UNITEDSTATES
SECURITIESANDEXCHANGECOMMISSION
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. (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 52^nd 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: 06/30/2010

Item 1 – Report to Stockholders

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BlackRock Enhanced

Government Fund, Inc. (EGF)

SEMI-ANNUAL REPORT

JUNE 30, 2010 | (UNAUDITED)

NOT FDIC INSURED

MAY LOSE VALUE

NO BANK GUARANTEE

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BlackRock Enhanced Government Fund, Inc. (EGF) (the “Fund”), acting pursuant to a Securities and Exchange Commission (“SEC”) exemptive order, has
adopted a level distribution plan (the “Plan”), consistent with its investment objectives and policies. In adopting the Plan, the Fund employs an option
over-write strategy to support a level distribution of income, capital gains and/or return of capital. In accordance with the Plan, the Fund currently distrib-
utes $0.08 per share on a monthly basis.

The fixed amounts distributed per share are subject to change at the discretion of the Board. Under its Plan, the Fund will distribute all available invest-
ment income to its shareholders, consistent with its primary investment objectives and as required by the Internal Revenue Code of 1986, as amended
(the “Code”). If sufficient investment income is not available on a monthly basis, the Fund will distribute long-term capital gains and/or return of cap-
ital to shareholders in order to maintain a level distribution. Each monthly distribution to shareholders is expected to be at the fixed amount estab-
lished by the Board, except for extraordinary distributions and potential distribution rate increases or decreases to enable the Fund to comply with the
distribution requirements imposed by the Code.

Shareholders should not draw any conclusions about the Fund’s investment performance from the amount of these distributions or from the terms of the
Plan. The Fund’s total return performance on net asset value is presented in its financial highlights table.

The Board may amend, suspend or terminate the Fund’s Plan without prior notice if it deems such actions to be in the best interests of the Fund or its
shareholders. The suspension or termination of the Plan could have the effect of creating a trading discount (if the Fund’s stock is trading at or above
net asset value) or widening an existing trading discount. The Fund is subject to risks that could have an adverse impact on its ability to maintain a
level distribution. Examples of potential risks include, but are not limited to, economic downturns impacting the markets, decreased market volatility,
companies suspending or decreasing corporate dividend distributions and changes in the Code. Please refer to the Fund’s prospectus for a more com-
plete description of its risks.

Please refer to Additional Information for a cumulative summary of the Section 19(a) notices for the Fund’s current fiscal period. Section 19(a) notices
for the Fund are available on the BlackRock website www.blackrock.com.

2 BLACKROCK ENHANCED GOVERNMENT FUND, INC.

JUNE 30, 2010

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Dear Shareholder

Although overall global economic and financial conditions have generally improved over the past year, the past several months have seen high levels
of market volatility and diminishing investor confidence sparked by the sovereign debt crisis in Europe and mixed economic data that have raised con-
cerns over the possibility that some economies could slide back into recession. Despite the uneven nature of recent market conditions, we continue
to believe that the “Great Recession” likely ended at some point last summer, thanks primarily to massive fiscal and monetary stimulus, and that the
global economy remains in recovery mode for most regions of the world. Regarding the US economy, we believe it is unlikely that the United States
will experience a “double dip” recession, although we acknowledge that subpar growth is likely to persist for some time.

Global equity markets bottomed in early 2009 and since that time have moved unevenly higher as investors were lured back into the markets by
depressed valuations, desire for higher yields and improvements in corporate earnings prospects. Volatility levels, however, have remained elevated —
primarily as a result of uneven economic data and lingering deflation issues (especially in Europe). As the period drew to a close, equity markets had
endured a significant correction that drove stock prices into negative territory on a year-to-date basis in almost every market. Over a 12-month basis,
however, global equities posted positive returns thanks to improving corporate revenues and profits and a reasonably strong macro backdrop. From a
geographic perspective, US equities have significantly outpaced their international counterparts over the past six and twelve months, as the domestic
economic recovery has been more pronounced and as credit-related issues have held European markets down. Within the United States, smaller cap
stocks have noticeably outperformed large caps.

In fixed income markets, yields have been moving unevenly over the past six and twelve months as improving economic conditions have been acting
to push Treasury yields higher (and prices correspondingly lower), while concerns over ongoing deflation threats have acted as a counterweight. As the
period drew to a close, however, Treasury yields fell sharply as investors flocked to the “safe haven” asset class in the face of escalating uncertainty. As
a result, US Treasuries became one of the world’s best-performing asset classes on a six-month basis. High yield bonds have also continued to perform
well, thanks in large part to ongoing high levels of investor demand. Meanwhile, municipal bonds performed in line with their taxable counterparts on a
12-month basis, but slightly underperformed over the last six months as investors rotated to the relative safety of Treasuries.

Regarding cash investments, yields on money market securities remain near all-time lows (producing returns only marginally above zero percent), with
the Federal Open Market Committee reiterating that economic circumstances are likely to necessitate an accommodative interest rate stance for an
“extended period.”

 

Past performance is no guarantee of future results. Index performance shown for illustrative purposes only. You cannot invest directly in an index.

Although conditions are certainly better than they were a couple of years ago, global financial markets continue to face high volatility and questions
about the strength and sustainability of the recovery abound. Through periods of uncertainty, as ever, BlackRock’s full resources are dedicated to
the management of our clients’ assets. For additional market perspective and investment insight, visit www.blackrock.com/shareholdermagazine,
where you’ll find the most recent issue of our award-winning Shareholder® magazine, as well as its quarterly companion newsletter, Shareholder
Perspectives. As always, we thank you for entrusting BlackRock with your investments, and we look forward to your continued partnership in the
months and years ahead.

Sincerely,

Rob Kapito
President, BlackRock Advisors, LLC

THIS PAGE NOT PART OF YOUR FUND REPORT

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Fund Summary as of June 30, 2010

Investment Objective and Overview

BlackRock Enhanced Government Fund, Inc.'s (EGF) (the “Fund”) investment objective is to seek to provide shareholders with current income and
gains. The Fund seeks to achieve its investment objective by investing primarily in a portfolio of US Government securities and US Government Agency
securities, including US Government mortgage-backed securities that pay interest in an attempt to generate current income, and by employing a strat-
egy of writing (selling) call options on individual or baskets of US Government securities, US Government Agency securities or other debt securities
held by the Fund in an attempt to generate gains from option premiums.
No assurance can be given that the Fund’s investment objective will be acheived.

Performance

For the six months ended June 30, 2010, the Fund returned 0.78% based on market price and 3.51% based on net asset value (NAV). For the same
period, the Fund’s benchmark, Citigroup Government/Mortgage Index, posted a total return of 5.15%. All returns reflect reinvestment of dividends. The
Fund's premium to NAV, which narrowed during the period, accounts for the difference between performance based on market price and performance
based on NAV. The following discussion relates to performance based on NAV. The Fund’s exposure to corporate debt through preferred securities
detracted from performance during the period. Investment grade corporates, particularly in the financials sector, experienced heightened volatility in
the face of uncertainty around financial regulatory reform. In addition, the call-writing strategy hampered performance as calls written on mortgages
and interest rates lost value when Treasuries rallied during the period. The Fund employed interest rate swaps to synthetically reduce the duration of its
portfolio during the period. As interest rates declined, the swaps lost value, negatively impacting performance. Conversely, direct exposure to Treasuries,
agency debentures and agency mortgage-backed securities (MBS) benefited performance. Agency MBS, in particular, performed well versus risk-free
Treasuries. Despite the removal of the government’s mortgage purchase program on March 31, 2010, strong technicals supported the sector. The Fund’s
holdings in commercial MBS and asset-backed securities also added to performance. The Fund engaged in financial futures contracts for purposes of
managing risk related to duration and yield curve positioning, which overall was beneficial to performance.

The views expressed reflect the opinions of BlackRock as of the date of this report and are subject to change based on changes in market, economic or other conditions.
These views are not intended to be a forecast of future events and are no guarantee of future results.

 

The following chart shows the portfolio composition and credit quality allocation of the Fund’s long-term investments:

 

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The Benefits and Risks of Leveraging

The Fund may utilize leverage to seek to enhance its yield and NAV.
However, these objectives cannot be achieved in all interest
rate environments.

The Fund may utilize leverage through borrowings by entering into
reverse repurchase agreements and Treasury rolls. In general, the con-
cept of leveraging is based on the premise that the financing cost of
assets to be obtained from leverage will be based on short-term inter-
est rates, which normally will be lower than the income earned by the
Fund on its longer-term portfolio investments. To the extent that the
total assets of the Fund (including the assets obtained from leverage)
are invested in higher-yielding portfolio investments, the Fund’s share-
holders will benefit from the incremental net income.

