**Exhibit 13.2**

Management's
Report****

Management is responsible for the preparation of the
Company's consolidated financial statements. Management
believes that the consolidated financial statements fairly reflect the form and substance of transactions and that the
consolidated financial statements reasonably present the Company's financial condition and results of operations. The
consolidated financial statements have been prepared in accordance with accounting principles generally accepted in
Canada ("Canadian GAAP").  These principles are also generally accepted in the United States ("US GAAP") in all
material respects except as disclosed in Note 16. Management has included in the Company's consolidated financial
statements amounts based on estimates and judgements that it believes are reasonable under the circumstances.

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



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

|*Derek J. Burney* | *John Blaine*                    
|----------------- | ---------------------------------
|President and CEO | Executive Vice-President Finance,
|                  | CFO and Treasurer                



Auditors' Report to the Shareholders

**We have audited the consolidated balance sheets of Corel Corporation as at
November 30, 2000 and November 30,
1999 and the related consolidated statements of operations, shareholders' equity and cash flows for each of the three
years ended November 30, 2000, 1999 and 1998. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial statements based on our audits.

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



In our
opinion, these consolidated financial statements present fairly, in all material respects, the financial position of
the Company as at November 30, 2000 and November 30, 1999, and the results of its operations and its cash flows
for the years ended November 30, 2000, 1999 and 1998 in accordance with generally accepted accounting principles
in Canada.







***PricewaterhouseCoopers* LLP

Chartered
Accountants

Ottawa, Canada

January 26,
2001

******Consolidated Balance
Sheets**

(in thousands of US$)

|                                                                             | As at November
30
|---------------------------------------------------------------------------- | -----------------
|                                                                             | 2000             
|**Assets**                                                                   |                  
|Current
assets:                                                              |                  
|Cash and cash
equivalents                                                    | $  127,430       
|Restricted cash                                                              | 1,136            
|Accounts receivable                                                          |                  
|Trade                                                                        | 28,620           
|Other                                                                        | 773              
|Inventory                                                                    | 3,117            
|Income taxes recoverable                                                     |                  
|Future tax asset                                                             | 479              
|Prepaid expenses                                                             | 1,050            
|Total current assets                                                         | 162,605          
|                                                                             |                  
|Investments                                                                  | 11,996           
|Future tax asset                                                             | 965              
|Deferred financing charges                                                   | 550              
|Capital assets                                                               | 42,471           
|Total assets                                                                 | $  218,587       
|                                                                             |                  
|**Liabilities and shareholders' equity**                                     |                  
|Current
liabilities:                                                         |                  
|Accounts payable
and accrued liabilities                                     | $  28,441        
|Current portion of Novell obligations                                        | 10,000           
|Income taxes payable                                                         | 6,595            
|Deferred revenue                                                             | 10,907           
|Total current liabilities                                                    | 55,943           
|                                                                             |                  
|Novell obligations                                                           |                  
|                                                                             |                  
|**Commitments and contingencies**                                            |                  
|**Shareholders' equity**                                                     |                  
|Share
Capital                                                                |                  
|Preferred shares
(000's), no par value, unlimited authorized; 24,000 and nil |                  
|Series A issued
and outstanding at November 30, 2000 and 1999, respectively  |                  
|Common shares
(000's), no par value, unlimited authorized; 73,641 and        |                  
|65,532 issued and
outstanding at November 30, 2000 and 1999, respectively    | 371,890          
|Contributed surplus                                                          | 4,990            
|Deficit                                                                      | (214,236)        
|Total shareholders' equity                                                   | 162,644          
|Total liabilities and shareholders' equity                                   | $  218,587       

****On behalf of the
Board



|James Baillie | Lawrence O'Brien
|------------- | ----------------
|Director      | Director        



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

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

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

|                                         | Year ended November 30
|---------------------------------------- | ----------------------
|                                         | 2000                  
|Sales                                    | $  157,487            
|Cost of sales                            | 47,025                
|Gross profit                             | 110,462               
|Expenses:                                |                       
|Advertising                              | 33,258                
|Selling, general and administrative      | 85,662                
|Research and development                 | 43,867                
|Depreciation and amortization            | 7,354                 
|Restructuring charge                     |                       
|Settlement proceeds                      |                       
|Loss (gain) on foreign exchange          | 1,371                 
|                                         | 171,512               
|Income (loss) from operations            | (61,050)              
|Gain on sale of investment               | 14,585                
|Interest
expense                         | (1,305)               
|Income (loss) before the undernoted      | (47,770)              
|Income taxes (expense) recovery:         |                       
|Current                                  | (4,507)               
|Future                                   | (198)                 
|                                         | (4,705)               
|Share of loss of equity investments      | (2,873)               
|Net income (loss)                        | $  (55,348)           
|Income (loss) per share:                 |                       
|Basic                                    | $  (0.80)             
|Diluted                                  | $  (0.80)             
|                                         |                       
|Weighted average number of common
shares |                       
|outstanding (000's) :                    |                       
|Basic                                    | 69,498                
|Diluted                                  | 69,498                

