LOEWEN GROUP INC, 10-Q, 2000-11-08

LOEWEN GROUP INC
10-Q, 2000-11-08
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, 2000

/ / 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

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

THE LOEWEN GROUP INC.

(Exact name of registrant as specified in its charter)

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

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

4126 NORLAND AVENUE, BURNABY, V5G 3S8
BRITISH COLUMBIA, CANADA (Postal Code)
(Address of principal executive offices)
</TABLE>

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 mark /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 / /

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

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS

Indicate by check mark /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 / /

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

APPLICABLE ONLY TO CORPORATE ISSUERS

The number of outstanding Common shares as of October 31, 2000 was
74,145,466.

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<PAGE>
THE LOEWEN GROUP INC.

<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS:

CONSOLIDATED BALANCE SHEETS
as of September 30, 2000 and December 31, 1999........ 1

CONSOLIDATED STATEMENTS OF OPERATIONS AND DEFICIT
for the Three Months Ended September 30, 2000 and 1999
and the Nine Months Ended September 30, 2000 and
1999.................................................. 2

CONSOLIDATED STATEMENTS OF CASH FLOWS
for the Three Months Ended September 30, 2000 and 1999
and the Nine Months Ended September 30, 2000 and
1999.................................................. 3

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

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS......................................... 23

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK...................................... 33

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS................................ 34

ITEM 3. DEFAULTS ON SENIOR SECURITIES.................... 36

ITEM 5. OTHER INFORMATION................................ 36

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K................. 40

SIGNATURES............................................................ 47
</TABLE>

i
<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
2000 1999
------------- ------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets
Cash...................................................... $ 138,572 $ 55,166
Receivables, net of allowances............................ 194,941 198,500
Inventories............................................... 36,434 34,850
Prepaid expenses.......................................... 12,603 12,332
---------- ----------
382,550 300,848
Long-term receivables, net of allowances.................... 577,562 577,733
Cemetery property........................................... 894,185 923,344
Property and equipment...................................... 717,061 799,813
Names and reputations....................................... 613,268 650,200
Insurance invested assets................................... 302,198 281,423
Future income tax assets.................................... 3,034 5,128
Pre-arranged funeral services............................... 437,765 438,541
Other assets................................................ 126,492 133,553
---------- ----------
$4,054,115 $4,110,583
========== ==========

LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities not subject to compromise
Current liabilities
Accounts payable and accrued liabilities................ $ 107,807 $ 97,637
Long-term debt, current portion......................... 24,876 20,693
---------- ----------
132,683 118,330
Long-term debt, net of current portion.................... 49,832 70,511
Other liabilities......................................... 421,745 426,019
Insurance policy liabilities.............................. 199,620 184,207
Future income tax liabilities............................. 145,167 146,028
Deferred pre-arranged funeral services revenue............ 437,765 438,541
Liabilities subject to compromise........................... 2,282,723 2,282,601

Shareholders' equity
Common shares............................................. 1,276,414 1,276,434
Preferred shares.......................................... 157,144 157,146
Deficit................................................... (1,061,433) (1,004,917)
Foreign exchange adjustment............................... 12,455 15,683
---------- ----------
384,580 444,346
---------- ----------
$4,054,115 $4,110,583
========== ==========
</TABLE>

Bankruptcy proceedings and basis of presentation (Note 1)

Commitments and contingencies (Notes 3, 4 and 6)

See accompanying notes to interim consolidated financial statements

1
<PAGE>
THE LOEWEN GROUP INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND DEFICIT
EXPRESSED IN THOUSANDS OF U.S. DOLLARS EXCEPT PER SHARE AMOUNTS

<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
----------------------- -----------------------
2000 1999 2000 1999
----------- --------- ----------- ---------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Revenue
Funeral..................................... $ 135,185 $ 136,048 $ 435,793 $ 458,137
Cemetery.................................... 46,543 74,142 172,909 270,714
Insurance................................... 24,464 23,813 73,199 71,434
----------- --------- ----------- ---------
206,192 234,003 681,901 800,285
----------- --------- ----------- ---------
Costs and expenses
Funeral..................................... 100,190 98,913 307,341 309,306
Cemetery.................................... 38,934 61,261 133,008 209,483
Insurance................................... 20,158 18,502 58,409 56,359
----------- --------- ----------- ---------
159,282 178,676 498,758 575,148
----------- --------- ----------- ---------
46,910 55,327 183,143 225,137
Expenses
General and administrative.................. 16,530 18,626 52,526 68,596
Depreciation and amortization............... 13,777 15,764 43,006 47,066
Provision for asset impairment.............. -- -- 92,031 15,112
----------- --------- ----------- ---------
30,307 34,390 187,563 130,774
----------- --------- ----------- ---------
Earnings (loss) from operations............... 16,603 20,937 (4,420) 94,363

Interest on long-term debt.................... 3,441 5,917 9,936 82,917
Reorganization costs.......................... 11,024 11,194 25,447 78,357
Dividends on preferred securities of
subsidiary.................................. -- -- -- 2,971
Other expenses................................ 2,427 687 4,611 14,640
----------- --------- ----------- ---------
Earnings (loss) before income taxes........... (289) 3,139 (44,414) (84,522)
Income taxes.................................. 2,680 1,223 12,102 11,965
----------- --------- ----------- ---------
Net earnings (loss) for the period............ $ (2,969) $ 1,916 $ (56,516) $ (96,487)
Deficit, beginning of period.................. (1,058,464) (638,144) (1,004,917) (539,741)
----------- --------- ----------- ---------
Deficit, end of period........................ $(1,061,433) $(636,228) $(1,061,433) $(636,228)
=========== ========= =========== =========
Basic earnings (loss) per Common share........ $ (0.07) $ -- $ (0.85) $ (1.39)
</TABLE>

See accompanying notes to interim consolidated financial statements

2
<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
------------------- --------------------
2000 1999 2000 1999
-------- -------- -------- ---------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
CASH PROVIDED BY (APPLIED TO)
Operations
Net earnings (loss)............................... $ (2,969) $ 1,916 $(56,516) $ (96,487)
Items not affecting cash
Depreciation and amortization................... 17,814 19,460 55,697 58,663
Amortization of debt issue costs................ 1,013 1,331 2,978 4,090
Provision for asset impairment.................. -- -- 92,031 15,112
Future income taxes............................. 1,322 1,656 1,789 (2,096)
Losses on disposition of assets and
investments................................... 2,427 687 4,611 14,640
Non-cash reorganization costs................... 8 (26) 336 58,617
Other, including net changes in other non-cash
balances........................................ 11,322 5,108 24,258 (39,680)
-------- -------- -------- ---------
30,937 30,132 125,184 12,859
-------- -------- -------- ---------
Investing
Purchase of insurance invested assets............. (36,144) (24,245) (86,965) (118,356)
Proceeds on disposition and maturities of
insurance invested assets....................... 28,323 17,552 65,163 109,422
Proceeds on disposition of assets and
investments..................................... 3,623 5,647 13,265 198,483
Purchase of property and equipment................ (6,181) (17,721) (13,820) (30,454)
Construction of new facilities.................... (615) (5,234) (1,478) (13,281)
-------- -------- -------- ---------
(10,994) (24,001) (23,835) 145,814
-------- -------- -------- ---------
Financing
Increase in long-term debt........................ -- 16,323 -- 22,609
Repayment of long-term debt....................... (2,774) (9,927) (16,990) (142,853)
Repayment of current indebtedness................. -- (22,717) -- (49,487)
Debt issue costs.................................. (167) (2,743) (953) (8,797)
Preferred share dividends......................... -- -- -- (2,156)
-------- -------- -------- ---------
(2,941) (19,064) (17,943) (180,684)
-------- -------- -------- ---------
Increase (decrease) in cash......................... 17,002 (12,933) 83,406 (22,011)
Cash, beginning of period........................... 121,570 85,063 55,166 94,141
-------- -------- -------- ---------
Cash, end of period................................. $138,572 $ 72,130 $138,572 $ 72,130
======== ======== ======== =========
</TABLE>

See accompanying notes to interim consolidated financial statements

3
<PAGE>
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, 869 United States
subsidiaries and one European subsidiary voluntarily filed a petition for
creditor protection under Chapter 11 of the U.S. Bankruptcy Code ("Chapter 11")
in the U.S. Bankruptcy Court for the District of Delaware (the "U.S. Bankruptcy
Court"). Concurrent with the Chapter 11 filing, the Company and 116 Canadian
subsidiaries voluntarily filed an application for creditor protection under the
Companies' Creditors Arrangement Act ("CCAA") with the Ontario Superior Court of
Justice, Toronto, Ontario, Canada (together with the U.S. Bankruptcy Court, the
"Bankruptcy Courts"). Subsequent to the Petition Date, three additional
subsidiaries of the Company voluntarily filed for creditor protection and 41
subsidiaries were voluntarily deleted.

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 United Kingdom subsidiaries, which generate
approximately 1% of the Company's revenues, along with the Company's insurance
and certain funeral and cemetery subsidiaries, were excluded from the filings.

The Company is reorganizing its affairs under the protection of Chapter 11
and CCAA. In June 2000, the U.S. Bankruptcy Court extended the Company's
exclusive right to file a plan of reorganization to December 31, 2000, which
prevents creditors or other parties from filing alternative plans until such
date.

The Company expects to file a plan of reorganization (the "Plan") and
disclosure statement for itself and its filing subsidiaries with the
U.S. Bankruptcy Court on or before November 15, 2000. The Plan and disclosure
statement will describe the proposed structure and business operations of the
reorganized company, and will provide a proposed schedule of creditor
recoveries. The Plan and the disclosure statement will be subject to approval by
the Bankruptcy Courts, and the Plan will be subject to a vote by certain classes
of creditors. The Company anticipates that certain creditors of the Company are
likely to challenge the proposed Plan.

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 ("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. There is
substantial doubt about the appropriateness of the use of the "going concern"
assumption because of the Chapter 11 and CCAA bankruptcy proceedings and
circumstances relating to this event, including the Company's current debt
structure, recent losses and cash flow. As 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

4
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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 1. BANKRUPTCY PROCEEDINGS AND BASIS OF PRESENTATION (CONTINUED)
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. 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 a debtor-in-possession revolving credit facility, and the
ability to generate sufficient cash from operations and financing arrangements
to meet obligations.

Additionally, if a plan of reorganization is confirmed by the Bankruptcy
Courts, the Company will be required to adopt "fresh start" accounting under
Canadian and U.S. GAAP. This accounting will require that assets and liabilities
be recorded at fair value, based on the values determined in connection with the
plan of reorganization. As a result, the reported amounts in the interim
consolidated financial statements could materially change, because they do not
give effect to the adjustments to the carrying values of assets and liabilities
that may ultimately result from the adoption of "fresh start" accounting.

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The interim consolidated financial statements of the Company 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 10.

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 interim consolidated
financial statements have been prepared on a basis consistent with the
accounting policies described in the Company's Annual Report on Form 10-K/A
filed with the Securities and Exchange Commission for the year ended
December 31, 1999 and should be read in conjunction therewith.

MEASUREMENT UNCERTAINTY

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 significantly differ from those estimates.

COMPARATIVE FIGURES

Certain of the comparative figures have been reclassified to conform to the
presentation adopted in the current period.

5
<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 SUBJECT TO COMPROMISE AND DEBT

In the Chapter 11 and CCAA proceedings, substantially all unsecured and
under-secured 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
creditors. 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.
The Bar Date, which was the last date by which claims against the Company had to
be filed in the U.S. Bankruptcy Court if the claimants wished to receive any
distribution in the Chapter 11 proceedings, expired on December 15, 1999. The
Bar Date for claims against operating entities applicable to the CCAA
proceedings was extended to and expired on March 17, 2000. In June 2000, the
Company filed amended schedules identifying additional potential creditors, for
which the Bar Date was set at July 14, 2000.

