10-Q

U.S. SECURITIES AND EXCHANGE COMMISSION

Washington D.C. 20549

FORM 10-Q

x Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended June 30, 2002

¨ Transition Report Under Section 13 or 15(d) of the Exchange Act

For the transition period from                      to                     

Commission File Number 0-22439

FISHER COMMUNICATIONS, INC.

(Exact Name of Registrant as Specified in Its Charter)

WASHINGTON	91-0222175
(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification Number)

1525 One Union Square

600 University Street

Seattle, Washington 98101-3185

(Address of Principal Executive Offices) (Zip Code)

(206) 404-7000

(Registrant’s Telephone Number, Including Area Code)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:

Common Stock, $1.25 par value, outstanding as of June 30, 2002: 8,594,060

PART I

FINANCIAL INFORMATION

Item 1.    Financial Statements

The following Condensed Consolidated Financial Statements (unaudited) are presented for the Registrant, Fisher Communications, Inc., and its subsidiaries.

1.	Condensed Consolidated Statement of Operations:
	Three and six months ended June 30, 2002 and 2001.
2.	Condensed Consolidated Balance Sheet:
	June 30, 2002 and December 31, 2001.
3.	Condensed Consolidated Statement of Cash Flows:
	Six months ended June 30, 2002 and 2001.
4.	Condensed Consolidated Statement of Comprehensive Income:
	Three and six months ended June 30, 2002 and 2001.
5.	Notes to Condensed Consolidated Financial Statements.

2

ITEM 1—FINANCIAL STATEMENTS

FISHER COMMUNICATIONS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

	Six months ended June 30						Three months ended June 30
	2002			2001			2002		2001
	(in thousands, except per share amounts)
	(Unaudited)
Revenue
Broadcasting	$	64,908		$	72,876		$	35,061	$	38,061
Media services		3,113			2,791			1,481		1,346
Real estate		6,505			5,927			3,302		2,954
		74,526			81,594			39,844		42,361
Costs and expenses
Cost of services sold		34,098			33,426			16,920		16,217
Selling expenses		9,763			10,255			5,183		5,419
General and administrative expenses		21,316			22,727			10,743		11,237
Depreciation and amortization		9,917			12,032			4,946		6,203
		75,094			78,440			37,792		39,076
Income (loss) from operations		(568	)		3,154			2,052		3,285
Net gain on derivative instruments		6,103						6,828
Other income, net		1,376			1,879			789		635
Equity in operations of equity investees		32			1			33		4
Interest expense		10,423			8,875			5,422		4,229
Income (loss) from continuing operations before income taxes and extraordinary item		(3,480	)		(3,841	)		4,280		(305	)
Provision for federal and state income taxes (benefit)		(1,300	)		(1,333	)		760		(112	)
Income (loss) from continuing operations before extraordinary item		(2,180	)		(2,508	)		3,520		(193	)
Loss from discontinued operations of milling businesses, net of income tax benefit of $173					(327	)				(327	)
Income (loss) before extraordinary item		(2,180	)		(2,835	)		3,520		(520	)
Extraordinary item—loss from extinguishment of long-term debt, net of income tax benefit of $1,206		(2,058	)
Net income (loss)	$	(4,238	)	$	(2,835	)	$	3,520	$	(520	)
Income (loss) per share:
From continuing operations	$	(0.25	)	$	(0.29	)	$	0.41	$	(0.02	)
From discontinued operations					(0.04	)				(0.04	)
Income (loss) before extraordinary item		(0.25	)		(0.33	)		0.41		(0.06	)
Extraordinary item		(0.24	)
Net income (loss)	$	(0.49	)	$	(0.33	)	$	0.41	$	(0.06	)
Income (loss) per share assuming dilution:
From continuing operations	$	(0.25	)	$	(0.29	)	$	0.41	$	(0.02	)
From discontinued operations					(0.04	)				(0.04	)
Income (loss) before extraordinary item		(0.25	)		(0.33	)		0.41		(0.06	)
Extraordinary item		(0.24	)
Net income (loss)	$	(0.49	)	$	(0.33	)	$	0.41	$	(0.06	)
Weighted average shares outstanding		8,592			8,561			8,593		8,563
Weighted average shares outstanding assuming dilution		8,592			8,561			8,613		8,563
Dividends declared per share	$	0.52		$	0.26		$	0.26	$	—

See accompanying notes to condensed consolidated financial statements.

3

FISHER COMMUNICATIONS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEET

	June 30 2002			December 31 2001
	(in thousands, except share and per share amounts)
	(Unaudited)
ASSETS
Current Assets
Cash and short-term cash investments	$	11,874		$	3,568
Receivables, net		28,823			33,081
Prepaid income taxes		7,550			10,760
Prepaid expenses		6,072			4,251
Television and radio broadcast rights		3,135			10,318
Net working capital of discontinued operations		777			216
Total current assets		58,231			62,194
Marketable Securities, at market value		96,973			97,107
Other Assets
Cash value of life insurance and retirement deposits		12,704			12,403
Television and radio broadcast rights		7,088			1,725
Goodwill, net		189,133			189,133
Investments in equity investees		2,860			2,594
Other		22,330			12,232
Net noncurrent assets of discontinued operations		1,863			1,635
		235,978			219,722
Property, Plant and Equipment, net		252,860			244,094
	$	644,042		$	623,117
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities
Notes payable	$	4,796		$	25,469
Trade accounts payable		4,498			5,490
Accrued payroll and related benefits		7,733			7,616
Television and radio broadcast rights payable		1,922			8,980
Other current liabilities		3,206			5,259
Total current liabilities		22,155			52,814
Long-term Debt, net of current maturities		307,491			261,480
Other Liabilities
Accrued retirement benefits		11,935			12,028
Deferred income taxes		62,982			50,994
Television and radio broadcast rights payable, long-term portion		1,007			1,570
Other liabilities		7,538			6,777
		83,462			71,369
Stockholders’ Equity
Common stock, shares authorized 12,000,000, $1.25 par value; issued 8,594,060 in 2002 and 8,591,658 in 2001		10,743			10,739
Capital in excess of par		3,486			3,486
Deferred compensation		(53	)		(66	)
Accumulated other comprehensive income—net of income taxes:
Unrealized gain on marketable securities		62,273			62,360
Net loss on interest rate swap					(2,256	)
Retained earnings		154,485			163,191
		230,934			237,454
	$	644,042		$	623,117

See accompanying notes to condensed consolidated financial statements.

