Basic earnings per common share (“EPS”) is computed by dividing earnings (loss) applicable to Morgan Stanley common shareholders by the weighted average number of common shares outstanding for the period. Common shares outstanding include common stock and vested restricted stock units (“RSUs”) where recipients have satisfied either the explicit vesting terms or retirement eligibility requirements. Diluted EPS reflects the assumed conversion of all dilutive securities. The Company calculates EPS using the two-class method and determines whether instruments granted in share-based payment transactions are participating securities (see Note 2 to the consolidated financial statements for the year ended December 31, 2011 in the Form 10-K). The following table presents the calculation of basic and diluted EPS (in millions, except for per share data):

				Three Months Ended				Six Months Ended
				June 30,				June 30,
				2012		2011		2012		2011
Basic EPS:
	Income from continuing operations		$	714	$	1,432	$	863	$	2,577
	Net gain (loss) from discontinued operations			36		(26)		21		(41)
	Net income			750		1,406		884		2,536
	Net income applicable to noncontrolling interests			159		213		387		375
	Net income applicable to Morgan Stanley			591		1,193		497		2,161
	Less: Preferred dividends (Series A Preferred Stock)			(11)		(11)		(22)		(22)
	Less: Preferred dividends (Series B Preferred Stock)			—		—		—		(196)
	Less: MUFG stock conversion			—		(1,726)		—		(1,726)
	Less: Preferred dividends (Series C Preferred Stock)			(13)		(13)		(26)		(26)
	Less: Allocation of earnings to participating RSUs(1):
		From continuing operations		(3)		(1)		(3)		(3)
	Earnings (loss) applicable to Morgan Stanley common shareholders		$	564	$	(558)	$	446	$	188
	Weighted average common shares outstanding			1,885		1,464		1,881		1,460
Earnings (loss) per basic common share:
	Income (loss) from continuing operations		$	0.28	$	(0.36)	$	0.23	$	0.16
	Net gain (loss) from discontinued operations			0.02		(0.02)		0.01		(0.03)
		Earnings (loss) per basic common share	$	0.30	$	(0.38)	$	0.24	$	0.13

Diluted EPS:
	Earnings (loss) applicable to Morgan Stanley common shareholders		$	564	$	(558)	$	446	$	188
	Weighted average common shares outstanding			1,885		1,464		1,881		1,460
	Effect of dilutive securities:
		Stock options and RSUs(1)		27		—		26		17
	Weighted average common shares outstanding and common
		stock equivalents		1,912		1,464		1,907		1,477

Earnings (loss) per diluted common share:
	Income (loss) from continuing operations		$	0.28	$	(0.36)	$	0.23	$	0.16
	Net income (loss) from discontinued operations			0.01		(0.02)		—		(0.03)
		Earnings (loss) per diluted common share	$	0.29	$	(0.38)	$	0.23	$	0.13

(1) RSUs that are considered participating securities participate in all of the earnings of the Company in the computation of basic EPS, and therefore, such RSUs are not included as incremental shares in the diluted calculation.

The following securities were considered antidilutive and, therefore, were excluded from the computation of diluted EPS: