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UNITEDSTATES
SECURITIESANDEXCHANGECOMMISSION
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: Anne F. Ackerley, Chief Executive Officer, BlackRock
Enhanced Government Fund, Inc., 55 East 52nd Street, New York, NY 10055

Registrant’s telephone number, including area code: (800) 882-0052, Option 4

Date of fiscal year end: 12/31/2010

Date of reporting period: 09/30/2010

Item 1 – Schedule of Investments


Schedule of Investments September 30, 2010 (Unaudited)

BlackRock Enhanced Government Fund, Inc. (EGF)
(Percentages shown are based on Net Assets)

    Par   
Asset-Backed Securities (a)    (000)  Value 
First Franklin Mortgage Loan       
Asset-Backed Certificates,       
Series 2005-FF2, Class M2,       
0.70%, 3/25/35  $ 3,220  $ 2,921,567 
GSAA Home Equity Trust,       
Series 2005-1, Class AF2,       
4.32%, 11/25/34    598  583,880 
Securitized Asset-Backed Receivables     
LLC Trust:       
Series 2005-0P1, Class M2,       
0.71%, 1/25/35    2,000  1,476,424 
Series 2005-OP2, Class M1,       
0.69%, 10/25/35    1,025  468,867 
Soundview Home Equity Loan       
Trust, Series 2007-OPT5,       
Class 2A2, 1.21%, 10/25/37    2,500  1,439,235 
Total Asset-Backed Securities – 3.5%    6,889,973 
Foreign Agency Obligations       
Province of Ontario Canada,       
4.10%, 6/16/14    1,745  1,916,938 
Total Foreign Agency Obligations – 1.0%    1,916,938 
Non-Agency Mortgage-Backed       
Securities       
Collateralized Mortgage       
Obligations — 3.6%       
Bank of America Mortgage       
Securities Inc., Series 2003-J,       
Class 2A1, 3.60%, 11/25/33 (a)    344  325,207 
Bear Stearns Alt-A Trust,       
Series 2004-13, Class A1,       
0.63%, 11/25/34 (a)    445  360,511 
CS First Boston Mortgage       
Securities Corp.,       
Series 2005-11, Class 6A5,       
6.00%, 12/25/35    835  795,273 
Countrywide Alternative Loan       
Trust, Series 2006-41CB,       
Class 2A17, 6.00%, 1/25/37    1,203  1,018,910 

 

Non-Agency Mortgage-Backed    Par   
Securities    (000)  Value 
Collateralized Mortgage Obligations     
(concluded)       
Homebanc Mortgage Trust,       
Series 2005-4, Class A1, 0.53%,     
10/25/35 (a)  $ 1,713  $ 1,266,442 
Thornburg Mortgage Securities Trust (a):     
Series 2006-6, Class A1,       
0.37%, 11/25/46    1,658  1,612,912 
Series 2007-2, Class A2A,       
0.39%, 6/25/37    1,183  1,129,265 
WaMu Mortgage Pass-Through       
Certificates, Series 2005-AR7,       
Class A1, 2.94%, 8/25/35 (a)    473  469,684 
      6,978,204 
Commercial Mortgage-Backed       
Securities — 8.4%       
Bear Stearns Commercial       
Mortgage Securities,       
Series 2001-T0P2, Class A2,       
6.48%, 2/15/35    1,256  1,273,034 
Commercial Mortgage Pass-       
Through Certificates,       
Series 2007-C9, Class A2,       
5.81%, 12/10/49 (a)    3,250  3,380,870 
Credit Suisse Mortgage Capital       
Certificates, Series 2007-C5,       
Class A2, 5.59%, 9/15/40    3,400  3,539,422 
LB-UBS Commercial Mortgage Trust,     
Class A2:       
Series 2007-C1, 5.32%,       
2/15/40    2,000  2,064,481 
Series 2007-C7, 5.59%,       
9/15/45    3,000  3,138,023 
Wachovia Bank Commercial       
Mortgage Trust,       
Series 2007-C32, Class A2,       
5.93%, 6/15/49 (a)    3,000  3,122,594 
      16,518,424 
Interest Only Collateralized       
Mortgage Obligations — 0.0%       
CitiMortgage Alternative Loan       
Trust, Series 2007-A5,       
Class 1A7, 6.00%, 5/25/37    552  56,975 
Total Non-Agency Mortgage-Backed     
Securities – 12.0%      23,553,603 

 

Portfolio Abbreviations

To simplify the listings of portfolio holdings in the Schedule of Investments, the names and descriptions of many of the securities have been abbreviated
according to the following list:

GO General Obligation Bonds

LIBOR  London InterBank Offered Rate

BLACKROCK ENHANCED GOVERNMENT FUND, INC.

