carved out of the working  interest,  that is not subject to most  operating
costs associated with the property.

               The  Company  does not own working  interests  nor does it engage
directly in any drilling,  completing or operating  activities,  but may benefit
from such  activities  undertaken  by the  owners of the  working  interests  in
properties  burdened by the  Company's  non-operating  interests.  The Company's
operations are concentrated in a single industry segment.

               The  principal  executive  office of the Company is maintained at
800 Rockmead Drive, Suite 200, Three Kingwood Place, Kingwood,  Texas 77339. The
telephone number at this office is (713) 358-8401.
The Company has no regional offices.


                                       I-1

<PAGE>



     The Company has no employees.  On March 1, 1997, Enex and its  subsidiaries
employed 23 persons.

Marketing

               The  marketing of oil and gas produced by the Company is affected
by a number of factors which are beyond the Company's control,  the exact nature
of which cannot be accurately predicted.  These factors include the quantity and
price of crude oil imports,  fluctuating  supply and demand,  pipeline and other
transportation facilities, the marketing of competitive fuels, state and federal
regulation  of oil  and  gas  production  and  distribution  and  other  matters
affecting the availability of a ready market. All of these factors are extremely
volatile.

               Torch Operating Company,  Samson Production  Services Company and
Exxon  Company,  USA  accounted  for  45%,  30% and  19%,  respectively,  of the
Company's  total sales in 1996.  Torch Operating  Company and Samson  Production
Services Company accounted for 53% and 35%, respectively, of the Company's total
sales in 1995. No other  purchaser  individually  accounted for more than 10% of
such sales.  Although the Company marketed a significant portion of its sales to
the above noted companies, such a concentration does not pose a significant risk
due to the commodity nature of the Company's products.

               The  Company's  operators of the  properties  are noted in Item 2
below.  Although a significant portion of the Company's properties were operated
by a limited number of operators, this concentration does not pose a significant
risk since the Company's rights are secured by joint operating agreements.

Environmental and Conservation Regulation

               State  regulatory  authorities in the states in which the Company
owns net profits  interests in producing  properties  are  empowered to make and
enforce  regulations to prevent waste of oil and gas and to protect  correlative
rights  and  opportunities  to  produce  oil  and  gas for  owners  of a  common
reservoir.  Each of such regulatory authorities also regulates the amount of oil
and gas  produced  by  assigning  allowable  rates of  production,  which may be
increased  or  decreased  in  accordance  with supply and  demand.  Requirements
regarding the  prevention  and clean-up of pollution  and similar  environmental
matters are also generally  applicable.  The costs, if any, that may be incurred
in this regard cannot be predicted.

               The  existence of such  regulations  has had no material  adverse
effects on the Company's  operations to date, and the cost of compliance has not
yet been material.  There are no material administrative or judicial proceedings
arising under such laws or regulations pending against the Company.  The Company
is unable to assess or predict the impact that compliance with environmental and
pollution control laws and regulations may have on its future operation, capital
expenditures, earnings or competitive position.

Tax Laws

               The  operations of the Company are affected by the federal income
tax laws  contained  in the  Internal  Revenue  Code of 1986,  as  amended  (the
"Code").  In general,  the limited  partners of the Company will generate income
from the receipt of royalties and net profits  interests and will be entitled to
a depletion

                                       I-2

<PAGE>



deduction.  Net income,  if any, will  generally be  characterized  as portfolio
income  under  the Code and will be taxed in the same  manner as  dividends  and
interest.

               Partnerships  with interests that are "publicly traded" are taxed
as  corporations  unless at least 90% of their  income is  "qualifying  income."
Passive income or loss from publicly traded  partnerships  that are not taxed as
corporations  generally  cannot be applied  against  passive income or loss from
other  sources.  As  stated  in  Item  5 of  this  Annual  Report,  there  is no
established  public  trading  market  for  the  Company's  limited   partnership
interests.  In addition,  the Company derives more than 90% of its income within
the meaning of section 7704(d) of the Code. Therefore, the Company should not be
affected by the publicly traded partnership rules.


Item 2.        Description of Property

               Presented   below  is  a  summary  of  the   Company's   property
acquisitions.

               PECAN ISLAND acquisition. Mineral interests and royalty interests
in 3 gas wells were  acquired  from Naomi Morel Kiern  effective  May 1988 for a
purchase price of $136,800.  These wells are located in North Pecan Island Field
in Vermilion  Parish,  Louisiana.  The Pecan Island  acquisition  is operated by
Exxon Corporation.  The Company owns a .80% royalty interest in the wells in the
Pecan Island acquisition at December 31, 1996.

               CORINNE  acquisition.  The Company  acquired  royalty and mineral
interests in 16 wells in Corinne Field,  Monroe County,  Mississippi,  effective
July 1,  1988  from  Lehndorff  of  Dallas,  Texas  for  $532,730.  The  Corinne
acquisition  is operated by Samson  Resources  Corp.  The Company  owns  royalty
interests ranging from .04% to 2.96% in the wells in the Corinne  acquisition at
December 31, 1996.

               EAST  CAMERON  acquisition.  The Company  acquired an  overriding
royalty  interest  in the State Lease 11508  located in East  Cameron  Block 17,
offshore  Louisiana.  This  interest  was  acquired  from John Warren  Doyle for
$54,500  effective  October 1988.  The East Cameron  acquisition  is operated by
Torch  Operating Co. and Oryx Energy Corp. The Company owns  overriding  royalty
interests  ranging from .02% to .5% in the East Cameron  acquisition at December
31, 1996.

               BARNES  ESTATE  acquisition.  Effective  February  1,  1989,  net
profits  royalty  interests in 5 oil and gas wells in  Brettchance  Field,  Webb
County,  Texas were purchased for $302,806.  Enex has assumed operation of these
wells.  The Company owns net profits  royalty  interests  ranging from 1.625% to
13.0% in the wells in the Barnes Estate acquisition at December 31, 1996.

               RIGNEY  acquisition.  This  acquisition  consists  of  overriding
royalty interests in 9 wells located in 4 counties in Michigan.  These interests
were acquired from M. Spencer Rigney et ux for $31,500  effective March 1, 1989.
The Rigney  acquisition is operated by Terra Energy,  Ltd, West Bay Exploration,
Northern Processors,  Inc. and Somoco, Inc. Effective August 1, 1996 the Company
sold its interest in the Spider Lake 3-2 well for $1,640. The Company recognized
a gain of $209 from the sale.  The Company  owns  overriding  royalty  interests
ranging from .01% to .51% in the Rigney acquisition at December 31, 1996.

