HMH Helios Multi-Secto

MANAGEMENT DISCUSSION OF FUND PERFORMANCE

For the six months ended September 30, 2012, Helios Advantage Income Fund, Inc. (NYSE: HAV) had a total return based on net asset value of 6.98% and a total return based on market price of 3.28%, which assumes the reinvestment of dividends and is exclusive of brokerage commissions. Based on the NYSE closing price of $9.21 on September 30, 2012, the Fund’s shares had a dividend yield of 8.14%. 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.

Individual contributors of performance included Marina District Finance, Pultegroup, and Niska Gas Storage. Marina District Finance owns the Borgata Hotel/Casino in Atlantic City whose bonds rallied as investors realized that competition in that market would not negatively impact the property. Pultegroup is a residential homebuilder benefitting from the apparent bottoming in the housing sector and Niska Gas Storage which benefited from high volumes of natural gas injections as new gas production came online this period.

Detractors of performance included Insight Communications, General Motors’ equity, and AK Steel. Insight Communications is a cable TV company whose bonds were called when the company was acquired by Time Warner Cable. General Motors’ equity was down in the period as investors worried about the possible impact of a

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sale of the U.S. government’s shares acquired during the recession. AK Steel is a large North American steel producer whose bonds were lower on softer steel prices resulting from a reduction in Chinese demand.

HIGH YIELD MARKET ENVIRONMENT

The high yield market delivered robust returns for the six-month period ended September 30, 2012. Early in the period, markets corrected lower as, for the third year in a row, investors held a negative view beginning in May 2012. This was primarily attributed to concerns over the health of the European Union and slowing economic growth in China. Unlike prior years, however, the correction was short-lived, confined mostly to the month of May. Every other month during the period saw strong positive returns in excess of 1% per month cumulating to a six-month return of 6.5% despite the correction in May. The high yield bond market’s enthusiasm was not matched by equity returns, which were up only 1.6% as measured by the Russell 2000 Index.

The spread between high yield corporate bonds and the 10-Year U.S. Treasury compressed modestly during the six-month period from 594 basis points to 569 basis points. We view this compression as a positive because the underlying 10-year U.S. Treasury rate fell from 2.21% to 1.64%.

Current spreads of 569 basis points remain wider than the 400-500 basis points we would normally expect to see at this point in the credit cycle, although that has diminished somewhat as spreads continue to narrow. Therefore, while the high yield market continues to represent value to investors, further price appreciation is likely to be limited as the sector, as a whole, is trading above par.

Corporate credit has been sound for the past couple of years, and we saw stable credit this period with the default rate declining slightly from 1.9%. ¹ to 1.8%. ² Note that this period’s default rate of 1.8% remains well below the market’s 25-year average default rate of 4.2% ³

Credit ratings agencies confirm the stable trend in corporate credit by upgrading 1.0 times as many high yield companies as they downgraded in the past 12 months. ⁴ We noted that companies reported acceptable (but not strong) earnings through the second quarter of 2011, (the latest reporting period) and we saw more management teams taking a cautious view of the future.

Supply and demand was generally positive during the period with high yield mutual funds seeing strong inflows. ⁵ New issue volume was strong following May’s correction, accelerating to an all-time quarterly record of $98.5 billion, in the third quarter of calendar 2012, above the previous record of $96.8 billion posted in the first quarter of 2012. September’s new issue volume of $46 billion was an all-time record. Overall, with money flooding into mutual funds, deals were oversubscribed and traded higher in the aftermarket. Traders report that there seems to be ample cash available to buy issues and report that some challenges exist in purchasing good quality paper in the secondary market. The bulk of new issues are used to refinance debt which has the effect of improving credit quality by eliminating near term maturities. We note with some concern, however, a rise in the number of riskier new issues late in the period when some companies took advantage of the robust buying appetite and issued lower quality paper, PIK or pay-in-kind bonds, and financing to pay dividends to owners. While the volume of these riskier transactions is not yet concerning, we note that it is the first time since the downturn that we have seen a significant increase in such paper.

OUTLOOK

Brookfield has been positive on the high yield market, noting the robust credit quality, good corporate liquidity and excellent progress on the part of corporate treasurers in managing their debt structures. The high yield market agreed and returns were excellent. As these fundamentals remain in place, our outlook for this asset class over the next 12 months or so remains positive.

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However, we also believe that significant further potential upside appreciation is limited due to the decline in spreads from 737 to 569 basis points in 2012, and with the return of the market above par. While normally we would expect the spread to be 50 to 100 basis points narrower than current levels, we note the unusually depressed level of the benchmark treasury yields, which may be artificially depressed due to actions by the Federal Reserve. With the high yield market trading at yields near all time lows, our enthusiasm is tempered at this point. We are carefully watching the quality of new issues coming to market as a possible negative going forward.

Given our expectation of modest economic growth, modestly increasing defaults, although no general recession, we believe that high yield investors are adequately, but not generously compensated at current yield spread levels. While we would normally be targeting yield spreads of 400 to 500 basis points at this point in the credit cycle, we remain skeptical that the problems in Europe are permanently addressed, and are increasingly concerned with the health of the U.S. balance sheet which will need to be addressed shortly after the November election. With these risks outstanding we expect high yield investors will continue to demand a premium to historical spreads, at least for the next few quarters. For investors seeking to clip the current coupon offered in the high yield market, the investment landscape remains attractive.

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 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.

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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 September 30, 2012 and subject to change based on subsequent developments.

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Portfolio Characteristics (Unaudited)

September 30, 2012

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