UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM N-Q

QUARTERLY SCHEDULE OF PORTFOLIO HOLDINGS OF REGISTERED MANAGEMENT INVESTMENT COMPANY

Investment Company Act file number 811-3070

Hilliard-Lyons Government Fund, Inc.

(Exact name of registrant as specified in charter)

500 W. Jefferson St.

Louisville, Kentucky 40202-2823

(Address of principal executive offices) (Zip code)

Joseph C. Curry, Jr.

Hilliard-Lyons Government Fund, Inc.

P.O. Box 32760

Louisville, Kentucky 40232-2760

(Name and address of agent for service)

Registrant’s telephone number, including area code: 502-588-8400

Date of fiscal year end: August 31

Date of reporting period: May 31, 2007

Form N-Q is to be used by management investment companies, other than small business investment companies registered on Form
N-5 (§§ 239.24 and 274.5 of this chapter), to file reports with the Commission, not later than 60 days after the close of the first and third fiscal quarters, pursuant to rule 30b1-5 under the Investment Company Act of 1940 (17 CFR 270.30b1-5). The Commission may use the information provided on Form N-Q in its regulatory, disclosure review, inspection, and policymaking roles.

A registrant is required to disclose the information specified by Form N-Q, and the Commission will make this information public. A registrant is not required to respond to the collection of information contained in Form N-Q unless the Form displays a currently valid Office of Management and Budget (“OMB”) control number. Please direct comments concerning the accuracy of the information collection burden estimate and any suggestions for reducing the burden to the Secretary, Securities and Exchange Commission, 450 Fifth Street, NW, Washington, DC 20549-0609. The OMB has reviewed this collection of information under the clearance requirements of 44 U.S.C. § 3507.

Item 1. Schedule of Investments.

HILLIARD-LYONS GOVERNMENT FUND, INC.

SCHEDULE OF INVESTMENTS

(UNAUDITED)

May 31, 2007

	Principal       Amount		Cash Equivalent Yield		Maturity Date	Value
		U.S. GOVERNMENT SPONSORED ENTERPRISES* --100.3%**
$	40,000,000	Federal Home Loan Bank Discount Note	5.256	%	06/01/07	$      40,000,000
	1,718,000	Federal Home Loan Bank Discount Note	5.253		06/01/07	1,718,000
	40,000,000	Federal Farm Credit Bank Discount Note	5.169		06/04/07	39,983,017
	25,000,000	Federal Farm Credit Bank Discount Note	5.167		06/05/07	24,985,889
	30,000,000	Federal Home Loan Bank Discount Note	5.285		06/06/07	29,978,625
	20,000,000	Federal Farm Credit Bank Discount Note	5.142		06/07/07	19,983,000
	40,000,000	Federal Home Loan Bank Discount Note	5.280		06/08/07	39,960,061
	40,000,000	Federal Home Loan Bank Discount Note	5.164		06/11/07	39,943,889
	35,000,000	Federal Home Loan Bank Discount Note	5.210		06/12/07	34,945,458
	35,000,000	Federal Home Loan Bank Discount Note	5.202		06/13/07	34,940,150
	29,000,000	Federal Home Loan Bank Discount Note	5.219		06/14/07	28,946,696
	28,574,000	Federal Home Loan Bank Discount Note	5.285		06/15/07	28,517,161
	20,000,000	Federal Farm Credit Bank Discount Note	5.175		06/18/07	19,951,928
	35,000,000	Federal Farm Credit Bank Discount Note	5.218		06/19/07	34,911,100
	40,000,000	Federal Home Loan Bank Discount Note	5.259		06/20/07	39,891,806
	20,000,000	Federal Home Loan Bank Discount Note	5.238		06/21/07	19,943,667
	30,000,000	Federal Home Loan Bank Discount Note	5.228		06/22/07	29,910,487
	25,000,000	Federal Farm Credit Bank Discount Note	5.247		06/25/07	24,914,833
	40,000,000	Federal Farm Credit Bank Discount Note	5.212		06/26/07	39,858,611
	35,000,000	Federal Home Loan Bank Discount Note	5.228		06/27/07	34,870,451
	40,000,000	Federal Home Loan Bank Discount Note	5.487		06/28/07	39,847,600
	40,000,000	Federal Home Loan Bank Discount Note	5.197		06/29/07	39,840,400
	20,000,000	Federal Farm Credit Bank Discount Note	5.432		07/02/07	19,912,339
	20,000,000	Federal Home Loan Bank Discount Note	5.245		07/03/07	19,909,333
	35,000,000	Federal Home Loan Bank Discount Note	5.197		07/05/07	34,830,756
	30,000,000	Federal Home Loan Bank Discount Note	5.218		07/06/07	29,850,667
	30,000,000	Federal Home Loan Bank Discount Note	5.230		07/09/07	29,838,817
	25,000,000	Federal Home Loan Bank Discount Note	5.217		07/10/07	24,861,875
	30,000,000	Federal Farm Credit Bank Discount Note	5.218		07/11/07	29,831,000
	25,000,000	Federal Home Loan Bank Discount Note	5.250		07/12/07	24,855,931
	25,000,000	Federal Home Loan Bank Discount Note	5.238		07/13/07	24,850,667
	30,000,000	Federal Farm Credit Bank Discount Note	5.296		07/16/07	29,809,500
	25,000,000	Federal Home Loan Bank Discount Note	5.264		07/17/07	24,836,764
	40,000,000	Federal Home Loan Bank Discount Note	5.270		07/18/07	39,732,622
	19,189,000	Federal Farm Credit Bank Discount Note	5.227		07/19/07	19,058,643
	30,000,000	Federal Home Loan Bank Discount Note	5.422		07/20/07	29,791,342
	40,000,000	Federal Home Loan Bank Discount Note	5.228		07/23/07	39,705,911
	30,000,000	Federal Home Loan Bank Discount Note	5.216		07/25/07	29,770,050
	30,000,000	Federal Home Loan Bank Discount Note	5.254		07/27/07	29,761,533
	37,000,000	Federal Farm Credit Bank Discount Note	5.262		07/30/07	36,691,954