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

********

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

(in thousands of US$ except share data)****

|                                      | Number of Shares

(000's) | Share

capital | Contributed

surplus | Deficit  | Total

shareholders'

equity
|------------------------------------- | ------------------------- | -------------- | -------------------- | -------- | ----------------------------
|                                      | Common                    | Preferred     
|Balance at November 30, 1997          | 59,740                    |                | $     204,235        | $  730   | $  (145,156)                
|Issuance of common shares             |                           |                |                      |          |                             
|pursuant to stock options             | 132                       |                | 209                  |          |                             
|Cancellation of common shares         | (394)                     |                | (987)                |          |                             
|Discount on shares repurchased        |                           |                | (369)                | 369      |                             
|Net
loss                              |                           |                |                      |          | (30,448)                    
|Balance at November 30, 1998          | 59,478                    |                | 203,088              | 1,099    | (175,604)                   
|Issuance of common shares             |                           |                |                      |          |                             
|pursuant to stock options             | 5,054                     |                | 12,767               |          |                             
|Issuance of common shares             |                           |                |                      |          |                             
|for acquisitions                      | 1,000                     |                | 6,300                |          |                             
|Net Income                            |                           |                |                      |          | 16,716                      
|Balance at November 30, 1999          | 65,532                    |                | 222,155              | 1,099    | (158,888)                   
|Issuance of common shares             |                           |                |                      |          |                             
|pursuant to stock options             | 798                       |                | 3,390                |          |                             
|Issuance of common shares and         |                           |                |                      |          |                             
|warrants for cash                     | 7,299                     |                | 15,630               | 3,291    |                             
|Issuance of common shares pursuant    |                           |                |                      |          |                             
|to warrants                           | 12                        |                | 36                   |          |                             
|Issuance of preferred shares for cash |                           | 24,000         | 130,679              |          |                             
|Issuance of warrants for services     |                           |                |                      | 600      |                             
|Net loss                              |                           |                |                      |          | (55,348)                    
|Balance at November 30, 2000          | 73,641                    | 24,000         | $  371,890           | $  4,990 | $  (214,236)                

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

******Consolidated Statements of Cash
Flows**********

(in thousands of US$)****

|                                                      | Year ended November 30
|----------------------------------------------------- | ----------------------
|                                                      | 2000                  
|Operating activities:                                 |                       
|Net Income (loss)                                     | $  (55,348)           
|Items which do not involve cash or cash equivalents:  |                       
|Depreciation and amortization                         | 19,889                
|Bad debt expense                                      | 2,357                 
|Write down of assets                                  | 984                   
|Future income
taxes                                   | 198                   
|Gain on sale of investment                            | (14,585)              
|Gain on disposal
of assets                            |                       
|Share of loss in equity investments                   | 2,873                 
|Write down of assets included in restructuring
charge |                       
|Write down of short-term investment                   |                       
|Changes in operating assets and liabilities:          |                       
|Restricted cash                                       | (1,136)               
|Accounts receivable                                   | 26,974                
|Inventory                                             | 10,450                
|Income taxes recoverable                              | 5,135                 
|Prepaid expenses                                      | 992                   
|Accounts payable and accrued liabilities              | (25,843)              
|Income taxes payable                                  | 6,595                 
|Deferred revenue                                      | (7,565)               
|Net cash provided by (used in) operating activities   | (28,030)              
|Financing activities:                                 |                       
|Issuance of common shares                             | 19,056                
|Issuance of preferred shares                          | 130,679               
|Issuance of
warrants                                  | 3,291                 
|Shares
repurchased for cancellation                   |                       
|Reduction of Novell obligations                       | (8,579)               
|Net cash provided by (used in) financing activities   | 144,447               
|Investing activities:                                 |                       
|Proceeds on sale of investments                       | 14,585                
|Purchase of investments                               | (2,356)               
|Purchase of capital assets                            | (19,511)              
|Proceeds on disposal of assets                        | 274                   
|Net cash used in investing activities                 | (7,008)               
|Increase (decrease) in
cash and cash equivalents      | 109,409               
|Cash and cash equivalents at beginning of year        | 18,021                
|Cash and cash equivalents at end of year              | $  127,430            
|                                                      |                       
|Supplemental non-cash information:                    |                       
|Non-monetary investment in Hemera Technologies Inc.   | $  9,727              
|                                                      |                       

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

******Notes to Consolidated
Financial Statements******

************

********1.****Summary****of****significant****accounting****policies****

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

The consolidated financial statements have been prepared in accordance with accounting
principles generally accepted in
Canada ("Canadian GAAP").  These principles are also generally accepted in the United States ("US GAAP") in all
material respects except as disclosed in Note 16.

