BlackRock Enhanced Government Fund, Inc.

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM N-Q

QUARTERLY SCHEDULE OF PORTFOLIO HOLDINGS OF REGISTERED

MANAGEMENT INVESTMENT COMPANY

Investment Company Act file number: 811-21793

Name of Fund: BlackRock Enhanced Government Fund, Inc. (EGF)

Fund Address: 100 Bellevue Parkway, Wilmington, DE 19809

Name and address of agent for service: John M. Perlowski, Chief Executive Officer, BlackRock Enhanced

            Government Fund, Inc., 55 East 52nd Street, New York, NY 10055

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

Date of fiscal year end: 12/31/2017

Date of reporting period: 09/30/2017

Item 1 – Schedule of Investments

Schedule of Investments September 30, 2017 (Unaudited)   

BlackRock Enhanced Government Fund, Inc. (EGF)

(Percentages shown are based on Net Assets)

 

Asset-Backed Securities    Par
(000)		     Value  

Securitized Asset Backed Receivables LLC Trust (a):

     

Series 2005-OP1, Class M2, (1 mo. LIBOR US + 0.68%), 1.91%, 1/25/35

    $ 677     $ 664,988  

Series 2005-OP2, Class M1, (1 mo. LIBOR US + 0.43%), 1.67%, 10/25/35

      1,025       1,012,517  
Total Asset-Backed Securities — 1.8%       1,677,505  
    
   
Non-Agency Mortgage-Backed Securities  
Collateralized Mortgage Obligations — 0.8%  

Bank of America Mortgage Trust,
Series 2003-J, Class 2A1, 3.45%, 11/25/33 (b)

      79       79,005  

Bear Stearns ALT-A Trust, Series 2004-13, Class A1, (1 mo. LIBOR US + 0.74%), 1.98%, 11/25/34 (a)

      83       82,538  

HomeBanc Mortgage Trust, Series 2005-4, Class A1, (1 mo. LIBOR US + 0.27%), 1.51%, 10/25/35 (a)

      569       560,048  
               721,591  
Interest Only Collateralized Mortgage Obligations — 0.0%  

CitiMortgage Alternative Loan Trust, Series 2007-A5, Class 1A7, 6.00%, 5/25/37

      188       41,931  
Total Non-Agency Mortgage-Backed Securities — 0.8%       763,522  
    
                  
Preferred Securities  
Capital Trust — 2.2%  
Electric Utilities — 2.2%  

PPL Capital Funding, Inc., Series A, 4.00%, 3/30/67 (c)

      2,000       1,965,000  
Total Preferred Securities — 2.2%       1,965,000  
    
                  
U.S. Government Sponsored Agency Securities  
Agency Obligations — 4.1%  

Federal Farm Credit Bank, 4.55%, 6/08/20

      3,500       3,760,872  
Collateralized Mortgage Obligations — 4.1%  

Fannie Mae Mortgage-Backed Securities, Series 2014-28, Class BD, 3.50%, 8/25/43

      1,222       1,273,657  
U.S. Government Sponsored Agency Securities    Par
(000)		     Value  
Collateralized Mortgage Obligations (continued)  

Freddie Mac Mortgage-Backed Securities, Series 4480, Class ZX, 4.00%, 11/15/44

    $ 684     $ 720,160  

Ginnie Mae Mortgage-Backed Securities, Series 2006-3, Class C, 5.24%, 4/16/39 (b)

      1,707       1,712,713  
               3,706,530  
Interest Only Collateralized Mortgage Obligations — 1.4%  

Fannie Mae Mortgage-Backed Securities:

     

Series 2012-96, Class DI, 4.00%, 2/25/27

      1,108       89,991  

Series 2012-M9, Class X1, 4.15%, 12/25/17 (b)

      483       101  

Series 2012-47, Class NI, 4.50%, 4/25/42

      1,206       263,050  

Ginnie Mae Mortgage-Backed Securities:

     

Series 2006-30, Class IO, 2.30%, 5/16/46 (b)

      298       20,029  

Series 2009-78, Class SD, (1 mo. LIBOR + 6.20%), 4.96%, 9/20/32 (a)

      1,236       197,911  

Series 2009-116, Class KS, (1 mo. LIBOR + 6.47%), 5.24%, 12/16/39 (a)