4

FISHER COMMUNICATIONS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

	Six months ended June 30
	2002			2001
	(in thousands)
	(Unaudited)
Cash flows from operating activities
Net loss	$	(4,238	)	$	(2,835	)
Adjustments to reconcile net loss to net cash provided by operating activities
Depreciation and amortization		9,944			13,559
Noncurrent deferred income taxes		12,036			5,756
Net (gain) loss in equity investees		(32	)		1,631
Increase in fair market value of derivative under forward transaction		(9,677	)
Extraordinary item—loss from extinguishment of debt		3,264
Amortization of television and radio broadcast rights		7,857			7,682
Payments for television and radio broadcast rights		(13,657	)		(8,383	)
Other		105			(81	)
Change in operating assets and liabilities
Receivables		4,269			7,009
Inventories					(321	)
Prepaid income taxes		3,210			(7,610	)
Prepaid expenses		(1,821	)		(3,337	)
Cash value of life insurance and retirement deposits		(301	)		(340	)
Other assets		636			(1,031	)
Trade accounts payable, accrued payroll and related benefits and other current liabilities		(709	)		(8,516	)
Accrued retirement benefits		(93	)		(574	)
Other liabilities		3,788			146
Net cash provided by operating activities		14,581			2,755
Cash flows from investing activities
Proceeds from sale of discontinued milling business assets					49,769
Proceeds from sale of property, plant and equipment		376			212
Purchase of property, plant and equipment		(21,562	)		(18,324	)
Investments in equity investees					(1,496	)
Net cash provided by (used in) investing activities		(21,186	)		30,161
Cash flows from financing activities
Net (payments) borrowings under notes payable		(8,259	)		2,311
Borrowings under borrowing agreements and mortgage loans		255,131			13,000
Payments on borrowing agreements and mortgage loans		(222,461	)		(34,464	)
Payment of deferred loan costs		(5,053	)
Retirement of preferred stock of subsidiary					(6,675	)
Proceeds from exercise of stock options		21
Cash dividends paid		(4,468	)		(4,452	)
Net cash provided by (used in) financing activities		14,911			(30,280	)
Net increase in cash and short-term cash investments		8,306			2,636
Cash and short-term cash investments, beginning of period		3,568			275
Cash and short-term cash investments, end of period	$	11,874		$	2,911

See accompanying notes to condensed consolidated financial statements.

5

FISHER COMMUNICATIONS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

	Six months ended June 30						Three months ended June 30
	2002			2001			2002			2001
	(In thousands)
	(Unaudited)
Net income (loss)	$	(4,238	)	$	(2,835	)	$	3,520		$	(520	)
Other comprehensive income:
Cumulative effect of accounting change, net of income tax benefit of $489					(907	)
Unrealized gain (loss) on marketable securities		(134	)		(9,868	)		(3,388	)		4,216
Effect of income taxes		47			3,453			1,186			(1,476	)
Net gain (loss) on interest rate swap		835			(1,177	)		—			111
Effect of income taxes		(292	)		412			—			(39	)
Loss on settlement of interest rate swap reclassified to operations, net of income tax benefit of $923		1,713						—
Comprehensive income (loss)	$	(2,069	)	$	(10,922	)	$	1,318		$	2,292

See accompanying notes to condensed consolidated financial statements.

6

FISHER COMMUNICATIONS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. The unaudited financial information furnished herein, in the opinion of management, reflects all adjustments which are necessary to state fairly the consolidated financial position, results of operations, and cash flows of Fisher Communications, Inc. and subsidiaries (the “Company”) as of and for the periods indicated. Fisher Communications, Inc.’s wholly-owned subsidiaries include Fisher Broadcasting Company, Fisher Media Services Company, Fisher Mills Inc., and Fisher Properties Inc. The Company presumes that users of the interim financial information herein have read or have access to the Company’s audited consolidated financial statements and that the adequacy of additional disclosure needed for a fair presentation, except in regard to material contingencies or recent subsequent events, may be determined in that context. Accordingly, footnote and other disclosures which would substantially duplicate the disclosures contained in Form 10-K for the year ended December 31, 2001 filed on March 27, 2002 by the Company have been omitted. The financial information herein is not necessarily representative of a full year’s operations.

2. Discontinued operations

During 2001 substantially all of the assets and working capital used in the Company’s flour milling and food distributions operations were sold. Net working capital of discontinued operations includes net current assets of the discontinued milling operations remaining during the wind-up phase. Net noncurrent assets of discontinued operations includes the book value of property, plant and equipment not included in the sales described above and other noncurrent assets less noncurrent liabilities relating to the discontinued milling operations.

3. Derivative instruments

On March 21, 2002 the Company entered into a variable forward sales transaction (forward transaction) with a financial institution. The Company’s obligations under the forward transaction are collateralized by 3,000,000 shares of SAFECO Corporation common stock owned by the Company. A portion of the forward transaction will be considered a derivative and, as such, the Company will periodically measure its fair value and recognize the derivative as an asset or a liability. The change in the fair value of the derivative is recorded in the income statement. The Company may in the future designate the forward transaction as a hedge and, accordingly, the change in fair value will be recorded in the income statement or in other comprehensive income depending on its effectiveness. As of June 30, 2002 the derivative portion of the forward transaction had a fair market value of $9,677,000, which is reported in other assets in the accompanying financial statements. Changes in the fair value of the forward transaction are included in net gain on derivative instruments in the accompanying financial statements. The amount available under the forward transaction is dependent on interest rates. The Company presently has authority from its board of directors to borrow proceeds of up to $70,000,000. As of June 30, 2002, $47,707,000, including accrued interest, was outstanding under the forward transaction.

The broadcasting subsidiary entered into an interest rate swap agreement fixing the interest rate at 6.87%, plus a margin based on the broadcasting subsidiary’s ratio of consolidated funded debt to consolidated EBITDA (earnings before interest, taxes, depreciation, and amortization), on a portion of its floating rate debt. The notional amount of the swap is $65,000,000, which reduces as payments are made on principal outstanding under the floating rate debt, until termination of the contract in March 2004. As of June 30, 2002 the fair market value of the swap agreement declined $938,000 since inception in March 2002. Changes in the fair market value of the swap agreement are included in net gain on derivative instruments in the accompanying financial statements.

4. Television and radio broadcast rights and other commitments

The Company acquires television and radio broadcast rights, and has commitments under license agreements amounting to $80,084,000 for future rights to broadcast television and radio programs through 2008, and $12,000,000 in related fees. As these programs will not be available for broadcast until a future date, they have been excluded from the financial statements. In addition, the Company has commitments under a Joint Sales Agreement totaling $14,872,000 through 2007.

7

FISHER COMMUNICATIONS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

5. Income (loss) per share

Income (loss) per share is computed as follows:

	Six months ended June 30						Three months ended June 30
	2002			2001			2002		2001
	(Unaudited)
Weighted average common shares outstanding during the period		8,592,183			8,560,578			8,592,708		8,563,114
Dilutive effect of:
Restricted stock rights								1,796
Stock options								18,712
Weighted average shares outstanding assuming dilution		8,592,183			8,560,578			8,613,216		8,563,114
Income (loss) from continuing operations	$	(2,180	)	$	(2,508	)	$	3,520	$	(193	)
Loss from discontinued operations of milling businesses, net of income tax benefit					(327	)				(327	)
Income (loss) before extraordinary item		(2,180	)		(2,835	)		3,520		(520	)
Extraordinary item, net of income tax benefit		(2,058	)
Net income (loss)	$	(4,238	)	$	(2,835	)	$	3,520	$	(520	)
Income (loss) per share:
From continuing operations	$	(0.25	)	$	(0.29	)	$	0.41	$	(0.02	)
From discontinued operations					(0.04	)				(0.04	)
Income (loss) before extraordinary item		(0.25	)		(0.33	)		0.41		(0.06	)
Extraordinary item		(0.24	)
Net income (loss)	$	(0.49	)	$	(0.33	)	$	0.41	$	(0.06	)
Income (loss) per share assuming dilution:
From continuing operations	$	(0.25	)	$	(0.29	)	$	0.41	$	(0.02	)
From discontinued operations					(0.04	)				(0.04	)
Income (loss) before extraordinary item		(0.25	)		(0.33	)		0.41		(0.06	)
Extraordinary item		(0.24	)
Net income (loss)	$	(0.49	)	$	(0.33	)	$	0.41	$	(0.06	)

The dilutive effect of 1,474 restricted stock rights and options to purchase 442,933 shares are excluded for the six month period ended June 30, 2002 because such rights and options were anti-dilutive. The dilutive effect of 4,728 restricted stock rights and options to purchase 490,988 shares are excluded for the six month and three month periods ended June 30, 2001 because such rights and options were anti-dilutive.

