BlackRock Enhanced Government Fund NCSRS Certified semi-annual shareholder report (management investment company)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM N-CSR

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: John M. Perlowski, 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: 12/31/2022

Date of reporting period: 06/30/2022

Item��1 – Report to Stockholders

(a) The Report to Shareholders is attached herewith.


		JUNE 30, 2022

2022 Semi-Annual Report

(Unaudited)

BlackRock Enhanced Government Fund, Inc. (EGF)

Not FDIC Insured • May Lose Value • No Bank Guarantee

Supplemental Information (unaudited)

Section 19(a) Notices

BlackRock Enhanced Government Fund, Inc.’s (EGF) (the “Fund”) amounts and sources of distributions reported are estimates and are being provided to you pursuant to regulatory requirements 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 remainder of its fiscal year and may be subject to changes based on tax regulations. The Fund will provide a Form 1099-DIV each calendar year that will tell you how to report these distributions for U.S. federal income tax purposes.

June 30, 2022



	Total Cumulative Distributions for the Fiscal Period									% Breakdown of the Total Cumulative Distributions for the Fiscal Period


Fund Name		Net Income	Net Realized Capital Gains Short-Term	Net Realized Capital Gains Long-Term		Return of Capital	^(a)		Total Per Common Share		Net Income		Net Realized Capital Gains Short-Term		Net Realized Capital Gains Long-Term		Return of Capital		Total Per Common Share

EGF	$	0.146671	$ —	$ —	$	0.058329		$	0.205000		72	%	—	%	—	%	28	%	100	%

^(a)

The Fund estimates that it has distributed more than its net income and net realized capital gains; therefore, a portion of the distribution may be a return of capital. A return of capital may occur, for example, when some or all of the shareholder’s investment in the Fund is returned to the shareholder. A return of capital does not necessarily reflect the Fund’s investment performance and should not be confused with “yield” or “income.” When distributions exceed total return performance, the difference will reduce the Fund’s net asset value per share.

Section 19(a) notices for the Fund, as applicable, are available on the BlackRock website at blackrock.com.

Section 19(b) Disclosure

The Fund, acting pursuant to a U.S. Securities and Exchange Commission (“SEC”) exemptive order and with the approval of the Fund’s Board of Directors (the “Board”), has adopted a managed distribution plan, consistent with its investment objectives and policies to support a level distribution of income, capital gains and/or return of capital (the “Plan”). In accordance with the Plan, the Fund currently distributes the following fixed amounts per share on a monthly basis:



Exchange Symbol	Amount Per Common Share

EGF	$	0.0410

The fixed amounts distributed per share are subject to change at the discretion of the Fund’s Board. Under its Plan, the Fund will distribute all available net income to its shareholders as required by the Internal Revenue Code of 1986, as amended (the “Code”). If sufficient income (inclusive of net income and short-term capital gains) is not earned on a monthly basis, the Fund will distribute long-term capital gains and/or return of capital to shareholders in order to maintain a level distribution. Each monthly distribution to shareholders is expected to be at the fixed amount established by the Board; however, the Fund may make additional distributions from time to time, including additional capital gain distributions at the end of the taxable year, if required to meet requirements imposed by the Code and/or the Investment Company Act of 1940, as amended (the “1940 Act”).

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 is presented in its financial highlights table.

The Board may amend, suspend or terminate the Fund’s Plan at any time without prior notice to the Fund’s shareholders 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 level distributions. Examples of potential risks include, but are not limited to, economic downturns impacting the markets, changes in interest rates, decreased market volatility, companies suspending or decreasing corporate dividend distributions and changes in the Code.


2		2 0 2 2 BLACK ROCK SEMI - ANNUAL REPORT TO SHAREHOLDERS

The Markets in Review

Dear Shareholder,

The 12-month reporting period as of June 30, 2022 saw the emergence of significant challenges that disrupted the economic recovery and strong financial markets. The U.S. economy shrank in the first quarter of 2022, ending the run of robust growth that followed the reopening of global economies and the development of COVID-19 vaccines. Rapid changes in consumer spending led to supply constraints and elevated inflation, which reached a 40-year high. Moreover, while the foremost effect of Russia’s invasion of Ukraine has been a severe humanitarian crisis, the ongoing war continued to present challenges for both investors and policymakers.

Equity prices fell, as persistently high inflation drove investors’ expectations for higher interest rates, particularly weighing on relatively high-valuation growth stocks and economically sensitive small-capitalization stocks. While both large- and small-capitalization U.S. stocks fell, declines for small-capitalization U.S. stocks were particularly steep. Both emerging market stocks and international equities from developed markets fell significantly, pressured by rising interest rates and a strengthening U.S. dollar.

The 10-year U.S. Treasury yield (which is inversely related to bond prices) rose notably during the reporting period as increasing inflation drove investors’ expectations for higher interest rates. The corporate bond market also faced inflationary headwinds, and increasing uncertainty led to higher corporate bond spreads (the difference in yield between U.S. Treasuries and similarly-dated corporate bonds).

The U.S. Federal Reserve (the “Fed”), acknowledging that inflation is growing faster than expected, raised interest rates three times while indicating that additional large rate hikes were likely. Furthermore, the Fed wound down its bond-buying programs and began to reduce its balance sheet. Continued high inflation and the Fed’s statements led many analysts to anticipate that interest rates have significant room to rise before peaking.

Furthermore, the horrific war in Ukraine has significantly clouded the outlook for the global economy, leading to major volatility in energy and metals markets. Sanctions on Russia, Europe’s top energy supplier, and general wartime disruption have magnified supply problems for key commodities. We believe elevated energy prices will continue to exacerbate inflationary pressure while also constraining economic growth. Combating inflation without stifling a recovery, while buffering against ongoing supply and price shocks, will be an especially challenging environment for setting effective monetary policy. Despite the likelihood of more rate increases on the horizon, we believe the Fed will err on the side of protecting employment, even at the expense of higher inflation. However, markets have been primed to expect sharp tightening, which could weigh on valuations until central banks begin to tap the brakes.

In this environment, while we favor an overweight to equities in the long-term, the market’s concerns over excessive rate hikes from central banks moderate our outlook. Furthermore, the energy shock and a deteriorating economic backdrop in China and Europe are likely to challenge corporate earnings, so we are underweight equities overall in the near-term. We take the opposite view on credit, where higher spreads provide near-term opportunities, while the likelihood of a higher inflation regime leads us to take an underweight stance on credit in the long-term. We believe that investment-grade corporates, U.K. gilts, local-currency emerging market debt, and inflation-protected bonds (particularly in Europe) offer strong opportunities in a six- to twelve-month horizon.

Overall, our view is that investors need to think globally, extend their scope across a broad array of asset classes, and be nimble as market conditions change. We encourage you to talk with your financial advisor and visit blackrock.com for further insight about investing in today’s markets.

Sincerely,

LOGO

Rob Kapito

President, BlackRock Advisors, LLC

LOGO

Rob Kapito

President, BlackRock Advisors, LLC



Total Returns as of June 30, 2022

	6-Month	12-Month

U.S. large cap equities (S&P 500^® Index)	(19.96)%	(10.62)%

U.S. small cap equities (Russell 2000^® Index)	(23.43)	(25.20)

International equities (MSCI Europe, Australasia, Far East Index)	(19.57)	(17.77)

Emerging market equities (MSCI Emerging Markets Index)	(17.63)	(25.28)

3-month Treasury bills (ICE BofA 3-Month U.S. Treasury Bill Index)	0.15	0.18

U.S. Treasury securities (ICE BofA 10-Year U.S. Treasury Index)	(11.34)	(10.94)

U.S. investment grade bonds (Bloomberg U.S. Aggregate Bond Index)	(10.35)	(10.29)

Tax-exempt municipal bonds (Bloomberg Municipal Bond Index)	(8.98)	(8.57)

U.S. high yield bonds (Bloomberg U.S. Corporate High Yield 2% Issuer Capped Index)	(14.19)	(12.82)

Past performance is not an indication of future results. Index performance is shown for illustrative purposes only. You cannot invest directly in an index.


THIS PAGE IS NOT PART OF YOUR FUND REPORT		3

Table of Contents


		Page

Supplemental Information		2
The Markets in Review		3
Semi-Annual Report:
The Benefits and Risks of Leveraging		5
Option Over-Writing Strategy		6
Derivative Financial Instruments		6
Fund Summary		7
Financial Statements:
Schedule of Investments		9
Statement of Assets and Liabilities		16
Statement of Operations		17
Statements of Changes in Net Assets		18
Statement of Cash Flows		19
Financial Highlights		20
Notes to Financial Statements		21
Disclosure of Investment Advisory Agreement		30
Additional Information		33
Glossary of Terms Used in this Report		36


4


The Benefits and Risks of Leveraging

The Fund may utilize leverage to seek to enhance the distribution rate on, and net asset value (“NAV”) of, its common shares (“Common Shares”). However, there is no guarantee that these objectives can be achieved in all interest rate environments.

In general, the concept of leveraging is based on the premise that the financing cost of leverage, which is based on short-term interest rates, is normally lower than the income earned by the Fund on its longer-term portfolio investments purchased with the proceeds from leverage. 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 shareholders benefit from the incremental net income. The interest earned on securities purchased with the proceeds from leverage (after paying the leverage costs) is paid to shareholders in the form of dividends, and the value of these portfolio holdings (less the leverage liability) is reflected in the per share NAV.

To illustrate these concepts, assume the Fund’s capitalization is $100 million and it utilizes leverage for an additional $30 million, creating a total value of $130 million available for investment in longer-term income securities. If prevailing short-term interest rates are 3% and longer-term interest rates are 6%, the yield curve has a strongly positive slope. In this case, the Fund’s financing costs on the $30 million of proceeds obtained from leverage are based on the lower short-term interest rates. At the same time, the securities purchased by the Fund with the proceeds from leverage earn income based on longer-term interest rates. In this case, the Fund’s financing cost of leverage is significantly lower than the income earned on the Fund’s longer-term investments acquired from such leverage proceeds, and therefore the holders of Common Shares (“Common Shareholders”) are the beneficiaries of the incremental net income.

However, in order to benefit shareholders, the return on assets purchased with leverage proceeds must exceed the ongoing costs associated with the leverage. If interest and other costs of leverage exceed the Fund’s return on assets purchased with leverage proceeds, income to shareholders is lower than if the Fund had not used leverage. 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 contrast, the amount of the Fund’s obligations under its leverage arrangement generally does not fluctuate in relation to interest rates. As a result, changes in interest rates can influence the Fund’s NAV positively or negatively. Changes in the future direction of interest rates are very difficult to predict accurately, and there is no assurance that the Fund’s intended leveraging strategy will be successful.

The use of leverage also generally causes greater changes in the Fund’s NAV, market price and dividend rates than comparable portfolios without leverage. In a declining market, leverage is likely to cause a greater decline in the NAV and market price of the Fund’s shares than if the Fund were not leveraged. In addition, 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 leverage may limit the Fund’s ability to invest in certain types of securities or use certain types of hedging strategies. The Fund incurs expenses in connection with the use of leverage, all of which are borne by shareholders and may reduce income to the shareholders. Moreover, to the extent the calculation of the Fund’s investment advisory fees includes assets purchased with the proceeds of leverage, the investment advisory fees payable to the Fund’s investment adviser will be higher than if the Fund did not use leverage.

The Fund may utilize leverage through reverse repurchase agreements as described in the Notes to Financial Statements, if applicable.

Under the Investment Company Act of 1940, as amended (the “1940 Act”), the Fund is permitted to issue debt up to 33 1/3% of its total managed assets. The Fund may voluntarily elect to limit its leverage to less than the maximum amount permitted under the 1940 Act.

If the Fund segregates or designates on its books and records cash or liquid assets having a value not less than the value of the Fund’s obligations under a reverse repurchase agreement (including accrued interest) then such transaction is not considered a senior security and is not subject to the foregoing limitations and requirements imposed by the 1940 Act.


THE BENEFITS AND RISKS OF LEVERAGING		5


Option Over-Writing Strategy		BlackRock Enhanced Government Fund, Inc. (EGF)

In general, the goal of the Fund is to provide shareholders with current income and gains. The Fund seeks to pursue this goal primarily by investing in a portfolio of U.S. Government and U.S. Agency securities and utilizing an option over-writing strategy in an effort to generate current gains from option premiums and to enhance each Fund’s risk-adjusted return. The Fund’s objectives cannot be achieved in all market conditions.

The Fund writes call options on individual U.S. Government and U.S. Agency securities or on baskets of such securities or on interest rate swaps (“swaptions”) and may write call options on other debt securities. When writing (selling) a call option, the Fund grants the counterparty the right to buy an underlying reference security or enter into a defined transaction (e.g., a swap contract, in the case of the swaption) at an agreed-upon price (“strike price”) within an agreed upon time period. The Fund receives cash premiums from the counterparties upon writing (selling) the option or swaption, which along with net investment income and net realized gains, if any, are generally available to support current or future distributions paid by the Fund. During the option term, the counterparty may elect to exercise the option if the market value of the underlying reference security or underlying contract rises above the strike price, and the Fund is obligated to sell the security or contract to the counterparty at the strike price, realizing a gain or loss. If the option remains unexercised upon its expiration, the Fund realizes gains equal to the premiums received.

Writing call options and swaptions entails certain risks, which include but are not limited to, the following: an increase in the value of the underlying security above the strike price can result in the exercise of a written option (sale by the Fund to the counterparty) when the Fund might not otherwise have sold the security; exercise of the option by the counterparty may result in a sale below the current market value and in a gain or loss realized by the Fund; writing call options and swaptions limits the potential appreciation on the underlying interest rate swap or security and the yield on the Fund could decline; if current market interest rates fall below the strike price, the counterparty could exercise a written swaption when the Fund might not otherwise have entered into an interest rate swap; the Fund is bound by the terms of the underlying interest rate swap agreement upon exercise of the option by the counterparty which can result in a loss to the Fund in excess of the premium received. The premium that the Fund receives from writing a call option or swaption may not be sufficient to offset the potential appreciation on the underlying equity security or interest rate swap above the strike price of the option that could have otherwise been realized by the Fund. As such, an option over-writing strategy may outperform the general fixed-income market in rising or flat interest rate environments (when bond prices are steady or falling) but underperform in a falling interest rate environment (when bond prices are rising).

The Fund intends to write call options and swaptions to varying degrees depending upon market conditions. Please refer to the Schedule of Investments and the Notes to Financial Statements for details of written call options and swaptions.

Derivative Financial Instruments

The Fund may invest in various derivative financial instruments. These instruments are used to obtain exposure to a security, commodity, index, market, and/or other assets without owning or taking physical custody of securities, commodities and/or other referenced assets or to manage market, equity, credit, interest rate, foreign currency exchange rate, commodity and/or other risks. Derivative financial instruments may give rise to a form of economic leverage and involve risks, including the imperfect correlation between the value of a derivative financial instrument and the underlying asset, possible default of the counterparty to the transaction or illiquidity of the instrument. The Fund’s successful use of a derivative financial instrument depends on the investment adviser’s ability to predict pertinent market movements accurately, which cannot be assured. The use of these instruments may result in losses greater than if they had not been used, may limit the amount of appreciation the Fund can realize on an investment and/or may result in lower distributions paid to shareholders. The Fund’s investments in these instruments, if any, are discussed in detail in the Notes to Financial Statements.


6		2 0 2 2 BLACK ROCK SEMI - ANNUAL REPORT TO SHAREHOLDERS


Fund Summary as of June 30, 2022		BlackRock Enhanced Government Fund, Inc. (EGF)

Investment Objective

BlackRock Enhanced Government Fund, Inc.’s (EGF) (the “Fund”) investment objective is to provide shareholders with current income and gains. The Fund seeks to achieve its investment objective by investing primarily in a portfolio of U.S. Government securities and U.S. Government Agency securities, including U.S. Government mortgage-backed securities, that pay interest in an attempt to generate current income, and by employing a strategy of writing (selling) call options on individual or baskets of U.S. Government securities, U.S. Government Agency securities or other debt securities held by the Fund.

No assurance can be given that the Fund’s investment objective will be achieved.

