**UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549**

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**FORM 10-K**

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(MARK ONE)

**[X]   ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
     SECURITIES EXCHANGE ACT OF 1934**

**For the fiscal year ended November 30, 2002**

**OR**

**[   ]  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 0-20562**

**COREL CORPORATION**
(Exact name of Registrant as Specified in its Charter)



|**Canada**                                                     | **Not Applicable**                     
|-------------------------------------------------------------- | ---------------------------------------
|(State or Other Jurisdiction of Incorporation or Organization) | (I.R.S. Employer Identification Number)

**1600 Carling AvenueOttawa, Ontario, Canada     KIZ 8R7**(Address of Principal Executive Offices including Zip Code)

**(613) 728-8200**(Registrant's Telephone Number, Including Area Code)

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act:

**Title of Each Class**

**Common shares, no par value**

**Common share purchase rights**

Indicate by check mark 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 [   ]

Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K (Section 229.4054 of this chapter) is not contained
herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy
or information statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K.  [X]

As of February 12, 2003, the aggregate market value of Common Shares held by
non-affiliates of the registrant, based on the closing sales price of $0.78 of the Registrant's Common Shares
as reported on the NASDAQ National Market,
was $71,635,225. As of that date 91,840,033 Common Shares were issued and
outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

None







**COREL CORPORATION
                                             FORM 10-K
                       For The Fiscal Year Ended November 30, 2002
                                          Table of Contents**



|Part I.        |                                                                                       |                                                                                                          
|-------------- | ------------------------------------------------------------------------------------- | ---------------------------------------------------------------------------------------------------------
|Item 1.        | Business                                                                              |                                                                                                          
|Item 2.        | Properties                                                                            |                                                                                                          
|Item 3.        | Legal Proceedings                                                                     |                                                                                                          
|Item 4.        | Submission of Matters to a Vote of Security Holders                                   |                                                                                                          
|Part II.       |                                                                                       |                                                                                                          
|Item 5.        | Market for the Registrant's Common Equity and Related Stockholder Matters             |                                                                                                          
|Item 6.        | Selected Financial Data                                                               |                                                                                                          
|Item 7.        | Management's Discussion and Analysis of Financial Condition and Results of Operations |                                                                                                          
|Item 7a.       | Quantitative and Qualitative Disclosures About Market Risk                            |                                                                                                          
|Item 8.        | Financial Statements and Supplementary Data                                           |                                                                                                          
|Item 9.        | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure  |                                                                                                          
|Part III.      |                                                                                       |                                                                                                          
|Item 10.       | Directors and Executive Officers of the Registrant                                    |                                                                                                          
|Item 11.       | Executive Compensation                                                                |                                                                                                          
|Item 12.       | Security Ownership of Certain Beneficial Owners and Management                        |                                                                                                          
|Item 13.       | Certain Relationships and Related Transactions                                        |                                                                                                          
|Item 14.       | Controls and Procedures                                                               | Part IV.Item 15.
Exhibits, Financial Statement Schedules and Reports on Form 10-KSignaturesCERTIFICATIONS
|Part IV.       |                                                                                       |                                                                                                          
|Item 15.       | Exhibits, Financial Statement Schedules and Reports on Form 10-K                      |                                                                                                          
|Signatures     |                                                                                       |                                                                                                          
|CERTIFICATIONS |                                                                                       |                                                                                                          

All financial information contained in this report is expressed in United States dollars,
unless otherwise stated.

******FORWARD-LOOKING STATEMENTS**

The following information contains forward-looking statements as defined by the United
States Private Securities Litigation Reform Act of 1995,
involving Corel's expectations about future financial results and other matters. These statements reflect management's current
forecast of
certain aspects of Corel's future business. Specifically, this release contains forward-looking statements regarding the likely
benefits from new
product introductions and the need by the marketplace for the products under development; the programs being undertaken by Corel
and
expectations regarding the ability of Corel to increase sales and return to profitability; and results in future quarters and for
the next fiscal year.
The words "plan", "expect", "believe", "will", "intend", "anticipate", "forecast", "target", "estimate" and similar expressions
identify
forward-looking statements. These forward-looking statements are subject to certain risks and uncertainties that could cause
actual results of
operations to differ materially from historical results or current expectations. In particular, there can be no assurance that
Corel's cost reductions
will be adequate or that Corel will achieve a level of revenue that will allow Corel to return to profitability, that Corel will
be able to produce
and launch new products or that Corel will be able to successfully implement or complete the short-term and long-term programs
that Corel
has undertaken. Risk factors include shifts in customer demand, product shipment schedules, product mix, competitive products and
pricing,
technological shifts, Corel's effectiveness at executing its sales, marketing and development plans, the market acceptance of new
products and
other variables. Readers are referred to Corel's most recent reports filed with the Securities and Exchange Commission for a more
complete
discussion of the other risks and uncertainties. The factors underlying forecasts are dynamic and subject to change. As a result,
forecasts speak
only as of the date they are given and do not necessarily reflect Corel's outlook at any other point in time. Corel does not
undertake to update
or review these forward-looking statements.

******PART****I**

**Item 1.  Business**

******GENERA************L**

Founded in 1985, Corel Corporation ("Corel") is a leading technology company
specializing in content creation tools (graphic and office
productivity), business process management and XML-enabled enterprise solutions. Our goal is to give consumers and enterprise
customers the
ability to create, exchange and instantly interact with visual content that is always relevant, accurate and available. With our
headquarters in
Ottawa, Canada, our common stock trades on the NASDAQ Stock Market under the symbol CORL and on the Toronto Stock Exchange under
the symbol COR.

Corel was originally incorporated as Corel Systems Corporation under the Canada
Business Corporations Act by Articles of Incorporation, dated
May 29, 1985. Our name was then changed to Corel Corporation in May 1992. Corel was continued under the Canada Business
Corporation
Act by Articles of Amalgamation dated December 1, 1998, when it amalgamated with Corel Computer Corporation, a wholly owned
subsidiary.
We maintain executive offices and principal facilities at 1600 Carling Avenue, Ottawa, Ontario, Canada K1Z 8R7. Our telephone
number is 613-728-0826 and our toll-free telephone number is 1-888-267-3548. We maintain a World Wide Web site at
*www.corel.com*. The information on
our web site should not be considered part of this Form 10-K report.

**CORPORATE STRATEGY**

Our business strategy is to leverage our expertise in content creation and open
standards such as XML (Extensible Markup Language) in
delivering solutions that empower customers to create, exchange and interact with visually rich content. Using Corel's solutions,
customers have
access to data that is always relevant, accurate and up to date, saving them time, reducing costs and giving them a competitive advantage.

We have established a global reputation for technological innovation, based primarily
on the success of our established product lines,
WordPerfect Office and CorelDRAW, which continue to generate significant revenues. These software solutions are used by customers
to create
content, whether it's text, a spreadsheet, an illustration or an image.

In October 2001, we acquired Micrografx, Inc. ("Micrografx"), a company that developed
enterprise process management and graphics
software, solutions and services. They also provided training, support and services to their customer base. The technology
acquired from
Micrografx is being used to develop new products that enable customers to create graphics-rich content that can be output easily
and
simultaneously to multiple channels, including the Web. This acquisition also gave us access to a new market, Enterprise Process Management ("EPM").

In March 2002, we completed the acquisition of SoftQuad Software, Ltd. ("SoftQuad"),
giving us access to leading enterprise-class XML
technology and expertise. Our consolidated statements of operations reflect the results of operations from the date of
acquisition. SoftQuad
was a founding member of the World Wide Web Consortium ("W3C"), the standards body that designed and defined the XML
specification.
Members of SoftQuad's management team played a key role at the W3C and were instrumental in the development of the XML standard,
and
are now members of our management team. Open standards such as XML and SVG (Scalable Vector Graphics) are a critical component of
the
new solution sets that we are developing for enterprise customers.

We are capitalizing on our software technology and development expertise to address
new customer requirements fueled by the growth of
Web services, the increasing reliance on mobile devices and the need to instantly access and interact with up-to-date information
that has
previously been constrained by proprietary file formats. As we execute this strategy, we continue to meet the needs of our
existing customer
base through our consumer offerings. The revenue generated from these product offerings will provide the necessary means for us to
fund
investments in new business opportunities and address customer requirements.

We service consumers with our flagship brands, WordPerfect and CorelDRAW. In addition,
we offer a range of graphics solutions for creative
professionals working in the design community and for technical illustrators working in the manufacturing industry. These
solutions include
applications like Corel Painter, our natural-media painting tool, and Corel DESIGNER, our technical illustration application. We
target the
education market primarily with our graphics solutions, which are available on both the Windows and Macintosh platforms.

We provide business and government customers with enterprise-class solutions,
including our XML-based solutions Corel XMetaL and Corel
Ventura, and our process management solutions, including iGrafx FlowCharter and iGrafx Process for Six Sigma. Our WordPerfect
Office tools
are also widely used by government clients and law firms in North America.

We instituted key operational improvements during 2002. We increased our focus on
driving internal efficiencies and established the framework
and infrastructure to better support our external partners, helping us reach out to new customers. To meet these objectives, we
made a number
of changes to the executive team in 2002, including the addition of a Chief Operating Officer and the alignment of our sales
executives with
our customer base and related partner channels.

Going forward in 2003, our strategy remains consistent -- to give customers the tools
that enable them to create, exchange and instantly
interact with "intelligent" visual content that is always relevant, accurate and available.

Over the coming year, we will continue to deliver advanced solutions to the
marketplace, including the latest version of our WordPerfect Office
suite, a new version of Corel Painter as well as new enterprise solutions based on open standards such as XML and SVG.

In 2003, we will strengthen our relationships with enterprise-focused partners and
customers while increasing the overall visibility and
awareness of our global brand with consumers. We will work closely with our channel partners to ensure that end-users and
decision-makers
recognize the value of the Corel brand at retail as well as in the enterprise market.

**********PRODUCTS**

Our products are grouped into four portfolios: Graphics Solutions, Office Productivity
Solutions, Process Management Solutions and Other
(including XML Solutions). Our solutions include a range of software applications as well as training, technical support and professional services.

******Graphics
Solutions**

Our graphics portfolio includes creative and technical graphics applications. Primary
examples of graphics applications include illustration, photo-editing, painting, 3D rendering, and animation programs. Corel's
graphics applications are developed principally for Windows and Macintosh
operating systems, and are available in English and French as well as selected other languages.

Our creative graphics solutions include CorelDRAW Graphics Suite, Corel Painter,
KnockOut and KPT effects. These applications are used
principally by artists, designers and photographers who are self-employed or work in small-to-medium sized firms. Our tools are
designed
expressly to accelerate the creation process, offering designers maximum flexibility and control in applying creative effects.
This allows our
customers to work more efficiently and stay competitive within their respective industries.

Our technical graphics solutions are targeted at industries where precision and speed
in creating technically precise illustrations are essential for
success. Both Corel DESIGNER and CorelDRAW are used in the manufacturing, automotive and aerospace industries - from the
conceptualization stage, through the design specification stage, to the production of technical manuals and marketing
collateral.

To address the consumer market, Corel has a family of graphics offerings aimed at home
users and design enthusiasts. These products are
distributed through our retail channel partners and includes products such as Bryce and Picture Publisher.

Graphics remains one of our core development strengths. We are using this expertise to
deliver upgrades to our current product line, while at
the same time introducing new products, such as Corel Grafigo, that address the increasing demand for solutions that are mobile,
collaborative
and interactive. Below is a list of the our graphics solutions:

***CorelDRAW Graphics Suite 11***** features CorelDRAW 11 for page layout and illustration, Corel PHOTO-PAINT 11 for image editing and
Corel R.A.V.E. 2 for vector animation.

***Painter 7***** is a digital painting application that simulates natural media, such as watercolors, inks, oil paints, chalks,
pastels, and more.
Compatibility with Adobe Photoshop means users can combine photo editing with the advanced capabilities of Painter 7.

***KPT effects*****features nine plug-in filters that let users add effects to digital images. The plug-in filters help users
create images that range from
the practical to the fantastic, and add details that would be extremely time-consuming with any other application.

***KnockOut*****is a masking tool that can perform complex masking functions while preserving fine image details, such as
blurred or out of focus
edges, hair, smoke and shadows.

*********Corel DESIGNER***** is the technical
graphics solution that bridges the gap between AutoCAD and camera-ready images, providing a graphical tool
set that supports a range of file types. Engineering departments and technical publishers can take advantage of it to create
presentation-quality
graphics that can be easily utilized in office software documents, presentations, Web and Intranet pages, and much more. With
tools for image
editing and creation, Corel DESIGNER is a complete graphics solution for technical illustration.

***Corel Grafigo*****is a powerful tool for mobile professionals to create graphics, exchange ideas, and interact with colleagues in
a collaborative
environment. Providing an easy and intuitive way to leverage graphics on the go, the application allows mobile users to create
accurate graphics
from sketches through the use of shape recognition, symbols and tools. In addition, Corel Grafigo features annotation tools, such
as digital ink
and "onion skins" that enable enhanced collaboration and communication of ideas with colleagues.

***Bryce***offers
an easy way to create, explore and animate 3D imagery for multimedia, video and the Web.

***Picture Publisher***is a photo-editing, image composition and painting application. It features a variety of image-enhancing filters to
improve the
quality of scanned images, and special effects filters, such as the new Red Eye Removal and Smart Blur tools that alter the
appearance of images.

******Office
Productivity Solutions**

Office productivity applications are designed for use by a broad spectrum of end
users, regardless of business, industry or market segment.

We develop WordPerfect Office suite for the Windows platform. It is currently
available in English and French, and includes a word processor,
spreadsheet, and presentations package. The professional version of the suite also includes a relational database, Paradox. Our
office suite is
used principally in government and legal departments, academic institutions and small-to-medium sized businesses. Within a
business setting,
our office suite is used in departments that produce or edit a high volume of long, heavily formatted documents. In these types of
settings,
power and the ability to easily manage complex content are key requirements for productivity.

During the latter half of 2002, Corel secured a number of high-profile original
equipment manufacturer ("OEM") wins with industry leaders
including Hewlett-Packard, Dell, Sony and Gateway. For the first time, these vendors chose to replace Microsoft Works on certain
systems and
pre-load the WordPerfect Productivity Pack which includes WordPerfect word processor and Quattro Pro spreadsheet applications.
These
bundling wins increase our visibility with consumers and provide up-sell opportunities for future versions of Corel's Office
Productivity
applications.

Our presence in the consumer market was further supported with the release of
WordPerfect Family Pack, a version of our office suite designed
specifically for home users.

On an ongoing basis, we assess opportunities to include technologies in products that
further enhance customer experiences. These
technologies may be obtained through acquisitions or licensing agreements whereby we pay the supplier a royalty for the inclusion
of their
technologies in our products. The following outlines our current office productivity complement:

***WordPerfect Office 2002 - Standard Edition***contains the following applications:

-*WordPerfect 10*, Corel's world-famous word-processing program,
providing all the features that users of word-processing products
expect plus the ability to handle graphics, tables, spreadsheet data, charts, and images imported from other software
programs;

-*Quattro Pro 10*, an integrated spreadsheet program with database,
business graphics and Internet capabilities;

-*Corel Presentations 10*, a presentation graphics program for producing
slide shows, overheads, transparencies and prints; and

-*CorelCENTRAL 10*, Corel's personal information manager and calendar
application.

***WordPerfect Office 2002 - Professional Edition*****adds Paradox 10 to the Standard Edition, a powerful data management tool that delivers
advanced features such as the ability to publish a database to the Web. The speech-recognition technology of Dragon
NaturallySpeaking is also
included in the professional edition.



The next version of the WordPerfect Office Suite is slated for release in the spring
of 2003.

**Process Management Solutions**

The iGrafx family of Enterprise Process Management (EPM) tools and services provides
high-value solutions for organizations where
performance management and process improvement are strategic initiatives. With these tools, business managers are able to
visualize their
processes and simulate "what if" scenarios in an effort to improve the overall efficiency and productivity of their organizations.

The following process management  tools are developed and distributed by
Corel:

***iGrafx FlowCharter*****  provides productive and easy-to-use tools for creating process maps, flowcharts, process flows and other
business
diagrams. IGrafx FlowCharter allows users to document even the most complex processes, systems or organization charts in the least
possible
time using intuitive drawing features. It outputs to the Web, presentations or print.

*********iGrafx Process***** builds on the power
of iGrafx FlowCharter, adding '"what-if" modeling capabilities and graphical reports that managers can
use to validate potential changes to business processes in a safe, risk-free environment. iGrafx Process enables the documentation
and analysis
of almost any business, manufacturing or transactional process and enables users to shorten cycle times, optimize resources and
reduce costs.

***iGrafx Process for Six Sigma***** customizes the process documentation, modeling and analysis capabilities of iGrafx Process to the
specific needs
of Six Sigma professionals. When applied as a part of a Six Sigma methodology, iGrafx Process for Six Sigma gives new insights
into business
processes and enables users to reduce time, eliminate risk, and increase the pay back for any Six Sigma project. Seamless
integration with
MINITAB brings a new dimension to Design of Experiments.

***iGrafx IDEF0*****, iGrafx Integrated Definition language 0 (IDEF0) an add-on for iGrafx FlowCharter, enables organizations to
quickly and easily
build IDEF0-compliant diagrams, including FEO (For Exposition Only), text and node tree diagrams, and more. IGrafx IDEF0 and
iGrafx
FlowCharter components can be integrated and output to the Web, print or presentations.

***iGrafx Process Central***** is a team-based collaborative groupware application that provides extensive version control, document
security, query
capabilities and a comprehensive audit capability. Based on industry-standard database platforms, iGrafx Process Central delivers
a
heterogeneous Web-enabled environment in which to share and communicate process and other document types essential to an EPM
knowledge base.



**XML Solutions ****

Leveraging our expertise in open standards, we are using XML and SVG to enhance our
current product offerings and introduce new solutions
that speak directly to the challenges resulting from the proliferation of content, the expansion of Web-based services, and the
increasing
customer demand for information that is instantly available and always up to date.

XML is a language that allows for the exchange of data on the Web and is an emerging
standard for business-to-business e-commerce. Content
management systems support the publishing process from authored document to final output, controlling and tracking the flow of
work and
managing revisions. XML, on the other hand, facilitates the reuse of information across documents and delivery media. As with
other open
standard technologies, XML enables organizations to streamline, automate and manage information flow, eliminating unnecessary
duplication,
reducing costs and improving service levels to customers.

Today, for example, traditional word processors and desktop publishing tools do not
produce XML content that is suitable for cross-media
publishing applications. Our vision is to offer solutions that not only enable non-technical authors within enterprises to create
various types of
content, but also to interact with and share XML content more easily, thereby allowing enterprises to deploy XML content
management
solutions more broadly within their organizations and across many delivery channels.

Incorporating standards based technologies such as XML and SVG into our existing
applications, we will offer products, training and services
that enable companies to leverage their investments in engineering drawings, technical illustrations, schematics and diagrams, and
optimize
them for use in Web-based applications such as parts catalogues, technical documentation, shop-floor viewing, and real-time
monitoring and
control systems. Corel Smart Graphics Studio is one example of how we are building on our core capabilities and developing new
tools to help
enterprise customers fully capitalize on their content assets. Moreover, we are working with partners to implement XML-enabled
e-learning
programs that allow educators to more effectively monitor and test the progress of their students.

The following XML-enabled solutions are developed by Corel:

***Corel XMetaL***** is an XML editing application that enables customers to easily create XML content in a word processor-like
environment. Corel
XMetaL is the only richly customizable XML editor that supports both the W3C standards for customer-defined document type
definitions and
schemas, while outputting valid XML. In February 2003, we will be releasing a new version of Corel XMetaL, delivering four new
applications
that create a platform for an enterprise XML rollout. Comprised of Corel XMetaL Author, Corel XMetaL for ActiveX, Corel XMetaL
Developer
and Corel XMetaL Central, this platform simplifies the process of creating XML content, as well as managing and maintaining an XML
infrastructure. It also enables customers to integrate XML authoring capabilities into any ActiveX-compliant Windows application.

*********Corel Ventura***** is a publishing
application that specializes in the creation of highly formatted business documents. The publishing companion to
Corel XMetaL, it includes XML import and the ability to natively produce PDF documents.

*********Corel Smart Graphics Studio***** is a development platform designed to speed and simplify the creation of SVG-based smart graphics -
enterprise-class, graphically rich Web applications based on XML. Using Corel Smart Graphics Studio, Web designers and developers
can easily
create dynamic, data-driven graphics. These smart graphics enable enterprise and government customers to use visual interfaces to
display the
vital information contained in both their legacy and new Web service systems. Smart graphics applications are being used to create
dynamic
technical graphics for maintenance, repair and overhaul, visual control systems, mapping applications, and custom data
visualizations. We are
currently partnering with solution providers and early adopters, including Ford Motor Company, to pilot and enhance the design
capabilities of
Corel Smart Graphics Studio. Corel Smart Graphics Studio will be available in mid-2003.

**MARKETING**

Advertising, direct marketing and marketing materials are delivered through targeted
programs designed to reach our core customer groups.
These programs include (a) global advertising in trade and industry-specific publications; (b) joint promotions with computer
retailers under
which qualifying resellers and OEMs are reimbursed for certain advertising expenditures; (c) trade show and user group
participation; (d)
partner-focused marketing programs and (e) direct corporate marketing efforts. We have an in-house tactical and strategic
marketing
department which, in conjunction with third-party agencies, is responsible for conceptualizing, producing, placing and monitoring
the
effectiveness of our global ad copy, packaging and promotional material, and public relations programs.

In Q3 2002, we launched an innovative marketing campaign to introduce educators,
students and artists across North America to our portfolio
of graphics solutions. The Digitalism Tour visited schools, festivals, conferences, corporate accounts and special events
throughout the latter half
of 2002, in order to raise awareness of our offerings in the graphics arena. Featuring a mobile, interactive art studio and
exhibition, The
Digitalism Tour showcased our graphics solutions to students, educators and artists across North America. The tour was supported
by partners
including Intel, Sony, Wacom, Alias/Wavefront and The Art Institutes who provided equipment, financial support and presenters. The
tour ran
from July to January 2003.

**SALES AND DISTRIBUTION**

Our sales efforts are directed toward several customer types including consumers,
business customers, individuals working in government and
academic institutions, channel partners and OEMs. Our sales staff seek to build long-term relationships with customers and end
users of our
products. We operate as one global operating segment and in addition to the OEM channel, we have three major geographic sales and
marketing areas: North America, Europe-Middle East-Africa and the rest of the world. Note 14 to the Consolidated Financial
Statements (see
Item 8) sets forth financial information by product group, sales channel and geographic region.****

End user sales activities cover all of our products and target end users who make
individual buying decisions for the computers they use at work
or at home. These activities include developing and administering reseller relationships, channel marketing and promotions, end
user marketing
programs and seminars, events and product training for resellers.

The corporate licensing unit has responsibility for sales and marketing activities
that target groups of users in all organizations and enterprises.
The unit works directly with these organizations and enterprises, as well as with channel partners such as distributors,
value-added resellers
(VARs) and large account resellers (LARs), to provide complete office productivity solutions to this customer group. The unit's
sales and
marketing activities include providing technical training to channel resellers, and supporting and providing seminars, events and
sales training
for channel partners. The unit also has responsibility for administering the Corel Licence Programs worldwide. Key products for
the corporate
licensing unit are graphics, office productivity, process management and XML-enabled solutions.