SEPTEMBER 30, 2010 1


Schedule of Investments(continued)

BlackRock Enhanced Government Fund, Inc. (EGF)
(Percentages shown are based on Net Assets)

  Par   
Preferred Securities  (000)  Value 
Capital Trusts     
Diversified Financial     
Services — 1.0%     
JPMorgan Chase Capital XXII,     
6.45%, 1/15/87  $ 2,000  $ 2,002,770 
Electric Utilities — 1.0%     
PPL Capital Funding, 6.70%,     
3/30/67 (a)  2,000  1,900,000 
Insurance — 1.2%     
The Allstate Corp., 6.50%, 5/15/67 (a)  2,000  1,855,000 
ZFS Finance (USA) Trust V, 6.50%,     
5/09/67 (a)(b)  504  468,720 
    2,323,720 
Total Capital Trusts – 3.2%    6,226,490 
Trust Preferreds  Shares   
Capital Markets — 1.0%     
Morgan Stanley Capital Trust VIII,     
6.45%, 4/15/67  80,000  1,980,899 
Media — 1.1%     
Comcast Corp., 6.63%, 5/15/56  80,000  2,058,277 
Total Trust Preferreds – 2.1%    4,039,176 
Total Preferred Securities – 5.2%    10,265,666 
  Par   
Taxable Municipal Bonds  (000)   
State of California, GO, Taxable,     
Various Purpose 3, Mandatory     
Put Bonds, 5.65%, 4/01/39 (a)  $ 1,680  1,808,470 
Total Taxable Municipal Bonds – 0.9%    1,808,470 
U.S. Government Sponsored Agency     
Securities     
Agency Obligations — 3.4%     
Fannie Mae, 5.25%, 8/01/12  2,460  2,653,828 
Federal Farm Credit Bank, 4.55%,     
6/08/20  3,500  3,995,058 
    6,648,886 
Collateralized Mortgage     
Obligations — 11.6%     
Ginnie Mae Mortgage-Backed     
Securities, Class C (a):     
Series 2005-87, 5.33%,     
9/16/34  10,000  11,330,088 
Series 2006-3, 5.24%,     
4/16/39  10,000  11,442,976 
    22,773,064 

 

U.S. Government Sponsored Agency  Par   
Securities    (000)  Value 
Interest Only Collateralized       
Mortgage Obligations — 0.6%       
Ginnie Mae Mortgage-Backed       
Securities (a):       
Series 2006-30, Class IO,       
0.80%, 5/16/46  $ 8,313  $ 321,901 
Series 2007-20, Class SA,       
5.69%, 4/20/37    1,983  221,271 
Series 2007-40, Class SN,       
6.23%, 7/20/37    2,299  241,647 
Series 2008-7, Class SA,       
3.14%, 2/20/38    4,155  422,368 
      1,207,187 
Mortgage-Backed       
Securities — 64.0%       
Fannie Mae Mortgage-Backed       
Securities:       
4.00%, 4/01/24 - 10/15/40 (c)  9,146  9,572,858 
4.50%, 4/01/39 - 8/01/40    23,186  24,260,950 
4.68%, 2/01/13    5,141  5,364,015 
5.00%, 11/01/33 - 2/01/40 (d)  24,024  25,461,922 
5.24%, 4/01/12 (d)    7,939  8,283,687 
5.50%, 7/01/17 -       
9/01/36 (d)(e)    27,759  29,837,926 
5.71%, 2/01/12    2,478  2,597,874 
6.00%, 2/01/36 - 3/01/38    13,435  14,470,910 
6.60%, 1/01/11    4,616  4,612,751 
Freddie Mac Mortgage-Backed       
Securities, 4.50%, 5/01/34    802  843,062 
Ginnie Mae Mortgage-Backed       
Securities, 5.00%, 11/15/35    34  35,975 
      125,341,930 
Total U.S. Government Sponsored       
Agency Securities – 79.6%      155,971,067 
U.S. Treasury Obligations       
U.S. Treasury Notes:       
0.75%, 9/15/13 (f)    5,490  5,508,013 
1.88%, 6/30/15 (f)    29,125  30,012,410 
2.50%, 6/30/17 (f)    18,000  18,750,937 
2.63%, 8/15/20 (f)    4,000  4,037,500 
4.63%, 2/15/40    9,795  11,444,850 
4.38%, 5/15/40 (f)    10,000  11,231,300 
3.88%, 8/15/40 (f)    12,000  12,405,000 
Total U.S. Treasury Obligations – 47.6%    93,390,010 
Total Long-Term Investments       
(Cost – $281,418,589) – 149.9%      293,795,727 