Fund Information



Symbol on New York Stock Exchange		EGF
Initial Offering Date		October 31, 2005
Current Distribution Rate on Closing Market Price as of June 30, 2022 ($10.50)^(a)		4.69%
Current Monthly Distribution per Common Share^(b)		$0.0410
Current Annualized Distribution per Common Share^(b)		$0.4920
Leverage as of June 30, 2022^(c)		29%

^(a)

Current distribution rate on closing market price is calculated by dividing the current annualized distribution per share by the closing market price. The current distribution rate may consist of income, net realized gains and/or a return of capital. Past performance is not an indication of future results.

^(b)

The distribution rate is not constant and is subject to change. A portion of the distribution may be deemed a return of capital or net realized gain.

^(c)

Represents reverse repurchase agreements as a percentage of total managed assets, which is the total assets of the Fund (including any assets attributable to any borrowings) minus the sum of its liabilities (other than borrowings representing financial leverage). Does not reflect derivatives or other instruments that may give rise to economic leverage. For a discussion of leveraging techniques utilized by the Fund, please see The Benefits and Risks of Leveraging and Derivative Financial Instruments.

Market Price and Net Asset Value Per Share Summary


	06/30/22		12/31/21		Change			High		Low

Closing Market Price	$	10.50	$	12.57		(16.47	)%	$	12.63	$	10.12
Net Asset Value		11.02		12.74		(13.50	)		12.74		10.71

Performance

Returns for the period ended June 30, 2022 were as follows:


				Average Annual Total Returns


	6-month			1 Year			5 Years			10 Years

Fund at NAV^(a)(b)		(11.86	)%		(11.51	)%		(1.06	)%		0.36	%
Fund at Market Price^(a)(b)		(14.88	)		(15.42	)		(0.92	)		0.50

ICE BofA 1-3 Year U.S. Treasury Index^(c)		(2.84	)		(3.30	)		0.94			0.79
FTSE Government/Mortgage Index^(d)		(8.87	)		(8.91	)		0.65			1.10
ICE BofA 1-10 Year U.S. Treasury Index^(e)		(11.34	)		(10.94	)		0.56			0.84

^(a)

All returns reflect reinvestment of dividends and/or distributions at actual reinvestment prices. Performance results reflect the Fund’s use of leverage.

^(b)

The Fund’s discount to NAV widened during the period, which accounts for the difference between performance based on market price and performance based on NAV.

^(c)

An unmanaged index comprised of Treasury securities with maturities ranging from one to three years.

^(d)

An unmanaged index that tracks the performance of U.S. dollar-denominated bonds issued in the U.S. investment-grade bond market. The index includes U.S. Treasury, government sponsored, and collateralized securities and provides a reliable representation of the U.S. investment-grade bond market.

^(e)

An index that is a subset of ICE BofA U.S. Treasury Index including all securities with a remaining term to final maturity less than 10 years. ICE BofA U.S. Treasury Index tracks the performance of US dollar denominated sovereign debt publicly issued by the U.S. government in its domestic market.

Performance results may include adjustments made for financial reporting purposes in accordance with U.S. generally accepted accounting principles.

Past performance is not an indication of future results.

The Fund is presenting the performance of one or more indices for informational purposes only. The Fund is actively managed and does not seek to track or replicate the performance of any index. The index performance shown is not intended to be indicative of the Fund’s investment strategies, portfolio components or past or future performance.

More information about the Fund’s historical performance can be found in the “Closed End Funds” section of blackrock.com.

The following discussion relates to the Fund’s absolute performance based on NAV:

What factors influenced performance?

Performance is reviewed on an absolute basis due to the Fund’s unique strategy, which entails writing call options on individual or baskets of U.S. government securities or interest rates. The index returns listed above are for reference purposes only, as these indices do not reflect an option writing strategy.


FUND SUMMARY		7


Fund Summary as of June 30, 2022 (continued)		BlackRock Enhanced Government Fund, Inc. (EGF)

The Fund’s exposure to 30-year and 15-year pass-through mortgage-backed securities (“MBS”), agency collateralized mortgage obligations (“CMOs”), corporate bonds and U.S. Treasuries detracted from performance.

Positions in asset-backed securities (“ABS”) and agency securities provided modest positive contributions to performance.

Describe recent portfolio activity.

The Fund increased its allocations to 15-year and 30-year pass-through MBS, agency and non-agency CMOs, ABS, and corporate bonds. Exposure to U.S. Treasuries MBS, foreign currencies, municipal bonds and cash was reduced.

Describe portfolio positioning at period end.

At period end, the Fund held overweight positions in corporate bonds, MBS and securitized assets on the basis of more attractive spreads. The Fund maintained underweight positions in U.S. Treasuries, agency securities and sovereign plus issues compared to the composite benchmark.

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.

Overview of the Fund’s Total Investments

PORTFOLIO COMPOSITION



Asset Type^(a)	06/30/22

U.S. Government Sponsored Agency Securities		48.6	%
U.S. Treasury Obligations		39.8
Asset-Backed Securities		4.4
Non-Agency Mortgage-Backed Securities		3.4
Preferred Securities		2.0
Corporate Bonds		1.3
Foreign Agency Obligations		0.5

CREDIT QUALITY ALLOCATION



Credit Rating^(a)(b)	06/30/22

AAA/Aaa^(c)		90.6	%
AA/Aa		1.1
A		3.2
BBB/Baa		2.9
B		0.2
N/R		2.0

^(a)

Excludes short-term securities.

^(b)

For financial reporting purposes, credit quality ratings shown above reflect the highest rating assigned by either S&P Global Ratings or Moody’s Investors Service, Inc. if ratings differ. These rating agencies are independent, nationally recognized statistical rating organizations and are widely used. Investment grade ratings are credit ratings of BBB/Baa or higher. Below investment grade ratings are credit ratings of BB/Ba or lower. Investments designated N/R are not rated by either rating agency. Unrated investments do not necessarily indicate low credit quality. Credit quality ratings are subject to change.

^(c)

The investment adviser evaluates the credit quality of not-rated investments based upon certain factors including, but not limited to, credit ratings for similar investments and financial analysis of sectors, individual investments and/or issuer. Using this approach, the investment adviser has deemed U.S. Government Sponsored Agency Securities and U.S. Treasury Obligations as AAA/Aaa.


8		2 0 2 2 BLACK ROCK SEMI - ANNUAL REPORT TO SHAREHOLDERS

Schedule of Investments (unaudited)

June 30, 2022

BlackRock Enhanced Government Fund, Inc. (EGF)

(Percentages shown are based on Net Assets)


Security	Par (000)		Value

Asset-Backed Securities
AMMC CLO 20 Ltd., Series 2017-20A, Class AR, (3 mo. LIBOR US + 0.87%), 1.91%, 04/17/29^(a)(b)	$	176	$	173,397
Birch Grove CLO Ltd., Series 19A, Class CR, (3 mo. LIBOR US + 2.20%), 4.03%, 06/15/31^(a)(b)		300		286,910
BlueMountain CLO XXV Ltd., Series 2019-25A, Class BR, (3 mo. LIBOR US + 1.70%), 2.74%, 07/15/36^(a)(b)		250		236,404
Dryden 53 CLO Ltd., Series 2017-53A, Class B, (3 mo. LIBOR US + 1.40%), 2.44%, 01/15/31^(a)(b)		250		236,250
Elmwood CLO X Ltd., Series 2021-3A, Class C, (3 mo. LIBOR US + 1.95%), 3.01%, 10/20/34^(a)(b)		500		469,760
Neuberger Berman Loan Advisers CLO 35 Ltd., Series 2019-35A, Class C, (3 mo. LIBOR US + 2.60%), 3.64%, 01/19/33^(a)(b)		250		237,466
OCP CLO Ltd., Series 2019-17A, Class BR, (3 mo. LIBOR US + 1.60%), 2.66%, 07/20/32^(a)(b)		250		236,551
OHA Credit Funding 4 Ltd., Series 2019-4A, Class CR, (3 mo. LIBOR US + 2.05%), 3.19%, 10/22/36^(a)(b)		250		232,876
Palmer Square CLO Ltd., Series 2015-1A, Class BR4, (3 mo. LIBOR US + 1.85%), 3.35%, 05/21/34^(a)(b)		250		231,698
Palmer Square Loan Funding Ltd., Series 2019-4A, Class B, (3 mo. LIBOR US + 2.10%), 3.28%, 10/24/27^(a)(b)		250		244,867
Securitized Asset-Backed Receivables LLC Trust, Series 2005-OP1, Class M2, (1 mo. LIBOR US + 0.68%), 2.30%, 01/25/35^(a)		137		127,290
Trimaran Cavu Ltd., Series 2019-1A, Class C1, (3 mo. LIBOR US + 3.15%), 4.21%, 07/20/32^(a)(b)		250		242,712


Total Asset-Backed Securities — 6.5% (Cost: $3,081,931)				2,956,181


Corporate Bonds

Aerospace & Defense — 0.1%
Boeing Co., 3.63%, 02/01/31		50		43,158


Beverages — 0.2%
Anheuser-Busch InBev Worldwide, Inc., 3.50%, 06/01/30		100		93,736


Capital Markets — 0.3%
Charles Schwab Corp., Series H, (10 year CMT + 3.08%), 4.00%^(a)(c)		150		115,463


Diversified Financial Services — 0.2%
Morgan Stanley, (SOFR + 3.12%), 3.62%, 04/01/31^(a)		75		68,891


Diversified Telecommunication Services — 0.4%
Verizon Communications, Inc.
1.75%, 01/20/31		75		60,242
2.55%, 03/21/31		130		111,151


				171,393

Health Care Providers & Services — 0.1%
Elevance Health, Inc., 2.55%, 03/15/31		75		64,761


Media — 0.2%
Comcast Corp., 3.40%, 04/01/30		120		112,593


Pharmaceuticals — 0.3%
AbbVie, Inc., 2.95%, 11/21/26		125		118,443


Security	Par (000)		Value

Producer Durables: Miscellaneous — 0.2%
Oracle Corp., 2.88%, 03/25/31	$	125	$	102,989


Total Corporate Bonds — 2.0% (Cost: $966,911)				891,427


Foreign Agency Obligations

Supranational — 0.8%
International Bank for Reconstruction & Development, Series C, 0.00%, 09/17/30^(d)		500		375,308


Total Foreign Agency Obligations — 0.8% (Cost: $442,206)				375,308


Non-Agency Mortgage-Backed Securities

Collateralized Mortgage Obligations — 5.1%
Angel Oak Mortgage Trust, Class A1, 2.88%, 12/25/66^(b)(e)		73		68,746
Banc of America Mortgage Trust, Series 2003-J, Class 2A1, 2.56%, 11/25/33^(a)		20		18,081
BRAVO Residential Funding Trust, Series 2021-NQM1, Class A1, 0.94%, 02/25/49^(a)(b)		69		64,834
Chase Home Lending Mortgage Trust, Class A12, 6.50%, 04/25/49^(a)(b)		46		46,279
COLT Mortgage Loan Trust^(b)
Series 2022-1, Class A1, 4.55%, 04/25/67^(a)		112		110,630
Series 2022-2, Class A1, 2.99%, 02/25/67^(e)		140		132,582
Credit Suisse Mortgage Capital Certificates Trust, Class A, 2.87%, 01/25/67^(a)(b)		140		135,333
Ellington Financial Mortgage Trust, Series 2022-1, Class A1, 2.21%, 01/25/67^(a)(b)		257		234,433
GS Mortgage-Backed Securities Corp. Trust, Series 2022- PJ2, Class A4, 2.50%, 06/25/52^(a)(b)		96		81,652
GS Mortgage-Backed Securities Trust^(a)(b) 2.50%, 11/25/51		90		77,104
Series 2021-PJ7, Class A2, 2.50%, 01/25/52		182		154,907
JP Morgan Mortgage Trust, Series 2022-INV3, Class A3B, 3.00%, 09/25/52^(a)(b)		96		85,473
Mello Mortgage Capital Acceptance, Series 2022-INV2, Class A3, 3.00%, 04/25/52^(a)(b)		98		86,788
MFA Trust^(a)(b)
Series 2020-NQM1, Class A1, 1.48%, 03/25/65		90		86,708
Series 2021-NQM1, Class M1, 2.31%, 04/25/65		250		226,624
OBX Trust, Series 2022-INC3, Class A1, 3.00%, 02/25/52^(a)(b)		97		85,673
RCKT Mortgage Trust, Series 2022-2, Class A1, 3.00%, 02/25/52^(a)(b)		97		86,095
STAR Trust, Series 2021-1, Class M1, 2.36%, 05/25/65^(a)(b)		200		187,609
TRK Trust, Series 2021-INV2, Class A1, 1.97%, 11/25/56^(a)(b)		164		150,187
Verus Securitization Trust^(b)(e)
Series 2022-1, Class A1, 2.72%, 01/25/67		95		89,259
Series 2022-3, Class A1, 4.13%, 02/25/67		96		93,926


				2,302,923


SCHEDULE OF INVESTMENTS		9

Schedule of Investments (unaudited) (continued)

June 30, 2022

BlackRock Enhanced Government Fund, Inc. (EGF)

(Percentages shown are based on Net Assets)


Security	Par (000)		Value

Interest Only Collateralized Mortgage Obligations — 0.0%
CitiMortgage Alternative Loan Trust, Series 2007-A5, Class 1A7, 6.00%, 05/25/37	$	75	$	14,521


Total Non-Agency Mortgage-Backed Securities — 5.1%

(Cost: $2,461,275)				2,317,444


Preferred Securities

Capital Trusts — 2.9%^(a)

Banks^(c)— 0.6%
U.S. Bancorp, 3.70%		180		138,150
Wells Fargo & Co., Series U, 5.88%		160		155,984


				294,134

Capital Markets — 0.3%
Bank of New York Mellon Corp., Series I, 3.75%^(c)		175		142,858


Diversified Financial Services^(c)— 1.5%
Bank of America Corp., Series FF, 5.88%		360		316,091
JPMorgan Chase & Co.
Series FF, 5.00%		175		154,438
Series KK, 3.65%		265		217,035


				687,564

Electric Utilities — 0.5%
PPL Capital Funding, Inc., Series A, 4.92%, 03/30/67		285		210,187


				1,334,743


Total Preferred Securities — 2.9% (Cost: $1,637,449)				1,334,743


U.S. Government Sponsored Agency Securities

Collateralized Mortgage Obligations — 7.3%
Fannie Mae REMICS
Series 2013-73, Class KE, 3.00%, 07/25/43		500		455,424
Series 2017-90, Class WB, 3.00%, 11/25/47		434		384,523
Series 2022-25, Class KL, 4.00%, 05/25/52		1,000		978,909
Freddie Mac REMICS
3.50%, 09/25/44		400		367,765
3.00%, 10/25/49		504		431,855
Series 4480, Class ZX, 4.00%, 11/15/44		703		703,741


				3,322,217

Commercial Mortgage-Backed Securities — 0.0%
Ginnie Mae, Series 2006-30, Class IO, 2.73%, 05/16/46^(a)		50		4


Interest Only Collateralized Mortgage Obligations — 0.5%
Fannie Mae REMICS, Series 2012-47, Class NI, 4.50%, 04/25/42		243		50,379
Ginnie Mae^(a)
Series 2009-116, Class KS, (1 mo. LIBOR US + 6.47%), 4.96%, 12/16/39		134		14,367
Series 2011-52, Class NS, (1 mo. LIBOR US + 6.67%), 5.16%, 04/16/41		1,415		147,080


				211,826

Mortgage-Backed Securities — 64.0%
Fannie Mae Mortgage-Backed Securities, 4.00%, 12/01/44		3,871		3,898,362
Freddie Mac Mortgage-Backed Securities, 3.50%, 08/01/33 - 01/01/46		1,872		1,853,889
Ginnie Mae Mortgage-Backed Securities, 5.00%, 11/15/35		2		1,699
Uniform Mortgage-Backed Securities 4.00%, 07/14/22 - 04/25/52^(f)		6,886		6,852,435


