<PAGE>
 
================================================================================
                                 UNITED STATES
                      SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D.C. 20549

                                   FORM 10-K

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

                  FOR THE FISCAL YEAR ENDED NOVEMBER 30, 1997

                        Commission File Number 0-20562

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

                     CANADA                            NOT APPLICABLE
         (State or other jurisdiction of              (I.R.S. Employer
          incorporation or organization)             Identification No.)
                                                
    1600 CARLING AVENUE, OTTAWA, ONTARIO, CANADA            K1Z 8R7
     (Address of principal executive offices)             (Zip Code)

Registrant's telephone number, including area code:  (613) 728-8200

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

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

                  COMMON SHARES WITHOUT NOMINAL OR PAR VALUE
                               (Title of Class)

  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 is not contained herein, and will not be contained, to the
best of the 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 ]

The aggregate market value of Common Shares held by non-affiliates of the
registrant, based on the last reported sales price of the Common Shares as
reported on the NASDAQ National Market on February 26, 1998 was $126,110,771.
As of that date 59,346,217 Common Shares were issued and outstanding.

                      DOCUMENTS INCORPORATED BY REFERENCE

Portions of the 1997 Annual Report to Shareholders are incorporated by reference
                             into Parts II and IV.

================================================================================
<PAGE>
 
                               COREL CORPORATION

                                   FORM 10-K

                  FOR THE FISCAL YEAR ENDED NOVEMBER 30, 1997

                                     INDEX


<TABLE>

<S>        <C>                                                                            <C>
PART I
Item 1.    Business.........................................................................   3
Item 2.    Properties.......................................................................  11
Item 3.    Legal Proceedings................................................................  11
Item 4.    Submission of Matters to a Vote of Security Holders..............................  12

PART II
Item 5.    Market for the Registrant's Common Equity and Related Stockholder Matters........  13
Item 6.    Selected Financial Data..........................................................  15
Item 7.    Management's Discussion and Analysis of Financial Condition and Results of.......  15
           Operations
Item 8.    Financial Statements and Supplementary Data......................................  15
Item 9.    Changes in and Disagreements with Accountants on Accounting and Financial........  16
           Disclosures

PART III
Item 10.   Directors and Executive Officers of the Registrant...............................  17
Item 11.   Executive Compensation...........................................................  19
Item 12.   Security Ownership of Certain Beneficial Owners and Management...................  23
Item 13.   Certain Relationships and Related Transactions...................................  23

PART IV
Item 14.   Exhibits, Financial Statement Schedules, and Reports on Form 8-K.................  24
Signatures..................................................................................  25
</TABLE>



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

                                       2
<PAGE>
 
                                    PART I
ITEM 1.  BUSINESS

GENERAL
________________________________________________________________________________

The Company was incorporated as Corel Systems Corporation under the Canada
Business Corporations Act by Articles of Incorporation dated May 29, 1985. The
name of the Company was changed to Corel Corporation in May 1992.  For the
purposes of this report, unless the context otherwise requires, "Corel" refers
to the consolidated operations of Corel Corporation and its wholly owned
subsidiaries, Corel Corporation Limited, Corel Computer Corporation, Corel
International Corporation, Corel Inc. and Corel Corporation (U.S.A.), while "the
Company" refers to the parent, Corel Corporation.

Corel develops, manufactures, licenses, sells and supports a wide range of
software products including graphics applications, business and consumer
productivity applications, multimedia titles and communications applications.
Corel is also engaged in the research and development of advanced technology
software such as products for the new Webtop environment, which includes Java,
XML and HTML.   Corel products are available for users of most PCs, including
International Business Machines Corporation ("IBM/(R)/") and IBM-compatible PCs,
Apple Computer Inc.'s ("Apple") Macintosh/(R)/ ("Mac"), and UNIX-based systems.

During the second quarter, Corel recorded a nonrecurring charge totaling
$113.7 million. The charge consisted of write-downs of previously capitalized
acquired technologies for the WordPerfect family of software programs and
deferred development costs in the form of advance royalties paid to various
developers of the Corel CD HOME Collection and Corel Medical Series software.
Both multimedia product lines were sold to Hoffman + Associates Inc. of
Toronto for cash, a minority interest in the acquiring company and an ongoing
royalty stream over a period of time. During the same quarter, Corel announced
the formation of a spin-off company, Corel Computer Corporation. This
subsidiary develops and sells video and network computer products, and offers
turnkey computing and communication solutions for corporate users.

On September 30, 1997, Corel sold various consumer product software lines to
IMSI (International Microcomputer Software, Inc.).  These lines included
CorelCAD, Corel Visual CADD, CorelFLOW, Corel Lumiere Suite, Corel Click &
Create and Corel Family Tree Suite.  Corel sold these lines for cash, marketable
securities in the acquiring company and an ongoing royalty stream over a period
of time.

On January 20, 1998, Corel issued a press release announcing its financial
results for the fourth quarter and the restatement of financial information for
the first three quarters of fiscal 1997. The restatement related to certain Java
technology exchange transactions undertaken by Corel during the first three
quarters of the year. In that press release, Corel reported, in part, that the
restatement had the effect of eliminating revenues and the amortization of
related costs previously reported in connection with those transactions. The
press release stated that the accounting treatment of these transactions in the
first three quarters was considered appropriate at the time and that the
treatment adopted in the restatement resulted from further consideration by
Corel's auditors in connection with the year end audit. The release, which was
included as an exhibit to a Report on Form 8-K filed by Corel with the
Securities and Exchange Commission in January 1998, provided further information
concerning the effects of the restatement on previously reported quarterly
results and results for the fiscal year. See "Legal Proceedings."

Corel's business strategy emphasizes the development of a broad line of PC
software application products for business and personal use, marketed through
multiple channels of distribution. Corel is divided into three broad areas: the
Software Development Group; the Sales and Customer Support Group; and the
Operations and Administration Group.

The Software Development Group consists of four divisions, each responsible for
a particular area of software development. The Graphics Software Division
develops graphics software applications and products designed for the business,
academic and home markets. The Productivity Applications Division creates
business productivity applications and products designed for the business,
academic and home markets. The Multimedia Software Division develops the CD-ROM
Photo titles and the small computer system interface ("SCSI) software.  The
Communications Applications Division, operating as Corel Computer Corporation,
develops video communication software and hardware.

                                       3
<PAGE>
 
The Sales and Customer Support Group is responsible for building long-term
business relationships with customers. This group is organized to serve three
customer types: end-users, original equipment manufacturers ("OEMs") and
enterprises. The group also focuses directly on large organizations, offering
tailored license programs and organization-wide support. The group manages the
channels that serve customers by working with distributors, resellers and OEMs.
The group supports Corel's products with technical support and customer service
for end-users and organizations.

The Operations and Administration Group is responsible for managing business
operations and overall business planning. This includes the process of
manufacturing and delivering finished goods and licenses, and corporate
functions such as finance, administration, human resources and legal.

 
PRODUCTS                                          GRAPHICS SOFTWARE APPLICATIONS
________________________________________________________________________________

The Graphics Software Division develops graphics applications software, which
provides the PC with instructions for creating and manipulating graphics, text,
or numbers. Corel's graphics software applications are designed to meet the
needs of general business users, graphics professionals, and home PC users.
Primary examples of graphics software applications include illustration, photo
editing and painting, 3D rendering, and animation programs. Corel's graphics
software applications programs are developed principally for the Microsoft
Corporation ("Microsoft/(R)/") Windows/TM/ ("Windows") and Macintosh operating
systems.

CORELDRAW.  CorelDRAW/TM/ is a suite of software programs featuring integration 
of all of the major graphics functions that share a common "look and feel".
CorelDRAW modules feature common commands and extensive use of object linking
and embedding ("OLE") cross-application capabilities. CorelDRAW is available in
several versions, with certain combinations of modules, supporting utilities,
clipart images, fonts, photos and 3D models available for the various operating
system platforms. Versions of CorelDRAW include: CorelDRAW 8 and CorelDRAW 7, 
32-bit suites designed to run under Windows 95 and Windows NT, CorelDRAW 6 Suite
for Power Macintosh and CorelDRAW 5 for Windows 3.x.

The CorelDRAW module is an illustration program allowing users to produce color
illustrations incorporating both text and objects. The Corel PHOTO-PAINT/TM/
module is a photo-editing and painting module that enables users to apply global
photo-retouching and pixel by pixel editing to scanned or photographic images.
The Corel DREAM 3D module is a spline-based 3D modeling and rendering
application that allows users to create 3D illustrations with predefined models
and surface textures, lighting controls and high resolution rendering.
Supporting utilities include Corel TEXTURE/TM/, a tool for creating realistic
natural textures, Corel OCR-TRACE/TM/, a bitmap-to-vector conversion utility for
images and text, Corel DEPTH/TM/, a tool for applying 3D effects to text and
graphics, Corel SCAN/TM/, a wizard-based scanning utility with preset processing
options, and Corel CAPTURE/TM/, a tool for capturing portions of, or the entire,
application window.

CorelDRAW has the leading market share in the illustration segment of the
Windows graphics software market with an installed base of over 6.3 million
units worldwide.

