##### Table of Contents



UNITED STATES SECURITIES AND
    EXCHANGE COMMISSIONWashington, D.C.
    20549
  Form 10-K
  þ

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES
    EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED NOVEMBER 30,
    2006oro

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES
    EXCHANGE ACT OF 1934   Commission File Number:
    000-20562
  COREL CORPORATION
 (Exact name of registrant as
    specified in its charter)
  Canada
 (State or other jurisdiction of
    incorporation and organization)
  98-0407194
 (I.R.S. Employer Identification No.)
     (Address of principal executive
    offices, including zip code)
   (Registrants telephone
    number, including area code)
  Securities registered pursuant
    to
    Section 12(b) of the Act:Common Shares, no par
    value
    (together with associated rights to
    purchase additional Common Shares)(Title of class)

Name of exchange on which
    registered:The Nasdaq Global Market   Securities registered pursuant to Section 12(g) of the
    Act:
  o þ
  o þ
  þ o
  Regulation S-K Form 10-K Form 10-K. þ o
  Rule 12b-2
  Large
    accelerated filer o
    Accelerated
    filer o
    Non-accelerated
    filer þ  Rule 12b-2 o þ




---



##### 



TABLE OF
    CONTENT
  
  PagePART IITEM 1.


BUSINESS


1ITEM 1A.


RISK
    FACTORS


12ITEM 1B.


UNRESOLVED STAFF
    COMMENTS


24ITEM 2.


PROPERTIES


24ITEM 3.


LEGAL
    PROCEEDINGS


24ITEM 4.


SUBMISSION OF
    MATTERS TO A VOTE OF SECURITY HOLDERS


25PART IIITEM 5.


MARKET FOR
    REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND
    ISSUER PURCHASES OF EQUITY SECURITIES


26ITEM 6.


SELECTED FINANCIAL
    DATA


32ITEM 7.


MANAGEMENTS
    DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
    OPERATIONS


36ITEM 7A.


QUANTITATIVE AND
    QUALITATIVE DISCLOSURES ABOUT MARKET RISK


60ITEM 8.


FINANCIAL
    STATEMENTS AND SUPPLEMENTARY DATA


60ITEM 9.


CHANGES IN AND
    DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
    DISCLOSURE


93ITEM 9A.


CONTROLS AND
    PROCEDURES


93ITEM 9B.


OTHER
    INFORMATION


93PART IIIITEM 10.


DIRECTORS AND
    EXECUTIVE OFFICERS OF THE REGISTRANT


94ITEM 11.


EXECUTIVE
    COMPENSATION


98ITEM 12.


SECURITY OWNERSHIP
    OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT


102ITEM 13.


CERTAIN
    RELATIONSHIPS AND RELATED TRANSACTIONS


107ITEM 14.


PRINCIPAL
    ACCOUNTANT FEES AND SERVICES


108PART IVITEM 15.


EXHIBITS AND
    FINANCIAL STATEMENT SCHEDULES


109EX-10.8: EMPLOYMENT AGREEMENTEX-21.1: SUBSIDIARIES OF COREL CORPORATIONEX-23.1: CONSENT OF PRICEWATERHOUSECOOPERS LLPEX-31.1: CERTIFICATIONEX-31.2: CERTIFICATIONEX-32.1: CERTIFICATIONEX-32.2: CERTIFICATIONEX-99.1: SCHEDULE   i




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##### Table of Contents



INFORMATION
    REGARDING FORWARD-LOOKING STATEMENTS
  Form 10-K
    Form 10-K
 PART I  ITEM 1.
    BUSINESS  easy-to-use e-Store,
  WordPerfect Office Suite WinZip WordPerfect Office Suite WinZip iGrafx CorelDRAW Graphics Suite Corel Paint Shop Pro. CorelDRAW Graphics Suite Corel Paint Shop
    Pro Corel Snapfire Corel Snapfire Plus Corel DESIGNER Technical Suite Corel Painter
 1




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##### Table of Contents



WinDVD WinDVD
  
    WinDVD Creator, a video editing, DVD authoring and
    burning application;
    InterVideo DVD Copy, an application to copy and backup
    DVDs and CDs;
    InterVideo Home Theater, a media center suite for the
    viewing and management of digital media content;
    MediaOne, an
    all-in-one
    package of our most popular applications such as WinDVD,
    WinDVD Creator, Disc Master, PhotoAlbumand
    others;
    Linux-based versions of our DVD and DVR software designed for
    Linux-based PCs and CE devices;
    InterVideo InstantOn, an embedded system infrastructure
    that provides PCs with capabilities similar to those of CE
    devices, allowing PC users to access multimedia assets and
    devices without requiring booting into traditional operating
    systems such as Microsoft Windows;
    Ulead Systems, Inc. product offerings including Ulead DVD
    MovieFactory, a consumer DVD authoring software;
    VideoStudio, a video editing software; and
    PhotoImpact, an image editing software.  Corporate
    History
  Canada Business
    Corporations Act CorelDRAW WordPerfect Business Corporations Act
    (Ontario). Canada
    Business Corporations Act.
  Our
    Industry
   2




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##### Table of Contents



Our
    Strategy
    
    Leverage existing platform and brands to maximize value from
    acquisitions.  We are actively seeking to acquire
    complimentary businesses to ours. Our acquisition and
    integration strategy is focused on acquisitions of companies
    with proven and complementary products and established user
    bases that we believe will be accretive to earnings. As part of
    this strategy, in October 2004 we acquired Jasc to extend our
    reach in graphics and digital imaging software, in May 2006 we
    acquired WinZip to enhance our productivity software offerings,
    and in December 2006 we acquired InterVideo to expand our
    presence in the digital media software market by creating a
    broad portfolio of digital imaging and DVD video products. We
    analyze acquisition candidates and effect acquisition
    transactions to ensure they meet our strategic and operational
    objectives. We seek acquisition candidates that we believe can
    benefit from our existing global marketing, sales, distribution
    and general and administrative infrastructure.
    Broaden our distribution network to capitalize on the rapid
    adoption of low cost technologies.  We view our
    relationships with OEMs, other distributors and online services
    companies as key growth drivers, and we are focused on forging
    new distribution relationships and broadening our existing
    relationships. To accomplish this goal, we have implemented a
    flexible channel friendly strategy of providing
    customized solutions tailored to the specific business needs of
    OEMs, other distributors and online services companies. We offer
    these parties:  
    attractive pricing;
    marketing and sales support and incentives;
    customized versions of our software; and
    private label packaging and customized promotional materials.  
    Increase upgrade conversion rates.  Increasing
    upgrade conversion rates represents a significant incremental
    revenue opportunity for us. We intend to increase upgrade
    conversion rates through a number of strategic initiatives,
    including:  
    increasing our database of registered users through on-line
    registration for new products to market product upgrades to them
    more effectively;
    embedding upgrade information directly in our software and
    employing other types of proactive marketing within our products
    including access to Tips and Tricks, product tutorials, online
    communities and special offers from Corel and our partners; and
    offering products in tiers of functionality, such as
    entry-level, advanced and expert versions, enabling users at
    varying levels of product knowledge and sophistication to
    purchase the applications they need and then migrate to the more
    advanced versions over time.  
    Expand presence in emerging markets.  We are
    expanding our presence in emerging markets, such as China,
    India, Eastern Europe and Latin America, by continuing to
    localize our products in additional languages, expanding our
    reseller network and direct sales force and developing
    additional regionally-focused versions of our
    e-Store. We
    believe these markets represent attractive growth opportunities
    for us because they are characterized by first time users of low
    cost PCs and digital cameras who have not yet developed loyalty
    to a particular brand of software. However, expansion of our
    operations in these emerging markets will involve a number of
    risks, challenges and uncertainties. See
    Item 1A  Risk Factors  We
    are subject to risks associated with international operations
    that may harm our business.
    Continue to respond to user needs to better serve specific
    market sectors and increase loyalty.  We will
    continue to work with our current customer base to help us
    develop additional product innovations, 3




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improve our products to better meet the needs of specific market
    segments and strengthen user loyalty. We have had significant
    success through our offering of high quality products for
    specific markets such as the legal and education sectors, and,
    as we continue to expand, we plan to target additional markets.  
    Continue to deliver high operating margins and positive cash
    flow.  We are committed to maximizing our
    operating margins and positive cash flow by keeping research and
    development activities focused on market driven, add-on
    functionality, utility and geographic reach of our existing
    product lines rather than speculative projects. We employ
    disciplined cost management policies and maintain stringent
    minimum
    return-on-investment
    criteria for our acquisition strategies. Our existing
    administrative, marketing and distribution infrastructure is
    highly scalable, and we believe it will enable us to grow our
    revenues without experiencing a proportionate increase in fixed
    costs, and continue to deliver high operating margins.  Our
    Products
  easy-to-use
  Year of


Fiscal





Entry-levelInitial


Quarter of


Current


SuggestedRelease


Latest Release


Version


Retail Price*Primary Products By
    CategoryProductivity:WordPerfect Office
    Suite


1982



Q1 2006



13


$
99.99WinZip


1991



Q4 2006



11



29.95iGrafx FlowCharter


1991



Q1 2006



11



395.00iGrafx Process


1991



Q1 2006



11



995.00Graphics and Digital Imaging:Graphics:CorelDRAW Graphics
    Suite


1989



Q1 2006



13



399.00Corel DESIGNER Suite


1995



Q2 2005



12



699.00Corel Painter


1991



Q1 2007



10



429.00Digital Imaging:Corel Paint Shop Pro


1991



Q4 2006



11



99.99Corel Photo Album


2002



Q4 2005



6



49.00Corel Snapfire Plus


2006



Q4 2006



1.0



39.99     *
    
    Entry-level suggested retail price reflects our suggested retail
    price as of November 30, 2006 for the respective products.
    This table does not reflect the prices for upgrade versions of
    our software products or products that are bundled with hardware
    or services and sold through OEMs.  Productivity
  WordPerfect Office
    Suite WinZip iGrafx
  WordPerfect Office Suite. Standard
    Edition WordPerfect Office Suite WordPerfect, Quattro Pro Presentations WordPerfect MAIL Paradox WordPerfect easy-to-use Quattro Pro Presentations WordPerfect MAIL e-mail, Paradox
 4




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##### Table of Contents



WordPerfect Office Suite WordPerfect Office Suite WordPerfect Office Suite Workspace Manager WordPerfect Office Suite.
  WordPerfect Office Suite
  Standard Edition WordPerfect
    Office Suite Professional
    Edition Paradox Professional
    Edition Home Edition Small Business Edition WordPerfect MAIL Corel
    Paint Shop Pro
  WinZip. WinZip WinZip WinZip
    Companion for Outlook WinZip Self
    Extractor. WinZip WinZip WinZip WinZip Companion for Outlook WinZip WinZip Self Extractor WinZip
  WinZip WinZip WinZip WinZip ease-of-use,
  iGrafx FlowCharter and iGrafx Process. iGrafx iGrafxs iGrafx FlowCharter iGrafx
    Process. iGrafx FlowCharter iGrafx
    Process iGrafxs iGrafx
  Graphics
    and Digital Imaging
  Graphics
  CorelDRAW Graphics Suite Corel DESIGNER Technical Suite Corel Painter.
  CorelDRAW Graphics Suite. CorelDRAW
    Graphics Suite
 5




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##### Table of Contents



CorelDraw
    Graphics Suite
  CorelDRAW Graphics Suite easy-to-use CorelDRAW Graphics Suite
  Corel DESIGNER Technical Suite. Corel
    DESIGNER Technical Suite Corel DESIGNER Corel PHOTO-PAINT Corel TRACE Corel DESIGNER Professional
  Corel DESIGNER Technical Suite Corel
    DESIGNER Technical Suite Corel DESIGNER
    Technical Suite easy-to-use
  Corel Painter. Corel Painter Corel Painter Corel
    Painter Corel
    Painter
  Digital
    Imaging
  Corel Paint Shop
    Pro Corel Photo Album Corel Snapfire.
  Corel Paint Shop Pro. Corel Paint Shop Pro Corel Paint
    Shop Pro Corel Paint Shop
    Pro
  Corel Photo Album. Corel Photo Album Corel Photo Album back-ups Corel
    Photo Albums Corel Photo
    Album
  Corel Snapfire and Snapfire Plus. Corel
    Snapfire Corel Snapfire Plus Corel
    Snapfire Corel Snapfire
 6




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##### Table of Contents



Plus Corel
    Snapfire
  WinDVD WinDVD.
  Customer
    Support
  up-to-date
  Distribution,
    Sales and Marketing
  Distribution
    OEMs.
  Internet Distribution. e-Store year-over-year.
  Retail and Reseller.
  
    retailers including Office Depot, Best Buy, CompUSA, Staples,
    The Source by Circuit City, Future Shop, Amazon, Dixon System
    Group and Media Market who sell our products to consumers and
    small businesses;
    software distributors, including Ingram Micro, Tech Data and
    Navarre, who sell our products to their retail customer base and
    license programs to their reseller partners;
    large account resellers, including CDW, Insight Software House
    International, SoftChoice, ASAP and Softmart USA, who sell our
    software directly to large enterprises and government accounts,
    working closely with our direct sales force to help fulfill
    orders;
    value-added resellers, including independent software vendors,
    consultants, system integrators and custom application
    developers, who generally service small to medium-sized
    businesses and provide varying degrees of technical support,
    implementation services and customization. 7