Security	Par (000)		Value

Mortgage-Backed Securities (continued)
Uniform Mortgage-Backed Securities (continued)
5.50%, 10/01/23 - 09/01/36	$	941	$	1,008,346
2.50%, 10/01/28 - 01/01/52		7,217		6,617,611
5.00%, 11/01/33 - 02/01/40		1,121		1,179,062
3.50%, 09/01/34 - 04/01/52		2,269		2,239,971
6.00%, 02/01/36 - 03/01/38		94		101,080
4.50%, 04/01/39 - 02/01/46		3,257		3,345,624
3.00%, 03/01/43		2,236		2,136,415


				29,234,494


Total U.S. Government Sponsored Agency Securities — 71.8%

(Cost: $33,973,747)				32,768,541


U.S. Treasury Obligations
U.S. Treasury Bonds
1.88%, 02/15/41 - 02/15/51^(g)		4,245		3,238,189
3.00%, 08/15/48^(g)		5,100		4,818,902
2.38%, 05/15/51		700		590,926
2.00%, 08/15/51		950		734,209
U.S. Treasury Notes
2.00%, 05/31/24^(g)		4,930		4,840,836
2.88%, 07/31/25^(g)		9,230		9,187,456
1.25%, 03/31/28 - 08/15/31		1,220		1,080,905
1.13%, 02/15/31^(g)		2,090		1,795,931
1.63%, 05/15/31		600		536,109


Total U.S. Treasury Obligations — 58.7% (Cost: $28,719,278)				26,823,463


Total Long-Term Investments — 147.8% (Cost: $71,282,797)				67,467,107


	Shares

Short-Term Securities

Money Market Funds — 0.7%
BlackRock Liquidity Funds, T-Fund, Institutional Class, 1.33%^(h)(i)		311,974		311,974


Total Short-Term Securities — 0.7% (Cost: $311,974)				311,974


Total Investments Before TBA Sale Commitments and Options Written — 148.5%

(Cost: $71,594,771)				67,779,081


10		2 0 2 2 BLACK ROCK SEMI - ANNUAL REPORT TO SHAREHOLDERS

Schedule of Investments (unaudited) (continued)

June 30, 2022

BlackRock Enhanced Government Fund, Inc. (EGF)

(Percentages shown are based on Net Assets)


Security	Par (000)			Value


TBA Sale Commitments

Mortgage-Backed Securities — (4.7)%
Uniform Mortgage-Backed Securities, 4.00%, 07/14/52^(f)	$	(2,150	)	$	(2,120,060	)


Total TBA Sale Commitments — (4.7)% (Proceeds: $(2,104,198))					(2,120,060	)


Options Written — (0.5)% (Premiums Received: $(227,500))					(227,500	)


Total Investments, Net of TBA Sale Commitments and Options Written — 143.3% (Cost: $69,263,073)					65,431,521

Liabilities in Excess of Other Assets — (43.3)%					(19,775,413	)


Net Assets — 100.0%				$	45,656,108

^(a)	Variable rate security. Interest rate resets periodically. The rate shown is the effective interest rate as of period end. Security description also includes the reference rate and spread if published and available.

^(b)	Security exempt from registration pursuant to Rule 144A under the Securities Act of 1933, as amended. These securities may be resold in transactions exempt from registration to qualified institutional investors.

^(c)	Perpetual security with no stated maturity date.

^(d)	Zero-coupon bond.

^(e)	Step coupon security. Coupon rate will either increase (step-up bond) or decrease (step- down bond) at regular intervals until maturity. Interest rate shown reflects the rate currently in effect.

^(f)	Represents or includes a TBA transaction.

^(g)	All or a portion of the security has been pledged as collateral in connection with outstanding reverse repurchase agreements.

^(h)	Affiliate of the Fund.

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

Affiliates

Investments in issuers considered to be affiliate(s) of the Fund during the six months ended June 30, 2022 for purposes of Section 2(a)(3) of the Investment Company Act of 1940, as amended, were as follows:



Affiliated Issuer	Value at 12/31/21		Purchases at Cost		Proceeds from Sales			Net Realized Gain (Loss)		Change in Unrealized Appreciation (Depreciation)		Value at 06/30/22		Shares Held at 06/30/22		Income		Capital Gain Distributions from Underlying Funds

BlackRock Liquidity Funds, T-Fund, Institutional Class	$	4,355,867	$	—	$	(4,043,893	)^(a)	$	—	$	—	$	311,974		311,974	$	2,007	$	—

^(a)

Represents net amount purchased (sold).

Reverse Repurchase Agreements

Counterparty

Interest
Rate

Trade
Date

Maturity
Date

^(a)

Face Value

Face Value
Including
Accrued Interest

Type of Non-Cash Underlying
Collateral

Remaining
Contractual Maturity
of the Agreements

^(a)

Credit Agricole Corporate and Investment Bank

1.50

%^(b)

10/06/21

Open

4,818,500

4,826,681

U.S. Treasury Obligations

Open/Demand

BofA Securities, Inc.

0.82

^(b)

11/16/21

Open

7,516,250

7,524,832

U.S. Treasury Obligations

Open/Demand

Credit Agricole Corporate and Investment Bank

1.50

^(b)

02/22/22

Open

2,272,500

2,276,151

U.S. Treasury Obligations

Open/Demand

Deutsche Bank AG

1.46

06/30/22

07/01/22

1,797,400

1,797,473

U.S. Treasury Obligations

Overnight

Deutsche Bank AG

1.54

06/30/22

07/01/22

2,005,413

2,005,498

U.S. Treasury Obligations

Overnight

18,410,063

18,430,635

^(a)

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

^(b)

Variable rate security. Rate as of period end and maturity is the date the principal owed can be recovered through demand.


SCHEDULE OF INVESTMENTS		11

Schedule of Investments (unaudited) (continued)

June 30, 2022

BlackRock Enhanced Government Fund, Inc. (EGF)

Derivative Financial Instruments Outstanding as of Period End

Futures Contracts



Description	Number of Contracts		Expiration Date		Notional Amount (000)		Value/ Unrealized Appreciation (Depreciation)

Long Contracts
10-Year U.S. Ultra Long Treasury Note		23		09/21/22	$	2,922	$	(34,203	)
2-Year U.S. Treasury Note		19		09/30/22		3,987		(16,094	)


								(50,297	)

Short Contracts
10-Year U.S. Treasury Note		38		09/21/22		4,498		(84,865	)
Ultra U.S. Treasury Bond		38		09/21/22		5,865		70,893
5-Year U.S. Treasury Note		24		09/30/22		2,691		(35,203	)


								(49,175	)


							$	(99,472	)

OTC Interest Rate Swaptions Written

Paid by the Fund

Received by the Fund

Expiration

Exercise

Notional

Description

Rate

Frequency

Rate

Frequency

Counterparty

Date

Rate

Amount (000)

Value

Call

10-Year Interest Rate Swap, 07/30/32

2.95%

Semi-Annual

1-Day SOFR,

0.82%

Quarterly

Morgan Stanley & Co.
International PLC

07/28/22

2.95

USD

4,248

(51,190

)

2-Year Interest Rate Swap, 07/30/24

3.20%

Semi-Annual

1-Day SOFR,

0.82%

Quarterly

Morgan Stanley & Co.
International PLC

07/28/22

3.20

USD

20,393

(78,726

)

30-Year Interest Rate Swap, 07/30/52

2.73%

Semi-Annual

1-Day SOFR,

0.82%

Quarterly

Morgan Stanley & Co.
International PLC

07/28/22

2.73

USD

1,699

(41,539

)

5-Year Interest Rate Swap, 07/30/27

2.97%

Semi-Annual

1-Day SOFR,

0.82%

Quarterly

Morgan Stanley & Co.
International PLC

07/28/22

2.97

USD

7,647

(56,045

)

(227,500

)

Centrally Cleared Interest Rate Swaps



Paid by the Fund		Received by the Fund		Effective		Termination		Notional					Upfront Premium Paid			Unrealized Appreciation
Rate	Frequency	Rate	Frequency	Date		Date		Amount (000)		Value			(Received)			(Depreciation)

1.61%	Semi-Annual	3-Month LIBOR, 2.29%	Quarterly		N/A		03/28/32	USD	850	$	102,461		$	—		$	102,461
1.66%	Semi-Annual	3-Month LIBOR, 2.29%	Quarterly		N/A		04/25/32	USD	1,200		143,980			—			143,980
3 Month LIBOR, 2.29%	Quarterly	1.92%	Semi Annual		N/A		10/27/41	USD	250		(45,037	)		(603	)		(44,434	)
3 Month LIBOR, 2.29%	Quarterly	1.75%	Semi Annual		N/A		11/09/41	USD	400		(82,138	)		(663	)		(81,475	)
2.87%	Annual	1-Day SOFR, 0.82%	Annual		N/A		05/11/42	USD	300		(1,753	)		7			(1,760	)
1.91%	Semi-Annual	3-Month LIBOR, 2.29%	Quarterly		N/A		10/28/51	USD	230		46,973			548			46,425
3-Month LIBOR, 2.29%	Quarterly	1.77%	Semi-Annual		N/A		11/01/51	USD	1,000		(232,479	)		(2,070	)		(230,409	)


										$	(67,993	)	$	(2,781	)	$	(65,212	)


12		2 0 2 2 BLACK ROCK SEMI - ANNUAL REPORT TO SHAREHOLDERS

Schedule of Investments (unaudited) (continued)

June 30, 2022

BlackRock Enhanced Government Fund, Inc. (EGF)

OTC Credit Default Swaps — Sell Protection



Reference Obligation/Index	Financing Rate Received by the Fund		Payment Frequency	Counterparty	Termination Date	Credit Rating^(a)	Notional Amount (000	)^(b)		Value			Upfront Premium Paid (Received	)		Unrealized Appreciation (Depreciation	)

CMBX.NA.9	3.00	%	Monthly	Goldman Sachs International	09/17/58	N/R	USD 100		$	(17,092	)	$	(10,796	)	$	(6,296	)
CMBX.NA.9	3.00		Monthly	Goldman Sachs International	09/17/58	N/R	USD 67			(11,395	)		(6,870	)		(4,525	)
CMBX.NA.9	3.00		Monthly	Morgan Stanley & Co. International PLC	09/17/58	N/R	USD 41			(7,008	)		(4,453	)		(2,555	)
CMBX.NA.9	3.00		Monthly	Morgan Stanley & Co. International PLC	09/17/58	N/R	USD 33			(5,697	)		(3,408	)		(2,289	)


									$	(41,192	)	$	(25,527	)	$	(15,665	)

^(a)

Using the rating of the issuer or the underlying securities of the index, as applicable, provided by S&P Global Ratings.

^(b)

The maximum potential amount the Fund may pay should a negative credit event take place as defined under the terms of the agreement.

Balances Reported in the Statement of Assets and Liabilities for Centrally Cleared Swaps, OTC Swaps and Options Written




Description	Swap Premiums Paid		Swap Premiums Received			Unrealized Appreciation		Unrealized Depreciation			Value


Centrally Cleared Swaps^(a)	$	555	$	(3,336	)	$	292,866	$	(358,078	)	$	—
OTC Swaps		—		(25,527	)		—		(15,665	)		—
Options Written		N/A		N/A			—		—			(227,500	)

^(a)

Includes cumulative appreciation (depreciation) on centrally cleared swaps, as reported in the Schedule of Investments. Only current day’s variation margin is reported within the Statement of Assets and Liabilities and is net of any previously paid (received) swap premium amounts.

Derivative Financial Instruments Categorized by Risk Exposure

As of period end, the fair values of derivative financial instruments located in the Statement of Assets and Liabilities were as follows:




	Commodity Contracts		Credit Contracts		Equity Contracts		Foreign Currency Exchange Contracts		Interest Rate Contracts		Other Contracts		Total


Assets — Derivative Financial Instruments
Futures contracts
Unrealized appreciation on futures contracts^(a)	$	—	$	—	$	—	$	—	$	70,893	$	—	$	70,893
Swaps — centrally cleared
Unrealized appreciation on centrally cleared swaps^(a)		—		—		—		—		292,866		—		292,866


	$	—	$	—	$	—	$	—	$	363,759	$	—	$	363,759


Liabilities — Derivative Financial Instruments
Futures contracts
Unrealized depreciation on futures contracts^(a)	$	—	$	—	$	—	$	—	$	170,365	$	—	$	170,365
Options written
Options written at value		—		—		—		—		227,500		—		227,500
Swaps — centrally cleared
Unrealized depreciation on centrally cleared swaps^(a)		—		—		—		—		358,078		—		358,078
Swaps — OTC
Unrealized depreciation on OTC swaps; Swap premiums received		—		41,192		—		—		—		—		41,192


	$	—	$	41,192	$	—	$	—	$	755,943	$	—	$	797,135

^(a)

Net cumulative unrealized appreciation (depreciation) on futures contracts and centrally cleared swaps, if any, are reported in the Schedule of Investments. In the Statement of Assets and Liabilities, only current day’s variation margin is reported in receivables or payables and the net cumulative unrealized appreciation (depreciation) is included in accumulated earnings (loss).


SCHEDULE OF INVESTMENTS		13

Schedule of Investments (unaudited) (continued)

June 30, 2022

BlackRock Enhanced Government Fund, Inc. (EGF)

For the period ended June 30, 2022, the effect of derivative financial instruments in the Statement of Operations was as follows:



	Commodity Contracts		Credit Contracts			Equity Contracts		Foreign Currency Exchange Contracts		Interest Rate Contracts			Other Contracts		Total

Net Realized Gain (Loss) from:
Futures contracts	$	—	$	—		$	—	$	—	$	(132,872	)	$	—	$	(132,872	)
Options written		—		—			—		—		1,109,601			—		1,109,601
Swaps		—		3,903			—		—		15,379			—		19,282


	$	—	$	3,903		$	—	$	—	$	992,108		$	—	$	996,011


Net Change in Unrealized Appreciation (Depreciation) on:
Futures contracts	$	—	$	—		$	—	$	—	$	(25,795	)	$	—	$	(25,795	)
Swaps		—		(18,975	)		—		—		(76,813	)		—		(95,788	)


	$	—	$	(18,975	)	$	—	$	—	$	(102,608	)	$	—	$	(121,583	)

Average Quarterly Balances of Outstanding Derivative Financial Instruments




Futures contracts:
Average notional value of contracts — long	$	7,023,535
Average notional value of contracts — short	$	9,801,359
Options:
Average notional value of swaption contracts written	$	37,650,500
Credit default swaps:
Average notional value — sell protection	$	241,000
Interest rate swaps:
Average notional value — pays fixed rate	$	2,430,000
Average notional value — receives fixed rate	$	1,650,000

For more information about the Fund’s investment risks regarding derivative financial instruments, refer to the Notes to Financial Statements.

Derivative Financial Instruments — Offsetting as of Period End

The Fund’s derivative assets and liabilities (by type) were as follows:



	Assets			Liabilities

Derivative Financial Instruments
Futures contracts	$	30,781		$	132,771
Options		—			227,500
Swaps — centrally cleared		—			11,296
Swaps — OTC^(a)		—			41,192


Total derivative assets and liabilities in the Statement of Assets and Liabilities		30,781			412,759


Derivatives not subject to a Master Netting Agreement or similar agreement (“MNA”)		(30,781	)		(144,067	)


Total derivative assets and liabilities subject to an MNA	$	—		$	268,692

^(a)

Includes unrealized appreciation (depreciation) on OTC swaps and swap premiums (paid/received) in the Statement of Assets and Liabilities.

The following table presents the Fund’s derivative liabilities by counterparty net of amounts available for offset under an MNA and net of the related collateral pledged by the Fund:




Counterparty		Derivative Liabilities Subject to an MNA by Counterparty		Derivatives Available for Offset		Non-Cash Collateral Pledged		Cash Collateral Pledged		Net Amount of Derivative Liabilities	^(a)

Goldman Sachs International	$	28,487	$	—	$	—	$	—	$	28,487
Morgan Stanley & Co. International PLC		240,205		—		—		—		240,205


	$	268,692	$	—	$	—	$	—	$	268,692

^(a)

Net amount represents the net amount payable due to counterparty in the event of default. Net amount may be offset further by the options written receivable/payable on the Statement of Assets and Liabilities.


