mspnq0310.htm
OMB APPROVAL   
OMB Number: 3235-0578
Expires: April 30, 2010
Estimated average burden  
hours per response....10.5
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC  20549
 
FORM N-Q
 
QUARTERLY SCHEDULE OF PORTFOLIO HOLDINGS OF REGISTERED
MANAGEMENT INVESTMENT COMPANY
 
Investment Company Act file number 811-21713
 
Madison Strategic Sector Premium Fund
(Exact name of registrant as specified in charter)
 
550 Science Drive, Madison, WI  53711
(Address of principal executive offices)(Zip code)
 
W. Richard Mason
Madison/Mosaic Legal and Compliance Department
8777 N. Gainey Center Drive, Suite 220
Scottsdale, AZ  85258
(Name and address of agent for service)
 
Registrant's telephone number, including area code:  608-274-0300
 
Date of fiscal year end:  December 31
 
Date of reporting period:  March 31, 2010
 
Form N-Q is to be used by management investment companies, other than small business investment companies registered on Form N-5 (ss 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, 100 F Street, NE, Washington, DC  20549-0609.  The OMB has reviewed this collection of information under the clearance requirements of 44 U.S.C. s 3507.
 
Item 1.  Schedule of Investments.
 
Madison Strategic Sector Premium Fund
 
Portfolio of Investments - March 31, 2010 (unaudited)

 

     
Number
 
     
of Shares
Value
COMMON STOCKS:   84.3% of net assets
      
         
CONSUMER DISCRETIONARY:
12.6%
    
 
American Eagle Outfitters, Inc.
  
             30,900
572,268.00
 
Bed Bath & Beyond Inc.*
  
                  400
17,504.00
 
Best Buy Co., Inc.
  
             60,000
2,552,400.00
 
Home Depot Inc.
  
             30,000
970,500.00
 
Kohls Corp.*
  
             26,500
1,451,670.00
 
Lowe's Companies, Inc.
  
            110,000
2,666,400.00
 
Target Corp.
  
             30,000
1,578,000.00
 
Williams-Sonoma, Inc.
  
             24,300
638,847.00
         
CONSUMER SERVICES:
6.4%
    
 
eBay Inc.*
  
127,000
3,422,650.00
 
Garmin Ltd.
  
47,900
1,843,192.00
         
ENERGY:
  
11.8%
    
 
Apache Corp.
  
28,000
2,842,000.00
 
Schlumberger Ltd.
  
22,000
1,396,120.00
 
Transocean Ltd.*
  
29,000
2,505,020.00
 
Weatherford International Ltd.*
  
70,000
1,110,200.00
 
XTO Energy Inc.
  
40,000
1,887,200.00
         
EXCHANGE TRADED FUNDS
4.2%
    
 
Powershares QQQ
  
35,000
1,686,300.00
 
SPDR Trust Series 1
  
15,000
1,754,850.00
         
FINANCIALS:
  
14.6%
    
 
Affiliated Managers Group, Inc.*
  
10,000
790,000.00
 
Bank of America Corp.
  
61,867
1,104,325.95
 
Capital One Financial Corp.
  
67,800
2,807,598.00
 
Citigroup Inc.
  
190,000
769,500.00
 
Marshall & Ilsley Corp.
  
95,000
764,750.00
 
Morgan Stanley
  
68,000
1,991,720.00
 
State Street Corp.
  
50,000
2,257,000.00
 
Wells Fargo & Co.
  
50,000
1,556,000.00
         
HEALTH CARE:
  
17.8%
    
 
Biogen Idec*
  
43,100
2,472,216.00
 
Genzyme Corp.*
  
36,000
1,865,880.00
 
Gilead Sciences, Inc.*
  
45,000
2,046,600.00
 
Medtronic Inc.
  
35,000
1,576,050.00
 
Mylan, Inc.*
  
35,500
806,205.00
 
Pfizer Inc.
  
109,800
1,883,070.00
 
UnitedHealth Group, Inc.
  
86,000
2,809,620.00
 
Zimmer Holdings Inc.*
  
21,000
1,243,200.00
         
INSURANCE:
  
1.4%
    
 
Aflac Inc.
  