                                       I-3

<PAGE>


               BAGLEY acquisition.  Net profits royalty interests in 7 oil wells
located in Bagley Field,  Otsego  County,  Michigan,  were acquired for $249,667
effective  July 1989. The Bagley  acquisition is operated by Terra Energy,  Ltd.
The Company owns net profits royalty  interests  ranging from 1.56% to 1.575% in
the wells in the Bagley acquisition at December 31, 1996.

               Purchase  price as used above is  defined as the actual  contract
price plus finders' fees, if  applicable.  Miscellaneous  acquisition  expenses,
subsequent capital additions, etc. are not included.

Oil and Gas Reserves

               For quantitative  information regarding the Company's oil and gas
reserves,  please see  Supplementary  Oil and Gas Information and related tables
which follow the Notes to  Financial  Statements  in Item 7 of this report.  The
Company has not filed any current oil and gas reserve  estimates or included any
such  estimates in reports to any federal or foreign  governmental  authority or
agency, including the Securities and Exchange Commission.

               Proved  oil  and  gas  reserves  reported  herein  are  based  on
engineering reports prepared by the petroleum engineering  consulting firm of H.
J. Gruy and Associates,  Inc. The reserves included in this report are estimates
only and should not be  construed as exact  quantities.  Future  conditions  may
affect  recovery of  estimated  reserves  and  revenue,  and all reserves may be
subject to  revision  as more  performance  data  become  available.  The proved
reserves used in this report conform to the applicable  definitions  promulgated
by the Securities and Exchange Commission. No major discovery or other favorable
or adverse  event  that  could  potentially  cause a  significant  change in the
estimated proved reserves has occurred since December 31, 1996.

Net Oil and Gas Production

               The following  table shows for the years ended  December 31, 1996
and 1995, the approximate  production  attributable to the Company's oil and gas
interests. The figures in the table represent "net production"; i.e., production
owned by the Company and produced to its interest  after  deducting  royalty and
other similar interests. All production occurred in the United States.


                                                           1996           1995
Crude oil and condensate (Bbls).......................    1,120            915
Natural gas (Mcf).....................................   47,767         44,632




                                       I-4

<PAGE>



                  The  following  table sets forth the  Company's  average sales
price per barrel of oil,  per Mcf of gas, and average  production  cost per unit
produced for the years ended  December 31, 1996 and 1995. The average prices are
lower than the average  market prices for oil and gas as they are computed using
the net revenues  received  from the Company's  ownership of net profit  royalty
interests.


                                                     1996          1995
Average sales price per barrel of oil........... $  16.26       $ 14.70
Average sales price per Mcf of gas..............     2.11          1.23
Average production taxes per equivalent
   barrel of production.........................     0.60          0.61


Item 3.           Legal Proceedings

                  There are no material  pending legal  proceedings to which the
Company is a party.


Item 4.           Submission of Matters to a Vote of Security Holders

                  No matter was submitted to a vote of security  holders  during
the fourth quarter of the fiscal year covered by this report.


                                       I-5

<PAGE>



                                     PART II


Item 5.      Market for Common Equity and Related Security Holder Matters

Market Information

             There is no  established  public  trading  market for the Company's
outstanding limited partnership interests.



Number of Equity Security Holders

                                               Number of Record Holders
               Title of Class                    (as of March 1, 1997)
             -----------------                 --------------------------


          General Partner's Interests                      1

          Limited Partnership Interests                   135



Dividends

          The Company made cash  distributions to partners of $4 and $9 per $500
investment in 1996 and 1995, respectively.  The Company temporarily discontinued
the payment of  distributions  in the third quarter of 1995. A distribution  was
made in the fourth quarter of 1996.  Future  distributions  are dependent  upon,
among other  things,  an increase in the prices  received  for oil and gas.  The
Company will  continue to recover its reserves and reduce  obligations  in 1997.
Based upon current  projected  cash flows from its property,  it does not appear
that the Company  will have  sufficient  net cash flow after debt service to pay
distributions in the near future.


                                      II-1

<PAGE>



Item 6.     Management's Discussion and Analysis or Plan of Operation

Results of Operations

            This  discussion  should be read in  conjunction  with the financial
statements of the Company and the notes thereto included in this Form 10-KSB.

            Oil and gas sales in 1996 were  $118,862 as compared with $68,527 in
1995.  This  represents  an increase of $50,335 or 73%.  Oil sales  increased by
$4,766 or 35%. A 22%  increase  in oil  production  caused  sales to increase by
$3,014. An 11% increase in the average oil net sales price increased sales by an
additional  $1,752.  Gas sales increased by $45,569 or 83%. A 7% increase in gas
production  increased  sales by $3,856.  A 72% increase in average gas net sales
prices  increased sales by an additional  $41,713.  The increases in oil and gas
production  were  primarily  due to  higher  production  from the  Pecan  Island
acquisition  which had new wells  drilled on it in 1996.  The  increases  in the
average net oil and gas sales prices were due to  relatively  higher net profits
royalty payments  received from the Barnes Estate  acquisition,  which had lower
operating  costs in 1996,  coupled with higher prices in the overall  market for
the sale of oil and gas.

            Depletion expense decreased to $25,415 in 1996 from $48,531 in 1995.
This  represents a decrease of $23,116 or 48%. A 52%  decrease in the  depletion
rate reduced depletion expense by $27,346. This decrease was partially offset by
the changes in production,  noted above.  The decrease in the depletion rate was
primarily due to the lower  property basis  resulting from the  recognition of a
$52,602  impairment  of property in the first  quarter of 1996,  as noted below,
coupled with upward revisions of the oil and gas reserves during 1996.