The interest earned on securities purchased with the proceeds from
leverage is paid to shareholders in the form of dividends, and the value
of these portfolio holdings is reflected in the per share NAV. However, in
order to benefit shareholders, the yield curve must be positively sloped;
that is, short-term interest rates must be lower than long-term interest
rates. If the yield curve becomes negatively sloped, meaning short-term
interest rates exceed long-term interest rates, returns to shareholders will
be lower than if the Fund had not used leverage.

To illustrate these concepts, assume a Fund’s capitalization is $100 mil-
lion and it issues debt securities for an additional $30 million, creating
a total value of $130 million available for investment in long-term secu-
rities. If prevailing short-term interest rates are 3% and long-term interest
rates are 6%, the yield curve has a strongly positive slope. In this case,
the Fund pays interest expense on the $30 million of debt securities
based on the lower short-term interest rates. At the same time, the
Fund’s total portfolio of $130 million earns income based on long-term
interest rates. In this case, the interest expense of the debt securities is
significantly lower than the income earned on the Fund’s long-term
investments, and therefore the Fund’s shareholders are the beneficiaries
of the incremental net income.

If short-term interest rates rise, narrowing the differential between short-
term and long-term interest rates, the incremental net income pickup will
be reduced or eliminated completely. Furthermore, if prevailing short-term

interest rates rise above long-term interest rates of 6%, the yield curve
has a negative slope. In this case, the Fund pays interest expense on the
higher short-term interest rates whereas the Fund’s total portfolio earns
income based on lower long-term interest rates.

Furthermore, the value of the Fund’s portfolio investments generally
varies inversely with the direction of long-term interest rates, although
other factors can influence the value of portfolio investments. In con-
trast, the redemption value of the Fund’s debt securities do not fluctuate
in relation to interest rates. As a result, changes in interest rates can
influence the Fund’s NAV positively or negatively in addition to the
impact on Fund performance from leverage from debt securities.

The use of leverage may enhance opportunities for increased income to
the Fund and shareholders, but as described above, it also creates risks
as short- or long-term interest rates fluctuate. Leverage also will gener-
ally cause greater changes in the Fund’s NAV, market price and dividend
rate than a comparable portfolio without leverage. If the income derived
from securities purchased with assets received from leverage exceeds
the cost of leverage, the Fund’s net income will be greater than if lever-
age had not been used. Conversely, if the income from the securities
purchased is not sufficient to cover the cost of leverage, the Fund’s net
income will be less than if leverage had not been used, and therefore
the amount available for distribution to shareholders will be reduced. The
Fund may be required to sell portfolio securities at inopportune times or
at distressed values in order to comply with regulatory requirements
applicable to the use of leverage or as required by the terms of leverage
instruments which may cause the Fund to incur losses. The use of lever-
age may limit the Fund’s ability to invest in certain types of securities or
use certain types of hedging strategies. The Fund will incur expenses in
connection with the use of leverage, all of which are borne by sharehold-
ers and may reduce income.

Under the Investment Company Act of 1940, the Fund is permitted to
borrow up to 33 ¹ / ₃ % of total managed assets. As of June 30, 2010, the
Fund had economic leverage of 4% from reverse repurchase agreements
as a percentage of its total of managed assets.

Derivative Financial Instruments

The Fund may invest in various derivative instruments, including finan-
cial futures contracts, swaps, foreign currency exchange contracts and
options, as specified in Note 2 of the Notes to Financial Statements,
which may constitute forms of economic leverage. Such instruments are
used to obtain exposure to a market without owning or taking physical
custody of securities or to hedge market, interest rate and/or foreign
currency exchange rate risks. Such derivative instruments involve risks,
including the imperfect correlation between the value of a derivative
instrument and the underlying asset, possible default of the counter-
party to the transaction or illiquidity of the derivative instrument. The

Fund’s ability to successfully use a derivative instrument depends on
the investment advisor’s ability to accurately predict pertinent market
movements, which cannot be assured. The use of derivative instruments
may result in losses greater than if they had not been used, may require
the Fund to sell or purchase portfolio securities at inopportune times or
for distressed values, may limit the amount of appreciation the Fund
can realize on an investment, may result in lower dividends paid to
shareholders or may cause the Fund to hold a security that it might
otherwise sell. The Fund’s investments in these instruments are
discussed in detail in the Notes to Financial Statements.

BLACKROCK ENHANCED GOVERNMENT FUND, INC.

JUNE 30, 2010

5

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Schedule of Investments June 30, 2010 (Unaudited)

 

(Percentages shown are based on Net Assets)

 

 

6 BLACKROCK ENHANCED GOVERNMENT FUND, INC.

JUNE 30, 2010

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Schedule of Investments (continued)

(Percentages shown are based on Net Assets)

 

See Notes to Financial Statements.

 

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

 

(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)	All or a portion of security has been pledged as collateral in connection with swaps.

BLACKROCK ENHANCED GOVERNMENT FUND, INC.

JUNE 30, 2010

7

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Schedule of Investments (continued)

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

 

(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:

 

(h) Represents the current yield as of report date.
(i) One contract represents a notional amount of $1 million.
•Financial futures contracts purchased as of June 30, 2010 were as follows:

 

See Notes to Financial Statements.

• _{Financial futures contracts sold as of June 30, 2010 were as follows:}

 

•Foreign currency exchange contracts as of June 30, 2010 were as follows:

 

•Reverse repurchase agreements outstanding as of June 30, 2010 were as follows:

 

•Interest rate swaps outstanding as of June 30, 2010 were as follows:

 

8 BLACKROCK ENHANCED GOVERNMENT FUND, INC.

JUNE 30, 2010

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Schedule of Investments (continued)

•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 liabili-
ties (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 (includ-
ing the Fund's own assumptions used in determining the fair value of invest-
ments 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 infor-
mation about the Fund's policy regarding valuation of investments and other
significant accounting policies, please refer to Note 1 of the Notes to
Financial Statements.

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

 

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

See Notes to Financial Statements.

BLACKROCK ENHANCED GOVERNMENT FUND, INC.

JUNE 30, 2010

9

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Schedule of Investments (concluded)

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

 

² Included in the related change in unrealized appreciation/depreciation
in the Statement of Operations. The change in unrealized appreciation/
depreciation on securities still held at June 30, 2010 was $995,669.

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

 

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

See Notes to Financial Statements.

10 BLACKROCK ENHANCED GOVERNMENT FUND, INC.

JUNE 30, 2010

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See Notes to Financial Statements.

BLACKROCK ENHANCED GOVERNMENT FUND, INC.

JUNE 30, 2010

11

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See Notes to Financial Statements.

12 BLACKROCK ENHANCED GOVERNMENT FUND, INC.

JUNE 30, 2010

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See Notes to Financial Statements.

BLACKROCK ENHANCED GOVERNMENT FUND, INC.

JUNE 30, 2010

13

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1	Commencement of operations.
2	Based on average shares outstanding.
3	Amount is less than $(0.01) per share.
4	Total investment returns based on market value, which can be significantly greater or lesser than the net asset value, may result in substantially different returns. Where applicable, total investment returns exclude the effects of any sales charges and include the reinvestment of dividends and distributions.
5	Aggregate total investment return.
6	Annualized.
7	Includes mortgage dollar transactions; excluding these transactions the portfolio turnover would have been 111%.
8	Includes mortgage dollar transactions; excluding these transactions the portfolio turnover would have been 174%.
9	Includes mortgage dollar transactions; excluding these transactions the portfolio turnover would have been 212%.

See Notes to Financial Statements.

14 BLACKROCK ENHANCED GOVERNMENT FUND, INC.

JUNE 30, 2010

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Notes to Financial Statements (Unaudited)

1. Organization and Significant Accounting Policies:

BlackRock Enhanced Government Fund, Inc. (the “Fund”) is registered
under the Investment Company Act of 1940, as amended (the “1940
Act”), as a diversified, closed-end management investment company. The
Fund is organized as a Maryland corporation. The Fund’s financial state-
ments are prepared in conformity with accounting principles generally
accepted in the United States of America ("US GAAP"), which may re-
quire management to make estimates and assumptions that affect the
reported amounts and disclosures in the financial statements. Actual
results could differ from those estimates. The Fund determines and
makes available for publication the net asset value of its shares on a
daily basis.