 

2 BLACKROCK ENHANCED GOVERNMENT FUND, INC.

SEPTEMBER 30, 2010


Schedule of Investments(continued)

BlackRock Enhanced Government Fund, Inc. (EGF)
(Percentages shown are based on Net Assets)

Short-Term Securities    Shares  Value 
BlackRock Liquidity Funds,       
TempFund, Institutional Class,       
0.23% (g)(h)    4,855,517  $ 4,855,517 
Total Short-Term Securities       
(Cost – $4,855,517) – 2.4%      4,855,517 
Total Investments Before Outstanding     
Options Written       
(Cost – $286,274,106*) – 152.3%    298,651,244 
    Notional   
    Amount   
Options Written    (000)   
Over-the-Counter Call       
Swaptions — (0.2)%       
Pay a fixed rated of 0.60% and       
receive a floating rate based on       
3-month LIBOR, Expires       
10/28/10, Broker Morgan       
Stanley Capital Services, Inc.  $ 25,000  (16,000) 
Pay a fixed rate of 1.65% and       
receive a floating rate based on       
3-month LIBOR, Expires       
10/28/10, Broker BNP Paribas       
SA    40,000  (262,040) 
Pay a fixed rate of 2.50% and       
receive a floating rate based on       
3-month LIBOR, Expires       
10/28/10, Broker JPMorgan       
Chase Bank NA    20,000  (117,860) 
Pay a fixed rated of 3.20% and       
receive a floating rate based on       
3-month LIBOR, Expires       
10/28/10, Broker Morgan       
Stanley Capital Services, Inc.    5,000  (58,990) 
Total Options Written       
(Premiums Received – $359,000) – (0.2)%  (454,890) 
Total Investments, Net of Outstanding Options   
Written – 152.1%      298,196,354 
Liabilities in Excess of Other Assets – (52.1)%  (102,184,751) 
Net Assets – 100.0%      $ 196,011,603 

 

* The cost and unrealized appreciation (depreciation) of investments as of
September 30, 2010, as computed for federal income tax purposes were
as follows:

Aggregate cost $ 286,274,106 
Gross unrealized appreciation $ 15,338,091 
Gross unrealized depreciation $ (2,960,953) 
Net unrealized appreciation    12,377,138 

 

(a) Variable rate security. Rate shown is as of report date.
(b) Security exempt from registration under Rule 144A of the Securities Act
of 1933. These securities may be resold in transactions exempt from
registration to qualified institutional investors.

(c) Represents or includes a to-be-announced (“TBA”) transaction. Unsettled
TBA transactions as of report date were as follows:

  Market  Unrealized 
Counterparty  Value  Depreciation 
Goldman Sachs & Co.  $ 925,031  $ (1,547) 

 

(d) All or a portion of security has been pledged as collateral in connection
with swaps.
(e) All or a portion of security has been pledged as collateral in connection
with open financial futures contracts.
(f) All or a portion of security has been pledged as collateral in connection
with open reverse repurchase agreements.
(g) Investments in companies considered to be an affiliate of the Fund
during the period, for purposes of Section 2(a)(3) of the Investment
Company Act of 1940, as amended, were as follows:

      Shares Held   
  Shares Held    at   
  at December    September   
Affiliate  31, 2009  Net Activity  30, 2010  Income 
BlackRock         
Liquidity         
Funds,         
TempFund,         
Institutional         
Class  2,181,318  2,674,199  4,855,517  $ 5,129 

 

(h) Represents the current yield as of report date.

BLACKROCK ENHANCED GOVERNMENT FUND, INC.