14		2 0 2 2 BLACK ROCK SEMI - ANNUAL REPORT TO SHAREHOLDERS

Schedule of Investments (unaudited) (continued)

June 30, 2022

BlackRock Enhanced Government Fund, Inc. (EGF)

Fair Value Hierarchy as of Period End

Various inputs are used in determining the fair value of financial instruments. For a description of the input levels and information about the Fund’s policy regarding valuation of financial instruments, refer to the Notes to Financial Statements.

The following table summarizes the Fund’s financial instruments categorized in the fair value hierarchy. The breakdown of the Fund’s financial instruments into major categories is disclosed in the Schedule of Investments above.



	Level 1			Level 2			Level 3		Total

Assets
Investments
Long-Term Investments
Asset-Backed Securities	$	—		$	2,956,181		$	—	$	2,956,181
Corporate Bonds		—			891,427			—		891,427
Foreign Agency Obligations		—			375,308			—		375,308
Non-Agency Mortgage-Backed Securities		—			2,317,444			—		2,317,444
Preferred Securities		—			1,334,743			—		1,334,743
Capital Trusts
U.S. Government Sponsored Agency Securities		—			32,768,541			—		32,768,541
U.S. Treasury Obligations		—			26,823,463			—		26,823,463
Short-Term Securities
Money Market Funds		311,974			—			—		311,974
Liabilities
Investments
TBA Sale Commitments		—			(2,120,060	)		—		(2,120,060	)


	$	311,974		$	65,347,047		$	—	$	65,659,021

Derivative Financial Instruments^(a)
Assets
Interest Rate Contracts	$	70,893		$	292,866		$	—	$	363,759
Liabilities
Credit Contracts		—			(15,665	)		—		(15,665	)
Interest Rate Contracts		(170,365	)		(585,578	)		—		(755,943	)


	$	(99,472	)	$	(308,377	)	$	—	$	(407,849	)

^(a)

Derivative financial instruments are swaps, futures contracts and options written. Swaps and futures 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 or face value, including accrued interest, for financial statement purposes. As of period end, reverse repurchase agreements of $18,430,635 are categorized as Level 2 within the fair value hierarchy.

See notes to financial statements.


SCHEDULE OF INVESTMENTS		15

Statement of Assets and Liabilities (unaudited)

June 30, 2022


	EGF


ASSETS
Investments, at value — unaffiliated^(a)	$	67,467,107
Investments, at value — affiliated^(b)		311,974
Cash		12,922
Cash pledged:
Futures contracts		307,000
Centrally cleared swaps		30,000
Foreign currency, at value^(c)		49,765
Receivables:
Investments sold		3,106
Options written		227,500
Reverse repurchase agreements		3,802,813
TBA sale commitments		2,104,198
Dividends — affiliated		875
Interest — unaffiliated		373,129
Variation margin on futures contracts		30,781


Total assets		74,721,170


LIABILITIES
Options written, at value^(d)		227,500
TBA sale commitments, at value^(e)		2,120,060
Reverse repurchase agreements, at value		18,430,635
Payables:
Investments purchased		4,221,883
Reverse repurchase agreements		3,750,654
Accounting services fees		6,436
Custodian fees		12,650
Income dividend distributions		588
Investment advisory fees		29,603
Directors’ and Officer’s fees		1,202
Other accrued expenses		14,619
Principal payups		7,894
Professional fees		41,281
Transfer agent fees		14,798
Variation margin on futures contracts		132,771
Variation margin on centrally cleared swaps		11,296
Swap premiums received		25,527
Unrealized depreciation on OTC swaps		15,665


Total liabilities		29,065,062


NET ASSETS	$	45,656,108


NET ASSETS CONSIST OF
Paid-in capital^(f)(g)(h)	$	74,216,680
Accumulated loss		(28,560,572	)


NET ASSETS	$	45,656,108


Net asset value^(f)(g)(h)	$	11.02


^(a) Investments, at cost — unaffiliated	$	71,282,797
^(b) Investments, at cost — affiliated	$	311,974
^(c) Foreign currency, at cost	$	53,684
^(d)Premiums received	$	227,500
^(e) Proceeds from TBA sale commitments	$	2,104,198
^(f)Shares outstanding		4,142,327
^(g) Shares authorized		200 million
^(h)Par value	$	0.10

See notes to financial statements.


16		2 0 2 2 BLACK ROCK SEMI - ANNUAL REPORT TO SHAREHOLDERS

Statement of Operations (unaudited)

Six Months Ended June 30, 2022


	EGF


INVESTMENT INCOME
Dividends — affiliated	$	2,007
Interest — unaffiliated		925,544


Total investment income		927,551


EXPENSES
Investment advisory		270,113
Professional		31,713
Transfer agent		20,908
Custodian		10,148
Repurchase offer		8,481
Accounting services		4,877
Registration		3,929
Directors and Officer		2,044
Miscellaneous		7,945


Total expenses excluding interest expense		360,158
Interest expense		26,712


Total expenses		386,870
Less:
Fees waived and/or reimbursed by the Manager		(95,644	)


Total expenses after fees waived and/or reimbursed		291,226


Net investment income		636,325


REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) from:
Investments — unaffiliated		(529,224	)
Foreign currency transactions		(429	)
Futures contracts		(132,872	)
Options written		1,109,601
Swaps		19,282


		466,358

Net change in unrealized appreciation (depreciation) on:
Investments — unaffiliated		(7,260,669	)
Foreign currency translations		(3,374	)
Futures contracts		(25,795	)
Swaps		(95,788	)


		(7,385,626	)


Net realized and unrealized loss		(6,919,268	)


NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS	$	(6,282,943	)

See notes to financial statements.


FINANCIAL STATEMENTS		17

Statements of Changes in Net Assets


	EGF


	Six Months Ended 06/30/22 (unaudited)				Year Ended 12/31/21


INCREASE (DECREASE) IN NET ASSETS

OPERATIONS
Net investment income		$	636,325		$	1,219,273
Net realized gain			466,358			466,049
Net change in unrealized appreciation (depreciation)			(7,385,626	)		(2,147,967	)


Net decrease in net assets resulting from operations			(6,282,943	)		(462,645	)


DISTRIBUTIONS TO SHAREHOLDERS^(a)
From net investment income			(849,177	)^(b)		(1,285,743	)
Return of capital			—			(801,311	)


Decrease in net assets resulting from distributions to shareholders			(849,177	)		(2,087,054	)


CAPITAL SHARE TRANSACTIONS
Reinvestment of distributions			—			7,186
Redemption of shares resulting from a repurchase offer			—			(1,501,126	)^(c)


Net decrease in net assets derived from capital share transactions			—			(1,493,940	)


NET ASSETS
Total decrease in net assets			(7,132,120	)		(4,043,639	)
Beginning of period			52,788,228			56,831,867


End of period		$	45,656,108		$	52,788,228

^(a)	Distributions for annual periods determined in accordance with U.S. federal income tax regulations.

^(b)	A portion of the distributions from net investment income may be deemed a return of capital or net realized gain at fiscal year-end.

^(c)	Net of repurchase fees of $30,645.

See notes to financial statements.


18		2 0 2 2 BLACK ROCK SEMI - ANNUAL REPORT TO SHAREHOLDERS

Statement of Cash Flows (unaudited)

Six Months Ended June 30, 2022


	EGF


CASH PROVIDED BY (USED FOR) OPERATING ACTIVITIES
Net decrease in net assets resulting from operations	$	(6,282,943	)
Adjustments to reconcile net decrease in net assets resulting from operations to net cash used for operating activities:
Proceeds from sales of long-term investments and principal paydowns/payups		82,304,210
Purchases of long-term investments		(92,869,480	)
Net proceeds from sales of short-term securities		4,043,893
Amortization of premium and accretion of discount on investments and other fees		31,408
Premiums paid on closing options written		(246,900	)
Premiums received from options written		1,356,500
Net realized gain on investments and options written		(566,608	)
Net unrealized depreciation on investments, swaps and foreign currency translations		7,279,644
(Increase) Decrease in Assets
Receivables
Dividends — affiliated		(858	)
Interest — unaffiliated		(20,923	)
Variation margin on futures contracts		(30,594	)
Variation margin on centrally cleared swaps		4,499
Prepaid expenses		134
Increase (Decrease) in Liabilities
Payables
Accounting services fees		3,333
Custodian fees		7,292
Interest expense		18,884
Investment advisory fees		(852	)
Directors’ and Officer’s fees		934
Other accrued expenses		(3,862	)
Professional fees		(9,063	)
Transfer agent fees		10,781
Variation margin on futures contracts		107,236
Variation margin on centrally cleared swaps		11,296
Swap premiums received		(248	)


Net cash used for operating activities		(4,852,287	)


CASH PROVIDED BY (USED FOR) FINANCING ACTIVITIES
Cash dividends paid to shareholders		(1,018,424	)
Net borrowing of reverse repurchase agreements		6,023,153


Net cash provided by financing activities		5,004,729


CASH IMPACT FROM FOREIGN EXCHANGE FLUCTUATIONS
Cash impact from foreign exchange fluctuations		(3,374	)


CASH AND FOREIGN CURRENCY
Net increase in restricted and unrestricted cash and foreign currency		149,068
Restricted and unrestricted cash and foreign currency at beginning of period		250,619


Restricted and unrestricted cash and foreign currency at end of period	$	399,687


SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the period for interest expense	$	7,828


RECONCILIATION OF RESTRICTED AND UNRESTRICTED CASH AND FOREIGN CURRENCY AT THE END OF PERIOD TO THE STATEMENT OF ASSETS AND LIABILITIES
Cash	$	12,922
Cash pledged
Futures contracts		307,000
Centrally cleared swaps		30,000
Foreign currency at value		49,765


	$	399,687

See notes to financial statements.


FINANCIAL STATEMENTS		19

Financial Highlights

(For a share outstanding throughout each period)


			EGF

		Six Months Ended 06/30/22 (unaudited)				Year Ended December 31,
		Six Months Ended 06/30/22 (unaudited)				2021			2020			2019			2018			2017

Net asset value, beginning of period			$	12.74		$	13.34		$	13.52		$	13.48		$	13.96		$	13.88


Net investment income^(a)				0.15			0.29			0.33			0.33			0.30			0.28
Net realized and unrealized gain (loss)^(b)				(1.66	)		(0.40	)		(0.02	)		0.20			(0.29	)		0.28


Net increase (decrease) from investment operations				(1.51	)		(0.11	)		0.31			0.53			0.01			0.56


Distributions^(c)
From net investment income				(0.21	)^(d)		(0.30	)		(0.33	)		(0.30	)		(0.31	)		(0.33	)
Return of capital				—			(0.19	)		(0.16	)		(0.19	)		(0.18	)		(0.16	)


Total distributions				(0.21	)		(0.49	)		(0.49	)		(0.49	)		(0.49	)		(0.49	)


Capital contributions^(e)				—			—			—			—			—			0.01


Net asset value, end of period			$	11.02		$	12.74		$	13.34		$	13.52		$	13.48		$	13.96


Market price, end of period			$	10.50		$	12.57		$	13.46		$	13.15		$	12.98		$	13.40


Total Return^(f)
Based on net asset value				(11.86	)%^(g)		(0.75	)%		2.41	%		4.13	%		0.27	%		4.32	%^(h)


Based on market price				(14.88	)%^(g)		(2.94	)%		6.25	%		5.18	%		0.59	%		5.29	%


Ratios to Average Net Assets⁽ⁱ⁾
Total expenses				1.60	%^(j)		1.38	%		1.37	%		1.90	%		1.53	%		1.40	%


Total expenses after fees waived and/or reimbursed				1.21	%^(j)		1.02	%		1.02	%		1.52	%		1.18	%		1.03	%


Total expenses after fees waived and/or reimbursed and excluding interest expense				1.09	%^(j)		1.00	%		0.93	%		0.97	%		0.90	%		0.85	%


Net investment income				2.63	%^(j)		2.21	%		2.45	%		2.44	%		2.17	%		2.02	%


Supplemental Data
Net assets, end of period (000)			$	45,656		$	52,788		$	56,832		$	64,004		$	70,901		$	81,612


Borrowings outstanding, end of period (000)			$	18,431		$	12,336		$	10,952		$	16,258		$	15,635		$	16,480


Portfolio turnover rate^(k)				116	%		116	%		3	%		17	%		70	%		—	%^(l)


^(a) Based on average shares outstanding. ^(b) Net realized and unrealized gain (loss) per share amounts include repurchase fees of $0.01 for the year ended December 31, 2021 and $0.03 for each of the years ended December 31, 2017 through December 31, 2020. ^(c) Distributions for annual periods determined in accordance with U.S. federal income tax regulations. ^(d) A portion of the distributions from net investment income may be deemed a return of capital or net realized gain at fiscal year-end. ^(e) Payment received related to certain shareholder transactions. ^(f) Total returns based on market price, which can be significantly greater or less than the net asset value, may result in substantially different returns. Where applicable, excludes the effects of any sales charges and assumes the reinvestment of distributions at actual reinvestment prices. ^(g) Aggregate total return. ^(h) Includes payment received from an affiliate, which impacted the Fund’s total return. Excluding the payment from an affiliate, the Fund’s total return is 4.24%. ⁽ⁱ⁾ Excludes fees and expenses incurred indirectly as a result of investments in underlying funds. ^(j) Annualized. ^(k) Includes mortgage dollar roll transactions (“MDRs”). Additional information regarding portfolio turnover rate is as follows:

		Six Months Ended 06/30/22 (unaudited)				Year Ended December 31,
		Six Months Ended 06/30/22 (unaudited)				2021			2020			2019			2018			2017

	Portfolio turnover rate (excluding MDRs)			81	%		57	%		3	%		17	%		68	%		—	%^(l)

^(l)	Percentage is less than 1%.

See notes to financial statements.


20		2 0 2 2 BLACK ROCK SEMI - ANNUAL REPORT TO SHAREHOLDERS

Notes to Financial Statements (unaudited)

1.	*ORGANIZATION*

BlackRock Enhanced Government Fund, Inc. (the “Fund”) is registered under the Investment Company Act of 1940, as amended (the “1940 Act”). The Fund is registered as a diversified, closed-end management investment company. The Fund is organized as a Maryland corporation. The Fund determines and makes available for publication the net asset value (“NAV”) of its Common Shares on a daily basis.

The Fund, together with certain other registered investment companies advised by BlackRock Advisors, LLC (the “Manager”) or its affiliates, is included in a complex of open-end non-index fixed-income funds and all BlackRock-advised closed-end funds referred to as the BlackRock Fixed-Income Complex.

2.	*SIGNIFICANT ACCOUNTING POLICIES*

The financial statements are prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”), which may require management to make estimates and assumptions that affect the reported amounts of assets and liabilities in the financial statements, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results could differ from those estimates. The Fund is considered an investment company under U.S. GAAP and follows the accounting and reporting guidance applicable to investment companies. Below is a summary of significant accounting policies:

Investment Transactions and Income Recognition: For financial reporting purposes, investment transactions are recorded on the dates the transactions are executed. Realized gains and losses on investment transactions are determined using the specific identification method. Dividend income and capital gain distributions, if any, are recorded on the ex-dividend dates. Non-cash dividends, if any, are recorded on the ex-dividend dates at fair value. Interest income, including amortization and accretion of premiums and discounts on debt securities, is recognized daily on an accrual basis.

Foreign Currency Translation: The Fund’s books and records are maintained in U.S. dollars. Securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollars using exchange rates determined as of the close of trading on the New York Stock Exchange (“NYSE”). Purchases and sales of investments are recorded at the rates of exchange prevailing on the respective dates of such transactions. Generally, when the U.S. dollar rises in value against a foreign currency, the investments denominated in that currency will lose value; the opposite effect occurs if the U.S. dollar falls in relative value.

The Fund does not isolate the effect of fluctuations in foreign exchange rates from the effect of fluctuations in the market prices of investments for financial reporting purposes. Accordingly, the effects of changes in exchange rates on investments are not segregated in the Statement of Operations from the effects of changes in market prices of those investments, but are included as a component of net realized and unrealized gain (loss) from investments. The Fund reports realized currency gains (losses) on foreign currency related transactions as components of net realized gain (loss) for financial reporting purposes, whereas such components are generally treated as ordinary income for U.S. federal income tax purposes.