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

Under the U.S. Bankruptcy Code, the Debtors may elect to assume or reject
leases, employment contracts, service contracts and other pre-Petition Date
executory contracts, subject to U.S. Bankruptcy Court approval. Liabilities
related to executory contracts are recorded as liabilities not subject to
compromise, unless the Company has decided to reject the contract. Claims for
damages resulting from the rejection, after December 15, 1999, 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, as well as 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 are filed with the Bankruptcy Courts, and may be subject to future
adjustment depending on Bankruptcy Court action, further developments or
resolution with respect to potential disputed claims, and determination as to
the value of any collateral securing claims or other events. Additional claims
may also arise from the rejection of executory contracts by the Debtors.

6
<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 SUBJECT TO COMPROMISE AND DEBT (CONTINUED)
The liabilities subject to compromise and debt are as follows:

<TABLE>
<CAPTION>
SEPTEMBER 30, 2000 DECEMBER 31, 1999
----------------------- -----------------------
LIABILITIES LIABILITIES
SUBJECT TO LONG-TERM SUBJECT TO LONG-TERM
COMPROMISE DEBT COMPROMISE DEBT
----------- --------- ----------- ---------
<S> <C> <C> <C> <C>
(UNAUDITED)
DIP Facilities.................................... $ -- $ -- $ -- $ 8,000
Bank credit agreements............................ 355,975 -- 338,689 --
11.12% Series D senior amortizing notes due in
2003............................................ 36,518 -- 36,518 --
7.82% Series E senior amortizing notes due in
2004............................................ 30,432 -- 30,432 --
7.50% Series 1 senior notes due in 2001........... 225,000 -- 225,000 --
8.25% Series 2 senior notes due in 2003........... 125,000 -- 125,000 --
7.75% Series 3 senior notes due in 2001........... 125,000 -- 125,000 --
8.25% Series 4 senior notes due in 2003........... 225,000 -- 225,000 --
6.10% Series 5 senior notes due in 2002
(Cdn. $200,000,000)............................. 132,714 -- 139,567 --
7.20% Series 6 senior notes due in 2003........... 200,000 -- 200,000 --
7.60% Series 7 senior notes due in 2008........... 250,000 -- 250,000 --
6.70% Pass-through Asset Trust Securities ("PATS")
and related option liability recorded, due in
1999............................................ 309,760 -- 309,760 --
Promissory notes and capital lease obligations.... 76,106 74,708 80,159 83,204
Accounts payable and accrued liabilities.......... 89,039 -- 95,622 --
9.45% Cumulative Monthly Income Preferred
Securities, Series A ("MIPS")................... 75,000 -- 75,000 --
Executory contracts............................... 27,179 -- 26,854 --
---------- ------- ---------- -------
2,282,723 74,708 2,282,601 91,204
Less current portion of long-term debt............ -- 24,876 -- 20,693
---------- ------- ---------- -------
$2,282,723 $49,832 $2,282,601 $70,511
========== ======= ========== =======
</TABLE>

Litigation against the Company and its filing subsidiaries as of June 1,
1999 and any additional liabilities related thereto will be subject to
compromise (see Note 6(a)).

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
creditors, has been confirmed by the Bankruptcy Courts and has become effective.
In June 2000, the U.S. Bankruptcy Court extended the Company's exclusive right
to file a plan of reorganization to December 31, 2000, which prevents creditors
or other parties from filing alternative plans until such date.

7
<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 SUBJECT TO COMPROMISE AND DEBT (CONTINUED)
by the Bankruptcy Courts, and the Plan will be subject to a vote by certain
classes of creditors. The Company anticipates that certain creditors of the
Company are likely to challenge the proposed Plan.

Interest on unsecured and under-secured 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
vendor financing, including capital lease obligations. Contractual interest
expense not recorded on liabilities subject to compromise totaled $43,693,000
for the three months ended September 30, 2000 (1999--$43,109,000), and
$130,110,000 for the nine months ended September 30, 2000 (1999--$56,827,000).

In 1996, the Company, Loewen Group International, Inc. ("LGII") and a
trustee 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 credit agreements as well as the holders of certain letters of credit.

Subsequent to the execution of the Collateral Trust Agreement, among other
financings, the Company issued the Series 3, Series 4, Series 6 and Series 7
Senior Notes and the PATS (the "Subject Debt"). The aggregate principal amount
outstanding of the Subject Debt is $1,100,000,000. In April 2000, the Company
announced that there is uncertainty as to the secured status under the
Collateral Trust Agreement with respect to the Subject Debt. In accordance with
the terms of the Collateral Trust Agreement, holders of future indebtedness or
their representatives were to effect registration by delivering to the
collateral trustee Additional Secured Indebtedness Registration Statements in a
form set forth in the Collateral Trust Agreement. However, Additional Secured
Indebtedness Registration Statements relating to the Subject Debt were either
not delivered to the collateral trustee or were delivered indicating an
incorrect outstanding amount. The Company has confirmed that it satisfied its
obligations under the financing agreements to adopt appropriate corporate
resolutions and to deliver to lender representatives, in connection with
closing, Additional Secured Indebtedness Registration Statements relating to the
Subject Debt. Pursuant to the agreements with lender representatives in
connection with those financings, the Company and LGII have treated the Subject
Debt as secured under the Collateral Trust Agreement. On this basis, the total
indebtedness owed to the senior lending group subject to the Collateral Trust
Agreement, including holders of certain letters of credit, at the Petition Date
aggregated $2,016,000,000.

On September 29, 2000, Bankers Trust Company, the trustee under the
Collateral Trust Agreement, filed an adversary proceeding in the
U.S. Bankruptcy Court seeking a declaratory judgment that the Subject Debt is
secured debt and entitled to the benefits of the Collateral Trust Agreement. The
Company has been named as a defendant in that proceeding. See Note 6 for
additional information.

The Company Plan will treat the Subject Debt, along with certain other debt,
as secured debt under the Collateral Trust Agreement, entitled to, on a pari
passu basis, the benefits of the collateral held by the collateral trustee.

8
<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 SUBJECT TO COMPROMISE AND DEBT (CONTINUED)
It is not known when the uncertainty will be resolved. Accordingly, the
effects of this contingency, if any, have not been reflected in the Company's
interim consolidated financial statements.

In March 1999, the Company deferred future dividends applicable to the MIPS.
Since June 1, 1999, as a result of the Chapter 11 and CCAA 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, and PATS and, accordingly,
has not made interest, principal or dividend payments when due on secured,
unsecured and under-secured debt obligations.

The scheduled payments in arrears based on original contractual terms on the
Company's senior debt obligations are as follows:

<TABLE>
<CAPTION>
SEPTEMBER 30 DECEMBER 31
2000 1999
------------- ------------
<S> <C> <C>
(UNAUDITED)
Interest payments in arrears:
Bank credit agreements.................................... $ 54,028 $ 21,417
11.12% Series D senior notes.............................. 6,207 1,825
7.82% Series E senior notes............................... 3,461 958
7.50% Series 1 senior notes............................... 17,192 8,438
8.25% Series 2 senior notes............................... 10,525 5,156
7.75% Series 3 senior notes............................... 9,875 4,844
8.25% Series 4 senior notes............................... 18,945 9,281
6.10% Series 5 senior notes............................... 8,219 4,257
7.20% Series 6 senior notes............................... 22,387 14,659
7.60% Series 7 senior notes............................... 29,597 19,361
6.70% PATS................................................ 10,050 10,050
-------- --------
$190,486 $100,246
======== ========
Principal payments in arrears:
11.12% Series D senior notes.............................. $ 17,143 $ 8,571
7.82% Series E senior notes............................... 7,143 --
6.70% PATS................................................ 300,000 300,000
-------- --------
$324,286 $308,571
======== ========
Subsidiary dividends in arrears:
9.45% MIPS................................................ $ 11,222 $ 5,906
======== ========
</TABLE>

The Company, LGII and all of its U.S. debtor subsidiaries, as
debtors-in-possession, became parties to a Petition Date $200,000,000 revolving
credit agreement (the "DIP Facility"). On May 24, 2000, the Company, LGII and
all of its U.S. debtor subsidiaries entered into a new debtors-in-possession
credit agreement (the "New DIP Facility"), replacing the DIP Facility. The New
DIP Facility will be used primarily to fund LGII's working capital needs during
the course of the bankruptcy proceedings. The credit limit was reduced to
$100,000,000 and the number of participating banks was reduced from 15 to seven.
The material covenants include restrictions on new indebtedness and asset sales
not already approved by

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 3. LIABILITIES SUBJECT TO COMPROMISE AND DEBT (CONTINUED)
the U.S. Bankruptcy Court, a quarterly interest coverage ratio, and quarterly
minimum funeral home gross margin. For the quarter ended September 30, 2000, the
Company was in technical default of the minimum funeral home gross margin,
falling short by $5,000. The Company is seeking a waiver from its New DIP
Facility lenders for non-compliance. The Company believes that sufficient cash
resources currently exist, and no borrowings are outstanding or expected to be
required of the New DIP Facility to satisfy its near-term obligations, though
further use of the New DIP Facility for letters of credit will be restricted
until a waiver is obtained.

Use of the New DIP Facility for letters of credit is limited to a maximum of
$50,000,000. The New DIP Facility matures on June 30, 2001 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 New DIP Facility also
have the benefit of a "super-priority" administrative expense claim in LGII's
bankruptcy proceedings.

Currently, loans made under the New DIP Facility bear interest at floating
rates of U.S. Prime plus 1.25% (LIBOR plus 2.75% for Eurodollar advances). A fee
of 2.75% is charged on letters of credit and a commitment fee of 0.50% is
charged on the unused portion of the New DIP Facility. Related debt issue costs
have been deferred and are being amortized over the remaining life of the New
DIP Facility. As at September 30, 2000, the borrowings under the New DIP
Facility were $nil and the letters of credit outstanding were $13,391,000.

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 were due August 31, 2024 and were
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. As a result of the Chapter 11 filing,
the MIPS became currently redeemable. The MIPS are subject to an unsecured
guarantee by the Company and LGII. Accordingly, the MIPS have been designated as
liabilities subject to compromise.

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

<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
------------------- --------------------
2000 1999 2000 1999
-------- -------- -------- ---------
<S> <C> <C> <C> <C>
(UNAUDITED) (UNAUDITED)
Income statement information:
Revenue.......................................... $186,168 $212,711 $614,659 $ 720,854
Gross margin..................................... 41,559 54,052 160,925 192,414
Earnings (loss) from operations.................. 11,968 8,377 (12,465) 66,750
Net earnings (loss).............................. 1,854 6,985 (47,577) (137,929)
</TABLE>

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

NOTE 3. LIABILITIES SUBJECT TO COMPROMISE AND DEBT (CONTINUED)

<TABLE>
<CAPTION>
SEPTEMBER 30 DECEMBER 31
2000 1999
------------- ------------
<S> <C> <C>
(UNAUDITED)
Balance sheet information:
Current assets............................................ $ 320,646 $ 195,124
Non-current assets........................................ 3,374,384 3,456,213
---------- ----------
Total assets.............................................. 3,695,030 3,651,337
Liabilities not subject to compromise:

Current liabilities....................................... 122,086 104,113
Non-current liabilities................................... 1,208,694 1,175,831
Liabilities subject to compromise........................... 3,156,424 3,115,990
---------- ----------
Total liabilities........................................... 4,487,204 4,395,934

Shareholders' deficiency.................................... (792,174) (744,597)
</TABLE>

NOTE 4. DISPOSITIONS

In March 1999, the Company sold 124 cemeteries and three funeral homes to an
investor group for gross proceeds of $193,000,000, before purchase price
adjustments and transaction costs, resulting in a pre-tax loss of $1,122,000. A
pre-tax asset impairment provision for long-lived assets of $301,605,000,
relating to these properties, was recorded in 1998. The assets and liabilities
disposed of were $244,338,000 and $67,867,000, respectively.

