UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSRS
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
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: (800) 882-0052
Date of fiscal year end: 12/31/07
Date of reporting period: 01/01/07 - 06/30/07
Item 1 - Report to Stockholders
EQUITIES FIXED INCOME REAL ESTATE LIQUIDITY ALTERNATIVES
BLACKROCK SOLUTIONS
BlackRock Enhanced
Government Fund, Inc.
SEMI-ANNUAL REPORT
JUNE 30, 2007 (UNAUDITED)
(BLACKROCK logo)
NOT FDIC INSURED
MAY LOSE VALUE
NO BANK GUARANTEE
BlackRock Enhanced Government Fund, Inc. seeks to provide stockholders with
current income and gains by investing primarily in a portfolio of U.S.
Government securities and U.S. Government Agency securities, including U.S.
Government mortgage-backed securities, that pay interest in an attempt to
generate current income and by employing a strategy of writing (selling) call
options on individual or baskets of U.S. Government or U.S. Government Agency
securities or other debt securities held by the Fund in an attempt to generate
gains from option premiums.
This report, including the financial information herein, is transmitted to
shareholders of BlackRock Enhanced Government Fund, Inc. for their information.
It is not a prospectus. Past performance results shown in this report should
not be considered a representation of future performance. Statements and
other information herein are as dated and are subject to change.
A description of the policies and procedures that the Fund uses to determine
how to vote proxies relating to portfolio securities is available (1)
without charge, upon request, by calling toll-free 1-800-441-7762; (2) at
www.blackrock.com; and (3) on the Securities and Exchange Commission's Web
site at http://www.sec.gov. Information about how the Fund voted proxies
relating to securities held in the Fund's portfolio during the most recent
12-month period ended June 30 is available (1) at www.blackrock.com and (2) on
the Securities and Exchange Commission's Web site at http://www.sec.gov.
BlackRock Enhanced Government Fund, Inc.
P.O. Box 9011
Princeton, NJ 08543-9011
(GO PAPERLESS... logo)
It's Fast, Convenient, & Timely!
BlackRock Enhanced Government Fund, Inc.
Fundamental Periodic Repurchase Policy
The Board of Directors approved a fundamental policy whereby the Fund has
adopted an "interval fund" structure pursuant to Rule 23c-3 under the
Investment Company Act of 1940, as amended (the "1940 Act"). As an interval
fund, the Fund will make annual repurchase offers at net asset value (less
repurchase fee not to exceed 2%) to all Fund shareholders. The percentage
of outstanding shares that the Fund can repurchase in each offer will be
established by the Fund's Board of Directors shortly before the commencement
of each offer, and will be between 5% and 25% of the Fund's then outstanding
shares.
The Fund has adopted the following fundamental policy regarding periodic
repurchases:
(a) The Fund will make repurchase offers at periodic intervals pursuant to
Rule 23c-3 under the 1940 Act.
(b) The periodic interval between repurchase request deadlines will be
approximately 12 months.
(c) The repurchase request deadline for each repurchase offer will be 14 days
prior to the second Friday in December; provided, that in the event that
such day is not a business day, the repurchase request deadline will be
the subsequent business day.
(d) The maximum number of days between a repurchase request deadline and the
next repurchase pricing date will be 14 days; provided that if the 14th
day after a repurchase request deadline is not a business day, the
repurchase pricing date shall be the next business day.
The Board of Directors may place such conditions and limitations on a
repurchase offer as may be permitted under Rule 23c-3. Repurchase offers
may be suspended or postponed under certain circumstances, as provided in
Rule 23c-3.
BLACKROCK ENHANCED GOVERNMENT FUND, INC. JUNE 30, 2007
A Letter to Shareholders
Dear Shareholder
At the mid-point of 2007, investor sentiment appeared quite buoyant,
notwithstanding some undertones of caution. For equity markets, positive
momentum as the year began was interrupted by a notable but transitory
set-back at the end of February. Markets resumed their ascent through May,
but entered a trading range in June as investors began to question the
sustainability of the rally. For the most part, equities found support in
robust merger-and-acquisition activity, healthy global economies, tame
inflation, relatively low interest rates, still-positive earnings growth and
attractive valuations. These tailwinds prevailed over such headwinds as a
weakening U.S. economy, slowing housing market, credit-related lending
problems, escalating geopolitical concerns and high energy prices, leading
the Standard & Poor's (S&P) 500 Index to a new record high in May.
Meanwhile, turmoil in the subprime mortgage market and generally mixed
economic signals weighed on bonds. In June, bond prices dropped precipitously
as long-term yields rose to their highest levels in five years. The 10-year
Treasury yield, which began 2007 at 4.68%, reached nearly 5.30% in mid-June
before retracing to 5.03% by month's end. Notably, this year has brought some
re-steepening of the yield curve, which had been flat to inverted throughout
2006. Still, at the end of June, yields along the curve remained below the
federal funds rate of 5.25%, the level at which the Federal Reserve Board (the
Fed) has left it since first pausing in August 2006. While first-quarter gross
domestic product growth of 0.7% represented the slowest rate of expansion
since 2002, the Fed reiterated that inflation, not a slowing economy, remains
its primary concern. Many observers interpreted the Fed's reaction to mean
that the economy has hit its low and is bound for renewed strength, thereby
reducing the likelihood of an interest rate cut in the near future.
Against this backdrop, the major equity market indexes posted strong returns
for the annual and semi-annual periods ended June 30, 2007, while fixed income
assets were more mixed:
Total Returns as of June 30, 2007 6-month 12-month
U.S. equities (S&P 500 Index) + 6.96% +20.59%
Small cap U.S. equities (Russell 2000 Index) + 6.45 +16.43
International equities (MSCI Europe, Australasia, Far East Index) +10.74 +27.00
Fixed income (Lehman Brothers U.S. Aggregate Bond Index) + 0.98 + 6.12
Tax-exempt fixed income (Lehman Brothers Municipal Bond Index) + 0.14 + 4.69
High yield bonds (Lehman Brothers U.S. Corporate High Yield 2% Issuer Cap Index) + 2.96 +11.22
We expect market volatility to linger throughout the second half of 2007. As
you navigate the uncertainties, we encourage you to review your investment
goals with your financial professional and to make portfolio changes, as
needed. For more market insight, we invite you to view "What's Ahead in 2007:
The Second-Quarter Update" and "Are You Prepared for Volatility?" at
www.blackrock.com/funds. We thank you for entrusting BlackRock with your
investment assets, and we look forward to continuing to serve you in the
months and years ahead.
Sincerely,
(Robert C. Doll, Jr.)
Robert C. Doll, Jr.
