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UNITED STATES
SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549



Form 10-K

Annual Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934

For the fiscal year ended: December 31, 2010

Commission file number: 001-34516


Cowen Group, Inc.(Exact name of registrant as specified in its charter)

Delaware(State or other jurisdiction of
incorporation or organization)

27-0423711(I.R.S. Employer
Identification No.)


599 Lexington Avenue
New York, New York 10022
(212) 845-7900(Address, including zip code, and telephone number, including area code, of registrant's principal executive office)

Securities
registered pursuant to Section 12(b) of the Act:

Title of Each Class

Name of Exchange on Which RegisteredClass A Common Stock, par value $0.01 per share

The Nasdaq Global Market


Securities
registered pursuant to Section 12(g) of the Act:None



Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities
Act. Yes o    No ý

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the
Act. Yes o    No ý

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past
90 days. Yes ý    No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period
that the registrant was required to submit and post such
files). o Yes    o No

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of the Annual Report on Form 10-K or any
amendment to the Annual Report on Form 10-K. ý

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting
company. See the definitions of "large accelerated filer," "accelerated filer," and "smaller reporting company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer o

Accelerated filer ý

Non-accelerated filer o (Do not check if a smaller
reporting company)

Smaller reporting company o


Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the
Act). Yes o    No ý

The aggregate market value of Class A common stock held by non-affiliates of the registrant on June 30, 2010, the last business day of the registrant's
most recently completed second fiscal quarter, based upon the closing sale price of the Class A common stock on the NASDAQ Global Market on that date was $138,580,525.

As
of March 10, 2011 there were 75,882,678 shares of the registrant's common stock outstanding.

Documents
incorporated by reference:

Part III
of this Annual Report on Form 10-K incorporates by reference information (to the extent specific sections are referred to herein) from the Registrant's
Proxy Statement for its 2011 Annual Meeting of Stockholders.



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Item No.





Page No.PART I1.

Business

11A.

Risk Factors

91B.

Unresolved Staff Comments

312.

Properties

313.

Legal Proceedings

314.

(Removed and Reserved)

40PART II5.

Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

416.

Selected Financial Data

417.

Management's Discussion and Analysis of Financial Condition and Results of Operations

437A.

Quantitative and Qualitative Disclosures About Market Risk

838.

Financial Statements and Supplementary Data

879.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

879A.

Controls and Procedures

879B.

Other Information

87PART III10.

Directors, Executive Officers and Corporate Governance

8811.

Executive Compensation

8812.

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

8813.

Certain Relationships and Related Transactions

8814.

Principal Accountant Fees and Services

88PART IV15.

Exhibits and Financial Statement Schedules

89CONSOLIDATED FINANCIAL STATEMENTS

F-1Management's Report on Internal Control over Financial Reporting

F-2Report of PricewaterhouseCoopers LLP, Independent Registered Public Accounting
Firm

F-3Consolidated Statements of Financial Condition

F-3Consolidated Statements of Operations

F-4Consolidated Statements of Changes in Equity

F-5Consolidated Statements of Cash Flows

F-6Notes to Consolidated Financial Statements

F-8Supplemental Financial Information

F-84SIGNATURESEXHIBIT INDEX


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Special Note Regarding Forward-Looking Statements

We have included or incorporated by reference into our Annual Report on Form 10-K (the "Annual Report"), and from
time to time may make in our public filings, press releases or other public documents, certain statements, including (without limitation) those under Item 1"Business,"
Item 1A"Risk Factors," Item 3"Legal Proceedings," Item 7"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and Item 7A"Quantitative and Qualitative Disclosures about Market Risk" that may constitute "forward-looking statements" within the meaning of the safe harbor
provisions of the Private Securities Litigation Reform Act of 1995. In some cases, you can identify these statements by forward-looking terms such as "may," "might," "will," "would," "could,"
"should," "expect," "plan," "anticipate," "believe," "estimate," "predict," "project," "possible," "potential," "intend," "seek" or "continue," the negative of these terms and other comparable
terminology or similar expressions. In addition, our management may make forward-looking statements to analysts, representatives of the media and others. These forward-looking statements represent
only the Company's beliefs regarding future events (many of which, by their nature, are inherently uncertain and beyond our control) and are predictions only, based on our current expectations and
projections about future events. There are important factors that could cause our actual results, level of activity, performance or achievements to differ materially from those expressed or implied by
the forward-looking statements. In particular, you should consider the risks outlined under Item 1A"Risk Factors" in this Annual Report.

Although
we believe the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, level of activity, performance or achievements.
Moreover, neither we nor any other person assumes responsibility for the accuracy or completeness of any of these forward-looking statements. You should not rely upon forward-looking statements as
predictions of future events. We undertake no obligation to update any of these forward-looking statements after the date of this filing to conform our prior statements to actual results or revised
expectations.

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PART I

When we use the terms "we," "us," "Cowen Group" and the "Company," we mean, following the Transactions, Cowen
Group, Inc., a Delaware corporation, its consolidated subsidiaries and entities in which it has a controlling financial interest, taken as a whole, as well as any predecessor entities, unless
the context otherwise indicates.

Item 1.    Business

Overview

Cowen Group, Inc., a Delaware corporation, is a holding company formed in connection with the business combination of
Ramius LLC ("Ramius") and Cowen Holdings, Inc. ("Cowen Holdings"). The Company was jointly formed on June 1, 2009 by Cowen Holdings and RCG Holdings LLC ("RCG") in
connection with the transactions contemplated by the Transaction Agreement and the Agreement and Plan of Merger, dated as of June 3, 2009 (the "Transactions").

Cowen
Group, Inc. is a diversified financial services firm and, together with its consolidated subsidiaries (collectively, "Cowen Group" or the "Company"), provides alternative
investment management, investment banking, research, and sales and trading services through its two business segments: Ramius and its affiliates comprise the Company's alternative investment
management segment, while Cowen and Company, LLC ("Cowen and Company") is its broker-dealer segment. Prior to the consummation of the Transactions on November 2, 2009, the Company
conducted its operations through one reportable segment, the alternative investment management segment. For a discussion of certain financial information regarding our revenues from external
customers, a measure of profit or loss and total assets broken down by segment, please see the notes to the Company's consolidated financial statements appearing elsewhere in this
Form 10-K.

Our
alternative investment management business had approximately $9 billion of assets under management as of January 1, 2011. The predecessor to this business was founded
in 1994 and, through one of its subsidiaries, has been a registered investment adviser under the Investment Advisers Act since 1997. Our alternative investment management products, solutions and
services include hedge funds, replication products, mutual funds, managed futures funds, fund of funds, real estate, healthcare royalty funds, and cash management services offered primarily under the
Ramius name. Our institutional investors include pension funds, insurance companies, banks, foundations and endowments, wealth management organizations and family offices.

In
February 2010, we integrated senior management and certain aspects of the infrastructure of our hedge fund and fund of funds businesses to improve institutional efficiency and
service. In March 2010, we expanded our alternative investment management business with the formation of the Ramius Trading Strategies managed futures platform.

In
July 2010, we announced the further expansion of our alternative investment management business through the launch of our first mutual fund, the Ramius Dynamic Replication Fund. The
fund focuses on replication of a custom alternative investment index and provides investors the opportunity to access market exposures typically characterized by investments in less liquid alternative
investments, but with the daily liquidity of a mutual fund. The fund began trading in the beginning of August 2010 with over $120 million in initial capital.

Our
broker-dealer businesses include research, brokerage and investment banking services to companies and institutional investor clients primarily in the healthcare, technology, media
and telecommunications, consumer, aerospace and defense, financial technology, REITs and alternative energy sectors. We provide research and brokerage services to over 1,000 domestic and international
clients seeking to trade securities, principally in our target sectors. Historically, we have focused our

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investment
banking efforts on small to mid-capitalization public companies as well as private companies.

In
June of 2010, we expanded our investment banking services to include credit and fixed income, including public and private debt placements, exchange offers, consent solicitations and
tender offers. We also added origination and distribution capabilities for convertible securities. In addition, we have enhanced our presence in the Private investment in public equity transaction
("PIPE") and registered direct market by adding personnel over the course of the year. With the addition of these additional capital markets capabilities we also established a unified capital markets
group which we believe will allow us to be more effective in providing cohesive solutions for our clients.

Principal Business Lines

Alternative Investment Management Business

We operate our alternative investment management business primarily through Ramius. Our alternative investment management business had
approximately $9.0 billion of assets under management as of January 1, 2011. The predecessor to this business was founded in 1994 and, through one of its subsidiaries, has been a
registered investment adviser under the Investment Advisers Act since 1997. Our alternative investment management products, solutions and services include hedge funds, replication products, mutual
funds, managed futures funds, fund of funds, real estate, healthcare royalty funds, and cash management services offered primarily under the Ramius name. Our institutional investors include pension
funds, insurance companies, banks, foundations and endowments, wealth management organizations and family offices.

Alternative Investment Management Products and Services

Hedge Funds.The Company's hedge funds are focused on addressing the needs of institutional investors and high net worth individuals to
preserve and
grow allocated capital. The Company offers two single-strategy hedge funds, one focused on global long/short credit and another small-cap value creation focused on corporate credit and
credit-related products. The Company also manages multi-strategy hedge funds. The majority of assets remaining in these funds includes private investments in public companies, investments in private
companies, real estate and special situations.

Alternative Solutions.The Company's Alternative Solutions business includes replication funds, individual portfolio solutions for
large
institutional clients, and traditional fund of funds products. Our replication funds and accounts focus on replication of a custom alternative investment index and seek to provide investors the
opportunity to access market exposures typically characterized by investments in less liquid alternative investments. The individual portfolio solutions business seeks to provide institutional clients
with customized products and services designed to the characteristics of their individual portfolio. The Company offers fund of funds investment products that invest in a number of alternative
investment management vehicles that are selected by the Company and are not affiliated with the Company, with the goal of achieving consistent and stable returns to investors. A fund of funds offers
investors the opportunity to invest in private investment vehicles whose purpose is to invest in a group of underlying hedge funds or other alternative investment management vehicles selected by the
fund of funds investment manager. We have created a number of programs including long/short equity, global value creation, diversified absolute return, concentrated multi-strategy, as well as
client-focused solutions based on hedging overlays and replication, varying regulatory structures and other client-driven portfolio constraints. The fund of funds program employs evaluation procedures
to determine the opportunity set for each strategy, identifies appropriate institutional quality underlying-managers with a history of longevity and stability, conducts detailed investment,
operational, legal, financial and risk due diligence on each underlying-manager, and utilizes qualitative and quantitative techniques to construct portfolios of those underlying-managers' alternative
investment management

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vehicles.
The resulting portfolio allocations are continuously analyzed and adjusted according to the outlook for each strategy and underlying-manager. The Company's fund of funds program invests with
approximately 125 underlying fund managers and was established in 1998.

Ramius Trading Strategies ("RTS").RTS manages various funds and accounts that seek to provide investors with returns uncorrelated with
the public
equity and debt markets while maintaining a strong liquidity profile. In order to achieve this objective, RTS identifies, and allocates capital to, various third party commodity trading advisors that
pursue a managed futures strategy in a managed account format.

Real Estate Funds.The Company's real estate funds have focused on generating attractive, risk adjusted returns by using our
owner/manager approach
to underwriting, structuring, financing and redevelopment of all real estate property types since 1999. This approach emphasizes a focus on real estate fundamentals and potential market
inefficiencies. As of December 31, 2010, the Ramius Urban American Funds owned interests in and managed approximately 12,300 multi family housing units in the New York metropolitan area. The
RCG Longview platform provides bridge senior loans, subordinated mortgages, mezzanine loans, and preferred equity through its debt fund series, and makes equity investments through its equity fund. As
of December 31, 2010, the members of the general partners of the RCG Longview platform, independent of the RCG Longview Funds, collectively owned or managed directly and/or indirectly, 56,924
residential units, 25.1 million square feet of retail, 13.4 million square feet of office space and 1,340 hotel rooms. The Company's ownership interests in the various general partners
of the Ramius Urban American Funds and RCG Longview Funds range from 30% to 55%.

Cowen Healthcare Royalty Partners ("CHRP").The funds managed by CHRP (the "CHRP Funds") invest principally in commercial-stage
biopharmaceutical
products and companies through the purchase of royalty or synthetic royalty interests and structured debt and equity instruments. The CHRP Funds seek these royalty interests in end-user
sales of commercial-stage or near commercial-stage medical products such as pharmaceuticals, biotechnology products and medical devices. Prior to the consummation of the Transactions, the CHRP Funds
were part of Cowen Holdings's business. We share the net management fees from the CHRP Funds equally with the founders of the CHRP Funds. In addition, we have interests in the general partners of the
CHRP Funds ranging from 32.1% to 40.2%.

Cash Management and Mortgage Advisory Services.The Company's cash management services business provides clients with investment
guidelines for
managing cash and establishes investment programs for managing their cash in separately managed accounts. The Company's cash management products are focused on preserving principal, maintaining daily
liquidity and maximizing returns for investors. Portfolios are separately managed according to each investor's investment guidelines and are held at a custodian. Investor cash and other short term
fixed income assets are managed for corporate, municipal, not-for-profit and other institutional clients (including hedge funds). The Company's mortgage advisory business
involves collateral management services for certain collateralized debt obligation products.

Broker-Dealer Business

We operate our broker-dealer business through Cowen and Company. Cowen and Company is an international investment bank dedicated to
providing superior research, brokerage and investment banking services to companies and institutional investor clients primarily in the healthcare, technology, media and telecommunications, consumer,
aerospace and defense, financial technology, REITs and alternative energy sectors. We provide research and sales and trading services to over 1,000 domestic and international clients seeking to trade
securities, principally in our target sectors. We focus our investment banking efforts on growth-oriented public companies as well as private companies.

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Investment Banking

Our investment banking professionals are focused on providing strategic advisory and capital raising services to U.S. and international
public and private companies in the healthcare, technology, media and telecommunications, consumer, aerospace and defense, financial technology, REITs and alternative energy sectors. By focusing on
Cowen and Company's target sectors over a long period of time, we have developed a significant understanding of the unique challenges and demands with respect to public and private capital raising and
strategic advice in these sectors. Our advisory and capital raising capabilities begin at the early stages of a private company's accelerated growth phase and continue through its evolution as a
public company. Historically, a significant majority of Cowen and Company's investment banking revenue has been earned from high-growth small and mid-capitalization companies.
We believe the high level of expertise and client trust Cowen and Company has developed allows it to generate repeat business. During 2010, we generated a significant amount of our investment banking
business from companies based in China, and we were one of only two non-bulge bracket investment banks to book-run at least two U.S. IPOs for Chinese companies. We believe our
expanded capital markets capabilities and unified capital markets group will allow us to be even more effective in providing cohesive solutions for our clients.

Brokerage

Our team of brokerage professionals serves institutional investor clients in the United States and internationally. Cowen and Company
trades common stocks, listed options and equity-linked and fixed income securities on behalf of its clients. We also provide our clients with an electronic execution suite and an ETF trading platform.
We have relationships with over 1,000 institutional investor clients. Our brokerage team is comprised of experienced professionals dedicated to Cowen and Company's target sectors, which allows us to
develop a level of knowledge and focus that we believe differentiates our brokerage capabilities from those of many of our competitors. We tailor our account coverage to the unique needs of our
clients. We believe that our sector traders are able to provide superior execution because of their knowledge of the interests of our institutional investor clients in specific companies in Cowen and
Company's target sectors.

Our
sales professionals also provide our institutional investor clients with access to the management of our investment banking clients outside the context of financing transactions.
These meetings are commonly referred to as non-deal road shows. Non-deal road shows allow our investment banking clients to increase their visibility within the institutional
investor community while providing our institutional investor clients with the opportunity to further educate themselves on companies and industries through meetings with management. We believe Cowen
and Company's deep relationships with company management teams and its sector-focused approach provide us with broad access to management for the benefit of our institutional investor and investment
banking clients.

Research

As of December 31, 2010, we have a research team of 27 senior analysts covering approximately 400 companies. Within our coverage
universe, approximately 104 are healthcare companies, 145 are technology companies, 68 are consumer companies, 31 are aerospace and defense companies, 10 are alternative energy companies, 33 are REITs
and 7 are Chinese companies. Our differentiated approach to research focuses our analysts' efforts toward delivering specific investment ideas and de-emphasizes maintenance research. We
have developed surveys and professional networks that provide us with frequent and timely industry insights regarding evolving trends in our target sectors. We sponsor a number of conferences every
year that are focused on our target sectors and sub-sectors. During these conferences we highlight our investment research and provide significant investor access to corporate management
teams.

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Information About Geographic Areas

We are principally engaged in providing alternative investment management services to global institutional investors and investment
banking sales and trading and research services to corporations and institutional investor clients primarily in the United States. We provide investment banking services to companies in China though
Cowen Latitude Advisors Limited ("CLAL"). We provide investment banking services to companies and institutional investor clients in Europe through our U.K. broker-dealer, Cowen
International Limited ("CIL").

Employees

As of March 10, 2011, the Company had 553 employees.

Competition

We compete with many other firms in all aspects of our business, including raising funds, seeking investment opportunities and hiring
and retaining professionals, and we expect our business will continue to be highly competitive. The alternative investment management and investment banking industries are currently undergoing
contraction and consolidation, reducing the number of industry participants and generally resulting in the larger firms being better positioned to retain and gain market share. We compete in the
United States and globally for investment opportunities, investor capital, client relationships, reputation and talent. We face competitors that are larger than we are and have greater financial,
technical and marketing resources. Certain of these competitors continue to raise additional amounts of capital to pursue investment strategies that may be similar to ours. Some of these competitors
may also have access to liquidity sources that are not available to us, which may pose challenges for us with respect to investment opportunities. In addition, some of these competitors may have
higher risk tolerances or make different risk assessments than we do, allowing them to consider a wider variety of investments and establish broader networks of business relationships. Our competitive
position depends on our reputation, our investment performance and processes, the breadth of our business platform and our ability to continue to attract and retain
qualified employees while managing compensation and other costs. For additional information regarding the competitive risks that we face, see "Item 1A Risk FactorsRisks Related to
the Company's Alternative Investment Management Business" and "Risk FactorsRisks Related to the Company's Broker-Dealer Business."

Regulation

Our businesses, as well as the financial services industry generally, are subject to extensive regulation, including periodic
examinations by governmental and self-regulatory organizations, in the United States and the jurisdictions in which we operate around the world. As a publicly traded company in the United
States, we are subject to the U.S. federal securities laws and regulation by the Securities and Exchange Commission ("SEC").

Most
of the investment advisers of our alternative investment funds are registered as investment advisers with the SEC. Registered investment advisers are subject to the requirements and
regulations of the Investment Advisers Act of 1940 (the "Advisers Act"). Such requirements relate to, among other things, fiduciary duties to clients, maintaining an effective compliance program,
solicitation agreements, conflicts of interest, recordkeeping and reporting requirements, disclosure requirements, limitations on agency cross and principal transactions between an advisor and
advisory clients and general anti-fraud prohibitions. All of our wholly-owned investment advisers to our alternative investment funds comply with the Advisers Act requirements and
regulations.

We
are also subject to regulation under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), the Securities Act of 1933, as amended (the "Securities Act"), and various
other statutes. Many of the investment advisers of our alternative investment funds are also subject to

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regulation
by the National Futures Association and the U.S. Commodities Futures Trading Commission. In addition, we are subject to regulation by the Department of Labor under the U.S. Employee
Retirement Income Security Act of 1974 ("ERISA"). In the United Kingdom, we are subject to regulation by the U.K. Financial Services Authority ("FSA"), in Luxembourg by the Commission de Surveillance
du Secteur Financier, in Japan by the Financial Services Agency and in Hong Kong by the Securities and Futures Commission ("SFC"). Our investment activities around the globe are subject to a variety
of regulatory regimes that vary country by country.

Regulatory
bodies in the United States and the rest of the world are charged with safeguarding the integrity of the securities and other financial markets and with protecting the
interests of customers participating in those markets. In light of recent events in the financial markets, governmental authorities in the United States and in the other countries in which we operate
have proposed
additional disclosure requirements and regulation of hedge funds and other alternative asset managers. For example, rulemaking by the SEC and other regulatory authorities outside the United States has
imposed trading and reporting requirements on short selling, which could adversely affect trading opportunities, including hedging opportunities, for our funds. In addition, on July 21, 2010,
the Dodd-Frank Wall Street Reform and Consumer Protection Act ("Dodd-Frank Act") was signed into law in the United States. Implementation of the Dodd-Frank Act will
be accomplished through extensive rulemaking by the SEC and other governmental agencies. In addition, the Dodd-Frank Act establishes the Financial Services Oversight Council (the "FSOC")
to identify threats to the financial stability of the United States; promote market discipline; and respond to emerging risks to the stability of the United States financial system. The FSOC is
empowered to determine whether the material financial distress or failure of a non-bank financial company would threaten the stability of the United States financial system, and such a
determination can subject a non-bank financial company to supervision by the Board of Governors of the Federal Reserve and the imposition of standards and supervision including stress
tests, liquidity requirements and enhanced public disclosures. The FSOC has released a proposed rule regarding its authority to require the supervision and regulation of systemically significant
non-bank financial companies. A final rule and designations of systemically significant non-bank financial companies are expected later this year. The Dodd-Frank
Act also mandates the preparation of studies on a wide range of issues that could lead to additional regulatory changes. Until these rules and resulting changes are fully developed, it is not
practical to assess the impact that the Dodd-Frank Act or the resulting rules and regulations will have on us and on the financial services industry. See "Item 1A Risk Factors" for
more information.

Our
businesses have operated for many years within a legal framework that requires us to be able to monitor and comply with a broad range of legal and regulatory developments that affect
our activities. In addition, certain of our businesses are subject to compliance with laws and regulations of United States federal and state governments, foreign governments, their respective
agencies and/or various self-regulatory organizations or exchanges relating to the privacy of client information, and any failure to comply with these regulations could expose us to
liability and/or reputational damage. Additional legislation, changes in rules promulgated by the SEC and self-regulatory organizations or changes in the interpretation or enforcement of
existing laws and rules, either in the United States or elsewhere, may directly affect the mode of our operation and profitability. The United States and non-United States government
agencies and self-regulatory organizations, as well as state securities commissions in the United States, are empowered to conduct administrative proceedings that can result in censure,
fine, the issuance of cease-and-desist orders or the suspension or expulsion of a broker-dealer or its directors, officers or employees. Occasionally, we have been subject to
investigations and proceedings, and sanctions have been imposed for infractions of various regulations relating to our activities.

Cowen
and Company is registered as a broker-dealer with the SEC and in all 50 states, the District of Columbia and Puerto Rico. Self-regulatory organizations, including the
Financial Industry Regulatory

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Authority
("FINRA"), adopt and enforce rules governing the conduct and activities of its member firms, including Cowen and Company. In addition, state securities regulators have regulatory or
oversight authority over our broker-dealer entities. Accordingly, Cowen and Company is subject to regulation and oversight by the SEC and FINRA. Cowen and Company is also a member of, and subject to
regulation by, the New York Stock Exchange ("NYSE"), the Chicago Board Options Exchange, the Philadelphia Stock Exchange, the American Stock Exchange, the International Stock Exchange, the Nasdaq
Stock Exchange, the Chicago Board of Trade and the New York Mercantile Exchange.

Broker-dealers
are subject to regulations that cover all aspects of the securities business, including sales methods, trade practices among broker-dealers, use and safekeeping of
customers' funds, securities and information, capital structure, record-keeping, the financing of customers' purchases and the conduct and qualifications of directors, officers and employees. In
particular, as a registered broker-dealer and member of various self-regulatory organizations, Cowen and Company is subject to the SEC's uniform net capital rule,
Rule 15c3-1 under the Exchange Act. Rule 15c3-1 specifies the minimum level of net capital a broker-dealer must maintain and also requires that a significant part
of a broker-dealer's assets be kept in relatively liquid form. The SEC and various self-regulatory organizations impose rules that require notification when net capital falls below certain
predefined criteria, limit the ratio of subordinated debt to equity in the regulatory capital composition of a broker-dealer and constrain the ability of a broker-dealer to expand its business under
certain circumstances. Additionally, the SEC's uniform net capital rule requires us to give prior notice to the SEC for certain withdrawals of capital. As a result, our ability to withdraw capital
from our broker-dealer subsidiary may be limited.

The
research functions of investment banks have been, and continue to be, the subject of regulatory scrutiny. In 2002 and 2003, acting in part pursuant to a mandate contained in the
Sarbanes-Oxley Act of 2002, the SEC, the NYSE and the predecessor to FINRA adopted rules imposing heightened restrictions on the interaction between equity research analysts and investment banking
personnel at member securities firms. The requirements resulting from these regulations have necessitated the development and enhancement of corresponding policies and procedures.

The
effort to combat money laundering and terrorist financing is a priority in governmental policy with respect to financial institutions. The Bank Secrecy Act ("BSA"), as amended by
Title III of the USA PATRIOT Act of 2001 and its implementing regulations ("Patriot Act"), requires broker-dealers and other financial services companies to maintain an anti-money
laundering compliance program that includes written policies and procedures, designated compliance officer(s), appropriate training, independent review of the program, standards for verifying client
identity at account opening and obligations to report suspicious activities and certain other financial transactions. Through these and other provisions, the BSA and Patriot Act seek to promote the
identification of parties that may be involved in financing terrorism or money laundering. We must also comply with sanctions programs
administered by the U.S. Department of Treasury's Office of Foreign Asset Control, which may include prohibitions on transactions with designated individuals and entities and with individuals and
entities from certain countries.

Anti-money
laundering laws outside the United States contain certain similar provisions. The obligation of financial institutions, including us, to identify their customers,
watch for and report suspicious transactions, respond to requests for information by regulatory authorities and law enforcement agencies, and share information with other financial institutions, has
required the implementation and maintenance of internal practices, procedures and controls that have increased, and may continue to increase, our costs. Any failure with respect to our programs in
this area could subject us to serious regulatory consequences, including substantial fines, and potentially other liabilities.

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Rigorous
legal and compliance analysis of our businesses and investments is important to our culture and risk management. In addition, disclosure controls and procedures and internal
controls over financial reporting are documented, tested and assessed for design and operating effectiveness in compliance with the Sarbanes-Oxley Act of 2002. We strive to maintain a culture of
compliance through the use of policies and procedures such as oversight compliance, codes of conduct, compliance systems, communication of compliance guidance and employee education and training. Our
corporate risk management function further analyzes our business, investment and other key risks, reinforcing their importance in our environment. We have a compliance group that monitors our
compliance with all of the regulatory requirements to which we are subject and manages our compliance policies and procedures. Our General Counsel supervises our compliance group, which is responsible
for addressing all regulatory and compliance matters that affect our activities. Our compliance policies and procedures address a variety of regulatory and compliance risks such as the handling of
material non-public information, position reporting, personal securities trading, valuation of investments on a fund-specific basis, document retention, potential conflicts of
interest and the allocation of investment opportunities. Our compliance group also monitors the information barriers that we maintain between each of our different businesses. We believe that our
various businesses' access to the intellectual capital, contacts and relationships that reside throughout our firm benefits all of our businesses. However, in order to maximize that access without
compromising our legal and contractual obligations, our compliance group oversees and monitors the communications between or among our firm's different businesses.

Available Information

We routinely file annual, quarterly and current reports, proxy statements and other information required by the Exchange Act with the
SEC. You may read and copy any document we file with the SEC at the SEC's public reference room located at 100 F Street, N.E., Washington, D.C. 20549, U.S.A. Please call the SEC at
1-800-SEC-0330 for further information on the public reference room. Our SEC filings also are available to the public from the SEC's internet site at
http://www.sec.gov.

We
maintain a public internet site at http://www.cowen.com and make available free of charge through this site our Annual Reports on Form 10-K, Quarterly Reports on
Form 10-Q, Current Reports on Form 8-K, Proxy Statements and Forms 3, 4 and 5 filed on behalf of directors and executive officers, as well as any
amendments to those reports filed or furnished pursuant to the Exchange Act as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC. We also post
on our website the charters for our Board of Directors' Audit Committee, Compensation Committee and Nominating and Corporate Governance Committee, as well as our Corporate Governance Guidelines, our
Code of Business Conduct and Ethics governing our directors, officers and employees and other related materials. The information on our website is not incorporated by reference into this Annual
Report.

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Item 1A.    Risk Factors

RISK FACTORS

Risks Related to the Company's Businesses and Industry

For purposes of the following risk factors, references made to the Company's funds include hedge funds and
other alternative investment management products, services and solutions offered by the Company, investment vehicles through which the Company invests its own capital, funds in the Company's fund of
funds business and real estate funds.

The Company

The Company's alternative investment management and broker-dealer businesses have incurred losses in recent periods and may incur losses in the future.

The Company's alternative investment management and broker-dealer businesses have incurred losses in several recent periods and also
recorded net losses in certain quarters within other fiscal years. The Company may incur losses in any of its future periods. Future losses may have a significant effect on the Company's liquidity as
well as our ability to operate.

In
addition, we may incur significant expenses in connection with any expansion, strategic acquisition or investment with respect to our businesses. Specifically, we have invested, and
will continue to invest, in our broker-dealer business, including, during 2010, hiring a number of senior professionals to create a fixed-income and equity-linked origination and distribution
platform. Accordingly, the Company will need to increase its revenues at a rate greater than its expenses to achieve and maintain profitability. If the Company's revenues do not increase sufficiently,
or even if its revenues increase but it is unable to manage its expenses, the Company will not achieve and maintain profitability in future periods. As an alternative to increasing its revenues, the
Company may seek additional capital through the sale of additional common stock or other forms of debt or equity financing. Particularly in light of current market conditions, the Company cannot be
certain that it would have access to such financing on acceptable terms.

The Company depends on its key senior personnel and the loss of their services would have a material adverse effect on the Company's businesses and results of operations,
financial condition and prospects.

The Company depends on the efforts, skill, reputations and business contacts of its principals and other key senior personnel, the
information and investment activity these individuals generate during the normal course of their activities and the synergies among the diverse fields of expertise and knowledge held by the Company's
senior professionals. Accordingly, the Company's continued success will depend on the continued service of these individuals. Key senior personnel may leave the Company in the future, and we cannot
predict the impact that the departure of any key senior personnel will have on our ability to achieve our investment and business objectives. The loss of the services of any of them could have a
material adverse effect on the Company's revenues, net income and cash flows and could harm our ability to maintain or grow assets under management in existing funds or raise additional funds in the
future. Our senior and other key personnel possess substantial experience and expertise and have strong business relationships with investors in its funds, clients and other members of the business
community. As a result, the loss of these personnel could have a material adverse effect on the Company's businesses and results of operations, financial condition and prospects.

The Company's ability to retain its senior professionals is critical to the success of its businesses, and its failure to do so may materially affect the Company's
reputation, business and results of operations.

Our people are our most valuable resource. Our success depends upon the reputation, judgment, business generation capabilities and
project execution skills of our senior professionals. Our employees'

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reputations
and relationships with our clients are critical elements in obtaining and executing client engagements. Ramius and Cowen and Company encounter intense competition for qualified employees
from other companies inside and outside of their industries. From time to time, Ramius and Cowen and Company have experienced departures of professionals. Losses of key personnel have occurred and may
occur in the future. In addition, if any of our client-facing employees or executive officers were to join an existing competitor or form a competing company, some of our clients could choose
to use the services of that competitor instead of the services of Ramius and Cowen and Company.

The
success of our businesses is based largely on the quality of our employees and we must continually monitor the market for their services and seek to offer competitive compensation.
In challenging market conditions, such as have occurred over the past two years, it may be difficult to pay competitive compensation without the ratio of our compensation and benefits expense to
revenues becoming higher. In addition, a portion of the compensation of many of our employees takes the form of
restricted stock that vests over a period of years, which is not as attractive to existing and potential employees as compensation consisting solely of cash or a lesser percentage of stock that may be
offered by our competitors.

Difficult market conditions, market disruptions and volatility have adversely affected, and may continue to adversely affect, the Company's businesses, results of operations
and financial condition.

The Company's businesses, by their nature, do not produce predictable earnings, and all of the Company's businesses may be materially
affected by conditions in the global financial markets and by global economic conditions, such as interest rates, the availability of credit, inflation rates, economic uncertainty, changes in laws,
commodity prices, asset prices (including real estate), currency exchange rates and controls and national and international political circumstances (including wars, terrorist acts, protests or
security operations). Recently, global credit and other financial markets suffered substantial stress, volatility, illiquidity and disruption. Market turbulence reached unprecedented levels during the
third and fourth quarters of 2008, as investors lost confidence in the financial system resulting in an historically unprecedented lack of liquidity, a general decline in asset values (including real
estate assets), and the bankruptcy or acquisition of, or government assistance to, several major domestic and international financial institutions. These factors, combined with volatile commodity
prices and foreign exchange rates, contributed to recessionary economic conditions globally and a deterioration in consumer and corporate confidence and could further exacerbate the overall market
disruptions and risks to market participants, including the Company's funds and managed accounts. These market conditions may affect the level and volatility of securities prices and the liquidity and
the value of investments in the Company's funds, including Ramius Enterprise LP (which we refer to as Enterprise Fund), Cowen Overseas Investment LP (which we refer to as COIL) and
Ramius Optimum Investments LLC (which we refer to as ROIL) in which the Company has investments of approximately $153.6 million, $88.8 million and $48.7 million, respectively, of its own
capital as of December 31, 2010 and managed accounts, and the Company may not be able to effectively manage its alternative investment management business's exposure to these market conditions.
Losses in the Enterprise Fund, COIL and ROIL could adversely affect our results of operations.

Volatility in the value of the Company's investments and securities portfolios or other assets and liabilities could adversely affect the financial condition or results of
operations of the Company.

The Company is subject to the provisions of Accounting Standards Codification ("ASC") Topic 820 (which we refer to as ASC 820) which
RCG, as the accounting predecessor of the Company, adopted on January 1, 2008. ASC 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in
an orderly transaction between market participants at the measurement date. ASC 820 also establishes a framework for measuring fair value and a valuation hierarchy based upon the transparency of
inputs used in the valuation of an asset or liability. Changes in fair value are

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reflected
in the statement of operations at each measurement period. Therefore, continued volatility in the value of the Company's investments and securities portfolios or other assets and
liabilities, including funds, will result in volatility of the Company's results. As a result, changes in value may have an adverse effect on the Company's financial condition or operations in the
future.

Limitations on access to capital by the Company and its subsidiaries could impair its liquidity and its ability to conduct its businesses.

Liquidity, or ready access to funds, is essential to the operations of financial services firms. Failures of financial institutions
have often been attributable in large part to insufficient liquidity. Liquidity is of particular importance to Cowen and Company's trading business and perceived liquidity issues may affect the
willingness of the Company's investment banking clients and counterparties to engage in brokerage transactions with Cowen and Company. Cowen and Company's liquidity could be impaired due to
circumstances that the Company may be unable to control, such as a general market disruption or an operational problem that affects Cowen and Company, its trading clients or third parties.
Furthermore, Cowen and Company's ability to sell assets may be impaired if other market participants are seeking to sell similar assets at the same time.

The
Company is a holding company and primarily depends on its subsidiaries to fund its operations. Cowen and Company is subject to the net capital requirements of the SEC and various
self-regulatory organizations of which it is a member. These requirements typically specify the minimum level of net capital a broker-dealer must maintain and also mandate that a
significant part of its assets be kept in relatively liquid form. CIL the Company's U.K. registered broker-dealer subsidiary, is subject to the capital requirements of the FSA. CLA is subject to the
financial resources requirements of the SFC of Hong Kong. Any failure to comply with these capital requirements could impair the Company's ability to conduct its investment banking business.

The Company and its funds and/or Cowen and Company may become subject to additional regulations which could increase the costs and burdens of compliance or impose additional
restrictions which could have a material adverse effect on the Company's businesses and the performance of the funds in its alternative investment management business.

Firms in the financial services industry have been subject to an increasingly regulated environment. The industry has experienced
increased scrutiny from a variety of regulators, including the SEC, FINRA, the NYSE and state attorneys general. Penalties and fines sought by regulatory authorities have increased substantially over
the last several years. In light of current conditions in the global financial markets and the global economy, regulators have increased their focus on the regulation of the financial services
industry. The Company may be adversely affected by changes in the interpretation or enforcement of existing laws and rules by these governmental authorities and self-regulatory
organizations. The Company also may be adversely affected as a result of new or revised legislation or regulations imposed by the SEC, other United States or foreign governmental regulatory
authorities or self-regulatory organizations that supervise the financial markets. Among other things, the Company could be fined, prohibited from engaging in some of its business
activities or subjected to limitations or conditions on its business activities. In addition, the Company could incur significant expense associated with compliance with any such legislation or
regulations or the regulatory and enforcement environment generally. Substantial legal liability or significant regulatory action against the Company could have a material adverse effect on the
financial condition and results of operations of the Company or cause significant reputational harm to the Company, which could seriously affect its business prospects.

The
Company may need to modify the strategies or operations of its alternative investment management business, face increased constraints or incur additional costs in order to satisfy
new regulatory requirements or to compete in a changed business environment. The Company's alternative

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investment
management business is subject to regulation by various regulatory authorities that are charged with protecting the interests of investors. The activities of certain of the Company's
subsidiaries are regulated primarily within the United States by the SEC, FINRA, and the National Futures Association, as well as various state agencies, and are also subject to regulation by other
agencies in the various jurisdictions in which they operate, including the FSA, the Financial Services Agency of Japan, the SFC, the German Federal Financial Supervisory Authority and the Commission
de Surveillance du Secteur Financier in Luxembourg. The activities of Ramius LLC, Ramius Advisors, LLC, Ramius Asia LLC, Ramius Alternative Solutions LLC, Ramius Structured
Credit Group LLC, Ramius Trading Strategies LLC and Ramius Value and Opportunity Advisors LLC are all regulated by the SEC due to their registrations as U.S. investment advisers.
In addition, the funds in the Company's alternative investment management business are subject to regulation in the jurisdictions in which they are organized. These and other regulators in these
jurisdictions have broad regulatory powers dealing with all aspects of financial services including, among other things, the authority to make inquiries of companies regarding compliance with
applicable regulations, to grant permits and to regulate marketing and sales practices and the maintenance of adequate financial resources. The Company is also subject to applicable
anti-money laundering regulations and net capital requirements in the
jurisdictions in which it operates. Additionally, the regulatory environment in which the Company operates frequently changes and has seen significant increased regulation in recent years and it is
possible that this trend may continue. Such additional regulation could, among other things, increase compliance costs or limit our ability to pursue investment opportunities and strategies.

The
regulatory environment continues to be turbulent as regulators around the world respond to the recent financial crisis. There is an extraordinary volume of regulatory discussion
papers, draft directives and proposals being issued around the world and these initiatives are not always coordinated. The European Commission has issued a draft Directive on Alternative Investment
Fund Managers, recommendations on directors' pay and financial services sector compensation and proposals on packaged retail investment products. In addition, the FSA of the United Kingdom has issued
a discussion paper entitled "A Regulatory Response to the Global Banking Crisis" as well as undertaken an exercise to collect data to assess the systemic risk that hedge funds may or may not pose. The
Bank of England is also collecting data on the systemic risk of hedge funds. Recent rulemaking by the SEC and other regulatory authorities outside the United States have imposed trading restrictions
and reporting requirements on short selling, which have impacted certain of the investment strategies of the Company's investment funds and managed accounts, and continued restrictions on or further
regulations of short sales could negatively impact the performance of the investment funds and managed accounts.

In
addition, financial services firms are subject to numerous perceived or actual conflicts of interest, which have drawn scrutiny from the SEC and other federal and state regulators.
For example, the research areas of investment banks have been and remain the subject of heightened regulatory scrutiny, which has led to increased restrictions on the interaction between equity
research analysts and investment banking personnel at securities firms. While the Company maintains various policies, controls and procedures to address or limit actual or perceived conflicts and
regularly seeks to review and update such policies, controls and procedures, appropriately dealing with conflicts of interest is complex and difficult, and our reputation could be damaged if it fails
to do so. Such policies and procedures to address or limit actual or perceived conflicts may also result in increased costs, additional operational personnel and increased regulatory risk. Failure to
adhere to these policies and procedures may result in regulatory sanctions or client litigation.

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Cowen and Company, Ramius and the Company are subject to third party litigation risk and regulatory risk which could result in significant liabilities and reputational harm
which, in turn, could materially adversely affect their business, results of operations and financial condition.

As an investment banking firm, Cowen and Company depends to a large extent on its reputation for integrity and high-caliber
professional services to attract and retain clients. As a result, if a client is not satisfied with Cowen and Company's services, it may be more damaging in its business than in other businesses.
Moreover, Cowen and Company's role as
advisor to clients on underwriting or merger and acquisition transactions involves complex analysis and the exercise of professional judgment, including rendering "fairness opinions" in connection
with mergers and other transactions. Such activities may subject the Company to the risk of significant legal liabilities to clients and aggrieved third parties, including stockholders of clients who
could commence litigation against Cowen and Company and/or the Company. Although Cowen and Company's investment banking engagements typically include broad indemnities from its clients and provisions
to limit exposure to legal claims relating to such services, these provisions may not protect the Company or may not be enforceable in all cases. As a result, the Company may incur significant legal
and other expenses in defending against litigation and may be required to pay substantial damages for settlements and/or adverse judgments. Substantial legal liability or significant regulatory action
against the Company could have a material adverse effect on our results of operations or cause significant reputational harm, which could seriously harm our business and prospects.

In
connection with the initial public offering of the former Cowen Group, Inc. (now Cowen Holdings) in July 2006 ("Cowen Holdings's IPO"), Cowen Holdings entered into an
Indemnification Agreement with Société Générale, wherein, among other things, Société
Générale agreed to indemnify Cowen Holdings for all liability arising out of all known, pending or threatened litigation (including the cost of such litigation) and
arbitrations and certain known regulatory matters, in each case, that existed prior to the date of Cowen Holdings's IPO. Société Générale,
however, will not indemnify Cowen Holdings, and Cowen Holdings will instead indemnify Société Générale, for most litigation, arbitration and
regulatory matters that may occur in the future but were unknown at the time of Cowen Holdings's IPO and certain known regulatory matters.

In
general, the Company is exposed to risk of litigation by investors in its alternative investment management business if the management of any of its funds is alleged to constitute
negligence or dishonesty. Investors could sue to recover amounts lost by the Company's funds due to any alleged misconduct, up to the entire amount of the loss. In addition, the Company faces the risk
of litigation from investors in the Company's funds if restrictions applicable to such funds are violated. We may also be exposed to litigation by investors in the Company's fund of funds platform for
losses resulting from similar conduct at an underlying fund. Furthermore, the Company may be subject to litigation arising from investor dissatisfaction with the performance of the Company's funds and
the funds invested in by the Company's fund of funds platform. In addition, the Company is exposed to risks of litigation or investigation relating to transactions that presented conflicts of interest
that were not properly addressed. In the majority of such actions the Company would be obligated to bear legal, settlement and other costs, which may be in excess of any available insurance coverage.
In addition, although the Company is indemnified by the Company's funds, our rights to indemnification may be challenged. If the Company is required to incur all or a portion of the costs arising out
of litigation or investigations as a result of inadequate insurance proceeds, if any, or fails to obtain indemnification from its funds, our business, results of operations and financial condition
could be materially adversely affected. In its alternative investment management business, the Company is exposed to the risk of litigation if a fund suffers catastrophic losses due to the failure of
a particular investment strategy or due to the trading activity of an employee who has violated market rules or regulations. Any litigation arising in such circumstances is likely to be protracted,
expensive and surrounded by circumstances which are materially damaging to the Company's reputation and businesses.

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As a result of the Transactions, there exists the potential for conflicts of interest, and a failure to appropriately identify and deal with conflicts of interest could
adversely affect our businesses.

Due to the combination of our alternative investment management and investment banking businesses, we face an increased potential for
conflicts of interest, including situations where our services to a particular client or investor or our own interests in our investments conflict with the interests of another client. Such conflicts
may also arise if our investment banking business has access to material non-public information that may not be shared with our alternative investment management business or vice versa.
Additionally, our regulators have the ability to scrutinize our activities for potential conflicts of interest, including through detailed examinations of specific transactions.

We
have developed and implemented procedures and controls that are designed to identify and address conflicts of interest, including those designed to prevent the improper sharing of
information among our businesses. However, appropriately identifying and dealing with conflicts of interest is complex and difficult, and the willingness of clients to enter into transactions or
engagements in which such a conflict might arise may be affected if we fail to identify and appropriately address potential conflicts of interest. In addition, potential or perceived conflicts could
give rise to litigation or enforcement actions.

Employee misconduct could harm the Company by, among other things, impairing the Company's ability to attract and retain investors and subjecting the Company to significant
legal liability, reputational harm and the loss of revenue from its own invested capital.

It is not always possible to detect and deter employee misconduct. The precautions that the Company takes to detect and prevent this
activity may not be effective in all cases, and we may suffer significant reputational harm and financial loss for any misconduct by our employees. The potential harm to the Company's reputation and
to our business caused by such misconduct is impossible to quantify.

There
is a risk that the Company's employees or partners, or the managers of funds invested in by the Company's fund of funds platform, could engage in misconduct that materially
adversely affects the Company's business, including a decrease in returns on its own invested capital. The Company is subject to a number of obligations and standards arising from its businesses. The
violation of these obligations and standards by any of the Company's employees could materially adversely affect the Company and its investors. For instance, the Company's businesses require that the
Company properly deal with confidential information. If the Company's employees were improperly to use or disclose confidential information, we could suffer serious harm to our reputation, financial
position and current and future business relationships. If one of the Company's employees were to engage in misconduct or were to be accused of such misconduct, the business and reputation of the
Company could be materially adversely affected.

Required reductions in the available credit under the Company's secured revolving loan facility may limit our ability to maintain sufficient liquidity and any additional
financing that we may need may not be available on favorable terms, or at all.

Under the terms of the Company's secured revolving loan facility the amount of capital available was reduced to $25 million from
$50 million on January 4, 2010 and the facility terminates on September 29, 2011. Such reduction in our available liquidity could have a material adverse impact on our future
financial condition and results of operations and we may be required to obtain additional financing from other sources. There can be no assurance that we can find such financing in the amounts
required or that the terms, covenants and the cost of such financing will be as favorable as those which were available under our existing secured revolving loan facility. If we are unable to obtain

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additional
capital, we may have to alter our business and capital expenditure plans, which would have a materially adverse effect on our future results of operations.

The Company may be unable to successfully identify, manage and execute future acquisitions, investments and strategic alliances, which could adversely affect our results of
operations.

We intend to continually evaluate potential acquisitions, investments and strategic alliances to expand our alternative investment
management and investment banking businesses. In the future, we may seek additional acquisitions, investments, strategic alliances or similar arrangements, which may expose us to risks such
as:



Furthermore,
any future acquisitions of businesses could entail a number of risks, including:



There
can be no assurance that we would successfully overcome these risks or any other problems encountered with these acquisitions, investments, strategic alliances or similar arrangements.

RCG's significant ownership interest in the Company could affect the liquidity in the market for our Class A common stock.

RCG holds approximately 43.2% of our Class A common stock and therefore has significant influence over matters requiring
approval by the Company's stockholders, including in the election of directors and approval of significant corporate transactions. Furthermore, RCG's managing member is controlled by certain members
of our senior management, including Peter A. Cohen, our Chairman and Chief Executive Officer. RCG's concentration of ownership may discourage a third party from proposing a change of control or other
strategic transaction concerning the Company or otherwise have the effect of delaying or preventing a change of control of the Company that other stockholders may view as beneficial. As a result, the
Company's Class A common stock could trade at prices that do not reflect a "control premium" to the same extent as do the stocks of similarly situated companies that do not have any single
stockholder with an ownership interest as large as RCG's ownership interest.

The Company's future results will suffer if the Company does not effectively manage its expanded operations.

The Company may continue to expand its operations through new product and service offerings and through additional strategic
investments, acquisitions or joint ventures, some of which may involve complex technical and operational challenges. The Company's future success depends, in part, upon its

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ability
to manage its expansion opportunities, which pose numerous risks and uncertainties, including the need to integrate new operations into its existing business in an efficient and timely manner,
to combine accounting and data processing systems and management controls and to integrate relationships with customers and business partners. In addition, future acquisitions or joint ventures may
involve the issuance of additional shares of common stock of the Company, which may dilute the ownership of the Company's stockholders.

BA Alpine Holdings, Inc., its designee on the Company's board of directors and RCG may have interests that conflict with the interests of our stockholders.

BA Alpine Holdings, Inc., its designee on the Company's board of directors and RCG may have interests that conflict with, or are
different from, those of the Company and our stockholders. Conflicts of interest between BA Alpine Holdings, Inc. and/or RCG and the Company may arise, and such conflicts of interest may not be
resolved in a manner favorable to the Company, including potential competitive business activities (in the case of BA Alpine Holdings, Inc.), corporate opportunities, indemnity arrangements,
registration rights and sales or distributions by RCG, BA Alpine Holdings, Inc. or their respective affiliates of Class A common stock. The Company's amended and restated certificate of
incorporation and by-laws do not contain any provisions designed to facilitate resolution of actual or potential conflicts of interest, or to ensure that potential business opportunities
that may become available to BA Alpine Holdings, Inc. and the Company will be reserved for or made available to the Company. In addition, RCG, as the holder of a significant portion of the
Company's issued and outstanding shares of Class A common stock, could delay or prevent an acquisition or merger even if such a transaction would benefit other stockholders.

Commencing on January 1, 2011, the Company's failure to maintain effective internal control over financial reporting in accordance with Section 404 of the
Sarbanes-Oxley Act could have a material adverse effect on the Company's financial condition, results of operations and business and the price of our Class A common stock.

As a result of the business combination of Ramius and Cowen Holdings, which was consummated on November 2, 2009, the Company
must be fully compliant with the requirements of Section 404 of the Sarbanes-Oxley Act as of January 1, 2011. The Sarbanes-Oxley Act and the related rules require our management to
conduct an annual assessment of the effectiveness of our internal control over financial reporting and require a report by our independent registered public accounting firm addressing our internal
control over financial reporting. To comply with Section 404 of the Sarbanes-Oxley Act, we are required to document formal policies, processes and practices related to financial reporting that
are necessary to comply with Section 404. Such policies, processes and practices are important to ensure the identification of key financial reporting risks, assessment of their potential
impact and linkage of those risks to specific areas and activities within our organization.

If
we fail for any reason to comply with the requirements of Section 404 in a timely manner, our independent registered public accounting firm may, at that time, issue an adverse
report regarding the effectiveness of our internal control over financial reporting. Matters impacting our internal controls may cause us to be unable to report our financial information on a timely
basis and thereby subject us to adverse regulatory consequences, including sanctions by the SEC or violations of applicable stock exchange listing rules. There could also be a negative reaction in the
financial markets due to a loss of investor confidence in us and the reliability of our financial statements. Any such event could adversely affect our financial condition, results of operations and
business, and result in a decline in the price of our Class A common stock.

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Certain provisions of the Company's amended and restated certificate of incorporation and bylaws and Delaware law may have the effect of delaying or preventing an
acquisition by a third party.

The Company's amended and restated certificate of incorporation and bylaws contain several provisions that may make it more difficult
for a third party to acquire control of the Company, even if such acquisition would be financially beneficial to the Company's stockholders. These provisions also may delay, prevent or deter a merger,
acquisition, tender offer, proxy contest or other transaction that might otherwise result in the Company's stockholders receiving a premium over the then-current trading price of
Class A common stock. For example, the Company's amended and restated certificate of incorporation authorizes its board of directors to issue up to 10,000,000 shares of "blank check" preferred
stock. Without stockholder approval, the board of directors has the authority to attach special rights, including voting and dividend rights, to this preferred stock. With these rights, preferred
stockholders could make it more difficult for a third party to acquire the Company. In addition, the Company's amended and restated bylaws provide for an advance notice procedure with regard to the
nomination of candidates for election as directors and with regard to business to be brought before a meeting of stockholders. The Company is also subject to the anti-takeover provisions
of Section 203 of the Delaware General Corporation Law. Under these provisions, if anyone becomes an "interested stockholder," the Company may not enter into a "business combination" with that
person for three years without special approval, which could discourage a third party from making a takeover offer and could delay or prevent a change of control. For the purposes of
Section 203, "interested stockholder" means, generally, someone owning 15% or more of the Company's outstanding voting stock or an affiliate of the Company that owned 15% or more of our
outstanding voting stock during the past three years, subject to certain exceptions as described in Section 203.

The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 may adversely impact the Company's business.

The Dodd-Frank Act, signed into law on July 21, 2010, represents a comprehensive overhaul of the financial services
industry within the United States and will be implemented through extensive rulemaking by the SEC and other governmental agencies. In addition, the Dodd-Frank Act establishes the new
federal Bureau of Consumer Financial Protection (the "BCFP") and the FSOC and will require the BCFP and FSOC, among other federal agencies, to implement new rules and regulations. Until these rules
and resulting changes are fully developed, it is not practical to assess the impact that the Dodd-Frank Act or the resulting rules and regulations will have on the Company's business or
the financial services industry within the United States.

Risks Related to the Company's Alternative Investment Management Business

Ramius's profitability and, thus, the Company's profitability may be adversely affected by decreases in revenue relating to changes in market and economic conditions.

While market conditions improved in 2010, they have been and remain inherently unpredictable and outside of the Company's control, and
may result in reductions in Ramius's revenue and results of operations. Such reductions may be caused by a decline in assets under management, resulting in lower management fees and incentive income,
an increase in the cost of financial instruments, lower investment returns or reduced demand for assets held by the Company's funds, which would negatively affect the funds' ability to realize value
from such assets or continued investor redemptions, resulting in lower fees and increased difficulty in raising new capital.

These
factors may reduce the Company's revenue, revenue growth and income and may slow the growth of the alternative investment management business or may cause the contraction of the
alternative investment management business. In particular, negative fund performance reduces assets under management, which decreases the management fees and incentive income that the Company

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earns.
Negative performance of the Enterprise Fund, COIL and ROIL also decreases revenue derived from the Company's returns on investment of its own capital.

Ramius's revenues and, in particular, its ability to earn incentive income, would be adversely affected if its funds or managed accounts fall beneath their
"high-water marks" as a result of negative performance.

Incentive income, which has historically comprised a substantial portion of Ramius's annual revenues, is, in most cases, subject to
"high-water marks" whereby incentive income is earned by Ramius only to the extent that the net asset value of a fund or managed account at the end of a measurement period exceeds the
highest net asset value as of the end of a preceding measurement period for which Ramius earned incentive income. Ramius's incentive allocations are also subject, in some cases, to performance hurdles
or benchmarks. To the extent Ramius's funds or managed accounts experience negative investment performance, as they did in 2008, and in the case of certain real estate funds, in 2009, the investors in
these funds or managed accounts would need to recover cumulative losses before Ramius can earn incentive income with respect to the investments of those investors who previously suffered losses. As of
December 31, 2010, the products currently offered by Ramius are all above their high-water marks, though Ramius is not earning incentive income with respect to the investments of
some of its investors who transferred assets from our multi-strategy funds, which are being wound down, to these products.

