LOEWEN GROUP INC, 10-Q, 1999-11-10

LOEWEN GROUP INC
10-Q, 1999-11-10
PERSONAL SERVICES

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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

----------------

FORM 10-Q

(Mark One)

/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 1999

/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

for the transition period from to

Commission file number 1-12163

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THE LOEWEN GROUP INC.

(Exact name of registrant as specified in its charter)

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<TABLE>
<S> <C>
BRITISH COLUMBIA 98-0121376
(State or other jurisdiction (I.R.S. Employer
of Identification Number)
incorporation or organization)
</TABLE>

4126 NORLAND AVENUE
BURNABY, BRITISH COLUMBIA, CANADA V5G 3S8
(Address of principal executive offices) (Zip Code)

604-299-9321

Registrant's telephone number, including area code

N/A
(Former name, former address and former fiscal year, if changed since last
report)

Indicate by check /X/ 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 /X/ No / /

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APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY

PROCEEDINGS DURING THE PRECEDING FIVE YEARS

Indicate by check /X/ whether the registrant has filed all documents and
reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes / / No / /

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APPLICABLE ONLY TO CORPORATE ISSUERS

The number of outstanding Common shares as of October 29, 1999 was
74,145,401.

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<PAGE>
THE LOEWEN GROUP INC.

<TABLE>
<S> <C> <C> <C>
PAGE
--------

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS:

CONSOLIDATED BALANCE SHEETS
as of September 30, 1999 and December 31, 1998.............. 1

CONSOLIDATED STATEMENTS OF OPERATIONS AND
RETAINED EARNINGS (DEFICIT)
for the Three Months Ended September 30, 1999 and 1998 and
the Nine Months Ended September 30, 1999 and 1998........... 2

CONSOLIDATED STATEMENTS OF CASH FLOWS
for the Three Months Ended September 30, 1999 and 1998 and
the Nine Months Ended September 30, 1999 and 1998........... 3

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS.......... 4

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS................................... 19

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK................................................. 27

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS........................................... 29

ITEM 3. DEFAULTS ON SENIOR SECURITIES............................... 30

ITEM 5. OTHER INFORMATION........................................... 31

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K............................ 33

SIGNATURES....................................................................... 40
</TABLE>
<PAGE>
PART I

ITEM 1. FINANCIAL STATEMENTS

THE LOEWEN GROUP INC.

CONSOLIDATED BALANCE SHEETS
Expressed in thousands of U.S. dollars

<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1999 1998
-------------- -------------
<S> <C> <C>
(unaudited)
ASSETS
Current assets
Cash and term deposits.................................... $ 72,130 $ 94,141
Receivables, net of allowances............................ 201,262 203,772
Inventories............................................... 33,777 34,482
Prepaid expenses.......................................... 13,126 8,916
---------- ----------
320,295 341,311
Long-term receivables, net of allowances.................... 559,516 664,999
Cemetery property........................................... 1,204,168 1,235,847
Property and equipment...................................... 789,275 825,985
Names and reputations....................................... 730,571 748,665
Insurance invested assets................................... 274,656 266,661
Future income tax assets.................................... 2,578 12,003
Prearranged funeral services................................ 431,866 413,934
Other assets................................................ 136,776 164,503
---------- ----------
$4,449,701 $4,673,908
========== ==========

LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities not subject to compromise
Current liabilities
Current indebtedness.................................... $ 16,736 $ 66,222
Accounts payable and accrued liabilities................ 92,669 170,134
Long-term debt, current portion......................... 14,557 874,123
---------- ----------
123,962 1,110,479
Long-term debt, net of current portion.................... 58,916 1,393,891
Other liabilities......................................... 370,124 399,304
Insurance policy liabilities.............................. 180,231 166,920
Future income tax liabilities............................. 191,305 208,939
Deferred prearranged funeral services revenue............. 431,866 413,934

Liabilities subject to compromise........................... 2,284,834 --
Preferred securities of subsidiary.......................... -- 75,000
Shareholders' equity
Common shares............................................. 1,276,449 1,274,096
Preferred shares.......................................... 157,146 157,146
Deficit................................................... (639,914) (539,741)
Foreign exchange adjustment............................... 14,782 13,940
---------- ----------
808,463 905,441
---------- ----------
$4,449,701 $4,673,908
========== ==========
</TABLE>

Commitments and contingencies (Notes 1 and 8)

See accompanying notes to interim consolidated financial statements

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<PAGE>
THE LOEWEN GROUP INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS (DEFICIT)
Expressed in thousands of U.S. dollars except per share amounts

<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
-------------------- --------------------
1999 1998 1999 1998
--------- -------- --------- --------
(unaudited) (unaudited)
<S> <C> <C> <C> <C>
Revenue
Funeral.......................................... $ 137,157 $150,747 $ 462,248 $473,510
Cemetery......................................... 70,849 89,883 273,030 329,701
Insurance........................................ 23,813 23,257 71,434 72,335
--------- -------- --------- --------
231,819 263,887 806,712 875,546
Costs and expenses
Funeral.......................................... 95,367 101,690 296,800 296,212
Cemetery......................................... 58,043 80,351 211,735 249,909
Insurance........................................ 18,502 18,253 56,359 58,847
--------- -------- --------- --------
171,912 200,294 564,894 604,968
--------- -------- --------- --------
59,907 63,593 241,818 270,578
Expenses
General and administrative....................... 19,510 44,464 73,680 93,480
Depreciation and amortization.................... 19,460 24,748 58,663 60,754
Provision for asset impairment................... -- -- 15,112 --
--------- -------- --------- --------
38,970 69,212 147,455 154,234
--------- -------- --------- --------
Earnings (loss) from operations.................... 20,937 (5,619) 94,363 116,344
Interest on long-term debt......................... 5,917 46,503 82,917 121,953
Dividends on preferred securities of subsidiary.... -- 1,772 2,971 5,316
Reorganization costs............................... 11,194 -- 78,357 --
Other expenses (income)............................ 687 (1,583) 14,640 (8,123)
--------- -------- --------- --------
Earnings (loss) before income taxes................ 3,139 (52,311) (84,522) (2,802)
Income taxes....................................... 1,223 (19,873) 11,965 (10,645)
--------- -------- --------- --------
Net earnings (loss) for the period................. $ 1,916 $(32,438) $ (96,487) $ 7,843

Retained earnings (deficit), beginning of period... (641,830) 103,816 (539,741) 75,624
Common share dividends............................. -- -- -- (7,496)
Preferred share dividends.......................... -- (2,173) (3,686) (6,766)
--------- -------- --------- --------
Retained earnings (deficit), end of period......... $(639,914) $ 69,205 $(639,914) $ 69,205
========= ======== ========= ========
Basic earnings (loss) per Common share............. $ 0.03 $ (0.47) $ (1.35) $ 0.01
</TABLE>

See accompanying notes to interim consolidated financial statements

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<PAGE>
THE LOEWEN GROUP INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS
Expressed in thousands of U.S. dollars

<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------------------ -------------------------------
1999 1998 1999 1998
-------- ------------------- --------- -------------------
(restated -- (restated --
Note 5) Note 5)
(unaudited) (unaudited)
<S> <C> <C> <C> <C>
CASH PROVIDED BY (APPLIED TO)
Operations
Net earnings (loss)............................. $ 1,916 $ (32,438) $ (96,487) $ 7,843
Items not affecting cash
Depreciation and amortization................. 19,460 24,748 58,663 60,754
Amortization of debt issue costs.............. 1,331 5,026 4,090 9,800
Provision for asset impairment and other
expenses (income)........................... 687 (1,583) 29,752 (8,123)
Non-cash reorganization costs................. (26) -- 58,617 --
Other, including net changes in other non-cash
balances...................................... 6,516 11,887 (41,806) (106,651)
-------- --------- --------- ---------
29,884 7,640 12,829 (36,377)
-------- --------- --------- ---------
Investing
Proceeds on disposition of assets............... 5,647 17,516 198,483 22,188
Purchase of property and equipment.............. (17,721) (15,933) (30,454) (36,028)
Construction of new facilities.................. (5,234) (5,470) (13,281) (13,538)
Purchase of insurance invested assets........... (24,245) (38,242) (118,356) (142,775)
Proceeds on disposition and maturities of
insurance invested assets..................... 17,552 32,631 109,422 119,450
Business acquisitions........................... -- (45,492) -- (239,599)
Investments, net................................ -- 885 -- (1,384)
-------- --------- --------- ---------
(24,001) (54,105) 145,814 (291,686)
-------- --------- --------- ---------
Financing
Increase in long-term debt...................... 16,323 126,705 22,609 942,904
Repayment of long-term debt..................... (9,927) (124,779) (142,853) (633,924)
Increase in (repayment of) current
indebtedness.................................. (22,717) 71,654 (49,487) 71,654
Debt issue costs................................ (2,743) (1,943) (8,797) (20,392)
Issue of Common shares, before income tax
recovery...................................... -- 356 -- 1,839
Common share dividends.......................... -- (7,496) -- (14,830)
Preferred share dividends....................... -- (2,173) (2,156) (6,766)
-------- --------- --------- ---------
(19,064) 62,324 (180,684) 340,485
-------- --------- --------- ---------
Increase (decrease) in cash and cash equivalents
during the period............................... (13,181) 15,859 (22,041) 12,422
Effect of foreign exchange adjustment............. 248 7 30 (7)
Cash and cash equivalents, beginning of period.... 85,063 33,316 94,141 36,767
-------- --------- --------- ---------
Cash and cash equivalents, end of period.......... $ 72,130 $ 49,182 $ 72,130 $ 49,182
======== ========= ========= =========

Cash and cash equivalents include cash and term deposits
</TABLE>

See accompanying notes to interim consolidated financial statements

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THE LOEWEN GROUP INC.

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Tabular amounts expressed in thousands of U.S. dollars
except per share amounts and number of shares

NOTE 1. BANKRUPTCY PROCEEDINGS AND BASIS OF PRESENTATION

BANKRUPTCY PROCEEDINGS

The Loewen Group Inc. (the "Company") is a company organized under the laws
of British Columbia, Canada. On June 1, 1999 (the "Petition Date"), the Company
and each of approximately 850 United States subsidiaries voluntarily filed a
petition for creditor protection under Chapter 11 of the United States
Bankruptcy Code ("Chapter 11") in the United States Bankruptcy Court,
Wilmington, Delaware, United States. Concurrent with the Chapter 11 filing, the
Company and 116 of its Canadian subsidiaries filed for creditor protection under
the Companies' Creditors Arrangement Act ("CCAA") with the Ontario Superior
Court of Justice, Toronto, Ontario, Canada (together with the United States
Bankruptcy Court, the "Bankruptcy Courts"). The Company and its subsidiaries
under creditor protection (the "Debtors") are presently operating their
businesses as debtors-in-possession. The United States trustee for the District
of Delaware appointed a statutory committee of unsecured creditors (the
"Official Unsecured Creditors' Committee"). The proceedings of the Debtors are
being jointly administered for procedural purposes only. The Company's
insurance, United Kingdom and certain funeral and cemetery subsidiaries were not
included in the Chapter 11 and CCAA filings.

The Company is reorganizing its affairs under the protection of Chapter 11
and CCAA and will propose a plan of reorganization for itself and other filing
subsidiaries, which will be submitted to the Bankruptcy Courts overseeing the
Chapter 11 and CCAA proceedings for confirmation after submission to any vote
and approval required by affected parties. During the pendency of these
proceedings, the Company will be implementing operational and systems
improvements while working to restructure its indebtedness.

BASIS OF PRESENTATION

The accompanying interim consolidated financial statements have been
prepared on a "going concern" basis in accordance with Canadian generally
accepted accounting principles. The "going concern" basis of presentation
assumes that the Company will continue in operation for the foreseeable future
and will be able to realize its assets and discharge its liabilities and
commitments in the normal course of business. As a result of the Chapter 11 and
CCAA proceedings and circumstances relating to this event, including the
Company's current debt structure, recent losses and negative cash flow, such
realization of assets and discharge of liabilities are subject to significant
uncertainty.

The interim consolidated financial statements do not reflect adjustments
that would be necessary if the "going concern" basis was not appropriate. If the
"going concern" basis was not appropriate for these interim consolidated
financial statements, then significant adjustments would be necessary in the
carrying value of assets and liabilities, the reported revenues and expenses,
and the balance sheet classifications used. Additionally, the amounts reported
could materially change because of a plan of reorganization, since the reported
amounts in these interim consolidated financial statements do not give effect to
adjustments to the carrying value of the underlying assets or amounts of
liabilities that may ultimately result. The appropriateness of the "going
concern" basis is dependent upon, among other things, confirmation of a plan of
reorganization, future profitable operations, the ability to comply with the
terms of the Petition Date debtor-in-possession $200,000,000 revolving credit
agreement (the "DIP Facility") and the ability to generate sufficient cash from
operations and financing arrangements to meet obligations.

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THE LOEWEN GROUP INC.

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

Tabular amounts expressed in thousands of U.S. dollars
except per share amounts and number of shares

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The interim consolidated financial statements have been prepared in
accordance with accounting principles generally accepted in Canada, which in the
case of the Company, generally conform with those established in the United
States, except as explained in Note 11. The United States dollar is the
principal currency of the Company's business and accordingly the interim
consolidated financial statements are expressed in United States dollars.

The interim consolidated financial statements include the accounts of all
subsidiary companies and all adjustments, including normal recurring
adjustments, which in management's opinion are necessary for a fair presentation
of the financial results for the interim periods. The financial statements have
been prepared consistent with the accounting policies described in the Company's
Annual Report on Form 10-K filed with the Securities and Exchange Commission for
the year ended December 31, 1998 and should be read in conjunction therewith.
Certain of the comparative figures have been reclassified to conform to the
presentation adopted in the current period.

USE OF ESTIMATES

The preparation of interim consolidated financial statements in accordance
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the interim consolidated financial statements and the reported amounts of
revenue and expenses during the reporting period. As a result, actual results
could differ from those estimates.

