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.
Fund Address: P.O. Box 9011
Princeton, NJ 08543-9011
Name and address of agent for service: Robert C. Doll, Jr., 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: (609) 282-2800
Date of fiscal year end: 12/31/2007
Date of reporting period: 01/01/07 - 03/31/07
Item 1 - Schedule of Investments
BlackRock Enhanced Government Fund, Inc.
Schedule of Investments as of March 31, 2007 (in U.S. dollars)
Face Interest Maturity
Issue Amount Rate Date(s) Value
Government & Agency Obligations - 67.3%
Federal Farm Credit Bank $ 3,500,000 4.55 % 6/08/2020 $ 3,294,288
Federal Home Loan Bank System 3,525,000 5.40 10/27/2011 (e) 3,533,150
U.S. Treasury Bonds 789,000 8.125 8/15/2019 1,030,385
1,220,000 8.50 2/15/2020 1,644,522
2,500,000 6.25 5/15/2030 2,961,915
1,500,000 4.50 2/15/2036 1,414,218
U.S. Treasury Notes 75,000 4.875 8/15/2009 75,486
100,000,000 4.75 2/15/2010 100,570,300
25,000,000 4.625 2/15/2017 24,949,225
4,800,000 8.75 5/15/2020 6,604,123
11,700,000 4.75 2/15/2037 11,517,188
Total Government & Agency Obligations (Cost - $157,928,719) - 67.3% 157,594,800
Government Agency Mortgage-Backed Securities** - 81.0%
Fannie Mae Guaranteed Pass-Through Certificates 8,596,925 4.50 4/01/2020 - 11/01/2020 8,323,471
1,935,469 4.66 7/01/2010 1,907,788
6,400,038 4.681 2/01/2013 6,393,386
7,939,300 5.24 4/01/2012 8,005,317
7,448,128 5.315 10/01/2035 (a) 7,452,664
50,835,793 5.50 12/01/2021 - 2/01/2037 50,353,254
2,679,590 5.707 2/01/2012 2,790,534
20,238,508 6.00 10/01/2035 - 4/15/2037 (b) 20,388,028
5,516,000 6.60 1/01/2011 5,731,972
Fannie Mae Trust 353-2 4,819,621 5.00 8/01/2034 (c) 1,146,429
378-5 4,857,661 5.00 7/01/2036 (c) 1,162,842
2006-129-PA 4,386,153 5.50 7/25/2028 4,396,770
367-2 4,546,596 5.50 1/25/2036 (c) 1,064,339
Freddie Mac Mortgage Participation 1,105,990 4.50 5/01/2034 1,042,684
Certificates 19,658,730 5.00 5/01/2020 - 11/01/2035 19,103,028
4,512,836 5.015 10/01/2035 (a) 4,489,933
660,965 5.50 10/01/2035 654,706
2,495,519 6.00 10/01/2035 2,517,198
4,460,910 6.50 9/01/2035 - 10/01/2035 4,552,098
Freddie Mac Multiclass Certificates 232-IO 5,232,315 5.00 8/01/2035 (c) 1,228,259
2958-MD 5,000,000 5.50 1/15/2031 5,005,631
3042-EA 2,680,000 4.50 9/15/2035 2,447,443
3081-CP 1,600,000 5.50 10/15/2034 1,586,466
3136-PD 1,674,840 6.00 12/15/2034 1,708,407
Ginnie Mae MBS Certificates 2,994,120 5.00 11/15/2035 2,914,999
3,041,799 5.50 11/15/2035 3,026,941
Government Agency Mortgage-Backed Securities**
Ginnie Mae Trust 2005-87-C 10,000,000 5.328 9/16/2034 (a) 9,983,367
2006-3-C 10,000,000 5.235 4/16/2039 (a) 9,733,026
2006-30-IO 8,937,063 0.80 5/16/2046 (a)(c) 499,544
Total Government Agency Mortgage-Backed Securities (Cost - $189,519,471) - 81.0% 189,610,524
Non-Government Agency Mortgage-Backed Securities** - 8.4%
CS First Boston Mortgage Securities Corp.