HILLIARD-LYONS GOVERNMENT FUND, INC.

SCHEDULE OF INVESTMENTS – continued

(UNAUDITED)

May 31, 2007

	Principal       Amount		Cash   Equivalent Yield		Maturity     Date	Value
$	30,000,000	Federal Home Loan Bank Discount Note	5.274	%	07/31/07	$      29,746,000
	35,000,000	Federal Home Loan Bank Discount Note	5.275		08/01/07	34,699,914
	40,000,000	Federal Home Loan Bank Discount Note	5.279		08/03/07	39,642,300
	40,000,000	Federal Home Loan Bank Discount Note	5.275		08/08/07	39,618,067
	30,000,000	Federal Farm Credit Bank Discount Note	5.262		08/10/07	29,701,917
	35,000,000	Federal Home Loan Bank Discount Note	5.268		08/15/07	34,627,396
	25,000,000	Federal Home Loan Bank Discount Note	5.275		08/17/07	24,728,896
	17,000,000	Federal Home Loan Bank Discount Note	5.275		08/17/07	16,814,558
	30,000,000	Federal Home Loan Bank Discount Note	5.261		08/22/07	29,650,133
	20,000,000	Federal Home Loan Bank Discount Note	5.275		08/24/07	19,760,833
	40,000,000	Federal Home Loan Bank Discount Note	5.264		08/29/07	39,492,700
	25,000,000	Federal Home Loan Bank Discount Note	5.275		08/31/07	24,680,868
		TOTAL U. S. GOVERNMENT SPONSORED ENTERPRISES
		(at amortized cost – $1,568,906,115)				1,568,906,115
		TOTAL INVESTMENTS - 100.3%
		(at amortized cost – $1,568,906,115***)				1,568,906,115
		OTHER ASSETS LESS LIABILITIES - (0.3%)				(4,103,295)
		NET ASSETS - 100.0%				$1,564,802,820

* Obligations of U.S. Government sponsored enterprises are not issued nor guaranteed by the United States Treasury.

** The percentage shown for each investment category is the total value of that category as a percentage of the total net assets of the Fund.

*** Also represents cost for federal income tax purposes.

Item 2. Controls and Procedures.

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

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

Item 3. Exhibits.

(a) Certifications pursuant to Section 302 of the Sarbanes Oxley Act of 2002. Filed herewith.

SIGNATURES

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.

(Registrant)        Hilliard-Lyons Government Fund, Inc.                                                                             

By (Signature and Title)    /s/ Joseph C. Curry, Jr.                                                         

Joseph C. Curry, Jr., President

(principal executive officer)

Date: June 29, 2007

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

By (Signature and Title)    /s/ Dianna P. Wengler                                                         

Dianna P. Wengler, Senior Vice President and Treasurer

(principal financial officer)

Date: June 29, 2007

By (Signature and Title)    /s/ Joseph C. Curry, Jr.                                                         

Joseph C. Curry, Jr., President

(principal executive officer)

Date: June 29, 2007