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##### Table of Contents



Direct Sales.
  Sales
    and Marketing
      
    communicating our value proposition and the benefits of our
    products;
    designing and implementing incentive programs for our
    distributors to promote our products;
    identifying, establishing and developing relationships with OEMs
    and online services companies;
    ensuring that our distributors are prominently positioning our
    products and managing inventory levels effectively; and
    recruiting new resellers, retailers and distributors.    
    joint marketing and promotions with online services companies,
    OEMs and other distributors;
    selective, highly targeted advertising;
    direct mail; and
    public relations.  Internal
    Systems
  e-Store,
  Outsourced
    Manufacturing
    Intellectual
    Property
   8




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Our
    success depends heavily on our ability to adequately protect our
    intellectual property
  Competition
    WordPerfect easy-to-use
    Research
    and Development
    ease-of-use CorelDRAW X3 Corel
    Painter IX.5 WinZip 11
 9




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Corel DRAWings DRAWings Corel Painter Essentials
  Corel Snapfire Corel Snapfire Plus Corel Snapfire
    Plus
  Employees
    We
    rely on our ability to recruit and retain qualified
    employees
  Acquisition
    of InterVideo
      easy-to-use,
 10




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nine-month
  Nine Months Ended


Nine Months EndedSeptember 30,


September 30,


PercentageInterVideo Selected Financial Data

2005


2006


Change(Unaudited, in thousands)Revenues


78,512



85,971



9.5
%Gross Profit


48,991



44,090



(10.0
)Net Income


3,368



117



(96.5
)Operating Cash Flows


7,998



4,855



(39.3
)     Financial
    Information by Business Segment and Geographic Data
  Segment Reporting Form 10-K.
  Available
    Information
  Form 10-K, Form 10-Q, Form 8-K Form 10-K
 11




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ITEM 1A.
    RISK
    FACTORS  Risks
    Relating to our Business
  Our
    quarterly operating results may fluctuate depending on the
    timing and success of product releases, which may result in
    volatility of our stock price.
    We may
    not realize the anticipated benefits of our acquisition of
    InterVideo and the integration of InterVideo or other acquired
    companies may disrupt our business and management.
    
    incorporating InterVideos technology and products into our
    technology and products;
    maintaining InterVideos relationship with its OEM
    distributors;
    coordinating research and development activities to enhance
    introduction of new products and technologies;
    integrating InterVideos internal control over financial
    reporting with our internal control over financial reporting;
    integrating InterVideos international operations with ours;
    potentially incurring impairment charges in connection with the
    proposed merger; and
    persuading the employees of both companies that the
    companies business cultures are compatible and maintaining
    employee morale.    We
    have grown, and may continue to grow, through acquisitions that
    give rise to risks and challenges that could adversely affect
    our future financial results.
    
    Complexity, time, and costs associated with the integration of
    acquired business operations, workforce, products, and
    technologies into our existing business, sales force, employee
    base, product lines, and technology; 12




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
    Diversion of management time and attention from our existing
    business and other business opportunities;
    Loss or termination of employees, including costs associated
    with the termination or replacement of those employees;
    Assumption of debt or other liabilities of the acquired
    business, including litigation related to alleged liabilities of
    the acquired business;
    The incurrence of additional acquisition-related debt as well as
    increased expenses and working capital requirements;
    Dilution of stock ownership of existing stockholders, or
    earnings per share;
    Increased costs and efforts in connection with compliance with
    Section 404 of the Sarbanes-Oxley Act; and
    Substantial accounting charges for restructuring and related
    expenses, write-off of in-process research and development,
    impairment of goodwill, amortization of intangible assets, and
    stock-based compensation expense.        The
    long-term trend in our business reflects growth in revenues from
    acquisitions and not our existing products.
    We
    rely on the accuracy of our customers sales reports for
    collecting and reporting revenue. If these reports are not
    accurate, our reported revenue will be inaccurate.
   13




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If we
    fail to manage our growth effectively, our business could be
    harmed.
    Our
    core products compete with products offered by Microsoft and
    Adobe, which have dominant market positions and other
    significant competitive advantages.
  WordPerfect Suite
    
    sales and marketing advantages;
    advantages in the recruitment and retention of skilled technical
    personnel;
    advantages in the establishment and negotiation of profitable
    strategic, distribution and customer relationships;
    advantages in the development and acquisition of innovative
    software technology and the acquisition of software companies;
    greater ability to pursue larger scale product development and
    distribution initiatives on a global basis; and
    operational advantages.  and/or
  We
    face significant competitive threats from Internet companies
    that may offer competitive software products at little or no
    cost to consumers to increase their market presence and user
    base.
   14




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Our
    success depends on our ability to offer products that are highly
    compatible with products offered by Microsoft and
    Adobe.
        Our
    products are complex and may contain errors or defects resulting
    from such complexity.
    The
    manner in which packaged software is distributed is changing
    rapidly, which presents challenges to established software
    companies such as us and presents opportunities for potential
    competitors.
     15




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With
    the growth in the Internet as a medium to download and purchase
    software, we expect to face increasing competition from smaller
    software providers.
    Because
    there are a small number of large PC original equipment
    manufacturers, we only have a limited number of potential new
    large original equipment manufacturer customers, which will
    cause revenue to grow at a slower rate.
    
    Our lack of control over the shipping dates or volume of systems
    shipped;
    Our OEM partners are generally not subject to minimum sales
    requirements or any obligation to market our products to their
    customers;
    Our OEM partners may terminate or renegotiate their arrangements
    with us and new terms may be less favorable due, among other
    things, to an increasingly competitive relationship with certain
    partners;
    Sales through our OEM partners are subject to changes in
    strategic direction, competitive risks, and other issues that
    could result in reduction of OEM sales;
    The development work that we must generally undertake under our
    agreements with our OEM partners may require us to invest
    significant resources and incur significant costs with little or
    no associated revenues;
    The time and expense required for the sales and marketing
    organizations of our OEM partners to become familiar with our
    products may make it more difficult to introduce those products
    to the market; and
    Our OEM partners may develop, market, and distribute their own
    products and market and distribute products of our competitors,
    which could reduce our sales. 16




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##### Table of Contents



Slow
    growth, or negative growth, in the PC industry could reduce
    demand for our product, and reduce gross profit.
    Open
    source software and open standards may make us more vulnerable
    to competition because new market entrants and existing
    competitors could introduce similar products quickly and
    cheaply.
      Our
    prices may decline, which could harm our operating
    results.
    We
    rely on relationships with a small number of companies for a
    significant percentage of our revenues, and if any of these
    companies terminates its relationship with us, our revenues
    could decline.
    If we
    fail to maintain strong relationships with our resellers and
    distributors, our ability to successfully deploy and sell our
    products may be harmed.
   17




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##### Table of Contents



An
    interruption of our supply of certain products of key components
    from our sole source supplier, or a price increase in such
    products or complements, could hurt our business.
  just-in-time
  The
    packaged software industry is subject to rapid technological
    change, and if we fail to respond to dynamic market forces, our
    position within the industry will be harmed.
    Our
    recent growth through acquisitions may not be representative of
    future growth.
     18




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##### Table of Contents



We are
    subject to risks associated with international operations that
    may harm our business.
    
    foreign currency fluctuations;
    increased software piracy and uncertainty with respect to the
    enforcement of intellectual property rights;
    international economic and political conditions;
    labor and employment laws, particularly in Europe, which make it
    difficult to maintain flexible staffing levels;
    tariffs, quotas and other trade barriers and restrictions;
    difficulties and expenses in localizing our products,
    particularly in Asian markets;
    difficulties inherent in staffing and managing foreign
    operations; and
    the burdens of complying with a variety of foreign laws.    We may
    incur losses associated with currency fluctuations and may not
    effectively reduce our exposure.
    Our
    business may be constrained by the intellectual property rights
    of others, and we have been and are currently subject to claims
    of intellectual property infringement, which are costly and
    time-consuming to defend.
  Legal
    Proceedings
 19




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##### Table of Contents



We may
    be unable to maintain licenses to third-party technology that is
    integrated into our products.
    Our
    success depends heavily on our ability to adequately protect our
    intellectual property.
    non-competition
    As a
    global business, we have a relatively complex tax structure, and
    there is a risk that tax authorities will disagree with our tax
    positions.
     20




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##### Table of Contents



WinZip
  Our
    substantial indebtedness could affect our financing options and
    liquidity.
    
    limiting our ability to obtain additional financing in the
    future for working capital, capital expenditures or acquisitions;
    requiring a significant portion of our cash flow from operations
    to be dedicated to the payment of the principal of and interest
    on our indebtedness, thereby reducing funds available for other
    purposes;
    making us more vulnerable to economic downturns and limiting our
    ability to withstand competitive pressures; and
    making it more difficult to pay dividends on our common shares,
    if we decide to do so.  and/or Quantitive and Qualitative
    Disclosures about Market Risk  Interest Rate
    Risk.
  We are
    subject to restrictive debt covenants that impose operating and
    financial restrictions on our operations and could limit our
    ability to grow our business.
      If we
    do not provide acceptable customer support, our reputation will
    suffer and it will be difficult to retain existing customers or
    to acquire new customers.
   21




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##### Table of Contents



higher-than-anticipated
  Risks
    Related to an Investment in our Common Shares
  Our
    common share price is likely to be volatile.
    
    our quarterly operating results;
    sales of our common shares by principal shareholders;
    future announcements concerning our or our competitors
    businesses;
    changes in financial forecasts and recommendations by securities
    analysts or the termination of coverage by one or more
    securities analysts;
    actions of our competitors;
    general market, economic and political conditions;
    natural disasters, terrorist attacks and acts of war; and
    the other risks described in this section.  Future
    sales, or the possibility of future sales, of a substantial
    amount of common shares may depress the price of the common
    shares.
    Form S-8
  Vector
    Capital has significant control over our business and you may
    not have the same corporate governance protections you would
    have if we were not a controlled company.
      
    that a majority of our Board consists of independent directors; 22




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##### Table of Contents




    that our prospective directors be nominated solely by
    independent directors; and
    that the compensation of our executive officers be determined
    solely by independent directors.    Vector
    Capitals ownership of a majority of our common shares,
    coupled with provisions contained in our articles of
    incorporation and Canadian law, reduce the likelihood that you
    will receive a premium upon a change of control.
  Competition Act Investment Canada Act
  You
    may be unable to enforce actions against us, certain of our
    directors and officers or our independent public accounting firm
    under U.S. federal securities laws.
    U.S. investors
    in our company could suffer adverse tax consequences if we are
    characterized as a passive foreign investment
    company.
   23




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##### Table of Contents



Material
    United States Federal and Canadian Income Tax
    Consequences.
  ITEM 1B.
    UNRESOLVED
    STAFF COMMENTS    ITEM 2.
    PROPERTIES    Area


ExpirationLocation

Purpose

(in square feet)


YearOttawa, Canada

Corporate Head Office


69,652



2010Eden Prairie, Minnesota

Sales and Development


74,224



2008Tualitin, Oregon

Sales and Development


10,908



2012Maidenhead, England

Sales and Administration


10,549



2015Mansfield, Connecticut

Sales, Operations and
    Administration


8,890



2009Munich, Germany

Sales and Administration


6,657



2007Munich, Germany

iGrafxSales and Administration


3,152



2007Tokyo, Japan

Sales and Administration


1,531



2007     Area


ExpirationLocation

Purpose

(in sq. ft.)


YearTaipei, Taiwan

Ulead Corporate and InterVideo


51,000



2013Fremont, California

Corporate/Research and
    Development/Sales
    and Marketing


35,069



2011Taipei, Taiwan

Research and Development/Sales and
    Marketing


24,167



2009Shanghai, China

Research and Development/Sales and
    Marketing


16,258



2007Bangalore, India

Research and Development/Sales and
    Marketing


5,500



2007Kanagawa, Japan

Sales and Marketing


3,417



2008   ITEM 3.
    LEGAL
    PROCEEDINGS    Electronics For Imaging, Inc., Massachusetts Institute of
    Technology v. Corel Corporation et al.
 24




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##### Table of Contents



ITEM 4.
    SUBMISSION
    OF MATTERS TO A VOTE OF SECURITY HOLDERS   25




---



##### Table of Contents



PART II  ITEM 5.
    MARKET
    FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS
    AND ISSUER PURCHASES OF EQUITY SECURITIES    Year Ended November 30, 2006Corel CorporationNasdaq [US$]



TSX [C$]High


Low



High


LowQ2

$
16.15


$
13.19



$
16.15


$
13.96Q3

$
12.90


$
9.40



$
14.09


$
10.62Q4

$
14.15


$
11.10



$
15.92


$
12.71     RECORD
    HOLDERS
    DIVIDEND
    POLICY
      MATERIAL
    UNITED STATES FEDERAL AND CANADIAN INCOME TAX
    CONSEQUENCES
  General
   26




---



##### Table of Contents



Material
    U.S. Federal Income Tax Consequences
  mark-to-market
        Taxation
    of Dividends
   27




---



##### Table of Contents



Canada-United
  Taxation
    of Dispositions
            mark-to-market
   28




---



##### Table of Contents



Information
    Reporting and Backup Withholding
    
    dividend payments or other taxable distributions made to you
    within the United States; and
    the payment of proceeds to you from the sale of common shares
    effected at a United States office of a broker,      
    fail to provide an accurate taxpayer identification number;
    are notified by the Internal Revenue Service (IRS)
    that you have failed to report all interest and dividends
    required to be shown on your United States federal income tax
    returns; or
    in certain circumstances, fail to comply with other applicable
    requirements of the backup withholding rules.      Material
    Canadian Income Tax Consequences
    Canada-United
  Taxation
    Of Dividends
   29