During 1999, as a result of the Company's bankruptcy filings and operating
performance decline, the Company conducted extensive reviews of each of its
operating locations, resulting in a pre-tax asset impairment provision for
long-lived assets of $340,068,000. In calculating the long-lived asset
impairment provision, the Company used estimated cash flow from operations for
properties anticipated to be held for their remaining life and, for locations
identified as probable for sale, used estimated cash proceeds on the anticipated
sale of these properties.

The review resulted in the identification of 201 funeral homes and 170
cemeteries as probable for sale and the development of a program for disposition
of these locations. In January 2000, the Bankruptcy Courts approved the
Company's program for disposition.

At June 30, 2000, the Company revised its estimates of expected proceeds of
the locations held for disposal, resulting in a pre-tax impairment provision to
the locations' long-lived assets of $92,031,000. The asset impairment provision
reduced funeral property by $41,636,000, cemetery property by $39,716,000 and
names and reputations by $10,679,000.

As of October 31, 2000, transactions involving sales proceeds of more than
$46,000,000 have been approved by the U.S. Bankruptcy Court or have been signed
and submitted for approval.

The long-lived asset impairment provisions were based on management
estimates. The Company continues to assess these estimates as it proceeds with
the disposition of locations identified as probable for sale. As a result,
actual results could differ significantly from these estimates. In addition, due
to the bankruptcy proceedings, other properties, although not specifically
identified, could be sold.

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

NOTE 5. REORGANIZATION COSTS

The Company has incurred the following pre-tax charges for costs associated
with reorganizing its affairs under the protection of Chapter 11 and CCAA:

<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
------------------- -------------------
2000 1999 2000 1999
-------- -------- -------- --------
<S> <C> <C> <C> <C>
(UNAUDITED) (UNAUDITED)
Executory contracts submitted for rejection............. $ -- $ -- $ 141 $27,228
Deferred debt issue costs written off................... -- 596 173 22,251
PATS option liability recorded.......................... -- -- -- 9,760
Key Employee Retention Plan costs....................... 2,920 3,226 6,297 3,226
Professional fees and other costs....................... 8,104 7,372 18,836 15,892
------- ------- ------- -------
$11,024 $11,194 $25,447 $78,357
======= ======= ======= =======
</TABLE>

Professional fees and other costs 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.

In September 1999, the Bankruptcy Courts approved the Key Employee Retention
Plan, a long-term agreement structured to ensure that appropriate employee
levels and expertise are retained during the reorganization process.

NOTE 6. CONTINGENCIES

(a) LEGAL CONTINGENCIES

BANKRUPTCY FILINGS

On June 1, 1999, the Company, 869 United States subsidiaries and one
European subsidiary voluntarily filed a petition for creditor protection and to
reorganize under Chapter 11 of the U.S. Bankruptcy Code in the U.S. 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 voluntarily 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). Subsequent
to the Petition Date, three additional subsidiaries of the Company voluntarily
filed for creditor protection and 41 subsidiaries were voluntarily deleted. The
Company's United Kingdom subsidiaries, which generate approximately 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 5 for
additional information.

The Company and its subsidiaries under creditor protection are presently
operating their businesses as debtors-in-possession and are parties to the New
DIP Facility, a $100,000,000 revolving credit agreement that has been approved
by the U.S. Bankruptcy Court (Note 3). An Official Unsecured Creditors'
Committee has been appointed by the United States trustee in the bankruptcy
proceedings.

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

NOTE 6. CONTINGENCIES (CONTINUED)
As a result of the Chapter 11 and CCAA filings, litigation against the
Company and its filing subsidiaries was stayed as of June 1, 1999, and any
additional liabilities related thereto will be subject to compromise, unless the
stay is lifted by the applicable Bankruptcy Court.

BANKERS TRUST ACTION

Since the commencement of the adversary proceeding, Bank of Montreal has
filed an answer requesting that the court enter a judgment declaring that
Bankers Trust Company does not hold a valid, attached and perfected security
interest in the collateral for the benefit of the holders of the Subject Debt,
Wachovia Bank has filed an answer, cross-claims and a counterclaim seeking a
declaratory judgment that the Subject Debt is unsecured and not entitled to
share in the benefits of the Collateral Trust Agreement, and the Official
Unsecured Creditors' Committee has filed an answer, counterclaim and cross-claim
seeking a declaratory judgment that the Subject Debt and the Series 5 Senior
Notes are not secured under the Collateral Trust Agreement. Additionally, HSBC
Bank USA, as successor indenture trustee for the Series 1 and 2 Senior Notes,
has filed a motion to intervene in the Bankers Trust Company adversary
proceeding. Bankers Trust Company has since filed a motion to stay the adversary
proceeding pending the Company's efforts to confirm its plan of reorganization
(the "Plan"). The Court has not yet ruled on this motion or on any other matters
in the adversary proceeding. The Company has not yet responded to the Bankers
Trust Company complaint.

PREFERRED SHARES CONVERSION MOTION

In August 2000, a motion was filed in the Ontario Court by RBC Dominion
Securities Inc., Sunrise Partners LLC and Paloma Strategic Fund LP seeking an
order to compel the Company to convert the Preferred shares to Common shares
upon request from the Preferred shareholders. The court denied that motion on
September 29, 2000.

LOUISIANA LAWSUITS

Since July 2000, eight lawsuits have been filed against various insurance
companies asserting similar claims and seeking class action certification.
Security Industrial Insurance Company ("Security Industrial"), a Company
subsidiary, is a named defendant in each case. Security Industrial is one of the
Company's insurance subsidiaries that has been excluded from the bankruptcy
filings and, as a result, litigation involving Security Industrial is not
subject to the automatic stay. The ALEXANDER, BEVERLY, COTHRAN, SMITH and
SUTHERLAND cases were filed in July 2000 and have been described in more detail
in the Company's previous periodic reports. The FLETCHER, FRANK and PRINCE cases
were filed in October 2000.

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

NOTE 6. CONTINGENCIES (CONTINUED)
without disclosing that premiums paid would likely exceed the face value of the
policies, and that plaintiffs paid higher premiums than Caucasian policyholders
and received proportionately lower death benefits. The plaintiffs seek
injunctive relief, equitable relief, restitution, disgorgement, increased death
benefits, premium refunds (in one case, with interest), costs and attorney fees.
The plaintiffs in the ALEXANDER, COTHRAN and SMITH cases also allege racial
discrimination under the Louisiana Constitution as well as unfair trade
practices, and seek compensatory damages, including, where applicable, punitive,
exemplary or special damages; however, Louisiana law prohibits punitive damages
unless specifically authorized by Federal law. The BEVERLY, SUTHERLAND, FLETCHER
and PRINCE cases include an allegation that defendants violated the Civil Rights
Act of 1866 (42 USC 1981), which provides for punitive damages in certain
circumstances. In each case, Security Industrial has filed a motion to dismiss
all claims for failure to state a cause of action and/or for summary judgment
("Motion to Dismiss"). Certain procedural and other recent developments with
respect to the eight lawsuits through November 3, 2000 are described below.

In October 2000, Unitrin, Inc., a defendant in the COTHRAN case and other
related cases, filed a motion with the court administering the COTHRAN case
requesting the transfer of the COTHRAN case and the other related cases to the
Judicial Panel on Multidistrict Litigation (the "MDL Panel") for consolidation
for administrative purposes.

a. ALEXANDER, ET AL. V. SECURITY INDUSTRIAL, filed in the United States
District Court, Western District of Louisiana, Lafayette-Opelousas Division
(No. 6:00CV1810). Security Industrial moved for a transfer of venue to the
United States District Court, Eastern District of Louisiana, which has been
denied. In October 2000, the plaintiffs filed a motion for class certification,
which is scheduled for hearing in December 2000. Security Industrial's Motion to
Dismiss is scheduled to be heard November 16, 2000.

b. BEVERLY, ET AL. V. UNION NATIONAL LIFE INSURANCE CO., ET AL., filed in
the United States District Court, Western District of Louisiana,
Lafayette-Opelousas Division, (No. CV00-1633L-0). In October 2000, the Court
ordered this case administratively terminated pending the final decision of the
MDL Panel on the transfer of cases.

c. COTHRAN, ET AL. V. SECURITY INDUSTRIAL, ET AL., filed in the United
States District Court, Western District of Louisiana, Shreveport Division
(No. 5:00CV1811). In August 2000, Security Industrial moved for a transfer of
venue to the United States District Court, Eastern District of Louisiana, which
was granted in October 2000. Security Industrial's Motion to Dismiss and certain
other procedural motions are expected to be decided in late November. Security
Industrial has made a motion to stay these proceedings pending the MDL Panel's
final decision on the transfer of all related cases, which has not yet been
decided.

d. SMITH V. SECURITY INDUSTRIAL, filed in the United States District Court,
Eastern District of Louisiana. In September 2000, the Court consolidated this
case with the SUTHERLAND case identified below. In October 2000, the Court
granted a motion to stay these proceedings pending the MDL Panel's final
decision on the transfer of all related cases.

e. SUTHERLAND, ET AL. V. UNITED INSURANCE CO. OF AMERICA, ET AL., filed in
the United States District Court, Eastern District of Louisiana (No. 00-2076 "F"
(2)). This case has been consolidated with the SMITH case identified above. In
October 2000, the Court granted a motion to stay these proceedings pending the
MDL Panel's final decision on the transfer of all related cases.

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

NOTE 6. CONTINGENCIES (CONTINUED)
f. FLETCHER, ET AL. V. UNITED INSURANCE CO. OF AMERICA ET AL., filed in the
United States District Court, Eastern District of Louisiana (No. 00-2932
"S" (1)). In October 2000, Security Industrial filed a motion for transfer of
the case to Judge Feldman's section or, in the alternative, for a stay pending
resolution of the motion before the MDL Panel for transfer of all
related cases.

g. FRANK, ET AL. V. UNION NATIONAL LIFE INSURANCE COMPANY AND SECURITY
INDUSTRIAL, originally filed in the 13th Judicial District Court for the Parish
of Evangeline, State of Louisiana (No. 62369 Div. A). In October 2000, Security
Industrial filed a notice of removal to the United States District Court
(CA 6:00CV2324) and a motion for transfer of the case to Judge Feldman's section
or, in the alternative, for a stay pending resolution of the motion before the
MDL Panel for transfer of all related cases.

h. PRINCE V. UNITED INSURANCE CO. OF AMERICA, UNION NATIONAL LIFE INSURANCE
COMPANY AND SECURITY INDUSTRIAL, filed in the United States District Court,
Western District of Louisiana, Lafayette-Opelousas Division (No. CV-00-2255,
LO). In October 2000, Security Industrial filed a Motion for Transfer of the
case to Judge Feldman's section or, in the alternative, for a stay pending
resolution of the motion before the MDL Panel for transfer of all
related cases.

OTHER

There were no material changes to previously reported litigation, as
described in the Company's Annual Report on Form 10-K/A for the year ended
December 31, 1999.

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.

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

In 1998, the Company concluded that its investments in Prime and Rose Hills
had suffered a decline in value that was other than temporary and wrote down its
investments based on an assumed distribution of Prime's and Rose Hills'
shareholders' equity. In 1999, due to the performance of Prime, the Company
wrote off its remaining investment in Prime. No further write down was made to
the investment in Rose Hills in 1999.