            The Financial  Accounting  Standards  Board has issued  Statement of
Financial  Accounting Standard ("SFAS") No. 121,  "Accounting for the Impairment
of  Long-Lived  Assets  and for  Long-Lived  Assets to be  Disposed  Of,"  which
requires  certain  assets  to be  reviewed  for  impairment  whenever  events or
circumstances indicate the carrying amount may not be recoverable. Prior to this
pronouncement,  the Company  assessed  properties  on an aggregate  basis.  Upon
adoption of SFAS 121, the Company  began  assessing  properties on an individual
basis, wherein total capitalized costs may not exceed the property's fair market
value.  The fair market value of each property was  determined by H. J. Gruy and
Associates,  ("Gruy").  To determine the fair market value,  Gruy estimated each
property's oil and gas reserves, applied certain assumptions regarding price and
cost  escalations,  applied a 10% discount factor for time and certain  discount
factors for risk,  location,  type of ownership interest,  category of reserves,
operational  characteristics,  and other factors.  In the first quarter of 1996,
the Company recognized a non-cash  impairment of $52,602 for certain oil and gas
properties  due to changes in the overall market for the sale of oil and gas and
significant  decreases in the projected production from certain of the Company's
oil and gas properties.

            Effective August 1, 1996 the Company sold its interest in the Spider
Lake 3-2 well for $1,640.  The Company  recognized a gain of $209 from the sale.
The impact of these sales on current and future net revenues are not expected to
be material,  as such interests  represented  approximately 1% of historical and
future net revenues.

            General and administrative expenses were $30,690 in 1996 as compared
with $35,296 in 1995.  This  decrease of $4,606 or 13% was primarily due to less
staff time being required to manage the Company's operations in 1996.



                                      II-2

<PAGE>



Capital Resources and Liquidity

            The Company's  cash flows from  operations is a direct result of the
amount  of net  proceeds  realized  from  the  sale of oil  and gas  production.
Accordingly,  the changes in cash flows from 1995 to 1996 are due to the changes
in oil and gas sales described above. It is the general  partner's  intention to
distribute  substantially  all of the Company's  available net cash flows to the
Company's partners.

            The Company will continue to recover its reserves and  distribute to
the partners the net proceeds  realized from the sale of oil and gas  production
after payment of debt. The Company plans to repay the amount owed to the general
partner over a two year period.  Distributions  decreased  from 1995 to 1996 due
primarily to the repayment of $40,095 of debt payable to the general  partner in
1996 as  compared  to  repayment  of $18,402 in 1995.  The  Company  temporarily
discontinued  the  payment of  distributions  in the third  quarter  of 1995.  A
distribution was made in the fourth quarter of 1996.  Future  distributions  are
dependent  upon among other things,  an increase in the prices  received for oil
and gas.  The  Company  will  continue to recover  its  reserves  and reduce its
obligations  in  1997.  The  Company  does not  intend  to  purchase  additional
properties or fund extensive development of existing oil and gas properties, and
as such; has no long-term  liquidity needs.  The Company's  projected cash flows
from operations will provide  sufficient  funding to pay its operating  expenses
and debt  obligations.  The general  partner does not intend to  accelerate  the
repayment of the debt beyond the cash flow provided by operating,  financing and
investing activities. Based upon current projected cash flows from its property,
it does not appear that the  Company  will have  sufficient  net cash flow after
debt service to pay distributions in the near future.

                                      II-3

<PAGE>



Item 7.      Financial Statements and Supplementary Data


INDEPENDENT AUDITORS' REPORT

The Partners
Enex Income and Retirement Fund -
  Series 3, L.P.:


We have audited the  accompanying  balance  sheet of Enex Income and  Retirement
Fund - Series 3, L.P. (a New Jersey limited partnership) as of December 31, 1996
and the related statements of operations, changes in partners' capital, and cash
flows for each of the two years in the period ended  December  31,  1996.  These
financial  statements  are the  responsibility  of the  general  partner of Enex
Income and Retirement  Fund Series 3, L.P. Our  responsibility  is to express an
opinion on the financial statements based on our audits.

We  conducted  our  audits  in  accordance  with  generally   accepted  auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our  opinion,  such  financial  statements  present  fairly,  in all material
respects,  the financial position of Enex Income and Retirement Fund - Series 3,
L.P. at December 31, 1996 and the results of its  operations  and its cash flows
for each of the two years in the period ended  December  31, 1996 in  conformity
with generally accepted accounting principles.


DELOITTE & TOUCHE  LLP




Houston, Texas
March 18, 1997

                                      II-4

<PAGE>
ENEX INCOME AND RETIREMENT FUND - SERIES 3, L.P.

BALANCE SHEET, DECEMBER 31, 1996
----------------------------------------------------------------------------
<TABLE>
<CAPTION>

ASSETS
                                                                1996
                                                       ---------------------
CURRENT ASSETS:
<S>                                                    <C>
  Cash                                                 $              8,244
  Accounts receivable - oil & gas sales                              34,657
                                                       ---------------------

Total current assets                                                 42,901
                                                       ---------------------

OIL & GAS PROPERTIES
  (Successful efforts accounting method) - Proved
   mineral interests                                              1,312,406
  Less  accumulated depletion                                     1,150,513
                                                       ---------------------

Property, net                                                       161,893
                                                       ---------------------

TOTAL                                                  $            204,794
                                                       =====================

LIABILITIES AND PARTNERS' CAPITAL

CURRENT LIABILITIES:
   Accounts payable                                    $              2,178
   Payable to general partner                                        42,408
                                                       ---------------------

Total current liabilities                                            44,586
                                                       ---------------------

PARTNERS' CAPITAL:
   Limited partners                                                 150,235
   General partner                                                    9,973
                                                       ---------------------

Total partners' capital                                             160,208
                                                       ---------------------

TOTAL                                                  $            204,794
                                                       =====================
</TABLE>


Number of $500 Limited Partner units outstanding                      2,988



See accompanying notes to financial statements.
----------------------------------------------------------------------------

                                      II-5

<PAGE>
ENEX INCOME AND RETIREMENT FUND - SERIES 3, L.P.

STATEMENTS OF OPERATIONS
FOR THE TWO YEARS ENDED DECEMBER 31, 1996
----------------------------------------------------------------------------
<TABLE>
<CAPTION>

                                                  1996                  1995
                                          -------------------    -------------------

REVENUES:
<S>                                       <C>                         <C>
  Oil and gas sales                       $          118,862          $      68,527
                                          -------------------    -------------------

EXPENSES:
  Depletion                                           25,415                 48,531
  Impairment of property                              52,602                      -
  Production taxes                                     5,446                  5,127
  General and administrative:
    Allocated from general partner                    28,526                 30,983
    Direct expense                                     2,164                  4,313
                                          -------------------    -------------------

Total expenses                                       114,153                 88,954
                                          -------------------    -------------------

INCOME (LOSS) FROM OPERATIONS                          4,709                (20,427)
                                          -------------------    -------------------

OTHER INCOME
  Gain on sale of property                               209                      -
                                          -------------------    -------------------

NET INCOME (LOSS)                         $            4,918         $      (20,427)
                                          ===================    ===================
</TABLE>





See accompanying notes to financial statements.
----------------------------------

                                      II-6
<PAGE>
ENEX INCOME AND RETIREMENT FUND - SERIES 3, L.P.

STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
FOR THE TWO YEARS ENDED DECEMBER 31, 1996
----------------------------------------------------------------------------
<TABLE>
<CAPTION>
                                                                                                                       PER $500
                                                                                                                       LIMITED
                                                                                                                       PARTNER
                                                                             GENERAL             LIMITED               UNIT OUT-
                                                         TOTAL               PARTNER            PARTNERS                STANDING
                                                   -----------------    -----------------    -----------------    -----------------

<S>                                                   <C>                   <C>              <C>                  <C>
BALANCE, JANUARY 1, 1995                              $     220,414         $      3,340     $        217,074     $             72

CASH DISTRIBUTIONS                                          (30,255)              (3,027)             (27,228)                  (9)

NET INCOME (LOSS)                                           (20,427)               2,811              (23,238)                  (8)
                                                   -----------------    -----------------    -----------------    -----------------

BALANCE, DECEMBER 31, 1995                                  169,732                3,124              166,608                   55

CASH DISTRIBUTIONS                                          (14,442)              (1,444)             (12,998)                  (4)

NET INCOME (LOSS)                                             4,918                8,293               (3,375)                  (1)
                                                   -----------------    -----------------    -----------------    -----------------

BALANCE, DECEMBER 31, 1996                           $      160,208         $      9,973     $        150,235 (1) $             50
                                                   =================    =================    =================    =================
</TABLE>



(1)  Includes 505 units purchased by the general partner as a limited partner.




See accompanying notes to financial statements.
------------------------------------------------------------------------------

                                      II-7

<PAGE>

ENEX INCOME AND RETIREMENT FUND - SERIES 3, L.P.

STATEMENTS OF CASH FLOWS
FOR THE TWO YEARS ENDED DECEMBER 31, 1996
------------------------------------------------------------------------------
<TABLE>
<CAPTION>
                                                                    1996                    1995
                                                            -------------------      -------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S>                                                         <C>                           <C>
Net income (loss)                                           $            4,918            $     (20,427)
                                                            -------------------      -------------------

Adjustments to reconcile net income (loss) to net cash
   provided by operating activities
  Depletion                                                             25,415                   48,531
  Impairment of property                                                52,602                        -
  Gain on sale of property                                                (209)                       -
(Increase) decrease in:
  Accounts receivable - oil & gas sales                                (21,496)                  13,677
Increase (decrease) in:
   Accounts payable                                                     (2,114)                   1,383
   Payable to general partner                                          (40,095)                 (18,402)
                                                            -------------------      -------------------

Total adjustments                                                       14,103                   45,189
                                                            -------------------      -------------------

Net cash provided by operating activities                               19,021                   24,762
                                                            -------------------      -------------------

CASH FLOWS FROM INVESTING ACTIVITIES:
  Proceeds from sale of property                                         1,640                        -
                                                            -------------------      -------------------

CASH FLOWS FROM FINANCING ACTIVITIES:
    Cash distributions                                                 (14,442)                 (30,255)
                                                            -------------------      -------------------

NET INCREASE (DECREASE) IN CASH                                          6,219                   (5,493)

CASH AT BEGINNING OF YEAR                                                2,025                    7,518
                                                            -------------------      -------------------

CASH AT END OF YEAR                                         $            8,244            $       2,025
                                                            ===================      ===================
</TABLE>


See accompanying notes to financial statements.
----------------------------------------------------------------------------

                                      II-8

<PAGE>

ENEX INCOME AND RETIREMENT FUND - SERIES 3, L.P.

NOTES TO FINANCIAL STATEMENTS
------------------------------------------------------------------------------
FOR THE TWO YEARS ENDED DECEMBER 31, 1996



1.           PARTNERSHIP ORGANIZATION

             Enex Income and Retirement Fund Series 3, L.P. (the  "Company"),  a
             New Jersey limited  partnership,  commenced  operations on December
             30, 1987 for the purpose of  acquiring  non-operating  interests in
             producing   oil  and  gas   properties.   Total   limited   partner
             contributions were $1,493,792,  of which $14,938 was contributed by
             Enex Resources Corporation ("Enex"), the general partner.

             In  accordance  with the  partnership  agreement,  the Company paid
             syndication  fees  and  due  diligence  expenses  of  $154,825  for
             solicited   subscriptions   to  Enex  Securities   Corporation,   a
             subsidiary of Enex, and reimbursed Enex for  organization  expenses
             of approximately $45,000.

             The Company owns only non-operating  interests in producing oil and
             gas  properties.  Such interests  typically  entitle the Company to
             receive its pro rata share of net profits  and  royalties  from the
             underlying  properties without obligating the Company to develop or
             operate the properties or directly bear any share of development or
             operating costs.

             Information  relating  to the  allocation  of  costs  and  revenues
             between Enex, as general  partner,  and the limited  partners is as
             follows:
                                                                      Limited
                                                         Enex         Partners

             Commissions and selling expenses                           100%
             Company reimbursement of organization
               expense                                                  100%
             Company property acquisition                               100%
             General and administrative costs             10%            90%
             Revenues from temporary investment
               of partnership capital                                   100%
             Revenues from producing properties           10%            90%

             At the point in time  when the cash  distributions  to the  limited
             partners  equal  their  subscriptions  ("payout"),   revenues  from
             producing  properties and general and administrative  costs will be
             allocated  15% to  the  general  partner  and  85%  to the  limited
             partners.


                                      II-9

<PAGE>




2.           SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

             Oil and Gas  Properties - The Company uses the  successful  efforts
             method of accounting  for its oil and gas  operations.  Capitalized
             costs are  amortized  on the  units-of-production  method  based on
             estimated total proved  reserves.  The acquisition  costs of proved
             oil and gas properties are  capitalized and  periodically  assessed
             for impairments.