Series 2005-11 Class 6A5 1,918,888 6.00 12/25/2035 1,943,879
Countrywide Alternative Loan Trust
Series 2006-41CB Class 2A17 3,187,697 6.00 1/25/2037 3,218,273
Greenwich Capital Commercial Funding Corp.
Series 2006-GG7 Class A4 1,500,000 6.11 7/10/2038 (a) 1,565,676
JPMorgan Mortgage Trust Series 2005-A2 Class 4A1 4,197,636 5.21 4/25/2035 (a) 4,134,079
JPMorgan Mortgage Trust Series 2006-CB15 Class 4A 2,500,000 5.814 6/12/2043 (a) 2,579,230
JPMorgan Mortgage Trust Series 2006-LDP7 Class 4A 2,000,000 5.875 4/15/2045 (a) 2,083,352
Residential Funding Mortgage Securities I
Series 2006-S1 Class 1A5 1,644,481 5.25 1/25/1936 1,640,347
Wells Fargo Mortgage Backed Securities Trust
Series 2005-13Class A1 2,595,214 5.00 11/25/2020 2,579,171
Total Non-Government Agency Mortgage-Backed Securities (Cost - $19,395,526) - 8.4% 19,744,007
Short-Term Securities - 8.5%
Government Agency Obligations*** 200,000 Federal Home Loan Bank System, 4.902%
due 4/02/2007 200,000
Repurchase Agreements 19,695,375 Lehman Brothers, Inc., purchased on
3/30/2007 to yield 4.75% to 4/05/2007,
repurchase price $19,710,967, collateralized
by U.S. Treasury Bonds, 5.375% due 2/15/2031 19,695,375
Total Short-Term Securities (Cost - $19,895,375) - 8.5% 19,895,375
Number of
Contracts Options Purchased
Options Purchased - 0.5%
Call Options Purchased - 0.3% 1+ Euro $1 YR MID-CRV, expiring September 2007 at USD 94.75 (d) 31,500
1+ Euro $1 YR MID-CRV, expiring September 2007 at USD 95 (d) 103,950
1+ Euro $1 YR MID-CRV, expiring September 2007 at USD 95.5 (d) 226,800
8+ Receive a fixed rate of 5.575% and pay a floating rate
based on 3-month LIBOR, expiring January 2007 (d) 302,319
---------------
664,569
Put Options Purchased - 0.2% 8+ Pay a fixed rate of 5.575% and receive a floating rate
based on 3-month LIBOR, expiring January 2007 (d) 350,717
90,000 U.S. Treasury Bonds, expiring May 2007 at USD 110 15,469
---------------
366,186
Total Options Purchased (Premiums Paid - $1,119,909) - 0.5% 1,030,755
Total Investments (Cost - $387,859,000) - 165.7% 387,875,461
Options Written
Call Options Written - (0.3%) 50+ Pay a fixed rate of 4.85% and pay a floating rate based on
3-month LIBOR, expiring April 2007 (d) (11,100)
40+ Pay a fixed rate of 5.074% and receive a floating rate based
on 3-month LIBOR, expiring April 2007 (d) (92,480)
50+ Pay a fixed rate of 5.1275% and receive a floating rate based
on 3-month LIBOR, expiring April 2007 (d) (167,200)
15+ Pay a fixed rate of 5.2825% and receive a floating rate based
on 3-month LIBOR, expiring April 2007 (d) (51,030)
50+ Pay a fixed rate of 4.625% and receive a floating rate based
on 3-month LIBOR, expiring March 2008 (d) (327,850)
---------------
(649,660)
Put Options Written - (0.4%) 50+ Receive a fixed rate of 5.35% and pay a floating rate based
on 3-month LIBOR, expiring April 2007 (d) (100)
50+ Receive a fixed rate of 5.125% and pay a floating rate based
on 3-month LIBOR, expiring March 2008 (d) (482,200)
1+ Euro $1 YR MID-CRV, expiring September 2007 at USD 95.5 (d) (393,750)
---------------
(876,050)
Total Options Written (Premiums Received - $2,107,407) - (0.7%) (1,525,710)
Total Investments, Net of Options Written (Cost - $385,751,593*) - 165.0% 386,349,751
Liabilities in Excess of Other Assets - (65.0%) (152,203,406)
---------------
Net Assets - 100.0% $ 234,146,345
===============
* The cost and unrealized appreciation (depreciation) of investments,
net of options written, as of March 31, 2007, as computed for federal
income tax purposes, were as follows:
Aggregate cost $ 385,751,593
=======================
Gross unrealized appreciation $ 1,778,906
Gross unrealized depreciation (1,180,748)
-----------------------
Net unrealized appreciation $ 598,158
=======================
** Mortgage-Backed Securities are subject to principal paydowns. As a result
of prepayments or refinancing of the underlying mortgage instruments,
the average life may be substantially less than the original maturity.