Fund President and Director
THIS PAGE NOT PART OF YOUR FUND REPORT
BLACKROCK ENHANCED GOVERNMENT FUND, INC. JUNE 30, 2007
Fund Summary as of June 30, 2007 (Unaudited)
BlackRock Enhanced Government Fund, Inc.
Fund Information
Symbol on New York Stock Exchange EGF
Initital Offering Date October 31, 2005
Yield on Closing Market Price as of 6/30/07 ($18.43)* 7.60%
Current Monthly Distribution per share of Common Stock** $.116667
Current Annualized Distribution per share of Common Stock** $1.40
Leverage as of 6/30/07*** 4%
* Yield on closing market price is calculated by dividing the current
annualized distribution per share by the closing market price.
Past performance does not guarantee future results.
** The distribution is not constant and is subject to change. A portion of
the distribution may be deemed a tax return of capital or net realized
gain at fiscal year end.
*** As a percentage of net assets, which is the total assets of the Fund
(including any assets attributable to any borrowing that may be
outstanding) minus the sum of accrued liabilities (other than debt
representing financial leverage).
The table below summarizes the changes in the Fund's market price and net
asset value:
6/30/07 12/31/06 Change High Low
Market Price $18.43 $18.54 (0.59%) $20.06 $17.61
Net Asset Value $17.75 $18.50 (4.05%) $18.56 $17.55
The following chart shows the portfolio composition of the Fund's long-term
investments:
Portfolio Composition
6/30/07 12/31/06
Government Agency Mortgage-Backed Securities 75% 61%
Government & Agency Obligations 13 28
Non-Government Agency Mortgage-Backed Securities 5 11
Preferred Securities 4 --
Corporate Bonds 3 --
BLACKROCK ENHANCED GOVERNMENT FUND, INC. JUNE 30, 2007
Schedule of Investments as of June 30, 2007 (Unaudited) (in U.S. dollars)
Face Interest Maturity
Issue Amount Rate Date(s) Value
Government & Agency Obligations--16.1%
Federal Farm Credit Bank $ 3,500,000 4.55 % 6/08/2020 $ 3,192,326
Federal Home Loan Bank System 3,525,000 5.40 10/27/2011 (g) 3,509,649
U.S. Treasury Bonds 2,500,000 6.25 5/15/2030 2,857,423
1,500,000 4.50 2/15/2036 1,358,204
U.S. Treasury Notes 75,000 4.875 8/15/2009 74,947
25,005,000 4.625 2/15/2017 24,215,792
1,700,000 4.50 5/15/2017 1,629,875
Total Government & Agency Obligations (Cost--$38,058,715)--16.1% 36,838,216
Government Agency Mortgage-Backed Securities**--92.1%
Fannie Mae Guaranteed Pass-Through Certificates 8,400,000 4.50 7/01/2020 - 7/15/2022 (b) 7,969,500
1,925,264 4.66 7/01/2010 1,883,897
6,372,745 4.681 2/01/2013 6,241,941
30,923,039 5.00 11/01/2033 - 10/01/2035 29,104,172
7,939,300 5.24 4/01/2012 7,816,979
6,454,499 5.296 10/01/2035 (a) 6,372,406
48,850,380 5.50 12/01/2021 - 7/15/2037 (b) 47,291,276
2,670,635 5.707 2/01/2012 2,732,528
19,728,436 6.00 10/01/2035 - 7/15/2037 (b) 19,522,889
5,459,388 6.60 1/01/2011 5,597,392
Fannie Mae Trust 353-2 4,681,258 5.00 8/01/2034 (h) 1,208,534
367-2 4,365,663 5.50 1/25/2036 (h) 1,185,772
378-5 4,731,026 5.00 7/01/2036 (h) 1,104,175
2006-129-PA 4,211,526 5.50 7/25/2028 4,199,731
Freddie Mac Mortgage Participation Certificates 1,100,540 4.50 5/01/2034 1,003,913
19,729,733 5.00 5/01/2020 - 7/15/2037 (b) 18,617,792
4,396,458 5.016 10/01/2035 (a) 4,310,713
638,469 5.50 10/01/2035 617,228
2,392,068 6.00 10/01/2035 2,374,287
4,120,849 6.50 9/01/2035 - 10/01/2035 4,169,069
Freddie Mac Multiclass Certificates 232-IO 5,041,987 5.00 8/01/2035 (h) 1,306,196
2958-MD 5,000,000 5.50 1/15/2031 4,921,192
3042-EA 2,680,000 4.50 9/15/2035 2,383,718
3081-CP 1,600,000 5.50 10/15/2034 1,549,403
3136-PD 1,674,840 6.00 12/15/2034 1,662,015
Ginnie Mae MBS Certificates 2,908,776 5.00 11/15/2035 2,754,591
2,809,670 5.50 11/15/2035 2,729,982
Ginnie Mae Trust 2005-87-C 10,000,000 5.328 9/16/2034 (a) 9,727,582
2006-3-C 10,000,000 5.235 4/16/2039 (a) 9,326,778
2006-30-IO 8,900,154 0.80 5/16/2046 (a)(h) 486,829
Total Government Agency Mortgage-Backed Securities (Cost--$213,503,071)--92.1% 210,172,480
Non-Government Agency Mortgage-Backed Securities**--6.6%
CS First Boston Mortgage Securities Corp.
Series 2005-11 Class 6A5 1,838,521 6.00 12/25/2035 1,842,318
Countrywide Alternative Loan Trust Series
2006-41 CB Class 2A17 3,040,005 6.00 1/25/2037 3,046,503
Greenwich Capital Commercial Funding Corp.