---



##### Table of Contents



Taxation
    Of Gain On Disposition
      RECENT
    SALES OF UNREGISTERED SECURITIES
       30




---



##### Table of Contents



PURCHASES
    OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED
    PURCHASERS
    Regulation S-K Share Option and
    Other Compensation Plans
 31




---



##### Table of Contents



ITEM 6.
    SELECTED
    FINANCIAL DATA  SELECTED
    CONSOLIDATED FINANCIAL DATA
  Form 10-K. Form 10-K.
    Form 10-K.
 32




---



##### Table of Contents



Predecessor(1)Fiscal Year


December 1,


August 29,Ended


2002 Through


2003 Through


Fiscal Years EndedNovember 30,


August 28,


November 30,


November 30,2002


2003


2003


2004


2005


2006(In thousands, except per share data)Consolidated Statement of
    Operations Data:Revenues

$
126,701


$
85,386


$
23,806


$
111,692


$
164,044


$
177,191Gross margin


98,479



62,102



15,852



79,845



118,290



140,344Total operating expenses


200,908



88,215



24,974



71,454



101,404



106,187Income (loss) from operations


(102,429
)


(26,113
)


(9,122
)


8,391



16,886



34,157Income tax expenses (recovery)


(6,943
)


(3,895
)


555



7,315



6,291



4,668Net income (loss)


(93,238
)


(27,895
)


(9,272
)


1,207



(8,753
)


9,251Net income (loss) per Corel common
    share:Basic

$
N/A


$
N/A


$
N/A


$
N/A


$
N/A


$
0.41Fully diluted

$
N/A


$
N/A


$
N/A


$
N/A


$
N/A


$
0.40Weighted average number of Corel
    common shares used in per share calculations:Basic


N/A



N/A



N/A



N/A



N/A



22,410Fully diluted


N/A



N/A



N/A



N/A



N/A



23,156Net income (loss) per shareBasicClass A

$
(1.05
)

$
(0.30
)

$
(0.87
)

$
0.08


$
(2.40
)

$
N/AClass B

$
N/A


$
N/A


$
N/A


$
0.08


$
(2.40
)

$
N/AWinZip common

$
N/A


$
N/A


$
N/A


$
N/A


$
136.90


$
N/AFully dilutedClass A

$
(1.05
)

$
(0.30
)

$
(0.87
)

$
0.08


$
(2.40
)

$
N/AClass B

$
N/A


$
N/A


$
N/A


$
0.08


$
(2.40
)

$
N/AWinZip common

$
N/A


$
N/A


$
N/A


$
N/A


$
136.90


$
N/AWeighted average number of shares
    used in per share calculations:BasicClass A


88,627



91,853



11,677



8,218



3,737



N/AClass B


N/A



N/A



N/A



3,497



8,321



N/AWinZip common


N/A



N/A



N/A



N/A



20



N/AFully dilutedClass A


88,627



91,853



11,677



8,218



3,737



N/AClass B


N/A



N/A



N/A



3,497



8,321



N/AWinZip common


N/A



N/A



N/A



N/A



20



N/ACash Flow Data:Cash flow provided by (used in)
    operating activities

$
(19,742
)

$
(10,792
)

$
8,671


$
32,512


$
40,459


$
36,225Cash flow provided by (used in)
    financing activities


97



(240
)


(47,516
)


(5,329
)


(38,552
)


(3,885
)Cash flow provided by (used in)
    investing activities


13,595



6,418



43,143



(34,099
)


7,301



(1,906
)Other Financial Data:EBITDA(3)

$
(79,585
)

$
(23,151
)

$
(3,428
)

$
29,183


$
39,531


$
42,405Adjusted EBITDA(3)

$
(15,542
)


(14,561
)


(2,290
)


32,199



49,033


$
55,214   33




---



##### Table of Contents



Predecessor(1)As of November 30,2002


2003


2004


2005


2006(In thousands)Consolidated Balance Sheet
    Data:Cash, cash equivalents and
    short-term investments

$
75,826


$
24,683


$
21,788


$
20,746


$
51,030Working capital (deficit)


63,457



(3,556
)


(19,417
)


(13,482
)


31,152Total assets


129,802



101,400



108,788



120,836



130,686Deferred revenue


9,754



8,026



10,020



13,840



14,734Total debt






26,895



64,799



150,971



90,649Total shareholders equity
    (deficit)


91,005



38,579



1,537



(85,234
)


(11,807
)     (1)
    
    Reflects data prior to us being
    acquired by Vector Capital. The predecessor financial data is
    not comparable with financial data for periods subsequent to
    August 28, 2003 due to the application of push-down
    accounting effective August 29, 2003 and the adoption of
    SFAS No. 123 R, Share-based payments (revised
    2004) (SFAS 123(R)) relating to the
    accounting for stock-based compensation effective
    December 1, 2003. In predecessor periods, stock-based
    compensation was accounted for in accordance with Accounting
    Principles Board Opinion No. 25, Accounting for Stock
    Issued to Employees (APB 25).(2)
    
    Financial data for our fiscal year
    ended November 30, 2005 is not comparable to prior periods due
    to the combination of financial data of WinZip from
    January 18, 2005 to November 30, 2005, which reflects
    the period that WinZip and we were under common control by
    Vector Capital.(3)
    
    EBITDA represents net income before
    interest, income taxes, depreciation and amortization. Adjusted
    EBITDA represents EBITDA, further adjusted to eliminate items
    specifically defined in our credit facility agreement. EBITDA
    and Adjusted EBITDA are not measures of operating income,
    operating performance or liquidity under GAAP. We have included
    a presentation of EBITDA because we understand it is used by
    some investors to determine a companys historical ability
    to service indebtedness, and it is a starting point for
    calculating Adjusted EBITDA. We have included a presentation of
    Adjusted EBITDA because certain covenants in our credit facility
    are tied to Adjusted EBITDA. If our Adjusted EBITDA were to
    decline below certain levels, it could result in, among other
    things, a default or mandatory prepayment under our current
    credit facility. The covenants in our credit facility are
    described under Managements Discussion and Analysis
    of Financial Condition and Results of Operations 
    Indebtedness. Additionally, management uses EBITDA and
    Adjusted EBITDA as supplementary non-GAAP measures to assist in
    its overall evaluation of our liquidity and to determine
    appropriate levels of indebtedness. Neither EBITDA nor Adjusted
    EBITDA should be considered in isolation or as a substitute for
    cash flow from operations (as determined in accordance with
    GAAP) as an indicator of our operating performance, or of
    operating income (as determined in accordance with GAAP). EBITDA
    and Adjusted EBITDA are not necessarily comparable to similarly
    titled measures used by other companies.We consider EBITDA and Adjusted
    EBITDA to be measures of liquidity. Accordingly, they are
    reconciled to cash flow from operations in the table below.  34




---



##### Table of Contents



PredecessorFiscal Year


December 1,


August 29,Ended


2002 Through


2003 Through


Fiscal Years EndedNovember 30,


August 28,


November 30,


November 30,2002


2003


2003


2004


2005


2006(In thousands)Cash flow provided by (used in)
    operating activities

$
(19,742
)

$
(10,792
)

$
8,671


$
32,512


$
40,459


$
36,225Change in operating assets and
    liabilities


3,666



2,030



(12,275
)


1,683



(9,527
)


3,414Interest expense










225



2,709



12,786



12,309Interest income


(1,790
)


(1,383
)


(19
)


(1,485
)


(178
)


(978
)Income tax expense (recovery)


(6,943
)


(3,895
)


555



7,315



6,291



4,668Stock-based compensation














(225
)


(1,731
)


(3,232
)Other non-cash charges


















(2,242
)


Loss on debt retirement


















(3,937
)


(8,292
)Goodwill impairment


(48,258
)


















Writedown of technology


(14,595
)


















Accrued interest


















(913
)


322Provision for bad debts


(596
)


(755
)


(326
)


93



(529
)


(195
)Unrealized foreign exchange gains
    (losses) on forward contracts






162



(22
)


27



(263
)


(150
)Deferred income taxes


10,148



139



(237
)


(5,178
)


(830
)


(876
)Loss on interest rate swap recorded
    at fair value






















(810
)Gain (loss) on disposal of fixed
    assets


(136
)


(67
)






(3
)


20



Loss on investments


(149
)


















(Impairment) gain on disposal of
    investments






(7,448
)






729



125



Share of loss of equity investments


(1,190
)


(1,142
)














Predecessor legal settlement and
    tax refund














(8,994
)






EBITDA

$
(79,585
)

$
(23,151
)

$
(3,428
)

$
29,183


$
39,531


$
42,405Restructuring










1,138



3,520



834



810Stock-based compensation














225



1,731



3,232Integration costs






















358Impairment (gain on disposal) of
    investments






7,448







(729
)


(125
)


Share of loss of equity investments


1,190



1,142















Other non-cash charges


















2,242



Reorganization costs


















883



117Loss on debt retirement


















3,937



8,292Goodwill impairment


48,258



















Writedown of technology


14,595



















Adjusted EBITDA

$
(15,542
)

$
(14,561
)

$
(2,290
)

$
32,199


$
49,033


$
55,214  35




---



##### Table of Contents



ITEM 7.
    MANAGEMENTS
    DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
    OPERATIONS  The following discussion and analysis should be read together
    with our audited consolidated financial statements for the years
    ended November 30, 2006, 2005 and 2004 and accompanying
    notes set forth elsewhere in this report. All financial
    information is presented in U.S. dollars.
  Some of the statements set forth in this section are
    forward-looking statements relating to our future results of
    operations. Our actual results may vary from the results
    anticipated by these statements. Please see Information
    Regarding Forward-Looking Statements.
  OVERVIEW
  easy-to-use e-Store,
  WordPerfect Office Suite WinZip WordPerfect Office Suite WinZip iGrafx CorelDRAW Graphics Suite Corel Paint Shop Pro Corel DESIGNER Corel
    Painter Snapfire. CorelDRAW Graphics
    Suite Corel Paint Shop Pro Corel Snapfire Corel Snapfire Plus Corel DESIGNER
    Technical Suite Corel
    Painter
    Corel Paint Shop Pro Corel Photo Album
 36




---



##### Table of Contents



WinZip
  Acquisition of InterVideo,
      Industry
    and Business Trends
        Acquisition
    of InterVideo
   37




---



##### Table of Contents



easy-to-use,
          9 Months Ended


9 Months EndedSeptember 30,


September 30,


PercentageInterVideo Selected Financial Data

2005


2006


Change(In thousands)Revenues


78,512



85,971



9.5
%Gross profit


48,991



44,090



(10.0
)Net income


3,368



117



(96.5
)Operating cash flows


7,998



4,855



(39.3
)     OPERATIONS
  Revenues
   38




---



##### Table of Contents



WordPerfect Office Suite iGrafx FlowCharter iGrafx Process WinZip CorelDraw
    Graphics Suite Corel Paint Shop Pro Corel Photo
    Album Corel Painter Corel Designer Technical
    Suite Corel Snapfire.
    Current


PriorCurrent


Release


ReleaseVersion


Quarter


QuarterProductProductivity:WordPerfect Office
    Suite


13



Q1 2006



Q2 2004WinZip


11



Q4 2006



Q4 2005iGrafx FlowCharter


11



Q1 2006



Q4 2004Graphics and Digital Imaging:CorelDRAW Graphics
    Suite


13



Q1 2006



Q1 2004Corel Designer Technical
    Suite


12



Q2 2005



Q3 2003Corel Painter


10



Q1 2007



Q1 2006Corel Paint Shop Pro


11



Q4 2006



Q4 2005Corel Snapfire


1.0



Q4 2006



N/A   Item 1A-Risk Our quarterly operating results may fluctuate
    depending on the timing and success of product
    releases
  Cost
    of Revenues
    
    salaries, benefits, stock-based compensation and related costs
    of the manufacturing oversight staff;
    the cost of packaging and distribution of our packaged software
    products;
    the cost of related customer and technical support functions;
    royalties paid and costs of licensing third party intellectual
    property;
    credit card fees; and
    allocated facilities, depreciation and amortization and other
    related overhead.  e-Store,
    
    salaries, benefits, stock-based compensation and related costs
    of customer and technical support functions; and
    allocated facilities, depreciation and amortization and other
    related overhead. 39




---



##### Table of Contents



Sales
    and Marketing
    
    salaries, commissions, benefits and stock-based compensation
    related to sales and marketing personnel;
    travel and living expenses;
    marketing, such as co-marketing programs with our resellers and
    OEMs, trade shows and advertising; and
    allocated facilities, depreciation and amortization and other
    related overhead.  Research
    and Development
    
    salaries, benefits and stock-based compensation related to
    research and development personnel;
    allocated facilities, depreciation and amortization and other
    related overhead; and
    localization and contract development expenses.    General
    and Administrative
    
    salaries, benefits and stock-based compensation related to
    general and administrative personnel;
    accounting, legal and other professional fees;
    allocated facilities, depreciation and amortization and other
    related overhead; and
    insurance costs.  Taxes
   40




---



##### Table of Contents



RESULTS
    OF OPERATIONS
  Comparison
    of Fiscal Year Ended November 30, 2006 to Fiscal Year Ended
    November 30, 2005
    year-over-year
 Years Ended November 30,


Percentage2005


2006


2005


2006


Change(Dollars in thousands)RevenuesProduct

$
148,308


$
157,319



90.4
%


88.8
%


6.1
%Maintenance and services


15,736



19,872



9.6



11.2



26.3Total revenues


164,044



177,191



100.0



100.0



8.0Cost of revenuesCost of product(1)


