Segment Reporting

The Company conducts its operations through two segments: the alternative investment segment and the broker‑dealer segment. 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 (Loss), which management uses to evaluate the financial performance of and make operating decisions for the segments including determining appropriate compensation levels.

In general, Economic Income (Loss) is a pre-tax measure that (i) eliminates the impact of consolidation for consolidated funds and (ii) excludes certain other acquisition-related and/or reorganization expenses (See Note 2). 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 US GAAP purposes, these items are included in each of their respective line items. Economic Income (Loss) 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 and the Company's investment in the activist business. For US 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 US GAAP purposes is presented gross as part of revenue.

As further stated below, one major difference between Economic Income (Loss) and US GAAP net income (loss) is that Economic Income (Loss) 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 redeemable non-controlling interest in consolidated subsidiaries in the accompanying condensed consolidated statements of operations. This pro rata share has no effect on the overall financial performance for the alternative investment segment, as ultimately, this income or loss is not income or loss for the alternative investment segment itself. Included in Economic Income (Loss) 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.

The following tables set forth operating results for the Company's alternative investment and broker dealer segments and related adjustments necessary to reconcile the Company's Economic Income (Loss) measure to arrive at the Company's consolidated US GAAP net income (loss):



	Three Months Ended June 30, 2014
									Adjustments
	Alternative Investment			Broker-Dealer (1)		Total Economic Income/(Loss)			Funds Consolidation			Other Adjustments				US GAAP
	(dollars in thousands)
Revenues
Investment banking	$	—		$	30,292	$	30,292		$	—		$	—			$	30,292
Brokerage	25			35,027		35,052			—			(1,741		)	(e)	33,311
Management fees	16,166			—		16,166			(243		)	(6,231		)	(a)	9,692
Incentive income	8,193			—		8,193			(154		)	(5,315		)	(a)	2,724
Investment Income	16,632			4,964		21,596			—			(21,596		)	(c)	—
Interest and dividends	—			—		—			—			12,460			(c)(e)	12,460
Reimbursement from affiliates	—			—		—			(84		)	3,102			(f)	3,018
Other revenue	140			102		242			—			510			(c)	752
Consolidated Funds revenues	—			—		—			653			—				653
Total revenues	41,156			70,385		111,541			172			(18,811		)		92,902
Expenses
Employee compensation and benefits	18,666			44,966		63,632			—			772				64,404
Non-compensation expenses—Fixed	10,228			13,316		23,544			—			(23,544		)	(c)(d)	—
Non-compensation expenses—Variable	1,732			9,404		11,136			—			(11,136		)	(c)(d)	—
Non-compensation expenses	—			—		—			—			32,909			(c)(d)	32,909
Interest and dividends	2,622			32		2,654			—			7,539			(c)(e)	10,193
Reimbursement from affiliates	(1,756		)	—		(1,756		)	—			1,756			(f)	—
Consolidated Funds expenses	—			—		—			398			—				398
Total expenses	31,492			67,718		99,210			398			8,296				107,904
Other income (loss)
Net gain (loss) on securities, derivatives and other investments	—			—		—			—			23,037			(c)	23,037
Consolidated Funds net gains (losses)	—			—		—			2,414			3,195				5,609
Total other income (loss)	—			—		—			2,414			26,232				28,646
Income (loss) before income taxes and non-controlling interests	9,664			2,667		12,331			2,188			(875		)		13,644
Income taxes expense / (benefit)	—			—		—			—			46			(b)	46
Economic Income (Loss) / Net income (loss) before non-controlling interests	9,664			2,667		12,331			2,188			(921		)		13,598
(Income) loss attributable to redeemable non-controlling interests in consolidated subsidiaries	(3,818		)	—		(3,818		)	(2,188		)	790				(5,216		)
Economic Income (Loss) / Net Income (loss) attributable to Cowen Group, Inc. stockholders	$	5,846		$	2,667	$	8,513		$	—		$	(131	)		$	8,382

(1) For the three months ended June 30, 2014, the Company has reflected $5.7 million of investment income and related compensation expense of $1.9 million within the broker-dealer segment in proportion to that segment's capital.