In addition, under separate put and call agreements entered into with the
majority investor of Prime and Rose Hills, the Company determined that its
exercise of the call was unlikely, and the exercise of the put was likely. As a
result, based on the Company's determination of the difference between the
estimated put option price and the estimated fair value of the majority
investor's equity in Prime and Rose Hills, the Company recorded contingent
losses and corresponding liabilities. The respective contingent liabilities have
been recorded in "Other liabilities," net of the carrying value of the
investment in Rose Hills. Such amounts could change based on changes in the
estimated future values of the businesses.

The majority investor in Prime has filed a claim in the Company's
Chapter 11 proceedings. The majority investor's entitlement to recover on the
claim, if any, is uncertain, and will be resolved in the course of the
Chapter 11 proceedings.

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

NOTE 6. CONTINGENCIES (CONTINUED)
On July 12, 2000, Prime voluntarily filed a petition for creditor protection
under Chapter 11 in the U.S. Bankruptcy Court. Prime announced that it has an
agreement in place with major creditors with respect to a plan of
reorganization.

On July 14, 2000, Prime and its affiliated Chapter 11 debtors filed their
proposed plan of reorganization. The plan of reorganization, as filed,
contemplates the distribution of warrants to purchase new common stock in
reorganized Prime, to existing holders of Prime preferred stock and no
distribution to holders of Prime common stock. The plan of reorganization is
subject to approval by the bankruptcy court and affected parties.

There were no other material changes to the information previously reported
in the Company's Annual Report on Form 10-K/A for the year ended December 31,
1999.

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 and after acquisition. Management endeavors
to ensure that environmental issues are identified and addressed in advance of
acquisition or are covered by an indemnity by the seller or an offset to the
purchase price. On a continuing basis, management assesses and evaluates
environmental risk and, when necessary, conducts appropriate corrective
measures. The Company provides for environmental liabilities using its best
estimates. Actual environmental liabilities could differ significantly from
these estimates.

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

NOTE 7. CHANGES IN OTHER NON-CASH BALANCES

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

<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
------------------- -------------------
2000 1999 2000 1999
-------- -------- -------- --------
<S> <C> <C> <C> <C>
(UNAUDITED) (UNAUDITED)
Decrease (increase) in assets:
Receivables, net of allowances
Trade............................................ $ (1,265) $ 26,817 $ 8,711 $ 12,343
Other............................................ 1,516 (53,817) (14,111) (43,282)
Inventories........................................ (3,165) (636) (2,002) 494
Prepaid expenses................................... (2,314) 2,877 (414) (4,477)
Amounts receivable from cemetery merchandise
trusts........................................... (13,851) (8,014) (42,908) (61,254)
Installment contracts, net of allowances........... 20,743 18,917 56,021 36,798
Cemetery property.................................. (640) (7,552) (2,660) (24,279)
Other assets....................................... 1,796 2,129 2,957 (1,830)
Increase (decrease) in liabilities, including certain
liabilities subject to compromise:
Accounts payable and accrued liabilities........... 3,416 11,665 1,097 5,190
Other liabilities.................................. 626 7,872 (2,252) 9,789
Cemetery long-term liabilities..................... (1,739) 1,975 1,868 16,718
Insurance policy liabilities....................... 5,577 4,379 15,413 13,311
Other changes in non-cash balances................. 622 (1,504) 2,538 799
-------- -------- -------- --------
$ 11,322 $ 5,108 $ 24,258 $(39,680)
======== ======== ======== ========
Supplemental information:
Interest paid...................................... $ 1,458 $ 4,331 $ 5,103 $ 82,197
Taxes paid......................................... 373 1,142 10,100 8,499
Bad debt expense................................... 5,549 8,851 20,192 33,461
Non-cash investing and financing activities:
Non-cash debt and share consideration on
acquisitions..................................... -- -- -- 2,280
Capital leases..................................... (4,135) (70) (8,222) (344)
</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

NOTE 8. SEGMENTED INFORMATION

The Company's reportable segments are comprised of the three businesses it
operates, each of which offers different products and services: funeral homes,
cemeteries and insurance. 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 Company's Annual Report on
Form 10-K/A for the year ended December 31, 1999.

<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2000 FUNERAL CEMETERY INSURANCE OTHER CONSOLIDATED
--------------------------------------------- -------- -------- --------- -------- ------------
<S> <C> <C> <C> <C> <C>
(UNAUDITED)
Revenue earned from external sales:
2000...................................... $135,185 $46,543 $24,464 $ -- $206,192
1999...................................... 136,048 74,142 23,813 -- 234,003
Earnings (loss) from operations:
2000...................................... $ 22,425 $ 4,581 $ 4,297 $(14,700) $ 16,603
1999...................................... 22,538 8,738 5,303 (15,642) 20,937
</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
-------------------
2000 1999
-------- --------
<S> <C> <C>
(UNAUDITED)
Earnings from operations of funeral, cemetery and insurance
segments.................................................. $ 31,303 $ 36,579
Other expenses of operations:
General and administrative expenses....................... (12,871) (13,009)
Depreciation and amortization............................. (1,829) (2,633)
-------- --------
Total earnings from operations.............................. $ 16,603 $ 20,937
======== ========
</TABLE>

<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000 FUNERAL CEMETERY INSURANCE OTHER CONSOLIDATED
-------------------------------------------- ---------- ---------- --------- -------- ------------
<S> <C> <C> <C> <C> <C>
(UNAUDITED)
Revenue earned from external sales:
2000................................... $ 435,793 $ 172,909 $ 73,199 $ -- $ 681,901
1999................................... 458,137 270,714 71,434 -- 800,285
Earnings (loss) from operations:
2000................................... $ 33,929 $ (5,589) $ 14,766 $(47,526) $ (4,420)
1999................................... 103,822 30,534 15,052 (55,045) 94,363
Total assets, as at:
September 30, 2000 (UNAUDITED)......... $1,869,794 $1,687,347 $311,838 $185,136 $4,054,115
December 31, 1999...................... 1,984,739 1,745,673 290,398 89,773 4,110,583
</TABLE>

18
<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

NOTE 8. SEGMENTED INFORMATION (CONTINUED)
The following table reconciles earnings from operations of reportable
segments to total earnings (loss) from operations and identifies the components
of "Other" segment earnings (loss) from operations:

<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30
-------------------
2000 1999
-------- --------
<S> <C> <C>
(UNAUDITED)
Earnings from operations of funeral, cemetery and insurance
segments.................................................. $ 43,106 $149,408
Other expenses of operations:
General and administrative expenses....................... (42,404) (47,750)
Depreciation and amortization............................. (5,122) (7,295)
-------- --------
Total earnings (loss) from operations....................... $ (4,420) $ 94,363
======== ========
</TABLE>

NOTE 9. SHARE CAPITAL

In March 1999, the Company announced that future dividends on the Series C
Preferred Shares would be deferred. As of September 30, 2000, the deferred
dividends aggregated $15,328,000. Under the terms of these Preferred shares,
they become convertible at the option of the holder into Common shares upon
deferral of preferred dividends for six consecutive calendar quarters.

As of October 2, 2000, the Company had deferred payment of dividends for
seven consecutive calendar quarters. Accordingly, these Preferred shares are
currently convertible into Common shares at a ratio of 9.208 Common shares per
Preferred share. However, because the Company is now operating under creditor
protection, the Company will not be accepting requests for conversion.

19
<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

NOTE 10. UNITED STATES ACCOUNTING PRINCIPLES

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

(a) EARNINGS AND EARNINGS PER COMMON SHARE

<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
---------------------- --------------------
2000 1999 2000 1999
-------- -------- -------- ---------
<S> <C> <C> <C> <C>
(UNAUDITED) (UNAUDITED)
Net earnings (loss) in accordance with Canadian
GAAP............................................... $(2,969) $ 1,916 $(56,516) $ (96,487)
Effects of differences in accounting for:
Cemetery costs and expenses (c).................... 54 -- 225 --
Insurance operations............................... (832) (2,180) (1,758) (4,013)
Stock options...................................... -- -- (18) (22)
Cost of start-up activities........................ 115 561 353 1,786
------- ------- -------- ---------
Net earnings (loss) in accordance with U.S. GAAP..... (3,632) 297 (57,714) (98,736)
Other comprehensive loss:
Foreign currency translation adjustments........... (332) 559 (3,229) 842
Unrealized gains (losses) on securities:
Unrealized holding gains (losses) arising during
the period..................................... 103 (2,413) (621) (8,285)
Less: reclassification adjustment for gains
included in earnings........................... (81) (528) (1,512) (2,848)
------- ------- -------- ---------
Comprehensive loss in accordance with U.S. GAAP...... $(3,942) $(2,085) $(63,076) $(109,027)
======= ======= ======== =========
</TABLE>

Basic loss per Common share in accordance with U.S. 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:

<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
------------------- --------------------
2000 1999 2000 1999
-------- -------- -------- ---------
<S> <C> <C> <C> <C>
(UNAUDITED) (UNAUDITED)
Net earnings (loss) in accordance with U.S. GAAP...... $(3,632) $ 297 $(57,714) $ (98,736)
Less provision for Preferred share dividends........ 2,216 2,215 6,715 6,644
------- ------- -------- ---------
Net loss in accordance with U.S. GAAP attributable to
Common shareholders................................. $(5,848) $(1,918) $(64,429) $(105,380)
======= ======= ======== =========
Weighted average number of shares
outstanding (thousands)............................. 74,145 74,145 74,145 74,103
------- ------- -------- ---------
Basic loss per Common share........................... $ (0.08) $ (0.03) $ (0.87) $ (1.42)
======= ======= ======== =========
</TABLE>

20
<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

NOTE 10. UNITED STATES ACCOUNTING PRINCIPLES (CONTINUED)
(b) BALANCE SHEET

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

<TABLE>
<CAPTION>
SEPTEMBER 30, 2000 DECEMBER 31, 1999
--------------------------- ---------------------------
CANADIAN UNITED STATES CANADIAN UNITED STATES
GAAP GAAP GAAP GAAP
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
(UNAUDITED)
Assets:
Long-term receivables, net of
allowances............................. $ 577,562 $ 584,223 $ 577,733 $ 589,840
Cemetery property........................ 894,185 816,909 923,344 845,840
Names and reputations.................... 613,268 618,259 650,200 655,191
Insurance invested assets................ 302,198 286,470 281,423 263,960
Other assets............................. 126,492 155,732 133,553 161,091
Liabilities and shareholders' equity:
Other liabilities........................ 421,745 419,380 426,019 423,384
Insurance policy liabilities............. 199,620 236,688 184,207 217,915
Future income tax liabilities............ 145,167 122,420 146,028 125,394
Common shares............................ 1,276,414 1,302,819 1,276,434 1,302,806
Deficit.................................. (1,061,433) (1,117,243) (1,004,917) (1,059,529)
Accumulated other comprehensive income:
Unrealized losses on securities available
for sale, net of tax..................... -- (6,167) -- (4,034)
Foreign exchange adjustment.............. 12,455 (16,543) 15,683 (13,314)
</TABLE>

The Company follows the provisions of Statement of Financial Accounting
Standards No. 121 ("FAS 121"), "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to Be Disposed Of," for U.S. GAAP purposes.

The application of FAS 121 at December 31, 1999, resulted in an additional
impairment for U.S. GAAP purposes of $73,014,000 applicable to long-lived assets
of locations which are anticipated to be held for their remaining useful life.
This additional impairment is due to differences in the measurement of expected
future cash flows under Canadian and U.S. GAAP.

During 1999, as a result of the Company's bankruptcy filings and operating
performance decline, the Company conducted extensive reviews of each of its
operating locations. The review resulted in the identification of 201 funeral
homes and 170 cemeteries, which did not meet the criteria for inclusion in
the Company's new business plan and were designated as potential divestiture
candidates. The Company developed a program for disposition for these locations.
In January 2000, the disposition program was approved by the Bankruptcy Courts.