Basis of consolidation

The consolidated financial statements include the accounts of the Company and its
wholly-owned subsidiaries, Corel
Corporation Limited, Corel International Corporation,  Corel Inc. and Corel Corporation (U.S.A.). All material
intercompany transactions and balances have been eliminated. The Company follows the equity method of accounting for
investments in other companies where it holds 20% or more of the outstanding voting shares and has the ability to exert
significant influence. Under the equity method the Company records its initial investment at cost and records its pro rata
share of earnings or losses of equity investments in its results of operations. Certain amounts for periods ended prior to
November 30, 2000 have been reclassified to conform to the current year presentation.

Estimates and assumptions**

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

Software revenue recognition

The Company recognizes revenue in accordance with Statement of Position 97-2, "Software
Revenue Recognition",
("SOP 97-2")  issued by the American Institute of Certified Public Accountants in October 1997.  During the year ended
November 30, 2000 the Company adopted the Statement of Position 98-9, "Modification of SOP 97-2, Software Revenue
Recognition with Respect to Certain Transactions"(SOP 98-9) issued in December 1998. The adoption of SOP 98-9 has not
had a material impact on the Company's financial results.

The Company recognizes revenue from packaged software and license fees when the software
is delivered, there is persuasive
evidence that an arrangement exists, the fee is fixed and determinable and collection is probable. If software products
transactions include the right to receive future products, a portion of the revenue is deferred and recognized as such products
are delivered.  Revenue from services is recognized as the services are performed.

**

**Research and development costs

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

Cash and cash equivalents

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

Restricted cash

The Company maintains restricted cash in term deposits with major financial institutions
as security for corporate credit cards

issued by such financial institutions.

Inventory

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

Capital assets

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



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



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

Income taxes

On December 1, 1999, the Company adopted the asset and liability method for determining
income taxes as prescribed
by the Canadian Institute of Chartered Accountants ("CICA") 3465 - "Income Taxes" ("CICA 3465").  Under this
method, future tax assets and liabilities are recognized for the estimated tax recoverable or payable which would arise if
assets were recovered and liabilities settled at the financial statement carrying amounts. Future tax assets and liabilities
are measured using substantially enacted tax rates expected to apply to taxable income in the years in which temporary
differences are expected to be recovered or settled. Changes to these balances are recognized in income in the period in
which they occur.

Foreign currency**

Translation of the financial statements of the Company and its subsidiaries, who are
accounted for as  integrated foreign
operations, are translated in accordance with CICA 1650 - "Foreign Currency Translation". Monetary assets and
liabilities denominated in foreign currencies are translated at the closing year-end rates of exchange.  Non-monetary
items and any related amortization of such items are translated at the rates of exchange in effect when the assets were
acquired or obligations incurred.  All other income and expense items have been translated at the average rates
prevailing during the respective years.  The gains or losses resulting from the translation of these amounts have been
reflected in earnings.

Investment tax credits

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

Stock options

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



2.    Financial Instruments

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

Cash equivalents include a $14.0 million term deposit issued by a major North American
bank and a loan of$110.0
million to a major Canadiancorporation, which is guaranteed
by a major North American bank, with maturity on
December 27, 2000. Subsequent to year end, the loan, including accrued interest, was repaid in full.



Concentration of credit risk, with respect to accounts receivable, is limited due to the
diversity of the Company's channel
arrangements.  The Company has credit evaluation, approval and monitoring processes intended to mitigate potential
credit risks.  Ingram Micro Inc. accounted for $10.4 million (36.5%) and $27.1 million (49.5%) of accounts receivable at
November 30, 2000 and November 30,1999, respectively.



3.   Inventory

|                   | As at November
30
|------------------ | -----------------
|                   | 2000             
|Product components | $  1,424         
|Finished goods     | 1,693            
|                   | $     3,117      

4.    Investments

|                                                            | As at November
30
|----------------------------------------------------------- | -----------------
|                                                            | 2000             
|Equity investments                                          |                  
|Hemera
Technologies Inc.                                    | $  9,727         
|LinuxForce, Inc.                                            | 243              
|Rebel.com Inc.                                              |                  
|Alchemy Software Development Limited                        |                  
|                                                            | 9,970            
|Investments recorded at cost, including GraphOn
Corporation | 2,026            
|                                                            | $
11,996         

Hemera Technologies Inc.