6. Segment information

Effective January 1, 2002, the Company restructured its continuing operations into three principal business segments: broadcasting, media services, and real estate. The operations of Fisher Entertainment LLC, a producer of content for cable and television, and Fisher Pathways, Inc., a provider of satellite transmission services, are included in the media services segment. Previously these businesses were reported in the broadcasting segment. The operations of the portion of Fisher Plaza not occupied by KOMO TV, which previously were reported in the real estate segment, are also included in the media services segment. Fisher Plaza operations attributable to KOMO TV are included in the broadcasting segment. The media services segment also includes the operations of Civia, Inc. Certain 2001 balances have been reclassified to conform to 2002 classifications.

Income from operations by business segment consists of revenue less operating expenses. In computing income from operations by business segment, other income (expense), net, has not been included, and

8

FISHER COMMUNICATIONS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

interest expense, income taxes and unusual items have not been deducted. Identifiable assets by business segment are those assets used in the operations of each segment. Corporate assets are principally marketable securities.

Identifiable assets for each segment are as follows:

	June 30 2002		December 31 2001
Broadcasting	$	334,182	$	340,638
Media services		79,799		62,936
Real estate		94,537		93,328
Corporate, eliminations and other		132,884		124,364
Continuing operations		641,402		621,266
Discontinued operations—net		2,640		1,851
	$	644,042	$	623,117

Income (loss) from operations for each segment are as follows:

	Six months ended June 30						Three months ended June 30
	2002			2001			2002			2001
Broadcasting	$	3,194		$	6,005		$	3,958		$	5,220
Media services		(1,418	)		(438	)		(788	)		(703	)
Real estate		2,000			2,105			1,112			1,030
Corporate, eliminations and other		(4,344	)		(4,518	)		(2,230	)		(2,262	)
	$	(568	)	$	3,154		$	2,052		$	3,285

7. Recent Accounting Pronouncements

On January 1, 2002, the Company adopted Statement of Financial Accounting Standards No. 142, “Goodwill and Other Intangible Assets” (FAS 142). FAS 142 changes the accounting for goodwill from an amortization method to an impairment-only approach. Goodwill is to be tested for impairment upon adoption of FAS 142, and will be tested annually or whenever events or circumstances occur indicating that goodwill might be impaired. The Company has determined that indefinite-lived intangible assets resulting from past business combinations are to be accounted for as goodwill. The Company has completed the first step of the transitional impairment test for goodwill and found no impairment. The determination of fair value is a critical and complex consideration when assessing impairment under FAS 142 that involves significant assumptions and estimates. These assumptions and estimates were based on the Company’s best judgments. In the future, impairment must be assessed at least annually for these assets, or when indications of impairment exist. The Company’s judgments regarding the existence of impairment indicators include the Company’s assessment of the impacts of legal factors and market and economic conditions; the results of the Company’s operational performance and strategic plans; competition and market share; any potential for the sale or disposal of a significant portion of the Company’s business; and availability of sources of funding to conduct the Company’s principal operations. In the future, it is possible that such assessments could cause the Company to conclude that impairment indicators exist and that certain assets are impaired. The aggregate carrying value of the Company’s goodwill is $189 million as of June 30, 2002.

As required by FAS 142, the results for periods prior to adoption have not been restated. The following table reconciles the reported net loss and net loss per share to that which would have resulted for the six and three month periods ended June 30, 2001 if FAS 142 had been adopted effective in 2001.

9

FISHER COMMUNICATIONS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

	Six months ended June 30 2001			Three months ended June 30 2001
Net loss	$	(2,835	)	$	(520	)
Goodwill amortization, net of income tax benefit		1,703			857
Pro forma net income (loss)	$	(1,132	)	$	337
Net loss per share:
Basic	$	(0.33	)	$	(0.06	)
Assuming dilution	$	(0.33	)	$	(0.06	)
Pro forma net income (loss) per share:
Basic	$	(0.13	)	$	0.04
Assuming dilution	$	(0.13	)	$	0.04

In May 2002, the Financial Accounting Standards Board (FASB) issued FASB Statement No. 145 “Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections” (FAS 145). FAS 145, which updates, clarifies, and simplifies existing accounting pronouncements, addresses the reporting of debt extinguishments and accounting for certain lease modifications that have economic effects that are similar to sale-leaseback transactions. The provisions of FAS 145 shall be effective for financial statements issued for fiscal years beginning after May 15, 2002. The Company is currently assessing the impact of FAS 145 on its financial statements.

In July 2002, the FASB issued FASB Statement No. 146 “Accounting for Costs Associated with Exit or Disposal Activities” (FAS 146). FAS 146 addresses financial accounting and reporting for costs associated with exit or disposal activities. The provisions of FAS 146 shall be effective for exit or disposal activities initiated after December 31, 2002. The Company is currently assessing the impact of FAS 146 on its financial statements.

8. Subsequent events

At a meeting held on July 3, 2002, the Company’s board of directors voted to suspend payment of the quarterly dividend.

On July 19, 2002, the Company’s broadcasting subsidiary entered into a non-binding letter of intent for the sale of all member interests in the limited liability company which owns the FCC licenses and the assets associated with the operation of television stations WFXG-TV, Augusta, Georgia and WXTX-TV, Columbus, Georgia. The transaction is subject to negotiation of a purchase and sale agreement, completion of due diligence, negotiation and execution of network affiliation agreements, and FCC consent to assignment of the licenses. If the transaction is concluded, the broadcasting subsidiary may incur a loss.

On July 26, 2002, the Company’s real estate subsidiary received notification that inspection contingencies contained in a purchase and sale agreement for sale of certain of that subsidiary’s property located on Lake Union in Seattle had been satisfied. Closing of the transaction is anticipated to occur in early September. The transaction is expected to result in a gain of approximately $3,700,000 net of income tax effects.

On July 30, 2002, the Company received notice of a buyer’s intent to proceed with the purchase of land and a building located in Portland, Oregon, which is owned by the Company’s flour milling subsidiary. The transaction is anticipated to close in late August. No gain or loss is anticipated, as the property is included in discontinued operations of the milling businesses.

Net proceeds from these sales, after income taxes, are expected to be used to reduce debt and to fund construction of Fisher Plaza.

10

ITEM 2—MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL POSITION AND RESULTS OF OPERATIONS

The following discussion and analysis should be read in conjunction with the Financial Statements and related Notes thereto included elsewhere in this Form 10-Q. Except for the historical information, the following discussion contains forward-looking statements that involve risks and uncertainties, such as our objectives, expectations and intentions. Our actual results could differ materially from results that may be anticipated by such forward-looking statements and discussed elsewhere herein. Factors that could cause or contribute to such differences include, but are not limited to, those discussed below, those discussed under the caption “Additional Factors That May Affect Our Business, Financial Condition And Future Results”, and those discussed in our Form 10-K for the year ended December 31, 2001. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this report. We undertake no obligation to revise any forward-looking statements in order to reflect events or circumstances that may subsequently arise. Readers are urged to carefully review and consider the various disclosures made in this report and in our other reports filed with the Securities and Exchange Commission that attempt to advise interested parties of the risks and factors that may affect our business, prospects and results of operations. As used herein, unless the context requires otherwise, when we say “we”, “us”,” our”, or the “Company”, we are referring to Fisher Communications, Inc. and its consolidated subsidiaries.