18,461



21,339



12.4



13.6



15.6Cost of maintenance and services(1)


1,154



1,142



7.3



5.7



(1.0
)Amortization of intangible assets


26,139



14,366



15.9



8.1



(45.0
)Total cost of revenues


45,754



36,847



27.9



20.8



(19.5
)Gross margin


118,290



140,344



72.1



79.2



18.6Operating expenses:Sales and marketing


54,056



54,851



33.0



31.0



1.5Research and development


23,538



25,883



14.3



14.6



10.0General and administrative


19,851



24,285



12.1



13.7



22.3Other operating expense


3,125



358



1.9



0.2



(88.5
)Restructuring


834



810



0.5



0.5



(2.9
)Total operating expenses


101,404



106,187



61.8



59.9



4.7Income from operations


16,886



34,157



10.3
%


19.3
%


102.3
%Other expenses (income):Loss on debt retirement


3,937



8,292




*


*



*Interest expense, net


12,608



11,331




*


*



*Gain on disposal of investments


(125
)







*


*



*Amortization of deferred financing
    fees


1,756



1,180




*


*



*Other non-operating (income)
    expense


1,172



(565
)



*


*



*Income (loss) before income tax
    expense (recovery)


(2,462
)


13,919




*


*



*Income tax expense


6,291



4,668




*


*



*Net income (loss)

$
(8,753
)

$
9,251




*


*



*     (1)
    
    Percentage reflects percentage of related revenues.*
    
    Not Meaningful 41




---



##### Table of Contents



Revenues
  WinZip 10.0 Pro CorelDRAW iGrafx WordPerfect Corel Paint Shop Pro. WinZip WinZip
  WinZip when-and-if-available
  Total
    Revenues by Product Group
  Years Ended November 30,


Percentage2005


2006


2005


2006


Change(Dollars in thousands)Productivity

$
67,597


$
78,177



41.2
%


44.1
%


15.7
%Graphics and digital imaging


96,447



99,014



58.8



55.9



2.7Total

$
164,044


$
177,191



100.0
%


100.0
%


8.0
%   WinZip WinZip WinZip 10.0 WinZip 10.0 Pro WinZip iGrafx
  WordPerfect WordPerfect WordPerfect Quattro Pro Presentations WordPerfect WordPerfect X3. WordPerfect CorelDRAW Paint Shop Pro WinZip.
  CorelDRAW CorelDRAW Graphics Suite Corel Painter Corel Designer
    Suite Corel PaintShop
 42




---



##### Table of Contents



Total
    Revenues by Region
  Years Ended November 30,


Percentage2005


2006


2005


2006


Change(Dollars in thousands)Americas

$
98,412


$
104,447



60.0
%


58.9
%


6.1
%EMEA


52,965



58,253



32.3



32.9



10.0Asia Pacific


12,667



14,491



7.7



8.2



14.4Total

$
164,044


$
177,191



100.0
%


100.0
%


8.0
%     WinZip CorelDRAW WordPerfect
  e-stores.
  CorelDraw X3 WinZip.
  Cost
    of Revenues
  Cost of Product Revenues.
  Cost of Maintenance and Services
    Revenues.
 43




---



##### Table of Contents



Amortization of Intangible
    Assets.
  Operating
    Expenses
  Sales and Marketing. WordPerfect CorelDRAW Graphics Suite
  Research and Development.
  General and Administrative.
  Other Operating Expense.
  Restructuring.
  Non-Operating
    (Income) Expense
  Loss on Debt Retirement.
 44




---



##### Table of Contents



Interest (Income) Expense, Net.
  Amortization of Deferred Financing Fees.
  Other Non-Operating (Income) Expense.
  Income Tax Expense.
        Comparison
    of Years Ended November 30, 2005 and November 30,
    2004
   45




---



##### Table of Contents



year-over-year
  Years Ended November 30,


Percentage2004


2005


2004


2005


Change(Dollars in thousands)RevenuesProduct

$
97,724


$
148,308



87.5
%


90.4
%


51.8
%Maintenance and services


13,968



15,736



12.5



9.6



12.7Total revenues


111,692



164,044



100.0



100.0



46.9Cost of revenuesCost of product(1)


14,215



18,461



14.5



12.4



29.9Cost of maintenance and services(1)


1,085



1,154



7.8



7.3



6.4Amortization of intangible assets


16,547



26,139



14.8



15.9



58.0Total cost of revenues


31,847



45,754



28.5



27.9



43.7Gross margin


79,845



118,290



71.5



72.1



48.1Operating expenses:Sales and marketing


38,508



54,056



34.5



33.0



40.4Research and development


14,550



23,538



13.0



14.3



61.8General and administrative


14,876



19,851



13.3



12.1



33.4Other operating expense






3,125







1.9



Restructuring


3,520



834



3.2



0.5



(76.3
)Total operating expenses


71,454



101,404



64.0



61.8



41.9Income from operations


8,391



16,886



7.5
%


10.3
%


101.2
%Other expenses (income):Loss on debt retirement






3,937




*


*



*Interest expense, net


1,224



12,608




*


*



*Gain on disposal of investments


(729
)


(125
)



*


*



*Amortization of deferred financing
    fees


407



1,756




*


*



*Other non-operating (income)
    expense


(1,033
)


1,172




*


*



*Income (loss) before income tax
    expense (recovery)


8,522



(2,462
)



*


*



*Income tax expense


7,315



6,291




*


*



*Net income (loss)

$
1,207


$
(8,753
)



*


*



*     (1)
    
    Percentage reflects percentage of related revenues.*
    
    Not Meaningful  Revenues
  year-over-year
 46




---



##### Table of Contents



WinZip
  Total
    Revenues by Product Group
  Years Ended November 30,


Percentage2004


2005


2004


2005


Change(Dollars in thousands)Productivity

$
49,775


$
67,597



44.6
%


41.2
%


35.8
%Graphics and digital imaging


61,917



96,447



55.4



58.8



56.0
%Total

$
111,692


$
164,044



100.0
%


100.0
%   WordPerfect
  CorelDRAW Graphics Suite, Corel
    Painter, Corel DESIGNER Technical Suite Corel Paint Shop Pro Corel Photo Album Corel Paint Shop Pro Corel Photo Album non-core
  Total
    Revenues by Region
  Years Ended November 30,


Percentage2004


2005


2004


2005


Change(Dollars in thousands)Americas

$
67,212


$
98,412



60.2
%


60.0
%


46.4
%EMEA


38,673



52,965



34.6



32.3



37.0
%Asia Pacific


5,807



12,667



5.2



7.7



118.1
%Total

$
111,692


$
164,044



100.0
%


100.0
%


46.9
%   WinZip WinZip
 47




---



##### Table of Contents



Corel Paint Shop Pro Corel Photo
    Album WinZip
  Corel Painter Corel Painter 9 WordPerfect
  CorelDRAW Corel DESIGNER 12 Corel Painter
  Corel Paint Shop Pro Corel Photo Album
  Cost
    of Revenues
  Cost of Product Revenues.
  Cost of Maintenance and Services
    Revenues.
  Amortization of Intangible
    Assets.
  Operating
    Expenses
  Sales and Marketing.
 48




---



##### Table of Contents



Research and Development. WordPerfect
  General and Administrative.
  Other Operating Expense.
  Restructuring.
    Non-Operating
    (Income) Expense
  Loss on Debt Retirement.
  Interest (Income) Expense, Net.
  Amortization of Deferred Financing Fees.
  Other Non-Operating Expense.
 49




---



##### Table of Contents



Income Tax Expense.
    LIQUIDITY
    AND CAPITAL RESOURCES
      Risk Factors
  Working
    Capital
       50




---



##### Table of Contents



Cash
    Flows
  Years Ended November 30,2004


2005


2006(In thousands)Cash provided by operating
    activities

$
32,512


$
40,459


$
36,225Cash used in financing activities


(5,329
)


(38,552
)


(3,885
)Cash provided by (used in)
    investing activities


(34,099
)


7,301



(1,906
)   Year
    ended November 30, 2006 compared to year ended
    November 30, 2005.
        Indebtedness
     51




---



##### Table of Contents



Term LoanPrincipal


Interest


Total(In thousands)2007

$
1,425


$
14,743


$
16,1682008


1,600



14,855



16,4552009


1,600



14,704



16,3042010


1,600



14,551



16,1512011


1,600



14,400



16,0002012


151,725



4,795



156,520Total

$
159,550


$
78,048


$
237,598     
    a maximum total leverage ratio, which is defined as the ratio of
    total debt to trailing four quarter consolidated Adjusted
    EBITDA, as defined in the credit agreement, to be less than
    specified amounts over the term of the facility, from 3.50:1.00
    to 2.25:1.00; the applicable note for November 30, 2006 was
    3.00:1.00.
    a minimum fixed charge coverage ratio, which is defined as the
    ratio of trailing four quarter consolidated Adjusted EBITDA to
    fixed charges, of 2.50 to 1.00 up to December 2006, 2.00 to 1.00
    from January 2006 until November 2010, 2.25 to 1.00 from
    December 2010 to November 2011 and 2.50 to 1.00 thereafter.     52




---



##### Table of Contents



Year-Ended November 302006


2005


2004(In thousands)Cash flow provided by operations

$
36,225


$
40,459


$
32,512Change in operating assets and
    liabilities


3,414



(9,527
)


1,683Interest expense, net


11,331



12,608



1,224Income tax expense


4,668



6,291



7,315Accrued interest


322



(913
)


Provision for bad debts


(195
)


(529
)


93Unrealized foreign exchange losses
    on forward contracts


(150
)


(263
)


27Deferred income taxes


(876
)


(830
)


(5,178
)Loss on interest rate swap
    recorded at fair value


(810
)






Gain on disposal of fixed assets






20



(3
)Restructuring


810



834



3,520Integration costs


358







Predecessor legal settlement and
    tax refund










(8,994
)Reorganization costs


117



883



Adjusted EBITDA

$
55,214


$
49,033


$
32,199   Contractual
    Obligations and Commitments
        Less than








More than1 Year


2-3 Years


4-5 Years


5 Years


Total(In thousands)Long-term debt

$
16,168


$
32,759


$
32,151


$
156,520


$
237,598Operating leases


2,847



4,112



2,250



215



9,424Total

$
19,015


$
36,871


$
34,401


$
156,735


$
247,022     Off-Balance
    Sheet Arrangements
  Regulation S-K.
 53




---



##### Table of Contents



CRITICAL
    ACCOUNTING POLICIES AND ESTIMATES
      Revenue
    Recognition
  97-2, Software Revenues Recognition, SOP 98-9, Modification of
    97-2,
    Software Recognition with Respect to Certain Transactions Revenues Recognition in Financial Statements,
  SOP 97-2 when-and-if-available
        Allowance
    for Product Returns and Rebate Programs
   54




---



##### Table of Contents



Accounting
    for Income Taxes
            Business
    Combinations
     55




---



##### Table of Contents



Impairment
    of Goodwill
    Long-lived
    Assets
    Stock
    Option Accounting
     56




---



##### Table of Contents



RECENTLY
    ISSUED ACCOUNTING PRONOUNCEMENTS
  Accounting for Uncertainty in Income
    Taxes  An Interpretation of FASB Statement 109
  Employers Accounting for Defined Benefit Pension
    and other Postretirement Plans
  Fair Value Measurements
 57




---



##### Table of Contents



QUARTERLY
    FINANCIAL DATA
  Quarter Ended2006

Feb. 28


May. 31


Aug. 30


Nov. 30


Total Year(Dollars in thousands,except number of shares and per share amounts)Revenue:Product

$
39,498


$
39,151


$
36,362


$
42,308


$
157,319Maintenance and service


4,789



5,059



4,892



5,132



19,872Total revenue


44,287



44,210



41,254



47,440



177,191Cost of revenues:Cost of products


5,005



5,049



5,338



5,947



21,339Cost of maintenance and services


314



276



287



265



1,142Amortization of intangible assets


6,627



2,648



2,712



2,379



14,366Total cost of revenues


11,946



7,973



8,337



8,591



36,847Gross margin


32,341



36,237



32,917



38,849



140,344Operating expenses:Sales and marketing


14,504



14,023



11,810



14,514



54,851Research and development


6,181



6,640



6,379



6,683



25,883General and administration


5,395



6,193



5,833



6,864



24,285Business integration costs














358



358Restructuring


560



251







(1
)


810Total operating expenses


26,640



27,107



24,022



28,418



106,187Income from operations


5,701



9,130



8,895



10,431



34,157Other expenses (income):Loss on debt retirement






8,275



17







8,292Interest income














(978
)


(978
)Interest expense, net


3,863



3,207



2,334



2,905



12,309Amortization of deferred financing
    fees


444



357



188



191



1,180Other non-operating (income) expense


(120
)


(528
)


377



(294
)


(565
)Income (loss) before taxes


1,514



(2,181
)


5,979



8,607



13,919Income tax expense, current


3,152



1,791



485



(2,017
)


3,411Income tax expense, deferred














1,257



1,257Net (loss)

$
(1,638
)

$
(3,972
)

$
5,494


$
9,367


$
9,251Other comprehensive income (loss):Unrealized (loss) gain on securities


(48
)


(23
)


(36
)


(24
)


(131
)Total comprehensive loss

$
(1,686
)

$
(3,995
)

$
5,458


$
9,343


$
9,120Net income (loss) per share:BasicWinZip common

$
105.85



N/A



N/A



N/A



N/ACorel common

$
(0.25
)

$
(0.19
)