NOTE 3. LIABILITIES UNDER BANKRUPTCY PROCEEDINGS

In the Chapter 11 and CCAA proceedings, substantially all unsecured and
undersecured liabilities of the Debtors as of the Petition Date are subject to
compromise or other treatment under a plan of reorganization to be confirmed by
the Bankruptcy Courts after submission to any required vote and approval by
affected parties. For financial reporting purposes, those liabilities and
obligations whose treatment and satisfaction are dependent on the outcome of the
Chapter 11 and CCAA proceedings have been segregated and classified as
liabilities subject to compromise in the interim consolidated financial
statements. Generally, all actions to enforce or otherwise effect repayment of
pre-Petition Date liabilities as well as all pending litigation against the
Debtors are stayed while the Debtors continue their business operations as
debtors-in-possession. On October 21, 1999 the U.S. Bankruptcy Court entered an
order providing for the setting of the Bar Date, which is the last date by which
claims against the Company must be filed if the claimants wish to receive any
distribution in the Chapter 11 proceedings. By a mailing on or before
November 1, 1999, all known claimants applicable to the Chapter 11 proceedings
were notified that the Bar Date has been set at December 15, 1999 and that they
must file their proof of claim by that date. The Bar Date for claims applicable
to the CCAA proceeding has not yet been set.

Differences between amounts shown by the Debtors and claims filed by
creditors will be investigated and either amicably resolved or adjudicated
before the Bankruptcy Courts. The ultimate amount of and settlement terms for
such liabilities are subject to an approved plan of reorganization and,
accordingly, are not presently determinable.

Under the United States Bankruptcy Code, the Debtors may elect to assume or
reject leases, employment contracts, service contracts and other pre-Petition
Date executory contracts, subject to

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<PAGE>
THE LOEWEN GROUP INC.

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

Tabular amounts expressed in thousands of U.S. dollars
except per share amounts and number of shares

NOTE 3. LIABILITIES UNDER BANKRUPTCY PROCEEDINGS (CONTINUED)

U.S. Bankruptcy Court approval. Claims for damages resulting from the rejection
of executory contracts will be subject to separate bar dates. The Debtors are
reviewing all executory contracts for assumption or rejection. In August 1999,
the Debtors applied to the U.S. Bankruptcy Court to reject approximately
200 non-compete agreements. The Company has suspended payments applicable to
these non-compete agreements. The U.S. Bankruptcy Court disallowed the Company's
motion to reject these non-compete agreements as a group in August 1999. The
Company may resubmit some or all of these non-compete agreements on an
individual or smaller group basis in the future. The Debtors also intend to make
further applications to reject additional executory contracts.

The principal categories of obligations classified as liabilities subject to
compromise under the reorganization proceedings are identified below. The
amounts in total may vary significantly from the stated amount of proofs of
claim that ultimately will be filed with the Bankruptcy Courts, and may be
subject to future adjustment depending on Bankruptcy Court action, further
developments with respect to potential disputed claims, and determination as to
the value of any collateral securing claims or other events. Additional claims
may arise from the rejection of executory contracts by the Debtors.

At September 30, 1999, the liabilities subject to compromise applicable to
the June 1, 1999 Petition Date were:

<TABLE>
<S> <C>
Accounts payable and accrued liabilities.................... $ 98,365
9.45% Cumulative Monthly Income Preferred Securities,
Series A.................................................. 75,000
Bank credit agreements...................................... 335,914
9.62% Series D senior amortizing notes due in 2003.......... 37,453
6.49% Series E senior amortizing notes due in 2004.......... 30,432
7.50% Series 1 senior notes due in 2001..................... 225,000
7.75% Series 3 senior notes due in 2001..................... 125,000
8.25% Series 2 and 4 senior notes due in 2003............... 350,000
6.10% Series 5 senior notes due in 2002 (Cdn.
$200,000,000)............................................. 136,054
7.20% Series 6 senior notes due in 2003..................... 200,000
7.60% Series 7 senior notes due in 2008..................... 250,000
6.70% Pass-through Asset Trust Senior notes ("PATS") and
related option liability recorded......................... 309,760
Unsecured promissory notes.................................. 84,388
Executory contracts......................................... 27,468
----------
$2,284,834
==========
</TABLE>

Litigation against the Company and its filing subsidiaries was stayed as of
June 1, 1999 and any resultant liabilities will be subject to compromise. See
Note 8(b).

As a result of the Chapter 11 and CCAA filings, no principal or interest
payments will be made on most pre-Petition Date debt obligations without
Bankruptcy Court approval or until a plan of reorganization providing for the
repayment terms has been submitted to any required vote and approval of affected
parties, has been confirmed by the Bankruptcy Courts and has become effective.
Interest on unsecured and undersecured pre-Petition Date debt obligations
subject to compromise has not been accrued after the Petition Date. Interest
expense and principal payments will continue to be recorded on most secured

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THE LOEWEN GROUP INC.

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

Tabular amounts expressed in thousands of U.S. dollars
except per share amounts and number of shares

NOTE 3. LIABILITIES UNDER BANKRUPTCY PROCEEDINGS (CONTINUED)

vendor financing, including capital lease obligations, unless the leases are
rejected by the Debtors. Contractual interest expense not recorded on certain
pre-Petition Date debt obligations totaled $43,109,000 for the three months
ended September 30, 1999 and $56,827,000 for the nine months ended
September 30, 1999.

In 1996, the Company, Loewen Group International, Inc. ("LGII") and their
senior lenders entered into a collateral trust agreement pursuant to which the
senior lenders share certain collateral and guarantees on a pari passu basis
(the "Collateral Trust Agreement"). The security for lenders under the
Collateral Trust Agreement consists of (i) all of LGII's right, title and
interest in and to all rights to receive payment under or in respect of
accounts, contracts, contractual rights, chattel paper, documents, instruments
and general intangibles, (ii) a pledge of the shares of capital stock of
substantially all of the subsidiaries in which the Company directly or
indirectly holds more than a 50% voting or economic interest, and (iii) a
guarantee by each subsidiary that is pledging stock. The security is held by a
trustee for the equal and ratable benefit of the senior lending group. The
senior lending group consists principally of the lenders under the senior
amortizing notes, senior notes and bank and term credit agreements as well as
the holders of certain letters of credit. At the Petition Date, the indebtedness
owed to the senior lending group subject to the collateral trust agreement,
including holders of certain letters of credit, aggregated $2,016,000,000.

In 1994, Loewen Group Capital L.P. ("LGC") issued 3,000,000 9.45% Cumulative
Monthly Income Preferred Securities, Series A ("MIPS") for an aggregate amount
of $75,000,000. LGC is a limited partnership and LGII as its general partner
manages its business and affairs. The MIPS are due August 31, 2024 and are
subject to redemption at par at the option of LGC, in whole or in part, from
time to time on or after August 31, 2004. The Company has guaranteed certain
payment obligations of LGII to LGC and of LGC to the MIPS holders. The
guarantees are subordinate to all liabilities of the Company and are unsecured.

A subsidiary of the Company, which is not included in the Chapter 11 or CCAA
filings, has a receivables finance facility (the "Receivables Finance Facility")
provided by a subsidiary of one of the Company's bank lenders. The Receivables
Finance Facility is secured by a pledge of the receivables held by the
subsidiary (September 30, 1999--$123,809,000). Another subsidiary of the Company
services, administers and collects the receivables. As a result of the
Chapter 11 filing by the Company, there has been an Early Termination Event
under the Receivables Finance Facility and it is being paid down according to
its terms. The lender has commenced applying 100% of the cash collected from the
underlying receivables to the repayment of the outstanding balance. At
September 30, 1999, the balance outstanding on the Receivables Finance Facility
was $16,736,000 (December 31, 1998--$66,222,000). The Receivables Finance
Facility bears interest at a floating rate based on U.S. Prime plus a premium of
2% (September 30, 1999--10.25%). The Receivables Finance Facility is also
subject to a commitment fee of 3.25% of the total facility amount of
$50,000,000, depending on certain financial ratios.

The Company, LGII and all of its U.S. debtor subsidiaries, as
debtors-in-possession, are parties to the DIP Facility, a Petition Date
$200,000,000 revolving credit agreement. The DIP Facility was approved by the
U.S. Bankruptcy Court on July 16, 1999. The DIP Facility has a term of two years
and is secured by a perfected security interest in substantially all of the
existing and future assets of LGII and its U.S. debtor subsidiaries (subject
only to valid and perfected pre-Petition Date liens). The lenders under the DIP
Facility also have the benefit of a "super-priority" administrative expense
claim in LGII's bankruptcy

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<PAGE>
THE LOEWEN GROUP INC.

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

Tabular amounts expressed in thousands of U.S. dollars
except per share amounts and number of shares

NOTE 3. LIABILITIES UNDER BANKRUPTCY PROCEEDINGS (CONTINUED)

proceedings. The DIP Facility will be used primarily to fund LGII's working
capital needs during the course of the bankruptcy proceedings. Use of the DIP
Facility for letters of credit is limited to a maximum of $50,000,000. As at
September 30, 1999, the borrowings under the DIP Facility were $10,000,000 and
the letters of credit outstanding were $17,300,000.

Loans made under the DIP Facility bear interest at floating rates of
U.S. Prime plus 1.25% (LIBOR plus 2.75% for Eurodollar advances). A commitment
fee of 0.50% is charged on the unused portion of the DIP Facility. Related
financing fees have been deferred and are being amortized over the two-year life
of the DIP Facility.

The DIP Facility contains various financial and other restrictive covenants
including, among other things, limitations on asset sales, additional
indebtedness, intercompany payments, capital expenditures, and minimum levels of
operating cash flow, gross margin and revenue. In October 1999, the Company
obtained waivers from its DIP Facility lenders for non-compliance as of
August 31, 1999 with certain financial covenants related to funeral home gross
margin and non-compete payments to former owners. At the same time, the Company
also received a waiver for non-compliance with certain other covenants measured
against its third quarter operating results. As the waivers will expire on
November 15, 1999, the Company and its DIP Facility lenders have undertaken a
comprehensive review of all current financial covenants and intend to amend such
covenants to be effective through the first quarter of 2000. The Company
believes that sufficient cash resources currently exist to satisfy its near-term
obligations.

NOTE 4. REORGANIZATION COSTS

Reorganization costs incurred in 1999 are as follows:

<TABLE>
<CAPTION>
SEPTEMBER 30, 1999
--------------------------
THREE MONTHS NINE MONTHS
ENDED ENDED
------------ -----------
<S> <C> <C>
Executory contracts submitted for rejection......... $ -- $27,228
Deferred debt issue costs written off............... 596 22,251
PATS option liability recorded...................... -- 9,760
Professional fees and other costs................... 10,598 19,118
------- -------
$11,194 $78,357
======= =======
</TABLE>

Professional fees include accounting, legal and consulting services provided
to the Company and the Official Unsecured Creditors' Committee which, subject to
court approval, are required to be paid by the Company as it reorganizes under
Chapter 11 and CCAA.

NOTE 5. CHANGE IN ACCOUNTING PRINCIPLES

The Company adopted CICA Handbook Section 1540, Cash Flow Statements, for
the year ended December 31, 1998. The provisions were applied retroactively with
restatement of prior period financial statements. Under Section 1540, non-cash
investing and financing activities are excluded from the statement of cash flows
and are disclosed as supplementary information to the interim consolidated
statements of cash flows.

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<PAGE>
THE LOEWEN GROUP INC.

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

Tabular amounts expressed in thousands of U.S. dollars
except per share amounts and number of shares

NOTE 6. PROVISION FOR ASSET IMPAIRMENT AND OTHER EXPENSES

Other expenses includes a pre-tax charge of approximately $13,500,000
recorded in the second quarter of 1999 to reflect contractual adjustments
pursuant to the purchase agreement associated with the sale of 124 cemeteries
and three funeral homes on March 31, 1999. At December 31, 1998, the Company
recorded a pre-tax impairment charge of $301,605,000 relating to the sale.

The Company also recorded an additional $15,100,000 pre-tax impairment
charge in the second quarter of 1999 for other properties identified at
December 31, 1998 as probable for sale.

NOTE 7. LGII SUMMARIZED FINANCIAL INFORMATION

LGII serves as the holding company for all United States assets and
operations of the Company. The consolidated financial statements of LGII are
prepared in accordance with Canadian generally accepted accounting principles
and are presented in United States dollars. Summarized financial data for LGII
are as follows:

<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------- --------------------
1999 1998 1999 1998
-------- -------- --------- --------
(unaudited) (unaudited)
<S> <C> <C> <C> <C>
Income statement information:
Revenue.......................... $210,605 $251,061 $ 726,561 $816,741
Gross margin..................... 58,682 56,249 209,321 246,042
Earnings (loss) from
operations..................... 8,377 (1,960) 66,750 111,346
Net earnings (loss).............. 6,985 (46,366) (137,929) (59,657)
</TABLE>

<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1999 1998
-------------- -------------
(unaudited)
<S> <C> <C>
Balance sheet information:
Current assets.................................... $ 246,216 $ 218,107
Other assets...................................... 3,777,135 3,922,407
---------- ----------
Total assets...................................... 4,023,351 4,140,514

Current liabilities............................... 94,537 1,207,708
Liabilities subject to compromise................. 2,102,132 --
Other liabilities................................. 2,266,508 3,237,888
---------- ----------
Total liabilities................................. 4,463,177 4,445,596

Shareholders' deficiency.......................... (439,826) (305,082)
</TABLE>

NOTE 8. CONTINGENCIES

(a) INVESTMENT CONTINGENCIES--PRIME SUCCESSION HOLDINGS, INC. ("PRIME") AND ROSE
HILLS HOLDINGS CORP. ("ROSE HILLS")

The Company owns 213.2353 shares of Prime common stock, representing 21.8%
of Prime's voting common stock, and 100% of Prime's non-voting preferred stock,
with a 10% cumulative annual payment-in-kind dividend. Blackstone Capital
Partners II Merchant Banking Fund L.P. and certain affiliates

-9-
<PAGE>
THE LOEWEN GROUP INC.