17,000
922,930.00
 
MGIC Investment Corp.*
  
25,000
274,250.00
         
SOFTWARE:
  
0.5%
    
 
Check Point Software Technologies Ltd.*
700
24,542.00
 
Symantec Corp.*
  
25,000
423,000.00
         
TECHNOLOGY:
  
15.0%
    
 
Applied Materials, Inc.
  
39,400
531,112.00
 
Cisco Systems, Inc.*
  
170,000
4,425,100.00
 
Dell Inc.*
  
100,000
1,501,000.00
 
EMC Corp.*
  
100,000
1,804,000.00
 
Flextronics International Ltd.*
  
234,900
1,841,616.00
 
Qualcomm Inc.*
  
32,000
1,343,680.00
 
Yahoo! Inc.*
  
60,000
991,800.00
         
 
TOTAL COMMON STOCKS  (Cost $90,828,739)
  
 $    69,721,886
 

 
Contracts
      
 
(100 shares
Expiration
Exercise
 
 
per contract)
Date
Price
Value
CALL OPTIONS WRITTEN:
        
Aflac Inc.
170
May 2010
49.00
98,600.00
American Eagle Outfitters, Inc.
165
May 2010
17.50
25,575.00
American Eagle Outfitters, Inc.
144
August 2010
17.50
30,960.00
Apache Corp.
146
April 2010
95.00
100,010.00
Apache Corp.
134
April 2010
105.00
10,050.00
Bed Bath & Beyond Inc.
4
May 2010
40.00
1,720.00
Best Buy Co., Inc.
300
September 2010
38.00
179,250.00
Best Buy Co., Inc.
300
January 2011
17.50
37,800.00
Best Buy Co., Inc.
100
January 2011
40.00
56,250.00
Biogen Idec
295
April 2010
55.00
81,862.50
Biogen Idec
136
July 2010
50.00
116,280.00
Capital One Financial Corp.
300
June 2010
40.00
106,500.00
Capital One Financial Corp.
200
September 2010
40.00
96,500.00
Check Point Software Technologies Ltd.
7
July 2010
30.00
3,745.00
Cisco Systems, Inc.
400
April 2010
24.00
83,400.00
Cisco Systems, Inc.
500
July 2010
24.00
130,250.00
Cisco Systems, Inc.
500
July 2010
25.00
93,750.00
Cisco Systems, Inc.
300
October 2010
25.00
73,200.00
eBay Inc.
200
April 2010
24.00
60,100.00
eBay Inc.
250
July 2010
25.00
75,500.00
eBay Inc.
500
October 2010
25.00
185,000.00
EMC Corp.
700
July 2010
18.00
69,300.00
EMC Corp.
300
October 2010
19.00
29,550.00
Garmin Ltd.
315
July 2010
33.00
174,825.00
Genzyme Corp.
160
April 2010
52.50
15,200.00
Genzyme Corp.
200
July 2010
57.50
32,000.00
Gilead Sciences, Inc.
200
May 2010
49.00
8,100.00
Gilead Sciences, Inc.
250
August 2010
50.00
27,500.00
Home Depot Inc.
300
August 2010
32.00
55,350.00
Kohl's Corp.
150
April 2010
50.00
72,000.00
Kohl's Corp.
115
July 2010
50.00
69,000.00
Lowe's Companies, Inc.
700
July 2010
25.00
57,050.00
Lowe's Companies, Inc.
400
October 2010
24.00
73,200.00
Marshall & Ilsley Corp.
250
September 2010
7.50
33,125.00
Medtronic Inc
350
May 2010
46.00
38,500.00
Morgan Stanley
280
October 2010
33.00
39,060.00
Mylan, Inc.
290
April 2010
17.50
153,700.00
Mylan, Inc.
65
October 2010
21.00
18,362.50
Mylan, Inc.
300
January 2011
17.50
48,150.00
Pfizer Inc.
300
September 2010
19.00
9,600.00
Pfizer Inc.
500
January 2011
7.50
62,000.00
Powershares QQQ
350
June 2010
46.00
106,925.00
Qualcomm, Inc
200
October 2010
40.00
88,000.00
Schlumberger Ltd
220
May 2010
65.00
42,900.00
SPDR Trust Series 1
150
May 2010
112.00
95,925.00
State Street Corp.
200
May 2010
46.00
32,000.00
State Street Corp.
300
August 2010
47.00
78,000.00
Symantec Corp.
50
January 2011
17.50
7,500.00
Target Corp.
300
April 2010
49.00
111,000.00
Transocean Ltd
90
May 2010
85.00
39,375.00
Transocean Ltd
200
January 2011
90.00
146,000.00
UnitedHealth Group, Inc.
200
June 2010
33.00
34,100.00
UnitedHealth Group, Inc.
200
September 2010
36.00
30,300.00
Weatherford International Ltd
400
August 2010
20.00
14,400.00
Wells Fargo & Co.
200
April 2010
29.00
44,600.00
Wells Fargo & Co.
300
July 2010
29.00
95,250.00
Williams-Sonoma, Inc.
243
August 2010
22.50
116,640.00
XTO Energy Inc.
80
May 2010
47.00
10,560.00
XTO Energy Inc.
320
August 2010
47.00
69,280.00
Yahoo! Inc.
300
October 2010
17.00
32,250.00
Zimmer Holdings Inc.
100
June 2010
60.00
22,250.00
Zimmer Holdings Inc.
110
September 2010
60.00
39,600.00
         