It may be difficult for Ramius to retain investment professionals during periods where market conditions make it more difficult to generate positive investment returns.

Certain of the Company's funds face particular retention issues with respect to investment professionals whose compensation is tied,
often in large part, to such performance thresholds. This retention risk is heightened during periods where market conditions make it more difficult to generate positive investment returns. For
example, several investment professionals receive performance-based compensation at the end of each year based upon their annual investment performance, and this performance-based compensation
represents substantially all of the compensation the professional is entitled to receive during the year. If the investment professional's annual performance is negative, the professional may not be
entitled to receive any performance-based compensation for the year. If investment professionals or funds, as the case may be, produce investment results that are negative (or below the applicable
hurdle or benchmark), the affected investment professionals may be incentivized to join a competitor because doing so would allow them
to earn performance-based compensation without the requirement that they first satisfy the high-water mark.

Investors in the Company's funds and investors with managed accounts can generally redeem investments with prior notice. The rate of redemptions could accelerate at any
time. Historically, redemptions have created difficulties in managing the liquidity of certain of the Company's funds and managed accounts, reduced assets under management and adversely affected the
Company's revenues, and may do so in the future.

Investors in the Company's funds and investors with managed accounts may generally redeem their investments with prior notice, subject
to certain initial holding periods. Investors may reduce the aggregate amount of their investments, or transfer their investments to other funds or asset managers with different fee rate arrangements,
for any number of reasons, including investment performance, changes in prevailing interest rates and financial market performance. Furthermore, investors in the Company's funds may be investors in
products managed by other alternative asset managers where redemptions have been restricted or suspended. Such investors may redeem capital from Company's funds, even if the Company's funds'
performance is superior, due to an inability to redeem capital from other managers. The allocation process for many investors is more selective and deliberate than it was prior to 2008. Increased
volatility in global markets could accelerate the pace of fund and managed account redemptions. Redemptions of investments in the Company's funds could also take place more quickly than assets may be
sold by those funds to meet the price of such redemptions, which could

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result
in the relevant funds and/or Ramius being in breach of applicable legal, regulatory and contractual requirements in relation to such redemptions, resulting in possible regulatory and investor
actions against Ramius, the Company's funds and/or the Company. If the Company's funds or managed accounts underperform, existing investors may decide to reduce or redeem their investments or transfer
asset management responsibility to other asset managers and the Company may be unable to obtain new alternative investment management business. Any such action could potentially cause further
redemptions and/or make it more difficult to attract new investors.

The
redemption of investments in the Company's funds or in managed accounts could also adversely affect the revenues of the Company's alternative investment management business, which
are substantially dependent upon the assets under management in the Company's funds. If redemptions of investments cause revenues to decline, they would likely have a material adverse effect on our
business, results of operations or financial condition. As a result of the disruptions and the resulting uncertainty during the second half of 2008 and early 2009, Ramius experienced an increase in
the level of redemptions from the Company's funds and managed accounts. If this level of redemption activity returns, it could become more difficult to manage the liquidity requirements of the
Company's funds, making it more difficult or more costly for the Company's funds to liquidate positions rapidly to meet redemption requests or otherwise. This in turn may negatively impact the
Company's returns on its own invested capital.

In
addition to the impact on the market value of assets under management, illiquidity and volatility of the global financial markets could negatively affect Ramius's ability to manage
inflows and outflows from the Company's funds. Several alternative investment managers, including Ramius, have in the past exercised, and may in the future exercise their rights to limit, and in some
cases, suspend, redemptions from the funds they manage. Ramius has also and may in the future negotiate with investors or exercise such rights in an attempt to limit redemptions or create a variety of
other investor structures to bring fund assets and liquidity requirements into a more manageable balance. To the extent that Ramius has negotiated with investors to limit redemptions, it may be likely
that such investors will continue to seek further redemptions in the future. Such actions may have an adverse effect on the ability of the Company's funds to attract new capital to existing funds or
to develop new investment platforms. The Ramius fund of funds platform may also be adversely impacted as the hedge funds in which it invests themselves face similar investor redemptions or if such
hedge funds exercise their rights to limit or suspend Ramius's redemptions from such funds. Poor performance relative to other asset management firms may result in reduced investments in the Company's
funds and managed accounts and increased redemptions from the Company's funds and managed accounts. As a result, investment underperformance would likely have a material adverse effect on the
Company's results of operations and financial condition.

Hedge fund investments, including the investments of the Company's own capital in the Enterprise Fund, COIL and ROIL, are subject to other additional risks.

Investments by the Company's funds (including the Enterprise Fund, COIL and ROIL, in which the Company's own capital is invested) are
subject to certain risks that may result in losses. Decreases to assets under management as a result of investment losses or client redemptions may have a material adverse effect on the Company's
revenues, net income and cash flows and could harm our ability to maintain or grow assets under management in existing funds or raise additional funds in the future. Additional risks include the
following:



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If a Ramius fund's counterparty for any of its derivative or non-derivative contracts defaults on the performance of those contracts, the Company may not be able
to cover its exposure under the relevant contract.

The Company's funds enter into numerous types of financing arrangements with a wide array of counterparties around the world, including
loans, hedge contracts, swaps, repurchase agreements and other derivative and non-derivative contracts. The terms of these contracts are generally complex and often customized and
generally are not subject to regulatory oversight. The Company is subject to the risk that the counterparty to one or more of these contracts may default, either voluntarily or involuntarily, on its
performance under the contract. Any such default may occur at any time without notice. Additionally, Ramius may not be able to take action to cover its exposure if a counterparty defaults under such a
contract, either because of a lack of the contractual ability or because market conditions make it difficult to take effective action. The impact of market stress or counterparty financial condition
may not be accurately foreseen or evaluated and, as a result, Ramius may not take sufficient action to reduce its risks effectively.

Counterparty
risk is accentuated where the fund has concentrated its transactions with a single or small group of counterparties. Generally, hedge funds are not restricted from
concentrating any or all of their transactions with one counterparty. Moreover, the funds' internal review of the creditworthiness of their counterparties may prove inaccurate. The absence of a
regulated market to facilitate settlement and the evaluation of creditworthiness may increase the potential for losses.

In
addition, these financing arrangements often contain provisions that give counterparties the ability to terminate the arrangements if any of a number of defaults occurs with respect
to the Company or its funds, including declines in fund performance or assets under management and losses of key management personnel, each of which may be beyond our control. In the event of any such
termination, the Company's funds may not be able to enter into alternative arrangements with other counterparties and our business may be materially adversely affected.

The Company may suffer losses in connection with the insolvency of prime brokers, custodians, administrators and other agents whose services the Company uses and who may
hold assets of the Company's funds.

All of the Company's funds use the services of prime brokers, custodians, administrators or other agents to carry out certain
securities transactions and to conduct certain business of the Company's funds. In the event of the insolvency of a prime broker and/or custodian, the Company's funds might not be able to recover
equivalent assets in full as they may rank among the prime broker's and custodian's unsecured creditors in relation to assets which the prime broker or custodian borrows, lends or otherwise uses. In
addition, the Company's funds' cash held with a prime broker or custodian (if any) may not be segregated from the prime broker's or custodian's own cash, and the funds will therefore rank as unsecured
creditors in relation thereto. Specifically, certain of the Company's funds used an affiliate of Lehman Brothers as one of their prime brokers and some of these funds also held assets through accounts
at Lehman Brothers. Other affiliates of Lehman Brothers that are now in insolvency proceedings were also trading counterparties for some of the hedge funds managed by Ramius. The total net equity
claim of the Company's funds with respect to Lehman Brothers was approximately $254.0 million, of which the Company has recovered $26.9 million and anticipates recovering approximately
$87.8 million more from Lehman Brothers and its affiliates.

Operational risks relating to the failure of data processing systems and other information systems and technology may disrupt our alternative investment management business,
result in losses and/or limit the business's operations and growth.

Ramius and its funds rely heavily on financial, accounting, trading and other data processing systems to, among other things, execute,
confirm, settle and record transactions across markets and

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geographic
locations in a time-sensitive, efficient and accurate manner. If any of these systems does not operate properly or are disabled, the Company could suffer financial loss, a
disruption of its business, liability to the Company's funds, regulatory intervention and/or reputational damage. In addition, Ramius is highly dependent on information systems and technology, and the
cost of
maintaining such systems may increase from its current level. Such a failure to accommodate Ramius's operational needs, or an increase in costs related to such information systems, could have a
material adverse effect on the Company, both with respect to a decrease in the operational performance of its alternative investment management business and an increase in costs that may be necessary
to improve such systems.

The
Company depends on its headquarters in New York, New York, where most of the Company's alternative investment management personnel are located, for the continued operation of its
business. We have taken precautions to limit the impact that a disruption to operations at our New York headquarters could cause (for example, by ensuring that can operate independently of offices in
other geographic locations). Although these precautions have been taken, a disaster or a disruption in the infrastructure that supports our alternative investment management business, including a
disruption involving electronic communications or other services used by Ramius or third parties with whom Ramius does conduct business (including the funds invested in by the Ramius fund of funds
platform), or directly affecting the New York, New York, headquarters, could have a material adverse impact on the Company's ability to continue to operate its alternative investment management
business without interruption. Ramius's disaster recovery programs may not be sufficient to mitigate the harm that may result from such a disaster or disruption. In addition, insurance might only
partially reimburse us for our losses, if at all. Finally, the Company relies on third party service providers for certain aspects of its business, including for certain information systems and
technology and administration of the Company's funds. Severe interruptions or deteriorations in the performance of these third parties or failures of their information systems and technology could
impair the quality of Ramius's operations and could impact the Company's reputation and materially adversely affect our alternative investment management business.

Certain of the Company's funds may invest in relatively high-risk, illiquid assets, and Ramius may fail to realize any profits from these activities for a
considerable period of time or lose some or all of the principal amounts of these investments.

Certain of the Company's funds (including the Enterprise Fund, COIL and ROIL, in which the Company had approximately
$153.6 million, $88.8 million and $48.7 million, respectively, of its own capital invested as of December 31, 2010) invest a portion of their assets in securities that are not publicly
traded and funds invested in by the Ramius fund of funds platform may do the same. In many cases, such funds may be prohibited by contract or by applicable securities laws from selling such securities
for a period of time or there may not be a public market for such securities. Even if the securities are publicly traded, large holdings of securities can often be disposed of only over a substantial
length of time, exposing the investment returns to risks of downward movement in market prices during the disposition period. Accordingly, under certain conditions, the Company's funds, or funds
invested in by the Ramius fund of funds platform, may be forced to either sell securities at lower prices than they had expected to realize or defer, potentially for a considerable period of time,
sales that they had planned to make. Investing in these types of investments can involve a high degree of risk, and the Company's funds (including the Enterprise Fund, COIL and ROIL) may lose some or
all of the principal amount of such investments, including our own invested capital.

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Risk management activities may materially adversely affect the return on the Company's funds' investments if such activities do not effectively limit a fund's exposure to
decreases in investment values or if such exposure is overestimated.

When managing the Company's funds' exposure to market risks, the relevant fund (or one of the funds invested in by the Ramius fund of
funds platform) may use forward contracts, options, swaps, caps, collars and floors or pursue other strategies or use other forms of derivative financial instruments to limit its exposure to changes
in the relative values of investments that may result from market developments, including changes in interest rates, currency exchange rates and asset prices. The success of such derivative
transactions generally will depend on Ramius's (or the underlying fund manager's) ability to accurately predict market changes in a timely fashion, the degree of correlation between price movements of
a derivative instrument, the position being hedged, the creditworthiness of the counterparty and other factors. As a result, these transactions may result in poorer overall investment performance than
if they had not been executed. Such transactions may also limit the opportunity for gain if the value of a hedged position increases. For a variety of reasons, a perfect correlation between the
instruments used in a hedging or other derivative transaction and the position being hedged may not be attained. An imperfect correlation could give rise to a loss. Also, it may not be possible to
fully or perfectly limit exposure against all changes in the value of an investment because the value of an investment is likely to fluctuate as a result of a number of factors, many of which will be
beyond Ramius's (or the underlying fund manager's) control or ability to hedge.

Fluctuations in currency exchange rates could materially affect the Company's alternative investment management business and its results of operations and financial
condition.

The Company uses U.S. dollars as its reporting currency. Investments in the Company's funds and managed accounts are made in different
currencies, including Euros, Pounds Sterling and Yen. In addition, the Company's funds and managed accounts hold investments denominated in many foreign currencies. To the extent that the Company's
revenues from its alternative investment management business are based on assets under management denominated in such foreign currencies, our reported revenues may be significantly affected by the
exchange rate of the U.S. dollar against these currencies. Typically, an increase in the exchange rate between U.S. dollars and these currencies will reduce the impact of revenues denominated in these
currencies in the financial results of our alternative investment management business. For example, management fee revenues derived from each Euro of assets under management denominated in Euros will
decline in U.S. dollar terms if the value of the U.S. dollar appreciates against the Euro. In addition, the calculation of the amount of assets under management is affected by exchange rate movements
as assets under management denominated in foreign currencies are converted to U.S. dollars. Ramius also incurs a portion of its expenditures in currencies other than U.S. dollars. As a result, our
alternative investment management business is subject to the effects of exchange rate fluctuations with respect to any currency conversions and Ramius's ability to hedge these risks and the cost of
such hedging or Ramius's decision not to hedge could impact the performance of the Company's funds and our alternative investment management business and its results of operations and financial
condition.

The due diligence process that Ramius undertakes in connection with investments by the Company's funds is inherently limited and may not reveal all facts that may be
relevant in connection with making an investment.

Before making investments, particularly investments in securities that are not publicly traded, Ramius endeavors to conduct a due
diligence review of such investment that it deems reasonable and appropriate based on the facts and circumstances applicable to each investment. When conducting due diligence, Ramius is often required
to evaluate critical and complex business, financial, tax, accounting, environmental and legal issues. Outside consultants, legal advisors, accountants, investment bankers and financial analysts may
be involved in the due diligence process in varying degrees depending on the

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type
of investment. Nevertheless, when conducting due diligence and making an assessment regarding an investment, Ramius is limited to the resources available, including information provided by the
target of the investment and, in some circumstances, third party investigations. The due diligence investigation that Ramius conducts with respect to any investment opportunity may not reveal or
highlight all relevant facts that may be necessary or helpful in evaluating such investment opportunity. Moreover, such an investigation will not necessarily result in the investment being successful,
which
may adversely affect the performance of the Company's funds and managed accounts and the Company's ability to generate returns on its own invested capital from any such investment.

The Ramius real estate funds are subject to the risks inherent in the ownership and operation of real estate and the construction and development of real estate.

Investments in the Ramius real estate funds are subject to the risks inherent in the ownership and operation of real estate and real
estate-related businesses and assets. These risks include those associated with general and local economic conditions, changes in supply of and demand for competing properties in an area, changes in
environmental regulations and other laws, various uninsured or uninsurable risks, natural disasters, changes in real property tax rates, changes in interest rates, the reduced availability of mortgage
financing which may render the sale or refinancing of properties difficult or impracticable, environmental liabilities, contingent liabilities on disposition of assets, terrorist attacks, war and
other factors that are beyond our control. Further, the U.S. Environmental Protection Agency has found that global climate change could increase the severity and perhaps the frequency of extreme
weather events, which could subject real property to increased weather-related risks in the coming years. There are also presently a number of current and proposed regulatory initiatives, both
domestically and globally, that are geared towards limiting and scaling back the emission of greenhouse gases, which certain scientists have linked to global climate change. Although not known with
certainty at this time, such regulation could adversely affect the costs to construct and operate real estate in the coming years, such as through increased energy costs.

During
2008, 2009 and continuing through 2010, commercial real estate markets in the United States and Japan generally experienced major disruptions due to the unprecedented lack
of available capital, in the form of either debt or equity, and declines in value as a result of the overall economic decline. As a result, transaction volume has dropped precipitously, negatively
impacting the valuation and performance of the Ramius real estate funds significantly. Additionally, if the Ramius real estate funds acquire direct or indirect interests in undeveloped land or
underdeveloped real property, which may often be non-income producing, they will be subject to the risks normally associated with such assets and development activities, including risks
relating to the availability and timely receipt of zoning and other regulatory or environmental approvals, the cost, potential for cost overruns and timely completion of construction (including risks
beyond the control of Ramius fund, such as weather or labor conditions or material shortages) and the availability of both construction and permanent financing on favorable terms.

The alternative investment management industry is intensely competitive, which may adversely affect the Company's ability to attract and retain investors and investment
professionals.

The alternative investment management industry is extremely competitive. Competition includes numerous international, national,
regional and local asset management firms and broker-dealers, commercial bank and thrift institutions, and other financial institutions. Many of these institutions offer products and services that are
similar to, or compete with, those offered by us and have substantially more personnel and greater financial resources than Ramius does. The key areas for competition include historical investment
performance, the ability to identify investment opportunities, the ability to attract and retain the best investment professionals and the quality of service provided to investors. The Company's
ability to compete may be adversely affected if it underperforms in comparison to relevant

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benchmarks,
peer groups or competing asset managers. The competitive market environment may result in increased downward pressure on fees, for example, by reduced management fee and incentive
allocation percentages. The future results of operations of the Company's alternative investment management business are dependent in part on its ability to maintain appropriate fee levels for its
products and services. In the current economic environment, many competing asset managers have experienced substantial declines in investment performance, increased redemptions, or counterparty
exposures which impair their businesses. Some of these asset managers have reduced their fees in an attempt to avoid additional redemptions. Competition within the alternative investment management
industry could lead to pressure on the Company to reduce the fees that it charges its clients for alternative investment management products and services. A failure to compete effectively in this
environment may result in the loss of existing clients and business, and of opportunities to generate new business and grow assets under management, each of which could have a material adverse effect
on the Company's alternative investment management business and results of operations, financial condition and prospects. Furthermore, consolidation in the alternative investment management industry
may accelerate, as many asset managers are unable to withstand the substantial declines in investment performance, increased redemptions, and other pressures impacting their businesses, including
increased regulatory, compliance and control requirements. Some competitors may acquire or combine with other competitors. The combined business may have greater resources than the Company does and
may be able to compete more effectively against Ramius and rapidly acquire significant market share.

If Ramius or the Company were deemed an "investment company" under the U.S. Investment Company Act, applicable restrictions could make it impractical for Ramius and the
Company to continue their respective businesses as contemplated and could have a material adverse effect on Ramius's and the Company's businesses and prospects.

A person will generally be deemed to be an "investment company" for purposes of the U.S. Investment Company Act of 1940,
if:



The
Company believes it is engaged primarily in the business of providing asset management and financial advisory services and not in the business of investing, reinvesting or trading in
securities. The Company also believes that the primary source of income from its business is properly characterized as income earned in exchange for the provision of services. Ramius is an alternative
investment management company and the Company does not propose to engage primarily in the business of investing, reinvesting or trading in securities. Accordingly, the Company does not believe that
Ramius is a traditional investment company as defined in Section 3(a)(1)(A) of the Investment Company Act and described in the first bullet point above. Additionally, neither Ramius nor the
Company is an inadvertent investment company by virtue of the 40% test in Section 3(a)(1)(C) of the Investment Company Act as described in the second bullet point above.

The
Investment Company Act and the rules thereunder contain detailed requirements for the organization and operation of investment companies. Among other things, the Investment Company
Act and the rules thereunder limit transactions with affiliates, impose limitations on the issuance of debt and equity securities, generally prohibit the issuance of options and impose certain
governance requirements. The Company intends to conduct its alternative investment management operations so that neither the Company nor Ramius will be deemed to be an investment company under the
Investment Company Act. If anything were to happen which would cause Ramius or the Company to

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be
deemed to be an investment company under the Investment Company Act, requirements imposed by the Investment Company Act, including limitations on their respective capital structures, ability to
transact business with affiliates (including subsidiaries) and ability to compensate key employees, could make it impractical for either Ramius or the Company to continue their respective businesses
as currently conducted, impair the agreements and arrangements between and among them, their subsidiaries and their senior personnel, or any combination thereof, and materially adversely affect their
business, financial condition and results of operations. Accordingly, Ramius or the Company may be required to limit the amount of investments that it makes as a principal or otherwise conduct its
business in a manner that does not subject Ramius or the Company to the registration and other requirements of the Investment Company Act.

Recently,
legislation was proposed in the U.S. that would impose recordkeeping, disclosure, and reporting requirements upon investment funds advised by a firm that is registered with the
SEC under the Advisers Act. Should this or similar legislation be adopted, the Company's funds may become subject to additional registration, reporting and other requirements. As a result, compliance
costs and burdens upon the Ramius business may increase and the additional requirements may constrain Ramius's ability to conduct its business as currently conducted, which may adversely affect
Ramius's and the Company's business, results of operations or financial condition.

Increased regulatory focus could result in regulation that may limit the manner in which the Company and the Company's funds invest and the types of investors that may
invest in the Company's funds, materially impacting the Company's business.

The Company's alternative investment management business may be adversely affected if new or revised legislation or regulations are
enacted, or by changes in the interpretation or enforcement of existing rules and regulations imposed by the SEC, other U.S. or foreign governmental regulatory authorities or
self-regulatory organizations that supervise the financial markets and their participants. Such changes could place limitations on the type of investor that can invest in alternative
investment funds or on the conditions under which such investors may invest. Further, such changes may limit the scope of investing activities that may be undertaken by alternative investment managers
as well as their funds. It is impossible to determine the extent of the impact of any new or recently enacted laws, including the Dodd-Frank Act, or any regulations or initiatives that may
be proposed, or whether any of the proposals will become law. Compliance with any new laws or regulations could be difficult and expensive and affect the manner in which Ramius conducts business,
which may adversely impact its results of operations, financial condition and prospects.

Additionally,
as a result of recent highly publicized financial scandals, investors, regulators and the general public have exhibited concerns over the integrity of both the U.S.
financial markets and the regulatory oversight of these markets. As a result, the business environment in which Ramius operates is subject to heightened regulation. With respect to alternative
investment management funds, in recent years, there has been debate in both U.S. and foreign governments about new rules or regulations, including increased oversight or taxation, in addition to the
recently proposed legislation described above. As calls for additional regulation have increased, there may be a related increase in regulatory investigations of the trading and other investment
activities of alternative investment management funds, including the Company's funds. Such investigations may impose additional expenses on the Company, may require the attention of senior management
and may result in fines if any of the Company's funds are deemed to have violated any regulations.

The Company's alternative investment management business may suffer as a result of loss of business from key investors.

The Company generates a significant proportion of its alternative investment management revenue from a small number of its largest
clients. As of January 1, 2011, Ramius's largest institutional investor

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represented
approximately 12.4% of assets under management, with the five largest investors collectively representing approximately 22.8% of assets under management. The loss of all or a substantial
portion of the business provided by one or more of these investors would have a material impact on income derived from management fees and incentive allocations and consequently have a material
adverse effect on our alternative investment management business and results of operations or financial condition.

Risks Related to the Company's Broker-Dealer Business

The Company's broker-dealer business focuses principally on specific sectors of the economy, and deterioration in the business environment in these sectors or a decline in
the market for securities of companies within these sectors could materially affect our broker-dealer business.

Cowen and Company focuses principally on the healthcare, technology, media and telecommunications, consumer, aerospace and defense,
financial technology, REITs and alternative energy sectors of the economy. Therefore, volatility in the business environment in these sectors or in the market for securities of companies within these
sectors could substantially affect the Company's financial results and, thus, the market value of the Class A common stock. The business environment for companies in these sectors has been
subject to substantial volatility, and Cowen and Company's financial results have consequently been subject to significant variations from year to year. The market for securities in each of Cowen and
Company's target sectors may also be subject to industry-specific risks. For example, changes in policies of the United States Food and Drug Administration, along with changes in Medicare and
government reimbursement policies, may affect the market for securities of healthcare companies. Further, current and proposed regulatory initiatives that are geared towards scaling back the emission
of greenhouse gases may present opportunities for the growth of alternative energy. Expansion in the alternative energy sector has also been enhanced, in part, by government-backed financial and tax
incentives. However, should proposed limitations on the
emission of greenhouse gases not be adopted or governmental incentives for alternative energy be significantly diminished or eliminated, the alternative energy sector could be adversely affected.

As
an investment bank which focuses primarily on specific growth sectors of the economy, Cowen and Company also depends significantly on private company transactions for sources of
revenues and potential business opportunities. Most of these private company clients are initially funded and controlled by private equity firms. To the extent the pace of these private company
transactions slows or the average size declines due to a decrease in private equity financings, difficult market conditions in Cowen and Company's target sectors or other factors, the Company's
business and results of operations may be adversely affected.

The financial results of the Company's broker-dealer business may fluctuate substantially from period to period, which may impair the stock price of the Class A
common stock.

Cowen and Company has experienced, and we expect to experience in the future, significant periodic variations in its revenues and
results of operations. These variations may be attributed in part to the fact that its investment banking revenues are typically earned upon the successful completion of a transaction, the timing of
which is uncertain and beyond Cowen and Company's control. In most cases, Cowen and Company receives little or no payment for investment banking engagements that do not result in the successful
completion of a transaction. As a result, our investment banking business is highly dependent on market conditions as well as the decisions and actions of its clients and interested third parties. For
example, a client's acquisition transaction may be delayed or terminated because of a failure to agree upon final terms with the counterparty, failure to obtain necessary regulatory consents or board
or stockholder approvals, failure to secure necessary financing, adverse market conditions or unexpected financial or other problems in the client's or counterparty's business. If the parties fail to
complete a transaction on which Cowen and Company is advising or an offering in which Cowen and

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Company
is participating, we will earn little or no revenue from the transaction, and we may incur significant expenses that may not be recouped. This risk may be intensified by Cowen and Company's
focus on growth companies in the healthcare, technology, media and telecommunications, consumer, aerospace and defense, financial technology, REITs and alternative energy sectors as the market for
securities of these companies has experienced significant variations in the number and size of equity offerings. Many companies initiating the process of an IPO are simultaneously exploring other
strategic alternatives, such as a merger and acquisition transaction. The Company's investment banking revenues would be adversely affected in the event that an IPO for which it is acting as an
underwriter is preempted by the company's sale if Cowen and Company is not also engaged as a strategic advisor in such sale. As a result, our investment banking business is unlikely to achieve steady
and predictable earnings on a quarterly basis, which could in turn adversely affect the stock price of the Class A common stock.

Pricing and other competitive pressures may impair the revenues of the Company's brokerage business.

Cowen and Company's brokerage business accounted for approximately 66.9% of Cowen and Company's revenues during 2010. Along with other
firms, Cowen and Company has experienced price competition in this business in recent years. In particular, the ability to execute trades electronically and through alternative trading systems has
increased the pressure on trading commissions and spreads. We expect to continue to experience competitive pressures in these and other areas in the future as some of our competitors in the investment
banking industry seek to obtain market share by competing on the basis of price or use their own capital to facilitate client trading activities. In addition, the Company faces pressure from Cowen and
Company's larger competitors, who may be better able to offer a broader range of complementary products and services to clients in order to win their trading business. We are committed to maintaining
and improving Cowen and Company's comprehensive research coverage to support its brokerage business and the Company may be required to make additional investments in Cowen and Company's research
capabilities.

Cowen and Company faces strong competition from larger firms.

The research, brokerage and investment banking industries are intensely competitive, and the Company expects them to remain so. Cowen
and Company competes on the basis of a number of factors, including client relationships, reputation, the abilities of Cowen and Company's professionals, market focus and the relative quality and
price of Cowen and Company's services and products. Cowen and Company has experienced intense price competition in some of its businesses, including trading commissions and spreads in its brokerage
business. In addition, pricing and other competitive pressures in investment banking, including the trends toward multiple book runners, co-managers and financial advisors, and a larger
share of the underwriting fees and discounts being allocated to the book-runners, could adversely affect the Company's revenues from its investment banking business.

Cowen
and Company is a relatively small investment bank. Many of Cowen and Company's competitors in the research, brokerage and investment banking industries have a broader range of
products and services, greater financial resources, larger customer bases, greater name recognition and marketing resources, a larger number of senior professionals to serve their clients' needs,
greater global reach and more established relationships with clients than Cowen and Company has. These larger competitors may be better able to respond to changes in the research, brokerage and
investment banking industries, to compete for skilled professionals, to finance acquisitions, to fund internal growth and to compete for market share generally.

The
scale of our competitors in the investment banking industry has increased in recent years as a result of substantial consolidation among companies in the research, brokerage and
investment banking industries. In addition, a number of large commercial banks and other broad-based financial services firms have established or acquired underwriting or financial advisory practices
and broker- dealers or

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have
merged with other financial institutions. These firms have the ability to offer a wider range of products than Cowen and Company does which may enhance their competitive position. They also have
the ability to support their investment banking and advisory groups with commercial banking and other financial services in an effort to gain market share, which has resulted, and could further
result, in pricing pressure in Cowen and Company's businesses. If we are unable to compete effectively with our competitors in the investment banking industry, the Company's business and results of
operations may be adversely affected.

A portion of Cowen and Company's investment banking business is from Chinese companies which could be materially adversely affected by an adverse change in investors'
attitudes towards Chinese companies and changes in the political and economic policies of the government of the People's Republic of China.

During 2010, Cowen and Company derived a portion of its investment banking revenues from companies based in China and expects to pursue
additional business in China in the future. Cowen and Company's ability to generate revenue from Chinese companies is significantly affected by investors' views of the Chinese economy and of the
sophistication and integrity of a Chinese company's management. For instance, during 2010, several publicly listed Chinese companies, one of which was a Cowen and Company client, were alleged to be
engaging in fraud. Although this was limited to a small number of Chinese companies, negative publicity was generated for all Chinese issuers. While Cowen and Company performs extensive due diligence
on all potential investment banking clients, including those located in China, if any such clients were alleged to be engaging in fraud, Cowen and Company may be subject to legal liability and
reputational harm, which could adversely affect our results of operations and business condition. In addition, the current government leadership of the People's Republic of China has been pursuing
economic reform policies that encourage private economic activity, greater economic decentralization and globalization, there is no assurance that the Chinese government will continue to pursue these
policies, or that it will not significantly alter these policies from time to time, with or without notice. Further, the China region and markets may experience volatility, political turmoil,
uncertainty or difficult economic or market conditions that differ from those in the United States. Any of these changes could negatively impact Cowen and Company's current business and its expansion
plans within the China region which could have a negative impact on its revenues and results of operations

The Company's capital markets and strategic advisory engagements are singular in nature and do not generally provide for subsequent engagements.

The Company's investment banking clients generally retain Cowen and Company on a short-term,
engagement-by-engagement basis in connection with specific capital markets or mergers and acquisitions transactions, rather than on a recurring basis under
long-term contracts. As these transactions are typically singular in nature and Cowen and Company's engagements with these clients may not recur, Cowen and Company must seek out new
engagements when its current engagements are successfully completed or are terminated. As a result, high activity levels in any period are not necessarily indicative of continued high levels of
activity in any subsequent period. If Cowen and Company is unable to generate a substantial number of new engagements that generate fees from new or existing clients, the Company's investment banking
business and results of operations would likely be adversely affected.

Larger and more frequent capital commitments in the Company's trading and underwriting businesses increase the potential for significant losses.

There has been a trend toward larger and more frequent commitments of capital by financial services firms in many of their activities.
For example, in order to compete for certain transactions, investment banks may commit to purchase large blocks of stock from publicly traded issuers or significant stockholders, instead of the more
traditional marketed underwriting process in which

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marketing
is completed before an investment bank commits to purchase securities for resale. The Company anticipates participating in this trend and, as a result, Cowen and Company will be subject to
increased risk as it commits capital to facilitate business. Furthermore, Cowen and Company may suffer losses as a result of the positions taken in these transactions even when economic and market
conditions are generally favorable for others in the industry.

Cowen
and Company may enter into large transactions in which it commits its own capital as part of its trading business to facilitate client trading activities. The number and size of
these large transactions may materially affect Cowen and Company's results of operations in a given period. Market fluctuations may also cause Cowen and Company to incur significant losses from its
trading activities. To the extent that Cowen and Company owns assets (i.e., has long positions), a downturn in the value of those assets or in the
markets in which those assets are traded could result in losses. Conversely, to the extent that Cowen and Company has sold assets it does not own (i.e.,
has short positions), in any of those markets, an upturn in the value of those assets or in markets in which those assets are traded could expose the Company's investment banking business to
potentially large losses as it attempts to cover short positions by acquiring assets in a rising market.

Operational risks relating to the failure of data processing systems and other information systems and technology or other infrastructure may disrupt the Company's
broker-dealer business, result in losses or limit the our operations and growth in the industry.

Cowen and Company's broker-dealer business is highly dependent on its ability to process, on a daily basis, a large number of
transactions across diverse markets, and the transactions that Cowen and Company processes have become increasingly complex. The inability of Cowen and Company's systems to accommodate an increasing
volume of transactions could also constrain the Company's ability to expand its broker-dealer business. If any of these systems do not operate properly or are disabled, or if there are other
shortcomings or failures in Cowen and Company's internal processes, people or systems, the Company could suffer impairments, financial loss, a disruption of its broker-dealer business, liability to
clients, regulatory intervention or reputational damage.

Cowen
and Company has outsourced certain aspects of its technology infrastructure including data centers and wide area networks, as well as some trading applications. Cowen and Company
is dependent on its technology providers to manage and monitor those functions. A disruption of any of the outsourced services would be out of the Company's control and could negatively impact our
broker-dealer business. Cowen and Company has experienced disruptions on occasion, none of which has been material to Cowen and Company's operations and results. However, there can be no guarantee
that future material disruptions with these providers will not occur.

The
Company also faces the risk of operational failure of or termination of relations with any of the clearing agents, exchanges, clearing houses or other financial intermediaries that
Cowen and Company uses to facilitate its securities transactions. Any such failure or termination could adversely affect Cowen and Company's ability to effect transactions and to manage its exposure
to risk.

In
addition, the Company's ability to conduct its broker-dealer business may be adversely impacted by a disruption in the infrastructure that supports Cowen and Company and the
communities in which we are located. This may affect, among other things, the Company's financial, accounting or other data processing systems. This may include a disruption involving electrical,
communications, transportation or other services used by us or third parties with which Cowen and Company conducts business, whether due to fire, other natural disaster, power or communications
failure, act of terrorism or war or otherwise. Nearly all of our broker-dealer employees in our primary locations in New York, Boston, San Francisco and London work in close proximity to each other.
Although Cowen and Company has a formal disaster recovery plan in place, if a disruption occurs in one location and our broker-dealer employees in that location are unable to communicate with or
travel to other locations, Cowen and

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Company's
ability to service and interact with its clients may suffer, and the Company may not be able to implement successfully contingency plans that depend on communication or travel.

Our
investment banking business also relies on the secure processing, storage and transmission of confidential and other information in its computer systems and networks. Cowen and
Company's computer systems, software and networks may be vulnerable to unauthorized access, computer viruses or other malicious code and other events that could have a security impact. If one or more
of such events occur, this could jeopardize our or our broker-dealer clients' or counterparties' confidential and other information processed and stored in, and transmitted through, Cowen and
Company's computer systems and networks, or otherwise cause interruptions or malfunctions in our broker-dealer business', its clients', its counterparties' or third parties' operations. The Company
may be required to expend significant additional resources to modify its protective measures, to investigate and remediate vulnerabilities or other exposures or to make required notifications, and the
Company may be subject to litigation and financial losses that are either not insured against or not fully covered through any insurance maintained by the Company.

Item 1B.    Unresolved Staff Comments

None.

Item 2.    Properties

Our main offices, all of which are leased, are located in New York City, Boston, San Francisco and London. Our corporate headquarters
are located at 599 Lexington Avenue, New York, New York, comprise approximately 91,124 square feet of leased space, pursuant to lease agreements expiring in 2022. We also lease approximately 42,434
square feet of space at 1221 Avenue of the Americas, New York, New York pursuant to a sublease agreement expiring in 2013. We lease 38,217 square feet of space at Two International Place in Boston
pursuant to a lease agreement expiring in 2014, which is used primarily by our broker-dealer segment. In San Francisco, we lease approximately 29,072 square feet of space at 555 California Street,
pursuant to a lease agreement expiring in 2015 and used by our broker-dealer segment. Our London offices are located at Broadgate West Phase II, 1 Snowden Street, subject to a lease agreement
expiring in 2017 that is used by our alternative investment management and broker-dealer segments, respectively. We also lease property at 10 Bruton Street in London subject to a lease agreement
expiring in 2011. Our other offices, all of which are leased, are located in Atlanta, Chicago, Dallas, Stamford, Geneva, Munich, Purchase (New York), Luxembourg, Tokyo, Hong Kong, Beijing and
Shanghai.

Item 3.    Legal Proceedings

We face significant legal risks in our businesses and, in recent years, the volume of claims and amount of damages sought in litigation
and regulatory proceedings against financial institutions have been increasing. These risks include potential liability under federal securities and other laws in connection with securities offerings
and other transactions, as well as advice and opinions we provide concerning strategic transactions. In addition, like most financial institutions, we are often the subject of claims made by current
and former employees arising out of their employment or termination of employment with us. We are involved in a number of judicial, regulatory and arbitration matters arising in connection with our
business including those described below.

Pursuant
to ASC Topic 450, we review the need for any loss contingency reserves, and we have established reserves for certain of these matters that we believe are adequate where, in the
opinion of management, the likelihood of liability is probable and the extent of such liability is reasonably estimable. In addition, in connection with the Cowen Holdings's IPO, Cowen Holdings
entered into an indemnification agreement (which we refer to as the Indemnification Agreement) with Société Générale, wherein
Société Générale agreed to indemnify Cowen Holdings for all liability arising out of

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all
known, pending or threatened litigation and arbitrations and certain specified regulatory matters that existed at the time of the Cowen Holdings IPO. The Indemnification Agreement provides that
Société Générale will indemnify Cowen Holdings for all known or unknown liabilities, including litigation and related matters, arising from
any business conducted by Société Générale or previously conducted by Cowen Holdings to the extent that such business was not part of the
businesses conducted by Cowen Holdings at the time of the Cowen Holdings IPO. The liabilities for which Société Générale will indemnify
Cowen Holdings include the costs of legal fees and related expenses incurred in connection with the indemnified matters as well as any settlements or awards. Under the Indemnification Agreement, Cowen
Holdings has agreed to indemnify Société Générale for all claims made after the Cowen Holdings IPO to the extent they relate to the
businesses conducted by Cowen Holdings at the time of the Cowen Holdings IPO and were not known or threatened at the time of the Cowen Holdings IPO. All of the Company's material pending legal
proceedings are described below. Certain of these material proceedings, along with certain other immaterial known, pending or threatened litigations and arbitrations, are subject to indemnification by
Société Générale under the Indemnification Agreement as indicated below.

In re: Initial Public Offering Securities Litigation

Cowen and Company is one of many financial institutions named as a defendant in a number of putative securities class actions entitled In re: Initial Public
Offering Securities Litigation, filed in the United States District Court for the Southern District of New York ("SDNY") relating
to numerous initial and other public offerings of common stock from approximately 1998 through 2000. The various complaints allege that the underwriters of certain IPOs, including Cowen and Company,
made material misrepresentations and omissions to purchasers of the stock sold in the IPOs, thereby inflating the value of the stock. Specifically, the plaintiffs allege that the defendants failed to
disclose, among other things, the purported existence of improper tie-in and compensation arrangements they had with certain purchasers of the stock and alleged conflicts of interest
relating to research published by the underwriters, all in violation of federal securities laws. The district court granted plaintiffs' motion to certify six "focus" cases as class actions. Cowen and
Company was a named defendant in one of these "focus" cases. Cowen and Company appealed the class certification decision to the Second Circuit Court of Appeals (the "Second Circuit") and on
December 4, 2006, the Second Circuit reversed the SDNY's decision and remanded the matter for reconsideration in light of the Second Circuit's opinion. Plaintiffs petitioned for rehearing and
rehearing en banc by the Second Circuit. On December 14, 2006, the SDNY stayed discovery. On April 6, 2007, the Second Circuit denied plaintiffs' petition for rehearing en banc.
Plaintiffs amended their complaints and revised their class definitions in an attempt to comply with the Second Circuit's December 4, 2006 decision. Defendants in the six focus cases, including
Cowen and Company, moved to dismiss the amended complaints in each case and opposed plaintiffs' motion for class certification. On March 26, 2008, the SDNY denied defendants' motion to dismiss
the amended complaints. On October 3, 2008, plaintiffs withdrew their motion for class certification without prejudice. On April 2, 2009, counsel for plaintiffs filed a Motion for
Preliminary Approval of Settlement with the SDNY. On June 10, 2009, the SDNY granted plaintiffs' Motion for Preliminary Approval of Settlement and, on June 11, 2009, issued a Preliminary
Order in Connection with Settlement Proceedings. On October 5, 2009, the SDNY issued a final order approving the settlement. On October 23, 2009, certain class members filed with the
Second Circuit Court a petition pursuant to Federal Rule of Civil Procedure 23(f) for leave to appeal the portion of the SDNY's October 5, 2009 order certifying a settlement class. Separately,
certain other class members filed appeals with the Second Circuit of the SDNY's final order approving the settlement. On April 16, 2010, plaintiffs filed a motion with the SDNY requesting that
those class members who appealed the SDNY's final order approving the settlement be required to post appeal bonds. On June 17, 2010, the SDNY granted the motion and set the bond amount at
$25,000. On July 16, 2010, those class members appealing the SDNY's final order approving the settlement posted a $25,000 appeal bond. Plaintiffs thereafter settled the objections with all but
two of the objecting class members. On November 3, 2010,

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the
appeal of one of the objecting class members was dismissed by the Second Circuit Court. To the extent that the Company incurs legal fees, costs or expenses related to this settlement, it will be
indemnified by Société Générale.

Adelphia Communications Corp. Litigation

Cowen and Company is a named defendant in several litigations relating to Adelphia Communications, a cable company that filed for
bankruptcy in June 2002. The complaints generally allege that the Rigas family, who controlled Adelphia, took advantage of Adelphia's assets, including through the use of certain loans, or
"co-borrowing facilities," that allowed the family to take more than $3 billion for their private use. Cowen and Company has been named as a defendant in four actions arising out of
certain offerings of Adelphia securities in which Cowen and Company participated as a member of the underwriting syndicate. All four actions are pending before the SDNY. The complaints in each of
these actions raise a variety of claims arising out of the sale of Adelphia securities, including claims under the federal securities laws.

These
actions are generally referred to as the "Adelphia Securities Class Action," "W.R. Huff Asset Management" (or "Huff"), "Appaloosa" and "Stocke." The SDNY granted Cowen and
Company's motion to dismiss all federal securities claims brought against Cowen and Company in the Adelphia Securities Class Action. Thereafter, the financial institution defendants reached a
settlement with the plaintiffs. On June 15, 2006, the SDNY preliminarily approved the settlement. A fairness hearing was held on November 10, 2006, and the settlement was approved on
November 20, 2006. Cowen and Company's share of the settlement is approximately $1.7 million plus interest at 4.37% beginning December 1, 2006 (all of which is covered by the
Indemnification Agreement). In November 2006, this amount was placed in an attorneys' escrow account bearing the required rate of interest. On December 8, 2006, a group of class members
appealed the order approving the settlement agreement with the class plaintiffs to the Second Circuit. The SDNY also has granted in part, and denied in part, certain motions to dismiss filed by
various defendants, including Cowen and Company, in Huff, Appaloosa and Stocke. On April 7, 2008, the Stocke action was dismissed by stipulation and order following a ruling by the Second
Circuit that affirmed in all respects the SDNY's approval of the class settlement, which ruling is now final. Accordingly, the claims made by all class members who did not opt out, including the
Stocke plaintiffs, have been dismissed and released. On April 19, 2010, the Appaloosa plaintiffs filed with the SDNY a Stipulation and Order of Dismissal with Prejudice, which was signed by the
SDNY on April 20, 2010.

In
addition, in August 2005, the SDNY denied Cowen and Company's motion to dismiss based on Huff's lack of standing, and subsequently granted leave to file an interlocutory appeal to the
Second Circuit of that ruling. The Second Circuit granted Cowen and Company's petition to appeal under 28 U.S.C. § 1292. In December 2008, the Second Circuit held that Huff lacks
standing to pursue the claims it had asserted, and remanded the case. In January 2009, the SDNY issued an order dismissing the Huff case. Huff subsequently moved to vacate the dismissal order, which
was denied, and for reconsideration, which also was denied. Thereafter, Huff moved to (among other things) amend the complaint in an effort to overcome the effect of the Second Circuit's ruling. On
May 21, 2009, the SDNY issued an opinion and order granting plaintiff Huff leave to amend the complaint to add the actual purchasers of the securities, but in addition, granted defendants leave
to serve discovery regarding the identity of those purchasers and the circumstances under which Huff was purportedly prosecuting claims on their behalf. That discovery has now been completed, and the
defendants (including Cowen and Company) have moved to dismiss many of the newly named plaintiffs. Further, following Appaloosa's amendment of the complaint, Cowen and Company (and most of the other
defendants) have filed answers. Certain defendants in Appaloosa have filed a motion to dismiss
challenging the newly amended complaint. Discovery in Huff and Appaloosa remains stayed until the pending motions have been resolved, which motion is still pending.

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In
addition to the cases in which Cowen and Company has been named as a defendant, Cowen may also face potential liability pursuant to the applicable master agreements among underwriters
for any judgments or settlements in other cases involving the Adelphia securities offerings in which Cowen participated. To the extent that the Company incurs additional legal fees or pays any fine or
monetary sanction, it will be indemnified by Société Générale.

Cowen
and Company was also named as one of many defendants in two related adversary proceedings that originally were filed in the United States Bankruptcy Court for the Southern District
of New York (the "Bankruptcy Court"). These adversary proceedings were filed by the Official Committee of Unsecured Creditors (the "Creditors' Committee") and the Official Committee of Equity Security
Holders (collectively, the "Committees"). Both of these cases raised a variety of common law and federal claims, which were generally similar to the claims asserted in the Adelphia cases described
above. With respect to Cowen and Company and other investment banks, the complaints taken together originally set forth claims for violation of the Bank Holding Company Act, equitable disallowance or
equitable subordination, breach of fiduciary duty, aiding and abetting breach of fiduciary duty, aiding and abetting fraud, gross negligence and breach of contract, among others. Cowen and Company
filed motions to dismiss the claims asserted by the Committees, which were granted in part and denied in part, by the Bankruptcy Court in two decisions issued on June 11, 2007 and
August 17, 2007, respectively. Cowen and Company appealed to the SDNY those portions of the Bankruptcy Court's June 11, 2007 decision that denied Cowen and Company's motion to dismiss
the claims asserted against Cowen and Company by the Creditors' Committee. On January 17, 2008, the SDNY denied Cowen and Company's appeal and affirmed, in part, the June 11, 2007
decision, with the exception of the Bank Holding Company Act claim which was dismissed against Cowen and Company and the other investment banks.

As
part of the bankruptcy plan confirmation process, claims by both Committees were assigned to a litigation trust. In October 2007, the trust filed an amended complaint in the SDNY
against multiple defendants, including Cowen and Company, in which it repleaded several of its claims, including, without limitation, the following claims: aiding and abetting fraud; fraudulent
concealment; fraud; equitable disallowance; equitable subordination; and violation of the Bank Holding Company Act. On January 4, 2008, Cowen and Company filed an answer to the amended
complaint and a joinder to a motion filed by certain investment banks seeking a dismissal of several counts in the amended complaint. On June 17, 2008, the SDNY issued an Opinion and Order
dismissing certain claims contained in the amended complaint, including, without limitation, the equitable disallowance and equitable subordination claims. On May 4, 2009, the SDNY issued an
opinion that resolved the pending motions to dismiss portions of the amended complaint filed by the litigation trust. In its decision, the SDNY dismissed the fraudulent concealment claim and the fraud
claim as to certain alleged misstatements. The court denied the motions to dismiss the remaining claims. The litigation trust
appealed the June 17, 2008 Opinion and Order issued by the SDNY, which was affirmed by the Second Circuit Court on May 26, 2010. On October 25, 2010, the Adelphia Recovery Trust
and Cowen and Company, among others, settled the remaining claims pending against Cowen and Company, among others, in connection with this litigation. The settlement was approved by the SDNY at a
hearing on November 18, 2010 and on January 3, 2011, the claims against the Company were voluntarily dismissed. To the extent that the Company incurs additional legal fees or pays any
fine or monetary sanction, it will be indemnified by Société Générale.

In re: HealthSouth Corporation Bondholder Litigation

Cowen and Company was named as a defendant in a purported class action filed in the United States District Court for the Northern
District of Alabama on January 8, 2004 as a result of Cowen and Company's predecessor's involvement as one of the initial purchasers in a March 1998 private placement of debt securities issued
by HealthSouth Corporation, which were subsequently exchanged for materially identical registered securities. The complaint alleges that the offering materials for the

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private
placement and the registration statement in the associated offering violated federal securities laws by failing to disclose HealthSouth's subsequently revealed accounting irregularities. On
June 8, 2006, the District Court, among other things, dismissed the claims arising out of the March 1998 private placement (the only claims against Cowen and Company). On August 21,
2006, following plaintiffs' subsequent submission of amendments to the complaint, the District Court so-ordered a stipulation and order dismissing all amended counts against Cowen and
Company. The dismissal was not yet a "final" judgment from which an appeal may be taken by plaintiffs. However, on July 26, 2010, the District Court for the Northern District of Alabama
approved a settlement between plaintiffs and certain other defendants, entered a partial final judgment as to those defendants, and dismissed the case as to another defendant. By virtue of the
District Court's rulings, plaintiffs had 30 days from July 26, 2010 to appeal the District Court's dismissal of Cowen and Company from the case. No appeal was filed. To the extent that
the Company incurs additional legal fees or pays any fine or monetary sanction, it will be indemnified by Société Générale.

Madden Litigation

On June 28, 2006, a group of approximately 60 medical doctors filed a lawsuit against Cowen and Company in San Francisco
Superior Court. Plaintiffs allege that Cowen and Company negligently rendered a fairness opinion in 1998 in connection with the acquisition of Orange Coast Managed Care Services and St. Joseph
Medical Corporation by FPA Medical Management, Inc. ("FPA"). According to the complaint, plaintiffs received restricted FPA stock as consideration in the
sale and, shortly after the acquisition, FPA went bankrupt, rendering the stock worthless. On August 14, 2006, Cowen and Company removed the case to the United States District Court for the
Northern District of California (the "NDCA"). On August 17, 2006 Cowen and Company filed a motion to dismiss the complaint. Plaintiffs sought a remand to state court. On March 18, 2007,
the Court granted Cowen and Company's motion to dismiss, with leave to replead, and denied plaintiffs' motion to remand. By stipulation and order dated April 20, 2007, the Court directed entry
of a final judgment dismissing the complaint with prejudice. On May 17, 2007, plaintiffs filed with the United States Court of Appeals for the Ninth Circuit (the "Ninth Circuit"), a Notice of
Appeal of the District Court's dismissal. On February 11, 2009, the Ninth Circuit issued an opinion vacating the NDCA's judgment and remanding the matter back to state court. On March 4,
2009, Cowen and Company filed with the Ninth Circuit a petition for panel rehearing and suggestion for rehearing en banc. On August 7, 2009, the Ninth Circuit issued an opinion denying Cowen
and Company's petition for rehearing and rehearing en banc, but also superseding the February 11, 2009 opinion and remanding the matter back to the NDCA to determine whether the case should be
dismissed or remanded to state court. On January 29, 2010, plaintiffs filed with the NDCA a motion to remand the case to state court and on February 12, 2010, defendants filed an
opposition to that motion and moved to dismiss the complaint. On April 14, 2010, the NDCA denied Cowen and Company's motion to dismiss and granted plaintiffs' motion to remand the case to the
San Francisco Superior Court. On May 20, 2010, Cowen and Company filed a demurrer in San Francisco Superior Court seeking dismissal of the complaint. On October 14, 2010, a
hearing was held on the demurrer, at which time the court denied the demurrer. Cowen and Company filed an answer to the complaint on January 6, 2011. To the extent that the Company incurs
additional legal fees or pays any fine or monetary sanction, it will be indemnified by Société Générale.

WorldSpace Litigation

Cowen and Company is named as an underwriter defendant in several putative securities class actions brought in the SDNY in 2007. In all
of the cases, plaintiffs seek to recover for losses allegedly caused by misrepresentations and omissions in connection with the August 4, 2005 IPO of WorldSpace, Inc., a satelliteradio
provider. The complaints allege that the WorldSpace prospectus referenced a subscriber count that improperly included subscribers who had stopped paying for the service and failed to disclose that
WorldSpace lacked the internal systems necessary to accurately

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determine
the number of subscribers to its service. On June 21, 2007, the SDNY issued an order consolidating the actions and appointing a lead plaintiff. The consolidated amended complaint was
filed on August 9, 2007. On October 9, 2007, Cowen and Company filed a motion to dismiss the consolidated amended complaint, which was denied by the SDNY on July 21, 2008. On
August 25, 2008, Cowen and Company filed an answer to the consolidated amended complaint. On October 17, 2008, WorldSpace filed for Chapter 11 bankruptcy protection with the
United States Bankruptcy Court for the District of Delaware (the "Delaware Bankruptcy Court"). The SDNY subsequently entered a stay of the securities class action litigation in light of the ongoing
WorldSpace bankruptcy proceedings. On August 16, 2010, the Delaware Bankruptcy Court granted lead plaintiff's motion for limited modification of the automatic stay to permit plaintiff to obtain
document discovery from WorldSpace, effective October 14, 2010. On September 14, 2010, the SDNY lifted the stay in the securities class action litigation,
permitting lead plaintiff to move forward with discovery as of October 14, 2010. The SDNY subsequently referred the matter to a magistrate and instructed the parties to submit a proposed
scheduling order for discovery and an eventual motion for summary judgment.

China Sunergy Litigation

Cowen and Company is named as one of several underwriter defendants in two cases filed in the SDNY in 2007. Plaintiffs in both cases
seek to recover for losses allegedly caused by misrepresentations and omissions in the prospectus relating to the May 17, 2007 IPO of China Sunergy Co. Ltd ("China Sunergy").
Principally, the complaints allege that China Sunergy's prospectus failed to disclose that China Sunergy was having difficulty obtaining sufficient raw materials to achieve its revenue objectives, and
also failed to disclose that China Sunergy would likely face a loss in the second quarter of 2007. On September 29, 2008, the SDNY appointed a lead plaintiff. On December 5, 2008, the
lead plaintiff filed a consolidated amended complaint, and on January 26, 2009, defendants filed a motion to dismiss that complaint. On October 16, 2009, the plaintiffs filed a
Stipulation and Agreement of Settlement with the SDNY, which is pending final approval by the court.