      365       53,217  

Series 2011-52, Class NS, (1 mo. LIBOR + 6.67%), 5.44%, 4/16/41 (a)

      3,468       625,970  
               1,250,269  
Mortgage-Backed Securities — 49.2%  

Fannie Mae Mortgage-Backed Securities:

     

2.50%, 4/01/28

      4,895       4,959,286  

3.00%, 6/01/42 - 4/01/43

      6,045       6,097,882  

3.50%, 8/01/26 - 8/01/44

      10,214       10,615,488  

4.00%, 4/01/24 - 2/01/41

      8,801       9,306,117  

4.50%, 4/01/39 - 8/01/40

      5,990       6,487,767  

5.00%, 11/01/33 - 2/01/40

      3,253       3,594,356  

5.50%, 10/01/23 - 9/01/36

      2,742       3,067,072  

6.00%, 2/01/36 - 3/01/38

      501       569,681  

Freddie Mac Mortgage-Backed Securities, 4.50%, 5/01/34

      152       163,345  

Ginnie Mae Mortgage-Backed Securities, 5.00%, 11/15/35

      5       5,406  
               44,866,400  
Total U.S. Government Sponsored Agency Securities — 58.8%       53,584,071  
 

 

                
   BLACKROCK ENHANCED GOVERNMENT FUND, INC.    SEPTEMBER 30, 2017    1

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

 

U.S. Treasury Obligations    Par
(000)		     Value  

U.S. Treasury Bonds, 4.38%, 5/15/41

    $ 5,100     $ 6,523,817  

U.S. Treasury Notes:

     

1.38%, 4/30/20 (d)

      13,500       13,432,500  

1.50%, 5/31/20

      1,300       1,297,156  

3.13%, 5/15/21

      6,500       6,816,621  

2.00%, 11/30/22

      3,500       3,506,152  

2.00%, 2/15/25

      6,000       5,917,969  

2.25%, 11/15/25

      2,800       2,799,891  

1.63%, 2/15/26

      900       855,703  
Total U.S. Treasury Obligations — 45.2%       41,149,809  
Total Long-Term Investments
(Cost — $96,800,924) — 108.8%		       99,139,907  
Short-Term Securities        
Shares		     Value  

BlackRock Liquidity Funds, T-Fund, Institutional Class, 0.91%, (e)(f)

      2,472     $ 2,471,813  
Total Short-Term Securities
(Cost — $2,471,813) — 2.7%		       2,471,813  
Options Purchased
(Cost — $332,342) — 0.2%		       152,894  
Total Investments Before Options Written
(Cost — $99,605,079) — 111.7%		       101,764,614  
Options Written
(Premiums Received — $490,993) — (0.5)%		       (429,883 ) 

Total Investments, Net of Options Written

(Cost — $99,114,086) — 111.2%

 

 

     101,334,731  

Liabilities in Excess of Other Assets — (11.2)%

 

     (10,211,106 ) 
    

 

 

  

Net Assets — 100.0%

 

   $ 91,123,625  
    

 

 

  
 
Notes to Schedule of Investments

 

(a)   Floating rate security. Rate shown is the rate in effect as of period end.
(b)   Variable or floating rate security, which interest rate adjusts periodically based on changes in current interest rates and prepayments on the underlying pool of assets. Rate shown is the rate in effect as of period end.
(c)   Variable rate security. Security may be issued at a fixed coupon rate, which converts to a variable rate at a specified date. Rate shown is the rate in effect as of period end.
(d)   All or a portion of the security has been pledged as collateral in connection with outstanding reverse repurchase agreements.
(e)   During the period ended September 30, 2017, investments in issuers considered to be an affiliate of the Fund for purposes of Section 2(a)(3) of the Investment Company Act of 1940, as amended, as follows:

 

Affiliate  

Shares Held

at December 31,
2016

        Net
Activity		       

Shares Held

at September 30,
2017

        Value at
September 30,
2017		        Income        Realized
Gain(Loss)		        Change in
Unrealized
Appreciation
(Depreciation)		  

BlackRock Liquidity Funds, T-Fund, Institutional Class

     3,730,899          (1,259,086 )         2,471,813        $ 2,471,813        $ 24,751          —          —  

 

(f)   Annualized 7-day yield as of period end.