Segregation and Collateralization: In cases where the Fund enters into certain investments (e.g., dollar rolls, TBA sale commitments, futures contracts, options written, swaps) or certain borrowings (e.g., reverse repurchase transactions) that would be treated as “senior securities” for 1940 Act purposes, the Fund may segregate or designate on its books and records cash or liquid assets having a market value at least equal to the amount of its future obligations under such investments or borrowings. Doing so allows the investments or borrowings to be excluded from treatment as a “senior security.” Furthermore, if required by an exchange or counterparty agreement, the Fund may be required to deliver/deposit cash and/or securities to/with an exchange, or broker-dealer or custodian as collateral for certain investments or obligations.

Distributions: Distributions paid by the Fund are recorded on the ex-dividend dates. Subject to the Fund’s managed distribution plan, the Fund intends to make monthly cash distributions to shareholders, which may consist of net investment income, and net realized and unrealized gains on investments and/or return of capital.

The character of distributions is determined in accordance with U.S. federal income tax regulations, which may differ from U.S. GAAP. The portion of distributions that exceeds the Fund’s current and accumulated earnings and profits, which are measured on a tax basis, will constitute a non-taxable return of capital.

Deferred Compensation Plan: Under the Deferred Compensation Plan (the “Plan”) approved by the Board of Directors of the Fund (the “Board”), the directors who are not “interested persons” of the Fund, as defined in the 1940 Act (“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 certain funds in the BlackRock Fixed-Income Complex selected by the Independent Directors. This has the same economic effect for the Independent Directors as if the Independent Directors had invested the deferred amounts directly in certain funds in the BlackRock Fixed-Income Complex.

The Plan is not funded and obligations thereunder represent general unsecured claims against the general assets of the Fund, as applicable. Deferred compensation liabilities, if any, are included in the Directors’ and Officer’s fees payable in the Statement of Assets and Liabilities and will remain as a liability of the Fund until such amounts are distributed in accordance with the Plan. Net appreciation (depreciation) in the value of participants’ deferral accounts is allocated among the participating funds in the Fixed-Income Complex and reflected as Directors and Officer expense on the Statement of Operations. The Directors and Officer expense may be negative as a result of a decrease in value of the deferred accounts.

Indemnifications: In the normal course of business, the Fund enters into contracts that contain a variety of representations that provide general indemnification. The Fund’s maximum exposure under these arrangements is unknown because it involves future potential claims against the Fund, which cannot be predicted with any certainty.

Other: Expenses directly related to the Fund are charged to the Fund. Other operating expenses shared by several funds, including other funds managed by the Manager, are prorated among those funds on the basis of relative net assets or other appropriate methods.


NOTES TO FINANCIAL STATEMENTS		21

Notes to Financial Statements (unaudited) (continued)

3.	*INVESTMENT VALUATION AND FAIR VALUE MEASUREMENTS*

Investment Valuation Policies: The Fund’s investments are valued at fair value (also referred to as “market value” within the financial statements) each day that the Fund is open for business and, for financial reporting purposes, as of the report date. U.S. GAAP defines fair value as the price a fund would receive to sell an asset or pay to transfer a liability in an orderly transaction between market participants at the measurement date. The Fund determines the fair values of its financial instruments using various independent dealers or pricing services under policies approved by the Board. If a security’s market price is not readily available or does not otherwise accurately represent the fair value of the security, the security will be valued in accordance with a policy approved by the Board as reflecting fair value. The BlackRock Global Valuation Methodologies Committee (the “Global Valuation Committee”) is the committee formed by management to develop global pricing policies and procedures and to oversee the pricing function for all financial instruments.

Fair Value Inputs and Methodologies: The following methods and inputs are used to establish the fair value of the Fund’s assets and liabilities:

•

Fixed-income investments for which market quotations are readily available are generally valued using the last available bid price or current market quotations provided by independent dealers or third-party pricing services. Pricing services generally value fixed-income securities assuming orderly transactions of an institutional round lot size, but a fund may hold or transact in such securities in smaller, odd lot sizes. Odd lots may trade at lower prices than institutional round lots. The pricing services may use matrix pricing or valuation models that utilize certain inputs and assumptions to derive values, including transaction data (e.g., recent representative bids and offers), market data, credit quality information, perceived market movements, news, and other relevant information. Certain fixed-income securities, including asset- backed and mortgage related securities may be valued based on valuation models that consider the estimated cash flows of each tranche of the entity, establish a benchmark yield and develop an estimated tranche specific spread to the benchmark yield based on the unique attributes of the tranche. The amortized cost method of valuation may be used with respect to debt obligations with sixty days or less remaining to maturity unless the Manager determines such method does not represent fair value.

•

Investments in open-end U.S. mutual funds (including money market funds) are valued at that day’s published NAV.

•

Futures contracts are valued based on that day’s last reported settlement or trade price on the exchange where the contract is traded.

•

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 valued 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 options on swaps (“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.

•

Swap agreements are valued utilizing quotes received daily by independent pricing services 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, trades and values of the underlying reference instruments.

If events (e.g., market volatility, company announcement or a natural disaster) occur that are expected to materially affect the value of such investment, or in the event that application of these methods of valuation results in a price for an investment that is deemed not to be representative of the market value of such investment, or if a price is not available, the investment will be valued by the Global Valuation Committee, or its delegate, in accordance with a policy approved by the Board as reflecting fair value (“Fair Valued Investments”). The fair valuation approaches that may be used by the Global Valuation Committee include market approach, income approach and cost approach. Valuation techniques such as discounted cash flow, use of market comparables and matrix pricing are types of valuation approaches and are typically used in determining fair value. When determining the price for Fair Valued Investments, the Global Valuation Committee, or its delegate, seeks to determine the price that the Fund might reasonably expect to receive or pay from the current sale or purchase of that asset or liability in an arm’s-length transaction. Fair value determinations shall be based upon all available factors that the Global Valuation Committee, or its delegate, deems relevant and consistent with the principles of fair value measurement. The pricing of all Fair Valued Investments is subsequently reported to the Board or a committee thereof on a quarterly basis.

Fair Value Hierarchy: Various inputs are used in determining the fair value of 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); and

•

Level 3 – Unobservable inputs based on the best information available in the circumstances, to the extent observable inputs are not available (including the Global Valuation Committee’s assumptions used in determining the fair value of 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 Global Valuation Committee in determining the price for Fair Valued Investments. Level 3 investments include equity or debt issued by Private Companies that may not have a secondary market and/or may have a limited number of investors. The categorization of a value determined for financial instruments is based on the pricing transparency of the financial instruments and is not necessarily an indication of the risks associated with investing in those securities.


22		2 0 2 2 BLACK ROCK SEMI - ANNUAL REPORT TO SHAREHOLDERS

Notes to Financial Statements (unaudited) (continued)

4.	*SECURITIES AND OTHER INVESTMENTS*

Asset-Backed and Mortgage-Backed Securities: Asset-backed securities are generally issued as pass-through certificates or as debt instruments. Asset-backed securities issued as pass-through certificates represent undivided fractional ownership interests in an underlying pool of assets. Asset-backed securities issued as debt instruments, which are also known as collateralized obligations, are typically 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 number of different parties. The yield characteristics of certain asset-backed securities may differ from traditional debt securities. One such major difference 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 will have the effect of shortening the maturity of the security. In addition, a fund may subsequently have to reinvest the proceeds at lower interest rates. If a 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.

For mortgage pass-through securities (the “Mortgage Assets”) there are a number of important differences among the agencies and instrumentalities of the U.S. Government that issue mortgage-related securities and among the securities that they issue. For example, mortgage-related securities guaranteed by 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 Freddie Mac and Fannie Mae, including Freddie Mac and Fannie Mae guaranteed mortgage pass-through certificates, 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, but are supported by the right of the issuer to borrow from the U.S. Treasury.

Non-agency mortgage-backed securities are securities issued by non-governmental issuers and have no direct or indirect government guarantees of payment and are subject to various risks. Non-agency mortgage loans are obligations of the borrowers thereunder only and are not typically insured or guaranteed by any other person or entity. The ability of a borrower to repay a loan is dependent upon the income or assets of the borrower. A number of factors, including a general economic downturn, acts of God, terrorism, social unrest and civil disturbances, may impair a borrower’s ability to repay its loans.

Multiple Class Pass-Through Securities: Multiple class pass-through securities, including collateralized mortgage obligations (“CMOs”) and commercial mortgage-backed securities, may be issued by Ginnie Mae, U.S. 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 a pool of residential or commercial mortgage loans or mortgage pass-through securities (the “Mortgage Assets”). The payments on these are used to make payments on the CMOs or multiple pass-through securities. Multiple class pass-through securities represent direct ownership interests in the Mortgage Assets. Classes of CMOs include interest only (“IOs”), principal only (“POs”), planned amortization classes and targeted amortization classes. IOs and POs are stripped mortgage-backed securities representing 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 prepayments of principal, a fund’s initial investment in the IOs may not fully recoup.

Zero-Coupon Bonds: Zero-coupon bonds are normally issued at a significant discount from face value and do not provide for periodic interest payments. These bonds may experience greater volatility in market value than other debt obligations of similar maturity which provide for regular interest payments.

Capital Securities and Trust Preferred Securities: Capital securities, including trust preferred securities, are typically issued by corporations, generally in the form of interest-bearing notes with preferred securities characteristics. In the case of trust preferred securities, an affiliated business trust of a corporation issues these securities, generally in the form of beneficial interests in subordinated debentures or similarly structured securities. The securities can be structured with either a fixed or adjustable coupon that can have either a perpetual or stated maturity date. For trust preferred securities, the issuing bank or corporation pays interest to the trust, which is then distributed to holders of these securities as a dividend. 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. These securities generally are rated below that of the issuing company’s senior debt securities and are freely callable at the issuer’s option.

TBA Commitments: TBA commitments are forward agreements for the purchase or sale of securities, including mortgage-backed securities for a fixed price, with payment and delivery on an agreed upon future settlement date. 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. When entering into TBA commitments, a fund may take possession of or deliver the underlying mortgage-backed securities but can extend the settlement or roll the 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, if there are expenses or delays in connection with the TBA transactions, or if the counterparty fails to complete the transaction.

In order to better define contractual rights and to secure rights that will help a fund mitigate its counterparty risk, TBA commitments may be entered into by a fund under Master Securities Forward Transaction Agreements (each, an “MSFTA”). An MSFTA typically contains, among other things, collateral posting terms and netting provisions in the event of default and/or termination event. The collateral requirements are typically calculated by netting the mark-to-market amount for each transaction under such agreement and comparing that amount to the value of the collateral currently pledged by a fund and the counterparty. Cash collateral that has been pledged to cover the obligations of a fund and cash collateral received from the counterparty, if any, is reported separately in the Statement of Assets and Liabilities as cash pledged as collateral for TBA commitments or cash received as collateral for TBA commitments, respectively. Non-cash collateral pledged by a fund, if any, is noted in the Schedule of Investments. Typically, a fund is permitted to sell, re-pledge or use the collateral it receives; however, the counterparty is not permitted to do so. To the extent amounts due to a fund are not fully collateralized, contractually or otherwise, a fund bears the risk of loss from counterparty non-performance.

Mortgage Dollar Roll Transactions: The Fund may sell TBA mortgage-backed securities and simultaneously contract to repurchase substantially similar (i.e., same type, coupon and maturity) securities on a specific future date at an agreed upon price. During the period between the sale and repurchase, a fund is not entitled to receive interest


NOTES TO FINANCIAL STATEMENTS		23

Notes to Financial Statements (unaudited) (continued)

and principal payments on the securities sold. Mortgage dollar roll transactions are treated as purchases and sales and a fund realizes gains and losses on these transactions. Mortgage dollar rolls involve the risk that the market value of the securities that a fund is required to purchase may decline below the agreed upon repurchase price of those securities.

Reverse Repurchase Agreements: Reverse repurchase agreements are agreements with qualified third-party broker dealers in which a fund sells securities to a bank or broker-dealer and agrees to repurchase the same securities at a mutually agreed upon date and price. A fund receives cash from the sale to use for other investment purposes. During the term of the reverse repurchase agreement, a fund continues to receive the principal and interest payments on the securities sold. 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. A fund may utilize reverse repurchase agreements when it is anticipated that the interest income to be earned from the investment of the proceeds of the transaction is greater than the interest expense of the transaction. Reverse repurchase agreements involve leverage risk. If a fund suffers a loss on its investment of the transaction proceeds from a reverse repurchase agreement, a fund would still be required to pay the full repurchase price. Further, a fund remains subject to the risk that the market value of the securities repurchased declines below the repurchase price. In such cases, a fund would be required to return a portion of the cash received from the transaction or provide additional securities to the counterparty.

Cash received in exchange for securities delivered plus accrued interest due to the counterparty is recorded as a liability in the Statement of Assets and Liabilities at face value including accrued interest. Due to the short-term nature of the reverse repurchase agreements, face value approximates fair value. Interest payments made by a fund to the counterparties are recorded as a component of interest expense in the Statement of Operations. In periods of increased demand for the security, a fund may receive a fee for the use of the security by the counterparty, which may result in interest income to a fund.

For the six months ended June 30, 2022, the average daily amount of reverse repurchase agreements outstanding and the weighted average interest rate for the Fund were $15,426,769 and 0.35%, respectively.

Reverse repurchase transactions are entered into by a fund under Master Repurchase Agreements (each, an “MRA”), which permit a fund, under certain circumstances, including an event of default (such as bankruptcy or insolvency), to offset payables and/or receivables under the MRA with collateral held and/or posted to the counterparty and create one single net payment due to or from a fund. With reverse repurchase transactions, typically a fund and counterparty under an MRA are permitted to sell, re-pledge, or use the collateral associated with the transaction. Bankruptcy or insolvency laws of a particular jurisdiction may impose restrictions on or prohibitions against such a right of offset in the event of the MRA counterparty’s bankruptcy or insolvency. Pursuant to the terms of the MRA, a fund receives or posts securities and cash as collateral with a market value in excess of the repurchase price to be paid or received by a fund upon the maturity of the transaction. Upon a bankruptcy or insolvency of the MRA counterparty, a fund is considered an unsecured creditor with respect to excess collateral and, as such, the return of excess collateral may be delayed.

As of period end, the following table is a summary of the Fund’s open reverse repurchase agreements by counterparty which are subject to offset under an MRA on a net basis:



Counterparty		Reverse Repurchase Agreements			Fair Value of Non-Cash Collateral Pledged Including Accrued Interest	^(a)		Cash Collateral Pledged/Received	^(a)		Net Amount	^(b)

BofA Securities, Inc.	$	(7,524,832	)	$	7,514,677		$	—		$	(10,155	)
Credit Agricole Corporate and Investment Bank		(7,102,832	)		7,102,832			—			—
Deutsche Bank AG		(3,802,971	)		3,802,971			—			—


	$	(18,430,635	)	$	18,420,480		$	—		$	(10,155	)

^(a)

Collateral, if any, with a value of $19,086,493 has been pledged in connection with open reverse repurchase agreements. Excess of collateral pledged to the individual counterparty is not shown for financial reporting purposes.

^(b)

Net exposure represents the net receivable (payable) that would be due from/to the counterparty in the event of default.

In the event the counterparty of securities under an MRA files for bankruptcy or becomes insolvent, a fund’s use of the proceeds from the agreement may be restricted while the counterparty, or its trustee or receiver, determines whether or not to enforce a fund’s obligation to repurchase the securities.

5.	*DERIVATIVE FINANCIAL INSTRUMENTS*

The Fund engages in various portfolio investment strategies using derivative contracts both to increase the returns of the Fund and/or to manage its exposure to certain risks such as credit risk, equity risk, interest rate risk, foreign currency exchange rate risk, commodity price risk or other risks (e.g., inflation risk). Derivative financial instruments categorized by risk exposure are included in the Schedule of Investments. These contracts may be transacted on an exchange or OTC.

Futures Contracts: Futures contracts are purchased or sold to gain exposure to, or manage exposure to, changes in interest rates (interest rate risk) and changes in the value of equity securities (equity risk) or foreign currencies (foreign currency exchange rate risk).