Series 2006-GG7 Class A4 1,500,000 6.11 7/10/2038 (a) 1,513,857
JPMorgan Chase Commercial Mortgage Securities
Corp. Class A4:
Series 2006-CB15 2,500,000 5.814 6/12/2043 (a) 2,492,265
Series 2006-LDP7 2,000,000 5.875 4/15/2045 (a) 2,012,097
Residential Funding Mortgage Securities I
Series 2006-S1 Class 1A5 1,589,325 5.25 1/25/2036 1,568,569
Wells Fargo Mortgage Backed Securities Trust
Series 2005-13 Class A1 2,518,715 5.00 11/25/2020 2,462,881
Total Non-Government Agency Mortgage-Backed Securities (Cost--$14,912,047)--6.6% 14,938,490
BLACKROCK ENHANCED GOVERNMENT FUND, INC. JUNE 30, 2007
Schedule of Investments (continued) (in U.S. dollars)
Face
Industry Amount Issue Value
Corporate Bonds--3.3%
Electric Utilities--0.8% $ 2,000,000 PPL Capital Funding, 6.70% due 5/15/2067 (a) $ 1,925,844
Insurance--2.5% 2,000,000 AllState Corp., 6.50% due 5/15/2057 (a) 1,891,188
2,000,000 XL Capital Ltd. Series E, 6.50% due 12/31/2049 (a) 1,878,372
2,000,000 ZFS Finance USA Trust I, 6.50% due 5/09/2037 (a)(f) 1,934,290
---------------
5,703,850
Total Corporate Bonds (Cost--$7,930,520)--3.3% 7,629,694
Preferred Securities
Capital Trusts--1.8%
Consumer Finance--1.8% 2,000,000 Capital One Capital III, 7.686% due 8/15/2036 2,059,782
2,000,000 JPMorgan Chase Capital XXII, 6.45% due 2/02/2037 1,900,832
Total Capital Trusts (Cost--$4,175,653)--1.8% 3,960,614
Trust Preferreds--2.5%
Capital Markets--0.9% 2,000,000 Morgan Stanley Capital Trust VIII, 6.45% due 4/15/2067 1,932,000
Commercial Banks--0.8% 2,000,000 Wachovia Capital Trust IX, 6.375% due 6/01/2067 1,918,400
Media--0.8% 2,000,000 Comcast Corp., 6.625% due 5/15/2056 1,911,200
Total Trust Preferreds (Cost--$5,982,208)--2.5% 5,761,600
Total Preferred Securities (Cost--$10,157,861)--4.3% 9,722,214
Beneficial
Interest
Short-Term Securities--0.7%
$ 1,507,655 BlackRock Liquidity Series, LLC Cash Sweep Series, 5.33% (d)(e) 1,507,655
Total Short-Term Securities (Cost--$1,507,655)--0.7% 1,507,655
Number of
Contracts++ Options Purchased
Options Purchased--2.4%
Call Options Purchased 50 Receive a fixed rate of 4.933% and pay a floating rate based on
3-month LIBOR, expiring August 2007, Broker Credit Suisse First
Boston International (c) 550
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 (c) 999,752
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 (c) 575,082
8 Receive a fixed rate of 5.575% and pay a floating rate based on
3-month LIBOR, expiring January 2017, Broker JPMorgan Chase (c) 243,713
18 Receive a fixed rate of 5.676% and pay a floating rate based on
3-month LIBOR, expiring May 2017, Broker Credit Suisse First Boston
International (c) 520,544
---------------
2,339,641
Put Options Purchased 50 Pay a fixed rate of 5.433% and receive a floating rate based on
3-month LIBOR, expiring August 2007, Broker Credit Suisse First
Boston International (c) 1,021,600
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 (c) 517,605
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
Finance (c) 890,857
8 Pay a fixed rate of 5.575% and receive a floating rate based on
3-month LIBOR, expiring January 2017, Broker JPMorgan Chase (c) 441,004
18 Pay a fixed rate of 5.676% and receive a floating rate based on
3-month LIBOR, expiring May 2017, Broker Credit Suisse First Boston
International (c) 354,802
---------------
3,225,868
Total Options Purchased (Premiums Paid--$4,524,712)--2.4% 5,565,509
Total Investments (Cost--$290,594,581*)--125.5% 286,374,258
BLACKROCK ENHANCED GOVERNMENT FUND, INC. JUNE 30, 2007
Schedule of Investments (continued) (in U.S. dollars)
Face Interest Maturity
Issue Amount Rate Date(s) Value
TBA Sale Commitments--(12.6%)
Fannie Mae $30,800,000 5.00% 8/01/2034 $ (28,860,432)
Total TBA Sale Commitments--(Premiums Received--$29,744,638*)--(12.6%) (28,860,432)
Number of
Contracts++ Options Written
Options Written--(4.3%)
Call Options Written 25 Pay a fixed rate of 5.43% and receive a floating rate based on
3-month LIBOR, expiring July 2007, Broker Lehman Brothers Special
Finance (c) (875)
25 Pay a fixed rate of 5.769% and receive a floating rate based on
3-month LIBOR, expiring July 2007, Broker Lehman Brothers Special
Finance (c) (190,425)
25 Pay a fixed rate of 5.773% and receive a floating rate based on
3-month LIBOR, expiring July 2007, Broker Lehman Brothers Special
Finance (c) (179,325)
10 Pay a fixed rate of 5.865% and receive a floating rate based on
3-month LIBOR, expiring July 2007, Broker Deutsche Bank AG London (c) (129,630)
50 Pay a fixed rate of 5.183% and receive a floating rate based on
3-month LIBOR, expiring August 2007, Broker Credit Suisse First
Boston International (c) (1,874,400)
50 Pay a fixed rate of 5.25% and receive a floating rate based on
3-month LIBOR, expiring August 2007, Broker Deutsche Bank AG London (c) (34,850)
50 Pay a fixed rate of 5.31% and receive a floating rate based on
3-month LIBOR, expiring September 2007, Broker Deutsche Bank AG London (c) (171,050)
25 Pay a fixed rate of 5.958% and receive a floating rate based on
3-month LIBOR, expiring December 2007, Broker Deutsche Bank AG London (c) (932,397)
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 (c) (57,500)
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 (c) (1,001,664)
11 Pay a fixed rate of 5.448% and receive a floating rate based on
3-month LIBOR, expiring May 2010, Broker Credit Suisse First Boston
International (c) (1,009,580)
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
Finance (c) (468,747)
20 Pay a fixed rate of 5.651% and receive a floating rate based on
3-month LIBOR, expiring May 2022, Broker Credit Suisse First Boston
International (c) (473,000)
---------------
(6,523,443)
Put Options Written 50 Receive a fixed rate of 5.183% and pay a floating rate based on
3-month LIBOR, expiring August 2007, Broker Credit Suisse First
Boston International (c) (14,400)
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 (c) (1,072,100)
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 (c) (600,746)
11 Receive a fixed rate of 5.448% and pay a floating rate based on
3-month LIBOR, expiring May 2010, Broker Credit Suisse First Boston
International (c) (404,734)
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
finance (c) (857,631)
19 Receive a fixed rate of 5.651% and pay a floating rate based on
3-month LIBOR, expiring May 2022, Broker Credit Suisse First Boston
International (c) (334,039)
---------------
(3,283,650)
Total Options Written (Premiums Received--($8,585,719*)--(4.3%) (9,807,093)
Liabilities in Excess of Other Assets--(8.6%) (19,547,298)
---------------
Net Assets--100.0% $ 228,159,435
===============
BLACKROCK ENHANCED GOVERNMENT FUND, INC. JUNE 30, 2007
Schedule of Investments (concluded) (in U.S. dollars)
* The cost and unrealized appreciation (depreciation) of investments,
net of TBA sale commitments and options written, as of June 30,
2007, as computed for federal income tax purposes, were as follows:
Aggregate cost $ 252,264,225
===============
Gross unrealized appreciation $ 5,216,389
Gross unrealized depreciation (9,773,881)
---------------
Net unrealized depreciation $ (4,557,492)
==============
** 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.
++ 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) 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.