Opnext Litigation

Cowen and Company is one of five underwriters named as defendants in two cases filed in March 2008 in the United States District Court
of New Jersey ("DNJ"), relating to the February 14, 2007 IPO of Opnext, Inc. ("Opnext"). Both complaints assert claims against the underwriters under federal securities laws and allege
generally that the financial statements in the registration statement and prospectus contained materially false and misleading statements and omissions, which resulted in the financial statements
being restated by Opnext due to an error in the valuation of inventory consigned to one of its contract manufacturers. On June 30, 2008, the DNJ appointed a lead plaintiff, and on
July 30, 2008, the lead plaintiff filed a consolidated class action complaint. The underwriter defendants filed an answer and affirmative defenses to the consolidated complaint on
October 21, 2008. On January 30, 2009, the DNJ entered an order referring the matter to non-binding mediation and staying any further discovery in the litigation until
April 30, 2009. On October 2, 2009, plaintiffs filed a motion for preliminary approval of settlement and, on October 6, 2009, the DNJ issued an order preliminarily approving the
settlement. On January 6, 2010, the DNJ held a fairness hearing and issued an order and final judgment approving the settlement. No settlement contribution was made by the underwriter
defendants, including Cowen and Company.

Global Cash Litigation

On August 18, 2008, Cowen and Company was named as a defendant, along with several other underwriters, in a consolidated
complaint filed in the SDNY relating to the September 22, 2005 initial public offering and subsequent secondary offering of Global Cash Access Holdings, Inc. ("GCA") common stock. The
consolidated complaint alleges generally that the registration statements and prospectuses for the GCA IPO and secondary offering were false and misleading and failed to disclose,

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among
other things, that GCA incorrectly calculated the amount of commissions payable to GCA's customers and that GCA's financial statements understated the GCA's expenses and overstated net income
for 2005 and 2006. On September 18, 2008, the SDNY granted a motion made by certain defendants to transfer venue of the case to the United States District Court for the District of Nevada
("DNV"). On November 14, 2008, the underwriter defendants moved to dismiss the consolidated amended complaint. On June 23, 2009, the DNV heard oral argument on defendants' motion to
dismiss the consolidated amended complaint, and on June 29, 2009, the DNV issued an order denying that motion. The defendants filed an answer to the consolidated amended complaint on
July 29, 2009. Certain pretrial discovery was conducted in the matter, including the production of documents, pursuant to a scheduling order entered by the DNV. On October 23, 2009,
plaintiffs filed a motion for class certification. The underwriter defendants' filed an opposition to that motion on November 20, 2009. On December 16, 2009, the parties conducted a
settlement mediation of the case, and shortly thereafter, a tentative settlement of the case was negotiated, pursuant to which the claims against the underwriter defendants will be dismissed, and no
settlement contribution will be made by the underwriters. On February 17, 2010, a Stipulation of Settlement was executed and submitted to the DNV for preliminary and final approval. On
June 25, 2010, the DNV held a fairness hearing entered a final order and judgment in which it approved and confirmed the settlement, and dismissed the litigation.

CardioNet Litigation

On March 5, 2010, Cowen and Company was named as a defendant, along with several other underwriters, in a putative class action
filed in the San Diego Superior Court, in connection with an August 2008 follow-on offering for CardioNet, Inc. ("CardioNet"). The complaint alleges, among other things, that
the prospectuses for CardioNet's March 2008 initial public offering (in which Cowen and Company did not participate) and subsequent follow-on equity offering (in which Cowen and Company
did participate) were false and misleading and failed to disclose, among other things, that CardioNet incorrectly reported revenue and failed to disclose certain risks relating to Medicare
reimbursement rates for CardioNet's services. On April 5, 2010, Cowen and Company and the other defendants moved to remove the case to the United States District Court for the Southern District
of California and, on April 7, 2010, moved to transfer the
case to the United States District Court for the Eastern District of Pennsylvania. On April 23, 2010, plaintiffs moved to remand the case back to California state court. The motions to transfer
and remand remain pending. The Company cannot presently predict the ultimate outcome of the litigation or estimate the possible loss or range of loss, if any.

Fuqi Litigation

In March 2010, Cowen and Company was named, along with several other underwriters, as a defendant in two putative class actions filed
in the SDNY in connection with a July 2009 follow-on offering for Fuqi International, Inc. ("Fuqi"). The complaint alleges, among other things, that the prospectus for Fuqi's
follow-on offering was false and misleading and contained materially inaccurate financial statements that overstated Fuqi's gross profit and net income. On July 26, 2010, the court
consolidated the two putative class actions in which Cowen and Company was named as a defendant with several related actions and appointed lead plaintiffs. On August 20, 2010 the court ordered
that plaintiffs shall file their consolidated complaint no later than 30 days after Fuqi publicly releases its financial statements for the fiscal year ended December 31, 2009 and its
restated financial statements for the periods ended March 31, June 30, and September 30, 2009. The court further ordered that defendants will have 45 days after the date on
which plaintiffs file their complaint at answer, plead, or otherwise response to the complaint. The Company cannot presently predict the ultimate outcome of the litigation or estimate the possible
loss or range of loss, if any.

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LaBranche Litigation

On February 22, 2011, a putative class action, captionedMoskal v. LaBranche & Co.,
et. al., was filed in the Supreme Court of the State of New York, County of New York, naming as defendants the Company, LaBranche & Co. and members of the
board of directors of LaBranche & Co. (collectively, "LaBranche"), and Louisiana Merger Sub, Inc. On February 26, 2011, a separate lawsuit was filed, captioned Borowka v. LaBranche & Co.,
et al., in the Supreme Court of the State of New York, County of New York naming as defendants the same
parties. The lawsuits challenge LaBranche's decision to sell all of its outstanding shares of common stock to the Company for $192.8 million. The complaints allege, among other things, that the
Company aided and abetted the LaBranche defendants in breaching their fiduciary duties to shareholders by failing to maximize the sale price for LaBranche. The Company cannot presently predict the
ultimate outcome of the litigation or estimate the possible loss or range of loss, if any.

Alphatec Litigation

On February 22, 2011, a putative class action, captionedMallen v. Alphatec Holdings, Inc., et.
al., was filed in the United States District Court for the Southern District of California, naming as defendants Alphatec Holdings, Inc. ("Alphatec"), members of the
Alphatec board of directors, Healthpoint Capital Partners, LLP, Healthpoint Capital Partners II, LLP, as well as Jefferies & Co., Inc., Canaccord Adams, Inc.,
Lazard Capital Markets, LLC, and Cowen and Company (the "Underwriter Defendants"). The complaint brings claims against the Underwriter Defendants under sections 11 and 12 of the
Securities Act of 1933 for alleged materially inaccurate and misleading statements and omissions in the registration statement and prospectus for an April 2010 offering of common stock of
Alphatec regarding the success of Alphatec's acquisition of a company named Scient'x. The Company cannot presently predict the ultimate outcome of the litigation or estimate the possible loss or range
of loss, if any.

Lehman Brothers

Certain of the hedge funds managed by Ramius used Lehman Brothers International (Europe) ("LBIE") as one of their prime brokers and
some of these funds also held assets through accounts at Lehman Brothers, Inc. ("LBI"). As a result of LBIE being placed into administration on September 15, 2008 by order of the English
Court and LBI entering liquidation proceedings under the Securities Investor Protection Act of 1970, as amended, the assets, including securities and cash, held by Ramius and the hedge funds in
their LBIE accounts and LBI accounts were frozen at LBIE and LBI, respectively.

The
net assets of the Ramius hedge funds held at LBIE at the time of administration, which we refer to as the total net equity claim, were approximately $232.6 million. Given the
great degree of uncertainty as to the status of the assets held at LBIE and the process and prospects of the return of those assets, the Company initially valued the total net equity claim at an 80%
discount, or approximately $46.5 million, which the Company believed, at the time, was a reasonable estimate of value that ultimately may be recovered with respect to the total net equity
claim. Since the status and ultimate resolution of the assets under LBIE's administration proceedings is uncertain, the Company decided that only the investors who were invested at the time of the
administration should participate in any profit/loss relating to the estimated recoverable Lehman claim. As such, the Company has segregated the Lehman claims for the benefit of such investors for so
long as they remain in the funds. These segregated Lehman claims do not earn management fees.

In
November 2008, one of the hedge funds managed by Ramius was appointed as a member of the unsecured creditors' committee of LBIE and representatives of the Company have been
attending regular meetings of the creditors' committee and assisting in working on potential solutions to provide a framework for returning assets to clients. In this connection, in the fall of 2009,
LBIE proposed

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entering
into a multilateral contract between LBIE and its clients, referred to as the Claims Resolution Agreement, or CRA, which would govern the basis on which assets can be returned by LBIE. On
December 29, 2009, LBIE announced that the CRA had become effective with respect to LBIE and the signatories to the CRA, which includes the Ramius hedge funds who had assets at LBIE. The CRA
included a March 19, 2010 bar date for LBIE 's trust creditors to notify LBIE of claims to any of the trust assets controlled by LBIE. Given (1) the fact that the bar date has passed and
(2) the additional information Ramius has received from LBIE regarding the various components of the Ramius hedge funds' claims against LBIE, Ramius has decided to value its total net equity
claim as follows: (i) the trust assets that we have been informed are within the control of LBIE and are expected to be distributed to us in the relatively near term are being valued at market
less a 1% discount that corresponds to the fee that will be charged under the CRA for the return of trust assets, (ii) the trust assets that are not within the control of LBIE, but that Ramius
believes are held by LBIE through LBI, are being valued at 47% which represents the present value of the mid-point between what Ramius believes are reasonable estimates of the
low-side and high-side potential recovery rates with respect to its LBI exposure, (iii) the trust assets that are not within the control of LBIE and are not believed to
be held through LBI are being valued at 47% US denominated Assets and 30% foreign denominated Assets, which represents Ramius's estimate of potential recovery rates with respect to this exposure and
(iv) Ramius's remaining unsecured claims against LBIE are being valued at 40%, which represents Ramius's estimate of potential recovery rates with respect to this exposure.

In
addition, the Company currently estimates that the combined net exposure of the hedge funds to LBI amounts to approximately $21.5 million in cash and securities. On
September 19, 2008, LBI was placed in a Securities Investor Protection Corporation ("SIPC") liquidation proceeding after the filing for bankruptcy of its parent Lehman Brothers
Holdings, Inc. The status of the assets under LBI's bankruptcy proceedings has not been determined. The amount that will ultimately be recovered from LBI will depend on the amount of assets
available in the fund of customer property to be established by the trustee appointed under the Securities Investor Protection Act (the "SIPA Trustee") as approved by the bankruptcy court as well as
the total amount of customer claims that seek recovery from the fund of customer property. Based on recent court filings by the SIPA Trustee, the total amount of customer claims exceeds the assets
that are likely to be in the fund of customer property. In addition, the court filings also indicate that Barclays plc has submitted a substantial claim against LBI relating to the asset
purchase agreement entered into by Barclays with LBIE near the time of the SIPC liquidation proceeding that could affect the amount of assets that are included in the fund of customer property. As a
result of these uncertainties and the timing of any distributions from LBI in respect of our customer claims, Ramius estimated its recovery with respect to our LBI exposure at 47%, which represents
the present value of the mid point between what it believes are reasonable estimates of the low side and high side potential recovery rates with respect to its LBI exposure. The estimated recoverable
amount by the Ramius hedge funds may differ from the actual recoverable amount of the pending LBI claim, and the differences may be material.

At
the end of June 2010, LBIE returned certain trust assets that were under their control. Such assets were sold in July 2010 and the subsequent proceeds distributed. As
part of this distribution, the Company received $5.3 million, which represents approximately 58.62% of Company's share of the Enterprise Fund's Estimated Recoverable Lehman Claims as of
June 30, 2010. We expect the balance of the trust assets within the control of LBIE to be distributed to us in the relatively near term.

As
a result of Ramius being an investor in the Enterprise Fund and due to Ramius's additional direct exposure to LBIE, Ramius had a total exposure to LBIE of $3.8 million and a
total exposure to LBI of $2.7 million, as of December 31, 2010. At December 31, 2010, the value of Ramius's exposure to LBIE and LBI after the mark downs discussed above, was
$6.5 million.

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Regulatory Inquiries and Investigations

In addition to the civil litigation matters described above, we are also involved in a number of regulatory inquiries and
investigations, which are not covered by the Indemnification Agreement. The most significant regulatory matters are as follows:



Item 4.    Removed and Reserved

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PART II



Item 5.    Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Stock Price Information and Stockholders

Our Class A common stock is listed and trades on the NASDAQ Global Market under the symbol "COWN." As of March 10, 2011,
there were approximately 58 holders of record of our Class A common stock. This number does not include stockholders for whom shares were held in "nominee" or "street" name.

Prior
to November 2, 2009, the common stock of Cowen Holdings had traded under the symbol "COWN" since Cowen Holdings's IPO in July 2006. Prior to November 2, 2009, our
common stock was held by RCG and Cowen Holdings as restricted shares and was not publicly tradable.

The
following table contains historical quarterly price information for the year ended December 31, 2010. On March 10, 2011, the last reported sale price of our common
stock was $4.08.

2010 Fiscal Year

High

LowFirst Quarter

$
6.02

$
4.84Second Quarter


6.02


3.87Third Quarter


4.51


2.99Fourth Quarter


5.04


3.25


For
the period from November 2, 2009 through December 31, 2009, the high trading price for the Company's Class A common stock was $9.00, and the low was $4.94.

Dividend Policy

We have never declared or paid any cash dividends on Class A common stock or any other class of stock. Any payment of cash
dividends on stock in the future will be at the discretion of our board of directors and will depend upon our results of operations, earnings, capital requirements, financial condition, future
prospects, contractual restrictions and other factors deemed relevant by our board of directors. Our ability to pay cash dividends is restricted under the terms of the HVB Credit Facility. We
currently intend to retain any future earnings to fund the operation, development and expansion of our business, and therefore we do not anticipate paying any cash dividends in the foreseeable future.

Issuer Purchases of Equity Securities

None.

Item 6.    Selected Financial Data

The following table sets forth our selected consolidated financial and other data for the years ended December 31, 2010, 2009,
2008, 2007, and 2006. The selected consolidated statements of financial condition data and consolidated statements of operations data as of and for the years ended December 31, 2010, 2009,
2008, 2007, and 2006 have been derived from our audited consolidated financial statements. Our selected consolidated financial data are only a summary and should be read in conjunction with the
section entitled "Management's Discussion and Analysis of Financial Condition and Results of Operations" and with our audited consolidated financial statements and related notes included elsewhere in
this Annual Report on Form 10-K. The selected financial data includes the

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results
of Cowen Holdings for the period from November 2, 2009 through December 31, 2009 and for the year ended December 31, 2010.

Year Ended December 31,2010

2009

2008

2007

2006(in thousands except per share data)Consolidated Statements of Operations Data:RevenuesInvestment banking

$
38,965

$
10,557

$


$


$
Brokerage


112,217


17,812








Management fees


38,847


41,694


70,818


73,950


65,635Incentive income


11,363


1,911





60,491


81,319Interest and dividends


11,547


477


1,993


16,356


17,189Reimbursement from affiliates


6,816


10,326


16,330


7,086


4,070Other revenues


1,936


4,732


6,853


5,086


8,038Consolidated Funds revenues


12,119


36,392


31,739


25,253


35,897Total revenues


233,810


123,901


127,733


188,222


212,148ExpensesEmployee compensation and benefits


194,919


96,592


84,769


123,511


112,433Non-compensation expense


136,902


69,818


54,856


79,020


54,277Goodwill impairment








10,200





Consolidated Funds expenses


8,121


23,581


34,268


21,014


39,300Total expenses


339,942


189,991


184,093


223,545


206,010Other income (loss)Net gain (loss) on securities, derivatives and other investments


21,980


(2,154
)

(2,006
)

94,078


54,765Consolidated Funds net gains (losses)


31,062


20,999


(198,485
)

84,846


78,656Total other income (loss)


53,042


18,845


(200,491
)

178,924


133,421Income (loss) before income taxes


(53,090
)

(47,245
)

(256,851
)

143,601


139,559Income tax expense (benefit)


(21,400
)

(8,206
)

(1,301
)

1,397


4,814Net income (loss)


(31,690
)

(39,039
)

(255,550
)

142,204


134,745Income (loss) attributable to redeemable non-controlling interests


13,727


16,248


(113,786
)

66,343


74,189Special allocation to the Managing Member











26,551


21,195Net income (loss) attributable to Cowen Group stockholders


(45,417
)

(55,287
)

(141,764
)

49,310


39,361Weighted average common shares outstanding:Basic


73,149


41,001


37,537


37,537


37,537Diluted


73,149


41,001


37,537


37,537


37,537Earnings (loss) per share:Basic

$
(0.62
)
$
(1.35
)
$
(3.78
)
$
1.31

$
1.05Diluted

$
(0.62
)
$
(1.35
)
$
(3.78
)
$
1.31

$
1.05




As of December 31,2010

2009

2008

2007

2006Consolidated Statements of Financial Condition Data:Total assets

$
1,247,170

$
959,441

$
797,831

$
2,113,532

$
2,468,195Total liabilities


653,568


255,091


182,003


1,430,029


1,657,992Redeemable non-controlling interests


144,346


230,825


284,936


203,523


514,761Total Stockholders' Equity

$
449,256

$
473,525

$
330,892

$
479,980

$
295,442


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Item 7.    Management's Discussion and Analysis of Financial Condition and Results of Operations

The following discussion should be read in conjunction with our audited consolidated financial statements and
the related notes that appear elsewhere in this Annual Report. In addition to historical information, this discussion includes forward-looking information that involves risks and assumptions, which
could cause actual results to differ materially from management's expectations. See "Special Note Regarding Forward-Looking Statements" included elsewhere in this Annual Report on
Form 10-K.

Overview

Cowen Group, Inc. is a diversified financial services firm and, together with its consolidated subsidiaries provides alternative
investment management, investment banking, research, and sales and trading services through its two business segments: alternative investment management and broker-dealer. The alternative investment
management segment includes hedge funds, replication products, mutual funds, managed futures funds, fund of funds, real estate funds, healthcare royalty funds, cash management services, offered
primarily under the Ramius name. The broker-dealer segment offers industry focused investment banking for growth-oriented companies including advisory and global capital markets origination and domain
knowledge-driven research and a sales and trading platform for institutional investors, primarily under the Cowen name.

On
November 2, 2009, the transactions contemplated by the Transaction Agreement (the "Transactions"), were consummated including (1) the merger of Lexington Merger Corp.
with and into Cowen Holdings, pursuant to which each outstanding share of common stock of Cowen Holdings was converted into one share of Class A common stock of the Company and (2) the
transfer by RCG (which prior to the consummation of the Transactions operated the Ramius business) of substantially all of its assets and liabilities to Park Exchange LLC in exchange for the
Company's issuance to RCG of 37,536,826 shares of Class A common stock of the Company. Following the consummation of the Transactions, each of Park Exchange LLC and Cowen Holdings became
wholly owned subsidiaries of the Company, and Park Exchange LLC was renamed Ramius LLC. Prior to the consumption of the
Transactions, the Company conducted its operations through one reportable segment, the alternative investment management segment.

Our
alternative investment management business had approximately $9.0 billion of assets under management as of January 1, 2011. The predecessor to this business was founded
in 1994 and, through one of its subsidiaries, has been a registered investment adviser under the Investment Advisers Act since 1997. Our alternative investment management products, solutions and
services include hedge funds, replication products, mutual funds, managed futures funds, fund of funds, real estate, healthcare royalty funds, and cash management services. Our institutional investors
include pension funds, insurance companies, banks, foundations and endowments, wealth management organizations and family offices.

In
February 2010, we integrated senior management and certain aspects of the infrastructure of our hedge fund and fund of funds businesses to improve institutional efficiency and
service. In March 2010, we expanded our alternative investment management business with the formation of the Ramius Trading Strategies managed futures platform.

In
July 2010, we announced the further expansion of our investment management business through the launch of our first mutual fund, the Ramius Dynamic Replication Fund. The fund focuses
on replication of a custom alternative investment index and provides investors the opportunity to access market exposures typically characterized by investments in less liquid alternative investments,
but with the daily liquidity of a mutual fund. The fund began trading in the beginning of August with over $120.0 million in initial capital.

Our
broker-dealer businesses include research, brokerage and investment banking services to companies and institutional investor clients primarily in the healthcare, technology, media
and telecommunications, consumer, aerospace and defense, financial technology, REITs and alternative energy sectors. We provide research and brokerage services to over 1,000 domestic and international

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clients
seeking to trade securities, principally in our target sectors. Historically, we have focused our investment banking efforts on small to mid-capitalization public companies as well
as private companies.

In
June 2010, we expanded our investment banking product offerings to include credit and fixed income, including public and private debt placements, exchange offers, consent
solicitations and tender offers. We also added origination and distribution capabilities for convertible securities. In addition, we have enhanced our presence in the PIPE and registered direct market
by adding personnel over the course of the year. With the addition of these capital markets capabilities we also established a unified capital markets group which we believe will allow us to be more
effective in providing cohesive solutions for our clients.

In
the fourth quarter of 2010, the Company recorded deferred tax benefits generated by a Luxembourg subsidiary. In the same quarter, the Company acquired four reinsurance companies in
Luxembourg, including two from the master fund of one of its Consolidated Funds, offering a service program that provides reinsurance coverage to the Company against certain risks. The reinsurance
companies had deferred tax liabilities and upon their purchase the deferred tax benefits referenced above fully offset these liabilities, resulting in the recognition of the deferred tax benefits.
Also, the Company incurred acquisition-related legal fees, professional fees, and financing costs, as well as operational and administrative expenses in the fourth quarter of 2010 as a result of these
transactions.

Success
in our business is highly dependent on human capital; accordingly, compensation and benefits comprise the largest component of our expenses, and our performance is dependent upon
our ability to attract, develop and retain highly skilled employees who are motivated and committed to provide the highest quality of service and guidance to our clients.

Certain Factors Impacting Our Business

Our alternative investment management business and results of operations are impacted by the following
factors:



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External Factors Impacting Our Business

Our financial performance is highly dependent on the environment in which our businesses operate. A favorable business environment is
characterized by many factors, including a stable geopolitical climate, transparent financial markets, low inflation, low interest rates, low unemployment, strong business profitability and high
business and investor confidence. Unfavorable or uncertain economic and market conditions can be caused by declines in economic growth, business activity or investor or business confidence,
limitations on the availability or increases in the cost of credit and capital, increases in inflation, interest rates, exchange rate volatility, unfavorable global asset allocation trends, outbreaks
of hostilities or other geopolitical instability, corporate, political or other scandals that reduce investor confidence in the capital markets, or a combination of these or other
factors. Our businesses and profitability have been and may continue to be adversely affected by market conditions in many ways, including the following:



Our
businesses, by their nature, do not produce predictable earnings. Our results in any period can be materially affected by conditions in global financial markets and economic
conditions generally. We are also subject to various legal and regulatory actions that impact our business and financial results.

Recent Developments

The Company has agreed to spin-off its Value and Opportunity business, which focuses on investing in deep value situations
and using shareholder activism to generate superior returns, into stand-alone and independent business that will be managed by Starboard Value LP ("Starboard").

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Upon
completion of the spin-off, the Company will maintain a significant minority interest in Starboard. The Company expects to complete the separation by March 31, 2011.

In
February 2011, the Company and LaBranche & Co Inc. ("LaBranche") announced a definitive merger agreement under which the Company has agreed to acquire LaBranche, a
market-maker in options, exchange traded funds and futures on various exchanges domestically and internationally. Under the terms of the merger agreement and subject to the satisfaction or waiver of
certain closing conditions, the Company will acquire LaBranche in a stock-for-stock merger transaction valued, as of the signing date, at approximately $192.8 million.
LaBranche shareholders will receive upon closing a fixed ratio of 0.9980 of a share of the Company Class A common stock for each outstanding share of LaBranche common stock. The total Company
shares to be issued to LaBranche shareholders will represent approximately 35.1 percent of the combined company and 33.8 percent on a fully diluted basis.

Basis of presentation

The consolidated financial statements are prepared in accordance with generally accepted accounting principles in the United States of
America ("US GAAP") under the Financial Accounting Standards Board ("FASB") Accounting Standards Codification as the source of authoritative accounting principles in the preparation of
financials statements, of the Company appearing elsewhere in this Form 10-K include the accounts of the Company, its subsidiaries, and entities in which the Company has a
controlling financial interest or a substantive, controlling general partner interest. All material intercompany transactions and balances have been eliminated in consolidation. Certain fund entities
that are consolidated in the consolidated financial statements, are not subject to these consolidation provisions with respect to their own investments pursuant to their specialized accounting.

The
Company serves as the managing member/general partner and/or investment manager to affiliated fund entities which it sponsors and manages. Certain of these funds in which the Company
has a
controlling general partner interest are consolidated with the Company pursuant to generally accepted accounting principles (the "Consolidated Funds"). Consequently, the Company's consolidated
financial statements reflect the assets, liabilities, income and expenses of these funds on a gross basis. The ownership interests in the Consolidated Funds which are not owned by the Company are
reflected as redeemable non-controlling interests in consolidated subsidiaries in the consolidated financial statements appearing elsewhere in this Form 10-K. The
management fees, incentive income and other intercompany transactions from these funds are eliminated in consolidation.

The
business combination between Ramius and Cowen Holdings was accounted for as an "acquisition" by Ramius of Cowen Holdings, as that term is used under accounting principles generally
accepted in the United States of America ("GAAP") for accounting and financial reporting purposes. As a result, the historical financial statements of Ramius (the business of which was operated by RCG
Holdings LLC, the Company's accounting predecessor, prior to the consummation of the Transactions) have become the historical financial statements of the Company. As a result, the Company's
2010 results reflect twelve months of combined operations, while 2009 results reflect twelve months of legacy Ramius and two months of legacy Cowen operations.

Revenue recognition

The Company's principal sources of revenue are derived from two segments: an alternative investment management segment and a
broker-dealer segment as more fully described below.

Our
alternative investment management segment generates revenue through three principal sources: management fees, incentive income and investment income from our own capital.

Our
broker-dealer segment generates revenue through two principal sources: investment banking and brokerage.

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Management fees

The Company earns management fees from affiliated funds and certain managed accounts that it serves as the investment manager based on
assets under management. The actual management fees received vary depending on distribution fees or fee splits paid to third parties either in connection with raising the assets or structuring the
investment.

Management
fees are generally paid on a quarterly basis at the beginning of each quarter in arrears and are prorated for capital inflows and redemptions. While some investors may have
separately negotiated fees pursuant to side letter arrangements, in general the management fees are as follows:



Incentive income

The Company earns incentive income based on net profits (as defined in the respective investment management agreements) of the
Company's funds and certain managed accounts, allocable for each

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fiscal
year that exceeds cumulative unrecovered net losses, if any, that have carried forward from prior years. For the products we offer, incentive income earned is typically 20% for hedge funds and
10% for fund of funds (in certain cases in excess of a benchmark), in each case, of the net profits earned for the full year that are attributable to each fee-paying investor. Incentive
income on real estate investments is earned in the year of a sale or realization of a private investment. Incentive income in the CHRP Funds is earned only after investors receive a full return of
their capital plus a preferred return.

In
periods following a period of a net loss attributable to an investor, the Company does not earn incentive income on any future profits attributable to that investor until the
accumulated net loss from prior periods is recovered, an arrangement commonly referred to as a "high-water mark." The Company has elected to record incentive income revenue in accordance
with "Method 2" of the Financial Accounting Standards Board ("FASB") accounting standards. Under Method 2, the incentive income from the Company's funds and managed accounts for any period is based
upon the net profits of those funds and managed accounts at the reporting date. Any incentive income recognized in a quarter's consolidated statement of operations may be subject to reversal in a
subsequent quarter as a result of subsequent negative investment performance prior to the conclusion of the fiscal year, when all contingencies have been resolved. As a result of negative investment
performance in 2008, and in the case of certain real estate funds, in 2009, the Company entered 2010 with high-water marks in certain of its fund products. These high-water
marks require the funds to recover cumulative losses before the Company can begin to earn incentive income in 2010 and beyond with respect to the investments of investors who previously suffered
losses. In 2010, the Ramius Value and Opportunity Funds surpassed their high water marks and the Company began to earn incentive income again on these products.

Carried
interest is subject to clawback to the extent that the carried interest actually distributed to date exceeds the amount due to the Company based on cumulative results. As such,
the accrual for potential repayment of previously received carried interest, which is a component of due to related parties, represents all amounts previously distributed to the Company, less an
assumed tax liability, that would need to be repaid to certain real estate funds if these funds were to be liquidated based on the current fair value of the underlying funds' investments as of the
reporting date. Generally, the actual clawback liability does not become realized until the end of a fund's life.

Investment Banking

The Company earns investment banking revenue primarily from fees associated with public and private capital raising transactions and
providing strategic advisory services. Investment banking revenues are derived primarily from small and mid-capitalization companies within the Company's target sectors of healthcare,
technology, media and telecommunications, consumer, aerospace and defense, financial technology, REITs and alternative energy.



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Brokerage

Brokerage revenue consists of commissions, principal transactions, net and equity research fees.



Interest and dividends

Interest and dividends are earned by the Company from various sources. The Company receives interest and dividends primarily from
investments held by its Consolidated Funds and its brokerage balances from invested capital. Interest is recognized on an accrual basis and interest income is recognized on the debt of those issuers
that is deemed collectible. Interest income
and expense includes premiums and discounts amortized and accreted on debt investments based on criteria determined by the Company using the effective yield method, which assumes the reinvestment of
all interest payments. Dividends are recognized on the ex-dividend date.

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Reimbursement from affiliates

The Company allocates, at its discretion, certain expenses incurred on behalf of its hedge fund, fund of funds and real estate
businesses. These expenses relate to the administration of such subsidiaries and assets that the Company manages for its funds. In addition, pursuant to the funds' offering documents, the Company
charges certain allowable expenses to the funds, including charges and personnel costs for legal, compliance, accounting, tax compliance, marketing, risk and technology expenses that directly relate
to administering the assets of the funds. Such expenses that have been reimbursed at their actual costs are included in the consolidated statements of operations as employee compensation and benefits,
professional, advisory and other fees, communications, occupancy and equipment, client services and business development and other.

Other revenues

The Company receives other revenues which are unrelated to its principal sources of revenue and which may vary from year to year.
Sources of such other revenues primarily include other fees earned from real estate entities and deferred gains from a sale of an asset.

Expenses

The Company's expenses consist of compensation and benefits, interest expense and general, administrative and other expenses.



Income Taxes

Prior to November 2009, Ramius, the accounting predecessor of the Company, operated as a limited liability company that was treated as
a partnership and was not subject to U.S. federal or state income taxes. However, as a partnership, Ramius was subject to New York City unincorporated business tax, on its business and investment
activities conducted in New York City. In 2010 and in the future, the Company will be subject to U.S. federal, state and city taxation as a corporation. The Company is also subject to foreign taxation
on income it generates in certain countries.

The
Company records deferred tax assets and liabilities for the future tax benefit or expense that will result from differences between the carrying value of its assets for income tax
purposes and for financial reporting purposes, as well as for operating or capital loss and tax credit carryovers. A valuation allowance is recorded to bring the net deferred tax assets to a level
that, in management's

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view,
is more likely than not to be realized in the foreseeable future. This level will be estimated based on a number of factors, especially the amount of net deferred tax assets of the Company that
are actually expected to be realized, for tax purposes, in the foreseeable future. As of December 31, 2010, the Company recorded a valuation allowance against substantially all of its net
deferred tax assets.

As
of December 31, 2010, the Company recorded tax receivables resulting from refund claims stemming from the carry back of net operating losses to the Company's 2006 tax return.
The Company received $4.1 million related to one of its refund claims in June 2010.

Redeemable Non-controlling Interests

Redeemable non-controlling interests represent the pro rata share of the income or loss of the non-wholly owned
consolidated entities
attributable to the other owners of such entities. Due to the fact that the non-controlling interests are redeemable at the option of the holder they have been classified as temporary
equity.

Assets Under Management and Fund Performance

Assets Under Management

Assets under management refer to all of our alternative investment management products, solutions and services including hedge funds,
replication products, mutual funds, managed futures funds, fund of funds, real estate, healthcare royalty funds, cash management services and mortgage advisory services. Assets under management also
include the fair value of assets we manage pursuant to separately managed accounts, collateralized debt obligations for which we are the collateral manager, and, as indicated in the footnotes to the
table below, proprietary assets which the Company has invested in these products. Also, as indicated, assets under management for certain products represent committed capital and certain products
where the Company owns a portion of the general partners.

As
of January 1, 2011, the Company had assets under management of $9.0 billion, an 8.75% increase as compared to assets under management of $8.3 billion as of
December 31, 2009. The $728 million increase in assets under management during the year ended 2010 resulted from $578 million in net subscriptions (this includes redemptions
during the year ended 2010, including redemptions effective on January 1, 2011, of $824 million, which represents assets returned to investors as a result of closing the Ramius
Multi-Strategy Fund and the Enterprise Fund and the return of assets to UniCredit pursuant to the terms of Modification Agreement), and a $150 million performance-related increase in assets.

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The
following table is a breakout of total assets under management by platform as of January 1, 2011.

Platform

Total Assets
under Management

Primary Strategies(dollars in millions)Hedge Funds

$
1,385
(1)
Multi-StrategySingle StrategyAlternative Solutions(2)


1,750
(2)
Multi-StrategySingle StrategyCustomized SolutionsHedging Strategies1,125

Commodity TradingAdvisoryReal Estate(3)


1,628
(4)
DebtEquityCowen Healthcare Royalty Partners(5)


1,041
(4)
Royalty InterestsOther(6)


2,113

Cash ManagementMortgage AdvisoryTotal

$
9,042


(1)This
amount includes the Company's invested capital of approximately $154 million as of January 1, 2011.(2)This
amount includes the Company's invested capital of approximately $32 million (which includes the notional amount of one of the fund of funds
products) as of January 1, 2011.(3)The
Company owns between 30% and 55% of the general partners of the real estate business. We do not possess unilateral control over any of these general
partners.(4)This
amount reflects committed capital.(5)The
Company shares the management fees from the CHRP Funds equally with the founders of the CHRP Funds. In addition, the Company receives a share of the
carried interests of the general partners of the CHRP Funds of between 32.1% and 40.2%.(6)The
Company's cash management services business provides clients with investment guidelines for managing cash and establishes investment programs for
managing their cash in separately managed accounts. The Company also provides mortgage advisory services where the Company manages collateralized debt obligations ("CDOs") held by investors and
liquidates CDOs that were historically managed by others.


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The
following table presents total assets under management by period:

Year ended December 31,January 1,
20112010

2009

2008

2007(dollars in thousands)Beginning Assets under Management

$
9,276,278

$
8,313,638

$
9,765,230

$
12,900,355

$
9,592,135Net Subscriptions (Redemptions)


(234,832
)

812,555


(1,780,117
)(2)

(1,066,714
)

2,601,939Net Performance(1)





150,085


328,525


(2,068,411
)

706,281Ending Assets under Management

$
9,041,446

$
9,276,278

$
8,313,638

$
9,765,230

$
12,900,355


(1)Net
performance is net of all management and incentive fees and includes the effect of any foreign exchange translation adjustments and leverage in certain
funds.(2)Net
redemptions for 2009 include $807 million of capital commitments to the CHRP Funds that were part of Cowen Holdings prior to the Transactions.


Fund Performance

The year 2010 was marked by a reversal in investors' appetite for risk assets. The year was also noteworthy for market participants'
changing views on global economic activity and their focus on the effect of increased government intervention and new global policy initiatives. In effect, macro considerations seemed to play a larger
role in almost every investment strategy.

Ramius
investment vehicles ended the year with positive results in each category. A combination of well-timed hedges earlier in the year, followed by solid execution in
creating liquidity, provided investors in the multi-strategy funds with positive returns even as assets were being liquidated and distributions made. In 2010, the directly managed hedge funds as well
as the customized hedge fund of funds portfolios have either met or exceeded the parameters of their individual mandates. In addition, longer-dated investment vehicles in areas such as real estate
enjoyed higher valuations, rebounding sharply from 2009.

The
table below sets forth performance information as of December 31, 2010, for the Company's funds with assets greater than $200 million as well as information with
respect to the firm's single-strategy hedge funds and RTS funds. The performance reflected below is representative of the net return of the most recently issued full fee paying class of fund interests
offered for the respective fund. The net
returns are net of all management and incentive fees, and are calculated monthly based on the change in an investor's current month ending equity as a percentage of their prior month's ending equity,
adjusted for the current month's subscriptions and redemptions. Such returns are compounded monthly in calculating the final net year to date return. Performance information for the CHRP Funds are not
presented due to existing confidentiality provisions.

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Table of Contents

The
following table presents fund performance for the year ended December 31, 2010, 2009, and 2008:

Performance for Year Ended December 31,Platform

Strategy

Largest Fund(1)

2010

2009

2008Hedge Funds

Single Strategy

Ramius Value and Opportunity Fund Ltd. (Inception Mar. 1, 2006)


31.70
%

16.88
%

(20.81
)%Ramius Global Credit Fund LP (Inception Oct. 1, 2009)


17.68%
(4)

n/a


n/aRamius Enterprise LP (Inception Jan. 1, 2008)


3.53%
(2)

4.92
%

(25.38
)%(2)Alternative Solutions

Managed Accounts

Activist Portfolio with Hedging Overlay (Inception Sept. 1, 2007)


6.93
%

12.03
%

(8.90
)%Global Macro/Managed Futures

RTS Global Fund LP (Inception Mar. 1, 2010)


4.61%
(4)

n/a


n/aRTS Global 3X Fund LP (Inception Mar. 1, 2010)


18.51%
(4)

n/a


n/aReal Estate

Debt

RCG Longview Debt Fund IV, L.P.(3) (Inception Nov. 12, 2007)


14.48
%

(19.46
)%

(8.57
)%Equity

RCG Longview Equity Fund, L.P.(3) (Inception Nov. 22, 2006)


21.74
%

(0.87
)%

(14.85
)%Other

Cash Management




0.96
%

(0.28
)%

3.67
%


(1)Products
included above represent funds and accounts with assets under management greater than $200 million (excluding CHRP and Ramius Multi-Strategy
Fund Ltd), the Company's single-strategy funds and the Ramius Trading Strategies funds. Ramius Multi-Strategy Fund Ltd and Ramius Enterprise LP have been closed to new investors
and we began winding down these funds in 2010. Ramius Enterprise LP has been included above as the firm maintains a substantial proprietary equity investment in this entity. The inception date
for a fund or account represent the initial date that the fund or account accepted capital from third party investors. As of January 1, 2011, the net assets of the funds presented above were
$3.6 billion, or 40% of the total assets under management as of January 1, 2011 of $9.04 billion. Excluded from the table above are funds and managed accounts with
$5.44 billion, or 60%, of total assets under management as of January 1, 2011. These include a total of 63 smaller individual funds and managed accounts, the Ramius Multi-Strategy
Fund Ltd and the Cowen Healthcare Royalty Partners funds.(2)Performance
does not reflect any increase in valuation for Lehman Brothers International (Europe) ("LBIE") assets which have been segregated.(3)Returns
for each year represent net internal rates of return to limited partners after management fees and incentive allocations, if any, and are computed
on a year-to-year basis consistent with industry standards. Incentive allocations are computed based on a hypothetical liquidation of net assets of each fund as of the balance
sheet date. Returns are calculated for the investors as a whole. The computation of such returns for an individual investor may vary from these returns based on different management fee and incentive
arrangements and the timing of capital transactions. The hypothetical liquidation value may not reflect the ultimate value that may be realized from the real estate investments, particularly given the
relatively long period of time that the real estate investments may be held under the terms of the real estate fund documents.(4)Performance
reflects application of the fee terms applicable to the Class B interests, which is the class of interests offered by the Fund beginning
on July 1, 2010. As a result, the 2010 year to date data is pro forma for the period beginning on January 1, 2010 and ending on June 30, 2010.


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Results of Operations

To provide comparative information of the Company's operating results for the periods presented, a discussion of Economic Income of our
alternative investment management and broker-dealer segments follows the discussion of our total consolidated GAAP results. Economic Income reflects, on a consistent basis for all periods presented in
the Company's consolidated financial statements, income earned from the Company's funds and managed accounts and from its own invested capital. Economic Income excludes certain adjustments required
under GAAP. See the section titled "Management's Discussion and Analysis of Financial Condition and Results of Operations of the CompanySegment Analysis and Economic Income," and
Note 21 to the Company's consolidated financial statements, appearing elsewhere in this Form 10-K, for a reconciliation of Economic Income to total Company net income (loss).

Year Ended December 31, 2010 Compared with the Year Ended December 31, 2009

The Company's 2010 results reflect twelve months of combined operations, while 2009 results reflect twelve months of legacy Ramius and
two months of legacy Cowen.

Year Ended December 31, 2010 Compared with the Year Ended December 31, 2009  Consolidated Statements of Operations

Year ended December 31,

Period to Period2010

2009

$ Change

% Change(dollars in thousands)RevenuesInvestment banking

$
38,965

$
10,557

$
28,408


269.1
%Brokerage


112,217


17,812


94,405


530.0
%Management fees


38,847


41,694


(2,847
)

(6.8
)%Incentive income


11,363


1,911


9,452


494.6
%Interest and dividends


11,547


477


11,070


NMReimbursement from affiliates


6,816


10,326


(3,510
)

(34.0
)%Other revenue


1,936


4,732


(2,796
)

(59.1
)%Consolidated Funds revenues


12,119


36,392


(24,273
)

(66.7
)%Total revenues


233,810


123,901


109,909


88.7
%ExpensesEmployee compensation and benefits


194,919


96,592


98,327


101.8
%Interest and dividends


8,971


1,601


7,370


460.3
%General, administrative and other expenses


127,931


68,217


59,714


87.5
%Consolidated Funds expenses


8,121


23,581


(15,460
)

(65.6
)%Total expenses


339,942


189,991


149,951


78.9
%Other income (loss)Net gain (loss) on securities, derivatives and other investments


21,980


(2,154
)

24,134


NMConsolidated Funds net gains (losses)


31,062


20,999


10,063


47.9
%Total other income (loss)


53,042


18,845


34,197


181.5
%Income (loss) before income taxes


(53,090
)

(47,245
)

(5,845
)

12.4
%Income taxes expense (benefit)


(21,400
)

(8,206
)

(13,194
)

160.8
%Net income (loss)


(31,690
)

(39,039
)

7,349


(18.8
)%Income (loss) attributable to redeemable non-controlling interests


13,727


16,248


(2,521
)

(15.5
)%Net income (loss) attributable to Cowen Group stockholders

$
(45,417
)
$
(55,287
)
$
9,870


(17.9
)%


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Table of Contents

Revenues

Investment Banking

Investment banking revenues increased $28.4 million, or 269.1%, to $38.9 million for the year ended December 31,
2010 compared with $10.6 million in 2009. The 2009 revenues represent the investment banking activity for the period from November 2, 2009 to December 31, 2009, compared to a full
year in 2010.

Brokerage

Brokerage revenues increased $94.4 million, or 530.0%, to $112.2 million for the year ended December 31, 2010
compared with $17.8 million in 2009. The 2009 revenues represent the brokerage activity for the period from November 2, 2009 to December 31, 2009, compared to a full year in 2010.

Management Fees

Management fees decreased $2.8 million, or 6.8%, to $38.8 million for the year ended December 31, 2010 compared
with $41.7 million in 2009. The decrease was a result of returning assets to investors in 2010, as a result of closing the Ramius Multi-Strategy and Ramius Enterprise funds, and the return of
assets to, and no longer charging management fees, to certain affiliates of UniCredit S.p.A effective July 1, 2010, pursuant to the terms of the Modification Agreement. This was partially
offset by increases in assets under management in our single-strategy funds.

Incentive Income

Incentive income increased $9.5 million to $11.4 million for the year ended December 31, 2010, compared to
$1.9 million in 2009. The incentive income in 2010 is primarily a result of (i) the performance fees related to the Ramius Value and Opportunity Master Fund Ltd surpassing its
high-water marks, (ii) two fund of funds managed accounts that have also surpassed their high-water marks and hurdles during the year and (iii) the performance of
the Ramius Global Credit Master Fund Ltd.

Interest and Dividends

Interest and dividends increased $11.1 million to $11.5 million for the year ended December 31, 2010 compared with
$0.5 million in 2009. The increase was primarily attributable to an increase in interest income resulting from an increased number of investments in interest bearing securities during 2010
compared to 2009.

Reimbursements from Affiliates

Reimbursements from affiliates decreased $3.5 million, or 34.0%, to $6.8 million for the year ended December 31,
2010 compared with $10.3 million in 2009. The decrease was attributable to a decrease in assets under management associated with the funds from which the Company receives the majority of its
reimbursements.

Other Revenue

Other revenue decreased $2.8 million, or 59.1%, to $1.9 million for the year ended December 31, 2010 compared with
$4.7 million in 2009. The higher amount in 2009 was primarily related to a $1.9 million one-time legal settlement claim.

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Table of Contents

Consolidated Funds Revenues

Consolidated Funds revenues decreased $24.2 million, or 66.7%, to $12.1 million for the year ended December 31,
2010 compared with $36.4 million in 2009. The decrease was primarily attributable to a decrease in Enterprise Fund's holdings of interest bearing securities due to unwinding of its investments.

Expenses

Employee Compensation and Benefits

Employee compensation and benefits expenses increased $98.3 million, or 101.8%, to $195.0 million for the year ended
December 31, 2010 compared with $96.6 million in 2009. The increase was due to the impact of including two months of compensation and benefits expense associated with the legacy Cowen
Holdings business in 2009 compared with twelve months in 2010, partially offset by lower accruals for incentive compensation and lower base salaries and benefit expense associated with a reduction in
head count in 2010 compared to 2009.

Interest and Dividends

Interest and dividend expense increased $3.3 million, or 203.4%, to $4.9 million for the year ended December 31,
2010 compared with $1.6 million in 2009. Interest and dividends expense relates to interest on our credit facility in addition to increased trading activity with respect to the Company's
investments.

General, Administrative and Other Expenses

General, administrative and other expenses increased $59.7 million, or 87.5%, to $128 million for the year ended
December 31, 2010 compared with $68.2 million in 2009. The increase was due to the impact of including two months of general, administrative and other expense associated with the legacy
Cowen Holdings business during 2009 compared with twelve months of 2010, or $62.2 million, partially offset by implementing approximately $2.5 million of cost savings related to the integration
of systems and facilities related to the Transactions.

Consolidated Funds Expenses

Consolidated Funds expenses decreased $15.5 million, or 65.6%, to $8.1 million for the year ended December 31,
2010 compared with $23.6 million in 2009. The decrease was attributable to a decrease in interest expense recognized by the Enterprise Fund due to a decrease in short holdings of interest
bearing securities, due to unwinding of its investment portfolio.

Other Income (Loss)

Other income (loss) increased $34.2 million, or 181.5%, to $53.0 million for the year ended December 31, 2010
compared with $18.8 million in 2009. This primarily relates to an increase of $24.1 million in the performance of the Company's directly owned traded invested capital. In addition, the
increase in consolidated funds net gains (losses) of $10.1 million was primarily attributable to the performance of RTS Global 3x Fund LP, which was consolidated by the Company in the
first quarter of 2010 and a decrease in net losses from derivative activities in The Enterprise Fund. This was partially offset by the decrease in the performance of certain of Ramius consolidated
multi-strategy funds and The Enterprise Fund due to the closing and ongoing wind down of these funds in 2010. The gains and losses shown under Consolidated Funds reflect the consolidated total
performance for such funds, and the portion of those gains or losses that are attributable to other investors is allocated to a non-controlling interest.

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Table of Contents

Income Taxes

Income tax benefit increased $13.2 million to $21.4 million for the year ended December 31, 2010 from
$8.2 million in 2009. The Company's tax benefit increased primarily due to a $16.2 million increase in deferred tax benefits recorded pursuant to an Advance Tax Agreement upon the
acquisition, by a consolidated subsidiary of the Company as part of a reinsurance service program, of Luxembourg reinsurance companies that carry deferred tax liabilities; partially offset by the
recognition in 2009 of a $2.0 million benefit related to net operating loss carryback claims and $0.6 million of higher foreign taxes recorded by the Company's foreign subsidiaries
resulting from increased pre-tax income, during 2010.

Income (Loss) Attributable to Redeemable non-controlling Interests

Income (loss) attributable to redeemable non-controlling interests decreased by $2.5 million to $13.7 million
for the year ended December 31, 2010 compared with $16.2 million in 2009. The period over period change was the result of an decrease in performance in the Consolidated Funds, primarily
driven by Enterprise Master which has been in the process of closing and other consolidated multi strategy funds in wind down during 2010.

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Table of Contents

Year Ended December 31, 2009 Compared with the Year Ended December 31, 2008

The Company's 2009 results reflect twelve months of legacy Ramius results and two months of legacy Cowen Holdings results. The
Company's 2008 results reflect twelve months of legacy Ramius results only.

Year Ended December 31, 2009 Compared with the Year Ended December 31, 2008  Consolidated Statements of Operations

Year ended December 31,

Period to Period2009

2008

$ Change

% Change(dollars in thousands)RevenuesInvestment banking

$
10,557

$


$
10,557


NMBrokerage


17,812





17,812


NMManagement fees


41,694


70,818


(29,124
)

(41.1
)%Incentive income


1,911





1,911


NMInterest and dividends


477


1,993


(1,516
)

(76.1
)%Reimbursement from affiliates


10,326


16,330


(6,004
)

(36.8
)%Other revenue


4,732


6,853


(2,121
)

(30.9
)%Consolidated Funds revenues


36,392


31,739


4,653


14.7
%Total revenues


123,901


127,733


(3,832
)

(3.0
)%ExpensesEmployee compensation and benefits


96,592


84,769


11,823


13.9
%Interest and dividends


1,601


1,820


(219
)

(12.0
)%General, administrative and other expenses


68,217


53,036


15,181


28.6
%Goodwill impairment





10,200


(10,200
)

(100.0
)%Consolidated Funds expenses


23,581


34,268


(10,687
)

(31.2
)%Total expenses


189,991


184,093


5,898


3.2
%Other income (loss)Net gain (loss) on securities, derivatives and other investments


(2,154
)

(2,006
)

(148
)

7.4
%Consolidated Funds net gains (losses)


20,999


(198,485
)

219,484


(110.6
)%Total other income (loss)


18,845


(200,491
)

219,336


(109.4
)%Income (loss) before income taxes


(47,245
)

(256,851
)

209,606


(81.6
)%Income taxes expense (benefit)


(8,206
)

(1,301
)

(6,905
)

530.7
%Net income (loss)


(39,039
)

(255,550
)

216,511


(84.7
)%Income (loss) attributable to redeemable non-controlling interests


16,248


(113,786
)

130,034


(114.3
)%Net income (loss) attributable to Cowen Group stockholders

$
(55,287
)
$
(141,764
)
$
86,477


(61.0
)%


Revenues

Investment Banking

Investment banking revenues were $10.6 million for the year ended December 31, 2009, representing the investment banking
activity of Cowen Holdings for the period from November 2, 2009

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Table of Contents

through
December 31, 2009. There were no investment banking revenues in 2008 as the historic results of operations only reflect the legacy Ramius business.

Brokerage

Brokerage revenues were $17.8 million for the year ended December 31, 2009, representing the brokerage activity of Cowen
Holdings for the period from November 2, 2009 through December 31, 2009. There were no brokerage revenues in 2008 as the historic results of operations only reflect the legacy Ramius
business.

Management Fees

Management fees decreased $29.1 million, or 41%, to $41.7 million for the year ended December 31, 2009 compared
with $70.8 million in 2008. The decrease was primarily due to the lower level of assets under management in 2009 relative to the prior year.

Incentive Income

Incentive income was $1.9 million for the year ended December 31, 2009, compared to no incentive income for 2008. In
addition, due to losses in 2008, many of our funds now have high-water marks such that Ramius will not earn incentive income with respect to the assets of the fund investors who suffered
such losses in 2008 until these investors recover their
losses. Incentive income earned in 2009 relates primarily to fees earned on one of our fund of funds products that went over its high water mark in December 2009.

Interest and Dividends

Interest and dividends decreased $1.5 million, or 76%, to $0.5 million for the year ended December 31, 2009,
compared with $2.0 million in 2008. The decrease was primarily attributable to a combination of lower average interest rates and lower average interest bearing assets in 2009 compared with
2008.

Reimbursements from Affiliates

Ramius's reimbursements from affiliates decreased $6.0 million, or 37%, to $10.3 million for the year ended
December 31, 2009 compared with $16.3 million for 2008. The decrease was attributable to lower assets under management in 2009 as the Company generally limits such allocations based on a
percentage of assets under management.

Other Revenue

Other revenue decreased $2.2 million, or 31%, to $4.7 million for the year ended December 31, 2009 compared with
$6.9 million in 2008. The decrease was primarily due to the elimination of stock loan fee income as the Company exited that business in the fourth quarter of 2008, and the reduction of
placement fee income. The Company exited the placement agent business in the third quarter of 2009.

Consolidated Funds Revenues

Consolidated Funds revenues increased $4.7 million, or 14.7%, to $36.4 million for the year ended December 31,
2009 compared with $31.7 million in 2008. The increase
was primarily attributable to an increase in the interest and dividends earned by the Enterprise Fund due to a larger concentration in fixed income securities.

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Expenses

Employee Compensation and Benefits

Employee compensation and benefits expenses increased $11.8 million, or 14%, to $96.6 million for the year ended
December 31, 2009 compared with $84.8 million in 2008. The increase was due to the impact of including two months of compensation and benefits expense associated with the legacy Cowen
Holdings business, partially offset by lower accruals for incentive compensation and lower base salaries and benefit expense associated with a reduction in head count in 2009 compared to 2008 for the
legacy Ramius business.

Interest and Dividends

Interest and dividend expense remained substantially unchanged at $1.6 million for the year ended December 31, 2009
compared to $1.8 million for 2008. Interest expense relates primarily to interest on our credit facility.

General, Administrative and Other Expenses

General, administrative and other expenses increased $15.2 million, or 29%, to $68.2 million for the year ended
December 31, 2009 compared with $53.0 million in 2008. This increase was primarily due to the inclusion of two months of activity for Cowen Holdings after the closing of the Transactions
in 2009, professional, advisory and other fees related to the Transactions, and legal fees incurred in connection with an arbitration initiated by the Company in 2009. These increases were partially
offset by a decrease in occupancy and equipment, as a result of the Company subleasing its former office space for the entire year ended December 31, 2009 compared to only the final eight
months of 2008, and a decrease in client service and business development expenses. The Company does not expect to incur additional expense in connection with the arbitration matter referenced above
and expects that transaction related expenses, if any, to be minimal.

Consolidated Funds Expenses

Consolidated Funds expenses decreased $10.7 million, or 31.2%, to $23.6 million for the year ended December 31,
2009 compared with $34.3 million in 2008. The decrease was attributable to a decrease in interest and dividend expense recognized by the Enterprise Fund due to a general decrease in interest
rates.

Goodwill Impairment

The Company recorded a goodwill impairment charge of $10.2 million for the year ended December 31, 2008. This
non-cash charge related to the impairment of its then 50% ownership of the fund of funds business. In the fourth quarter of 2008, the Company conducted its annual goodwill impairment test
and, due to the decline in assets under management and the resulting decline in expected management fees and incentive income, recognized an impairment. There were no goodwill impairment charges
recorded in the year ended December 31, 2009.