COREL PRINT HOUSE/TM/, COREL PRINT & PHOTO HOUSE/TM/ AND COREL PRINT HOUSE/TM/
MAGIC. Corel Print House was developed as a graphics tool for home and small
business design projects. Designed to run under Windows 95 and Windows NT, Corel
Print House can be used to create greeting cards, banners, invitations, business
cards, signs, calendars, menus, fax report covers, certificates and labels.
Corel Print & Photo House adds photo-editing and bitmap creation capabilities
that allow users to scan in their own photographs and touch them up or add
special effects. Corel Print House Magic is a suite of applications which
include Corel Print House 3, Corel Photo House 2 and an all-in-one Calendar,
Address Book and List Manager.

COREL GALLERY/TM/, COREL GALLERY 2/TM/, COREL MEGA GALLERY/TM/ AND COREL
GALLERY/TM/ MAGIC. Published on a single CD-ROM, Corel GALLERY is a visual
clipart manager containing 10,000 of the clipart images that are included with
CorelDRAW separated into over 50 categories. Corel GALLERY 2 contains 15,000
clipart images, 500 royalty-free photos, 500 fonts, 75 sound clips and 10 video
clips. Corel MEGA GALLERY contains over 50,000 vector clipart images, 60,000
Internet-ready professional photos, 1,000 fonts, 200 sound clips, and 100 video
clips. Corel GALLERY Magic 65,000 contains 25,000 vector clipart images, 40,000
photos, 500 fonts, 100 animated GIFs and 100 Web theme sets. Corel GALLERY Magic
200,000 is a collection of 105,000 

                                       4
<PAGE>
 
clipart images, 80,000 photos and hundreds of fonts, animated GIFs, sounds,
video clips and Web theme sets. All versions of Corel GALLERY allows users to
drag and drop any of these images into any OLE compatible application or export
images to several industry standard formats.

COREL PHOTO-PAINT.  Corel PHOTO-PAINT is a photo-editing and painting program
that enables users to apply global photo-retouching and pixel by pixel editing
to scanned or photographic images. Corel PHOTO-PAINT is available in various
versions: Corel PHOTO-PAINT 8, Corel PHOTO-PAINT 7 Plus and Corel PHOTO-PAINT 6
for Windows 95 and Windows NT; and Corel PHOTO-PAINT 5 Plus for Windows 3.x.

COREL GRAPHICS PACK.  Corel Graphics Pack includes five, fully integrated
graphics programs with a wizard-driven, task oriented user interface which
prompts the user to the appropriate program particular to the project selected
and guides them step by step through to completion of the task. Designed for
Windows 95, Corel Graphics Pack includes Corel Print House; CorelFLOW 3, a
business graphics and technical diagraming program; Corel PHOTO-PAINT 6; Corel
MOTION 3D 6, an animation tool and internet utilities; and Corel PRESENTS 6, a
presentation graphics program.

CORELWEB.GRAPHICS SUITE.  CorelWEB.GRAPHICS SUITE includes six HTML authoring,
animation and graphics programs designed for Windows 3.x, Windows 95 and Windows
NT which allow users to create web pages for the Internet or corporate intranet.
CorelWEB.GRAPHICS SUITE includes: CorelWEB.DESIGNER, Internet authoring software
requiring no HTML programming knowledge and using a familiar word processor-
style interface; CorelWEB.Transit, a tool to convert legacy documents into HTML
format; CorelWEB.GALLERY, a library of over 7,500 Internet-ready images;
CorelWEB.MOVE, software to add animations to Web pages; CorelWEB.WORLD, a tool
that enables the user to turn a Web site into an interactive virtual reality;
and CorelWEB.DRAW, software to create and edit illustrations using CorelDRAW
technology.

COREL WEBMASTER SUITE.  Corel WebMaster Suite offers a complete solution for
creating Intranet and Internet web sites.  Corel WebMaster Suite includes: Corel
WEB.DESIGNER, Internet authoring software using a familiar word processor-style
interface; Corel WEB.SiteManager, a tool that allows the user to manage local
and remote Web sites; Corel WEB.WORLD enables the user to turn a Web site into
an interactive reality; Corel WEB.MOVE, software that creates animation; design
and bitmap editing as well as the ability to do database and  Java-based
publishing.

COREL VENTURA/TM/.  Corel VENTURA is a suite of high-end desktop publishing
software programs for publishing documents of any size, length or complexity.
The latest version of Corel VENTURA, Corel VENTURA 7, allows users to publish
Corel VENTURA 7 documents to HTML, portable electronic formats, such as Corel
Envoy/TM/ and Adobe Acrobat/(R)/, a CD-ROM, over an internal network, or on the
Internet. Corel VENTURA is available in two versions: Corel VENTURA 7 for
Windows 95 and Windows NT, and Corel VENTURA 5 for Windows 3.x.

COREL XARA/TM/.  CorelXARA, designed for Windows 3.x, Windows for Workgroups,
Windows 95 and Windows NT, is a vector and bitmap drawing program allowing the
user to create photo-realistic images using powerful artistic tools such as
anti-aliasing, graduated transparency and stepless graduated fills.  Tools for
web page graphics publishing are also included.

OTHER GRAPHICS SOFTWARE PRODUCTS. On September 30, 1997, Corel sold to IMSI
various graphics software titles in exchange for cash, marketable securities in
the acquiring company and an ongoing royalty stream over a period of time. The
software product lines sold included CorelCAD/TM/, Corel Visual CADD/TM/,
CorelFLOW/TM/, Corel Click & Create/TM/, Corel Lumiere/TM/ and Corel Family
Tree Suite/TM/.

 
                                              PRODUCTIVITY SOFTWARE APPLICATIONS
________________________________________________________________________________

Corel's productivity applications software are designed for use by a broad class
of end-users, regardless of business, industry, or market segment. Primary
examples of productivity software applications are word processing, spreadsheet,
and presentation graphics programs. Corel's productivity software applications
are developed for Windows, Macintosh, DOS and UNIX operating systems.

COREL WORDPERFECT SUITE.  Corel WordPerfect/(R)/ Suite is a suite of software
programs featuring seamless integration 

                                       5
<PAGE>
 
of the most commonly used desktop applications. Corel WordPerfect Suite combines
document creation with graphics and Internet capabilities. There are several
versions of Corel WordPerfect Suite available: Corel WordPerfect Suite for DOS;
Corel WordPerfect Suite 7 for Windows 3.x; and Corel WordPerfect Suite 7 and
WordPerfect Suite 8 for Windows 95 and Windows NT. In each of the 16-bit
versions, certain combinations of the following programs are included: Corel
WordPerfect; Corel Quattro/(R)/ Pro; Corel Presentations/TM/; CorelFLOW; Envoy
electronic publishing software; Starfish Software's Sidekick personal
information manager; Starfish Software's Dashboard integrated application and
task-automation launcher; AT&T WorldNet Service software including Netscape
Navigator Internet browser; 150 fonts and 10,000 clipart images. Corel
WordPerfect Suite 8 and Corel WordPerfect Suite 7 for Windows 95 and Windows NT
contain 32-bit versions of Corel WordPerfect, Corel Quattro/(R)/ Pro, Corel
Presentations/TM/. Corel also created versions of Corel WordPerfect Suite for
three key business sectors - legal, medical and construction. Corel Office
Professional 7 - Medical Edition, Corel WordPerfect Suite 7 - Construction
Edition and Corel WordPerfect Suite 7 - Legal Edition offer all the features
found in the Corel WordPerfect Suite 7 along with industry-specific applications
and resources.

COREL OFFICE PROFESSIONAL. Corel Office Professional is a suite of software
programs which, depending on the version, includes enhanced Internet
connectivity, graphics, and database features. Corel Office Professional is
available in three versions: Corel Office Professional for Windows 3.x; Corel
Office Professional 8 and Corel Office Professional 7 for Windows 95 and Windows
NT with certain combinations of products available for the two operating system
platforms. Products offered in Corel Office Professional for Windows 3.x and
Corel Office Professional 7 versions include all of the components of Corel
WordPerfect Suite plus the Corel Paradox/TM/ database management program and the
InfoCentral/TM/ database information manager. Corel Office Professional 8 and
Corel Office Professional 7 also include the CorelDRAW 6 illustration module,
the Corel Time Line/(R)/ project management software, Corel Barista/TM/
technology which allows users to publish to the Java/TM/ language,
QuickTasks/TM/ cross-application automation tool, and an additional 850 fonts.
Among the features offered in Corel Office Professional 8 are Corel
WEB.SiteBuilder 8, a tool which simplifies the process of creating and managing
a Web site; CorelCENTRAL/TM/ 8, a personal information manager with fully
integrated Netscape Communicator; Grolier Multimedia Encyclopedia Deluxe Edition
1998, a comprehensive online encyclopedia; and Corel Paradox 8.

COREL WORDPERFECT.  Corel WordPerfect is Corel's principal 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. Corel WordPerfect is available on
a stand-alone basis for the Macintosh, DOS and UNIX operating systems, while
Windows versions are available only as components of Corel WordPerfect Suite or
Corel Office Professional.

