UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-Q
QUARTERLY SCHEDULE OF PORTFOLIO HOLDINGS OF REGISTERED
MANAGEMENT INVESTMENT COMPANY
Investment Company Act file number 811-21793
Name of Fund: BlackRock Enhanced Government Fund, Inc. (EGF)
Fund Address: 100 Bellevue Parkway, Wilmington, DE 19809
Name and address of agent for service: Donald C. Burke, Chief Executive
Officer, BlackRock Enhanced Government Fund, Inc., 800 Scudders Mill
Road, Plainsboro, NJ, 08536. Mailing address: P.O. Box 9011,
Princeton, NJ, 08543-9011
Registrant's telephone number, including area code: (800) 882-0052, Option 4
Date of fiscal year end: 12/31/2007
Date of reporting period: 07/01/2007 - 09/30/2007
Item 1 - Schedule of Investments
BlackRock Enhanced Government Fund, Inc.
Schedule of Investments as of September 30, 2007 (Unaudited) (in U.S. dollars)
Face Interest Maturity
Issue Amount Rate Date(s) Value
Government & Agency Obligations - 4.9%
Federal Farm Credit Bank $ 3,500,000 4.55% 6/08/2020 $ 3,299,156
Federal Home Loan Bank System 3,525,000 5.40 10/27/2011 3,555,308
U.S. Treasury Bonds 2,500,000 6.25 5/15/2030 2,971,875
1,500,000 4.50 2/15/2036 1,422,071
Total Government & Agency Obligations (Cost - $11,390,396) - 4.9% 11,248,410
Government Agency Mortgage-Backed Obligations - 96.5%
Fannie Mae Guaranteed Pass-Through Certificates 8,400,000 4.50 10/15/2022 (b) 8,087,621
1,914,917 4.66 7/01/2010 1,893,901
6,345,035 4.681 2/01/2013 6,276,183
30,354,938 5.00 11/01/2033 - 10/15/2037 (b) 29,042,083
7,939,300 5.24 4/01/2012 7,996,659
6,148,744 5.307 10/01/2035 (a) 6,123,233
49,828,657 5.50 10/15/2022 - 10/15/2037 (b) 48,897,216
2,661,518 5.707 2/01/2012 2,743,600
26,718,195 6.00 10/01/2035 - 10/15/2037 (b) 26,756,415
5,401,684 6.60 1/01/2011 5,576,659
Fannie Mae Trust 353-2 4,603,300 5.00 8/01/2034 (c) 1,213,991
367-2 4,287,889 5.50 1/25/2036 (c) 1,125,323
378-5 4,650,385 5.00 7/01/2036 (c) 1,145,699
2006-129-PA 4,081,094 5.50 7/25/2028 4,100,575
Freddie Mac Mortgage Participation Certificates 1,095,022 4.50 5/01/2034 1,019,187
19,408,295 5.00 5/01/2020 - 8/01/2037 18,620,678
4,340,102 5.014 10/01/2035 (a) 4,302,474
797,341 5.50 4/01/2037 780,744
2,500,000 6.00 10/01/2035 - 10/15/2037 (b) 2,502,345
4,200,000 6.50 10/15/2037 (b) 4,274,810
Freddie Mac Multiclass Certificates 232-IO 4,950,226 5.00 8/01/2035 (c) 1,303,445
2654-YD 6,995,600 5.00 12/15/2026 (c) 635,704
2659-IA 1,763,907 5.00 12/15/2021 (c) 29,314
2958-MD 5,000,000 5.50 1/15/2031 4,971,538
3042-EA 2,680,000 4.50 9/15/2035 2,443,417
3136-PD 1,674,840 6.00 12/15/2034 1,695,614
3183-KI 4,287,428 6.00 12/15/2034 (c) 702,764
Ginnie Mae MBS Certificates 2,857,856 5.00 11/15/2035 2,766,829
2,666,647 5.50 11/15/2035 2,631,186
Ginnie Mae Trust 2005-87-C 10,000,000 5.33 9/16/2034 (a) 9,910,285
2006-3-C 10,000,000 5.24 4/16/2039 (a) 9,503,225
2006-30-IO 8,900,154 0.80 5/16/2046 (a)(c) 479,496
Total Government Agency Mortgage-Backed Securities
(Cost - $219,730,951) - 96.5% 219,552,213
Non-Government Agency Mortgage-Backed Securities** - 8.1%
CS First Boston Mortgage Securities Corp.