         
TOTAL CALL OPTIONS WRITTEN (Premiums Received $3,437,335)
  
 $      3,988,730



SHORT-TERM INVESTMENTS:
      
         
 
Repurchase Agreement - 20.4%
      
 
US Bank issued 3/31/10 at 0.01%, due
    
 
4/1/10, collateralized by $17,227,711 in Fannie
    
 
Mae MBS # due 7/1/18.  Proceeds at
      
 
maturity are $16,889,852 (Cost $16,889,847).
  
16,889,847
         
 
TOTAL INVESTMENTS:  104.7% of net assets (Cost $107,718,587)
 $    86,611,733
         
LIABILITIES LESS CASH AND OTHER ASSETS:  0.1%
  
           113,729
TOTAL CALL OPTIONS WRITTEN:  (4.8%)
    
       (3,988,730)
         
NET ASSETS:  100%
    
 $    82,736,732

Notes to Quarterly Holdings Report

 
Securities Valuation: Securities traded on a national securities exchange are valued at their closing sale price.  Repurchase agreements and other securities having maturities of 60 days or less are valued at amortized cost, which approximates market value.  Securities having longer maturities, for which quotations are readily available, are valued at the mean between their closing bid and ask prices.  Securities for which market quotations are not readily available are valued at their fair value as determined in good faith under procedures approved by the Board of Trustees.
The Funds adopted Financial Accounting Standards Board (“FASB”) guidance on fair value measurements effective January 1, 2008.  Fair value is defined as the price that the Funds would receive to sell an investment or pay to transfer a liability in an orderly transaction with an independent buyer in the principal market, or in the absence of a principal market, the most advantageous market for the investment or liability.  A three-tier hierarchy distinguishes between (1) inputs that reflect the assumptions market participants would use in pricing an asset or liability developed based on market data obtained from sources independent of the reporting entity (observable inputs) and (2) inputs that reflect the reporting entity’s own assumptions about the assumptions market participants would use in pricing an asset or liability developed based on the best information available in the circumstances (unobservable inputs) and to establish classification of fair value measurements for disclosure purposes.
Various inputs as noted above are used in determining the value of the Fund's investments and other financial instruments. These inputs are summarized in the three broad levels listed below.
Level 1: Quoted prices in active markets for identical securities
Level 2: Other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.)
Level 3: Significant unobservable inputs (including the Funds’ own assumptions in determining the fair value of investments)
The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. In April 2009, the FASB issued guidance on how to determine the fair value of assets and liabilities when the volume and level of activity for the asset/liability have significantly decreased as well as guidance on identifying circumstances that indicate a transaction is not orderly.  As of March 31, 2010, none of the Funds held securities deemed as a Level 3.
The following is a summary representing the Fund's investments carried on the Statements of Assets and Liabilities by caption and by level within the fair value hierarchy as of March 31, 2010:
           