             The Financial  Accounting  Standards Board has issued  Statement of
             Financial Accounting Standard ("SFAS") No. 121, "Accounting for the
             Impairment of  Long-Lived  Assets and for  Long-Lived  Assets to be
             Disposed  Of," which  requires  certain  assets to be reviewed  for
             impairment  whenever events or circumstances  indicate the carrying
             amount may not be  recoverable.  Prior to this  pronouncement,  the
             Company assessed properties on an aggregate basis. Upon adoption of
             SFAS 121, the Company began  assessing  properties on an individual
             basis,   wherein  total   capitalized  costs  may  not  exceed  the
             property's  fair  market  value.  The  fair  market  value  of each
             property was determined by H. J. Gruy and Associates,  ("Gruy"). To
             determine the fair market value, Gruy estimated each property's oil
             and gas reserves,  applied certain assumptions  regarding price and
             cost  escalations,  applied  a 10%  discount  factor  for  time and
             certain  discount  factors for risk,  location,  type of  ownership
             interest, category of reserves,  operational  characteristics,  and
             other factors. In the first quarter of 1996, the Company recognized
             a non-cash impairment of $52,602 for certain oil and gas properties
             due to  changes in the  overall  market for the sale of oil and gas
             and significant  decreases in the projected production from certain
             of the Company's oil and gas properties.

             Cash Flows - The  Company  has  presented  its cash flows using the
             indirect method and considers all highly liquid investments with an
             original maturity of three months or less to be cash equivalents.

             General and  Administrative  Expenses - The Company  reimburses the
             General Partner for direct costs and administrative  costs incurred
             on its behalf.  Administrative  costs  allocated to the Company are
             computed  on a cost  basis in  accordance  with  standard  industry
             practices  by  allocating  the time spent by the General  Partner's
             personnel  among  all  projects  and by  allocating  rent and other
             overhead on the basis of the relative direct time charges.

             Uses of Estimates - The preparation of the 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 the reported  amounts of revenue and expenses during
             the  reporting  periods.  Actual  results  could  differ from these
             estimates.

3.           FEDERAL INCOME TAXES

             General - The Company is not a taxable  entity for  federal  income
             tax purposes. Such taxes are liabilities of the individual partners
             and the  amounts  thereof  will vary  depending  on the  individual
             situation of each partner.  Accordingly,  there is no provision for
             income taxes in the accompanying financial statements.


                                      II-10

<PAGE>

Set forth below is a  reconciliation  of net  income(loss)  as  reflected in the
accompanying  financial  statements and net income (loss) for federal income tax
purposes for the year ended December 31, 1996:
<TABLE>
<CAPTION>

                                                                                     Allocable to                    Per $500
                                                                      -------------------------------------
                                                                                                                     Limited
                                                                            General            Limited             Partner Unit
                                                       TOTAL                Partner           Partners             Outstanding
                                                 -----------------    ------------------ ------------------   ---------------------
Net income (loss) as reflected in the
<S>                                              <C>                  <C>                <C>                  <C>
     accompanying financial statements           $          4,918     $           8,293  $          (3,375)   $                 (1)
Reconciling items:
Difference in gain on property sales
     for federal income tax purposes and
     the amount computed for financial
     reporting purposes                                       201                   (21)               222                       -
  Difference in depletion computed
     for federal income tax purposes
     and the amount computed for
     financial reporting purposes                          29,630                     -             29,630                      10
                                                 -----------------    ------------------ ------------------   ---------------------

Net income for federal
   income tax purposes                           $         34,749     $           8,272  $          26,477    $                  9
                                                 =================    ================== ==================   =====================
</TABLE>


Net income for federal  income tax  purposes is a summation  of ordinary  income
(loss), portfolio income (loss), cost depletion and intangible drilling costs as
presented in the Company's federal income tax return.

Set forth below is a reconciliation  between  partners'  capital as reflected in
the accompanying  financial  statements and partners' capital for federal income
tax purposes as of December 31, 1996:
<TABLE>
<CAPTION>

                                                                                     Allocable to                    Per $500
                                                                      -------------------------------------
                                                                                                                     Limited
                                                                            General            Limited             Partner Unit
                                                       TOTAL                Partner           Partners             Outstanding
                                                 -----------------    ------------------ ------------------   ---------------------
Partners' capital as reflected in the
<S>                                              <C>                  <C>                <C>                  <C>
     accompanying financial statements           $        160,208     $           9,973  $         150,235    $                 50
Reconciling items:
  Difference in accumulated
     depletion and amortization
     for financial reporting and
     federal income tax purposes                           57,584                     -             57,584                      19
Accumulated difference in property
     sales for financial reporting purposes
     and for federal income tax purposes                      201                   (21)               222                       -
  Commissions and syndication
     fees capitalized for federal
     income tax purposes                                  154,825                     -            154,825                      52
                                                 -----------------    ------------------ ------------------   ---------------------

Partners' capital for federal
     income tax purposes                         $        372,818     $           9,952  $         362,866    $                121
                                                 =================    ================== ==================   =====================
</TABLE>

                                      II-11
<PAGE>



4.           PAYABLE TO GENERAL PARTNER

             The payable to general  partner  primarily  consists of general and
             administrative  expenses  allocated  to the Company by Enex for its
             ongoing  operations.  The Company plans to repay the amount owed to
             the general partner over a period of two years.

5.           REPURCHASE OF LIMITED PARTNER INTERESTS

             In accordance with the partnership  agreement,  the general partner
             is required to purchase limited partner interests (at the option of
             the  limited  partners)  at annual  intervals  beginning  after the
             second year  following the  formation of the Company.  The purchase
             price,  as  specified  in  the  partnership  agreement,   is  based
             primarily  on reserve  reports  prepared by  independent  petroleum
             engineers as reduced by a specified risk factor.

6.           SIGNIFICANT PURCHASERS

             Torch Operating  Company,  Samson  Production  Services Company and
             Exxon Company, USA accounted for 45%, 30% and 19%, respectively, of
             the  Company's  total sales in 1996.  Torch  Operating  Company and
             Samson  Production  Services  Company  accounted  for 53% and  35%,
             respectively,  of the  Company's  total  sales  in  1995.  No other
             purchaser individually accounted for more than 10% of such sales.