*** Certain Short-Term Government Agency Obligations are traded on a discount
basis; the interest rates shown are the range of discount rates paid at
the time of purchase.
+ 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 securities and
has either a nominal or a notional amount of principal.
(d) 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.
(e) All or a portion of the security is on hold as collateral in connection
with open financial futures contracts.
o Investments 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) $ 74,819
BlackRock Liquidity Series, LLC
Money Market Series - $ 195
o Short sales entered into as of March 31, 2007 were as follows:
Shares Issue Value
18,300,000 U.S. Treasury Bond $ (19,567,418)
---------------
Total (Proceeds - $19,567,418) $ (19,567,418)
===============
o Swaps outstanding as of March 31, 2007 were as follows:
Unrealized
Notional Appreciation
Amount (Depreciation)
Receive a fixed rate of 4.8825% and
pay a floating rate based
3-month LIBOR
Broker, UBS Warburg
Expires December 2013 $ 20,000,000 $ (196,421)
Pay a fixed rate of 5.14% and
receive a floating rate based
3-month LIBOR
Broker, UBS Warburg
Expires March 2010 $ 40,000,000 (208,585)
Receive a fixed rate of 4.926% and
pay a floating rate based
3-month LIBOR
Broker, Credit Suisse First Boston
International
Expires August 2011 $ 50,000,000 (99,100)
Pay a fixed rate of 5.4075% and
receive a floating rate based
3-month LIBOR
Broker, Credit Suisse First Boston
International
Expires February 2017 $ 25,000,000 (452,411)
Pay a fixed rate of 5.24% and
receive a floating rate based
3-month LIBOR
Broker, UBS Warburg
Expires March 2017 $ 15,000,000 (76,204)
Pay a fixed rate of 5.21336% and
receive a floating rate based
3-month LIBOR
Broker, Credit Suisse First Boston
International
Expires March 2037 $ 12,500,000 330,279
------------
Total $ (702,442)
============
Item 2 - Controls and Procedures
2(a) - The registrant's certifying officers have reasonably designed such
disclosure controls and procedures to ensure material information
relating to the registrant is made known to us by others
particularly during the period in which this report is being
prepared. The registrant's certifying officers have determined that
the registrant's disclosure controls and procedures are effective
based on our evaluation of these controls and procedures as of a
date within 90 days prior to the filing date of this report.
2(b) - As of September 29, 2006, with the conclusion of the combination of
Merrill Lynch's asset management business with BlackRock, the
registrant was migrated to BlackRock's trading and compliance
monitoring systems, and various personnel changes occurred. In
conjunction with these business improvements, there were no changes
in the registrant's internal control over financial reporting (as
defined in Rule 30a-3(d) under Act (17 CFR 270.30a-3(d)) that
occurred during the last fiscal quarter that has materially
affected, or is reasonably likely to 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/ Robert C. Doll, Jr.
-----------------------
Robert C. Doll, Jr.
Chief Executive Officer
BlackRock Enhanced Government Fund, Inc.
Date: May 21, 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/ Robert C. Doll, Jr.
-----------------------
Robert C. Doll, Jr.
Chief Executive Officer
BlackRock Enhanced Government Fund, Inc.
Date: May 21, 2007
By: /s/ Donald C. Burke
-------------------
Donald C. Burke
Chief Financial Officer
BlackRock Enhanced Government Fund, Inc.
Date: May 21, 2007