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

Tabular amounts expressed in thousands of U.S. dollars
except per share amounts and number of shares

NOTE 8. CONTINGENCIES (CONTINUED)

(together, "Blackstone") owns 764.7059 shares of Prime common stock,
representing 78.2% of Prime's voting common stock. Prime holds all of the
outstanding common shares of Prime Succession, Inc., an operator of funeral
homes and cemeteries in the United States. The Company also owns
204.5454 shares of Rose Hills common stock, representing 20.45% of Rose Hills'
voting common stock, and 100% of Rose Hills non-voting preferred stock, with a
10% cumulative annual payment-in-kind dividend. Blackstone owns 795.4546 shares
of Rose Hills common stock, representing 79.55% of Rose Hills' voting common
stock. Rose Hills holds all of the outstanding common stock of Rose Hills
Company and the cemetery related assets of Rose Hills Memorial Park Association,
representing the largest single location cemetery in the United States.

Under separate Put/Call Agreements for Prime and Rose Hills entered into
with Blackstone in August 1996 and November 1996, respectively, the Company has
the option to acquire ("Call") Blackstone's Prime and Rose Hills common stock
commencing on the fourth anniversary of the acquisitions, and for a period of
two years thereafter, at a price determined pursuant to the Put/Call Agreements.
Blackstone has the option to sell ("Put") its Prime and Rose Hills common stock
to the Company commencing on the sixth anniversary of the acquisitions, and for
a period of two years thereafter, at a price determined pursuant to the Put/Call
Agreements.

The prices for the Call and the Put are based on a formula that calculates
the equity value attributable to Blackstone's common share interests. The
calculated equity value for Prime and Rose Hills is determined at the Put or
Call date based on a multiple of approximately 12x-13x earnings before interest,
taxes, depreciation and amortization ("EBITDA") for the previous year, after
deduction of certain liabilities. Any payment to Blackstone under the Call or
the Put may be in the form of cash and/or Common shares of the Company, at the
Company's option, subject to certain conditions.

Upon a Call, Blackstone is entitled to receive, at a minimum, its original
investment plus a 24.1% and 22.5% compound return per annum thereon regardless
of the calculated equity value for Prime and Rose Hills, respectively. Any
additional equity value attributable to Blackstone common stock interests will
be determined on the basis of a formula set forth in the Put/Call Agreements.
Upon a Put by Blackstone, there is no guaranteed return to Blackstone. Any
payment to Blackstone is limited to Blackstone's share of the calculated equity
value based on a formula set forth in the Put/Call Agreements.

Prior to the fourth quarter of 1998, the Company evaluated the exercise of
the Call on the fourth anniversary date as likely. During the fourth quarter of
1998, due to liquidity concerns of the Company, the performance of Prime and
Rose Hills and the reduced market values for the Company's and other industry
participants' stock, the Company determined the exercise of the Call on the
fourth anniversary as unlikely and the exercise of the Put as likely.
Accordingly, the Company assessed that its investments suffered a decline in
value that was other than temporary and wrote down its investments based on an
assumed distribution of Prime and Rose Hills shareholders' equity at
December 31, 1998 taking into account Blackstone's return under the Put. In
addition, the Company estimated the expected Put option price on the sixth
anniversary, the first date the Put option becomes exercisable by Blackstone,
based on the Company's best estimate of EBITDA at that time and the relevant
formula in the Put/Call Agreements. The Company has accrued a contingent loss
based upon the difference between the estimated option prices and the Company's
estimates of the fair values of Blackstone's equity in Prime and Rose Hills
which are based in part on current market conditions. Such amounts could change
based on changes in the

-10-
<PAGE>
THE LOEWEN GROUP INC.

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

Tabular amounts expressed in thousands of U.S. dollars
except per share amounts and number of shares

NOTE 8. CONTINGENCIES (CONTINUED)

estimated future values of the businesses. Net liabilities have been recorded
reflecting accruals of the expected losses on the options reduced by the
remaining carrying values of Prime and Rose Hills.

(b) LEGAL CONTINGENCIES

BANKRUPTCY FILINGS

On June 1, 1999, the Company and each of approximately 850 United States
subsidiaries filed a voluntary petition for creditor protection and to
reorganize under Chapter 11 of the U.S. Bankruptcy Code in the U.S. Bankruptcy
Court for the District of Delaware (the "Bankruptcy Court"). The filings
subsequently were consolidated for joint administration (IN RE LOEWEN GROUP
INTERNATIONAL, INC., ET AL., No. 99-1244). On the same day, the Company and 116
Canadian subsidiaries filed an application for creditor protection under the
Companies' Creditors Arrangement Act in the Ontario Superior Court of Justice in
Toronto (File No. 99-CL-3384). The Company's United Kingdom subsidiaries, which
generate less than 1% of the Company's revenues, along with the Company's
insurance and certain funeral and cemetery subsidiaries, were excluded from the
filings. See Notes 1, 3 and 4 to the interim consolidated financial statements
for additional information.

The Company and its subsidiaries under creditor protection are presently
operating their businesses as debtors-in-possession. An Official Unsecured
Creditors' Committee has been appointed by the United States trustee in the
bankruptcy proceedings. On July 16, 1999, the U.S. Bankruptcy Court approved the
DIP Facility. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations" for further information about the DIP Facility.

As a result of the bankruptcy filings, litigation against the Company and
its filing subsidiaries was stayed as of June 1, 1999, and any resultant
liabilities will be subject to compromise. There are no material changes to
previously reported litigation, except for the stay under the bankruptcy filings
and as noted below. Please refer to the Company's Quarterly Report on Form 10-Q
for the quarter ended March 31, 1999 for a description of previously reported
litigation.

SECURITIES CLASS ACTIONS

Since December 1998, the Company has been served with various related
lawsuits filed in the United States District Courts for the Eastern District of
Pennsylvania and for the Eastern District of New York. Raymond L. Loewen, the
former Chairman and Chief Executive Officer, and certain current and former
officers and directors have been named as defendants in some of the suits. All
but one of these lawsuits were filed as purported class actions on behalf of
persons or entities that purchased Company Common shares during five different
time periods ranging from November 3, 1996 through January 14, 1999. LGII and
LGC are named as defendants in two suits (with the Company, the "Loewen
Defendants"). The plaintiffs in these two lawsuits purport to sue on behalf of a
class of purchasers of MIPS from March 5, 1997 through January 14, 1999. The
MIPS were issued by LGC.

The complaints generally make allegations concerning, among other things,
the Company's internal controls, accounting practices, financial disclosures and
acquisition practices.

-11-
<PAGE>
THE LOEWEN GROUP INC.

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

Tabular amounts expressed in thousands of U.S. dollars
except per share amounts and number of shares

NOTE 8. CONTINGENCIES (CONTINUED)

The Judicial Panel on Multidistrict Litigation (the "MDL Panel") granted the
Loewen Defendants' motion to consolidate all of the actions for pretrial
coordination in the United States District Court for the Eastern District of
Pennsylvania.

On April 15, 1999, Judge Thomas O'Neill of the District Court for the
Eastern District of Pennsylvania entered an order consolidating in the Eastern
District of Pennsylvania all of the cases listed below as well as any related
cases thereafter transferred to that District (the "April 15 Order"). The
April 15 Order appointed the City of Philadelphia Board of Pensions and
Retirement as lead plaintiff, ordered the filing of a Consolidated Amended
Complaint within 45 days, and required the defendants to respond within 45 days
after the filing of the Consolidated Amended Complaint. Subsequent to the
Company's bankruptcy filings and before the filing of a Consolidated Amended
Complaint, Judge O'Neill entered an order staying all of the cases and placing
them on the suspense docket. Plaintiffs have filed a motion asking the Court to
restore the cases to the active docket for purposes of allowing them to file a
Consolidated Amended Complaint against the current and certain additional
unnamed individual defendants. The Company and the individual defendants have
filed papers opposing that motion.

The complaints filed in the United States District Court for the Eastern
District of Pennsylvania are: BERG V. THE LOEWEN GROUP INC., ET AL., 99-CV-321;
BRODY V. RAYMOND L. LOEWEN, ET AL., 99-CV-19; CAMUTO ET AL. V. RAYMOND L.
LOEWEN, ET AL., 99-CV-640; GILMORE V. RAYMOND L. LOEWEN, ET AL., 99-CV-232; CITY
OF PHILADELPHIA V. THE LOEWEN GROUP INC., ET AL., 99-CV-1007; HILL V. THE LOEWEN
GROUP INC., ET AL., 99-CV-560; JAMISON V. RAYMOND L. LOEWEN, ET AL., 99-CV-98;
MCGLATHERY, ET AL. V. RAYMOND L. LOEWEN, ET AL., 99-CV-665 (the MCGLATHERY suit
was filed on behalf of purchasers of MIPS); PASKOWITZ V. RAYMOND L. LOEWEN, ET
AL., 99-CV-91; SIROTA & SIROTA EMPLOYEES PROFIT SHARING PLAN V. THE LOEWEN
GROUP INC., ET AL., 99-CV-585; STEINER V. RAYMOND L. LOEWEN, ET AL., 98-CV-6740;
TEKIRAN V. RAYMOND L. LOEWEN, ET AL., 99-CV-589; and TRAVIS V. RAYMOND L.
LOEWEN, ET AL., No. 99-11340.

The complaints originally filed in the United States District Court for the
Eastern District of New York and now consolidated in the Eastern District of
Pennsylvania are: COHEN V. THE LOEWEN GROUP INC., ET AL. (the COHEN suit was
filed on behalf of purchasers of MIPS), 99-CV-553; COLLINS V. THE LOEWEN
GROUP INC., ET AL., 99-CV-261; CORRADINI, ET AL. V. THE LOEWEN GROUP INC.,
ET AL., 99-CV-443; GERSH V. THE LOEWEN GROUP INC., 98-CV-7983; GREAT NECK
CAPITAL APPRECIATION PARTNERS V. RAYMOND L. LOEWEN, ET AL., 99-CV-164;
HARRIS V. THE LOEWEN GROUP INC., ET AL., 99-CV-153; and SALEM V. THE LOEWEN
GROUP INC., ET AL., 99-CV-351.

The Company has determined that it is not possible at this time to predict
the final outcome of these proceedings or to establish a reasonable estimate of
possible damages, if any, or to reasonably estimate the range of possible
damages that may be awarded to the plaintiffs. Accordingly, no provision with
respect to these lawsuits has been made in the Company's interim consolidated
financial statements.

OTHER

The Company is a party to other legal proceedings in the ordinary course of
its business but does not expect the outcome of any other proceedings,
individually or in the aggregate, to have a material adverse effect on the
Company's financial position, results of operation or liquidity.

-12-
<PAGE>
THE LOEWEN GROUP INC.

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

Tabular amounts expressed in thousands of U.S. dollars
except per share amounts and number of shares

NOTE 8. CONTINGENCIES (CONTINUED)

The Year 2000 Issue arises because many computerized systems use two digits
rather than four to identify a year. Date-sensitive systems may recognize the
year 2000 as 1900 or some other date, resulting in errors when information using
year 2000 dates is processed. In addition, similar problems may arise in some
systems which use certain dates in 1999 to represent something other than a
date. The effects of the Year 2000 Issue may be experienced before, on, or after
January 1, 2000, and, if not addressed, the impact on operations and financial
reporting may range from minor errors to significant systems failure which could
affect the Company's ability to conduct normal business operations. It is not
possible to be certain that all aspects of the Year 2000 Issue affecting the
Company, including those related to efforts of customers, suppliers, or other
third parties, will be fully resolved.

-13-
<PAGE>
THE LOEWEN GROUP INC.

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

Tabular amounts expressed in thousands of U.S. dollars
except per share amounts and number of shares

NOTE 9. CHANGES IN OTHER NON-CASH BALANCES

Supplemental disclosures related to the interim consolidated statements of
cash flows consist of the following:

<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------- --------------------
1999 1998 1999 1998
-------- -------- -------- ---------
(unaudited) (unaudited)
<S> <C> <C> <C> <C>
(Increase) decrease in assets:
Receivables, net of allowances:
Trade........................................... $ (3,612) $ (5,604) $ 12,343 $ 2,458
Other........................................... (23,388) 19,330 (43,282) 19,145
Inventories....................................... (636) 1,630 494 777
Prepaid expenses.................................. 2,877 1,347 (4,477) (685)
Amounts receivable from cemetery merchandise
trusts.......................................... (8,014) (25,288) (61,254) (67,148)
Installment contracts, net of allowances.......... 18,917 5,060 36,798 (23,922)
Cemetery property................................. (7,552) (1,976) (24,279) (24,611)
Other assets...................................... 2,129 (1,629) (1,830) (6,909)
Increase (decrease) in liabilities, including
certain liabilities subject to compromise:
Accounts payable and accrued liabilities.......... 11,665 39,547 5,190 12,211
Other liabilities................................. 7,872 6,336 9,789 10,619
Cemetery long-term liabilities.................... 1,975 (4,971) 16,718 1,251
Insurance policy liabilities...................... 4,379 7,962 13,311 9,021
Future income tax liabilities..................... 779 (29,002) (1,984) (36,476)
Other changes in non-cash balances.................. (875) (855) 657 (2,382)
-------- -------- -------- ---------
$ 6,516 $ 11,887 $(41,806) $(106,651)
======== ======== ======== =========
Supplemental information:
Interest paid..................................... $ 4,331 $ 13,042 $ 82,197 $ 102,220
Taxes paid........................................ 1,142 6,807 8,499 15,516
Bad debt expense.................................. 8,851 39,615 33,461 78,321
Non-cash investing and financing activities:
Non-cash debt and share consideration on
acquisitions.................................... $ -- $ 5,981 $ 2,280 $ 25,282
</TABLE>

-14-
<PAGE>
THE LOEWEN GROUP INC.

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

Tabular amounts expressed in thousands of U.S. dollars
except per share amounts and number of shares

NOTE 10. SEGMENTED INFORMATION

In 1998 the Company adopted CICA Handbook Section 1701, Segment Disclosures,
which changed the way the Company reports information about its operating
segments.