$
0.22


$
0.38


$
0.41Fully dilutedWinZip common

$
92.04



N/A



N/A



N/A



N/ACorel common

$
(0.25
)

$
(0.19
)

$
0.22


$
0.37


$
0.40  58




---



##### Table of Contents



Quarter Ended2005

Feb. 28


May. 31


Aug. 30


Nov. 30


Total Year(Dollars in thousands,except number of shares and per share amounts)Revenue:Product

$
36,082


$
36,428


$
34,360


$
41,438


$
148,308Maintenance and service


3,906



3,573



4,129



4,128



15,736Total revenue


39,988



40,001



38,489



45,566



164,044Cost of revenues:Cost of products


4,708



4,097



4,263



5,393



18,461Cost of maintenance and services


348



293



257



256



1,154Amortization of intangible assets


6,199



6,636



6,654



6,650



26,139Total cost of revenues


11,255



11,026



11,174



12,299



45,754Gross margin


28,733



28,975



27,315



33,267



118,290Operating expenses:Sales and marketing


12,824



12,164



12,938



16,130



54,056Research and development


5,671



5,982



6,016



5,869



23,538General and administration


5,659



4,654



5,088



4,450



19,851Other operating expense














3,125



3,125Restructuring


540



72



68



154



834Total operating expenses


24,694



22,872



24,110



29,728



101,404Income from operations


4,039



6,103



3,205



3,539



16,886Other expenses (income):Loss on debt retirement


3,931



6











3,937Interest income














(178
)


(178
)Interest expense, net


1,970



3,407



3,549



3,860



12,786Gain on disposal of investments














(125
)


(125
)Amortization of deferred financing
    fees


300



504



455



497



1,756Other non-operating (income) expense


178



193



222



579



1,172Income (loss) before taxes


(2,340
)


1,993



(1,021
)


(1,094
)


(2,462
)Income tax expense, current


180



1,835



1,969



1,477



5,461Income tax expense, deferred














830



830Net (loss)

$
(2,520
)

$
158


$
(2,990
)

$
(3,401
)

$
(8,753
)Other comprehensive income (loss):Realized gain (loss) on sale of
    securities






(91
)






19



(72
)Unrealized (loss) gain on securities


214



(57
)


(60
)


2



99Other comprehensive (loss) income


214



(148
)


(60
)


21



27Total comprehensive loss

$
(2,306
)

$
10


$
(3,050
)

$
(3,380
)

$
(8,726
) 59




---



##### Table of Contents



Quarter Ended2005

Feb. 28


May. 31


Aug. 30


Nov. 30


Total Year(Dollars in thousands,except number of shares and per share amounts)Net income (loss) per share:BasicClass A

$
(1.64
)

$
(0.05
)

$
(0.31
)

$
(0.33
)

$
(2.40
)Class B

$
(1.64
)

$
(0.05
)

$
(0.31
)

$
(0.33
)

$
(2.40
)WinZip common

$
(9.75
)

$
38.95


$
35.75


$
29.50


$
136.90Fully dilutedClass A

$
(1.64
)

$
(0.05
)

$
(0.31
)

$
(0.33
)

$
(2.40
)Class B

$
(1.64
)

$
(0.05
)

$
(0.31
)

$
(0.33
)

$
(2.40
)WinZip common

$
(9.75
)

$
38.95


$
35.75


$
29.50


$
136.90Pro-formaBasic

$
(0.16
)

$
0.01


$
(0.15
)

$
(0.17
)

$
(0.45
)Diluted

$
(0.16
)

$
0.01


$
(0.15
)

$
(0.17
)

$
(0.45
)  59.1




---



##### Table of Contents



ITEM 7A.
    QUANTITATIVE
    AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.  Qualitative
    and Quantitative Disclosure About Market Risk
    Interest
    Rate Risk
          Foreign
    Currency Risk
          ITEM 8.
    FINANCIAL
    STATEMENTS AND SUPPLEMENTARY DATA    Managements Discussion
    and Analysis of Financial Condition and Results of
    Operations
 60




---



##### Table of Contents



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
             61




---



##### Table of Contents



COREL
    CORPORATION
  CONSOLIDATED
    BALANCE SHEETS
 (In
    thousands of U.S. dollars)
  As of November 30,Note


2006


2005ASSETSCurrent assets:Cash and cash equivalents





$
51,030


$
20,746Restricted cash


2



717



966Accounts receivableTrade, net


3



18,150



19,342Due from related parties


4







667Other






808



311Inventory


5



914



726Deferred tax assets


11







592Prepaids and other current assets






2,300



2,343Total current assets






73,919



45,693Investments


6



203



334Capital assets


7



3,651



3,532Intangible assets


7, 8



37,831



52,397Goodwill


8, 9



9,850



9,850Deferred income tax assets


11







284Deferred financing and other
    long-term assets


2



5,232



8,746Total assets





$
130,686


$
120,836LIABILITIES AND
    SHAREHOLDERS (DEFICIT) EQUITYCurrent liabilities:Accounts payable and accrued
    liabilities


10


$
28,220


$
30,152Due to related parties


4



167



334Income taxes payable


11



235



Deferred revenue






12,719



11,755Current portion of long term debt


12



1,426



16,934Total current liabilities






42,767



59,175Deferred revenue






2,015



2,085Income taxes payable


11



8,488



10,773Long term debt


12



89,223



134,037Total liabilities






142,493



206,070Commitments and contingencies


13Shareholders (deficit) equityShare capital:Class A Common Shares (par
    value: none; authorized: unlimited; issued and outstanding: nil
    and 3,740 shares, respectively; convertible to Class B
    Common Shares)


14







(42,229
)Class B Common Shares (par
    value: none; authorized: unlimited; issued and outstanding: nil
    and 8,321 shares, respectively)


14







(34,184
)Preferred Shares (par value: none;
    authorized: unlimited; issued and outstanding:
    nil and 3,105 shares, respectively)


14







2,600WinZip Common Shares (par value:
    $1; authorized: 50; issued and outstanding:
    nil and 20 shares, respectively)


14







20Corel Common Shares (par value:
    none; authorized: unlimited; issued and outstanding: 24,535 and
    nil shares, respectively)


14



30,722Additional paid-in capital


14



4,612



7,427Accumulated other comprehensive
    income (loss)


6



(46
)


85Deficit






(47,095
)


(18,953
)Total shareholders (deficit)
    equity






(11,807
)


(85,234
)Total liabilities and
    shareholders (deficit) equity





$
130,686


$
120,836    62




---



##### Table of Contents



COREL
    CORPORATION
  CONSOLIDATED
    STATEMENTS OF OPERATIONS
 (In
    thousands of U.S. dollars, except per share data)
  Year Ended November 30,Note


2006


2005


2004RevenuesProduct





$
157,319


$
148,308


$
97,724Maintenance and services






19,872



15,736



13,968Total revenues






177,191



164,044



111,692Cost of revenuesCost of product






21,339



18,461



14,215Cost of maintenance and services






1,142



1,154



1,085Amortization of intangible assets






14,366



26,139



16,547Total cost of revenues






36,847



45,754



31,847Gross margin






140,344



118,290



79,845Operating expensesSales and marketing






54,851



54,056



38,508Research and development






25,883



23,538



14,550General and administration






24,285



19,851



14,876Other operating expense


12, 20



358



3,125



Restructuring


16



810



834



3,520Total operating
    expenses






106,187



101,404



71,454Income from operations






34,157



16,886



8,391Other expenses
    (income)Loss on debt retirement


12



8,292



3,937



Interest income






(978
)


(178
)


(1,485
)Interest expense






12,309



12,786



2,709Gain on disposal of investments










(125
)


(729
)Amortization of deferred financing
    fees






1,180



1,756



407Other non-operating expense (income)






(565
)


1,172



(1,033
)Income (loss) before income
    taxes






13,919



(2,462
)


8,522Income tax expense


11Current






3,411



5,461



2,137Deferred






1,257



830



5,178Net income (loss)





$
9,251


$
(8,753
)

$
1,207Other comprehensive
    incomeUnrealized gains (losses) on
    securities, net of taxes


6



(131
)


99



33Realized gain on sale of
    securities, net of taxes


6







(72
)


Other comprehensive income, net
    of taxes






(131
)


27



33Comprehensive income
    (loss)





$
9,120


$
(8,726
)

$
1,240Net income (loss) per Corel
    common share:


17Basic





$
0.41


$
N/A


$
N/AFully diluted





$
0.40


$
N/A


$
N/AWeighted average number of Corel
    common shares:Basic






22,410



N/A



N/AFully diluted






23,156



N/A



N/ADistributed earnings to Corel
    common shares





$
9,251


$
N/A


$
N/A 63




---



##### Table of Contents



Year Ended November 30,Note


2006


2005


2004Net income (loss) per
    share:BasicClass A





$
N/A


$
(2.40
)

$
0.08Class B





$
N/A


$
(2.40
)

$
0.08WinZip common





$
N/A


$
136.90


$
N/AFully dilutedClass A





$
N/A


$
(2.40
)

$
0.08Class B





$
N/A


$
(2.40
)

$
0.08WinZip common





$
N/A


$
136.90


$
N/AIncome (loss) applicable to
    shareholders:Class ADistributed earnings to class





$
N/A


$
21,018


$
22,709Loss allocable to class





$
N/A


$
(29,991
)

$
(22,040
)Class BDistributed earnings to class





$
N/A


$
46,800


$
9,663Loss allocable to class





$
N/A


$
(66,781
)

$
(9,378
)WinZip commonDistributed earnings to class





$
N/A


$
12,000


$
N/ALoss allocable to class





$
N/A


$
(9,262
)

$
N/AWeighted average number of
    shares:Shares used in basic per share
    amountsClass A






N/A



3,737



8,218Class B






N/A



8,321



3,497WinZip common






N/A



20



N/AShares used in diluted per share
    amountsClass A






N/A



3,737



8,218Class B






N/A



8,321



3,497WinZip common






N/A



20



N/A    64




---



##### Table of Contents



COREL
    CORPORATION
  CONSOLIDATED
    STATEMENTS OF CASH FLOWS
 (In
    thousands of U.S. dollars)
  Year Ended November 30,Note


2006


2005


2004Cash flow from operating
    activitiesNet income (loss)





$
9,251


$
(8,753
)

$
1,207Depreciation and amortization






1,609



1,490



2,483Amortization of deferred financing
    fees






1,180



1,756



407Amortization of intangible assets






14,366



26,139



16,547Stock-based compensation






3,232



1,731



225Other non-cash charges


12







2,242



Accrued interest






(322
)


913



Provision for bad debts






195



529



(93
)Deferred income taxes






876



830



5,178Unrealized foreign exchange loss
    (gain) on forward exchange contracts






150



263



(27
)Loss (gain) on disposal of fixed
    assets










(20
)


3Loss on early retirement of debt


12



8,292



3,937



Gain on disposal of investments










(125
)


(729
)Loss on interest rate swap recorded
    at fair value






810







Change in operating assets and
    liabilities


19



(3,414
)


9,527



(1,683
)Legal settlement and tax refund














8,994Cash flow provided by operating
    activities






36,225



40,459



32,512Cash flow from financing
    activitiesRestricted cash






249



1,257



(327
)Utilization (repayment) of
    operating line of credit










(2,500
)


2,500Proceeds from long term debt


12



90,000



153,000



67,500Repayments of long term debt


12



(150,323
)


(83,575
)


(32,096
)Payments on deferred purchase price










(750
)


Financing fees incurred






(5,259
)


(8,708
)


(1,954
)Net proceeds from public offering
    (net of costs of $5,176)






69,132







Paid up capital distribution










(83,146
)


(40,952
)Dividends






(7,500
)


(14,135
)


Other financing activities






(184
)


5



Cash flow used in financing
    activities






(3,885
)


(38,552
)


(5,329
)Cash flow from investing
    activitiesProceeds on disposal of assets










20



1,983Proceeds on disposal of investments










125



730Redemption (purchase) of short-term
    investments










9,987



(3,994
)Acquisition of Jasc










(898
)


(32,250
)Purchase of long lived assets






(1,906
)


(1,933
)


(568
)Cash flow provided by (used in)
    investing activities






(1,906
)


7,301



(34,099
)Effect of exchange rate changes on
    cash and cash equivalents






(150
)


(19
)


(22
)Increase (decrease) in cash and
    cash equivalents






30,284



9,189



(6,938
)Cash and cash equivalents,
    beginning of period






20,746



11,557



18,495Cash and cash equivalents, end
    of period





$
51,030


$
20,746


$
11,557Supplemental
    disclosures:Cash paid for interest






9,613



11,808



2,709Cash paid (recovered) for income
    taxes






5,526



1,561



(4,500
)Share consideration on acquisitions






35,138







2,445    65




---



##### Table of Contents



COREL
    CORPORATION
  CONSOLIDATED
    STATEMENTS OF CHANGES IN SHAREHOLDERS (DEFICIT) EQUITY
 (In
    thousands of U.S. dollars, except per share data)
  OtherCompre





Retained


TotalClass A


Class B


Preferred


WinZip


Corel Common


hensive





Earnings


ShareholdersCommon


Common


Shares


Stock


Shares


Income


APIC


(Deficit)


DeficitBalances at November 30,
    2004


3,736


$
(9,097
)


8,321


$
(34,184
)


3,105


$
52,600






$















$
58


$
225


$
(8,065
)

$
1,537WinZip equity as of
    January 18, 2005


























20



20



















17,480







17,500Total comprehensive income (loss)














































27







(8,753
)


(8,726
)WinZip dividends paid


















































(12,000
)






(12,000
)Corel dividends paid






















































(2,135
)