Other Income (Loss)

Other income (loss) increased $219.3 million to income of $18.8 million for the year ended December 31, 2009
compared to a loss of $200.5 million in 2008. The increase is a result of positive fund performance in the current year period versus negative performance in the prior year period as a result
of the general unprecedented levels of market volatility, and liquidity constraints that began in the third quarter of 2008 and affected almost every asset class globally. As previously described, the
Company invests its own capital primarily in the Enterprise Fund with any gains or losses from the Company's investment in the Enterprise Fund shown under Consolidated Funds for that period. The

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gains
and losses shown under Consolidated Funds reflect the consolidated total performance for such funds, and the portion of those gains or losses that are attributable to other investors is
allocated to a non-controlling interest.

Income Taxes

Income tax benefit increased $6.9 million to $8.2 million for the year ended December 31, 2009 from
$1.3 million in 2008. The increase was primarily related to a tax benefit of $6.0 million representing the Company's proportionate share of deferred tax benefits generated by the master
fund of one of the Consolidated Funds. During the third quarter of 2009, this master fund acquired reinsurance companies in Luxembourg as part of a service program that provides reinsurance coverage
to the master fund. In order to obtain reinsurance coverage against certain risks, this master fund, through a local subsidiary, acquired reinsurance companies in Luxembourg that had deferred tax
liabilities. Pursuant to an Advance Tax Agreement, upon these purchases, the local subsidiary generated deferred tax assets that fully offset these liabilities, resulting in the recognition of the
deferred tax benefit.

(Income) Loss Attributable to Redeemable non-controlling Interests

Income (loss) attributable to redeemable non-controlling interests increased $130.0 million, to a gain of
$16.2 million for the year ended December 31, 2009
compared with a loss of $113.8 million in 2008. The period over period change was the result of improved performance in certain of the Consolidated Funds.

Segment Analysis and Economic Income (Loss)

Segments

Prior to the consummation of the Transactions, the Company conducted its operations through one reportable segment, the alternative
investment management segment, which provides management services to its hedge funds, fund of funds, real estate and other investment platforms. Following the combination of Ramius and Cowen Holdings,
the Company conducts its operations through two segments: an alternative investment management segment and a broker-dealer segment. The Company's alternative investment management segment currently
includes its hedge funds, fund of funds, real estate and other investment platforms businesses, as well as CHRP, which was a legacy Cowen operating business prior to the Transactions. The Company's
broker-dealer segment currently includes its investment banking, brokerage and equity research businesses.

Economic Income (Loss)

The performance measure used by the Company for each segment is Economic Income (Loss), which management uses to evaluate the financial
performance of and make operating decisions for the firm as a whole and each segment. Accordingly, management assesses its business by analyzing the performance of each segment and believes that
investors should review the same performance measure that it uses to analyze its segment and business performance. In addition, management believes that Economic Income (Loss) is helpful to gain an
understanding of its segment results of operations because it reflects such results on a consistent basis for all periods presented.

Our
Economic Income (Loss) may not be comparable to similarly titled measures used by other companies. We use Economic Income (Loss) as a measure of each segment's operating performance,
not as a measure of liquidity. Economic Income (Loss) should not be considered in isolation or as a substitute for operating income, net income, operating cash flows, investing and financing
activities, or other income or cash flow statement data prepared in accordance with GAAP. As a result of the adjustments made to arrive at Economic Income (Loss), Economic Income (Loss) has
limitations in that it does not take into account certain items included or excluded under GAAP, including our

62

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Consolidated
Funds. Economic Income (Loss) is considered by management as a supplemental measure to the GAAP results to provide a more complete understanding of each segment's performance as measured
by management. For a reconciliation of Economic Income to GAAP net income (loss) for the periods presented and additional information regarding the reconciling adjustments discussed above, see
Note 21 to the Company's audited consolidated financial statements included in this Form 10-K.

In
general, Economic Income (Loss) is a pre-tax measure that (i) presents the Company's results of operations without the impact resulting from the consolidation of
any of the Company's funds, (ii) excludes goodwill impairment (although there were no goodwill impairment charges in either period presented), (iii) excludes allocations to the managing
member, as there will be no such allocations in the future (although there were no allocations made to the managing member in either period presented), and (iv) excludes the reorganization
expenses for the Transactions (in the 2009 period only) and one-time equity awards made in connection with the Transactions (in the 2010 period only). In addition, Economic Income (Loss)
revenues include investment income that represents the income the Company has earned in investing its own capital, including realized and unrealized gains and losses, interest and dividends, net of
associated investment related expenses. For GAAP purposes, these items are included in each of their respective line items. Economic Income revenues also include management fees, incentive income and
investment income earned through the Company's investment as a general partner in certain real estate entities. For GAAP purposes, all of these items are recorded in other income (loss). In addition,
Economic Income (Loss) expenses are reduced by reimbursement from affiliates, which for GAAP purposes is presented gross as part of revenue.

Economic Income Revenues

The Company's principal sources of Economic Income revenues are derived from activities in the following business segments:

Our
alternative investment management segment generates Economic Income revenues through three principal sources: management fees, incentive income and investment income from our own
capital. Management fees are directly impacted by any increase or decrease in assets under management, while incentive income is impacted by our funds' performance and any increase or decrease in
assets under
management. Investment income from the Company's own capital is impacted by the performance of the funds and other securities in which our capital is invested, which is principally the Enterprise
Fund. The Company periodically receives other Economic Income revenue which is unrelated to our own invested capital or our activities on behalf of the Company's funds, such as certain placement fee
income received by a non-wholly owned subsidiary that engaged in the distribution of interests in the real estate funds.

Our
broker-dealer segment generates Economic Income revenues through two principal sources: investment banking and brokerage. The Company earns investment banking revenue primarily from
fees associated with public and private capital raising transactions and providing strategic advisory services. Investment banking revenues are derived primarily from small and
mid-capitalization companies within the Company's target sectors of healthcare, technology, media and telecommunications, consumer, aerospace and defense, financial technology,
REITs and alternative energy. The Company's brokerage revenues consist of commissions, principal transactions and fees paid for equity research. Management reviews brokerage revenue on a combined
basis as the vast majority of the revenue is derived from the same group of clients. The Company derives its brokerage revenue primarily from trading equity and equity-linked securities on behalf of
institutional investors. The majority of the Company's trading gains and losses are a result of activities that support the facilitation of client orders in both listed and
over-the-counter securities, although all trading gains and losses are recorded in brokerage.

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Economic Income Expenses

The Company's Economic Income expenses consist of compensation and benefits, non-compensation expensesfixed
and non-compensation expensesvariable, less reimbursement from affiliates.

Non-controlling Interests

Non-controlling interests represent the pro rata share of the income or loss of the non-wholly owned
consolidated entities attributable to the other owners of such entities. Non-wholly-owned entities included Ramius Alternative
Solutions LLC, in the 2009 period only, as subsequent to the Transactions that entity became a wholly-owned subsidiary of the Company.

Year Ended December 31, 2010 Compared with the Year Ended December 31, 2009

For the year ended December 31, 2010, the Company's alternative investment management segment includes twelve months of its
hedge funds, replication products, mutual funds, managed futures fund, fund of funds, real estate funds, healthcare royalty funds, cash management services and other investment platforms operating
results. In addition, the alternative investment management segment includes twelve months of CHRP's operating results for the year ended December 31, 2010, as a result of the Transactions. For
the year ended December 31, 2009, the Company's alternative investment management segment includes twelve months of its hedge funds, fund of funds, real estate and other investment platforms
operating results. In addition, the alternative investment management segment includes two months of CHRP's operating results in 2009, as a result of the Transactions.

For
the year ended December 31, 2010, the Company's broker-dealer segment includes twelve months of its investment banking and brokerage businesses' operating results. For the
year ended December 31, 2009, the Company's broker-dealer segment includes two months of its investment banking and brokerage businesses' operating results as the historic results of operations
reflect the legacy Ramius business only.

Year ended
December 31,2010

2009

Total
Period-to-PeriodAlternative
Investment
Management



Total
2010

Alternative
Investment
Management



Total
2009Broker-Dealer

Broker-Dealer

$ Change

% Change(dollars in thousands)Economic Income RevenuesInvestment banking

$


$
38,965

$
38,965

$


$
10,557

$
10,557

$
28,408


269.1
%Brokerage





112,217


112,217





17,812


17,812


94,405


530.0
%Management fees


51,440





51,440


53,940





53,940


(2,500
)

(4.6
)%Incentive income (loss)


9,615





9,615


(6,996
)




(6,996
)

16,611


(237.4
)%Investment income (loss)


59,638


(221
)

59,417


21,958





21,958


37,459


170.6
%Other revenue


932


7


939


3,536





3,536


(2,597
)

(73.4
)%Total economic income revenues


121,625


150,968


272,593


72,438


28,369


100,807


171,786


170.4
%Economic Income ExpensesCompensation and benefits


58,831


127,062


185,893


63,207


30,032


93,239


92,654


99.4
%Non-compensation expensesFixed


29,894


64,255


94,149


41,889


10,946


52,835


41,314


78.2
%Non-compensation expensesVariable


6,672


27,022


33,694


3,467


3,674


7,141


26,553


371.8
%Reimbursement from affiliates


(7,315
)




(7,315
)

(11,044
)




(11,044
)

3,729


(33.8
)%Total economic income expenses


88,082


218,339


306,421


97,519


44,652


142,171


164,250


115.5
%Net economic income (loss) (before non-controlling interest)


33,543


(67,371
)

(33,828
)

(25,081
)

(16,283
)

(41,364
)

7,536


(18.2
)%Non-controlling interest


(1,759
)




(1,759
)

(602
)




(602
)

(1,157
)

192.2
%Economic income (loss)

$
31,784

$
(67,371
)
$
(35,587
)
$
(25,683
)
$
(16,283
)
$
(41,966
)
$
6,379


(15.2
)%


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Table of Contents

Economic Income Revenues

Total Economic Income revenues were $272.6 million for the year ended December 31, 2010, an increase of
$171.8 million compared to economic income revenues of $100.8 million for the year ended December 31, 2009.

Alternative Investment Management Segment

Alternative investment management segment economic income revenues was $121.6 million for the year ended December 31,
2010, an increase of $49.2 million compared to economic income revenues of $72.4 million for the year ended December 31, 2009.

Management Fees.Management fees for the segment decreased $2.5 million, or 4.6%, to $51.4 million for the year ended
December 31, 2010 compared with $53.9 million for 2009. The decrease was a result of returning assets to investors in 2010, as a result of closing the Ramius Multi-Strategy Fund and the
Enterprise Fund, and the return of assets to, and no longer charging management fees, to certain affiliates of UniCredit S.p.A effective July 1, 2010, pursuant to the terms of the Modification
Agreement. This was partially offset by increases in assets under management in our single-strategy funds.

Incentive Income (Loss).Incentive income for the segment increased $16.6 million to $9.6 million for the year ended
December 31, 2010 compared to a loss of $7.0 million for 2009. The loss in the prior year was primarily due to a reversal of previously recorded incentive income allocations from
Ramius's interests in the general partner of a certain real estate fund pursuant to the terms of the governing documents of such funds. The incentive income in 2010 is primarily a result of
(i) the performance fees related to the Value and Opportunity fund surpassing its high-water marks, (ii) two fund of funds managed accounts that have also surpassed their
high-water marks and hurdles during the year and (iii) the performance of the Global Credit fund.

Investment Income.Investment income for the segment increased $37.6 million to $59.6 million for the year ended
December 31,
2010, compared to income of $22.0 million for 2009. The increase is a result of revenue generated from the Luxembourg reinsurance service program and a general increase in performance in the
Company's invested capital.

Other Revenue.Other revenue for the segment decreased $2.5 million to $1.0 million for the year ended December 31, 2010,

compared to $3.5 million for 2009.

Broker-Dealer Segment

Broker-dealer segment economic income revenues were $151.0 million for the year ended December 31, 2010, an increase of
$122.6 million compared to economic income revenues of $28.4 million for the year ended December 31, 2009. The increase was primarily attributable to the inclusion of only two
months of the legacy Cowen Holdings brokerage revenues as compared to twelve months during 2010.

Investment Banking.Investment banking revenues increased $28.4 million, or 269%, to $39.0 million for the year ended
December 31, 2010 compared with $10.6 million for 2009. The 2009 represents the investment banking activity of Cowen and Company for the period from November 2, 2009 through
December 31, 2009. During the year ended December 31, 2010, the Company completed thirty one underwriting transactions, six private capital raising transactions and twelve strategic
advisory transactions. During November and December of 2009, the Company completed five underwriting transactions, two private capital raising transactions and three strategic advisory transactions.

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Table of Contents

Brokerage.Brokerage revenues increased $94.4 million, or 530%, to $112.2 million for the year ended December 31, 2010
compared
with $17.8 million for 2009. The increase was primarily attributable to the inclusion of only two months of the legacy Cowen Holdings brokerage revenues as compared to twelve months during
2010.

Economic Income Expenses

Compensation and Benefits.Total compensation and benefits expense increased $92.7 million, or 99.4%, to $185.9 million for the
year ended
December 31, 2010, compared with $93.2 million in 2009. The increase was primarily attributable to the inclusion of only two months of legacy Cowen Holdings compensation and benefits
expense during 2009.

Compensation
and benefits expenses for the alternative investment management segment decreased $4.4 million, or 6.9%, to $58.8 million for the year ended
December 31, 2010 compared with $63.2 million in 2009. The decrease was driven by lower accruals for incentive compensation and lower base salaries and benefit expense associated with a
reduction in head count.

Compensation
and benefits expenses for the broker-dealer segment increased $97.1 million to $127.1 million for the year ended December 31, 2010 compared with
$30.0 million in 2009. The increase was primarily attributable to the inclusion of only two months of the legacy Cowen Holdings compensation and benefits expense during 2009 as compared to
twelve months during 2010.

Non-compensation ExpensesFixed.Fixed non-compensation expenses increased $41.3 million, or 78.2%, to
$94.1 million for the year ended December 31, 2010 compared to $52.8 million in 2009. The increase was primarily due to the inclusion of two months of fixed
non-compensation expenses associated with the legacy Cowen Holdings business during 2009, partially offset by a decrease in non-compensation expense from the alternative
investment management business.

Fixed
non-compensation expenses for the alternative investment management segment decreased $12.0 million, or 28.6%, to $29.9 million for the year ended
December 31, 2010 compared with $41.9 million in 2009. Fixed non-compensation expenses for the broker-dealer segment increased $53.4 million to $64.3 million
for the year ended December 31, 2010 compared with $10.9 million in 2009.

The
following table shows the components of the non-compensation expensesfixed, for the year ended December 31, 2010 and 2009:

Year ended
December 31,

Period-to-Period2010

2009

$ Change

% Change(dollars in thousands)Non-compensation expensesfixed:Interest expense

$
1,026

$
1,549

$
(523
)

(33.8
)%Professional, advisory and other fees


14,032


12,249


1,783


14.6
%Occupancy and equipment


18,167


13,969


4,198


30.1
%Depreciation and amortization


11,432


5,751


5,681


98.8
%Service fees


15,813


4,453


11,360


255.1
%Other


33,679


14,864


18,815


126.6
%Total

$
94,149

$
52,835

$
41,314


78.2
%


Non-compensation ExpensesVariable.Variable non-compensation expenses, which primarily are comprised of expenses
which are incurred as a direct result of the processing and soliciting of revenue generating activities, increased $26.6 million to $33.7 million for the year ended December 31,
2010 compared to $7.1 million in 2009. The increase was due to the inclusion of two months of variable

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non-compensation
expenses associated with the legacy Cowen and Company business during 2009 related to Cowen and Company's investment banking and broker dealer businesses as compared to
twelve months during 2010. During the fourth quarter of 2010, variable expenses of $4.3 million were incurred related to Luxembourg reinsurance transactions, of which $3.3 million
related to transaction related costs, and $1.0 million related to administrative costs.

The
following table shows the components of the non-compensation expensesvariable, for the year ended December 31, 2010 and 2009:

Year ended
December 31,

Period-to-Period2010

2009

$ Change

% Change(dollars in thousands)Non-compensation expensesVariable:Floor brokerage and trade execution

$
15,280

$
2,451

$
12,829


523.4
%Expenses related to Luxembourg reinsurance companies


4,279





4,279


NMMarketing and business development


14,135


4,690


9,445


201.4
%Total

$
33,694

$
7,141

$
26,553


371.8
%


Reimbursement from Affiliates.Reimbursements from affiliates, which relate to the alternative investment
management segment, decreased $3.7 million, or 33.8%, to $7.3 million for the year ended December 31, 2010 compared with $11.0 million in 2009. The decrease was mainly
attributable to a decrease in AUM associated with the funds for which the Company receives the majority of its reimbursements.

Non-Controlling Interest.Non-Controlling interest represents the portion of the net income or loss attributable to certain
non-wholly owned subsidiaries that is allocated to other investors.

Year Ended December 31, 2009 Compared with the Year Ended December 31, 2008

In 2009, the Company's alternative investment management segment includes twelve months of its hedge funds, fund of funds, real estate
and other investment platforms operating results. In addition, the alternative investment management segment includes two months of CHRP's operating results in 2009, as a result of the Transactions.
In 2008, the Company's alternative investment management segment reflects twelve months of its hedge funds, fund of funds, real estate and other investment platforms operating results, but does not
include any of CHRP's operating results.

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Table of Contents

In
2009, the Company's broker-dealer segment includes two months of its investment banking and brokerage businesses' operating results. There were no investment banking nor brokerage
operating results in 2008 as the historic results of operations only reflect the legacy Ramius business.

Year ended
December 31,2009

2008Total
Period-to-PeriodAlternative
Investment
Management



Total
2009

Total
2008Broker-Dealer

$ Change

% Change(dollars in thousands)Economic Income RevenuesInvestment banking

$


$
10,557

$
10,557

$


$
10,557


NMBrokerage





17,812


17,812





17,812


NMManagement fees


53,940





53,940


84,621


(30,681
)

(36.3
)%Incentive income (loss)


(6,996
)




(6,996
)

(2,586
)

(4,410
)

170.5
%Investment income (loss)


21,958





21,958


(104,939
)

126,897


(120.9
)%Other revenue


3,536





3,536


4,004


(468
)

(11.7
)%Total economic income revenues


72,438


28,369


100,807


(18,900
)

119,707


(633.4
)%Economic Income ExpensesCompensation and benefits


63,207


30,032


93,239


84,769


8,470


10.0
%Non-compensation expensesFixed


41,889


10,946


52,835


48,061


4,774


9.9
%Non-compensation expensesVariable


3,467


3,674


7,141


4,030


3,111


77.2
%Reimbursement from affiliates


(11,044
)




(11,044
)

(17,394
)

6,350


(36.5
)%Total economic income expenses


97,519


44,652


142,171


119,466


22,705


19.0
%Net economic income (loss) (before non-controlling interest)


(25,081
)

(16,283
)

(41,364
)

(138,366
)

97,002


(70.1
)%Non-controlling interest


(602
)




(602
)

5,501


(6,103
)

(110.9
)%Economic income (loss)

$
(25,683
)
$
(16,283
)
$
(41,966
)
$
(132,865
)
$
90,899


(68.4
)%


Economic Income Revenues

Total economic income revenues were $100.8 million for the year ended December 31, 2009, an increase of
$119.7 million compared to a revenue loss of $18.9 million for the year ended December 31, 2008.

Alternative Investment Management Segment

Alternative investment management segment economic income revenues were $72.4 million for the year ended December 31,
2009, an increase of $91.3 million compared to a revenue loss of $18.9 million for the year ended December 31, 2008.

Management Fees.Management fees for the segment decreased $30.7 million, or 36%, to $53.9 million for the year ended
December 31, 2009 compared with $84.6 million for 2008. The decrease was due to the decrease in assets under management.

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Incentive Income (Loss).Incentive loss for the segment increased $4.4 million to a loss of $7.0 million for the year ended
December 31, 2009 compared to a loss of $2.6 million for 2008 primarily as a result of an increase in a reversal, in the current year period, of previously recorded incentive income
allocations from Ramius's interests in the general partner of a certain real estate fund pursuant to the terms of the governing documents of such fund. In addition, as of December 31, 2009
there was a $4.5 million accrual pertaining to subordination agreements entered into by the general partners of two real estate funds with those funds' lead investor. Furthermore, many of the
funds now have high-water marks so that Ramius will not earn incentive income with respect to the investments of the fund investors who suffered such losses last year until the investors
recover their losses.

Investment Income.Investment income for the segment increased $127.0 million, or 121%, to a gain of $22.0 million for the
year ended
December 31, 2009, compared with a loss of $105.0 million for 2008. The increase is a result of positive fund performance in the current year period versus negative performance in the
prior year period as a result of the general unprecedented levels of market volatility, and liquidity constraints that began in the third quarter of 2008 that affected almost every asset class
globally.

Other Revenue.Other revenue for the segment decreased $0.5 million, or 12%, to $3.5 million for the year ended
December 31,
2009, compared with $4.0 million for 2008. The decrease was primarily due to the elimination of stock loan fee income as Ramius exited that business in the fourth quarter of 2008, and the
elimination of placement fee income. Ramius exited the placement agent business in the third quarter of 2009.

Broker-Dealer Segment

Broker-dealer segment economic income revenues were $28.4 million for the year ended December 31, 2009. There were no
broker-dealer segment revenues in 2008 as the historic results of operations only reflect the legacy Ramius business.

Investment Banking.Investment banking revenues were $10.6 million for the year ended December 31, 2009, representing the
investment
banking activity of Cowen and Company for the period from November 2, 2009 through December 31, 2009. During November and December of 2009, the Company completed 5 underwriting
transactions, 2 private capital raising transactions and 3 strategic advisory transactions. There were no investment banking revenues in 2008 as the historic results of operations only reflect the
legacy Ramius business.

Brokerage.Brokerage revenues were $17.8 million for the year ended December 31, 2009, representing the brokerage activity of
Cowen and
Company for the period from November 2, 2009 through December 31, 2009. There were no brokerage revenues in 2008 as the historic results of operations only reflect the legacy Ramius
business.

Economic Income Expenses

Compensation and Benefits.Total compensation and benefits expense increased to $93.2 million for the year ended December 31,
2009, an
increase of $8.4 million compared to $84.8 million in 2008. The increase was attributable to the inclusion of two months of legacy Cowen and Company compensation and benefits expense in
2009.

Compensation
and benefits expenses for the alternative investment management segment decreased $21.6 million, or 25%, to $63.2 million for the year ended
December 31, 2009 compared with $84.8 million in the prior year period. The decrease was driven by lower accruals for incentive compensation and lower base salaries and benefit expense
associated with a reduction in head count.

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Table of Contents

Compensation
and benefits expenses for the broker-dealer segment were $30.0 million for the year ended December 31, 2009, which represents two months of operations of
legacy Cowen. There were no broker-dealer segment compensation and benefits expenses in 2008 as the historic results of operations only reflect the legacy Ramius business.

Non-compensation Expensesfixed.Non-compensation expenses for the alternative investment management segment were
$41.9 million for the year ended December 31, 2009. Non-compensation expenses for the broker-dealer segment were $10.9 million for the year ended December 31,
2009, which represents two months of legacy Cowen Holdings. The following table shows the components of the non-compensation expenses, in total, for the year ended December 31, 2009
and 2008.

The
following table shows the components of the non-compensation expensesfixed, for the year ended December 31, 2009 and 2008:

Year ended
December 31,

Period-to-Period2009

2008

$ Change

% Change(dollars in thousands)Non-compensation expensesfixed:Interest expense

$
1,549

$
1,500

$
49


3.3
%Professional, advisory and other fees


12,249


13,803


(1,554
)

(11.3
)%Occupancy and equipment


13,969


11,401


2,568


22.5
%Depreciation and amortization


5,751


4,611


1,140


24.7
%Other


19,317


16,746


2,571


15.4
%Total

$
52,835

$
48,061

$
4,774


9.9
%


Non-compensation ExpensesVariable.Variable non-compensation expenses, which primarily are comprised of expenses
which are incurred as a direct result of the processing and soliciting of revenue generating activities, increased $3.1 million to $7.1 million for the year ended December 31,
2009 compared to $4 million in the prior year. The increase was due to the inclusion of two months variable non-compensation expenses associated with the legacy Cowen Holdings
business during 2009 related to Cowen Holdings investment banking and broker dealer businesses and was offset by a reduction in variable non-compensation expenses in the Alternative
Investment management business.

The
following table shows the components of the non-compensation expensesvariable, for the year ended December 31, 2009 and 2008:

Year ended
December 31,

Period-to-Period2009

2008

$ Change

% Change(dollars in thousands)Non-compensation expensesVariable:Floor brokerage and trade execution

$
2,451

$


$
2,451


NMMarketing and business development


4,690


4,030


660


16.4
%Total

$
7,141

$
4,030

$
3,111


77.2
%


Reimbursement from Affiliates.Reimbursements from affiliates, which relate to the alternative investment management segment, decreased
$6.4 million, or 37%, to $11.0 million for the year ended December 31, 2009 compared with $17.4 million for 2008. The decrease was attributable to lower assets under
management in the 2009 period as such allocations are largely made based on a percentage of assets under management.

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Non-Controlling Interest.Non-Controlling interest represents the portion of the net income or loss attributable to certain
non-wholly owned subsidiaries that is allocated to other investors.

Liquidity and Capital Resources

We continually monitor our liquidity position. The working capital needs of the Company's business have been met through current levels
of equity capital, current cash and cash equivalents, and anticipated cash generated from our operating activities, including management fees, incentive income, returns on the Company's own capital,
investment banking fees and brokerage commissions. The Company expects that its primary working capital liquidity needs over the next twelve months will be to:



Based
on our historical results, management's experience, our current business strategy and current assets under management, the Company believes that its existing cash resources will be
sufficient to meet its anticipated working capital and capital expenditure requirements for at least the next twelve months. Our cash reserves include cash, cash equivalents and assets readily
convertible into cash such
as our securities held in inventory. Securities inventories are stated at fair value and are generally readily marketable. As of December 31, 2010, we had cash and cash equivalents of
$36.4 million, which includes $12.4 million held in foreign subsidiaries, and net liquid investment assets of $233 million. At December 31, 2010, the Company's investment
in the Enterprise Fund was valued at $153.6 million. The Company received total distributions of $142.4 million from the Enterprise Fund during 2010 which includes the January 1,
2011 redemption of $12.5 million. On September 29, 2011, the Company will need to repay all amounts outstanding under the loan facility.

The
timing of cash bonus payments to our employees may significantly affect our cash position and liquidity from period to period. While our employees are generally paid salaries
bi-weekly during the year, cash bonus payments, which can make up a significant portion of total compensation, are generally paid once a year in February.

As
discussed in "Management's Discussion and Analysis of Financial Condition and Results of OperationsCertain Factors Impacting Our Business" we have entered into a
modification agreement with affiliates of Unicredit S.p.A. It is not expected to have a material impact on the Company's liquidity and capital resources.

As
of December 31, 2010, the Company had unfunded commitments of $8.3 million pertaining to capital commitments in three real estate investments held by the Company, all of
which pertain to related party investments. Such commitments can be called at any time, subject to advance notice. In addition, the Company has committed to invest $40.7 million in CHRP Funds
as a limited partner of the CHRP Funds and also as a member of Cowen Healthcare Royalty GP, LLC, the general partner of the CHRP Funds. This commitment is expected to be called over a
two to five year period. The Company will make its pro-rata investment in the CHRP Funds along with the other limited partners. Through December 31, 2010, the Company has funded
$18.9 million towards these commitments.

As
a registered broker-dealer, Cowen and Company is subject to the SEC's Uniform Net Capital Rule 15c3-1 (the "Rule"), which requires the maintenance of minimum net
capital. Under the alternative method permitted by the Rule, Cowen and Company's minimum net capital requirement, as defined, is $1.0 million. Cowen and Company is not permitted to withdraw
equity if certain minimum net capital requirements are not met. As of December 31, 2010, Cowen and Company had total net

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capital
of approximately $27.7 million, which was approximately $26.7 million in excess of its minimum net capital requirement of $1.0 million.

Cowen
and Company is exempt from the provisions of Rule 15c3-3 under the Securities Exchange Act of 1934 as their activities are limited to those set forth in the
conditions for exemption appearing in paragraph (k)(2)(ii) of the Rule.

Proprietary
accounts of introducing brokers ("PAIB") held at the clearing broker are considered allowable assets for net capital purposes, pursuant to agreements between Cowen and
Company and the clearing broker, which require, among other things, that the clearing broker performs computations for PAIB and segregates certain balances on behalf of Cowen and Company, if
applicable.

Ramius
UK Ltd. ("Ramius UK") and Cowen International Limited ("CIL") are subject to the capital requirements of the Financial Services Authority ("FSA") of the UK.
Financial Resources, as defined, must exceed the total Financial Resources requirement of the FSA. At December 31, 2010, Ramius UK's Financial Resources of $3.8 million exceeded its
minimum requirement of $0.4 million by $3.4 million. At December 31, 2010, CIL's Financial Resources of $5.1 million exceeded its minimum requirement of
$2.7 million by $2.4 million.

Cowen
Latitude Advisors Limited ("CLAL") is subject to the financial resources requirements of the Securities and Futures Commission ("SFC") of Hong Kong. Financial
Resources, as defined, must exceed the Total Financial Resources requirement of the SFC. At December 31, 2010, CLAL's Financial Resources of $0.8 million exceeded the
minimum requirement of $0.1 million by $0.7 million.

The
Company may also incur additional indebtedness or raise additional capital under certain circumstances to respond to market opportunities and challenges. Current market conditions
may make it more difficult or costly to borrow additional funds or raise additional capital. In addition, our secured revolving credit facility with UniCredit Bank AG (formerly known as Bayerische
Hypo-und Vereinsbank AG) ("HVB AG") referenced below prohibits us and certain of our subsidiaries from incurring any indebtedness, other than certain indebtedness permitted under the
facility.

Cash Flows Analysis

The Company's primary sources of cash are derived from its operating activities, fees, realized returns on its own invested capital and
borrowings under its line of credit. The Company's primary uses of cash include compensation, general and administrative expenses and payments of interest and principal under its line of credit. Cash
flow results during the year ended December 31, 2008 only reflect the cash flows and net loss of Ramius LLC prior to the Transactions. The cash flow results during the year ended
December 31, 2009 only include the cash flows of the legacy Cowen Holdings business for two months. As a result, the cash flow amounts from operating, investing and financing activities for the
year ended December 31, 2010, 2009, and 2008 are not comparable.

Operating Activities.Net cash used in operating activities of $51.6 million for the year ended December 31, 2010 was
predominately
related to cash payments for purchases of securities related the Company's invested capital and Consolidated Funds offset partially by proceeds from sales of securities owned by the Company and the
Consolidated Funds. Net cash provided by operating activities of $110.3 million for the year ended December 31, 2009 was predominately related to cash acquired upon the completion of the
Transactions, proceeds from sales of securities and sales of other investments, partially offset by a net cash loss and purchases of securities owned. Net cash used in operating activities of
$96.7 million for the year ended December 31, 2008 was predominately related to a net cash loss, partially offset by the reduction in securities owned and fees receivable. In 2008, the
Company wound down its securities lending operation which resulted in a significant change in receivables from brokers mostly offset by a corresponding change in payable to brokers.

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Investing Activities.Net cash used in investing activities of $109.5 million for the year ended December 31, 2010 was
primarily from
the purchase of other investments related to the Company's invested capital and increased reverse repurchase agreement activity. Net cash provided by investing activities of $8.9 million for
the year ended December 31, 2009 was primarily due to the proceeds from sale of other investments. Net cash used in investing activities of $16.1 million for the year ended
December 31, 2008 was primarily due to the purchase of fixed assets related to the relocation of the Company's headquarters into new office space.

Financing Activities.Net cash provided by financing activities for the year ended December 31, 2010 was $50 million
primarily related
to increased repurchase agreement activity partially offset by a repayment on the line of credit and payments by the Consolidated Funds for capital withdrawals. For the year ended December 31,
2009 net cash used in financing activities was $18.5 million, the financing activities excluding the consolidated entities provided net cash of $80.6 million due to proceeds from a
capital raising event in December 2009 which was partially offset by capital withdrawals of $23.9 million, which were mostly redeemed prior to the Transactions, and $10.4 million used to
purchase the 50% interest in Ramius Alternative Solutions. For the twelve months ended December 31, 2008 net cash provided by financing activities was $141.6 million, however, the
financing activities excluding the consolidated entities used net cash of $11.7 million primarily driven by a net withdrawal of $21 million of member's capital.

Short-Term Borrowings and other debt

On June 3, 2009, the Company entered into a collateralized revolving credit agreement with HVB AG, as lender, administrative
agent and issuing bank, providing for a revolving credit facility with a $50.0 million aggregate loan commitment amount available, with a $7.0 million letter of credit
sub-limit. As of December 31, 2010 and December 31, 2009, the Company had borrowings of $24.0 million and $43.0 million, respectively, under the line of credit
portion. The Company also had a letter of credit of $6.7 million at December 31, 2009 with HVB AG. At the Company's election and discretion, borrowings under this collateralized
revolving credit agreement bear interest per annum (based on a 360 day year) equal to either: (a) 0.5% plus the greater of (1) the lender's prime rate, (2) the overnight
federal funds rate plus 0.5% and (3) the LIBOR rate plus 1.0% or (b) the LIBOR rate plus 2.75%. Due to the variable interest rate on these borrowings, their carrying values approximate
fair value. The Company is required to pay a quarterly commitment fee on the undrawn portion of the revolving credit facility equal to 1.0% per annum of the undrawn amount. For letters of credit, the
Company will pay a fee on the stated amount of the letter of credit at a rate equal to 2.75%. The 2009 collateralized revolving credit agreement was to mature on November 2, 2009 but was
extended; $25.0 million was extended through January 4, 2010 and $25 million was extended through September 29, 2011. All terms of the extended collateralized revolving
credit agreement remain the same except the following: at the Company's election and discretion, borrowings under the extended 2009 collateralized revolving credit agreement bear interest per annum
(based on a 360 day year) equal to either: (1) the lender's prime rate plus 1.5% or (2) the 1, 2 or 3 month LIBOR rate plus 3.5%. For letters of credit, the Company will
pay a fee on the stated amount of the letter of credit at a rate equal to 3.5%. The 2009 collateralized revolving credit agreement contained financial and other restrictive covenants that limited the
Company's ability to incur additional debt and engage in other activities. As of December 31, 2010 and during the period from June 3, 2009 to December 31, 2010, the Company was in
compliance with these covenants.

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During 2010, HVB AG notified us that they will not be renewing the $6.7 million letter of credit which supports the lease of office space in New York. The
Company has replaced that letter of credit with a new letter of credit by another financial institution which expires December 12, 2011.

On
January 4, 2010, in accordance with the terms of the collateralized revolving credit agreement, the Company remitted $25 million to HVB AG, reducing its revolving line
of credit balance.

Interest
incurred on the Company's lines of credit (in combination with all previous lines of credit) for the years ended December 31, 2010, 2009 and 2008 was $1.0 million,
$1.5 million and $1.5 million, respectively.

Cash
collateral pledged at December 31, 2009, on the consolidated statements of financial condition, represents collateral that was required to be posted for obligations or
potential obligations under the letter of credit discussed above pursuant to the lease agreement for the Company's premises in New York City. This collateral was released with the terms of the
extended collateralized revolving credit agreement. The Company's investment in Enterprise Master through the Enterprise Fund has been pledged as collateral under the line of credit portion of the
revolving credit agreement discussed above.

In
November 2010, the Company borrowed $0.6 million and $1.5 million to fund insurance premium payments. These notes bear interest at 5.05% and 4.95%, respectively and are
due in October of 2011. As of December 31, 2010, the outstanding balance on these combined notes payable was $1.4 million. Interest expense for the year ended December 31, 2010
was not significant.

As
of December 31, 2010 the Company also has four additional irrevocable letters of credit, for which there is cash collateral pledged, including (i) $50,000, which expires
on July 12, 2011, supporting workers' compensation insurance with Safety National Casualty Corporation, (ii) $57,000, which expires on May 12, 2011, supporting Cowen Healthcare
Royalty Management, LLC's Stamford office lease and (iii) $82,000, which expires on May 12, 2011, supporting the Company's San Francisco office and (iv) $1.2 million
which expires on August 31, 2011, supporting the Company's lease of additional office space in New York. To the extent any letter of credit is drawn upon, interest will be assessed at the prime
commercial lending rate. As of December 31, 2010 and December 31, 2009, there were no amounts due related to these letters of credit.

Ramius
Levered Multi-Strategy FOF LP had a $100.0 million line of credit with a major financial institution with a minimum borrowing amount of $20.0 million. Levered
FOF could borrow on this line of credit up to 72% of the amount of collateral pledged. In accordance with the loan agreement, interest accrued on the loan as well as custodian and other fees incurred
by Levered FOF in connection with the loan was capitalized and added to the total outstanding balance of the loan. During 2008, due to Levered FOF going into liquidation, the minimum borrowing amount
was waived. As of December 31, 2008, the outstanding balance on this line of credit was $10.0 million. This loan bears interest at LIBOR plus 1.35% per annum. Due to the floating rate of
interest, its carrying value approximates fair value. At December 31, 2008, all investments owned by Levered FOF were pledged as collateral in connection with this line of credit. Interest
incurred on Levered FOF's line of credit during the years ended December 31, 2009 and 2008 was $0 and $1.6 million, respectively. Levered FOF's line of credit was repaid in full as of
February 5, 2009 and was discontinued on that date.

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Contractual Obligations

The following tables summarize the Company's contractual cash obligations as of December 31, 2010:

Total

1-3 Years

4-5 Years

More Than
5 Years(dollars in thousands)Equipment Leases, Service Payments and Facility LeasesReal Estate

$
135,439

$
52,081

$
22,104

$
61,254Service Payments


37,079


28,943


8,136


Capital leases


6,974


4,475


2,422


77Aircraft


5,426


5,279


147


Total

$
184,918

$
90,778

$
32,809

$
61,331DebtLine of Credit

$
24,000

$
24,000

$


$
Interest PayableLine of Credit


132


132





Notes Payable


1,396


1,396





Letter of Credit











Benefit Plan


633


633





Total

$
26,161

$
26,161

$


$



(1)Estimated
2010 funding requirements for the Company's defined benefit plan. Future contributions to the plan beyond 2010 cannot reasonably be estimated and
are excluded from the table above.


Clawback obligations

For financial reporting purposes, the general partners have recorded a liability for potential clawback obligations to the limited
partners of a real estate fund, due to changes in the unrealized value of the fund's remaining investments and where the fund's general partner has previously received Carried Interest distributions.

The
actual clawback liability, however, does not become realized until the end of a fund's life. The life of the real estate fund's with a potential clawback obligation, including
available contemplated extensions, are currently anticipated to expire at the end of 2013. Further extensions of such terms may be implemented under certain circumstances.

As
of December 31, 2010, the clawback obligations were $6.2 million. (See Note 23 "Related Party Transactions" and Note 17 "Commitments and Contingencies" in
the Notes to the Consolidated Financial Statements.)

Off-Balance Sheet Arrangements

We have no material off-balance sheet arrangements as of December 31, 2010. However, through indemnification
provisions in our clearing agreement, customer activities may expose us to off-balance-sheet credit risk. Pursuant to the clearing agreement, we are required to reimburse our clearing
broker, without limit, for any losses incurred due
to a counterparty's failure to satisfy its contractual obligations. However, these transactions are collateralized by the underlying security, thereby reducing the associated risk to changes in the
market value of the security through the settlement date.

Cowen
and Company is a member of various securities exchanges. Under the standard membership agreement, members are required to guarantee the performance of other members and,
accordingly, if another member becomes unable to satisfy its obligations to the exchange, all other

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members
would be required to meet the shortfall. Cowen and Company's liability under these arrangements is not quantifiable and could exceed the cash and securities it has posted as collateral.
However, management believes that the potential for Cowen and Company to be required to make payments under these arrangements is remote. Accordingly, no contingent liability is carried in the
accompanying consolidated statements of financial condition for these arrangements.

Critical Accounting Policies and Estimates

Critical accounting policies are those that require the Company to make significant judgments, estimates or assumptions that affect
amounts reported in its consolidated financial statements or the notes thereto. The Company bases its judgments, estimates and assumptions on current facts, historical experience and various other
factors that the Company believes to be reasonable and prudent. Actual results may differ materially from these estimates.

The
following is a summary of what the Company believes to be its most critical accounting policies and estimates:

Consolidation

The Company determines whether it has a controlling financial interest in an entity by first evaluating whether the entity is a voting
operating entity ("VOE") or a variable interest entity ("VIE") under US GAAP.

Voting Operating EntitiesVOEs are entities in which (i) the total equity investment at risk is sufficient to enable the entity to finance
its
activities independently and (ii) the equity holders have the obligation to absorb losses, the right to receive residual returns and the right to direct the activities of the entity that most
significantly impact the entity's economic performance. VOEs are consolidated in accordance with Financial Accounting Standards Board ("FASB") accounting standards. In accordance with these standards,
the Company presently consolidates five funds deemed to be VOEs for which it acts as the general partner and investment manager. RTS Global 3x Fund LP ("RTS Global 3x") was first consolidated
in the first quarter of 2010, when it commenced operations.

Under
FASB accounting standards, the usual condition for a controlling financial interest in an entity is ownership of a majority voting interest. Accordingly, the Company consolidates
VOEs in which it owns a majority of the entity's voting shares or units. FASB accounting standards also provide that a general partner of a limited partnership (or a managing member, in the case of a
limited liability company) is presumed to control the partnership, and thus should consolidate it, unless a simple majority of the limited partners has the right to remove the general partner without
cause or to terminate the partnership. In accordance with these standards, the Company presently consolidates five funds deemed to be VOEs for which it acts as the general partner.

As
at December 31, 2010 the Company consolidates the following funds (the "Consolidated Funds"): the Enterprise Fund, Ramius Multi-Strategy FOF LP ("Multi-Strat FOF"),
Ramius Vintage Multi-Strategy FOF LP ("Vintage LP"), Ramius Levered Multi-Strategy FOF LP ("Levered FOF"), and RTS Global 3x.

Variable Interest EntitiesVIEs are entities that lack one or more of the characteristics of a VOE. In accordance with FASB accounting standards,
an
enterprise must consolidate all VIEs of which it is the primary beneficiary. Under the new FASB consolidation model for VIEs (as discussed in "Recently adopted accounting pronouncements"), an
enterprise that (1) has the power to direct the activities of a VIE that most significantly impacts the VIE's economic performance, and (2) has an obligation to absorb losses or the
right to receive benefits from the VIE that could potentially be significant to the VIE, is considered to have a controlling financial interest in the VIE and thus is required to consolidate it.

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However,
the FASB has deferred the application of the new consolidation model for VIEs that meet certain conditions, as discussed in "Recent adopted accounting pronouncements". Where the
VIEs have qualified for the deferral, the analysis is based on previous consolidation rules. These rules require
an analysis to (a) determine whether an entity in which the Company holds a variable interest is a variable interest entity and (b) whether the Company's involvement, through holding
interests directly or indirectly in the entity or contractually through other variable interests (e.g., management and performance related fees), would be expected to absorb a majority of the
VIE's expected losses, receive a majority of the VIEs expected residual returns, or both. If this condition is met, the Company is considered to have a controlling financial interest in the VIE and
thus is required to consolidate it.

Under
both guidelines, the Company determines whether it is the primary beneficiary of a VIE at the time it becomes involved with a variable interest entity and reconsiders that
conclusion continuously.

The
Company determines whether it is the primary beneficiary of a VIE by performing a qualitative and/or quantitative analysis of the VIE that includes a review of, among other things,
its capital structure, terms of any contracts between the Company and the VIE, which interests create or absorb variability, related party relationships and the design of the VIE. As of
December 31, 2010, the Company does not consolidate any VIEs.

The
Company has determined that it no longer exercises control over Cowen Healthcare Royalty GP, LLC (the "CHRP GP") as it no longer acts as managing member of this
entity, and beginning with the first quarter of 2010, no longer consolidates this entity. The Company now accounts for its investment in the CHRP GP under the equity method of accounting.
Ramius Alternative Replication Fund Ltd ("Replication Ltd") was consolidated as of April 1, 2010, when the Company first invested in the fund. This fund was deconsolidated on
October 1, 2010 when the investment in the fund ceased providing the Company with a controlling interest and included within portfolio funds, at fair value as of December 31, 2010.

As
at December 31, 2010 and 2009, the Company holds a variable interest in Ramius Enterprise Master Fund Ltd ("Enterprise Master"), Ramius Multi-Strategy Master
FOF LP and Ramius Vintage Multi-Strategy Master FOF LP (the "Unconsolidated Master Funds") through three of its Consolidated Funds: the Enterprise Fund, Multi-Strat FOF and Vintage FOF
(the "Consolidated Feeder Funds"), respectively. Investment companies like the Consolidated Feeder Funds, which account for their investments under the specialized industry accounting guidance for
investment companies prescribed under FASB accounting standards, are not subject to the consolidation provisions for their investments. Therefore, the Company has not consolidated the Unconsolidated
Master Funds.

Equity Method InvestmentsFor operating entities over which the Company exercises significant influence but which do not meet the requirements for
consolidation as outlined above, the Company uses the equity method of accounting. The Company's investments in equity method investees are recorded in other investments in the consolidated statements
of financial condition. The Company's equity in earnings or losses from equity method investees is included in net gains (losses) on securities, derivatives and other investments in the consolidated
statements of operations.

The
Company evaluates for impairment its equity method investments whenever events or changes in circumstances indicate that the carrying amounts of such investments may not be
recoverable. The difference between the carrying value of the equity method investment and its estimated fair value is recognized as an impairment when the loss in value is deemed other than
temporary.

Retention of Specialized AccountingThe Consolidated Funds are investment companies and apply specialized industry accounting for investment
companies. The Company has retained this specialized accounting for these funds pursuant to FASB accounting standards. The Consolidated Funds report their investments on the consolidated statements of
financial condition at their estimated fair value,

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with
unrealized gains (losses) resulting from changes in fair value reflected as a component of operations. Accordingly, the accompanying consolidated financial statements reflect different accounting
policies for investments depending on whether or not they are held through a consolidated investment company. In addition, the Company's broker-dealer subsidiaries, Ramius Securities LLC
("Ramius Securities") and Cowen and Company, apply the specialized industry accounting for brokers and dealers in securities also prescribed under FASB accounting standards. The Company also has
retained this specialized accounting in consolidation.

Valuation of investments and derivative contracts

FASB accounting standards establish a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair
value. 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). The three levels of the fair value hierarchy are as follows:

Level 1

Inputs that reflect unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date;Level 2

Inputs other than quoted prices that are observable for the asset or liability either directly or indirectly, including inputs in markets that are not considered to be active; andLevel 3

Fair value is determined based on pricing inputs that are unobservable and includes situations where there is little, if any, market activity for the asset or liability. The determination of fair value for assets and
liabilities in this category requires significant management judgment or estimation.


Inputs
are used in applying the various valuation techniques and broadly refer to the assumptions that market participants use to make valuation decisions, including assumptions about
risk. Inputs may include price information, volatility statistics, specific and broad credit data, liquidity statistics, and other factors. A financial instrument's level within the fair value
hierarchy is based on the lowest level of any input that is significant to the fair value measurement. However, the determination of what constitutes "observable" requires significant judgment by the
Company. The Company considers observable data to be that market data which is readily available, regularly distributed or updated, reliable and verifiable, not proprietary, and provided by
independent sources that are actively involved in the relevant market. The categorization of a financial instrument within the hierarchy is based upon the pricing transparency of the instrument and
does not necessarily correspond to the Company's perceived risk of that instrument.

The
Company and its operating company subsidiaries act as the manager for the Consolidated Funds. Both the Company and the Consolidated Funds hold certain investments which are valued by
the Company, acting as the investment manager. The fair value of these investments is generally estimated based on proprietary models developed by the Company, which include discounted cash flow
analyses, public market comparables, and other techniques and may be based, at least in part, on independently sourced market information. The material estimates and assumptions used in these models
include the timing and expected amount of cash flows, the appropriateness of discount rates used, and, in some cases, the ability to execute, timing of, and estimated proceeds from expected
financings. Significant judgment and estimation goes into the selection of an appropriate valuation methodology as well as the assumptions used in these models, and the timing and actual values
realized with respect to investments could be materially different from values derived based on the use of those estimates. The valuation methodologies applied impact the reported value of the
Company's investments and the investments held by the Consolidated Funds in the consolidated financial statements.

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The
Company primarily uses the "market approach" valuation technique to value its financial instruments measured at fair value. In determining an instrument's placement within the
hierarchy, the Company separates the Company's financial instruments into three categories: securities, derivative contracts and other investments. To the extent applicable, each of these categories
can further be divided between those held long or sold short.

SecuritiesSecurities whose values are based on quoted market prices in active markets for identical assets, and are therefore classified in
level 1 of the fair value hierarchy, include active listed equities, certain U.S. government and sovereign obligations, and certain money market securities. The Company does not adjust the
quoted price for such instruments, even in situations where the Company holds a large position and a sale could reasonably impact the quoted price.

Certain
positions for which there is a limited market, consisting primarily of convertible debt, corporate debt and loans, are stated at fair value. The estimated fair values assigned by
management are determined in good faith and are based on available information considering, among other things, quotations provided by published pricing services, counterparties and other market
participants, and pricing models using quoted inputs, and do not necessarily represent the amounts which might ultimately be realized. Such positions that trade in markets that are not considered to
be active, but are valued based on quoted market prices, dealer quotations or alternative pricing sources which are supported by observable inputs are classified within level 2. As
level 2 investments include positions that are not traded in active markets and/or are subject to transfer restrictions, valuations may be adjusted to reflect illiquidity and/or
non-transferability.

Derivative contractsDerivative contracts can be exchange-traded or privately negotiated over-the-counter ("OTC").
Exchange-traded derivatives, such as futures contracts and exchange traded option contracts, are typically classified within level 1 or level 2 of the fair value hierarchy depending on
whether or not they are deemed to be actively traded. OTC derivatives, such as generic forwards, swaps and options, have inputs which can generally be corroborated by market data and are therefore
classified within level 2. Derivative contracts are included within other assets on the consolidated statements of financial condition.

Other investmentsOther investments measured at fair value consist primarily of portfolio funds and real estate investments, which are valued as
follows:



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See
Note 5 to the Company's audited consolidated financial statements for further information regarding the Company's investments and fair value measurements.

Revenue recognition

The Company generates revenue through several principal sources as more fully described below:

Management fees

The Company earns management fees from funds and managed accounts for which serves as the investment manager, based on a fixed
percentage of net asset value, committed capital or invested capital. Management fees are based on contractual terms specified in the underlying investment management agreements with each specific
fund or managed account. Management fees are generally paid on a quarterly basis at the beginning of each quarter in arrears and are prorated for
capital inflows and redemptions. Management fees earned from our fund of funds products and certain portfolio funds are based and initially calculated on estimated net asset values and actual fees
ultimately earned could be impacted to the extent of any changes in these estimates.

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Incentive Income

The Company earns incentive income based on the net profits, as defined in the respective investment management agreements with
Company's funds and certain managed accounts, allocable for each fiscal year that exceeds cumulative unrecovered net losses, if any, that have carried forward from prior years. Incentive income earned
is typically between 10% and 20% for hedge funds and 10% for fund of funds of the net profits earned for the full year that are attributable to each fee-paying investor. Incentive income
on real estate investments is earned in the year of a sale or realization of a private investment. Incentive income in the CHRP Funds is earned only after investors receive a full return of their
capital plus a preferred return.

In
periods following a period of a net loss attributable to an investor, the Company does not earn incentive income on any future profits attributable to that investor until the
accumulated net loss from prior periods is recovered. Incentive income, once earned, is not subject to repayment. The Company has elected to record incentive income revenue in accordance with "Method
2" of FASB accounting standards. Under Method 2, the incentive income from the Company's funds and managed accounts for any period is based upon the net profits of those funds and managed accounts at
the reporting date. Any incentive income recognized in a quarter's consolidated statement of operations may be subject to reversal in a subsequent quarter as a result of subsequent negative investment
performance prior to the conclusion of the fiscal year, when all contingencies have been resolved. As a result of negative investment performance in 2008, and in the case of certain real estate funds,
in 2009, the Company entered 2010 with high-water marks in many funds that the Company manages. These high-water marks require the funds to recover cumulative losses before the
Company can begin to earn incentive income in 2010 and beyond until the high-water marks are reached with respect to the capital accounts of the funds' investors who suffered losses in
2008, and in the case of certain real estate funds, in 2009. In 2010, the Ramius Value and Opportunity Funds surpassed their high-water marks and the Company began to earn incentive income again on
these products.

Carried
interest is subject to clawback to the extent that the carried interest actually distributed to date exceeds the amount due to the Company based on cumulative results. As such,
the accrual for potential repayment of previously received carried interest, which is a component of due to related parties, represents all amounts previously distributed to the Company, less an
assumed tax liability, that would
need to be repaid to certain real estate funds if these funds were to be liquidated based on the current fair value of the underlying funds' investments as of the reporting date. Generally, the actual
clawback liability does not become realized until the end of a fund's life.

Investment Banking Revenues

The Company earns investment banking revenue primarily from fees associated with public and private capital raising transactions and
providing strategic advisory services. The Company's investment banking revenues are derived primarily from small and mid-capitalization companies within the Company's target sectors of
healthcare, technology, media and telecommunications, consumer, aerospace & defense, and alternative energy.



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Goodwill and Intangible Assets

Goodwill represents the excess of the purchase price consideration of acquired companies over the estimated fair value assigned to the
individual assets acquired and liabilities assumed. The Company tests goodwill for impairment in accordance with the two-step method described in FASB accounting standards. The first step
involves a comparison of the estimated fair value of the reporting unit to its carrying amount, including goodwill. If the estimated fair value of the reporting unit exceeds its carrying amount, its
goodwill is not impaired and the second step of the impairment test is not necessary. If the carrying amount of the reporting unit exceeds its estimated fair value, then the second step of the
goodwill impairment test must be performed. The second step of the goodwill impairment test compares the implied fair value of the reporting unit goodwill with its carrying amount to measure the
amount of impairment, if any. The implied fair value of goodwill is determined in the same manner as the amount of goodwill recognized in a business combination. In other words, the estimated fair
value of the reporting unit is allocated to all of its assets and liabilities (including any unrecognized intangible assets) as if the reporting unit had been acquired in a business combination and
the fair value of the reporting unit was the purchase price paid. If the carrying amount of the reporting unit goodwill exceeds the implied fair value of that goodwill, an impairment is recognized in
an amount equal to that excess. Goodwill is tested annually for impairment during the fourth quarter or earlier upon the occurrence of certain events or substantive changes in circumstances. Goodwill
impairment tests are subject to significant judgment in determining the estimation of future cash flows, discount rates and other assumptions. Changes in these estimates and assumptions could have a
significant impact on the fair value and any resulting impairment of goodwill.

Intangible
assets with finite lives are amortized over their estimated average useful lives. The Company does not have any intangible assets deemed to have indefinite lives. Intangible
assets are tested for potential impairment whenever events or changes in circumstances suggest that an asset's or asset group's carrying value may not be fully recoverable. An impairment loss,
calculated as the difference between the estimated fair value and the carrying value of an asset or asset group, is

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recognized
if the sum of the estimated undiscounted cash flows relating to the asset or asset group is less than the corresponding carrying value.