This discussion is intended to provide an analysis of significant trends and material changes in our financial position and operating results during the three- and six-month periods ended June 30, 2002 compared with the similar period in 2001.

Effective January 1, 2002, we restructured our continuing operations into three principal business segments: broadcasting, media services, and real estate. Accordingly, the operations of Fisher Entertainment LLC, a producer of content for cable and television, and Fisher Pathways, Inc., a provider of satellite transmission services, are included in the media services segment. Previously these businesses were reported in the broadcasting segment. The operations of the portion of Fisher Plaza not occupied by KOMO TV, which previously were reported in the real estate segment, are also included in the media services segment. Fisher Plaza operations attributable to KOMO TV are included in the broadcasting segment. The media services segment also includes the consolidated operations of Civia, Inc. In 2002, we converted certain loans into a majority equity interest in Civia, Inc. During the second quarter of 2002, we purchased all remaining minority equity interests in Civia. Accordingly, Civia’s 2002 operating results are consolidated, while its 2001 results are reported under the equity method. Certain 2001 balances have been reclassified to conform to 2002 classifications.

At a meeting held on July 3, 2002, the Company’s board of directors voted to suspend payment of the quarterly dividend.

On July 19, 2002, the Company’s broadcasting subsidiary entered into a non-binding letter of intent for the sale of all member interests in the limited liability company which owns the FCC licenses and the assets associated with the operation of television stations WFXG-TV, Augusta, Georgia and WXTX-TV, Columbus, Georgia. The transaction is subject to negotiation of a purchase and sale agreement, completion of due diligence, negotiation and execution of network affiliation agreements, and FCC consent to assignment of the licenses. If the transaction is concluded, the broadcasting subsidiary may incur a loss.

On July 26, 2002, the Company’s real estate subsidiary received notification that inspection contingencies contained in a purchase and sale agreement for sale of certain of that subsidiary’s property located on Lake Union in Seattle had been satisfied. Closing of the transaction is anticipated to occur in early September. The transaction is expected to result in a gain of approximately $3,700,000 net of income tax effects.

On July 30, 2002, the Company received notice of a buyer’s intent to proceed with the purchase of land and a building located in Portland, Oregon, which is owned by the Company’s flour milling subsidiary. The transaction is anticipated to close in late August. No gain or loss is anticipated, as the property is included in discontinued operations of the milling businesses.

The terms of the proposed sale of the Georgia television stations have not yet been formalized and the Company and the proposed buyer of the Georgia television stations may be unable to reach agreement on final terms or may reach agreement on terms, including the purchase price, that are substantially different from the terms contained in the non-binding letter of intent. The sale of the Lake Union properties and Oregon property may not be consummated in the event the conditions to the closing of the transactions are not satisfied by the Company or the buyers.

Net proceeds from these sales, after income taxes, are expected to be used to reduce debt and to fund construction of Fisher Plaza.

Percentage comparisons have been omitted within the following tables where they are not considered meaningful.

CRITICAL ACCOUNTING POLICIES

On January 1, 2002, we adopted Statement of Financial Accounting Standards No. 142, “Goodwill and Other Intangible Assets” (FAS 142). FAS 142 changes the accounting for goodwill from an amortization method to an impairment-only approach. Goodwill is to be tested for impairment upon adoption of FAS 142, and will be tested annually or whenever events or circumstances occur indicating that goodwill might be impaired. We have determined that indefinite-lived intangible assets resulting from past business combinations are to be accounted for as goodwill. We have completed the first step of the transitional impairment test for goodwill and found no impairment. The determination of fair value is a critical and complex consideration when assessing impairment under FAS 142 that involves significant assumptions and estimates. These assumptions and estimates were based on our best judgments. In the future, impairment must be assessed at least annually for these assets, or when indications of impairment exist. Our judgments regarding the existence of impairment indicators include our assessment of the impacts of legal factors and market and economic conditions; the results of our operational performance and strategic plans; competition and market share; any potential for the sale or disposal of a significant portion of our business; and availability of sources of funding to conduct our principal operations. In the future, it is possible that such assessments could cause us to conclude that impairment indicators exist and that certain assets are impaired. The aggregate carrying value of our goodwill is $189 million as of June 30, 2002.

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CONSOLIDATED RESULTS OF OPERATIONS

Operating results for the six months ended June 30, 2002 showed a consolidated loss of $4,238,000 including an extraordinary loss item amounting to $2,058,000, net of income taxes, for write-off of deferred loan costs relating to early extinguishment of long-term debt that was repaid during the first quarter. Net loss for the six months ended June 30, 2001 was $2,835,000, including a loss of $327,000 from discontinued operations of milling businesses.

Operating results for the three months ended June 30, 2002 showed consolidated net income of $3,520,000. Second quarter results include net gain on derivative instruments amounting to $6,828,000, before income tax effects. Excluding net after-tax gains on derivative instruments, second quarter results would have been a loss of $785,000. Net loss for the three months ended June 30, 2001 was $520,000, including a loss of $327,000 from discontinued operations of milling businesses.

Revenue

	Six months ended June 30						Three months ended June 30
	2002		% Change		2001		2002		% Change		2001
Broadcasting	$	64,908,000	-10.9	%	$	72,876,000	$	35,061,000	-7.9	%	$	38,061,000
Media services		3,113,000	11.5	%		2,791,000		1,481,000	10.1	%		1,346,000
Real estate		6,505,000	9.8	%		5,927,000		3,302,000	11.8	%		2,954,000
Consolidated	$	74,526,000	-8.7	%	$	81,594,000	$	39,844,000	-5.9	%	$	42,361,000

Broadcasting revenue declined $7,968,000 during the six months ended June 30, 2002, compared with the same period of 2001, due largely to a weak economy in the Northwest and relatively weak performance by the ABC television network. Television revenues, net of sales commissions, were down 14%. Net revenue from radio operations declined 2%.

Based on information published by Miller, Kaplan, Arase & Co. (Miller Kaplan), during the six-month period ended June 30, 2002, revenue for the overall Seattle television market declined 12%, and revenue for the overall Portland television market declined less than 1%. Our Seattle and Portland television stations experienced revenue declines of 23% and 12%, respectively, during the six-month period. We believe that the performance of ABC and coverage of the Winter Olympic Games on a competing network were contributing factors. We also believe that KOMO TV in Seattle is impacted by the success of the Seattle Mariners baseball team, whose games are broadcast on a competing station. Our smaller market television operations experienced mixed revenue results with the Oregon and Idaho stations reporting flat or increased revenue and the Washington and Georgia station groups reporting declines.

Our radio operations also reported mixed revenue results during the first six months of 2002. Local and national revenues for our Seattle radio operations declined 15% during the six-month period due, in part, to a decline in ratings, while local and national revenues at our Portland radio stations increased 23% due, in part, to improving ratings. Miller Kaplan reported that local and national radio revenues for the Seattle and Portland radio markets declined 10% and 1%, respectively, during the same period. Six-month revenue at our small market radio stations in Eastern Washington and Montana increased 6%.

Second quarter 2002 broadcasting revenue declined $3,000,000, compared with the same period of last year. Net television revenues were down 11%. Net revenue from radio operations was unchanged from the second quarter of 2001.