On July 17, 2000, the Company purchased and currently maintains a
23% interest in Hemera Technologies Inc., a privately
held company.  As consideration for these shares, the Company transferred its GraphicCorp division and related assets to
Hemera Technologies Inc.  As of the effective date of the transaction, the fair value of the GraphicCorp division and its
related assets was estimated at $9.7 million and the shares were valued at this amount. No gain or loss was recognized on the
transfer. In fiscal 2000, the Company's share of Hemera Technologies Inc.'s operating results was nominal.

LinuxForce, Inc.

In December 1999, the Company purchased and currently maintains,
a 33% interest in LinuxForce, Inc., a privately held
company, for cash.  The Company also holds a three year option to purchase another 33% of LinuxForce, Inc.  In 2000, the
Company's share of LinuxForce, Inc.'s operating results was nominal.



Rebel.com Inc.

On February 17, 1999, the Company purchased and currently
maintains, a 25% interest in Rebel.com Inc., a privately held
company for $3.4 million.  The Company's share of the net book value of the underlying assets was $1.3 million. The
remaining balance of the purchase price of $2.1 million had been allocated to goodwill and was being amortized on a
straight-line basis over three years.  The fair value of the assets given up to purchase the Company's share of Rebel.com Inc.
was as follows:



|Cash                 | $  1,561
|-------------------- | --------
|Capital assets       | 1,341   
|Inventory            | 381     
|Accounts receivable  | 68      
|Total purchase price | $  3,351



In 2000, the Company's share of Rebel.com Inc.'s net loss was
$1.2 million which has been deducted from the carrying
value of the investment, reducing the investment in Rebel.com Inc. to nil.  Due to the magnitude of the losses, the remaining
goodwill on the investment has been written down to nil.

Alchemy Software Development Limited

On November 28, 2000, the Company purchased and currently maintains, a 25% interest in
Alchemy Software Development
Limited, a privately held company.  At the same time, the Company sold its CATALYST software and related assets to
Alchemy Software Development Limited. The transaction was accounted for as a non-monetary transaction and the net book
value of the assets sold was nil, resulting in the shares being fair valued at nil with no gain or loss recognized. In 2000, the
Company's share of Alchemy Software Development Limited's operating results was nominal.

Investments recorded at cost, including GraphOn
Corporation ("GraphOn")

On December 31, 1998, the Company sold its jBridge technology to
GraphOn.  In consideration for the transfer of
technology, GraphOn issued to the Company 3,886,503 shares of common stock of GraphOn and a warrant to purchase up to
388,650 shares of additional common stock. The assets transferred had a nominal value in the Company's financial
statements.



On July 12, 1999, GraphOn completed a merger with Unity First Acquisition Corp.
("Unity"), a publicly traded acquisition
corporation.  As part of the merger, Unity changed its name to GraphOn.  Under the terms of the merger agreement,
GraphOn shareholders received a fixed exchange ratio of 0.5576 share of Unity common stock for each share of GraphOn
common stock.  As result of the merger, the Company held 2,167,114 shares of common stock, representing 19.5% of the
merged company and, during the year, exercised warrants to purchase 216,711 shares of common stock at an exercise price
of $1.79 per share.

During fiscal 2000, the Company sold a total of 1,190,001 shares of GraphOn for a
realized gain of approximately  $14.6
million.  The Company still owns 1,193,824 shares of common stock (including warrants exercised above), recorded at $0.4
million representing  8.1 % of total shares outstanding which, as of November 30, 2000, had a market value of $1.50 per
share for an aggregate fair value of $1.8 million. The Company has accounted for the cost of this investment under the first-in,
first-out method.

Other investments, at cost, totaled $1.6 million.

5.   Capital assets

|                                                         | November 30,
2000 |                           | November 30, 1999
|-------------------------------------------------------- | ----------------- | ------------------------- | -----------------
|                                                         | Cost              | Accumulated

amortization |                  
|Furniture and equipment                                  | $14,463           | $10,877                   |                  
|Computer equipment                                       | 74,462            | 65,866                    |                  
|Research and development equipment                       | 12,400            | 9,947                     |                  
|Leasehold improvements                                   | 3,707             | 3,426                     |                  
|Licenses, purchased software and deferred
     royalties | 109,926           | 82,371                    |                  
|Clipart libraries and photo CD libraries                 |                   |                           |                  
|                                                         | 214,958           | $ 172,487                 |                  
|Less: Accumulated amortization                           | 172,487           |                           |                  
|Net book value                                           | $42,471           |                           |                  

6.         Accounts payable and accrued liabilities

|                       | As at November
30
|---------------------- | -----------------
|                       | 2000             
|Trade accounts payable | $  11,518        
|Accrued payroll        | 4,005            
|Accrued liabilities    | 5,918            
|Metacreations payable  | 4,000            
|Microsoft accrual      | 3,000            
|                       | $
28,441         

The Metacreations payable relates to
capital asset purchases during the year. The Microsoft Corporation ("Microsoft")
accrual relates to obligations under the technology and services agreement as further discussed in Note 12.