Legal Reserves

The Company estimates potential losses that may arise out of legal and regulatory proceedings and records a reserve and takes a charge
to income when losses with respect to such matters are deemed probable and can be reasonably estimated, in accordance with FASB accounting standards. These amounts are reported in other expenses, net
of recoveries, in the consolidated statements of operations. The consolidated statements of operations do not include litigation expenses incurred by the Company in connection with indemnified
litigation matters. See Note 17 to the Company's consolidated financial statements for further discussion. As the successor of the named party in these litigation matters, the Company
recognizes the related legal reserve in the consolidated statements of financial condition.

Future adoption of accounting pronouncements

As of December 31, 2010, none of the changes to the Codification issued by the FASB that are not yet effective are expected to
have an impact on the Company's financial position or results of operations.

Item 7A.    Quantitative and Qualitative Disclosures about Market Risk

The Company's primary exposure to market risk is a function of our role as investment manager for our funds and managed accounts, our
role as a financial intermediary in custom trading and our market making activities, as well as the fact that a significant portion of our own capital is invested in securities. Adverse movements in
the prices of securities that are either owned or sold short may negatively impact the Company's management fees and incentive income, as well as the value of our own invested capital.

The
market value of the assets and liabilities with our funds and managed accounts, as well as the Company's own securities, may fluctuate in response to changes in equity prices,
interest rates, credit spreads, currency exchange rates, commodity prices, implied volatility, dividends, prepayments, recovery rates and the passage of time. The net effect of market value changes
caused by fluctuations in these risk factors will result in gains (losses) for our funds and managed accounts which will impact our management fees and incentive income and for the Company's
securities which will impact the value of our own invested capital as well as the capital utilized in facilitating customer trades.

The
Company's risk measurement and risk management processes are an integral part of our daily investment process as well as market making and customer facilitation trading activities.
These processes are implemented at the individual position, strategy and total portfolio levels and are designed to provide a complete picture of the Company's funds' and managed accounts' risks. The
key elements of our risk reporting include sensitivities, exposures, stress testing and profit and loss attribution. As a result of our views of levels of risk being taken, the firm may undertake to
hedge out some or all of any or all risks at either the individual position, strategy or total portfolio levels.

Impact on Management Fees

The Company's management fees are based on the net asset value of the Company's funds and managed accounts. Accordingly, management
fees will change in proportion to changes in the market value of investments held by the Company's funds and managed accounts.

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Impact on Incentive Income

The Company's incentive income is generally based on a percentage of the profits of the Company's various funds and managed accounts,
which is impacted by global economies and market conditions and other factors. Consequently, incentive income cannot be readily predicted or estimated.

Custody and prime brokerage risks

There are risks involved in dealing with the custodians or prime brokers who settle trades. Under certain circumstances, including
certain transactions where the Company's assets are pledged as collateral for leverage from a non-broker-dealer custodian or a non-broker-dealer affiliate of the prime broker,
or where the Company's assets are held at a non-U.S. prime broker, the securities and other assets deposited with the custodian or broker may be exposed to credit risk with regard to such
parties. In addition, there may be practical or timing problems associated with enforcing the Company's rights to its assets in the case of an insolvency of any such party.

Market risk

Market risk represents the risk of loss that may result from the change in value of a financial instrument due to fluctuations in its
market price. Market risk may be exacerbated in times of trading illiquidity when market participants refrain from transacting in normal quantities and/or at normal bid-offer spreads. Our
exposure to market risk is primarily related to the fluctuation in the fair values of securities owned and sold, but not yet purchased in the Company's funds and our role as a financial intermediary
in customer trading and to our market making and investment activities. Market risk is inherent in financial instruments and risks arise in options, warrants and derivative contracts from changes in
the fair values of their underlying financial instruments. Securities sold, but not yet purchased, represent obligations of the Company's funds to deliver specified securities at contracted prices and
thereby create a liability to repurchase the securities at prevailing future market prices. We trade in equity securities as an active participant in both listed and over the counter markets. We
typically maintain securities in inventory to facilitate our market making activities and customer order flow. We may use a variety of risk management techniques and hedging strategies in the ordinary
course of our trading business to manage our exposures. In connection with our trading business, management also reviews reports appropriate to the risk profile of specific trading activities.
Typically, market conditions are evaluated and transaction details and securities positions are reviewed. These activities are intended to ensure that our trading strategies are conducted within
acceptable risk tolerance parameters, particularly when we commit our own capital to facilitate client trading. Activities
inclde price verification procedures, position reconciliations and reviews of transaction booking. We believe these procedures, which stress timely communications between traders, trading management
and senior management, are important elements of the risk management process.

A
10% change in the fair value of the investments held by the Company's funds as of December 31, 2010 would result in a change of approximately $904 million in our assets
under management and would impact management fees by approximately $5.1 million. This number is an estimate. The amount would be dependent on the fee structure of the particular fund or funds
that experienced such a change.

Currency risk

The Company is also exposed to foreign currency fluctuations. Currency risk arises from the possibility that fluctuations in foreign
currency exchange rates will affect the value of such financial instruments, including direct or indirect investments in securities of non-U.S. companies. A 10% weakening or strengthening
of the U.S. dollar against all or any combination of currencies to which the

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Company's
investments or the Company's funds have exposure to exchange rates would not have a material effect on the Company's revenues, net loss or Economic Income.

Inflation risk

Because our assets are, to a large extent, liquid in nature, they are not significantly affected by inflation. However, the rate of
inflation affects such expenses as employee compensation and communications charges, which may not be readily recoverable in the prices of services we offer. To the extent inflation results in rising
interest rates and has other adverse effects on the securities markets, it may adversely affect our financial condition and results of operations in certain businesses.

Leverage and interest rate risk

There is no guarantee that the Company's borrowing arrangements or other arrangements for obtaining leverage will continue to be
available, or if available, will be available on terms and conditions acceptable to the Company. Unfavorable economic conditions also could increase funding costs, limit access to the capital markets
or result in a decision by lenders not to extend credit to the Company. In addition, a decline in market value of the Company's assets may have particular adverse consequences in instances where they
have borrowed money based on the market value of those assets. A decrease in market value of those assets may result in the lender (including derivative counterparties) requiring the Company to post
additional collateral or otherwise sell assets at a time when it may not be in the Company's best interest to do so.

As
we may hold interest-sensitive assets and liabilities from time to time, we are exposed to additional interest rate risk arising from changes in the level and volatility of interest
rates and in the shape of the yield curve.

In
the event that LIBOR, and rates directly or indirectly tied to LIBOR, were to increase by 10% over LIBOR as of December 31, 2009, based on the Company's funds' debt investments
and obligations as of December 31, 2009, we estimate that the net effect on interest income and interest expense would not result in a material impact on our results of operations. A tightening
of credit and increase in prevailing interest rates could make it difficult for us to raise capital and sustain our growth rate.

In
addition, the Company's debt obligations bear interest at rates indexed to LIBOR. For every 1% increase in LIBOR, as of December 31, 2009, our annual interest expense will
increase by $0.2 million.

Credit risk

The Company clears all of its securities transactions through clearing brokers on a fully disclosed basis. Pursuant to the terms of the
agreements between the Company and the clearing brokers, the clearing brokers have the right to charge the Company for losses that result from a counterparty's failure to fulfill its contractual
obligations. As the right to charge the Company has no maximum amount and applies to all trades executed through the clearing brokers, we believe there is no maximum amount assignable to this right.
Accordingly, at December 31, 2010, the Company had recorded no liability.

Credit
risk is the potential loss the Company may incur as a result of the failure of a counterparty or an issuer to make payments according to the terms of a contract. The Company's
exposure to credit risk at any point in time is represented by the fair value of the amounts reported as assets at such time.

In
the normal course of business, our activities may include trade execution for our clients. These activities may expose us to risk arising from price volatility which can reduce
clients' ability to meet their obligations. To the extent investors are unable to meet their commitments to us, we may be

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required
to purchase or sell financial instruments at prevailing market prices to fulfill clients' obligations.

In
accordance with industry practice, client trades are settled generally three business days after trade date. Should either the client or the counterparty fail to perform, we may be
required to complete the transaction at prevailing market prices.

We
manage credit risk by monitoring the credit exposure to and the standing of each counterparty, requiring additional collateral where appropriate, and using master netting agreements
whenever possible.

Operational risk

Operational risk is the risk of loss resulting from inadequate or failed internal processes, people and systems or from external
events. We outsource all or a portion of several critical business functions, such as clearing, data center and desktop maintenance and support. Accordingly, we negotiate our agreements with these
firms with attention focused not only on the delivery of core services but also on the safeguards afforded by back-up systems and disaster recovery capabilities. We make specific inquiries
on any relevant exceptions noted in a service provider's Statement on Auditing Standards No. 70 report on the state of its internal controls. We are focused on maintaining our overall
operational risk management framework and minimizing or mitigating these risks through a formalized control assessment process to ensure awareness and adherence to key policies and control procedures.

Our
Internal Audit department oversees, monitors, measures, analyzes and reports on operational risk across the Company. The scope of Internal Audit encompasses the examination and
evaluation of the adequacy and effectiveness of the Company's system of internal controls and is sufficiently broad to help determine whether the Company's network of risk management, control and
governance processes,
as designed by management, is adequate and functioning as intended. Internal Audit works with the senior management to help ensure a transparent, consistent and comprehensive framework exists for
managing operational risk within each area, across the Company and globally.

Primary
responsibility for management of operational risk is with the businesses and the business managers therein. The business managers, generally, maintain processes and controls
designed to identify, assess, manage, mitigate and report operational risk. As new products and business activities are developed and processes are designed and modified, operational risks are
considered.

Legal risk

Legal risk includes the risk of non-compliance with applicable legal and regulatory requirements and standards. Legal risk
also includes contractual and commercial risk such as the risk that a counterparty's performance obligations will be unenforceable. The Company has established procedures based on legal and regulatory
requirements that are designed to achieve compliance with applicable statutory and regulatory requirements. The Company, principally through the Legal and Compliance Division, also has established
procedures that are designed to require that the Company's policies relating to conduct, ethics and business practices are followed. In connection with its businesses, the Company has and continuously
develops various procedures addressing issues such as regulatory capital requirements, sales and trading practices, new products, potential conflicts of interest, use and safekeeping of customer funds
and securities, money laundering, privacy and recordkeeping. In addition, the Company has established procedures to mitigate the risk that a counterparty's performance obligations will be
unenforceable, including consideration of counterparty legal authority and capacity, adequacy of legal documentation, the permissibility of a transaction under applicable law and whether applicable
bankruptcy or insolvency laws limit or alter contractual remedies. The legal and regulatory focus on the financial services industry presents a continuing business challenge for the Company.

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Item 8.    Financial Statements and Supplementary Data

The financial statements and supplementary data required by this item are listed in Item 15"Exhibits and Financial
Statement Schedules" of this Annual Report on Form 10-K.

Item 9.    Changes in and Disagreements With Accountants on Accounting and Financial Disclosure

None.

Item 9A.    Controls and Procedures

We maintain disclosure controls and procedures, as defined in Rule 13a-15(e) of the Exchange Act, that are designed
to provide reasonable assurance that information required to be disclosed in our reports filed or submitted under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported
within the time periods specified in the SEC's rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial
Officer, as appropriate, to allow for timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and
procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating
the cost-benefit relationship of possible controls and procedures.

As
of December 31, 2010 we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and our Chief
Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Based on the foregoing, our Chief Executive Officer and Chief Financial Officer concluded
that our disclosure controls and procedures were effective and were operating at the reasonable assurance level.

For
Management's report on internal control over financial reporting see page F-2, and attestation report of our independent registered public accounting firm see page F-3.

In
addition, there were no changes in our internal control over financial reporting, as defined in Rule 13a-15(f) under the Exchange Act, that occurred in the fourth
quarter of 2010 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Item 9B.    Other Information

None.

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PART III



Item 10.    Directors, Executive Officers and Corporate Governance

The information in the definitive proxy statement for our 2011 annual meeting of stockholders under the captions "Executive Officers,"
"Board of Directors," "Information Regarding the Board of Directors and Corporate GovernanceCommittees of the BoardAudit Committee," "Information Regarding the Board of
Directors and Corporate GovernanceDirector Nomination Process," "Information Regarding the Board of Directors and Corporate GovernanceProcedures for Nominating Director
Candidates," "Information Regarding the Board of Directors and Corporate GovernanceCode of Business Conduct and Ethics" and "Section 16(a) Beneficial Ownership Reporting
Compliance" is incorporated herein by reference.

Item 11.    Executive Compensation

The information in the definitive proxy statement for our 2011 annual meeting of stockholders under the captions "Executive
CompensationCompensation and Benefits Committee Report," "Certain Relationships and Related TransactionsCompensation and Benefits Committee Interlocks and Insider
Participation" and "Information Regarding the Board of Directors and Corporate GovernanceCompensation Program for Non-Employee Directors" is incorporated herein by reference.

Item 12.    Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

The information in the definitive proxy statement for our 2011 annual meeting of stockholders under the captions "Security
OwnershipBeneficial Ownership of Directors, Nominees and Executive Officers," "Security OwnershipBeneficial Owners of More than Five Percent of our Common Stock" and
"Securities Authorized for Issuance Under Equity Compensation Plans" are incorporated herein by reference.

Item 13.    Certain Relationships and Related Transactions

The information in the definitive proxy statement for our 2011 annual meeting of stockholders under the captions "Information Regarding
the Board of Directors and Corporate GovernanceDirector Independence," "Certain Relationships and Related TransactionsTransactions with Related Persons," and "Certain
Relationships and Related TransactionsReview and Approval of Transactions with Related Persons" is incorporated herein by reference.

Item 14.    Principal Accounting Fees and Services

The information in the definitive proxy statement for our 2011 annual meeting of stockholders under the captions "Audit Committee
Report and Payment of Fees to Our Independent AuditorAuditor Fees" and "Audit Committee Report and Payment of Fees to Our Independent AuditorAuditor Services
Pre-Approval Policy" is incorporated herein by reference.

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PART IV

Item 15.    Exhibits and Financial Statement Schedules



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INDEX TO CONSOLIDATED FINANCIAL STATEMENTS



Consolidated Financial Statements

PageManagement's Report on Internal Control over Financial Reporting

F-2Report of PricewaterhouseCoopers LLP, Independent Registered Public Accounting
Firm

F-3Consolidated Statements of Financial Condition

F-4Consolidated Statements of Operations

F-5Consolidated Statements of Changes in Equity

F-6Consolidated Statements of Cash Flows

F-7Notes to Consolidated Financial Statements

F-9Note 1Organization and Business

F-9Note 2Acquisition

F-9Note 3Significant Accounting Policies

F-12Note 4Cash Collateral Pledged

F-31Note 5Investments of Operating Entities and Consolidated Funds

F-31Note 6Fair Value Measurements for Operating Entities and Consolidated Funds

F-47Note 7Receivable from and Payable to Brokers

F-49Note 8Other Assets and Accounts Payable, Accrued Expenses and Other Liabilities

F-50Note 9Fixed Assets

F-51Note 10Goodwill and Intangible Assets

F-51Note 11Redeemable Non-controlling Interests in Consolidated Subsidiaries

F-54Note 12Other Revenues and Expenses

F-55Note 13Share-based Compensation and Employee Ownership Plans

F-55Note 14Defined Benefit Plans

F-61Note 15Defined Contribution Plans

F-65Note 16Income Taxes

F-65Note 17Commitments and Contingencies

F-69Note 18Short-Term Borrowings and Other Debt

F-71Note 19Stockholders' Equity

F-74Note 20Earnings Per Share

F-75Note 21Segment Reporting

F-76Note 22Regulatory Requirements

F-81Note 23Related Party Transactions

F-82Note 24Guarantees

F-83Note 25Subsequent Events

F-84


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Management's Report on Internal Control over Financial Reporting

Management of Cowen Group, Inc. (the "Company") is responsible for establishing and maintaining adequate internal control over
financial reporting. The Company's internal control over financial reporting is a process designed under the supervision of the Company's principal executive and principal financial officers to
provide reasonable assurance regarding the reliability of financial reporting and the preparation of the Company's financial statements for external reporting purposes in accordance with U.S.
generally accepted accounting principles.

As
of the end of the Company's 2010 fiscal year, management conducted an assessment of the Company's internal control over financial reporting based on the framework established in Internal ControlIntegrated
Frameworkissued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on this
assessment, management has determined that the Company's internal control over financial reporting as of December 31, 2010 was effective.

Our
internal control over financial reporting includes policies and procedures that pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect
transactions and dispositions of assets; provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. generally
accepted accounting principles, and that receipts and expenditures are being made only in accordance with authorizations of management and the directors of the Company; and provide reasonable
assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company's assets that could have a material effect on our financial statements.

The
Company's internal control over financial reporting as of December 31, 2010 has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting
firm, as stated in their report included herein, which expresses an unqualified opinion on the effectiveness of the Company's internal control over financial reporting as of December 31, 2010.

F-2

---



Table of Contents

Report of Independent Registered Public Accounting Firm

To
the Board of Directors and Stockholders of Cowen Group, Inc.

In
our opinion, the accompanying consolidated statements of financial condition and the related consolidated statements of operations, changes in equity, and cash flows present fairly,
in all material respects, the financial position of Cowen Group, Inc. and its subsidiaries (the Company) at December 31, 2010 and 2009, and the results of their operations and their cash
flows for each of the three years in the period ended December 31, 2010 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the
Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2010, based on criteria established
inInternal ControlIntegrated Frameworkissued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The
Company's management is responsible for these financial statements, for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control
over financial reporting, included in Management's Report on Internal Control over Financial Reporting appearing on page F-2. Our responsibility is to express opinions on these financial
statements and on the Company's internal control over financial reporting based on our audits (which was an integrated audit in 2010). We conducted our audits in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of
material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the financial statements included examining, on a test
basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall
financial statement presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a
material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as
we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

A
company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures
that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide
reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and
expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or
timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.

Because
of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/
PricewaterhouseCoopers LLP
New York, New York
March 11, 2011

F-3

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Table of Contents

Cowen Group, Inc.    Consolidated Statements of Financial Condition    As of December 31, 2010 and 2009    (in thousands, except share and per share data)

As of December 31,2010

2009AssetsCash and cash equivalents

$
36,354

$
147,367Cash collateral pledged


8,633


7,246Securities owned, at fair value


474,095


54,153Securities purchased under agreement to resell


97,755


Other investments


40,320


28,490Receivable from brokers


95,937


32,525Fees receivable


31,688


22,446Due from related parties (see Note 23)


16,370


14,860Fixed assets, net of accumulated depreciation and amortization of $17,764 and $16,449, respectively


36,591


32,603Goodwill


27,179


27,179Intangible assets, net of accumulated amortization of $8,146 and $4,506, respectively


12,754


16,394Other assets


19,456


24,199Consolidated FundsCash and cash equivalents


7,210


625Securities owned, at fair value


8,722


Other investments, at fair value


333,374


550,407Other assets


732


947Total Assets

$
1,247,170

$
959,441Liabilities and Stockholders' EquitySecurities sold, not yet purchased, at fair value

$
197,916

$
14,812Securities sold under agreement to repurchase


192,165


Payable to brokers


85,655


3,817Compensation payable


76,204


80,923Short-term borrowings and other debt


31,733


49,746Fees payable (see Note 23)


8,797


5,387Due to related parties (see Note 23)


9,187


8,103Accounts payable, accrued expenses and other liabilities


42,267


65,599Consolidated FundsCapital withdrawals payable


7,817


26,312Accounts payable, accrued expenses and other liabilities


1,827


392Total Liabilities


653,568


255,091Commitments and Contingencies (see Note 17)Redeemable non-controlling interests


144,346


230,825Stockholders' equityPreferred stock, par value $0.01 per share; 10,000,000 shares authorized, no shares issued and outstanding





Class A common stock, par value $0.01 per share: 250,000,000 shares authorized, 75,490,209 and 74,743,163 shares issued and outstanding as of
December 31, 2010 and 2009, respectively (including 1,554,124 and 2,323,116 restricted shares, respectively)


726


726Class B common stock, par value $0.01 per share: 250,000,000 authorized, no shares issued and outstanding





Additional paid-in capital


504,480


483,872(Accumulated deficit) retained earnings


(55,970
)

(10,553
)Accumulated other comprehensive income (loss)


20


(520
)Total Stockholders' Equity


449,256


473,525Total Liabilities and Stockholders' Equity

$
1,247,170

$
959,441


The accompanying notes are an integral part of these consolidated financial statements.

F-4

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Table of Contents

Cowen Group, Inc.        Consolidated Statements of Operations        For the Years Ended December 31, 2010, 2009 and 2008        (in thousands,
except per share data)

Year ended December 31,2010

2009

2008RevenuesInvestment banking

$
38,965

$
10,557

$
Brokerage


112,217


17,812


Management fees


38,847


41,694


70,818Incentive income


11,363


1,911


Interest and dividends


11,547


477


1,993Reimbursement from affiliates


6,816


10,326


16,330Other revenues


1,936


4,732


6,853Consolidated FundsInterest and dividends


11,733


33,697


30,267Other


386


2,695


1,472Total revenues


233,810


123,901


127,733ExpensesEmployee compensation and benefits


194,919


96,592


84,769Floor brokerage and trade execution


17,143


2,451


Interest and dividends


8,971


1,601


1,820Professional, advisory and other fees


14,547


20,140


9,829Service fees


15,814


4,452


3,974Communications


13,972


2,906


1,574Occupancy and equipment


18,119


11,835


11,401Depreciation and amortization


11,543


5,761


4,611Client services and business development


14,470


7,804


8,647Goodwill impairment








10,200Other


22,323


12,868


13,000Consolidated FundsInterest and dividends


3,078


14,017


28,806Professional, advisory and other fees


3,094


6,500


2,790Floor brokerage and trade execution


995


707


1,228Other


954


2,357


1,444Total expenses


339,942


189,991


184,093Other income (loss)Net gains (losses) on securities, derivatives and other investments


21,980


(2,154
)

(2,006
)Consolidated Funds:Net realized and unrealized gains (losses) on investments and other transactions


33,116


55,908


(216,910
)Net realized and unrealized gains (losses) on derivatives


(761
)

(31,750
)

6,771Net gains (losses) on foreign currency transactions


(1,293
)

(3,159
)

11,654Total other income (loss)


53,042


18,845


(200,491
)Income (loss) before income taxes


(53,090
)

(47,245
)

(256,851
)Income tax expense (benefit)


(21,400
)

(8,206
)

(1,301
)Net income (loss)


(31,690
)

(39,039
)

(255,550
)Net income (loss) attributable to redeemable non-controlling interests in consolidated subsidiaries


13,727


16,248


(113,786
)Net income (loss) attributable to Cowen Group, Inc. stockholders

$
(45,417
)
$
(55,287
)
$
(141,764
)Weighted average common shares outstanding:Basic


73,149


41,001


37,537Diluted


73,149


41,001


37,537Earnings (loss) per share:Basic

$
(0.62
)
$
(1.35
)
$
(3.78
)Diluted

$
(0.62
)
$
(1.35
)
$
(3.78
)


The accompanying notes are an integral part of these consolidated financial statements.

F-5

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Table of Contents

Cowen Group, Inc.        Consolidated Statements of Changes in Equity        For the Years Ended December 31, 2010, 2009 and 2008        (in
thousands, except share data)

Common Shares Outstanding

Common Stock

Additional Paid-in Capital

Accumulated Other Comprehensive Income (Loss)

Retained Earnings/ Accumulated deficit

Total Stockholders' Equity

Redeemable Noncontrolling Interest

Total Comprehensive Income (Loss)Balance, December 31, 2007


37,536,826

$
375

$
264,999

$
(290
)
$
214,896

$
479,980

$
203,523Comprehensive income (loss):Net income














(141,764
)

(141,764
)

(113,786
)
$
(255,550
)Defined Benefit Plans











(873
)




(873
)




(873
)Total comprehensive income (loss)











(873
)

(141,764
)

(142,637
)

(113,786
)

(256,423
)Capital contributions








12,465








12,465


236,886Capital distributions














(18,916
)

(18,916
)

(41,687
)Balance, December 31, 2008


37,536,826


375


277,464


(1,163
)

54,216


330,892


284,936Comprehensive income (loss):Net loss














(55,287
)

(55,287
)

16,248


(39,039
)Defined Benefit Plans











636





636





636Foreign currency translation











7





7





7Total comprehensive income (loss)











643


(55,287
)

(54,644
)

16,248


(38,396
)Capital contributions








4,906








4,906


1,613Capital distributions














(9,482
)

(9,482
)

(60,214
)Acquisition of non-controlling interest (see Note 2)


2,713,882


27


3,085








3,112


(13,482
)Common Stock issuance upon close of Transaction (see Note 2)


15,055,619


151


114,346








114,497


1,724Restricted stock awards issued


2,144,138

















Issuance of Common Stock on share offering (see Note 19)


17,292,698


173


80,434








80,607


Amortization of share based compensation








3,637








3,637


Balance, December 31, 2009


74,743,163


726


483,872


(520
)

(10,553
)

473,525


230,825Comprehensive income (loss):Net income (loss)














(45,417
)

(45,417
)

13,727


(31,690
)Defined Benefit Plans











241





241





241Foreign currency translation











299





299





299Total comprehensive income (loss)











540


(45,417
)

(44,877
)

13,727

$
(31,150
)Capital contributions




















10,062Capital withdrawals




















(105,869
)Consolidation of Replication Ltd (see Note 3b)




















409Deconsolidation of CHRP (see Note 3b)




















(1,713
)Deconsolidation of Replication Ltd (see Note 3b)




















(3,095
)Restricted stock awards issued


747,046

















Amortization of share based compensation








20,608








20,608


Balance, December 31, 2010


75,490,209

$
726

$
504,480

$
20

$
(55,970
)
$
449,256

$
144,346


The accompanying notes are an integral part of these consolidated financial statements.

F-6

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Table of Contents

Cowen Group, Inc.        Consolidated Statements of Cash Flows        For the Years Ended December 31, 2010, 2009 and 2008        (in thousands)

Year ended December 31,2010

2009

2008(dollars in thousands)Cash flows from operating activities:Net income (loss)

$
(31,690
)
$
(39,039
)
$
(255,550
)Adjustments to reconcile net income (loss) to net cash (used in) / provided by operating activities:Depreciation and amortization


11,543


5,761


4,611Share-based compensation


20,608


3,637


Interest, custody and other expenses capitalized on the note payable balance








1,538Net loss on disposal of fixed assets


299


249


Goodwill impairment








10,200Purchases of securities owned, at fair value


(3,415,775
)

(84,350
)

(44,199
)Proceeds from sales of securities owned, at fair value


2,943,376


97,299


28,890Proceeds from the sale of securities sold, not yet purchased, at fair value


2,678,922





Payments to cover securities sold, not yet purchased, at fair value


(2,556,056
)




Net (gains) losses on securities, derivatives and other investments


(20,339
)

(1,891
)

211Consolidated Funds:Purchases of securities owned, at fair value


(445,913
)




Proceeds from sales of securities owned, at fair value


437,147





Purchases of other investments


(30,583
)

(2,181
)

(234,550
)Proceeds from sales of other investments


285,915


75,743


84,142Net realized and unrealized (gains) losses on investments and other transactions


(34,316
)

(39,506
)

199,983(Increase) decrease in operating assets:Cash acquired upon transaction





97,903


Cash collateral pledged


(8,132
)

203


9,564Securities owned, at fair value, held at broker dealer


50,895


(34,133
)

78,100Other investments, at fair value, held at broker dealer








(769
)Receivable from brokers


(63,412
)

13,279


759,982Fees receivable


(9,242
)

1,686


78,261Securities purchased under agreement to resell








(435
)Due from related parties


(1,510
)

9,021


8,413Other assets


5,040


(1,682
)

10,410Consolidated Funds:Cash and cash equivalents


(4,024
)

(92
)

4,752Other assets


215


(645
)

4,248Increase (decrease) in operating liabilities:Securities sold, not yet purchased, at fair value, held at broker dealer


75,075


1,980


Payable to brokers


81,838


(1,304
)

(767,313
)Compensation payable


(4,248
)

4,425


(41,868
)Fees payable


3,410


(2,394
)

(30,067
)Due to related parties


1,084


(2,446
)

(2,224
)Accounts payable, accrued expenses and other liabilites


(23,332
)

8,931


(3,393
)Consolidated Funds:Due to related parties





(136
)

136Accounts payable, accrued expenses and other liabilities


1,652


(20
)

195Net cash (used in) / provided by operating activities


(51,553
)

110,298


(96,732
)


The accompanying notes are an integral part of these consolidated financial statements.

F-7

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Table of Contents

Cowen Group, Inc.

Consolidated Statements of Cash Flows (Continued)

For the Years Ended December 31, 2010, 2009 and 2008

(in thousands)

Year ended December 31,(continued)

2010

2009

2008(dollars in thousands)Cash flows from investing activities:Securities purchased under agreement to resell


(97,755
)




Purchases of other investments


(321,914
)

(233
)

(5,383
)Proceeds from sales of other investments


316,063


9,477


7,602Sale of fixed assets








46Purchase of fixed assets


(5,853
)

(399
)

(18,388
)Net cash provided by / (used in) investing activities


(109,459
)

8,845


(16,123
)Cash flows from financing activities:Securities sold under agreement to repurchase


192,165


(1,425
)

Borrowings on the line of credit


6,000





68,203Repayments on the line of credit


(25,000
)

(203
)

(68,254
)Borrowings on notes payable


2,059





Repayments on notes payable


(663
)




Proceeds from issuance of common stock





80,607


Purchase of non-controlling interest (see Note 2)





(10,370
)

Capital contributions by members








11,899Capital withdrawals to members





(23,943
)

(21,059
)Capital contributions by non-controlling interests in operating entities








Capital withdrawals to non-controlling interests in operating entities





486


(2,500
)Consolidated Funds:Borrowings on the line of credit








14,900Repayments on the line of credit





(10,207
)

(63,817
)Non-controlling interest deconsolidation








Capital contributions by non-controlling interests in Consolidated Funds


10,062


1,613


235,565Capital withdrawals to non-controlling interests in Consolidated Funds


(134,624
)

(55,011
)

(33,372
)Net cash (used in) / provided by financing activities


49,999


(18,453
)

141,565Change in cash and cash equivalents


(111,013
)

100,690


28,710Cash and cash equivalents at beginning of year


147,367


46,677


17,967Cash and cash equivalents at end of year

$
36,354

$
147,367

$
46,677Supplemental informationCash paid during the year for interest

$
6,943

$
1,277

$
4,119Cash paid during the year for taxes

$
1,310

$


$
2,530Supplemental non-cash informationCash collateral pledged and note payable

$
6,746

$


$
Net assets of deconsolidated entities

$
6,816

$


$
Assets aquired under capital lease obligations

$
6,337

$


$
Common stock issuance to acquire non-controlling interest (see Note 2)

$


$
20,490

$
Common stock issuance upon close of the Transactions (see Note 2)

$


$
114,347

$
3,722Capital contributions made through REOP Program (see Note 13)

$


$
4,906

$
Interest, custody and other expenses capitalized on the note payable balance
(see Note 18)

$


$


$
1,538


The accompanying notes are an integral part of these consolidated financial statements.

F-8

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Table of Contents

Cowen Group, Inc.        Notes to Consolidated Financial Statements



1. Organization and Business

Cowen Group, Inc., a Delaware corporation, was formed on June 1, 2009 in connection with the Transaction Agreement and Agreement and Plan of Merger ("Transaction
Agreement"), dated as of June 3, 2009, by and among Cowen Holdings, Inc., ("Cowen Holdings," formerly Cowen Group, Inc.), Lexington Merger Corp., Ramius LLC ("Ramius,"
formerly Park Exchange LLC) and RCG Holdings LLC ("RCG," formerly Ramius LLC). For more information related to the acquisition, see Note 2.

Cowen
Group, Inc. is a diversified financial services firm and, together with its consolidated subsidiaries (collectively, "Cowen Group" or the "Company") provides alternative
investment management, investment banking, research, and sales and trading services through its two business segments: alternative investment management and broker-dealer. The alternative investment
management segment includes hedge funds, replication products, mutual funds, managed futures funds fund of funds, real estate funds, healthcare royalty funds, cash management services, offered
primarily under the Ramius name. The broker-dealer segment offers industry focused investment banking for growth-oriented companies including advisory and global credit markets origination and domain
knowledge-driven research and a sales and trading platform for institutional investors, primarily under the Cowen name.

2. Acquisition

On November 2, 2009, the transactions contemplated by the Transaction Agreement (the "Transactions"), were consummated including (1) the merger of Lexington Merger Corp.
with and into Cowen Holdings, pursuant to which each outstanding share of common stock of Cowen Holdings was converted into one share of Class A common stock of the Company and (2) the
transfer by RCG (which prior to the consummation of the Transactions operated the Ramius business) of substantially all of its assets and liabilities to Park Exchange LLC in exchange for the
Company's issuance to RCG of 37,536,826 shares of Class A common stock of the Company. Following the consummation of the Transactions, each of Park Exchange LLC and Cowen Holdings became
wholly owned subsidiaries of the Company, and Park Exchange LLC was renamed Ramius LLC.

The
Transactions were accounted for under the acquisition method in accordance with US GAAP. Accordingly, the Transactions were accounted for as an acquisition by Ramius of Cowen
Holdings. As such, results of operations for Cowen Holdings are included in the accompanying consolidated statements of operations since the date of acquisition, and the assets acquired and
liabilities assumed were recorded at their fair value as at the acquisition date.

Under
the terms of the Transaction Agreement, each outstanding share of common stock of Cowen Holdings was converted into a share of the Class A common stock of the Company. The
consideration received by Cowen Holdings's shareholders was valued at $7.55 per share, or approximately $114.5 million in the aggregate, based on the closing stock price of Cowen Holdings on
October 30, 2009. This is based on the 14,883,968 shares of Cowen Holdings stock that were outstanding at the date of the completion of the Transactions, including 12,071,646 freely tradable
shares, 2,784,816 restricted shares and 27,506 shares underlying vested restricted stock units at the acquisition date. The number of shares used to estimate the purchase consideration excludes
185,828 restricted shares at the acquisition date that did not vest as part of the Transactions and were not effectively purchased. Restricted shares, restricted share units and stock options of Cowen
Holdings

F-9

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Table of Contents

Cowen Group, Inc.

Notes to Consolidated Financial Statements (Continued)

2. Acquisition (Continued)

common
stock at the acquisition date were converted into an equivalent number of restricted shares, restricted share units and stock options of the Company's Class A common stock.

The
Company acquired Cowen Holdings due to its experienced teams and complementary strengths that will enable the combined company to take advantage of a wide variety of corporate
finance and investment opportunities.

The
estimated fair value of the Company's Class A common stock issued to Cowen Holdings stockholders represents the purchase consideration in the Transactions, which was computed
as follows:

(in thousands,
except per share data)Number of Cowen Holdings common shares outstanding at closing:Common float


12,072
(1)Restricted shares


2,785
(2)Restricted share units


27
(3)Total shares issued to Cowen Holdings stockholders


14,884Estimated market price a Cowen Holdings common share

$
7.55
(4)Estimated purchase price of Cowen Holdings common shares

$
112,374Add: Fair value of unvested restricted shares and options issued


2,123
(5)Estimated purchase price

$
114,497


(1)Based
on the trading float of Cowen Holdings's common shares on the acquisition date.(2)Based
on Cowen Holdings's unvested restricted shares outstanding on the acquisition date. Excludes restricted shares that were not subject to accelerated
vesting as a result of the Transactions.(3)Based
on Cowen Holdings's restricted share units outstanding on the acquisition date.(4)The
$7.55 share price used in calculating the estimated purchase consideration represents the closing share price of Cowen Holdings common stock on
October 30, 2009.(5)In
connection with the Transactions, each outstanding Cowen Holdings stock option was exchanged for one stock option of the Company. Each newly issued stock
option was fully vested upon issuance, and has a strike price and expiration date equal to that of the original stock option. Cowen Holdings had 892,782 stock options outstanding as of the closing
date. The fair value of Cowen Holdings's stock option awards was estimated to be $0.7 million based on a Black-Scholes valuation model. Also included in the $2.1 million is
$1.4 million related to the fair value of pre-combination service on restricted shares that were not subject to accelerated vesting as a result of the Transactions.


F-10

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Table of Contents

Cowen Group, Inc.

Notes to Consolidated Financial Statements (Continued)

2. Acquisition (Continued)




The
table below summarizes the fair value of identifiable assets acquired and liabilities assumed at the acquisition date as well as the acquisition date fair value of the
non-controlling interest in Cowen Holdings that was acquired:

(dollars in thousands)Cash and cash equivalents

$
97,903Cash collateral pledged


501Securities owned, at fair value


17,555Receivable from brokers


19,893Other investments


17,121Fees receivable


4,802Due from related parties


1,061Fixed assets, net


8,379Intangible assets, net


17,000Other assets


17,535Securities sold, not yet purchased, at fair value


(12,832
)Payable to brokers


(1,304
)Compensation payable


(37,592
)Accounts payable, accrued expenses and other liabilities


(40,952
)Total identifiable net assets acquired


109,070Non-controlling interest


(1,724
)Goodwill


7,151Total purchase price

$
114,497


The
amount of the acquired receivables and contractual amounts receivable as reflected above are shown net of approximately $0.4 million of receivables which were expected to be
uncollectible.

The
non-controlling interest in Cowen Holdings at the acquisition date represents the non-controlling equity interests in Cowen Healthcare
Royalty GP, LLC and CHRP Overflow Fund GP, LLC (collectively, the "CHRP GPs"), the general partners, respectively, to Cowen Healthcare Royalty Partners, L.P.
and CHRP Overflow Fund, L.P. (the "CHRP Funds"), and are recorded at fair value. The CHRP GPs' only significant assets are their investments in the CHRP Funds, which invest principally
in commercial-stage biopharmaceutical products and companies through the purchase of royalty or synthetic royalty interests and structured debt and equity instruments. The CHRP Funds follow industry
practices for valuation techniques including discounted cash flows, Black-Scholes valuation models and sale price of recent transactions in the same or similar securities and significant inputs such
as estimated future cash flows, discount rates, volatility and dividend yield to measure the fair value of the investments in the CHRP Funds. As such, the carrying value of CHRP GP's
investments in the CHRP Funds, and the related non-controlling interest, approximate fair value.

Based
on the November 2, 2009 estimated purchase price allocation, the purchase price of $114.5 million exceeded the fair value of the net identifiable assets acquired and
liabilities assumed of $107.3 million. As a result, the Company has recognized goodwill of $7.2 million related to the Transactions. The goodwill primarily relates to expected synergies
from the merger. All of the goodwill has been assigned to the broker-dealer segment of the Company. None of the goodwill is expected to

F-11

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Table of Contents

Cowen Group, Inc.

Notes to Consolidated Financial Statements (Continued)

2. Acquisition (Continued)

be
deductible for tax purposes. See Note 10 for a discussion of the intangible assets acquired and their amortization periods.

In
addition to the purchase price consideration, the Company incurred acquisition related expenses of $12.2 million related to the Transactions, which are included in
professional, advisory and other fees in the consolidated statements of operations for the year ended 2009.

Included
in the accompanying consolidated statements of operations for the year ended December 31, 2009 are revenues of $31.2 million and a net loss of $15.0 million
related to Cowen Holdings for the period from November 2, 2009 through December 31, 2009. The following table provides unaudited supplemental pro forma financial information for the
years ended December 31, 2009 and 2008 as if the Transactions had occurred as of the beginning of each period presented:

Year ended December 31,2009

2008(in thousands, except per share data)(unaudited)Pro forma total revenues

$
284,459

$
345,057Pro forma net loss


(100,759
)

(290,900
)Pro forma net loss attributable to Cowen Group, Inc. stockholders


(116,719
)

(182,363
)Pro forma net loss per share:Basic

$
(2.12
)
$
(3.31
)Diluted

$
(2.12
)
$
(3.31
)


On
November 2, 2009, in connection with the Transactions, Cowen Holdings purchased from HVB Alternative Advisors LLC ("HVB") the 50% interest in Ramius Alternative
Solutions LLC ("Ramius Alternative Solutions"), the Company's alternative solution business, that HVB owned in exchange for (1) the Company's issuance to HVB of 2,713,882 shares of the
Company's Class A common stock and (2) approximately $10.4 million in cash, resulting in Ramius Alternative Solutions becoming an indirect wholly owned subsidiary of the Company.
In accordance with applicable Financial Accounting Standards Board ("FASB") accounting standards the acquisition of the additional interest in the Company's alternative solution business was treated
as an equity transaction and the difference between the fair value of the consideration paid and the carrying value of the derecognized non-controlling interest was recognized in equity.

3. Significant Accounting Policies

These
consolidated financial statements are prepared in accordance with generally accepted accounting principles in the United States of America ("US GAAP") under the Financial
Accounting Standards Board ("FASB") Accounting Standards Codification as the source of authoritative accounting principles in the preparation of financials statements, and include the accounts of the
Company, its operating and other subsidiaries, and entities in which the Company has a controlling financial interest or a substantive, controlling general partner interest. All material intercompany
transactions and balances have been eliminated in consolidation. Certain fund entities that are consolidated in these

F-12

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Table of Contents

Cowen Group, Inc.

Notes to Consolidated Financial Statements (Continued)

3. Significant Accounting Policies (Continued)

consolidated
financial statements, as further discussed below, are not subject to these consolidation provisions with respect to their own investments pursuant to their specialized accounting.

The
business combination between Ramius and Cowen Holdings was accounted for as an acquisition by Ramius of Cowen Holdings. As a result, the historical financial statements of Ramius
have become the historical financial statements of the Company.

The
assets and liabilities of Cowen Holdings were recorded at their respective fair values, as of November 2, 2009, and combined with those of Ramius. The financial statements of
the Company that include periods after November 2, 2009 reflect such fair values and were not restated retroactively to reflect the historical financial position or results of operations of
Cowen Holdings. For periods after
November 2, 2009, the results of operations of Cowen Holdings are included in the results of operations of the Company. Stockholders' equity has been retroactively restated to include the
37,536,826 shares of Class A common stock issued to RCG at the consummation of the Transactions (as defined in Note 2) as the issued capital for all periods prior to the Transactions.

The
Company serves as the managing member/general partner and/or investment manager to affiliated fund entities which it sponsors and manages. Funds in which the Company has a
substantive, controlling general partner interest are consolidated with the Company pursuant to US GAAP as described below. Consequently, the Company's consolidated financial statements reflect
the assets, liabilities, income and expenses of these funds on a gross basis. The ownership interests in these funds which are not owned by the Company are reflected as redeemable
non-controlling interests in consolidated subsidiaries in the accompanying consolidated financial statements. The management fees and incentive income earned by the Company from these
funds are eliminated in consolidation.

The
Company determines whether it has a controlling financial interest in an entity by first evaluating whether the entity is a voting operating entity ("VOE") or a variable interest
entity ("VIE") under US GAAP.

Voting Operating EntitiesVOEs are entities in which (i) the total equity investment at risk is sufficient to enable the entity to finance its
activities independently and (ii) the equity holders at risk have the obligation to absorb losses, the right to receive residual returns and the right to direct the activities of the entity
that most significantly impact the entity's economic performance. VOEs are consolidated in accordance with Financial Accounting Standards Board ("FASB") accounting standards. In accordance with these
standards, the Company presently consolidates five funds deemed to be VOEs for which it acts as the general partner and investment manager. RTS Global 3x Fund LP ("RTS Global 3x") was first
consolidated in the first quarter of 2010, when it commenced operations.

Under
FASB accounting standards, the usual condition for a controlling financial interest in an entity is ownership of a majority voting interest. Accordingly, the Company consolidates
VOEs in which it owns a majority of the entity's voting shares or units. FASB accounting standards also provide that a general partner of a limited partnership (or a managing member, in the case of a
limited liability company) is presumed to control the partnership, and thus should consolidate it, unless a simple majority of the limited partners has the right to remove the general partner without
cause or to terminate the partnership. In accordance with these standards, the Company presently consolidates five funds deemed to be VOEs for which it acts as the general partner.

F-13

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Table of Contents

Cowen Group, Inc.

Notes to Consolidated Financial Statements (Continued)

3. Significant Accounting Policies (Continued)

As
at December 31, 2010 the Company consolidates the following funds (the "Consolidated Funds"): Ramius Enterprise LP ("Enterprise LP"), Ramius Multi-Strategy
FOF LP ("Multi-Strat FOF"), Ramius Vintage Multi-Strategy FOF LP ("Vintage LP"), Ramius Levered Multi-Strategy FOF LP ("Levered FOF"), and RTS Global 3x.

Variable Interest EntitiesVIEs are entities that lack one or more of the characteristics of a VOE. In accordance with FASB accounting standards,
an
enterprise must consolidate all VIEs of which it is the primary beneficiary. Under the new FASB consolidation model for VIEs (as discussed in "Recently adopted accounting pronouncements"), an
enterprise that (1) has the power to direct the activities of a VIE that most significantly impacts the VIE's economic performance, and (2) has an obligation to absorb losses or the
right to receive benefits from the VIE that could potentially be significant to the VIE, is considered to have a controlling financial interest in the VIE and thus is required to consolidate it.

However,
the FASB has deferred the application of the new consolidation model for VIEs that meet certain conditions, as discussed in "Recently adopted accounting pronouncements". Where
the VIEs have qualified for the deferral, the analysis is based on previous consolidation rules. These rules require an analysis to (a) determine whether an entity in which the Company holds a
variable interest is a variable interest entity and (b) whether the Company's involvement, through holding interests directly or indirectly in the entity or contractually through other variable
interests (e.g., management and performance related fees), would be expected to absorb a majority of the VIE's expected losses, receive a majority of the VIEs expected residual returns, or
both. If this condition is met, the Company is considered to have a controlling financial interest in the VIE and thus is required to consolidate it. Under both guidelines, the Company determines
whether it is the primary beneficiary of a VIE at the time it becomes involved with a variable interest entity and reconsiders that conclusion continuously.

The
Company determines whether it is the primary beneficiary of a VIE by performing a qualitative and/or quantitative analysis of the VIE that includes a review of, among other things,
its capital structure, terms of any contracts between the Company and the VIE, which interests create or absorb variability, related party relationships and the design of the VIE. As of
December 31, 2010, the Company does not consolidate any VIEs.

The
Company has determined that it no longer exercises control over Cowen Healthcare Royalty GP, LLC (the "CHRP GP") as it no longer acts as managing member of this
entity, and beginning with the first quarter of 2010, no longer consolidates this entity. The Company now accounts for its investment in the CHRP GP under the equity method of accounting.

Ramius
Alternative Replication Fund Ltd ("Replication Ltd") was consolidated as of April 1, 2010, when the Company first invested in the fund. This fund was
deconsolidated on October 1, 2010 when the investment in the fund ceased providing the Company with a controlling interest and is included within Portfolio Funds, at fair value as of
December 31, 2010.

As
at December 31, 2010 and 2009, the Company holds a variable interest in Ramius Enterprise Master Fund Ltd ("Enterprise Master"), Ramius Multi-Strategy Master
FOF LP and Ramius Vintage Multi-Strategy Master FOF LP (the "Unconsolidated Master Funds") through three of its Consolidated Funds: Enterprise LP, Multi-Strat FOF and Vintage FOF
(the "Consolidated Feeder Funds"), respectively. Investment companies like the Consolidated Feeder Funds, which account for their investments under the specialized industry accounting guidance for
investment companies prescribed

F-14

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Table of Contents

Cowen Group, Inc.

Notes to Consolidated Financial Statements (Continued)

3. Significant Accounting Policies (Continued)

under
FASB accounting standards, are not subject to the consolidation provisions for their investments. Therefore, the Company has not consolidated the Unconsolidated Master Funds.

In
the ordinary course of business, the Company also sponsors various other entities that it has determined to be VIEs. These VIEs are primarily funds and real estate entities for which
the Company serves as the general partner, managing member and/or investment manager with decision-making rights.

The
Company does not consolidate any of the funds or real estate entities that are VIEs as it has concluded that it is not the primary beneficiary in each instance. Fund investors are
entitled to all of the economics of these VIEs with the exception of the management fee and incentive income, if any, earned by the Company. The Company's involvement with funds and real estate
entities that are unconsolidated VIEs is limited to providing investment management services in exchange for management fees and incentive income. Although the Company may advance amounts and pay
certain expenses on behalf of the funds and real estate entities that it considers to be VIEs, it does not provide, nor is it required to provide, any type of substantive financial support to these
entities outside of regular investment management services.

The
total assets and liabilities of the variable interest entities for which the Company has concluded that it holds a variable interest, but for which it is not the primary beneficiary,
are $383.3 million and $26.7 million as of December 31, 2010 and $1,224.8 million and $640.3 million as of December 31, 2009, respectively. In addition, the
maximum exposure relating to these variable interest entities as of December 31, 2010 was $307.8 million, of which $307.2 million is included in other investments, at fair value
and $0.6 million is included in due from related parties and as of December 31, 2009 was $541.8 million, of which $540.5 million is included in other investments, at fair
value and $1.3 million is included in due from related parties in the Company's consolidated statements of financial condition, respectively. The Consolidated Feeder Funds' maximum exposure to
loss related to their respective Unconsolidated Master Funds at December 31, 2010 and December 31, 2009 was limited to their
investment in their respective Unconsolidated Master Funds. See Note 5 for further information regarding the Company's investments.

Equity Method InvestmentsFor operating entities over which the Company exercises significant influence but which do not meet the requirements for
consolidation as outlined above, the Company uses the equity method of accounting. The Company's investments in equity method investees are recorded in other investments in the consolidated statements
of financial condition. The Company's equity in earnings or losses from equity method investees is included in net gains (losses) on securities, derivatives and other investments in the consolidated
statements of operations.

The
Company evaluates for impairment its equity method investments whenever events or changes in circumstances indicate that the carrying amounts of such investments may not be
recoverable. The difference between the carrying value of the equity method investment and its estimated fair value is recognized as an impairment when the loss in value is deemed other than
temporary.

Cost Method InvestmentsWhen the Company does not have a controlling financial interest and does not exert significant influence over an entity's
operating and financial policies, but has an investment in private equity for which market quotations are not readily available and is not otherwise

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Cowen Group, Inc.

Notes to Consolidated Financial Statements (Continued)

3. Significant Accounting Policies (Continued)

accounted
for at fair value, the Company accounts for its investment in accordance with the cost method of accounting.

OtherIf the Company does not consolidate an entity, apply the equity method of accounting or account for an investment under the cost method, the
Company accounts for all other debt and marketable equity securities which are bought and held principally for the purpose of selling them in the near term as trading securities in accordance with
FASB accounting standards, at fair value with unrealized gains (losses) resulting from changes in fair value reflected within net gains (losses) on securities, derivatives and other investments in the
consolidated statements of operations.

Retention of Specialized AccountingThe Consolidated Funds are investment companies and apply specialized industry accounting for investment
companies. The Company has retained this specialized accounting for these funds pursuant to FASB accounting standards. The Consolidated Funds report their investments on the consolidated statements of
financial condition at their estimated fair value, with unrealized gains (losses) resulting from changes in fair value reflected as a component of operations. Accordingly, the accompanying
consolidated financial statements reflect different accounting policies for investments depending on whether or not they are held through a consolidated investment company. In addition, the Company's
broker-dealer subsidiaries, Ramius Securities LLC ("Ramius Securities") and Cowen and Company, LLC ("Cowen and Company") apply the specialized industry accounting for brokers and dealers
in securities also prescribed under FASB accounting standards. The Company also has retained this specialized accounting in consolidation.

The
preparation of the consolidated financial statements in conformity with GAAP requires the management of the Company to make estimates and assumptions that affect the fair value of
securities and other investments, the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the consolidated financial statements, the accounting
for goodwill and identifiable intangible assets and the reported amounts of revenues and expenses during the reporting period. Actual results could materially differ from those estimates.

The
Company considers investments in money market funds and other highly liquid investments with original maturities of three months or less which are deposited with a bank or prime
broker to be cash equivalents. Cash and cash equivalents held at Consolidated Funds, although not legally restricted, are not available to fund the general liquidity needs of the Company. The Company
is also exposed to credit risk as a result of cash being held at several banks.

The
FASB accounting standards establish a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to
unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurements) and the lowest

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Table of Contents

Cowen Group, Inc.

Notes to Consolidated Financial Statements (Continued)

3. Significant Accounting Policies (Continued)

priority
to unobservable inputs (level 3 measurements). The three levels of the fair value hierarchy are as follows:

Level 1

Inputs that reflect unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date;Level 2

Inputs other than quoted prices that are observable for the asset or liability either directly or indirectly, including inputs in markets that are not considered to be active; andLevel 3

Fair value is determined based on pricing inputs that are unobservable and includes situations where there is little, if any, market activity for the asset or liability. The determination of fair value for assets and
liabilities in this category requires significant management judgment or estimation.


Inputs
are used in applying the various valuation techniques and broadly refer to the assumptions that market participants use to make valuation decisions, including assumptions about
risk. Inputs may include price information, volatility statistics, specific and broad credit data, liquidity statistics, and other factors. A financial instrument's level within the fair value
hierarchy is based on the lowest level of any input that is significant to the fair value measurement. However, the determination of what constitutes "observable" requires significant judgment by the
Company. The Company considers observable data to be that market data which is readily available, regularly distributed or updated, reliable and verifiable, not proprietary, and provided by
independent sources that are actively involved in the relevant market. The categorization of a financial instrument within the hierarchy is based upon the pricing transparency of the instrument and
does not necessarily correspond to the Company's perceived risk of that instrument.

The
Company and its operating company subsidiaries act as the manager for the Consolidated Funds. Both the Company and the Consolidated Funds hold certain investments which are valued by
the Company, acting as the investment manager. The fair value of these investments is generally estimated based on proprietary models developed by the Company, which include discounted cash flow
analyses, public market comparables, and other techniques and may be based, at least in part, on independently sourced market information. The material estimates and assumptions used in these models
include the timing and expected amount of cash flows, the appropriateness of discount rates used, and, in some cases, the ability to execute, timing of, and estimated proceeds from expected
financings. Significant
judgment and estimation goes into the selection of an appropriate valuation methodology as well as the assumptions used in these models, and the timing and actual values realized with respect to
investments could be materially different from values derived based on the use of those estimates. The valuation methodologies applied impact the reported value of the Company's investments and the
investments held by the Consolidated Funds in the consolidated financial statements. Certain of the Company's investments are relatively illiquid or thinly traded and may not be immediately liquidated
on demand if needed. Fair values assigned to these investments may differ significantly from the fair values that would have been used had a ready market for the investments existed and such
differences could be material.

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Table of Contents

Cowen Group, Inc.

Notes to Consolidated Financial Statements (Continued)

3. Significant Accounting Policies (Continued)

The
Company primarily uses the "market approach" valuation technique to value its financial instruments measured at fair value. In determining an instrument's placement within the
hierarchy, the Company separates the Company's financial instruments into three categories: securities, derivative contracts and other investments. To the extent applicable, each of these categories
can further be divided between those held long or sold short.