7.           SALE OF PROPERTY

             Effective  August  1, 1996 the  Company  sold its  interest  in the
             Spider Lake 3-2 well for $1,640.  The Company  recognized a gain of
             $209 from the sale.

                                      II-12

<PAGE>
ENEX INCOME AND RETIREMENT FUND - SERIES 3, L.P.

SUPPLEMENTARY OIL AND GAS INFORMATION
FOR THE TWO YEARS ENDED DECEMBER 31, 1996
-----------------------------------------------------------------------------

Proved Oil and Gas Reserve Quantities (Unaudited)

The following  presents an estimate of the Company's  proved oil and gas reserve
quantities  and changes  therein  for each of the two years in the period  ended
December 31, 1996.  Oil reserves are stated in barrels  ("BBLS") and natural gas
in thousand cubic feet ("MCF"). The amounts per $500 limited partner unit do not
include a potential 5% reduction after payout. All of the Company's reserves are
located within the United States.
<TABLE>
<CAPTION>

                                                                          Per $500                                  Per $500
                                                                           Limited              Natural              Limited
                                                       Oil              Partner Unit              Gas             Partner Unit
                                                      (BBLS)             Outstanding             (MCF)             Outstanding
                                                 -----------------    ------------------   ------------------   ------------------

PROVED DEVELOPED AND
    UNDEVELOPED RESERVES:

<S>                                                         <C>                       <C>            <C>                       <C>
January 1, 1995                                             4,960                     1              288,752                   87

    Revisions of previous estimates                           443                     -               18,998                    6
    Production                                               (915)                    -              (44,632)                 (14)
                                                 -----------------    ------------------   ------------------   ------------------

December 31, 1995                                           4,488                     1              263,118                   79

    Revisions of previous estimates                         1,036                     -               69,237                   21
    Production                                             (1,120)                    -              (47,767)                 (14)
                                                 -----------------    ------------------   ------------------   ------------------

December 31, 1996                                           4,404                     1              284,588                   86
                                                 =================    ==================   ==================   ==================



PROVED DEVELOPED RESERVES:

January 1, 1995                                             4,960                     1              288,752                   87
                                                 =================    ==================   ==================   ==================

December 31, 1995                                           4,488                     1              263,118                   79
                                                 =================    ==================   ==================   ==================

December 31, 1996                                           4,404                     1              284,588                   86
                                                 =================    ==================   ==================   ==================
</TABLE>


                                      II-13


<PAGE>

Item 8.      Changes In and Disagreements With Accountants on Accounting and
               Financial Disclosure


             Not Applicable


                                      II-14

<PAGE>



                                    PART III

------------------------------------------------------------------------------
Item 9.       Directors, Executive Officers, Promoters and Control Persons;
              Compliance with Section 16(a) of the Exchange Act

              The Company's sole General Partner is Enex Resources  Corporation,
a Delaware corporation.  The Company has no Directors or executive officers. The
Directors and executive officers of Enex are:

              Gerald B. Eckley.  Mr.  Eckley,  age 70, has served as a Director,
President and Chief Executive Officer of the General Partner since its formation
in 1979.  He was  employed by Shell Oil Company  from 1951 to 1967 and served in
managerial  capacities  from 1959 to 1967. From 1967 to 1969, he was Director of
Fund  Raising at the  University  of  Oklahoma  and from 1969 to 1971,  was Vice
President of Land and Operations for Imperial American  Management  Company.  In
1971, Mr. Eckley was a petroleum consultant and in 1972-1973 was General Counsel
and Executive  Director of the Oil Investment  Institute.  From 1973 to 1974, he
was Manager of Oil  Properties,  Inc. and from 1974 to 1976, was Vice President,
Land and Joint Ventures for Petro-Lewis  Corporation.  From 1977 to August 1979,
Mr. Eckley was President of Eckley Energy, Inc., a company engaged in purchasing
and selling oil and gas properties.  Mr. Eckley  received an L.L.B.  degree from
the University of Oklahoma in 1951 and a Juris Doctor degree from the University
of Oklahoma in 1970.

              William C. Hooper,  Jr. Mr. Hooper, age 59, has been a Director of
the General  Partner  since its formation in 1979 and is a member of the General
Partner's Audit and Compensation and Options Committees.  In 1960 he was a staff
engineer in the Natural Gas Department of the Railroad Commission of Texas, with
principal  duties  involving  reservoir units and gas proration.  In 1961 he was
employed by the California  Company as a Drilling  Engineer and  Supervisor.  In
1963 he was employed as a Staff Engineer by California Research  Corporation and
in 1964 rejoined the  California  Company as a project  manager  having  various
duties involving  drilling and reservoir  evaluations.  In 1966 he was Executive
Vice  President  for Moran Bros.  Inc.,  coordinating  and  managing all company
activities,  drilling operations,  bidding and engineering.  From 1970 until the
present, he has been self-employed as a consulting  petroleum engineer providing
services to industry and  government  and engaged in business as an  independent
oil and gas operator and investor.  From 1975 to 1987 he was also a Director and
President of Verna Corporation,  a drilling contractor and service organization.
He received a B.S.  degree in Petroleum  Engineering in 1960 from the University
of Texas and an M.S. degree in Petroleum  Engineering  from that same University
in 1961.

              Stuart  Strasner.  Mr.  Strasner,  age 67, was a  Director  of the
General  Partner from its formation until October of 1986. He was reappointed to
the  Board on April  19,  1990 to fill a  vacancy.  He is a member  of the Audit
Committee. He is a professor of business law at Oklahoma City University and was
Dean of the law school at  Oklahoma  City  University  from July 1984 until June
1991.  Prior to July 1984, Mr. Strasner was an attorney in private practice with
McCollister,  McCleary, Fazio and Holliday in Oklahoma City, Oklahoma. From 1959
to 1974,  he was  employed  by various  banks,  bank  holding  companies  and an
insurance  company  in  executive  capacities.  From  1974  to  1978,  he  was a
consultant to various  corporations  such as insurance  companies,  bank holding
companies and small business investment companies. From 1978 until late 1981, he
was Executive  Director of the Oklahoma Bar  Association,  and from 1981 to 1983
was  a  Director  and  President  of  PRST  Enterprises,  Inc.,  a  real  estate
development  company.  Mr.  Strasner  holds an A.B.  degree from  Panhandle  A&M
College,  Oklahoma,  and a J.D. degree from the University of Oklahoma.  He is a
member  of the  Fellows  of the  American  Bar  Association  and a member of the
Oklahoma  Bar  Association.  Mr.  Strasner is also a director of Health  Images,
Inc., a public  company which  provides  fixed site magnetic  resonance  imaging
("MRI") services.