Futures contracts are exchange-traded agreements between the Fund and a counterparty to buy or sell a specific quantity of an underlying instrument at a specified price and on a specified date. Depending on the terms of a contract, it is settled either through physical delivery of the underlying instrument on the settlement date or by payment of a cash amount on the settlement date. Upon entering into a futures contract, the Fund is required to deposit initial margin with the broker in the form of cash or securities in an amount that varies depending on a contract’s size and risk profile. The initial margin deposit must then be maintained at an established level over the life of the contract. Amounts pledged, which are considered restricted, are included in cash pledged for futures contracts in the Statement of Assets and Liabilities.

Securities deposited as initial margin are designated in the Schedule of Investments and cash deposited, if any, are shown as cash pledged for futures contracts in the Statement of Assets and Liabilities. Pursuant to the contract, the Fund agrees to receive from or pay to the broker an amount of cash equal to the daily fluctuation in market


24		2 0 2 2 BLACK ROCK SEMI - ANNUAL REPORT TO SHAREHOLDERS

Notes to Financial Statements (unaudited) (continued)

value of the contract (“variation margin”). Variation margin is recorded as unrealized appreciation (depreciation) and, if any, shown as variation margin receivable (or payable) on futures contracts in the Statement of Assets and Liabilities. When the contract is closed, a realized gain or loss is recorded in the Statement of Operations equal to the difference between the notional amount of the contract at the time it was opened and the notional amount at the time it was closed. The use of futures contracts involves the risk of an imperfect correlation in the movements in the price of futures contracts and interest rates, foreign currency exchange rates or underlying assets.

Options: The Fund may purchase and write call and put options to increase or decrease its exposure to the risks of underlying instruments, including equity risk, interest rate risk and/or commodity price risk and/or, in the case of options written, to generate gains from options premiums.

A call option gives the purchaser (holder) of the option the right (but not the obligation) to buy, and obligates the seller (writer) to sell (when the option is exercised) the underlying instrument at the exercise or strike 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 or strike price at any time or at a specified time during the option period.

Premiums paid on options purchased and premiums received on options written, as well as the daily fluctuation in market value, are included in investments at value –unaffiliated and options written at value, respectively, in the Statement of Assets and Liabilities. When an instrument is purchased or sold through the exercise of an option, the premium is offset against the cost or proceeds of the underlying instrument. When an option expires, a realized gain or loss is recorded in the Statement of Operations to the extent of the premiums received or paid. When an option is closed or sold, a gain or loss is recorded in the Statement of Operations to the extent the cost of the closing transaction exceeds the premiums received or paid. When the Fund writes a call option, such option is typically “covered,” meaning that it holds the underlying instrument subject to being called by the option counterparty. When the Fund writes a put option, cash is segregated in an amount sufficient to cover the obligation. These amounts, which are considered restricted, are included in cash pledged as collateral for options written in the Statement of Assets and Liabilities.

•

Swaptions — The Fund may purchase and write options on swaps (“swaptions”) primarily to preserve a return or spread on a particular investment or portion of the Fund’s holdings, as a duration management technique or to protect against an increase in the price of securities it anticipates purchasing at a later date. The purchaser and writer of a swaption is buying or granting the right to enter into a previously agreed upon interest rate or credit default swap agreement (interest rate risk and/or credit risk) at any time before the expiration of the option.

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

Swaps: Swap contracts are entered into to manage exposure to issuers, markets and securities. Such contracts are agreements between the Fund and a counterparty to make periodic net payments on a specified notional amount or a net payment upon termination. Swap agreements are privately negotiated in the OTC market and may be entered into as a bilateral contract (“OTC swaps”) or centrally cleared (“centrally cleared swaps”).

For OTC swaps, any upfront premiums paid and any upfront fees received are shown as swap premiums paid and swap premiums received, respectively, in the Statement of Assets and Liabilities and amortized over the term of the contract. The daily fluctuation in market value is recorded as unrealized appreciation (depreciation) on OTC Swaps in the Statement of Assets and Liabilities. Payments received or paid are recorded in the Statement of Operations as realized gains or losses, respectively. When an OTC swap is terminated, a realized gain or loss is recorded in the Statement of Operations 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 contract is the premium received or paid.

In a centrally cleared swap, immediately following execution of the swap contract, the swap contract is novated to a central counterparty (the “CCP”) and the CCP becomes the Fund’s counterparty on the swap. The Fund is required to interface with the CCP through the broker. Upon entering into a centrally cleared swap, the Fund is required to deposit initial margin with the broker in the form of cash or securities in an amount that varies depending on the size and risk profile of the particular swap. Securities deposited as initial margin are designated in the Schedule of Investments and cash deposited is shown as cash pledged for centrally cleared swaps in the Statement of Assets and Liabilities. Amounts pledged, which are considered restricted cash, are included in cash pledged for centrally cleared swaps in the Statement of Assets and Liabilities. Pursuant to the contract, the Fund agrees to receive from or pay to the broker variation margin. Variation margin is recorded as unrealized appreciation (depreciation) and shown as variation margin receivable (or payable) on centrally cleared swaps in the Statement of Assets and Liabilities. Payments received from (paid to) the counterparty are amortized over the term of the contract and recorded as realized gains (losses) in the Statement of Operations, including those at termination.

•

Credit default swaps — Credit default swaps are entered into to manage exposure to the market or certain sectors of the market, to reduce risk exposure to defaults of corporate and/or sovereign issuers or to create exposure to corporate and/or sovereign issuers to which a fund is not otherwise exposed (credit risk).

The Fund may either buy or sell (write) credit default swaps on single-name issuers (corporate or sovereign), a combination or basket of single-name issuers or traded indexes. Credit default swaps are agreements in which the protection buyer pays fixed periodic payments to the seller in consideration for a promise from the protection seller to make a specific payment should a negative credit event take place with respect to the referenced entity (e.g., bankruptcy, failure to pay, obligation acceleration, repudiation, moratorium or restructuring). As a buyer, if an underlying credit event occurs, the Fund will either (i) receive from the seller an amount equal to the notional amount of the swap and deliver the referenced security or underlying securities comprising the index, or (ii) receive a net settlement of cash equal to the notional amount of the swap less the recovery value of the security or underlying securities comprising the index. As a seller (writer), if an underlying credit event occurs, the Fund will either pay the buyer an amount equal to the notional amount of the swap and take delivery of the referenced security or underlying securities comprising the index or pay a net settlement of cash equal to the notional amount of the swap less the recovery value of the security or underlying securities comprising the index.


NOTES TO FINANCIAL STATEMENTS		25

Notes to Financial Statements (unaudited) (continued)

•

Interest rate swaps — Interest rate swaps are entered into to gain or reduce exposure to interest rates or to manage duration, the yield curve or interest rate (interest rate risk).

Interest rate swaps are agreements in which one party pays a stream of interest payments, either fixed or floating, in exchange for another party’s stream of interest payments, either fixed or floating, on the same notional amount for a specified period of time. In more complex interest rate swaps, the notional principal amount may decline (or amortize) over time.

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 counterparty to the agreements may default on its obligation to perform or disagree 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.

Master Netting Arrangements: In order to define its contractual rights and to secure rights that will help it mitigate its counterparty risk, the Fund may enter into an International Swaps and Derivatives Association, Inc. Master Agreement (“ISDA Master Agreement”) or similar agreement with its counterparties. An ISDA Master Agreement is a bilateral agreement between the Fund and a counterparty that governs certain OTC derivatives and typically contains, among other things, collateral posting terms and netting provisions in the event of a default and/or termination event. Under an ISDA Master Agreement, the Fund may, under certain circumstances, offset with the counterparty certain derivative financial instruments’ payables and/or receivables with collateral held and/or posted and create one single net payment. The provisions of the ISDA Master Agreement typically permit a single net payment in the event of default including the bankruptcy or insolvency of the counterparty. However, bankruptcy or insolvency laws of a particular jurisdiction may impose restrictions on or prohibitions against the right of offset in bankruptcy, insolvency or other events.

Collateral Requirements: For derivatives traded under an ISDA Master Agreement, the collateral requirements are typically calculated by netting the mark-to-market amount for each transaction under such agreement and comparing that amount to the value of any collateral currently pledged by the Fund and the counterparty.

Cash collateral that has been pledged to cover obligations of the Fund and cash collateral received from the counterparty, if any, is reported separately in the Statement of Assets and Liabilities as cash pledged as collateral and cash received as collateral, respectively. Non-cash collateral pledged by the Fund, if any, is noted in the Schedule of Investments. Generally, the amount of collateral due from or to a counterparty is subject to a certain minimum transfer amount threshold before a transfer is required, which is determined at the close of business of the Fund. Any additional required collateral is delivered to/pledged by the Fund on the next business day. Typically, the counterparty is not permitted to sell, re-pledge or use cash and non-cash collateral it receives. The Fund generally agrees not to use non-cash collateral that it receives but may, absent default or certain other circumstances defined in the underlying ISDA Master Agreement, be permitted to use cash collateral received. In such cases, interest may be paid pursuant to the collateral arrangement with the counterparty. To the extent amounts due to the Fund from the counterparties are not fully collateralized, the Fund bears the risk of loss from counterparty non-performance. Likewise, to the extent the Fund has delivered collateral to a counterparty and stands ready to perform under the terms of its agreement with such counterparty, the Fund bears the risk of loss from a counterparty in the amount of the value of the collateral in the event the counterparty fails to return such collateral. Based on the terms of agreements, collateral may not be required for all derivative contracts.

For financial reporting purposes, the Fund does not offset derivative assets and derivative liabilities that are subject to netting arrangements, if any, in the Statement of Assets and Liabilities.

6.	*INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES*

Investment Advisory: The Fund entered into an Investment Advisory Agreement with the Manager, the Fund’s investment adviser and an indirect, wholly-owned subsidiary of BlackRock, Inc. (“BlackRock”), to provide investment advisory and administrative services. The Manager is responsible for the management of the Fund’s portfolio and provides the personnel, facilities, 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 equal to 0.85% of the average daily value of the Fund’s managed assets, plus the proceeds of any debt securities or outstanding borrowings used for leverage.

For purposes of calculating this fee, “managed assets” are determined as total assets of the Fund (including any assets attributable to money borrowed for investment purposes) less the sum of its accrued liabilities (other than money borrowed for investment purposes).

Expense Waivers: The Manager voluntarily agreed to waive a portion of its investment advisory fees equal to the annual rate of 0.30% of the Fund’s average daily net assets, plus the proceeds of any outstanding borrowings used for leverage. This amount is included in fees waived and/or reimbursed by the Manager in the Statement of Operations. During the six months ended June 30, 2022, the Manager waived $95,334 pursuant to this agreement.

The Manager contractually agreed to waive its investment advisory fees by the amount of investment advisory fees the Fund pays to the Manager indirectly through its investment in affiliated money market funds (the “affiliated money market fund waiver”) through June 30, 2023. The contractual agreement may be terminated upon 90 days’ notice by a majority of the Independent Directors, or by a vote of a majority of the outstanding voting securities of the Fund. These amounts are included in fees waived and/or reimbursed by the Manager in the Statement of Operations. For the six months ended June 30, 2022, the amount waived was $310.

The Manager contractually agreed to waive its investment advisory fee with respect to any portion of the Fund’s assets invested in affiliated equity and fixed-income mutual funds and affiliated exchange-traded funds that have a contractual management fee through June 30, 2023. The agreement can be renewed for annual periods thereafter, and may be terminated on 90 days’ notice, each subject to approval by a majority of the Fund’s Independent Directors. For the six months ended June 30, 2022, there were no fees waived by the Manager pursuant to this arrangement.

Directors and Officers: Certain directors and/or officers of the Fund are directors and/or officers of BlackRock or its affiliates. The Fund reimburses the Manager for a portion of the compensation paid to the Fund’s Chief Compliance Officer, which is included in Directors and Officer in the Statement of Operations.


26		2 0 2 2 BLACK ROCK SEMI - ANNUAL REPORT TO SHAREHOLDERS

Notes to Financial Statements (unaudited) (continued)

7.	*PURCHASES AND SALES*

For the six months ended June 30, 2022, purchases and sales of investments, including paydowns/payups and mortgage dollar rolls, excluding short-term investments, were as follows:




	U.S. Government Securities				Other Securities


Fund Name	Purchases		Sales		Purchases		Sales


EGF		$ —	$	4,903,748	$	81,373,470	$	71,898,243

For the six months ended June 30, 2022, purchases and sales related to mortgage dollar rolls were $23,073,120 and $23,088,647, respectively.

8.	*INCOME TAX INFORMATION*

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 U.S. federal income tax provision is required.

The Fund files U.S. federal and various state and local tax returns. No income tax returns are currently under examination. The statute of limitations on the Fund’s U.S. federal tax returns generally remains open for a period of three years after they are filed. The statutes of limitations on the Fund’s state and local tax returns may remain open for an additional year depending upon the jurisdiction.

Management has analyzed tax laws and regulations and their application to the Fund as of June 30, 2022, inclusive of the open tax return years, and does not believe that there are any uncertain tax positions that require recognition of a tax liability in the Fund’s financial statements.

As of December 31, 2021, the Fund had non-expiring capital loss carryforwards available to offset future realized capital gains of $24,687,376.

As of June 30, 2022, gross unrealized appreciation and depreciation based on cost of investments (including short positions and derivatives, if any) for U.S. federal income tax purposes were as follows:




Fund Name	Tax Cost		Gross Unrealized Appreciation		Gross Unrealized Depreciation			Net Unrealized Appreciation (Depreciation)


EGF	$	71,613,118	$	648,900	$	(4,679,148	)	$	(4,030,248	)

9.	*PRINCIPAL RISKS*

In the normal course of business, the Fund invests in securities or other instruments and may enter into certain transactions, and such activities subject the Fund to various risks, including among others, fluctuations in the market (market risk) or failure of an issuer to meet all of its obligations. The value of securities or other instruments may also be affected by various factors, including, without limitation: (i) the general economy; (ii) the overall market as well as local, regional or global political and/or social instability; (iii) regulation, taxation or international tax treaties between various countries; or (iv) currency, interest rate and price fluctuations. Local, regional or global events such as war, acts of terrorism, the spread of infectious illness or other public health issues, recessions, or other events could have a significant impact on the Fund and its investments.

The Fund may invest without limitation in illiquid or less liquid investments or investments in which no secondary market is readily available or which are otherwise illiquid, including private placement securities. The Fund may not be able to readily dispose of such investments at prices that approximate those at which the Fund could sell such investments if they were more widely traded and, as a result of such illiquidity, the Fund may have to sell other investments or engage in borrowing transactions if necessary to raise funds to meet its obligations. Limited liquidity can also affect the market price of investments, thereby adversely affecting the Fund’s NAV and ability to make dividend distributions. Privately issued debt securities are often of below investment grade quality, frequently are unrated and present many of the same risks as investing in below investment grade public debt securities.

Market Risk: The Fund may be exposed to prepayment risk, which is the risk that borrowers may exercise their option to prepay principal earlier than scheduled during periods of declining interest rates, which would force the Fund to reinvest in lower yielding securities. The Fund may also be exposed to reinvestment risk, which is the risk that income from the Fund’s portfolio will decline if the Fund invests the proceeds from matured, traded or called fixed-income securities at market interest rates that are below the Fund portfolio’s current earnings rate.

An outbreak of respiratory disease caused by a novel coronavirus has developed into a global pandemic and has resulted in closing borders, quarantines, disruptions to supply chains and customer activity, as well as general concern and uncertainty. The impact of this pandemic, and other global health crises that may arise in the future, could affect the economies of many nations, individual companies and the market in general in ways that cannot necessarily be foreseen at the present time. This pandemic may result in substantial market volatility and may adversely impact the prices and liquidity of a fund’s investments. Although vaccines have been developed and approved for use by various governments, the duration of this pandemic and its effects cannot be determined with certainty.