SecuritiesSecurities whose values are based on quoted market prices in active markets for identical assets, and are therefore classified in
level 1 of the fair value hierarchy, include active listed equities, certain U.S. government and sovereign obligations, and certain money market securities. The Company does not adjust the
quoted price for such instruments, even in situations where the Company holds a large position and a sale could reasonably impact the quoted price.

Certain
positions for which there is a limited market, consisting primarily of convertible debt, corporate debt and loans, are stated at fair value. The estimated fair values assigned by
management are determined in good faith and are based on available information considering, among other things, quotations provided by published pricing services, counterparties and other market
participants, and pricing models using quoted inputs, and do not necessarily represent the amounts which might ultimately be realized. Such positions that trade in markets that are not considered to
be active, but are valued based on quoted market prices, dealer quotations or alternative pricing sources which are supported by observable inputs are classified within level 2. As
level 2 investments include positions that are not traded in active markets and/or are subject to transfer restrictions, valuations may be adjusted to reflect illiquidity and/or
non-transferability.

Derivative contractsDerivative contracts can be exchange-traded or privately negotiated over-the-counter ("OTC").
Exchange-traded derivatives, such as futures
contracts and exchange traded option contracts, are typically classified within level 1 or level 2 of the fair value hierarchy depending on whether or not they are deemed to be actively
traded. OTC derivatives, such as generic forwards, swaps and options, have inputs which can generally be corroborated by market data and are therefore classified within level 2. Derivative
contracts are included within other assets or accounts payable, accrued expenses and other liabilities on the consolidated statements of financial condition. The Company's direct involvement with
derivative financial instruments includes credit default swaps, futures, equity swaps, options and warrants and rights which are included within securities owned, at fair value in the consolidated
statements of financial condition.

Other investmentsOther investments consist primarily of portfolio funds, real estate investments and equity method investments, which are valued
as
follows:



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Cowen Group, Inc.

Notes to Consolidated Financial Statements (Continued)

3. Significant Accounting Policies (Continued)





See
Note 5 and 6 for further information regarding the Company's investments, including equity method investments, and fair value measurements.

The
Company may advance amounts and pay certain expenses on behalf of employees of the Company or other affiliates of the Company. These amounts settle in the ordinary course of
business.

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Table of Contents

Cowen Group, Inc.

Notes to Consolidated Financial Statements (Continued)

3. Significant Accounting Policies (Continued)

Such
amounts are included in due from and due to related parties, respectively, on the consolidated statements of financial condition.

Receivable
from and payable to brokers, includes cash held at clearing brokers, amounts receivable or payable for unsettled transactions, monies borrowed and proceeds from short sales
equal to the fair value of securities sold, but not yet purchased. Pursuant to the Company's prime broker agreements, these balances are presented net (assets less liabilities) across balances with
the same broker.

Securities
borrowed and securities loaned are carried at the amounts of cash collateral advanced or received. Securities borrowed transactions require the Company to deposit cash or
other collateral with the lender. The Company receives cash or collateral in an amount generally in excess of the market value of securities loaned. The Company monitors the market value of securities
borrowed and loaned on a daily basis and may require counterparties to deposit additional collateral or return collateral pledged, when appropriate.

Transactions
involving purchases of securities under agreements to resell are carried at their contract value which approximates fair value. As of December 31, 2010, the fair
value of the collateral received by the Company was $95.5 million.

Transactions
involving the sale of securities under agreements to repurchase are carried at their contract value and are accounted for as collateralized financings. In connection with
these financings, as of December 31, 2010, the Company had pledged collateral in the amount $207.4 million, which is included in securities owned, at fair value in the consolidated
statements of financial condition.

Collateral
is valued periodically and the Company and its counterparties may adjust the collateral or require additional collateral to be deposited when appropriate. Collateral held by
counterparties may be sold or rehypothecated by such counterparties, subject to certain limitations sometimes imposed by the Company. Collateralized repurchase agreements may result in credit exposure
in the event the counterparties to the transactions are unable to fill their contractual obligations. The Company minimizes the credit risk associated with this activity by monitoring credit exposure
and collateral values, and by requiring additional collateral to be promptly deposited with or returned to the Company when deemed necessary. The Company's securities purchased under agreements to
resell and securities sold under agreements to repurchase were transacted pursuant to agreements with multiple counterparties at December 31, 2010.

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Table of Contents

Cowen Group, Inc.

Notes to Consolidated Financial Statements (Continued)

3. Significant Accounting Policies (Continued)

Fixed
assets are stated at cost less accumulated depreciation or amortization. Leasehold improvements are amortized on a straight-line basis over the lesser of their useful
life or lease term. Other fixed assets are depreciated on a straight-line basis over their estimated useful lives.

Asset

Depreciable Lives

Principal MethodTelephone and computer equipment

3-5 years

Straight-lineComputer software

3-5 years

Straight-lineFurniture and fixtures

3-8 years

Straight-lineLeasehold improvements

2-15 years

Straight-line


Goodwill
represents the excess of the purchase price consideration of acquired companies over the estimated fair value assigned to the individual assets acquired and liabilities assumed.
The Company tests goodwill for impairment in accordance with the two-step method described in FASB accounting standards. The first step involves a comparison of the estimated fair value of
the reporting unit to its carrying amount, including goodwill. If the estimated fair value of the reporting unit exceeds its carrying amount, its goodwill is not impaired and the second step of the
impairment test is not necessary. If the carrying amount of the reporting unit exceeds its estimated fair value, then
the second step of the goodwill impairment test must be performed. The second step of the goodwill impairment test compares the implied fair value of the reporting unit goodwill with its carrying
amount to measure the amount of impairment, if any. The implied fair value of goodwill is determined in the same manner as the amount of goodwill recognized in a business combination. In other words,
the estimated fair value of the reporting unit is allocated to all of its assets and liabilities (including any unrecognized intangible assets) as if the reporting unit had been acquired in a business
combination and the fair value of the reporting unit was the purchase price paid. If the carrying amount of the reporting unit goodwill exceeds the implied fair value of that goodwill, an impairment
is recognized in an amount equal to that excess. Goodwill is tested annually for impairment during the fourth quarter or earlier upon the occurrence of certain events or substantive changes in
circumstances. Goodwill impairment tests are subject to significant judgment in determining the estimation of future cash flows, discount rates and other assumptions. Changes in these estimates and
assumptions could have a significant impact on the fair value and any resulting impairment of goodwill. See Note 10 for further discussion.

Intangible
assets with finite lives are amortized over their estimated average useful lives. The Company does not have any intangible assets deemed to have indefinite lives. Intangible
assets are tested for potential impairment whenever events or changes in circumstances suggest that an asset or asset group's carrying value may not be fully recoverable. An impairment loss,
calculated as the difference between the estimated fair value and the carrying value of an asset or asset group, is recognized if the sum of the estimated undiscounted cash flows relating to the asset
or asset group is less than the corresponding carrying value.

The
Company estimates potential losses that may arise out of legal and regulatory proceedings and records a reserve and takes a charge to income when losses with respect to such matters
are deemed

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Table of Contents

Cowen Group, Inc.

Notes to Consolidated Financial Statements (Continued)

3. Significant Accounting Policies (Continued)

probable
and can be reasonably estimated, in accordance with FASB accounting standards. These amounts are reported in other expenses, net of recoveries, in the consolidated statements of operations.
The consolidated statements of operations do not include litigation expenses incurred by the Company in connection with indemnified litigation matters. See Note 17 for further discussion. As
the successor of the named party in these litigation matters, the Company recognizes the related legal reserve in the consolidated statements of financial condition.

Capital
withdrawals from the Consolidated Funds are recognized as liabilities, net of any incentive income, when the amount requested in the withdrawal notice represents an unconditional
obligation at a specified or determined date (or dates) or upon an event certain to occur. This generally may occur either at the time of the receipt of the notice, or on the last day of a reporting
period, depending on the nature of the request. As a result, withdrawals paid after the end of the year, but based upon year-end capital balances are reflected as liabilities at the
balance sheet date.

Redeemable
non-controlling interests represent the pro rata share of the book value of the financial positions and results of operations attributable to the other owners of
the consolidated subsidiaries. Redeemable non-controlling interests related to Consolidated Funds are generally subject to annual, semi-annual or quarterly withdrawals or
redemptions by investors in these funds, sometimes following the expiration of a specified period of time (generally one year), or may only be withdrawn subject to a redemption fee (generally ranging
from 1% to 5%). Likewise, non-controlling interests related to certain other consolidated entities are generally subject to withdrawal, redemption, transfer or put/call rights that permit
such non-controlling investors to withdraw from the entities on varying terms and conditions. Because these non-controlling interests are redeemable at the option of the
non-controlling interests, they have been classified as temporary equity in the consolidated statements of financial condition. When redeemed amounts become legally payable to investors on
a current basis, they are reclassified as a liability.

Comprehensive
income (loss) consists of net income and other comprehensive income (loss). The Company's other comprehensive income (loss) is comprised of valuation adjustments to the
Company's defined benefit plans and foreign currency cumulative translation adjustments.

The
Company generates revenue through several principal sources as more fully described below:

Management fees

The Company earns management fees from affiliated funds and certain managed accounts that it serves as the investment manager based on
assets under management. The actual management fees received can vary depending on distribution fees or fee splits paid to third parties either in connection with raising the assets or structuring the
investment.

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Table of Contents

Cowen Group, Inc.

Notes to Consolidated Financial Statements (Continued)

3. Significant Accounting Policies (Continued)

Management
fees are generally paid on a quarterly basis at the beginning of each quarter in arrears and are prorated for capital inflows and redemptions. While some investors may have
separately negotiated fees pursuant to side letter arrangements, in general the management fees are as follows:



Incentive income

The Company earns incentive income based on the net profits, as defined in the respective investment management agreements with
Company's funds and certain managed accounts, allocable for each fiscal year that exceeds cumulative unrecovered net losses, if any, that have carried forward from prior years. Incentive income earned
is typically between 10% and 20% for hedge funds and 10% for fund of funds of the net profits earned for the full year that are attributable to each fee-paying investor. Incentive income
on real estate investments is earned in the year of a sale or realization of a

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Table of Contents

Cowen Group, Inc.

Notes to Consolidated Financial Statements (Continued)

3. Significant Accounting Policies (Continued)

private
investment. Incentive income in the CHRP Funds is earned only after investors receive a full return of their capital plus a preferred return.

In
periods following a period of a net loss attributable to an investor, the Company does not earn incentive income on any future profits attributable to that investor until the
accumulated net loss from prior periods is recovered. Incentive income, once earned, is not subject to repayment. The Company has elected to record incentive income revenue in accordance with "Method
2" of FASB accounting standards. Under Method 2, the incentive income from the Company's funds and managed accounts for any period is based upon the net profits of those funds and managed accounts at
the reporting date. Any incentive income recognized in a quarter's consolidated statement of operations may be subject to reversal in a subsequent quarter as a result of subsequent negative investment
performance prior to the conclusion of the fiscal year, when all contingencies have been resolved. As a result of negative investment performance in 2008, and in the case of certain real estate funds,
in 2009, the Company entered 2010 with high-water marks in many funds that the Company manages. These high-water marks require the funds to recover cumulative losses before the
Company can begin to earn incentive income in 2010 and beyond until the high-water marks are reached with respect to the capital accounts of the funds' investors who suffered losses in
2008, and in the case of certain real estate funds, in 2009. In 2010, the Ramius Value and Opportunity Funds surpassed their high water marks and the Company began to earn incentive income fees on
these products.

Carried
interest is subject to clawback to the extent that the carried interest actually distributed to date exceeds the amount due to the Company based on cumulative results. As such,
the accrual for potential repayment of previously received carried interest, which is a component of due to related parties, represents all amounts previously distributed to the Company, less an
assumed tax liability, that would need to be repaid to certain real estate funds if these funds were to be liquidated based on the current fair value of the underlying funds' investments as of the
reporting date. Generally, the actual clawback liability does not become realized until the end of a fund's life.

Investment Banking

The Company earns investment banking revenue primarily from fees associated with public and private capital raising transactions and
providing strategic advisory services. Investment banking revenues are derived primarily from small and mid-capitalization companies within the Company's target sectors of healthcare,
technology, media and telecommunications, consumer, aerospace & defense, and alternative energy.



The
Company earns underwriting revenues in securities offerings in which the Company can act as an underwriter, such as initial public offerings, follow-on equity offerings
and convertible security offerings. Underwriting revenues include management fees, selling concessions and underwriting fees. Fee revenue relating to underwriting commitments is recorded when all
significant items relating to the underwriting cycle have been completed and the amount of the underwriting revenue has been determined. This generally is the point at which all of the following have
occurred: (i) the issuer's registration statement has become effective with the U.S. Securities and Exchange Commission ("SEC"), or the other offering documents are finalized; (ii) the
Company has made a firm commitment for the purchase of shares from the issuer; and (iii) the Company has been informed of the number of shares that it has been allotted.

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Table of Contents

Cowen Group, Inc.

Notes to Consolidated Financial Statements (Continued)

3. Significant Accounting Policies (Continued)

When
the Company is not the lead manager for a registered equity underwriting transaction, management must estimate the Company's share of transaction-related expenses incurred by the
lead manager in order to recognize revenue. Transaction-related expenses are deducted from the underwriting fee and therefore reduce the revenue the Company recognizes as co-manager. Such
amounts are adjusted to reflect actual expenses in the period in which the Company receives the final settlement, typically within 90 days following the closing of the transaction.



The
Company's strategic advisory revenues include success fees earned in connection with advising companies, both buyers and sellers, principally in mergers and acquisitions. The Company
also earns fees for related advisory work such as providing fairness opinions. The Company records strategic advisory revenues when the services for the transactions are completed under the terms of
each assignment or engagement and collection is reasonably assured. Expenses associated with such transactions are deferred until the related revenue is recognized or the engagement is otherwise
concluded and recorded within other assets in the consolidated statements of financial condition.



The
Company earns agency placement fees in non-underwritten transactions such as private placements, private investment in public equity transactions ("PIPEs") and registered
direct transactions ("RDs"). The Company records private placement revenues when the services for the transactions are completed under the terms of each assignment or engagement and collection is
reasonably assured. Expenses associated with such transactions are deferred until the related revenue is recognized or the engagement is otherwise concluded and recorded within other assets in the
consolidated statements of financial condition.

Brokerage

Brokerage revenue consists of commissions, principal transactions, net and equity research fees.



Commission
revenue includes fees from executing client transactions in listed securities. These fees are recognized on a trade date basis. The Company permits institutional customers to
allocate a portion of their gross commissions to pay for research products and other services provided by third parties. The amounts allocated for those purposes are commonly referred to as soft
dollar arrangements. Commissions are recorded net of the related soft dollar amount. During the years ended December 31, 2010 and 2009, the Cowen legacy business earned $76.1 million and $10.8
million of revenues from commissions, respectively.



Principal
transaction revenue includes net trading gains and losses from the Company's market-making activities in fixed income and over-the-counter equity
securities, listed options trading, trading of convertible securities, and trading gains and losses on inventory and other firm positions, which include warrants previously received as part of
investment banking transactions. Commissions associated with these transactions are also included herein. In certain cases, the Company provides liquidity to clients buying or selling blocks of shares
of listed stocks without previously identifying the other side of the trade at execution, which subjects the Company to market risk. These positions are typically held

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Table of Contents

Cowen Group, Inc.

Notes to Consolidated Financial Statements (Continued)

3. Significant Accounting Policies (Continued)

for
a very short duration. During the years ended December 31, 2010 and 2009, the Cowen legacy business earned $36.1 million and $7.0 million of revenues from principal transactions, net,
respectively.



Equity
research fees are paid to the Company for providing equity research. Revenue is recognized once an arrangement exists, access to research has been provided, the fee amount is
fixed or determinable, and collection is reasonably assured.

Interest and dividends

Interest and dividends are earned by the Company from various sources. The Company receives interest and dividends primarily from
investments held by its Consolidated Funds and its brokerage balances from invested capital. Interest is recognized on an accrual basis and interest income is recognized on the debt of those issuers
that is deemed collectable. Interest income and expense includes premiums and discounts amortized and accreted on debt investments based on criteria determined by the Company using the effective yield
method. Dividends are recognized on the ex-dividend date.

Reimbursement from affiliates

The Company allocates, at its discretion, certain expenses incurred on behalf of its operating subsidiaries, including its hedge fund,
fund of funds and real estate businesses. These expenses relate to the administration of such subsidiaries and assets that the Company manages for its funds. In addition, pursuant to the funds'
offering documents, the Company charges certain allowable expenses to the funds, including charges and personnel costs for legal, compliance, accounting, tax compliance, marketing, risk and technology
expenses that directly relate to administering the assets of the funds. Such expenses that have been reimbursed at their actual costs are included in the consolidated statements of operations as
employee compensation and benefits, professional, advisory and other fees, communications, occupancy and equipment, client services and business development and other.

Other revenues

The Company receives other revenues which is unrelated to its principal sources of revenue and which may vary from year to year.
Historical sources of such other revenues primarily included deferred income from a sale-leaseback transaction of a plane, advisory fee income, and rebate income earned from stock lending
activities of the Company.

In
accordance with financial reporting guidance of the AICPA Audit and Accounting GuideBrokers and Dealers in Securities, the Company has reported securities borrowing and
lending rebate interest income and expense related to the operations of Ramius Securities on a net basis in other revenues on the consolidated statements of operations. As of November 2008, Ramius
Securities ceased its stock borrowing and lending activities.

Purchases
and sales of securities, net of commissions, and derivative contracts, and the related revenues and expenses are recorded on a trade date basis with net trading gains and
losses included as a component of net gains (losses) on securities, derivatives and other investments, and with respect to the Consolidated Funds and other real estate entities as a component of net
realized and unrealized

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Table of Contents

Cowen Group, Inc.

Notes to Consolidated Financial Statements (Continued)

3. Significant Accounting Policies (Continued)

gains
(losses) on investments and other transactions and net realized and unrealized gains (losses) on derivatives, in the consolidated statements of operations.

The
Company accounts for its share-based awards granted to individuals as payment for employee services in accordance with FASB accounting standards and values such awards based on fair
value methods at the grant date. In accordance with these standards, unearned compensation associated with share-based awards is amortized over the vesting period of the option or award. The Company
estimates forfeiture for equity-based awards that are not expected to vest. See Note 13 for further information regarding the Company's share-based compensation plans.

The
Company recognizes, in its consolidated statements of financial condition, the funded status of its defined benefit plans, measured as the difference between the fair value of the
plan assets and the benefit obligation The Company recognizes changes in the funded status of a defined benefit plan within accumulated other comprehensive income (loss), net of tax, to the extent
such changes are not recognized in earnings as components of periodic net benefit cost. See Note 14 for further information regarding the Company's defined benefit plans.

The
Company leases certain facilities and equipment used in its operations. The Company evaluates and classifies its leases as operating or capital leases for financial reporting
purposes. Assets held under capital leases are included in fixed assets. Operating lease expense is recorded on a
straight-line basis over the lease term. Landlord incentives are recorded as deferred rent and amortized, as reductions to lease expense, on a straight-line basis over the life
of the applicable lease.

During
June 2008, the Company sold its fractional share ownership of a business aircraft for a net gain of $0.5 million. In the same month, October LLC, a wholly owned
subsidiary of the Company, also sold an aircraft through a sale-leaseback transaction. The Company is recognizing a net gain of $2.8 million over a period of sixty-seven months, the
term of the lease. During the years ended December 31, 2010, 2009 and 2008, the amount of the gain recognized in the consolidated statements of operations was $0.5 million,
$0.5 million and $0.3 million, respectively. In connection with this transaction, the Company was required to maintain minimum assets under management at all times of no less than
$6.5 billion. In the event that the Company does not maintain this minimum, the Company shall immediately either a) deposit collateral with a perfected security interest to secure the
next twelve months' lease payments (approximately $1.8 million) or b) provide a letter of credit in the same amount. As of and during the years ended December 31, 2010 and 2009
the Company was in compliance with this minimum requirement.

The
income tax provision reflected in the consolidated statements of operations is consistent with the liability method prescribed by GAAP. Under the liability method, deferred income
taxes reflect the net tax effects of temporary differences between the carrying amount of assets and liabilities for financial statement and income tax purposes, as determined under applicable tax
laws and rates. A valuation allowance is provided for deferred tax assets when it is considered more likely than not that the benefits of net deductible temporary differences and tax loss or credit
carryforwards will not be realized.

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Cowen Group, Inc.

Notes to Consolidated Financial Statements (Continued)

3. Significant Accounting Policies (Continued)

The
Company adopted the accounting guidance for uncertainty in income taxes as of April 1, 2007. It requires recognition and measurement of a tax position taken or expected to be
taken in a tax return and provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. The Company recognizes accrued interest
and penalties related to its uncertain tax positions as a component of income tax expense.

In
accordance with federal and state tax laws, the Company has filed income tax returns as well as stand-alone state and local tax returns. The Company has subsidiaries that are resident
in foreign
countries where tax filings have to be submitted on a stand-alone basis. These subsidiaries are subject to tax in their respective countries and the Company is responsible for and, thus, reports all
taxes incurred by these subsidiaries. The countries where the Company owns subsidiaries are the United Kingdom, Germany, Luxembourg, Japan, Hong Kong, and China. Income tax expense (benefit) for the
year ended December 31, 2010 and 2009 includes tax benefits from Luxembourg reinsurance transactions.

The
Company consolidates certain foreign subsidiaries that have designated a foreign currency as their functional currency. For entities that have designated a foreign currency as their
functional currency, assets and liabilities are translated into U.S. dollars based on current rates, which are the rates prevailing at each statement of financial condition date, and revenues and
expenses are translated at historical rates, which are the average rates for the relevant periods. The resulting translation gains and losses, and the tax effects of such gains and losses, are
recorded in accumulated other comprehensive income (loss), a separate component of stockholders' equity.

For
subsidiaries that have designated the U.S. Dollar as their functional currency, securities and other assets and liabilities denominated in foreign currencies are translated into U.S.
Dollar amounts at the date of valuation. Purchases and sales of securities and other assets and liabilities and the related income and expenses denominated in foreign currencies are translated into
U.S. Dollar amounts on the respective dates of the transactions. The Company does not isolate that portion of the results of operations resulting from changes in foreign exchange rates on these
balances from fluctuations arising from changes in market prices of securities and other assets/liabilities held or sold. Such fluctuations are included in the consolidated statements of operations as
a component of net gains (losses) on securities, derivatives and other investments. Gains and losses primarily relating to foreign currency broker balances are included in net gains (losses) on
foreign currency transactions in the consolidated statements of operations.

In
June 2009, the FASB issued an accounting standard ("ASC 810, Consolidation") which revises the accounting for VIEs by introducing a new consolidation model. This new standard
changes the approach to determining the primary beneficiary of a VIE and requires companies to more frequently assess whether they must consolidate VIEs. The revised guidance also enhances the
disclosure requirements for a reporting entity's involvement with VIEs, including presentation on the consolidated statements of financial condition of assets and liabilities of consolidated VIEs
which meet the separate presentation criteria and disclosure of assets and liabilities recognized in the consolidated statements of financial condition and the maximum exposure to loss for those VIEs
in which a reporting entity is determined to not be the primary beneficiary but in which it has a variable interest. The new model identifies two primary characteristics of a controlling financial
interest: (1) the power to direct

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Table of Contents

Cowen Group, Inc.

Notes to Consolidated Financial Statements (Continued)

3. Significant Accounting Policies (Continued)

significant
activities of the VIE, and (2) the obligation to absorb losses of and/or provide rights to receive benefits from the VIE that are potentially significant to the VIE. In February
2010, the FASB issued an accounting standard ("ASU 2010-10") which defers the effective date of this pronouncement for certain investment entities to allow the FASB to work with the International
Accounting Standards Board in developing consistent consolidation guidance. The guidance provides a limited scope deferral for a reporting entity's interest in an entity that meets all of the
following conditions: (a) the entity has all the attributes of an investment company as defined under AICPA Audit and Accounting Guide,Investment
Companies, or does not have all the attributes of an investment company but is an entity for which it is acceptable based on industry practice to apply measurement principles
that are consistent with the AICPA Audit and Accounting Guide,Investment Companies, (b) the reporting entity does not have explicit or implicit
obligations to fund any losses of the entity that could potentially be significant to the entity, and (c) the entity is not a securitization entity, asset-backed financing entity or an entity
that was formerly considered a qualifying special-purpose entity. The reporting entity is required to perform a consolidation analysis for entities that qualify for the deferral in accordance with
previously issued guidance on variable interest entities. The Company's involvement with its funds is such that all three of the above conditions are met. The deferral is effective for annual
reporting periods beginning on or after November 15, 2009, and for interim periods within that first annual reporting period. Therefore the adoption of the new consolidation standard on
January 1, 2010 did not have a material impact on the Company's financial position, results of operations or cash flows, as substantially all of the entities in which it holds variable
interests qualify for the scope deferral under ASU 2010-10.

In
June 2009, the FASB issued amended guidance on accounting for transfers of financial assets. The amendments were issued to improve the information that a reporting entity provides in
its financial statements about a transfer of financial assets, the effects of a transfer on its financial statements, and a transferor's continuing involvement, if any, in transferred financial
assets. The amendments eliminate the concept of qualifying special purpose entities from US GAAP. These entities will now be evaluated for consolidation in accordance with the applicable
consolidation criteria. The amendments are effective for reporting periods beginning on or after November 15, 2009. The adoption of this new standard on January 1, 2010 did not have a
material impact on the Company's financial position, results of operations or cash flows.

In
July 2009, the FASB issued the FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles ("ASC 105-10"). ASC 105-10
establishes the FASB Accounting Standards Codification ("Codification") as the single source of
authoritative U.S. GAAP recognized by the FASB to be applied by nongovernmental entities. Rules and interpretive releases of the SEC under authority of federal securities laws are also sources
of authoritative GAAP for SEC registrants. The Codification supersedes all existing non-SEC accounting and reporting standards. All other nongrandfathered, non-SEC accounting
literature not included in the Codification will become nonauthoritative. Following the Codification, the FASB will not issue new standards in the form of Statements, FASB Staff Positions or Emerging
Issues Task Force Abstracts. Instead, it will issue Accounting Standards Updates, which will serve to update the Codification, provide background information about the guidance and provide the basis
for conclusions on the changes to the Codification. GAAP was not intended to be changed as a result of the FASB's Codification project, but it will change the way the guidance is organized and
presented.

F-29

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Table of Contents

Cowen Group, Inc.

Notes to Consolidated Financial Statements (Continued)

3. Significant Accounting Policies (Continued)

In January 2010, the FASB issued guidance on improving disclosures about fair value measurements. The guidance requires additional disclosure on transfers in and out of Levels I
and II fair value measurements in the fair value hierarchy and the reasons for such transfers. In addition, for fair value measurements using significant unobservable inputs (Level III), the
reconciliation of beginning and ending balances shall be presented on a gross basis, with separate disclosure of gross purchases, sales, issuances and settlements and transfers in and transfers out of
Level III. The new guidance also requires enhanced disclosures on the fair value hierarchy to disaggregate disclosures by each class of assets and liabilities. In addition, an entity is
required to provide further disclosures on valuation techniques and inputs used to measure fair value for fair value measurements that fall in either Level II or Level III.
The guidance is effective for interim and annual periods beginning after December 15, 2009, except for the disclosures about purchases, sales, issuances, and settlements in the roll forward of
activity in Level III fair value measurements, which are effective for fiscal years beginning after December 15, 2010. The Company adopted the guidance, excluding the reconciliation of
Level III activity, with the issuance of its March 31, 2010 financial statements. As the guidance is limited to enhanced disclosures, adoption did not have a material impact on the
Company's consolidated financial statements.

In
March 2010, the FASB issued accounting guidance that changes the accounting for credit derivatives embedded in beneficial interests in securitized financial assets. The new guidance
eliminates the scope exception for embedded credit derivatives, unless they are created solely by subordination of one financial instrument to another. Bifurcation and separate recognition may be
required for certain beneficial interests that are currently not accounted for at fair value through earnings. The adoption of this accounting guidance on July 1, 2010 did not have a material
impact on the Company's consolidated financial statements.

In
April 2010, the FASB issued guidance on the accounting for stock awards to employees of a foreign operation or employees whose pay is denominated in a currency other than the one in
which the equity security trades. The guidance clarifies that share-based payment awards with an exercise price denominated in the currency of a market in which a substantial portion of the entity's
equity securities trade shall not be considered to contain a condition that is not a market, performance, or service condition. Such an award shall not be classified as a liability if it otherwise
qualifies for equity classification. The guidance is effective for fiscal years and interim periods ending after December 15, 2010. The Company makes share-based payment awards to employees in
foreign operations. The guidance did not have a material impact on the Company's consolidated financial statements.

In
December 2010, the FASB issued enhanced guidance on when to perform step two of the goodwill impairment test for reporting units with zero or negative carrying amounts. The updated
guidance modifies existing requirements under step one of the goodwill impairment test for reporting units with zero or negative carrying amounts and requires step two to be performed if it is more
likely than not that a goodwill impairment exists. The guidance is effective for interim and annual reporting periods beginning after December 15, 2010. As the Company 's reporting units do not
currently have zero or negative carrying values, adoption is not expected to have a material impact on the Company's consolidated financial statements.

In
December 2010, the FASB issued guidance on disclosures around business combinations for public entities that present comparative financial statements. The guidance specifies that an
entity should disclose revenue and earnings of the combined entity as though the business combination(s) that

F-30

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Table of Contents

Cowen Group, Inc.

Notes to Consolidated Financial Statements (Continued)

3. Significant Accounting Policies (Continued)

occurred
during the current year had occurred as of the beginning of the comparable prior annual reporting period. The guidance is effective prospectively for business combinations for which the
acquisition date is on or after the beginning of the first annual reporting period beginning on or after
December 15, 2010. As the guidance is limited to disclosures, adoption is not expected to have a material impact on the Company's consolidated financial statements.

As
of December 31, 2010, none of the changes to the Codification issued by the FASB that are not yet effective are expected to have an impact on the Company's financial position
or results of operations.

4. Cash collateral pledged

As of December 31, 2010 and 2009, cash collateral pledged in the amount of $8.6 million and $7.2 million, respectively, primarily relates to a letter of credit
issued to the landlord of the Company's premises in New York City (see Note 18). Also included in cash collateral pledged as of December 31, 2010 and 2009 is $0.5 million and
$0.5 million, respectively, relating to an agreement that the Company has with Société Générale to cover the costs of litigation
matters included in the agreement.

5. Investments of Operating Entities and Consolidated Funds

Securities owned, at fair value

Securities owned are held by the Company and considered held for trading and carried at fair value. Substantially all equity securities
and options are pledged to the clearing broker under terms which permit the clearing broker to sell or re-pledge the securities to others subject to certain limitations.

F-31

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Table of Contents

Cowen Group, Inc.

Notes to Consolidated Financial Statements (Continued)

5. Investments of Operating Entities and Consolidated Funds (Continued)

As
of December 31, 2010 and December 31, 2009, securities owned consisted of the following, at fair value:

As of December 31,2010

2009(dollars in thousands)U.S. Government securities(a)

$
143,247

$
Common stocks


116,215


11,439Restricted common stock


5,000


Corporate bonds(b)


191,702


38,327Options


14,349


1,312Warrants and rights


2,334


1,356Mutual funds


1,248


1,719$
474,095

$
54,153


(a)As
of December 31, 2010, maturities ranged from November 2019 to February 2026 and interest rates ranged between 3.375% and 8%.(b)As
of December 31, 2010, maturities ranged from May 2011 to August 2039 and interest rates ranged between 1.4% and 13%. At December 31, 2009,
maturities ranged from January 2010 to January 2013 and interest rates ranged between 0.27% and 10.00%.


The
Company's direct involvement with derivative financial instruments includes credit default swaps, futures, equity swaps, options and warrants and rights. The Company's long exposure
to futures and equity swap derivative contracts, at fair value, as of December 31, 2010 of $0.4 million is included in other assets in the accompanying consolidated statements of
financial condition. The Company's short exposure to futures and equity swap derivative contracts, at fair value, as of December 31, 2010 of $0.6 million is included in accounts payable,
accrued expenses and other liabilities in the accompanying consolidated statements of financial condition.

The
Company may transact in a variety of derivative instruments primarily for trading purposes with each instruments' primary risk exposure being interest rate, credit, foreign exchange,
equity or commodity risk.

Pursuant
to the various derivatives transactions discussed above, the Company is required to post collateral for its obligations or potential obligations. As of December 31, 2010
collateral consisting of $3.2 million is included in receivable from brokers on the consolidated statements of financial condition. As of December 31, 2010 all derivative contracts were
with major financial institutions.

F-32

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Table of Contents

Cowen Group, Inc.

Notes to Consolidated Financial Statements (Continued)

5. Investments of Operating Entities and Consolidated Funds (Continued)

Other investments

As of December 31, 2010 and December 31, 2009, other investments consisted of the following:



As of December 31,2010

2009(dollars in thousands)(1) Portfolio Funds, at fair value

$
29,391

$
20,683(2) Real estate investments, at fair value


1,882


1,077(3) Equity method investments


8,734


6,521(4) Lehman claims, at fair value


313


209$
40,320

$
28,490




The Portfolio Funds, at fair value as of December 31, 2010 and December 31, 2009, included the following:

Portfolio Funds, at fair value

As of December 31,2010

2009(dollars in thousands)Tapestry Investment Co PCC Ltd(a)

$
565

$
2,669Cowen Healthcare Royalty Partners(b)(*)


14,769


17,009Cowen Healthcare Royalty Partners II(b)(*)


143


Ramius Global Credit Fund LP(c)(*)


11,733


Ramius Alternative Replication Ltd(d)(*)


866


639RCG Special Opportunities Fund, Ltd(e)(*)





321Other affiliated funds(f)(*)


1,315


45$
29,391

$
20,683


*These
portfolio funds are affiliates of the Company The
Company has no unfunded commitments regarding the portfolio funds, at fair value held by the Company except as noted for Cowen Healthcare Royalty Partners and Cowen Healthcare Royalty Partners II
as noted in Note 17. (a)Tapestry
Investment Co PCC Ltd is in the process of liquidating and redemptions will be made periodically by the investment managers' decision based
on cash available.(b)Cowen
Healthcare Royalty Partners and Cowen Healthcare Royalty Partners II are private equity funds and therefore redemptions will be paid out at the
investment manager's discretion.


F-33

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Table of Contents

Cowen Group, Inc.

Notes to Consolidated Financial Statements (Continued)

5. Investments of Operating Entities and Consolidated Funds (Continued)

(c)Ramius
Global Credit Fund LP has a quarterly redemption policy with 60 day notice period and one year soft lock (4% penalty).(d)Ramius
Alternative Replication Ltd has monthly redemption policies with seven days notice period.(e)RCG
Special Opportunities Fund, Ltd is completely invested in other funds managed by the Company. This fund has no formal redemption policy.(f)The
majority of these funds are real estate fund affiliates of the Company or are managed by the Company and the investors can redeem from these funds when
cash is available.




Real estate investments as of December 31, 2010 and December 31, 2009 are carried at fair value and include real estate equity investments held by
RCG RE Manager, LLC ("RE Manager"), a real estate operating subsidiary of the Company, of $1.1 million and $0.2 million, respectively, and real estate debt investments held by the
Company of $0.8 million and $0.9 million, respectively.



Equity method investments include investments held by the Company in several operating companies whose responsibilities primarily include the day to day
management of a number of real estate funds, including the portfolio management and administrative services related to the acquisition, disposition, and active monitoring of the real estate funds'
underlying debt and equity investments. The Company's ownership interests in these equity method investments range from 30% to 55%. The Company holds a majority of the outstanding ownership interest
(i.e., more than 50%) in three of these entities: RCG Longview Debt Fund IV Management, LLC, RCG Longview Debt Fund IV Partners, LLC and RCG Longview Partners II, LLC. The
operating agreements that govern the management of day-to-day operations and affairs of each of these three entities stipulate that certain decisions require support and approval from other members in
addition to the support and approval of the Company. As a result, all operating decisions made in these three entities require the support of both the Company and an affirmative vote of a majority of
the other managing members who are not affiliates of the Company that is not protective in nature. As the Company does not possess unilateral control over any of these entities, the presumption of
consolidation has been overcome pursuant to current accounting standards and the Company accounts for these investments under the equity method

F-34

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Table of Contents

Cowen Group, Inc.

Notes to Consolidated Financial Statements (Continued)

5. Investments of Operating Entities and Consolidated Funds (Continued)

of
accounting. Also included in equity method investments is the investment in CHRP GP (see Note 3). The following table summarizes equity method investments held by the Company:

As of December 31,2010

2009(dollars in thousands)RCG Longview Debt Fund IV Management, LLC

$
2,009

$
1,651Cowen Healthcare Royalty GP, LLC


1,176


Cowen Healthcare Royalty GP II, LLC


8


RCG Longview Partners, LLC


2,203


1,565RCG Longview Louisiana Manager, LLC


186


400RCG Urban American, LLC


889


605RCG Urban American Management, LLC


359


RCG Longview Equity Management, LLC


499


1,360Urban American Real Estate Fund II, L.P.


833


409RCG Kennedy House, LLC


259


222Other


313


309$
8,734

$
6,521


As
of December 31, 2010, the Company's share of losses in its equity method investment in RCG Longview Partners II, LLC has exceeded the carrying amount recorded in this
investee. RCG Longview Partners II, LLC, as general partner to a real estate fund, has reversed previously recorded incentive income allocations and has recorded a current clawback obligation
to the limited partners in the fund. This obligation is due to a change in unrealized value of the fund on which there have previously been distributed carried interest realizations; however, the
settlement of a potential obligation is not due until the end of the life of the respective fund. As the Company is obligated to return previous distributions it received from RCG Longview Partners
II, LLC, it has continued to record its share of losses in the investee including reflecting its share of the clawback obligation in the amount of $6.2 million. All such amounts are
included in accounts payable, accrued expenses and other liabilities in the consolidated statements of financial condition.

The
Company's income (loss) from equity method investments was $3.4 million, $(3.3) million, and $5.5 million, respectively for the years ended December 31, 2010,
2009 and 2008, respectively, and is included in net gains (losses) on securities, derivatives and other investments on the accompanying consolidated statements of operations. In addition, the Company
recorded no impairment charges in relation to its equity method investments for the years ended December 31, 2010, 2009 and 2008, respectively.



Lehman Brothers International (Europe) ("LBIE"), through certain affiliates, was a prime broker to the Company, and the Company held cash and cash equivalent
balances with LBIE. On September 15, 2008, LBIE was placed into administration (the "Administration") in the United Kingdom and, as a result, the assets held by the Company in its LBIE accounts
were frozen at LBIE. The status and ultimate resolution of the assets under LBIE's Administration proceedings is uncertain. The assets of the Company at LBIE at the time of Administration (the "Total
Net Equity Claim")

F-35

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Table of Contents

Cowen Group, Inc.

Notes to Consolidated Financial Statements (Continued)

5. Investments of Operating Entities and Consolidated Funds (Continued)

consist
of $1.0 million. There can be no assurance that the Total Net Equity Claim value, as determined by the Company, will be accepted by the Administrators, nor does the Company know the
manner and timing in which such claim will be satisfied and the ultimate value that will be received.

Given
the great degree of uncertainty as to the status of the assets held at LBIE and the process and prospects of the return of those assets, the Company has decided to record the fair
value of the Total Net Equity Claim at an approximately 80% discount at December 31, 2009 and a 70% discount at December 31, 2010, which represents management's best estimate at the
respective dates of the value that ultimately may be recovered with respect to the Total Net Equity Claim (the "Estimated Recoverable Lehman Claim"). The Estimated Recoverable Lehman Claim was
recorded at estimated fair value considering a number of factors including the status of the assets under U.K. insolvency laws and the trading levels of Lehman unsecured debt. In determining the
estimated value of the Total Net Equity Claim, the Company was required to use considerable judgment and is based on the facts currently available. As additional information on the LBIE proceeding
becomes available, the Company may need to adjust the valuation of the Estimated Recoverable Lehman Claim. The actual loss that may ultimately be incurred by the Company with respect to the pending
LBIE claim is not known and could be materially different from the estimated value assigned by the Company.

Securities sold, not yet purchased, at fair value

Securities sold, not yet purchased, represent obligations of the Company to deliver a specified security at a contracted price and,
thereby, create a liability to purchase that security in the market at prevailing prices. The Company's liability for securities to be delivered is measured at their fair value as of the date of the
consolidated financial statements. However, these transactions result in off-balance sheet risk, as the Company's ultimate cost to satisfy the delivery of securities sold, not yet
purchased, may exceed the amount reflected in the consolidated statements of financial condition. Substantially all equity securities and options are pledged to the clearing broker under terms which
permit the clearing broker to sell or re-pledge the securities to others subject to certain limitations. As of December 31, 2010 and December 31, 2009, securities sold, not
yet purchased, consisted of the following, at fair value:

As of December 31,2010

2009(dollars in thousands)U.S. Government securities(a)

$
100,559

$
Common stocks


88,580


14,307Corporate bonds(b)


2,615


Options


6,162


505$
197,916

$
14,812


(a)As
of December 31, 2010, maturities ranged from December 2015 to August 2026 and interest rates ranged between 2.125% and 6.75%.(b)As
of December 31, 2010, maturities ranged from June 2013 to December 2025 and interest rates ranged between 2.25% and 3.75%.


F-36

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Table of Contents

Cowen Group, Inc.

Notes to Consolidated Financial Statements (Continued)

5. Investments of Operating Entities and Consolidated Funds (Continued)

Securities purchased under agreements to resell and securities sold under agreements to repurchase

The following table represents the Company's securities purchased under agreements to resell and securities sold under agreements to
repurchase as of December 31, 2010:

(dollars in thousands)Securities purchased under agreements to resellAgreements with Barclays Capital Inc bearing interest of 0.07% - 0.14% due on January 3, 2011

$
97,755Securities sold under agreements to repurchaseAgreements with Royal Bank of Canada bearing interest of 1.415% due on February 22, 2011 to September 1, 2011


48,532Agreements with Barclays Capital Inc bearing interest of 0.18% - 1.50% due on January 7, 2011 to June 6, 2011


143,633


Securities owned, at fair value

As of December 31, 2010 and December 31, 2009 securities owned, at fair value, held by the Consolidated Funds are
comprised of:

As of December 31,2010

2009(dollars in thousands)Government sponsored securities*

$
7,682

$
Corporate bond**


1,040


$
8,722

$



*As
of December 31, 2010, maturities range from January 2011 to December 2012 and interest rates ranging between 0.35% and 4.88%.**As
of December 31, 2010, maturity was January 2011 with an interest rate of 0.42%.


Other investments, at fair value

As of December 31, 2010 and December 31, 2009 other investments, at fair value, held by the Consolidated Funds are
comprised of:

As of December 31,2010

2009(dollars in thousands)(1) Portfolio Funds

$
327,131

$
546,526(2) Lehman claims


6,243


3,881$
333,374

$
550,407




F-37

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Table of Contents

Cowen Group, Inc.

Notes to Consolidated Financial Statements (Continued)

5. Investments of Operating Entities and Consolidated Funds (Continued)

As of December 31, 2010 and December 31, 2009, investments in Portfolio Funds, at fair value, included the following:

As of December 31Description

2010

2009(dollars in thousands)Investments of Enterprise LP

$
257,246

$
449,160Investments of consolidated fund of funds investment companies


69,885


97,366$
327,131

$
546,526




Enterprise LP operates under a "master-feeder" structure with Enterprise Master, whereby Enterprise Master's shareholders are
Enterprise LP and RCG II Intermediate, LP. The consolidated investments in Portfolio Funds recorded in other investments on the consolidated statements of financial condition includes
Enterprise LP's investment of $257 million and $449.2 million in Enterprise Master as of December 31, 2010 and December 31, 2009, respectively. On May 12,
2010, the Company announced its intention to close Enterprise Master. Prior to this announcement, strategies utilized by Enterprise Master included merger arbitrage and activist investing, investments
in distressed securities, convertible hedging, capital structure arbitrage, equity market neutral, investments in private placements of convertible securities, proprietary mortgages, structured credit
investments, investments in mortgage backed securities and other structured finance products, investments in real estate and real property interests, structured private placements and other relative
value strategies. Enterprise Master has broad investment powers and maximum flexibility in seeking to achieve its investment objective. Enterprise Master may invest in equity securities, debt
instruments, options, futures, swaps, credit default swaps and other derivatives. Enterprise Master has been selling, and will continue to sell, its positions and return capital to its investors.
There are no unfunded commitments at Enterprise LP. See Note 17 for unfunded commitments of Enterprise Master.



The investments of consolidated fund of funds investment companies of $70 million and $97.4 million at
December 31, 2010 and December 31, 2009, respectively, include the investments of Levered FOF, Multi-Strat FOF and Vintage FOF, all of which are investment companies managed by Ramius
Alternative Solutions LLC, as well as RTS Global 3x, which is managed by Ramius Trading Strategies LLC. Levered FOF's and Multi-Strat FOF's investment objectives are to invest discrete
pools of their capital on a leveraged basis among portfolio managers that invest through Portfolio Funds, forming a multi-strategy, diversified investment portfolio designed to achieve returns with
low to moderate volatility. Vintage FOF's investment objective is to allocate its capital among portfolio managers that invest through investment pools or managed accounts thereby forming concentrated
investments in high conviction managers designed to achieve attractive risk adjusted returns with moderate relative volatility. RTS Global 3x's investment objective is to achieve attractive investment
returns on a risk-adjusted basis that are non-correlated with the traditional equity and bond markets by investing substantially all of its capital pursuant to managed futures
and global macro-based investment

F-38

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Table of Contents

Cowen Group, Inc.

Notes to Consolidated Financial Statements (Continued)

5. Investments of Operating Entities and Consolidated Funds (Continued)

strategies.
RTS Global 3x seeks to achieve its objective through a multi-advisor investment approach by allocating its capital among third-party trading advisors that are unaffiliated with RTS Global
3x. However, unlike a traditional "fund of funds" that invests with advisors through entities controlled by third-parties, RTS Global 3x will allocate its capital among a number of different trading
accounts organized and managed by the general partner.

The
following is a summary of the investments held by the four consolidated fund of funds, at fair value, as of December 31, 2010 and December 31, 2009:

As of December 31, 2010Ramius Levered Multi-Strategy FOF LP

Ramius Multi-Strategy FOF LP

Ramius Vintage Multi-Strategy FOF LP

RTS Global 3x Fund LP

TotalDescription

Strategy

Fair Value

Fair Value

Fair Value

Fair Value

Fair Value(dollars in thousands)Ramius Multi-Strategy Master FOF LP*

Multi-Strategy

$


$
28,633

$


$


$
28,633
(a)Ramius Vintage Multi-Strategy Master FOF LP*

Multi-Strategy








20,722





20,722
(a)Tapestry Pooled Account V LLC*

Credit-Based


687











687
(b)Independently Advised Portfolio Funds*

Futures & Global Macro











15,889


15,889
(c)Externally Managed Portfolio Funds

Credit-Based


522











522
(b)Externally Managed Portfolio Funds

Event Driven


2,800











2,800
(d)Externally Managed Portfolio Funds

Hedged Equity


39











39
(e)Externally Managed Portfolio Funds

Multi-Strategy


535











535
(f)Externally Managed Portfolio Funds

Fixed Income Arbitrage


58











58
(g)$
4,641

$
28,633

$
20,722

$
15,889

$
69,885




As of December 31, 2009Description

Strategy

Ramius Levered Multi-Strategy FOF LP

Ramius Multi-Strategy FOF LP

Ramius Vintage Multi-Strategy FOF LP

Total(dollars in thousands)Ramius Multi-Strategy Master FOF LP*

Multi-Strategy

$


$
43,939

$


$
43,939
(a)Ramius Vintage Multi-Strategy Master FOF LP*

Multi-Strategy








47,371


47,371
(a)Tapestry Pooled Account V LLC*

Credit-Based


783








783
(b)Externally Managed Portfolio Funds

Credit-Based


1,894








1,894
(b)Externally Managed Portfolio Funds

Event Driven


2,787








2,787
(d)Externally Managed Portfolio Funds

Hedged Equity


28








28
(e)Externally Managed Portfolio Funds

Multi-Strategy


497








497
(f)Externally Managed Portfolio Funds

Fixed Income Arbitrage


56








56
(g)Externally Managed Portfolio Funds

Other


11








11$
6,056

$
43,939

$
47,371

$
97,366


*These
Portfolio Funds are affiliates of the Company.


F-39

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Table of Contents

Cowen Group, Inc.

Notes to Consolidated Financial Statements (Continued)

5. Investments of Operating Entities and Consolidated Funds (Continued)

The
Company has no unfunded commitments regarding investments held by the four consolidated funds.(a)Investments
held in affiliated master funds can be redeemed on a monthly basis with no advance notice.(b)The
Credit-Based strategy aims to generate returns via positions in the credit sensitive sphere of the fixed income markets. The strategy generally involves
the purchase of corporate bonds with hedging of the interest exposure. The investments held in Tapestry Pooled Account V LLC, a related fund, are held solely in a credit based fund which the
fund's manager has placed in a side-pocket. The remaining amount of the investments within this category represents an investment in a fund that is in the process of liquidating.
Distributions from this fund will be received as underlying investments are liquidated.(c)The
futures and global macro strategy is made up of several portfolio accounts, each of which will be advised independently by a professional commodity
trading advisor implementing primarily managed futures or global macro-based investment strategies. The trading advisors (through their respective portfolio accounts) will trade independently of each
other and, as a group, will employ a wide variety of systematic, relative value and discretionary trading programs in the global currency, fixed income, commodities and equity futures markets. In
implementing their trading programs, the trading advisors will trade primarily in the futures and forward markets (as well as in related options). Although certain trading advisors may be permitted to
use total return swaps and trade other financial instruments from time to time on an interim basis, the primary focus will be on the futures and forward markets. Redemption frequency of these
portfolio accounts are monthly (and intra-monthly for a $10,000 fee) and the notification period for redemptions is 5 business days (or 3 business days for intra-month).(d)The
Event Driven strategy is generally implemented through various combinations and permutations of merger arbitrage, restructuring and distressed
instruments. Approximately 3% as of December 31, 2010 and 9% as of December 31, 2009 of the investments in this category represent investments in a fund that is in the process of
liquidating. Distributions from this fund will be received as underlying investments are liquidated. The remaining amount of the investments in this category is in a side pocket or suspended with
undetermined payout dates.(e)The
Hedged Equity strategy focuses on equity strategies with some directional market exposure. The strategy attempts to profit from market efficiencies and
direction. As of December 31, 2010, the investee fund manager has side-pocketed investments.(f)The
Multi-Strategy investment objective is to invest discrete pools of its capital among portfolio managers that invest through investment funds, forming
multi-strategy, diversified investment portfolios designed to achieve non-market directional returns with low relative volatility. The investments in this category represent investments in
a fund that is in the process of liquidating. Distributions from this fund will be received as underlying investments are liquidated.(g)The
Fixed Income Arbitrage strategy seeks to achieve long term capital appreciation by employing a variety of strategies to generate returns without
significant exposure to credit spread, interest rate changes or duration. As of December 31, 2010, the investment manager has gated investments.




With respect to the aforementioned Lehman claims, the Total Net Equity Claim of Enterprise Master consists of $24.3 million.
Included in this claim were assets with a value of $9.5 million, at the time LBIE entered administration, that were returned to Enterprise Master and its affiliated funds in June 2010.
Enterprise Master and its affiliated funds sold the returned assets, for an aggregate $10.7 million, and distributed this amount to Enterprise Master's investors in July 2010. As a result, the
remaining Net Equity Claim for Enterprise Master is $14.8 million. Enterprise Master is valuing this claim at $7.8 million as of December 31, 2010. The estimated final recoverable
amount by Enterprise Master may differ from the actual recoverable amount of the pending LBIE and LBI claims, and the differences may be material.

As
a result of Enterprise Master and certain of the funds managed by the Company having assets they held at LBIE frozen in their LBIE prime brokerage account and the degree of
uncertainty as to the status of those assets and the process and prospects of the return of those assets, Enterprise Master

F-40

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Table of Contents

Cowen Group, Inc.

Notes to Consolidated Financial Statements (Continued)

5. Investments of Operating Entities and Consolidated Funds (Continued)

and
the funds managed by the Company decided that only the investors who were invested at the time of the Administration should participate in any profit or loss relating to the Estimated Recoverable
Lehman Claim. As a result, Enterprise Master and certain of the funds managed by the Company with assets held at LBIE granted a 100% participation in the Estimated Recoverable Lehman Claims to Special
Purpose Vehicles (the "SPVs" or "Lehman Segregated Funds") incorporated under the laws of the Cayman Islands on September 29, 2008, whose shares were distributed to each of their investor
funds. Fully redeeming investors of Enterprise LP will not be paid out on the balance invested in the SPV until the claim with LBIE is settled and assets are returned by LBIE.

In
addition, Lehman Brothers, Inc. ("LBI") was a prime broker to Enterprise Master and it holds cash balances of $5.3 million. On September 19, 2008, LBI was placed
in a Securities Investor Protection Corporation ("SIPC") liquidation proceeding after the filing for bankruptcy of its parent Lehman Brothers Holdings, Inc. The status of the assets under LBI's
bankruptcy proceedings has not been determined. The amount that will ultimately be recovered from LBI will depend on the amount of
assets available in the fund of customer property to be established by the trustee appointed under the Securities Investor Protection Act (the "SIPA Trustee") as approved by the bankruptcy court as
well as the total amount of customer claims that seek recovery from the fund of customer property. Based on court filings by the SIPA Trustee, the total amount of customer claims exceeds the assets
that are likely to be in the fund of customer property. In addition, the court filings also indicate that Barclays plc has submitted a substantial claim against LBI relating to an asset
purchase agreement entered into by Barclays plc with LBIE near the time of the SIPC liquidation proceeding that could affect the amount of assets that are included in the fund of customer
property. As a result of these uncertainties and the timing of any distributions from LBI in respect of the Company's customer claims, management has estimated recovery with respect to the Company's
LBI exposure at 47% or $2.5 million as of December 31, 2010, which represents the present value of the mid point between what management believes are reasonable estimates of the low side and high side
potential recovery rates with respect to the Company's LBI exposure. The estimated recoverable amount by the Company may differ from the actual recoverable amount of the pending LBI claim, and the
differences may be material.

Indirect Concentration of the Underlying Investments Held by Consolidated Funds

From time to time, through its investments in the Consolidated Funds, the Company may indirectly maintain exposure to a particular
issue or issuer (both long and/or short) which may account for 5% or more of the Consolidated Funds' net assets (on an aggregated basis). Based on information that is available to the Company as of
December 31, 2010 and December 31, 2009, the Company identified Consolidated Funds that had interests in an issuer for which the Company's pro-rata share exceeds 5% of the
Consolidated Funds' net assets (on an aggregated basis). There were no indirect concentrations that exceed 5% of the Consolidated Funds' net assets held by the Company as of December 31, 2010.
The following table presents such interests, as of December 31, 2009, which represent the aggregate of (i) the gross amount of exposure that Consolidated Funds have through their
investments held directly

F-41

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Table of Contents

Cowen Group, Inc.