The following is a summary of significant accounting policies followed by
the Fund:

Valuation: The Fund's policy is to fair value its financial instruments at
market value using independent dealers or pricing services selected
under the supervision of the Fund's Board of Directors (the "Board"). The
Fund values its bond investments on the basis of last available bid
prices or current market quotations provided by dealers or pricing serv-
ices. Floating rate loan interests are valued at the mean of the bid prices
from one or more brokers or dealers as obtained from a pricing service.
In determining the value of a particular investment, pricing services may
use certain information with respect to transactions in such investments,
quotations from dealers, pricing matrixes, market transactions in compa-
rable investments, various relationships observed in the market between
investments and calculated yield measures based on valuation technol-
ogy commonly employed in the market for such investments. Asset-
backed and mortgage-backed securities are valued by independent
pricing services using models that consider estimated cash flows of
each tranche of the security, establish a benchmark yield and develop
an estimated tranche specific spread to the benchmark yield based on
the unique attributes of the tranche. Financial futures contracts traded
on exchanges are valued at their last sale price. To-be-announced
("TBA") commitments are valued on the basis of last available bid prices
or current market quotations provided by pricing services. Swap agree-
ments are valued utilizing quotes received daily by the Fund's pricing
service or through brokers, which are derived using daily swap curves
and models that incorporate a number of market data factors, such as
discounted cash flows and trades and values of the underlying reference
instruments. Investments in open-end investment companies are valued
at net asset value each business day. Short-term securities with remain-
ing maturities of 60 days or less may be valued at amortized cost, which
approximates fair value.

Securities and other assets and liabilities denominated in foreign curren-
cies are translated into US dollars using exchange rates determined as
of the close of business on the New York Stock Exchange (“NYSE”).

Foreign currency exchange contracts are valued at the mean between
the bid and ask prices and are determined as of the close of business
on the NYSE. Interpolated values are derived when the settlement date
of the contract is an interim date for which quotations are not available.

Exchange-traded options are valued at the mean between the last bid
and ask prices at the close of the options market in which the options
trade. An exchange-traded option for which there is no mean price is val-
ued at the last bid (long positions) or ask (short positions) price. If no
bid or ask price is available, the prior day’s price will be used, unless it
is determined that the prior day’s price no longer reflects the fair value of
the option. Over-the-counter (“OTC”) options and swaptions are valued
by an independent pricing service using a mathematical model which
incorporates a number of market data factors, such as the trades and
prices of the underlying instruments.

In the event that application of these methods of valuation results in a
price for an investment which is deemed not to be representative of the
market value of such investment or is not available, the investment will
be valued in accordance with a policy approved by the Board as reflect-
ing fair value (“Fair Value Assets”). When determining the price for Fair
Value Assets, the investment advisor and/or the sub-advisor seeks to
determine the price that the Fund might reasonably expect to receive
from the current sale of that asset in an arm’s-length transaction. Fair
value determinations shall be based upon all available factors that the
investment advisor and/or sub-advisor deems relevant. The pricing of
all Fair Value Assets is subsequently reported to the Board or a
committee thereof.

Generally, trading in foreign instruments is substantially completed
each day at various times prior to the close of business on the NYSE.
Occasionally, events affecting the values of such instruments may occur
between the foreign market close and the close of business on the NYSE
that may not be reflected in the computation of the Fund net assets. If
events (for example, a company announcement, market volatility or a
natural disaster) occur during such periods that are expected to materi-
ally affect the value of such instruments, those instruments may be Fair
Value Assets and be valued at their fair values, as determined in good
faith by the investment advisor using a pricing service and/or policies
approved by the Board.

Foreign Currency Transactions: The Fund's books and records are main-
tained in US dollars. Purchases and sales of investment securities are
recorded at the rates of exchange prevailing on the date the transactions
are entered into. Generally, when the US dollar rises in value against for-
eign currency, the Fund's investments denominated in that currency will
lose value because its currency is worth fewer US dollars; the opposite
effect occurs if the US dollar falls in relative value.

BLACKROCK ENHANCED GOVERNMENT FUND, INC.

JUNE 30, 2010

15

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Notes to Financial Statements (continued)

The Fund reports foreign currency related transactions as components of
realized gain (loss) for financial reporting purposes, whereas such com-
ponents are treated as ordinary income for federal income tax purposes.

Asset-Backed and Mortgaged-Backed Securities: The Fund may invest in
asset-backed securities. Asset-backed securities are generally issued as
pass-through certificates, which represent undivided fractional ownership
interests in an underlying pool of assets, or as debt instruments, which
are also known as collateralized obligations, and are generally issued as
the debt of a special purpose entity organized solely for the purpose of
owning such assets and issuing such debt. Asset-backed securities are
often backed by a pool of assets representing the obligations of a num-
ber of different parties. The yield characteristics of certain asset-backed
securities may differ from traditional debt securities. One such major dif-
ference is that all or a principal part of the obligations may be prepaid
at any time because the underlying assets (i.e., loans) may be prepaid
at any time. As a result, a decrease in interest rates in the market may
result in increases in the level of prepayments as borrowers, particularly
mortgagors, refinance and repay their loans. An increased prepayment
rate with respect to an asset-backed security subject to such a prepay-
ment feature will have the effect of shortening the maturity of the secu-
rity. If the Fund has purchased such an asset-backed security at a
premium, a faster than anticipated prepayment rate could result in a
loss of principal to the extent of the premium paid.

The Fund may purchase certain mortgage pass-through securities. There
are a number of important differences among the agencies and instru-
mentalities of the US Government that issue mortgage-related securities
and among the securities that they issue. For example, mortgage-related
securities guaranteed by the Government National Mortgage Association
(“Ginnie Mae”) are guaranteed as to the timely payment of principal and
interest by Ginnie Mae and such guarantee is backed by the full faith
and credit of the United States. However, mortgage-related securities
issued by the Federal Home Loan Mortgage Corporation (“Freddie Mac”)
and Federal National Mortgage Association (“Fannie Mae”), including
Freddie Mac and Fannie Mae guaranteed Mortgage Pass-Through Certifi-
cates, which are solely the obligations of Freddie Mac and Fannie Mae,
are not backed by or entitled to the full faith and credit of the United
States and are supported by the right of the issuer to borrow from
the Treasury.

Multiple Class Pass-Through Securities: The Fund may invest in multiple
class pass-through securities, including collateralized mortgage obliga-
tions (“CMOs”) and commercial mortgage-backed securities. These mul-
tiple class securities may be issued by Ginnie Mae, US government
agencies or instrumentalities or by trusts formed by private originators
of, or investors in, mortgage loans. In general, CMOs are debt obligations
of a legal entity that are collateralized by, and multiple class pass-
through securities represent direct ownership interests in, a pool of
residential or commercial mortgage loans or mortgage pass-through

securities (the “Mortgage Assets”), the payments on which are used to
make payments on the CMOs or multiple pass-through securities.
Classes of CMOs include interest only (“IOs”), principal only (“POs”),
planned amortization classes (“PACs”) and targeted amortization classes
(“TACs”). IOs and POs are stripped mortgage-backed securities repre-
senting interests in a pool of mortgages, the cash flow from which has
been separated into interest and principal components. IOs receive the
interest portion of the cash flow while POs receive the principal portion.
IOs and POs can be extremely volatile in response to changes in interest
rates. As interest rates rise and fall, the value of IOs tends to move in the
same direction as interest rates. POs perform best when prepayments on
the underlying mortgages rise since this increases the rate at which the
principal is returned and the yield to maturity on the PO. When payments
on mortgages underlying a PO are slower than anticipated, the life of the
PO is lengthened and the yield to maturity is reduced. If the underlying
mortgage assets experience greater than anticipated pre-payments of
principal, the Fund may not fully recoup its initial investment in IOs.

Stripped Mortgage-Backed Securities: The Fund may invest in stripped
mortgage-backed securities issued by the U.S. government, its agencies
and instrumentalities. Stripped mortgage-backed securities are usually
structured with two classes that receive different proportions of the inter-
est (IOs) and principal (POs) distributions on a pool of mortgage assets.
The Fund also may invest in stripped mortgage-backed securities that
are privately issued.

Capital Trusts: These securities are typically issued by corporations, gen-
erally in the form of interest-bearing notes with preferred securities char-
acteristics, or by an affiliated business trust of a corporation, generally in
the form of beneficial interests in subordinated debentures or similarly
structured securities. The securities can be structured as either fixed or
adjustable coupon securities that can have either a perpetual or stated
maturity date. Dividends can be deferred without creating an event of
default or acceleration, although maturity cannot take place unless all
cumulative payment obligations have been met. The deferral of payments
does not affect the purchase or sale of these securities in the open
market. Payments on these securities are treated as interest rather than
dividends for federal income tax purposes. These securities can have
a rating that is slightly below that of the issuing company’s senior
debt securities.

TBA Commitments: The Fund may enter into TBA commitments pursuant
to which it agrees to purchase or sell mortgage-backed securities for a
fixed price, with payment and delivery at a scheduled future date beyond
the customary settlement period for the mortgage-backed security. The
specific securities to be delivered are not identified at the trade date;
however, delivered securities must meet specified terms, including issuer,
rate and mortgage terms. The Fund generally enters into TBA transactions
with the intent to take possession of or deliver out the underlying
mortgage-backed securities but can extend the settlement or roll the

16 BLACKROCK ENHANCED GOVERNMENT FUND, INC.

JUNE 30, 2010

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Notes to Financial Statements (continued)

transaction. TBA commitments involve a risk of loss if the value of the
security to be purchased or sold declines or increases, respectively, prior
to settlement date, which is in addition to the risk of decline in the value
of the Fund's other assets.