7.   Income taxes

The Company operates in several tax jurisdictions.  Its income is subject to varying
rates of tax, and losses incurred in
one jurisdiction cannot be used to offset income taxes payable in another.

The income (loss)
before income taxes consisted of the following:

|                                       | ********Year ended November 30
|-------------------------------------- | ------------------------------
|****                                   | 2000                          
|****                                   |                               
|**************Domestic income (loss)** | $     8,779                   
|Foreign income (loss)                  | (56,549)                      
|                                       |                               
|Income (loss) before income taxes      | $  (47,770)                   
|****                                   |                               

****************

The income taxes (expense) recovery consist of the following:

|                                                | Year ended
November 30
|----------------------------------------------- | ----------------------
|                                                | 2000                  
|                                                |                       
|****************Domestic:                       |                       
|Current income taxes                            | $     (3,913)         
|Future income taxes                             | 529                   
|                                                |                       
|                                                | (3,384)               
|                                                |                       
|Foreign:                                        |                       
|Current income taxes                            | (594)                 
|Future income taxes                             | (727)                 
|                                                |                       
|                                                | (1,321)               
|                                                |                       
|****************Income taxes (expense) recovery | $    (4,705)          
|                                                |                       

The Company has foreign non-capital loss carryforwards of $180 million, which begin to expire in 2003.

A reconciliation of the combined Canadian federal and provincial income tax rate with
the Company's effective income
tax rate is as follows:

|                                         | Year ended November 30
|---------------------------------------- | ----------------------
|                                         | 2000                  
|                                         |                       
|Expected statutory rate                  | 44.04%                
|Expected income taxes (expense) recovery | $  21,038             
|Effect of foreign tax rate differences   | (21,865)              
|Change in valuation allowance            | (6,470)               
|Permanent differences                    | 494                   
|Other                                    | 1,579                 
|Superallowance                           | 519                   
|                                         |                       
|Income taxes (expense) recovery          | $  (4,705)            
|                                         |                       

The primary temporary differences which gave rise to future taxes at November 30, 2000 and 1999 are:

|                                            | ************Year****ended****November****30****
|------------------------------------------- | -----------------------------------------------
|****                                        | ****2000****                                   
|****                                        |                                                
|************************Current****         |                                                
|Reserves                                    | $  2,807                                       
|Royalty settlement                          | 1,000                                          
|Investment tax
credits                      |                                                
|Share issue costs                           | 241                                            
|                                            |                                                
|                                            | 4,048                                          
|Less:  valuation allowance                  | (3,569)                                        
|                                            |                                                
|Future tax asset                            | $    479                                       
|                                            |                                                
|************Long-term                       |                                                
|Net operating loss carryforwards            | $ 19,304                                       
|Depreciation                                | 3,344                                          
|Share issue costs                           | 724                                            
|Royalties not yet
deducted for tax purposes |                                                
|                                            |                                                
|                                            | 23,372                                         
|Less:  valuation allowance                  | (22,407)                                       
|                                            |                                                
|Future tax asset                            | $      965                                     

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

****8.
Novell obligations



The Novell obligations comprised royalty and product return obligations pursuant to the
March 1, 1996 acquisition of
the WordPerfect family of software programs and related technologies from Novell, Inc. ("Novell").

****

The Company was obligated at the date of acquisition, to pay royalties at a rate of 2%
of its net revenues to Novell to a
maximum of a then present value of $30.0 million imputing a 10% discount rate. At the date of acquisition the Company
recorded the $30.0 million as licenses and purchased software included in capital assets, and recorded the $30.0 million
as part of the Novell obligations. In subsequent periods, the Company recorded payments on this obligation as royalty
expense, amortization expense and as a reduction of Novell obligations.

On October 30, 2000, the Company agreed to pay Novell the total sum of $15.0 million
representing the present value of
the future royalty obligation referred to above. The first payment was made on October 31, 2000 with the remaining two
payments of $5.0 million each due January 24, 2001 and April 23, 2001.

****9.  Share capital

Issuance of Series A preferred shares

On October 2, 2000, the Company issued 24,000,000
Series A participating, convertible, non voting, non redeemable
preferred shares to Microsoft for total gross proceeds of $135.0 million ($5.625 per share).  Each preferred share is
convertible into one common share but not in the hands of Microsoft or its affiliates. As part of the share purchase
agreement the Company is obligated to file, with the United States Securities and Exchange Commission ("SEC"), a
resale registration statement for 24,000,000 common shares underlying these preferred shares.