COREL QUATTRO PRO.  Corel Quattro Pro is an integrated spreadsheet with
database, business graphics and, in version 7, Internet capabilities. Corel
Quattro Pro is available in two versions: Corel Quattro Pro 6.0 for Windows 3.x
and Corel Quattro Pro 7 for Windows 95.

COREL PARADOX.  Corel Paradox, a powerful data management tool, delivers
advanced features such as the ability to publish a database to the Web.  It is
offered in several configurations including a retail version and a Java runtime
version.

COREL PRESENTATIONS.  Corel Presentations is a presentation graphics program for
producing slides, overheads, transparencies and prints. Corel Presentations is
available in two versions: Corel Presentations 3 for Windows 3.x and Corel
Presentations 7 for Windows 95.

 
                                                    MULTIMEDIA SOFTWARE PRODUCTS
________________________________________________________________________________

The Multimedia Software Division develops photo CD titles (for both the Internet
and retail markets) as well as peripheral interface software for PCs.

COREL PROFESSIONAL PHOTO TITLES.  Corel Professional Photo titles on CD-ROM
provides an easy and inexpensive way for people to use professional photographs
in all their visual communications. Corel Professional Photos are available on
individual CDs (100 photos per CD), in packages of 10 CDs (100 photos per CD) or
in one of three Corel Stock Photo Libraries, each of which consists of 200 Corel
Professional Photos CD-ROM titles. Individual 

                                       6
<PAGE>
 
Corel Professional Photos can also be downloaded from Corel's World Wide Web
home page.

COREL CD HOME AND COREL MEDICAL SERIES TITLES. In May, 1997, Corel sold all
software titles in the Corel CD HOME and Corel Medical series to Hoffmann +
Associates for cash, a minority interest in the acquiring company as well as an
ongoing royalty stream over a time period.

PERIPHERAL INTERFACE SOFTWARE.  CorelSCSI/TM/ is a software package that allows
users to link up to seven peripheral devices with a single host adapter card.
CorelSCSI supports most major SCSI peripherals, including CD-ROM and other
optical drives, hard disk drives, tape drives, printers and scanners.

 
                                            COMMUNICATIONS APPLICATIONS PRODUCTS
________________________________________________________________________________

In the second quarter, Corel announced the formation of a spin-off company,
Corel Computer Corporation.  This subsidiary develops and sells video and
network computer products, and offers turnkey computing and communication
solutions for corporate users. Corel's current desktop video communications
product, CorelVIDEO/TM/, is a hardware and software solution that provides
television quality video and audio, along with extensive communications features
such as broadcast, multi-party conferencing, data sharing, and telephony. Within
the local environment, CorelVIDEO uses a single pair of existing unused category
5 UTP wires to transport audio and video signals without impacting network
traffic.

 
RESEARCH AND DEVELOPMENT
________________________________________________________________________________

The PC 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,
networking in general, and new programming languages such as Java.

Accordingly, Corel must be able to provide new software products and modify and
enhance existing products on a timely and continuing basis to be competitive.
Corel employs a strategy of both internally developing software, including
overseeing third party development for certain products, and acquiring or
licensing technology that will, in most cases, be enhanced by Corel. Corel
believes that its ability to maintain technological competitiveness will depend
in large part upon its ability to successfully enhance its existing products,
develop new products on a timely basis and acquire or license complementary
technologies and products in a timely manner. The Company strives to become as
informed as possible at an early stage about changing usage patterns and
hardware advances that may affect software design.

In order to better serve the needs of users outside of Canada and the United
States, Corel "localizes" many of its products to reflect local languages and
conventions. Various Corel products have been localized into more than 20
languages.

Corel's research and development expenses were $27.2 million, $65.9 million and
$89.5 million in fiscal 1995, 1996 and 1997 respectively. Those amounts
represented approximately 13%, 20%, and 34%, respectively, of sales in each of
those years. Software acquired or licensed for incorporation into Corel's
product line totaled $11.7 million in fiscal 1995, $171.1 million in fiscal
1996, of which $153.4 million was for the acquisition of the WordPerfect
technology on March 1, 1996, and $12.2 million in fiscal 1997. Corel intends to
continue significant expenditures for research and development activities.

 
MANUFACTURING
________________________________________________________________________________

The principal materials and components used in Corel's products include computer
media (diskettes, CD-ROMs or tapes), documentation, and video hardware in the
case of CorelVIDEO. Corel is often able to acquire component parts and materials
on a volume discount basis.

Corel contracts all of its 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, in
accordance

                                       7
<PAGE>
 
with Corel's specifications. Corel believes there is an adequate supply of and
source for the raw materials used in its products, and that multiple sources are
available for media duplication, manual printing and final packaging. Corel's
products are generally shipped as orders are received and, accordingly, Corel
has historically operated with little backlog.

 
MARKETING, SALES AND DISTRIBUTION
________________________________________________________________________________

Corel's marketing and sales efforts are directed towards several customer types,
including end-users, corporate accounts, and OEMs. Corel's marketing and sales
staff seeks to build long-term relationships with customers and end-users of
Corel products. In addition to the OEM channel, Corel has three major geographic
sales and marketing areas: North America, Europe and the rest of the world.

End-user marketing activities cover all of Corel's products and target end-users
who make individual buying decisions for the PCs they use at work or at home.
Marketing activities aimed at end-users 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 and large account
resellers, to provide complete desktop productivity solutions to this customer
segment. The unit's sales and marketing activities include providing technical
training to channel resellers, supporting and providing seminars, events, and
sales training for channel partners. The unit also has responsibility for
administering the Corel License Programs worldwide. Key products for the
Corporate Licensing unit are graphics and productivity software applications.

The OEM customer unit works with original equipment manufacturers that
preinstall or bundle Corel software on their PCs or peripheral hardware.

 
                                                         FINISHED GOODS CHANNELS
________________________________________________________________________________

DISTRIBUTORS AND RESELLERS.  Corel sells its products worldwide to over 160
distributors for resale through software resellers. Distributors include Ingram
Micro, Merisel, Tech Data, and Computer 2000. Resellers include MicroWarehouse
and Multiple Zones International. Within the United States and Canada, Corel has
sales representatives and support personnel who solicit orders from distributors
and resellers and provide product training and sales support. In other
countries, Corel's marketing personnel provide product training and sales
support.

LICENSING.  Corel has a program designed to make it easier for large or small
organizations to acquire and maintain Corel products. The Corel License Program
("CLP") consists of two separate programs. CLP Universal 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. Marketing
efforts and fulfillment are generally coordinated through Corel's network of
large account resellers. CLP Choice offers flexible software acquisition and
licensing options specially designed to meet the needs of small and medium sized
organizations. Marketing efforts and fulfillment are generally coordinated
through Corel's network of distributors and resellers.

SOLUTION PARTNERS.  Corel's Solution Partners program is a support relationship
with independent developers and consultants that provide products, solutions or
services around Corel products. The program supports independent software
vendors, consultants, value-added resellers ("VARs"), system integrators, custom
application developers, and solution developers, as well as technical support
and training organizations. Under this business partnership strategy, the
Company provides sales and product information, development services, access to
beta software, discounts on Corel products, as well as dedicated developer
technical support.

APPROVED SERVICE BUREAUS.  The Corel Approved Service Bureau Program ("CASB")
supports organizations that output and render files created with Corel's
graphics software applications such as CorelDRAW and Corel VENTURA. Under CASB,
the Company provides members with product information, free priority technical

                                       8
<PAGE>
 
support, and referral services through Corel's bulletin board service ("BBS"),
CompuServe Forum and Customer Service and Technical Support networks.

DIRECT MARKETING.  Corel promotes some of its products through direct marketing
techniques directed toward existing and potential users of Corel's products.
Fulfillment of product to the end-user is either by direct shipment or through
resellers.

 
                                                                     OEM CHANNEL
________________________________________________________________________________

Corel markets certain productivity, graphics, and multimedia software
applications under license agreements with OEMs that grant the OEMs the right to
distribute copies of Corel's products with their hardware products. Corel has
OEM agreements covering one or more of its products with most of the major PC
hardware vendors, including Canon, Compaq, Cybermax, Dell, Digital Equipment
Corporation, Epson, Gateway 2000, Hewlett-Packard, Packard Bell, Quantex and
Vobis.

 
                                                       ADVERTISING AND PROMOTION
________________________________________________________________________________

Advertising, direct marketing, and marketing materials are targeted to various
end-user groups through a variety of programs: (i) extensive worldwide
advertising in broad consumer media (business publications and television) and
trade publications; (ii) joint promotions with computer retailers under which
qualifying resellers and OEMs are reimbursed for certain advertising
expenditures; (iii) trade show and PC user group participation; and (iv) direct
corporate marketing efforts. The Company has an in-house creative design group
responsible for conceptualizing and producing all of Corel's ad copy, box
covers, and promotional material. The Company has an in-house ad agency which
places and monitors the effectiveness of Corel's worldwide advertising. The
Company maintains a broad advertising campaign emphasizing the Corel brand
identity.


CUSTOMERS
________________________________________________________________________________

As described above, Corel has three customer types: end-users, organizations or
enterprises, and OEMs. Most end-users of Corel products are individuals in
business, government agencies, educational institutions, and at home. These end-
users obtain Corel products primarily through distributors, resellers, and OEMs,
which include certain Corel products with their hardware. Note 7 to Consolidated
Financial Statements (see Item 8) identifies customers that represent more than
10% of Corel's revenues.