	Three Months Ended June 30, 2013
										Adjustments
	Alternative Investment			Broker-Dealer (1)			Total Economic Income/(Loss)			Funds Consolidation			Other Adjustments				US GAAP
	(dollars in thousands)
Revenues
Investment banking	$	—		$	25,571		$	25,571		$	—		$	—			$	25,571
Brokerage	—			33,300			33,300			—			(1,779		)	(e)	31,521
Management fees	14,606			—			14,606			(286		)	(4,622		)	(a)	9,698
Incentive income	3,765			—			3,765			—			(1,811		)	(a)	1,954
Investment Income	3,834			(271		)	3,563			—			(3,563		)	(c)	—
Interest and dividends	—			—			—			—			10,521			(c)(e)	10,521
Reimbursement from affiliates	—			—			—			(196		)	1,410			(f)	1,214
Other revenue	114			164			278			—			207			(c)	485
Consolidated Funds revenues	—			—			—			243			—				243
Total revenues	22,319			58,764			81,083			(239		)	363				81,207
Expenses
Employee compensation and benefits	9,723			37,303			47,026			—			481				47,507
Non-compensation expenses—Fixed	8,471			13,885			22,356			—			(22,356		)	(c)(d)	—
Non-compensation expenses—Variable	1,139			8,850			9,989			—			(9,989		)	(c)(d)	—
Non-compensation expenses	—			—			—			—			31,131			(c)(d)	31,131
Interest and dividends	50			22			72			—			7,417			(c)(e)	7,489
Reimbursement from affiliates	(1,411		)	—			(1,411		)	—			1,411			(f)	—
Consolidated Funds expenses	—			—			—			485			—				485
Total expenses	17,972			60,060			78,032			485			8,095				86,612
Other income (loss)
Net gains (losses) on securities, derivatives and other investments	—			—			—			—			4,994			(c)	4,994
Consolidated Funds net gains (losses)	—			—			—			1,378			2,539				3,917
Total other income (loss)	—			—			—			1,378			7,533				8,911
Income (loss) before income taxes and non-controlling interests	4,347			(1,296		)	3,051			654			(199		)		3,506
Income taxes expense / (benefit)	—			—			—			—			158			(b)	158
Economic Income (Loss) / Net income (loss) before non-controlling interests	4,347			(1,296		)	3,051			654			(357		)		3,348
(Income) loss attributable to redeemable non-controlling interests in consolidated subsidiaries	(1,581		)	—			(1,581		)	(654		)	(20		)		(2,255		)
Economic Income (Loss) / Net income (loss) attributable to Cowen Group, Inc. stockholders	$	2,766		$	(1,296	)	$	1,470		$	—		$	(377	)		$	1,093

(1) For the three months ended June 30, 2013, the Company has reflected $0.3 million of investment income and related compensation expense of $0.1 million within the broker-dealer segment in proportion to that segment's capital.



	Six Months Ended June 30, 2014
									Adjustments
	Alternative Investment			Broker-Dealer (1)		Total Economic Income/(Loss)			Funds Consolidation			Other Adjustments				US GAAP
	(dollars in thousands)
Revenues
Investment banking	$	—		$	79,854	$	79,854		$	—		$	—			$	79,854
Brokerage	25			69,376		69,401			—			(3,260		)	(e)	66,141
Management fees	30,255			—		30,255			(477		)	(11,162		)	(a)	18,616
Incentive income	12,919			—		12,919			(154		)	(7,543		)	(a)	5,222
Investment Income	24,961			4,809		29,770			—			(29,770		)	(c)	—
Interest and dividends	—			—		—			—			21,712			(c)(e)	21,712
Reimbursement from affiliates	—			—		—			(164		)	5,082			(f)	4,918
Other revenue	97			—		97			—			1,210			(c)	1,307
Consolidated Funds revenues	—			—		—			1,809			—				1,809
Total revenues	68,257			154,039		222,296			1,014			(23,731		)		199,579
Expenses
Employee compensation and benefits	32,053			98,536		130,589			—			1,376				131,965
Non-compensation expenses—Fixed	19,122			27,237		46,359			—			(46,359		)	(c)(d)	—
Non-compensation expenses—Variable	2,481			18,092		20,573			—			(20,573		)	(c)(d)	—
Non-compensation expenses	—			—		—			—			64,002			(c)(d)	64,002
Interest and dividends	3,231			66		3,297			—			13,968			(c)(e)	17,265
Reimbursement from affiliates	(3,482		)	—		(3,482		)	—			3,482			(f)	—
Consolidated Funds expenses	—			—		—			700			—				700
Total expenses	53,405			143,931		197,336			700			15,896				213,932
Other income (loss)
Net gains (losses) on securities, derivatives and other investments	—			—		—			—			34,391			(c)	34,391
Consolidated Funds net gains (losses)	—			—		—			2,621			5,091				7,712
Total other income (loss)	—			—		—			2,621			39,482				42,103
Income (loss) before income taxes and non-controlling interests	14,852			10,108		24,960			2,935			(145		)		27,750
Income taxes expense / (benefit)	—			—		—			—			125			(b)	125
Economic Income (Loss) / Net income (loss) before non-controlling interests	14,852			10,108		24,960			2,935			(270		)		27,625
(Income) loss attributable to redeemable non-controlling interests in consolidated subsidiaries	(6,444		)	—		(6,444		)	(2,935		)	(24		)		(9,403		)
Economic Income (Loss) / Net Income (loss) attributable to Cowen Group, Inc. stockholders	$	8,408		$	10,108	$	18,516		$	—		$	(294	)		$	18,222

(1) For the six months ended June 30, 2014, the Company has reflected $5.6 million of investment income and related compensation expense of $1.8 million within the broker-dealer segment in proportion to that segment's capital.