Series 2005-11 Class 6A5 1,806,889 6.00 12/25/2035 1,828,043
Citigroup Commercial Mortgage Trust
Series 2007-C6 Class A4 475,000 5.889 6/10/2017 (a) 480,194
Countrywide Alternative Loan Trust
Series 2006-41CB Class 2A17 2,941,543 6.00 1/25/2037 2,970,050
First Horizon Alternative Mortgage Securities
Series 2007-FA2 Class 1A11 25,100,000 1.245 4/25/2037 (a)(c) 998,340
Greenwich Capital Commercial Funding Corp.
Series 2006-GG7 Class A4 1,500,000 6.11 7/10/2038 (a) 1,546,491
JPMorgan Chase Commercial Mortgage Securities Corp.
Series 2006-CB15 Class A4 2,500,000 5.814 6/12/2043 (a) 2,548,236
JPMorgan Chase Commercial Mortgage Securities Corp.
Series 2006-LDP7 Class A4 2,000,000 5.88 4/15/2045 (a) 2,056,451
JPMorgan Chase Commercial Mortgage Securities Corp.
Series 2007-CB20 Class A4 1,330,000 5.794 2/12/2051 (a) 1,336,570
Residential Asset Securitization Trust
Series 2004-A9 Class A3 18,883,262 1.83 12/25/2035 (a)(c) 725,180
Residential Funding Mortgage Securities I
Series 2006-S1 Class 1A5 1,549,302 5.25 1/25/2036 1,541,181
Wells Fargo Mortgage Backed Securities Trust
Series 2005-13 Class A1 2,456,452 5.00 11/25/2020 2,406,876
Total Non-Government Agency Mortgage-Backed Securities
(Cost - $17,870,211) - 8.1% 18,437,612
Issue
Asset-Backed Securities** - 2.1%
3,220,000 First Franklin Mortgage Loan Asset Backed
Certificates Series 2005-FF2 Class M2,
5.313% due 3/25/2035 (a) 2,993,684
2,000,000 Securitized Asset Backed Receivables LLC
Trust Series 2005-0P1 Class M2, 5.323%
due 1/25/2035 (a) 1,913,421
Total Asset-Backed Securities (Cost - $4,959,000) - 2.1% 4,907,105
Corporate Bonds - 3.4%
Electric Utilities - 0.9% 2,000,000 PPL Capital Funding, 6.70%
due 3/30/2067 (a) 1,921,600
Insurance - 2.5% 2,000,000 The Allstate Corp., 6.50%
due 5/15/2057 (a) 1,926,700
2,000,000 XL Capital Ltd. Series E, 6.50% (a)(f) 1,868,054
2,000,000 ZFS Finance USA Trust I, 6.50%
due 5/09/2037 (a)(d) 1,933,602
------------
5,728,356
Total Corporate Bonds (Cost - $7,930,520) - 3.4% 7,649,956
Preferred Securities
Capital Trusts - 1.7%
Consumer Finance - 0.9% 2,000,000 Capital One Capital III, 7.686%
due 8/15/2036 1,965,108
Diversified Financial Services - 0.8% 2,000,000 JPMorgan Chase Capital XXII, 6.45%
due 2/02/2037 1,843,118
Total Capital Trusts (Cost - $4,175,163) - 1.7% 3,808,226
Trust Preferreds - 2.4%
Capital Markets - 0.8% 2,000,000 Morgan Stanley Capital Trust VIII,
6.45% due 4/15/2067 1,790,400
Commercial Banks - 0.8% 2,000,000 Wachovia Capital Trust IX, 6.375%
due 6/01/2067 1,845,600
Media - 0.8% 2,000,000 Comcast Corp., 6.625% due 5/15/2056 1,876,800
Total Trust Preferreds (Cost - $5,982,207) - 2.4% 5,512,800
Total Preferred Securities (Cost - $10,157,370) - 4.1% 9,321,026
Number of
Contracts + Options Purchased
Options Purchased - 1.8%
Call Options Purchased 9 Receive a fixed rate of 5.895% and pay a floating rate based
on 3-month LIBOR, expiring August 2011, Broker JPMorgan Chase (e) 484,391
18 Receive a fixed rate of 5.495% and pay a floating rate based
on 3-month LIBOR, expiring May 2012, Broker Credit Suisse First
Boston International (e) 951,256
18 Receive a fixed rate of 5.725% and pay a floating rate based
on 3-month LIBOR, expiring May 2012, Broker Lehman Brothers
Special Financing (e) 828,384
------------
2,264,031
Put Options Purchased 9 Pay a fixed rate of 5.895% and receive a floating rate based
on 3-month LIBOR, expiring August 2011, Broker JPMorgan Chase (e) 341,728
18 Pay a fixed rate of 5.495% and receive a floating rate based
on 3-month LIBOR, expiring May 2012, Broker Credit Suisse First
Boston International (e) 714,330
18 Pay a fixed rate of 5.725% and receive a floating rate based