 
PRODUCT SUPPORT
________________________________________________________________________________

Corel provides product support coverage options to meet the needs of users of
Corel products. Support personnel are located in Orem, Utah; Ottawa, Ontario;
and Dublin, Ireland. Certain support is also provided by qualified third-party
support organizations in accordance with Corel's specifications for quality and
timeliness of the support response. Corel generally hires individuals with
product expertise and provides them with the productivity tools, continuous
product education, training and consistent processes to deliver quality support
for Corel 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 Corel products 24 hours per day, 7 days
per week.

Users have access to Corel's Knowledge Base, a database of technical support
articles that is updated regularly with useful information regarding Corel
products. Corel provides access to Knowledge Base, technical support information
and frequently asked question and answers via Corel's worldwide web site on the
Internet (http://www.corel.com). Corel maintains a forum on CompuServe and a
bulletin board service ("BBS") to provide users with a mechanism to provide
feedback as well as receive technical updates and notes. Additionally, users can
access Corel's automated "Fax on Demand" system where up-to-date information
about common issues and tips and tricks is stored in numbered documents.

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

                                       9
<PAGE>
 
COMPETITION
________________________________________________________________________________

The PC software business is highly competitive and subject to rapid
technological change. Many of Corel's current and potential competitors have
larger technical staffs, more established and larger marketing and sales
organizations and significantly greater financial resources than does Corel. 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 Corel's products continues to develop, additional
competitors may enter the market and competition may intensify.

GRAPHICS SOFTWARE. Corel's graphics software products face substantial
competition from a wide variety of companies. In the illustration graphics
segment, Corel's competitors include Adobe Systems Incorporated, Macromedia
Inc., Deneba Systems Inc. and Micrografx, Inc.. In the photo-editing and
painting graphics segment, Corel's competitors include Adobe and Micrografx. In
the charting and presentation segments, Corel's competitors include Software
Publishing Corporation, Microsoft Corporation, Adobe, Micrografx and IBM (Lotus
Development Corporation). In the desktop publishing segment, Corel's competitors
include Adobe and Quark, Inc. Corel's competitors include many other
independent software vendors, such as Autodesk, Inc., Borland International,
Inc., Apple Computer Inc. (Claris Corporation) and Computer Associates, as well
as a number of personal computer manufacturers which devote significant
resources to creating personal computer software, including Apple, Hewlett-
Packard Company and IBM.

PRODUCTIVITY SOFTWARE. Corel's competitors in the productivity software
(primarily office suites) marketplace include Microsoft and IBM (Lotus).
According to industry sources, Microsoft currently has the largest overall
market share for office suites. IBM has a large installed base with its
spreadsheet program. Also, IBM pre-installs certain of its software products on
various models of its PCs, competing directly with Corel productivity software.

MULTIMEDIA SOFTWARE. The Company competes with other participants in the Photo
CD market on the basis of price, the categories of photographs available, the
quality of the photographs and the nature of the rights attached to the photos
included on the Photo CD. The Company's competitors in this market include
Westflight, Digital Zone and Aris Entertainment.

COMMUNICATIONS APPLICATIONS. The Company's communications applications products
(CorelVIDEO) compete against offerings from Intel, PictureTel, C-Phone, and many
other companies.

The Company believes that the principal competitive factors in the PC software
markets include performance, product features, ease of use, reliability,
hardware compatibility, brand name recognition, product reputation, pricing,
levels of advertising, availability and quality of customer support, and
timeliness of product upgrades. Corel competes with other software vendors for
access to distribution channels, retail shelf space and the attention of
customers at the retail level and in corporate accounts. The Company also
competes with other software companies in its efforts to acquire software
technology developed by third parties. The Company believes that, in the future,
competition in the industry will intensify as major software companies expand
their product lines.

 
PROPRIETARY RIGHTS
________________________________________________________________________________

Corel regards certain features of its internal operations, software and
documentation as proprietary and relies on contract, copyright, trademark, and
trade secret laws and other measures to protect its proprietary information. The
Company holds no patents applicable to its current business, and existing
copyright and trade secret laws afford only limited protection. The Company
believes that, due to the rapid pace of innovation within its industry, factors
such as the technological expertise and creative skills of its personnel are
more important to establishing and maintaining technological leadership than are
the various legal protections of its technology.

Corel provides its products to end users under non-exclusive licenses, which
generally are non-transferable and have a perpetual term. Corel makes source
code available for certain of Corel's products. The provision of source code may
increase the likelihood of misappropriation or other misuse of Corel's
intellectual property. Corel licenses its products pursuant to shrink wrap
licenses 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 Corel's proprietary rights to the same extent as do the
laws of Canada and the United States.

                                       10
<PAGE>
 
Except as noted in the "Legal Proceedings" section of this report, Corel is not
aware that its products, trademarks or other proprietary rights infringe the
proprietary rights of third parties. However, from time to time Corel receives
notices from third parties asserting that Corel has infringed their patents or
other intellectual property rights. Corel may find it necessary or desirable in
the future to obtain licenses from third parties relating to one or more of its
products or relating to current or future technologies. There can be no
assurance that third parties will not assert infringement claims against Corel
in the future with respect to current or future products or that any such
assertion will not require Corel 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, Corel believes 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 November 30, 1997, Corel employed 1,454 people on a full-time basis,
including 839 in research and development, 539 in sales, marketing and support,
and 76 in finance and administration. Corel's success depends to a significant
extent upon the performance of Corel's executive officers and key technical and
marketing personnel, particularly the Company's founder and Chairman, President
and Chief Executive Officer, Dr. Michael C.J. Cowpland. The loss of Dr. Cowpland
could have a material adverse effect on Corel's results of operations. Corel
believes that its future success will also depend in large part on its 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, Corel believes it has been successful in its efforts to
recruit qualified employees, but there can be no assurance that Corel will
continue to be as successful in the future. None of Corel's employees are
subject to collective bargaining agreements. Corel believes relations with its
employees are good.

ITEM 2.  PROPERTIES

Corel leases 188,000 square feet of office space in a facility located in
Ottawa, Ontario under leases that expire in 2015; 20,484 square feet under a
lease that expires in 2002 in another facility in Ottawa, Ontario; 106,450
square feet of office space in a facility located in Orem, Utah under a lease
that expires in 1999; and 23,520 square feet of office space in a facility
located in Dublin, Ireland under leases that expire between 1997 and 1999.

ITEM 3.  LEGAL PROCEEDINGS

On or about July 5, 1995, the Company received notice that a class action
lawsuit had been filed against it by named plaintiff Jeffery L. Fishbein, in the
Court of Common Pleas of the Seventeenth Judicial District in Snyder County,
Pennsylvania.  The complaint, as amended, included causes of action for breach
of warranty and violations of state consumer protection laws, on behalf of
persons who purchased CorelDRAW 4 and 5.  The plaintiff's deposition, originally
scheduled to continue on September 9 and 10, 1997, was postponed, due to
plaintiff counsel's Petition for Leave to Withdraw as Counsel.  By order of the
Court dated September 5, 1997, all matters were stayed pending disposition of
the Plaintiff's Counsels' Petition.  On November 3, 1997, the Court ordered Mr.
Fishbein to find replacement counsel on or before December 4, 1997, and granted
Plaintiff's Counsel's Petition to Withdraw as Counsel.  Because new counsel did
not enter an appearance by December 4, 1997, the court held a hearing on
December 12, 1997, "to address the issues as to why the action should not be
discontinued".  Pursuant to Pennsylvania Rules of Civil Procedure, a class
action (even one that has not yet been certified) cannot be discontinued without
notice unless the Court finds that the discontinuance will not prejudice other
prospective class members.  By Order dated December 12, 1997, this action was
dismissed in its entirety, due to the failure of the plaintiff to appear and
show cause as to why the action should not be discontinued and dismissed.

On or about January 12, 1998, the Company received notice that a complaint had
been filed against it by Micrografx, Inc. in the Northern District of Texas,
Dallas Division.  The complaint alleges that the personal calendar included in
Corel Print House Magic is strikingly similar to and in some instances virtually
identical to the personal calendar found in the plaintiff's CreataCard Gold and
CreataCard Plus software products.  The complaint includes causes of action for
copyright infringement, false designation of origin and false representations in
commerce, unfair competition and unjust enrichment.  By motion filed January 20,
1998, the plaintiff seeks a preliminary injunction to stop the Company from
distributing or selling the personal calendar (Corel Family & Friends) included
in Corel Print House Magic.  An attempt to mediate the matters at issue occurred
on February 12, 

                                       11
<PAGE>
 
1998; however, this initiative was unsuccessful. Depositions of Corel's
representatives occurred in Ottawa on February 19 and 20, 1998. Depositions of
the plaintiff's representatives are currently scheduled to be held in Texas on
March 2 and 3, 1998. Corel believes that the plaintiff's motion for
preliminary injunction will likely be heard in mid-to-late April 1998, but
there can be no assurance that this will be the case. The Company considers
the complaint to be ill-founded and will vigorously defend both the action and
motion for preliminary injunction.
 