The OEM customer unit works with OEMs that pre-install or bundle our software on their
computers or peripheral hardware.

The following discussion outlines specific distribution channels that we
utilize.

**Distributors and Resellers**. We sell our products worldwide to over
160 distributors for resale through software resellers. Distributors include
Ingram Micro, Merisel, Tech Data and Navarre. Resellers include ASAP Software and Software House International. Within the United
States and
Canada, we have sales representatives and support personnel who solicit orders from distributors and resellers, and provide
product training
and sales support. In other countries, our sales personnel provide product training and sales support.

**Licensing.** We have a program designed to make it easier for large or
small organizations to acquire and maintain our products. This program
consists of two separate options. Corel Contractual Licensing offers flexible software acquisition, licensing and Maintenance
options specially
designed to meet the needs of large multinational organizations. Targeted audiences include technology specialists and influential
end users in
large enterprises. Sales efforts and fulfillment are generally co-ordinated through our network of large account resellers. This
option also
provides a site licence option that provides an easy and affordable way for organizations to standardize on a single software
solution. This
option allows organizations to license our software products over a fixed term. The minimum dollar commitment to qualify is
approximately
$25,000 for an entire organization or a defined portion of an organization.

Corel Transactional Licensing offers flexible software acquisition and licensing
options specially designed to meet the needs of small- and
medium-sized organizations. Sales efforts and fulfillment are generally co-ordinated through our network of distributors and
resellers. We also
receive orders for our legacy licence programs, including Corel License Program Universal. Over time, customers will be migrated
to the licence
options depending on their needs.

**Solution Partners.** Our Solution Partners program supports independent
software vendors, consultants, VARs, system integrators, custom
application developers and solution developers, as well as technical support and training organizations. Under this business
partnership strategy,
we provide sales and product information, development services, access to beta software, discounts on our products and dedicated
developer
technical support.

**Approved Service Bureaus.** The Corel Approved Service Bureau Program
supports organizations that output and render files created with our
graphics software applications, including CorelDRAW and Corel Ventura. Under this program, we provide members with product
information,
free priority technical support, referral services through Corel's Bulletin Board service, and customer service and technical
support networks.

**Direct Sales.** We promote some of our products through direct sales
techniques aimed at existing and potential users of our products.
Fulfillment of product to the end user is either by direct shipment or through resellers.

**Online Distribution.**We offer our products online through third-party
Web sites, including buy.com and egghead.com, as well as through our
own eStore at www.corel.com.****

**Original Equipment Manufacturers (OEM) Channel.** We market certain
productivity, graphics and consumer software under licence
agreements with OEMs that grant the OEMs the right to distribute copies of our products with their OEM hardware products. We have
OEM
agreements covering one or more of our products with most major PC and peripheral hardware vendors, including AGFA, Canon, Compaq,
Cybermax, Dell, Epson, Gateway 2000, Hewlett-Packard, Packard Bell, PC Chips, Quantex and Vobis.

In the latter half of 2002, we noted a shift in the industry as more hardware vendors
sought cost-effective alternatives that allowed them to
protect their margins and offer customers established software solutions with strong brand recognition. As a result of this shift
and our strong
relationships with leading OEMs, we were able to secure new bundling arrangements for WordPerfect Productivity Pack, replacing
Microsoft
Works on certain computer systems from Hewlett-Packard, Dell, Sony and Gateway. Our long-standing relationships with OEMs are
instrumental in exposing our product lines to new audiences of potential users. These bundling agreements lay the foundation for
future
revenue streams since users, after being exposed to an OEM version of our product, may choose to upgrade to future
versions.

**Partners and Distribution Channels.** Channel partners include
distributors, retail partners, Value Added Resellers and large-account resellers.
Partnerships play a central role in our strategy to address both existing and future customers. In 2002, we sharpened our focus on
this area of
the business, organizing our sales and marketing efforts to better support both our consumer and enterprise-focused channel
partners.

To further strengthen our relationships with our partners and key distributors, we
appointed two new senior executives - David Roberts and
John Deegan - both former Microsoft executives with established relationships within the enterprise and channel communities. These
appointments are consistent with our commitment to leverage partnerships as a key route to market for our products and
solutions.

******GENERAL AND
ADMINISTRATIVE,** **SUPPLY AND MANUFACTURING**

Supporting functions responsible for managing business operations and overall business
planning include corporate functions such as finance,
administration, human resources, legal and information technology.

The principal materials and components used in our products include computer media and
documentation. We are often able to acquire
component parts and materials on a volume discount basis.

We contract all of our manufacturing activity to third parties. Manufacturing involves
the duplication of computer media and user manuals,
assembly of components, spot testing of the product and final packaging, all in accordance with our specifications. We believe
there is an
adequate supply of and source for the raw materials used in our products, and that multiple sources are available for media
duplication, manual
printing and final packaging. Our products are generally shipped as orders are received and accordingly, we have historically
operated with little backlog.

******RESEARCH AND
DEVELOPMENT**

The software industry is characterized by frequent changes in technology and user
preferences, which require constant attention to software
technology trends, shifting consumer demand and rapid product innovation. The pace of change has recently increased due to the
burgeoning
interest in the Internet, wireless networking and new programming languages and platforms, such as XML and Microsoft's .NET
platform.

Accordingly, we must be able to provide new software products, and modify and enhance
existing products on a timely and continuing basis to
be competitive. We employ a strategy of internally developing software, contracting for the development of certain products by
third parties
and acquiring or licensing technology that will, in most cases, be enhanced by us. We believe that our ability to maintain
technological
competitiveness will depend in large part upon our ability to successfully enhance our existing products, develop new products on
a timely basis
and acquire or license complementary technologies and products in a timely manner. We strive to become as informed as possible at
an early
stage about changing usage patterns and hardware advances that may affect software design.

Our research and development expenses were $30.0 million, $27.2 million and $43.9
million in fiscal 2002, 2001 and 2000, respectively.

**CUSTOMERS**

We develop, license, sell and support software applications for consumers, business
customers, and individuals employed in government
departments and academic institutions. Our applications are built to run on most industry computers, including those produced by
International
Business Machines Corporation (IBM) and Apple Computer, Inc. Customers obtain our products primarily through distributors,
resellers and
OEMs. Note 14 to the Consolidated Financial Statements (see Item 8) identifies customers that represent more than 10% of Corel's
revenues.

******PRODUCT
SUPPORT**

We provide product support options to meet the needs of users of our products. The
majority of in-house support personnel are located in
Ottawa, Canada and Maidenhead, England. Certain support is also provided by qualified third-party support organizations in
accordance with
our specifications for quality and timeliness of the support response. We generally hire individuals with product expertise and
provide them with
the productivity tools, continuous product education, training and consistency processes to deliver quality support for our
products. Coverage
options currently range from standard, no-charge toll telephone support to fee-based offerings, providing unlimited toll-free
telephone and
technical support for all our products, 24 hours a day, seven days a week.

Users have access to our Knowledge Base, a database of technical support articles that
is updated regularly with useful information regarding
our products. We provide access to the Knowledge Base, technical support information and frequently asked questions and answers
via our
Web site (*www.corel.com*). We maintain an Internet news group to provide users with a mechanism to provide feedback as
well as receive
technical updates and notes. Additionally, up-to-date information about common issues and tips and tricks is stored on our Web
site.

Our Customer Service representatives, including a number of third-party organizations,
answer questions about product specifications and
pricing, sell our products, and issue replacement media and documents.

**********COMPETITION**

Competition and channel compression within distribution channels may adversely affect
our business. We compete with other software vendors
for access to distribution channels, and the attention of customers at the retail level and in corporate accounts. Other
competitors with greater
market share and significantly greater financial resources may command the attention of the retail accounts, the corporate market
and OEMs. In
order to compete for distribution channel space, we must offer compelling reasons to distribute our products at a reasonable price
and offer
compatibility with competitive products. We must also use innovative marketing campaigns to compel the distributor to carry our
products.
Inability to maintain distribution channel space could have a material adverse effect on our business, results of operations and
financial condition.

The marketplace is intensely competitive and rapidly changing, and we may not be able
to compete successfully in the future. Many of our
current and potential competitors have larger technical staffs, more established and larger marketing and sales organizations, and
significantly
greater financial resources. The rapid pace of technological change constantly creates new opportunities for existing and new
competitors, and
can quickly render existing technologies less valuable. As the market for our products continues to develop, additional
competitors may enter
the market and competition may intensify. Inability to compete in any of the following areas could have a material adverse effect
on our
business, results of operations and financial condition: product performance, product features, ease of use, reliability, hardware
and competitor
compatibility, brand name recognition, product reputation, pricing levels of advertising, availability and quality of customer
support, and
timeliness of product upgrades.

Our consumer-oriented software products face competition from companies, including
Adobe Systems Incorporated, JASC Software Inc.,
Macromedia Inc., and Microsoft. Our competitors in the graphics marketplace include Adobe, Macromedia and Apple Computer, Inc.
Within
the office productivity arena, our primary competitors include Microsoft, IBM (Lotus Development Corporation) and Sun
Microsystems, Inc.

As we broaden our offerings in the XML Solutions category, we face competition from
companies including Microsoft and Adobe, as well as
Arbortext and Altova. In addition, as we expand our presence in the enterprise market with our process management offerings, we
may face
competition from companies such as IDS Sheer, Casewise and ProcessModel.

**PROPRIETARY RIGHTS**

We regard certain features of our internal operations, software and documentation as
proprietary, and rely on contract, patent, copyright,
trademark, trade secret laws and other measures to protect our proprietary information. We believe, however, that due to the rapid
pace of
innovation within our industry, factors such as technological expertise and creative skills of our personnel are more important to
establishing
and maintaining technological leadership than are the various legal protections of our technology.

We provide our products to end users under non-exclusive licences, which generally
have a perpetual term, with the exception of academic
licences, and are transferable provided the transferor erases or destroys its copy of the product. In special circumstances, we
make source code
available for certain products. The provision of source code may increase the likelihood of misappropriation or other misuse of
our intellectual
property. We license our products pursuant to "shrink wrap" and/or "click wrap" licences that are not signed by licensees and
therefore may
be unenforceable under the laws of certain jurisdictions. In addition, the laws of some foreign countries do not protect our
proprietary rights to
the same extent as do the laws of Canada and the United States.

From time to time, we receive notices from third parties asserting that we have
infringed their patents or other intellectual property rights. We
may find it necessary or desirable in the future to obtain licences from third parties relating to one or more of our products, or
relating to
current or future technologies. There is a risk that third parties will assert infringement claims against us in the future with
respect to current or
future products, and that any such assertion will require us to enter into royalty arrangements or result in costly litigation. As
the number of
software products in the industry increases and the functionality of these products further overlap, we believe that software
developers may
become increasingly subject to infringement claims. Any such claims, with or without merit, can be time-consuming and expensive to
defend.

**EMPLOYEES**

As of February 12, 2003, we employed approximately****750 people on a
full-time basis. Our success depends to a significant extent upon the
performance of our executive officers and key technical, sales and marketing personnel. We believe that our future success will
also depend in
large part on our ability to attract and retain highly skilled technical, managerial, and sales and marketing personnel.
Competition for employees
is intense in the software industry. To date, we believe we have been successful in our efforts to recruit qualified employees,
but there can be
no assurance that we will continue to be as successful in the future. None of our employees are subject to collective bargaining
agreements.
Management believes relations with employees are favorable.

**Item 2.  Properties**

The following chart outlines significant properties that we currently lease. In
addition to these, there are smaller office spaces leased in various
countries around the world that perform sales and marketing functions. Management believes that these facilities will be adequate
for our
immediate needs and that additional or substitute space is available if needed to accommodate expansion. We also have a total of
approximately 20,000 square feet in Toronto, Canada, Dublin, Ireland and Woking, England that is currently vacant and we are
seeking
subtenants to take over the leases that expire from 2003 to 2025.

|                     |                          | **********Area**     | **Expiration**
|-------------------- | ------------------------ | -------------------- | --------------
|**Location**         | **Purpose**              | **(in square feet)** | **year**      
|Ottawa, Canada       | Corporate head office    | 177,000              | 2004          
|Burnaby, Canada      | Sales and development    | 10,697               | 2006          
|Dallas, Texas        | Sales and marketing      | 13,904               | 2005          
|Petaluma, California | Sales and marketing      | 2,363                | 2004          
|Portland, Oregon     | Sales and development    | 10,908               | 2006          
|Annapolis, Maryland  | Sales and development    | 10,588               | 2005          
|Maidenhead, England  | Sales and administration | 10,500               | 2015          
|Munich, Germany      | Sales and administration | 7,261                | 2005          
|Tokyo, Japan         | Sales and administration | 1,672                | 2004          

**********Item 3.  Legal Proceedings**

On March 13, 2000, Corel was served with a complaint filed against it and Dr. Michael
C.J. Cowpland by Plaintiffs Anthony Basilio and Fred
Spagnola in the U.S. District Court for the Eastern District of Pennsylvania. The Complaint was filed on behalf of all persons who
purchased or
otherwise acquired Corel common shares between December 7, 1999 and December 21, 1999 (the "Class Period"). The Complaint alleges
that
the defendants violated various provisions of U.S. federal securities laws, including Section 10(b), Section 20(a) and Rule 10b-5
of the Securities
Exchange Act of 1934, by misrepresenting or failing to disclose material information about Corel's financial condition. The
Complaint seeks an
unspecified amount of money damages. Further complaints were filed thereafter, each making similar allegations and referencing the
same
Class Period as the initial claims. The Court has consolidated all pending cases in the Eastern District of Pennsylvania. An
Amended Consolidated
Complaint was served on or about August 14, 2000, which claims an expanded Class Period, from December 7, 1999 to March 20, 2000
(inclusive), and contains several new allegations. On or about July 6, 2001, Corel and co-defendant Cowpland filed their answers
to the
amended Complaint, denying all liability to Plaintiffs and asserting various affirmative defences. By order dated February 1,
2002, the Court
granted Plaintiffs' motion for class certification and on May 3, 2002, approved the expanded Class Period as claimed in the
Amended
Consolidated Complaint. Corel strongly disagrees with the claims made against it in the Complaint and intends to continue its
vigorous defence
of this action. This case is currently in the discovery phase. The trial date for this action has not yet been set.

In January 2002, Corel was notified of a claim filed December 28, 2001, which also
names Micrografx (acquired by Corel in 2001) and 92 other
defendants, by The Massachusetts Institute of Technology ("MIT") and Electronics for Imaging, Inc. ("EMI") in the U.S. District
Court, Eastern
District of Texas, for alleged patent infringement of U.S. Patent No. 4,500,919 relating to a system and method of color
management. The
subject patent expired in May 2002. Plaintiffs filed an amended complaint on April 25, 2002 (the "Complaint"), increasing the
number of
defendants to 214. The defendants include numerous large corporations, including Microsoft, IBM, Dell, and Nikon. The Complaint
seeks
injunctive relief and an unspecified amount of money damages. Both Corel and Micrografx have licensed from Eastman Kodak ("Kodak")
a
color management system included in the products identified in the Complaint, and as such, Corel has claimed indemnity from Kodak
for losses
arising from the Complaint, including for those claims of co-defendants who are claiming indemnity from Corel. This case is
continuing in its
discovery process. Corel strongly disagrees with the Plaintiffs' claims and intends to vigorously defend this matter.



In February 2002, Corel was served with a claim filed November 2, 2001 by Heidelberger
Druckmaschinen AG, in the U.S. District Court,
Southern District of New York, for alleged infringement of U.S. Patent No. 4,393,399 relating to a process for electronic color
retouching. The
subject patent expired July 12, 2000. The Complaint seeks an unspecified amount of money damages. This case is in the discovery
phase.
Management strongly believes that the claims made by Plaintiff are without merit and will continue to vigorously defend the
action.

Corel is a party to a number of additional claims arising in the ordinary course of
business relating to employment, intellectual property and
other matters. Based on its review of the individual matters, Corel believes that such claims, individually, will not have a
material adverse effect
on its business, financial position or results of operations but, in the aggregate, may have a material adverse effect on its
business, financial
position or results of operations. Such possible effect cannot be reasonably estimated at this time.

**Item 4.  Submission of Matters
to a Vote of Security Holders******

None.

**********PART II******

**Item 5. Market for the Registrant's Common Equity and Related Stockholder
Matters**

**PRICE RANGE OF COMMON SHARES**

Our common shares are traded on the Toronto Stock Exchange (TSX) under the symbol COR
and in the over-the-counter market on the
NASDAQ National Market under the symbol CORL. The following table sets forth the range of quarterly high and low closing sale
prices of the
common shares in CDN$ on the TSX and in US$ on the NASDAQ National Market within the two most recent fiscal years.

|                               |  | **FISCAL 2002**    | **** | **FISCAL 2001**
|------------------------------ |  | ------------------ | ---- | ---------------
|                               |  | **High**           |      | **Low**        
|**The Toronto Stock Exchange** |  | (Canadian dollars)
|First Quarter                  |  | $   3.93           |      | $   2.27       
|Second Quarter                 |  | 2.67               |      | 1.70           
|Third Quarter                  |  | 2.07               |      | 1.03           
|Fourth Quarter                 |  | 1.89               |      | 1.03           
|**NASDAQ National Market**     |  | (US dollars)      
|First Quarter                  |  | $   2.50           |      | $   1.40       
|Second Quarter                 |  | 1.65               |      | 1.10           
|Third Quarter                  |  | 1.34               |      | 0.67           
|Fourth Quarter                 |  | 1.21               |      | 0.64           

As of February 12, 2003, there were 1,642 holders of record of common shares. A
substantial number of our common shares are held by
depositories, brokerage firms and financial institutions in "street name." Based upon the number of annual reports and proxy
statements
requested by such nominees, management has determined that the****number of beneficial holders of Common Shares
approximates 90,000 holders.

On February 3, 2003 we received a NASDAQ Staff Determination that our common stock had
not maintained the minimum bid price
requirement for continued listing on The NASDAQ National Market. As a result, we were given until 4:00 pm on February 10, 2003 to
indicate
our desired course of action. We could apply to transfer our securities to The NASDAQ SmallCap Market, or we could appeal Staff's
determination to a Listing Qualifications Panel. The letter indicated that if we do not transfer or appeal, our securities will be
delisted from The
NASDAQ National Market on February 12, 2003. We decided that the best course of action would be to request a hearing, and on
February 7,
2003, we had completed a press release and Request for Hearing, both of which were prepared for issuance that day. Prior to
issuing the
release and submitting the Request for Hearing, we were advised by The NASDAQ Listing Qualifications department on that day to
suspend
these actions until at least February 14, 2003, as it is expected that the current NASDAQ proposal to the SEC to extend the
minimum bid price
rule period may be approved in the very near future, rendering the notice of delisting and its requirements moot.

**LIMITATIONS AFFECTING SECURITY HOLDERS**

There is no law or government decree or regulation in Canada that restricts the export
or import of capital, or affects the remittances of
dividends, insurance or other payments to a non-resident holder of common shares.

**DIVIDEND POLICY**

We have neither declared nor paid cash dividends on our common shares since our
inception and we do not anticipate paying any dividends in
the foreseeable future, but intend to retain future earnings for reinvestment to finance the growth of our business. Any future
determination to
pay dividends will be at the discretion of our Board of Directors. There is no Corel policy with regards to the timing or amount
of common share
repurchases and cancellation. There are no plans to repurchase and cancel common shares at this time.

**********

******Item 6.
Selected Financial Data****

The Statement of Operations data set forth below with respect to the years ended
November 30, 2002, 2001 and 2000, and the balance sheet
data as at November 30, 2002 and 2001, are derived from the audited financial statements of Corel, included in Item 8 hereof, and
should be
read in conjunction with those financial statements and the notes thereto. The balance sheet data as at November 30, 2000, 1999
and 1998
are derived from audited financial statements of Corel not included in this Annual Report on Form 10-K. The Statement of
Operations data set
forth below with respect to the fiscal years ended November 30, 1999 and 1998 are derived from audited financial statements not
included in
this Annual Report on Form 10-K. All amounts are in United States dollars.

|                                            | **Year ended November 30**           
|------------------------------------------- | -------------------------------------
|                                            | **2002**                             
|                                            | (in thousands, except per share
data)
|**Canadian GAAP**                           |                                      
|                                            |                                      
|Revenue                                     | $126,701                             
|                                            |                                      
|Income (loss) from continuing operations(1) | (96,424)                             
|                                            |                                      
|Income (loss) from continuing operations    |                                      
|per share (fully diluted)(1)                | (1.09)                               
|                                            |                                      
|Cash and short-term investments             | 75,826                               
|                                            |                                      
|Working capital                             | 63,457                               
|                                            |                                      
|Total assets                                | 130,927                              
|                                            |                                      
|Novell obligations                          |                                      
|                                            |                                      
|Shareholders' equity                        | 92,130                               
|                                            |                                      

|                                         | **Year ended November 30**           
|---------------------------------------- | -------------------------------------
|                                         | **2002**                             
|                                         | (in thousands, except per share
data)
|**US GAAP**                              |                                      
|                                         |                                      
|Revenue                                  | $126,701                             
|                                         |                                      
|Income (loss) from continuing operations | (93,238)                             
|                                         |                                      
|Comprehensive (loss) income(1)           | (93,569)                             
|                                         |                                      
|Income (loss) from continuing            |                                      
|operations per share (diluted)(1)        | (1.05)                               
|                                         |                                      
|Cash and short-term investments          | 75,826                               
|                                         |                                      
|Working capital                          | 63,457                               
|                                         |                                      
|Total assets                             | 129,802                              
|                                         |                                      
|Novell obligations                       |                                      
|                                         |                                      
|Shareholders' equity                     | 91,005                               
|                                         |                                      

(1)
Fiscal 2002 includes $49.9 million in impairment of goodwill and $17.9 million in write-down of acquired technology. Fiscal 2000
includes a
$14.6 million gain on investments. Fiscal 1999 includes $6.4 million in settlement proceeds. Fiscal 1998 includes $15.9 million in restructuring charges.

See Item 8 - Financial Statements and Supplementary Data, and the Notes to Corel's
Consolidated Financial Statements, Note 15 - Significant
Differences Between Canadian and United States GAAP for an explanation of differences.

**Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations******

**OVERVIEW**

Despite the progress we made in advancing our strategy, our financial performance in
2002 was adversely impacted by the persistently soft
economy and the associated decline in IT spending. Overall, revenues for fiscal 2002 were $126.7 million, down 6.0% from the prior
year. As a
result of this decline and corresponding decrease in our share price, we reviewed the value of our goodwill and acquired
technology. Based
upon this review, our market capitalization and independent valuations, we incurred a $67.7 million non-cash charge for the
write-down of
intangible assets.  The write-downs related to intangible assets associated with our acquisition of Micrografx and SoftQuad.
Despite the
challenges posed by the uncertain economic climate, we remained focused on executing our strategy and made the investments
necessary to
support our long-term growth.

Our business strategy is to leverage our expertise in content creation and open
standards such as XML (Extensible Markup Language) to deliver
solutions that allow customers to create, exchange and interact instantly with visually rich content. Using Corel's solutions,
customers have
access to data which is relevant, accurate and up to date, saving them time, reducing costs and giving them a competitive
advantage.

We develop, manufacture, license, sell and support software that is grouped into four
main solution categories: Graphic Solutions, Office
Productivity Solutions, XML Solutions and Process Management Solutions. As customer needs evolve, we are developing solutions that
enable
customers to create, deploy and interact with content across multiple delivery channels.

On January 23, 2001, we announced a corporate strategy designed to reposition us for
long-term growth and profitability. We began with a
renewed emphasis on fiscal discipline that focused on preserving our existing office productivity business, while growing our
graphics revenues
through the introduction of new products aimed at creative professionals. The cost reductions achieved in fiscal 2001 provided
evidence of our
success in injecting the necessary financial discipline into our operations. Next, we focused on growth through strategic
investments. The
acquisitions of Micrografx (October 2001) and SoftQuad (March 2002) provided access to complementary technologies, technical
expertise, an
expanded customer base, and increased access to European markets. In 2003, we will continue to balance our investments in research
and
development with our incoming revenues to ensure that we address the evolving needs of the market while running the business
profitably.

On October 29, 2001, we acquired Micrografx for $33.8 million consisting of shares and
cash. Micrografx developed Enterprise Process
Management (EPM) and graphics software, solutions and services. The technology acquired from Micrografx will aid in the
development of new
products that enable customers to create graphic rich content that can be output easily and simultaneously to multiple channels,
including the
Web. Upon close, approximately 6.9 million common shares were issued to former Micrografx shareholders for a value of $16.0
million and the
balance of the purchase price was paid in cash in October 2002. Through this acquisition, Corel gains access to a new client base
focused on
the delivery of EPM tools. With the support of our partners, we are using these solutions to increase our penetration in
enterprise accounts. Our
results from operations presented reflect the combined revenues and expenses from the date of acquisition, consequently fiscal
2001 contains
only one month of Corel and Micrografx operations.

On March 15, 2002, we acquired SoftQuad by issuing 11.1 million common shares. This
resulted in a total purchase price of $18.1 million.
SoftQuad was a developer of XML-enabling technologies and commerce solutions for e-Business.

On November 6, 2002, as part of streamlining our operations we reduced our workforce
by 220 people, or 22%. These changes will result in a
payroll cost reduction of approximately $12.0 million per year on an ongoing basis and resulted in a charge to income of $5.9
million for
redundancy and lease termination charges.

******RESULTS OF
OPERATIONS**

**Fiscal 2002 compared to fiscal
2001**

**Revenue**

Management believes the 5.7% decrease in revenue to $126.7 million in fiscal 2002 is a
result of having the majority of our revenue come from
established products that are in the later stage of their life cycles. As a result, we have taken steps to improve revenue by
acquiring technology
and product lines, giving us access to new enterprise markets. The enterprise market has a longer sales cycle, resulting in slower
growth in our
new markets than the decline we experienced in established markets. We were also negatively impacted by the general economic
conditions
and decline in consumer spending in the U.S.

We provide for estimated future returns, exchanges and price protection. The timing of
establishing the provision and actual usage may vary
according to the respective product's life cycle and/or the amount in inventory in the distribution channel.

******Revenue by product groups**

Revenue from Graphics Solutions (formerly Creative Products) decreased by 10.2% from
fiscal 2001 largely due to the lack of market
acceptance of Mac OS X. There was a decrease in revenue for products that we had developed for this operating software: Painter
and Bryce.
There was also a $6.6 million decrease in revenue from legacy consumer application products that were not actively marketed during
fiscal
2002. However, these declines were offset by a $6.3 million increase in revenues that resulted from products acquired from
Micrografx, such as
Corel DESIGNER and Picture Publisher. Revenue from Graphic Solutions products is expected to remain relatively consistent in
fiscal 2003 with a
small decrease overall as certain unprofitable product lines are dropped.

Office Productivity Solutions (formerly Business Applications) revenue declined 16.9%
from fiscal 2001, as a result of no new releases of
WordPerfect Office. The release of WordPerfect Office 2002 was in the second quarter of 2001 and the next release is scheduled for
the first
half of 2003. The decrease in revenue can also be attributed to a reduction of the number of languages in which WordPerfect is
localized and
the loss of certain retail accounts in the North American market. This decrease was slightly mitigated by the increase in sales
generated by
WordPerfect Family Pack 4, released in the third quarter of 2002, and bundling deals with Dell and Hewlett-Packard. We anticipate
that office
productivity revenue will continue to decline in fiscal 2003 due to the maturity of the product. However, the rate of decline
should be less than
currently experienced due to the release of a new version of WordPerfect Office in the first half of 2003.

Revenue from Process Management Solutions increased by $8.1 million from $0.2 million
to $8.3 million. This increase is the result of a full
year's revenue in fiscal 2002 for the iGrafx line of products versus one month of revenue in fiscal 2001. Revenues from Process
Management
products are forecasted to increase in fiscal 2003 as we increase our focus within this market.

Other product lines, which includes XML Solutions, increased by $1.7 million from $1.5
million to $3.2 million. This increase is a result of
offering new products, mainly XMetaL acquired from SoftQuad, in March 2002. With the recent launch of Corel Ventura, we have
reclassified it
from Creative Products to XML Solutions and adjusted prior years' segmented comparative figures to reflect this reclassification.
Revenue from
XML Solutions is forecasted to increase in fiscal 2003 as we further develop this technology.

**************Revenue by sales channels**

Retail product revenue was down 11.7% from fiscal 2001 as a result of expanding our
focus to direct corporate sales in addition to the retail
channel, and the general economic downturn.

OEM revenue declined 35.2% from 2001 levels as a result of tighter margins being
demanded by our customers as the margins for personal
computers decreased. We have responded to the changing market by partnering with OEMs such as Hewlett-Packard and Dell and
obtaining
revenue through up-sell programs. Revenue from these programs is not included in OEM revenue.

Corporate licence revenue increased by 12.2% as a result of our increased focus on
enterprise accounts and the launch of a new licensing
program in the Summer of 2002.

******Revenue by region**

Revenue in North America decreased by 7.4% from the previous year. There were,
however, significant declines in revenue from our two
flagship products, CorelDRAW and WordPerfect. The decline in WordPerfect is consistent with the revenue patterns typical as a
product nears
the end of its version life cycle and customers begin to anticipate the next release. The first three weeks of the CorelDRAW
Graphics Suite 11
launch were negatively impacted by delays in moving the product through our distribution channel. These issues were subsequently
resolved.

Europe, Middle East and Africa (EMEA) revenue increased by 20.0% as a result of our
increased marketing and sales efforts and the additional
product lines acquired from Micrografx.

Revenue in the rest of the world is mostly from the Latin America and Asia Pacific
regions and was down 30.9%. This was due to the increase
in our focus on the enterprise market which adversely affected the retail market. Future revenue is expected to increase as we
strengthen our
relationships with our distribution partners.

In the fourth quarter of 2002, we realigned our geographic segments to be more
comparable with our competitors. We removed OEM revenue
from traditional geographic regions, as our customers for OEM products are global companies and are not specific to one area.
Comparative
figures have been reclassified accordingly. The decrease in OEM revenue is a result of our adapting to the changing market and
partnering with
OEMs such as HP and Dell, and obtaining revenue through up-sell programs. Revenue from these programs is not included in OEM
revenue as it
can be directly attributed to a specific region.



******Cost of sales and gross profit**

In cost of sales, we included all costs associated with the acquisition of components,
the assembly of finished products, product royalties and
shipping. Costs associated with warehousing are included in general and administrative expenses.

We have historically included the amortization of acquired technology as a component
of cost of goods sold. To make the analysis of our
financial results more comparable with general industry practices, these costs have been reclassified for all periods presented to
depreciation
and amortization expense. After this change, the gross margin for 2002 was 88.5%, up from 86.7% in 2001. Cost of sales declined by
18.7%
from 2001. This is a result of reduced royalty costs from 2001, in particular those associated with graphics products, and the
increase in
corporate licence sales, which require minimal manufacturing costs.

The reduction in royalty costs in 2002 helped to offset transitional costs associated
with the change in our contract manufacturer that occurred
in June 2002. All product manufacturing was relocated from operations based in Canada and Ireland to facilities in the U.S. and
the
Netherlands. This move is expected to improve efficiencies, reduce inventory and better serve our customers. As a result, it is
anticipated that
the costs associated with assembly and manufacturing will decline as a percentage of revenue, with the net effect being a marginal
improvement in the gross profit margin percentage.

******Sales expenses**

Sales expenses include sales staff expenses, sales promotion and advertising expenses,
and technical support costs. The year-over-year increase
of 50.0% is a result of increasing our presence in EMEA and broadening our sales focus to include the enterprise market. Part of
the increase in
sales expenses resulted from an effort to streamline operations that occurred in the Fall of 2002, resulting in a $1.4 million
charge to income.
As a result of these efforts, sales expenses are expected to decrease in 2003 as we harmonize our sales force and business
strategy.

******Marketing
expenses**

Advertising expenses, which include employee expenses, marketing, advertising and
trade show expenses, and agency costs, increased by
28.7% ($5.3 million). The increase was primarily a result of the cost of rebranding efforts that resulted in increased agency
costs. The increase
in the number of products that resulted from the acquisitions of Micrografx and SoftQuad also gave rise to increased marketing and
advertising
expenditures. In addition, marketing expenses increased as a result of the launch of the Digitalism Tour in the latter half of
fiscal 2002. This
program is a customized tractor trailer that visits schools, festivals, conferences, corporate accounts and special events in an
effort to raise
awareness of our Graphic Solutions products with educators, students and artists in North America. Marketing expenses are expected
to remain
consistent or decrease slightly in fiscal 2003, as most of the initial outlay related to the Digitalism Tour has been previously
expensed.

********

******General and
administrative expenses**

General and administrative expenses include expenses associated with human resources,
finance, legal, manufacturing, senior management,
information systems, facilities and corporate governance. General and administrative expenses remained unchanged from 2001.
Included in
fiscal 2001 general and administrative expenses were consulting costs associated with the development of a corporate strategy. Bad
debt
expenses decreased by $2.6 million as a result of improved credit controls. There were further cost savings in fiscal 2002 from
rationalizations
that occurred in the fall of 2001. These savings were off-set by costs associated with the efforts to streamline operations in the
fall of 2002.
These efforts resulted in a $3.4 million charge in the fourth quarter that consisted of $0.6 million in severance and $2.8 million
associated with
charges related to facilities no longer required for operations. We also experienced increases in certain administrative costs
such as corporate
expenses related to acquisitions and business operations.

********

**Research and development expenses**

Research costs are expensed as incurred. Development costs related to software
products developed for sale are expensed as incurred unless
they meet the criteria for deferral under generally accepted accounting principles. Research and development expenses are reported
net of
recorded Canadian investment tax credits.

Research and development expenses increased by $2.8 million (10.4%) as a result of
increased development work required as a result of the
acquisition of Micrografx and SoftQuad. There was also an increase in localization costs resulting from the release of a new
version of
CorelDRAW that is localized into more languages than most of our products.

********

**Depreciation and amortization expenses**

In the third quarter of 2002, we reclassified amortization related to acquired
technology to depreciation and amortization. Comparative
numbers have been reclassified accordingly. Depreciation and amortization increased $6.6 million (48.5%) as a result of the
increase in
technology acquired from Micrografx ($8.8 million) and SoftQuad ($15.3 million). In the fourth quarter of 2002, a review of our
capitalized
technology indicated there was an impairment and consequently certain assets were written down to fair market value (see
Technology write-down below). As a result of this write-down, depreciation and amortization expenses are forecasted to decrease
substantially in 2003.

**Impairment of goodwill**

During the third quarter of fiscal 2002, a review of our current market capitalization
suggested that our goodwill was impaired and that the
carrying amount may not be recoverable. Following this review, we determined that the impairment loss to be recognized was the
full carrying
amount of such goodwill of $49.9 million. This write-off due to impairment was a non-cash charge to income.

******Technology
write-down**

During the fourth quarter of fiscal 2002, a review of our existing and acquired
technology assets suggested that these assets were overvalued.
To determine the appropriate carrying value of the technology, we requested an independent valuator to evaluate the fair market
value of
acquired technology. The valuation suggested that the fair market value was $17.8 million less than the carrying value. As a
result, we reduced
the cost of our acquired technology by $17.8 million to reduce it to the lower of cost or market. This write-down included assets
acquired from
Micrografx ($6.7 million) and SoftQuad ($11.0 million). See Note 4 to the Consolidated Financial Statements (Item 8) for
additional details. This
write-down due to asset impairment was a non-cash charge to income.

******Interest revenue**

Interest revenue, net of expense, declined 67.0% from fiscal 2001. This decline is
primarily attributable to the $45 million decline in cash
available for investment during 2002 (see Liquidity and Capital Resources section for an analysis of use of funds). In addition,
interest rates in
2002 were significantly lower than rates in 2001.****

**Income taxes**

We operate in a number of different countries and consequently, our tax rates are
affected by the profitability of our operations in those
countries. In fiscal 2002, we recorded a tax recovery of $8.6 million on a pretax loss of $103.8 million. The recovery includes
the reversal of
future tax liabilities originally recorded as part of the acquisitions of Micrografx and SoftQuad. The reversal of the liabilities
relates to the write-off of a significant portion of the technology acquired in those acquisitions.

******Fiscal 2001
compared to fiscal 2000**

**Revenue**

We believe the 14.7% decrease in revenue to $134.3 million in fiscal 2001 is partially
a result of focusing on profitability instead of revenue. As
part of our corporate strategy, we moved away from the retail market and instead emphasized corporate sales. Certain
non-profitable product
lines were dropped during the year. WordPerfect was not localized in as many languages as it had been in the past. This resulted
in a reduction
in expenses which improved profitability while reducing revenue. We provide for estimated future returns, exchanges and price
protection. The
timing of establishment of the provision and actual usage may vary according to the respective product's life cycle and/or the
amount of
inventory in the distribution channel.

**Revenue by product
groups**

Revenue from Graphic Solutions (formerly Creative Products) remained relatively
constant, showing a 2.6% decline from fiscal 2000. During the
year, a number of new Creative Products were released: CorelDRAW ESSENTIALS, a software package for graphics users combining the
functionality of CorelDRAW 9 and Corel PHOTO-PAINT 9; Corel GRAPHICS SUITE 10, a creative tool for the Mac environment; and the
entire
procreate line of products. These releases helped maintain revenue in a competitive market during an economic downturn.

Office Productivity Solutions (formerly Business Applications) revenue declined 25.2%
as a result of a change in focus for business applications.
WordPerfect Office 2002 was released in the second quarter of 2001 and was not localized into as many languages as was done
historically.
This resulted in decreased revenues in many foreign jurisdictions. A decision to not reduce prices and a focus on profitable
products resulted in
a decline in revenues. However, expenses declined in greater proportion than the decline in revenues. The global economic downturn
experienced in 2001 also negatively affected business application revenues.

Other product lines revenue declined 51.6% as Corel LINUX OS was exclusively licensed
for distribution to a third party in August 2001,
resulting in obsolescence of the product line.

******Revenue by
sales channels**

Retail product revenue was down 2.8% from fiscal 2001 as a result of the general
downturn in the economy.

OEM revenue declined 34.9% from 2000 levels as a result of the change in our focus and
the general economic downturn. As our product mix
changes, product offerings for OEM become limited. OEM offers high volume, low cost products, a market we are moving away from
with
WordPerfect Office 2002 not being offered as an OEM product. With the downturn in the economy, OEM partners have looked to ways of
cutting costs of products, resulting in a decrease in demand for our products by OEMs.

Corporate licence revenue was down 24.7% as a result of corporations increasing the
length of their upgrade cycles and thereby not upgrading
their licences to the current version of WordPerfect. Also, increased competition in the legal and government market negatively
affected
corporate licensing sales.

**Revenue by region**

The regional revenue mix did not change significantly in fiscal 2001 from fiscal 2000.
North American revenue declined in proportion to the
general decline in revenue as a result of the general decline in the economic environment.

EMEA revenue was down 15.9% as a result of us not localizing as many of our products
as we did in the past. Revenue in EMEA is expected to
increase in fiscal 2002 as a result of a significant increase in our operating infrastructure in there.



Revenue in the rest of the world was down 18.1%, due primarily to changing our product
strategies and from not localizing WordPerfect Office
2002 into as many languages as was done historically.

**Cost of sales and gross profit**

In cost of sales, we include all costs associated with the acquisition of components,
the assembly of finished products, product royalties and
shipping. Costs associated with warehousing are included in selling, general and administrative expenses.

We have historically included the amortization of acquired technology as a component
of cost of goods sold. To make the analysis of our
financial results more comparable with general industry practices, these costs have been reclassified for all periods presented to
depreciation
and amortization expense. Gross profit as a percentage of revenue increased 14.0% as a result of improved inventory management and
purchasing techniques. These process changes, such as building to requirements instead of building to sales forecast, resulted in
fewer charges
to cost of sales for obsolete products. The improved cost of sales can also be attributed to a significant reduction in the amount
of inventory on
hand as well as in the distribution channel.

******Sales
expenses**

Selling expenses increased by $8.8 million (43.6%) as a result of the expenses
incurred to support the release of products supported by the Mac
OS X platform. This increase is also a result of the increase in sales staff and consulting expenses.

**Marketing expenses**

Marketing expenses, which include all marketing, advertising and trade show expenses,
decreased by 44.8% as a result of the cost-reduction
plan implemented in fiscal 2000. During fiscal 2001, we had a more focused marketing strategy, resulting in advertising dollars
being spent in
areas that would provide the best benefit for the cost. We also reduced the number of trade shows we attended, which further
reduced
advertising expenses.

**General and administrative expenses**

General and administrative expenses declined by $31.3 million (47.8%) as a result of
the cost-cutting plan implemented in the first half of fiscal
2000. This decrease was partly offset by increases of approximately $4.0 million in consulting fees that resulted from development
of our
corporate strategy. Additional non-recurring charges of approximately $1.5 million that occurred from the restructuring of our
business further
offset the reduction in general and administration expenses.

**Research and development expenses**

Research costs are expensed as incurred. Development costs related to software
products developed for sale are expensed as incurred unless
they meet the criteria for deferral under generally accepted accounting principles. Research and development expenses are reported
net of
recorded Canadian investment tax credits.

Research and development expenses declined $16.7 million (38.1%) as a result of the
cost-cutting plan implemented in the first half of fiscal
2000. As noted previously, one such initiative was the decreased localization of WordPerfect Office 2002.

******Depreciation
and amortization expenses**

Depreciation and amortization increased $2.3 million (20.6%) as a result of the
cost-cutting plan implemented in the first half of fiscal 2000.
There was a decrease in capital asset additions of $11.7 million, excluding our acquisition of Micrografx capital assets in

October 2001.

******Interest
revenue/expense**

Interest revenue consisted primarily of interest earned from the investing of our
funds (cash and cash equivalents, restricted cash and short-term
investments) resulting from Microsoft's investment in Corel in October 2000. Interest expense in fiscal 2000 related to Novell
obligations for the
acquisition of the WordPerfect technology from Novell, Inc. The obligation was repaid during fiscal 2001.

**Income taxes**

We operate in a number of different countries and consequently, our tax rates are
affected by the profitability of our operations in those
countries. In fiscal 2001, we recorded a tax expense of $4.0 million on a pretax loss of $2.8 million. The tax expense primarily
related to
withholding tax on income from foreign jurisdictions and income tax from prior year reassessments.

******LIQUIDITY AND
CAPITAL RESOURCES**

As of November 30, 2002, our principal sources of liquidity included cash and cash
equivalents and short-term investments of $75.8 million
($103.0 million in 2001), and trade accounts receivable of $20.0 million ($18.7 million in 2001). In addition, at November 30,
2002, only $1.6
million of cash was restricted in use as security against certain corporate financial obligations compared to $19.4 million of
cash at November
30, 2001, as the $16.3 million held in trust as a requirement of the participation rights issued in the acquisition of Micrografx
was paid out to
former Micrografx shareholders in October 2002.

Cash used in operations was $19.7 million for fiscal 2002 compared to cash provided by
operations of $15.1 million for fiscal 2001. The
decrease of $34.9 million was primarily due to planned increases in sales and marketing expenses in 2002 and lower overall
revenues. While our
loss increased from $7.3 million in 2001 to $96.4 million in 2002, $67.7 million of the current loss resulted from write-downs of
goodwill and
technology which had no impact on cash.

Trade accounts receivable, net of provisions, remained fairly constant from 2001 to
2002, increasing by only $1.3 million to $20.0 million at the
end of 2002. Accounts payable and accrued liabilities decreased to $22.6 million at November 30, 2002 from $27.9 million at
November 30,
2001.  The higher balance in 2001 reflected the assumption of Micrografx accounts payable and accrued liabilities, as the
acquisition of
Micrografx closed on October 30, 2001 adding a significant amount to our 2001 year end payable balances.

The only financing activity in 2002 was the issuance of common shares under our
employee stock option plan for proceeds of $0.1 million.
Financing activities used $9.7 million in 2001, consisting primarily of the $10.0 million used to repay the Novell debt. Repayment
of Novell
obligations was based on an agreement that we reached with Novell in fiscal 2000 whereby the balance due was fixed and was repaid
in three
equal payments of $5.0 million.

****Investing activities provided
$13.6 million in 2002 compared to the use of $107.9 million in fiscal 2001. The cash was provided through the
redemption of short-term investments. In 2002, we continued to reduce our spending on capital assets, with 2002 purchases totaling
$3.2
million compared to $7.8 million in 2001. The other significant use of cash in 2002 was the $3.6 million of costs relating to
SoftQuad. The $3.6
million consists of closing costs plus the net amount of obligations assumed with the acquisition of SoftQuad . Significant uses
of cash in fiscal
2001 were our investment of $78.1 million in short-term investments and the $16.3 million of funds placed in trust to satisfy the
requirements
of the participation rights issued as part of the acquisition of Micrografx. The $16.3 million was fully paid out to former
Micrografx shareholders
in the fourth quarter of 2002.

At November 30, 2002, our capital resource commitments consisted primarily of lease
arrangements for office space and corporate sponsorship
of sporting venues. No significant commitments exist for future capital expenditures. We believe available balances of cash and
cash equivalents
and short-term investments are sufficient to meet our working capital requirements for the foreseeable future.

******FUTURE
PAYMENTS UNDER LEASE AND SPONSORSHIP CONTRACTS**

See Note 7 to the Consolidated Financial Statements (Item 8).

****

**RISKS AND UNCERTAINTIES**

We are optimistic about our long-term prospects; however, the following risks and
uncertainties among others, could have an effect on future
operating results.

We incurred losses in each of the past three fiscal years. In order to sustain
long-term profitability with appreciation of the stock value, our
revenues need to increase along with continued improvements to our cost controls. There are many factors that will affect demand
for our
product and future revenues; general economic conditions and corporate capital spending, PC unit sales, price competition,
exchange rate
fluctuations, channel compression within distribution channels, pace of technological change, competition with greater resources.
A number of
these factors have been discussed earlier in this Form 10-K.

The demand for our products is affected by various factors, many of which are beyond
our control. For example, overall general economic
conditions have not generally improved and this may affect the overall rate of capital spending by our corporate customers. If
general economic
conditions do not improve, demand for our products may suffer and operating results may not be as expected.