on 3-month LIBOR, expiring May 2012, Broker Lehman Brothers
Special Financing (e) 818,230
------------
1,874,288
Total Options Purchased (Premiums Paid - $3,573,570) - 1.8% 4,138,319
Total Investments Before TBA Sale Commitments and Options Written (Cost - $275,612,018) - 120.9% 275,254,641
Face Amount TBA Sale Commitments
$ 30,200,000 Fannie Mae Guaranteed Pass-Through Certificates, 5%
due 11/01/2033 - 10/15/2037 (28,902,950)
7,100,000 Fannie Mae Guaranteed Pass-Through Certificates, 6%
due 10/01/2035 - 10/15/2037 (7,110,948)
Total TBA Sale Commitments (Premiums Received - $36,301,403) - (15.8%) (36,013,898)
Number of
Contracts + Options Written
Options Written - (3.9%)
Call Options Written 100 Pay a fixed rated of 4.795% and received a floating rate based
on 3-month LIBOR, expiring October 2007, Broker Deutsche Bank
AG London (e) (530,600)
50 Pay a fixed rated of 4.805% and received a floating rate based
on 3-month LIBOR, expiring October 2007, Broker Lehman Brothers
Special Financing (e) (306,000)
11 Pay a fixed rate of 5.685% and receive a floating rate based
on 3-month LIBOR, expiring May 2010, Broker Lehman Brothers
Special Financing (e) (798,897)
50 Pay a fixed rate of 4.625% and receive a floating rate based
on 3-month LIBOR, expiring March 2008, Broker Deutsche Bank
AG London (e) (381,250)
11 Pay a fixed rate of 5.4475% and receive a floating rate based
on 3-month LIBOR, expiring May 2010, Broker Credit Suisse First
Boston International (e) (866,899)
36 Pay a fixed rate of 5.88% and receive a floating rate based
on 3-month LIBOR, expiring June 2008, Broker Deutsche Bank
AG London (e) (1,978,403)
25 Pay a fixed rate of 5.9575% and receive a floating rate based
on 3-month LIBOR, expiring December 2007, Broker Deutsche Bank
AG London (e) (1,968,800)
-------------
(6,830,849)
Put Options Written 35 Receive a fixed rate of 5.29% and pay a floating rate based
on 3-month LIBOR, expiring October 2007, Broker Deutsche Bank
AG London (e) (160,150)
50 Receive a fixed rate of 5.125% and pay a floating rate based
on 3-month LIBOR, expiring March 2008, Broker Deutsche Bank
AG London (e) (372,600)
11 Receive a fixed rate of 5.4475% and pay a floating rate based
on 3-month LIBOR, expiring May 2010, Broker Credit Suisse First
Boston International (e) (639,375)
11 Receive a fixed rate of 5.685% and pay a floating rate based
on 3-month LIBOR, expiring May 2010, Broker Lehman Brothers
Special Financing (e) (689,959)
36 Receive a fixed rate of 5.88% and pay a floating rate based on
3-month LIBOR, expiring June 2008, Broker Deutsche Bank AG London (e) (271,030)
-------------
(2,133,114)
Total Options Written (Premiums Received - $6,480,734) - (3.9%) (8,963,963)
Total Investments, Net of TBA Sale Commitments and Options Written (Cost - $232,829,881*) - 101.2% 230,276,780
Liabilities in Excess of Other Assets - (1.2%) (2,663,355)
-------------
Net Assets - 100.0% $ 227,613,425
=============
* The cost and unrealized appreciation (depreciation) of investments, net
of TBA sale commitments and options written, as of September 30, 2007,
as computed for federal income tax purposes, were as follows:
Aggregate cost $ 232,829,881
======================
Gross unrealized appreciation $ 4,037,024
Gross unrealized depreciation (6,590,125)
----------------------
Net unrealized depreciation $ (2,553,101)
======================
** Asset-Backed and Mortgage-Backed Securities are subject to principal
paydowns. As a result of prepayments or refinancing of the underlying
instruments, the average life may be substantially less than the
original maturity.
+ One contract represents a notional amount of $1,000,000.