On January 20, 1998, Corel issued a press release announcing its financial
results for the fourth quarter and the restatement of financial information for
the first three quarters of fiscal 1997. The restatement related to certain Java
technology exchange transactions undertaken by Corel during the first three
quarters of the year. In that press release, Corel reported, in part, that the
restatement had the effect of eliminating revenues and the amortization of
related costs previously reported in connection with those transactions. The
press release stated that the accounting treatment of these transactions in the
first three quarters was considered appropriate at the time and that the
treatment adopted in the restatement resulted from further consideration by
Corel's auditors in connection with the year end audit.

On or about February 23, 1998, Corel became aware that a class action lawsuit
had been filed against it by named Plaintiff Great Neck Capital Appreciation
Investment Partnership in the United States District Court for the Eastern
District of New York. The complaint also names as co-defendants Dr. Michael C.
J. Cowpland, Corel's Chairman, President and Chief Executive Officer, and Mr.
Charles Norris, Corel's former Vice President, Finance and Chief Financial
Officer. The complaint was filed on behalf of all persons who purchased or
otherwise acquired Corel common shares between March 26, 1997 and January 20,
1998 (the "Class Period"). The complaint alleges that the defendants violated
various provisions of the federal securities laws, including Section 10(b) and
10(a) of the Securities Exchange Act of 1934, as amended, and Securities and
Exchange Commission Rule 10b-5, by misrepresenting or failing to disclose
material information about Corel's financial condition. The complaint alleges
that the defendants issued false and misleading press releases and financial
statements for the first three quarters of fiscal 1997. Plaintiff alleges, in
part, that defendants (a) failed to disclose that they were overstating Corel's
reported profits by, among other things, inflating reported revenues and
earnings through improperly recognizing revenue on Java technology exchange
transactions, and (b) overstated revenues and earnings by understating reserves
in connection with sales to distributors who had no obligation to keep or pay
for the products. The complaint also alleges that Corel insiders, including the
individual co-defendants, sold common shares during the Class Period at
"artificially inflated prices". The complaint seeks an unspecified amount of
money damages. As of February 26, 1998 the complaint had not been served on any
defendant.

No motions have been filed or discovery yet undertaken. Corel intends to
defend the litigation vigorously. However, due to the inherent uncertainties
of litigation, Corel cannot accurately predict the ultimate outcome of the
litigation. Investigating and defending the complaint may require expenditure
of material amounts of funds and may require a significant amount of
management's time and resources. An unfavorable outcome in the litigation
could have a material adverse effect on Corel's business, financial condition
and results of operations. Announcement of material developments in the
litigation prior to its resolution could adversely affect the market price of
Corel's common shares.

The Company is a party to a number of additional claims arising in the ordinary
course of business relating to intellectual property and other matters.  The
Company believes that the ultimate resolution of these claims will not have a
material adverse effect on its business, financial position or results of
operations.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matters were submitted to a vote of security holders during the fourth
quarter of the fiscal 1997.

                                       12
<PAGE>
 
                                    PART II

ITEM 5.  MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
         MATTERS

PRICE RANGE OF COMMON SHARES

The Company's Common Shares are traded on The Toronto Stock Exchange (the"TSE")
under the symbol "COS" and in the over-the-counter market on the NASDAQ National
Market under the symbol "COSFF". The following table sets forth the range of
quarterly high and low closing sale prices of the Common Shares on the TSE and
on the NASDAQ National Market within the two most recent fiscal years.

<TABLE>
<CAPTION>
 
                                                  FISCAL 1996                          FISCAL 1997
                                              HIGH            LOW                HIGH             LOW
                                          -----------     -----------         -----------     -----------
<S>                                       <C>             <C>                <C>              <C>  
THE TORONTO STOCK EXCHANGE                                      (Canadian dollars)
--------------------------
First Quarter.............................    $24.50          $11.75             $11.10            $7.45
Second Quarter............................     19.05           12.25               9.70             6.90
Third Quarter.............................     17.75           11.25               9.15             7.60
Fourth Quarter............................     14.75            8.38               8.95             3.13
 
NASDAQ NATIONAL MARKET                                             (US dollars)
---------------------- 
First Quarter.............................    $18.00          $ 8.38             $ 8.25            $6.38
Second Quarter............................     13.88            8.88               7.13             5.00
Third Quarter.............................     13.00            8.25               6.75             5.50
Fourth Quarter............................     10.75            6.50               6.50             2.23
</TABLE>

As of February 26, 1998, there were 693 record holders of Common Shares. A
substantial number of Common Shares of the Company 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, the
management of the Company estimates that the number of beneficial holders of
Common Shares approximates 36,000 holders.

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, other than the
withholding tax requirements described below.

TAXATION

The following discussion summarizes certain tax considerations relevant to an
investment by individuals and corporations who, for income tax purposes, are
resident in the United States and not in Canada, hold Common Shares as capital
property, and do not use or hold the Common Shares in carrying on business
through a permanent establishment or in connection with a fixed base in Canada
(collectively, "Unconnected US Shareholders"). The Canadian tax consequences of
an investment in the Common Shares by investors who are not Unconnected US
Shareholders may be expected to differ substantially from the tax consequences
discussed herein. The discussion is based upon the provisions of the Income Tax
Act (Canada) (the "Tax Act"), the Convention between Canada and the United
States of America with respect to taxes on Income and on Capital
(the"Convention") and the published administrative practices of Revenue Canada,
Taxation and judicial decisions, all of which are subject to change. The
discussion does not take into account the tax laws of the various provinces or
territories of Canada.

The discussion is intended to be a general description of the Canadian tax
considerations and does not take into account the individual circumstances of
any particular shareholder.

                                       13
<PAGE>
 
Any cash dividends and stock dividends on the Common Shares payable to
Unconnected US Shareholders generally will be subject to Canadian withholding
tax. Under the Convention, the rate of withholding tax generally applicable to
Unconnected US Shareholders is 15%. In the case of a United States corporate
shareholder owning 10% or more of the voting shares of the Company, the
applicable withholding tax under the revised Canada US Income Tax Convention is
reduced to 5% for 1997.

Capital gains realized on the disposition of Common Shares by Unconnected US
Shareholders will not be subject to tax under the Tax Act unless such Common
Shares are taxable Canadian property within the meaning of the Tax Act. Common
Shares will generally not be taxable Canadian property to a holder unless, at
any time during the five-year period immediately preceding a disposition, the
holder, or persons with whom the holder did not deal at arm's length, or any
combination thereof, owned 25% or more of the issued shares of any class or
series of the Company. If the Common Shares are considered taxable Canadian
property to a holder, the Convention will generally exempt Unconnected US
Shareholders from tax under the Tax Act in respect of a disposition of Common
Shares provided the value of the shares of the Company is not derived
principally from real property situated in Canada. Neither Canada nor any
province thereof currently imposes any estate taxes or succession duties.

DIVIDEND POLICY

The Company has neither declared nor paid cash dividends on its Common Shares
since its inception and does not anticipate paying any dividends in the
foreseeable future, but intends to retain future earnings for reinvestment to
finance the growth of its business. On November 22, 1993, the Board of Directors
declared a two for one stock split, effected in the form of a stock dividend,
payable December 8, 1993 to shareholders of record on December 1, 1993. On
October 8, 1994, the Board of Directors declared a three for two stock split,
effected in the form of a stock dividend, payable October 28, 1994 to
shareholders of record on October 24, 1994. Any future determination to pay
dividends will be at the discretion of the Board of Directors.

                                       14
<PAGE>
 
ITEM 6.  SELECTED FINANCIAL DATA

The statement of income data set forth below with respect to the years ended
November 30, 1995, 1996 and 1997 and the balance sheet data at November 30, 1996
and 1997 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 statement of income data set forth below with respect
to the fiscal years ended November 30, 1993 and 1994 and the balance sheet data
at November 30, 1993, 1994 and 1995 are derived from audited financial
statements not included in this Annual Report on Form 10-K. All amounts are in
United States dollars.

<TABLE>
<CAPTION>
                                                                              YEAR ENDED NOVEMBER 30,
                                                           -------------------------------------------------------------
                                                              1993         1994          1995        1996         1997
                                                           ---------     ---------    ---------   ---------    ---------
<S>                                                        <C>          <C>          <C>         <C>          <C>
                                                                       (In thousands, except per share data)
CANADIAN GAAP
Sales.....................................................  $105,027     $164,313     $196,379    $334,245     $ 260,581
Income (loss) from continuing operations..................    20,853       32,503       14,484      (2,750)     (231,678)
Income (loss) from continuing operations
   per share (fully diluted)..............................      0.45         0.63         0.26       (0.04)        (3.84)
Cash and short-term investments...........................    57,000       85,618       81,816      30,629        30,629
Working capital...........................................    84,821      129,094      149,353     120,945        20,356
Total assets..............................................   132,290      191,422      221,346     398,478       163,743
Long-term debt............................................         -            -            -      33,830        24,044
Shareholders' equity......................................   111,234      164,953      195,858     290,260        59,809

US GAAP
Income (loss) from continuing operations..................    20,853       32,503       14,484      (2,750)     (231,678)
Net income (loss) from continuing
   operations per share (fully diluted)...................      0.49         0.67  .      0.29       (0.05)        (3.84)

</TABLE>
_________
<TABLE>
<S>                          <C>
Note:                        The summary financial information is prepared on the basis of Canadian GAAP, which is different in
                             some respects from US GAAP. Significant differences between Canadian GAAP and US GAAP are set forth in
                             Note 10 of "Notes to Consolidated Financial Statements" included in Item 8 hereof.
</TABLE>
ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

The information set forth on pages 18-31 of the 1997 Annual Report to
Shareholders is incorporated herein by reference and is filed herewith as
Exhibit 13.1.