Counterparty Credit Risk: The Fund may be exposed to counterparty credit risk, or the risk that an entity may fail to or be unable to perform on its commitments related to unsettled or open transactions, including making timely interest and/or principal payments or otherwise honoring its obligations. The Fund manages counterparty credit risk by entering into transactions only with counterparties that the Manager 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


NOTES TO FINANCIAL STATEMENTS		27

Notes to Financial Statements (unaudited) (continued)

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 approximately their value recorded in the Statement of Assets and Liabilities, less any collateral held by the Fund.

A derivative contract may suffer a mark-to-market loss if the value of the contract decreases due to an unfavorable change in the market rates or values of the underlying instrument. Losses can also occur if the counterparty does not perform under the contract.

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 held by the Fund should the counterparty fail to perform under the contracts. Options written by the Fund do not typically give rise to counterparty credit risk, as options written generally obligate the Fund, and not the counterparty, to perform. The Fund may be exposed to counterparty credit risk with respect to options written to the extent the Fund deposits collateral with its counterparty to a written option.

With exchange-traded options purchased and exchange-traded futures and centrally cleared swaps, there is less counterparty credit risk to the Fund since the exchange or clearinghouse, as counterparty to such instruments, guarantees against a possible default. The clearinghouse stands between the buyer and the seller of the contract; therefore, credit risk is limited to failure of the clearinghouse. While offset rights may exist under applicable law, the Fund does not have a contractual right of offset against a clearing broker or clearinghouse in the event of a default (including the bankruptcy or insolvency). Additionally, credit risk exists in exchange-traded futures and centrally cleared swaps with respect to initial and variation margin that is held in a clearing broker’s customer accounts. While clearing brokers are required to segregate customer margin from their own assets, in the event that a clearing broker becomes insolvent or goes into bankruptcy and at that time there is a shortfall in the aggregate amount of margin held by the clearing broker for all its clients, typically the shortfall would be allocated on a pro rata basis across all the clearing broker’s customers, potentially resulting in losses to the Fund.

Concentration Risk: A diversified portfolio, where this is appropriate and consistent with a fund’s objectives, minimizes the risk that a price change of a particular investment will have a material impact on the NAV of a fund. The investment concentrations within the Fund’s portfolio are disclosed in its Schedule of Investments.

The Fund invests a significant portion of its assets in fixed-income securities and/or uses derivatives tied to the fixed-income markets. Changes in market interest rates or economic conditions may affect the value and/or liquidity of such investments. Interest rate risk is the risk that prices of bonds and other fixed-income securities will increase as interest rates fall and decrease as interest rates rise. The Fund may be subject to a greater risk of rising interest rates due to the current period of historically low rates.

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. When a Fund concentrates its investments in this manner, it assumes a greater risk of prepayment or payment extension by securities issuers. 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. Investment percentages in these securities are presented in the Schedule of Investments.

LIBOR Transition Risk: The United Kingdom’s Financial Conduct Authority announced a phase out of the London Interbank Offered Rate (“LIBOR”). Although many LIBOR rates ceased to be published or no longer are representative of the underlying market they seek to measure after December 31, 2021, a selection of widely used USD LIBOR rates will continue to be published through June 2023 in order to assist with the transition. The Fund may be exposed to financial instruments tied to LIBOR to determine payment obligations, financing terms, hedging strategies or investment value. The transition process away from LIBOR might lead to increased volatility and illiquidity in markets for, and reduce the effectiveness of new hedges placed against instruments whose terms currently include LIBOR. The ultimate effect of the LIBOR transition process on the Fund is uncertain.

10.

CAPITAL SHARE TRANSACTIONS

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

Common Shares

For the six months ended June 30, 2022, shares issued and outstanding remained constant.

The Fund participates in an open market share repurchase program (the “Repurchase Program”). From December 1, 2021 through November 30, 2022, the Fund may repurchase up to 5% of its outstanding common shares under the Repurchase Program, based on common shares outstanding as of the close of business on November 30, 2021, subject to certain conditions. The Repurchase Program has an accretive effect as shares are purchased at a discount to the Fund’s NAV. There is no assurance that the Fund will purchase shares in any particular amounts. For the six months ended June 30, 2022, the Fund did not repurchase any shares.

The Fund will make offers to purchase between 5% and 25% of its outstanding shares at approximate 12 month intervals. Repurchase offer results for the year ended December 31, 2021 were as follows:



Commencement Date of Tender Offer Period^(a)	Valuation Date		Number of Shares Tendered		Tendered Shares as a Percentage of Outstanding Shares			Number of Tendered Shares Purchased		Tendered Shares Purchased as a Percentage of Outstanding Shares			Purchase Price		Total Amount of Purchases

October 15, 2021		November 17, 2021		119,707		2.8	%		119,707		2.8	%		$12.5400		$1,501,126

^(a)

Date the repurchase offer period began.

The amount of the repurchase offer is shown as redemptions of shares resulting from a repurchase offer in the Statements of Changes in Net Assets. The Fund charged a 2% repurchase fee of the value of the shares that were repurchased to compensate the Fund for expenses directly related to the repurchase offer, which is included in the capital


28		2 0 2 2 BLACK ROCK SEMI - ANNUAL REPORT TO SHAREHOLDERS

Notes to Financial Statements (unaudited) (continued)

share transactions in the Statements of the Changes in Net Assets. Costs directly related to the repurchase offer, primarily mailing and printing costs, are shown as repurchase offer in the Statement of Operations.

11.

SUBSEQUENT EVENTS

Management’s evaluation of the impact of all subsequent events on the Fund’s financial statements was completed through the date the financial statements were issued and the following items were noted:

The Fund declared and paid or will pay distributions to Common Shareholders as follows:

Fund Name

Declaration
Date

Record
Date

Payable/
Paid Date

Dividend Per
Common Share

EGF

07/01/22

07/15/22

07/29/22

0.041000

08/01/22

08/15/22

08/31/22

0.041000


NOTES TO FINANCIAL STATEMENTS		29

Disclosure of Investment 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 14, 2022 (the “April Meeting”) and May 19-20, 2022 (the “May Meeting”) to consider the approval to continue the investment advisory agreement (the “Advisory Agreement”) or (the “Agreement”) between the Fund and BlackRock Advisors, LLC (the “Manager” or “BlackRock”), the Fund’s investment advisor.

The Approval Process

Consistent with the requirements of the Investment Company Act of 1940 (the “1940 Act”), the Board considers the approval of the continuation of the Agreement for the Fund on an annual basis. The Board members who are not “interested persons” of the Fund, as defined in the 1940 Act, are considered independent Board members (the “Independent Board Members”). The Board’s consideration entailed a year-long deliberative process during which the Board and its committees assessed BlackRock’s various services to the Fund, including through the review of written materials and oral presentations, and the review of additional information provided in response to requests from the Independent Board Members. The Board had four quarterly meetings per year, each typically extending for two days, as well as additional ad hoc meetings and executive sessions throughout the year, as needed. The committees of the Board similarly met throughout the year. The Board also had an additional one-day meeting to consider specific information surrounding the renewal of the Agreement. In particular, the Board assessed, among other things, the nature, extent and quality of the services provided to the Fund by BlackRock, BlackRock’s personnel and affiliates, including (as applicable): investment management services; accounting oversight; administrative and shareholder services; oversight of the Fund’s service providers; risk management and oversight; and legal, regulatory and compliance services. Throughout the year, including during the contract renewal process, the Independent Board Members were advised by independent legal counsel, and met with independent legal counsel in various executive sessions outside of the presence of BlackRock’s management.

During the year, the Board, acting directly and through its committees, considered information that was relevant to its annual consideration of the renewal of the Agreement, including the services and support provided by BlackRock to the Fund and its shareholders. BlackRock also furnished additional information to the Board in response to specific questions from the Board. Among the matters the Board considered were: (a) investment performance for one-year, three-year, five-year, and/or since inception periods, as applicable, against peer funds, relevant benchmarks, and other performance metrics, as applicable, as well as BlackRock senior management’s and portfolio managers’ analyses of the reasons for any outperformance or underperformance relative to its peers, benchmarks, and other performance metrics, as applicable; (b) leverage management, as applicable; (c) fees, including advisory, administration, if applicable, and other amounts paid to BlackRock and its affiliates by the Fund for services; (d) Fund operating expenses and how BlackRock allocates expenses to the Fund; (e) the resources devoted to risk oversight of, and compliance reports relating to, implementation of the Fund’s investment objective, policies and restrictions, and meeting regulatory requirements; (f) BlackRock’s and the Fund’s adherence to applicable compliance policies and procedures; (g) the nature, character and scope of non-investment management services provided by BlackRock and its affiliates and the estimated cost of such services, as available; (h) BlackRock’s and other service providers’ internal controls and risk and compliance oversight mechanisms; (i) BlackRock’s implementation of the proxy voting policies approved by the Board; (j) execution quality of portfolio transactions; (k) BlackRock’s implementation of the Fund’s valuation and liquidity procedures; (l) an analysis of management fees paid to BlackRock for products with similar investment mandates across the open-end fund, closed-end fund, sub-advised mutual fund, collective investment trust and institutional separate account product channels, as applicable, and the similarities and differences between these products and the services provided as compared to the Fund; (m) BlackRock’s compensation methodology for its investment professionals and the incentives and accountability it creates, along with investment professionals’ investments in the fund(s) they manage; (n) periodic updates on BlackRock’s business; and (o) the Fund’s market discount/premium compared to peer funds.

Prior to and in preparation for the April Meeting, the Board received and reviewed materials specifically relating to the renewal of the Agreement. The Independent Board Members are continuously engaged in a process with their independent legal counsel and BlackRock to review the nature and scope of the information provided to the Board to better assist its deliberations. The materials provided in connection with the April Meeting included, among other things: (a) information independently compiled and prepared by Broadridge Financial Solutions, Inc. (“Broadridge”), based on Lipper classifications, regarding the Fund’s fees and expenses as compared with a peer group of funds as determined by Broadridge (“Expense Peers”) and the investment performance of the Fund as compared with a peer group of funds (“Performance Peers”); (b) information on the composition of the Expense Peers and Performance Peers and a description of Broadridge’s methodology; (c) information on the estimated profits realized by BlackRock and its affiliates pursuant to the Agreement and a discussion of fall-out benefits to BlackRock and its affiliates; (d) a general analysis provided by BlackRock concerning investment management fees received in connection with other types of investment products, such as institutional accounts, sub-advised mutual funds, closed-end funds, and open-end funds, under similar investment mandates, as applicable; (e) a review of non-management fees; (f) the existence, impact and sharing of potential economies of scale, if any, with the Fund; (g) a summary of aggregate amounts paid by the Fund to BlackRock; and (h) various additional information requested by the Board as appropriate regarding BlackRock’s and the Fund’s operations.

At the April Meeting, the Board reviewed materials relating to its consideration of the Agreement and the Independent Board Members presented BlackRock with questions and requests for additional information. BlackRock responded to these questions and requests with additional written information in advance of the May Meeting.

At the May Meeting, the Board concluded its assessment of, among other things: (a) the nature, extent and quality of the services provided by BlackRock; (b) the investment performance of the Fund as compared to its Performance Peers and to other metrics, as applicable; (c) the advisory fee and the estimated cost of the services and estimated profits realized by BlackRock and its affiliates from their relationship with the Fund; (d) the Fund’s fees and expenses compared to its Expense Peers; (e) the existence and sharing of potential economies of scale; (f) any fall-out benefits to BlackRock and its affiliates as a result of BlackRock’s relationship with the Fund; and (g) other factors deemed relevant by the Board Members.

The Board also considered other matters it deemed important to the approval process, such as other payments made to BlackRock or its affiliates relating to securities lending and cash management, and BlackRock’s services related to the valuation and pricing of Fund portfolio holdings. The Board noted the willingness of BlackRock’s personnel to engage in open, candid discussions with the Board. The Board Members evaluated the information available to it on a fund-by-fund basis. The following paragraphs provide more information about some of the primary factors that were relevant to the Board’s decision. The Board Members did not identify any particular information, or any single factor as determinative, and each Board Member may have attributed different weights to the various items and factors considered.


30		2 0 2 2 BLACK ROCK SEMI - ANNUAL REPORT TO SHAREHOLDERS

Disclosure of Investment Advisory Agreement (continued)

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, relevant benchmarks, and performance metrics, as applicable. The Board met with BlackRock’s senior management personnel responsible for investment activities, including the senior investment officers. The Board also reviewed the materials provided by the Fund’s portfolio management team discussing the Fund’s performance, investment strategies and outlook.

The Board considered, among other factors, with respect to BlackRock: the number, education and experience of investment personnel generally and the Fund’s portfolio management team; research capabilities; investments by portfolio managers in the funds they manage; portfolio trading capabilities; use of technology; commitment to compliance; credit analysis capabilities; risk analysis and oversight capabilities; and the approach to training and retaining portfolio managers and other research, advisory and management personnel. The Board also considered BlackRock’s overall risk management program, including the continued efforts of BlackRock and its affiliates to address cybersecurity risks and the role of BlackRock’s Risk & Quantitative Analysis Group. The Board engaged in a review of BlackRock’s compensation structure with respect to the Fund’s portfolio management team and BlackRock’s ability to attract and retain high-quality talent and create performance incentives.

In addition to investment advisory services, the Board considered the nature and quality of the administrative and other non-investment advisory services provided to the Fund. BlackRock and its affiliates provide the Fund with certain administrative, shareholder 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 particular, BlackRock and its affiliates provide the Fund with administrative services including, among others: (i) responsibility for disclosure documents and periodic shareholder reports; (ii) preparing communications with analysts to support secondary market trading of the Fund; (iii) oversight of daily accounting and pricing; (iv) responsibility for periodic filings with regulators and stock exchanges; (v) overseeing and coordinating the activities of third-party service providers including, among others, the Fund’s custodian, fund accountant, transfer agent, and auditor; (vi) organizing Board meetings and preparing the materials for such Board meetings; (vii) providing legal and compliance support; (viii) furnishing analytical and other support to assist the Board in its consideration of strategic issues such as the merger, consolidation or repurposing of certain closed-end funds; and (ix) performing or managing administrative functions necessary for the operation of the Fund, such as tax reporting, expense management, fulfilling regulatory filing requirements, and shareholder call center and other services. The Board reviewed the structure and duties of BlackRock’s fund administration, shareholder services, and legal and compliance departments and considered BlackRock’s policies and procedures for assuring compliance with applicable laws and regulations. The Board considered the operation of BlackRock’s business continuity plans, including in light of the ongoing COVID-19 pandemic.

B. The Investment Performance of the Fund and BlackRock

The Board, including the Independent Board Members, reviewed and considered the performance history of the Fund throughout the year and at the April Meeting. In preparation for the April Meeting, the Board was provided with reports independently prepared by Broadridge, which included an analysis of the Fund’s performance as of December 31, 2021, as compared to its Performance Peers. The performance information is based on net asset value (NAV), and utilizes Lipper data. Lipper’s methodology calculates a fund’s total return assuming distributions are reinvested on the ex-date at a fund’s ex-date NAV. Broadridge ranks funds in quartiles, ranging from first to fourth, where first is the most desirable quartile position and fourth is the least desirable. In connection with its review, the Board received and reviewed information regarding the investment performance of the Fund as compared to its Performance Peers and certain performance metrics (“Performance Metrics”). The Board and its Performance Oversight Committee regularly review and meet with Fund management to discuss the performance of the Fund throughout the year.

In evaluating performance, the Board focused particular attention on funds with less favorable performance records. The Board also noted that while it found the data provided by Broadridge generally useful, it recognized the limitations of such data, including in particular, that notable differences may exist between a fund and its Performance Peers (for example, the investment objectives and strategies). Further, the Board recognized that the performance data reflects a snapshot of a period as of a particular date and that selecting a different performance period could produce significantly different results. The Board also acknowledged that long-term performance could be impacted by even one period of significant outperformance or underperformance, and that a single investment theme could have the ability to disproportionately affect long-term performance.

The Board reviewed and considered the Fund’s performance relative to the Fund’s Performance Metrics. Based on an overall rating relative to the Performance Metrics, the Fund generally performed in line with expectations. The Board noted that BlackRock believes that the Performance Metrics are an appropriate performance comparison for the Fund, and that BlackRock has explained its rationale for this belief to the Board.