During the second quarter our Seattle and Portland television stations experienced revenue declines of 22% and 7%, respectively. Our smaller market television operations experienced revenue increases ranging from 14% to 25%, except for the Washington and Georgia station groups, which experienced declines of 1% and 8%, respectively, compared with the same period last year.

The increases in revenue for the media services segment for the six months ended June 30, 2002 and the second quarter are principally due to revenues from program production and development at Fisher Entertainment, and revenue from Fisher Plaza. Revenue from Fisher Pathways declined 42% during the six-month period and 48% during the second quarter ended June 30, 2002, compared with the same periods last year, due to a decline in demand for our satellite transmission services.

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The increase in real estate revenue is primarily due to rents from the Fisher Industrial Technology Center (Fisher ITC) located in Auburn, Washington, which was 71% leased during 2002. Fisher ITC was in lease-up phase during 2001, with the first tenant taking occupancy in May.

Cost of services sold

	Six months ended June 30								Three months ended June 30
	2002			% Change		2001			2002			% Change		2001
Broadcasting	$	31,495,000		-3.5	%	$	32,652,000		$	15,595,000		-0.7	%	$	15,712,000
Media services		1,485,000					84,000			779,000					139,000
Real estate		1,118,000		62.1	%		690,000			546,000		49.0	%		366,000
Consolidated	$	34,098,000		2.0	%	$	33,426,000		$	16,920,000		4.3	%	$	16,217,000
Percentage of revenue		45.8	%				41.0	%		42.5	%				38.3	%

The cost of services sold consists primarily of costs to acquire, produce, and promote broadcast programming, operating costs of the businesses in the media services segment, and costs to operate the properties held by the real estate segment. These costs are relatively fixed in nature, and do not necessarily vary on a proportional basis with revenue.

Emphasis on expense control resulted in a reduction in operating expenses at the broadcasting segment for the first six months of 2002, compared with the first half of 2001. The largest decline was in salaries and related expenses due to staff reduction; however, many other operating expenses in the segment declined. A decline in operating expenses at the broadcasting segment during the second quarter was partially offset by costs incurred in connection with a Joint Sales Agreement that became effective in March 2002.

Operating expenses in the media services segment increased as each of the businesses included in the segment incurred additional costs in connection with growth, with the largest increase at Fisher Plaza, where certain costs were deferred during 2001. Prior year operating expenses for the media services segment reflect adjustments to prior estimates of common area costs received from occupants and customers at Fisher Plaza.

The real estate segment experienced increased operating costs in several categories, including repairs and maintenance, energy and utilities, and insurance. In addition, certain operating costs relating to Fisher ITC were capitalized during the first six months of 2001 as the facility was in lease-up phase.

Selling expenses

	Six months ended June 30								Three months ended June 30
	2002			% Change		2001			2002			% Change		2001
Broadcasting	$	9,536,000		-6.8	%	$	10,230,000		$	5,074,000		-6.1	%	$	5,402,000
Media services		227,000					25,000			109,000					17,000
Consolidated	$	9,763,000		-4.8	%	$	10,255,000		$	5,183,000		-4.3	%	$	5,419,000
Percentage of revenue		13.1	%				12.6	%		13.0	%				12.8	%

Emphasis on expense control and reduced revenue resulted in a reduction in selling expenses at the broadcasting segment for the first half and second quarter of 2002, compared with the similar periods of 2001. The largest cost reductions were in salaries and commissions.

Selling expenses at the media services segment increased during the first half and second quarter of 2002, compared with the same periods last year, due to efforts to increase revenue growth at Fisher Pathways and at Civia, Inc.

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General and administrative expenses

	Six months ended June 30								Three months ended June 30
	2002			% Change		2001			2002			% Change		2001
Broadcasting	$	13,957,000		-4.8	%	$	14,654,000		$	7,083,000		2.7	%	$	6,894,000
Media services		1,936,000		-17.6	%		2,351,000			935,000		-38.0	%		1,507,000
Real estate		1,197,000		-6.9	%		1,286,000			555,000		-10.0	%		617,000
Corporate, eliminations & other		4,226,000		-4.7	%		4,436,000			2,170,000		-2.2	%		2,219,000
Consolidated	$	21,316,000		-6.2	%	$	22,727,000		$	10,743,000		-4.4	%	$	11,237,000
Percentage of revenue		28.6	%				27.9	%		27.0	%				26.5	%

Emphasis on expense control during the first half and second quarter of 2002 resulted in expense reductions, or minimized expense increases, in many expense categories throughout the company.

Depreciation and amortization

	Six months ended June 30								Three months ended June 30
	2002			% Change		2001			2002			% Change		2001
Broadcasting	$	6,727,000		-27.9	%	$	9,335,000		$	3,352,000		-30.7	%	$	4,834,000
Media services		881,000		14.7	%		769,000			444,000		15.3	%		385,000
Real estate		2,190,000		18.6	%		1,846,000			1,090,000		15.6	%		943,000
Corporate, eliminations & other		119,000		44.1	%		82,000			60,000		44.3	%		41,000
Consolidated	$	9,917,000		-17.6	%	$	12,032,000		$	4,946,000		-20.3	%	$	6,203,000
Percentage of revenue		13.3	%				14.7	%		12.4	%				14.6	%

The decline in depreciation and amortization at the broadcasting segment is primarily due to a new accounting standard that provides for discontinuation of goodwill amortization beginning January 1, 2002. Goodwill amortization amounted to $2,600,000 during the first six months of 2001 and $1,309,000 during the second quarter of 2001. Depreciation expense remained relatively constant.

The increase in depreciation in the media services segment is attributable to operations of Fisher Plaza and Civia, Inc. Depreciation on a portion of Fisher Plaza did not begin in the first half of 2001 as the project was not substantially complete.

The increase in depreciation in the real estate segment is primarily attributable to Fisher ITC, which was 71% leased in 2002, but was vacant until May of 2001.

Income (Loss) from operations

	Six months ended June 30								Three months ended June 30
	2002			% Change		2001			2002			% Change		2001
Broadcasting	$	3,194,000		-46.8	%	$	6,005,000		$	3,958,000		-24.2	%	$	5,220,000
Media services		(1,418,000	)				(438,000	)		(788,000	)	-12.0	%		(703,000	)
Real estate		2,000,000		-5.0	%		2,105,000			1,112,000		8.0	%		1,030,000
Corporate, eliminations & other		(4,344,000	)	-3.8	%		(4,518,000	)		(2,230,000	)	-1.4	%		(2,262,000	)
Consolidated	$	(568,000	)			$	3,154,000		$	2,052,000		-37.5	%	$	3,285,000

Income (loss) from operations by business segment consists of revenue less operating expenses. In computing income from operations by business segment, net gain on derivative instruments and other income, net, have not been included, and interest expense, income taxes and unusual items have not been deducted.

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Net gain on derivative instruments

Six months ended June 30		Three months ended June 30
2002	2001	2002	2001
$6,103,000	$-0-	$6,828,000	$-0-

Net gain on derivative instruments includes unrealized gain resulting from an increase in fair value of a variable forward sales transaction amounting to $9,677,000 in the first half of 2002 and $7,637,000 in the second quarter of 2002, and unrealized loss from a decline in fair value of an interest rate swap agreement amounting to $938,000 in the first half and $809,000 in the second quarter of 2002 (See Note 3 to the Condensed Consolidated Financial Statements). The net gain for the six months ended June 30, 2002 also includes a realized loss amounting to $2,636,000 from termination, in March, of an interest rate swap agreement.