At June 30, 2000, the Company revised its estimates of expected proceeds of
the locations held for disposal, resulting in a pre-tax impairment provision to
the locations' long-lived assets of $92,031,000. The net carrying amount of the
long-lived assets of these locations, net of impairment provisions, is

21
<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

NOTE 10. UNITED STATES ACCOUNTING PRINCIPLES (CONTINUED)
$58,061,000. The net carrying amount of long-lived assets excludes working
capital and other financial assets and liabilities.

(d) RECENT ACCOUNTING STANDARDS

The effective date for Statement of Financial Accounting Standards No. 133
("FAS 133"), "Accounting for Derivative Instruments and Hedging Activities," as
deferred by Statement of Financial Accounting Standards No. 137, "Accounting for
Derivative Instruments and Hedging Activities--Deferral of the Effective Date of
Financial Accounting Standards No. 133 (an amendment of FASB Statement
No. 133)," is for all fiscal quarters of fiscal years beginning after June 15,
2000. FAS 133 requires that an entity recognize all derivatives as either assets
or liabilities in the statement of financial position and measure those
instruments at fair value. Management has not determined the impact of this
accounting standard on the Company's interim consolidated financial statements.

In December 1999, the United States Securities and Exchange Commission (the
"SEC") issued Staff Accounting Bulletin No. 101, "Revenue Recognition in
Financial Statements" ("SAB 101"). SAB 101 provides the staff's views on the
application of existing GAAP to revenue recognition in financial statements. In
June 2000, the SEC deferred the implementation date of SAB 101, as applicable to
the Company, to the fourth quarter of 2000, with retroactive application to
January 1, 2000. Management has projected the estimated impact of SAB 101, in
connection with the Company's Plan and disclosure statement for its Chapter 11
proceedings, which reflect the accounting policies currently expected to be
implemented. However, as management is awaiting clarification from the SEC
regarding the complete application of SAB 101, the accounting policies
ultimately adopted may differ. Accordingly, management has not yet fully
determined the impact on the Company's interim consolidated financial
statements, but expects such impact, when determined, to be significant.

22
<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 is the second-largest operator of funeral homes and cemeteries
in North America. In addition to providing services at-need, the Company also
makes funeral, cemetery and cremation arrangements on a pre-need basis. As at
October 31, 2000, the Company operated 1,078 funeral homes and 425 cemeteries
throughout North America and 32 funeral homes in the United Kingdom. As at
October 31, 2000, the Company also operated three insurance subsidiaries that
sell a variety of life insurance products that provide life insurance benefits
and fund funeral services on a pre-need basis.

The Company has received approvals from the British Columbia Registrar of
Companies (which office consulted with the B.C. Securities Commission) and the
Toronto Stock Exchange to defer the holding of its next annual general meeting
to a date no later than January 4, 2001. However, to keep shareholders informed,
in June 2000 the Company mailed to all shareholders a copy of its Annual Report
on
Form 10-K/A as filed on April 28, 2000.

FINANCIAL CONDITION

BANKRUPTCY PROCEEDINGS

On June 1, 1999 (the "Petition Date"), Loewen, 869 United States
subsidiaries and one European subsidiary voluntarily filed a petition for
creditor protection under Chapter 11 of the U.S. Bankruptcy Code ("Chapter 11")
in the U.S. Bankruptcy Court for the District of Delaware (the "U.S. Bankruptcy
Court"). Concurrent with the Chapter 11 filing, Loewen and 116 Canadian
subsidiaries voluntarily filed an application for creditor protection under the
Companies' Creditors Arrangement Act ("CCAA") with the Ontario Superior Court of
Justice, Toronto, Ontario, Canada (together with the U.S. Bankruptcy Court, the
"Bankruptcy Courts"). Subsequent to the Petition Date, three additional
subsidiaries of Loewen voluntarily filed for creditor protection and 41
subsidiaries were voluntarily deleted. The Company's United Kingdom
subsidiaries, which generate approximately 1% of the Company's revenues, along
with the Company's insurance and certain funeral and cemetery subsidiaries, were
excluded from the filings. Loewen and its subsidiaries under creditor protection
(the "Debtors") are presently operating their businesses as
debtors-in-possession. The U.S. 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 expects to file a plan of reorganization (the "Plan") and
disclosure statement for itself and its filing subsidiaries with the
U.S. Bankruptcy Court on or before November 15, 2000. The Plan and disclosure
statement will describe the proposed structure and business operations of the
reorganized company, and will provide a proposed schedule of creditor
recoveries. In addition, the Plan will treat the Company's bank credit
agreements, Series D, E, 1, 2, 3, 4, 5, 6, 7 Senior Notes, and the Pass-through
Asset Trust Securities as secured debt under the Collateral Trust Agreement,
entitled to, on a pari passu basis, the benefits of the collateral held by the
collateral trustee. The Plan and the disclosure statement will be subject to
approval by the Bankruptcy Courts, and the Plan will be subject to a vote by
certain classes of

23
<PAGE>
creditors. The Company anticipates that certain creditors of the Company are
likely to challenge the proposed Plan.

If a plan of reorganization is approved by the Bankruptcy Courts, the
Company will be required to adopt "fresh start" accounting under Canadian and
U.S. generally accepted accounting principles ("GAAP"). This accounting will
require that assets and liabilities be recorded at fair value, based on the
values determined in connection with the plan of reorganization. As a result,
the reported amounts in the Interim Consolidated Financial Statements could
materially change, because they do not give effect to the adjustments to the
carrying value of assets and liabilities that may ultimately result from the
adoption of "fresh start" accounting.

On January 24, 2000, the Company announced that the U.S. Bankruptcy Court
approved the Company's disposition process in connection with its
previously-announced program for disposition of non-strategic assets. Through
this program, the Company intends to sell up to 371 of its approximately 1,400
U.S. funeral home and cemetery locations. In addition, due to the bankruptcy
proceedings, other properties, although not specifically identified, could be
sold.

BASIS OF PRESENTATION

This discussion and analysis of the Company should be read in conjunction
with the Interim Consolidated Financial Statements and accompanying Notes in
Item 1 of this Form 10-Q. The results reported herein 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. There is
substantial doubt about the appropriateness of the use of the "going concern"
assumption because of the Chapter 11 and CCAA bankruptcy proceedings and
circumstances relating to this event, including the Company's current debt
structure, recent losses and cash flow. As 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 a debtor-in-possession revolving credit facility and the ability to
generate sufficient cash from operations and financing arrangements to meet
obligations.

As detailed below under "Liquidity and Capital Resources--Collateral Trust
Agreement," the Company announced in April 2000 that there is uncertainty as to
the secured status of certain senior debt with principal aggregating
$1.1 billion. It is not known when the uncertainty will be resolved.
Accordingly, the effects of this contingency, if any, have not been reflected in
the Company's Interim Consolidated Financial Statements.

RESULTS OF OPERATIONS

Detailed below are the Company's operating results for the three months and
nine months ended September 30, 2000 and 1999, expressed in dollar amounts as
well as relevant percentages. The operating results are presented as a
percentage of revenue, except income taxes which are presented as a percentage
of earnings before income taxes.

24
<PAGE>
The Company's operations are comprised of three businesses: funeral homes,
cemeteries and insurance. Additional segmented information is provided in
Note 8 to the Interim Consolidated Financial Statements.

<TABLE>
<CAPTION>
THREE MONTHS THREE MONTHS
ENDED ENDED
SEPTEMBER 30 SEPTEMBER 30
------------------- -------------------
2000 1999 2000 1999
-------- -------- -------- --------
<S> <C> <C> <C> <C>
(IN MILLIONS) (PERCENTAGES)
Revenue
Funeral................................................... $135.2 $136.0 65.5 58.1
Cemetery.................................................. 46.5 74.2 22.6 31.7
Insurance................................................. 24.5 23.8 11.9 10.2
------ ------ ----- -----
Total................................................... $206.2 $234.0 100.0 100.0
====== ====== ===== =====
Gross margin
Funeral................................................... $ 35.0 $ 37.1 25.9 27.3
Cemetery.................................................. 7.6 12.9 16.3 17.4
Insurance................................................. 4.3 5.3 17.6 22.3
------ ------
Total................................................... 46.9 55.3 22.8 23.6
Expenses
General and administrative................................ 16.5 18.6 8.0 8.0
Depreciation and amortization............................. 13.8 15.8 6.7 6.7
------ ------
Earnings from operations.................................... 16.6 20.9 8.1 8.9
Interest on long-term debt.................................. 3.4 5.9 1.7 2.6
Reorganization costs........................................ 11.0 11.2 5.3 4.8
Other expenses.............................................. 2.4 0.7 1.2 0.3
Income taxes................................................ 2.7 1.2 n/a 39.0
------ ------
Net earnings (loss)......................................... $ (2.9) $ 1.9 (1.4) 0.8
====== ======
</TABLE>

THREE MONTHS ENDED SEPTEMBER 30, 2000 COMPARED TO THREE MONTHS ENDED
SEPTEMBER 30, 1999

Consolidated revenue decreased 11.9% to $206.2 million for the three months
ended September 30, 2000 from $234.0 million in 1999. This is primarily due to
decreases in cemetery and funeral revenue as described below. Consolidated gross
margin decreased 15.2%, to $46.9 million for the three months ended
September 30, 2000 from $55.3 million in 1999, primarily due to the decline in
cemetery and funeral revenue, though costs, as a percentage of revenue, also
increased for all businesses compared to the same period in the prior year. As a
percentage of revenue, consolidated gross margin decreased slightly to 22.8% for
the three months ended September 30, 2000 from 23.6% in 1999.

Funeral revenue decreased 0.6% to $135.2 million for the three months ended
September 30, 2000 from $136.0 million in 1999, primarily due to fewer funeral
services. At locations in operation for all of the three months ended
September 30, 1999 and 2000 ("Established Locations"), the average revenue per
funeral service decreased by 1.8%, while the number of funeral services
performed decreased by 0.3%. Overall funeral gross margin, as a percentage of
funeral revenue, decreased to 25.9% for the three months ended September 30,
2000 from 27.3% in 1999, principally as a result of lower revenue and fixed
operating costs. The Company's previously-announced program to dispose of 201
funeral home locations that are considered non-strategic assets will result in a
significant reduction in future funeral revenue.

Cemetery revenue decreased 37.2% to $46.5 million for the three months ended
September 30, 2000 from $74.2 million in 1999, primarily due to additional
pre-need sales contract term changes effected in the second quarter of 2000.
These contract changes included shorter terms and larger down payments that are
less attractive to certain customers but are designed to improve cash flow.
Overall cemetery gross margin,

25
<PAGE>
as a percentage of cemetery revenue, decreased to 16.3% for the three months
ended September 30, 2000 from 17.4% in 1999, primarily due to the lower revenue,
and fixed and indirect variable operating costs. The Company's previously
announced program to dispose of 170 cemetery locations that are considered
non-strategic assets will result in a significant reduction in future cemetery
revenue.

Insurance revenue increased 2.7% to $24.5 million for the three months ended
September 30, 2000 from $23.8 million in 1999. Overall insurance gross margin as
a percentage of insurance revenue decreased to 17.6% for the three months ended
September 30, 2000 from 22.3% in 1999, primarily due to reduced premium income,
higher claims and increased policy reserves, which were partially offset by
increased investment income.

General and administrative expenses were reduced 11.3%, or $2.1 million, to
$16.5 million for the three months ended September 30, 2000 from $18.6 million
in 1999. The decrease in general and administrative expenses for the three
months ended September 30, 2000 is primarily due to the Company's continuing
program to operate more efficiently and implement systems improvements. General
and administrative expenses, as a percentage of revenue, were 8.0% for the three
months ended September 30, 2000 and 1999, though revenue declined by 11.9%.

