HMH Helios Multi-Secto

MANAGE MENT DISCUSSION OF FUND PERFORMANCE

For the fiscal year ended March 31, 2013, Helios Advantage Income Fund, Inc. (NYSE: HAV) had a total return based on net asset value of 14.66% and a total return based on market price of 6.22%, which assumes the reinvestment of dividends and is exclusive of brokerage commissions. Based on the NYSE closing price of $9.09 on March 28, 2013 (the last business day of the fiscal year), the Fund’s shares had a dividend yield of 8.25%. The dividend yield is calculated as the annualized amount of the reporting period’s most recent monthly dividend declared divided by the stated stock price.

The Fund was overweight in Basic Industry, Services and Capital Goods. The Basic Industry sector benefited from improving economic growth as well as strong security selection which contributed to the Fund’s performance, particularly in Building Materials. The greatest contributor to performance was the overweight in the Services sector, where strong security selection, particularly among Homebuilding bonds, contributed to the Fund’s overall performance. Strong security selection in the Capital Goods sector, particularly among Packaging bonds, also added to performance.

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The Fund was underweight in Banking, Financial Services, Automotive and Telecommunications. Banking detracted from the Fund’s performance as the sector outperformed the market. Also underweight were bonds in the Financial Services sector, which detracted from performance as the sector outperformed. The Fund’s exposure to the Automotive sector, whose bonds outperformed the market, coupled with below market security selection from the better-quality bias in the holdings in that industry was the greatest detractor to performance. The Fund’s underweight in Telecommunications also detracted from performance, a sector that also outperformed during the period.

HIGH YIELD MARKET COMMENTARY

Investors enjoyed strong returns in the high yield market for the 12-month period ended March 31, 2013. The majority of catalysts were positive during the period which saw robust equity markets and lower government bond yields. The Chicago Board Options Exchange Market Volatility Index (VIX), a measure of equity market volatility, sometimes called the “fear gauge” fell, indicating that investors grew increasingly confident and were willing to take risk.

Despite the overall positive trend, there was some uncertainty during the period. As we entered the late spring of 2012, worldwide markets experienced a period of concern centering on the pace of worldwide economic growth. Commentators noted this was the third consecutive summer growth scare and wondered if there were problems with the seasonal statistics followed by investors. Whatever the cause, equity markets and, to a lesser extent high yield, corrected in May 2012, however the correction was short-lived. It was positive thereon in, with only a minor pause in late autumn interrupting the uptrend.

Towards the end of the period, markets again focused on possibly negative macroeconomic factors in the U.S. such as a closely fought Presidential election, the so-called “fiscal cliff”; automatic tax increases of such magnitude that many economists warned of recession and automatic federal governmental spending cuts called the “sequester.” A last minute compromise softened the tax increase blow, and the “sequester” had little impact on the economy. Worry was again fueled by a banking crisis in Cyprus which raised the possibility of insured bank depositors receiving less than the full value of their deposits. While the final resolution made insured depositors whole, Cyprus imposed capital controls which run counter to resolutions made by the European Union (EU) and may bode poorly for other peripheral European countries.

It may seem surprising in light of these repeated crises that investors maintained a “risk-on” posture, driving equity markets to record or near-record highs. As the high yield bond market tends to be more correlated to equities than U.S. Treasuries, it is not surprising that the high yield market showed strong returns.

U.S. Treasury yields, as measured by the 10-Year U.S. Treasury bond, fell 36 basis points this period. This decline, coupled with strong high yield market returns, pushed the high yield market spread down to 478 basis points from 599 basis points at the beginning of the first quarter. While this represents a significantly lower spread than we have seen in a while, spreads remain wide to the level normally seen at this point in the credit cycle, and may indicate the market retains value.

As is typical in a bull market, the more volatile lower quality credits outperformed better quality names. CCC-rated bonds outperformed, returning 16.1% in the period, compared to 13.0% for single B-rated securities.

Corporate credit has been sound for the past several years, and we saw a 1.2% default rate ¹ at the end of this period. This remains well below the market’s 25-year average default rate of 4.2%.2 The 2013 calendar year begins the fourth year in which high yield defaults are less than 2%, which is normal for the middle part of the credit cycle. It is not at all unusual, however, for the default rate to pop up in any individual year for idiosyncratic, as opposed to systemic, reasons.

The end of the first quarter also saw stability in rating agency activity which began deteriorating in the third quarter of 2011. The trailing 12-month upgrade/downgrade ratio ended the period at 1.0x, ³ indicating stable credit, as measured by the ratings agencies. Brookfield noted that companies reported generally acceptable cash flows

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through the fourth quarter but we continue to see challenging earnings and a continued reduction of forward earnings estimates.

During the period, the market saw outperformance in housing, service and financial industries which were up 15.8%, 15.2%, and 15.5%, respectively. ⁴ The outperformers tend to be sectors which underperformed in the past recession. Underperforming sectors included technology, consumer non-durables, and manufacturing, which were up 9.4%, 10.6%, and 10.8%, respectively. ⁴ Underperforming sectors tended to be those that have led during the recovery rally.