(d) 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 $(9,009,432) $353,223
BlackRock Liquidity Series, LLC
Money Market Series -- $ 195
(e) Represents the current yield as of June 30, 2007.
(f) The security may be offered and sold to "qualified institutional buyers"
under Rule 144A of the Securities Act of 1933.
(g) All or a portion of the security is on hold as collateral in connection
with open financial futures contracts.
(h) Represents the interest only portion of a mortgage-backed security
and has either a nominal or a notional amount of principal.
o For Fund compliance purposes, the Fund's industry classifications
refer to any one or more of the industry sub-classifications used by
one or more widely recognized market indexes or ratings group
indexes, and/or as defined by Fund management. This definition
may not apply for purposes of this report, which may combine
industry sub-classifications for reporting ease. Industries are shown
as a percent of net assets.
o Financial futures contracts purchased as of June 30, 2007 were
as follows:
Number of Expiration Face Unrealized
Contracts Issue Date Value Appreciation
35 5-Year U.S. September
Treasury Note 2007 $ 3,616,573 $ 26,161
295 10-Year U.S. September
Treasury Note 2007 $31,090,978 91,444
----------
Total Unrealized Appreciation $ 117,605
==========
o Financial futures contracts sold as of June 30, 2007 were as follows:
Number of Expiration Face Unrealized
Contracts Issue Date Value Depreciation
137 2-Year U.S. September
Treasury Note 2007 $27,896,280 $ (21,751)
----------
Total Unrealized Depreciation $ (21,751)
==========
o Swaps outstanding as of June 30, 2007 were as follows:
Notional Unrealized
Amount Depreciation
Receive (pay) a variable return
based on the change in the spread
return of the Lehman Brothers CMBS
AAA 8.5+ index and receive a floating
rate based on the spread plus .20%
Broker, Credit Suisse First
Boston International
Expires September 2007 $11,500,000 --
Receive a fixed rate of 4.926%
and pay a floating rate based on
3-month LIBOR
Broker, Credit Suisse
First Boston International
Expires August 2011 $50,000,000 $ (955,764)
Receive a fixed rate of 5.393%
and pay a floating rate based on
3-month LIBOR
Broker, Credit Suisse
First Boston International
Expires June 2012 $36,000,000 (151,647)
Receive a fixed rate of 4.8825%
and pay a floating rate based on
3-month LIBOR
Broker, UBS Warburg
Expires December 2013 $20,000,000 (719,167)
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 (137,258)
------------
Total $(1,963,836)
============
See Notes to Financial Statements.
BLACKROCK ENHANCED GOVERNMENT FUND, INC. JUNE 30, 2007
Statement of Assets, Liabilities and Capital
As of June 30, 2007 (Unaudited)
Assets
Investments in unaffiliated securities, at value (identified cost--$284,562,214) $ 279,301,094
Investments in affiliated securities, at value (identified cost--$1,507,655) 1,507,655
Options purchased, at value (premiums paid--$4,524,712) 5,565,509
Cash 764,909
Receivables:
Securities sold $ 28,781,359
Interest 2,215,779
Options written 1,003,488
Variation margin 87,934
Principal paydowns 48,921
Swaps 5,847 32,143,328
---------------
Prepaid expenses 5,603
---------------
Total assets 319,288,098
---------------
Liabilities
Reverse repurchase agreements $ 10,198,864
Unrealized depreciation on swaps 1,963,836
TBA sale commitments, at value (premiums received--$29,744,638) 28,860,432
Options written, at value (premiums received--$8,585,719) 9,807,093
Payables:
Securities purchased 39,951,680
Investment adviser 164,337
Interest on reverse repurchase agreements 45,181
Swaps 3,244
Other affiliates 2,250 40,166,692
---------------
Accrued expenses 131,746
---------------
Total liabilities 91,128,663
---------------
Net Assets
Net assets $ 228,159,435
===============
Capital
Common Stock, par value $.10 per share; 200,000,000 shares authorized $ 1,285,616
Paid-in capital in excess of par 236,645,700
Accumulated distributions in excess of investment income--net $ (3,769,008)
Undistributed realized capital gains--net 422,600
Unrealized depreciation--net (6,425,473)
---------------
Total accumulated losses--net (9,771,881)
---------------
Total capital--Equivalent to $17.75 per share based on 12,856,160 shares of capital stock
outstanding (market value--$18.43) $ 228,159,435
===============
See Notes to Financial Statements.
BLACKROCK ENHANCED GOVERNMENT FUND, INC. JUNE 30, 2007
Statement of Operations
For the Six Months Ended June 30, 2007 (Unaudited)
Investment Income
Interest (including $353,223 from affiliates) $ 7,283,650
Securities lending--net 195
---------------
Total income 7,283,845
---------------
Expenses
Investment advisory fees $ 982,594
Interest expense 733,560
Short sale expense 181,688
Accounting services 43,542
Printing and shareholder reports 27,065
Transfer agent fees 26,829
Professional fees 26,501
Repurchase offer fees 17,208
Custodian fees 11,992
Directors' fees and expenses 11,544
Pricing services 6,017
Listing fees 4,716
Other 19,253
---------------
Total expenses 2,092,509
---------------
Investment income--net 5,191,336
---------------
Realized & Unrealized Gain (Loss)--Net
Realized gain (loss) on:
Investments--net (1,439,911)
Financial futures contracts and swaps--net 816,043
Options written--net 1,283,583
Short sales--net 251,051 910,766
---------------
Change in unrealized appreciation/depreciation on:
Investments--net (2,588,235)
Futures contracts and swaps--net (2,694,901)
Options written--net (1,477,084) (6,760,220)
--------------- ---------------
Total realized and unrealized loss--net (5,849,454)
---------------
Net Decrease in Net Assets Resulting from Operations $ (658,118)
===============
See Notes to Financial Statements.