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



In the event of liquidation of the Company, the greater of $5.625 per share purchase
price, and the aggregate amount that
could be distributed to common shareholders if these preferred shares did not exist, shall be distributed.  Both are
adjusted to include all accrued and unpaid dividends whether or not earned or declared.    If such payment is made,
Series A preferred shareholders will have no further claim on assets.

Issuance of
common shares

On June 28, 2000, the Company issued 7,299,270
common shares and 3,649,635 common share purchase warrants at
CDN $4.11 per unit for total gross proceeds of CDN $30.0 million. The values assigned to each of the components of
the unit were based on their relative fair values at the date of the transaction. The warrants are exercisable until June 27,
2001 at a price of CDN $4.56 per common share. In the event that all of the warrants are exercised, the Company will
issue an additional 3,649,635 common shares, resulting in gross proceeds of CDN $16.6 million. As at November 30,
2000, 11,659 warrants have been exercised for gross proceeds of CDN $53,165.



Equity line financing

On October 3, 2000, the Company completed a
standby-financing share purchase agreement with an institutional
investor. Subject to the terms and conditions of this agreement, the Company may issue and sell to the investor up to
14,690,000 shares in periodic draw down periods over 24 months if all associated warrants are exercised. At November
30, 2000, the Company has not issued or sold any shares under this arrangement. However, pursuant to the terms of the
arrangement the Company has issued 169,500 warrants to the investor and 56,500 warrants to each of its advisors,
Whale Securities Co., L.P. and Richard Geyser. The warrants are exercisable at any time until October 3, 2003 at $3.91
per share for the investor and $4.28 per share by Whale Securities Co., L.P. and Richard Geyser. At November 30, 2000,
no warrants have been exercised.The Company has deferred $0.6 million in financing charges representing the fair
value of the warrants issued to secure this financing.  This commitment fee is being amortized over 24 months.



****Stock option plans****

The Company's stock option plans are administered by the Compensation Committee which is
a subcommittee of the
Board of Directors.  The Compensation Committee designates eligible participants to be included under the plans and
designates the number of options and share price of the options, subject to applicable securities laws and stock exchange
regulations.  At November 30, 2000, there were approximately 13.9 million and 4.0 million common shares reserved for
issuance under the Corel Corporation Stock Option Plan and the Corel Corporation Stock Option Plan 2000,
respectively. Information with respect to stock option activity for 1998, 1999 and 2000 is as follows:



|                                 |                          | Price per share(CDN$)
|-------------------------------- | ------------------------ | ---------------------
|                                 | Number of shares (000's) | Range                
|Outstanding at November 30, 1997 | 6,158                    | $  4.00  -  $  22.38 
|Granted                          | 3,422                    | 2.10    -      4.10  
|Exercised                        | (132)                    | 3.00    -      3.00  
|Expired                          | (1,167)                  | 7.70    -    19.67   
|Outstanding at November 30, 1998 | 8,281                    | 2.10   -    22.38    
|Granted                          | 3,022                    | 3.37    -   11.70    
|Exercised                        | (5,054)                  | 2.10    -   13.50    
|Forfeited                        | (1,883)                  | 2.10    -   13.50    
|Expired                          | (1,313)                  | 2.10    -   22.38    
|Outstanding at November 30, 1999 | 3,053                    | 2.10    -   13.50    
|Granted                          | 3,869                    | 5.35    -   29.90    
|Exercised                        | (798)                    | 2.06   -   13.50     
|Forfeited                        | (1,115)                  | 2.10    -   15.25    
|Expired                          | (591)                    | 7.70    -   13.50    
|Outstanding at November 30, 2000 | 4,418                    | $   3.00   - $ 29.90 





For various price ranges (in CDN$), weighted average characteristics of outstanding
stock options at November 30,
2000 were as follows:

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

(years)
|$   2.00  -    $ 5.00 | 1,187          | 1.7                    
|5.01  -        9.00   | 752            | 1.1                    
|9.01  -      29.90    | 2,478          | 2.6                    

****The outstanding options
expire between March 14, 2001 and November 16, 2004.

On November 16, 2000, the Board of Directors passed a resolution that allowed certain
employees holding options
granted in March 2000 at a price of CDN $15.25 (or the then US$ equivalent) and one senior officer with options at a
price of  $20.62 US to tender a maximum aggregate number of approximately 1.8 million options held by them for
repricing. The exercise price of the repriced options, namely CDN $5.70 (or the then US$ equivalent), was the closing
price of the Company's common shares on the Toronto Stock Exchange ("TSE") on November 15, 2000. The condition
of the repricing was to introduce a vesting schedule where one third of the options will remain vested, one third will vest
March 30, 2001 and the remaining options will vest on March 30, 2002. Repricing of any of these options held by
insiders, as defined by the Securities Act (Ontario), requires shareholder approval.  Non-employee directors' options
were excluded from the repricings. At November 30, 2000, no options had been tendered and the market price of the
underlying common shares was CDN $4.10.