Our share of the market for each of our Graphic Solutions and Office Productivity
solutions has declined in the past three fiscal years.Continued
loss of market share could occur if users of our graphic solutions and office productivity solutions elect not to upgrade to newer
versions of our
applications. In addition, the introduction of new graphics, XML and process management solutions planned for the coming year may
fail to
achieve a market share sufficient to offset the aforementioned losses.

Many of our current products are used principally on personal computers
(PCs).Accordingly, our current revenue growth is tied to the sales
demand for PCs.A reduction in this demand may result in lower revenues. Any slowing of growth of PC unit sales may adversely
affect our
revenue growth.

Pricing pressures continue to intensify in the PC software applications market.
Corporate licensing, discount pricing for large volume distributors
and retailers, product bundling promotions and competitive upgrade programs are forms of price competition that may become more
prevalent.
In addition, enterprise-wide versions of products are generally priced lower per user than individual copies of the same products.
We also
compete with companies that produce standalone graphics and desktop publishing applications that might serve a specific need of a
user or
class of users at a price below that of our products. Reductions in the prices of our products could result in the lower revenue
and reduced
profit margins.

Our revenues and expenses are denominated in different currencies and are therefore
subject to exchange rate fluctuations. A substantial
portion of our revenues and local operating expenses in Europe are in euros. As a result, we are at risk from exchange rate
fluctuations
between the euro and the United States dollar.

We face risks in doing business in foreign countries that could adversely affect our
revenues and profitability. Currently, we market our products
in more than 60 countries. We anticipate that sales outside of North America will continue to account for a significant portion of
total sales.
These sales are subject to risks including imposition of government controls, export licence requirements, restrictions on the
export of technology,
political instability, trade restrictions, changes in tariffs, differences in copyright protection and difficulties in managing
accounts receivable.

Approximately 50% of our sales for the past two fiscal years were made in the United
States. As a result, adverse developments to the United
States economy could impact demand for our products and have a material adverse effect on revenues and profitability.

Our success depends to a significant extent on the performance of our executive
officers and key technical and marketing personnel. The loss of
certain key employees could have a material adverse effect on our ability to develop or sell products. We believe that our future
success will
depend in large part on our ability to attract and retain highly skilled technical, managerial, and sales and marketing personnel.
There can be no
assurance that we will be successful in attracting and retaining these personnel.

It is possible we could become a passive foreign investment company, or PFIC, for
United States federal income tax purposes, which could result
in negative tax consequences to our shareholders.The PFIC determination is a calculation made annually on the basis of facts and
circumstances
that may be beyond our control (including fluctuations in the market value of our stock and the market value of operational
assets).We have
not made a determination of our possible status as a PFIC and we cannot assure you that we would not be considered a PFIC for this
year or
future years.

******CRITICAL
ACCOUNTING POLICIES AND ESTIMATES**

The discussion and analysis of our financial condition and results of operations are
based upon our consolidated financial statements, which
have been prepared in accordance with accounting principles generally accepted in Canada. The preparation of these financial
statements
requires us to make estimates and judgements that affect the reported amounts of assets, liabilities, revenue and expenses and
related
disclosure of contingent assets and liabilities. On an ongoing basis, we evaluate our estimates, including those related to
product returns, bad
debts, inventories, intangible assets, income taxes, contingencies and litigation. We base our estimates on historical experience
and on various
other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making
judgements
about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ
from these estimates
under different assumptions or conditions.



We believe the following critical accounting policies affect our more significant
judgements and estimates used in the preparation of our
consolidated financial statements:

********Revenue recognition**

We recognize revenue in accordance with Statement of Position ("SOP") 97-2, "Software
Revenue Recognition," issued by the American
Institute of Certified Public Accountants ("AICPA"), SOP 98-9, "Modification of 97-2, Software Recognition with Respect to Certain
Transactions" and Staff Accounting Bulletin ("SAB") No. 101 "Revenue Recognition in Financial Statements," issued by the
Securities and
Exchange Commission ("SEC").

We record product revenue from packaged software and licence fees when persuasive
evidence of an arrangement exists, the software product
has been shipped, there are no significant uncertainties surrounding product acceptance, the fees are fixed and determinable and
collection is
considered probable.



Revenue is net of a provision for product returns. In computing this provision, we use
estimates and professional judgement. These estimates
are based on information on channel inventory and current return rates. Consequently, actual return rates could vary materially
from our
estimates. An increase in the return rate could result from changes in consumer demand. Should this variance occur, revenue could
fluctuate
significantly. Variances from estimated return rates and actual return rates are adjusted on a monthly basis.

At the time of contract signing, we assess whether the fee associated with the revenue
transactions is fixed and determinable based on the
payment terms associated with the transaction. We consider the fee to be fixed and determinable if it is due within our normal
payment terms,
which are generally 30 to 90 days from invoice date.

We assess collection based on a number of factors, including past transaction history
with the customer and the credit-worthiness of the
customer. We do not request collateral from our customers. If it is determined that collection of a fee is not reasonably assured,
management
defers the fee and recognizes revenue at the time collection becomes reasonably assured, which is generally upon receipt of
cash.

We use binding purchase orders and signed licence agreements as evidence of an
arrangement. Our arrangements do not include acceptance clauses.

We review our accounts receivable and evaluate the adequacy of our allowance for
doubtful accounts. Specific items that are analyzed include
historical bad debts, changes in customer payments, and current economic trends.

**Income taxes**

We have a net future tax asset, the principal components of which are book and tax
differences on assets and net operating loss carryforwards.
We believe sufficient uncertainty exists regarding the realizability of these net future tax assets such that a valuation
allowance has been taken
on the entire amount. Assumptions regarding the realizability of these net future tax assets are revisited at each balance sheet
date. Any
changes in our overall operating environment and financial performance could result in adjustments to our valuation
allowance.

******Write-Down of
Assets**

We evaluate our assets annually for impairment in value, and adjust them for any
impairment. The valuation is based on the income approach,
under which fair value is a function of the future revenue expected to be generated by an asset, net of all allocable expenses.
The income
approach focuses on the income-producing capability of the developed software and the core technology, and best represents the
present
value of the future economic benefits expected to be derived.

**NEW ACCOUNTING PRONOUNCEMENTS**

See Note 15 to the Consolidated Financial Statements (Item 8).

******Item 7A.
Quantitative And Qualitative Disclosures About Market Risk**

**INTEREST RATE RISK**

Our exposure to market risk for changes in interest rates relates primarily to our
investment portfolio of cash equivalents and short-term
investments. Our primary objective with respect to investments is security of principal. Investment criteria include selecting
securities having an
acceptable credit rating and diversifying both issuers and terms to maturity, which in no case exceed one year. Short-term
investments include
only those securities with active secondary or resale markets to ensure portfolio liquidity. Sustained low general interest rates,
particularly in the
United States, could significantly reduce our interest income. We do not use derivative financial instruments in our investment
portfolio.

At November 30, 2002, interest rates on our investments ranged from 1.26% to 2.37% per
annum (average rate approximately 2.04% per
annum) with all investments maturing by the end of January 2003. Our cash, cash equivalents and short-term investments are
denominated
predominantly in US dollars. As at November 30, 2002 maturity values approximated fair value.

******FOREIGN CURRENCY RISK**

We conduct business worldwide. Revenues and expenses are generated primarily in
US dollars, but we operate in foreign currencies, primarily in
Canada and Europe and, to a lesser extent, in Australia, Latin America, Japan and other Asian countries. As our business expands,
our exposure
to foreign currency risk will increase. We continue to monitor our foreign currency exposure to minimize the impact on our
business operations.
We have mitigated, and expect to continue to mitigate, a portion of our currency exposure through decentralized sales, marketing
and support
operations in which most costs are local currency based.****In addition, as at November 30, 2002, we had US dollar
foreign exchange forward
contracts with maturity dates from December 23, 2002 to August 8, 2003 to purchase a total of CDN $9.7 million. As of November 30,
2001,
we had no outstanding foreign currency contracts.

******Item 8.
Financial Statements and Supplementary Data**

**Corel Corporation**

**Index to Consolidated Financial Statements**

|Management's Report                                       | 25
|--------------------------------------------------------- | --
|Auditors' Report                                          | 25
|Consolidated Financial Statements:                        |   
|Consolidated Balance Sheets at November 30, 2002 and 2001 | 26
|Consolidated Statements of Operations for the years ended |   
|November 30, 2002, 2001 and 2000                          | 27
|Consolidated Statements of Cash Flows for the years ended |   
|November 30, 2002, 2001 and 2000                          | 29
|Notes to Consolidated Financial Statements                | 30

**MANAGEMENT'S REPORT**

Management is responsible for the preparation of Corel's consolidated financial
statements. Management believes that the consolidated
financial statements fairly reflect the form and substance of transactions and that the consolidated financial statements
reasonably present
Corel's financial condition and results of operations. The consolidated financial statements have been prepared in accordance with
accounting
principles generally accepted in Canada ("Canadian GAAP"). These principles are also generally accepted in the United States ("US
GAAP") in
all material respects except as disclosed in Note 15. Management has included in Corel's consolidated financial statements amounts
based on
estimates and judgements that it believes are reasonable under the circumstances.

PricewaterhouseCoopers LLP, the independent auditors of Corel, have audited Corel's
consolidated financial statements in accordance with
generally accepted auditing standards, and they provide an objective, independent review of the fairness of reported operating
results and
financial position.

The Board of Directors of Corel has an Audit Committee that meets with financial
management and the independent auditors to review
accounting, auditing, internal accounting controls, and financial reporting matters.

|/s/ Derek Burney      |  | /s/ W. Martin Catto                  
|--------------------- |  | -------------------------------------
|                      |  |                                      
|Derek J.Burney        |  | W. Martin Catto                      
|*President and Chief* |  | *Executive Vice President, Finance*  
|*Executive Officer*   |  | *and Interim Chief Financial Officer*

**AUDITOR'S REPORT TO THE SHAREHOLDERS**

We have audited the consolidated balance sheets of Corel Corporation as at November
30, 2002 and November 30, 2001 and the related
consolidated statements of operations, shareholders' equity and cash flows for the years ended November 30, 2002, 2001 and 2000.
These
financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these
financial
statements based on our audits.

We conducted our audits in accordance with generally accepted auditing standards in
both Canada and the United States. Those standards
require that we plan and perform an audit to obtain reasonable assurance whether the financial statements are free of material
misstatement.
An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An
audit also
includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall
financial
statement presentation.

In our opinion, these consolidated financial statements present fairly, in all
material respects, the financial position of the Company as at
November 30, 2002 and November 30, 2001, and the results of its operations and its cash flows for the years ended November 30,
2002, 2001
and 2000 in accordance with generally accepted accounting principles in Canada.

|/s/ PricewaterhouseCoopers LLP |  |                 
|------------------------------ |  | ----------------
|                               |  |                 
|PricewaterhouseCoopers LLP     |  | Ottawa, Canada  
|*Chartered Accountants*        |  | January 24, 2003

******Consolidated
Balance Sheets******

(in thousands of US$, except share data)

|                                           |                                                                       |               | ******As at November
30**
|------------------------------------------ | --------------------------------------------------------------------- | ------------- | -------------------------
|                                           |                                                                       |               | ******2002**             
|****                                       |                                                                       |               |                          
|**Assets**                                 |                                                                       |               |                          
|Current assets:                            |                                                                       |              
|                                           | Cash and cash equivalents                                             | $     18,874  | $     24,924             
|                                           | Restricted cash                                                       | 1,558         | 19,367                   
|                                           | Short-term investments                                                | 56,952        | 78,076                   
|                                           | Accounts receivable                                                   |               |                          
|                                           |                                                                      
|                                           | Trade                                                                 | 19,958        | 18,689                   
|                                           | Other                                                                 | 250           | 1,272                    
|                                           | Inventory                                                             | 191           | 799                      
|                                           | Prepaid expenses                                                      | 2,786         | 1,779                    
|Total current assets                       | 100,569                                                               | 144,906      
|Investments                                | 8,590                                                                 | 9,886        
|Deferred financing charges                 |                                                                       | 250          
|Capital assets                             | 21,768                                                                | 43,123       
|Goodwill                                   |                                                                       | 37,534       
|Total assets                               | $     130,927                                                         | $     235,699
|                                           |                                                                       |               |                          
|**Liabilities and shareholders' equity**   |                                                                      
|Current liabilities:                       |                                                                       |              
|                                           | Accounts payable and accrued liabilities                              | $     22,552  | $     27,862             
|                                           | Participation rights obligation                                       |               | 16,338                   
|                                           | Income taxes payable                                                  | 5,685         | 4,749                    
|                                           | Deferred revenue                                                      | 8,875         | 9,450                    
|Total current liabilities                  | 37,112                                                                | 58,399       
|Deferred revenue                           | 879                                                                   | 710          
|Future income tax liability                | 806                                                                   | 4,967        
|Total liabilities                          | 38,797                                                                | 64,076       
|                                           |                                                                       |               |                          
|Commitments and contingencies              |                                                                       |              
|                                           |                                                                       |              
|****Shareholders' equity                   |                                                                       |              
|Share
capital                              |                                                                       |              
|                                           | Issued and outstanding (000s): 91,818 common shares (80,709 in 2001); |               |                          
|                                           | 24,000 Series A preferred shares (24,000 in 2001)                     | $     405,124 | $     388,193            
|Contributed surplus                        | 4,990                                                                 | 4,990        
|Deficit                                    | (317,984)                                                             | (221,560)    
|Total shareholders' equity                 | 92,130                                                                | 171,623      
|Total liabilities and shareholders'
equity | $     130,927                                                         | $     235,699

(See accompanying Notes to Consolidated Financial
Statements.)

On behalf of the Board,

|/s/ James
Baillie |    | /s/ Jean-Louis Malouin
|----------------- | -- | ----------------------
|                  |    |                       
|James Baillie     |    | Jean-Louis Malouin    
|*Director*        | ** | *Director*            

**Consolidated Statements of Operations******

(in thousands of US$, except share and per share data)

|                                         |                                 | **Year ended November 30**
|---------------------------------------- | ------------------------------- | --------------------------
|                                         |                                 | **2002**                  
|                                         |                                 |                           
|                                         |                                 |                           
|Sales                                    | $     126,701                   | $     134,320             
|Cost of sales                            | 14,543                          | 17,895                    
|Gross profit                             | 112,158                         | 116,425                   
|                                         |                                 |                           
|Expenses:                                |                                 |                           
|                                         | Sales                           | 43,629                    
|                                         | Marketing                       | 23,626                    
|                                         | Research and development        | 29,994                    
|                                         | General and administration      | 34,269                    
|                                         | Depreciation and amortization   | 20,216                    
|                                         | Impairment of goodwill          | 49,896                    
|                                         | Write-down of technology        | 17,781                    
|                                         | Loss (gain) on foreign exchange | (1,797)                   
|                                         |                                 | 217,614                   
|                                         |                                 |                           
|Loss from operations                     | (105,456)                       | (5,874)                   
|Gain (loss) on investments               | (149)                           | (2,359)                   
|Interest income (expense)                | 1,790                           | 5,420                     
|Loss before the undernoted               | (103,815)                       | (2,813)                   
|                                         |                                 |                           
|Income tax (recovery)
expense            | (8,581)                         | 4,039                     
|Share of loss of equity investments      | 1,190                           | 472                       
|                                         |                                 |                           
|Net loss                                 | $     (96,424)                  | $     (7,324)             
|                                         |                                 |                           
|**Loss  per share:**                     |                                 |                           
|Basic                                    | $     (1.09)                    | $     (0.10)              
|Diluted                                  | $     (1.09)                    | $     (0.10)              
|                                         |                                 |                           
|Weighted average number
of common shares |                                 |                           
|outstanding (000s):                      |                                 |                           
|Basic                                    | 88,627                          | 74,325                    
|Diluted                                  | 88,627                          | 74,325                    

(See accompanying Notes to Consolidated Financial
Statements.)

******Consolidated
Statements of Shareholders' Equity******

(in thousands of US$ except share data)

|                                      | ******Number of shares (000s)** | ****          |                   |                              | ************   
|------------------------------------- | ------------------------------- | ------------- | ----------------- | ---------------------------- | ---------------
|****                                  | **Common**                      | **Preferred** | **Share
capital** | **Contributed**

**surplus** | **Deficit**    
|Balance at November 30, 1999          | 65,532                          |               | $   222,155       | $     1,099                  | $     (158,888)
|Issuance of common shares pursuant    |                                 |               |                   |                              |                
|to stock options                      | 798                             |               | 3,390             |                              |                
|Issuance of common shares and         |                                 |               |                   |                              |                
|warrants for cash                     | 7,299                           |               | 15,630            | 3,291                        |                
|Issuance of common shares pursuant    |                                 |               |                   |                              |                
|to warrants                           | 12                              |               | 36                |                              |                
|Issuance of preferred shares for cash |                                 | 24,000        | 130,679           |                              |                
|Issuance of warrants for services     |                                 |               |                   | 600                          |                
|Net loss                              |                                 |               |                   |                              | (55,348)       
|Balance at November 30, 2000          | 73,641                          | 24,000        | 371,890           | 4,990                        | (214,236)      
|Issuance of common shares pursuant    |                                 |               |                   |                              |                
|to stock options                      | 174                             |               | 265               |                              |                
|Issuance of common shares for         |                                 |               |                   |                              |                
|acquisition                           | 6,894                           |               | 16,038            |                              |                
|Net loss                              |                                 |               |                   |                              | (7,324)        
|Balance at November 30, 2001          | 80,709                          | 24,000        | 388,193           | 4,990                        | (221,560)      
|Issuance of common shares pursuant    |                                 |               |                   |                              |                
|to stock options                      | 37                              |               | 97                |                              |                
|Issuance of common shares for         |                                 |               |                   |                              |                
|acquisition                           | 11,072                          |               | 16,834            |                              |                
|Net loss                              |                                 |               |                   |                              | (96,424)       
|Balance at November 30, 2002          | 91,818                          | 24,000        | $     405,124     | $     4,990                  | $     (317,984)

(See accompanying Notes to Consolidated Financial
Statements.)



**Consolidated Statements of Cash Flows**

(in thousands of US$)

|                                                    |                                                      |                                     | ******Year ended November 30**
|--------------------------------------------------- | ---------------------------------------------------- | ----------------------------------- | ------------------------------
|                                                    |                                                      |                                     | ******2002**                  
|                                                    |                                                      |                                     |                               
|Operating activities:                               |                                                      |                                     |                               
|                                                    | Net loss                                             | $     (96,424)                      | $(7,324)                      
|                                                    | Items which do not involve cash or cash
equivalents: |                                     |                               
|                                                    |                                                      | Depreciation                        | 6,359                         
|                                                    |                                                      | Amortization                        | 16,027                        
|                                                    |                                                      | Bad debt
expense                    | 596                           
|                                                    |                                                      | Impairment of
goodwill              | 49,896                        
|                                                    |                                                      | Write down of assets                | 17,781                        
|                                                    |                                                      | Future income
taxes                 | (10,148)                      
|                                                    |                                                      | Loss (gain) on
investments          | 149                           
|                                                    |                                                      | Gain (loss) on
disposal of assets   | 136                           
|                                                    |                                                      | Share of loss of equity investments | 1,190                         
|                                                    | Changes in operating assets and
liabilities:         |                                     |                               
|                                                    | Restricted
cash                                      | 1,473                               | (1,893)                       
|                                                    | Accounts receivable                                  | (221)                               | 10,277                        
|                                                    | Inventory                                            | 608                                 | 2,836                         
|                                                    | Income taxes recoverable                             |                                     |                               
|                                                    | Prepaid expenses                                     | (998)                               | 430                           
|                                                    | Accounts payable and accrued liabilities             | (6,696)                             | (9,897)                       
|                                                    | Income taxes payable                                 | 936                                 | (2,051)                       
|                                                    | Deferred revenue                                     | (406)                               | (747)                         
|Net cash provided by (used in) operating
activities | (19,742)                                             | 15,144                              | (30,015)                      
|                                                    |                                                      |                                     |                               
|Financing activities:                               |                                                      |                                     |                               
|                                                    | Issuance of common
shares                            | 97                                  | 265                           
|                                                    | Issuance of preferred shares                         |                                     |                               
|                                                    | Issuance of warrants                                 |                                     |                               
|                                                    | Reduction of Novell obligations                      |                                     | (10,000)                      
|Net cash provided by (used in) financing
activities | 97                                                   | (9,735)                             | 146,432                       
|                                                    |                                                      |                                     |                               
|Investing activities:                               |                                                      |                                     |                               
|                                                    | Proceeds on sale of
investments                      |                                     |                               
|                                                    | Purchase of investments                              | (43)                                | (909)                         
|                                                    | Redemption (purchase) of short-term
investments      | 21,185                              | (78,076)                      
|                                                    | Purchase of capital assets                           | (3,236)                             | (7,817)                       
|                                                    | Cash restricted for participation rights
obligation  |                                     | (16,338)                      
|                                                    | Proceeds on disposal of assets                       |                                     | 818                           
|                                                    | Acquisition of SoftQuad Software, Ltd.               | (3,631)                             |                               
|                                                    | Acquisition of Micrografx, Inc.,                     | (680)                               | (5,593)                       
|Net cash provided by (used in)
investing activities | 13,595                                               | (107,915)                           | (7,008)                       
|                                                    |                                                      |                                     |                               
|Increase (decrease) in cash and cash equivalents    | (6,050)                                              | (102,506)                           | 109,409                       
|Cash and cash equivalents at beginning of
year      | 24,924                                               | 127,430                             | 18,021                        
|Cash and cash equivalents at end of year            | $     18,874                                         | $24,924                             | $     127,430                 
|                                                    |                                                      |                                     |                               
|**Supplemental
non-cash information:**              |                                                      |                                     |                               
|Purchase of SoftQuad Software, Ltd.                 | $     16,897                                         |                                     |                               
|Purchase of Micrografx, Inc.                        |                                                      | $   32,376                          |                               
|Settlement of participation rights
obligation       | $     (16,338)                                       |                                     |                               
|Investment in Hemera Technologies, Inc.             |                                                      |                                     | $     9,727                   
|Purchase of MetaCreations assets                    |                                                      |                                     | $     4,000                   

(See accompanying Notes to Consolidated Financial
Statements.)****

**Notes to Consolidated Financial Statements**

**1. Summary of Significant Accounting Policies**

****All dollar amounts included herein are expressed in thousands of US$
unless otherwise noted. Certain per share information is expressed in units
of US$ unless otherwise noted.

The consolidated financial statements have been prepared in accordance with accounting
principles generally accepted in Canada ("Canadian
GAAP"). These principles are also generally accepted in the United States ("US GAAP") in all material respects except as disclosed
in Note 15.

**Nature of operations**

Founded in 1985, Corel Corporation  is a technology company specializing in content
creation tools, business process management and XML-enabled
enterprise solutions. Corel products are available for users of most PCs, including International Business Machines Corporation
and IBM-compatible
PCs, Apple Computer, Inc.'s Macintosh and Linux systems.

**Basis of consolidation**

The consolidated financial statements include the accounts of Corel and its
wholly-owned subsidiaries ("Corel").****All material intercompany
transactions and balances have been eliminated.****Corel follows the equity method of accounting for investments in
other companies where it
holds 20% or more of the outstanding voting shares and has the ability to exert significant influence. Under the equity method,
Corel records
its initial investment at cost and records its pro rata share of earnings or losses of equity investments in its results of
operations. Certain
amounts for periods ended November 30, 2002 and prior have been reclassified to conform to current year presentation.