Depreciation and amortization expenses decreased to $13.8 million for the
three months ended September 30, 2000 from $15.8 million in 1999, primarily due
to asset impairment provisions recorded in December 1999. As a percentage of
revenue, depreciation was 6.7% for the three months ended September 30, 2000 and
1999, though revenue declined by 11.9%.

Interest expense on long-term debt decreased by $2.5 million to
$3.4 million for the three months ended September 30, 2000 from $5.9 million in
1999. The decrease is primarily due to the continuing reduction of long-term
debt not subject to compromise. Contractual interest expense not recorded on
certain pre-Petition Date debt obligations amounted to $43.7 million and
$43.1 million for the three months ended September 30, 2000 and 1999,
respectively.

Reorganization costs decreased slightly to $11.0 million for the three
months ended September 30, 2000 from $11.2 million in 1999. These costs were
primarily for professional fees for accounting, legal and consulting services
provided to the Company and the Official Unsecured Creditors' Committee, costs
applicable to the Company's Key Employee Retention Plan, and other costs and
fees incurred while the Company reorganizes under Chapter 11 and CCAA. Total
reorganization costs since the Petition Date applicable to the Company's
reorganization under Chapter 11 and CCAA amounted to $118.2 million as at
September 30, 2000.

Other expenses increased to $2.4 million for the three months ended
September 30, 2000 from $0.7 million in 1999, primarily due to losses associated
with miscellaneous asset disposals.

Income tax expense for the three months ended September 30, 2000 was
$2.7 million, compared to $1.2 million in 1999. For the three months ended
September 30, 2000, income tax expense exceeded the expected statutory rate,
because the Company was not able to realize a significant income tax benefit
associated with certain reorganization costs, certain intangible asset
amortization and other items recorded because these items are generally not
deductible for tax purposes or realization of the associated future tax benefits
was not considered more likely than not. Future income and losses, and the
disposition of certain locations, may require the Company to record a change in
the valuation allowance of 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, 2000. If this occurs, the
resulting change in the valuation allowance, which could be significant, would
generally be treated as an additional income tax expense or benefit in the
period in which it arises. The Company expects that its effective income tax
rate for fiscal year 2000 and beyond may vary significantly from the Canadian
and United States statutory rates.

26
<PAGE>
The Company had a net loss of $2.9 million for the three months ended
September 30, 2000 compared to net earnings of $1.9 million in 1999. Basic loss
per share was $0.07 for the three months ended September 30, 2000 compared to
net earnings per share of $nil in 1999. The increase in net loss for the three
months ended September 30, 2000 was primarily due to lower funeral and cemetery
gross margins and higher other expenses and income taxes, partially offset by
lower interest expense, general and administrative expenses and depreciation and
amortization expense.

The Company's statement of cash flows for the three months ended
September 30, 2000 reflects cash provided from operations of $31.0 million,
compared to $30.1 million in 1999, primarily due to lower interest expense and
the improved cash flow from cemetery financial assets, which were partially
offset by the reduction in earnings from operations.

<TABLE>
<CAPTION>
NINE MONTHS NINE MONTHS
ENDED ENDED
SEPTEMBER 30 SEPTEMBER 30
------------------- -------------------
2000 1999 2000 1999
-------- -------- -------- --------
(IN MILLIONS) (PERCENTAGES)
<S> <C> <C> <C> <C>
Revenue
Funeral................................................... $435.8 $458.2 63.9 57.3
Cemetery.................................................. 172.9 270.7 25.4 33.8
Insurance................................................. 73.2 71.4 10.7 8.9
------ ------ ----- -----
Total................................................... $681.9 $800.3 100.0 100.0
====== ====== ===== =====
Gross margin
Funeral................................................... $128.4 $148.8 29.5 32.5
Cemetery.................................................. 39.9 61.2 23.1 22.6
Insurance................................................. 14.8 15.1 20.2 21.1
------ ------
Total................................................... 183.1 225.1 26.9 28.1
Expenses
General and administrative................................ 52.5 68.6 7.7 8.5
Depreciation and amortization............................. 43.0 47.0 6.3 5.9
Provision for asset impairment............................ 92.0 15.1 13.5 1.9
------ ------
Earnings (loss) from operations............................. (4.4) 94.4 (0.6) 11.8
Interest on long-term debt.................................. 10.0 82.9 1.5 10.5
Reorganization costs........................................ 25.4 78.4 3.7 9.8
Dividends on preferred securities of subsidiary............. -- 3.0 -- 0.4
Other expenses.............................................. 4.6 14.6 0.7 1.8
Income taxes................................................ 12.1 12.0 n/a n/a
------ ------
Net loss.................................................... $(56.5) $(96.5) (8.3) (12.1)
====== ======
</TABLE>

NINE MONTHS ENDED SEPTEMBER 30, 2000 COMPARED TO NINE MONTHS ENDED
SEPTEMBER 30, 1999

Consolidated revenue decreased 14.8% to $681.9 million for the nine months
ended September 30, 2000 from $800.3 million in 1999. This is primarily due to
decreases in cemetery and funeral revenue as described below. Consolidated gross
margin decreased 18.7%, to $183.1 million for the nine months ended
September 30, 2000 from $225.1 million in 1999, primarily due to the decline in
cemetery and funeral revenue, though costs, as a percentage of revenue,
increased for the funeral and insurance businesses compared to the same period
in the prior year. As a percentage of revenue, consolidated gross margin
decreased to 26.9% for the nine months ended September 30, 2000 from 28.1% in
1999.

Funeral revenue decreased 4.9% to $435.8 million for the nine months ended
September 30, 2000 from $458.2 million in 1999, primarily due to fewer funeral
services, partly, management believes,

27
<PAGE>
attributable to continuing consumer concerns caused by the bankruptcy filings,
as well as the general business conditions also faced by other consolidators in
the industry. At locations in operation for all of the nine months ended
September 30, 1999 and 2000 ("Established Locations"), the average revenue per
funeral service was consistent with the prior year, while the number of funeral
services performed decreased by 4.1%. Overall funeral gross margin, as a
percentage of funeral revenue, decreased to 29.5% for the nine months ended
September 30, 2000 from 32.5% in 1999, principally as a result of lower revenue
and fixed operating costs. The Company's previously-announced program to dispose
of 201 funeral home locations that are considered non-strategic assets will
result in a significant reduction in future funeral revenue.

Cemetery revenue decreased 36.1% to $172.9 million for the nine months ended
September 30, 2000 from $270.7 million in 1999, partly due to the disposition of
124 cemetery properties at March 31, 1999, as well as, management believes,
continuing consumer concerns caused by the bankruptcy filings in June 1999. In
addition, revenues were negatively impacted by pre-need sales contract term
changes effected in the second quarter of 1999 and additional changes effected
in the second quarter of 2000. These contract changes included 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 slightly to 23.1% for the nine months ended
September 30, 2000 from 22.6% in 1999, primarily due to the effects of reduced
costs. The Company's previously announced program to dispose of 170 cemetery
locations that are considered non-strategic assets will result in a significant
reduction in future cemetery revenue.

Insurance revenue increased 2.5% to $73.2 million for the nine months ended
September 30, 2000 from $71.4 million in 1999. Overall insurance gross margin as
a percentage of insurance revenue decreased slightly to 20.2% for the nine
months ended September 30, 2000 from 21.1% in 1999, primarily due to reduced
premium income and increased claims and policy reserves, partially offset by an
increase in investment income.

General and administrative expenses were reduced 23.4%, or $16.1 million, to
$52.5 million for the nine months ended September 30, 2000 from $68.6 million in
1999. The decrease in general and administrative expenses for the nine months
ended September 30, 2000 is primarily due to the closure of the Trevose
corporate office in the second quarter of 1999, the termination of various
strategic initiatives subsequent to the bankruptcy filing on June 1, 1999, and
the Company's continuing program to operate more efficiently and implement
system improvements. General and administrative expenses, as a percentage of
revenue, decreased to 7.7% for the nine months ended September 30, 2000 from
8.5% in 1999, due to the reduction in costs, partially offset by the effect of
reduced revenues.

Depreciation and amortization expenses decreased to $43.0 million for the
nine months ended September 30, 2000 from $47.0 million in 1999, primarily due
to dispositions made in March 1999 and asset impairment provisions recorded in
1999 and 2000. As a percentage of revenue, depreciation was 6.3% for the
nine months ended September 30, 2000 compared to 5.9% in 1999, primarily due to
the decline in revenue.

Interest expense on long-term debt decreased by $72.9 million to
$10.0 million for the nine months ended September 30, 2000 from $82.9 million in
1999. The decrease is primarily a result of the suspension of post-Petition Date
interest expense and payments for under-secured and unsecured debt obligations
resulting from the Company's bankruptcy filings. Contractual interest expense
not recorded on certain pre-Petition Date debt obligations amounted to
$130.1 million and $56.8 million for the nine months ended September 30, 2000
and 1999, respectively.

Reorganization costs decreased to $25.4 million for the nine months ended
September 30, 2000 from $78.4 million in 1999. These costs were primarily for
professional fees for accounting, legal and consulting services provided to the
Company and the Official Unsecured Creditors' Committee, costs applicable to the
Company's Key Employee Retention Plan, and other costs and fees incurred while
the Company

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reorganizes under Chapter 11 and CCAA. In June 1999, immediately subsequent to
the Petition Date, the Company incurred reorganization costs of $21.7 million
for the write off of deferred debt issue costs, $9.8 million for the recording
of the PATS option liability, $27.2 million for the write off of costs
associated with executory contracts submitted for rejection by the Company, and
$8.5 million of professional fees associated with the Company's reorganization
under Chapter 11 and CCAA. Total reorganization costs since the Petition Date
applicable to the Company's reorganization under Chapter 11 and CCAA amounted to
$118.2 million as at September 30, 2000.

Other expenses decreased to $4.6 million for the nine months ended
September 30, 2000 from $14.6 million in 1999. Other expenses in 1999 reflects
an additional non-recurring pre-tax charge of approximately $13.5 million
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.

Income tax expense for the nine months ended September 30, 2000 was
$12.1 million, compared to $12.0 million in 1999. The Company was not able to
realize a significant income tax benefit associated with the provision for asset
impairment and the reorganization costs recorded in the nine months ended
September 30, 2000 and 1999 because these items were generally not deductible
for tax purposes or realization of the associated future tax benefits was not
considered more likely than not. Future income and losses, and the disposition
of certain locations, may require the Company to record a change in the
valuation allowance of 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, 2000. If this occurs, the resulting change in
the valuation allowance, which could be significant, would generally be treated
as an additional income tax expense or benefit in the period in which it arises.
The Company expects that its effective income tax rate for fiscal year 2000 and
beyond may vary significantly from the Canadian and United States statutory
rates.

The Company had a net loss of $56.5 million for the nine months ended
September 30, 2000 compared to a net loss of $96.5 million in 1999. Basic loss
per share was $0.85 for the nine months ended September 30, 2000 compared to a
loss per share of $1.39 in 1999. The reduction in net loss for the nine months
ended September 30, 2000 was primarily due to the suspension of interest expense
applicable to under-secured and unsecured debt obligations as a result of the
bankruptcy filings, lower reorganization costs, lower general and administrative
expenses, lower other expenses and lower depreciation and amortization costs,
partially offset by lower funeral and cemetery gross margins and higher
provision for asset impairment.

The Company's statement of cash flows for the nine months ended
September 30, 2000 reflects cash provided from operations of $125.2 million,
compared to cash provided of $12.9 million in 1999, primarily due to the
suspension of interest on under-secured and unsecured debt obligations as a
result of the bankruptcy filings and the improved cash flow from cemetery
operations.