Mortgage Dollar Roll Transactions: The Fund may sell TBA mortgage-
backed securities and simultaneously contract to repurchase substan-
tially similar (same type, coupon and maturity) securities on a specific
future date at an agreed-upon price. During the period between the sale
and repurchase, the Fund will not be entitled to receive interest and
principal payments on the securities sold. The Fund accounts for dollar
roll transactions as purchases and sales and realizes gains and losses
on these transactions. These transactions may increase the Fund's port-
folio turnover rate. Mortgage dollar rolls involve the risk that the market
value of the securities that the Fund is required to purchase may decline
below the agreed upon repurchase price of those securities.

Treasury Roll Transactions: A treasury roll transaction involves the sale of
a Treasury security, with an agreement to repurchase the same security
at an agreed upon price and date. Treasury rolls constitute a borrowing
and the difference between the sale and repurchase price represents
interest expense at an agreed upon rate. Whether such a transaction
produces a positive impact on performance depends upon whether the
income on the securities purchased with the proceeds received from the
sale of the security exceeds the interest expense incurred by the Fund.
For accounting purposes, treasury rolls are not considered purchases
and sales and any gains or losses incurred on the treasury rolls will be
deferred until the Treasury securities are disposed.

Treasury roll transactions involve the risk that the market value of the
securities that the Fund is required to purchase may decline below the
agreed upon purchase price of those securities. If investment perform-
ance of securities purchased with proceeds from these transactions
does not exceed the income, capital appreciation and gain or loss that
would have been realized on the securities sold as part of the treasury
roll, the use of this technique will adversely impact the investment
performance of the Fund.

Reverse Repurchase Agreements: The Fund may enter into reverse repur-
chase agreements with qualified third party broker-dealers. In a reverse
repurchase agreement, the Fund sells securities to a bank or broker-
dealer and agrees to repurchase the same securities at a mutually
agreed upon date and price. Certain agreements have no stated maturity
and can be terminated by either party at any time. Interest on the value
of the reverse repurchase agreements issued and outstanding is based
upon competitive market rates determined at the time of issuance. The
Fund may utilize reverse repurchase agreements when it is anticipated
that the interest income to be earned from the investment of the pro-
ceeds of the transaction is greater than the interest expense of the
transaction. Reverse repurchase agreements involve leverage risk and

also the risk that the market value of the securities that the Fund is
obligated to repurchase under the agreement may decline below the
repurchase price. In the event the buyer of securities under a reverse
repurchase agreement files for bankruptcy or becomes insolvent, the
Fund's use of the proceeds of the agreement may be restricted while the
other party, or its trustee or receiver, determines whether or not to
enforce the Fund's obligation to repurchase the securities.

Segregation and Collateralization: In cases in which the 1940 Act and
the interpretive positions of the Securities and Exchange Commission
(“SEC”) require that the Fund either delivers collateral or segregates
assets in connection with certain investments (e.g., dollar rolls, TBAs
beyond normal settlement, financial futures contracts, foreign currency
exchange contracts, swaps and written options), or certain borrowings
(e.g., reverse repurchase agreements) the Fund will, consistent with SEC
rules and/or certain interpretive letters issued by the SEC, segregate col-
lateral or designate on its books and records cash or other liquid securi-
ties having a market value at least equal to the amount that would
otherwise be required to be physically segregated. Furthermore, based
on requirements and agreements with certain exchanges and third party
broker-dealers, each party has requirements to deliver/deposit securities
as collateral for certain investments.

Investment Transactions and Investment Income: For financial reporting
purposes, investment transactions are recorded on the dates the trans-
actions are entered into (the trade dates). Realized gains and losses
on investment transactions are determined on the identified cost basis.
Interest income, including amortization of premium and accretion of dis-
count on debt securities, is recognized on the accrual basis. Interest
income, including amortization of premium and accretion of discount
on debt securities, is recognized on the accrual basis.

Dividends and Distributions: Dividends and distributions paid by the
Fund are recorded on the ex-dividend dates. Subject to the Fund’s level
distribution plan, the Fund intends to make monthly cash dividends
and/or distributions to shareholders, which may consist of net invest-
ment income, net options premium and net realized and unrealized
gains on investments. The portion of dividends and distributions that
exceeds the Fund's current and accumulated earnings and profits, which
are measured on a tax basis, may be treated as a tax return of capital.
The character of dividends and distributions are determined in accor-
dance with federal income tax regulations, which may differ from
US GAAP.

Income Taxes: It is the Fund's policy to comply with the requirements
of the Internal Revenue Code of 1986, as amended, 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.

BLACKROCK ENHANCED GOVERNMENT FUND, INC.

JUNE 30, 2010

17

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Notes to Financial Statements (continued)

The Fund files US federal and various state and local tax returns. No
income tax returns are currently under examination. The statute of limita-
tions on the Fund's US federal tax returns remains open for each of the
four periods ended December 31, 2009. The statutes of limitations on
the Fund's state and local tax returns may remain open for an additional
year depending upon the jurisdiction. There are no uncertain tax posi-
tions that require recognition of a tax liability.

Deferred Compensation and BlackRock Closed-End Share Equivalent
Investment Plan: Under the deferred compensation plan approved by
the Fund's Board, non-interested Directors (“Independent Directors”)
may defer a portion of their annual complex-wide compensation.
Deferred amounts earn an approximate return as though equivalent
dollar amounts had been invested in common shares of other certain
BlackRock Closed-End Funds selected by the Independent Directors. This
has approximately the same economic effect for the Independent
Directors as if the Independent Directors had invested the deferred
amounts directly in other certain BlackRock Closed-End Funds.

The deferred compensation plan is not funded and obligations
thereunder represent general unsecured claims against the general
assets of the Fund. The Fund may, however, elect to invest in common
shares of other certain BlackRock Closed-End Funds selected by the
Independent Directors in order to match its deferred compensation obli-
gations. Investments to cover the Fund's deferred compensation liability,
if any, are included in other assets in the Statement of Assets and
Liabilities. Dividends and distributions from the BlackRock Closed-End
Fund investments under the plan are included in income — affiliated in
the Statement of Operations.

Other: Expenses directly related to the Fund are charged to the Fund.
Other operating expenses shared by several funds are pro rated among
those funds on the basis of relative net assets or other appropriate
methods. The Fund has an arrangement with the custodian whereby fees
may be reduced by credits earned on uninvested cash balances, which
if applicable are shown as fees paid indirectly in the Statement of
Operations. The custodian imposes fees on overdrawn cash balances,
which can be offset by accumulated credits earned or may result in
additional custody charges.

2. Derivative Financial Instruments:

The Fund engages in various portfolio investment strategies using deriva-
tive contracts both to increase the returns of the Fund and to economi-
cally hedge, or protect, its exposure to certain risks such as interest rate
risk and foreign currency exchange rate risk. These contracts may be
transacted on an exchange or OTC.

Losses may arise if the value of the contract decreases due to an unfa-
vorable change in the market rates or values of the underlying instru-
ment or if the counterparty does not perform under the contract. The

Fund’s maximum risk of loss from counterparty credit risk on OTC deriva-
tives is generally the aggregate unrealized gain netted against any collat-
eral pledged by/posted to the counterparty. For OTC options purchased,
the Fund bears the risk of loss in the amount of the premiums paid plus
the positive change in market values net of any collateral received on
the options should the counterparty fail to perform under the contracts.
Options written by the Fund do not give rise to counterparty credit risk,
as options written obligate the Fund to perform and not the counter-
party. Counterparty risk related to exchange-traded financial futures
contracts and options is deemed to be minimal due to the protection
against defaults provided by the exchange on which these
contracts trade.

The Fund may mitigate counterparty risk by procuring collateral and
through netting provisions included within an International Swaps and
Derivatives Association, Inc. (“ISDA”) Master Agreement implemented
between the Fund and each of its respective counterparties. The ISDA
Master Agreement allows the Fund to offset with each separate counter-
party certain derivative financial instrument’s payables and/or receiv-
ables with collateral held. The amount of collateral moved to/from
applicable counterparties is generally based upon minimum transfer
amounts of up to $500,000. To the extent amounts due to the Fund
from its counterparties are not fully collateralized contractually or other-
wise, the Fund bears the risk of loss from counterparty non-performance.
See Note 1 “Segregation and Collateralization” for information with
respect to collateral practices. In addition, the Fund manages counter-
party risk by entering into agreements only with counterparties that it
believes have the financial resources to honor their obligations and by
monitoring the financial stability of those counterparties.

Certain ISDA Master Agreements allow counterparties to OTC derivatives
to terminate derivative contracts prior to maturity in the event the Fund’s
net assets decline by a stated percentage or the Fund fails to meet the
terms of its ISDA Master Agreements, which would cause the Fund to
accelerate payment of any net liability owed to the counterparty.