******Estimates and assumptions****

**Preparing financial statements requires management to make estimates and
assumptions that affect the reported amounts of assets, liabilities,
revenue and expenses, and the disclosure of contingent assets and liabilities. Examples of estimates include the provisions for
sales returns and
bad debts, the length of product cycles and related capital asset lives. Actual results may differ from these
estimates.

******Software revenue recognition**

Corel recognizes revenue from packaged software and licence fees when the software is
delivered, when there is persuasive evidence that an
arrangement exists,when the fee is fixed and determinable, and when collection is probable. Sales to distributors are subject to
agreements allowing
various rights of return and price protection. Corel establishes provisions for estimated future returns, exchanges and price
protection. When
telephone support is included for a limited time (post contract support or "PCS", generally for 90 days) together with the licence
fee, the entire
licence fee is recognized upon delivery of the product and the insignificant costs to provide the support are accrued. When
support is provided
together with an annual licensing fee, the entire fee is deferred and recognized ratably over the term of the licence agreement
since Corel does not
have vendor-specific objective evidence of fair market value of this PCS. Revenue from professional services and other services
are recognized as
the services are delivered.

******Research and development costs**

Research costs are expensed as incurred. Development costs related to software
products developed for sale are expensed as incurred unless
they meet the criteria for deferral under generally accepted accounting principles. ****

******Cash and cash equivalents**

Cash includes cash equivalents, which are investments that are highly liquid and have
terms to maturity of three months or less at the time

of acquisition. ****

Cash equivalents typically consist of commercial paper, term deposits and banker's
acceptances issued by major North American banks, and
corporate debt. Cash and cash equivalents are carried at cost, which approximates their fair value.

******Short-term
investments**

Short-term investments are investments that are generally held to maturity and have
terms greater than three months at the time of acquisition.
Short-term investments typically consist of commercial paper, Government of Canada Treasury Bills and banker's acceptances.
Short-term investments
are carried at cost plus accrued interest, which approximates their fair value.

**Restricted cash**

Corel maintains restricted cash in investments with major financial institutions as
security against certain financial obligations.

**Financial instruments**
Corel utilizes certain derivative financial instruments to enhance its ability to manage foreign currency exchange rate risk,
which exists as part of
its ongoing operations. Gains and losses are recognized when realized.

**Inventory**

Inventory of product components is valued at the lower of average cost and replacement cost, and finished goods are
valued at the lower of
average cost and net realizable value.

******Capital
assets**

Capital assets are recorded at cost. Amortization of licences commences with the
market release of each new software product and version.
Depreciation and amortization are calculated using the following rates and bases:

|Furniture and equipment                          | 20 - 33.3% declining balance                                                                                                                                                                                                                              
|------------------------------------------------ | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Computer equipment                               | 33.3% straight line                                                                                                                                                                                                                                       
|Research and development equipment               | 20 - 50% declining balance                                                                                                                                                                                                                                
|Leasehold improvements                           | Straight line over the term of the lease                                                                                                                                                                                                                  
|Licences, purchased software, deferred royalties | The greater of: a) the ratio that current gross revenues
bear to the total of current gross revenues and
anticipated future gross revenues or, b) the straight line
method over the remaining economic life, generally
estimated to be three to five years

****Corel regularly
reviews the carrying value of its capital assets. If the carrying value of its capital assets exceeds the amount recoverable, a
write-down is charged to the consolidated statement of operations to reflect the fair value of the assets.

**Goodwill**

Goodwill represents the excess of the purchase price of acquired companies over the
estimated fair value of the tangible and intangible net assets
acquired. Goodwill is not amortized.

******Income taxes**

Corel accounts for income taxes under the asset and liability method. Under this
method, future tax assets and liabilities are recognized for the
estimated tax recoverable or payable, which would arise if assets were recovered and liabilities settled at the financial
statement carrying
amounts. Future tax assets and liabilities are measured using substantively enacted tax rates expected to apply to taxable income
in the years in
which temporary differences are expected to be recovered or settled. Changes to these balances are recognized in income in the
period in
which they occur.

**********Foreign
currency****

**The functional currency of Corel and its subsidiaries, which are accounted
for as integrated foreign operations, is the US dollar. Monetary assets
and liabilities denominated in foreign currencies are remeasured at the closing period-end rates of exchange. The gains or losses
resulting from
the remeasurement of these amounts have been reflected in earnings in the respective periods. Non-monetary items and any related
amortization of such items are measured at the rates of exchange in effect when the assets were acquired or obligations incurred.
All other
income and expense items have been remeasured at the average rates prevailing during the respective periods.

******Investment tax credits**

Investments tax credits, which are earned as a result of qualifying research and
development expenditures, are recognized and applied to
reduce research and development expense in the year in which the expenditures are made and their realization is reasonably
assured.

**********Stock options**

Corel has stock option plans as described in Note 9. No compensation expense is
recognized when shares or stock options are issued to
employees. Any consideration paid by employees on the exercise of stock options is credited to share capital.

**2. Inventory**

|                   | **As at November
30**
|------------------ | ---------------------
|                   | **2002**             
|                   |                      
|Product components | $     118            
|Finished goods     | 73                   
|                   | $   191              

****

**3. Investments**

|                                                            | **As
at November 30**    
|----------------------------------------------------------- | -------------------------
|                                                            | **2002**                 
|Equity investments                                          |                          
|                                                            | Hemera Technologies, Inc.
|                                                            | LinuxForce, Inc.         
|                                                            |                          
|                                                            |                          
|Investments recorded at
cost, including GraphOn Corporation | 282                      
|                                                            |                          

**Hemera Technologies, Inc.**

On July 17, 2000, Corel purchased a 23% interest in Hemera Technologies,
Inc. ("Hemera"), a privately held company. As consideration for
these shares, Corel transferred its GraphicCorp division and related assets to Hemera. As of the effective date of the
transaction, the fair value
of the GraphicCorp division and its related assets was estimated at $9.7 million and the shares were valued at this amount. No
gain or loss was
recognized on the transfer. During fiscal 2001, Hemera received additional financing, which resulted in Corel's interest in Hemera
being diluted
to 21%. Corel's share of Hemera's operating results was nominal in fiscal 2002, 2001 and 2000.****

**LinuxForce, Inc.**

In December 1999, Corel purchased, and currently maintains, a 33%
interest in LinuxForce, Inc., a privately held company, for cash. Corel's
share of LinuxForce, Inc.'s operating results was nominal in fiscal 2002 and 2001.

******Investments recorded at cost**

During fiscal 2000, Corel sold a total of 1,190,001 shares of GraphOn
Corporation ("GraphOn") for a realized gain of approximately $14.6
million. Corel still owns 1,193,824 shares of common stock recorded at $0.2 million, representing 6.8% of total shares
outstanding, which, as
of November 30, 2002, had a market value of $0.20 per share. Corel has accounted for the cost of this investment under the
first-in,

first-out method.

During 2002, Corel acquired additional cost investments. Other
investments, recorded at the lesser of cost or net realizable value, totaled
$0.043 million and $nil at November 30, 2002 and 2001, respectively. The total write-down to net realizable value during 2002
resulted in a
$0.1 million charge to income.

******4.   Capital Assets**

|                                                 | **November 30, 2002** | ****                              | **November 30,
2001**
|------------------------------------------------ | --------------------- | --------------------------------- | ---------------------
|                                                 | **Cost**              | **Accumulated**

**amortization** | ****                 
|Furniture and equipment                          | $     13,888          | $     11,623                      |                      
|Computer equipment                               | 84,205                | 80,217                            |                      
|Research and development equipment               | 12,389                | 10,896                            |                      
|Leasehold improvements                           | 2,340                 | 2,142                             |                      
|Licences, purchased software, deferred royalties | 58,746                | 44,922                            |                      
|                                                 | 171,568               | $     149,800                     |                      
|Less: Accumulated amortization                   | 149,800               |                                   |                      
|Net book value                                   | $     21,768          |                                   |                      

**Technology write-down**

In fiscal 2002, circumstances suggested the possible impairment of
technology. An independent valuation of the majority of Corel's intangible
assets indicated an impairment in value existed. The independent valuator relied primarily on the income approach, under which
fair market
value is a function of the future revenue expected to be generated by an asset, net of all allocable expenses. The income approach
focuses on
the income-producing capability of the developed software and the core technology, and best represents the present value of the
future
economic benefits expected to be derived. Corel prepared a valuation on the intangible assets not covered in the independent
valuator's report.
This valuation resulted in a total write off of $17.8 million, which includes a write-off of technology acquired from SoftQuad
Software, Ltd.
("Softquad") of $11.0 million and technology acquired from Micrografx, Inc. ("Micrografx") of $6.7 million. The technology
write-offs are non
cash charges to income.

**5.    Impairment of Goodwill**

In fiscal 2002, circumstances suggested that Corel's goodwill was
impaired and that its carrying amount may not be recoverable. Following a
review, Corel determined that the impairment loss to be recognized was the full carrying amount. The total non cash charge was
$49.9 million
consisting of $36.3 million associated with the acquisition of Micrografx and $13.6 million associated with SoftQuad.

**************6.    Accounts Payable and Accrued
Liabilities******

|                       | **As at November 30**
|---------------------- | ---------------------
|                       | **2002**             
|Trade accounts payable | $     5,117          
|Accrued payroll        | 7,404                
|Accrued liabilities    | 9,069                
|Microsoft accrual      | 962                  
|                       | $   22,552           

******Microsoft accrual**

On October 2, 2000, concurrent with the issuance of Series A preferred
shares, Corel entered into a technology support and settlement
agreement with Microsoft Corporation ("Microsoft"). Together with the purchase of such Series A preferred shares, Microsoft
received the
option to request Corel to perform certain product development work. Corel is obligated to provide at least 30 full-time
equivalents (20
developers and 10 testers) for a 12-month period to Microsoft upon receipt of Microsoft's written intent to exercise the option.
On May 17,
2001, Corel received written notice from Microsoft of its exercise of the option. Corel estimated the costs to perform the
services described as
being $3.0 million based on the estimated average cost per developer and tester required to perform the services when required. If
the actual
costs to perform the required services is less than $3.0 million, the remainder of the liability will be recognized as an increase
in contributed
surplus. As of November 30, 2002, Corel had applied approximately $2.0 million in costs against this obligation and awaits formal
notification
from Microsoft of the fulfilment of their obligation before recording the increase in contributed surplus.

**7.    Commitments and Contingencies**

Corel rents office premises and sponsors various sporting events and
venues. Rent expense pursuant to lease obligations aggregated $6,756,
$5,313 and $7,654 during the years ended November 30, 2002, 2001 and 2000, respectively. At November 30, 2002, the minimum
commitments under long-term agreements, are as follows:

|                    | **Leases**  | **Sponsorship** | **Total**   
|------------------- | ----------- | --------------- | ------------
|2003                | $     3,597 | $     877       | $     4,474 
|2004                | 3,333       | 903             | 4,236       
|2005                | 1,852       | 930             | 2,782       
|2006                | 987         | 958             | 1,945       
|2007                | 392         | 987             | 1,379       
|2008 and thereafter | 6,101       | 11,656          | 17,757      
|                    | $   16,262  | $     16,311    | $     32,573

****Corel
is a party to a number of additional claims arising in the ordinary course of business relating to employment, intellectual
property and
other matters. Based on its review of the individual matters, Corel believes that such claims, individually, will not have a
material adverse effect
on its business, financial position or results of operations but, in the aggregate, may have a material adverse effect on its
business, financial
position or results of operations. Such possible effect cannot be reasonably estimated at this time.

**8.    Financial Instruments**

**Concentration of credit risk**

The primary objective of Corel with respect to short-term investments is
security of principal. Corel manages its investment credit risk through a
combination of the (i) selection of securities with an acceptable credit rating; (ii) selection of term to maturity, which in no
event exceeds one
year in length; and (iii) diversification of debt issuers.



Included in cash, cash equivalents and short-term investments as of
November 30, 2002 and November 30, 2001 were corporate debt amounts
of $10.0 million and $15.0 million, respectively. These amounts were repaid, in full, at maturity in December 2002 and January
2002,
respectively. All of Corel's short-term investments as at November 30, 2002 had maturity dates of less than two months from year
end. Corel's
cash, cash equivalents and short-term investments are denominated predominantly in US dollars.

Included in the restricted cash balance as at November 30, 2001 was
$16.3 million invested with a major US financial institution. This
investment related to the participation rights obligation arising from the acquisition of Micrografx. The obligation to Micrografx
shareholders
was settled in fiscal 2002 (see Note 13.)

Concentration of credit risk, with respect to accounts receivable, is
limited due to the diversity of Corel's channel arrangements. Corel has credit
evaluation, approval and monitoring processes intended to mitigate potential credit risks. Ingram Micro Inc. accounted for $8.7
million (43.1%)
and $13.0 million (67.8%) of accounts receivable at November 30, 2002 and November 30, 2001, respectively. Software House
International
accounted for $3.3 million (16.5%) and $3.5 (17.8%) million of accounts receivable at November 30, 2002 and November 30, 2001,
respectively.

**Fair value of financial instruments**

The carrying amounts for cash and cash equivalents, restricted cash,
short-term investments, accounts receivable, accounts payable and accrued
liabilities approximate fair value due to the short maturity of these instruments, unless otherwise noted.

**Foreign exchange forward contracts**

Corel manages its financial exposure to certain foreign exchange
fluctuations with the objective of minimizing the impact of foreign currency
exchange movements on its operations.

To meet this objective Corel enters into foreign exchange forward
contracts from time to time for terms of less than twelve months. Contracts
are with major Canadian chartered banks, and therefore non-performance by a counterparty is considered unlikely. As at November
30, 2002,
Corel had US dollar foreign exchange forward contracts with maturity dates from December 23, 2002 to August 8, 2003 to purchase a
total of
CDN $9.7 million (estimated fair value CDN $9.8 million). As of November 30, 2001, Corel had no outstanding foreign currency
contracts.

**9.  Share Capital**

**Common shares**

There are an unlimited number of common shares authorized. On June 28,
2000, Corel issued 7,299,270 common shares and 3,649,635
common share purchase warrants at CDN $4.11 per unit for total gross proceeds of CDN $30.0 million. The values assigned to each of
the
components of the unit were based on their relative fair values at the date of the transaction. The warrants were exercisable
until June 27,
2001 at a price of CDN $4.56. During fiscal 2000, 11,659 warrants were exercised for gross proceeds of CDN $53,165. The remaining
warrants
expired June 27, 2001.

On October 30, 2001, Corel completed the acquisition of Micrografx. The
aggregate purchase price paid, including acquisition costs of $1.5
million, was approximately $33.8 million consisting of 6,894,250 common shares valued at $16.0 million and participation rights
valued at
$16.3 million, which were settled for cash in October 2002 (see Note 13).

On March 15, 2002, Corel completed the acquisition of SoftQuad. The
aggregate purchase price paid was approximately $18.1 million,
consisting of 11,071,833 common shares valued at $16.9 million and the remaining amount consisting of $1.2 million in acquisition
costs (see
Note 13).

**Series A preferred shares**

There are an unlimited number of Series A preferred shares authorized.
On October 2, 2000, Corel issued 24,000,000 Series A participating,
convertible, non-voting, non-redeemable preferred shares to Microsoft Licensing, Inc. ("Microsoft Licensing") for total gross
proceeds of $135.0
million ($5.625 per share). Series A preferred shares are convertible into common shares on a one for one basis but not in the
hands of
Microsoft Licensing or its affiliates. As part of the share purchase agreement on October 2, 2001, Corel filed with the United
States Securities
and Exchange Commission (SEC) a resale registration statement for 24,000,000 common shares underlying these preferred
shares.

The dividend rights are the same as for common shares, other than
dividends or other distributions to the extent payable in the form of
common shares. Dividends on each full and each fractional Series A preferred share are cumulative.

In the event of liquidation of Corel, the greater of the $5.625 per
share purchase price plus all accrued and unpaid dividends, and the amount
per share that could be distributed to common shareholders, assuming the conversion of the preferred shares, will be distributed
to the holders
of the preferred shares. If such payment is made, Series A preferred shareholders will have no further claim on assets.

**Equity line financing**

On October 3, 2000, Corel completed a standby financing share purchase
agreement with an institutional investor. Subject to the terms and
conditions of this agreement, Corel was able to issue and sell to the investor up to 14,690,000 shares in periodic draw-down
periods over 24
months if all associated warrants were exercised. This arrangement has expired with Corel issuing no shares under it. Corel has
issued 169,500
warrants to the investor and 56,500 warrants to each of its advisors, Whale Securities Co., L.P. and Richard Geyser. The warrants
are
exercisable at any time until October 3, 2003 at $3.91 per share for the investor and $4.28 per share by Whale Securities Co.,
L.P. and Richard
Geyser. As of November 30, 2002, no warrants have been exercised. Corel deferred $0.6 million in financing charges, representing
the fair
value of the warrants issued to secure this financing, which were amortized over 24 months.

******Stock option plans**

Corel's stock option plans are administered by the Nominating and
Compensation Committee, which is a committee of the Board of Directors.
The Nominating and Compensation Committee designates eligible participants to be included under the plans and designates the
number of
options and share price of the options, subject to applicable securities laws and stock exchange regulations. At November 30,
2002, there were
approximately 13.9 million and 10.4 million common shares reserved for issuance under the Corel Corporation Stock Option Plan and
the Corel
Corporation Stock Option Plan 2000, respectively. Information with respect to stock option activity for 2000, 2001 and 2002 is as
follows:

|****Number of shares (000s)**
**Range**
**Weighted average price**** |                             |           |                            |  |  | **Number of shares (000s)** | **Range** | **Weighted average price**
|-------------------------------------------------------------------- | --------------------------- | --------- | -------------------------- |  |  | --------------------------- | --------- | --------------------------
|                                                                     |                             |           |                           
|                                                                     | **Number of shares (000s)** | **Range** | **Weighted average price**

|                                 |         |                   |      
|-------------------------------- | ------- | ----------------- | -----
|Outstanding at November 30, 1999 | 3,053   | $2.10   - $13.50  | $5.03
|Granted                          | 3,869   | 5.35   -   29.90  | 14.49
|Exercised                        | (798)   | 2.06   -   13.50  | 4.08 
|Forfeited                        | (1,115) | 2.10   -   15.25  | 14.44
|Expired                          | (591)   | 7.70   -   13.50  | 7.88 
|Outstanding at November 30, 2000 | 4,418   | 3.00   -   29.90  | 10.65
|Granted                          | 2,840   | 3.30   -     4.80 | 4.22 
|Exercised                        | (174)   | 3.00   -     4.80 | 3.26 
|Forfeited                        | (2,198) | 3.00   -   29.90  | 7.81 
|Expired                          | (364)   | 4.00   -     7.70 | 7.58 
|Outstanding at November 30, 2001 | 4,522   | 3.00   -   15.25  | 4.97 
|Granted                          | 4,865   | 1.11   -     2.92 | 1.80 
|Exercised                        | (27)    | 1.22   -     1.27 | 1.24 
|Forfeited                        | (1,676) | 1.22   -     9.65 | 3.54 
|Expired                          | (122)   | 3.00   -     4.10 | 3.05 
|Outstanding at November 30, 2002 | 7,562   | $1.11   - $15.25  | $3.29

For various price ranges (in CDN$), weighted average characteristics of
outstanding stock options at November 30, 2002 were as follows:

|                                 |                   | **********Outstanding options**
|-------------------------------- | ----------------- | -------------------------------
|**Range of grant price**         | **Shares (000s)** | **Remaining life**

**(years)**
|$ 1.00  -  $3.00                 | 4,063             | 3.52                           
|3.01  -   5.00                   | 2,156             | 2.51                           
|5.01 -   8.00                    | 1,031             | 1.34                           
|8.01  - 15.25                    | 312               | 1.78                           
|Outstanding at November 30, 2002 | 7,562             | 2.86                           

The outstanding options expire between March 25, 2003 and November 18,
2006, and as of November 30, 2002, 4,135,282 options have
vested. Options vest one third on the date of grant, one third on the first anniversary and one third on the second
anniversary.

On November 16, 2000, the Board of Directors passed a resolution that
allowed certain employees holding options granted in March 2000 at a
price of CDN $15.25 (or the then US$ equivalent) and one senior officer with options at a price of  US $20.62 to tender a maximum
aggregate
number of approximately 1.8 million options held by them for repricing. The exercise price of the repriced options, namely CDN
$5.70 (or the
then US$ equivalent), was the closing price of Corel's common shares on the Toronto Stock Exchange (TSX) on November 15, 2000. The
condition of the repricing was to introduce a vesting schedule where one third of the options remained vested, one third vested
March 30,
2001 and the remaining options vested on March 30, 2002. Repricing of any of these options held by insiders, as defined by the
Securities Act
(Ontario), required shareholder approval, which was obtained. Non-employee directors' options were excluded from the repricings.
No options
have been tendered for repricing since November 30, 2001.

The market price of the underlying common shares at November 30, 2002
was CDN $1.62 and US $1.07, respectively.

**10.  Loss Per Share**

The calculations of the loss per share are based on the weighted daily
average number of common shares outstanding during the year. The
calculation of diluted loss per share assumes that all outstanding options, warrants and convertible preferreds have been
exercised at the later
of the beginning of the fiscal period or the option issuance date, if they have a dilutive effect. As the impact of these items is
anti-dilutive for all
periods shown, outstanding options, warrants and convertible preferreds have been excluded from the calculation of diluted loss
per share. See
Note 9 for these other potentially dilutive instruments.

**11.   Cost of Sales**

|                     | ******Year ended November 30**
|-------------------- | ------------------------------
|****                 | **2002**                      
|                     |                               
|Cost of goods sold   | $     10,183                  
|Licence amortization | 2,066                         
|Royalties            | 2,294                         
|****                 | $    14,543                   

********

******12.   Income Taxes**

Income tax expense (recovery) consists of the following:

|                              | **Year ended November 30**
|----------------------------- | --------------------------
|                              | **2002**                  
|Current:                      |                           
|Canadian                      | $    662                  
|Foreign                       | 905                       
|                              |                           
|                              | 1,567                     
|Future:                       |                           
|Canadian                      | (5,181)                   
|Foreign                       | (4,967)                   
|                              | (10,148)                  
|Income tax expense (recovery) | $    (8,581)              

The reported income tax provision differs from the amount computed by
applying the Canadian statutory rate to income before taxes for the
following reasons:

|                                                                           | **Year ended November 30**
|-------------------------------------------------------------------------- | --------------------------
|                                                                           | **2002**                  
|                                                                           |                           
|Income (loss) before income taxes and share of
loss of equity Investments: |                           
|Canadian                                                                   | $    (108,180)            
|Foreign                                                                    | 4,365                     
|                                                                           | (103,815)                 
|                                                                           |                           
|Expected statutory rate                                                    | 39.0%                     
|                                                                          
|Expected tax expense (recovery)                                            | (40,488)                  
|Foreign tax rate differences                                               | (278)                     
|Change in valuation allowance                                              | 14,290                    
|Non-deductible expenses and non-taxable income                             | 17,078                    
|Reassessment of prior years                                                |                           
|Withholding tax on foreign income                                          | 500                       
|Other                                                                      | 317                       
|Reported income tax expense (recovery)                                     | $     (8,581)             

The tax effects of significant temporary differences which gave rise to
future taxes at November 30, 2002 and 2001 are:

|                                   | **Year ended November 30**
|---------------------------------- | --------------------------
|                                   | **2002**                  
|Assets                             |                           
|Reserves and
allowances            | $     1,983               
|Book and tax differences on assets | 8,618                     
|Net operating loss carryforwards   | 35,533                    
|Tax credits                        | 3,701                     
|Other                              | 485                       
|                                   | 50,320                    
|Less: valuation allowance          | (50,320)                  
|Future income tax asset            | $     0                   
|                                   |                           
|Liabilities                        |                           
|Book and tax
differences on assets | 806                       
|Future income tax liability        | $     806                 

The valuation allowance for future taxes is required due to Corel's operating history
and management's assessment of various uncertainties
related to their future realization. Since the realization of future tax assets is dependent upon generating sufficient taxable
income in the tax
jurisdictions which gave rise to the future tax asset, the amount of the valuation allowance for future taxes may be reduced if it
is demonstrated
that positive taxable income in the various tax jurisdictions is sustainable in the future.