Notes to Consolidated Financial Statements (Continued)

5. Investments of Operating Entities and Consolidated Funds (Continued)

and
(ii) the gross amount of exposure held indirectly through their investments in any unconsolidated master funds:

As of December 31, 2009Description

Shares/ Principal
Amount
(in local currency)

Fair Value(amounts in thousands)Harvest Energy Trust 7.875% October 2011

$
3,415

$
3,441Harvest Energy Trust 6.40% - 7.5% October 2012 - May 2015

C$
29,202


28,169Burlington Northern Sante Fe (common stock shares)


358


35,314U.S. Treasury notes, 0.75% - 8.75%, due September 2011 - August 2020, including futures

$
181,230


185,220U.S. Treasury notes, 1.375% - 3.625%, due April 2012 - November 2019, including futures

$
83,090


(82,034
)


Net realized and unrealized gains (losses)

Net realized gains (losses) and net unrealized gains (losses) on investments and other transactions and on derivatives for Consolidated
Funds for the years ended December 31, 2010, 2009 and 2008 were as follows:

Year Ended December 31,2010

2009

2008(dollars in thousands)Consolidated Funds net gains (losses) on investments and other transactions:Net realized gains (losses) on investments and other transactions

$
16,696

$
(8,561
)
$
(9,229
)Net unrealized gains (losses) on investments and other transactions


16,420


64,469


(207,681
)Consolidated Funds net gains (losses) on derivatives:Net realized gains (losses) on derivatives

$
(1,892
)
$
(26,517
)
$
1,581Net unrealized gains (losses) on derivatives


1,131


(5,233
)

5,190


F-42

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Table of Contents

Cowen Group, Inc.

Notes to Consolidated Financial Statements (Continued)

5. Investments of Operating Entities and Consolidated Funds (Continued)

Underlying Investments of Unconsolidated Funds Held by Consolidated Funds

Enterprise Master

Enterprise LP's investment in Enterprise Master is equal to Enterprise LP's proportional share of Enterprise Master's net
assets; as a result, the investment balances of Enterprise Master reflected below may exceed the net investment which Enterprise LP has recorded. The following tables present summarized
investment information for the underlying investments and derivatives held by Enterprise Master as of December 31, 2010 and 2009:



December 31, 2010

December 31, 2009Description

Securities
owned

Securities
sold, but not yet
purchased

Securities
owned

Securities
sold, but not yet
purchased(dollars in thousands)Bank debt

$


$


$
1,646

$
Commercial mortgage backed securities








2,723


Common stock


10,123





182,447


(47,151
)Convertible debt








123,060


Corporate bonds


1,997





181,402


(1,541
)Exchange traded funds











(5,549
)Foreign government debt








10,374


(10,660
)Loans








812


Optionsput








6,052


(84
)Optionscall








2,335


(3,048
)Over-the-counter foreign currency call option





(63
)

5


(1
)Preferred stock


410





4,558


(198
)Private debt


59








Private equity


173





107


Restricted stock


3,148





6,172


Rights


2,115





1,950


Trade claims


128





128


US Treasury notes








185,118


(82,004
)Warrants


55





6,831


$
18,208

$
(63
)
$
715,720

$
(150,236
)


F-43

---



Table of Contents

Cowen Group, Inc.

Notes to Consolidated Financial Statements (Continued)

5. Investments of Operating Entities and Consolidated Funds (Continued)



As of December 31,Description

2010

2009(dollars in thousands)Asset swaps

$
5

$
295Credit default swapsprotection purchased





(574
)Credit default swapsprotection sold





432Currency forwards


(36
)

691Equity swapslong exposure





(1,001
)Futures





(822
)Interest rate call swaptionlong exposure





105Interest rate call swaptionshort exposure





(127
)Interest rate swapslong exposure





40Total return swap





2,123$
(31
)
$
1,162




As of December 31,2010

2009Description

Strategy

Fair Value(dollars in thousands)624 Art Holdings, LLC*

Artwork

$
98

$
2,091QREX, LLC*

Life Settlements





1,278Q Capital Strategies, LLC*

Life Settlements


111


779RCG Longview Equity Fund, LP*

Real Estate


10,120


9,036RCG Longview II, LP*

Real Estate


1,835


2,261RCG Longview Debt Fund IV, LP*

Real Estate


12,628


6,807RCG Longview, LP*

Real Estate


383


272RCG Soundview, LLC*

Real Estate


2,542


3,859RCG Urban American Real Estate Fund, L.P.*

Real Estate


3,207


2,961RCG International Sarl*

Multi-Strategy


9,463


7,096Ramius Navigation Fund Ltd*

Multi-Strategy


24,972


Portside Growth & Opportunity Fund*

Multi-Strategy





9,753RCG Special Opportunities Fund, Ltd*

Multi-Strategy


97,845


110,279Ramius Credit Opportunities Fund Ltd*

Distressed


300


717RCG Endeavour, LLC*

Multi-Strategy


87


149RCG Energy, LLC *

Energy


18,850


23,063RCG Renergys, LLC*

Energy


2


3Other Private Investments

Various


15,189


16,059Real Estate Investments

Real Estate


25,662


21,364$
223,294

$
217,827


*These
Portfolio Funds are affiliates of the Company.


F-44

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Table of Contents

Cowen Group, Inc.

Notes to Consolidated Financial Statements (Continued)

5. Investments of Operating Entities and Consolidated Funds (Continued)



Multi-Strat FOF's and Vintage FOF's investments in their respective master funds are equal to their proportional share of their master
fund's net assets; as a result, the investments in Portfolio Funds of the master funds reflected below may exceed the net investment which Multi-Strat FOF and Vintage FOF have recorded. The following
table presents summarized investment information for the underlying Portfolio Funds held by Ramius Multi-Strategy Master FOF LP and Ramius Vintage Multi-Strategy Master FOF LP, at
estimated fair value, as of December 31, 2010 and 2009:

December 31, 2010

December 31, 2009Description

Strategy

Ramius
Multi-Strategy
Master FOF LP

Ramius Vintage
Multi-Strategy
Master FOF LP

Ramius
Multi-Strategy
Master FOF LP

Ramius Vintage
Multi-Strategy
Master FOF LP(dollars in thousands)Ramius Fixed Income Arbitrage FOF LP*



$


$


$


$
Ramius Hedged Equity FOF LP*

Hedged Equity








6,725


Ramius Vintage Multi-Strategy Master FOF LP*

Multi Strategy


1,354





5,394


Tapestry Pooled Account I, LLC*

Multi-Strategy











Tapestry Pooled Account II, LLC*

Hedged Equity





3,544





5,642Tapestry Pooled Account V, LLC*

Credit-Based


1,416


1,512


1,612


1,720Externally Managed Funds

Credit-Based


6,653


803


4,084


1,158Externally Managed Funds

Event Driven


6,491


6,802


9,117


13,912Externally Managed Funds

Fixed Income Arbitrage


83





81


Externally Managed Funds

Hedged Equity


4,386


3,055


5,461


5,453Externally Managed Funds

Multi Strategy


7,785


4,292


11,564


14,647Externally Managed Funds

Other








47


Externally Managed Funds

Global Macro


2,053


679


2,081


5,321Externally Managed Funds

Opportunistic Equity





1,677





2,825Externally Managed Funds

Managed Futures


2,430





2,256


1,278$
32,651

$
22,364

$
48,422

$
51,956


*These
Portfolio Funds are affiliates of the Company.


F-45

---



Table of Contents

Cowen Group, Inc.

Notes to Consolidated Financial Statements (Continued)

5. Investments of Operating Entities and Consolidated Funds (Continued)



RTS Global 3x, which commenced operations in March 2010, invests over half of its equity in six externally managed portfolio funds
which primarily concentrate on futures and global macro strategies. The following table presents the summarized investment information, which is primarily receivable/(payable) on derivatives, for the
underlying Portfolio Funds held by RTS Global 3X, at fair value, as of December 31, 2010:

As of December 31, 2010(dollars in thousands)Bond future

$
(2
)Commodity call option


(5
)Cash


17,139Currency option


191Commodity forward


32Commodity future


935Currency forward


(63
)Currency future


1,230Index future


130Interest rate future


(5
)$
19,582




During the fourth quarter of 2010, the Company acquired four Luxembourg reinsurance companies, two of which were acquired from
Enterprise Master. The Company acquired the other Luxembourg reinsurance companies from third parties through a wholly-owned local subsidiary, which, upon acquisition, recorded deferred assets and
subsequently deferred tax benefits. The purchase price of these two reinsurance companies totaled $266.4 million. The acquisitions are not accounted for as business combinations and are
discussed in more detail in the Income Taxes footnote.

F-46

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Table of Contents

Cowen Group, Inc.

Notes to Consolidated Financial Statements (Continued)

6. Fair Value Measurements for Operating Entities and Consolidated Funds

The following table presents the financial instruments recorded at fair value on the consolidated statements of financial condition by caption and by level within the valuation hierarchy
as of December 31, 2010 and December 31, 2009:



Assets at Fair Value as of December 31, 2010Level 1

Level 2

Level 3

Total(dollars in thousands)Securities owned and derivativesUS Government securities

$
143,247

$


$


$
143,247Common stocks


115,875


6


334


116,215Restricted common stock








5,000


5,000Corporate bonds





191,702





191,702Futures


442








442Options


14,234


115





14,349Warrants and rights


357





1,977


2,334Mutual funds


1,248








1,248Other investmentsPortfolio Funds


566


11,744


17,081


29,391Real estate investments








1,882


1,882Lehman claim








313


313$
275,969

$
203,567

$
26,587

$
506,123




Liabilities at Fair Value as of December 31, 2010Level 1

Level 2

Level 3

Total(dollars in thousands)Securities sold, not yet purchased and derivativesUS Government securities

$
100,559

$


$


$
100,559Common stocks


88,580








88,580Corporate bonds





2,615





2,615Equity swapsshort exposure





245





245Futures


334








334Options


6,162








6,162$
195,635

$
2,860

$


$
198,495


F-47

---



Table of Contents

Cowen Group, Inc.

Notes to Consolidated Financial Statements (Continued)

6. Fair Value Measurements for Operating Entities and Consolidated Funds (Continued)

Assets at Fair Value as of December 31, 2009Level 1

Level 2

Level 3

Total(dollars in thousands)Securities ownedUS Government securities

$


$


$


$
Common stocks


11,081


24


334


11,439Corporate bonds





38,327





38,327Options


1,312








1,312Warrants and rights





1,356





1,356Mutual funds


1,719








1,719Other investmentsPortfolio Funds


2,669


644


17,370


20,683Real estate investments








1,077


1,077Lehman claim








209


209$
16,781

$
40,351

$
18,990

$
76,122




Liabilities at Fair Value as of December 31, 2009Level 1

Level 2

Level 3

Total(dollars in thousands)Securities sold, not yet purchasedCommon stocks

$
14,307

$


$


$
14,307Options


505








505$
14,812

$


$


$
14,812




Assets at Fair Value as of December 31, 2010Level 1

Level 2

Level 3

Total(dollars in thousands)Securities ownedUS Government securities

$
7,682

$


$


$
7,682Corporate bonds





1,040





1,040Other investmentsPortfolio Funds





15,889


311,242


327,131Lehman claims








6,243


6,243$
7,682

$
16,929

$
317,485

$
342,096




F-48

---



Table of Contents

Cowen Group, Inc.

Notes to Consolidated Financial Statements (Continued)

6. Fair Value Measurements for Operating Entities and Consolidated Funds (Continued)

Assets at Fair Value as of December 31, 2009Level 1

Level 2

Level 3

Total(dollars in thousands)Other investmentsPortfolio Funds

$


$
449,160

$
97,366

$
546,526Lehman claims








3,881


3,881$


$
449,160

$
101,247

$
550,407


The
following table includes a rollforward of the amounts for the years ended December 31, 2010 and 2009 for financial instruments classified within level 3. The
classification of a financial instrument within level 3 is based upon the significance of the unobservable inputs to the overall fair value measurement.

Operating Entities

Consolidated FundsCommon
stocks

Restricted
Common
Stock

Corporate
Bonds

Warrants
and
Rights

Portfolio
Funds

Real
estate

Lehman
claim

Portfolio
Funds

Lehman
claim(dollars in thousands)Balance at December 31, 2008

$


$


$


$


$
1,970

$
1,605

$
209

$
157,513

$
3,881Purchases

















132





2,181


Sales














(2,226
)







(72,147
)

Transfers in (out)


334











17,121











Realized gains (losses)























4,527


Unrealized gains (losses)














505


(660
)




5,292


Balance at December 31, 2009

$
334

$


$


$


$
17,370

$
1,077

$
209

$
97,366

$
3,881Transfers in (out)











1,356


(2,011
)(b)







372,865
(a)

Purchases





5,000


1,215


36


310,078


800





20,685


Sales








(1,634
)

(938
)

(310,562
)

(100
)




(197,035
)

(8,547
)Realized gains (losses)








419


495


1,106








4,224


Unrealized gains (losses)











1,028


1,100


105


104


13,137


10,909Balance at December 31, 2010

$
334

$
5,000

$


$
1,977

$
17,081

$
1,882

$
313

$
311,242

$
6,243


(a)Due
to the change in strategy and composition of positions held in Enterprise Master fund, the investment in the Master fund by Enterprise LP has
changed during year ended December 31, 2010 from a level 2 to a level 3 asset. RTS 3X designation was changed from level 3 to level 2 given that: (1) RTS 3X
invests in underlying funds which primarily trade level 1 exchange traded assets and for which an RTS affiliate is the managing member, (2) NAV is readily available and
(3) redemption is available on a monthly or more frequent basis.(b)Deconsolidation
of Replication Fund Ltd and CHRP GP (See Note 3b)


All realized and unrealized gains (losses) in the table above are reflected in other income (loss) in the accompanying consolidated statements of
operations.

7. Receivables from and Payable to Brokers

Receivable from and payable to brokers includes cash held at the clearing brokers, amounts receivable or payable for unsettled transactions, monies borrowed and proceeds for short sales
(including commissions and fees related to securities transactions) equal to the fair value of securities sold, not yet purchased, which are restricted until the Company purchases the securities sold
short.

F-49

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Table of Contents

Cowen Group, Inc.

Notes to Consolidated Financial Statements (Continued)

7. Receivables from and Payable to Brokers (Continued)

Pursuant
to the Company's prime broker agreements, these balances are presented net (assets less liabilities) across balances with the same broker. As of December 31, 2010 and 2009, receivable
from brokers was $95.9 million and $32.5 million, respectively. Payable to brokers was $85.7 million and $3.8 million as of December 31, 2010 and 2009, respectively.

8. Other Assets and Accounts Payable, Accrued Expenses and Other Liabilities

Other assets in Operating Entities are as follows:

As of December 31,2010

2009(dollars in thousands)Deposits

$
1,384

$
1,399Prepaid expenses


7,691


7,092Taxes receivable


2,033


10,233Derivative contracts, at fair value


442


Interest receivable


5,237


1,048Other


2,669


4,427$
19,456

$
24,199


Accounts
payable, accrued expenses and other liabilities in Operating Entities are as follows:

As of December 31,2010

2009(dollars in thousands)Deferred rent obligations (see Note 3s)

$
8,198

$
6,712Acquired lease liability (see Note 2)


6,899


17,862Deferred income on sale-leaseback (see Note 3s)


1,536


2,034Deferred lease incentive


903


Equity in RCG Longview Partners II, LLC (see Note 5a(3))


5,576


5,167Litigation reserve (Note 17)


1,500


1,500Drafts payable





1,045Prepaid payroll taxes





8,365Derivative contracts, at fair value


579


Accrued expenses and accounts payable


15,711


20,340Accrued tax liabilities


1,231


2,241Interest and dividends payable


134


333$
42,267

$
65,599


F-50

---



Table of Contents

Cowen Group, Inc.

Notes to Consolidated Financial Statements (Continued)



9. Fixed Assets

As of December 31, 2010 and 2009, fixed assets consisted of the following:

As of December 31,2010

2009(dollars in thousands)Telephone and computer equipment

$
8,576

$
8,730Computer software


4,831


4,401Furniture and fixtures


4,630


6,039Leasehold improvements


25,271


29,822Assets acquired under capital leasesequipment


6,337


Construction in progress


4,650


Other


60


6054,355


49,052Less: Accumulated depreciation and amortization


(17,764
)

(16,449
)$
36,591

$
32,603


Depreciation
and amortization expense related to fixed assets was $5.7 million, $4.4 million and $3.8 million for the years ended December 31, 2010, 2009, and
2008, respectively.

Assets
acquired under capital leases were $6.3 million at December 31, 2010. If the assets acquired under capital leases transfer title at the end of the lease term or
contain a bargain purchase option, the assets are amortized over their estimated useful lives; otherwise, the assets are amortized over the respective lease term. The amortization of capital leases is
included with depreciation expenses. Amortization expense related to capital leases for the year ended December 31, 2010 was insignificant because the leases were entered into in October and
November of 2010.

At
December 31, 2010, construction in progress consisted primarily of leasehold improvement costs related to additional space acquired at 599 Lexington Avenue office. The
construction of leasehold improvements was completed in January 2011 and the Company began depreciating these costs at that time.

For
the year ended December 31, 2010, the Company recorded accelerated depreciation of $2.2 million related to leasehold improvements for a portion of office space located
at 1221 Avenue of Americas. This amount is included in depreciation and amortization in the accompanying consolidated statements of operations. See Note 17 to the Company's consolidated
financial statements for further discussion.

10. Goodwill and Intangible Assets

Goodwill

Goodwill of $30.2 million was recognized as a result of a 2004 business combination in the fund of funds reporting unit, within
the Alternative Investment Management segment.

As
a result of the Transactions discussed in Note 2, the Company recorded additional goodwill of $7.2 million during the year ended December 31, 2009. This goodwill
is attributable to the Cowen and Company reporting unit, the U.S. broker-dealer subsidiary of the Company, which is a part of the broker-dealer segment.

F-51

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Table of Contents

Cowen Group, Inc.

Notes to Consolidated Financial Statements (Continued)

10. Goodwill and Intangible Assets (Continued)

In
accordance with FASB accounting standards, the Company tests goodwill for impairment on an annual basis, at December 31st each year, or at an interim
period if events or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount. Based on the results of the valuations performed in 2008,
the Company recorded a partial impairment of goodwill in the fund of funds reporting unit during the year ended December 31, 2008 in the amount of $10.2 million. The aggregate impairment
charge was primarily attributable to a decline in the assets under management at that reporting unit and the resulting decline in the expected management and incentive income. The assets under
management declined from December 31, 2007 to December 31,
2008 by approximately $1.3 billion or 33%, primarily as a result of the difficult market environment in the second half of 2008. There were no additions or impairment charges to goodwill during
the year ended December 31, 2009.

Periodically
estimating the fair value of a reporting unit requires significant judgment and often involves the use of significant estimates and assumptions. These estimates and
assumptions could have a significant effect on whether or not an impairment charge is recorded and the magnitude of such a charge.

Based
on a valuation performed by an independent valuation firm in order to test the goodwill for impairment as of December 31, 2010, it has been determined that no impairment
loss would need to be recognized for the year ended December 31, 2010. The testing was performed using market multiples and discounted cash flow analyses.

In
addition, the Company changed the reporting units identified for the purposes of performing the goodwill impairment test during the year ended December 31, 2010. Prior to the
merger with Cowen Holdings, the 50% ownership held by Unicredito in the Ramius Fund of Funds business warranted that the Fund of Funds business be considered as a separate reporting unit for the
purposes of goodwill impairment assessment. As a result of the Transactions discussed in Note 2 and re-purchase of this 50% stake from Unicredito, the Company made a determination
to aggregate the Fund of Funds and Asset Management reporting units into one single operating segment, Alternative Investment Management, on the basis that these components have similar economic
characteristics. As such, the Company performed assessment of goodwill impairment based on two business segments: Alternative Investment Management and Broker-Dealer. The resulting change did not have
any impact on whether or not an impairment charge would have been recorded during 2010.

F-52

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Table of Contents

Cowen Group, Inc.

Notes to Consolidated Financial Statements (Continued)

10. Goodwill and Intangible Assets (Continued)

The
following table presents the changes in the Company's goodwill balance, by segment, for the years ended December 31, 2010 and 2009:

2010

2009Alternative
Investment
Management

Broker-
Dealer

Total

Alternative
Investment
Management

Broker-
Dealer

Total(dollars in thousands)Beginning balance:Goodwill

$
30,228

$
7,151

$
37,379

$
30,228

$


$
30,228Accumulated impairment charges


(10,200
)




(10,200
)

(10,200
)




(10,200
)Net


20,028


7,151


27,179


20,028





20,028Activity:Goodwill acquired














7,151


7,151











7,151


7,151Ending balance:Goodwill


30,228


7,151


37,379


30,228


7,151


37,379Accumulated impairment charges


(10,200
)




(10,200
)

(10,200
)




(10,200
)Net

$
20,028

$
7,151

$
27,179

$
20,028

$
7,151

$
27,179


Intangible assets

Information for the Company's intangible assets that are subject to amortization is presented below as of December 31, 2010 and
2009. The trade name, customer relationships, and customer contracts intangible assets were acquired in connection with the Transactions. See Note 2 for further discussion.

December 31, 2010

December 31, 2009Amortization
Period

Gross
Carrying
Amount

Accumulated
Amortization

Net
Carrying
Amount

Gross
Carrying
Amount

Accumulated
Amortization

Net
Carrying
Amount(in years)

(in thousands)

(in thousands)Investment contracts


5.0

$
3,900

$
(3,900
)
$


$
3,900

$
(3,900
)
$
Trade name


7.5


9,400


(1,463
)

7,937


9,400


(209
)

9,191Customer relationships


4.0


6,800


(1,983
)

4,817


6,800


(283
)

6,517Customer contracts


1.2


800


(800
)




800


(114
)

686$
20,900

$
(8,146
)
$
12,754

$
20,900

$
(4,506
)
$
16,394


Amortization
expense related to intangible assets was $3.6 million, $1.4 million and $0.8 million for the years ended December 31, 2010, 2009, and 2008,
respectively. All of the Company's intangible assets have finite lives. There were no impairment charges related to intangible assets during the years ended December 31, 2010, 2009, and 2008.

F-53

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Table of Contents

Cowen Group, Inc.

Notes to Consolidated Financial Statements (Continued)

10. Goodwill and Intangible Assets (Continued)

The estimated future amortization expense for the Company's intangible assets as of December 31, 2010 is as follows:

(dollars in thousands)2011

$
2,9542012


2,9542013


2,6702014


1,2532015


1,253Thereafter


1,670$
12,754




11. Redeemable non-controlling interests in consolidated subsidiaries

Redeemable non-controlling interests in consolidated subsidiaries and the related net income (loss) attributable to redeemable non-controlling interests in
consolidated subsidiaries are comprised as follows:

As of December 31,2010

2009(dollars in thousands)Redeemable non-controlling interests in consolidated subsidiariesOperating Companies(a)

$
1,009

$
1,713Consolidated Funds


143,337


229,112$
144,346

$
230,825


(a)See
Note 3b


Year ended December 31,2010

2009

2008(dollars in thousands)(Income) loss attributable to redeemable non-controlling interests in consolidated subsidiariesOperating Companies

$
(1,759
)
$
(602
)
$
5,485Consolidated Funds and certain real estate entities


(11,968
)

(15,646
)

108,301$
(13,727
)
$
(16,248
)
$
113,786


In
connection with the Transactions, Cowen Holdings purchased from HVB the 50% interest in Ramius Alternative Solutions that HVB owned, resulting in Ramius Alternative Solutions becoming
a wholly owned subsidiary of the Company. This resulted in the derecognition of the carrying value of HVB's non-controlling interest of $13.5 million as of the acquisition date.
Included in income (loss) attributable to non-controlling interests for the year-ended December 31, 2009 is $0.4 million of income attributable to HVB for the
period from January 1, 2009 to November 2, 2009.

F-54

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Table of Contents

Cowen Group, Inc.

Notes to Consolidated Financial Statements (Continued)

11. Redeemable non-controlling interests in consolidated subsidiaries (Continued)

Also
in connection with the Transactions, the Company recorded non-controlling interest in the CHRP GPs of $1.7 million. See Note 2 for further
information

12. Other Revenues and Expenses

Included within other revenues in the consolidated statement of operation for the year ended December 31, 2010, are gross insurance premium income of $3.1 million which is
offset by gross reinsurance premium expense of $3.1 million related to the Luxembourg reinsurance companies.

Gross
rebate income earned by Ramius Securities on securities borrowed transactions for the year ended December 31, 2008 was $17.9 million and rebate interest expense
incurred by Ramius Securities on securities loaned transactions was $13.7 million, respectively. The net rebate income for the year ended December 31, 2008 of $4.2 million, was
reduced by the income related to affiliates of the Company as that amount was transferred to the applicable affiliates. As a result, net rebate income from the operations of Ramius Securities of
$1.6 million was included in other revenues in the consolidated statements of operations for the year ended December 31, 2008. No such transactions occurred during the years ended
December 31, 2010 and 2009. As of December 31, 2010, 2009 and 2008 the amount due to JT Partners LLC totaled $0, $0, and $4.5 million respectively, which is included
in due to related parties in the consolidated statements of financial condition.

Prior
to 2009, Ramius Securities acted as a placement agent for certain affiliates and real estate entities. Accordingly Ramius Securities recorded placement fee income as services were
provided and revenues were earned. Placement fee income of $3.2 million was recorded in other revenues on the consolidated statements of operations for the year ended December 31, 2008.
Related to these activities, Ramius Securities' affiliate, JT Partners LLC, which was dissolved in 2009, incurred compensation and other expense charges. For the years ended December 31,
2010, 2009 and 2008, Ramius Securities reimbursed JT Partners LLC for these expenses of $0, $0.4 million and $3.2 million, respectively, which are included in other expenses on
the consolidated statements of operations.

Other
revenues for the year ended December 31, 2009 include legal settlement income of $1.9 million.

Other
expenses during the years ended December 31, 2010, 2009, and 2008, except as noted above, are primarily the general administrative expenses of operating the various
operating company subsidiaries or the Consolidated Funds and research expenses.

13. Share-Based Compensation and Employee Ownership Plans

Share-based compensation plans in place after the Transactions

The Company issues share based compensation under Cowen Holdings' previously established 2006 Equity and Incentive Plan and the 2007
Equity and Incentive Plan and the Cowen Group, Inc. 2010 Equity and Incentive Plan (collectively, the "Equity Plans"). The Equity Plans permit the grant of options, restricted shares,
restricted stock units and other equity based awards to the Company's employees, consultants and directors for up to 17,725,000 shares of common stock. Stock options granted generally vest over two to
five year periods and expire seven years from the date of grant. Restricted shares and restricted share units issued may be immediately vested or may generally vest over a two to five year period. As
of December 31, 2010, there were approximately 5.8 million shares available for future issuance under the Equity Plans. On January 1, 2011, 928,590 additional shares

F-55

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Table of Contents

Cowen Group, Inc.

Notes to Consolidated Financial Statements (Continued)

13. Share-Based Compensation and Employee Ownership Plans (Continued)

representing
7.5% of the Company's outstanding shares of stock, less shares available under the 2010 plan were added to the shares available under the 2010 Equity and Incentive Plan.

In
addition to the Equity Plans, certain employees of the Company were issued RCG membership interests by RCG, a related party of the Company, in connection with the Transactions (the
"RCG
Grants"). Substantially all of the assets owned by RCG consist of shares of common stock of the Company. Accordingly, upon withdrawal of capital from RCG, members receive either distributions in kind
of shares of common stock of the Company, or the proceeds from the sale of shares of the Company's common stock attributable to their capital accounts. The RCG Grants are subject to a service
condition and vest to each employee over a period of approximately three years. Any RCG Grants forfeited are redistributed to the remaining stakeholders in RCG, which includes both employees and
non-employees. The RCG Grants represent awards to employees of the Company by a related party, as compensation for services provided to the Company. As such, the expense related to these
grants is included in the compensation expense of the Company, with a corresponding credit to stockholders equity.

The
Company measures compensation cost for share based awards according to the fair value method. In accordance with the expense recognition provisions of those standards, the Company
amortizes unearned compensation associated with share based awards on a straight-line basis over the vesting period of the option or award. In relation to awards under the Equity Plans,
the Company recognized expense of $14.1 million and $2.3 million for the years ended December 31, 2010 and 2009, respectively. The income tax effect recognized for the Equity
Plans was a benefit of $6.0 million and $1.0 million for the years ended December 31, 2010 and 2009, respectively.

In
relation to awards under the RCG Grants, the Company recognized expense of $6.5 million and $1.3 million for the years ended December 31, 2010 and 2009, respectively.
The income tax effect recognized for the RCG Grants was a benefit of $2.6 million and $0.5 million for the years ended December 31, 2010 and 2009, respectively.

Stock Options

The
fair value of each option award is estimated on the date of grant utilizing a Black-Scholes option valuation model that uses the following assumptions:



F-56

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Table of Contents

Cowen Group, Inc.

Notes to Consolidated Financial Statements (Continued)

13. Share-Based Compensation and Employee Ownership Plans (Continued)

In
connection with the Transactions, 892,782 stock options of Cowen Holdings common stock outstanding at the effective time of the merger were converted into stock options of the Company
on a one-for-one basis. There were no other stock options granted or exercised during the years ended December 31, 2009 and 2008.

The
following table summarizes the Company's stock option activity for the year ended December 31, 2010:

Shares
Subject to
Option

Weighted
Average
Exercise
Price/Share

Weighted
Average
Remaining
Term

Aggregate
Intrinsic
Value(1)(in years)

(dollars in thousands)Balance outstanding at December 31, 2008




$
Options granted





Options acquired


892,782


15.06Options exercised





Options forfeited





Options expired





Balance outstanding at December 31, 2009


892,782

$
15.06


3.81Options granted


150,003


3.96
(2)Options acquired





Options exercised





Options forfeited





Options expired


(149,353
)

16.00Balance outstanding at December 31, 2010


893,432

$
13.04


3.50

$
Options exercisable at December 31, 2009


831,449

$
14.99


3.84

$
Options exercisable at December 31, 2010


743,429

$
14.87


2.87

$



(1)Based
on the Company's closing stock price of $5.92 on December 31, 2009 and $4.69 on December 31, 2010.(2)The
weighted average grant date fair value was 1.84.


As
of December 31, 2010, the unrecognized compensation expense related to the Company's grant of stock options was immaterial.

Restricted Shares and Restricted Stock Units Granted to Employees

In connection with the Transactions, 185,828 restricted shares of Cowen Holdings common stock outstanding at the effective time of the
merger were converted into restricted shares of the Company on a one-for-one basis. Restricted shares and restricted stock units are referred to collectively as

F-57

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Table of Contents

Cowen Group, Inc.

Notes to Consolidated Financial Statements (Continued)

13. Share-Based Compensation and Employee Ownership Plans (Continued)

restricted
stock. The following table summarizes the Company's restricted share and restricted stock unit activity for the year ended December 31, 2010:

Nonvested
Restricted Shares
and Restricted
Stock Units

Weighted-Average
Grant Date
Fair ValueBalance outstanding at December 31, 2008




$
Granted


2,368,354


6.85Vested


185,828


7.55Cancelled





Forfeited





Balance outstanding at December 31, 2009


2,554,182


6.90Granted


6,220,608


4.61Vested


(1,561,317
)

5.48Cancelled


(856,438
)

4.15Forfeited


(569,014
)

5.26Balance outstanding at December 31, 2010


5,788,021

$
5.39


The
fair value of restricted stock is determined based on the number of shares granted and the quoted price of the Company's common stock on the date of grant.

As
of December 31, 2010, there was $19.5 million of unrecognized compensation expense related to the Company's grant of nonvested restricted shares and restricted stock
units to employees. Unrecognized compensation expense related to nonvested restricted shares and restricted stock units granted to employees is expected to be recognized over a weighted-average period
of 1.6 years.

RCG Grants

The following table summarizes the Company's RCG Grants activity for the year ended December 31, 2010:

Nonvested
RCG Grants

Weighted-Average
Grant Date
Fair ValueBalance outstanding at December 31, 2008




$
Granted


2,859,426


7.30Vested





Forfeited





Balance outstanding at December 31, 2009


2,859,426

$
7.30Granted





Vested


(91,502
)

Forfeited


(129,846)
(*)

Balance outstanding at December 31, 2010


2,638,078

$
7.30


(*)Forfeitures
of non vested RCG Grants are reallocated to other interests within RCG Holdings, LLC.


F-58

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Table of Contents

Cowen Group, Inc.

Notes to Consolidated Financial Statements (Continued)

13. Share-Based Compensation and Employee Ownership Plans (Continued)




The
fair value of the RCG Grants was determined based on the number of the Company's shares underlying the RCG membership interest and the quoted price of the Company's
common stock on the date of the Transactions.

As
of December 31, 2010 there was $10.8 million of unrecognized compensation expense related to the Company's RCG Grants. Unrecognized compensation expense related to RCG
Grants is expected to be recognized over a weighted-average period of 1.83 years.

Restricted Shares and Restricted Stock Units Granted to Non-employee Board Members

There were 101,259 restricted stock units awarded, which were immediately vested and expensed upon grant, during the year ended
December 31, 2010. Vested awards of 31,081 were delivered to non-employee members of the Company's Board of Directors during the year ended December 31, 2010. As of
December 31, 2010 there were 98,054 restricted stock units outstanding for awards to non-employee members of the Company's Board of Directors.

Employee ownership plans in place prior to the Transactions

REOP Program

Prior to the Transactions, RCG sponsored an employee ownership plan ("REOP Program") for certain key employees. Upon the close of the
Transactions, all unvested REOP units immediately vested and the plan ceased. The REOP Program provided for the granting of equity interests in RCG to certain participants ("Equity REOP"). Other
participants had been granted non-equity awards which tracked the returns of an equity interest in RCG ("Phantom REOP"). Both Equity REOP and Phantom REOP awards vested over a specified
service period. Once vested, Equity REOP awards converted to ownership interests in RCG and Phantom REOP awards were settled in cash. Phantom REOP awards had all the same rights and privileges as
Equity REOP awards except for their vesting option. Upon vesting RCG settled a portion of the Equity REOP awards in cash in order to fund minimum tax withholding requirements. It was the intention of
RCG to settle in cash certain Equity REOP awards in excess of minimum tax withholding requirements. As a result, the Company applied variable accounting for both the Equity REOP and Phantom REOP
awards and recorded their fair value as a liability in the consolidated statements of financial condition.

As
all unvested Equity REOP and Phantom REOP units vested upon the close of the Transactions, the Company expensed any remaining unvested portions of these awards in November 2009 and
the plan was closed. Compensation expense related to the REOP Program was $2.9 million, and $0.3 million, for the years ended December 31, 2009, and 2008, respectively. The
Company did not grant any awards under the REOP Program during the years ended December 31, 2010 and 2009. The Company granted REOP Program awards with a grant date fair value of
$3.0 million in the year ended December 31, 2008.

For
the years ended December 31, 2010, 2009, and 2008, the Company did not capitalize as an asset any compensation expense and had no income tax benefit related to the REOP
Program compensation arrangement. There was no compensation payable and no unrecognized compensation expense related to REOP Program awards as of December 31, 2010 or December 31, 2009.

F-59

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Table of Contents

Cowen Group, Inc.

Notes to Consolidated Financial Statements (Continued)

13. Share-Based Compensation and Employee Ownership Plans (Continued)

The
following summarizes the REOP Program awards activity for the year ended December 31, 2009:

Unvested awards at January 1, 2009

$
7,334Awards granted during 2009


Awards vested/exercised during 2009


(6,987
)Awards expired during 2009


Awards forfeited during 2009


(347
)Unvested awards at December 31, 2009

$



For
the year ended December 31, 2009, cash used to settle awards under the REOP Program was $1.1 million.

Rapp Program

Ramius Alternative Solutions LLC, (formerly known as Ramius Fund of Funds Group LLC), a wholly owned subsidiary of the
Company, sponsors an employee Profit Participation Plan ("Rapp Program") for key employees. The Rapp Program provides for the granting of equity interests in related entities with initial grant values
based on a certain percentage of profits of Ramius Alternative Solutions LLC. One half of the amount granted represents equity units in one of the consolidated
fund-of-funds products managed by Ramius Alternative Solutions LLC chosen by senior management. Prior to the Transactions, the other half of the amount granted
represents equity units of RCG. For any future grants under the Rapp Program, the other half of the amount granted will represent equity units of the Company.

These
grants, as well as any income thereon, vest over a specified service period, generally four years. Similar to the REOP Program, on vesting, the Company may settle a portion of the
awards in cash in order to fund tax withholding requirements. It was the intention of the Company to settle in cash certain awards in excess of minimum tax withholding requirements. As a result, the
Company classified Rapp Program awards as liabilities in the consolidated financial statements. Upon the close of the Transactions, all unvested Rapp Program awards immediately vested.

For
the years ended December 31, 2010, 2009 and 2008, there were no awards granted to Rapp Program participants. For the years ended December 31, 2010, 2009, and 2008, the
Company recognized compensation expense of $0, $1.3 million and $0.9 million, respectively, for the Rapp Program. There was no compensation payable and no unrecognized compensation
expense related to Rapp Program awards as of December 31, 2010 or December 31, 2009.

The
following summarizes the Rapp Program awards activity for the year ended December 31, 2009:

Unvested awards at January 1, 2009

$
6,241Awards granted during 2009


Awards vested/exercised during 2009


(5,857
)Awards expired during 2009


Awards forfeited during 2009


(384
)Unvested awards at December 31, 2009

$



F-60

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Table of Contents

Cowen Group, Inc.

Notes to Consolidated Financial Statements (Continued)

13. Share-Based Compensation and Employee Ownership Plans (Continued)

There
was no award activity in the Rapp Program during the year ended December 31, 2010.

For
the year ended December 31, 2009, cash used to settle awards under the Rapp Program was $0.7 million.

14. Defined Benefit Plans

On December 1, 2005, the Company adopted a defined benefit plan ("Cash Balance Plan") to provide retirement income to all eligible employees of the Company and its subsidiaries in
accordance with the terms and conditions in the plan document. The benefits are determined based on years of credited service and employees' age. Investment policies and strategies of the Cash Balance
Plan will be set by the plan trustee, as appointed by the plan administrator. The plan trustee will oversee the actual investment of plan assets into permitted asset classes to achieve targeted plan
returns. There were net assets of $5.8 million and $5.8 million in the Cash Balance Plan at December 31, 2010 and 2009, respectively. Hypothetical participant balances are vested
at all times. The Cash Balance Plan pays lump sum payments and will apply settlement accounting in any given year if the total lump sum payments are in excess of the total service and interest cost
for the year. The Cash Balance Plan is developed to meet the requirements of Section 401(a) and Section 501(a) of the Internal Revenue Code.

The
Company's funding policy for the Cash Balance Plan is to contribute annually at least the minimum amount required by the Employee Retirement Income Security Act ("ERISA") of 1974.
The Company did not contributed into the plan during 2010. The Company contributed $1 million into the plan during 2009. The Company recorded a settlement loss of approximately $28,000 during
the year ended December 31, 2009 in connection with terminations and related payouts occurring during the period. The Trustees of the Cash Balance Plan have decided to temporarily suspend plan
contributions effective from January 1, 2009. The intent is to recommence the contributions once the economic climate improves.

The
Company has wound down the operations of Ramius GmbH ("GmbH"), and as a result, a defined benefit plan for employees of GmbH (the "GmbH Plan") ceased. During the year
ended December 31, 2009 the Company recorded additional compensation expense of $0.4 million related to the GmbH Plan and made payments of $1.0 million. As of December 31, 2009
all liabilities under the GmbH Plan had been settled.

In
addition, Ramius Japan Ltd. and Safe Harbor Advisors, Ltd. also established defined benefit plans (the "Retirement Allowance Plans") covering their employees. There are
no plan assets associated with
these plans and the benefits are based on years of credited service and a percentage of the employee's compensation. The Safe Harbor Advisors, Ltd. plan was closed during 2008.

The
estimated future benefits for the above plans are an actuarial estimate of the benefits that the Company will be required to pay. A measurement date of December 31 was used
for each of the actuarial calculations.

F-61

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Table of Contents

Cowen Group, Inc.

Notes to Consolidated Financial Statements (Continued)

14. Defined Benefit Plans (Continued)

The
following amounts contained in the following tables relate to the above plans in aggregate as of December 31, 2010 and 2009 and for the years ended December 31, 2010,
2009, and 2008:

As of December 31,2010

2009(dollars in thousands)Projected benefit obligationBenefit obligation at beginning of year

$
6,596

$
8,193Service cost


54


459Interest cost


317


340Actuarial loss (gain)


(47
)

(35
)Benefits paid





(11
)Curtailments


(140
)

110Lump sum settlement


(480
)

(2,498
)Effect of change in currency conversion


11


38Benefit obligation at end of year

$
6,311

$
6,596Change in plan assetsFair value of plan assets at beginning of year

$
5,846

$
5,190Actual return on plan assets


534


831Employer contributions





978Benefits paid


(589
)

(1,153
)Fair value of plan assets at the end of year

$
5,791

$
5,846Funded balance at end of year

$
(520
)
$
(750
)Amounts recognized in the consolidated statement of financial conditionLiabilities

$
520

$
750Accumulated benefit obligation

$
6,270

$
6,559


F-62

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Table of Contents

Cowen Group, Inc.

Notes to Consolidated Financial Statements (Continued)

14. Defined Benefit Plans (Continued)

Year ended December 31,2010

2009

2008(dollars in thousands)Components of net periodic benefit cost included in employee compensation and benefitsService cost

$
54

$
72

$
208Interest cost


317


339


443Expected return on plan assets


(294
)

(328
)

(397
)Amortization of (loss) / gain





(4
)

67Amortization of prior service cost


23


24


25Effect of curtailment


(10
)

62


24Effect of settlement


(7
)

12


84Net periodic benefit cost

$
83

$
177

$
454Other changes in plan assets and benefit obligations recognized in other comprehensive lossNet loss

$
(234
)
$
(542
)
$
1,073Effect of curtailment


10


(62
)

(24
)Effect of settlement


6


(12
)

(84
)Amortization of loss / (gain)





4


(67
)Amortization of prior service cost


(23
)

(24
)

(25
)Total recognized in other comprehensive loss

$
(241
)
$
(636
)
$
873Total recognized in net periodic benefit cost and other comprehensive loss

$
(158
)
$
(459
)
$
1,327Amounts recognized in accumulated other comprehensive lossNet gain (loss)

$
127

$
(154
)
$
(641
)Prior service cost


(463
)

(449
)

(535
)Effect of change in currency conversion





26


13Total recognized in accumulated other comprehensive loss

$
(336
)
$
(577
)
$
(1,163
)Estimated amounts to be amortized from accumulated other comprehensive loss into net periodic benefit cost over the next fiscal yearPrior service cost

$
3

$
19

$
24Net gain (loss)

$


$


$
(5
)


The
discount rates as of December 31, 2010, 2009, and 2008 used to measure the year-end benefit obligations and the earnings effects for the subsequent year were as
follows:

Cash Balance Plan

GmbH Plan

Retirement Allowance Plan2010

2009

2008

2010

2009

2008

2010

2009

2008Discount Rate


6.00
%

6.00
%

5.50
%
N/A

N/A


6.00
%

2.25
%

2.50
%

2.50
%Rate of Compensation Increase


N/A


N/A


N/A

N/A

N/A


5.00
%

2.40
%

2.50
%

2.50
%


F-63

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Table of Contents

Cowen Group, Inc.

Notes to Consolidated Financial Statements (Continued)

14. Defined Benefit Plans (Continued)

The assumed long term rate of return on the Cash Balance Plan assets was 6% as of December 31, 2010, 6% as of December 31, 2009 and
7% as of December 31, 2008. The Company's approach in determining the long-term rate of return for plan assets is based upon historical financial market relationships that have
existed over time with the presumption that this trend will generally remain constant in the future.

The
composition of plan assets by asset category for the Cash Balance Plan are set forth below:

As of December 31,2010

2009(dollars in thousands)Ramius Multi-Strategy Fund Ltd(a)

$
812

$
1,386Ramius Global Credit Fund Ltd(b)


725


External Mutual FundsTotal return(c)


2,699


2,493External Mutual FundsReal Return(d)


362


887External Mutual FundsConservative(e)


1,193


1,080$
5,791

$
5,846


The
investment approach of the Cash Balance Plan is to generate a return equal to or greater than the 30-year treasury rate with relatively low risk by investing in a variety
of vehicles. The Company has valued the assets in the Cash Balance Plan at fair value in accordance with the Company's investment policies (see Note 3e). The assets in the Cash Balance Plan are
categorized in Level 2 of the fair value hierarchy. Investment risk is measured and monitored on an ongoing basis through semi-annual retirement committee meetings and annual
liability measurements.

F-64

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Table of Contents

Cowen Group, Inc.

Notes to Consolidated Financial Statements (Continued)

14. Defined Benefit Plans (Continued)

Estimated future benefits payments

The following benefit payments, which reflect future service, as appropriate, are expected to be paid:

(dollars in thousands)2010

$
2,6592011


1,6372012


2,1952013


3082014


2,0472015 - 2020


4,453$
13,299


The
Company expects to contribute approximately $0.6 million to the pension plan during calendar year 2011.

15. Defined Contribution Plans

The Company sponsors two Retirement and Savings Plans which are defined contribution plans pursuant to Section 401(k) of the Internal Revenue Code (the "401k Plans"). All
full-time employees of the Company can contribute on a tax deferred basis to the 401k Plans up to 100% of their annual compensation, subject to certain limitations. The Company provides
matching contributions for certain employees that are equal to a specified percentage of the eligible participant's contribution as defined by the 401k Plans. For the years ended December 31,
2010, 2009, and 2008, the Company's contributions to the Plans (and related cost recognized) were $1.6 million, $0.7 million and $1.1 million, respectively.

GmbH
contributes to employer sponsored defined contribution plans for its Austria, United Kingdom and Germany based employees. These defined contribution plans are invested with several
pension providers based in Europe and the pension holders are entitled to insurance type guaranteed entitlements. The contribution amounts for the plans vary by pension provider and are also limited
by the local statutory requirements. For the years ended December 31, 2010, 2009, and 2008, GmbH's contribution to defined contribution plans and related cost recognized was $0,
$0.05 million and $0.1 million, respectively.

16. Income Taxes

The taxable results of the Company's U.S. operations are included in the consolidated income tax returns of Cowen Group, Inc. as well as stand-alone state and local tax returns.
The Company has subsidiaries that are resident in foreign countries where tax filings have to be submitted on a stand-alone basis. These subsidiaries are subject to tax in their respective countries
and the Company is responsible for and, thus, reports all taxes incurred by these subsidiaries. The countries where the Company owns subsidiaries are the United Kingdom, Germany, Luxembourg, Japan,
Hong Kong, and China.

F-65

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Table of Contents

Cowen Group, Inc.

Notes to Consolidated Financial Statements (Continued)

16. Income Taxes (Continued)

The
components of the Company's income tax expense for the years ended December 31, 2010, 2009, and 2008 are as follows:

Year ended December 31,2010

2009

2008(dollars in thousands)Current tax expense/(benefit)Federal

$
121

$
(4,227
)
$
State and local


(149
)

(556
)

(1,742
)Foreign


963


315


441Total


935


(4,468
)

(1,301
)Deferred tax expense/(benefit)Federal

$
(35
)
$
2,256

$
State and local


(13
)




Foreign


(22,287
)

(5,993
)

Total


(22,335
)

(3,737
)

Total Tax expense/(benefit)

$
(21,400
)
$
(8,205
)
$
(1,301
)


Consolidated
U.S. income/(loss) before income taxes was $(50.0) million in 2010, $(42.8) million in 2009, and $(252.1) million in 2008. The corresponding amounts for
non-U.S.-based income/(loss) were $(3.1) million in 2010, $(4.4) million in 2009, and $(4.8) million in 2008.

The
reconciliations of the Company's federal statutory rate to the effective income tax rate for the years ended December 31, 2010, 2009, and 2008 are as follows:

2010

2009

2008Pre-tax loss at U.S. statutory rate


35.0
%

35.0
%

35.0
%Partnership loss not subject to corporate tax


0.0


(17.5
)

(35.0
)Change in valuation allowance


(29.9
)

(13.0
)

0.0Deferred asset recognition


27.2


12.5


0.0Minority interest reversal


9.0


0.0


0.0Other, net


(1.0
)

0.4


0.5Total


40.3
%

17.4
%

0.5
%


As
of December 31, 2010, the Company has income taxes receivable of approximately $2.0 million which is included in other assets on the consolidated statements of financial
condition. This receivable mainly represents refund claims for federal taxes resulting from carrying back net operating losses to the Company's 2006 tax returns.

F-66

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Table of Contents

Cowen Group, Inc.

Notes to Consolidated Financial Statements (Continued)

16. Income Taxes (Continued)

The
components of the Company's deferred tax assets and liabilities as of December 31, 2010 and December 31, 2009 are as follows:

2010

2009(dollars in thousands)Deferred tax assets, net of valuation allowanceDeferred compensation

$
38,396

$
9,073Net operating loss


22,844


24,683Goodwill


13,288


15,046Acquired lease liability


3,355


7,472Unrealized losses on investments


2,987


3,983Foreign tax credits


1,786


1,744Other


1,986


2,979Total deferred tax assets


84,642


64,980Valuation allowance


(67,959
)

(52,973
)Deferred tax assets, net of valuation allowance


16,683


12,007Deferred tax liabilitiesBasis difference on investments


(7,772
)

Intangible assets


(5,219
)

(7,192
)Fixed assets


(3,482
)

(4,640
)Other


(50
)

(48
)Total deferred tax liabilities


(16,523
)

(11,880
)Deferred tax assets, net

$
160

$
127


Deferred
tax assets, net of valuation allowance, are reported in other assets in the consolidated statements of financial condition. In addition to the deferred tax
balances in the table above, the Company records balances related to its net operating loss in Luxembourg, which are discussed below.

The
Company records deferred tax assets and liabilities for the future tax benefit or expense that will result from differences between the carrying value of its assets for income tax
purposes and for financial reporting purposes, as well as for operating or capital loss and tax credit carryovers. A valuation allowance is recorded to bring the net deferred tax assets to a level
that, in management's view, is more likely than not to be realized in the foreseeable future. This level will be estimated based on a number of factors, especially the amount of net deferred tax
assets of the Company that are actually expected to be realized, for tax purposes, in the foreseeable future. The Company recorded a valuation allowance of approximately $68 million against its
deferred tax assets as of December 31, 2010 and approximately $53 million as of December 31, 2009 as management believes it is more likely than not that the deferred tax assets
will not be realized. Separately, the Company has deferred tax liabilities of $17 million as of December 31, 2010, and $12 million as of December 31, 2009.

In
2010, the Company recorded a deferred tax benefit of $22.2 million, representing the deferred tax benefits generated by a local subsidiary upon acquisition, in the fourth
quarter of 2010, of reinsurance companies in Luxembourg. In the fourth quarter of 2010, the Company acquired four reinsurance companies in Luxembourg, including two from Enterprise Master, offering a
service program that provides reinsurance coverage to the Company against certain risks. The reinsurance companies had deferred tax liabilities and upon their purchase, pursuant to an Advance Tax
Agreement, the local subsidiary generated deferred tax assets that fully offset these liabilities, resulting

F-67

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Table of Contents

Cowen Group, Inc.

Notes to Consolidated Financial Statements (Continued)

16. Income Taxes (Continued)

in
the recognition of deferred tax benefits. The Company incurred $4.1 million of financing costs in the fourth quarter of 2010 in connection with the acquisition of a Luxembourg reinsurance
company, which is included in interest and dividend expense in the consolidated statements of operations for the year ended December 31, 2010.

The
Company has the following net operating loss carryforwards at December 31, 2010:

Federal

New York

Hong KongJurisdiction:Net operating loss (in millions)

$
53.7

$
44.0

$
7.9Year of expiration


2029


2029


Indefinite


In
addition to the net operating loss carryforwards in the table above, the Company also has net operating loss carryforwards in Luxembourg. These loss carryforwards are
only accessible to the extent of taxable income generated by the Luxembourg reinsurance companies, including any deferred income that will be generated in the future. Consequently, the Company
recorded a deferred tax asset of $55.6 million, net of deferred tax liabilities of $95.6 million in connection with future taxable income, and an offsetting valuation allowance of
$55.6 million against its Luxembourg net operating loss carryforwards that are in excess of such taxable income.

At
December 31, 2010, the Company has capital loss and foreign tax credit carryovers of $0 and $1.7 million, respectively. The foreign tax credit carryforwards will fully
expire by 2019. The Company underwent a change of control under Section 382 of the Internal Revenue Code on November 2, 2009. Accordingly, a portion of the Company's deferred tax assets,
in particular a portion of its net operating loss and foreign tax credit carryovers, will be subject to an annual limitation. The deduction limitation is approximately $2.4 million annually and
applies to approximately $32.2 millions of pre-transaction losses. The Company will not lose any deferred tax assets as a result of this limitation.

The
Company adopted the accounting guidance for accounting for uncertainty in income taxes as of April 1, 2007. This guidance clarifies the criteria that must be met prior to
recognition of the financial statement benefit of a position taken in a tax return. The Company does not have any uncertain tax positions recorded for the year ended December 31, 2010. A
reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:

Year ended December 31,2010

2009

2008(dollars in thousands)Beginning Balance

$


$
504

$
1,775Additions:Current year tax positions








Prior year tax positions








Reductions:Expired statue of limitations





(504
)

(1,271
)Ending Balance

$


$


$
504


The
Company is subject to examination by the United States Internal Revenue Service, the United Kingdom Inland Revenue Service and state and local and foreign tax
authorities in jurisdictions where the Company has significant business operations, such as New York. The Company is currently
undergoing an audit by the IRS for the tax years 2006 through 2009. Management does not believe this audit will yield any significant adjustments. Also, the Company's subsidiary that operates in China
concluded its audits for tax years 2005-2008, which resulted in immaterial tax assessments that the Company fully paid by the end of the third quarter of 2010.

F-68

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Table of Contents

Cowen Group, Inc.

Notes to Consolidated Financial Statements (Continued)

16. Income Taxes (Continued)

The Company intends to permanently reinvest the capital and accumulated earnings of its foreign subsidiaries in the respective subsidiary, but remits the current earnings of its foreign
subsidiaries to the United States to the extent permissible under local regulatory rules. The undistributed earnings of the Company's foreign subsidiaries totaled $5.0 million at
December 31, 2010. Determining the tax liability that would arise if these earnings were remitted is not practicable.

17. Commitments and Contingencies

The Company has entered into non-cancellable leases for office space and equipment. These leases contain rent escalation clauses. The Company records rent expense on a
straight-line basis over the lease term, including any rent holiday periods. Net rent expense was $10.5 million, $9.7 million, and $9.9 million, for the year ended
December 31, 2010, 2009, and 2008, respectively.