Supply and demand was positive for most of the period, with strong mutual fund inflows, coupled with a robust new issue market. Debt refinancing continued to be the primary use of proceeds for new issuers, representing 68% of all volume in the first calendar quarter of 2013 up from 60% last year. Refinancings have the effect of reducing overall risk to high yield investors by extending debt maturities, and reducing “credit hammers” in high yield companies. Companies have taken advantage of robust new issue activity for the last four years to refinance a substantial portion of their capital structures with the result that current debt maturities in general remain quite manageable.

OUTLOOK

For most of the past year, our view has remained that the high yield bond market has maintained a balance between spreads which are, in our opinion, more attractive than usual for the current phase of the credit cycle, with the negative of trading well above par value – often approaching record high prices.

We retain our positive view of credit and note that new issue trends have lately been risk-reducing rather than risk-additive. Refinancings are up, new issue credit quality is up, mergers and acquisitions activity is muted, and despite the headlines surrounding the possible leveraged buyouts (LBO) of Heinz and Dell, LBO activity has been moderate. As we survey the leveraged finance landscape, we see more signs of re-risking in the investment grade corporate debt and the leveraged loan markets than the high yield bond market, which may work to the benefit of high yield bond investors.

We remain concerned about global political and economic risks as countries in Europe and North America struggle with structural deficits, ballooning debt and pension liabilities. While markets shrugged off the combined effects of a “fiscal cliff,” sequestration, and Cyprus at the end of the period, they may not prove so forgiving in the future. As economic growth in the U.S. takes root and deepens, and as a newly rebounding housing market fuels growth, investors are increasingly asking when the Federal Reserve will end its stimulative policies, resulting in higher interest rates. While the high yield bond market has historically had little correlation to U.S. Treasury bonds, there is always the possibility that rising rates could offset an otherwise positive environment.

As we have noted in past updates, the high yield market is trading at a substantial premium to par value, which we believe substantially limits further upside appreciation from here. Investors, therefore, should look at current return as the best indicator of possible future total returns and evaluate the attractiveness of the market on that basis, rather than looking at past total return performance. We note that the absolute level of yield in the high yield market is at or near historic lows, although point out that yield spread to government bond rates remains attractive given the current state of corporate credit, and believe the high yield market continues to represent value at today’s levels.

Forward-Looking Information

This management discussion contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements that are based on various assumptions (some of which are beyond our control) may

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be identified by reference to a future period or periods or by the use of forward-looking terminology, such as “may,” “will,” “believe,” “expect,” “anticipate,” “continue,” “should,” “intend,” or similar terms or variations on those terms or the negative of those terms. Although we believe that the expectations contained in any forward-looking statement are based on reasonable assumptions, we can give no assurance that our expectations will be attained. We do not undertake, and specifically disclaim any obligation, to publicly release any update or supplement to any forward-looking statements to reflect the occurrence of anticipated or unanticipated events or circumstances after the date of such statements.

Disclosure

The Fund’s portfolio holdings are subject to change without notice. The mention of specific securities is not a recommendation or solicitation for any person to buy, sell or hold any particular security. There is no assurance that the Helios Advantage Income Fund, Inc. currently holds these securities.

The Barclays Capital U.S. Corporate High Yield Index covers the U.S. dollar denominated, non-investment grade, fixed-rate, taxable corporate bond market. Securities are classified as high yield if the middle rating of Moody’s, Fitch, and S&P is Ba1/BB+/BB+ or below. The index excludes emerging markets debt. The Barclays Capital U.S. Corporate High Yield Index is part of the Barclays Capital U.S. Universal and Global High Yield Indices. The index is unmanaged and, unlike the Fund, is not affected by cash flows or trading and other expenses. It is not possible to invest directly in an index. Index performance is shown for illustrative purposes only and does not predict or depict the performance of the Fund.

The Fund may utilize leverage to seek to enhance the yield and net asset value of its common stock, through bank borrowings, issuance of short-term debt securities or shares of preferred stock, or a combination thereof. However, these objectives cannot be achieved in all interest rate environments. While leverage may result in a higher yield for the Fund, the use of leverage involves risk, including the potential for higher volatility of the NAV, fluctuations of dividends and other distributions paid by the Fund and the market price of the Fund’s common stock, among others. Certain funds may invest assets in securities of issuers domiciled outside the United States, including issuers from emerging markets. Foreign investing involves special risks, including foreign currency risk and the possibility of substantial volatility due to adverse political, economic or other developments.

Performance data quoted represents past performance results and does not guarantee future results. Current performance may be lower or higher than the performance data quoted.

These views represent the opinions of Brookfield Investment Management Inc. and are not intended to predict or depict the performance of any investment. These views are as of the close of business on March 31, 2013 and subject to change based on subsequent developments.

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Portfolio Characteristics (Unaudited)

March 31, 2013