BLACKROCK ENHANCED GOVERNMENT FUND, INC. JUNE 30, 2007
Statements of Changes in Net Assets
For the Six For the
Months Ended Year Ended
June 30, 2007 December 31,
Increase (Decrease) in Net Assets: (Unaudited) 2006
Operations
Investment income--net $ 5,191,336 $ 9,915,042
Realized gain (loss)--net 910,766 (37,918)
Change in unrealized appreciation/depreciation--net (6,760,220) (765,310)
--------------- ---------------
Net increase (decrease) in net assets resulting from operations (658,118) 9,111,814
--------------- ---------------
Dividends & Distributions to Shareholders
Investment income--net (8,960,344)++ (10,234,534)
Realized gain--net -- (437,155)
Tax return of capital -- (7,129,386)
--------------- ---------------
Net decrease in net assets resulting from dividends and distributions to shareholders (8,960,344) (17,801,075)
--------------- ---------------
Capital Stock Transactions
Value of shares issued to Common Stock Shareholders in reinvestment of dividends 1,803,388 1,428,985
Net redemption of Common Stock resulting from repurchase offer
(includes $8,789 of repurchase fees) -- (435,066)
Offering costs, including adjustments, resulting from the issuance of Common Stock -- (19,804)
--------------- ---------------
Net increase in net assets resulting from capital stock transactions 1,803,388 974,115
--------------- ---------------
Net Assets
Total decrease in net assets (7,815,074) (7,715,146)
Beginning of period 235,974,509 243,689,655
--------------- ---------------
End of period* $ 228,159,435 $ 235,974,509
=============== ===============
* Accumulated distributions in excess of investment income--net $ (3,769,008) --
=============== ===============
++ A portion of the dividends from net investment income may be deemed a tax return of capital
or net realized gain at fiscal year end.
See Notes to Financial Statements.
BLACKROCK ENHANCED GOVERNMENT FUND, INC. JUNE 30, 2007
Financial Highlights
For the Six For the For the Period
Months Ended Year Ended October 31, 2005++
The following per share data and ratios have been derived June 30, 2007 December 31, to December 31,
from information provided in the financial statements. (Unaudited) 2006 2005
Per Share Operating Performance
Net asset value, beginning of period $ 18.50 $ 19.18 $ 19.10
------------- ------------- -------------
Investment income--net** .41 .78 .13
Realized and unrealized gain (loss)--net (.46) (.06) .10
------------- ------------- -------------
Total from investment operations (.05) .72 .23
------------- ------------- -------------
Less dividends and distributions:
Investment income--net (.70)+++++ (.81) (.10)
Realized gain--net -- (.03) (.02)
Tax return of capital -- (.56) --
------------- ------------- -------------
Total dividends and distributions (.70) (1.40) (.12)
------------- ------------- -------------
Offering costs resulting from the issuance of Common Stock -- --++++ (.03)
------------- ------------- -------------
Net asset value, end of period $ 17.75 $ 18.50 $ 19.18
============= ============= =============
Market price per share, end of period $ 18.43 $ 18.54 $ 18.09
============= ============= =============
Total Investment Return***
Based on net asset value per share (.35%)+++ 4.08% 1.06%+++
============= ============= =============
Based on market price per share 3.25%+++ 10.59% (8.97%)+++
============= ============= =============
Ratios to Average Net Assets
Expenses, excluding interest expense 1.18%* 1.01% .94%*
============= ============= =============
Expenses 1.81%* 1.01% .94%*
============= ============= =============
Investment income--net 4.49%* 4.18% 3.89%*
============= ============= =============
Supplemental Data
Net assets, end of period (in thousands) $ 228,159 $ 235,975 $ 243,690
============= ============= =============
Portfolio turnover 226%++++++++ 76% 20%
============= ============= =============
* Annualized.
** Based on average shares outstanding.
*** Total investment returns based on market price, which can be significantly greater or lesser than the
net asset value, may result in substantially different returns. Total investment returns exclude the
effects of sales charges.
++ Commencement of operations.
++++ Amount is less than $(.01) per share.
+++ Aggregate total investment return.
+++++ A portion of the dividends from net investment income may be deemed a tax return of capital or net
realized gain at fiscal year end.
++++++++ Excludes dollar roll transactions.
See Notes to Financial Statements.
BLACKROCK ENHANCED GOVERNMENT FUND, INC. JUNE 30, 2007
Notes to Financial Statements (Unaudited)
1. Significant Accounting Policies:
BlackRock Enhanced Government Fund, Inc. (the "Fund") is registered under the
Investment Company Act of 1940, as amended, as a diversified, closed-end
management investment company. The Fund's financial statements are prepared in
conformity with U.S generally accepted accounting principles, which may
require the use of management accruals and estimates. Actual results may
differ from these estimates. These unaudited financial statements reflect all
adjustments, which are, in the opinion of management, necessary to present a
fair statement of the results for the interim period. All such adjustments are
of a normal, recurring nature. The Fund determines and makes available for
publication the net asset value of its Common Stock on a daily basis. The
Fund's Common Stock shares are listed on the New York Stock Exchange ("NYSE")
under the symbol EGF. The following is a summary of significant accounting
policies followed by the Fund.
(a) Valuation of investments--Debt securities are traded primarily in the
over-the-counter ("OTC") markets and are valued at the last available bid
price in the OTC market or on the basis of values obtained by a pricing
service. Pricing services use valuation matrixes that incorporate both dealer-
supplied valuations and valuation models. The procedures of the pricing
service and its valuations are reviewed by the officers of the Fund under the
general direction of the Board of Directors. Such valuations and procedures
will be reviewed periodically by the Board of Directors of the Fund. Financial
futures contracts and options thereon, which are traded on exchanges, are
valued at their closing prices as of the close of such exchanges. Options
written or purchased are valued at the last sale price in the case of exchange-
traded options. In the case of options traded in the OTC market, valuation is
the last asked price (options written) or the last bid price (options
purchased). Swap agreements are valued based upon quoted fair valuations
received daily by the Fund from a pricing service or counterparty. Repurchase
agreements are valued at cost plus accrued interest. Investments in open-end
investment companies are valued at their net asset value each business day.
Securities and other assets for which market quotations are not readily
available are valued at fair value as determined in good faith by or under the
direction of the Board of Directors of the Fund.
Equity securities that are held by the Fund, which are traded on stock
exchanges or the NASDAQ Global Market, are valued at the last sale price or
official close price on the exchange, as of the close of business on the day
the securities are being valued or, lacking any sales, at the last available
bid price for long positions, and at the last available asked price for short
positions. In cases where equity securities are traded on more than one
exchange, the securities are valued on the exchange designated as the primary
market by or under the authority of the Board of Directors of the Fund. Long
positions traded in the OTC market, NASDAQ Capital Market or Bulletin Board
are valued at the last available bid price obtained from one or more dealers
or pricing services approved by the Board of Directors of the Fund. Short
positions traded in the OTC market are valued at the last available asked
price. Portfolio securities that are traded both in the OTC market and on a
stock exchange are valued according to the broadest and most representative
market.