Other income, net

Six months ended June 30			Three months ended June 30
2002	% Change	2001	2002	% Change	2001
$1,376,000	-26.8%	$1,879,000	$789,000	24.2%	$635,000

Other income, net includes dividends received on marketable securities and, to a lesser extent, interest and miscellaneous income. The decline in the six months ended June 30, 2002 is primarily due to a reduction in the quarterly dividend paid by SAFECO Corporation effective in February 2001.

Interest expense

Six months ended June 30			Three months ended June 30
2002	% Change	2001	2002	% Change	2001
$10,423,000	17.4%	$8,875,000	$5,422,000	28.2%	$4,229,000

Interest expense includes interest on borrowed funds, loan fees, and net payments under interest rate swap agreements. The increases in 2002 interest expense, compared with 2001, are attributable to higher amounts borrowed during 2002, partially offset by lower interest rates. Interest incurred in connection with funds borrowed to finance construction of Fisher Plaza and other significant capital projects is capitalized as part of the cost of the related project. Interest capitalized during the six months ended June 30, 2002 and 2001 amounted to $1,027,000 and $1,147,000, respectively. Interest capitalized during the three months ended June 30, 2002 and 2001 amounted to $627,000 and $558,000, respectively.

Provision for federal and state income taxes (benefit)

	Six months ended June 30								Three months ended June 30
	2002			% Change		2001			2002			% Change	2001
	$	(1,300,000	)	-2.5	%	$	(1,333,000	)	$	760,000			$	(112,000	)
Effective tax rate		37.4	%				34.7	%		17.8	%			36.7	%

The provision for federal and state income taxes varies directly with pre-tax income. The tax benefits reflect our ability to utilize net operating loss carrybacks. The effective tax rate varies from the statutory rate primarily due to a deduction for dividends received, offset by the impact of state income taxes.

Extraordinary item, net of income tax benefit

Six months ended June 30		Three months ended June 30
2002	2001	2002	2001
$(2,058,000)	$-0-	$-0-	$-0-

We repaid certain loans in March 2002 and, as a result, wrote off deferred loan costs amounting to $3,264,000. Net of income tax benefit this charge amounted to $2,058,000.

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Other comprehensive income (loss)

Six months ended June 30		Three months ended June 30
2002	2001	2002	2001
$2,169,000	$(8,087,000)	$(2,202,000)	$2,812,000

Other comprehensive income (loss) includes unrealized gain or loss on our marketable securities and the effective portion of the change in fair value of an interest rate swap agreement, and is net of income taxes. During the six- and three-month periods ended June 30, 2002 the value of our marketable securities decreased $87,000 and $2,202,000, respectively, net of tax. A significant portion of the marketable securities consists of 3,002,376 shares of SAFECO Corporation common stock. The per share market price of SAFECO Corporation common stock was $31.15 at December 31, 2001, $32.04 at March 31, 2002, $30.89 at June 30, 2002, $32.88 at December 31, 2000, $28.19 at March 31, 2001, and $29.50 at June 30, 2001.

During the period from January 1 through March 21, 2002 we used an interest rate swap, designated as a cash flow hedge, to manage exposure to interest rate risks. During this period the fair value of the swap increased $543,000, net of tax, which is recorded in other comprehensive income. In connection with the refinancing of our long-term debt the swap agreement was terminated and the remaining negative fair market value ($1,713,000 net of tax benefit) was reclassified to operations.

Unrealized gains and losses are reported as accumulated other comprehensive income, a separate component of stockholders’ equity.

Liquidity and Capital Resources

As of June 30, 2002 we had working capital of $36,075,000 and cash and short-term cash investments totaling $11,874,000. We intend to finance working capital, debt service, capital expenditures, and dividend requirements primarily through operating activities. However, we will consider using available credit facilities to fund acquisition activities and significant real estate project development activities. As of June 30, 2002, approximately $37,000,000 is available under existing credit facilities.

Net cash provided by operating activities during the six months ended June 30, 2002 was $14,581,000. Net cash provided by operating activities consists of our net income or loss, increased by non-cash expenses such as depreciation and amortization, and adjusted by changes in operating assets and liabilities. Net cash used in investing activities during the period was $21,186,000, primarily for purchase of property, plant and equipment (including for the Fisher Plaza project). Net cash provided by financing activities was $14,911,000, comprised of borrowings under borrowing agreements and mortgage loans of $255,131,000 less payments of $222,461,000 on borrowing agreements and mortgage loans, as two prior credit facilities were repaid from proceeds from new credit facilities, payments on notes payable of $8,259,000, payment of deferred loan costs of $5,053,000 paid in connection with obtaining new credit facilities, and cash dividends paid to stockholders totaling $4,468,000 or $.52 per share. At a meeting held on July 3, 2002, the Company’s board of directors voted to suspend payment of the quarterly dividend.

ADDITIONAL FACTORS THAT MAY AFFECT OUR BUSINESS, FINANCIAL CONDITION AND FUTURE RESULTS

The following risk factors and other information included in this Quarterly Report should be carefully considered. The risks and uncertainties described below are not the only ones we face. Additional risks and uncertainties not presently known to us or that we currently deem immaterial also may impair our business operations. If any of the following risks occur, our business, financial condition, operating results and cash flows could be materially adversely affected.

A continuing economic downturn in the Seattle, Washington or Portland, Oregon areas could adversely affect our operations, revenue, cash flow and earnings.

Our operations are concentrated primarily in the Pacific Northwest. The Seattle, Washington and Portland, Oregon markets are particularly important for our financial well being. Operating results during 2001 and 2002 were adversely impacted by a soft economy, and a continuing economic downturn in these markets could have a material adverse effect on our operations and financial condition. Because our costs of services are relatively fixed, we may

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be unable to significantly reduce costs if our revenues continue to decline. If our revenues do not increase or if they continue to decline, we could continue to suffer net losses or such net losses could increase.

Our debt service consumes a substantial portion of the cash we generate, but our ability to generate cash depends on many factors beyond our control.

We currently use a significant portion of our operating cash flow to service our debt. Our leverage makes us vulnerable to an increase in interest rates or a downturn in the operating performance of our businesses or a decline in general economic conditions. It further limits our ability to obtain additional financing for working capital, capital expenditures, acquisitions, debt service requirements or other purposes, and may limit our ability to pay dividends. Finally, it inhibits our ability to compete with competitors who are less leveraged than we are, and it constrains our ability to react to changing market conditions, changes in our industry and economic downturns.

Prevailing economic conditions and financial, business and other factors, many of which are beyond our control, will affect our ability to satisfy our debt obligations. If in the future we cannot generate sufficient cash flow from operations to meet our obligations, we may need to refinance our debt, obtain additional financing, forego or delay acquisitions and capital expenditures, or sell assets. Any of these actions could adversely affect the value of our common stock. We cannot assure you that we will generate sufficient cash flow or be able to obtain sufficient funding to satisfy our debt service requirements.

Competition in the broadcasting industry and the rise of alternative entertainment and communications media may result in losses of audience share and advertising revenue by our stations.