The Company's reportable segments are comprised of the three businesses it
operates: funeral homes, cemeteries and insurance, each of which offers
different products and services. There has been no change in the basis of this
segmentation, accounting policies of the segments, or the basis of measurement
of segment profit or loss from that disclosed in the 1998 annual financial
statements. The information for the three and nine months ended September 30,
1998 has been restated to conform to the 1999 presentation.

<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED SEPTEMBER 30 (UNAUDITED) FUNERAL CEMETERY INSURANCE OTHER CONSOLIDATED
- --------------------------------------------------- -------- -------- --------- -------- ------------
<S> <C> <C> <C> <C> <C>
Revenue earned from external sales
1999......................................... $137,157 $70,849 $23,813 $ -- $231,819
1998......................................... 150,747 89,883 23,257 -- 263,887

Earnings (loss) from operations
1999......................................... $ 22,538 $ 8,738 $ 5,303 $(15,642) $ 20,937
1998......................................... 24,346 3,316 4,997 (38,278) (5,619)
</TABLE>

The following table reconciles earnings from operations of reportable
segments to total earnings from operations and identifies the components of
"Other" segment earnings (loss) from operations:

<TABLE>
<CAPTION>
THREE MONTHS ENDED
SEPTEMBER 30,
-------------------
1999 1998
-------- --------
(unaudited)
<S> <C> <C>
Earnings from operations of funeral, cemetery and
insurance segments....................................
$ 36,579 $ 32,659
Other expenses of operations:
General and administrative expenses................... (13,009) (33,465)
Depreciation and amortization......................... (2,633) (4,813)
-------- --------
Total earnings (loss) from operations................... $ 20,937 $ (5,619)
======== ========
</TABLE>

-15-
<PAGE>
THE LOEWEN GROUP INC.

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

Tabular amounts expressed in thousands of U.S. dollars
except per share amounts and number of shares

NOTE 10. SEGMENTED INFORMATION (CONTINUED)

<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED SEPTEMBER 30 (UNAUDITED) FUNERAL CEMETERY INSURANCE OTHER CONSOLIDATED
- -------------------------------------------------- ---------- ---------- --------- -------- ------------
<S> <C> <C> <C> <C> <C>
Revenue earned from external sales............
1999........................................ $ 462,248 $ 273,030 $ 71,434 $ -- $ 806,712
1998........................................ 473,510 329,701 72,335 -- 875,546

Earnings (loss) from operations
1999........................................ $ 103,822 $ 30,534 $ 15,052 $(55,045) $ 94,363
1998........................................ 111,949 62,739 13,465 (71,809) 116,344

Total assets, as at:
September 30, 1999 (unaudited).............. $2,059,467 $2,013,997 $284,182 $ 92,055 $4,449,701
December 31, 1998........................... 2,059,422 2,175,663 276,098 162,725 4,673,908
</TABLE>

The following table reconciles earnings from operations of reportable
segments to total earnings from operations and identifies the components of
"Other" segment earnings (loss) from operations:

<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
-------------------
1999 1998
-------- --------
(unaudited)
<S> <C> <C>
Earnings from operations of funeral, cemetery and
insurance segments....................................
$149,408 $188,153
Other expenses of operations:
General and administrative expenses................... (47,750) (63,501)
Depreciation and amortization......................... (7,295) (8,308)
-------- --------
Total earnings from operations.......................... $ 94,363 $116,344
======== ========
</TABLE>

-16-
<PAGE>
THE LOEWEN GROUP INC.

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

Tabular amounts expressed in thousands of U.S. dollars
except per share amounts and number of shares

NOTE 11. UNITED STATES ACCOUNTING PRINCIPLES

The interim consolidated financial statements have been prepared in
accordance with Canadian generally accepted accounting principles ("GAAP").
These principles differ in the following material respects from those in the
United States as summarized below:

(a) EARNINGS AND BASIC EARNINGS PER COMMON SHARE

EARNINGS

Other comprehensive income (loss):
Foreign currency translation adjustments............ 559 (1,539) 842 (1,040)
Unrealized gains (losses) on securities:
Unrealized holding gains (losses) arising during
the period...................................... (2,413) (4,827) (8,285) 3,267
Less: reclassification adjustment for gains
included in
net income...................................... (528) (160) (2,848) (7,083)
------- -------- --------- -------
Comprehensive income (loss) in accordance with United
States GAAP......................................... $(2,085) $(40,447) $(109,027) $(1,950)
======= ======== ========= =======
</TABLE>

-17-
<PAGE>
THE LOEWEN GROUP INC.

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

Tabular amounts expressed in thousands of U.S. dollars
except per share amounts and number of shares

NOTE 11. UNITED STATES ACCOUNTING PRINCIPLES (CONTINUED)

BASIC EARNINGS PER COMMON SHARE

Basic earnings per Common share in accordance with United States GAAP, and
similar to Canadian GAAP, is based on the weighted average number of Common
shares outstanding during the year, and is computed as follows:

(b) BALANCE SHEET

The amounts in the interim consolidated balance sheets that differ from
those reported under Canadian GAAP are as follows:

<TABLE>
<CAPTION>
SEPTEMBER 30, 1999 DECEMBER 31, 1998
--------------------------- ---------------------------
CANADIAN UNITED STATES CANADIAN UNITED STATES
GAAP GAAP GAAP GAAP
---------- -------------- ---------- --------------
(unaudited)
<S> <C> <C> <C> <C>
Assets
Receivables, net of allowances............. $ 201,262 $ 201,262 $ 203,772 $ 204,013
Long-term receivables, net of allowances... 559,516 566,037 664,999 673,100
Insurance invested assets.................. 274,656 262,276 266,661 270,809
Other assets............................... 136,776 163,242 164,503 187,760

Liabilities and Shareholders' Equity
Other liabilities.......................... 370,124 366,462 399,304 394,377
Insurance policy liabilities............... 180,231 213,159 166,920 196,230
Future income tax liabilities.............. 191,305 188,065 208,939 212,378
Common shares.............................. 1,276,449 1,302,821 1,274,096 1,300,428
Deficit.................................... (639,914) (638,512) (539,741) (536,089)

Accumulated other comprehensive income:
Unrealized gains on securities available
for sale, net of tax..................... -- (4,196) -- 6,937
Foreign exchange adjustment................ 14,782 (14,215) 13,940 (15,057)
</TABLE>

-18-
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

Unless the context otherwise requires (i) "Loewen" refers to The Loewen
Group Inc., a company organized under the laws of British Columbia, Canada,
(ii) "LGII" refers to Loewen Group International, Inc., a Delaware corporation
and a wholly-owned subsidiary of Loewen, and (iii) the "Company" refers to
Loewen together with its subsidiaries and associated companies.

OVERVIEW

The Company operates the second-largest number of funeral homes and
cemeteries in North America. In addition to providing services at the time of
need, the Company also makes funeral, cemetery and cremation arrangements on a
pre-need basis. As at October 29, 1999, the Company operated 1,113 funeral homes
and 427 cemeteries throughout North America and 32 funeral homes in the United
Kingdom. As at October 29, 1999, the Company also operated three insurance
subsidiaries that principally sell a variety of life insurance products to fund
funeral services purchased through a pre-need arrangement.

FINANCIAL CONDITION

BANKRUPTCY PROCEEDINGS

On June 1, 1999 (the "Petition Date"), the Company and each of approximately
850 United States subsidiaries voluntarily filed a petition for creditor
protection under Chapter 11 of the United States Bankruptcy Code ("Chapter 11")
in the United States Bankruptcy Court, Wilmington, Delaware, United States.
Concurrent with the Chapter 11 filing, the Company and 116 of its Canadian
subsidiaries filed for creditor protection under the Companies' Creditors
Arrangement Act ("CCAA") with the Ontario Superior Court of Justice, Toronto,
Ontario, Canada. The Company and its subsidiaries under creditor protection (the
"Debtors") are presently operating their businesses as debtors-in-possession.
The United States trustee for the District of Delaware appointed a statutory
committee of unsecured creditors (the "Official Unsecured Creditors'
Committee"). The proceedings of the Debtors are being jointly administered for
procedural purposes only. The Company's insurance, United Kingdom and certain
funeral and cemetery subsidiaries were not included in the Chapter 11 and
CCAA filings.

The Company is reorganizing its affairs under the protection of Chapter 11
and CCAA and will propose a plan of reorganization for itself and other filing
subsidiaries, which will be submitted to the Bankruptcy Courts overseeing the
Chapter 11 and CCAA proceedings for confirmation after submission to any vote
and approval required by affected parties. During the pendency of these
proceedings, while working to restructure its indebtedness, the Company will be
assessing the carrying value of its assets, which may result in write downs, and
will also be implementing operational and systems improvements.

BASIS OF PRESENTATION

The accompanying Interim Consolidated Financial Statements have been
prepared on a "going concern" basis in accordance with Canadian generally
accepted accounting principles. The "going concern" basis of presentation
assumes that the Company will continue in operation for the foreseeable future
and will be able to realize its assets and discharge its liabilities and
commitments in the normal course of business. As a result of the Chapter 11 and
CCAA proceedings and circumstances relating to this event, including the
Company's current debt structure, recent losses and negative cash flow, such
realization of assets and discharge of liabilities are subject to significant
uncertainty.

-19-
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)

carrying value of assets and liabilities, the reported revenues and expenses,
and the balance sheet classifications used. Additionally, the amounts reported
could materially change because of a plan of reorganization, since the reported
amounts in the Interim Consolidated Financial Statements do not give effect to
adjustments to the carrying value of the underlying assets or amounts of
liabilities that may ultimately result. The appropriateness of the "going
concern" basis is dependent upon, among other things, confirmation of a plan of
reorganization, future profitable operations, the ability to comply with the
terms of the Petition Date debtor-in-possession $200 million revolving credit
agreement (the "DIP Facility") and the ability to generate sufficient cash from
operations and financing arrangements to meet obligations.

RESULTS OF OPERATIONS

Detailed below are the Company's operating results for the three months and
nine months ended September 30, 1999 and 1998, expressed in dollar amounts as
well as relevant percentages. The operating results are presented as a
percentage of revenue.

The Company's operations are comprised of three businesses: funeral homes,
cemeteries and insurance. Additional segmented information is provided in
Note 10 to the Interim Consolidated Financial Statements.

<TABLE>
<CAPTION>
THREE MONTHS THREE MONTHS
ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------- -------------------
1999 1998 1999 1998
-------- -------- -------- --------
(in millions) (percentages)
<S> <C> <C> <C> <C>
Revenue
Funeral................................................... $137.2 $150.7 59.2 57.1
Cemetery.................................................. 70.8 89.9 30.5 34.1
Insurance................................................. 23.8 23.3 10.3 8.8
------ ------
Total................................................... $231.8 $263.9 100.0 100.0
====== ======
Gross margin
Funeral................................................... $ 41.8 $ 49.1 30.5 32.5
Cemetery.................................................. 12.8 9.5 18.1 10.6
Insurance................................................. 5.3 5.0 22.3 21.5
------ ------
Total................................................... 59.9 63.6 25.8 24.1
Expenses
General and administrative................................ 19.5 44.5 8.4 16.8
Depreciation and amortization............................. 19.5 24.7 8.4 9.4
Provision for asset impairment............................ -- -- -- --
------ ------
Earnings (loss) from operations........................... 20.9 (5.6) 9.0 (2.1)
Interest on long-term debt................................ 5.9 46.5 2.6 17.6
Dividends on preferred securities of subsidiary........... -- 1.8 -- 0.7
Reorganization costs...................................... 11.2 -- 4.8 --
Other expenses (income)................................... 0.7 (1.6) 0.3 (0.6)
Income taxes.............................................. 1.2 (19.9) n/a n/a
------ ------
Net earnings (loss)....................................... $ 1.9 $(32.4) 0.8 (12.3)
====== ======
</TABLE>

-20-
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)

THREE MONTHS ENDED SEPTEMBER 30, 1999 COMPARED TO THREE MONTHS ENDED
SEPTEMBER 30, 1998

Consolidated revenue decreased by 12.2% to $231.8 million for the three
months ended September 30, 1999 from $263.9 million in 1998. Management believes
that the revenue decline in the funeral business was in part due to the
bankruptcy filings on June 1, 1999. Cemetery revenues were significantly
affected by the disposition of 124 properties at March 31, 1999 and to a lesser
degree by the bankruptcy filings. Consolidated gross margin decreased 5.8% to
$59.9 million for the three months ended September 30, 1999 from $63.6 million
in 1998, primarily attributable to the overall revenue decline. As a percentage
of revenue, consolidated gross margin increased to 25.8% for the three months
ended September 30, 1999 from 24.1% in 1998.

Funeral revenue decreased 9.0% to $137.2 million for the three months ended
September 30, 1999 compared to $150.7 million in 1998, due to fewer funeral
services and a reduced average revenue per funeral service, partly, management
believes, attributable to the bankruptcy filings. At locations in operation for
the three months ended September 30, 1998 and 1999, the average revenue per
funeral service decreased by 1.9%, while the number of funeral services
performed decreased by 5.5%. Overall funeral gross margin, as a percentage of
funeral revenue, decreased to 30.5% in 1999 from 32.5% in 1998 principally as a
result of lower revenues and significant fixed operating costs. Total funeral
services provided decreased to 37,600 compared to 39,400 for the same period
in 1998.

Cemetery revenue decreased 21.2% to $70.8 million in the three months ended
September 30, 1999 compared to $89.9 million in 1998, primarily due to the
disposition of 124 cemetery properties at March 31, 1999. In addition, revenues
were negatively impacted by the bankruptcy filing in June and pre-need sales
contract term changes, such as shorter terms and larger down payments that are
less attractive to certain customers but are designed to improve cash flow.
Overall cemetery gross margin, as a percentage of cemetery revenue, increased to
18.1% in 1999 from 10.6% in 1998, primarily due to, in 1998, an increase in
allowance for pre-need accounts receivable and imputed interest on low
interest contracts.

Insurance revenue increased 2.4% to $23.8 million for the three months ended
September 30, 1999 from $23.3 million in 1998. Overall insurance gross margin,
as a percentage of insurance revenue, increased slightly to 22.3% for 1999 from
21.5% in 1998, due to an increase in pre-need funeral sales and the related
elimination of intercompany commission costs.