Generally, trading in foreign securities, as well as U.S. government
securities, money market instruments and certain fixed income securities is
substantially completed each day at various times prior to the close of
business on the NYSE. The values of such securities used in computing the net
asset value of the Fund's shares are determined as of such times. Foreign
currency exchange rates generally will be determined as of the close of
business on the NYSE. Occasionally, events affecting the values of such
securities and such exchange rates may occur between the times at which they
are determined and the close of business on the NYSE that may not be reflected
in the computation of the Fund's net asset value. If events (for example, a
company announcement, market volatility or a natural disaster) occur during
such periods that are expected to materially affect the value of such
securities, those securities may be valued at their fair value as determined
in good faith by the Fund's Board of Directors or by BlackRock Advisors, LLC
(the "Manager"), an indirect, wholly owned subsidiary of BlackRock, Inc.,
using a pricing service and/or procedures approved by the Fund's Board of
Directors.
(b) Derivative financial instruments--The Fund may engage in various portfolio
investment strategies both to increase the return of the Fund and to hedge, or
protect, its exposure to interest rate movements and movements in the
securities markets. Losses may arise due to changes in the value of the
contract due to an unfavorable change in the price of the underlying security
or index, or if the counterparty does not perform under the contract. The
counterparty for certain instruments may pledge cash or securities as
collateral.
BLACKROCK ENHANCED GOVERNMENT FUND, INC. JUNE 30, 2007
Notes to Financial Statements (continued)
* Options--The Fund may write and purchase call and put options. When the Fund
writes an option, an amount equal to the premium received by the Fund is
reflected as an asset and an equivalent liability. The amount of the liability
is subsequently marked-to-market to reflect the current market value of the
option written. When a security is purchased or sold through an exercise of an
option, the related premium paid (or received) is added to (or deducted from)
the basis of the security acquired or deducted from (or added to) the proceeds
of the security sold. When an option expires (or the Fund enters into a
closing transaction), the Fund realizes a gain or loss on the option to the
extent of the premiums received or paid (or gain or loss to the extent the
cost of the closing transaction exceeds the premium paid or received). Written
and purchased options are non-income producing investments.
* Financial futures contracts--The Fund may purchase or sell financial futures
contracts and options on such financial futures contracts. Financial futures
contracts are contracts for delayed delivery of securities at a specific
future date and at a specific price or yield. Upon entering into a contract,
the Fund deposits and maintains as collateral such initial margin as required
by the exchange on which the transaction is effected. Pursuant to the
contract, the Fund agrees to receive from or pay to the broker an amount of
cash equal to the daily fluctuation in value of the contract. Such receipts or
payments are known as variation margin and are recorded by the Fund as
unrealized gains or losses. When the contract is closed, the Fund records a
realized gain or loss equal to the difference between the value of the
contract at the time it was opened and the value at the time it was closed.
* Swaps--The Fund may enter into swap agreements, which are OTC contracts in
which the Fund and a counterparty agree to make periodic net payments on a
specified notional amount. The net payments can be made for a set period of
time or may be triggered by a predetermined credit event. The net periodic
payments may be based on a fixed or variable interest rate; the change in
market value of a specified security, asket of securities, or index; or the
return generated by a security. These periodic payments received or made by
the Fund are recorded in the accompanying Statement of Operations as realized
gains or losses, respectively. Gains or losses are realized upon termination
of the swap agreements. Swaps are marked-to-market daily and changes in value
are recorded as unrealized appreciation (depreciation). Risks include changes
in the returns of the underlying instruments, failure of the counterparties to
perform under the contracts' terms and the possible lack of liquidity with
respect to the swap agreements.
(c) Reverse repurchase agreements--The Fund may enter into reverse repurchase
agreements. Under reverse repurchase agreements, the Fund sells securities to
the counterparty and agrees to repurchase them at a mutually agreed upon date
and price, and may exchange their respective commitments to pay or receive
interest. If the counterparty defaults on its obligation, the Fund's ability
to receive interest will be delayed or limited. Furthermore, if the Fund does
not have sufficient income to pay its obligation under the reverse repurchase
agreement, the Fund would be in default and the counterparty would be able to
terminate the repurchase agreement.
(d) Income taxes--It is the Fund's policy to comply with the requirements of
the Internal Revenue Code applicable to regulated investment companies and to
distribute substantially all of its taxable income to its shareholders.
Therefore, no federal income tax provision is required.
(e) Security transactions and investment income--Security transactions are
recorded on the dates the transactions are entered into (the trade dates).
Realized gains and losses on security transactions are determined on the
identified cost basis. Dividend income is recorded on the ex-dividend dates.
Interest income is recognized on the accrual basis. The Fund amortizes all
premiums and discounts on debt securities.
(f) Dividends and distributions--Dividends from net investment income are
declared and paid monthly. Distributions of capital gains are recorded on the
ex-dividend dates. If the total dividends and distributions made in any tax
year exceeds net investment income and accumulated realized capital gains, a
portion of the total distribution may be treated as a tax return of capital.
(g) Offering expenses--Direct expenses relating to the public offering of the
Fund's Common Stock were charged to capital at the time of issuance of the
shares. Any adjustments to estimates of offering costs were recorded to
capital.
BLACKROCK ENHANCED GOVERNMENT FUND, INC. JUNE 30, 2007
Notes to Financial Statements (continued)
(h) Securities lending--The Fund may lend securities to financial institutions
that provide cash or securities issued or guaranteed by the U.S. government as
collateral, which will be maintained at all times in an amount equal to at
least 100% of the current market value of the loaned securities. The market
value of the loaned securities is determined at the close of business of the
Fund and any additional required collateral is delivered to the Fund on the
next business day. Where the Fund receives securities as collateral for the
loaned securities, it collects a fee from the borrower. The Fund typically
receives the income on the loaned securities but does not receive the income
on the collateral. Where the Fund receives cash collateral, it may invest such
collateral and retain the amount earned on such investment, net of any amount
rebated to the borrower. Loans of securities are terminable at any time and
the borrower, after notice, is required to return borrowed securities within
five business days. The Fund may pay reasonable finder's, lending agent,
administrative and custodial fees in connection with its loans. In the event
that the borrower defaults on its obligation to return borrowed securities
because of insolvency or for any other reason, the Fund could experience
delays and costs in gaining access to the collateral. The Fund also could
suffer a loss where the value of the collateral falls below the market value
of the borrowed securities, in the event of borrower default or in the event
of losses on investments made with cash collateral.