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The following financial statements and independent auditors' report set forth on
pages 32-45 and the back cover of the 1997 Annual Report to Shareholders is
incorporated herein by reference and is filed herewith as Exhibit 13.2.

 .    Independent Auditors Report;
 .    Consolidated Balance Sheets at November 30, 1996 and 1997;
 .    Consolidated Statements of Operations and Retained Earnings (Deficit) for
     the years ended November 30, 1995, 1996, and 1997;
 .    Consolidated Statements of Changes in Financial Position for the years
     ended November 30, 1995, 1996, and 1997; and
 .    Notes to Consolidated Financial Statements.

                                       15
<PAGE>
 
ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
          FINANCIAL DISCLOSURE

None.

                                       16
<PAGE>
 
                                   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:

<TABLE>
<CAPTION>
 
NAME                                       AGE     POSITION WITH THE COMPANY
<S>                                      <C>      <C>
   Dr. Michael C.J. Cowpland                54     Chairman of the Board; President; Chief Executive Officer
   Patrick R. Beirne                        44     Chief Engineer
   Kim E. Dixon                             36     Vice President, Marketing
   Eid E. Eid                               40     President, Corel Computer Corporation
   Sandra Gibson                            34     Vice President, Human Resources
   Paul King                                39     Vice President, International Sales
   Paul C. LaBarge                          47     Secretary and Director
   Michael P. O'Reilly                      45     Vice President, Finance; Chief Financial Officer; Treasurer 
   Paul Skillen                             37     Vice President, Software Development
   Carey Stanton                            30     Vice President, Business Development
   Don Sylvester                            43     Senior Vice President, Sales
   Kerry D. Williams                        35     Vice President, Manufacturing
   Lyle B. Blair (2)                        67     Director
   Hon. William G. Davis (1) (2)            68     Director
   Hunter S. Grant (1) (2)                  55     Director
   Jean-Louis Malouin                       54     Director
</TABLE>
______________

(1)     Member of the Compensation Committee.
(2)     Member of the Audit Committee.

DR. MICHAEL C.J. COWPLAND founded the Company and has served as a Director,
Chairman of the Board and President of the Company since May 1986. Prior to
founding the Company in 1985, Dr. Cowpland held a variety of executive positions
with Mitel Corporation, a telecommunications company, most recently as Chairman
of the Board.

PATRICK R. BEIRNE joined the Company in November 1985 as Chief Engineer.  Prior
to November 1985, Mr. Beirne held a number of positions with Mitel Corporation,
most recently as Senior Staff Engineer.

KIM E. DIXON joined the Company in August 1990 as Senior Product Specialist -
Central USA and was appointed Corporate Accounts Manager - USA in December 1990
and North American Marketing Manager in November 1991. Ms. Dixon held the
positions of Manager of Media and Market Development - United Kingdom,
Australia, New Zealand from January 1993 until July 1993, Manager of
International Advertising and Product Marketing from August 1993 until August
1995, and Creative Director from September 1995 until January 1997, at which
time she was appointed to her current position, Vice President, Marketing.

EID E. EID joined the Company in October 1989 as a Software Programmer. He held
the positions of Team Leader from January 1993 until September 1993, and
Director, Graphics Software from October 1994 until April 1996, at which time he
was appointed Vice President, Software Development. In June 1997, he was 
appointed President, Corel Computer Corporation.

SANDRA GIBSON joined the Company in March 1990 as a Human Resource Generalist.
She held the positions of Supervisor, Human Resources from January 1993 until
March 1995, Manager, Human Resources from March 1995 until February 1996,
Director, Human Resources from March 1996 until September 1996, and Director,
Corporate Services from September 1996 until January 1997, at which time she was
appointed to her current position, Vice President, Human Resources.

                                       17
<PAGE>
 
PAUL KING joined the Company in January 1998. As Vice-President, International
Sales, Mr. King has more than 17 years of Canadian and International sales and
marketing experience. Prior to joining Corel, he was Vice President of retail
systems at NCR Canada Ltd. where he was responsible for direct sales and
marketing in that division.

PAUL C. LABARGE has been Secretary of the Company since January 1992. He was
appointed a Director of the Company in April 1996. Mr. LaBarge is a Partner of
LaBarge Weinstein, external counsel to the Company. Prior to establishing
LaBarge Weinstein in February 1997, Mr. LaBarge was a partner with Blake Cassels
& Graydon since February 1990. Previously, Mr. LaBarge was a partner with the
firm of Lang Michener.

MICHAEL P. O'REILLY was appointed Vice President, Finance, Chief Financial
Officer and Treasurer in December 1997. Prior to joining Corel, Mr. O'Reilly
was a senior tax partner in the Ottawa practice of KPMG, the international
professional advisory services firm.

PAUL SKILLEN joined the Company in September 1992 as a software developer. He
moved on to head up many engineering projects within Corel. In 1996 he was
transferred to Orem, Utah to oversee the WordPerfect transition from Novell,
Inc. to Corel Corporation. Mr. Skillen was subsequently named Vice President
of Engineering in 1997. Prior to joining Corel, he was involved in several
high-technology start-up companies including his own consulting firm. Mr.
Skillen has almost 20 years experience in the Ottawa area high technology
industry.

CAREY STANTON joined the Company in May 1991 as Sales Leads Coordinator and was
appointed Account Executive for CorelSCSI - USA in October 1991 and Product
Marketing Manager in December 1991. He held the positions of Manager, OEM Sales
for CorelSCSI, RAID and other Network related product lines from August 1992
until August 1993, and Business Manager from September 1993 until January 1997,
at which time he was appointed to his current position, Vice President, Business
Development.

DON SYLVESTER joined the Company in August 1997. As Senior Vice President,
Sales, Mr. Sylvester has twenty years of sales and marketing experience,
including seven years with Dell Computer Corporation as the Director of
Commercial Sales. Mr. Sylvester holds an MBA from the University of Windsor.

KERRY D. WILLIAMS joined the Company in November 1989 as Materials
Administrator. He held the positions of Manufacturing Manager from February 1990
until January 1994, Director, Operations and Advertising from January 1994 until
August 1995, and Director, Operations from September 1995 until January 1997, at
which time he was appointed to his most recent position, Vice President,
Manufacturing.

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.

WILLIAM G. DAVIS has been a Director since September 1989. Mr. Davis has been
counsel to Tory Tory DesLauriers & Binnington, Barristers and Solicitors, since
February 1986. He served as Canada's Special Envoy on Acid Rain from March 1985
to March 1986 and prior to March 1985 was Premier of the Province of Ontario.
Mr. Davis is a director of The Seagram Company Ltd., Magna International Inc.
and First American Title Insurance Company, all of which are reporting companies
under the Securities Exchange Act of 1934.

HUNTER S. GRANT has been a Director since September 1989. Mr. Grant has been Co-
Publisher, President and General Manager of the Recorder and Times Limited, a
newspaper publishing company, since July 1977.

JEAN-LOUIS MALOUIN became a Director in November 1996. Since 1992, Dr. Malouin
has been the Dean of the Faculty of Administration at the University of Ottawa.
From 1989 to 1992, Dr. Malouin was the Dean of Administration at the University
of Alberta and is a former dean at the Universite Laval.  He is an expert in
operations and production management, management information systems design and
research methodology.  He has served as a management consultant for numerous
organizations and institutions including the Canadian International Development
Agency (CIDA), the Universite du Quebec and the Organization for Economic and
Cooperation Development.

                                       18
<PAGE>
 
Under the Canada Business Corporations Act, a majority of the Board of Directors
and a majority of Board Committee members must be resident Canadians. All
directors hold office until the next annual meeting of shareholders and until
their successors have been elected. The officers of the Company serve at the
discretion of the Board of Directors of the Company. There are no family
relationships among any of the directors and executive officers of the Company.

The Audit Committee reviews the internal accounting procedures of the Company
and consults with and reviews the services provided by the Company's independent
auditors and is responsible for corporate governance issues relating to the
Company.

The Compensation Committee reviews the compensation and benefits of all officers
of the Company and recommends to the Board of Directors the compensation and
benefits of the most senior officers of the Company. It reviews general policy
matters relating to employment and wage equity, compensation and benefits of
employees of the Company generally. The Compensation Committee administers the
granting of stock options to eligible participants in the Corel Corporation
Stock Option Plan.

ITEM 11.  EXECUTIVE COMPENSATION

The following table, presented in accordance with the regulations to the
Securities Act (Ontario), sets forth all compensation paid in respect of the
individuals who were, at November 30, 1997, the Chief Executive Officer and the
other four most highly compensated executive officers of the Company (the "named
executive officers").