 

Portfolio Abbreviations

 

AUD    Australian Dollar      GBP    British Pound    OTC    Over-the-Counter
CAD    Canadian Dollar      JPY    Japanese Yen    SEK    Swedish Krona
CHF    Swiss Franc      NOK    Norwegian Krone    USD    U.S. Dollar
EUR    Euro      NZD    New Zealand Dollar      

 

     
                
2    BLACKROCK ENHANCED GOVERNMENT FUND, INC.    SEPTEMBER 30, 2017   

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

 

 

Reverse Repurchase Agreements  
Counterparty   Interest
Rate		        Trade
Date		      Maturity
Date1		    

Face

Value

     Face Value
Including
Accrued
Interest		     Type of  Non-Cash
Underlying
Collateral		   Remaining
Contractual Maturity
of the Agreements1		  

Credit Suisse Securities (USA) LLC

     1.22 %       9/26/17        Open     $ 11,528,750     $ 11,530,463     U.S. Treasury Obligations     Open/Demand  

1   Certain agreements have no stated maturity and can be terminated by either party at any time.

    

                   
Derivative Financial Instruments Outstanding as of Period End  
Futures Contracts  
Description     Number of
Contracts		    

Expiration

Date

     Notional
Amount
(000)		   Value /
Unrealized
Appreciation
(Depreciation)		  

Short Contracts

 

5-Year U.S. Treasury Note

 

     (5 )      December 2017     $        588   $ 4,256  

 

Forward Foreign Currency Exchange Contracts        
Currency
Purchased		     Currency
Sold		     Counterparty   Settlement
Date		     Unrealized
Appreciation
(Depreciation)		         
CAD     226,634       NZD       250,000     Barclays Bank PLC     10/10/17     $ 1,096    
NZD     250,000       CAD       223,927     Barclays Bank PLC     10/10/17       1,074    
NZD     315,000       CAD       275,762     Barclays Bank PLC     10/10/17       6,471    
NZD     315,000       CAD       276,891     Barclays Bank PLC     10/10/17       5,567    
NZD     190,000       CAD       166,563     Goldman Sachs International     10/10/17       3,719    
NZD     635,000       CAD       558,015     Goldman Sachs International     10/10/17       11,351    
GBP     175,000       USD       228,779     Goldman Sachs International     10/18/17       5,837    
JPY     30,988,430       USD       275,000     Barclays Bank PLC     10/18/17       580    
USD     230,000       CHF       218,071     Barclays Bank PLC     10/18/17       4,579    
USD     362,217       GBP       270,000     Morgan Stanley & Co. International PLC     10/18/17       238    
USD     275,000       JPY       30,697,672     Barclays Bank PLC     10/18/17       2,006    
USD     275,000       JPY       30,712,632     Barclays Bank PLC     10/18/17       1,873    
USD     825,000       JPY       92,766,300     Deutsche Bank AG     10/18/17       30    
USD     230,000       JPY       24,726,752     Barclays Bank PLC     10/25/17       10,038    
USD     230,000       JPY       24,899,848     Barclays Bank PLC     10/25/17       8,498    
SEK     1,858,232       GBP       170,000     Barclays Bank PLC     10/30/17       487    
SEK     1,883,111       NOK       1,840,000     Goldman Sachs International     10/30/17       383    
EUR     195,000       GBP       171,410     Barclays Bank PLC     12/01/17       1,103    
GBP     355,000       NOK       3,587,034     JPMorgan Chase Bank N.A.     12/01/17       25,591    
EUR     190,000       GBP       167,772     Citibank N.A.     12/12/17       131    
EUR     200,000       JPY       26,580,200     BNP Paribas S.A.     12/12/17       291    
GBP     175,000       SEK       1,860,403     Barclays Bank PLC     12/12/17       5,668    
NZD     640,000       NOK       3,652,902     Credit Suisse International     12/12/17       2,286    
USD     460,000       CHF       432,067     State Street Bank and Trust Co.     12/12/17       11,742    
           

 

 

    
            110,639    
           

 

 

