
<PAGE>
 
                                                                    EXHIBIT 99.2

               UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL 
                                  STATEMENTS
                  MORGAN STANLEY, DEAN WITTER, DISCOVER & CO.

The following unaudited pro forma condensed combined statement of financial
condition combines the historical consolidated balance sheet of Dean Witter,
Discover and Co. ("DWD") and the historical consolidated statement of financial
condition of Morgan Stanley Group Inc. ("Morgan Stanley") giving effect to the
Merger as though it had been consummated on February 28, 1997 after giving
effect to the pro forma adjustments described in the notes to the pro forma
condensed combined financial statements. The following unaudited pro forma
condensed combined statements of income combines the historical consolidated
statements of income of DWD and Morgan Stanley giving effect to the Merger,
which is intended to be accounted for as a pooling of interests after giving
effect to the pro forma adjustments described in the notes to the pro forma
condensed combined financial statements. This information should be read in
conjunction with the audited consolidated financial statements and other
financial information contained in DWD's Annual Report on Form 10-K for the year
ended December 31, 1996, including the notes thereto, the unaudited consolidated
interim income data contained in DWD's Current Report on Form 8-K dated April
17, 1997 for the period ended March 31, 1997 and the audited consolidated
statements and other financial information contained in Morgan Stanley's Annual
Report on Form 10-K for the fiscal year ended November 30, 1996 and the
unaudited consolidated interim financial statements contained in Morgan
Stanley's Quarterly Report on Form 10-Q for the period ended February 28, 1997,
including the notes thereto. These unaudited pro forma condensed combined
financial statements are not necessarily indicative of the operating results and
financial position that might have been achieved had the merger occurred as of
the beginning of the earliest period presented nor are they necessarily
indicative of operating results and financial position which may occur in the
future.

<PAGE>

 
                  MORGAN STANLEY, DEAN WITTER, DISCOVER & CO.

    UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF FINANCIAL CONDITION
                                 (IN MILLIONS)

<TABLE> 
<CAPTION> 

                                                              DWD         Morgan Stanley
                                                           Historical       Historical     Pro Forma      Pro Forma
                                                        December 31, 1996February 28, 1997Adjustments (a) Combined
                                                        ----------------------------------------------   ------------
ASSETS
<S>                                                         <C>             <C>                          <C> 
Cash and cash equivalents                                         $1,999           $4,488                     $6,487
Cash and securities deposited with clearing organizations
  or segregated under federal and other regulations                2,045            1,490                      3,535
Financial instruments owned:
    U.S. government and agency securities                            951           15,219                     16,170
    Other sovereign government obligations                             0           18,205                     18,205
    Corporate and other debt                                         923           17,905                     18,828
    Corporate equities                                                40           14,242                     14,282
    Derivative contracts                                               0           12,818                     12,818
    Physical commodities                                               0              287                        287
Securities purchased under agreements to resell                    3,564           70,029                     73,593
Securities borrowed                                                3,866           50,394                     54,260
Receivables:
    Consumer loans (net of allowances of $815)                    22,373                0                     22,373
    Customers, net                                                 2,839           10,368                     13,207
    Brokers, dealers and clearing organizations                        0            1,995                      1,995
    Fees, interest and other                                         805            2,524                      3,329
Other assets                                                       3,009            4,808                      7,817
                                                        ----------------------------------------------   ------------
Total assets                                                     $42,414         $224,772                   $267,186
                                                        ----------------------------------------------   ------------


LIABILITIES AND STOCKHOLDERS' EQUITY

Commercial paper and other short-term borrowings                  $5,865          $22,241                    $28,106
Deposits                                                           7,213                0                      7,213
Financial instruments sold, not yet purchased:
    U.S. government and agency securities                          1,199           13,991                     15,190
    Other sovereign government obligations                             0            8,355                      8,355
    Corporate and other debt                                          64            1,242                      1,306
    Corporate equities                                                11            8,762                      8,773
    Derivative contracts                                               0           11,006                     11,006
    Physical commodities                                               0               36                         36
Securities sold under agreements to repurchase                     3,567           95,919                     99,486
Securities loaned                                                  3,932           10,432                     14,364
Payables:
    Customers                                                      3,433           21,041                     24,474
    Brokers, dealers and clearing organizations                        0            4,113                      4,113
    Interest and dividends                                           200            1,244                      1,444
Other liabilities and accrued expenses                             3,622            2,425                      6,047
Long-term borrowings                                               8,144           16,470                     24,614
                                                        ----------------------------------------------   ------------
                                                                  37,250          217,277                    254,527
                                                        ----------------------------------------------   ------------
Capital Units                                                          0              999                        999
                                                        ----------------------------------------------   ------------
Commitments and contingencies
</TABLE> 
<PAGE>

 
                  MORGAN STANLEY, DEAN WITTER, DISCOVER & CO.

    UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF FINANCIAL CONDITION
                                 (IN MILLIONS)
<TABLE> 
<CAPTION> 

                                                              DWD         Morgan Stanley
                                                           Historical       Historical     Pro Forma      Pro Forma
                                                        December 31, 1996February 28, 1997Adjustments (a) Combined
                                                        ----------------------------------------------   ------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Stockholders' equity:
<S>                                                     <C>                <C>               <C>           <C> 
    Preferred stock                                                    0            1,027                      1,027
    Common stock (1)                                                   3              164        (161)(b)          6
    Paid-in capital (1)                                            2,703              892         161 (b)      3,756
    Retained earnings                                              2,973            4,767        (264)(b)      7,476
    Cumulative translation adjustments                                 0              (14)                       (14)
                                                        ----------------------------------------------   ------------
         Subtotal                                                  5,679            6,836        (264)        12,251

    Less:

         Stock compensation related deductions                       (83)              76                        (7)
         Common stock held in treasury, at cost                      598              264        (264)(b)        598
                                                        ----------------------------------------------   ------------
             Total stockholders' equity                            5,164            6,496           0         11,660
                                                        ----------------------------------------------   ------------
Total liabilities and stockholders' equity                       $42,414         $224,772          $0       $267,186
                                                        ----------------------------------------------   ------------

</TABLE> 

(1)   DWD historical amounts have been restated to reflect a two-for-one stock
      split which became effective January 14, 1997.

See Notes to the Unaudited Pro Forma Condensed Combined Financial Statements
<PAGE>
 
                  MORGAN STANLEY, DEAN WITTER, DISCOVER & CO.

          UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
                       (IN MILLIONS, EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
 
                                                    DWD         Morgan Stanley
                                                 Historical       Historical
                                                Three Months     Three Months
                                                   Ended             Ended         Pro Forma
                                               March 31, 1997  February 28, 1997    Combined
                                               ---------------------------------   ---------
<S>                                            <C>             <C>                 <C>
Revenues:
Investment banking                                      $79               $442          $521
Principal transactions:
         Trading                                        118                751           869
         Investments                                      0                 56            56
Commissions                                             306                182           488
Merchant and cardmember fees                            405                  0           405
Servicing fees                                          209                  0           209
Interest and dividends                                  987              2,367         3,354
Asset management and administration                     312                278           590
Other                                                    28                  0            28
                                               ---------------------------------   ---------
         Total revenues                               2,444              4,076         6,520
 
Interest expense                                        415              2,282         2,697
Provision for losses on credit receivables              376                  0           376
                                               ---------------------------------   --------- 
         Net revenues                                 1,653              1,794         3,447
                                               ---------------------------------   --------- 
Expenses excluding interest:
Compensation and benefits                               616                879         1,495
Occupancy and equipment                                  64                 62           126
Brokerage, clearing and exchange fees                    12                 84            96
Information processing and communications               181                 78           259
Business development                                    187                 59           246
Professional services                                    29                 60            89
Other                                                   110                 62           172
                                               ---------------------------------   ---------
         Total expenses excluding interest            1,199              1,284         2,483
                                               ---------------------------------   ---------
 
Income before income taxes                              454                510           964
Provision for income taxes                              178                194           372
                                               ---------------------------------   ---------
Net income                                             $276               $316          $592
                                               ---------------------------------   ---------
Preferred stock dividend requirements                     0                 19            19
                                               ---------------------------------   ---------
Earnings applicable to common shares (1)               $276               $297          $573
                                               ---------------------------------   ---------
 
Average common and common equivalent
   shares outstanding (1)                       339,369,778        158,307,567   600,577,264
Primary earnings per share                            $0.81              $1.88         $0.95
Fully diluted earnings per share                      $0.81              $1.80         $0.94
</TABLE>

(1) Amounts shown are used to calculate primary earnings per share.

See Notes to the Unaudited Pro Forma Condensed Combined Financial Statements
<PAGE>
 
                  MORGAN STANLEY, DEAN WITTER, DISCOVER & CO.

          UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
                       (IN MILLIONS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
 
                                                      DWD         Morgan Stanley
                                                   Historical       Historical
                                                  Three Months     Three Months
                                                     Ended             Ended         Pro Forma
                                                 March 31, 1996  February 29, 1996    Combined
                                                 ---------------------------------   ---------
<S>                                              <C>             <C>                 <C>
Revenues:
Investment banking                                        $65               $399          $464
Principal transactions:
         Trading                                          119                704           823
         Investments                                        0                 (7)           (7)
Commissions                                               301                154           455
Merchant and cardmember fees                              320                  0           320
Servicing fees                                            200                  0           200
Interest and dividends                                    861              1,933         2,794
Asset management and administration                       275                122           397
Other                                                      25                  3            28
                                                 ---------------------------------   ---------
         Total revenues                                 2,166              3,308         5,474
 
Interest expense                                          391              1,859         2,250
Provision for losses on credit receivables                225                  0           225
                                                 ---------------------------------   --------- 
         Net revenues                                   1,550              1,449         2,999
                                                 ---------------------------------   --------- 
Expenses excluding interest:
Compensation and benefits                                 570                705         1,275
Occupancy and equipment                                    61                 58           119
Brokerage, clearing and exchange fees                      11                 66            77
Information processing and communications                 171                 61           232
Business development                                      192                 37           229
Professional services                                      18                 42            60
Other                                                     127                 40           167
                                                 ---------------------------------   ---------
         Total expenses excluding interest              1,150              1,009         2,159
                                                 ---------------------------------   --------- 
Income before income taxes                                400                440           840
Provision for income taxes                                154                167           321
                                                 ---------------------------------   ---------
Net income                                       $        246       $        273  $        519
                                                 ---------------------------------   ---------
Preferred stock dividend requirements                       0                 16            16
                                                 ---------------------------------   ---------
Earnings applicable to common shares (1)         $        246       $        257  $        503
                                                 ---------------------------------   --------- 
Average common and common equivalent
   shares outstanding (1) (2)                     348,279,692        156,549,243   606,585,943
Primary earnings per share (2)                          $0.71              $1.64         $0.83
Fully diluted earnings per share (2)                    $0.70              $1.57         $0.81
</TABLE>

(1) Amounts shown are used to calculate primary earnings per share.
(2) DWD historical share and per share amounts have been restated to reflect a
    two-for-one stock split which became effective January 14, 1997.

See Notes to the Unaudited Pro Forma Condensed Combined Financial Statements
<PAGE>
 
NOTES TO THE UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

Note (a):  Basis of Presentation

The unaudited pro forma condensed combined statement of financial condition
combines the historical consolidated balance sheet of DWD at December 31, 1996
with the historical consolidated statement of financial condition of Morgan
Stanley at February 28, 1997. The unaudited pro forma condensed combined
statements of income combine the historical consolidated statements of income of
DWD for the three months ended March 31, 1997 and 1996 with the historical
consolidated statements of income of Morgan Stanley for the three months ended
February 28, 1997 and February 29, 1996. Certain amounts reflected in the
historical financial statement presentations of both companies have been
reclassified to conform to the unaudited pro forma condensed combined
presentation.

The unaudited pro forma condensed combined financial statements exclude 
(i) the effect of any potential changes in revenues or any operating
synergies which may be achieved upon combining the resources of the companies
(ii) investment banking, legal and miscellaneous transaction costs of the
Merger, which will be reflected as an expense in the period the Merger is
consummated, and (iii) costs associated with the integration and consolidation
of the companies which are not presently estimable.

Transactions between DWD and Morgan Stanley are not material in relation to the
unaudited pro forma condensed combined financial statements and therefore,
intercompany balances have not been eliminated from the pro forma combined
amounts.  DWD and Morgan Stanley are in the process of reviewing their
respective accounting policies and do not expect there to be any significant
adjustments necessary in order to conform such policies.

In January 1997, DWD acquired Lombard Brokerage, Inc. which was accounted for as
a purchase transaction.  During 1996, Morgan Stanley acquired Miller Anderson &
Sherrerd, LLP and Van Kampen American Capital, Inc., both accounted for as
purchase transactions. In April 1997, Morgan Stanley announced the acquisition
of the institutional global custody business of Barclays PLC. No pro forma
effect has been given to these transactions as the effect is not material.
<PAGE>

 
    NOTES TO THE UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

Note (b):  Pro Forma Adjustments

The pro forma adjustments to common stock, paid-in capital and retained earnings
accounts at December 31, 1996 reflect (i) an exchange of 158.0 million shares of
common stock, par value $1.00 per share of Morgan Stanley for 260.7 million
shares (using the exchange ratio of 1.65) of common stock, par value $.01 per
share of DWD and (ii) the cancellation and retirement of all shares of Morgan
Stanley common stock held in treasury.  The number of shares of DWD common stock
to be issued at consummation of the Merger will be based upon the actual number
of shares of Morgan Stanley common stock outstanding at that time.


Note (c):  Pro Forma Earnings Per Share

The pro forma combined primary and fully diluted earnings per common share for
the respective periods presented are based on the combined weighted average
number of common shares and share equivalents of DWD and Morgan Stanley.  The
number of common shares and share equivalents of Morgan Stanley is based on an
exchange ratio of 1.65 shares of DWD common shares for each issued and
outstanding share and share equivalent of Morgan Stanley.