C. Consideration of the Advisory/Management Fees and the Estimated Cost of the Services and Estimated Profits Realized by BlackRock and its Affiliates from their Relationship with the Fund

The Board, including the Independent Board Members, reviewed the Fund’s contractual management fee rate compared with those of its Expense Peers. The contractual management fee rate represents a combination of the advisory fee and any administrative fees, before taking into account any reimbursements or fee waivers. The Board also compared the Fund’s total expense ratio, as well as its actual management fee rate as a percentage of managed assets, which is the total assets of the Fund (including any assets attributable to money borrowed for investment purposes) minus the sum of the Fund’s accrued liabilities (other than money borrowed for investment purposes) to those of its Expense Peers. The total expense ratio represents a fund’s total net operating expenses, excluding any investment related expenses. The total expense ratio gives effect to any expense reimbursements or fee waivers, and the actual management fee rate gives effect to any management fee reimbursements or waivers. The Board considered the services provided and the fees charged by BlackRock and its affiliates to other types of clients with similar investment mandates, as applicable, including institutional accounts and sub-advised mutual funds (including mutual funds sponsored by third parties).

The Board received and reviewed statements relating to BlackRock’s financial condition. The Board reviewed BlackRock’s profitability methodology and was also provided with an estimated profitability analysis that detailed the revenues earned and the expenses incurred by BlackRock for services provided to the Fund. The Board reviewed BlackRock’s estimated profitability with respect to the Fund and other funds the Board currently oversees for the year ended December 31, 2021 compared to available aggregate estimated profitability data provided for the prior two years. The Board reviewed BlackRock’s estimated profitability with respect to certain other U.S. fund complexes


DISCLOSURE OF INVESTMENT ADVISORY AGREEMENT		31

Disclosure of Investment Advisory Agreement (continued)

managed by the Manager and/or its affiliates. The Board reviewed BlackRock’s assumptions and methodology of allocating expenses in the estimated profitability analysis, noting the inherent 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, precision of expense allocations and business mix. The Board thus recognized that calculating and comparing profitability at the individual fund level is difficult.

The Board noted that, in general, individual fund or product line profitability of other advisors is not publicly available. The Board reviewed BlackRock’s overall operating margin, in general, compared to that of certain other publicly traded asset management firms. The Board considered the differences between BlackRock and these other firms, including the contribution of technology at BlackRock, BlackRock’s expense management, and the relative product mix.

The Board considered whether BlackRock has the financial resources necessary to attract and retain high quality investment management personnel to perform its obligations under the Agreement and to continue to provide the high quality of services that is expected by the Board. The Board further considered factors including but not limited to BlackRock’s commitment of time, assumption of risk, and liability profile in servicing the Fund, including in contrast to what is required of BlackRock with respect to other products with similar investment mandates across the open-end fund, closed-end fund, sub-advised mutual fund, collective investment trust, and institutional separate account product channels, as applicable.

The Board noted that the Fund’s contractual management fee rate ranked in the third quartile, and that the actual management fee rate and total expense ratio each ranked in the second quartile relative to the Expense Peers. In addition, the Board noted that BlackRock had agreed to voluntarily waive a portion of the advisory fee payable by the Fund. An advisory fee waiver has been in effect since 2013, the amount of which may have varied from time to time. After discussions between the Board, including Independent Board Members, and BlackRock, the Board and BlackRock agreed to a continuation of the current 30 basis points voluntary advisory fee waiver.

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 of scale in a variety of ways, and whether there should be changes in the advisory fee rate or breakpoint structure in order to enable the Fund to more fully participate in these economies of scale. The Board considered the Fund’s asset levels and whether the current fee was appropriate.

Based on the Board’s review and consideration of the issue, the Board concluded that most closed-end funds do not have fund level breakpoints because closed-end funds generally do not experience substantial growth after the initial public offering. Closed-end funds are typically priced at scale at a fund’s inception.

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 may derive from BlackRock’s respective relationships with the Fund, both tangible and intangible, such as BlackRock’s ability to leverage its investment professionals who manage other portfolios and its risk management personnel, an increase in BlackRock’s profile in the investment advisory community, and the engagement of BlackRock’s affiliates as service providers to the Fund, including for administrative, securities lending and cash management services. The Board also considered BlackRock’s overall operations and its efforts to expand the scale of, and improve the quality of, its operations. The Board also noted that, subject to applicable law, BlackRock may use and benefit from third-party research obtained by soft dollars generated by certain registered fund transactions to assist in managing all or a number of its other client accounts.

In connection with its consideration of the Agreement, the Board also received information regarding BlackRock’s brokerage and soft dollar practices. The Board received reports from BlackRock which included information on brokerage commissions and trade execution practices throughout the year.

The Board noted the competitive nature of the closed-end fund marketplace, 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.

The Board also considered the various notable initiatives and projects BlackRock performed in connection with its closed-end fund product line. These initiatives included developing equity shelf programs; efforts to eliminate product overlap with fund mergers; ongoing services to manage leverage that has become increasingly complex; periodic evaluation of share repurchases and other support initiatives for certain BlackRock funds; and continued communication efforts with shareholders, fund analysts and financial advisers. With respect to the latter, the Independent Board Members noted BlackRock’s continued commitment to supporting the secondary market for the common shares of its closed-end funds through a comprehensive secondary market communication program designed to raise investor and analyst awareness and understanding of closed-end funds. BlackRock’s support services included, among other things: sponsoring and participating in conferences; communicating with closed-end fund analysts covering the BlackRock funds throughout the year; providing marketing and product updates for the closed-end funds; and maintaining and enhancing its closed-end fund website.

Conclusion

At the May Meeting, as a result of the discussions that occurred during the April Meeting, and as a culmination of the Board’s year-long deliberative process, the Board, including the Independent Board Members, approved, by unanimous vote of those present, the continuation of the Advisory Agreement between the Manager and the Fund for a one-year term ending June 30, 2023. Based upon its evaluation of all of the aforementioned factors in their totality, as well as other information, the Board, including the Independent Board Members, was satisfied that the terms of the Agreement were fair and reasonable and in the best interest of the Fund and its shareholders. In arriving at its decision to approve the Agreement, 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.


32		2 0 2 2 BLACK ROCK SEMI - ANNUAL REPORT TO SHAREHOLDERS

Additional Information

Fund Certification

The Fund is listed for trading on the NYSE and has filed with the NYSE its annual chief executive officer certification regarding compliance with the NYSE’s listing standards. The Fund filed with the SEC the certification of its chief executive officer and chief financial officer required by Section 302 of the Sarbanes-Oxley Act.

Regulation Regarding Derivatives

On October 28, 2020, the Securities and Exchange Commission (the “SEC”) adopted regulations governing the use of derivatives by registered investment companies (“Rule 18f-4”). The Fund will be required to implement and comply with Rule 18f-4 by August 19, 2022. Once implemented, Rule 18f-4 will impose limits on the amount of derivatives a fund can enter into, eliminate the asset segregation framework currently used by funds to comply with Section 18 of the 1940 Act, treat derivatives as senior securities and require funds whose use of derivatives is more than a limited specified exposure amount to establish and maintain a comprehensive derivatives risk management program and appoint a derivatives risk manager.

Environmental, Social and Governance (“ESG”) Integration

Although a Fund does not seek to implement a specific ESG, impact or sustainability strategy unless otherwise disclosed, Fund management will consider ESG characteristics as part of the investment process for actively managed Funds. These considerations will vary depending on a Fund’s particular investment strategies and may include consideration of third-party research as well as consideration of proprietary BlackRock research across the ESG risks and opportunities regarding an issuer. Fund management will consider those ESG characteristics it deems relevant or additive when making investment decisions for a Fund. The ESG characteristics utilized in a Fund’s investment process are anticipated to evolve over time and one or more characteristics may not be relevant with respect to all issuers that are eligible for investment. ESG characteristics are not the sole considerations when making investment decisions for a Fund. Further, investors can differ in their views of what constitutes positive or negative ESG characteristics. As a result, a Fund may invest in issuers that do not reflect the beliefs and values with respect to ESG of any particular investor. ESG considerations may affect a Fund’s exposure to certain companies or industries and a Fund may forego certain investment opportunities. While Fund management views ESG considerations as having the potential to contribute to a Fund’s long-term performance, there is no guarantee that such results will be achieved.

Dividend Policy

The Fund’s policy is to make monthly distributions to shareholders. In order to provide shareholders with a more stable level of dividend distributions, the Fund employs a managed distribution plan (the “Plan”), the goal of which is to provide shareholders with consistent and predictable cash flows by setting distribution rates based on expected long-term returns of the Fund.

The distributions paid by the Fund for any particular month may be more or less than the amount of net investment income earned by the Fund during such month. Furthermore, the final tax characterization of distributions is determined after the year-end of the Fund and is reported in the Fund’s annual report to shareholders. Distributions can be characterized as ordinary income, capital gains and/or return of capital. The Fund’s taxable net investment income and net realized capital gains (“taxable income”) may not be sufficient to support the level of distributions paid. To the extent that distributions exceed the Fund’s current and accumulated earnings and profits, the excess may be treated as a non-taxable return of capital.

A return of capital is a return of a portion of an investor’s original investment. A return of capital is not expected to be taxable, but it reduces a shareholder’s tax basis in his or her shares, thus reducing any loss or increasing any gain on a subsequent disposition by the shareholder of his or her shares. It is possible that a substantial portion of the distributions paid during a calendar year may ultimately be classified as return of capital for U.S. federal income tax purposes when the final determination of the source and character of the distributions is made.

Such distributions, under certain circumstances, may exceed the Fund’s total return performance. When total distributions exceed total return performance for the period, the difference reduces the Fund’s total assets and net asset value (“NAV”) per share and, therefore, could have the effect of increasing the Fund’s expense ratio and reducing the amount of assets the Fund has available for long term investment.

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.

The following information is a summary of certain changes since December 31, 2021. This information may not reflect all of the changes that have occurred since you purchased the Fund.

Except if noted otherwise herein, there were no changes to the Fund’s charter or by-laws that would delay or prevent a change of control of the Fund that were not approved by the shareholders.

In accordance with Section 23(c) of the Investment Company Act of 1940, the Fund may from time to time purchase shares of its common stock in the open market or in private transactions.

Quarterly performance, semi-annual and annual reports, current net asset value and other information regarding the Fund may be found on BlackRock’s website, which can be accessed at blackrock.com. Any reference to BlackRock’s website in this report is intended to allow investors public access to information regarding the Fund and does not, and is not intended to, incorporate BlackRock’s website in this report.


ADDITIONAL INFORMATION		33

Additional Information (continued)

Electronic Delivery

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

To enroll in electronic delivery:

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

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

Householding

The Fund will mail only one copy of shareholder documents, annual and semi-annual reports, Rule 30e-3 notices and proxy statements, to shareholders with multiple accounts at the same address. This practice is commonly called “householding” and is intended to reduce expenses and eliminate 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 call the Fund at (800) 882-0052.

Availability of Quarterly Schedule of Investments

The Fund files its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year as an exhibit to its reports on Form N-PORT. The Fund’s Form N-PORT is available on the SEC’s website at sec.gov. Additionally, the Fund makes its portfolio holdings for the first and third quarters of each fiscal year available at blackrock.com/fundreports.

Availability of Proxy Voting Policies, Procedures and Voting Records

A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities and 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 without charge, upon request (1) by calling (800) 882-0052; (2) on the BlackRock website at blackrock.com; and (3) on the SEC’s website at sec.gov.

Availability of Fund Updates

BlackRock will update performance and certain other data for the Fund on a monthly basis on its website in the “Closed-end Funds” section of blackrock.com as well as certain other material information as necessary from time to time. Investors and others are advised to check the website for updated performance information and the release of other material information about the Fund. 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 in this report.

BlackRock Privacy Principles

BlackRock is committed to maintaining the privacy of its current and former fund investors and individual clients (collectively, “Clients”) and to safeguarding their non-public personal information. The following information is provided to help you understand what personal information BlackRock collects, how we protect that information and why in certain cases we share such information with select parties.

If you are located in a jurisdiction where specific laws, rules or regulations require BlackRock to provide you with additional or different privacy-related rights beyond what is set forth below, then BlackRock will comply with those specific laws, rules or regulations.

BlackRock obtains or verifies personal non-public information from and about you from different sources, including the following: (i) information we receive from you or, if applicable, your financial intermediary, on applications, forms or other documents; (ii) information about your transactions with us, our affiliates, or others; (iii) information we receive from a consumer reporting agency; and (iv) from visits to our websites.

BlackRock does not sell or disclose to non-affiliated third parties any non-public personal information about its Clients, except as permitted by law or as is necessary to respond to regulatory requests or to service Client accounts. These non-affiliated third parties are required to protect the confidentiality and security of this information and to use it only for its intended purpose.

We may share information with our affiliates to service your account or to provide you with information about other BlackRock products or services that may be of interest to you. In addition, BlackRock restricts access to non-public personal information about its Clients to those BlackRock employees with a legitimate business need for the information. BlackRock maintains physical, electronic and procedural safeguards that are designed to protect the non-public personal information of its Clients, including procedures relating to the proper storage and disposal of such information.


34		2 0 2 2 BLACK ROCK SEMI - ANNUAL REPORT TO SHAREHOLDERS

Additional Information (continued)

Fund and Service Providers

Investment Adviser

BlackRock Advisors, LLC

Wilmington, DE 19809

Accounting Agent and Custodian

State Street Bank and Trust Company

Boston, MA 02111

Transfer Agent

Computershare Trust Company, N.A.

Canton, MA 02021

Independent Registered Public Accounting Firm

Deloitte & Touche LLP

Boston, MA 02116

Legal Counsel

Willkie Farr & Gallagher LLP

New York, NY 10019

Address of the Fund

100 Bellevue Parkway

Wilmington, DE 19809


ADDITIONAL INFORMATION		35

Glossary of Terms Used in this Report


Currency Abbreviation

USD		United States Dollar


Portfolio Abbreviation

CLO		Collateralized Loan Obligation

CMT		Constant Maturity Treasury

LIBOR		London Interbank Offered Rate

SOFR		Secured Overnight Financing Rate

TBA		To-Be-Announced


36		2 0 2 2 BLACK ROCK SEMI - ANNUAL REPORT TO SHAREHOLDERS

Want to know more?

blackrock.com | 800-882-0052

This report is intended for current holders. It is not a prospectus. Past performance results shown in this report should not be considered a representation of future performance. Statements and other information herein are as dated and are subject to change.

EGF-06/22-SAR

(b) Not Applicable

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(a) 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

(a) Not Applicable to this semi-annual report

(b) As of the date of this filing, there have been no changes in any of the portfolio managers identified in the most recent annual report on Form N-CSR.

Item 9 –

Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers – Not Applicable due to no such purchases during the period covered by this report.

Item 10 –

Submission of Matters to a Vote of Security Holders – There have been no material changes to these procedures.

Item 11 –

Controls and Procedures

(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.

(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 period covered by this report that have materially affected, or are reasonably likely to materially affect, the registrant’s internal control over financial reporting.

Item 12 –

Disclosure of Securities Lending Activities for Closed-End Management Investment Companies – Not Applicable to this semi-annual report

Item 13 –

Exhibits attached hereto

(a)(1) Code of Ethics – Not Applicable to this semi-annual report

(a)(2) Section 302 Certifications are attached

(a)(3) Any written solicitation to purchase securities under Rule 23c-1 – Not Applicable

(a)(4) Change in Registrant’s independent public accountant – Not Applicable

(b) Section 906 Certifications are attached

(c) Notices to the registrant’s common shareholders in accordance with the order under Section 6(c) of the 1940 Act granting an exemption from Section 19(b) of the 1940 Act and Rule 19b-1 under the 1940 Act, dated May 9, 2009¹

The Fund has received exemptive relief from the Securities and Exchange Commission 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 Fund to make the disclosures to the holders of the Fund’s common shares, in addition to the information required by Section 19(a) of the 1940 Act and Rule 19a-1 thereunder. The Fund 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.

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: August 19, 2022

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: August 19, 2022


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

Date: August 19, 2022

BlackRock Enhanced Government Fund (EGF) N-CSRSCertified semi-annual shareholder report (management investment company)