We cannot assure you that any of our stations will maintain or increase its current audience ratings or advertising revenue market share. Fisher Broadcasting’s television and radio stations face intense competition from local network affiliates and independent stations, as well as from cable and alternative methods of broadcasting brought about by technological advances and innovations. The stations compete for audiences on the basis of programming popularity, which has a direct effect on advertising rates. Additional significant factors affecting a station’s competitive position include assigned frequency and signal strength. The possible rise in popularity of competing entertainment and communications media could also have a materially adverse effect on Fisher Broadcasting’s audience share and advertising revenue. We cannot predict either the extent to which such competition will materialize or, if such competition materializes, the extent of its effect on our business.

The performance of the television networks could harm our operating results.

The operating results of our broadcasting operations are primarily dependent on advertising revenues. Our Seattle and Portland television stations are affiliated with the ABC Television Network. Popularity of programming on ABC lagged behind other networks during 2001 and 2002 and, contributed to a decline in audience ratings, which negatively impacted revenues for our Seattle and Portland television stations. Continued weak performance by ABC could harm our business and results of operations.

Our operating results are dependent on the success of programming aired by our television and radio stations.

We make significant commitments to acquire rights to television and radio programs under multi-year agreements. The success of such programs is dependent partly upon unpredictable and volatile factors beyond our control such as audience preferences, competing programming, and the availability of other entertainment activities. A shift in audience preferences could cause our programming not to gain popularity or decline in popularity, which could cause our advertising revenues to decline. In some instances, we may have to replace programs before their costs have been fully-amortized, resulting in write-offs that increase operating costs.

A write-down of goodwill to comply with new accounting standards would harm our operating results.

Approximately $189 million, or 29% of our total assets as of June 30, 2002, consists of unamortized goodwill. On January 1, 2002, we adopted Statement of Financial Accounting Standards No. 142, “Goodwill and Other Intangible Assets” (FAS 142). FAS 142 changes the accounting for goodwill from an amortization method to an impairment-only approach. Goodwill is to be tested for impairment upon adoption of FAS 142, and will be tested annually or whenever events or circumstances occur indicating that goodwill might be impaired. We have determined that indefinite-lived intangible assets resulting from past business combinations are to be accounted for as goodwill. We have completed the first step of the transitional impairment test for goodwill and found no impairment. The determination of fair value is a critical and complex consideration when assessing impairment under FAS 142 that

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involves significant assumptions and estimates. These assumptions and estimates were based on our best judgments. In the future, impairment must be assessed at least annually for these assets, or when indications of impairment exist. Our judgments regarding the existence of impairment indicators include our assessment of the impacts of legal factors and market and economic conditions; the results of our operational performance and strategic plans; competition and market share; any potential for the sale or disposal of a significant portion of our business; and availability of sources of funding to conduct our principal operations. In the future, it is possible that such assessments could cause us to conclude that impairment indicators exist and that certain assets are impaired which, would harm our operating results.

Our restructuring may cause disruption of operations and distraction of management, and may not achieve the desired results.

We continue to implement a restructuring of our corporate enterprise with the objective of allowing greater functional integration of core competencies and improving operational efficiencies. This restructuring may disrupt operations and distract management, which could have a material adverse effect on our operating results. We cannot predict whether this restructuring will achieve the desired benefits, or whether our company will be able to fully integrate our broadcast communications, media services and other operations. We cannot assure you that the restructuring will be completed in a timely manner or that any benefits of the restructuring will justify its costs. We may incur costs in connection with the restructuring in the areas of professional fees, marketing expenses, employment expenses, and administrative expenses. In addition, we may incur additional costs which we are unable to predict at this time.

Our efforts to develop new business opportunities are subject to technological risk and may not be successful, or results may take longer than expected to realize.

We are developing new opportunities for creating, aggregating and distributing content through non-broadcast media channels, such as the Internet, cell phones, and web-enabled personal digital assistants. The success of our efforts is subject to technological innovations and risks beyond our control, so that the anticipated benefits may take longer than expected to realize. In addition, we have limited experience in non-broadcast media, which may result in errors in the conception, design or implementation of a strategy to take advantage of the opportunities available in that area. We therefore cannot give any assurance that our efforts will result in successful products or services.

The FCC’s extensive regulation of the broadcasting industry limits our ability to own and operate television and radio stations and other media outlets.

The broadcasting industry is subject to extensive regulation by the Federal Communications Commission (“FCC”) under the Communications Act of 1934, as amended. Compliance with and the effects of existing and future regulations could have a material adverse impact on us. Issuance, renewal or transfer of broadcast station operating licenses requires FCC approval, and we cannot operate our stations without FCC licenses. Failure to observe FCC rules and policies can result in the imposition of various sanctions, including monetary forfeitures, the grant of short-term (i.e., less than the full eight years) license renewals or, for particularly egregious violations, the denial of a license renewal application or revocation of a license. While the majority of such licenses are renewed by the FCC, there can be no assurance that Fisher Broadcasting’s licenses will be renewed at their expiration dates, or, if renewed, that the renewal terms will be for eight years. If the FCC decides to include conditions or qualifications in any of our licenses, we may be limited in the manner in which we may operate the affected stations.

The Communications Act and FCC rules impose specific limits on the number of stations and other media outlets an entity can own in a single market. The FCC attributes interests held by, among others, an entity’s officers, directors, certain stockholders, and in some circumstances, lenders, to that entity for purposes of applying these ownership limitations. The existing ownership rules or proposed new rules may prevent us from acquiring additional stations in a particular market. We may also be prevented from engaging in a swap transaction if the swap would cause the other company to violate these rules.

The FCC is currently considering whether to modify its national and local television ownership limitations, as well as its local radio ownership limitations. We cannot predict what action the FCC will take. If the FCC adopts proposals to allow large broadcast groups to expand further their ownership on a national basis, to permit a single entity to own more than one station in markets with fewer independently owned stations, or to allow radio operators to increase their level of ownership in local markets, our existing operations could face increased competition from entities with significantly greater resources, and greater economies of scale, than Fisher Broadcasting.

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Dependence on key personnel may expose us to additional risks.

Our business is dependent on the performance of certain key employees, including our chief executive officer and other executive officers. We also employ several on-air personalities who have significant loyal audiences in their respective markets. A substantial majority of our executive officers do not have employment contracts with us. We can give no assurance that all such key personnel will remain with us. The loss of any key personnel could harm our operations and financial results.

The non-renewal or modification of affiliation agreements with major television networks could harm our operating results.

Our television stations’ affiliation with one of the four major television networks (ABC, CBS, NBC and FOX) has a significant impact on the composition of the stations’ programming, revenues, expenses and operations. We cannot give any assurance that we will be able to renew our affiliation agreements with the networks at all, or on satisfactory terms. In recent years, the networks have been attempting to change affiliation arrangements in manners that would disadvantage affiliates. The non-renewal or modification of any of the network affiliation agreements could harm our operating results.

A network might acquire a television station in one of our markets, which could harm our business and operating results.

If a network acquires a television station in a market in which we own a station affiliated with that network, the network will likely decline to renew the affiliation agreement for our station in that market, which could harm our business and results of operations.

The September 11, 2001 terrorist attacks may continue to affect our results of operations.

We may continue to be affected by the events of September 11, 2001, as well as by the actions taken by the United States in response to such events. At this time, we cannot determine the ultimate extent of the effect of these events and their aftermath on the operating results of our television and radio broadcasting operations. However, as a result of expanded news coverage following the attacks and subsequent military action, we experienced a loss in advertising revenues. The events of September 11 negatively affected economic activity in the United States and globally, including the markets in which we operate. If weak economic conditions continue or worsen, our financial condition and results of operations may be materially and adversely affected. Furthermore, there is no assurance that there will not be further terrorist attacks against the United States or United States businesses, including real or threatened attacks. Although we have received no specific threats of such attacks, any such attacks might directly impact our physical facilities or our personnel, potentially causing substantial losses or disruptions in our operations. Our insurance coverage may not be adequate to cover the losses and interruptions caused by terrorist attacks. Insurance premiums may increase, or adequate coverage may not be available.