Future income tax liabilities had been set up with the acquisitions of Micrografx and
SoftQuad. The reduction in the future tax liability balance
relates to the write off a significant portion of the technology acquired in those acquisitions,

As at November 30, 2002, Corel has tax loss carryforwards of approximately $174
million, which expire during the years 2007 to 2020.
Approximately $17 million of these losses acquired with the purchase of Micrografx are restricted in the amount of the loss that
may be claimed
each year based on U.S. tax loss limitations. A full valuation allowance has been taken against the Micrografx losses.

Income taxes paid were $0.7 million, $1.1 million and $0.4 million for fiscal years
2002, 2001 and 2000, respectively.****

******13.
Business Acquisitions**

**A.  Micrografx**

On October 30, 2001, Corel completed the acquisition of all of the issued and
outstanding stock of Micrografx, a Dallas, Texas-based provider
of enterprise process management and graphics software, solutions and services. Corel's consolidated statements of operations
reflect the
results of operations of Micrografx from the date of the acquisition. The aggregate purchase price paid was approximately $33.8
million,
consisting of 6,894,250 common shares at a value of $16.0 million and $16.3 million cash paid in October 2002 pursuant to

participation rights.

The components of the aggregate purchase price were as follows (in thousands):

|Common shares                   | $           16,038
|------------------------------- | ------------------
|Participation rights obligation | 16,338            
|Other costs of acquisition      | 1,457             
|Total purchase price            | $           33,833



Other costs of acquisition include professional fees and other costs directly related
to the acquisition.

The purchase price has been allocated to identifiable tangible and intangible assets
acquired and liabilities assumed based on their estimated
fair values as follows:

|Cash                                             | $     4,164 
|------------------------------------------------ | ------------
|Other current assets                             | 5,531       
|Developed software                               | 8,760       
|In-process research and development              | 4,311       
|Property and equipment                           | 323         
|Future tax liabilities                           | (4,967)     
|Bridge loan from Corel                           | (8,300)     
|Other liabilities                                | (13,523)    
|Net liabilities acquired                         | (3,701)     
|Total purchase price                             | 33,833      
|Goodwill at November 30, 2001                    | 37,534      
|Recovery of assumed liabilities incurred in 2002 | (1,271)     
|Goodwill                                         | $     36,263

The estimates of fair value were determined by Corel's management based on information
furnished by the management of Micrografx and an
independent valuation of developed software and in-process research and development projects.

To determine the fair market value of the developed software and in-process research
and development, Corel considered the three traditional
valuation approaches: the cost approach, the market approach and the income approach.

The independent valuator relied primarily on the income approach, under which fair
market value is a function of the future revenues expected
to be generated by an asset, net of all allocable expenses. The income approach focuses on the income-producing capability of the
developed
software, core technology, and purchased research and development projects, in arriving at the present value of the future
economic benefits
expected to be derived. In determining the amount of the purchase price to allocate to in-process research and development,
factors such as
stage of completion and technological uncertainties were considered by Corel and its independent appraiser in determining the
present value of
the future benefits to be received.

******B.
SoftQuad**

On March 15, 2002, Corel completed the acquisition of all of the issued and
outstanding stock of SoftQuad, a Canadian-based developer of
XML-enabling technologies and commerce solutions for e-Business. Corel's consolidated statements of operations reflect the results
of
operations of SoftQuad from the date of acquisition.

The aggregate purchase price paid was approximately $18.1 million, including
11,071,833 common shares of Corel at a value of $16.9 million.
The components of the aggregate purchase price were as follows (in thousands)



|Common shares              | $ 16,897
|-------------------------- | --------
|Other costs of acquisition | 1,226   
|Total purchase price       | $ 18,123



Other costs of acquisition include professional fees and other costs directly related
to the acquisition.

The purchase price has been allocated to identifiable tangible and intangible assets
acquired and liabilities assumed based on their estimated
fair values as follows:



|Cash                   | $     771   
|---------------------- | ------------
|Other current assets   | 839         
|Core technology        | 4,456       
|Developed software     | 10,858      
|Property and equipment | 161         
|Future tax liabilities | (5,957)     
|Bridge loan from Corel | (2,150)     
|Other liabilities      | (4,488)     
|Net assets acquired    | 4,490       
|Total purchase price   | 18,123      
|Goodwill               | $     13,633

The estimates of fair value were determined by Corel's management based on information
furnished by the management of SoftQuad and an
independent valuation of developed software and in-process research and development projects.

To determine the fair market value of the core technology and the developed software,
Corel considered the three traditional valuation
approaches: the cost approach, the market approach and the income approach.

The independent valuator relied primarily on the income approach, under which fair
market value is a function of the future revenue expected
to be generated by an asset, net of all allocable expenses. The income approach focuses on the income-producing capability of the
developed
software and the core technology, in arriving at the present value of the future economic benefits expected to be
derived.

******Unaudited Pro
Forma Financial Information**

The following unaudited pro forma financial information gives effect to the
acquisition of SoftQuad made by Corel as if the transactions
occurred at the beginning of each of the fiscal years endingNovember 30, 2002 and November 30, 2001. The pro forma financial
information
below excludes the non-recurring charges related to the goodwill impairment and technology write-down.****
**Year Ended****November 30,****2002******Sales****
$     128,342Cost of sales
14,559Gross profit
113,783Expenses
155,470Operating loss
(41,687)Interest and other income
(65,786)Net loss
$     (107,473)

****Pro forma loss per
share:    ****

|******Basic and Diluted:                      |  |  |            
|--------------------------------------------- |  |  | -----------
|Weighted average of common shares outstanding |  |  | 88,627     
|Net loss                                      |  |  | $
(107,473)
|Loss per share                                |  |  | $
(1.21)   
|                                              |  |  |            

****14.
Segmented Information**

Corel has only one global operating segment, and sells its products worldwide from
four geographic regions. A summary of sales by product
group, sales channel, region and major customer is as follows. Comparative amounts have been reclassified to be consistent with
current
presentation.

|                 |                                 | **Year ended November 30**
|---------------- | ------------------------------- | --------------------------
|                 |                                 | **2002**                  
|By product group |                                 |                           
|                 | Graphic Solutions               | $     66,428              
|                 | Office Productivity Solutions   | 48,716                    
|                 | Process Management Solutions    | 8,326                     
|                 | Other (including XML
Solutions) | 3,231                     
|                 |                                 | $
126,701                 

|By sales channel  |                                |                          |             
|----------------- | ------------------------------ | ------------------------ | ------------
|                  |                                | Retail packaged products | $     68,743
|                  |                                | OEM
licences             | 7,439       
|                  |                                | Corporate
licences       | 50,519      
|                  |                                |                          | $    126,701
|By region         |                                |                          |             
|                  | North
America                  |                          |             
|                  |                                | Canada                   | $     9,119 
|                  |                                | U.S.A                    | 61,693      
|                  | Europe, Middle East and Africa | 38,740                   | 32,288      
|                  | Rest of world                  | 9,710                    | 14,056      
|                  | OEM                            | 7,439                    | 11,475      
|                  |                                |                          | $    126,701
|By major customer |                                |                          |             
|                  | Ingram                         |                          | $   17,033  
|                  | All others                     |                          | 109,668     
|                  |                                |                          | $    126,701

**15.    Significant Differences Between Canadian and United States
GAAP**

Corel's financial statements are prepared on the basis of Canadian GAAP, which differs
in some respects from US GAAP. There were no differences
in reported cash flows for the periods presented. The effects of significant differences between Canadian GAAP and US GAAP are
reflected in the
balance sheets and Statements of Operations set forth below:

|**Balance Sheet**                          | ****      | **As at November
30**
|------------------------------------------ | --------- | ---------------------
|                                           | **Notes** | **2002**             
|**Assets**                                 | ****      |                      
|********Current assets                     |           | $   100,569          
|Investments                                |           | 8,590                
|Other non-current assets                   |           |                      
|Capital assets                             | (A)       | 20,643               
|Goodwill                                   |           |                      
|Total assets                               |           | $   129,802          
|                                           |           |                      
|**Liabilities**                            |           |                      
|Other current liabilities                  |           | $   31,427           
|Income taxes payable                       |           | 5,685                
|Deferred revenue                           |           | 879                  
|Future income tax liabilities              |           | 806                  
|Total liabilities                          |           | 38,797               
|Shareholders' equity                       | (A)       | 91,005               
|Cumulative comprehensive income            | (B)       |                      
|Total liabilities and shareholders' equity |           | $   129,802          

|********Statement of Operations information**              | ****           | **Year ended November
30**
|---------------------------------------------------------- | -------------- | --------------------------
|                                                           | **Notes**      | **2002**                  
|**Net loss in accordance with Canadian
GAAP**              | $    (96,424)  | $    (7,324)              
|Adjustments to reconcile to US GAAP:                       |                |                           
|Impairment of goodwill                                     | (A)            | 1,638                     
|Write-off of
purchased in-process research and development | (A)            | 3,186                     
|Related
income taxes                                       | (A)            | (1,638)                   
|**Net loss in accordance with US
GAAP**                    | $     (93,238) | $     (11,635)            
|                                                           |                |                           
|**Comprehensive income**                                   | (B)            |                           
|Net loss in accordance with US GAAP                        |                | $  (93,238)               
|Unrealized holding losses on available for sale
securities | (B)            | (543)                     
|Related income tax                                         | (B)            | 212                       
|Comprehensive loss                                         |                | $   (95,569)              
|                                                           |                |                           
|**Loss per share**                                         |                |                           
|Basic                                                      |                | $   (1.05)                
|Diluted                                                    |                | $   (1.05)                

******A.  Goodwill impairment and write-off research and development**

Associated with the allocation of the purchase price of the acquisition of Micrografx
was $4.3 million for in-process research and development
which, for US GAAP purposes, was expensed in fiscal 2001, the year of acquisition.

In fiscal 2002, under US GAAP, the goodwill impairment charge was reduced by $1.6
million, the write-down of technology was reduced by
$3.0 million and the income tax recovery was reduced by $1.6 million, all related to the Micrografx acquisition of the previous
year.

**B. Comprehensive income**

Corel adopted SFAS No. 130, "Reporting Comprehensive Income" ("SFAS 130") effective
December 1, 1998. SFAS 130 requires disclosure of
comprehensive income, which includes reported net earnings adjusted for other comprehensive income. Other comprehensive income
includes
items that cause changes in shareholders' equity but are not related to share capital or net earnings which, for Corel, comprises
only unrealized
holding gains on available-for-sale securities.

SFAS No. 115, "Accounting for Certain
Investments in Debt and Equity Securities"requires available-for-sale securities to be marked to market
with unrealized holding gains or losses being accounted for in other comprehensive income. Accordingly, the reported carrying
value of
investments would be decreased by $nil November 30, 2002 and increased by $0.4 million at November 30, 2001. In addition, income
taxes
payable would be decreased by $nil at November 30, 2002 and decreased by $0.1 million at November 30, 2001.

******Stock options plans**

Corel applies Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued
to Employees" (APB 25), and related interpretations in
accounting for its employee stock option plans. Accordingly, Corel also applies United States Financial Accounting Standards Board
("FASB")
Interpretation No. 44, "Accounting for Certain Transactions Involving Stock Compensation - an Interpretation of APB No. 25" ("FIN
44"),
providing clarification of the accounting rules for stock-based compensation under APB 25. FIN 44 does not change FASB Statement
of Financial
Accounting Standards ("SFAS") No. 123 "Accounting for Stock-Based Compensation" ("SFAS 123") and, as such, no compensation expense
has been recognized for Corel's stock-based compensation plan. Had compensation cost for Corel's employee stock option plan been
determined based on the fair value at the grant date for awards under the plan, consistent with the methodology prescribed under
the SFAS
123, Corel's net income (loss) would have changed to the pro forma amounts indicated as follows:

|                                         | **Year ended November 30**
|---------------------------------------- | --------------------------
|                                         | **2002**                  
|                                         |                           
|Net loss in accordance with US GAAP      | $     (93,238)            
|Estimated stock-based compensation costs | (2,947)                   
|Pro forma net loss                       | $     (96,185)            
|Pro forma loss per share                 | $     (1.09)              

The fair values of all options granted during 2002, 2001 and 2000 were estimated as of
the date of grant using the Black-Scholes option pricing
model with the following weighted average assumptions:

|                             | **2002** | **2001** | **2000**
|---------------------------- | -------- | -------- | --------
|                             |          |          |         
|Expected option life
(years) | 3        | 3        | 3.07    
|Volatility                   | 110      | 110      | 105     
|Risk free interest rate      | 3.82%    | 4.53%    | 6.13%   
|Dividend yield               | nil      | nil      | nil     



The fair values (in USD) at the date of grant for stock options granted during 2002,
2001 and 2000 were $1.13, $2.64 and $6.62 per option, respectively.

The Black-Scholes model, used by Corel to calculate option values, as well as other
currently accepted option valuation models, were developed
to estimate the fair value of freely tradeable, fully transferable options without vesting restrictions, which significantly
differ from Corel's stock
option awards. These models also require highly subjective assumptions, including future stock price volatility and expected time
until exercise,
which greatly affect the calculated values. Accordingly, management believes that these models do not necessarily provide a
reliable single
measure of the fair value of Corel's stock option awards.

On November 16, 2000, the Board of Directors passed a resolution that allowed certain
employees holding options granted in March 2000 at a
price of CDN $15.25 (or the then US$ equivalent) and one senior officer with options at a price of US $20.62 to tender a maximum
aggregate
number of approximately 1.8 million options held by them for repricing. The exercise price of the repriced options, namely CDN
$5.70 (or the
then US$ equivalent), was the closing price of Corel's common shares on the Toronto Stock Exchange (TSX) on November 15, 2000. The
condition of the repricing was to introduce a vesting schedule where one third of the options remained vested, one third vested
March 30,
2001 and the remaining options vested March 30, 2002. Repricing of any of these options held by insiders, as defined by the
Securities Act
(Ontario), requires shareholder approval. Non-employee directors' options were excluded from the repricings. At November 30, 2001,
1,544,500 options had been tendered for repricing to CDN $5.70 while 186,000 options had been tendered for repricing to US $3.63.
The
market price of the underlying common shares at November 30, 2001 was CDN $3.95 and US $2.52, respectively.

In accordance with FIN 44, the option repricing, as described above, will result in
variable plan accounting for the re-priced options. Future
periods may reflect compensation charges or credits depending on the fair market price of the underlying shares.

******New
accounting pronouncements**

In August 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets" ("SFAS 144"). This
Statement addresses financial accounting and reporting for the impairment or disposal of long-lived assets. The provisions of this
Statement are
effective for financial statements issued for fiscal years beginning after December 15, 2001, which is the fiscal year beginning
December 1,
2002 for Corel. Corel has not assessed the impact that the adoption of this standard will have on its results of operations or
financial position.

In December 2001, the CICA issued AcG 13 - "Hedging Relationships" ("AcG 13"). The
guideline presents the views of the Canadian
Accounting Standards Board on the identification, designation, documentation and effectiveness of hedging relationships, for the
purpose of
applying hedge accounting. The guideline is effective for all fiscal years beginning on or after July 1 2003, which is the fiscal
year beginning
December 1, 2003 for Corel. Corel has not assessed the impact that the adoption of this guideline will have on its results of
operations or
financial position.



In January 2002, the CICA amended CICA 1650 - "Foreign Currency Translation" ("CICA
1650"). The amended standard eliminates the
requirement to defer and amortize exchange gains and losses related to foreign currency denominated monetary items with a fixed or
ascertainable life extending beyond the end of the following fiscal year, and requires new disclosure surrounding foreign exchange
gains and
losses. The standard is effective for all fiscal years beginning on or after January 1, 2002, which is the fiscal year beginning
December 1, 2002
for Corel. Corel does not believe that the adoption of this guideline will have a material impact on its results of operations or
financial position.

In January 2002, the CICA issued CICA 3870 - "Stock-Based Compensation and Other
Stock-Based Payments" ("CICA 3870"). This section
establishes standards for the recognition, measurement and disclosure of stock-based compensation and other stock-based payments
made in
exchange for goods and services. This section sets out a fair value-based method of accounting which is required for certain, but
not all, stock-based transactions. The recommendations of this section should be adopted for fiscal years beginning on or after
January 1, 2002, which is the
fiscal year beginning December 1, 2002 for Corel, and applied to awards granted on or after the date of adoption. Corel does not
believe that
the adoption of this guideline will have a material impact on its results of operations and financial position.

In fiscal 2001, the CICA issued CICA 3062 - "Goodwill and Other Intangible Assets"
("CICA 3062") and FASB issued SFAS No. 142, "Goodwill
and Other Intangible Assets" ("SFAS 142"). These standards are effective for fiscal years beginning after December 15, 2001, which
is the fiscal
year beginning December 1, 2002 for the Corel, but applied immediately to any business combinations consummated after June 30,
2001.
CICA 3062 and SFAS 142 require that goodwill and other intangible assets with indefinite lives will no longer be amortized,
including goodwill
recorded in past business combinations, but will be subject to annual impairment tests in accordance with the new guidelines.
Other intangible
assets will continue to be amortized over their useful lives. Corel believes that the adoption of these pronouncements will not
have a material
impact on its results from operations and financial position.

In June 2002, the FASB issued SFAS No. 146 - "Accounting for Costs Associated with
Exit or Disposal Activities". SFAS No. 146 addresses
accounting and reporting for costs associated with exit or disposal activities and nullifies Emerging Issues Task Force Issue No.
94-3, "Liability
Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (Including Certain Costs Incurred in a
Restructuring)".
SFAS No. 146 requires that a liability for a cost associated with an exit or disposal activity be recognized and measured
initially at fair value
when the liability is incurred. SFAS No. 146 is effective for exit or disposal activities that are initiated after December 31,
2002, with early
application encouraged.

In November, 2002, the FASB issued FASB Interpretation No. 45 - "Guarantor's
Accounting and Disclosure Requirements for Guarantees,
Including Indirect Guarantees of Indebtedness of Others" ("FIN 45"). This interpretation elaborates on the disclosures to be made
by a
guarantor in its interim and annual financial statements about its obligations under certain guarantees that it has issued and
requires that they
be recorded at fair value. The initial recognition and measurement provisions of this interpretation are to be applied only on a
prospective basis
to guarantees issued or modified after December 31, 2002, which is in the fiscal year beginning December 1, 2002 for Corel. The
disclosure
requirements of this interpretation are effective for financial statements of interim or annual periods ending after December 15,
2002.

In December 2002, the FASB issued the SFAS No. 148, - "Accounting for Stock-Based
Compensation -- Transition and Disclosure an
amendment of FASB Statement No. 123" ("SFAS 148") This Statement amends FASB Statement No. 123, Accounting for Stock-Based
Compensation, to provide alternative methods of transition for a voluntary change to the fair value based method of accounting for
stock-based employee compensation. In addition, this Statement amends the disclosure requirements of Statement 123 to require
prominent
disclosures in both annual and interim financial statements about the method of accounting for stock-based employee compensation
and the
effect of the method used on reported results. The amendments to Statement 123 regarding disclosure are effective for financial
statements for
fiscal years ending after December 15, 2002, which is the fiscal year beginning December 1, 2002 for Corel. Corel applies APB 25
in accounting
for its employee stock option pan.

In December 2002, the CICA issued CICA 3475 - "Disposal of long-lived assets and
discontinued operations" ("CICA 3475"). This section
establishes standards for the recognition, measurement, presentation and disclosure of the disposal of long-lived assets. It also
establishes
standards for the presentation and disclosure of discontinued operations, whether or not they include long-lived assets. The
recommendations
in this section should be applied to disposal activities initiated by an enterprise's commitment to a plan on or after May 1,
2003, with early
adoption encouraged.

In December 2002, the CICA issued CICA 3063 - "Impairment of long-lived assets" ("CICA
3063"). This section establishes standards for the
recognition, measurement and disclosure of the impairment of long-lived assets. The Recommendations in this Section should be
applied
prospectively for years beginning on or after April 1, 2003, which is the fiscal year beginning December 1, 2003 for Corel, with
earlier
application encouraged.

******Item 9.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure**

None.

**PART III**

**Item 10.  Directors and
Executive Officers of the Registrant**

The following table sets forth certain information with respect to the executive
officers and directors of Corel as at February 12, 2003:



|**Name**               | **Age** | **Note** | **Position with Corel**                                              
|---------------------- | ------- | -------- | ---------------------------------------------------------------------
|Derek J. Burney        | 40      |          | President and Chief Executive Officer, Director                      
|Amanda Bedborough      | 33      |          | Executive Vice President, EMEA Operations                            
|Graham Brown           | 39      |          | Executive Vice President, Software Development                       
|W. Martin Catto        | 64      |          | Executive Vice President, Finance and Interim Chief Financial
Officer
|Brett Denly            | 42      |          | Vice President, Marketing EMEA                                       
|Randy D. Eisenbach     | 52      |          | Chief Operating Officer                                              
|Steven Houck           | 33      |          | Executive Vice President, Partner Relations                          
|Ian LeGrow             | 32      |          | Executive Vice President, New Ventures                               
|Annette McCleave       | 43      |          | Executive Vice President, Marketing                                  
|David Roberts          | 42      |          | Executive Vice President, Enterprise Sales and Professional
Services 
|Dr. Bruce Sharpe       | 48      |          | Executive Vice President, XML Content Solutions                      
|                       |         |          |                                                                      
|James C. Baillie       | 65      | 1        | Chair of the Board of Directors                                      
|Lyle B. Blair          | 72      | 1        | Director, Member of Audit Committee                                  
|David A. Galloway      | 59      | 1        | Director, Chair of Nominating and Compensation Committee             
|Hunter S. Grant        | 60      | 1        | Director, Member of Nominating and Compensation Committee            
|James L. Hopkins       | 56      | 1        | Director, Member of Audit Committee                                  
|Jean-Louis Malouin     | 59      | 1        | Director, Chair of Audit Committee                                   
|Hon. Barbara McDougall | 65      | 1        | Director, Member of Audit Committee                                  
|Germaine Gibara        | 58      | 1        | Director, Member of Nominating and Compensation Committee            

******Notes**

1. "Independent" director as defined in Section 301 of Sarbanes-Oxley Act.