On
August 20, 2010, the Company entered into an amendment to the Company's original lease for offices located at 1221 Avenue of Americas, New York, to surrender a portion of the
office space. As of January 1, 2011, the Company has surrendered the space. On August 20, 2010, the Company entered into an amendment to the Company's original lease for offices located
at 599 Lexington Avenue, New York, to lease approximately 18,500 square feet of additional office space through August 2022.

As
of December 31, 2010, future minimum annual lease and service payments for the Company were as follows:

Equipment Leases(a)

Service Payments

Facility Leases(b)(dollars in thousands)2011

$
3,152

$
13,725

$
17,8242012


3,301


9,505


17,7302013


3,301


5,713


16,5272014


1,518


5,559


12,2732015


1,051


2,577


9,831Thereafter


77





61,254$
12,400

$
37,079

$
135,439


(a)Equipment
Leases include the Company's commitments relating to operating and capital leases. See note 18 for further information on capital lease
minimum payments.(b)Though
not reflected on this schedule, as of January 1, 2011, the minimum lease payments for the facility lease for the office space at 1221 Avenue
of Americas will decrease by approximately $8.9 million as long as all the terms and conditions relating to the surrender of space as described above are met.


The
Company has entered into agreements to sublease certain of its premises. These subleases expired in May 2010. The Company recorded sublease income related to these leases of
$0.8 million and $1.9 million during the year ended December 31, 2010 and 2009, respectively.

For
financial reporting purposes, the general partners have recorded a liability for potential clawback obligations to the limited partners of a real estate fund, due to changes in the
unrealized value of the fund's remaining investments and where the fund's general partner has previously received carried interest distributions.

F-69

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Table of Contents

Cowen Group, Inc.

Notes to Consolidated Financial Statements (Continued)

17. Commitments and Contingencies (Continued)

The
actual clawback liability, however, does not become realized until the end of a fund's life. The life of the real estate fund's with a potential clawback obligation, including
available contemplated extensions, are currently anticipated to expire at the end of 2013. Further extensions of such terms may be implemented under certain circumstances. As of December 31,
2010, the clawback obligations were $6.2 million. (See Note 23 "Related Party Transactions").

The
Company serves as the general partner/managing member and/or investment manager to various affiliated and sponsored funds. As such, the Company is contingently liable for obligations
for those entities. These amounts are not included above as the Company believes that the assets in these funds are sufficient to discharge any liabilities.

As
of December 31, 2010, the Company had unfunded commitments of $8.3 million pertaining to capital commitments in three real estate investments held by the Company, all of
which pertain to related party investments. Such commitments can be called at any time, subject to advance notice. In addition, the Company has committed to invest $40.7 million to the funds
managed by Cowen Healthcare Royalty Partners (the "CHRP Funds") as a limited partner of the CHRP Funds and also as a member of CHRP GP, the general partner of the CHRP Funds. This commitment is
expected to be called over a two to five year period. The Company will make its pro-rata investment in the CHRP Funds along with the other limited partners. Through December 31,
2010, the Company has funded $18.9 million towards these commitments.

Litigation

We face significant legal risks in our businesses and, in recent years, the volume of claims and amount of damages sought in litigation
and regulatory proceedings against financial institutions have been increasing. These risks include potential liability under federal securities and other laws in connection with securities offerings
and other transactions, as well as advice and opinions we provide concerning strategic transactions. In addition, like most financial institutions, we are often the subject of claims made by current
and former employees arising out of their employment or termination of employment with us. We are involved in a number of judicial, regulatory and arbitration matters arising in connection with our
business including those described below.

Pursuant
to ASC Topic 450, we review the need for any loss contingency reserves, and we have established reserves, as described below, for certain of these matters that we believe are
adequate where, in the opinion of management, the likelihood of liability is probable and the extent of such liability is reasonably estimable. As of December 31, 2010 and December 31,
2009, the total amounts reserved were $1.5 million and $1.5 million respectively. These amounts are included within accounts payable, accrued expenses and other liabilities in the
consolidated statements of financial condition. There are no other matters which are probable and reasonably estimable.

In
connection with Cowen Holdings's previous IPO and separation from Société Générale ("SG") in 2006, Cowen Holdings entered
into an indemnification agreement with SG under which (1) SG will indemnify, and will defend and hold harmless Cowen Holdings and each of the Cowen Holdings's subsidiaries from and against
certain liabilities assumed or retained by SG; and (2) SG will indemnify Cowen Holdings for known, pending and threatened litigation (including the costs of such litigation) and certain known
regulatory matters, in each case, that existed prior to the date of the Cowen Holdings's IPO to the extent the cost of such litigation results in payments in excess of the amount placed in escrow to
fund such matters (the "Indemnification Agreement"). The Company is involved in a number of legal and regulatory matters that arise from time to time in connection with the conduct

F-70

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Table of Contents

Cowen Group, Inc.

Notes to Consolidated Financial Statements (Continued)

17. Commitments and Contingencies (Continued)

of
its businesses. The Company estimates potential losses that may arise out of these matters and records a reserve and takes a charge to income when losses with respect to such matters are deemed
probable and can be reasonably estimated, in accordance with FASB accounting standards. To the extent that the Company is indemnified by SG, indemnified legal expenses and liabilities will be paid out
of escrow pursuant to an escrow agreement with SG. As of December 31, 2010 and December 31, 2009, the total amounts reserved in relation to the Indemnification Agreement were
$0.5 million and $0.5 million respectively.

The
Company is involved in regulatory inquiries and investigations by FINRA as part of an industry-wide sweep relating to gifts, gratuities, entertainment, error accounts and
policies, practices and procedures.

Although
there can be no assurances as to the ultimate outcome, the Company has established reserves for litigation and regulatory matters that it believes are adequate as of
December 31, 2010. Estimates, by their nature, are based on judgment and currently available information and involve a variety of factors, including, but not limited to, the type and nature of
the litigation, claim or proceeding, the progress of the matter, the advice of legal counsel, the Company's defenses and its experience in similar cases or proceedings as well as its assessment of
matters, including settlements, involving other defendants in similar or related cases or proceedings. The Company may increase or decrease its legal reserves in the future, on a
matter-by-matter basis, to account for developments in such matters.

In
view of the inherent difficulty of predicting the outcome of various claims against the Company, particularly where the matters are in early stages of discovery or claimants seek
indeterminate damages, the Company cannot reasonably determine the eventual outcome, the timing of ultimate resolution or estimate a range of eventual loss, or impact related to each currently pending
matter.

Based
on information currently available, the Company believes that the amount of reasonably possible losses will not have a material adverse effect on the Company's consolidated
statements of financial condition or cash flows. However, in light of the uncertainties involved in such proceedings, losses may be material to the Company's operating results in a future period,
depending in part, on the operating
results for such period and the size of the loss or liability imposed.

18. Short-Term Borrowings and other debt

As of December 31, 2010, short term borrowings and other debt of the Company were as follows:

As of December 31,2010

2009(in thousands)Line of credit

$
24,000

$
43,000Letter of credit





6,746Notes payable


1,396


Capital lease obligations


6,337


$
31,733

$
49,746


On
June 3, 2009, the Company entered into a collateralized revolving credit agreement with HVB AG, as lender, administrative agent and issuing bank, providing for a revolving
credit facility with a $50.0 million aggregate loan commitment amount available, with a $7.0 million letter of credit sub-limit.

F-71

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Table of Contents

Cowen Group, Inc.

Notes to Consolidated Financial Statements (Continued)

18. Short-Term Borrowings and other debt (Continued)

The
first borrowing under this line occurred on June 30, 2009. As of December 31, 2010 and December 31, 2009, the Company had borrowings of $24.0 million and
$43.0 million, respectively, under the line of credit portion. The Company had a letter of credit of $6.7 million at December 31, 2009 with HVB AG as well. At the Company's
election and discretion, borrowings under this collateralized revolving credit agreement bear interest per annum (based on a 360 day year) equal to either: (a) 0.5% plus the greater of
(1) the lender's prime rate, (2) the overnight federal funds rate plus 0.5% and (3) the LIBOR rate plus 1.0% or (b) the LIBOR rate plus 2.75%. Due to the variable interest
rate on these borrowings, their carrying values approximate fair value. The Company is required to pay a quarterly commitment fee on the undrawn portion of the revolving credit facility equal to 1.0%
per annum of the undrawn amount. For letters of credit, the Company will pay a fee on the stated amount of the letter
of credit at a rate equal to 2.75%. The 2009 collateralized revolving credit agreement was to mature on November 2, 2009 but was extended; $25.0 million was extended through
January 4, 2010 and $25 million was extended through September 29, 2011. All terms of the extended collateralized revolving credit agreement remain the same except the following:
at the Company's election and discretion, borrowings under the extended 2009 collateralized revolving credit agreement bear interest per annum (based on a 360 day year) equal to either:
(1) the lender's prime rate plus 1.5% or (2) the 1, 2 or 3 month LIBOR rate plus 3.5%. For letters of credit, the Company will pay a fee on the stated amount of the letter of
credit at a rate equal to 3.5%. The 2009 collateralized revolving credit agreement contained financial and other restrictive covenants that limited the Company's ability to incur additional debt and
engage in other activities. As of December 31, 2010 and during the period from June 3, 2009 to December 31, 2010, the Company was in compliance with these covenants.

During
2010, HVB AG had notified us that they will not be renewing the $6.7 million letter of credit which supports the lease of office space in New York. The Company has replaced that
letter of credit with a new letter of credit by another financial institution which expires December 12, 2011

On
January 4, 2010, in accordance with the terms of the collateralized revolving credit agreement, the Company remitted $25 million to HVB AG, reducing its revolving line
of credit balance.

Interest
incurred on the Company's lines of credit (in combination with all previous lines of credit) for the years ended December 31, 2010, 2009 and 2008 was $1 million,
$1.5 million and $1.5 million, respectively.

Cash
collateral pledged at December 31, 2009, on the consolidated statements of financial condition, represents collateral that was required to be posted for obligations or
potential obligations under the letter of credit discussed above pursuant to the lease agreement for the Company's premises in New York City. This collateral was released with the terms of the
extended collateralized revolving credit agreement. The Company's investment in Enterprise Master through Enterprise LP has been pledged as collateral under the line of credit portion of the
revolving credit agreement discussed above.

In
November 2010, the Company borrowed $0.6 million and $1.5 million to fund insurance premium payments. These notes bear interest at 5.05% and 4.95%, respectively and are
due in October of 2011. As of December 31, 2010, the outstanding balance on these combined notes payable was $1.4 million. Interest expense for the year ended December 31, 2010
was not significant. In addition, during the fourth quarter of 2010, the Company incurred $4.1 million of financing costs relating to short-term borrowings from affiliated funds to finance the
acquisition of one of the Luxembourg reinsurance captives.

F-72

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Table of Contents

Cowen Group, Inc.

Notes to Consolidated Financial Statements (Continued)

18. Short-Term Borrowings and other debt (Continued)

The
Company entered into several capital leases for computer equipment during the fourth quarter of 2010. These leases amount to $6.3 million and are recorded in fixed assets and
as capital lease obligations and have lease terms that range from 48 to 60 months and interest rates that range from 0% to 6.36%. No payments have been made on these leases during 2010.

As
of December 31, 2010 the Company also has four additional irrevocable letters of credit, for which there is cash collateral pledged, including (i) $50,000, which expires
on July 12, 2011, supporting workers' compensation insurance with Safety National Casualty Corporation, (ii) $57,000, which expires on May 12, 2011, supporting Cowen Healthcare
Royalty Management, LLC's Stamford office lease and (iii) $82,000, which expires on May 12, 2011, supporting the Company's San Francisco office and (iv) $1.2 million
which expires on August 31, 2011, supporting the Company's lease of additional office space in New York. To the extent any letter of credit is drawn upon, interest will be assessed at the prime
commercial lending rate. As of December 31, 2010 and December 31, 2009, there were no amounts due related to these letters of credit.

Levered
FOF had a $100.0 million line of credit with a major financial institution with a minimum borrowing amount of $20.0 million. Levered FOF could borrow on this line
of credit up to 72% of the amount of collateral pledged. In accordance with the loan agreement, interest accrued on the loan as well as custodian and other fees incurred by Levered FOF in connection
with the loan was capitalized and added to the total outstanding balance of the loan. During 2008, due to Levered FOF going into liquidation, the minimum borrowing amount was waived. As of
December 31, 2008, the outstanding balance on this line of credit was $10.0 million. This loan bears interest at LIBOR plus 1.35% per annum. Due to the floating rate of interest, its
carrying value approximates fair value. At December 31, 2008, all investments owned by Levered FOF were pledged as collateral in connection with this line of credit. Interest incurred on
Levered FOF's line of credit during the years ended December 31, 2009 and 2008 was $0 and $1.6 million, respectively. Levered FOF's line of credit was repaid in full as of
February 5, 2009 and was discontinued on that date.

Annual
scheduled maturities of debt and minimum lease payments for short term borrowing and other debt during each year ending December 31, 2010, are as follows:

Capital Lease
Obligation

Short
Term
Borrowings(in thousands)2011

$
1,393

$
25,3962012


1,541


2013


1,541


2014


1,371


2015


1,051


Thereafter


77


Subtotal


6,974


25,396Less: Amount representing interest(a)


(637
)

Total

$
6,337

$
25,396


(a)Amount
necessary to reduce net minimum lease payments to present value calculated at the Company's implicit rate at lease inception.


F-73

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Table of Contents

Cowen Group, Inc.

Notes to Consolidated Financial Statements (Continued)






19. Stockholders' Equity

The Company is authorized to issue 500,000,000 shares of common stock, which shall consist of 250,000,000 shares of Class A common stock, par value $0.01 per share, and
250,000,000 shares of Class B common stock, par value $0.01 per share, and 10,000,000 shares of preferred stock, par value $0.01 per share. Subject to the rights of holders of any outstanding
preferred stock, the number of authorized shares of common stock or preferred stock may be increased or decreased by the affirmative vote of the holders of a majority of the shares entitled to vote on
such matters, but in no instance can the number of authorized shares be reduced below the number of shares then outstanding.

As
the Transactions were accounted for as a reverse acquisition by Ramius of Cowen Holdings, the 37,536,826 shares of the Company's Class A common stock issued to RCG at the
consummation of the Transactions are accounted for as having been issued for all periods prior to the acquisition date.

Common stock

The certificate of incorporation of the Company provides for two classes of common stock, and for the convertibility of each class into
the other, to provide a mechanism by which holders of Class A common stock of the Company who may be limited in the amount of voting common stock of the Company they can hold pursuant to
federal, state or foreign bank laws, to convert their shares into non-voting Class B common stock to prevent being in violation of such laws. Each holder of Class A common
stock is entitled to one vote per share in connection with the election of directors and on all other matters submitted to a stockholder vote, provided, however, that, except as otherwise required by
law, holders of Class A common stock are not entitled to vote on any amendment to the Company 's amended and restated certificate of incorporation that relates solely to the terms of one or
more outstanding series of the Company's preferred stock, if holders of the preferred stock series are entitled to vote on the amendment under the Company's certificate of incorporation or Delaware
law. No holder of Class A common stock may accumulate votes in voting for directors of the Company.

Each
holder of Class B common stock is not entitled to vote except as otherwise provided by law, provided however that the Company must obtain the consent of a majority of the
holders of Class B common stock to effect any amendment, alteration or repeal of any provision of the Company's amended and restated certificate of incorporation or amended and restated
by-laws that would adversely affect the voting powers, preferences or rights of holders of Class B common stock. Except as otherwise provided by law, Class B common stock
shares will not be counted as shares held by stockholders for purposes of determining whether a vote or consent has been approved or given by the requisite percentage of shares.

Each
share of Class A common stock is convertible at the option of the holder and at no cost into one share of Class B common stock, and each share of Class B common
stock is convertible at the option of the holder and at no cost into one share of Class A common stock. The conversion ratios will be adjusted proportionally to reflect any stock split, stock
dividend, merger, reorganization, recapitalization or other change in the Class A common stock and Class B common stock. Upon conversion, converted shares resume the status of authorized
and unissued shares.

Subject
to the preferences of the holders of any of the Company's preferred stock that may be outstanding from time to time, each share of Class A common stock and Class B
common stock will have an equal and ratable right to receive dividends and other distributions in cash, property or shares of stock as may be declared by the Company's board of directors out of assets
or funds legally available for the payment of dividends and other distributions.

F-74

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Table of Contents

Cowen Group, Inc.

Notes to Consolidated Financial Statements (Continued)

19. Stockholders' Equity (Continued)

In
the event of the liquidation, dissolution or winding up of the Company, subject to the preferences of the holders of any preferred stock of the Company that may be outstanding from
time to time, holders of Class A common stock and Class B common stock will be entitled to share equally and ratably in the assets available for distribution to the Company's
stockholders. There are no redemption or sinking fund provisions applicable to the Class A or the Class B common stock.

On
November 2, 2009, in connection with Transactions, the Company issued of 37,536,826 shares of Class A common stock to RCG and 2,713,882 shares of Class A common
stock to HVB. In addition, 15,042,290 shares of Cowen Holdings's stock were converted into an equivalent number of the Company's Class A common stock.

In
December 2009, the Company completed a public offering of 17,292,698 shares of Class A common stock, resulting in approximately $82 million of additional equity. An
additional 284,655 shares were sold in connection with this offering. These shares were held by RCG and attributable to certain of its
non-affiliate members who withdrew one-third of their capital in RCG as of December 31, 2009. RCG distributed the net proceeds from the sale of these shares to those
members to satisfy such withdrawals. As of December 31, 2009, RCG holds 37,252,171 shares of the Company's Class A common stock. During 2010, 3,676,072 shares were transferred to
member's ownership resulting in 33,576,099 shares in the Company's Class A common stock being held by RCG Holdings at December 31, 2010.

Preferred stock

The Company's amended and restated certificate of incorporation permits the Company to issue up to 10,000,000 shares of preferred stock
in one or more series with such designations, titles, voting powers, preferences and rights and such qualifications, limitations and restrictions as may be fixed by the board of directors of the
Company without any further action by the Company's stockholders. The Company's board of directors may increase or decrease the number of shares of any series of preferred stock following the issuance
of that series of preferred stock, but in no instance can the number of shares of a series of preferred stock be reduced below the number of shares of the series then outstanding.

20. Earnings Per Share

The Company calculates its basic and diluted earnings per share in accordance with FASB accounting standards. Basic earnings per common share is calculated by dividing net income by the
weighted average number of common shares outstanding for the period. As of December 31, 2010, there were 75,490,209 shares outstanding, of which 1,554,124 are restricted. To the extent that
outstanding restricted shares are unvested, they are excluded from the calculation of basic earnings per share. The Company has included 98,054 fully vested, unissued restricted stock units in its
calculation of basic earnings per share.

Diluted
earnings per common share is calculated by adjusting the weighted average outstanding shares to assume conversion of all potentially dilutive nonvested restricted stock and stock
options. The Company uses the treasury stock method to reflect the potential dilutive effect of the unvested restricted shares, restricted stock units and unexercised stock options. In calculating the
number of dilutive shares outstanding, the shares of common stock underlying unvested restricted shares and restricted stock units are assumed to have been delivered, and options are assumed to have
been exercised, on the grant date. The assumed proceeds from the assumed vesting, delivery and exercising

F-75

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Table of Contents

Cowen Group, Inc.

Notes to Consolidated Financial Statements (Continued)

20. Earnings Per Share (Continued)

were
calculated as the sum of (a) the amount of compensation cost attributed to future services and not yet recognized and (b) the amount of tax benefit that was credited to additional
paid-in capital assuming vesting and delivery of the restricted stock. The tax benefit is the amount resulting from a tax deduction for compensation in excess of compensation expense
recognized for financial statement reporting purposes. All outstanding stock options, and unvested restricted shares and restricted stock units were not included in the computation of diluted net loss
per common share for the year ended December 31, 2010, as their inclusion would have been anti-dilutive.

In
calculating earnings per share for the periods prior to the November 2, 2009 transaction date, the net earnings (loss) amounts represent the results for the former Ramius, and
the shares outstanding represents the number of shares received by the former Ramius in the Transactions. The computation of earnings per share is as follows:

For the Year Ended December 31,2010

2009

2008(dollars in thousands,
except per share data)Net (loss) income attributable to Cowen Group, Inc. shareholders

$
(45,417
)
$
(55,287
)
$
(141,764
)Shares for basic and diluted calculations:Average shares used in basic computation


73,149


41,001


37,537Stock options








Restricted stock








Average shares used in diluted computation


73,149


41,001


37,537Earnings (loss) per share:Basic

$
(0.62
)
$
(1.35
)
$
(3.78
)Diluted

$
(0.62
)
$
(1.35
)
$
(3.78
)




21. Segment Reporting

The Company conducts its operations through two segments: the alternative investment management segment and the broker-dealer segment (subsequent to the Transactions). These activities
are conducted primarily in the United States and substantially all of its revenues are generated domestically. The performance measure for these segments is Economic Income, which management uses to
evaluate the financial performance of and make operating decisions for the segment including determining appropriate compensation levels.

The
chief operating decision maker uses Economic Income to assess the performance of the segments and make operating decisions for the segments. In general, Economic Income (loss) is a
pre-tax measure that (i) presents the Company's results of operations without the impact resulting from the consolidation of any of the Company's funds (in both periods presented),
(ii) excludes goodwill impairment (there were no goodwill impairment charges in either period presented), (iii) excludes allocations to the managing member, as there will be no such
allocations in the future (there were no allocations made to the managing member in either period presented), and (iv) excludes the reorganization expenses for the Transactions (in the 2009
period only) and one-time equity awards made in connection with the Transactions (in the 2010 period only). In addition, Economic Income revenues include investment income that represents
the income the Company has earned in investing its own capital, including realized and unrealized gains and losses, interest and dividends, net of

F-76

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Table of Contents

Cowen Group, Inc.

Notes to Consolidated Financial Statements (Continued)

21. Segment Reporting (Continued)

associated
investment related expenses. For GAAP purposes, these items are included in each of their respective line items. Economic Income revenues also include management fees, incentive income and
investment income earned through the Company's investment as a general partner in certain real estate entities. For GAAP purposes, all of these items are recorded in other income (loss). In addition,
Economic Income expenses are reduced by reimbursement from affiliates, which for GAAP purposes is presented gross as part of revenue.

As
further stated below, one major difference between Economic Income and US GAAP net income is that Economic Income presents the segments' results of operations without the
impact resulting from the full consolidation of any of the Consolidated Funds. Consolidation of these funds results in including in income the pro rata share of the income or loss attributable to
other owners of such entities which is reflected in net income (loss) attributable to non-controlling interest in consolidated subsidiaries in the consolidated statements of operations.
This pro rata share has no effect on the overall financial performance for the Alternative Investment Management segment, as ultimately, this income or loss is not income or loss for the Alternative
Investment Management segment itself. Included in Economic Income is the actual pro rata share of the income or loss attributable to the Company as an investor in such entities, which is relevant in
management making operating decisions and evaluating financial performance.

F-77

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Table of Contents

Cowen Group, Inc.

Notes to Consolidated Financial Statements (Continued)

21. Segment Reporting (Continued)

The
following tables set forth operating results for the Company's alternative investment management and broker-dealer segments and related adjustments necessary to reconcile the
Company's Economic Income measure to arrive at the Company's consolidated net income (loss):

Year Ended December 31, 2010AdjustmentsAlternative
Investment
Management

Broker-Dealer

Total
Income

Funds
Consolidation

Other
Adjustments

GAAP(dollars in thousands)RevenuesInvestment banking

$


$
38,965

$
38,965

$


$


$
38,965Brokerage





112,217


112,217








112,217Management fees


51,440





51,440


(2,877
)

(9,716
)(a)

38,847Incentive income


9,615





9,615





1,748
(a)

11,363Investment Income


59,638


(221
)

59,417





(59,417
)(c)

Interest and dividends














11,547
(c)

11,547Reimbursement from affiliates











(499
)

7,315
(b)

6,816Other revenue


932


7


939





997
(c)

1,936Consolidated Funds revenues











12,119





12,119Total revenues


121,625


150,968


272,593


8,743


(47,526
)

233,810ExpensesEmployee compensation and benefits


58,831


127,062


185,893





9,026


194,919Interest and dividends


265


761


1,026





7,945
(c)

8,971Non-compensation expensesFixed


29,629


63,494


93,123





(93,123
)(c)(d)

Non-compensation expensesVariable


6,672


27,022


33,694





(33,694
)(c)(d)

Non-compensation expenses














127,931
(c)(d)

127,931Reimbursement from affiliates


(7,315
)




(7,315
)




7,315
(b)

Consolidated Funds expenses











8,121





8,121Total expenses


88,082


218,339


306,421


8,121


25,400


339,942Other income (loss)Net gain (loss) on securities, derivatives and other investments














21,980
(c)

21,980Consolidated Funds net gains (losses)











11,346


19,716


31,062Total other income (loss)











11,346


41,696


53,042Income (loss) before income taxes and non-controlling interests


33,543


(67,371
)

(33,828
)

11,968


(31,230
)

(53,090
)Income taxes expense / (benefit)














(21,400
)(b)(c)

(21,400
)Economic Income (Loss) / Net income (loss) before non-controlling interests


33,543


(67,371
)

(33,828
)

11,968


(9,830
)

(31,690
)(Income) loss attributable to redeemable non-controlling interests


(1,759
)




(1,759
)

(11,968
)




(13,727
)Economic Income (Loss) / Net Income (loss) attributable to Cowen Group stockholders

$
31,784

$
(67,371
)
$
(35,587
)
$


$
(9,830
)
$
(45,417
)


F-78

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Table of Contents

Cowen Group, Inc.

Notes to Consolidated Financial Statements (Continued)

21. Segment Reporting (Continued)



Year Ended December 31, 2009AdjustmentsAlternative
Investment
Management

Broker-Dealer

Total
Income

Funds
Consolidation

Other
Adjustments

GAAP(dollars in thousands)RevenuesInvestment banking

$


$
10,557

$
10,557

$


$


$
10,557Brokerage





17,812


17,812








17,812Management fees


53,940





53,940


(4,024
)

(8,222
)(a)

41,694Incentive income


(6,996
)




(6,996
)




8,907
(a)

1,911Investment Income


21,958





21,958





(21,958
)(c)

Interest and dividends














477
(c)

477Reimbursement from affiliates











(718
)

11,044
(b)

10,326Other revenue


3,536





3,536





1,196
(c)

4,732Consolidated Funds revenues











36,392





36,392Total revenues


72,438


28,369


100,807


31,650


(8,556
)

123,901ExpensesEmployee compensation and benefits


63,207


30,032


93,239





3,353


96,592Interest and dividends


1,549





1,549





52
(c)

1,601Non-compensation expensesFixed


40,340


10,946


51,286





(51,286
)(c)(d)

Non-compensation expensesVariable


3,467


3,674


7,141





(7,141
)(c)(d)

Non-compensation expenses














68,217
(c)(d)

68,217Goodwill impairment














 (b
)

Reimbursement from affiliates


(11,044
)




(11,044
)




11,044
(b)

Consolidated Funds expenses











23,581





23,581Total expenses


97,519


44,652


142,171


23,581


24,239


189,991Other income (loss)Net gain (loss) on securities, derivatives and other investments














(2,154
)(c)

(2,154
)Consolidated Funds net gains (losses)











1,588


19,411


20,999Total other income (loss)











1,588


17,257


18,845Income (loss) before income taxes and non-controlling interests


(25,081
)

(16,283
)

(41,364
)

9,657


(15,538
)

(47,245
)Income taxes expense/(benefit)











(5,989
)

(2,217
)(b)

(8,206
)Economic Income (Loss)/Net income (loss) before non-controlling interests


(25,081
)

(16,283
)

(41,364
)

15,646


(13,321
)

(39,039
)(Income) loss attributable to redeemable non-controlling interests


(602
)




(602
)

(15,646
)




(16,248
)Economic Income (Loss)/Net Income (loss) attributable to Cowen Group stockholders

$
(25,683
)
$
(16,283
)
$
(41,966
)
$


$
(13,321
)
$
(55,287
)


F-79

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Table of Contents

Cowen Group, Inc.

Notes to Consolidated Financial Statements (Continued)

21. Segment Reporting (Continued)

Year Ended December 31, 2008AdjustmentsAlternative
Investment
Management

Funds
Consolidation

Other
Adjustments

GAAP(dollars in thousands)RevenuesInvestment banking

$


$


$


$
Brokerage











Management fees


84,621


(5,210
)

(8,593
)(a)

70,818Incentive income


(2,586
)




2,586
(a)

Investment Income


(104,939
)




104,939
(c)

Interest and dividends








1,993
(c)

1,993Reimbursement from affiliates





(1,064
)

17,394
(b)

16,330Other revenue


4,004





2,849
(c)

6,853Consolidated Funds revenues





31,739





31,739Total revenues


(18,900
)

25,465


121,168


127,733ExpensesEmployee compensation and benefits


84,769








84,769Interest and dividends


1,500





320
(c)

1,820Non-compensation expensesFixed


46,561





(46,561
)(c)(d)

Non-compensation expensesVariable


4,030





(4,030
)(c)(d)

Non-compensation expenses








53,036
(c)(d)

53,036Goodwill impairment








10,200
(b)

10,200Reimbursement from affiliates


(17,394
)




17,394
(b)

Consolidated Funds expenses





34,268





34,268Total expenses


119,466


34,268


30,359


184,093Other income (loss)Net gain (loss) on securities, derivatives and other investments








(2,006
)(c)

(2,006
)Consolidated Funds net gains (losses)





(99,482
)

(99,003
)

(198,485
)Total other income (loss)





(99,482
)

(101,009
)

(200,491
)Income (loss) before income taxes and non-controlling interests


(138,366
)

(108,285
)

(10,200
)

(256,851
)Income taxes expense/(benefit)








(1,301
)(b)

(1,301
)Economic Income (Loss) / Net income (loss) before non-controlling interests


(138,366
)

(108,285
)

(8,899
)

(255,550
)(Income) loss attributable to redeemable non-controlling interests


5,501


108,285





113,786Economic Income (Loss) / Net Income (loss) available to all Members

$
(132,865
)
$


$
(8,899
)
$
(141,764
)


F-80

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Table of Contents

Cowen Group, Inc.

Notes to Consolidated Financial Statements (Continued)

21. Segment Reporting (Continued)

The
following is a summary of the adjustments made to US GAAP net income (loss) for the segment to arrive at Economic Income:

Funds Consolidation:The impacts of consolidation and the related elimination entries of the Consolidated Funds are not included in
Economic Income.
Adjustments to reconcile to US GAAP net income include elimination of incentive income and management fees earned from the Consolidated Funds and addition of fund expenses excluding management
fees paid, fund revenues and investment income (loss).

Other Adjustments:



For
the year ended December 31, 2010, 2009, and 2008, there was no one fund or other customer which represented more than 10% of the Company's total revenues.

22. Regulatory Requirements

As a registered broker-dealer, Cowen and Company is subject to the SEC's Uniform Net Capital
Rule 15c3-1 (the "Rule"), which requires the maintenance of minimum net capital. Under the alternative method permitted by the Rule, Cowen and Company's minimum net capital
requirement, as defined, is $1.0 million. Cowen and Company is not permitted to withdraw equity if certain minimum net capital requirements are not met. As of December 31, 2010, Cowen
and Company had total net capital of approximately $27.7 million, which was approximately $26.7 million in excess of its minimum net capital requirement of $1.0 million.

Cowen
and Company is exempt from the provisions of Rule 15c3-3 under the Securities Exchange Act of 1934 as their activities are limited to those set forth in the
conditions for exemption appearing in paragraph (k)(2)(ii) of the Rule.

Proprietary
accounts of introducing brokers ("PAIB") held at the clearing broker are considered allowable assets for net capital purposes, pursuant to agreements between Cowen and
Company and the clearing broker, which require, among other things, that the clearing broker performs computations for PAIB and segregates certain balances on behalf of Cowen and Company, if
applicable.

F-81

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Table of Contents

Cowen Group, Inc.

Notes to Consolidated Financial Statements (Continued)

22. Regulatory Requirements (Continued)

Ramius
UK Ltd. ("Ramius UK") and Cowen International Limited ("CIL") are subject to the capital requirements of the Financial Services Authority ("FSA") of the UK.
Financial Resources, as defined, must exceed the total Financial Resources requirement of the FSA. As of December 31, 2010, Ramius UK's Financial Resources of $3.8 million exceeded its
minimum requirement of $0.4 million by $3.4 million. As of December 31, 2010, CIL's Financial Resources of $5.1 million exceeded its minimum requirement of
$2.7 million by $2.4 million.

Cowen
Latitude Advisors Limited ("CLAL") is subject to the financial resources requirements of the Securities and Futures Commission ("SFC") of Hong Kong. Financial
Resources, as defined, must exceed the Total Financial Resources requirement of the SFC. As of December 31, 2010, CLAL's Financial Resources of $0.8 million exceeded the
minimum requirement of $0.1 million by $0.7 million.

23. Related Party Transactions

The Company acts as managing member, general partner and/or investment manager to the Ramius managed funds, Cowen Healthcare Royalty Management, LLC ("CHRP Management"), and the
CHRP Funds, and certain managed accounts. Management fees and incentive income are primarily earned from affiliated entities. Fees receivable primarily represents the management fees and incentive
income owed to the Company from these related funds and certain affiliated managed accounts. As of December 31, 2010, approximately $9.9 million included in fees receivable are earned
from external parties and the associated revenues are recorded in investment banking revenues in the consolidated statements of operations.

The
Company may, at its discretion, waive certain of the fees charged to the funds that it manages to avoid duplication of fees when such funds have an underlying investment in another
affiliated investment fund. For the year ended, December 31, 2010, 2009 and 2008, the Company reimbursed the funds that it manages $2.4 million, $5 million and
$24.6 million, respectively, which were recorded net in management fees and incentive income in the consolidated statements of operations. At December 31, 2010 and, 2009, related amounts
still payable were $2.3 million and $2.7 million, respectively, and were reflected in fees payable in the consolidated statements of financial condition.

During
the first quarter of 2010, certain affiliated funds incurred a loss related to a trading error for which the Company determined, consistent with its internal policies, to bear the
cost of correcting such error. This resulted in a loss of approximately $2.7 million for the Company. This amount is included in other expenses in the accompanying consolidated statements of
operations for the year ended December 31, 2010.

Pursuant
to the operating agreement for its subsidiary Ramius Alternative Solutions LLC, the Company is required to pay certain distribution fees on assets raised by third party
distributors. Such distribution fees are reported as client services and business development in the consolidated statements of operations. These amounts equaled $1 million,
$1.7 million, and $3.6 million for the years ended December 31, 2010, 2009, and 2008, respectively. At December 31, 2010 and December 31, 2009, related amounts still
payable were $0.2 million and $0.5 million, respectively, and were reflected in accounts payable, accrued expenses and other liabilities in the consolidated statements of financial
condition.

As
a result of a business combination in 2004, Ramius Alternative Solutions LLC acquired receivables of $9.6 million and assumed liabilities of a corresponding amount
relating to various

F-82

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Table of Contents

Cowen Group, Inc.

Notes to Consolidated Financial Statements (Continued)

23. Related Party Transactions (Continued)

agreements
with investors. Such amounts have been recorded in fees receivable and due to related parties, respectively, in the consolidated statements of financial condition. The remaining balance yet
to be paid was $1.7 million and $2.6 million as of December 31, 2010 and December 31, 2009, respectively. Of such amounts outstanding at December 31, 2010,
$0.7 million will be paid in 2011.

The
Company may, on occasion, also make loans to employees or other affiliates, excluding executive officers of the Company. These loans are interest bearing and settle pursuant to the
agreed-upon terms with such employees or affiliates and are included in receivable from affiliates in the consolidated statements of financial condition. As of December 31, 2010 and
December 31, 2009, loans to employees of $4.7 million and $1.9 million, respectively, were included in due from related parties on the consolidated statements of financial
condition. For the year ended December 31, 2010, 2009, and 2008, interest of $0.5 million, $0.1 million and $0.3 million was charged for these loans and advances,
respectively. The remaining balance included in due from related parties primarily relates to amounts due to the Company from affiliated funds and real estate entities due to expenses paid on their
behalf.

Included
in due to related parties is approximately $6.5 million and $5.0 million at December 31, 2010 and 2009, respectively, related to a subordination agreement
with an investor in certain real estate funds. This total is based on a hypothetical liquidation of the real estate funds as of the balance sheet date.

24. Guarantees

FASB accounting standards require the Company to disclose information about its obligations under certain guarantee arrangements. Those standards define guarantees as contracts and
indemnification agreements that contingently require a guarantor to make payments to the guaranteed party based on changes in an underlying security (such as an interest or foreign exchange rate,
security or commodity price, an index or the occurrence or nonoccurrence of a specified event) related to an asset, liability or equity security of a guaranteed party. Those standards also define
guarantees as contracts that contingently require the guarantor to make payments to the guaranteed party based on another entity's failure to perform under an agreement as well as indirect guarantees
of the indebtedness of others.

In
the normal course of its operations, the Company enters into contracts that contain a variety of representations and warranties and which provide general indemnifications. The
Company's maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Company that have not yet occurred. However, based on experience, the
Company expects the risk of loss to be remote.

The
Company indemnifies and guarantees certain service providers, such as clearing and custody agents, trustees and administrators, against specified potential losses in connection with
their acting as an agent of, or providing services to, the Company or its affiliates. The Company also indemnifies some clients against potential losses incurred in the event specified third-party
service providers, including sub-custodians and third-party brokers, improperly execute transactions. The maximum potential amount of future payments that the Company could be required to
make under these indemnifications cannot be estimated. However, the Company believes that it is unlikely it will have to make significant payments under these arrangements and has not recorded any
contingent liability in the consolidated financial statements for these indemnifications.

F-83

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Table of Contents

Cowen Group, Inc.

Notes to Consolidated Financial Statements (Continued)

24. Guarantees (Continued)

The
Company is a member of various securities exchanges. Under the standard membership agreements, members are required to guarantee the performance of other members and, accordingly, if
another member becomes unable to satisfy its obligations to the exchange, all other members would be required to meet the shortfall. The Company's liability under these arrangements is not
quantifiable and could exceed the cash and securities it has posted as collateral. However, management believes that the potential for the Company to be required to make payments under these
arrangements is remote. Accordingly, no contingent liability is recorded in the consolidated statements of financial condition for these arrangements.

The
Company also provides representations and warranties to counterparties in connection with a variety of commercial transactions and occasionally indemnifies them against potential
losses caused by the breach of those representations and warranties. The Company may also provide standard indemnifications to some counterparties to protect them in the event additional taxes are
owed or payments are withheld, due either to a change in or adverse application of certain tax laws. These indemnifications generally are standard contractual terms and are entered into in the normal
course of business. The maximum potential amount of future payments that the Company could be required to make under these indemnifications cannot be estimated. However, the Company believes it is
unlikely it will have to make material payments under these arrangements and has not recorded any contingent liability in the consolidated financial statements for these indemnifications.

25. Subsequent events

The Company and LaBranche & Co Inc. announced a definitive merger agreement under which the Company will acquire LaBranche, a market-maker in options, exchange traded funds
and futures on various exchanges domestically and internationally. Under the terms of the merger agreement and subject to the satisfaction or waiver of certain closing conditions, the Company will
acquire LaBranche in a stock-for-stock merger transaction valued at approximately $193 million. LaBranche shareholders will receive upon closing a fixed ratio of 0.9980
of a share of the Company Class A common stock for each outstanding share of LaBranche common stock. The total Company shares to be issued to LaBranche shareholders will represent approximately
35.1 percent of the combined company and 33.8 percent on a fully diluted basis.

The
Company plans to spin-off its Value and Opportunity business, which focuses on investing in deep value situations and using shareholder activism to generate superior
returns, into stand-alone and independent business that will be managed by Starboard Value LP ("Starboard"). Upon completion of the spin-off, the Company will maintain a significant
minority interest in Starboard. The Company expects to complete the separation by March 31, 2011.

Supplemental Financial Information

The following table presents unaudited quarterly results of operations for 2010 and 2009. These quarterly results reflect all normal
recurring adjustments that are, in the opinion of management, necessary for a fair presentation of the results. Revenues and net income (loss) can vary significantly from quarter to quarter due to the
nature of the Company's business activities.

F-84

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Cowen Group, Inc.

Notes to Consolidated Financial Statements (Continued)

Cowen Group, Inc.  Quarterly Financial Information (Unaudited)

Quarter EndedMarch 31,
2010

June 30,
2010

Sept. 30,
2010

Dec. 31,
2010(in thousands)Total revenues

$
56,258

$
55,000

$
52,202

$
70,350Net Income (loss) before income taxes


(5,186
)

(23,150
)

(13,027
)

(11,727
)Provision (benefit) for taxes


(266
)

599


299


(22,032
)Net Income (loss)


(4,920
)

(23,749
)

(13,326
)

10,305Net Income (loss) attributable to non-controlling interests in consolidated subsidiaries


8,056


(2,552
)

2,029


6,194Net income (loss) attributable to Cowen Group, Inc. stockholders

$
(12,976
)
$
(21,197
)
$
(15,355
)

4,111Earnings (loss) per share:Basic and diluted

$
(0.18
)
$
(0.29
)
$
(0.21
)
$
0.06Weighted average number of common shares:Basic and diluted


72,509


72,693


73,385


73,149




Quarter EndedMarch 31,
2009

June 30,
2009

Sept. 30,
2009

Dec. 31,
2009(in thousands)Total revenues

$
20,725

$
17,032

$
16,462

$
69,682Net Income (loss) before income taxes


(11,269
)

(10,801
)

(1,915
)

(23,260
)Provision (benefit) for taxes


(66
)

17


(5,929
)

(2,228
)Net Income (loss)


(11,203
)

(10,818
)

4,014


(21,032
)Net Income (loss) attributable to non-controlling interests in consolidated subsidiaries


(2,404
)

6,393


9,899


2,360Net income (loss) attributable to Cowen Group, Inc. stockholders

$
(8,799
)
$
(17,211
)
$
(5,885
)

(23,392
)Earnings (loss) per share:Basic and diluted

$
(0.23
)
$
(0.46
)
$
(0.16
)
$
(0.46
)Weighted average number of common shares:Basic and diluted


37,537


37,537


37,537


51,279


F-85

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Table of Contents

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly authorized.

COWEN GROUP, INC.By:

/s/ PETER A. COHENName:

Peter A. CohenDate: March 11, 2011

Title:

Chairman of the Board, Chief Executive
Officer and President


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

Signature

Title

Date/s/ PETER A. COHEN Peter A. Cohen

Chairman of the Board, Chief Executive Officer and President (Principal Executive Officer)

March 11, 2011/s/ STEPHEN A. LASOTA Stephen A. Lasota

Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)

March 11, 2011/s/ STEVEN KOTLER Steven Kotler

Director

March 11, 2011/s/ JEROME S. MARKOWITZ Jerome S. Markowitz

Director

March 11, 2011/s/ JACK H. NUSBAUM Jack H. Nusbaum

Director

March 11, 2011/s/ EDOARDO SPEZZOTTI Edoardo Spezzotti

Director

March 11, 2011/s/ JOHN E. TOFFOLON, JR. John E. Toffolon, Jr.

Director

March 11, 2011/s/ JOSEPH R. WRIGHT Joseph R. Wright

Director

March 11, 2011


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Table of Contents

Exhibit Index

Exhibit No.

Description2.1

Transaction Agreement and Agreement and Plan of Merger, dated as of June 3, 2009, by and among Cowen Group, Inc., Lexington Park Parent Corp., Lexington Merger Corp., Park Exchange LLC and Ramius LLC
(included as Appendix A to the proxy statement/prospectus forming a part of the Registration Statement on Form S-4 filed on July 10, 2009).2.2

Agreement and Plan of Merger, dated as of February 16, 2011, by and among the Company, Louisiana Merger Sub, Inc. and LaBranche (previously filed as Exhibit 2.1 to Form 8-K filed on
February 17, 2011).3.1

Amended and Restated Certificate of Incorporation of Cowen Group, Inc. (previously filed as Exhibit 3.1 to the Form 10-Q filed November 25, 2009).3.2

Amended and Restated By-Laws of Cowen Group, Inc. (previously filed as Exhibit 3.1 to the Form 10-Q filed November 25, 2009).3.3

Certificate of Amendment to the Amended and Restated Certificate of Incorporation of Cowen Group, Inc. (previously filed as Exhibit 3.1 to the Form 10-Q filed November 25, 2009).4.1

Form of Class A Common Stock Certificate (previously filed as Exhibit 4.1 to Amendment No. 2 to Form S-1 filed on December 14, 2009).4.2

Voting Agreement, dated as of February 16, 2011, by and among, the Company and the individuals listed on Schedule A thereto (previously filed as Exhibit 4.1 to Form 8-K filed on February 17,
2011).10.1

Registration Rights Agreement, dated as of November 2, 2009, by and among the Company, RCG Holdings LLC, BA Alpine Holdings, Inc., Bayerische Hypo-und Vereinsbank AG, and HVB Alternative
Advisors Inc. (previously filed as Exhibit 10.1 to the Form 8-K filed November 5, 2009).10.2

Secured Revolving Credit Agreement, dated as of November 2, 2009, by and among the Company, as Borrower, the various Lenders party thereto from time to time and Bayerische Hypo- und Vereinsbank AG, New York
Branch, as Administrative Agent, Issuer of the Letter of Credit, Fronting Bank and a Lender (previously filed as Exhibit 10.2 to the Form 8-K filed November 5, 2009).10.3

Asset Exchange Agreement, dated as of June 3, 2009, by and among RCG Holdings LLC, HVB Alternative Advisors LLC, Bayerische Hypo- und Vereinsbank AG, Cowen Group, Inc., Cowen Group, Inc. and
Lexington Merger Corp., as amended by the First Amendment to Asset Exchange Agreement, dated as of July 9, 2009 (included as Appendix B to the proxy statement/prospectus forming a part of the Registration Statement on Form S-4 filed
July 10, 2009).10.4

Employment Agreement of Peter A. Cohen, dated as of June 3, 2009, by and among Peter A. Cohen, Ramius LLC, Cowen Group, Inc. and RCG Holdings LLC (previously filed as Exhibit 10.3 to the First
Amendment to the Registration Statement on Form S-4 filed August 17, 2009).*


E-1

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Table of Contents

Exhibit No.

Description10.5

Employment Agreement of Morgan Stark, dated as of June 3, 2009, by and among Morgan Stark, Ramius LLC, Cowen Group, Inc. and RCG Holdings LLC (previously filed as Exhibit 10.4 to the First
Amendment to the Registration Statement on Form S-4 filed August 17, 2009).*10.6

Appendix A to Employment Agreement of Morgan Stark, dated as of June 3, 2009, by and between Morgan Stark, Ramius LLC and RCG Holdings LLC (previously filed as Exhibit 10.5 to the First
Amendment to the Registration Statement on Form S-4 filed August 17, 2009).*10.7

Employment Agreement of Thomas Strauss, dated as of June 3, 2009, by and among Thomas Strauss, Ramius LLC, Cowen Group, Inc. and RCG Holdings LLC (previously filed as Exhibit 10.6 to the First
Amendment to the Registration Statement on Form S-4 filed August 17, 2009).*10.8

Employment Agreement of David M. Malcolm, dated as of June 3, 2009, by and among David M. Malcolm, Cowen Group, Inc., RCG Holdings LLC and Cowen Holdings, Inc. (previously filed as
Exhibit 10.8 to Amendment No. 2 to Form S-1 filed on December 14, 2009).10.9

Appendix A to Employment Agreement of David M. Malcolm, dated as of June 3, 2009, by and between David M. Malcolm and Cowen Group, Inc. (previously filed as Exhibit 10.9 to Amendment No. 2 to
Form S-1 filed on December 14, 2009).*10.10

Employment Agreement of Christopher A. White, dated as of July 10, 2009, by and among Christopher A. White, Cowen Group, Inc., and Cowen Holdings, Inc. (previously filed as Exhibit 10.10 to
Amendment No. 2 to Form S-1 filed on December 14, 2009).*10.11

Employment Agreement of Jeffrey Solomon, dated as of June 3, 2009, by and among Jeffrey Solomon, Ramius LLC (f/k/a Park Exchange LLC), Cowen Group, Inc. (f/k/a LexingtonPark Parent Corp.) and RCG
Holdings LLC (f/k/a Ramius LLC) (previously filed as Exhibit 10.5 to the Form 8-K filed November 5, 2009).*10.12

Amendment to the Investment Management Agreement, dated as of June 3, 2009, by and between Ramius LLC (f/k/a Ramius Capital Group, L.L.C. and successor by assignment from Ramius Securities, L.L.C.) and
Alpine Cayman Islands Limited (f/k/a Bank Austria Cayman Islands Limited) (previously filed as Exhibit 99.14 to the First Amendment to the Registration Statement on Form S-4 filed August 17, 2009).^10.13

Second Amendment to the Investment Reporting Agreement, dated as of June 3, 2009, by and between Ramius Fund of Funds Group LLC (f/k/a Ramius HVB Partners LLC, New York) and Bayerische Hypo- und
Vereinsbank AG, Munich) (previously filed as Exhibit 99.15 to the First Amendment to the Registration Statement on Form S-4 filed August 17, 2009.).^10.14

Lease, dated as of June 22, 2007 by and between 599 Lexington Avenue LLC and Ramius LLC (as successor in interest to RCG Holdings LLC (f/k/a Ramius Capital Group, LLC)), as amended by the
First Amendment to Lease, dated as of June 9, 2008, by and between BP 599 Lexington Avenue LLC and Ramius LLC (as successor in interest to RCG Holdings LLC (f/k/a Ramius LLC)) (previously filed as Exhibit 10.14 to
Amendment No. 2 to Form S-1 filed on December 14, 2009).10.15

Sublease, dated as of December 19, 2005, by and between Société Générale and SG Cowen & Co., LLC. (previously filed as Exhibit 10.15 to Amendment No. 2 to
Form S-1 filed on December 14, 2009).


E-2

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Table of Contents

Exhibit No.

Description10.16

Lease, dated as of October 29, 1993 by and between Rock-McGraw, Inc. and Société Générale (previously filed as Exhibit 10.16 to Amendment No. 2 to Form S-1 filed on
December 14, 2009).10.17

Supplemental Indenture, dated as of May 5, 1998, by and between Rock-McGraw, Inc. and Société Générale (previously filed as Exhibit 10.17 to Amendment No. 2 to
Form S-1 filed on December 14, 2009).10.18

Indemnification Agreement, dated as of July 11, 2006, by and among Société Générale, SG Americas Securities Holdings, Cowen and Company, LLC and Cowen Holdings, Inc. (f/k/a
Cowen Group, Inc.) (previously filed as Exhibit 10.18 to Amendment No. 2 to Form S-1 filed on December 14, 2009).10.19

Escrow Agreement, dated as of July 12, 2006, by and among SG Americas Securities Holdings, Inc., Cowen and Company, LLC, Cowen Holdings, Inc. (f/k/a Cowen Group, Inc.) and the escrow agent
(previously filed as Exhibit 10.19 to Amendment No. 2 to Form S-1 filed on December 14, 2009).10.20

Cowen Group, Inc. 2006 Equity and Incentive Plan (previously filed as Exhibit 10.20 to Amendment No. 2 to Form S-1 filed on December 14, 2009).*10.21

Cowen Group, Inc. 2007 Equity and Incentive plan (previously filed as Exhibit 10.21 to Amendment No. 2 to Form S-1 filed on December 14, 2009).*10.22

Equity Award Agreement of Christopher A. White (previously filed as Exhibit 10.1 to the Form 8-K filed on December 7, 2009).*10.23

Form of RSU Award Agreement. (previously filed as Exhibit 10.23 to the Form 10-K filed on March 25, 2010).*10.24

Cowen Group, Inc. 2010 Equity and Incentive Plan (incorporated by reference to Appendix A to the Definitive Proxy Statement of Cowen Group, Inc., on Schedule 14A for the year ended December 31,
 2009, as filed on April 30, 2010).*10.25

Form of Equity Award Agreement (previously filed as Exhibit 10.2 to the Form 8-K filed on June 10, 2010).*10.26

Modification Agreement, dated as of May 11, 2010, among the Registrant, RCG Holdings LLC, C4S & Co. L.L.C., Ramius LLC, Ramius Alternative Solutions LLC, BA Alpine Holdings, Inc.,
 Alpine Cayman Islands Limited, UniCredit Bank AG (formerly known as Bayerische Hypo- und Vereinsbank G, Munich), HVB Alternative Advisors LLC and CEAKSCH Verwaltungs G.m.b.H. (previously filed as Exhibit 10.1 to the Form `0-Q filed
May 14, 2010).10.27

Amendment to the Employment Agreement with David M. Malcolm, dated July 19, 2010, by and between David M. Malcolm and Cowen Group, Inc. (previously filed as Exhibit 10.1 to the Form 8-K filed
July 22, 2010.*10.28

Amendment to the Employment Agreement with Christopher A. White, dated July 21, 2010, by and between Christopher A. White and Cowen Group, Inc. (previously filed as Exhibit 10.2 to the Form 8-K
filed July 22, 2010.*10.29

First Amendment to Sublease dated August 20, 2010 between Société Générale and the Company, amending that certain Sublease, dated as of December 19, 2005, between
Société Générale and Cowen and Company, LLC (f/k/a SG Cowen & Co, LLC) (previously filed as Exhibit 10.1 to the Form 8-K filed August 24, 2010.


E-3

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Table of Contents

Exhibit No.

Description10.30

Second Amendment to Lease dated August 20, 2010 between BP 599 Lexington Avenue and the Company, amending that certain Lease dated as of June 22, 2007 by and between 599 Lexington Avenue LLC and
Ramius LLC (as successor in interest to RCG Holdings LLC (f/k/a Ramius Capital Group, LLC)), as amended by the First Amendment to Lease, dated as of June 9, 2008, by and between BP 599 Lexington Avenue LLC and Ramius LLC
(previously filed as Exhibit 10.2 to Form 8-K filed August 24, 2010).10.31

Letter Agreement with David M. Malcolm, dated December 15, 2010, by and between David M. Malcolm and Cowen Group, Inc. (previously filed as Exhibit 10.1 to the Form 8-K filed December 16,
2010).*10.32

Letter Agreement with Christopher A. White, dated February 8, 2011, by and between Christopher A. White and Cowen Group, Inc. (previously filed as Exhibit 10.1 to the Form 8-K filed
February 11, 2011).*21.1

Subsidiaries of Cowen Group, Inc. (filed herewith).23.1

Consent of Independent Registered Public Accounting Firm (filed herewith).31.1

Certification of CEO Pursuant to Section 302 of Sarbanes-Oxley Act of 2002 (filed herewith).31.2

Certification of CFO Pursuant to Section 302 of Sarbanes-Oxley Act of 2002 (filed herewith).32

Certification of CEO and CFO Pursuant to Section 906 of Sarbanes-Oxley Act of 2002 (furnished herewith).


*Signifies
management contract or compensatory plan or arrangement.^Confidential
treatment has been granted for certain portions of this exhibit, which portions have been omitted and filed separately with the Securities and
Exchange Commission.


E-4

---