DISPOSITIONS

In December 1999, the Company announced its intention to dispose of 201
funeral homes and 170 cemeteries in the United States that do not meet the
Company's future geographic and strategic objectives. In January 2000, the
Bankruptcy Courts approved the Company's disposition process for the locations
identified. The Company received over 250 letters of intent for various groups
of these properties, and has formal bids for the majority of the properties
offered for sale. Potential buyers have commenced or are continuing due
diligence and negotiations. In addition, due to the bankruptcy proceedings,
other properties, although not specifically identified, could be sold.

As of October 31, 2000, transactions involving sales proceeds of more than
$46 million have been approved by the U.S. Bankruptcy Court or have been signed
and submitted for approval.

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In March 1999, the Company completed the sale of 124 cemeteries and three
funeral homes. The Company received gross proceeds of $193.0 million, before
purchase price adjustments and transaction costs.

LIQUIDITY AND CAPITAL RESOURCES

Over the past few years before the bankruptcy filings, 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, Loewen and most of its subsidiaries voluntarily filed a
petition for creditor protection under Chapter 11 and CCAA. The Company will
continue to conduct business in the ordinary course as debtors-in-possession
under the protection of the Bankruptcy Courts until a plan of reorganization is
developed, approved by creditors and confirmed by the Bankruptcy Courts.

The Company expects to file the Plan and disclosure statement for itself and
its filing subsidiaries with the U.S. Bankruptcy Court on or before
November 15, 2000. The Plan and disclosure statement will describe the proposed
structure and business operations of the reorganized company, and will provide a
proposed schedule of creditor recoveries. The Plan and the disclosure statement
will be subject to approval by the Bankruptcy Courts, and the Plan will be
subject to a vote by certain classes of creditors. The Company anticipates that
certain creditors of the Company are likely to challenge the proposed Plan.

Loewen, LGII and all of its U.S. debtor subsidiaries, as
debtors-in-possession, became parties to a Petition Date $200 million revolving
credit agreement (the "DIP Facility"). In May 2000, Loewen and all of its
U.S. debtor subsidiaries entered into a new debtors-in-possession credit
agreement (the "New DIP Facility"), replacing the DIP Facility. The New DIP
Facility, which will be used primarily to fund LGII's working capital needs
during the course of the bankruptcy proceedings, contains fewer and less onerous
financial covenants than the DIP Facility. The credit limit was reduced to
$100 million and the number of participating banks was reduced from 15 to seven.
The material covenants that remain are restrictions on new indebtedness and
asset sales not already approved by the U.S. Bankruptcy Court, a quarterly
interest coverage ratio, and quarterly minimum funeral home gross margin. Use of
the New DIP Facility for letters of credit is limited to a maximum of
$50 million. The New DIP Facility matures on June 30, 2001 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 New DIP Facility also
have the benefit of a "super-priority" administrative expense claim in LGII's
bankruptcy proceedings.

The Company believes that sufficient cash resources currently exist to
satisfy its near-term obligations. 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. To improve cash flow, the
Company implemented changes to the terms and conditions of cemetery pre-need
sales in the second quarter of 1999 and the second quarter of 2000. These
contract changes included shorter terms and larger down payments that are less
attractive to certain customers but are designed to improve cash flow.

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

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reorganization providing for the repayment terms has been submitted to any
required vote and approval of creditors, has been confirmed by the Bankruptcy
Courts and has become effective. In June 2000, the U.S. Bankruptcy Court
extended the Company's exclusive right to file a plan of reorganization to
December 31, 2000, which prevents creditors or other parties from filing
alternative plans until such date.

Interest on unsecured and under-secured 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
vendor financing, including capital lease obligations. Contractual interest
expense not recorded on liabilities subject to compromise totaled $43.7 million
for the three months ended September 30, 2000 (1999--$43.1 million), and
$130.1 million for the nine months ended September 30, 2000
(1999--$56.8 million).

In March 1999, the Company deferred future dividends applicable to the MIPS.
Since June 1, 1999, as a result of the bankruptcy filings, the Company was in
default of its bank and term credit agreements, senior amortizing notes and
senior notes and, accordingly, has not made interest, principal or dividend
payments when due on secured, unsecured and under-secured debt obligations.

The Company's balance sheet at September 30, 2000 as compared to
December 31, 1999, reflects significant changes from the asset impairment
provision and, to a lesser extent, changes from ongoing operating activities.

COLLATERAL TRUST AGREEMENT

In 1996, Loewen, LGII and a trustee 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 Loewen 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. This
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 the holders of certain letters of credit, aggregated approximately
$2.0 billion.

In April 2000, the Company announced that under the Collateral Trust
Agreement, there is uncertainty as to the secured status of the Company's
Series 3, 4, 6 and 7 Senior Notes and the Pass-through Asset Trust Securities
(the "Subject Debt"). The aggregate principal amount outstanding of the Subject
Debt is $1.1 billion. In accordance with the terms of the Collateral Trust
Agreement, holders of future indebtedness or their representatives were to
effect registration by delivering to the collateral trustee Additional Secured
Indebtedness Registration Statements. Pursuant to the agreements with lender
representatives in connection with financings subsequent to the establishment of
the Collateral Trust Agreement, the Company and LGII have treated the Subject
Debt as secured. However, Additional Secured Indebtedness Registration
Statements relating to the Subject Debt were either not delivered to the
collateral trustee or were delivered indicating an incorrect outstanding amount.
The Company has confirmed that it satisfied its obligations under the financing
agreements to adopt appropriate corporate resolutions and to deliver to lender
representatives, in connection with closing, Additional Secured Indebtedness
Registration Statements relating to the Subject Debt.

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The Company expects to file the Plan and disclosure statement for itself and
its filing subsidiaries with the U.S. Bankruptcy Court on or before
November 15, 2000. The Plan and disclosure statement will describe the proposed
structure and business operations of the reorganized company, and will provide a
proposed schedule of creditor recoveries. In addition, the Plan will treat the
Subject Debt, along with certain other debt, as secured debt under the
Collateral Trust Agreement, entitled to, on a pari passu basis, the benefits of
the collateral held by the collateral trustee. The Plan and the disclosure
statement will be subject to approval by the Bankruptcy Courts, and the Plan
will be subject to a vote by certain classes of creditors. The Company
anticipates that certain creditors of the Company are likely to challenge the
proposed Plan.

It is not known when the uncertainty will be resolved. Accordingly, the
effects of this contingency, if any, have not been reflected in the Company's
Interim Consolidated Financial Statements.

RESTRICTIONS

The New DIP Facility contains various financial and other restrictive
covenants including, among other things, restrictions on new indebtedness and
asset sales not already approved by the U.S. Bankruptcy Court, a minimum ratio
of quarterly cash flow to interest, and minimum quarterly funeral home gross
margin. Use of the New DIP Facility for letters of credit is limited to a
maximum of $50 million. Under the terms of the New DIP Facility, the cash of the
Company, LGII and the subsidiaries which have filed under Chapter 11 is
generally restricted for use within this group of filed companies.

For the quarter ended September 30, 2000, the Company was in technical
default of the minimum funeral home gross margin, falling short by $5,000. The
Company is seeking a waiver from its New DIP Facility lenders for
non-compliance. The Company believes that sufficient cash resources currently
exist, and no borrowings are outstanding or expected to be required of the New
DIP Facility to satisfy its near-term obligations, though further use of the New
DIP Facility for letters of credit will be restricted until a waiver
is obtained.

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.

RECENT ACCOUNTING STANDARDS

In December 1999, the Securities and Exchange Commission (the "SEC") issued
Staff Accounting Bulletin No. 101, "Revenue Recognition in Financial Statements"
("SAB 101"). SAB 101 provides the staff's views on the application of existing
generally accepted accounting principles to revenue recognition in financial
statements. In June 2000, the SEC deferred the implementation date of SAB 101,
as applicable to the Company, to the fourth quarter of 2000, with retroactive
application to January 1, 2000.

Based on Company discussions with the SEC and conclusions mutually agreed
to, the Company's pre-need revenue recognition policies under SAB 101, when
implemented, will:

- Recognize sales of pre-arranged funerals and pre-need cemetery merchandise
and services at time of delivery or performance of services;

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- Recognize sales of pre-need cemetery spaces when title to interment right
is transferred; and

- Expense immediately selling expenses incurred in connection with sales of
pre-arranged funerals and pre-need cemetery merchandise, services, and
spaces.

Management has projected the estimated impact of SAB 101, in connection with
the Company's Plan and disclosure statement for its Chapter 11 proceedings,
which reflect the accounting policies currently expected to be implemented.
However, as management is awaiting clarification from the SEC regarding the
complete application of SAB 101, the accounting policies ultimately adopted may
differ. Accordingly, management has not yet fully determined the impact on the
Company's Interim Consolidated Financial Statements, but expects such impacts,
when determined, to be significant.

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 was 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
resides 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 were non-trading and were stated in
U.S. dollars. The Company's derivative contracts were entered into with major
financial institutions, thereby minimizing the risk of credit loss. Fluctuations
in interest and currency rates that affected the swaps were 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.

As a result of the Company's bankruptcy filings on the Petition Date,
virtually all of the Company's fixed and floating rate debt instruments 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 about 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.

The Company's sensitivity to floating interest rates is primarily
attributable to borrowings under the New DIP Facility. Accordingly, changes in
U.S. interest rates affect the interest paid on the Company's debt.

The Company has foreign operations in the United Kingdom (32 locations) and
Mexico (one location). These countries are generally stable politically and
economically, and are not highly inflationary.

EQUITY-PRICE RISK MANAGEMENT

The sale of pre-arranged 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 pre-arranged 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 not sold prior 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.

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PART II

ITEM 1. LEGAL PROCEEDINGS.

BANKRUPTCY FILINGS

On June 1, 1999, the Company, 869 United States subsidiaries and one
European subsidiary voluntarily filed a 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 voluntarily 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). Subsequent to the Petition Date, three
additional subsidiaries of the Company voluntarily filed for creditor protection
and 41 subsidiaries were voluntarily deleted. The Company's United Kingdom
subsidiaries, which generate approximately 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 5 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. In May 2000, Loewen and all of its United States debtor
subsidiaries entered into a new debtors-in-possession credit agreement (see
Note 3 to the Interim Consolidated Financial Statements and "Management's
Discussion and Analysis of Financial Condition and Results of Operations" for
further information about the new debtors-in-possession credit agreement).

As a result of the Chapter 11 and CCAA filings, litigation against the
Company and its filing subsidiaries was stayed as of June 1, 1999, and any
additional liabilities related thereto will be subject to compromise, unless the
stay is lifted by the applicable Bankruptcy Court.

BANKERS TRUST ACTION

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PREFERRED SHARES CONVERSION MOTION

LOUISIANA LAWSUITS

Except as described in this paragraph, the complaints in each of the
lawsuits are almost identical. Plaintiffs allege that the defendants sold life
insurance products to plaintiffs and other African Americans without disclosing
that premiums paid would likely exceed the face value of the policies, and that
plaintiffs paid higher premiums than Caucasian policyholders and received
proportionately lower death benefits. The plaintiffs seek injunctive relief,
equitable relief, restitution, disgorgement, increased death benefits, premium
refunds (in one case, with interest), costs and attorney fees. The plaintiffs in
the ALEXANDER, COTHRAN and SMITH cases also allege racial discrimination under
the Louisiana Constitution as well as unfair trade practices, and seek
compensatory damages, including, where applicable, punitive, exemplary or
special damages; however, Louisiana law prohibits punitive damages unless
specifically authorized by Federal law. The BEVERLY, SUTHERLAND, FLETCHER and
PRINCE cases include an allegation that defendants violated the Civil Rights Act
of 1866 (42 USC 1981), which provides for punitive damages in certain
circumstances. In each case, Security Industrial has filed a motion to dismiss
all claims for failure to state a cause of action and/or for summary judgment
("Motion to Dismiss"). Certain procedural and other recent developments with
respect to the eight lawsuits through November 3, 2000 are described below.