************10.     Earnings
per share************

The Company adopted CICA 3500 "Earnings per Share" during the year ended November 30,
2000 and has retro-actively restated earnings per share, where required, for all periods presented. The calculations of the
earnings per share
are based on the weighted daily average number of shares outstanding during the year.  The calculation of diluted
earnings per share assumes that all outstanding options and warrants have been exercised at the later of the beginning of
the fiscal period or the option issuance date.  As the impact of the exercise of these options and warrants is anti-dilutive
in 2000 and in 1998, outstanding options and warrants have been excluded from the calculation of diluted earnings per
share. See Note 9 for these other potentially dilutive instruments. In 1999, the dilutive effect of the weighted average
share calculation results from the potential exercise of employee stock options.****

****

************11.
****Commitments************

****

****The Company rents office premises, sponsors
various sporting events and venues, and is obligated to pay minimum
product royalties under long-term agreements. Rent expense pursuant to lease obligations aggregated $7,654, $7,169 and
$7,155 during the years ended November 30, 2000, 1999 and 1998, respectively. At November 30, 2000, the minimum
commitments under long-term agreements, are as follows:

|2001                | $  3,626    
|------------------- | ------------
|2002                | 3,670       
|2003                | 3,363       
|2004                | 3,392       
|2005                | 3,321       
|2006 and thereafter | 42,367      
|                    | $     59,739

12.    Contingencies

On October 2, 2000, concurrent with the issuance of Series A
preferred shares (see Note 9), the Company entered into a
technology services and support agreement with Microsoft.  Together with the purchase of such Series A preferred
shares, Microsoft received the option to request the Company to perform certain product development work.  The
Company is obligated to provide at least 30 full time equivalents (20 developers and 10 testers) for a 12-month period to
Microsoft upon receipt of Microsoft's writtenintent to exercise the option.The option is exercisable for a period of
three years from the effective date.  The Company has deducted, from equity, $3.0 million to provide for this future
possible obligation.



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

****

13.    Cost of sales



|                     | Year ended
November 30
|-------------------- | ----------------------
|                     | 2000                  
|                     |                       
|Cost of goods sold   | $  28,036             
|License amortization | 11,880                
|Royalties            | 7,109                 
|                     | $     47,025          
|                     |                       





14.  Restructuring charge

************On September 11, 1998, approximately 460
employees were terminated at the Orem, Utah facility. The balance of the
workforce at that location remained with the Company until February 1, 1999 and assisted with the transfer of the
source code and technical services to the Ottawa facility.  As at November 30, 2000, the restructuring accrual included
in accounts payable and accrued liabilities is comprised  the following amounts:



|                                            | Asset

write-downs | Severance
costs | Facilities
closure costs | Total     | 
|------------------------------------------- | ------------------ | --------------- | ------------------------ | --------- | 
|Restructuring charge during the fiscal year | $  3,086           | $  10,104       | $  2,690                 | $  15,880 | 
|Payments                                    |                    | (6,395)         | (1,344)                  | (7,739)   | 
|Re-allocation                               |                    | (1,842)         | 1,842                    |           | 
|Non-cash asset
write-downs                  | (3,086)            |                 |                          | (3,086)   | 
|Restructuring accrual at November 30, 1998  |                    | 1,867           | 3,188                    | 5,055     | 
|Payments                                    |                    | (2,100)         | (1,705)                  | (3,805)   | 
|Re-allocation                               |                    | 233             | (233)                    |           | 
|Restructuring accrual at
November 30, 1999  |                    |                 | 1,250                    | 1,250     | 
|Payments                                    |                    |                 | (954)                    | (954)     | 
|Restructuring accrual at November 30, 2000  |                    |                 | $  296                   | $  296    | 

********15.   Segmented information

The Company has only one global operating segment, as detailed in the consolidated
financial statements included
herein.