(i) Short sales--When the Fund engages in a short sale, an amount equal to the
proceeds received by the Fund is reflected as an asset and an equivalent
liability. The amount of the liability is subsequently marked-to-market to
reflect the market value of the short sale. The Fund maintains a segregated
account of securities as collateral for the short sales. The Fund is exposed
to market risk based on the amount, if any, that the market value of the stock
exceeds the market value of the securities in the segregated account. The Fund
is required to repay the counterparty any dividends or interest received on
the security sold short.
(j) TBA Commitments--The Fund may enter into to be announced ("TBA")
commitments to purchase or sell securities for a fixed price at a future date.
TBA commitments are considered securities in themselves, and involve a risk of
loss if the value of the security to be purchased/sold declines/increases
prior to settlement date, which is in addition to the risk of decline in the
value of a Fund's other assets. Unsettled TBA commitments are valued at the
current market value of the underlying securities, according to the procedures
described under "Valuation of investments."
(k) Recent accounting pronouncements--Effective June 29, 2007, the Fund
implemented Financial Accounting Standards Board ("FASB") Interpretation
No. 48, "Accounting for Uncertainty in Income Taxes - an interpretation of
FASB Statement No. 109" ("FIN 48"). FIN 48 prescribes the minimum recognition
threshold a tax position must meet in connection with accounting for
uncertainties in income tax positions taken or expected to be taken by an
entity, including investment companies, before being measured and recognized
in the financial statements. Management has evaluated the application of FIN
48 to the Fund, and has determined that the adoption of FIN 48 does not have a
material impact on the Fund's financial statements. The Fund files U.S. and
various state tax returns. No income tax returns are currently under
examination. The statute of limitations on the Fund's tax returns remains open
for the years ended December 31, 2005 through December 31, 2006.
In September 2006, Statement of Financial Accounting Standards No. 157, "Fair
Value Measurements" ("FAS 157"), was issued and is effective for fiscal years
beginning after November 15, 2007. FAS 157 defines fair value, establishes a
framework for measuring fair value and expands disclosures about fair value
measurements. At this time, management is evaluating the implications of FAS
157 and its impact on the Fund's financial statements, if any, has not been
determined.
In addition, in February 2007, Statement of Financial Accounting Standards
No. 159, "The Fair Value Option for Financial Assets and Financial
Liabilities" ("FAS 159"), was issued and is effective for fiscal years
beginning after November 15, 2007. Early adoption is permitted as of the
beginning of a fiscal year that begins on or before November 15, 2007,
provided the entity also elects to apply the provisions of FAS 157. FAS 159
permits entities to choose to measure many financial instruments and certain
other items at fair value that are not currently required to be measured at
fair value. FAS 159 also establishes presentation and disclosure requirements
designed to facilitate comparisons between entities that choose different
measurement attributes for similar types of assets and liabilities. At this
time, management is evaluating the implications of FAS 159 and its impact on
the Fund's financial statements, if any, has not been determined.
BLACKROCK ENHANCED GOVERNMENT FUND, INC. JUNE 30, 2007
Notes to Financial Statements (concluded)
2. Investment Advisory Agreement and Transactions with Affiliates:
The Fund has entered into an Investment Advisory Agreement with the Manager.
Merrill Lynch & Co., Inc. ("Merrill Lynch") and The PNC Financial Services
Group, Inc. are the principal owners of BlackRock, Inc.
The Manager is responsible for the management of each Fund's portfolio and
provides the necessary personnel, facilities, equipment and certain other
services necessary to the operations of the Fund. For such services, the Fund
pays a monthly fee at an annual rate of .85% of the aggregate of the Fund's
average daily net assets and the proceeds of any outstanding debt securities
or borrowings used for leverage. In addition, the Manager has entered into a
sub-advisory agreement with BlackRock Financial Management, Inc., an affiliate
of the Manager, under which the Manager pays the Sub-Adviser for services it
provides a monthly fee that is a percentage of the management fee paid by the
Fund to the Manager.
The Fund has received an exemptive order from the Securities and Exchange
Commission permitting it to lend portfolio securities to Merrill Lynch,
Pierce, Fenner & Smith Incorporated, a wholly owned subsidiary of Merrill
Lynch, or its affiliates. Pursuant to that order, the Fund also has retained
BlackRock Investment Management, LLC. ("BIM"), an affiliate of the Manager, as
the securities lending agent for a fee based on a share of the returns on
investment of cash collateral. BIM may, on behalf of the Fund, invest cash
collateral received by the Fund for such loans, among other things, in a
private investment company managed by the Manager or in registered money
market funds advised by the Manager or its affiliates. For the six months
ended June 30, 2007, BIM received $84 in securities lending agent fees.
For the six months ended June 30, 2007, the Fund reimbursed the Manager
$2,214 for certain accounting services.
Certain officers and/or directors of the Fund are officers and/or directors
of BlackRock, Inc. or its affiliates.
3. Investments:
Purchases and sales (including paydowns and excluding dollar roll
transactions) of investments, excluding short-term securities, for the six
months ended June 30, 2007 were $632,621,037 and $613,022,076, respectively.
Transactions in options written for the six months ended June 30, 2007 were
as follows:
Number of Premiums
Contracts++ Received
Outstanding call options written,
beginning of period 128 $ 508,030
Options written 740 7,807,273
Options expired (390) (1,664,500)
Options closed (90) (1,354,130)
-------------- ---------------
Outstanding call options written,
end of period 388 $ 5,296,673
============== ===============
++ One contract represents a notional amount of $1,000,000.
Number of Premiums
Contracts++ Received
Outstanding put options written,
beginning of period 50 $ 30,000
Options written 759 4,753,052
Options expired (50) (50,000)
Options closed (582) (1,444,006)
-------------- ---------------
Outstanding put options written,
end of period 177 $ 3,289,046
============== ===============
++ One contract represents a notional amount of $1,000,000.
4. Capital Share Transactions:
The Fund is authorized to issue 200,000,000 shares of capital stock, par value
$.10, all of which were initially classified as Common Stock. The Board of
Directors is authorized, however, to classify and reclassify any unissued
shares of capital stock without approval of the holders of Common Stock.
Shares issued and outstanding during the six months ended June 30, 2007
increased by 97,910 as a result of dividend reinvestment. Shares issued and
outstanding during the year ended December 31, 2006 increased by 77,011 as a
result of dividend reinvestment and decreased by 23,997 as a result of a
repurchase offer.
The Fund will make offers to repurchase its shares at annual (approximately
12-month) intervals. The shares tendered in the repurchase offer may be
subject to a repurchase fee retained by the Fund to compensate the Fund for
expenses directly related to the repurchase offer.