    
CAD     214,328       NZD       240,000     Barclays Bank PLC     10/10/17       (1,545 )   
CAD     224,497       NZD       255,000     Barclays Bank PLC     10/10/17       (4,228 )   
CAD     225,136       NZD       250,000     Barclays Bank PLC     10/10/17       (105 )   
CAD     283,036       NZD       320,000     Barclays Bank PLC     10/10/17       (4,252 )   
CAD     447,034       NZD       505,000     Credit Suisse International     10/10/17       (6,416 )   
CAD     205,765       NZD       230,000     Goldman Sachs International     10/10/17       (1,187 )   

 

     
                
   BLACKROCK ENHANCED GOVERNMENT FUND, INC.    SEPTEMBER 30, 2017    3

Schedule of Investments (continued)

   

BlackRock Enhanced Government Fund, Inc. (EGF)

 

 

Forward Foreign Currency Exchange Contracts (continued)  
Currency
Purchased		     Currency
Sold		     Counterparty   Settlement
Date		     Unrealized
Appreciation
(Depreciation)		  
NZD     250,000     CAD     225,408     Barclays Bank PLC     10/10/17     $ (113 ) 
CHF     220,598     USD     230,000     Barclays Bank PLC     10/18/17       (1,968 ) 
GBP     465,000     USD     633,228     Barclays Bank PLC     10/18/17       (9,820 ) 
JPY     30,734,357     USD     275,000     Barclays Bank PLC     10/18/17       (1,680 ) 
JPY     30,849,720     USD     275,000     Barclays Bank PLC     10/18/17       (654 ) 
JPY     30,862,645     USD     275,000     Barclays Bank PLC     10/18/17       (539 ) 
JPY     30,870,647     USD     275,000     Barclays Bank PLC     10/18/17       (468 ) 
USD     231,921     GBP     175,000     Barclays Bank PLC     10/18/17       (2,695 ) 
JPY     25,022,114     USD     230,000     Barclays Bank PLC     10/25/17       (7,410 ) 
JPY     25,176,030     USD     230,000     Barclays Bank PLC     10/25/17       (6,041 ) 
NOK     1,830,000     SEK     1,876,724     Barclays Bank PLC     10/30/17       (854 ) 
NOK     1,815,000     SEK     1,858,150     Citibank N.A.     10/30/17       (455 ) 
NOK     1,795,332     GBP     175,000     Barclays Bank PLC     12/01/17       (9,212 ) 
NOK     1,487,885     GBP     140,000     Credit Suisse International     12/01/17       (880 ) 
AUD     290,000     CAD     283,559     Citibank N.A.     12/12/17       (68 ) 
CAD     566,767     AUD     580,000     Nomura International PLC     12/12/17       (146 ) 
EUR     190,000     JPY     25,462,310     Barclays Bank PLC     12/12/17       (1,606 ) 
NOK     1,789,932     GBP     175,000     Morgan Stanley & Co. International PLC     12/12/17       (9,910 ) 
NOK     1,740,241     NZD     310,000     Credit Suisse International     12/12/17       (4,771 ) 
NOK     3,592,497     NZD     640,000     Toronto-Dominion Bank     12/12/17       (9,882 ) 
SEK     3,625,610     EUR     380,000     Citibank N.A.     12/12/17       (3,920 ) 
SEK     1,882,343     GBP     180,000     Goldman Sachs International     12/12/17       (9,678 ) 
           

 

 

  
                                      (100,503 ) 

Net Unrealized Appreciation

         $ 10,136  
           

 

 

  

 

OTC Options Purchased  
Description   Counterparty    Number of
Contracts		      Expiration
Date		      Exercise
Price		      Notional
Amount
(000)		     Value  

Call

                    

NZD Currency

   Goldman Sachs International      —        10/06/17      CAD     0.92      NZD     5,070     $ 132  

GBP Currency

   HSBC Bank USA N.A.      —        10/16/17      USD     1.37      GBP     1,325       1,635  

GBP Currency

   Morgan Stanley & Co. International PLC      —        10/16/17      NOK     10.90      GBP     1,375       2,589  

USD Currency

   Deutsche Bank AG      —        10/16/17      CHF     1.00      USD     1,830       479  

USD Currency

   Morgan Stanley & Co. International PLC      —        10/16/17      JPY     112.00      USD     1,830       17,306  

EUR Currency

   JPMorgan Chase Bank N.A.      —        10/26/17      AUD     1.51      EUR     1,550       15,135  