****

**Derek J. Burney** joined Corel in April 1994 as the Project Leader for
CorelFLOW. Mr. Burney was appointed Technology Manager in August
1995, subsequently his title changed to Chief Technology Officer, and Director of CAD 3D in February 1996. He held this position
until October
1997 when he left Corel to work as Vice President and Regional Manager at IMSI (International Microcomputer Software Inc.) in the
product
group that purchased CorelCAD, Corel Visual CADD, CorelFLOW, Corel Lumiere Suite, Corel Click & Create and Corel Family Tree
Suite, from
Corel. Upon his return to Corel in May 1998, Mr. Burney served as Senior Vice President Engineering until December 1998, at which
time he
was appointed Executive Vice President, Engineering. Mr. Burney held this position until August 2000, at which time he was
appointed Interim
President and CEO. In October 2000, he was appointed President and Chief Executive Officer and appointed to the Board of
Directors.

**Amanda Bedborough**joined Corel in October 2001 as Executive Vice
President, EMEA Operations, responsible for leading Corel's operations
in the Europe, Middle East and Africa region. Before joining Corel, Ms. Bedborough had been Vice President, EMEA Operations for
3dfx
Interactive since April 1999. Prior to holding that position, she was employed for over five years with STB Systems, Inc., serving
as STB's
International Sales and Marketing Director from November 1996.

**Graham Brown**joined Corel in 1991. He has served as Developer and
Project Lead for CorelDRAW, Development Manager for Corel VENTURA
Publisher and WordPerfect, and Director of Software Development for WordPerfect Office. Mr. Brown served as Vice President of
Software
Development, Business Applications from June 1998 to October 2000 when he was appointed Executive Vice President, Business
Applications.
In January 2002, Mr. Brown was appointed Executive Vice President, Engineering. Mr. Brown's title has since been amended to
Executive Vice
President, Software Development without any change in responsibilities.

**W. Martin Catto** joined Corel in October 2002 as Corel's Executive
Vice President, Finance and Interim Chief Financial Officer. Prior to joining
Corel, Mr. Catto served 14 years as Senior Vice President and Chief Financial Officer of Harlequin Enterprises, the world's
largest publisher of
romance novels.

******Brett
Denly** joined Corel in October 2001 with the acquisition of Micrografx, as the Vice President of Enterprise Sales and
moved into his
current position as Vice President, Marketing EMEA when Corel integrated the enterprise and channel sales teams. Since 2001, and
prior to
Corel, Mr. Denly was the General Manager of Micrografx UK where he gained experience in sales and marketing. From 1999 to 2001,
Mr.
Denly was the Sales Director, EMEA for 3dfx Interactive. Mr. Denly also spent 10 years at Xerox, where he held a number of senior
sales and
marketing positions, including Sales Director, Retail Operations, EMEA from 1996 to 1998.

******Randy D.
Eisenbach** joined Corel in October 2002 as Corel's Chief Operating Officer. Before joining Corel, Mr. Eisenbach served as
President
and Chief Operating Officer of Enseo Corporation from May 2001 to October 2002, a company that designs and produces hardware and
software solutions that are the core infrastructure of digital servers. Prior to holding that position, Mr. Eisenbach served as
Executive Vice
President and Chief Operating Officer for STB Systems from 1992 until February 1999 and post-merger with 3dfx until May
2000.

**Steven Houck** joined Corel in 1995 as a consultant for its multimedia
division. He then moved on to become manager of Corel's OEM
Accounts. In December 1999, he was appointed to Executive Vice President, Sales. Mr. Houck held that position until October 2001
when he
was named Executive Vice President, Strategic Relations. In October 2002, Mr. Houck assumed his current position as Executive Vice
President,
Partner Relations.

**Ian LeGrow** joined Corel in 1994 and has held various positions in
product development. Mr. LeGrow was Vice President of Software
Development, CorelDRAW Graphics Suite from June 1998 to October 2000. In October 2000 he was appointed Executive Vice President,
Creative Products. In January 2002, he was appointed Executive Vice President, Product Strategy and has since assumed his current
position as
Executive Vice President, New Ventures.



**Annette McCleave** joined Corel in 1990 as a member of the technical
marketing team and later served as Product Manager for CorelDRAW
and Director of Product Management. From September 1998 to November 1999, she served as Vice President of Product Management and
was
subsequently appointed Vice President, New Ventures Division in 1999. In October 2000, she was appointed Executive Vice President,
Corporate
Marketing until February 2001. In February 2001, she was appointed Executive Vice

President, Marketing.

**David Roberts** joined Corel in August 2002 as Corel's Vice President,
Enterprise Solutions. He later moved to the position of Executive Vice
President, Enterprise Sales and Professional Services in October 2002. Prior to joining Corel, Mr. Roberts worked for Microsoft
Corporation,
where he served as General Manager, Global Accounts from 2000 to 2002 and Director Global Enterprise Partners from 1997 to
2000.

**Dr. Bruce Sharpe** joined Corel in March 2002 as Corel's Executive Vice
President, XML Content Solutions. At that time, Corel acquired
Softquad Software Ltd. where Dr. Sharpe served as the Chief Technical Officer. Dr. Sharpe has over six years experience in XML and

related technologies.

**James C. Baillie** joined the Board of Directors as Chairman in August
2000. Mr. Baillie is counsel to Torys LLP, Barristers and Solicitors, where
he practices in the general area of business law with an emphasis on financial institutions and securities law. Mr. Baillie was
the Chair of the
Ontario Securities Commission between 1978 and 1980, and was also the initial Chair of the federal government's Task Force on the
Future of
the Canadian Financial Services Sector from December 1996 to July 1997. Currently, Mr. Baillie is the Chair of the Independent
Electricity
Market Operator (Ontario) and is a director of Sun Life Financial Services of Canada Inc.

**Lyle B. Blair** has been a director since September 1989. Mr. Blair has
been Chairman of L.B. Blair Management Ltd. since 1976. L.B. Blair
Management Ltd. has owned and operated several companies, including, from 1980 to 1992, Storwal International Inc., an office
furniture
manufacturer, and Thames Valley Beverages, the largest independent Ontario Pepsi bottler, from 1976 to 1988. Prior to 1976, Mr.
Blair held
senior international positions with Procter & Gamble Inc. and Pepsico Inc.

******David A.
Galloway** joined the Board of Directors in October 2001. Mr. Galloway serves on a number of boards including Bank of
Montreal,
The E.W. Scripps Company in Cincinnati, Toromont Industries ,and The Harris Bankmont Bank in Chicago. He is also Chairman of The
Hospital
for Sick Children of Toronto, Canada. Mr. Galloway was formerly CEO of Torstar Corporation from 1988 to May 2002
..****

**Hunter S. Grant**has been a director since September 1989. Mr. Grant
was the Co-Publisher, President and General Manager of The Recorder
and Times Limited, a daily newspaper publishing company, from July 1977 until July 1998. He is currently the President of Kingmer
Holdings
Ltd., and also the President and Chairman of the Board of RipNet Limited, an Internet Provision Company in Brockville,
Ontario.

**James L. Hopkins** joined the Board of Directors in October 2001,
concurrent with Corel's completion of its acquisition of Micrografx, Inc. Prior
to the acquisition, Mr. Hopkins served as Chairman and Chief Executive Officer of Micrografx Inc., having been appointed to those
positions in
September 2000 and October 2000, respectively. Prior to that, Mr. Hopkins was Managing Director of the Austin, Texas office of
Hoak
Breedlove Wesneski & Co., a technology investment banking firm. From 1991 through May 1999, Mr. Hopkins held a variety of
positions with
STB Systems, Inc., leading to the position of Vice President of Strategic Marketing and Chief Financial Officer. Mr. Hopkins is on
the Board of
Directors for Healthaxis, Inc. in Irving, Texas, Palomar Mountain Spring Water, Inc. in Corona, CA, as well as two early-stage,
Texas-based,
privately held software companies.

**Jean-Louis Malouin** became a director in November 1997. Dr. Malouin
was professor and Dean of the Faculty of Business at the University of
Ottawa from 1992 to 2000, at the University of Alberta from 1989 to 1992  and at the Université Laval from 1966 to 1989
where he was Dean
from 1984 to 1988). He is presently Vice-president of Canada-China International Management Institute. He has served as a
management
consultant for numerous organizations and institutions, and is regularly invited to deliver graduate courses in Business Strategy.

**Hon. Barbara McDougall** became a director in April 1998. Since
February 1999, Mrs. McDougall has been President and Chief Executive
Officer of the Canadian Institute of International Affairs. Prior to that appointment, she was a private consultant on corporate
governance and
on international business. Mrs. McDougall was also chairperson of the Board of Directors of AT&T Canada. Her current corporate
directorships
include the Bank of Nova Scotia, Stelco Inc., and the Independent Order of Foresters. Prior to 1993, Mrs. McDougall was a Member
of
Parliament and Cabinet Minister in the Canadian Federal Government.

**Germaine Gibara** joined the Board of Directors in October 2001. From
1992 to 1994 and since 1995, Mrs. Gibara has been the President of
Avvio Management Inc., a management consulting firm associated with a network of consultants in Europe and the USA, serving
clients around
the world. Mrs. Gibara was Vice-President, Technology Investments, at the Caisse de dépot et placement duQuébec from
1994 to 1995, and
President of Alcan Automotive Structures, a division of Alcan Aluminum Ltd from 1991 to 1996. Since 2002, Mrs. Gibara sits on the
Board of
Sun Life Financial Services of Canada Inc. and Pechiney.

Under the Canada Business Corporations Act, at least 25% of the members of the Board
of must be resident Canadians. All directors hold
office until the next annual meeting of shareholders and until their successors have been elected. The executive officers of Corel
serve at the
discretion of the Board of Directors of Corel. There are no family relationships among any of the directors and executive officers
of Corel.



The Audit Committee reviews the internal accounting procedures of Corel and consults
with and reviews the services provided by Corel's
independent auditors.

The Nominating and Compensation Committee has a mandate to: (a) make recommendations
with respect to succession planning for senior
management and directors, (b) make recommendations with respect to compensation, stock option, stock purchase or similar plans,
and
administer such plans and grant stock options to eligible participants in the Corporation's stock option plans, (c) make
recommendations with
respect to compensation of senior officers and directors, and (d) review policy matters relating to employment, compensation and
benefits of
employees of Corel generally. The Nominating and Compensation Committee met three times in fiscal 2002 and acted by way of
resolution on
one other occasion.

Corel has a policy of compensation based on merit and performance and does not
discriminate or distinguish with respect to persons
performing similar functions. Compensation in Corel, as compared to industry surveys, is consistent with industry standards at the
level
necessary to attract and retain qualified personnel.

On January 31, 2003 Corel's Board of Directors approved the adoption of a Code of
Ethics (the"Code") applicable to Corel's principal executive
officer, principal financial officer, principal accounting officer and controller, and persons performing similar functions. The
Code complies with
regulations issued by the Securities Exchange Commission (the"SEC") under section 406 of the Sarbanes - Oxley Act of 2002. The
Code has
been designed to deter wrongdoing and promote: honest and ethical conduct, including the ethical handling of actual or apparent
conflicts of
interest between personal and professional relationships; full, fair, accurate, timely, and understandable disclosure in reports
and documents
that Corel files with, or submits to, the SEC and in other public communications made by Corel; compliance with applicable
governmental laws,
rules and regulations; the prompt internal reporting of violations of the Code to an appropriate person or persons; and
accountability for
adherence to the Code. The application of the Code to the persons it applies to may only be waived by the Board of Directors in
accordance
with SEC regulations and the Sarbanes - Oxley Act of 2002. A copy of the Code is available to the general public at Corel's
Website at
www.corel.com\investor. In addition, Corel will disclose on its website any amendment to its Code and any waiver of the Code that
applies to
its principal executive officer, principal financial officer, principal accounting officer or controller, or any person performing
similar functions.

**Section 16(a) Beneficial Ownership Reporting Compliance**

Not applicable.

********

**********Item 11.  Executive
Compensation**

The following table, presented in CDN$, in accordance with the regulations of the
Securities Act (Ontario), sets forth all compensation paid in
respect of the individuals who were, at November 30, 2002, the Chief Executive Officer, the other four most highly compensated
executive
officers of Corel and two executive officers who left the Corporation prior to November 30, 2002 (the "Named Executive
Officers").****

******Summary Compensation Table**

|                           |      |          |      |                                     |      |                  |      |                         |      | **************Long-term** | ****            
|-------------------------- | ---- | -------- | ---- | ----------------------------------- | ---- | ---------------- | ---- | ----------------------- | ---- | ------------------------- | ----------------
|                           |      |          |      | **************Annual compensation** | **** | **compensation** | ****
|                           |      |          |      |                                     |      |                  |      | **************Other**   | **** |                           |                 
|                           |      |          |      |                                     |      |                  |      | **************annual**  | **** | **Securities**            | **All**         
|**Name and principal**     | **** |          |      |                                     |      |                  |      | **************compen-** | **** | **under options**         | **other**       
|**Position**               | **** | **Year** | **** | **Salary**                          | **** | **Bonus**        | **** | **sation**              | **** | **granted (#)**           | **compensation**
|**Derek J. Burney**        |      | 2002     |      | $350,000                            |      | Nil              |      |                         |      | 339,325                   |                 
|President and              |      | 2001     |      | 303,461                             |      | 122,500          |      |                         |      | 187,500                   |                 
|Chief Executive Officer    |      | 2000     |      | 293,077                             |      | 57,884           |      |                         |      | 225,000                   |                 
|                           |      |          |      |                                     |      |                  |      |                         |      |                           |                 
|**Amanda Bedborough**      |      | 2002     |      | 467,588                             |      | Nil              |      |                         |      | 75,525                    | 22,839          
|Executive Vice President,  |      | 2001     |      | 81,054                              |      | Nil              |      |                         |      | 60,000                    |                 
|EMEA Operations            |      |          |      |                                     |      |                  |      |                         |      |                           |                 
|                           |      |          |      |                                     |      |                  |      |                         |      |                           |                 
|**Steven Houck**           |      | 2002     |      | 377,466                             |      | Nil              |      |                         |      | 43,925                    |                 
|Executive Vice President,  |      | 2001     |      | 297,409                             |      | Nil              |      |                         |      | 19,000                    |                 
|Partner Relations          |      | 2000     |      | 211,299                             |      | 65,100           |      |                         |      | 63,600                    |                 
|                           |      |          |      |                                     |      |                  |      |                         |      |                           |                 
|**Brett Denly**            |      | 2002     |      | 346,441                             |      | Nil              |      |                         |      | 20,400                    |                 
|Vice President,            |      | 2001     |      | 41,543                              |      | Nil              |      |                         |      | 7,075                     |                 
|Marketing EMEA             |      |          |      |                                     |      |                  |      |                         |      |                           |                 
|                           |      |          |      |                                     |      |                  |      |                         |      |                           |                 
|**Ian LeGrow (1)**         |      | 2002     |      | 203,676                             |      | Nil              |      | 84,469                  |      | 56,250                    |                 
|Executive Vice President,  |      | 2001     |      | 196,596                             |      | 40,000           |      |                         |      | 54,700                    |                 
|New Ventures               |      | 2000     |      | 163,269                             |      | Nil              |      |                         |      | 16,000                    |                 
|                           |      |          |      |                                     |      |                  |      |                         |      |                           |                 
|**John Blaine (2)**        |      | 2002     |      | 216,601                             |      | Nil              |      |                         |      | 100,875                   | 380,473         
|Executive Vice President,  |      | 2001     |      | 238,212                             |      | 48,000           |      |                         |      | 75,000                    |                 
|Finance, CFO and Treasurer |      | 2000     |      | 134,135                             |      | Nil              |      |                         |      | 100,000                   |                 
|                           |      |          |      |                                     |      |                  |      |                         |      |                           |                 
|**Gary Klembara (2)**      |      | 2002     |      | 457,073                             |      | Nil              |      |                         |      | 76,000                    | 322,213         
|Executive Vice President,  |      | 2001     |      | 43,290                              |      | Nil              |      |                         |      | 60,000                    |                 
|Sales                      |      |          |      |                                     |      |                  |      |                         |      |                           |                 

**Notes:**

**(1)**Ian LeGrow's other annual compensation includes tuition paid on his behalf for an Executive Master's Program.
Perquisites and other personal
benefits do not exceed the lesser of CDN $50,000 and 10% of the total of the annual salary and bonus for any of the other named

executive officers.****

****

**(2)**John
Blaine and Gary Klembara left Corel in fiscal 2002. Mr. Blaine left September 27, 2002 and Mr. Klembara left October 16,
2002.

The following table sets forth the
stock options granted under the Corel Corporation Stock Option Plan 2002 during the fiscal year ended
November 30, 2002 to the named executive officers.****

**Option Grants for the Year Ended November 30,
2002**

**and Potential Realizable Value of Each Grant of
Options**

|                  |                       |                  |               |                    | ****************Potential realizable value at
assumed annual rates of
stock price appreciation for
option term

**(CDN$)**
|----------------- | --------------------- | ---------------- | ------------- | ------------------ | --------------------------------------------------------------------------------------------------------------------------
|****              |                       |                  |               |                   
|                  | ************Number of | **% of total**   | **Exercise**  | ****              
|****              | **securities**        | **options**      | **or base**   | ****              
|                  | ******underlying**    | **granted to**   | **price**     | ****              
|                  | ******options**       | **employees in** | **($/share)** | **Expiration**    
|**Name**          | **granted (#)**       | **fiscal year**  | **(CDN$)**    | **date**           | **5% ($)**                                                                                                                
|Derek J. Burney   | 62,500                | 1.28%            | $     2.55    | February 6, 2006   | 34,346                                                                                                                    
|                  | 92,625                | 1.90%            | $     2.30    | April 3, 2006      | 45,911                                                                                                                    
|                  | 89,625                | 1.84%            | $     1.27    | July 3, 2006       | 24,530                                                                                                                    
|                  | 94,575                | 1.94%            | $     1.22    | September 30, 2006 | 24,865                                                                                                                    
|Amanda Bedborough | 20,000                | 0.41%            | $     2.55    | February 6, 2006   | 10,990                                                                                                                    
|                  | 18,200                | 0.37%            | $     2.30    | April 3, 2006      | 9,021                                                                                                                     
|                  | 16,900                | 0.35%            | $     1.27    | July 3, 2006       | 4,625                                                                                                                     
|                  | 18,425                | 0.38%            | $     1.22    | September 30, 2006 | 4,844                                                                                                                     
|Steven Houck      | 6,950                 | 0.14%            | $     2.55    | February 6, 2006   | 2,441                                                                                                                     
|                  | 17,875                | 0.37%            | $     2.30    | April 3, 2006      | 5,509                                                                                                                     
|                  | 9,325                 | 0.19%            | $     1.27    | July 3, 2006       | 1,668                                                                                                                     
|                  | 9,775                 | 0.20%            | $     1.22    | September 30, 2006 | 1,622                                                                                                                     
|Brett Denly       | 3,725                 | 0.43%            | $     2.55    | February 6, 2006   | 2,047                                                                                                                     
|                  | 5,100                 | 0.51%            | $     2.30    | April 3, 2006      | 2,528                                                                                                                     
|                  | 5,550                 | 0.45%            | $     1.27    | July 3, 2006       | 1,519                                                                                                                     
|                  | 6,025                 | 0.45%            | $     1.22    | September 30, 2006 | 1,584                                                                                                                     
|Ian LeGrow        | 18,750                | 0.39%            | $     2.55    | February 6, 2006   | 10,304                                                                                                                    
|                  | 20,700                | 0.43%            | $     2.30    | April 3, 2006      | 10,260                                                                                                                    
|                  | 17,400                | 0.36%            | $     1.27    | July 3, 2006       | 4,762                                                                                                                     
|                  | 17,700                | 0.36%            | $     1.22    | September 30, 2006 | 4,654                                                                                                                     
|John Blaine(1)    | 25,850                | 0.53%            | $     2.55    | March 30, 2003     | 14,206                                                                                                                    
|                  | 21,000                | 0.57%            | $     2.30    | March 30, 2003     | 13,755                                                                                                                    
|                  | 17,400                | 0.50%            | $     1.27    | March 30, 2003     | 6,637                                                                                                                     
|                  | 23,025                | 0.47%            | $     1.22    | March 30, 2003     | 6,057                                                                                                                     
|Gary Klembara(1)  | N/A                   | N/A              | N/A           | N/A                | N/A                                                                                                                       

(1)John Blaine
and Gary Klembara left Corel in fiscal 2002. Mr. Blaine left September 27, 2002 and Mr. Klembara left October 16, 2002.

The following table sets forth each exercise of stock options under the Corel
Corporation Stock Option Plan during the fiscal year ended
November 30, 2002 by the named executive officers.

**Aggregated Option Exercises During the Fiscal Year
Ended**

**November 30, 2002 and Fiscal Year-End Option
Values**

|                  |      |                     |      |               |      |                               |      | ****************Value of unexercised
|----------------- | ---- | ------------------- | ---- | ------------- | ---- | ----------------------------- | ---- | ------------------------------------
|****              |      |                     |      |               |      | ************Unexercised       | **** | **in-the-money**                    
|****              |      | ******Securities**  | **** | **Aggregate** | **** | **options at**                | **** | **options at**                      
|****              |      | ******acquired**    | **** | **value**     | **** | **Nov. 30, 2002**             | **** | **Nov. 30, 2002**                   
|****              |      | ******on exercise** | **** | **realized**  | **** | **Exercisable/Unexercisable** | **** | **Exercisable/Unexercisable**       
|**Name**          | **** | **(#)**             | **** | **(CDN$)**    | **** | **(#)**                       | **** | **(CDN$)**                          
|Derek Burney      |      |                     |      |               |      | 479,110 / 288,715             |      | $76,402 / $152,804                  
|Amanda Bedborough |      |                     |      |               |      | 64,510 / 69,015               |      | $14,648 / $29,293                   
|Steven Houck      |      |                     |      |               |      | 90,912 / 35,613               |      | $5,090* / $10,177*                  
|Brett Denly       |      |                     |      |               |      | 11,518 / 15,957               |      | $4,800 / $9,599                     
|Ian LeGrow        |      |                     |      |               |      | 133,050 / 68,450              |      | $14,564 / $29,128                   
|John Blaine(1)    |      |                     |      |               |      | 75,867 / 0                    |      | $39,259 / $0                        
|Gary Klembara(1)  |      | 11,700              |      | $   1,563     |      | 0 / 0                         |      | $0 / $0                             

(*) in US$.

(1)John Blaine and Gary Klembara left Corel in fiscal 2002. Mr. Blaine left
September 27, 2002 and Mr. Klembara left October 16, 2002.

All options are exercisable as to one-third on each of the date of original grant and
the first and second anniversaries thereof, except for
options granted prior to October 2000, which are exercisable when granted (with the exception of options granted during an
employee's
probationary period, usually six months in length).

**Compensation of Directors**

Directors who are salaried officers of Corel receive no compensation for serving on
the Board of Directors. The other directors (the
"independent directors"), of whom there are currently seven, receive an annual retainer of CDN $16,000 (CDN $25,000 for Board
Chair) and a
fee of CDN $1,000 (CDN $2,000 for Board and Committee Chairs and Board Vice-Chair) for each Board of Directors and Committee
meeting
they attend, and are reimbursed for traveling costs and other out-of-pocket expenses incurred in attending such
meetings.