Financial Futures Contracts: The Fund purchases or sells financial
futures contracts and options on financial futures contracts to gain expo-
sure to, or economically hedge against, changes in interest rates (inter-
est rate risk). Financial futures contracts are contracts for delayed
delivery of securities or currencies at a specific future date and at a spe-
cific price or yield. Pursuant to the contract, the Fund agrees to receive
from or pay to the broker an amount of cash equal to the daily fluctua-
tion in value of the contract. Such receipts or payments are known as
margin variation and are recognized 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. The use of
financial futures transactions involves the risk of an imperfect correlation

18 BLACKROCK ENHANCED GOVERNMENT FUND, INC.

JUNE 30, 2010

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Notes to Financial Statements (continued)

in the movements in the price of financial futures contracts, interest
rates and the underlying assets.

Foreign Currency Exchange Contracts: The Fund enters into foreign cur-
rency exchange contracts as an economic hedge against either specific
transactions or portfolio instruments or to gain exposure to foreign
currencies (foreign currency exchange rate risk). A foreign currency
exchange contract is an agreement between two parties to buy and sell
a currency at a set exchange rate on a future date. Foreign currency
exchange contracts, when used by the Fund, help to manage the overall
exposure to the currency backing some of the investments held by the
Fund. The contract is marked-to-market daily and the change in market
value is recorded by the Fund as an unrealized gain or loss. When the
contract is closed, the Fund records a realized gain or loss equal to the
difference between the value at the time it was opened and the value at
the time it was closed. The use of foreign currency exchange contracts
involves the risk that the value of a foreign currency contract changes
unfavorably due to movements in the value of the referenced foreign
currencies and the risk that a counterparty to the contract does not
perform its obligations under the agreement.

Options: The Fund purchases and writes call and put options to increase
or decrease its exposure to underlying instruments (interest rate risk)
and/or, in the case of options written, to generate gains from options
premiums. A call option gives the purchaser of the option the right (but
not the obligation) to buy, and obligates the seller to sell (when the
option is exercised), the underlying instrument at the exercise price at
any time or at a specified time during the option period. A put option
gives the holder the right to sell and obligates the writer to buy the
underlying instrument at the exercise price at any time or at a specified
time during the option period. When the Fund purchases (writes) an
option, an amount equal to the premium paid (received) by the Fund is
reflected as an asset (liability). The amount of the asset (liability) is sub-
sequently marked-to-market to reflect the current market value of the
option purchased (written). When an instrument 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 instrument acquired or
deducted from (or added to) the proceeds of the instrument 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 received or paid). When the Fund
writes a call option, such option is “covered,” meaning that the Fund
holds the underlying instrument subject to being called by the option
counterparty, or cash in an amount sufficient to cover the obligation.
When the Fund writes a put option, such option is covered by cash in an
amount sufficient to cover the obligation.

Options on swaps (swaptions) are similar to options on securities except
that instead of selling or purchasing the right to buy or sell a security,
the writer or purchaser of the swap option is granting or buying the right
to enter into a previously agreed upon interest rate swap agreement at
any time before the expiration of the option.

In purchasing and writing options, the Fund bears the risk of an unfavor-
able change in the value of the underlying instrument or the risk that
the Fund may not be able to enter into a closing transaction due to an
illiquid market. Exercise of an option written could result in the Fund
purchasing or selling a security at a price different from the current
market value.

Swaps: The Fund enters into swap agreements, in which the Fund and a
counterparty agree to make periodic net payments on a specified
notional amount. These periodic payments received or made by the Fund
are recorded in the Statement of Operations as realized gains or losses,
respectively. Any upfront fees paid or received on swaps are recognized
as cost and amortized over the term of the swap. Swaps are marked-to-
market daily and changes in value are recorded as unrealized apprecia-
tion (depreciation). When the swap is terminated, the Fund will record a
realized gain or loss equal to the difference between the proceeds from
(or cost of) the closing transaction and the Fund's basis in the contract,
if any. Generally, the basis of the contracts is the premium received or
paid. Swap transactions involve, to varying degrees, elements of interest
rate, credit and market risk in excess of the amounts recognized in the
Statement of Assets and Liabilities. Such risks involve the possibility that
there will be no liquid market for these agreements, that the counter-
party to the agreements may default on its obligation to perform or dis-
agree as to the meaning of the contractual terms in the agreements, and
that there may be unfavorable changes in interest rates and/or market
values associated with these transactions.

•Interest rate swaps — The Fund enters into interest rate swaps to gain
or reduce exposure to or manage duration, the yield curve or interest
rate risk by economically hedging the value of the fixed rate bonds
which may decrease when interest rates rise (interest rate risk).
Interest rate swaps are agreements in which one party pays a stream
of interest payments, either fixed or floating rate, for another party's
stream of interest payments, either fixed or floating, on the same
notional amount for a specified period of time. Interest rate floors,
which are a type of interest rate swap, are agreements in which one
party agrees to make payments to the other party to the extent that
interest rates fall below a specified rate or floor in return for a pre-
mium. In more complex swaps, the notional principal amount may
decline (or amortize) over time.

BLACKROCK ENHANCED GOVERNMENT FUND, INC.

JUNE 30, 2010

19

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*Includes cumulative appreciation/depreciation of financial futures contracts as reported in Schedule of Investments. Only current day’s margin variation is reported within the
Statement of Assets and Liabilities.

 

***Options purchased are included in the net realized gain (loss) from investments and net change in unrealized appreciation/depreciation on investments.

For the six months ended June 30, 2010, the average quarterly balance
of outstanding derivative financial instruments was as follows:

 

3. Investment Advisory Agreement and Other Transactions
with Affiliates:

The PNC Financial Services Group, Inc. ("PNC"), Bank of America
Corporation ("BAC") and Barclays Bank PLC ("Barclays") are the largest
stockholders of BlackRock, Inc. ("BlackRock"). Due to the ownership

structure, PNC is an affiliate of the Fund for 1940 Act purposes, but BAC
and Barclays are not.

The Fund entered into an Investment Advisory Agreement with BlackRock
Advisors, LLC (the “Manager”), the Fund's investment advisor, an indirect,
wholly owned subsidiary of BlackRock, to provide investment advisory
and administration services. The Manager is responsible for the manage-
ment of the Fund's portfolio and provides the necessary personnel, facil-
ities, equipment and certain other services necessary to the operations
of the Fund. For such services, the Fund pays the Manager a monthly fee
at an annual rate 0.85% of the Fund's average daily net assets, plus the
proceeds of any outstanding borrowings used for leverage.

The Manager entered into a sub-advisory agreement with BlackRock
Financial Management, Inc. (“BFM”), an affiliate of the Manager. The
Manager pays BFM for services it provides, a monthly fee that is a
percentage of the investment advisory fees paid by the Fund to
the Manager.

The Manager voluntarily agreed to waive its advisory fees by the amount
of investment advisory fees the Fund pays to the Manager indirectly
through its investment in affiliated money market funds; however the
Manager does not waive its advisory fees by the amount of investment

20 BLACKROCK ENHANCED GOVERNMENT FUND, INC.

JUNE 30, 2010

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Notes to Financial Statements (concluded)

advisory fees paid through its investment in other affiliated investment
companies, if any. This amount is shown as fees waived by advisor in the
Statement of Operations.

For the six months ended June 30, 2010, the Fund reimbursed the
Manager $1,819 for certain accounting services, which is included in
accounting services in the Statement of Operations.

Certain officers and/or directors of the Fund are officers and/or directors
of BlackRock or its affiliates. The Fund reimburses the Manager for com-
pensation paid to the Fund's Chief Compliance Officer.

4. Investments:

Purchases and sales of investments including paydowns, mortgage dollar
roll and TBA transactions and excluding short-term securities and US
government securities for the six months ended June 30, 2010, were
$91,840,459 and $109,986,224, respectively.

Purchases and sales of US government securities for the six months
ended June 30, 2010, were $218,531,071 and $216,905,846,
respectively.

For the six months ended June 30, 2010, purchases and sales of mort-
gage dollar rolls were $57,654,747 and $57,785,305, respectively.

Transactions in options written for the six months ended June 30, 2010,
were as follows:

 

As of December 31, 2009, the Fund had capital loss carryforwards in
the amount of $8,668,617, which expires December 31, 2017.

6. Concentration, Market and Credit Risk:

In the normal course of business, the Fund invests in securities and
enters into transactions where risks exist due to fluctuations in the mar-
ket (market risk) or failure of the issuer of a security to meet all its obli-
gations (issuer credit risk). The value of securities held by the Fund may
decline in response to certain events, including those directly involving
the issuers whose securities are owned by the Fund; conditions affecting
the general economy; overall market changes; local, regional or global
political, social or economic instability; and currency and interest rate
and price fluctuations. Similar to issuer credit risk, the Fund may be

exposed to counterparty credit risk, or the risk that an entity with which
the Fund has unsettled or open transactions may fail to or be unable
to perform on its commitments. The Fund manages counterparty credit
risk by entering into transactions only with counterparties that it believes
have the financial resources to honor their obligations and by monitoring
the financial stability of those counterparties. Financial assets, which
potentially expose the Fund to market, issuer and counterparty credit
risks, consist principally of financial instruments and receivables due
from counterparties. The extent of the Fund’s exposure to market, issuer
and counterparty credit risks with respect to these financial assets is
generally approximated by their value recorded in the Fund’s Statement
of Assets and Liabilities, less any collateral held by the Fund.