(2,135
)Paid up capital distribution






(33,146
)














(50,000
)


































(83,146
)Units exercised


4



14











































(9
)






5Stock-based compensation


















































1,731







1,731Balances at November 30,
    2005


3,740


$
(42,229
)


8,321


$
(34,184
)


3,105


$
2,600



20


$
20














$
85


$
7,427


$
(18,953
)

$
(85,234
)Balances at December 1,
    2005(*)


























20


$
20



15,167


$
(73,813
)





$
85


$
7,427


$
(18,953
)

$
(85,234
)Total comprehensive income (loss)














































(131
)






9,251



9,120Shares issued for services rendered


































3



52



















52Repurchase of options


















































(427
)






(427
)Stock based compensation


















































3,232







3,232WinZip dividends paid


















































(5,480
)


(2,020
)


(7,500
)Shares issued on initial public
    offering


































5,000



69,173



















69,173Shares issued on WinZip acquisition
    (Note 8)


























(20
)


(20
)


4,323



35,158















(35,373
)


(235
)Options Exercised


































42



152











(140
)






12Balances at November 30,
    2006





























$




24,535


$
30,722






$
(46
)

$
4,612


$
(47,095
)

$
(11,807
)     *
    On December 1, 2005 the Company reorganized its share
    capital and all of the outstanding Class A Common,
    Class B Common, and Preferred Shares were converted to
    Corel Common Shares (note 14)   66




---



##### Table of Contents



COREL
    CORPORATION
  NOTES TO
    THE CONSOLIDATED FINANCIAL STATEMENTS
 (All
    amounts in thousands of U.S. dollars, unless otherwise
    stated)
  1.
    Nature
    of Operations  WordPerfect Office Suite,
    CorelDRAW Graphics Suite and Corel Paint Shop Pro, Corel
    Painter, WinZip and Corel Snapfire.
  2.
    Summary
    of Significant Accounting Policies  Basis
    of presentation
        Basis
    of consolidation
    Estimates
    and assumptions
    Business
    combinations
   67




---



##### Table of Contents



COREL
    CORPORATION
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   Software
    revenue recognition
  97-2, SOP 98-9, 97-2,
    SOP 97-2
  when-and-if-available when-and-if-available.
        Allowance
    for product returns and rebate programs
   68




---



##### Table of Contents



COREL
    CORPORATION
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   Allowance
    for doubtful accounts
    Other
    comprehensive income (loss)
  available-for-sale
  Foreign
    currency translation
      Year Ended November 30,2006


2005


2004Gains (losses) on foreign exchange

$
413


$
(933
)

$
1,212   Cash
    and cash equivalents
    Restricted
    cash
   69




---



##### Table of Contents



COREL
    CORPORATION
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   Investments
  available-for-sale Available-for-sale available-for-sale
  and/or
  available-for-sale
  Concentration
    of credit risk
        Interest
    rate risk
      Fair
    value of financial instruments
     70




---



##### Table of Contents



COREL
    CORPORATION
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
     Forward
    exchange contracts
      Accounting for
    Derivative Instruments and Hedging Activities marked-to-market
  Interest
    rate swaps
        Inventory
   71




---



##### Table of Contents



COREL
    CORPORATION
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   Long-lived
    assets
    Capital assetsFurniture and fixtures

20-33.3% per year declining
    balanceComputer equipment 
    general

Three years straight lineComputer equipment 
    research and development

20-50% per year declining
    balanceLeasehold improvements

Straight line over the term of the
    leaseIntangible assetsLicenses

Straight line over their useful
    lives, generally three to seven yearsAcquired technologies

Straight line over the remaining
    economic life, generally estimated to be three to seven yearsTradenames

Straight line over estimated life
    of seven yearsCustomer relationships

Straight line over estimated life
    of four yearsNon-competition agreement

Straight line over two years, the
    term of the agreement     Goodwill
      Software
    development costs
   72




---



##### Table of Contents



COREL
    CORPORATION
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      Deferred
    financing charges
    Income
    taxes
        Investment
    tax credits
    Stock-based
    compensation
   73




---



##### Table of Contents



COREL
    CORPORATION
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   Advertising
    costs
    Year Ended November 30,2006


2005


2004Advertising costs

$
18,951


$
20,981


$
13,561   Shipping
    and handling costs
    Earnings
    per share
      Recent
    accounting pronouncements
  Accounting for Uncertainty in Income
    Taxes  An Interpretation of FASB Statement 109 ,
  Employers Accounting for Defined Benefit Pension
    and other Postretirement Plans
 74




---



##### Table of Contents



COREL
    CORPORATION
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   Fair Value Measurements
  3.
    Accounts
    Receivables and Allowance for Doubtful Accounts      November 30, 2006


November 30, 2005Gross accounts receivable

$
29,979


$
28,406Allowance for doubtful accounts


(1,003
)


(1,116
)Provisions for returns and rebates


(10,826
)


(7,948
)Trade receivables

$
18,150


$
19,342   4.
    Related
    Party Transactions  paid-up
        four-year
 75




---



##### Table of Contents



COREL
    CORPORATION
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   5.
    Inventory    November 30, 2006


November 30, 2005Product components

$
444


$
219Finished goods


470



507Inventory

$
914


$
726   6.
    Investments  available-for-sale available-for-sale
  Year Ended November 30,2006


2005


2004Equity securities:Fair value

$
203


$
334


$
393Gross unrealized gains


203



334



393Unrealized gains (losses) included
    in comprehensive income, net of taxes


(131
)


99



33Realized gain on sale of
    securities, net of taxes






72



     7.
    Long-Lived
    Assets    November 30, 2006


November 30, 2005Accumulated





AccumulatedCost


Amortization


Cost


AmortizationCapital
    AssetsFurniture and fixtures

$
2,114


$
994


$
2,056


$
790Computer equipment 
    general


4,682



3,117



3,817



2,613Computer equipment 
    research and development


1,448



729



1,446



570Leasehold improvements


474



227



314



1288,718



5,067



7,633



4,101Less: Accumulated amortization


5,067







4,101Net book value

$
3,651






$
3,532   76




---



##### Table of Contents



COREL
    CORPORATION
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  November 30, 2006


November 30, 2005Accumulated





AccumulatedCost


Amortization


Cost


AmortizationIntangible AssetsLicenses

$
2,428


$
1,735


$
2,067


$
1,468Acquired technologies


80,750



52,540



80,750



42,288Tradenames


23,502



7,021



23,502



3,334Customer relationships


884



535



884



270Non-competition agreement


150



140



150



65107,714



61,971



107,353



47,425Less: Accumulated amortization


61,971







47,425Cumulative pre-acquisition legal
    settlement


647







647Cumulative utilization of
    pre-acquisition tax carry forwards


7,265







6,884Net book value

$
37,831






$
52,397       EstimatedAmortizationExpense2007

$
10,5942008


9,8232009


9,0492010


3,9252011


3,925Total

$
37,316   8.
    WinZip
    Acquisition    one-year
 77




---



##### Table of Contents



COREL
    CORPORATION
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
        Current assets

$
2,497Capital assets


183Tradename


21,772Acquired technologies


5,704Non-competition agreements


150Customer relationships


348Goodwill on acquisition of Winzip
    by Vector


3,993Current liabilities


(858
)Fair value of net assets acquired
    by Vector Capital on January 18, 2005


33,789Fair value of shares issued to
    Vector Capital, recorded as a dividend


35,373Share issuance costs


235Purchase cost of WinZip acquisition

$
69,397     9.
    Goodwill    Balance, November 30,
    2004

$
4,960Adjustment for channel inventory
    and Jasc acquisition costs


897Addition on WinZip combination
    (note 8)


3,993Balance, November 30, 2005
    and 2006

$
9,850      78




---



##### Table of Contents



COREL
    CORPORATION
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   10.
    Accounts
    Payable and Accrued Liabilities    November 30,


November 30,2006


2005Accrued payroll

$
10,864


$
8,936Accrued interest


1,565



1,077Trade accounts payable


2,386



4,671Other accrued liabilities


13,405



15,468Accounts payable and accrued
    liabilities

$
28,220


$
30,152   11.
    Income
    Taxes      Year Ended November 30,2006


2005


2004Current:Canadian

$
736


$
1,090


$
587Foreign


2,675



4,371



1,5503,411



5,461



2,137Deferred:Canadian


381



1,706



5,178Foreign


876



(876
)


1,257



830



5,178Income tax expense

$
4,668


$
6,291


$
7,315     Year Ended November 30,2006


2005


2004Income (loss) before income taxes

$
13,919


$
(2,462
)

$
8,522Expected statutory rate


36.1
%


36.0
%


36.0
%Expected tax expense (recovery)


5,025



(886
)


3,068Losses not previously benefited


(601
)Foreign tax rate differences


(3,258
)


214



(55
)Change in valuation allowance


876



5,052



2,493Non-deductible expenses and
    non-taxable income


1,922



1,264



916Settlement of prior year audits






(334
)


Withholding tax on foreign income


685



930



828Other


19



51



65Reported income tax
    expense

$
4,668


$
6,291


$
7,315  79




---



##### Table of Contents



COREL
    CORPORATION
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    November 30,


November 30,2006


2005Deferred tax assets:Net operating losses carried
    forward

$
76,652


$
112,655Book and tax differences on assets


57,794



26,804Other


18,513



2,708Total deferred tax assets


152,959



142,167Valuation allowance for tax assets


(152,959
)


(141,291
)Net deferred tax
    assets

$



$
876     12.
    Long
    Term Debt    November 30, 2006


November 30, 2005Current


Long Term


Total


Current


Long Term


TotalTerm loan

$
900


$
88,650


$
89,550


$



$



$
Promissory note


526



573



1,099



1,170



1,072



2,242Credit Suisse First BostonFirst lien














10,014



63,111



73,125Second lien


















55,000



55,000WinZip debt














5,750



14,854



20,604Total

$
1,426


$
89,223


$
90,649


$
16,934


$
134,037


$
150,971   Term
    Loan
     80




---



##### Table of Contents



COREL
    CORPORATION
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
          
    a maximum total leverage ratio, which is defined as the ratio of
    total debt to trailing four quarter consolidated Adjusted
    EBITDA, as defined in the credit agreement, to be less than
    specified amounts over the term of the facility, from 3.50:1.00
    to 2.25:1.00; the applicable rate for November 30, 2006 was
    3.00:1.00;
    a minimum fixed charge coverage ratio, which is defined as the
    ratio of trailing four quarter consolidated Adjusted EBITDA to
    fixed charges, of 2.50 to 1.00 up to December 2006, 2.00 to 1.00
    from January 2006 until November 2010, 2.25 to 1.00 from
    December 2010 to November 2011 and 2.50 to 1.00 thereafter.      Term LoanPrincipal


Interest


Total2007


1,425



14,743



16,1682008


1,600



14,855



16,4552009


1,600



14,704



16,3042010


1,600



14,551



16,1512011


1,600



14,400



16,0002012


151,725



4,795



156,520Total

$
159,550


$
78,048


$
237,598   Credit
    Suisse First Boston term loans and credit facility
     81




---



##### Table of Contents



COREL
    CORPORATION
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
         WinZip
    debt
    Promissory
    Note
    13.
    Commitments
    and Contingencies  Operating
    leases
      Leases2007

$
2,8472008


2,7782009


1,3342010


1,1242011


1,1262012 and thereafter


215$
9,424     Customer
    Indemnification
  Guarantors
 82




---



##### Table of Contents



COREL
    CORPORATION
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Accounting and Disclosure Requirements for Guarantees,
    Including Indirect Guarantees of Indebtedness of Others
  Legal
    Proceedings
      Electronics For Imaging, Inc., Massachusetts Institute of
    Technology v. Corel Corporation
    et al.
  14.
    Shareholders
    Equity    Corel
    Common Shares
  winding-up
 83




---



##### Table of Contents



COREL
    CORPORATION
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    30-day
    Common
    shares  Class A
    Common
    shares  Class B
    Corel
    preferred shares
    winding-up
  winding-up,
  Preferred
    shares
   84




---



##### Table of Contents



COREL
    CORPORATION
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   WinZip
    Common
    Dividends
    and paid-up
    capital reductions
    paid-up
  Share
    Option Plans
    Year Ended November 30,2006


2005


2004Cost of products

$
26


$
15


$
7Cost of maintenance and services


8



4



2Sales and marketing


770



583



76Research and development


306



197



61General and administration


2,122



932



79Total stock-based compensation
    expense

$
3,232


$
1,731


$
225       Year Ended November 30,2006


2005


2004Expected option life (years)


7



7



7Volatility


36.13
%


39.18
%


40.90
%Risk free interest rate


4.33
%


4.36
%


4.71
%Dividend yield


Nil



Nil



NilForfeiture rate


16.82
%


Nil



Nil  85




---



##### Table of Contents



COREL
    CORPORATION
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  2006
    Equity Incentive Plan
          November 30, 2006WeightedWeighted


AverageAverage


GrantExercise


Date FairOptions


Price


ValueOutstanding at beginning of period


Nil


$
N/A


$
N/AOptions granted


527,949



9.75



6.26Options exercised


(1,691
)


1.20



13.90Options forfeited


(12,925
)


10.91



5.06Outstanding at end of period


513,333


$
9.56


$
6.26Exercisable at end of period


30,529Weighted average fair value of
    options granted

$
6.26Weighted average remaining life of
    the outstanding options


3.59



Years   2003 Share
    Option and Phantom Share Unit Plan
   86




---



##### Table of Contents



COREL
    CORPORATION
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
             November 30, 2006