General and administrative expenses, as a percentage of revenue, decreased
to 8.4% for the three months ended September 30, 1999 from 16.8% in 1998. The
decrease in general and administrative expenses in 1999 is primarily due to the
closure of the Trevose corporate office in the second quarter, the termination
of various strategic initiatives subsequent to the bankruptcy filing on June 1,
1999 and the write off in 1998 of approximately $14.9 million of previously
capitalized acquisition and construction costs which were no longer pursued.

Depreciation and amortization expenses for the three months ended
September 30, 1999 were 21.4% lower than in 1998, primarily due to dispositions
made in 1999 as well as the write off in 1998 of various depreciable assets.

Interest expense on long-term debt decreased by $40.6 million for the three
months ended September 30, 1999 compared to the same period in 1998. This is due
to the suspension of post-Petition Date interest expense and payments for
secured and unsecured debt obligations resulting from the Company's bankruptcy
filings. Contractual interest expense not recorded on certain pre-Petition Date
debt obligations was $43.1 million for the three months ended
September 30, 1999.

Reorganization costs of $11.2 million for the three months ended
September 30, 1999 include additional costs incurred primarily for professional
fees for accounting, legal and consulting services

-21-
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)

provided to the Company and the Official Unsecured Creditors' Committee, and
other costs and fees incurred while the Company reorganizes under Chapter 11
and CCAA.

The income tax expense of $1.2 million for the three months ended
September 30, 1999 compares to an income tax benefit of $19.9 million in 1998.
Prior to the year ended December 31, 1998, the Company's financing structures
allowed it to achieve an effective tax rate well below the Canadian statutory
rate of 45%. The Company expects that its income taxes for 1999 and beyond will
likely exceed the Canadian statutory rate.

In addition, the tax rate for 1999 and beyond may be affected
disproportionately by asset dispositions and the bankruptcy proceedings. In
addition to generating a gain or loss for tax purposes, the disposition of
certain locations, as well as limitations that may be placed on the realization
of other tax assets when the Company emerges from bankruptcy, may require the
Company to take a valuation allowance against certain tax assets that were taken
into account in determining the net amount of the Company's liability for future
income taxes recorded on its balance sheet at September 30, 1999. If this
occurs, the resulting change in the valuation allowance would generally be
treated as an additional income tax expense in the period such events
become probable.

The Company had net earnings of $1.9 million for the three months ended
September 30, 1999, an increase in earnings of $34.3 million compared to a net
loss of $32.4 million in 1998. The income was $0.03 per share compared to a loss
of $0.47 per share in 1998. The increase in net earnings for 1999 resulted from
the lower general and administrative, depreciation and amortization, and
interest expenses, as noted above, partly due to the effect of the 1998
significant charges related to pre-need accounts receivable allowance, imputed
interest and asset write-offs. These increases were partially offset by
increased income taxes and additional reorganization costs associated with the
bankruptcy proceedings.

-22-
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)

<TABLE>
<CAPTION>
NINE MONTHS NINE MONTHS
ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------- -------------------
1999 1998 1999 1998
-------- -------- -------- --------
(in millions) (percentages)
<S> <C> <C> <C> <C>
Revenue
Funeral................................................... $462.3 $473.5 57.3 54.1
Cemetery.................................................. 273.0 329.7 33.8 37.6
Insurance................................................. 71.4 72.3 8.9 8.3
------ ------
Total................................................... $806.7 $875.5 100.0 100.0
====== ======
Gross margin
Funeral................................................... $165.4 $177.3 35.8 37.4
Cemetery.................................................. 61.3 79.8 22.4 24.2
Insurance................................................. 15.1 13.5 21.1 18.6
------ ------
Total................................................... 241.8 270.6 30.0 30.9
Expenses
General and administrative................................ 73.7 93.5 9.1 10.7
Depreciation and amortization............................. 58.6 60.8 7.3 6.9
Provision for asset impairment............................ 15.1 -- 1.9 --
------ ------
Earnings from operations.................................. 94.4 116.3 11.7 13.3
Interest on long-term debt................................ 82.9 122.0 10.3 13.9
Dividends on preferred securities of subsidiary........... 3.0 5.3 0.4 0.6
Reorganization costs...................................... 78.4 -- 9.7 --
Other expenses (income)................................... 14.6 (8.1) 1.8 (0.9)
Income taxes.............................................. 12.0 (10.7) n/a n/a
------ ------
Net earnings (loss)....................................... $(96.5) $ 7.8 (12.0) 0.9
====== ======
</TABLE>

NINE MONTHS ENDED SEPTEMBER 30, 1999 COMPARED TO NINE MONTHS ENDED
SEPTEMBER 30, 1998

Consolidated revenue decreased by 7.9% to $806.7 million for the nine months
ended September 30, 1999 from $875.5 million in 1998. Management believes that
the revenue decline in the funeral business was in part due to the bankruptcy
filings on June 1, 1999. Cemetery revenues were significantly affected by the
disposition of 124 properties at March 31, 1999 and to a lesser degree by the
bankruptcy filings. Insurance revenues increased after excluding 1998 revenues
of a subsidiary sold in the fourth quarter of 1998. Consolidated gross margin
decreased 10.6% to $241.8 million for the nine months ended September 30, 1999
from $270.6 million in 1998, primarily attributable to the cemetery revenue
decline, though funeral margin also declined due to lower revenues and
significant fixed operating costs, while insurance margin improved. As a
percentage of revenue, consolidated gross margin decreased to 30.0% for the nine
months ended September 30, 1999 from 30.9% in 1998.

Funeral revenue decreased by 2.4% to $462.3 million for the nine months
ended September 30, 1999 compared to $473.5 million in 1998, primarily due to
lower average revenue per funeral service and, management believes, the negative
impacts of the bankruptcy filings. At locations in operation for the nine months
ended September 30, 1998 and 1999, the average revenue per funeral service
increased by 0.3%, while the number of funeral services performed decreased by
3.4%. Overall funeral gross margin as a percentage of funeral revenue, decreased
to 35.8% in 1999 from 37.4% in 1998 principally as a result of lower revenues
and significant fixed operating costs. Total funeral services provided increased
to 122,900 compared to 121,900 for the same period in 1998.

-23-
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)

Cemetery revenue decreased 17.2% to $273.0 million in the nine months ended
September 30, 1999 compared to $329.7 million in 1998, primarily due to the
disposition of 124 cemetery properties at March 31, 1999. In addition, revenues
were negatively impacted by the bankruptcy filing in June and pre-need sales
contract term changes, such as shorter terms and larger down payments that are
less attractive to certain customers but are designed to improve cash flow.
Overall cemetery gross margin, as a percentage of cemetery revenue, decreased to
22.4% in 1999 from 24.2% in 1998, primarily due to the decline in revenue. In
1998, cemetery gross margin was reduced significantly due to an increase in
allowance for pre-need accounts receivable and imputed interest on low interest
contracts.

Insurance revenue decreased 1.2% to $71.4 million for the nine months ended
September 30, 1999 from $72.3 million in 1998. However, excluding 1998 revenues
of a subsidiary sold in 1998, insurance revenues increased by approximately
$11.5 million primarily due to the continuing effort to expand the sale of
pre-need funeral insurance through Company-owned funeral homes. Overall
insurance gross margin as a percentage of insurance revenue increased to 21.1%
for 1999 from 18.6% in 1998, primarily due to an increase in pre-need funeral
sales and the related elimination of intercompany commission costs.

General and administrative expenses, as a percentage of revenue, decreased
to 9.1% for the nine month period ended September 30, 1999 from 10.7% in 1998.
The decrease in general and administrative expenses in 1999 is primarily due to
the closure of the Trevose corporate office in the second quarter, the
termination of various strategic initiatives subsequent to the bankruptcy filing
on June 1, 1999 and the write off in 1998 of approximately $14.9 million of
previously capitalized acquisition and construction costs which were no
longer pursued.

Depreciation and amortization expenses for the nine months ended
September 30, 1999 were 3.4% lower than in 1998, primarily due to dispositions
made in 1999 as well as the write off in 1998 of various depreciable assets.

The Company recorded a non-recurring pre-tax impairment charge of
approximately $15.1 million in the second quarter of 1999 for other properties
identified at December 31, 1998 as probable for sale.

Interest expense on long-term debt decreased by $39.1 million for the nine
months ended September 30, 1999 compared to the same period in 1998. The
decrease is primarily a result of the suspension of post-Petition Date interest
expense and payment for secured and unsecured debt obligations resulting from
the Company's bankruptcy filings. Contractual interest expense not recorded on
certain pre-Petition Date debt obligations was $56.8 million for the nine months
ended September 30, 1999.

Reorganization costs of $78.4 million for the nine months ended
September 30, 1999 included a charge of approximately $22.3 million for the
write off of deferred debt issue costs and $9.8 million for the recording of the
PATS option liability, each associated with debt now subject to compromise,
$27.2 million for the write off of costs associated with executory contracts
submitted for rejection by the Company, and $19.1 million of professional fees
for accounting, legal and consulting services provided to the Company and the
Official Unsecured Creditors' Committee, and other costs and fees incurred while
the Company reorganizes under Chapter 11 and CCAA.

Other expenses reflects an additional non-recurring pre-tax charge of
approximately $13.5 million in the second quarter of 1999 relating to the sale
of 124 cemeteries and three funeral homes on March 31, 1999, due to subsequent
purchase price adjustments pursuant to certain terms of the purchase agreement.

-24-
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)

The income tax expense of $12.0 million for the nine months ended
September 30, 1999 compares to an income tax benefit of $10.7 million in 1998.
Prior to the year ended December 31, 1998, the Company's financing structures
allowed it to achieve an effective tax rate well below the Canadian statutory
rate of 45%. These structures did not produce similar benefits in the current
period because the Company was unable to fully realize the tax benefit from its
interest expense. Also, the Company was unable to realize the benefit of either
the operating loss for the period or the deductible portion of the
reorganization expenses incurred in the period. The Company expects that its
income taxes for 1999 and beyond will likely exceed the Canadian
statutory rate.

In addition, the tax rate for 1999 and beyond may be affected
disproportionately by asset dispositions and bankruptcy proceedings. In addition
to generating a gain or loss for tax purposes, the disposition of certain
locations, as well as limitations that may be placed on the realization of other
tax assets when the Company emerges from bankruptcy, may require the Company to
take a valuation allowance against certain tax assets that were taken into
account in determining the net amount of the Company's liability for future
income taxes recorded on its balance sheet at September 30, 1999. If this
occurs, the resulting change in the valuation allowance would generally be
treated as an additional income tax expense in the period such events become
probable.

The Company had a net loss of $96.5 million for the nine months ended
September 30, 1999, a decrease in earnings of $104.3 million compared to net
earnings of $7.8 million in 1998. The loss was $1.35 per share compared to
earnings of $0.01 per share in 1998. The decrease in net earnings for 1999
resulted primarily from lower funeral and cemetery gross margins, increased
income taxes, certain charges and reorganization costs associated with the
bankruptcy proceedings, as noted above.

LIQUIDITY AND CAPITAL RESOURCES

Over the past few years the Company's strategic growth plan had emphasized
cemetery acquisitions, as compared to its historical emphasis on funeral home
acquisitions. Acquisition and the integration of cemeteries required significant
cash due to the pre-need sales of cemetery interment rights, products and
services and related interest costs on debt incurred.

On June 1, 1999, the Company and most of its subsidiaries voluntarily filed
a petition for creditor protection under Chapter 11 of the United States
Bankruptcy Code in the United States and the Companies' Creditors Arrangement
Act in Canada. The Company and its subsidiaries will continue to conduct
business in the ordinary course as debtors-in-possession under the protection of
the Bankruptcy Courts while a plan of reorganization is developed.

The Company, LGII and all of its U.S. debtor subsidiaries, as
debtors-in-possession, are parties to the DIP Facility. The DIP Facility was
approved by the U.S. Bankruptcy Court on July 16, 1999. The DIP Facility has a
term of two years and is secured by a perfected security interest in
substantially all of the existing and future assets of LGII and its U.S. debtor
subsidiaries (subject only to valid and perfected pre-Petition Date liens). The
lenders under the DIP Facility also have the benefit of a "super-priority"
administrative expense claim in LGII's bankruptcy proceedings. The DIP Facility
will be used primarily to fund LGII's working capital needs during the course of
the bankruptcy proceedings. Use of the DIP Facility for letters of credit is
limited to a maximum of $50 million. As at September 30, 1999, the borrowings
under the DIP Facility were $10.0 million and the letters of credit outstanding
were $17.3 million.

In addition, the Company has taken steps to improve profitability and cash
flow throughout the organization, including a review of its cemetery pre-need
sales strategy and, to improve cash flow, implemented changes to the terms and
conditions of cemetery pre-need sales. These changes included: setting contract
term thresholds; adjusting sales force compensation for sales with certain
terms; and eliminating certain types of contracts in jurisdictions with poor
cash flow characteristics after trusting obligations are considered.

-25-
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)

The Company's balance sheet at September 30, 1999 as compared to
December 31, 1998, reflects changes principally from the disposition of
properties and changes associated with the bankruptcy filings as of June 1,
1999, as well as from ongoing operating activities.

RESTRICTIONS

The DIP Facility contains various financial and other restrictive covenants
including, among other things, limitations on asset sales, additional
indebtedness, inter-company payments, capital expenditures, and minimum levels
of operating cash flow, gross margin and revenue. In October 1999, the Company
obtained waivers from its DIP Facility lenders for non-compliance as of
August 31, 1999 with certain financial covenants related to funeral home gross
margin and non-compete payments to former owners. At the same time, the Company
also received a waiver for non-compliance with certain other covenants measured
against its third quarter operating results. As the waivers will expire on
November 15, 1999, the Company and its DIP Facility lenders have undertaken a
comprehensive review of all current financial covenants and intend to amend such
covenants to be effective through the first quarter of 2000. The Company
believes that sufficient cash resources currently exist to satisfy its near-term
obligations.