The Fund invests a significant portion of its assets in securities backed
by commercial or residential mortgage loans or in issuers that hold
mortgage and other asset-backed securities. Please see the Schedule
of Investments for these securities. Changes in economic conditions,
including delinquencies and/or defaults on assets underlying these
securities, can affect the value, income and/or liquidity of
such positions.

7. Capital Share Transactions:

The Fund is authorized to issue 200 million shares, par value $0.10, all
of which were initially classified as Common Shares. The Board is
authorized, however, to reclassify any unissued shares without approval
of Common Shareholders.

The Fund will make offers to repurchase its shares at 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.

Shares issued and outstanding increased by 23,189 for the six months
ended June 30, 2010 as a result of dividend reinvestments. Shares
issued and outstanding during the year ended December 31, 2009
increased by 99,869 as a result of dividend reinvestment and
decreased by 36,242 as a result of a repurchase offer.

8. Borrowings:

For the six months ended June 30, 2010, the Fund's daily average
amount of outstanding transactions considered as borrowings from
reverse repurchase agreements and treasury rolls was approximately
$12,142,000 and the daily weighted average interest rate was 0.05%.

9. Subsequent Events:

Management's evaluation of the impact of all subsequent events on the
Fund's financial statements was completed through the date the finan-
cial statements were issued and the following item was noted:

The Fund paid a net investment income dividend in the amount of
$0.080 per share on July 30, 2010 to shareholders of record on
July 15, 2010.

BLACKROCK ENHANCED GOVERNMENT FUND, INC.

JUNE 30, 2010

21

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Disclosure of Investment Advisory Agreement and Sub-Advisory Agreement

The Board of Directors (the “Board,” the members of which are referred
to as “Board Members”) of BlackRock Enhanced Government Fund, Inc.
(the “Fund”) met on April 8, 2010 and May 13 – 14, 2010 to consider
the approval of the Fund’s investment advisory agreement (the “Advisory
Agreement”) with BlackRock Advisors, LLC (the “Manager”), the Fund’s
investment advisor. The Board also considered the approval of the
sub-advisory agreement (the “Sub-Advisory Agreement”) between the
Manager and BlackRock Financial Management, Inc. (the “Sub-Advisor”),
with respect to the Fund. The Manager and the Sub-Advisor are referred
to herein as “BlackRock.” The Advisory Agreement and the Sub-Advisory
Agreement are referred to herein as the “Agreements.”

Activities and Composition of the Board

The Board consists of ten individuals, eight of whom are not “interested
persons” of the Fund as defined in the Investment Company Act of 1940
(the “1940 Act”) (the “Independent Board Members”). The Board
Members are responsible for the oversight of the operations of the Fund
and perform the various duties imposed on the directors of investment
companies by the 1940 Act. The Independent Board Members have
retained independent legal counsel to assist them in connection with
their duties. The Chairman of the Board is an Independent Board
Member. The Board has established five standing committees: an Audit
Committee, a Governance and Nominating Committee, a Compliance
Committee, a Performance Oversight Committee and an Executive
Committee, each of which is composed of Independent Board Members
(except for the Executive Committee, which also has one interested
Board Member) and is chaired by an Independent Board Member.
The Board also has one ad hoc committee, the Joint Product Pricing
Committee, which consists of Independent Board Members and the
directors/trustees of the boards of certain other BlackRock-managed
funds, who are not “interested persons” of their respective funds.

The Agreements

Pursuant to the 1940 Act, the Board is required to consider the contin-
uation of the Agreements on an annual basis. In connection with this
process, the Board assessed, among other things, the nature, scope
and quality of the services provided to the Fund by the personnel of
BlackRock and its affiliates, including investment management, admin-
istrative and shareholder services, oversight of fund accounting and
custody, marketing services and assistance in meeting applicable legal
and regulatory requirements.

From time to time throughout the year, the Board, acting directly and
through its committees, considered at each of its meetings factors
that are relevant to its annual consideration of the renewal of the
Agreements, including the services and support provided by BlackRock
to the Fund and its shareholders. Among the matters the Board consid-
ered were: (a) investment performance for one-, three- and five-year
periods, as applicable, against peer funds, and applicable benchmarks,
if any, as well as senior management and portfolio managers’ analysis
of the reasons for any over performance or underperformance against
its peers and/or benchmark, as applicable; (b) fees, including advisory

and other amounts paid to BlackRock and its affiliates by the Fund
for services such as call center and fund accounting; (c) Fund oper-
ating expenses; (d) the resources devoted to and compliance reports
relating to the Fund’s investment objective, policies and restrictions;
(e) the Fund’s compliance with its Code of Ethics and compliance poli-
cies and procedures; (f) the nature, cost and character of non-invest-
ment management services provided by BlackRock and its affiliates;
(g) BlackRock’s and other service providers’ internal controls; (h)
BlackRock’s implementation of the proxy voting policies approved by the
Board; (i) execution quality of portfolio transactions; (j) BlackRock’s
implementation of the Fund’s valuation and liquidity procedures; (k) an
analysis of contractual and actual management fees for products with
similar investment objectives across the open-end fund, closed-end fund
and institutional account product channels; and (l) periodic updates on
BlackRock’s business.

Board Considerations in Approving the Agreements

The Approval Process: Prior to the April 8, 2010 meeting, the Board
requested and received materials specifically relating to the Agreements.
The Board is engaged in a process with BlackRock to periodically review
the nature and scope of the information provided to better assist its
deliberations. The materials provided in connection with the April meet-
ing included (a) information independently compiled and prepared by
Lipper, Inc. (“Lipper”) on Fund fees and expenses, and the investment
performance of the Fund as compared with a peer group of funds as
determined by Lipper (collectively, “Peers”); (b) information on the prof-
itability of the Agreements to BlackRock and a discussion of fall-out
benefits to BlackRock and its affiliates and significant shareholders;
(c) a general analysis provided by BlackRock concerning investment
advisory fees charged to other clients, such as institutional clients and
open-end funds, under similar investment mandates; (d) the impact of
economies of scale; (e) a summary of aggregate amounts paid by the
Fund to BlackRock and (f) if applicable, a comparison of management
fees to similar BlackRock closed-end funds, as classified by Lipper.

At an in-person meeting held on April 8, 2010, the Board reviewed
materials relating to its consideration of the Agreements. As a result
of the discussions that occurred during the April 8, 2010 meeting, the
Board presented BlackRock with questions and requests for additional
information and BlackRock responded to these requests with additional
written information in advance of the May 13 – 14, 2010 Board meeting.

At an in-person meeting held on May 13 – 14, 2010, the Board, includ-
ing the Independent Board Members, unanimously approved the contin-
uation of the Advisory Agreement between the Manager and the Fund
and the Sub-Advisory Agreement between the Manager and the Sub-
Advisor with respect to the Fund, each for a one-year term ending June
30, 2011. In approving the continuation of the Agreements, the Board
considered: (a) the nature, extent and quality of the services provided by
BlackRock; (b) the investment performance of the Fund and BlackRock;
(c) the advisory fee and the cost of the services and profits to be real-
ized by BlackRock and its affiliates from their relationship with the Fund;

22 BLACKROCK ENHANCED GOVERNMENT FUND, INC.

JUNE 30, 2010

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Disclosure of Investment Advisory Agreement and Sub-Advisory Agreement (continued)

(d) economies of scale; and (e) other factors deemed relevant by the
Board Members.

The Board also considered other matters it deemed important to the
approval process, such as services related to the valuation and pricing
of Fund portfolio holdings, direct and indirect benefits to BlackRock and
its affiliates and significant shareholders from their relationship with the
Fund and advice from independent legal counsel with respect to the
review process and materials submitted for the Board’s review. The Board
noted the willingness of BlackRock personnel to engage in open, candid
discussions with the Board. The Board did not identify any particular
information as controlling, and each Board Member may have attributed
different weights to the various items considered.

A. Nature, Extent and Quality of the Services Provided by BlackRock:
The Board, including the Independent Board Members, reviewed the
nature, extent and quality of services provided by BlackRock, including
the investment advisory services and the resulting performance of the
Fund. Throughout the year, the Board compared Fund performance to
the performance of a comparable group of closed-end funds, and the
performance of a relevant benchmark, if any. The Board met with
BlackRock’s senior management personnel responsible for investment
operations, including the senior investment officers. The Board also
reviewed the materials provided by the Fund’s portfolio management
team discussing Fund performance and the Fund’s investment objective,
strategies and outlook.

The Board considered, among other factors, the number, education
and experience of BlackRock’s investment personnel generally and the
Fund’s portfolio management team, investments by portfolio managers
in the funds they manage, BlackRock’s portfolio trading capabilities,
BlackRock’s use of technology, BlackRock’s commitment to compliance
and BlackRock’s approach to training and retaining portfolio managers
and other research, advisory and management personnel. The Board
also reviewed a general description of BlackRock’s compensation struc-
ture with respect to the Fund’s portfolio management team and
BlackRock’s ability to attract and retain high-quality talent.

In addition to advisory services, the Board considered the quality of the
administrative and non-investment advisory services provided to the
Fund. BlackRock and its affiliates and significant shareholders provide
the Fund with certain administrative and other services (in addition to
any such services provided to the Fund by third parties) and officers and
other personnel as are necessary for the operations of the Fund. In addi-
tion to investment advisory services, BlackRock and its affiliates provide
the Fund with other services, including (i) preparing disclosure docu-
ments, such as the prospectus and the statement of additional informa-
tion in connection with the initial public offering and periodic share-
holder reports; (ii) preparing communications with analysts to support
secondary market trading of the Fund; (iii) assisting with daily account-
ing and pricing; (iv) preparing periodic filings with regulators and stock
exchanges; (v) overseeing and coordinating the activities of other service

providers; (vi) organizing Board meetings and preparing the materials for
such Board meetings; (vii) providing legal and compliance support; and
(viii) performing other administrative functions necessary for the opera-
tion of the Fund, such as tax reporting, fulfilling regulatory filing require-
ments, and call center services. The Board reviewed the structure and
duties of BlackRock’s fund administration, accounting, legal and compli-
ance departments and considered BlackRock’s policies and procedures
for assuring compliance with applicable laws and regulations.

B. The Investment Performance of the Fund and BlackRock: The Board,
including the Independent Board Members, also reviewed and consid-
ered the performance history of the Fund. In preparation for the April 8,
2010 meeting, the Board was provided with reports, independently pre-
pared by Lipper, which included a comprehensive analysis of the Fund’s
performance. The Board also reviewed a narrative and statistical analysis
of the Lipper data that was prepared by BlackRock, which analyzed vari-
ous factors that affect Lipper’s rankings. In connection with its review, the
Board received and reviewed information regarding the investment per-
formance of the Fund as compared to a representative group of similar
funds as determined by Lipper and to all funds in the Fund’s applicable
Lipper category. The Board was provided with a description of the
methodology used by Lipper to select peer funds. The Board regularly
reviews the performance of the Fund throughout the year.

The Board noted that the Fund performed below the median of its
Lipper Performance Universe in each of the one-year, three-year and
since-inception periods reported. However, the Board and BlackRock
noted significant portfolio construction differences between the Fund
and its Lipper selected Peers, concluding that the Fund’s Peer Universe
was not an appropriate performance comparison. As noted above, the
Board periodically reviews the performance of the Fund throughout the
year. As a supplement to its review of the Fund’s performance versus the
Peer Group, the Board also considered the Fund’s performance relative
to its benchmark throughout the year. The Board noted that the Fund
outperformed its benchmark index for the one-year period and underper-
formed its benchmark for the three-year period. The Board was informed
that, among other factors, the Fund’s options strategy generated positive
returns in the one-year period as volatility was at an elevated level dur-
ing the year and the premiums received by selling calls helped produce
an above-average yield for the Fund.

The Board and BlackRock discussed BlackRock’s strategy for improving
the Fund’s performance and BlackRock’s commitment to providing the
resources necessary to assist the Fund’s portfolio managers in achieving
this goal. Furthermore, the Board asked BlackRock to continue to eval-
uate the most appropriate measures against which to compare and
monitor the Fund’s performance.

The Board noted that BlackRock has made changes to the organization
of the overall fixed income group management structure designed to
result in a strengthened leadership team with clearer accountability.

BLACKROCK ENHANCED GOVERNMENT FUND, INC.

JUNE 30, 2010

23

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Disclosure of Investment Advisory Agreement and Sub-Advisory Agreement (continued)

C. Consideration of the Advisory Fees and the Cost of the Services
and Profits to be Realized by BlackRock and its Affiliates from their
Relationship with the Fund: The Board, including the Independent Board
Members, reviewed the Fund’s contractual advisory fee rates compared
with the other funds in its Lipper category. It also compared the Fund’s
total expenses, as well as actual management fees, to those of other
funds in its Lipper category. The Board considered the services provided
and the fees charged by BlackRock to other types of clients with
similar investment mandates, including separately managed
institutional accounts.

The Board received and reviewed statements relating to BlackRock’s
financial condition and profitability with respect to the services it
provided the Fund. The Board was also provided with a profitability
analysis that detailed the revenues earned and the expenses incurred
by BlackRock for services provided to the Fund. The Board reviewed
BlackRock’s profitability with respect to the Fund and other funds the
Board currently oversees for the year ended December 31, 2009 com-
pared to available aggregate profitability data provided for the year
ended December 31, 2008. The Board reviewed BlackRock’s profitability
with respect to other fund complexes managed by the Manager and/or
its affiliates. The Board reviewed BlackRock’s assumptions and method-
ology of allocating expenses in the profitability analysis, noting the inher-
ent limitations in allocating costs among various advisory products. The
Board recognized that profitability may be affected by numerous factors
including, among other things, fee waivers and expense reimbursements
by the Manager, the types of funds managed, expense allocations and
business mix, and the difficulty of comparing profitability as a result of
those factors.

The Board noted that, in general, individual fund or product line prof-
itability of other advisors is not publicly available. Nevertheless, to the
extent such information was available, the Board considered BlackRock’s
overall operating margin, in general, compared to the operating margin
for leading investment management firms whose operations include
advising closed-end funds, among other product types. That data indi-
cates that operating margins for BlackRock with respect to its registered
funds are generally consistent with margins earned by similarly situated
publicly traded competitors. In addition, the Board considered, among
other things, certain third party data comparing BlackRock’s operating
margin with that of other publicly-traded asset management firms. That
third party data indicates that larger asset bases do not, in themselves,
translate to higher profit margins.

In addition, the Board considered the cost of the services provided to
the Fund by BlackRock, and BlackRock’s and its affiliates’ profits relating
to the management and distribution of the Fund and the other funds
advised by BlackRock and its affiliates. As part of its analysis, the Board
reviewed BlackRock’s methodology in allocating its costs to the manage-
ment of the Fund. The Board also considered whether BlackRock has
the financial resources necessary to attract and retain high quality
investment management personnel to perform its obligations under

the Agreements and to continue to provide the high quality of services
that is expected by the Board.

The Board noted that the Fund’s contractual management fee rate was
above the median contractual management fee rate paid by the Fund’s
Peers, in each case, before taking into account any expense reimburse-
ments or fee waivers. The Board also noted, however, that the Fund is
compared to Peers that do not employ a similar option writing strategy.
When compared to peers that employ a similar strategy, the Fund
is competitive.

D. Economies of Scale: The Board, including the Independent Board
Members, considered the extent to which economies of scale might be
realized as the assets of the Fund increase. The Board also considered
the extent to which the Fund benefits from such economies and whether
there should be changes in the advisory fee rate or structure in order to
enable the Fund to participate in these economies of scale, for example
through the use of breakpoints in the advisory fee based upon the asset
level of the Fund.

The Board noted that most closed-end fund complexes do not have fund
level breakpoints because closed-end funds generally do not experience
substantial growth after the initial public offering and each fund is man-
aged independently consistent with its own investment objectives. The
Board noted that only one closed-end fund in the Fund Complex has
breakpoints in its fee structure. Information provided by Lipper also
revealed that only one closed-end fund complex with total closed-end
fund nets assets exceeding $10 billion, as of December 31, 2009,
used a complex level breakpoint structure.

E. Other Factors Deemed Relevant by the Board Members: The Board,
including the Independent Board Members, also took into account other
ancillary or “fall-out” benefits that BlackRock or its affiliates and signifi-
cant shareholders may derive from their respective relationships with
the Fund, both tangible and intangible, such as BlackRock’s ability to
leverage its investment professionals who manage other portfolios, an
increase in BlackRock’s profile in the investment advisory community,
and the engagement of BlackRock’s affiliates and significant sharehold-
ers as service providers to the Fund, including for administrative and
distribution services. The Board also considered BlackRock’s overall
operations and its efforts to expand the scale of, and improve the qual-
ity of, its operations. The Board also noted that BlackRock may use and
benefit from third party research obtained by soft dollars generated by
certain mutual fund transactions to assist in managing all or a number
of its other client accounts. The Board further noted that BlackRock com-
pleted the acquisition of a complex of exchange-traded funds (“ETFs”)
on December 1, 2009, and that BlackRock’s funds may invest in such
ETFs without any offset against the management fees payable by the
funds to BlackRock.