On August 15, 2000, a Deferred Share Units Plan ("DSP") for non-employee members of
the Board of Directors was established by Corel.
Under the DSP, each director may elect to be paid up to 100% of his or her compensation in deferred share units ("DSUs"). A DSU is
credited
by means of a bookkeeping entry in the books of Corel to an account in the name of the director and payable only at the end of his
or her
mandate on the Board of Directors, in cash or by way of Common Shares equal in number to the DSUs credited to the director's
account, based
on the market value of the Common Shares at that time. The number of DSUs credited to each director is determined on the basis of
the
portion elected by each director of the amount payable to such director for the director's retainer and meeting fees for each
financial quarter,
divided by the value of a DSU (which is equal to the closing price of the Common Shares on The Toronto Stock Exchange (TSX) on the
third
trading day after the announcement of the results for such financial quarter). DSUs are credited with dividend equivalents when
dividends are
paid on Common Shares and such dividend equivalents are converted into additional DSUs. Additional compensation consisting of
options for
Common Shares may be awarded to non-employee directors as the Board of Directors deems appropriate.

The total compensation earned by non-employee directors in the financial year ending
November 30, 2002 for duties performed during that
fiscal year was CDN $266,500. As of February 12, 2002, a total of 171,355 units have been credited to
directors.****

**Employment Contracts and Termination of Employment and Change-in-Control
Arrangements**

Corel has entered into an employment agreement with Derek J. Burney dated as of
October 17, 2001. The employment agreement sets forth
the remuneration of Mr. Burney, including salary, bonus, vacation entitlement, car allowance and ancillary perquisites. Mr. Burney
receives an
annual base salary of CDN $350,000. Mr. Burney may terminate his employment with Corel at any time by giving 30 days notice of
termination
to Corel. If Corel terminates Mr. Burney without cause or good reason (as defined within the employment agreement), Corel will pay
severance
in the amount of 24 months' salary, (the "severance period"). If Mr. Burney is subsequently employed by another party for any
portion of the
severance period, the severance payment will be reduced by 50% during the period in which Mr. Burney has obtained alternate
employment.
Mr. Burney is also entitled to incentive payments earned during the severance period and accelerated vesting of any options that
vest within the
severance period. On a change of control (as defined within the employment agreement), if Mr. Burney is terminated, he is entitled
to an
amount equivalent to 24 months' salary along with the other benefits described above.

Corel entered into an employment agreement with Amanda Bedborough dated as of August
1, 2001. The employment agreement sets forth
the remuneration of Ms. Bedborough, including salary, bonus, vacation entitlement, car allowance and ancillary perquisites. Ms.
Bedborough
may terminate her employment with Corel at any time by giving 2 months notice of termination to Corel. If Corel terminates Ms.
Bedborough
without cause, Corel will pay severance of a minimum of six months base salary. If the employee is terminated because the employee
becomes
redundant, Ms. Bedborough shall receive an additional one months base salary per year of completed service to a maximum of 12
months base
(the "severance period").

Corel entered into an employment agreements with each of Steve Houck and Ian LeGrow
dated as of April 8, 2002 and April 17, 2002
respectively. Each employment agreement sets forth the remuneration of the individuals, including salary, bonus, vacation
entitlement, car
allowance and ancillary perquisites, as applicable. Each of these individuals may terminate their respective employment with Corel
at any time
by giving 30 days notice of termination to Corel. If Corel terminates any of these individuals without cause or good reason (as
defined within
the employment agreement), Corel will pay severance in the amount of 12 months' salary (the "severance period"). If that
individual is
subsequently employed by another party for any portion of the severance period, Corel will pay a lump sum payment equivalent to 6
months'
salary immediately upon termination and any additional severance payment will be reduced by 50% during the period in which that
individual
has obtained alternate employment. The individuals are also entitled to accelerated vesting of any options granted on or after
January 28, 2002
that vest within the severance period. On a change of control (as defined within the employment agreement), if that individual is
terminated, he
is entitled to an amount equivalent to 6 months' salary along with the other benefits described above.

Corel entered into an employment agreement with John Blaine dated as of January 8,
2002. Mr. Blaine left Corel on September 27, 2002 and
Corel entered into a settlement and release agreement dated as of October 3, 2002. Pursuant to the settlement agreement, Mr.
Blaine received
a lump sum payment for 18 months' salary, a lump sum payment equivalent to 12 months' salary was paid immediately upon termination
and
any additional severance payment will be reduced by 50% during the period in which Mr. Blaine has obtained alternate employment.
Mr. Blaine
was also entitled to accelerated vesting of any options granted on or after January 28, 2002.

Corel entered into an employment agreement with Gary Klembara dated September 10,
2001. Mr. Klembara left Corel on October 16, 2002
and Corel entered into a settlement agreement dated November 4, 2002. Pursuant to the settlement agreement, Mr. Klembara received
a lump
sum payment for six months' salary. Mr. Klembara also received certain incentive and commission amounts as part of his lump sum
payment.

******Item 12.
Security Ownership of Certain Beneficial Owners and Management**

The following table sets forth, as of****February 12, 2003, certain information with
respect to the beneficial ownership of Common Shares
(Company's only class of currently voting securities) by (1) each person known by Corel to be a beneficial owner of more than 5%
of its
outstanding Common Shares, (2) by each director and named executive officer and (3) by all directors and executive officers as a
group.

|**Name and address of**

**beneficial owner (2)** |  | **Common shares beneficially
owned** | **** | **Exercisable**

**options** |  | **Percentage**

**owned (1)**
|------------------------------------------------- |  | ------------------------------------ | ---- | ---------------------------- |  | -----------------------------
|                                                  |  |                                      |      |                              |  |                              
|Derek J. Burney                                   |  | 35,000                               |      | 560,818                      |  | *                            
|Amanda Bedborough                                 |  | 100                                  |      | 85,577                       |  | *                            
|Brett Denly                                       |  |                                      |      | 14,918                       |  | *                            
|Steven Houck                                      |  | 5,000                                |      | 107,521                      |  | *                            
|Ian LeGrow                                        |  | 7,000                                |      | 134,200                      |  | *                            
|James C. Baillie                                  |  | 25,000                               |      | 15,837                       |  | *                            
|Lyle B. Blair                                     |  |                                      |      | 25,837                       |  | *                            
|David A. Galloway                                 |  |                                      |      | 7,503                        |  | *                            
|Germaine Gibara                                   |  |                                      |      | 7,503                        |  | *                            
|Hunter S. Grant                                   |  | 5,000                                |      | 25,837                       |  | *                            
|James Hopkins                                     |  | 267,463                              |      | 12,503                       |  | *                            
|Jean-Louis Malouin                                |  | 1,000                                |      | 25,837                       |  | *                            
|Barbara McDougall                                 |  |                                      |      | 25,837                       |  | *                            
|Directors and Executive Officers                  |  | 347,563                              |      | 1,238,023                    |  | *                            

*     Indicates less than 1%

**Notes**

(1)   Percentage ownership is calculated using as a denominator the total number of
Common Share outstanding plus the number of Common
Shares which the beneficial owner indicated has a right to acquire pursuant to options currently exercisable or exercisable within
60 days.

(2) The address for each director and executive officer is Corel Corporation, 1600
Carling Avenue, Ottawa, Ontario, Canada, K1Z 8R7.

Statements contained in the table as to securities beneficially owned by directors,
executive officers and beneficial owners of more than 5% of
Corel's outstanding Common Shares are, in each instance, based upon information obtained from such directors and executive
officers. Statements
contained in the table as to securities beneficially owned by beneficial owners of holders of 5% or more of Corel's outstanding
Common Shares
are based on Schedules 13G or 13D filed by such persons with the U.S. Securities and Exchange Commission.

******SECURITIES
AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS**

(in thousands, except in per share data)

|**Plan category**                                          | **Number of securities to be
issued upon exercise of
outstanding options,
warrants and rights** | **Weighted-average exercise
price of outstanding options
warrants and rights** | **Number of securities
remaining available for
future issuance under equity
compensation plans
(excluding securities
reflected in column (a))**
|---------------------------------------------------------- | ----------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------ | -----------------------------------------------------------------------------------------------------------------------------------------------
|Equity compensation plans
approved by security holders     | 7,562                                                                                           | $3.29                                                                          | 24,300                                                                                                                                         
|Equity compensation plans not
approved by security holders |                                                                                                 |                                                                                |                                                                                                                                                
|                                                           | 7,562                                                                                           | $3.29                                                                          | 24,300                                                                                                                                         

******Item 13.
Certain Relationships and Related Transactions**

None

**Item 14.  Controls and Procedures**

(a) Evaluation of disclosure controls and procedures. Corel's chief executive officer
and chief financial officer have evaluated the effectiveness of
Corel's "disclosure controls and procedures" (as defined in the Securities Exchange Act of 1934 Rules 13a-14(c) and 15d-14(c)) as
of February
10, 2002, (the "Evaluation Date"). Based on such review, they have concluded that, as of the Evaluation Date, Corel's disclosure
controls and
procedures were effective to ensure that material information relating to Corel and its consolidated subsidiaries would be made
known to them
by others within those entities.

(b) Changes in internal controls. There were no significant changes in Corel's
internal controls or to the knowledge of Corel's chief executive
officer and chief financial officer, in other factors that could significantly affect Corel's internal controls subsequent to the
Evaluation Date.

(c) Limitations on the Effectiveness of Controls. Corel's management including the CEO
and CFO, does not expect that our Disclosure Controls
will prevent all error and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable,
not absolute,
assurance that the objectives of the control system are met.

******PART
IV**

******Item 15.
Exhibits, Financial Statement Schedules and Reports on Form 8-K**

(a) The following documents are filed as a part of this Annual Report on Form 10-K.



**1. Financial Statements**

**2. Financial Statements Schedule**

The following financial statements schedule and related auditors' report are filed as
part of this report herewith as Exhibits 99.1 and 99.2:

**Schedule II  Valuation and Qualifying Accounts for the years ended
November 30, 2002, 2001 and 2000**

All other schedules for which
provision is made in the applicable accounting regulations of the Securities and Exchange Commission are not
required under the related instructions or are inapplicable, and therefore have been omitted.

**3. Exhibits**

|Exhibit

Number |                                                                                                                                                                                         
|--------------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|3.1             | Certificate and Articles of Incorporation. (1)                                                                                                                                          
|3.2             | By-law No. 6. (1)                                                                                                                                                                       
|3.3             | Certificate and Articles of Amalgamation of Corel Corporation and Corel Computer
Corp. (1)                                                                                              
|3.4             | Amendment to Articles of Incorporation. (6)                                                                                                                                             
|4.1             | Specimen of Common Share Certificate. (1)                                                                                                                                               
|4.2             | Shareholder Rights Plan Agreement dated February 11, 1999, as amended and restated as
of March 31, 1999, by and between
Corel and Montreal Trust Company of Canada, as rights agent. (3)
|10.1            | Corel Corporation Stock Option Plan, as amended. (4)                                                                                                                                    
|10.2            | Corel Corporation Stock Option Plan 2000. (4)                                                                                                                                           
|10.3            | Share Purchase Agreement dated September 18, 2000 by and between Corel and Albans
Investments Limited. (6)                                                                              
|10.4            | Registration Rights Agreement dated September 18, 2000 by and between Corel and
Albans Investments Limited. (6)                                                                         
|10.5            | Escrow Agreement dated September 18, 2000 by and between Corel, Albans Investments
Limited and Epstein Becker & Green,
P.C., as escrow agent. (6)                                       
|10.6            | Form of Share Purchase Warrant between Corel and each of Albans Investment Limited,
Whale Securities Co., L.P., and Richard
Geyser. (6)                                                 
|10.7            | Share Purchase Agreement dated October 2, 2000 by and between Corel, Microsoft
Licensing, Inc. and

Microsoft Corporation. (5)                                                          
|10.8            | Registration Rights Agreement dated October 2, 2000 by and between Corel, Microsoft
Licensing, Inc.

and Microsoft Corporation. (5)                                                     
|10.9            | Technology and Services Agreement dated October 2, 2000 by and between Corel and
Microsoft Corporation. (5)                                                                             
|10.10           | Employment Agreement dated as of October 17, 2001 between Corel Corporation and Derek
J. Burney. (9)                                                                                    
|10.11           | Merger Agreement dated as of July 16, 2001 as amended and restated between Corel,
Calgary I Acquisition Corp. and
Micrografx, Inc. (7)                                                  
|10.12           | Participation Rights Agreement dated as of October 30, 2001 between Corel and The
Bank of New York, as Trustee. (9)                                                                     
|10.13           | Merger Agreement dated as of August 7, 2001 as amended and restated between Corel,
Calgary II Acquisition Corp. and
SoftQuad Software, Ltd. (8)                                         
|10.14           | Employment Agreement made as of August 1, 2001 between Corel Corporation and Amanda
Bedborough. (2)                                                                                     
|10.15           | Employment Agreement dated as of April 18, 2002 between Corel Corporation and Steven
Houck. (2)                                                                                         
|10.16           | Employment Agreement dated as of April 17, 2002 between Corel Corporation and Ian
LeGrow. (2)                                                                                           
|21.1            | Subsidiaries of Registrant. (2)                                                                                                                                                         
|23.1            | Consent of PricewaterhouseCoopers LLP Chartered Accountants. (2)                                                                                                                        
|99              | 906 Certifications (2)                                                                                                                                                                  
|99.1            | Financial Statement Schedule - Schedule II - Valuation and Qualifying Accounts for
the years ended November 30, 2002, 2001
and 2000. (2)                                                
|99.2            | Auditors' Report to the Board of Directors on Financial Statement Schedules.
(2)                                                                                                        
|99.3            | Code of conduct and ethics for Senior Financial Officers.
(2)                                                                                                                           

(1) Previously filed as an exhibit to Corel's Registration Statement No. 33-50886 and
incorporated herein by reference

(2) Filed herewith

(3) Previously filed as an exhibit to Corel's Registration Statement No. 000-20562 and
incorporated herein by reference

(4) Previously filed as an exhibit to Corel's Registration Statement No. 333-42790 and
incorporated herein by reference

(5) Previously filed as an exhibit to the Current Report on Form 8-K dated October 2,
2000 and incorporated herein by reference

(6) Previously filed as an exhibit to the Annual report on Form 10-K dated February
21, 2001 and incorporated herein by reference

(7) Previously filed as an exhibit to the Current Report on Form 8-K dated July 16,
2001 and incorporated herein by reference

(8) Previously filed as Annex A to Corel's Registration Statement 333-69868 and
incorporated herein by reference

(9) Previously filed as an exhibit to the Annual report on Form 10-K dated February
27, 2002 and incorporated herein by reference

(b)  Reports on Form 8-K

None

(c) Exhibits

The response to this portion of Item 15 is submitted as a separate section of this
report.

(d) Financial Statement Schedules

The response to this portion of Item 15 is submitted as a separate section of this
report.

**********SIGNATURES**

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of
1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized, in the City of Ottawa, Province of Ontario, Canada, on
February 18, 2003.

| | COREL
CORPORATION
| | -----------------
| |                  
| | By               
| |                  
| |                  
| |                  

**POWER OF ATTORNEY**

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below
constitutes and appoints Derek J. Burney and W.
Martin Catto, his or her Attorneys-in-fact, each with full power of substitution, for him or her in any and all capacities, to
sign any amendments
to this Annual Report on Form 10-K, and to file the same, with exhibits thereto and other documents in connection therewith, with
the
Securities and Exchange Commission, hereby ratifying and confirming all that each said Attorney-in-fact, or his or her substitute
or substitutes,
may do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has
been signed below by the following persons on behalf of
the registrant in the capacities indicated on February 18, 2003.

|**Signature**            |  | **Title**                                      
|------------------------ |  | -----------------------------------------------
|*/s/ James C. Baillie*   |  | Chair of the Board of Directors                
|James C. Baillie         |  |                                                
|                         |  |                                                
|**/s/ Derek J. Burney    |  | President and Chief Executive Officer, Director
|Derek J. Burney          |  |                                                
|                         |  |                                                
|*/s/ Lyle B. Blair*      |  | Director                                       
|Lyle B. Blair            |  |                                                
|                         |  |                                                
|*/s/ David Galloway*     |  | Director                                       
|David Galloway           |  |                                                
|                         |  |                                                
|*/s/ Hunter S. Grant*    |  | Director                                       
|Hunter S. Grant          |  |                                                
|                         |  |                                                
|*/s/ James Hopkins*      |  | Director                                       
|James Hopkins            |  |                                                
|                         |  |                                                
|*/s/ Jean-Louis Malouin* |  | Director                                       
|Jean-Louis Malouin       |  |                                                
|                         |  |                                                
|*/s/ Germaine Gibara*    |  | Director                                       
|Germaine Gibara          |  |                                                
|                         |  |                                                
|*/s/ Barbara McDougall*  |  | Director                                       
|Barbara McDougall        |  |                                                
|                         |  |                                                
|*/s/ W. Martin Catto*    |  | Executive Vice President, Finance              
|W. Martin Catto          |  | Interim Chief Financial Officer                
|                         |  | (principal
financial and accounting officer)   

******Schedule II - 1**

**Index to Exhibits**

|********Exhibit |                                                                                                                                                                                         
|--------------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|3.1             | Certificate and Articles of Incorporation. (1)                                                                                                                                          
|3.2             | By-law No. 6. (1)                                                                                                                                                                       
|3.3             | Certificate and Articles of Amalgamation of Corel Corporation and Corel Computer
Corp. (1)                                                                                              
|3.4             | Amendment to Articles of Incorporation. (6)                                                                                                                                             
|4.1             | Specimen of Common Share Certificate. (1)                                                                                                                                               
|4.2             | Shareholder Rights Plan Agreement dated February 11, 1999, as amended and restated as
of March 31, 1999, by and between
Corel and Montreal Trust Company of Canada, as rights agent. (3)
|10.1            | Corel Corporation Stock Option Plan, as amended. (4)                                                                                                                                    
|10.2            | Corel Corporation Stock Option Plan 2000. (4)                                                                                                                                           
|10.3            | Share Purchase Agreement dated September 18, 2000 by and between Corel and Albans
Investments Limited. (6)                                                                              
|10.4            | Registration Rights Agreement dated September 18, 2000 by and between Corel and
Albans Investments Limited. (6)                                                                         
|10.5            | Escrow Agreement dated September 18, 2000 by and between Corel, Albans Investments
Limited and Epstein Becker & Green, P.C.,
as escrow agent. (6)                                       
|10.6            | Form of Share Purchase Warrant between Corel and each of Albans Investment Limited,
Whale Securities Co., L.P., and Richard
Geyser. (6)                                                 
|10.7            | Share Purchase Agreement dated October 2, 2000 by and between Corel, Microsoft
Corporation and Microsoft Licensing, Inc.(5)

Microsoft Corporation. (5)Microsoft (                      
|10.8            | Registration Rights Agreement dated October 2, 2000 by and between Corel, Microsoft
Corporation and Microsoft Licensing, Inc.(5)                                                        
|10.9            | Technology and Services Agreement dated October 2, 2000 by and between Corel and
Microsoft Corporation. (5)                                                                             
|10.1            | Employment Agreement dated as of October 17, 2001 between Corel and Derek J. Burney.
(9)                                                                                                
|10.11           | Merger Agreement dated as of July 16, 2001 as amended and restated between Corel,
Calgary I Acquisition Corp. and Micrografx,
Inc. (7)                                                  
|10.12           | Participation Rights Agreement dated as of October 30, 2001 between Corel and The
Bank of New York, as Trustee. (9)                                                                     
|10.13           | Merger Agreement dated as of August 7, 2001 as amended and restated between Corel,
Calgary II Acquisition Corp. and SoftQuad
Software, Ltd. (8)                                         
|10.14           | Employment Agreement made as of August 1, 2001 between Corel Corporation and Amanda
Bedborough. (2)                                                                                     
|10.15           | Employment Agreement dated as of April 18, 2002 between Corel Corporation and Steven
Houck. (2)                                                                                         
|10.16           | Employment Agreement dated as of April 17, 2002 between Corel Corporation and Ian
LeGrow. (2)                                                                                           
|21.1            | Subsidiaries of Registrant. (2)                                                                                                                                                         
|23.1            | Consent of PricewaterhouseCoopers LLP Chartered Accountants. (2)                                                                                                                        
|99.0            | Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906
of the Sarbanes-Oxley Act of 2002.(2)                                                              
|99.1            | Financial Statement Schedule - Schedule II - Valuation and Qualifying Accounts for
the years ended November 30, 2002, 2001 and
2000. (2)                                                
|99.2            | Auditors' Report to the Board of Directors on Financial Statement Schedules.
(2)                                                                                                        

**********Form of Certification on Form
10-K**

I, Derek Burney, certify that:

1.I have reviewed this annual report on Form 10-K of Corel Corporation ("the
Registrant");



2. Based on my knowledge, this annual report does not contain any untrue statement of
a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to
the period
covered by this annual report;

3. Based on my knowledge, the financial statements, and other financial information
included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in
this annual report;

4. The Registrant's other certifying officer and I are responsible for establishing
and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the Registrant and we have:

a) designed such disclosure controls and procedures to ensure that
material information relating to the Registrant, including its
consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this
annual report
is being prepared;

b) evaluated the effectiveness of the Registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date
of this annual report (the "Evaluation Date"); and

c) presented in this annual report our conclusions about the effectiveness of
the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;

5. The Registrant's other certifying officer and I have disclosed, based on our most
recent evaluation, to the Registrant's auditors and the audit
committee of the Registrant's board of directors (or persons performing the equivalent functions):

a) all significant deficiencies in the design or operation of internal controls
which could adversely affect the Registrant's ability to record,
process, summarize and report financial data and have identified for the Registrant's auditors any material weaknesses in internal
controls; and

b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the Registrant's
internal controls;

6. The Registrant's other certifying officer and I have indicated in this annual
report whether or not there were significant changes in internal controls
or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation,
including any corrective
actions with regard to significant deficiencies and material weaknesses.

February 18, 2003

|/s/ Derek Burney
|----------------

Derek Burney

President and Chief Executive Officer



**Form of Certification on Form 10-K**

I, W. Martin Catto, certify that:

1.I have reviewed this annual report on Form 10-K of Corel Corporation ("the
Registrant");

2. Based on my knowledge, this annual report does not contain any untrue statement of
a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to
the period
covered by this annual report;

3. Based on my knowledge, the financial statements, and other financial information
included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in
this annual report;



4. The Registrant's other certifying officer and I are responsible for establishing
and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the Registrant and we have:

a) designed such disclosure controls and procedures to ensure that material
information relating to the Registrant, including its
consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this
annual report
is being prepared;

b) evaluated the effectiveness of the Registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date
of this annual report (the "Evaluation Date"); and

c) presented in this annual report our conclusions about the effectiveness of
the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;

5. The Registrant's other certifying officer and I have disclosed, based on our most
recent evaluation, to the Registrant's auditors and the audit
committee of the Registrant's board of directors (or persons performing the equivalent functions):

a) all significant deficiencies in the design or operation of internal controls
which could adversely affect the Registrant's ability to record,
process, summarize and report financial data and have identified for the Registrant's auditors any material weaknesses in internal
controls; and

b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the Registrant's
internal controls;



6. The Registrant's other certifying officer and I have indicated in this annual
report whether or not there were significant changes in internal controls
or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation,
including any corrective
actions with regard to significant deficiencies and material weaknesses.

February 18, 2003

|/s/ W. Martin Catto
|-------------------

W. Martin Catto

Executive Vice President, Finance and Interim Chief Financial
Officer****