The Company's insurance subsidiaries, which have not filed for protection
under Chapter 11, are also subject to certain state regulations that restrict
distributions, loans and advances from such subsidiaries to the Company.

IMPACT OF THE YEAR 2000 ISSUE

OVERVIEW

The Year 2000 Issue is the result of computer programs being written using
two digits rather than four to define the applicable year. As a result,
date-sensitive software may recognize a date using "00" as the year 1900 rather
than the year 2000. This could result in a system failure or other disruption of
operations and impede normal business activities.

THE COMPANY'S STATE OF READINESS

During the past two years, the Company has been evaluating and assessing its
existing informational computer systems, as well as non-informational systems,
and determined that it was necessary to modify or replace certain portions of
its software so that its systems will function properly beyond December 31,
1999. In particular, certain of the Company's financial reporting and
information gathering systems, such as general ledger, fixed assets, payroll,
commissions, accounts receivable and payable, etc., required varying degrees of
modification or replacement. Continued accurate and timely information
processing and reporting is critical to the ongoing operations of the Company.
Similarly, certain non-informational systems, such as communications systems,
security systems, etc., which are critical to the safe and uninterrupted
performance of the Company also required varying degrees of modification or
replacement.

A detailed plan was developed to ensure that each area requiring
modifications or replacement was adequately and timely addressed. At this time,
the Company's monitoring indicates that all critical areas have been remedied to
be Year 2000 compliant as of the end of October 1999. The Company's plan
included adequate time for remediation of the area, as well as testing to ensure
the remediation efforts were complete. In addition, systems improvements and
benefits beyond solution of the Year 2000 Issues are expected to be realized.

The Company continues to communicate with its significant vendors to
determine the extent of their respective Year 2000 readiness. Based on
information compiled, the Company does not anticipate any significant Year 2000
Issue events with respect to these vendors. However, there can be no guarantee
that

-26-
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)

the systems of other companies on which the Company's systems rely will be
converted on a timely basis, or that a failure to convert by another company, or
a conversion that is incompatible with the Company's systems, would not have
material adverse effect on the Company.

THE COST TO ADDRESS THE COMPANY'S YEAR 2000 ISSUES

The total cost incurred by the Company to evaluate, assess and remediate
Year 2000 Issues has been approximately $3 million, and is not material to the
operating results or financial position of the Company. This amount does not
include any provision or estimate for costs which might arise from a third
party's Year 2000 Issue, which are not determinable.

THE RISKS OF THE COMPANY'S YEAR 2000 ISSUES

It is difficult to accurately project what the potential risks and
ramifications to the Company may be if a year 2000 Issue event occurs within the
systems of either the Company or significant third parties. In such an event, it
is possible that the ability to maintain accurate and complete financial records
of the Company's activities and transactions, and possibly the timely and
cost-effective procurement of merchandise, will be impaired. Such events, should
they occur, would be likely to significantly impair the Company's ability to
operate as it does today, creating business interruption, potential loss of
business, and earnings and liquidity difficulties. The Company presently
believes that with the modifications made to existing software and the
conversions to new software, the risk of potential loss associated with the
Year 2000 Issue has been mitigated.

In a "worst-case scenario," which is extremely difficult for the Company to
predict, the Company may be unable to fulfill its customer service obligations
in a timely or cost-effective manner, vendor payments may be delayed and timely
and accurate financial reporting might be hindered. All such effects would be
temporary, but the Company is not able to predict the exact nature of events and
circumstances, extent of time nor cost that might be incurred if a "worst-case
scenario" occurred. The Company believes that its Year 2000 remediation efforts
described are adequate to mitigate such potential effects.

THE COMPANY'S CONTINGENCY PLANS

Though the Company's Year 2000 Issue remediation is believed to be adequate
to achieve full system compliance, the Company has developed contingency plans,
such as alternate back-up plans or "parallel" remediation efforts that modified
an existing system to be Year 2000 compliant even though the system was
replaced, in the event that replacement systems do not perform as expected.

In addition, the Company has also developed cross-over contingency plans for
December 31, 1999 which include: on-site and standby staffing, vendor staffing
commitments and alternate communication procedures.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company used derivatives, prior to filing for bankruptcy, primarily in
the form of interest rate swaps, cross-currency interest rate swaps, and both
Canadian and United States dollar borrowings. The objective is to manage the mix
of floating and fixed rate debt and to substantially hedge the Company's net
investment in foreign assets. The Company's major market risk exposures are to
changing interest rates, equity prices and foreign currency fluctuations. The
Company's exposure to interest rate fluctuations and equity prices primarily
reside in the United States, while the Company's exposure to foreign currency
fluctuations primarily resides in Canadian dollar investments. All derivative
and other financial instruments described are non-trading and are stated in
U.S. dollars. The Company's derivative contracts are

-27-
<PAGE>
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK (CONTINUED)

entered into with major financial institutions, thereby minimizing the risk of
credit loss. Fluctuations in interest and currency rates that affect the swaps
are generally offset by corresponding movements in the assets or debt being
hedged. The Company's market risk exposure, discussed below, provides
information about the Company's market sensitive financial instruments and
constitutes "forward-looking statements" which involve risks and uncertainties.
Actual results could differ materially from those projected in the
forward-looking statements.

The Company's debt instrument sensitivity to floating interest rates is
based on approximately 90% and 10% of the Company's floating rate debt being
based in the United States and Canada, respectively. Accordingly, changes in
U.S. and Canadian interest rates affect the interest paid on the Company's debt.
To reduce the impact of fluctuations in U.S. and Canadian interest rates, the
Company generally manages interest rates such that 50% to 80% of the total debt
is fixed rate debt. Interest rates are managed either by long-term borrowings or
by entering into interest rate swap or option transactions.

The countries in which the Company has foreign operations are generally
stable politically and economically and are not highly inflationary. The Company
hedges a portion of its net investment in foreign assets. The foreign currency
denominated debt acts as a hedge on foreign currency denominated earnings
provided there is not an operating loss in the foreign currency
denominated segment.

As a result of the Company's bankruptcy filings on the Petition Date,
virtually all of the Company's fixed and floating rate debt are in default. Such
obligations have been reclassified as liabilities subject to compromise and will
not be settled until a plan of reorganization is confirmed by the Bankruptcy
Courts. These material limitations restrict the Company's ability to fully
reflect the net market risk exposure of these instruments. Accordingly,
information for fair values and scheduled repayments of the debt obligations has
been omitted. In addition, all interest rate derivatives previously held by the
Company have been terminated and a liability has been recorded if necessary.

EQUITY-PRICE RISK MANAGEMENT

The sale of prearranged funeral services, pre-need cemetery merchandise and
insurance products results in the Company having significant investment in, or
managing trusts that have significant investment in mutual funds and equity
securities which are sensitive to current market prices. Fluctuations in
interest and equity market rates on investments held in prearranged funeral
trusts do not result in significant current income fluctuation as the income is
not realized until services are performed. Investments in pre-need cemetery
merchandise trusts and insurance invested assets predominately hold fixed income
securities. These investments are generally held to maturity. Accordingly, any
unrealized gains or losses created by fluctuations in interest rates will not be
realized. The Company manages the mix of equities and fixed income securities in
accordance with policies set by the Investment Committee which is comprised of
members of senior management. The Investment Committee sets and modifies the mix
of investments with the assistance of independent professional financial
advisors. The policy emphasizes a conservative approach while maintaining
acceptable levels of income and capital appreciation.

-28-
<PAGE>
PART II

ITEM 1. LEGAL PROCEEDINGS

BANKRUPTCY FILINGS

On June 1, 1999, the Company and each of approximately 850 United States
subsidiaries filed a voluntary petition for creditor protection and to
reorganize under Chapter 11 of the U.S. Bankruptcy Code in the U.S. Bankruptcy
Court for the District of Delaware (the "Bankruptcy Court"). The filings
subsequently were consolidated for joint administration (IN RE LOEWEN GROUP
INTERNATIONAL, INC., ET AL., No. 99-1244). On the same day, the Company and
116 Canadian subsidiaries filed an application for creditor protection under the
Companies' Creditors Arrangement Act in the Ontario Superior Court of Justice in
Toronto (File No. 99-CL-3384). The Company's United Kingdom subsidiaries, which
generate less than 1% of the Company's revenues, along with the Company's
insurance and certain funeral and cemetery subsidiaries, were excluded from the
filings. See Notes 1, 3, and 4 to the Interim Consolidated Financial Statements
for additional information.

SECURITIES CLASS ACTIONS

The complaints generally make allegations concerning, among other things,
the Company's internal controls, accounting practices, financial disclosures and
acquisition practices.

-29-
<PAGE>
ITEM 1. LEGAL PROCEEDINGS (CONTINUED)

order staying all of the cases and placing them on the suspense docket.
Plaintiffs have filed a motion asking the Court to restore the cases to the
active docket for purposes of allowing them to file a Consolidated Amended
Complaint against the current and certain additional unnamed individual
defendants. The Company and the individual defendants have filed papers opposing
that motion.

The complaints filed in the United States District Court for the Eastern
District of Pennsylvania are: BERG V. THE LOEWEN GROUP INC., ET AL., 99-CV-321;
BRODY V. RAYMOND L. LOEWEN, ET AL., 99-CV-19; CAMUTO ET AL. V. RAYMOND L.
LOEWEN, ET AL., 99-CV-640; GILMORE V. RAYMOND L. LOEWEN, ET AL., 99-CV-232; CITY
OF PHILADELPHIA V. THE LOEWEN GROUP INC., ET AL., 99-CV-1007; HILL V. THE LOEWEN
GROUP INC., ET AL., 99-CV-560; JAMISON V. RAYMOND L. LOEWEN, ET AL., 99-CV-98;
MCGLATHERY, ET AL. V. RAYMOND L. LOEWEN, ET AL., 99-CV-665 (the MCGLATHERY suit
was filed on behalf of purchasers of MIPS); PASKOWITZ V. RAYMOND L. LOEWEN,
ET AL., 99-CV-91; SIROTA & SIROTA EMPLOYEES PROFIT SHARING PLAN V. THE LOEWEN
GROUP INC., ET AL., 99-CV-585; STEINER V. RAYMOND L. LOEWEN, ET AL., 98-CV-6740;
TEKIRAN V. RAYMOND L. LOEWEN, ET AL., 99-CV-589; and TRAVIS V. RAYMOND L.
LOEWEN, ET AL., No. 99-11340.

The Company has determined that it is not possible at this time to predict
the final outcome of these proceedings or to establish a reasonable estimate of
possible damages, if any, or reasonably to estimate the range of possible
damages that may be awarded to the plaintiffs. Accordingly, no provision with
respect to these lawsuits has been made in the Company's Interim Consolidated
Financial Statements.

OTHER

ENVIRONMENTAL CONTINGENCIES AND LIABILITIES

The Company's operations are subject to numerous environmental laws,
regulations and guidelines adopted by various governmental authorities in the
jurisdictions in which the Company operates. Liabilities are recorded when
environmental liabilities are either known or considered probable and can be
reasonably estimated. The Company's policies are designed to control
environmental risk upon acquisition through extensive due diligence and
corrective measures taken prior to acquisition. The Company believes
environmental liabilities to be immaterial individually and in the aggregate.

ITEM 3. DEFAULTS ON SENIOR SECURITIES

(a) In March 1999, the Company suspended future dividends on its Common
shares, Preferred shares and MIPS.

<TABLE>
<CAPTION>
OCTOBER 29, 1999
-----------------
<S> <C>
Dividends in arrears:

6.00% Preferred Shares, Series C.......................... $ 7,072,000
9.45% MIPS................................................ 4,134,000
-----------
$11,206,000
===========
</TABLE>

-30-
<PAGE>
ITEM 3. DEFAULTS ON SENIOR SECURITIES (CONTINUED)

(b) Since June 1, 1999, as a result of the bankruptcy filings, the Company
was in default of its bank credit agreements, Series D and E senior amortizing
notes, Series 1 through 7 Senior notes, MIPS and PATS. Accordingly, the Company
has not made interest and/or principal payments when due on secured, unsecured
and undersecured debt obligations.

<TABLE>
<CAPTION>
OCTOBER 29, 1999
-----------------
<S> <C>
Interest payments in arrears:

Bank credit agreements.................................... $ 15,290,000
9.62% Series D senior notes............................... 1,241,000
6.49% Series E senior notes............................... 958,000
7.50% Series 1 senior notes............................... 8,438,000
8.25% Series 2 senior notes............................... 5,156,000
7.75% Series 3 senior notes............................... 4,688,000
8.25% Series 4 senior notes............................... 9,281,000
6.10% Series 5 senior notes............................... 4,150,000
7.20% Series 6 senior notes............................... 7,200,000
7.60% Series 7 senior notes............................... 9,500,000
6.70% PATS................................................ 10,050,000
------------
$ 75,952,000
============

Principal payments in arrears:
9.62% Series D senior notes............................... $ 5,831,000
6.70% PATS................................................ 300,000,000
------------
$305,831,000
============
</TABLE>

ITEM 5. OTHER INFORMATION

STOCK EXCHANGE LISTINGS

The Company's Common shares trade on The Toronto Stock Exchange ("TSE"), the
Montreal Exchange ("ME") and the New York Stock Exchange ("NYSE"). The MIPS also
trade on the NYSE.

In July 1999, the NYSE received approval from the U.S. Securities and
Exchange Commission ("SEC") to proceed with amendments to the NYSE's continued
listing criteria and procedures. The SEC is soliciting comments on the proposed
amendments for a 90-day period. The NYSE expects the SEC to approve the proposed
amendments as currently drafted after the comment period expires.

The new continued listing standards are: (i) total market capitalization and
shareholders' equity of not less than $50 million; (ii) total market
capitalization of not less than $15 million over a 30-day trading period; and
(iii) minimum share price of $1 over a 30-day trading period.

On August 10, 1999, the NYSE notified the Company that the Company is "below
criteria" for the new $1 share price continued listing standard. The NYSE stated
that the Company had until January 25, 2000, to raise its share price to or
above the $1 level, and that if the Company fails to meet that condition, the
NYSE will immediately thereafter suspend trading and apply to the SEC
for delisting.