The Company sells its products worldwide from four geographic regions.  A summary of
sales by product group, sales
channel, region and  major customer from consolidated operations is as follows:

|                               | Year ended
November 30
|------------------------------ | ----------------------
|                               | 2000                  
|By product group               |                       
|Creative products              | $  75,919             
|Business applications products | 78,917                
|Other                          | 2,651                 
|                               | $     157,487         
|By sales channel               |                       
|Retail packaged products       | $  80,069             
|OEM licenses                   | 17,640                
|Corporate licenses             | 59,778                
|                               | $     157,487         
|By region                      |                       
|Canada                         | $  13,181             
|U.S.A.                         | 83,355                
|Europe                         | 42,453                
|Other                          | 18,498                
|                               | $     157,487         
|By major customer              |                       
|Ingram Micro Inc.              | $  27,123             
|All others                     | 130,364               
|                               | $     157,487         

****Included in creative products revenues are
consumer applications products which were relatively consistent from fiscal
1998 ($27.6 million) to fiscal 1999 ($24.0 million).  In fiscal 2000, as Corel realigned itself and moved away from
promoting these products, these revenues declined significantly and are no longer managed or accounted for as a
separate segment.



16.   Significant differences between Canadian and United States
GAAP

The Company's financial statements are prepared on the basis of Canadian GAAP, which
differs in some respects from US
GAAP.  Significant effects of differences between Canadian GAAP and US GAAP are set forth below:

**Accounting
for stock-based compensation

The Company applies Accounting Principles Board Opinion No. 25, "Accounting for Stock
Issued to Employees"

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

|                                         | Year ended
November 30
|---------------------------------------- | ----------------------
|                                         | 2000                  
|Net income (loss) as reported            | $  (55,348)           
|Estimated stock based compensation costs | (32,761)              
|Pro forma net income (loss)              | $  (88,109)           
|Pro forma income (loss) per share        | $  (1.27)             

The fair values of all options granted during 2000, 1999 and 1998 were estimated as of
the date of grant using the Black-Scholes option pricing model with the following weighted average assumptions:

|                             | 2000  | 1999  | 1998 
|---------------------------- | ----- | ----- | -----
|Expected option life (years) | 3.07  | 3.34  | 2.0  
|Volatility                   | 105   | 86    | 45   
|Risk free interest rate      | 6.13% | 4.78% | 4.33%
|Dividend yield               | nil   | nil   | nil  



The fair values, at the date of grant, for stock options granted during 2000, 1999 and
1998 were $9.02, $1.35 and $0.54 per
option, respectively.



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

In accordance with FIN 44, the option repricing, as described in Note 9, will result in
variable plan accounting for the re-priced options. At November 30, 2000, no options had been tendered and the market price of the
underlying common shares
was CDN $4.10.  Future periods may reflect compensation charges or credits depending on the fair market price of the
underlying shares.

********Available for sale securities****

SFAS No. 115, "Accounting for Certain Investments in Debt and Equity Securities" ("SFAS
115") requires available-for-sale securities to be marked to market with unrealized holding gains or losses being accounted for in
other comprehensive
income. Accordingly, the reported carrying value of investments would be increased by $1.4 million and $3.1 million at
November 30, 2000 and 1999, respectively. In addition, income taxes payable would be increased by $0.3 million at
November 30, 2000 and taxes recoverable would be decreased by $1.0 million at November 30, 1999.****

Comprehensive income****

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

|                                                                   | Year ended
November 30
|------------------------------------------------------------------ | ----------------------
|                                                                   | 2000                  
|Net income (loss)                                                  | $  (55,348)           
|Other comprehensive income:                                        |                       
|Unrealized holding gains (losses) on available for sale securities | (1,669)               
|Related income tax                                                 | 729                   
|Comprehensive income (loss)                                        | $  (56,318)           

****New accounting pronouncements

In fiscal 1998, the FASB issued SFAS 133, "Accounting for Derivative Instruments and
Hedging Activities", ("SFAS 133")
which establishes standards for derivative instruments and hedging activities.  It requires that all derivatives be recognized
as either assets or liabilities on the Balance Sheet and be measured at fair value.  SFAS 133 is effective for fiscal years
beginning after June 15, 1999, which is the fiscal year beginning December 1, 1999 for the Company.  Prior periods should
not be restated.In June 1999, the FASB issued SFAS No. 137, which delays the
effective date of SFAS 133 until fiscal
years beginning after June 15, 2000, which is the fiscal year beginning December 1, 2000 for the Company.The Company
believes the adoption of this pronouncement will not have a material impact on its results of operations or financial
position.

In fiscal 2000, the SEC issued Staff
Accounting Bulletin ("SAB") No. 101, "Revenue Recognition in Financial Statements",
and its related interpretations. The SAB summarizes certain of the SEC staff views in applying generally accepted accounting
principles to revenue recognition in financial statements. This SAB is effective beginning the Company's first quarter of
fiscal 2001.The Company does not expect the adoption of this SAB to have a material impact on its results of operations
or financial position.