   
Level 1
Level 2
Level 3
Value at 3/31/10
 
Assets:
        
 
   Common Stocks
 $   69,721,886
 $                   -
 $                   -
 $    69,721,886
 
   Repurchase Agreement
   $  16,889,847  
                      16,889,847
 
      Total
 $   69,721,886
 $  16,889,847
 $                   -
 $    86,611,733
           
 
Liabilities:
        
 
   Written Options
 $     3,988,730
 $                   -
 $                   -
 $      3,988,730
 
      Total
 $     3,988,730
 $                   -
 $                   -
 $      3,988,730
           
 
 
    
In March 2008, the FASB issued guidance intended to enhance financial statement disclosures for derivative instruments and hedging activities and enable investors to understand: a) how and why a fund uses derivative instruments, b) how derivative instruments and related hedge fund items are accounted for, and c) how derivative instruments and related hedge items affect a fund’s financial position, results of operations and cash flows. This guidance is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008. The Fund adopted this guidance effective January 2009.
 
The following table presents the types of derivatives in the Fund by location as presented on the Statement of Assets and Liabilities as of March 31, 2010:
 
Statement of Asset & Liability Presentation of Fair Values of Derivative Instruments
 
 
Asset Derivatives
 
Liability Derivatives
 
Derivatives not accounted
for as hedging instruments
 
Statement of Assets and Liabilities Location
 
Fair Value
 
Statement of Assets
and Liabilities Location
 
Fair Value
 
Equity contracts
 
--
 
--
 
Options written
 
 
$3,988,730
 

The following table presents the effect of Derivative Instruments on the Statement of Operations for the period ended March 31, 2010:
 
 
Realized Gain on Derivatives:
 
Change in Unrealized Depreciation on Derivatives
 
Derivatives not accounted
for as hedging instruments
 
    
Equity contracts – options
 
$633,610
 
$833,546
 

 
In January 2010, amended guidance was issued by FASB for fair value measurement disclosures about transfers into and out of Levels 1 and 2 and separate disclosures about purchases, sales, issuances and settlements relating to Level 3 measurements. It also clarifies existing fair value disclosures about the level of disaggregation, inputs and valuation techniques used to measure fair value. The amended guidance is effective for financial statements for fiscal years and interim periods beginning after December 15, 2009 except for disclosures about purchases, sales, issuances and settlements relating to Level 3 measurements, which are effective for fiscal years beginning after December 15, 2010, and for interim periods within those fiscal years. Earlier adoption is permitted. In the period of initial adoption, the Fund will not be required to provide the amended disclosures for any previous periods presented for comparative purposes. However, those disclosures are required for periods ending after initial adoption. The impact of this guidance on the Fund’s financial statements and disclosures, if any, is currently being assessed.
 

 
 
 

Item 2. Controls and Procedures.
 
(a) The registrant's principal executive officer and principal financial officer determined that the registrant's disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940 (the "Act") are effective, based on their evaluation of these controls and procedures within 90 days of the date of this report based on the evaluation of these controls and procedures required by Rule 30a-3(b) under the Act.  There were no significant changes in the Trust's internal controls or in other factors that could significantly affect these controls subsequent to the date of their evaluation. The officers identified no significant deficiencies or material weaknesses.
 
(b) There were no changes in the registrant's internal control over financial reporting (as defined in Rule 30a-3(d) under the 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.
 
Certifications of principal executive and principal financial officers as required by Rule 30a-2(a) under the Act.
 
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.
 
Madison Strategic Sector Premium Fund
 
By: (signature)
 
W. Richard Mason, CCO
 
Date: May 26, 2010
 
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this Report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
 
By: (signature)
 
Katherine L. Frank, Chief Executive Officer
 
Date:  May 26, 2010
 
By:  (signature)
 
Greg Hoppe, Chief Financial Officer
 
Date: May 26, 2010