The NYSE also stated that given the Company's recent bankruptcy filings, the
NYSE will continue to monitor the Company's financial condition and will suspend
trading if at any point: (i) the NYSE receives authoritative advice that the
Company's Common shares have no value; (ii) the Company's Common shares are to
be cancelled; (iii) the Company announces any material adverse news; or
(iv) the Company's financial condition further deteriorates.

-31-
<PAGE>
ITEM 5. OTHER INFORMATION (CONTINUED)

The TSE and the ME also have rules setting forth quantitative and
qualitative criteria with respect to continued listing. As of October 29, 1999,
neither the TSE nor the ME has advised the Company that the Company does not
satisfy applicable continued listing criteria.

FORWARD-LOOKING STATEMENTS

Certain statements made in this Form 10-Q, including certain statements made
in the section entitled "Quantitative and Qualitative Disclosures about Market
Risk," in other filings made with the Securities and Exchange Commission, and
elsewhere (including oral statements made on behalf of the Company) are
forward-looking statements within the meaning of Section 27A(i) of the
Securities Act of 1933 and Section 21E(i) of the Securities Exchange Act of
1934. Shareholders and potential investors are hereby cautioned that certain
events or circumstances could cause actual results to differ materially from
those estimated, projected or predicted. The Company undertakes no obligation to
publicly release the result of any revisions to these forward-looking statements
that may be made to reflect events or circumstances after the date hereof or to
reflect the occurrence of unanticipated events.

CAUTIONARY STATEMENTS

In addition to other information in this Form 10-Q, including the
information that appears in the section entitled "Management's Discussion and
Analysis of Financial Condition and Results of Operations-Financial Condition,"
the following important factors, among others, could cause future results to
differ materially from estimates, predictions or projections.

1. ABILITY TO CONTINUE AS A GOING CONCERN. The Company's Interim
Consolidated Financial Statements have been prepared on a "going concern" basis
in accordance with Canadian GAAP. The "going concern" basis of presentation
assumes that the Company will continue in operation for the foreseeable future
and will be able to realize its assets and discharge its liabilities and
commitments in the normal course of business. As a result of the Chapter 11 and
CCAA bankruptcy proceedings and circumstances relating to this event, including
the Company's debt structure, recent losses and negative cash flow, such
realization of assets and discharge of liabilities are subject to significant
uncertainty.

The Interim Consolidated Financial Statements do not reflect adjustments
that would be necessary if the "going concern" basis was not appropriate. If the
"going concern" basis was not appropriate for the Interim Consolidated Financial
Statements, then significant adjustments would be necessary in the carrying
value of assets and liabilities, the reported revenues and expenses, and the
balance sheet classifications used. Additionally, the amounts reported could
materially change because of a plan of reorganization, since the reported
amounts in the Interim Consolidated Financial Statements do not give effect to
adjustments to the carrying value of the underlying assets or amounts of
liabilities that may ultimately result. The appropriateness of the "going
concern" basis is dependent upon, among other things, confirmation of a plan of
reorganization, future profitable operations, the ability to comply with the
terms of the DIP Facility and the ability to generate sufficient cash from
operations and financing arrangements to meet obligations.

2. REVENUE AND MARGINS. Revenue is affected by the volume of services
rendered and the mix and pricing of services and products sold and actual
pre-need contract cancellation experience. Margins are affected by the volume of
services rendered, the mix and pricing of services and products sold and related
costs. Further, revenue and margins may be affected by fluctuations in the
number of deaths (which may be significant from period to period), competitive
pricing strategies, pre-need sales and other sales programs implemented by the
Company and the ability to hire and retain the necessary level of sales staff.
Revenue is also affected by the level of dispositions and acquisitions. Revenue
may also be affected by the negative implications associated with the bankruptcy
proceedings.

-32-
<PAGE>
ITEM 5. OTHER INFORMATION (CONTINUED)

3. DISPOSITIONS. Although the Company may consummate additional asset
sales, it is not committed to sell and has not identified any other properties
for which a material sale is probable. Should additional properties be sold,
gains or losses could be small or significant depending upon the type of
property, location, cash flow and prevailing market conditions.

4. TAX RATE. Prior to the year ended December 31, 1998, the Company's
financing structures have allowed it to achieve an effective tax rate well below
the Canadian statutory rate of 45%. These structures are not expected to produce
similar benefits in the future due to uncertainty as to when, if ever, the tax
benefit of deducting the Company's future interest expense will be realized. As
a result, the Company expects that its income taxes for 1999 and beyond will
likely exceed the Canadian statutory rate.

5. OTHER. Consolidated financial results also may be affected by (i) the
ability of the Company to successfully develop and implement a plan of
reorganization pursuant to bankruptcy proceedings, (ii) the ability of the
Company to retain and motivate its employees, including senior management and
critical staff, (iii) the continued availability of operating cash flow and
debtor-in-possession financing, (iv) the number of Common shares outstanding,
(v) competition, (vi) the accounting treatment of dispositions and the valuation
of assets, (vii) the level of the Company's general and administrative costs,
(viii) changes in or application of applicable accounting principles and
governmental regulations, and (ix) the success of the Company's Year 2000 Issue
efforts and the ability of third parties to achieve Year 2000 Issue compliance
on a timely basis.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a) EXHIBITS

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
--------------------- -----------
<C> <S>

3 CHARTER DOCUMENTS

3.1 Certificate of Incorporation of The Loewen Group Inc.
("Loewen") issued by the British Columbia Registrar of
Companies (the "Registrar") on October 30, 1985 (1)

3.2 Altered Memorandum of Loewen, filed with the Registrar on
June 21, 1996 (2)

3.3 Articles of Loewen, restated, filed with the Registrar on
March 1, 1988, as amended on March 30, 1988, April 21,
1988, May 19, 1989, May 28, 1992, May 20, 1993, June 29,
1994, December 21, 1995 and February 7, 1996 (3)

4 INSTRUMENTS DEFINING THE RIGHTS OF SECURITY HOLDERS,
INCLUDING INDENTURES

4.1.1 Note Agreement, dated for reference September 1, 1993, by
and between Loewen and LGII re 9.62% Senior Guaranteed
Notes, Series D, due September 11, 2003, issued by Loewen
("Series D Notes"), as amended on June 10, 1994 (1)
</TABLE>

-33-
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (CONTINUED)

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
--------------------- -----------
<C> <S>
4.1.2 Second Amendment, dated for reference May 15, 1996, to Note
Agreement, dated for reference September 1, 1993, among
Loewen, LGII and institutions named therein, re Series D
Notes (4)

4.1.3 Summary of Terms and Conditions, dated March 30, 1999,
amending certain credit agreements to which Loewen is a
party (5)

4.2 Guaranty Agreement by LGII re Series D Notes, dated for
reference April 1, 1993 (1)

4.3.1 Note Agreement by LGII and Loewen re 6.49% Senior Guaranteed
Notes, Series E, due February 25, 2004, issued by LGII
("Series E Notes"), dated for reference February 1,
1994 (1)

4.3.2 Second Amendment, dated for reference May 15, 1996, to Note
Agreement, dated for reference February 1, 1994, among
Loewen, LGII and Teachers Insurance and Annuity
Association of America, re Series E Notes (4)

4.3.3 Summary of Terms and Conditions, dated March 30, 1999,
amending certain credit agreements to which Loewen is a
party (see Exhibit 4.1.3)

4.4 Guaranty Agreement by Loewen re Series E Notes, dated for
reference February 1, 1994 (1)

4.5.1 Amended and Restated 1994 MEIP Credit Agreement, dated as of
June 14, 1994, amended and restated as of May 15, 1996
(the "MEIP Credit Agreement"), by and between Loewen
Management Investment Corporation, in its capacity as
agent for LGII ("LMIC"), Loewen and the banks listed
therein (the "MEIP Banks") and Wachovia Bank of Georgia,
N.A., as agent for the MEIP Banks ("MEIP Agent") (6)

4.5.2 First Amendment to the MEIP Credit Agreement, dated as of
December 2, 1996 (7)

4.5.3 Second Amendment to the MEIP Credit Agreement, dated as of
April 30, 1997 (7)

4.5.4 Third Amendment to the MEIP Credit Agreement, dated as of
May 21, 1997 (8)

4.5.5 Fourth Amendment to the MEIP Credit Agreement, dated as of
September 29, 1997 (8)

4.5.6 Summary of Terms and Conditions, dated March 30, 1999,
amending certain credit agreements to which Loewen is a
party (see Exhibit 4.1.3)

4.6 Security Agreement, dated as of June 14, 1994, by and
between LMIC and the MEIP Agent (1)

4.7 Guaranty dated as of June 14, 1994, by LGII in favor of the
MEIP Agent for the ratable benefit of the MEIP Banks (1)

4.8 Guaranty dated as of June 14, 1994, by Loewen in favor of
the MEIP Agent for the ratable benefit of the MEIP
Banks (1)

4.9 Exchange Acknowledgment by Loewen, with respect to the 1994
Exchangeable Floating Rate Debentures due July 1, 2001
issued by LGII, dated June 15, 1994 (1)

4.10 Indenture, dated as of August 15, 1994, by and between LGII,
as issuer, Loewen, as guarantor, and State Street Bank and
Trust Company, as trustee with respect to 9.45% Junior
Subordinated Debentures, Series A, due 2024, issued by
LGII and guaranteed by Loewen (9)

4.11 MIPS Guarantee Agreement, dated August 15, 1994 (9)
</TABLE>

-34-
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (CONTINUED)

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
--------------------- -----------
<C> <S>
4.12 Indenture, dated as of March 20, 1996, by and between LGII,
as issuer, Loewen, as guarantor of the obligations of LGII
under the Indenture, and Fleet National Bank as Trustee,
with respect to Series 1 and 2 Senior Guaranteed Notes of
LGII (3)

4.13 Form of Senior Guarantee of LGII's Series 1 and 2 Notes
(included in Exhibit 4.13)

4.14 Form of Global Series 1 and 2 Exchange Notes of LGII (4)

4.15 Form of Physical Series 1 and 2 Exchange Notes of LGII (4)

4.16 Form of Senior Guarantee of LGII's Series 1 and 2 Exchange
Notes (included in Exhibit 4.14 or 4.15)

4.17.1 Amended and Restated Credit Agreement, dated as of
March 27, 1998 ("BMO Credit Agreement"), among LGII, as
borrower, Loewen, as a guarantor, the lenders named
therein, as the lenders, Goldman, Sachs & Co., as the
documentation agent, and Bank of Montreal, as issuer,
swingline lender and administrative and syndication
agent (8)

4.17.2 Summary of Terms and Conditions, dated March 30, 1999,
amending certain credit agreements to which Loewen is a
party (see Exhibit 4.1.3)

4.18 Collateral Trust Agreement, dated as of May 15, 1996, among
Bankers Trust Company, as trustee, Loewen, LGII and
various other pledgors (4)

4.19 Indenture, dated as of October 1, 1996, by and between LGII,
Loewen and Fleet National Bank, as trustee, with respect
to the Series 3 and 4 Notes (6)

4.20 Form of Senior Guarantee of LGII's Series 3 and 4 Notes
(included in Exhibit 4.22)

4.21 Form of Global Series 3 and 4 Exchange Notes of LGII (10)

4.22 Form of Physical Series 3 and 4 Exchange Notes of LGII (10)

4.23 Form of Senior Guarantee of LGII's Series 3 and 4 Exchange
Notes (included in Exhibit 4.21 or 4.22)

4.24 Indenture, dated as of September 26, 1997, between Loewen,
as issuer, LGII, as guarantor, and The Trust Company of
Bank of Montreal, as trustee, with respect to the
Series 5 Guaranteed Notes (11)

4.25 Form of Series 5 Guaranteed Notes of LGII (11)

4.26 Form of Loewen Guarantee of LGII's Series 5 Notes (11)

4.27 Indenture, dated as of September 30, 1997, between LGII, as
issuer, Loewen, as guarantor, and State Street Bank and
Trust Company, as trustee, with respect to the Series 5
Senior Guaranteed Notes due 2009 (11)

4.28 Form of Global "PATS" Senior Guaranteed Notes due 2009 of
LGII (11)

4.29 Form of Physical "PATS" Senior Guaranteed Notes due 2009 of
LGII (11)

4.30 Form of Senior Guarantee of LGII's "PATS" Senior Guaranteed
Notes due 2009 (11)

4.31 Shareholder Protection Rights Plan, dated as of April 20,
1990, as amended on May 24, 1990 and April 7, 1994 and
reconfirmed on May 17, 1995 (1)

4.32 Form of Indenture by and between LGII, as issuer, Loewen, as
guarantor, and Fleet National Bank, as trustee, relating
to the Debt Securities that may be issued pursuant to
Registration Statement No. 333-29443 (12)
</TABLE>

-35-
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (CONTINUED)

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
--------------------- -----------
<C> <S>
4.33 Indenture dated as of May 28, 1998, between LGII, as issuer,
Loewen, as guarantor, and State Street Bank and Trust
Company, as trustee, with respect to the Series 6 and 7
Notes (13)

4.35 Form of Global Series 6 and 7 Exchange Notes of LGII (14)

4.36 Form of Physical Series 6 and 7 Exchange Notes of LGII (14)

4.37 Form of Senior Guarantee of LGII's Series 6 and 7 Exchange
Notes (included in Exhibit 4.35 or 4.36)

4.38.1 Debtor-In-Possession Credit Agreement, dated as of June 1,
1999 (the "DIP Agreement"), by and among LGII, as debtor
and debtor-in-possession, each of LGII's subsidiaries
listed on the signature pages thereof, each as debtor and
debtor-in-possession, Loewen, the Lenders named therein,
as the initial Lenders, and First Union National Bank, as
the L/C Issuer and as the Administrative Agent for the
Lenders (15)

4.38.2 First Amendment to the DIP Agreement, dated as of July 16,
1999 (15)

4.39 Loewen and LGII hereby agree to furnish to the Commission,
upon request, a copy of the instruments which define the
rights of holders of long-term debt of Loewen and LGII.
None of such instruments not included as exhibits herein
collectively represents long-term debt in excess of 10% of
the consolidated total assets of Loewen or LGII.