	Six Months Ended June 30, 2013
										Adjustments
	Alternative Investment			Broker-Dealer (1)			Total Economic Income/(Loss)			Funds Consolidation			Other Adjustments				US GAAP
	(dollars in thousands)
Revenues
Investment banking	$	—		$	42,737		$	42,737		$	—		$	—			$	42,737
Brokerage	—			61,317			61,317			—			(3,196		)	(e)	58,121
Management fees	28,750			—			28,750			(597		)	(8,962		)	(a)	19,191
Incentive income	8,892			—			8,892			—			(4,327		)	(a)	4,565
Investment Income	12,138			2,298			14,436			—			(14,436		)	(c)	—
Interest and dividends	—			—			—			—			19,842			(c)(e)	19,842
Reimbursement from affiliates	—			—			—			(131		)	2,830			(f)	2,699
Other revenue	226			(389		)	(163		)	—			1,126			(c)	963
Consolidated Funds revenues	—			—			—			330			—				330
Total revenues	50,006			105,963			155,969			(398		)	(7,123		)		148,448
Expenses
Employee compensation and benefits	22,949			67,911			90,860			—			870				91,730
Non-compensation expenses—Fixed	17,609			27,151			44,760			—			(44,760		)	(c)(d)	—
Non-compensation expenses—Variable	2,145			16,569			18,714			—			(18,714		)	(c)(d)	—
Non-compensation expenses	—			—			—			—			62,966			(c)(d)	62,966
Interest and dividends	131			65			196			—			13,913			(c)(e)	14,109
Reimbursement from affiliates	(2,830		)	—			(2,830		)	—			2,830			(f)	—
Consolidated Funds expenses	—			—			—			919			—				919
Total expenses	40,004			111,696			151,700			919			17,105				169,724
Other income (loss)
Net gains (losses) on securities, derivatives and other investments	—			—			—			—			16,801			(c)	16,801
Consolidated Funds net gains (losses)	—			—			—			3,671			5,405				9,076
Total other income (loss)	—			—			—			3,671			22,206				25,877
Income (loss) before income taxes and non-controlling interests	10,002			(5,733		)	4,269			2,354			(2,022		)		4,601
Income taxes expense / (benefit)	—			—			—			—			334			(b)	334
Economic Income (Loss) / Net income (loss) before non-controlling interests	10,002			(5,733		)	4,269			2,354			(2,356		)		4,267
(Income) loss attributable to redeemable non-controlling interests in consolidated subsidiaries	(4,067		)	—			(4,067		)	(2,354		)	671				(5,750		)
Economic Income (Loss) / Net Income (loss) attributable to Cowen Group, Inc. stockholders	$	5,935		$	(5,733	)	$	202		$	—		$	(1,685	)		$	(1,483	)

(1) For the six months ended June 30, 2013, the Company has reflected $2.6 million of investment income and related compensation expense of $0.9 million within the broker-dealer segment in proportion to that segment's capital.

The following is a summary of the adjustments made to US GAAP net income (loss) for the segment to arrive at

Economic Income (Loss):

Funds Consolidation: The impacts of consolidation and the related elimination entries of the Consolidated Funds are not included in Economic Income (Loss). Adjustments to reconcile to US GAAP net income (loss) 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:

(a) Economic Income (Loss) recognizes revenues (i) net of distribution fees paid to agents and (ii) our proportionate share

of management and incentive fees of certain real estate operating entities and the activist business.

(b) Economic Income (Loss) excludes income taxes as management does not consider this item when evaluating the

performance of the segment.

(d) Economic Income (Loss) recognizes the Company's proportionate share of expenses for certain real estate and other

operating entities for which the investments are recorded under the equity method of accounting for investments.

(e) Economic Income (Loss) recognizes stock borrow/loan activity and other brokerage dividends as brokerage revenue

(f) Reimbursement from affiliates is shown as a reduction of Economic Income expenses, but is included as a part of

revenues under US GAAP.

For the three and six months ended June 30, 2014 and 2013, there was no one fund or other customer which represented more than 10% of the Company's total revenues.