(a) Floating rate security.
(b) Represents or includes a "to-be-announced" transaction. The Fund has
committed to purchasing securities for which all specific information
is not available at this time.
(c) Represents the interest only portion of a mortgage-backed security and
has either a nominal or a notional amount of principal.
(d) The security may be offered and sold to "qualified institutional buyers"
under Rule 144A of the Securities Act of 1933.
(e) This European style swaption, which can be exercised only on the
expiration date, represents a standby commitment whereby the writer
of the option is obligated to enter into a predetermined interest rate
swap contract upon exercise of the swaption.
(f) The security is a perpetual bond and has no stated maturity date.
o Investment in companies considered to be an affiliate of the Fund,
for purposes of Section 2(a)(3) of the Investment Company Act of 1940,
were as follows:
Net Interest
Affiliate Activity Income
BlackRock Liquidity Series, LLC
Cash Sweep Series $ (10,517,087) $ 375,065
BlackRock Liquidity Series, LLC
Money Market Series - $ 195
o Financial futures contracts purchased as of September 30, 2007
were as follows:
Unrealized
Number of Expiration Face Appreciation
Contracts Issue Date Value (Depreciation)
34 5-Year U.S.
Treasury Notes December 2007 $ 3,626,844 $ 12,219
409 10-Year U.S.
Treasury Notes December 2007 $ 45,222,671 (488,296)
------------
Total Unrealized Depreciation - Net $ (476,077)
============
o Financial futures contracts sold as of September 30, 2007
were as follows:
Number of Expiration Face Unrealized
Contracts Issue Date Value Depreciation
851 2-Year U.S.
Treasury Notes December 2007 $ 176,165,620 $ (71,161)
------------
Total Unrealized Depreciation $ (71,161)
============
o Swaps outstanding as of September 30, 2007 were as follows:
Notional Unrealized
Amount Depreciation
Receive a fixed rate of 4.6625% and pay a
floating rate based on 3-month LIBOR
Broker, Credit Suisse First Boston International
Expires September 2010 $ 351,000,000 $ (703,657)
Pay a fixed rate of 5.705% and receive a
floating rate based on 3-month LIBOR
Broker, Deutsche Bank AG London
Expires June 2017 $ 50,000,000 (1,983,463)
Pay a fixed rate of 5.769% and receive a
floating rate based on 3-month LIBOR
Broker, Lehman Brothers Special Financing
Expires July 2017 $ 25,000,000 (1,103,724)
Pay a fixed rate of 5.773% and receive a
floating rate based on 3-month LIBOR
Broker, Lehman Brothers Special Financing
Expires July 2017 $ 25,000,000 (1,111,306)
Received a fixed rate of 5.005% and pay a
floating rate based on 3-month LIBOR
Broker, Deutsche Bank AG London
Expires September 2017 $ 25,000,000 (400,750)
-------------
Total $ (5,302,900)
=============
Item 2 - Controls and Procedures
2(a) - The registrant's principal executive and principal financial
officers or persons performing similar functions have concluded that
the registrant's disclosure controls and procedures (as defined in
Rule 30a-3(c) under the Investment Company Act of 1940, as amended
(the "1940 Act")) are effective as of a date within 90 days of the
filing of this report based on the evaluation of these controls and
procedures required by Rule 30a-3(b) under the 1940 Act and Rule
13a-15(b) under the Securities and Exchange Act of 1934, as amended.
2(b) - There were no changes in the registrant's internal control over
financial reporting (as defined in Rule 30a-3(d) under the 1940 Act)
that occurred during the registrant's last fiscal quarter that have
materially affected, or are reasonably likely to materially affect,
the registrant's internal control over financial reporting.
Item 3 - Exhibits
Certifications - Attached hereto
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report
to be signed on its behalf by the undersigned, thereunto duly authorized.
BlackRock Enhanced Government Fund, Inc.
By: /s/ Donald C. Burke
-------------------
Donald C. Burke,
Chief Executive Officer of
BlackRock Enhanced Government Fund, Inc.
Date: November 20, 2007
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on
the dates indicated.
By: /s/ Donald C. Burke
-------------------
Donald C. Burke,
Chief Executive Officer (principal executive officer) of
BlackRock Enhanced Government Fund, Inc.
Date: November 20, 2007
By: /s/ Neal J. Andrews
-------------------
Neal J. Andrews,
Chief Financial Officer (principal financial officer) of
BlackRock Enhanced Government Fund, Inc.
Date: November 20, 2007