                          SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
                                                                                                                   LONG-TERM
                                                                                                                  COMPENSATION
                                                                           ANNUAL COMPENSATION                       AWARDS
                                                                --------------------------------------------    ----------------
                                                                                                OTHER ANNUAL    SECURITIES UNDER
                                                                                                COMPENSATION        OPTIONS
NAME AND PRINCIPAL POSITION                     YEAR            SALARY          BONUS                (1)           GRANTED (#)
---------------------------                     ----            ------          -----           ------------    ----------------
<S>                                             <C>             <C>             <C>             <C>             <C>
                                           

Michael C.J. Cowpland                           1997          $213,236           Nil                                        -
  Chairman, President and                       1996           188,388           Nil                                1,175,000
  Chief Executive Officer                       1995           163,895           Nil                                  603,000
                                                                                                                 
Eid E. Eid                                      1997           188,025           Nil                                        -
  President, Corel Computer Corp.               1996           181,062           Nil                                  200,000
                                                1995           156,617           Nil                                  234,400
                                                                                                                 
Charles A. Norris (2)                           1997           130,590           Nil                                        -
   Vice President, Finance and                  1996           106,300           Nil                                   24,400
   Chief Financial Officer                      1995            82,264           Nil                                   24,600
                                                                                                                 
Paul Skillen                                    1997           184,304           Nil                                        -
  Vice President, Software Development          1996           117,296           Nil                                   12,000
                                                1995            81,315           Nil                                   14,000
                                                                                                                 
Kerry D. Williams                               1997           130,287           Nil                                        -
  Vice President, Manufacturing                 1996           128,414           Nil                                   36,800
                                                1995           114,348           Nil                                   37,300
_____________________________________________________________________________________________________________________________
</TABLE>

Notes:
(1) Perquisites and other personal benefits do not exceed the lesser of $50,000
    and 10% of the total of the annual salary and bonus for any of the named
    executive officers.
(2) Effective December 2, 1997, Mr. Norris resigned his position as Vice
    President, Finance and CFO and left the Company. Mr. Norris'
    responsibilities were assumed by Mr. Michael P. O'Reilly.

                                       19
<PAGE>
 
CASH COMPENSATION

The aggregate cash compensation paid or payable to executive officers of the
Company for the year ended November 30, 1997 was $1,423,821 during which period
there were ten executive officers. The Company furnishes other benefits to its
officers and other employees. The estimated aggregate cost to the Company to
provide such other benefits to the executive officers of the Company as a group
for the year ended November 30, 1997 was less than $11,759 and was attributable
primarily to health and dental benefits.

Directors who are salaried officers of the Company receive no compensation for
serving on the Board. The other directors (the "independent directors"), of
which there are currently five, receive an annual retainer of CAD$16,000 and a
fee of CAD$800 (CAD$1,600 for Committee Chairman) 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. For the year
ended November 30, 1997, the independent directors received an aggregate of
$122,520 for their services and in reimbursement for their expenses.

DIRECTORS' AND OFFICERS' INSURANCE

Corel maintains directors' and officers' liability insurance insuring directors
and officers of the Company and its subsidiaries against liability for acts or
omissions in their capacities as directors or officers, as well as insuring the
Company and its subsidiaries for claims relating to securities matters, subject
to certain exclusions. Such insurance also insures Corel against all losses
which it may incur in indemnifying officers and directors of Corel. The maximum
amount payable under the policy is CAD$5,000,000 per occurrence and
CAD$5,000,000 per year, subject, in the case of Corel, to a deductible of
US$250,000 per occurrence for entity coverage in Canada, and a deductible of
US$250,000 per occurrence for any claims against a director, officer or entity
in the United States.

STOCK OPTION PLAN

The Corel Corporation Stock Option Plan (the "Plan") is administered by the
Compensation Committee (the "Committee") of the Board of Directors. Under the
Plan the Committee may grant options to purchase Common Shares of the Company to
all eligible participants including, full-time permanent employees of Corel,
directors on the Board of Directors and persons appointed as an officer of the
Company by the Board of Directors. The factors which the Committee considers
when granting options include outstanding performance and/or contribution to
Corel. The exercise price of such options may not be less than the closing price
of the Common Shares on the TSE on the trading day immediately preceding the
date of the grant. All options granted under the Plan are non-transferable and
the exercise price thereof must be paid at the time of exercise. Options are
exercisable for a period of four years from the date of grant. Options held by a
participant who ceases to hold a board or office position or whose employment is
terminated for any reason, including death, are, for options granted prior to
November 1, 1993, exercisable to a date which is not later than four years from
the date of the grant. Options granted since that date are exercisable for 30
days following termination. In addition, the Chief Executive Officer of the
Company may extend such periods for any participant to a date which is not later
than four years from the date of the grant.

On April 18, 1997, the shareholders passed a resolution that allowed employees
or directors of the Company to tender any existing options held by them to the
Company for repricing and regranting.  The number of options to be regranted was
determined by reducing the initial granted amount pro rata by that ratio that
the exercise price of the regranted option is to the original exercise price.
The exercise price of the regranted option was effected on the basis of the fair
market value of the Common Shares of the Company at the close of market on the
day prior to the 14/th/ day following all requisite approval, or CAD$7.70 on May
1, 1997.  Pursuant to the passing of the resolution, 10,373,000 options at
exercise prices ranging from CAD$7.917 to CAD$25.25 were exchanged for 5,773,614
options at an exercise price of CAD$7.70, of which 3,853,033 options at exercise
prices ranging from CAD$9.50 to CAD$22.38 were exchanged by the named executive
officers for 2,163,253 options at an exercise price of CAD$7.70. Michael C.J.
Cowpland exchanged 2,850,949 options at exercise prices ranging from CAD$9.50 to
CAD$22.38 for 1,631,683 options at an exercise price of CAD$7.70. Eid E. Eid
exchanged 598,098 options at exercise prices ranging from CAD$9.50 to CAD$22.38
for 311,232 options at an exercise price of CAD$7.70. Charles Norris exchanged
112,881 options at exercise prices ranging from CAD$9.50 to CAD$22.38 for 55,746
options at an exercise price of CAD$7.70. Paul Skillen exchanged 137,472 options
at exercise prices ranging from CAD$9.50 to CAD$22.38 for 80,494 options at an
exercise price of CAD$7.70. Kerry Williams exchanged 153,633 options at exercise
prices ranging from CAD$12.67 to CAD$19.67 for 84,098 options at an exercise
price of CAD$7.70.

                                       20
<PAGE>
 
During the year ended November 30, 1997, the Company granted options to purchase
up to 202,800 Common Shares to 33 participants at an average exercise price of
CAD$6.77 per share, of which options for 134,000 Common Shares were granted to
one executive officer and five directors of the Company at an average exercise
price of CAD $6.62 per share.

As of November 30, 1997, there were outstanding under the plan options
exercisable for an aggregate of 6,157,519 Common Shares at prices ranging from
CAD$4.00 to CAD$22.38 per share and expiring at various dates through November
14, 2001. Of such options, options exercisable for an aggregate total of
1,999,272 Common Shares were held by nine executive officers and five directors
of the Company. Other participants as a group as of such date held options
exercisable for an aggregate of 4,158,247 Common Shares at prices ranging from
CAD$7.05 to CAD$22.38 and expiring at various dates through September 12, 2001.

For the fiscal year ended November 30, 1997 there were no stock options granted
under the Plan to the above named executive officers; certain options were 
repriced as discussed above.

The following table sets forth each exercise of stock options under the Plan
during the fiscal year ended November 30, 1997 to the named executive officers.

           AGGREGATED OPTION EXERCISES DURING THE FISCAL YEAR ENDED
              NOVEMBER 30, 1997 AND FISCAL YEAR-END OPTION VALUES

<TABLE>
<CAPTION>
 
                                                                                    Value of
                                                                                   Unexercised
                           Securities                            Unexercised      in-the-Money
                            Acquired        Aggregate Value      Options at        Options at
                           on Exercise         Realized         Nov. 30, 1997     Nov. 30, 1996
        Name                   (#)              (CAD$)               (#)             (CAD$)
        ----               -----------      ---------------     -------------     -------------
<S>                       <C>               <C>                 <C>               <C>
Michael C.J.  Cowpland         455,910            $455,910         1,175,773                 -
Eid E. Eid                      37,993              38,443           273,239                 -
Charles A. Norris                2,900              14,007            55,746                 -
Paul Skillen                    41,339              47,540            39,155                 -
Kerry D. Williams               83,625              80,062           101,663                 -
</TABLE>

COMPENSATION COMMITTEE

As at November 30, 1997 the members of the Compensation Committee (the
"Committee") were Hunter S. Grant (Chairman) and the Honourable William G.
Davis. The Committee has a mandate to: (a) monitor compliance with provincial
legislation applicable in respect of employment practices of the Company, (b)
determine the appropriate allocation of options, (c) determine Chief Executive
Officer and senior officer compensation, (d) monitor compliance with statutory
requirements for employment matters including remittances and legislation, and
(e) review levels of compensation generally for the Company. The Committee met
five times in fiscal 1997 and acted by way of resolution on other occasions.

The Company 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 the Company, based on industry surveys, is consistent
with industry standards at the level necessary to attract and retain qualified
personnel.