SEPTEMBER 30, 2010 3


Schedule of Investments (continued) BlackRock Enhanced Government Fund, Inc. (EGF)

• Financial futures contracts purchased as of September 30, 2010 were as follows:     
      Expiration  Notional  Unrealized 
Contracts  Issue  Exchange  Date  Value  Appreciation 
31  10-Year U.S. Treasury  Chicago Board of       
  Bond  Trade  December 2010  $ 3,886,078  $ 21,375 
3  Euro Dollar Future  Chicago Mercantile  June 2013  $ 731,933  5,579 
Total          $ 26,954 

 

• Financial futures contracts sold as of September 30, 2010 were as follows:     
      Expiration  Notional  Unrealized 
Contracts  Issue  Exchange  Date  Value  Depreciation 
8  Euro Dollar Future  Chicago Mercantile  December 2010  $ 1,983,676  $ (9,124) 
8  Euro Dollar Future  Chicago Mercantile  March 2011  $ 1,979,176  (12,625) 
4  Euro Dollar Future  Chicago Mercantile  June 2011  $ 987,063  (8,087) 
5  Euro Dollar Future  Chicago Mercantile  September 2011  $ 1,229,972  (12,778) 
5  Euro Dollar Future  Chicago Mercantile  December 2011  $ 1,226,447  (14,803) 
6  Euro Dollar Future  Chicago Mercantile  March 2012  $ 1,467,019  (20,456) 
1  Euro Dollar Future  Chicago Mercantile  June 2012  $ 244,659  (2,878) 
2  Euro Dollar Future  Chicago Mercantile  September 2012  $ 488,194  (6,131) 
2  Euro Dollar Future  Chicago Mercantile  December 2012  $ 486,969  (6,481) 
2  Euro Dollar Future  Chicago Mercantile  March 2013  $ 485,969  (6,656) 
Total          $ (100,019) 

 

• Reverse repurchase agreements outstanding as of September 30, 2010 were as follows:     
  Interest  Trade  Maturity  Net Closing  Face 
Counterparty  Rate  Date  Date  Amount  Amount 
Credit Suisse Securities (USA) LLC  0.25%  7/22/10  Open  $ 10,855,275  $ 10,850,000 
Barclays Capital Inc.  0.15%  7/30/10  Open  $ 29,605,558  29,598,281 
Credit Suisse Securities (USA) LLC  0.19%  7/30/10  Open  $ 6,091,896  6,090,000 
Barclays Capital Inc.  0.20%  8/18/10  Open  $ 10,145,423  10,143,000 
Credit Suisse Securities (USA) LLC  0.10%  8/25/10  Open  $ 4,060,395  4,060,000 
Credit Suisse Securities (USA) LLC  0.20%  9/02/10  Open  $ 12,376,856  12,375,000 
Barclays Capital Inc.  0.25%  9/17/10  Open  $ 5,490,496  5,490,000 
Total          $ 78,606,281 

 

•  Interest rate swaps outstanding as of September 30, 2010 were as follows:       
          Notional   
  Fixed  Floating      Amount  Unrealized 
  Rate  Rate  Counterparty  Expiration  (000)  Depreciation 
  4.63%1  3-month LIBOR  Deutsche Bank AG  March 2013  $ 50,000   $ (4,773,490) 
  5.71%1  3-month LIBOR  Deutsche Bank AG  June 2017  $ 25,000  (5,926,603) 
  5.96%1  3-month LIBOR  Deutsche Bank AG  December 2037  $ 25,000  (12,220,593) 
  Total        $ (22,920,686) 
  1Pays fixed interest rate and receives floating rate.       

 

BLACKROCK ENHANCED GOVERNMENT FUND, INC.

SEPTEMBER 30, 2010 4


Schedule of Investments(continued)

BlackRock Enhanced Government Fund, Inc. (EGF)

•Fair Value Measurements - Various inputs are used in determining the fair
value of investments and derivatives, which are as follows:

•Level 1 — price quotations in active markets/exchanges for identical
assets and liabilities

•Level 2 — other observable inputs (including, but not limited to: quoted
prices for similar assets or liabilities in markets that are active, quoted
prices for identical or similar assets or liabilities in markets that are not
active, inputs other than quoted prices that are observable for the
assets or liabilities (such as interest rates, yield curves, volatilities,
prepayment speeds, loss severities, credit risks and default rates) or
other market-corroborated inputs)

•Level 3 — unobservable inputs based on the best information available
in the circumstances, to the extent observable inputs are not available
(including the Fund's own assumptions used in determining the fair
value of investments and derivatives)

The inputs or methodologies used for valuing securities are not necessarily
an indication of the risk associated with investing in those securities. For
information about the Fund's policy regarding valuation of investments and
other significant accounting policies, please refer to the Fund’s most recent
financial statements as contained in its semi-annual report.