EUR Currency

   JPMorgan Chase Bank N.A.      —        10/26/17      AUD     1.56      EUR     1,550       1,920  

NOK Currency

   Barclays Bank PLC      —        10/26/17      SEK     1.06      NOK     7,670       298  

EUR Currency

   HSBC Bank USA N.A.      —        11/14/17      JPY     132.00      EUR     1,555       33,265  

CAD Currency

   Goldman Sachs International      —        11/29/17      JPY     92.50      CAD     2,295       9,754  

EUR Currency

   Barclays Bank PLC      —        11/29/17      CAD     1.55      EUR     785       1,470  

EUR Currency

   JPMorgan Chase Bank N.A.      —        11/29/17      GBP     0.93      EUR     1,560       2,198  
    86,181  

Put

 

NZD Currency

   Goldman Sachs International      —        10/06/17      CAD     0.87      NZD     5,070       —  

GBP Currency

   Barclays Bank PLC      —        10/10/17      CAD     1.56      GBP     1,390       —  

NZD Currency

   UBS AG      —        10/10/17      USD     0.70      NZD     2,545       423  

GBP Currency

   Goldman Sachs International      —        10/16/17      NOK     10.30      GBP     1,425       701  

GBP Currency

   Goldman Sachs International      —        10/16/17      USD     1.25      GBP     1,405       —  

 

     
                
4    BLACKROCK ENHANCED GOVERNMENT FUND, INC.    SEPTEMBER 30, 2017   

Schedule of Investments (continued)

   

BlackRock Enhanced Government Fund, Inc. (EGF)

 

 

OTC Options Purchased (continued)  
Description   Counterparty      Number of
Contracts		      Expiration
Date		   Exercise
Price		   Notional
Amount
(000)		     Value  

Put

                      

GBP Currency

   Morgan Stanley & Co. International PLC        —      10/16/17     NOK      10.20     GBP       1,425     $ 254  

USD Currency

   Morgan Stanley & Co. International PLC        —      10/16/17     JPY      110.50     USD       1,830       4,449  

EUR Currency

   Barclays Bank PLC        —      10/23/17     SEK      9.60     EUR       1,555       9,586  

USD Currency

   Barclays Bank PLC        —      10/23/17     JPY      107.00     USD       1,830       1,213  

GBP Currency

   Goldman Sachs International        —      10/26/17     SEK      10.10     GBP       1,415       28  

NZD Currency

   Goldman Sachs International        —      10/27/17     CAD      0.91     NZD       3,690       41,589  

EUR Currency

   Morgan Stanley & Co. International PLC        —      11/14/17     NOK      9.15     EUR       1,540       2,712  

GBP Currency

   Morgan Stanley & Co. International PLC        —      11/29/17     NOK      9.80     GBP       1,435       650  

NZD Currency

   Citibank N.A.        —      11/29/17     USD      0.69     NZD       2,540       5,108  
                                                       66,713  

Total

                       $ 152,894  
 

 

 

  
   
OTC Interest Rate Swaptions Written  
       Received by the Fund  

Paid by the Fund

       
Description   Counterparty   Expiration
Date		     Exercise
Rate		     Rate     Frequency   Rate   Frequency  

Notional

Amount
(000)

     Value  

Call

                    

2-Year Interest Rate Swap, 9/28/17

   Citibank N.A.     10/30/17       1.75 %      6-Month LIBOR     Quarterly   1.75%   Quarterly   USD     35,000     $ (26,028 ) 

5-Year Interest Rate Swap, 9/28/17

   Citibank N.A.     10/30/17       2.02 %      6-Month LIBOR     Quarterly   2.02%   Quarterly   USD     30,000       (85,549 ) 

10-Year Interest Rate Swap, 9/28/17

   Citibank N.A.     10/30/17       2.31 %      6-Month LIBOR     Quarterly   2.31%   Quarterly   USD     15,000       (102,884 ) 

30-Year Interest Rate Swap, 9/28/17

   Citibank N.A.     10/30/17       2.57 %      6-Month LIBOR     Quarterly   2.57%   Quarterly   USD     5,000       (90,584 ) 

Total

 

   $ (305,045 ) 
 

 

 

  
   