REPORT ON EXECUTIVE COMPENSATION

The philosophy of the Company in the determination of senior executive
compensation is to encourage performance in order to maintain the position of
the Company in a highly competitive environment. As a result, the compensation
package is based upon salaries which provide a reasonable level of
remuneration and broad

                                       21
<PAGE>
 
distribution of employee stock options. Given the nature of the industry, the
performance of the stock is sensitive to the financial performance of Corel and
as such provides a compensation regime which encourages active support of the
Company's competitive efforts.

With the concurrence of the Compensation Committee, the Chief Executive Officer
participates directly in the fixing of the compensation for all levels of
employees. Base compensation is reviewed annually to verify compatibility with
industry norms. The Chief Executive Officer is involved in all aspects of
compensation determination and he assesses, with the assistance of the relevant
managers on an on-going basis, performance of the individual incumbents.
Individual salaries are set in an appropriate salary range and reflect the
employee's experience and proven or expected performance.

To ensure a linkage of management with the shareholder, stock options are
granted at 100% of market value at the time of the stock option grant. Under the
terms of the stock option plan, options must be exercised within a period of
four years from the date of the grant. All options granted vest immediately on
grant and terminate 30 days after termination of employment unless otherwise
determined by the Chief Executive Officer. The number of stock options available
for grant under the program are determined by shareholder resolution and fixed
as at April 18, 1997 at 16,000,000 and are restricted for certain participants
to 10% of the issued and outstanding capital of the Company from time to time.

No additional benefits or perquisites are provided to members of management that
are not available to employees of Corel generally. These currently include
health, long-term disability, dental, group life and a fitness membership.

PERFORMANCE GRAPH

The following chart and graph compares the yearly percentage change over the
last five years in the cumulative total shareholder return on the Company's
Common Shares with the cumulative total return of the NASDAQ Index and the
NASDAQ Computer and Data Processing Services Stock Index:


                             [GRAPH APPEARS HERE}
 

FIVE-YEAR TOTAL RETURN ON $100 INVESTMENT

<TABLE>
<CAPTION>
 
__________________________________________________________________________________________________________ 
                                                        1993       1994       1995       1996       1997
__________________________________________________________________________________________________________
<S>                                                     <C>        <C>        <C>        <C>        <C>
Corel                                                   100.00      79.86      97.81      47.11      13.39
Computer and Data Processing Services Stock Index       100.00     119.32     186.16     229.61     269.96
NASDAQ Index                                            100.00     116.07     164.31     200.25     248.80
__________________________________________________________________________________________________________
</TABLE>

                                       22
<PAGE>
 
ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth, as of February 26, 1998, certain information
with respect to the beneficial ownership of Common Shares by (1) each person
known by the Company to be a beneficial owner of more than 5% of its outstanding
Common Shares, (2) by each director and executive officer and (3) by all
directors and executive officers as a group.

<TABLE>
<CAPTION> 
                                           COMMON            EXERCISABLE        PERCENTAGE
NAME AND ADDRESS OF BENEFICIAL OWNER       SHARES              OPTIONS            OWNED   (1)
------------------------------------       ------            -----------        ----------
<S>                                        <C>               <C>                <C>           
Dr. Michael C.J. Cowpland                  5,450,558         1,175,773              10.9
Novell, Inc                                8,950,000                 -              15.1
    1555 N. Technology Way
    Orem, Utah   84057
Lyle B. Blair                                  3,000            27,107                  *
Hon. William G. Davis                          1,500            27,620                  *
Hunter S. Grant                                    -            30,186                  *
Paul C. LaBarge                                4,000            27,107                  *
Jean Louis Malouin                                 -             5,000                  *
Kim E. Dixon                                       -            41,273                  *
Eid E. Eid                                         -           273,239                  *
Sandra Gibson                                      -            16,134                  *
Michael P. O'Reilly (3)                            -           100,000                  *
Paul Skillen                                       -            39,155                  *
Carey Stanton                                      -            35,015                  *
Don Sylvester                                      -           100,000                  *
Kerry D. Williams                                290           101,663                  *
Directors and Executive Officers
    as a group (14 persons) (2)            5,459,348         1,999,272               12.0
</TABLE>
*     Indicates less than 1%.

(1)    Percentage ownership is calculated using as a denominator the total
       number of Common Shares outstanding plus the number of Common Shares to
       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.

(3)    Mr. O'Reilly's options were granted on December 3, 1997 but do not vest
       for a six month period thereafter.

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

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Inapplicable pursuant to Instruction 3 to Item 404 of Regulation S-K, except for
transactions described elsewhere in this Report.

                                       23
<PAGE>
 
                                    PART IV

ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

(a)     FINANCIAL STATEMENTS AND SCHEDULES

        The following audited financial statements of Corel (together with
        the independent auditors report thereon and the notes thereto) are
        included in this Report:

        (a) Consolidated Balance Sheets at November 30, 1996 and 1997.

        (b) Consolidated Statements of Operations and Retained Earnings 
            (Deficit) for the years ended November 30, 1995, 1996 and 1997.

        (c) Consolidated Statements of Changes in Financial Position for the 
            years ended November 30, 1995, 1996 and 1997.
  
        Financial statement schedules have been omitted because the required
        information is included in the financial statements or notes thereto as
        set forth under Item 8 of this Report on Form 10-K.

(b)     REPORTS ON FORM 8-K

        On January 21, 1998, the Company filed a Report on Form 8-K to report
        the restatement of the financial results for the first three quarters
        of fiscal 1997.

(c)     LISTING OF EXHIBITS

<TABLE>
<CAPTION>
 
        Exhibit
        Number          Description
        -------         -----------
        <S>             <C>        
 
         3.1            Certificate and Articles of Incorporation (1)
 
         3.2            By-law No. 6 (1)
 
         4.1            Specimen of Common Share Certificate (1)
 
        10.1            Distribution Agreement dated October 2, 1991 between
                        Corel Corporation and Ingram Micro Inc. (1)
 
        10.2            Distribution Agreement dated May 11, 1989 between Corel
                        Corporation and Merisel, Inc. (formerly Softsel Computer
                        Products, Inc.) (1)
 
        10.3            Agreement for Purchase and Sale by and among Novell,
                        Inc., Corel Corporation, Corel Corporation Limited, and
                        Corel Corporation (Delaware) (3)
 
        13.1            Management's Discussion and Analysis of Financial
                        Condition and Results of Operations (Incorporated by
                        Reference to Pages 18-31 of 1997 Annual Report to
                        Shareholders ("1997 Annual Report"))
 
        13.2            Financial Statements (Incorporated by Reference to Pages
                        32-45 and Back Cover of 1997 Annual Report)
 
        21.1            Subsidiaries of Registrant (Incorporated by Reference to
                        Exhibit 13.2 filed herein)
 
        23.1            Independent Auditor's Consent
 
        99.1            Form of License Agreement, including Limited Warranty(1)
</TABLE>
_________________

(1)  Incorporated by reference to Registration Statement on Form F-1, file no.
     33-50886.
(2)  Incorporated by reference to Annual Report on Form 10-K for the fiscal year
     ended November 30, 1994.
(3)  Incorporated by reference to Exhibit 2.01 to the Company's Report on Form
     8-K/A, Amendment No. 2, dated March 1, 1996.

                                       24
<PAGE>
 
                                  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 26, 1997.

                                                COREL CORPORATION
 
 
                                                By  /s/ Michael P. O'Reilly
                                                  -----------------------------
                                                        Michael P. O'Reilly
                                                     Vice-President, Finance; 
                                                     Chief Financial Officer; 
                                                            Treasurer

                               POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints MICHAEL C.J. COWPLAND and MICHAEL P. O'REILLY,
his Attorneys-in-fact, each with full power of substitution, for him 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 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 25, 1997.

<TABLE>
<CAPTION>
            SIGNATURE                              TITLE
<S>                                     <C> 
  /s/ Michael C.J. Cowpland
------------------------------ 
      Michael C.J. Cowpland             Chairman of the Board of Directors,
                                        President and Chief Executive Officer
                                                  
  /s/ Lyle B. Blair
------------------------------ 
      Lyle B. Blair                     Director
 
  /s/ William G. Davis
------------------------------         
      William G. Davis                  Director
 

------------------------------  
      Hunter S. Grant                   Director


------------------------------  
      Paul C. LaBarge                   Director
 
  /s/ Jean-Louis Malouin
------------------------------ 
      Jean-Louis Malouin                Director
 
  /s/ Michael P. O'Reilly
------------------------------ 
      Michael P. O'Reilly               Vice-President, Finance; Chief Financial
                                        Officer; Treasurer (Principal
                                        Financial and Accounting Officer)
</TABLE>

                                       25
<PAGE>
 
                                 EXHIBIT INDEX
                                 -------------
<TABLE>
<CAPTION>
 
 
Exhibit Number                       Description                     
--------------                       -----------                     
<S>               <C>                                                
 
  13.1            Management's Discussion and Analysis of Financial
                  Condition and Results of Operations
 
  13.2            Financial Statements

  21.1            Subsidiaries of Registrant
 
  23.1            Independent Auditor's Consent
</TABLE>









                                      26