10 MATERIAL CONTRACTS

10.1 Receipt Agreement, dated as of January 3, 1996, for the
Cumulative Redeemable Convertible First Preferred Shares,
Series C, of Loewen ("Series C Shares") (3)

10.2 Undertaking by Raymond L. Loewen and Anne Loewen, dated as
of January 3, 1996, to vote in favor of the motion to
subdivide the Series C Shares (3)

10.3 Letter Agreement, dated August 8, 1997, by and between
Loewen and Service Corporation International (8)

*10.4 Form of Indemnification Agreement with Outside
Directors (16)

*10.5 Form of Indemnification Agreement with Officers (16)

*10.6 Form of Loewen Severance Agreement (16)

*10.7 Loewen Severance Pay Plan (16)

*10.8 1994 Management Equity Investment Plan (the "MEIP") (16)

*10.9 Form of Executive Agreement executed by participants in the
MEIP (9)

*10.10 1994 Outside Director Compensation Plan, as restated and
amended as at January 9, 1997, and further amended as at
June 25, 1998 (5)

*10.11 Employee Stock Option Plan (International), as restated and
amended as at September 17, 1998 (5)

*10.12 Employee Stock Option Plan (Canada), as restated and amended
as at September 17, 1998 (5)

*10.13 Form of Stay Put Bonus Plan Letters, dated February 26,
1999 (5)

*10.14 Employment Agreement, dated August 19, 1988, by and between
Loewen and Tim Hogenkamp (1)
</TABLE>

-36-
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (CONTINUED)

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
--------------------- -----------
<C> <S>
*10.15 Employment Agreement, and Covenant Not to Compete, dated
November 14, 1990, by and between LGII and Albert S.
Lineberry, Sr. (1)

*10.16 Employment Agreement, dated April 12, 1991, by and between
Loewen and Dwight Hawes (1)

*10.17 Consulting Agreement, dated July 18, 1994, by and between
Loewen and Charles B. Loewen, LGII, and Corporate
Services International Inc. (1)

*10.18 Employment Letter, dated March 10, 1995, by Raymond L.
Loewen to Paul Wagler (6)

10.19 Employment Agreement, dated March 17, 1995, by and between
Loewen, LGII and Lawrence Miller (1)

10.20.1 Employment Agreement, dated March 17, 1995, by and between
Loewen and William R. Shane ("Shane Employment
Agreement") (1)

10.20.2 Amendment No. 1 to Shane Employment Agreement, dated
February 23, 1998, by and between Loewen and William R.
Shane (8)

*10.21 Resignation and Release Agreement, effective June 10, 1996,
by and between Loewen, LGII and Robert O. Wienke (6)

*10.23 Employment Agreement, dated October 31, 1997, by and between
Loewen and Michael G. Weedon (8)

*10.24 Severance Agreement, dated November 4, 1997, by and between
Loewen and Douglas J. McKinnon (8)

*10.25 Employment Agreement, dated January 30, 1998, by and between
Loewen and Brad Stam (8)

*10.26 Employment Agreement, dated October 26, 1998, by and between
Loewen and Peter S. Hyndman (5)

*10.27.1 Employment Agreement, dated November 30, 1998, by and
between Loewen and Robert Lundgren (5)

*10.27.2 Severance Agreement, dated as of November 30, 1998, by and
between Loewen and Robert Lundgren (5)

*10.27.3 Indemnification Agreement, dated February 3, 1999, by and
between Loewen and Robert Lundgren (5)

11 STATEMENT RE COMPUTATION OF PER SHARE EARNINGS

27 FINANCIAL DATA SCHEDULE

99 ADDITIONAL EXHIBITS

99.1 Stock Purchase Agreement, dated as of June 14, 1996, by and
among Prime Succession, Inc. the other individuals or
entities listed on the signature pages thereof, Loewen and
Blackhawk Acquisition Corp. (17)

99.2 Put/Call Agreement, dated as of August 26, 1996, by and
among Blackstone, Blackstone Offshore Capital Partners II
L.P. ("Blackstone Offshore"), Blackstone Family Investment
Partnership II L.P. ("Blackstone Family"), PSI Management
Direct L.P. ("PSI"), LGII and Loewen (18)
</TABLE>

-37-
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (CONTINUED)

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
--------------------- -----------
<C> <S>
99.3 Stockholders' Agreement, dated as of August 26, 1996, by and
among Prime Succession, Inc. (to be renamed Prime
Succession Holdings, Inc.), Blackstone, Blackstone
Offshore, Blackstone Family, PSI and LGII (17)

99.4 Subscription Agreement, dated as of November 19, 1996, by
and among Rose Hills Holdings Corp. ("Rose Hills"),
Blackstone, Blackstone Rose Hills Offshore Capital
Partners L.P. ("Blackstone Rose Hills"), Blackstone
Family, Roses Delaware, Inc. ("RDI"), Loewen, LGII and
RHI Management Direct, L.P. ("RHI") (19)

99.5 Put/Call Agreement, dated as of November 19, 1996, by and
among Blackstone, Blackstone Offshore, Blackstone Family,
Blackstone Rose Hills, LGII, RDI, Loewen and RHI (19)

99.6 Stockholders' Agreement, dated as of November 19, 1996, by
and among Rose Hills, Blackstone, Blackstone Rose Hills,
Blackstone Family, RDI, LGII and RHI (19)

99.7 Form of Letter of Transmittal (20)

99.8 Form of Notice of Guaranteed Delivery (20)

99.9 Standstill Agreement dated as of December 31, 1998, by and
between Loewen, Thomas M. Taylor and TMI-FW, Inc. (21)
</TABLE>

* Compensatory plan or management contract

(1) Incorporated by reference from Loewen's Annual Report on Form 10-K for the
year ended December 31, 1994, filed on March 31, 1995 (File No. 0-18429)

(2) Incorporated by reference from Loewen's Quarterly Report on Form 10-Q for
the quarter ended June 30, 1996, filed on August 14, 1996 (File
No. 0-18429)

(3) Incorporated by reference from Loewen's Annual Report on Form 10-K for the
year ended December 31, 1995, filed on March 28, 1996, as amended (File
No. 0-18429)

(4) Incorporated by reference from the Registration Statement on Form S-4 filed
by Loewen on May 3, 1996, as amended by the Registration Statement on
Form S-4/A filed by Loewen on June 20, 1996 and the Registration Statement
on Form S-4/A filed by Loewen on August 26, 1996 (File No. 333-03135)

(5) Incorporated by reference from Loewen's Annual Report on Form 10-K for the
year ended December 31, 1998, filed on April 15, 1999 (File No. 1-12163).

(6) Incorporated by reference from Loewen's Quarterly Report on Form 10-Q for
the quarter ended September 30, 1996, filed on November 14, 1996 (File
No. 1-12163)

(7) Incorporated by reference from Loewen's Quarterly Report on Form 10-Q for
the quarter ended March 31, 1997, filed on May 13, 1997 (File No. 1-12163)

(8) Incorporated by reference from Loewen's Annual Report on Form 10-K for the
year ended December 31, 1997, filed on March 30, 1998 (File No. 1-12163)

(9) Incorporated by reference from the combined Registration Statement on
Form F-9/F-3 filed by LGII and Loewen on July 1, 1994, as amended (File Nos.
33-81032 and 33-81034)

(10) Incorporated by reference from the Registration Statement on Form S-4 filed
by LGII and Loewen on November 18, 1996, as amended (File Nos. 333-16319 and
333-16319-01)

-38-
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (CONTINUED)

(11) Incorporated by reference from Loewen's Quarterly Report on Form 10-Q for
the quarter ended September 30, 1997, filed on November 14, 1997 (File
No. 1-12163)

(12) Incorporated by reference from the Registration Statement on Form S-3 filed
by Loewen and LGII on March 21, 1997, as amended (File Nos. 333-23747 and
333-23747-01)

(13) Incorporated by reference from Loewen's Quarterly Report on Form 10-Q/A for
the quarter ended June 30, 1998, filed on August 13, 1998 (File
No. 1-12163)

(14) Incorporated by reference from the Registration Statement on Form S-4 filed
by LGII and Loewen on August 26, 1998, as amended (File No. 333-62239-01)

(15) Incorporated by reference from Loewen's Quarterly Report on Form 10-Q for
the quarter ended June 30, 1999, filed on August 13, 1999 (File
No. 1-12163)

(16) Incorporated by reference from Loewen's Solicitation/Recommendation
Statement on Schedule 14D-9, filed on October 10, 1996, as amended

(17) Incorporated by reference from Loewen's Periodic Report on Form 8-K, dated
August 26, 1996, filed October 11, 1996, as amended October 29, 1996 (File
No. 1-12163)

(18) Incorporated by reference from Loewen's Periodic Report on Form 8-K/A
No. 1, dated August 26, 1996, filed October 29, 1996 (File No. 1-12163)

(19) Incorporated by reference from Loewen's Periodic Report on Form 8-K, dated
November 19, 1996, filed December 27, 1996 (File No. 1-12163)

(20) Incorporated by reference from Amendment No. 1 to the Registration
Statement on Form S-4 filed by LGII and Loewen on September 21, 1998 (File
No. 333-62239-01)

(21) Incorporated by reference from Loewen's Periodic Report on Form 8-K, dated
December 30, 1998, filed January 4, 1999 (File No. 1-12163)

(b) REPORTS ON FORM 8-K

The following Current Reports on Form 8-K were filed by Loewen during the
third quarter of fiscal 1999:

<TABLE>
<CAPTION>
FILING DATE ITEM NUMBER DESCRIPTION
- ----------- ----------- -----------
<S> <C> <C>
July 6, 1999 Item 5. Other Events Press release announcing the appointment of
(dated July 2, 1999) Michael A. Cornelissen as Chief Financial
Officer

July 21, 1999 Item 5. Other Events Press release announcing the receipt by
(dated July 19, 1999) Loewen of final court approval of
$200 million Debtor-in-Possession Financing
Agreement

August 16, 1999 Item 5. Other Events Press release announcing second quarter
(dated August 13, 1999) financial results
</TABLE>

-39-
<PAGE>
SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.

<TABLE>
<S> <C>
THE LOEWEN GROUP INC.

Dated: November 8, 1999 By: /s/ MICHAEL A. CORNELISSEN
-------------------------------------------
Name: Michael A. Cornelissen
Title: CHIEF FINANCIAL OFFICER
(PRINCIPAL FINANCIAL OFFICER)

Dated: November 8, 1999 By: /s/ DWIGHT K. HAWES
-------------------------------------------
Name: Dwight K. Hawes
Title: SENIOR VICE PRESIDENT, CORPORATE
CONTROLLER
(PRINCIPAL ACCOUNTING OFFICER)
</TABLE>

-40-

<PAGE>

EXHIBIT 11
FOR 10 Q
THE LOEWEN GROUP INC.

COMPUTATION OF PER SHARE EARNINGS
EXPRESSED IN THOUSANDS OF U.S. DOLLARS EXCEPT PER SHARE AMOUNTS

<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
------------------- -------------------
1999 1998 1999 1998
------- -------- --------- -------
<S> <C> <C> <C> <C>
BASIC
Net earnings (loss) $ 1,916 $(32,438) $ (96,487) $ 7,843
Less: Preferred share dividends 0 2,173 3,686 6,766
------- -------- --------- -------
Net earnings (loss) attributable
to Common shareholders 1,916 (34,611) (100,173) 1,077
------- -------- --------- -------
------- -------- --------- -------
Weighted average shares
outstanding 74,145 74,019 74,103 73,967

Basic earnings (loss) per share $ 0.03 $ (0.47) $ (1.35) $ 0.01
------- -------- --------- -------
------- -------- --------- -------

FULLY DILUTED
Net earnings (loss) attributable
to Common shareholders $ 1,916 $(34,611) $(100,173) $ 1,077
Add: imputed earnings from
dilutive options, net of tax
effect 0 0 0 0
------- -------- --------- -------
Fully diluted net earnings (loss) $ 1,916 $(34,611) $(100,173) $ 1,077
------- -------- --------- -------
------- -------- --------- -------

Weighted average shares outstanding 74,145 74,019 74,103 73,967
Shares issuable upon assumed
conversion of dilutive options 5,160 0 0 620
------- -------- --------- -------
Fully diluted shares 79,305 74,019 74,103 74,587
------- -------- --------- -------
------- -------- --------- -------

Fully diluted earnings (loss)
per share $ 0.02 $ (0.47) $ (1.35) $ 0.01
------- -------- --------- -------
------- -------- --------- -------
</TABLE>

<PAGE>
<ARTICLE> 5
<LEGEND>
THIS EXHIBIT 27 CONTAINS SUMMARY INFORMATION EXTRACTED FROM THE CONSOLIDATED
FINANCIAL STATEMENTS OF THE LOEWEN GROUP INC. FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>

<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> SEP-30-1999
<CASH> 72,130
<SECURITIES> 0
<RECEIVABLES> 257,683
<ALLOWANCES> 56,421
<INVENTORY> 33,777
<CURRENT-ASSETS> 320,295
<PP&E> 1,007,757
<DEPRECIATION> 218,482
<TOTAL-ASSETS> 4,449,701
<CURRENT-LIABILITIES> 123,962
<BONDS> 58,916
75,000
157,146
<COMMON> 1,276,449
<OTHER-SE> (625,132)
<TOTAL-LIABILITY-AND-EQUITY> 4,449,701
<SALES> 806,712
<TOTAL-REVENUES> 806,712
<CGS> 564,894
<TOTAL-COSTS> 564,894
<OTHER-EXPENSES> 211,816
<LOSS-PROVISION> 28,636
<INTEREST-EXPENSE> 82,917
<INCOME-PRETAX> (84,522)
<INCOME-TAX> 11,965
<INCOME-CONTINUING> (96,487)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (96,487)
<EPS-BASIC> (1.35)
<EPS-DILUTED> (1.35)

</TABLE>