   
OTC Options Written  
Description   Counterparty     Number of
Contracts		     Expiration
Date		     Exercise
Price		   Notional
Amount
(000)		   Value  

Call

                  

NZD Currency

   Goldman Sachs International       —       10/06/17     CAD   0.90   NZD   1,265   $ (7,231 ) 

GBP Currency

   Goldman Sachs International       —       10/16/17     USD   1.35   GBP   1,405     (6,718 ) 

GBP Currency

   HSBC Bank USA N.A.       —       10/16/17     USD   1.39   GBP   1,990     (467 ) 

USD Currency

   Deutsche Bank AG       —       10/16/17     JPY   112.00   USD   1,830     (17,736 ) 

EUR Currency

   JPMorgan Chase Bank N.A.       —       10/26/17     AUD   1.54   EUR   3,105     (11,340 ) 

USD Currency

   Citibank N.A.       —       10/26/17     JPY   115.00   USD   1,830     (4,253 ) 

EUR Currency

   HSBC Bank USA N.A.       —       11/14/17     JPY   135.00   EUR   2,335     (20,210 ) 

EUR Currency

   JPMorgan Chase Bank N.A.       —       11/29/17     GBP   0.95   EUR   1,560     (667 ) 
  $ (68,622 ) 
 

 

 

  

 

     
                
   BLACKROCK ENHANCED GOVERNMENT FUND, INC.    SEPTEMBER 30, 2017    5

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

 

 

OTC Options Written (continued)  
Description   Counterparty    Number of
Contracts		      Expiration
Date		    Exercise
Price		      Notional
Amount
(000)		     Value  

Put

 

NZD Currency

   Goldman Sachs International      —      10/06/17    CAD     0.90      NZD     1,265       (1,325 ) 

GBP Currency

   Deutsche Bank AG      —      10/10/17    CAD     1.56      GBP     1,390       —    

NZD Currency

   UBS AG      —      10/10/17    USD     0.70      NZD     2,545       (415 ) 

GBP Currency

   Goldman Sachs International      —      10/16/17    NOK     10.20      GBP     1,425       (250 ) 

GBP Currency

   Morgan Stanley & Co. International PLC      —      10/16/17    NOK     10.30      GBP     1,425       (708 ) 

USD Currency

   Deutsche Bank AG      —      10/16/17    JPY     110.50      USD     1,830       (4,275 ) 

AUD Currency

   JPMorgan Chase Bank N.A.      —      10/23/17    CAD     0.96      AUD     2,335       (3,603 ) 

EUR Currency

   Barclays Bank PLC      —      10/23/17    SEK     9.45      EUR     3,105       (4,125 ) 

USD Currency

   Barclays Bank PLC      —      10/23/17    JPY     105.00      USD     1,830       (326 ) 

NZD Currency

   Deutsche Bank AG      —      10/27/17    CAD     0.91      NZD     3,690       (41,189 ) 
                      (56,216 ) 
                   

 

 

  

Total

 

   $ (124,838 ) 
 

 

 

  

 

Fair Value Hierarchy as of Period End

Various inputs are used in determining the fair value of investments and derivative financial instruments. These inputs to valuation techniques are categorized into a fair value hierarchy consisting of three broad levels for financial reporting purposes as follows:

 

•  

Level 1 — Unadjusted price quotations in active markets/exchanges for identical assets or liabilities that the Fund has the ability to access

 

•  

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

 

•  

Level 3 — Unobservable inputs based on the best information available in the circumstances, to the extent observable inputs are not available (including the Fund’s own assumptions used in determining the fair value of investments and derivative financial instruments)

The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). Accordingly, the degree of judgment exercised in determining fair value is greatest for instruments categorized in Level 3. The inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the fair value hierarchy classification is determined based on the lowest level input that is significant to the fair value measurement in its entirety. Investments classified within Level 3 have significant unobservable inputs used by the BlackRock Global Valuation Methodologies Committee (the “Global Valuation Committee”) in determining the price for Fair Valued Investments. Level 3 investments include equity or debt issued by privately-held companies or funds. There may not be a secondary market, and/or there are a limited number of investors. Level 3 investments may also be adjusted to reflect illiquidity and/or non-transferability, with the amount of such discount estimated by the Global Valuation Committee in the absence of market information.