5. Reverse Repurchase Agreement:
The weighted average annual interest rate was 5.44% and the average amount
borrowed was approximately $27,033,000 for the six months ended June 30, 2007.
6. Subsequent Event:
The Fund paid an ordinary income dividend in the amount of $.116667 per share
on July 31, 2007 to shareholders of record on July 16, 2007.
BLACKROCK ENHANCED GOVERNMENT FUND, INC. JUNE 30, 2007
Officers and Directors
Robert C. Doll, Jr., Fund President and Director
David O. Beim, Director
James T. Flynn, Director
W. Carl Kester, Director
Karen P. Robards, Director
Donald C. Burke, Vice President and Treasurer
Karen Clark, Fund Chief Compliance Officer
Alice A. Pellegrino, Secretary
Custodian
State Street Bank and Trust Company
P.O. Box 351
Boston, MA 02101
Transfer Agent
The Bank of New York
101 Barclay Street--11 East
New York, NY 10286
BLACKROCK ENHANCED GOVERNMENT FUND, INC. JUNE 30, 2007
Availability of Quarterly Schedule of Investments
The Fund files its complete schedule of portfolio holdings with the Securities
and Exchange Commission ("SEC") for the first and third quarters of each fiscal
year on Form N-Q. The Fund's Forms N-Q are available on the SEC's Web site at
http://www.sec.gov. The Fund's Forms N-Q may also be reviewed and copied at the
SEC's Public Reference Room in Washington, DC. Information on the operation of
the Public Reference Room may be obtained by calling 1-800-SEC-0330.
Electronic Delivery
Electronic copies of most financial reports and prospectuses are available on
the Fund's Web site. Shareholders can sign up for e-mail notifications of
quarterly statements, annual and semi-annual reports and prospectuses by
enrolling in the Fund's electronic delivery program.
Shareholders Who Hold Accounts with Investment Advisers, Banks or Brokerages:
Please contact your financial advisor to enroll. Please note that not all
investment advisers, banks or brokerages may offer this service.
BLACKROCK ENHANCED GOVERNMENT FUND, INC. JUNE 30, 2007
BlackRock Privacy Principles
BlackRock is committed to maintaining the privacy of its current and former
fund investors and individual clients (collectively, "Clients") and to
safeguarding their non-public personal information. The following information
is provided to help you understand what personal information BlackRock
collects, how we protect that information and why in certain cases we share
such information with select parties.
If you are located in a jurisdiction where specific laws, rules or regulations
require BlackRock to provide you with additional or different privacy-related
rights beyond what is set forth below, then BlackRock will comply with those
specific laws, rules or regulations.
BlackRock obtains or verifies personal non-public information from and about
you from different sources, including the following: (i) information we
receive from you or, if applicable, your financial intermediary, on
applications, forms or other documents; (ii) information about your
transactions with us, our affiliates, or others; (iii) information we receive
from a consumer reporting agency; and (iv) from visits to our Web sites.
BlackRock does not sell or disclose to non-affiliated third parties any
non-public personal information about its Clients, except as permitted by
law or as is necessary to respond to regulatory requests or to service Client
accounts. These non-affiliated third parties are required to protect the
confidentiality and security of this information and to use it only for its
intended purpose.
We may share information with our affiliates to service your account or to
provide you with information about other BlackRock products or services
that may be of interest to you. In addition, BlackRock restricts access to
non-public personal information about its Clients to those BlackRock employees
with a legitimate business need for the information. BlackRock maintains
physical, electronic and procedural safeguards that are designed to protect
the non-public personal information of its Clients, including procedures
relating to the proper storage and disposal of such information.
BLACKROCK ENHANCED GOVERNMENT FUND, INC. JUNE 30, 2007
Item 2 - Code of Ethics - Not Applicable to this semi-annual report
Item 3 - Audit Committee Financial Expert - Not Applicable to this
semi-annual report
Item 4 - Principal Accountant Fees and Services - Not Applicable to this
semi-annual report
Item 5 - Audit Committee of Listed Registrants - Not Applicable to this
semi-annual report
Item 6 - Schedule of Investments - The registrant's Schedule of Investments
is included as part of the Report to Stockholders filed under Item 1
of this form.
Item 7 - Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies - Not Applicable to this semi-annual
report
Item 8 - Portfolio Managers of Closed-End Management Investment Companies -
Not Applicable to this semi-annual report
Item 9 - Purchases of Equity Securities by Closed-End Management Investment
Company and Affiliated Purchasers -
Period (a) Total (b) Average (c) Total Number (d) Maximum Number
Number of Price Paid of Shares Purchased (or Approx. Dollar Value)
Shares per Share as Part of Publicly of Shares that
Purchased Announced Plans May Yet Be Purchased
or Programs Under the Plans
or Programs
January 1-31, 2007 23,997 $18.50 per Share (1) 23,977 (2) 0
February 1-28, 2007
March 1-31, 2007
April 1-30, 2007
May 1-31, 2007
June 1-30, 2007
Total: 23,997 $18.50 per Share (1) 23,977 (2) 0
(1) Subject to a repurchase fee of 2% of the net asset value per share.
(2) On November 14, 2006, the repurchase offer was announced to repurchase up
to 5% of outstanding shares. The expiration date of the offer was December
21, 2006. The registrant may conduct annual repurchases for between 5% and
25% of its outstanding shares pursuant to Rule 23c-3 under the Investment
Company Act of 1940, as amended.
Item 10 - Submission of Matters to a Vote of Security Holders - The
registrant's Nominating Committee will consider nominees to the
Board recommended by shareholders when a vacancy becomes available.
Shareholders who wish to recommend a nominee should send nominations
which include biographical information and set forth the
qualifications of the proposed nominee to the registrant's
Secretary. There have been no material changes to these procedures.
Item 11 - Controls and Procedures
11(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.
11(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
(17 CFR 270.30a-3(d)) that occurred during the second fiscal quarter
of the period covered by this report that have materially affected,
or are reasonably likely to materially affect, the registrant's
internal control over financial reporting.
Item 12 - Exhibits attached hereto
12(a)(1) - Code of Ethics - Not Applicable to this semi-annual report
12(a)(2) - Certifications - Attached hereto
12(a)(3) - Not Applicable
12(b) - 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 of
BlackRock Enhanced Government Fund, Inc.
Date: August 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/ Robert C. Doll, Jr.
-----------------------
Robert C. Doll, Jr.,
Chief Executive Officer of
BlackRock Enhanced Government Fund, Inc.
Date: August 20, 2007
By: /s/ Donald C. Burke
-------------------
Donald C. Burke,
Chief Financial Officer of
BlackRock Enhanced Government Fund, Inc.
Date: August 20, 2007