                                      III-1

<PAGE>



     Martin J. Freedman.  Mr. Freedman, age 72, was one of the General Partner's
founders  and a member of its Board of  Directors  as well as a board  member of
Enex Securities  Corporation until June of 1986. He was reappointed to the Board
on April 19,  1990 to fill a  vacancy.  He is a member of the  Compensation  and
Options  Committee.  He is  currently  President  of Freedman Oil & Gas Company,
engaged primarily in the management of its exploration and producing properties,
and the managing  partner  Martin J. Freedman & Company which has an interest in
approximately  one hundred  producing  oil and/or gas wells.  Mr.  Freedman is a
lifetime member of the Denver  Petroleum Club as well as being a lifetime member
of the Denver Association of Petroleum  Landmen.  He was an officer and Director
and/or  founder of several  former private and public  companies.  Mr.  Freedman
entered the oil and gas business in 1954 when he joined Mr.  Marvin Davis of the
Davis Oil Company.  In 1956, he became President of Central Oil  Corporation,  a
company engaged in oil and gas exploration.  From 1958 on, Mr. Freedman operated
as Martin J. Freedman Oil Properties and was President of Oil Properties,  Inc.,
a private corporation. Mr. Freedman attended Long Island University and New York
University.  He received a bachelor's degree in Psychology and also attended New
York University's graduate school.

              James Thomas Shorney.  Mr. Shorney, age 71, has been a Director of
the General Partner since April of 1990 and is a member of the  Compensation and
Options Committee. He has been a petroleum consultant and Secretary/Treasurer of
the Shorney Company, a privately held oil and gas exploration company, from 1970
to date. From 1970 to 1976, he also served as a petroleum consultant in Land and
Lease Research Analysis Studies for the GHK Company. He was an oil and gas lease
broker  from  1962 to 1970  and  employed  by  Shell  Oil  Company  in the  Land
Department  from 1954 to 1962.  Before  joining Shell Oil Company,  he served as
Public  Information  Officer  in the  U.S.  Army  Air  Force  from  1950 to 1953
including attending  Georgetown  University Graduate School in 1952. Mr. Shorney
graduated  from the  University of Oklahoma with a B.A.  degree in Journalism in
1950.  From 1943 to 1945,  he  served in the U.S.  Army Air Force as an air crew
member  on a  B-24  Bomber.  Mr.  Shorney  is a  member  of  the  Oklahoma  City
Association  of  Petroleum  Landmen  on  which he has  served  as  Director  and
Secretary/Treasurer.  He is an active  member  of the  American  Association  of
Petroleum Landmen. In 1975, Mr. Shorney was first listed in the London Financial
Times' Who's Who in World Oil and Gas.

     Robert D. Carl,  III.  Mr.  Carl,  age 43, was  appointed a Director of the
General Partner on July 30, 1991 and is a member of the Audit  Committee.  He is
President,  Chief Executive  Officer and Chairman of the Board of Health Images,
Inc., a public company whose securities are traded on NYSE, which provides fixed
site magnetic  resonance imaging ("MRI")  services.  From 1978 to 1981, Mr. Carl
also  served as  President  of Carl  Investment  Associates,  Inc. a  registered
investment  advisor.  In 1981,  Mr. Carl joined  Cardio-Tech,  Inc.,  as general
counsel  and as an officer and  Director.  Upon the sale and  reorganization  of
Cardio-Tech,  Inc.  into  Cardiopul  Technologies  in  1982,  he  served  as its
Executive  Vice  President  and as a  Director.  In March,  1985 he was  elected
President,  Chief Executive Officer and Chairman of Cardiopul Technologies which
spun off its  non-imaging  medical  services  business  and  changed its name to
Health  Images,  Inc.  Mr. Carl  received a B.A. in History  from  Franklin  and
Marshall  College,  Lancaster,  Pennsylvania  in  1975  and a  J.D.  from  Emory
University  School of Law,  Atlanta,  Georgia in 1978.  Mr. Carl is a trustee of
Franklin & Marshall College and is a member of the State Bar of Georgia.

              On January 4, 1996, the SEC filed a complaint in the United States
District  Court for the District of Columbia  against Mr. Carl alleging that Mr.
Carl violated  Section 16(a) of the Securities  Exchange Act of 1934  ("Exchange
Act"), and Rule 16a-2 and 16a-3 (and former Rule 16a-1)  thereunder,  by failing
to timely file reports concerning  thirty-eight  securities  transactions in his
mother's brokerage  accounts involving shares of Health Images,  Inc. stock. The
SEC took the position that because Mr. Carl (1) provided substantial

                                      III-2

<PAGE>



financial  support to his mother,  (2) commingled  his mother's  assets with his
own, (3) provided a substantial portion of the funds used to purchase the shares
in question, and (4) received from his mother a substantial portion of the sales
proceeds, he, therefore, had a pecuniary interest in, and was a beneficial owner
of, the shares in question.

              In response to the SEC's  action,  Mr.  Carl  disgorged  to Health
Images,  Inc.  approximately  $92,400 in short-swing profits from the trading in
his mother's account,  plus interest thereon of approximately  $52,600.  The SEC
further  requested the court to impose a $10,000 civil penalty  against Mr. Carl
pursuant to Section 21(d)(3) of the Exchange Act.  Without  admitting or denying
the  allegations  in the  complaint,  Mr. Carl consented to the entry of a final
judgement  imposing the $10,000  penalty.  On January 12, 1996, a federal  judge
entered the final judgement in this matter, and Mr. Carl has since filed amended
reports on Forms 4 and 5 reflecting these transactions in his mother's accounts.

              In   relation  to  the  same   matter,   the  SEC  has  issued  an
administrative  Order  pursuant to Section 21C of the  Exchange  Act against Mr.
Carl,  finding  that he  violated  Section  16(a) and the rules  thereunder  and
requiring  him to cease and desist from  committing  or causing any violation or
future violation of those provisions. Without admitting allegations in the SEC's
Order, Mr. Carl consented to the entry of the Order.