In connection with its consideration of the Agreements, the Board also
received information regarding BlackRock’s brokerage and soft dollar
practices. The Board received reports from BlackRock which included

24 BLACKROCK ENHANCED GOVERNMENT FUND, INC.

JUNE 30, 2010

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Disclosure of Investment Advisory Agreement and Sub-Advisory Agreement (concluded)

information on brokerage commissions and trade execution practices
throughout the year.

The Board noted the competitive nature of the closed-end fund market-
place, and that shareholders are able to sell their Fund shares in the
secondary market if they believe that the Fund’s fees and expenses are
too high or if they are dissatisfied with the performance of the Fund.

Conclusion

The Board, including the Independent Board Members, unanimously
approved the continuation of the Advisory Agreement between the
Manager and the Fund for a one-year term ending June 30, 2011 and
the Sub-Advisory Agreement between the Manager and the Sub-Advisor,
with respect to the Fund, for a one-year term ending June 30, 2011.
As part of its approval, the Board considered the detailed review of
BlackRock’s fee structure, as it applies to the Fund, being conducted by
the ad hoc Joint Product Pricing Committee. Based upon its evaluation

of all of the aforementioned factors in their totality, the Board, including
the Independent Board Members, was satisfied that the terms of the
Agreements were fair and reasonable and in the best interest of the
Fund and its shareholders. In arriving at a decision to approve the
Agreements, the Board did not identify any single factor or group of
factors as all-important or controlling, but considered all factors
together, and different Board Members may have attributed different
weights to the various factors considered. The Independent Board
Members were also assisted by the advice of independent legal counsel
in making this determination. The contractual fee arrangements for the
Fund reflect the results of several years of review by the Board Members
and predecessor Board Members, and discussions between such Board
Members (and predecessor Board Members) and BlackRock. Certain
aspects of the arrangements may be the subject of more attention in
some years than in others, and the Board Members’ conclusions may
be based in part on their consideration of these arrangements in
prior years.

Officers and Directors

Richard E. Cavanagh, Chairman of the Board and Director
Karen P. Robards, Vice Chair of the Board, Chair of the Audit Committee
and Director
Richard S. Davis, Director
Frank J. Fabozzi, Director and Member of the Audit Committee
Kathleen F. Feldstein, Director
James T. Flynn, Director and Member of the Audit Committee
Henry Gabbay, Director
Jerrold B. Harris, Director

R. Glenn Hubbard, Director
W. Carl Kester, Director and Member of the Audit Committee

Anne Ackerley, President and Chief Executive Officer
Brendan Kyne, Vice President
Neal Andrews, Chief Financial Officer
Jay Fife, Treasurer
Brian Kindelan, Chief Compliance Officer of the Funds
Howard Surloff, Secretary

Investment Advisor
BlackRock Advisors, LLC
Wilmington, DE 19809

Sub-Advisor
BlackRock Financial Management, Inc.
New York, NY 10055

Custodian
State Street Bank and Trust Company
Boston, MA 02111

Transfer Agent
BNY Mellon Shareowner Services
Jersey City, NJ 07310

Accounting Agent
State Street Bank and Trust Company
Princeton, NJ 08540

Independent Registered Public Accounting Firm
Deloitte & Touche LLP
Princeton, NJ 08540

Legal Counsel
Skadden, Arps, Slate, Meagher & Flom LLP
New York, NY 10036

Address of the Fund
100 Bellevue Parkway
Wilmington, DE 19809

BLACKROCK ENHANCED GOVERNMENT FUND, INC.

JUNE 30, 2010

25

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Additional Information

Fundamental Periodic Repurchase Policy

The Board approved a fundamental policy whereby the Fund has adopted an “interval fund” structure pursuant to Rule 23c-3 under 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 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 14^th day after a repurchase request deadline is not a business day, the repurchase pricing date shall be the next business day.

The Board 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.

General Information

The Fund does not make available copies of its Statement of Additional
Information because the Fund’s shares are not continuously offered,
which means that the Statement of Additional Information of the Fund
has not been updated after completion of the Fund’s offerings and the
information contained in the Fund’s Statement of Additional Information
may have become outdated.

During the period, there were no material changes in the Fund’s invest-
ment objectives or policies or to the Fund’s charter or by-laws that were
not approved by the shareholders or in the principal risk factors associ-
ated with investment in the Fund. There have been no changes in the
persons who are primarily responsible for the day-to-day management of
the Fund’s portfolio.

Quarterly performance, semi-annual and annual reports and other
information regarding the Fund may be found on BlackRock’s website,
which can be accessed at http://www.blackrock.com. This reference
to BlackRock’s website is intended to allow investors public access to
information regarding the Fund and does not, and is not intended to,
incorporate BlackRock’s website into this report.

Electronic Delivery

Electronic copies of most financial reports are available on the Fund’s
website or shareholders can sign up for e-mail notifications of quarterly
statements, annual and semi-annual reports by enrolling in the Fund’s
electronic delivery program.

To enroll:

Shareholders Who Hold Accounts with Investment Advisors, Banks
or Brokerages:

Please contact your financial advisor. Please note that not all investment
advisors, banks or brokerages may offer this service.

Shareholders Who Hold Accounts Directly with BlackRock:

1) Access the BlackRock website at
http://www.blackrock.com/edelivery

2) Select “eDelivery” under the “More Information” section

3) Log into your account

Householding

The Fund will mail only one copy of shareholder documents, including
annual and semi-annual reports and proxy statements, to shareholders
with multiple accounts at the same address. This practice is commonly
called “householding” and it is intended to reduce expenses and elimi-
nate duplicate mailings of shareholder documents. Mailings of your
shareholder documents may be householded indefinitely unless you
instruct us otherwise. If you do not want the mailing of these documents
to be combined with those for other members of your household, please
contact the Fund at (800) 441-7762.

26 BLACKROCK ENHANCED GOVERNMENT FUND, INC.

JUNE 30, 2010

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Additional Information (concluded)

General Information (concluded)

Availability of Quarterly Portfolio Schedule of Investments

The Fund files its complete schedule of portfolio holdings with the Secu-
rities 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 website at http://www.sec.gov and may also be reviewed and
copied at the SEC’s Public Reference Room in Washington, D.C. Informa-
tion on the operation of the Public Reference Room may be obtained by
calling (800) SEC-0330. The Fund’s Form N-Q may also be obtained
upon request and without charge by calling (800) 441-7762.

Availability of Proxy Voting Policies and Procedures

A description of the policies and procedures that the Fund uses to
determine how to vote proxies relating to portfolio securities is avail-
able (1) without charge, upon request, by calling (800) 441-7762;
(2) at http://www.blackrock.com; and (3) on the SEC’s website at
http://www.sec.gov.

Availability of Proxy Voting Record

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 upon request and without charge (1) at
http://www.blackrock.com or by calling (800) 441-7762 and
(2) on the SEC’s website at http://www.sec.gov.

Section 19(a) Notices

These reported amounts and sources of distributions are estimates and
are not being provided for tax reporting purposes. The actual amounts
and sources for tax reporting purposes will depend upon the Fund’s
investment experience during the year and may be subject to changes
June 30, 2010

based on the tax regulations. The Fund will provide a Form 1099-DIV
each calendar year that will explain the character of these dividends and
distributions for federal income tax purposes.

 

BLACKROCK ENHANCED GOVERNMENT FUND, INC.

JUNE 30, 2010

27

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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 – Investments
(a) The registrant’s Schedule of Investments is included as part of the Report to
Stockholders filed under Item 1 of this form.
(b) Not Applicable due to no such divestments during the semi-annual period covered since
the previous Form N-CSR filing.

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 – Not Applicable

Item 10 – Submission of Matters to a Vote of Security Holders – The registrant’s Nominating and
Governance Committee will consider nominees to the board of directors recommended by
shareholders when a vacancy becomes available. Shareholders who wish to recommend a
nominee should send nominations that 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 13(a)-15(b) under the Securities 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) 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.

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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

 

¹ The registrant has received exemptive relief from the Securities and Exchange Commission (the
“SEC”) permitting it to make periodic distributions of long-term capital gains with respect to its
outstanding common stock as frequently as twelve times each year, and as frequently as distributions
are specified by or in accordance with the terms of its outstanding preferred stock. This relief is
conditioned, in part, on an undertaking by the registrant to make the disclosures to the holders of the
registrant’s common shares, in addition to the information required by Section 19(a) of the 1940 Act
and Rule 19a-1 thereunder. The registrant is likewise obligated to file with the SEC the information
contained in any such notice to shareholders and, in that regard, has attached hereto copies of each
such notice made during the period.

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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: September 2, 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: September 2, 2010

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

Date: September 2, 2010

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