November 30, 2005Weighted








WeightedWeighted


Average





Weighted


AverageAverage


Grant





Average


GrantExercise


Date Fair





Exercise


Date FairUnits


Price


Value


Units


Price


ValueOutstanding at beginning of period


1,381,350


$
1.34


$
7.11



468,381


$
1.17


$
2.73Units granted


59,217



16.07



7.54



955,395



1.41



9.13Units exercised


(41,006
)


1.17



3.99



(4,270
)


1.17



2.22Units repurchased


(22,696
)


1.17



9.10



Nil



N/A



N/AUnits forfeited


(56,151
)


1.86



6.32



(38,156
)


1.17



4.43Outstanding at end of period


1,320,714


$
1.98


$
7.24



1,381,350


$
1.34


$
7.11Exercisable at end of period


625,101











NilWeighted average fair value ofUnits granted

$
7.24










$
7.11Weighted average remaining life of
    the outstanding Units


1.90
Years










2.61
Years   87




---



##### Table of Contents



COREL
    CORPORATION
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  November 30, 2004WeightedWeighted


AverageAverage


GrantExercise


Date FairUnits


Price


ValueOutstanding at beginning of period


nil



nil


$
nilUnits granted


501,806



1.17



2.70Units forfeited


(33,425
)


1.17



2.31Outstanding at end of period


468,381


$
1.17


$
2.73Exercisable at end of period


NilWeighted average fair value of
    Units granted

$
2.73Weighted average remaining life of
    the outstanding Units


3.13



Years   15.
    Employee
    pension plans      16.
    Restructuring
    Charges       88




---



##### Table of Contents



COREL
    CORPORATION
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   17.
    Earnings
    (loss) per share    Year Ended November 30,2006


2005


2004Net income (loss)

$
9,251


$
(8,753
)

$
1,207Less: dividends and paid up
    capital distributions


Nil



(97,281
)


(40,952
)Total income (loss) allocable to
    shareholders


9,251


$
(106,034
)

$
(39,745
)Class A Common
    SharesNumeratorDistributed earnings to class

$
N/A


$
21,018


$
22,709Loss allocable to class


N/A



(29,991
)


(22,040
)Numerator for basic and diluted
    earnings (loss) per share


N/A



(8,973
)


669DenominatorWeighted average number of shares


N/A



3,737



8,218Class B Common
    SharesNumeratorDistributed earnings to class

$
N/A


$
46,800


$
9,663Loss allocable to class


N/A



(66,781
)


(9,378
)Numerator for basic and diluted
    earnings (loss) per share


N/A



(19,981
)


285DenominatorWeighted average number of shares


N/A



8,321



3,497WinZip Common
    SharesNumeratorDistributed earnings to class

$
N/A


$
12,000


$
N/ALoss allocable to class


N/A



(9,262
)


N/ANumerator for basic and diluted
    earnings per share


N/A



2,738



N/ADenominatorWeighted average number of shares


N/A



20



N/ACorel Common
    SharesNumeratorDistributed earnings to class

$
9,251


$
N/A


$
N/ALoss allocable to class






N/A



N/ANumerator for basic and diluted
    earnings per share


9,251



N/A



N/ADenominatorWeighted average number of shares
    (basic)


22,410



N/A



N/AWeighted average number of shares
    (fully diluted)


23,156



N/A



N/A  89




---



##### Table of Contents



COREL
    CORPORATION
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      18.
    Segment
    Reporting  Disclosures About Segments of an Enterprise and Related
    Information
    productivity graphics and digital imaging.
     90




---



##### Table of Contents



COREL
    CORPORATION
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
     Year Ended November 30,2006


2005


2004By product:Productivity

$
78,177


$
67,597


$
49,775Graphics and Digital Imaging


99,014



96,447



61,917$
177,191


$
164,044


$
111,692By geographic region:AmericasCanada

$
8,682


$
7,745


$
8,460United States


91,571



87,090



56,069Other


4,194



3,577



2,683Europe, Middle East, Africa (EMEA)


58,253



52,965



38,673Asia-Pacific


14,491



12,667



5,807$
177,191


$
164,044


$
111,692By major customer:Company A

$
18,298


$
22,213


$
7,088Company B


5,950



7,548



16,362All others


152,943



134,283



88,242$
177,191


$
164,044


$
111,692   19.
    Changes
    in operating assets and liabilities    Year Ended November 30,2006


2005


2004Accounts receivable


500



1,130



(972
)Due to/from related parties


73



(289
)


Inventory


(188
)


613



208Prepaids and other current assets


43



(2,405
)


113Accounts payable and accrued
    liabilities


(3,067
)


2,961



(3,936
)Taxes payable


(1,669
)


3,969



720Deferred revenue


894



3,548



2,184Total

$
(3,414
)

$
9,527


$
(1,683
)   20.
    Subsequent
    event   91




---



##### Table of Contents



COREL
    CORPORATION
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
            92




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ITEM 9.
    CHANGES
    IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
    FINANCIAL DISCLOSURE    ITEM 9A.
    CONTROLS
    AND PROCEDURES      ITEM 9B.
    OTHER
    INFORMATION   93




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##### Table of Contents



PART III  ITEM 10.
    DIRECTORS
    AND EXECUTIVE OFFICERS OF THE REGISTRANT    Name

Age

PositionDavid Dobson(4)


43


Chief Executive Officer, DirectorDouglas McCollam


52


Chief Financial Officer, DirectorRandall Eisenbach


55


Chief Operating OfficerAmanda Bedborough


37


Executive Vice President,
    International OperationsGraham Brown


42


Executive Vice President, Software
    DevelopmentChristopher DiFrancesco


42


Senior Vice President, Legal and
    General CounselPatrick Morley


39


Executive Vice President, Sales
    and Marketing, AmericasJonathan Kissane


37


Senior Vice President, Corporate
    DevelopmentShawn Cadeau


35


Vice President, Global MarketingGail Oxley


51


Vice President, Human ResourcesSteven Cohen(1)(2)(3)


41


DirectorJ. Ian Giffen(1)(2)(4)


49


DirectorAmish Mehta(3)


32


DirectorAlexander Slusky(2)(3)(4)


38


Director     (1)
    
    Independent director(2)
    
    Member of Audit Committee(3)
    
    Member of Compensation Committee(4)
    
    Member of Nominating and Corporate Governance Committee  David Dobson
  Douglas McCollam
  Randall Eisenbach
  Amanda Bedborough
  Graham Brown
 94




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##### Table of Contents



Christopher DiFrancesco
  Patrick Morley
  Jonathan Kissane
  Shawn Cadeau e-business
  Gail Oxley
  Steven Cohen
  J. Ian Giffen
  Amish Mehta
 95




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##### Table of Contents



Alexander Slusky
    Board of
    Directors
      Committees
    of the Board
    Audit Committee and Audit Committee Financial
    Expert.
    
    the integrity of our financial statements;
    our compliance with legal and regulatory matters;
    our independent registered public accounting firms
    qualifications and independence; and
    the performance of our internal audit function and independent
    registered public accounting firm.    
    compensating, retaining and overseeing the work of our
    independent registered public accounting firm;
    establishing procedures for (a) receipt and treatment of
    complaints on accounting and other related matters and
    (b) submission of confidential employee concerns regarding
    questionable accounting or auditing matters;
    pre-approving any non-audit services by our independent
    registered public accounting firm;
    reviewing and discussing the audited financial statements with
    management;
    discussing with the independent auditors the matters required by
    Auditing Standards No. 61; and
    receiving written disclosures and the letter from the
    independent accountants required by ISB No. 1 and
    discussing with the independent accountants their independence. 96




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##### Table of Contents



Compensation Committee.
  
    to review and approve goals and objectives relating to the
    compensation of our chief executive officer and, based upon a
    performance evaluation, to determine and approve the
    compensation of the chief executive officer;
    to make recommendations to our board of directors on the
    compensation of other executive officers and on incentive
    compensation and equity-based plans; and
    to produce reports on executive compensation to be included in
    our public filings to the extent required by applicable
    securities laws or listing requirements.  Nominating and Corporate Governance
    Committee.
  
    to identify individuals qualified for membership on our board of
    directors and to select, or recommend for selection, director
    nominees;
    to develop and recommend to our board of directors a set of
    corporate governance principles; and
    to oversee the evaluation of our board of directors and
    management.  Disclosure
    Policy
    
    articulates legal obligations with respect to confidential
    corporate information;
    identifies spokespersons who are the persons authorized to
    communicate with third parties such as analysts, media and
    investors;
    provides guidelines on the disclosure of forward-looking
    information;
    establishes procedures for reviewing disclosure, prohibiting
    selective disclosure of material information and addressing
    inadvertent disclosure; and
    establishes periods prior to the disclosure of certain financial
    information and material changes during which trading in our
    common shares by insiders is prohibited.  Section 16(a)
    Beneficial Ownership Reporting Compliance
  Rule 3a12-3
  Code of
    Ethics
  http://investor.corel.com/documents.cfm
 97




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(613) 728-0826. Form 8-K
  ITEM 11.
    EXECUTIVE
    COMPENSATION  Regulation S-K, Form 20-F.
  Summary
    Compensation Table
    Long Term CompensationSecurities


UnitsAnnual Compensation(1)


Underlying


Subject toName And Principal










Other Annual


Options


Resale


LTTP


All OtherPosition

Fiscal Year


Salary


Bonus


Compensation


Granted


Restrictions


Payments


CompensationDavid Dobson(2)


2006


$
376,820


$
369,284


$
679,676










$



$
Chief Executive Officer


2005



140,754



203,500







413,971











Douglas McCollam


2006



227,000



245,160



















Chief Financial Officer


2005



203,500



183,150







8,540











Randall Eisenbach


2006



260,000



181,400



















Chief Operating Officer


2005



260,000



97,500







61,910











Amanda Bedborough(3)


2006



305,688



203,254



















Executive VP,


2005



398,805



85,937







44,831











104,772International OperationsPatrick Morley


2006



300,000



175,500



















Executive VP, Sales &


2005



52,308



50,000







85,394











Marketing, Americas     (1)
    
    Excludes perquisites and other benefits because such
    compensation did not exceed the lesser of C$50,000 and 10% of
    the total annual salary and bonus for any of the Named Executive
    Officers.(2)
    
    Mr. Dobson has received other annual compensation of
    $252,324 relating to loans forgiven in our fiscal year ended
    November 30, 2006, and $4,844 for retirement plan payments.
    In addition, we repurchased options from Mr. Dobson that
    were previously granted to him pursuant to the terms of his
    employment agreement, for an aggregate amount of $427,352, of
    which half was applied as a repayment against a loan and half to
    help defray additional expenses incurred in connection with his
    relocation to Canada. See Item 13 
    Certain Relationships and Related Transactions.(3)
    
    Ms. Bedboroughs salary for our fiscal year ended
    November 30, 2005 includes $19,532 of retirement plan
    payments and $85,240 of insurance premiums. 98




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##### Table of Contents



Option
    Grants During the Fiscal Year Ended November 30, 2006 to
    Named Executive Officers
    % of Total





Market ValueNumber of Shares


Options Granted


Exercise Price


of SecuritiesUnderlying Options


to Employees


Per Share


Underlying


ExpirationName

Granted(1)


in Fiscal Year


($/Security)


Options(2)


DateDavid Dobson


nil



0.0



n/a



n/a



n/aDouglas McCollam


nil



0.0



n/a



n/a



n/aRandall Eisenbach


nil



0.0



n/a



n/a



n/aAmanda Bedborough


nil



0.0



n/a



n/a



n/aPatrick Morley


nil



0.0



n/a



n/a



n/a     (1)
    
    The options vest as to 25% on the first anniversary of the date
    of grant and as to an additional 6.25% at the completion of each
    three-month period thereafter.(2)
    
    Based on the difference between the exercise price per share and
    the market price per share as at November 30, 2006 of
    $13.15.  Aggregate
    Options Exercised During the Fiscal Year Ended November 30,
    2006, Most Recently Completed Financial Year and Option Values
    at November 30, 2006 for Named Executive Officers
  in-the-money
  Value of UnexercisedUnexercised Options at


In-the-Money
    Options as atShares Acquired


Aggregate Value


November 30, 2006


November 30, 2006(1)Name

on Exercise


Realized


Exercisable


Unexercisable


Exercisable


UnexercisableDavid Dobson


nil



nil



172,985



218,290
(2)

$
2,565,368


$
3,237,356Douglas McCollam


nil



nil



56,708



31,210



840,977



462,847Randall Eisenbach


nil



nil



35,892



38,827



532,278



575,804Amanda Bedborough


nil



nil



59,129



25,392



876,887



376,574Patrick Morley


nil



nil



21,349



64,046



316,606



949,802     (1)
    
    Based on the difference between the exercise price per share and
    our initial public offering price of $16.00 per share. The
    options granted to the above Named Executive Officers were
    issued prior to us becoming a public company.(2)
    
    Reflects the balance as of November 30, 2006 after
    accounting for options repurchased by us. See
    Item 13  Certain Relationships and
    Related Transactions.  Compensation
    Committee Interlocks and Insider Participation
    Compensation
    of Directors and Executive Officers
     99




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##### Table of Contents



out-of-pocket out-of-pocket
  Material
    Terms and Conditions of Employment Agreements
    David Dobson. six-month Certain
    Relationships and Related Party Transactions  Other
    Related Party Transactions
  Douglas McCollam.
  Randall Eisenbach.
  Amanda Bedborough.
  Patrick Morley.
 100