Changes in valuation techniques may result in transfers into or out of an assigned level within the hierarchy. In accordance with the Fund’s policy, transfers between different levels of the fair value hierarchy are deemed to have occurred as of the beginning of the reporting period. The categorization of a value determined for investments and derivative financial instruments is based on the pricing transparency of the investments and derivative financial instruments and is not necessarily an indication of the risks associated with investing in those securities. For information about the Fund’s policy regarding valuation of investments and derivative financial instruments, refer to the Fund’s most recent financial statements as contained in its semi-annual report.

 

     
                
6    BLACKROCK ENHANCED GOVERNMENT FUND, INC.    SEPTEMBER 30, 2017   

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

 

The following tables summarize the Fund’s investments and derivative financial instruments categorized in the disclosure hierarchy:

 

     Level 1        Level 2        Level 3     Total  

Assets:

 

Investments:  
Long-Term Investments:  

Asset-Backed Securities

    —        $ 1,677,505          —     $ 1,677,505  

Preferred Securities

     —          1,965,000          —       1,965,000  

Non-Agency Mortgage-Backed Securities

    —          763,522          —       763,522  

U.S. Government Sponsored Agency Securities

    —          53,584,071          —       53,584,071  

U.S. Treasury Obligations

    —          41,149,809          —       41,149,809  
Short-Term Securities   $ 2,471,813          —          —       2,471,813  
Options Purchased:  

Foreign currency exchange contracts

    —          152,894          —       152,894  
 

 

 

  

Total

   $ 2,471,813        $ 99,292,801          —     $ 101,764,614  
 

 

 

  
             
     Level 1        Level 2        Level 3     Total  
Derivative Financial Instruments 1  

Assets:

 

Foreign currency exchange contracts

     —        $ 110,639          —     $ 110,639  

Interest rate contracts

  $ 4,256          —          —       4,256  

Liabilities:

 

Foreign currency exchange contracts

     —          (225,341 )         —       (225,341 ) 

Interest rate contracts

     —          (305,045 )         —       (305,045 ) 
 

 

 

  

Total

   $ 4,256        $ (419,747 )         —     $ (415,491 ) 
 

 

 

  

1    Derivative financial instruments are futures contracts, forward foreign currency exchange contracts and options written. Futures contracts and forward foreign currency exchange contracts are valued at the unrealized appreciation (depreciation) on the instrument and options written are shown at value.

     

The Fund may hold assets and/or liabilities in which the fair value approximates the carrying amount for financial statement purposes. As of period end, reverse repurchase agreements of $11,530,463 are categorized as Level 2 within the disclosure hierarchy.

During the period ended September 30, 2017, there were no transfers between levels.

 

     
                
   BLACKROCK ENHANCED GOVERNMENT FUND, INC.    SEPTEMBER 30, 2017    7

Item 2 – Controls and Procedures
2(a) –  

The registrant’s principal executive and principal financial officers, or persons performing similar functions, have concluded that the registrant’s disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940, as amended (the “1940 Act”)) are effective as of a date within 90 days of the filing of this report based on the evaluation of these controls and procedures required by Rule 30a-3(b) under the 1940 Act and Rule 13a-15(b) under the Securities Exchange Act of 1934, as amended.

2(b) –  

There were no changes in the registrant’s internal control over financial reporting (as defined in Rule 30a-3(d) under the 1940 Act) that occurred during the registrant’s last fiscal quarter that have materially affected, or are reasonably likely to materially affect, the registrant’s internal control over financial reporting.

Item 3 – Exhibits
  Certifications – Attached hereto

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

BlackRock Enhanced Government Fund, Inc.

 

By:   /s/ John M. Perlowski                    
  John M. Perlowski
  Chief Executive Officer (principal executive officer) of
  BlackRock Enhanced Government Fund, Inc.
Date: November 20, 2017

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/ John M. Perlowski                    
  John M. Perlowski
  Chief Executive Officer (principal executive officer) of
  BlackRock Enhanced Government Fund, Inc.
Date: November 20, 2017
By:   /s/ Neal J. Andrews                       
  Neal J. Andrews
  Chief Financial Officer (principal financial officer) of
  BlackRock Enhanced Government Fund, Inc.
Date: November 20, 2017