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d. SMITH V. SECURITY INDUSTRIAL, filed in the United States District Court,
Eastern District of Louisiana. In September 2000, the Court consolidated this
case with the SUTHERLAND case identified below. In October 2000, the Court
granted a motion to stay these proceedings pending the MDL Panel's final
decision on the transfer of all related cases.

f. FLETCHER, ET AL. V. UNITED INSURANCE CO. OF AMERICA ET AL., filed in the
United States District Court, Eastern District of Louisiana (No. 00-2932
"S" (1)). In October 2000, Security Industrial filed a motion for transfer of
the case to Judge Feldman's section or, in the alternative, for a stay pending
resolution of the motion before the MDL Panel for transfer of all
related cases.

OTHER

There were no material changes to previously reported litigation, as
described in the Company's Annual Report on Form 10-K/A for the year ended
December 31, 1999.

ITEM 3. DEFAULTS ON SENIOR SECURITIES.

The amounts in default and arrears on the Company's senior debt obligations,
including dividends in arrears, are provided in Notes 3 and 9 to the Interim
Consolidated Financial Statements.

ITEM 5. OTHER INFORMATION.

STOCK EXCHANGE LISTINGS

The Common shares of Loewen trade on The Toronto Stock Exchange under the
symbol "LWN."

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 SEC 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-

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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. There is substantial doubt about the appropriateness
of the use of the "going concern" assumption because of the Chapter 11 and CCAA
bankruptcy proceedings and circumstances relating to this event, including the
Company's current debt structure, recent losses and cash flow. As 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 terms
of a debtor-in-possession revolving credit facility and the ability to generate
sufficient cash from operations and financing arrangements to meet obligations.

2. BANKRUPTCY PROCEEDINGS. 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. If the plan of
reorganization receives all requisite approvals, the Company will be required,
under Canadian and U.S. GAAP, to adopt "fresh start" accounting. Fresh start
accounting requires that assets and liabilities be recorded at fair value, based
on the values determined in connection with the plan of reorganization. If the
reorganization plan is approved and the Company emerges from bankruptcy, the
carrying value of assets and liabilities recorded in the Company's financial
statements after the adoption of fresh start accounting could differ materially
from the amounts reported in the consolidated balance sheet at September 30,
2000.

During the pendency of the reorganization proceedings, the Company is
implementing operational and system improvements. In particular, a new cemetery
contract management system is being implemented in the cemetery operations on a
location-by-location basis to improve the recording and tracking of individual
pre-need contracts. Management believes the new cemetery contract management
system will: (i) improve the timeliness of and access to operational and
financial information; (ii) reduce administrative costs; (iii) provide for
improved trust efficiencies, and (iv) improve the estimation of merchandise and
service liabilities. Further adjustments may be made to the estimation of
cemetery merchandise and service liabilities as the cemetery contract management
system is implemented.

In April 2000, the Company announced that under the Collateral Trust
Agreement among the Company, LGII and their senior lenders, there is uncertainty
as to the secured status of the Company's Series 3, 4, 6 and 7 Senior Notes and
the Pass-through Asset Trust Securities (the "Subject Debt"). The

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aggregate principal amount outstanding of the Subject Debt is $1.1 billion (see
Note 3 to the Interim Consolidated Financial Statements for additional
information regarding the terms of the Subject Debt).

Under the Collateral Trust Agreement, senior lenders share certain
collateral and guarantees on a pari passu basis. In accordance with the terms of
the Collateral Trust Agreement, holders of future indebtedness or their
representatives were to effect registration by delivering to the collateral
trustee Additional Secured Indebtedness Registration Statements. However,
Additional Secured Indebtedness Registration Statements relating to the Subject
Debt were either not delivered to the collateral trustee or were delivered
indicating an incorrect outstanding amount. The Company has confirmed that it
satisfied its obligations under the financing agreements to adopt appropriate
corporate resolutions and to deliver to lender representatives, in connection
with closing, Additional Secured Indebtedness Registration Statements relating
to the Subject Debt. Pursuant to the agreements with lender representatives in
connection with financings subsequent to the establishment of the Collateral
Trust Agreement, the Company and LGII have treated the Subject Debt as secured.

On September 29, 2000, Bankers Trust Company, the collateral trustee under
the Collateral Trust Agreement, filed an adversary proceeding in the
U.S. Bankruptcy Court seeking a declaratory judgment that the Subject Debt is
secured debt and entitled to the benefits of the Collateral Trust Agreement. The
Company has been named as a defendant in that proceeding. See Part II, Item 1
for additional information.

The Company expects to file a plan of reorganization (the "Plan") and
disclosure statement for itself and its filing subsidiaries with the
U.S. Bankruptcy Court on or before November 15, 2000. The Plan and disclosure
statement will describe the proposed structure and business operations of the
reorganized company, and will provide a proposed schedule of creditor
recoveries. In addition, the Plan will treat the Subject Debt, along with
certain other debt, as secured debt under the Collateral Trust Agreement,
entitled to, on a pari passu basis, the benefits of the collateral held by the
collateral trustee. The Plan and the disclosure statement will be subject to
approval by the Bankruptcy Courts, and the Plan will be subject to a vote by
certain classes of creditors. The Company anticipates that certain creditors of
the Company are likely to challenge the proposed Plan.

It is not known when the uncertainty regarding the secured status of the
Subject Debt will be resolved. Accordingly, the effects of this contingency, if
any, have not been reflected in the Company's Interim Consolidated Financial
Statements.

3. 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
will be affected by the proposed change in accounting policies associated with
the application of the guidance provided by the Securities and Exchange
Commission's Staff Accounting Bulletin No. 101, "Revenue Recognition in
Financial Statements" ("SAB 101").

Revenue is also affected by the level of dispositions. The Company's
intended disposition of 201 funeral homes and 170 cemeteries identified as
probable for sale in December 1999, will result in a significant reduction in
future revenue. In addition, due to the bankruptcy proceedings, other
properties, although not specifically identified, could be sold. Revenue may
also be affected by the negative implications associated with the bankruptcy
proceedings.

4. DISPOSITIONS. In December 1999, the Company identified 371 locations as
probable for sale. In January 2000, the U.S. Bankruptcy Court approved the
Company's proposed disposition process. Although the Company may consummate
additional asset sales, it is not committed to sell and has not identified any

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other properties for which a material sale is probable. When properties are
sold, gains or losses could be small or significant depending upon the type of
property, location, cash flow and prevailing market conditions.

5. TAX RATE. The Company expects that its effective income tax rate for 2000 and
beyond will likely vary significantly from the Canadian and United States
statutory rates. Future income and losses, the disposition of certain locations,
and the effects of the application of the guidance provided by SAB 101, may
require the Company to record a change in the valuation allowance of 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, 2000. If this occurs, the resulting change in the valuation
allowance, which could be significant, would generally be treated as an
additional income tax expense or benefit in future periods.

6. 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 that provides for achieving profitable
operations and obtaining appropriate financing, among other things, (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) dispositions and the related
valuation of assets, (v) the number of Common shares outstanding,
(vi) competition, (vii) the level of the Company's general and administrative
costs, and (viii) changes in applicable governmental regulations.

39
<PAGE>
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 ("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)

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)
</TABLE>

40
<PAGE>

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

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 4.12)

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 Exhibits 4.14 and 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 4.19)

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 Exhibits 4.21 and 4.22)
</TABLE>

41
<PAGE>

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

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)

4.34 Form of Senior Guarantee of Series 6 and 7 Notes of LGII
(included in Exhibit 4.33)

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 Exhibits 4.35 and 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)

4.38.3 Second Amendment to the DIP Agreement, dated as of
August 25, 1999(16)

4.38.4 Third Amendment to the DIP Agreement, dated as of
October 21, 1999(16)

4.38.5 Fourth Amendment to the DIP Agreement, dated as of
December 21, 1999(16)

4.39 Debtor-In-Possession Credit Agreement, dated as of May 24,
2000 (the "New 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 (17)
</TABLE>

42
<PAGE>

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
--------------------- -----------
<C> <S>
4.40 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* Form of Indemnification Agreement with Outside Directors(18)

10.4* Form of Indemnification Agreement with Officers(18)

10.5.1* The Loewen Group Inc. Corporate Incentive Plan(16)

10.5.2* The Loewen Group Inc. Operations Incentive Plan(16)

10.5.3* The Loewen Group Inc. Basic Employee Severance Plan(16)

10.5.4* The Loewen Group Inc. Executive and Other Specified Employee
Severance Plan(16)

10.5.5* The Loewen Group Inc. Confirmation Incentive Plan(16)

10.5.6* The Loewen Group Inc. Retention Incentive Plan(16)

10.5.7* Form of Employment and Release Agreement for Corporate and
Country Management(16)

10.5.8* Form of Employment and Release Agreement for Employees Other
Than Corporate and Country Management(16)

10.6* 1994 Management Equity Investment Plan (the "MEIP")(18)

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

10.8* 1994 Outside Director Compensation Plan, as restated and
amended as at January 9, 1997, and further amended as at
June 25, 1998(5)

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

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

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

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

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

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

10.15* Employment Agreement, dated October 31, 1997, by and between
Loewen and Michael G. Weedon(8)
</TABLE>

43
<PAGE>

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
--------------------- -----------
<C> <S>
10.16* Employment Agreement, dated January 30, 1998, by and between
Loewen and Brad Stam(8)

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

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

10.18.2* 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.(19)

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(20)

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(19)

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")(21)

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(21)

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(21)

99.7 Form of Letter of Transmittal (22)

99.8 Form of Notice of Guaranteed Delivery (22)
</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)

44
<PAGE>
(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)

(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 Annual Report on Form 10-K for
the year ended December 31, 1999, filed on March 16, 2000 (File
No. 1-12163)

(17) Incorporated by reference from Loewen's Quarterly Report on Form 10-Q
for the quarter ended June 30, 2000, filed on August 10, 2000 (File
No. 1-12163)

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

(19) 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)

(20) 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)

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

(22) 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)

45
<PAGE>
(b) REPORTS ON FORM 8-K

The following Current Reports on Form 8-K were filed by Loewen during the
third quarter of fiscal 2000:

<TABLE>
<CAPTION>
FILING DATE ITEM NUMBER DESCRIPTION
----------- --------------------- -----------
<S> <C> <C>
August 1, 2000 Item 5. Other Events Press release reporting second quarter
(dated July 31, 2000) 2000 results

September 7, 2000 Item 5. Other Events Press release announcing the
(dated September 6, 2000) consolidation of Loewen's eight existing
U.S. and Canadian administrative and
corporate offices

September 12, 2000 Item 5. Other Events Press release reporting second quarter
(dated July 31, 2000) 2000 results (duplicate copy of
July 31, 2000 press release filed in
error)

September 15, 2000 Item 5. Other Events Press release announcing the results of
(dated September 15, 2000) Loewen's factual investigation into the
uncertainty relating to the secured
status of its 7.75% Series 3 Senior
Notes, 8.25% Series 4 Senior Notes,
7.20% Series 6 Senior Notes, 7.60%
Series 7 Senior Notes and 6.70%
Pass-through Asset Trust Certificates
</TABLE>

46
<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 7, 2000 /s/ MICHAEL A. CORNELISSEN
Michael A. Cornelissen
SENIOR VICE-PRESIDENT
(PRINCIPAL FINANCIAL OFFICER)

Dated: November 7, 2000 /s/ DWIGHT K. HAWES
Dwight K. Hawes
SENIOR VICE-PRESIDENT, CORPORATE CONTROLLER
(PRINCIPAL ACCOUNTING OFFICER)
</TABLE>