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##### Table of Contents



Composition
    of the Compensation Committee
      Report on
    Executive Compensation
    
    oversee the Companys compensation and benefits policies
    generally;
    oversee and set compensation for the Companys executive
    officers;
    evaluate executive officer performance and review the
    Companys management succession plan; and
    review compensation related disclosure to be filed or submitted
    by the Company.  (613) 728-0826.
         101




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##### Table of Contents



Indebtedness
    of Directors, Officers and Others
  Certain Relationships and Related Transactions
  ITEM 12.
    SECURITY
    OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
    MANAGEMENT  Beneficial
    Ownership
    
    each person who is known by us to own beneficially 5% or more of
    our common shares;
    each member of our Board;
    each of the Named Executive Officers; and
    all members of our Board and our executive officers as a group.   102




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##### Table of Contents



Principal
    Shareholders Table
  Name and Address of Beneficial Owner(1)

Number of common shares


Percent of ClassFive Percent
    ShareholderVector Capital


17,657,614
(2)


71.97
%Executive Officers and
    DirectorsAlexander Slusky(3)


17,678,696
(3)


72.05
%David Dobson


192,830
(4)


*Douglas McCollam


62,203
(5)


*Randall Eisenbach


44,832
(6)


*Amanda Bedborough


61,877
(7)


*Amish Mehta(10)


3,202
(8)


*Steven Cohen


4,003
(9)


*J. Ian Giffen


3,202
(8)


*All directors and executive
    officers as a group (14 persons)


478,788
(2)(11)


1.95
%     *
    
    Less than 1%.(1)
    
    Except as otherwise indicated, the address for each beneficial
    owner is c/o Corel Corporation, 1600 Carling Avenue,
    Ottawa, Ontario, Canada K1Z 8R7.(2)
    
    All of these shares are held, directly or indirectly by Corel
    Holdings, L.P., a Cayman Islands limited partnership. The sole
    general partner of Corel Holdings, L.P. is Vector Capital
    Partners II International Ltd., which is wholly owned by
    VCPII International LLC. The managing member of VCPII
    International LLC is Alexander Slusky. The address for Corel
    Holdings, L.P. is c/o Vector Capital, 456 Montgomery
    Street, 19th Floor, San Francisco, California 94104.(3)
    
    Includes 21,082 common shares issuable upon the exercise of
    options that are exercisable within 60 days of
    November 30, 2006 all of which are vested. With respect to
    the remaining 17,657,614 shares, Mr. Slusky, a
    principal of Vector Capital, has voting and investment power
    over the common shares owned by Vector Capital and therefore
    beneficially owns the common shares held by Vector Capital.
    Mr. Slusky, however, disclaims beneficial ownership of
    these common shares, except to the extent of his pecuniary
    interest in them. The address for Mr. Slusky is
    c/o Vector Capital, 456 Montgomery Street, 19th Floor,
    San Francisco California 94104(4)
    
    Consists of 192,830 common shares issuable upon the exercise of
    options that are exercisable within 60 days of
    November 30, 2006 all of which are vested.(5)
    
    Includes 62,203 common shares issuable upon the exercise of
    options that are exercisable within 60 days of
    November 30, 2006 all of which are vested.(6)
    
    Consists of 40,562 common shares issuable upon the exercise of
    options that are exercisable within 60 days of
    November 30, 2006 all of which are vested and
    4,270 common shares held by him.(7)
    
    Consists of 61,877 common shares issuable upon the exercise of
    options that are exercisable within 60 days of
    November 30, 2006 all of which are vested.(8)
    
    Consists of 3,202 common shares issuable upon the exercise of
    options that are exercisable within 60 days of
    November 30, 2006 all of which are vested. 103




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##### Table of Contents



(9)
    
    Consists of 4.003 common shares issuable upon the exercise of
    options that are exercisable within 60 days of
    November 30, 2006 all of which are vested.(10)
    
    Mr. Mehta, a principal of Vector Capital, does not have
    voting or investment power over the common shares beneficially
    owned by Vector Capital. The address for Mr. Mehta is
    c/o Vector Capital, 456 Montgomery Street, 19th Floor,
    San Francisco, California 94104.(11)
    
    Includes 474,518 common shares issuable upon the exercise of
    options that are exercisable within 60 days of
    November 30, 2006 all of which are vested.  Securities
    Authorized For Issuance Under Equity Compensation
    Plans
    Number of SecuritiesNumber of Common





Remaining AvailableShares to be Issued


Weighted-Average


for Future Issuanceupon Exercise of


Exercise Price of


under EquityPlan Category

Name of Plan

Outstanding Options


Outstanding Options


Compensation PlanOption Plans approved by our
    Shareholders

2003 Share Option and Phantom
    Share Unit Plan


1,320,714


$
1.98



2006 Equity Incentive Plan


513,333


$
9.56



2,334,976Totals




1,834,047


$
4.10



2,334,976   Share
    Option and Other Compensation Plans
  Equity
    Incentive Plan
    Share Reserve.
        Administration of Awards.
 104




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##### Table of Contents



Rule 16b-3
  Stock options.
  Share Appreciation Rights.
  Restricted Shares.
 105




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##### Table of Contents



Restricted Share Units.
  Performance Share Units.
  Deferred Share Units.
  Other Share-Based Awards.
  Effect of a Significant Event.
    
    a person or group of persons (other than Vector Capital and its
    affiliates) becomes the beneficial owner of securities
    constituting 50% or more of our voting power;
    50% of our current Board (including any successors approved by
    50% of our current Board) cease to constitute 50% of the Board;
    a merger, consolidation, amalgamation or arrangement (or a
    similar transaction) involving us occurs, unless after the
    event, 50% or more of the voting power of the combined company
    is beneficially owned by stockholders who owned all of our
    common shares immediately before the event; or
    our shareholders approve a plan of complete liquidation or
    winding-up
    of our company, or the sale or disposition of all or
    substantially all our assets (other than a transfer to an
    affiliate). 106




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##### Table of Contents



Transferability.
  Section 162(m) Provisions.
  Additional Provisions.
  Prior
    Incentive Plans
          ITEM 13.
    CERTAIN
    RELATIONSHIPS AND RELATED TRANSACTIONS    paid-up
   107




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##### Table of Contents



WinZip Acquisition
      ITEM 14.
    PRINCIPAL
    ACCOUNTANT FEES AND SERVICES    Audit
    Fees
  Form F-1,
  Tax
    Fees
    All Other
    Fees
     108




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##### Table of Contents



PART IV  ITEM 15.
    EXHIBITS AND
    FINANCIAL STATEMENT SCHEDULES      Form 10-K.
        ExhibitNumber

Exhibit2
.1

Agreement and Plan of Merger dated
    as of October 8, 2004 by and among Corel Corporation, Corel
    JS Acquisition, Inc., Corel Holdings Corporation, Jasc Software,
    Inc. and each Jasc Software, Inc. shareholder, incorporated by
    reference to exhibit 2.1 of the Companys Registration
    Statement on
    Form F-1
    filed with the Securities and Exchange Commission (the
    Commission) on April 25, 20062
.2

Stock Purchase Agreement dated
    May 1, 2006 by and among Vector CC Holdings IV, SRL, WinZip
    Computing LLC, Cayman Ltd. Holdco and Corel Corporation,
    incorporated by reference to exhibit 2.2 of the
    Companys
    Form 10-Q
    filed with the Commission on May 5, 20052
.3

Agreement and Plan of Merger,
    dated as of August 28, 2006, among Corel Corporation,
    Iceland Acquisition Corporation and InterVideo Inc.,
    incorporated by reference to exhibit 2.1 to the
    Companys
    Form 8-K
    filed with the Commission on August 31, 20063
.1

Certificate and Articles of
    Continuance, incorporated by reference to exhibit 3.1 of
    the Companys Registration Statement on
    Form F-1
    filed with the Commission on April 25, 20063
.2

Articles of Amendment,
    incorporated by reference to exhibit 3.2 of the
    Companys Registration Statement on
    Form F-1
    filed with the Commission on April 25, 20063
.3

By-laws, incorporated by reference
    to exhibit 3.2 of the Companys Registration Statement
    on
    Form F-1
    filed with the Commission on April 25, 20064
.1

Form of Registration Rights
    Agreement by and among Corel Corporation and the stockholders
    named therein, incorporated by reference to exhibit 4.1 of
    the Companys Registration Statement on
    Form F-1
    filed with the Commission on April 25, 20064
.2

Form of Corel Corporation Share
    Certificate, incorporated by reference to exhibit 4.2 of
    the Companys Registration Statement on
    Form F-1
    filed with the Commission on April 25, 200610
.1

Form of Credit Agreement by and
    among Corel Corporation, Corel US Holdings, LLC, Morgan Stanley
    Senior Funding Inc., J.P. Morgan Securities Inc. and
    Deutsche Bank Securities Inc. and a syndicate of financial
    institutions, incorporated by reference to exhibit 2.2 of
    the Companys
    Form 10-Q
    filed with the Commission on May 5, 200510
.2

First Amendment and Waiver to
    Credit Agreement dated as of December 12, 2006,
    incorporated by reference to exhibit 99.1 of the
    Companys
    Form 8-K
    filed with the Commission on December 14, 200610
.3

Employment Agreement between Corel
    Corporation and David Dobson, incorporated by reference to
    exhibit 10.2 of the Companys Registration Statement
    on
    Form F-1
    filed with the Commission on April 25, 200610
.4

Employment Agreement between Corel
    Corporation and Douglas McCollam, incorporated by reference to
    exhibit 10.3 of the Companys Registration Statement
    on
    Form F-1
    filed with the Commission on April 25, 200610
.5

Employment Agreement between Corel
    Inc. and Randall Eisenbach, incorporated by reference to
    exhibit 10.4 of the Companys Registration Statement
    on
    Form F-1
    filed with the Commission on April 25, 2006 109




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##### Table of Contents



ExhibitNumber

Exhibit10
.6

Employment Agreement between Corel
    Corporation and Amanda Bedborough, incorporated by reference to
    exhibit 10.5 of the Companys Registration Statement
    on
    Form F-1
    filed with the Commission on April 25, 200610
.7

Employment Agreement between Corel
    Corporation and Jacqueline Maartense, incorporated by reference
    to exhibit 10.6 of the Companys Registration
    Statement on
    Form F-1
    filed with the Commission on April 25, 200610
.8*

Employment Agreement between Corel
    Inc. and Patrick Morley10
.9

2003 Share Option and Phantom
    Unit Plan, incorporated by reference to exhibit 10.7 of the
    Companys Registration Statement on
    Form F-1
    filed with the Commission on April 25, 200610
.10

2006 Equity Incentive Plan,
    incorporated by reference to exhibit 10.8 of the
    Companys Registration Statement on
    Form F-1
    filed with the Commission on April 25, 200610
.11

Form of Equity Award, incorporated
    by reference to exhibit 10.9 of the Companys
    Registration Statement on
    Form F-1
    filed with the Commission on April 25, 200610
.12

InterVideo, Inc. 1998 Stock Plan,
    incorporated by reference to exhibit 99.1 of the
    Companys Registration Statement on
    Form S-8
    filed with the Commission on December 14, 200610
.13

InterVideo, Inc. 2003 Stock Plan,
    incorporated by reference to exhibit 99.2 of the
    Companys Registration Statement on
    Form S-8
    filed with the Commission on December 14, 200610
.14

Form of Officer and Director
    Indemnification Agreement, incorporated by reference to
    exhibit 10.10 of the Companys Registration Statement
    on
    Form F-1
    filed with the Commission on April 25, 200610
.15

Lease of office space by and
    between Churchill Office Park Ltd. and Corel Corporation
    (headquarters office lease), incorporated by reference to
    exhibit 10.11 of the Companys Registration Statement
    on
    Form F-1
    filed with the Commission on April 25, 200610
.16

Advisory Services Expense
    Reimbursement Agreement, incorporated by reference to
    exhibit 10.12 of the Companys Registration Statement
    on
    Form F-1
    filed with the Commission on April 25, 200610
.17

Agreement and Full and Final
    Release between Corel Corporation and Jacqueline Maartense
    effective January 20, 2006, incorporated by reference to
    exhibit 10.13 of the Companys Registration Statement
    on
    Form F-1
    filed with the Commission on April 25, 200621
.1*

Subsidiaries of Corel Corporation23
.1*

Consent of PricewaterhouseCoopers
    LLP24
.1*

Powers of Attorney, incorporated
    by reference to the signature page to this Annual Report on
    Form 10-K31
.1*

Rule 13a-14(a)/15d-14(a)
    Certification of the Chief Executive Officer31
.2*

Rule 13a-14(a)/15d-14(a)
    Certification of the Chief Financial Officer32
.1*

Section 1350 Certification of
    the Chief Executive Officer32
.2*

Section 1350 Certification of
    the Chief Financial Officer99
.1*

Schedule II  Valuation
    and Qualifying Accounts     *
    
    Filed herewith. 110




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##### Table of Contents



SIGNATURES
      By:
    /s/  DAVID
    DOBSON       SIGNATURE

TITLES/s/  DAVID
    DOBSONDavid
    Dobson

Chief Executive Officer and
    Director (principal executive officer)/s/  DOUGLAS
    MCCOLLAMDouglas
    McCollam

Chief Financial Officer and
    Director (principal financial and accounting officer)/s/  STEVEN
    COHENSteven
    Cohen

Director/s/  J.
    IAN GIFFENJ.
    Ian Giffen

Director/s/  AMISH
    MEHTAAmish
    Mehta

Director (authorized
    representative in the United States)/s/  ALEXANDER
    SLUSKYAlexander
    Slusky

Director  111