The following tables summarize the inputs used as of September 30, 2010
in determining the fair valuation of the Fund's investments and derivatives:

Valuation Inputs  Level 1  Level 2  Level 3    Total 
Assets:           
Investments in Securities:           
Long-Term Investments:           
Asset-Backed Securities  --  $ 6,889,973    --   $ 6,889,973 
Foreign Agency Obligations  --  1,916,938    --  1,916,938 
Non-Agency Mortgage-Backed Securities  --  22,477,718    --  22,477,718 
Preferred Securities  $ 4,039,176  6,226,490    --  10,265,666 
Taxable Municipal Bonds  --  1,808,470    --  1,808,470 
U.S. Government Sponsored Agency Securities  --  155,971,067    --  155,971,067 
U.S. Treasury Obligations  --  93,390,010    --  93,390,010 
Short-Term Securities:           
Money Market Fund  4,855,517  --    --  4,855,517 
Total           
  $ 8,894,693  $ 288,680,666    --   $ 297,575,359 

 

Derivative Financial Instruments1
Valuation Inputs  Level 1  Level 2  Level 3  Total 
Assets:         
Interest rate contracts  $ 26,954  --  --  $ 26,954 
Liabilities:         
Interest rate contracts  (100,019)  $ (23,375,576)  --  (23,475,595) 
Total  $ (73,065)  $ (23,375,576)  --  $ (23,448,641) 

 

1 Derivative financial instruments are financial futures contracts, swaps and options written. Financial futures contracts and swaps are valued at
the unrealized appreciation/depreciation on the instrument and options written are shown at value.

BLACKROCK ENHANCED GOVERNMENT FUND, INC.

SEPTEMBER 30, 2010 5


Schedule of Investments(concluded)

BlackRock Enhanced Government Fund, Inc. (EGF)

The following table is a reconciliation of Level 3 investments for which significant unobservable inputs were used to
determine fair value:

  Asset-Backed  Non-Agency Mortgage-   
  Securities  Backed Securities  Total 
Asset/Liabilities:       
Balance, as of December 31, 2009  $ 1,255,800  $ 1,279,621  $ 2,535,421 
Accrued discounts/premium  --  (24,422)  (24,422) 
Net realized gain (loss)  --  (3,888)  (3,888) 
Net change in unrealized       
appreciation /depreciation2  895,458  222,445  1,117,903 
Purchases  --  --  -- 
Sales  --  (397,871)  (397,871) 
Transfers in3  --  --  -- 
Transfers out3  (2,151,258)  (1,075,885)  (3,227,143) 
Balance, as of September 30, 2010  --  --  -- 

 

2 The change in unrealized appreciation/depreciation on securities still held at September 30, 2010 was $0.

The following table is a reconciliation of Level 3 derivative financial instruments for which significant
unobservable inputs were used to determine fair value:

  Interest Rate Contracts 4 
Liabilities:   
Balance, as of December 31, 2009  $ (129,697) 
Accrued discounts/premium  -- 
Net realized gain (loss)  -- 
Net change in unrealized   
appreciation/depreciation  129,697 
Purchases  -- 
Sales  -- 
Transfers in3  -- 
Transfers out3  -- 
Balance, as of September 30, 2010  -- 

 

3 The Fund’s policy is to recognize transfers in and transfers out as of end of the period of the event or the
change in circumstances that caused the transfer.
4Derivative financial instruments are swaps.

6 BLACKROCK ENHANCED GOVERNMENT FUND, INC.

SEPTEMBER 30, 2010


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
31940 Act3)) areeffective 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 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/ Anne F. Ackerley
Anne F. Ackerley
Chief Executive Officer of
BlackRock Enhanced Government Fund, Inc.

Date: November 22, 2010

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/ Anne F. Ackerley
Anne F. Ackerley
Chief Executive Officer (principal executive officer) of
BlackRock Enhanced Government Fund, Inc.

Date: November 22, 2010

By: /s/ Neal J. Andrews
Neal J. Andrews
Chief Financial Officer (principal financial officer) of
BlackRock Enhanced Government Fund, Inc.

Date: November 22, 2010