     Robert E. Densford.  Mr. Densford,  age 39, was appointed a Director of the
General  Partner  on  September  11,  1991.  He joined  the  General  Partner as
Controller  on May 1, 1985 and became Vice  President-  Finance,  Secretary  and
Treasurer  on March 1, 1989.  From  January  1983 to April  1985,  he was Senior
Accountant for Deloitte Haskins & Sells in Houston, Texas, auditing both closely
held and publicly owned oil and gas  companies.  From September 1981 to December
1982, he was a staff  accountant for Coopers & Lybrand in Houston.  Mr. Densford
is a C.P.A.  and holds a B.B.A.  degree in Accounting and an M.S.  degree in Oil
and Gas  Accounting  from Texas Tech  University and is a member of the American
Institute of Certified  Public  Accountants  and the Texas  Society of Certified
Public Accountants.

     James A. Klein. Mr. Klein, age 33, joined the General Partner as Controller
in February 1991. In June 1993, he was appointed President and Principal of Enex
Securities  Corporation.  From June 1988 to February  1991,  he was  employed by
Positron Corporation in Houston.  From July 1987 to May 1988, he was employed by
Transworld  Oil Company in Houston and from  September  1985 until July 1987, he
was an accountant with Deloitte Haskins & Sells in Houston,  Texas, auditing oil
and gas and oil service  companies.  Mr. Klein is a Certified Public  Accountant
and holds a B.A. in  Accounting  (1985)  from the  University  of Iowa.  He is a
member of the American  Institute of Certified  Public  Accountants and the Iowa
Society of Certified Public Accountants.

Item 10.      Executive Compensation

              The Company has no Directors or executive officers.

              The  Company  does not pay a  proportional  or fixed  share of the
compensation paid to the officers of the General Partner.

              The Company  reimburses  the General  Partner for direct costs and
administrative  costs incurred on its behalf.  Administrative costs allocated to
the Company are computed on a cost basis in accordance  with  standard  industry
practices by allocating the time spent by the General Partner's  personnel among
all  projects  and by  allocating  rent and other  overhead  on the basis of the
relative direct time charges.  The Company  incurred $28,526 and $30,983 of such
administrative   costs  payable  to  the  General  Partner  in  1996  and  1995,
respectively.

                                      III-3

<PAGE>



Item 11.      Security Ownership of Certain Beneficial Owners and Management

                                            $500 Limited
                           Name of          Partner Units             Percent
 Title of Class       Beneficial Owner     Owned Directly            of Class
 ---------------     -----------------     ---------------          ----------


 Limited Partner       Enex Resources                 505            16.9010%


Item 12.      Certain Relationships and Related Transactions

              See  the  Statements  of  Operations  included  in  the  Financial
Statements  in Item 7 of this  report for  information  concerning  general  and
administrative  costs incurred by Enex and allocated to the Company,  and Note 1
to  such  Financial  Statements  for  information  concerning  payments  to Enex
Securities  Corporation,  a  wholly  owned  subsidiary  of Enex  and to Enex for
certain offering and organization expenses incurred by the Company.

         See Item  Number 2 -  "Description  of  Property"  in this report for a
description of the properties  operated by Enex.  Enex operates such  properties
under the terms of a Joint Operating Agreement ("JOA"). Overhead charges allowed
to third  parties  under the JOA in  accordance  with the  Council of  Petroleum
Accountants  Societies are not charged to the Company. Such costs are considered
to be within the general and  administrative  overhead charges  allocated to the
Company.

Item 13.     Exhibits and Reports on Form 8-K
                                                                      Sequential
                                                                        Page No.

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


             (a)    Exhibits

                    (3)           (a)  Certificate  of Limited  Partnership,  as
                                  amended.  Incorporated by reference to Exhibit
                                  3(a) to the  Company's  Annual  Report on Form
                                  10-K for the year ended December 31, 1987.

                             (b)  Amended Agreement of Limited Partnership.
                                  Incorporated by reference to
                                  Exhibit 3(a) to Post-Effective Amendment No.
                                  2 to the Registration
                                  Statement on Form S-1 (No. 2-99874) of Enex
                                  Income and Retirement Fund
                                  filed with the Securities and Exchange
                                  Commission on April 22, 1987.

                    (4)      Not Applicable

                    (10)     Not Applicable

                    (11)     Not Applicable

                    (12)     Not Applicable

                    (13)     Not Applicable


                                      III-4

<PAGE>



                    (18)     Not Applicable

                    (19)     Not Applicable

                    (22)     Not Applicable

                    (23)     Not Applicable

                    (24)     Not Applicable

                    (25)     Not Applicable

                    (28)     Not Applicable

(b)          Reports on Form 8-K

                    No reports on Form 8-K were filed during the last quarter of
                    the period covered by this report.


                                      III-5

<PAGE>

                                SIGNATURES


     In accordance with Section 13 or 15 (d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.

                              ENEX INCOME AND RETIREMENT FUND -
                              SERIES 3, L.P.

                              By:  ENEX RESOURCES CORPORATION
                                   the General Partner




March 18, 1997                 By:  /s/ G. B. Eckley
                                   -----------------
                                       G. B. Eckley, President


     In  accordance  with the Exchange Act, this report has been signed below on
March 18, 1997, by the following persons in the capacities indicated.



ENEX RESOURCES CORPORATION         General Partner


By:     /s/     G. B. Eckley
                ------------
                G. B. Eckley, President


        /s/     G. B. Eckley       President, Chief Executive
                ------------       Officer and Director
                G. B. Eckley


        /s/     R. E. Densford      Vice President, Secretary, Treasurer, Chief
                --------------      Financial Officer and Director
                R. E. Densford


        /s/     James A. Klein      Controller and Chief Accounting Officer
                --------------
                James A. Klein

                                      S-1

<PAGE>

                                   /s/ Robert D. Carl, III

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

                                       Robert D. Carl, III       Director



                                   /s/ Martin J. Freedman

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

                                       Martin J. Freedman        Director


                                   /s/ William C. Hooper, Jr.

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

                                       William C. Hooper, Jr.    Director


                                   /s/ Tom Shorney

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

                                       Tom Shorney               Director


                                   /s/ Stuart Strasner

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

                                       Stuart Strasner           Director



                                       S-2
<PAGE>



<PAGE>