Our operations may be adversely affected by power outages, increased energy costs or earthquakes in the Pacific Northwest.

Our corporate headquarters and a significant portion of our operations are located in the Pacific Northwest. The Pacific Northwest has from time-to-time experienced earthquakes and experienced a significant earthquake on February 28, 2001 which caused damage to some of our facilities. We do not know the ultimate impact on our operations of being located near major earthquake faults, but an earthquake could harm our operating results. In addition, the Pacific Northwest may experience power shortages or outages and increased energy costs. Power shortages or outages could cause disruptions to our operations, which in turn may result in a material decrease in our revenues and earnings and have a material adverse effect on our operating results. Power shortages or increased energy costs in the Northwest could harm the region’s economy, which could reduce our advertising revenues. Our insurance coverage may not be adequate to cover the losses and interruptions caused by earthquakes and power outages.

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Our development, ownership and operation of real property is subject to risks, including those relating to the economic climate, local real estate conditions, potential inability to provide adequate management, maintenance and insurance, potential collection problems, reliance on significant tenants, and regulatory risks.

Revenue and operating income from our properties and the value of our properties may be adversely affected by the general economic climate, the local economic climate and local real estate conditions, including prospective tenants’ perceptions of attractiveness of the properties and the availability of space in other competing properties. We are developing the second building at Fisher Plaza which entails significant investment by us. The softened economy in the Seattle area could adversely affect our ability to lease the space of our properties on attractive terms or at all, which could harm our operating results. Other risks relating to our real estate operations include the potential inability to provide adequate management, maintenance and insurance, and the potential inability to collect rent due to bankruptcy or insolvency of tenants or otherwise. Several of our properties are leased to tenants that occupy substantial portions of such properties and the departure of one or more of them or the inability of any of them to pay their rents or other fees could have a significant adverse effect on our real estate revenues. Real estate income and values may also be adversely affected by such factors as applicable laws and regulations, including tax and environmental laws, interest rate levels and the availability of financing. We carry comprehensive liability, fire, extended coverage and rent loss insurance with respect to our properties. There are, however, certain losses that may be either uninsurable, not economically insurable or in excess of our current insurance coverage limits. If an uninsured loss occurs with respect to a property, it could harm our operating results.

A reduction on the periodic dividend on the common stock of SAFECO may adversely affect our revenue, cash flow and earnings.

We are a 2.3% stockholder of the common stock of SAFECO Corporation. If SAFECO reduces its periodic dividends, it will negatively affect our revenue, cash flow and earnings. In February 2001, SAFECO reduced its quarterly dividend from $0.37 to $0.185 per share.

Antitrust law and other regulatory considerations could prevent or delay expansion of our business or adversely affect our revenues.

The completion of any future transactions we may consider may be subject to the notification filing requirements, applicable waiting periods and possible review by the Department of Justice or the Federal Trade Commission under the Hart-Scott-Rodino Act. Any television or radio station acquisitions or dispositions will be subject to the license transfer approval process of the FCC. Review by the Department of Justice or the Federal Trade Commission may cause delays in completing transactions and, in some cases, result in attempts by these agencies to prevent completion of transactions or to negotiate modifications to the proposed terms. Review by the FCC, particularly review of concentration of market revenue share, may also cause delays in completing transactions. Any delay, prohibition or modification could adversely affect the terms of a proposed transaction or could require us to abandon an acquisition or disposition opportunity. In addition, campaign finance reform laws or regulations could result in a reduction in funds being spent on advertising in certain political races, which would adversely affect our revenues and results of operations in election years.

Our investments in HDTV and digital broadcasting may not result in revenue sufficient to justify the investment.

The ultimate success of digital television broadcasting will depend on programming being produced and distributed in a digital format, the effect of current or future laws and regulations relating to digital television, including the FCC’s determination with respect to “must-carry” rules for carriage of each station’s digital channel and receiver standards for digital reception, and public acceptance and willingness to buy new digital television sets. Unless consumers embrace digital television and purchase enough units to cause home receiver prices to decline, the general public may not switch to the new technology, delaying or preventing its ultimate economic viability. Our investments in HDTV and digital broadcasting may not generate earnings and revenue sufficient to justify the investments.

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We periodically engage in new business ventures which may adversely affect our operating results.

While Fisher Broadcasting has created programming in the past, we do not have significant experience in the creation of programming on the scale contemplated by Fisher Entertainment. Factors that could harm the results of Fisher Entertainment include competition from existing and new competitors, as well as related performance and price pressures, potential difficulties in relationships with cable and television networks, failure to obtain air time for the programming produced and the changing tastes and personnel of the acquirers of programming. There are many inherent risks in new business ventures such as Fisher Entertainment and Civia, Inc., including startup costs, performance of certain key personnel, the unpredictability of audience tastes, and product acceptance.

Acquisitions could disrupt our business and harm our financial condition and are in any event uncertain.

We may opportunistically acquire broadcasting and other assets we believe will improve our competitive position. However, any acquisition may fail to increase our cash flow or yield other anticipated benefits due to a number of other risks, including:

• failure or unanticipated delays in completing acquisitions due to difficulties in obtaining regulatory approval,

• failure of an acquisition to maintain profitability, generate cash flow, or provide expected benefits,

• difficulty in integrating the operations, systems and management of any acquired assets or operations,

• diversion of management’s attention from other business concerns, and

• loss of key employees of acquired assets or operations.

Some competitors for acquisition of broadcasting or other assets are likely to have greater financial and other resources than we do. We cannot predict the availability of acquisition opportunities in which we might be interested.

ITEM 3—QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS

The market risk in our financial instruments represents the potential loss arising from adverse changes in financial rates. We are exposed to market risk in the areas of interest rates and securities prices. These exposures are directly related to our normal funding and investing activities.

Interest Rate Exposure

Our strategy in managing exposure to interest rate changes is to maintain a balance of fixed- and variable-rate instruments. We will also consider entering into interest rate swap agreements at such times as it deems appropriate.

As of June 30, 2002, our fixed rate debt totaled $114,864,000. The fair value of our fixed-rate debt is estimated to be approximately $1,776,000 greater than the carrying amount. Market risk is estimated as the potential change in fair value resulting from a hypothetical 10 percent change in interest rates and, as of June 30, 2002, amounted to $2,934,000.

We also had $197,193,000 in variable-rate debt outstanding as of June 30, 2002. A hypothetical 10 percent change in interest rates underlying these borrowings would result in a $1,225,000 annual change in our pre-tax earnings and cash flows.

We are a party to an interest rate swap agreement fixing the interest rate at 6.87%, plus a margin based on the broadcasting subsidiary’s ratio of consolidated funded debt to consolidated EBITDA, on a portion of our floating rate debt outstanding under an eight-year credit facility (broadcast facility). The notional amount of the swap reduces as payments are made on principal outstanding under the broadcast facility until termination of the contract on March 22, 2004. As of June 30, 2002, the notional amount of the swap was $65,000,000 and the fair value of the swap agreement was a liability of $4,274,000. A hypothetical 10 percent change in interest rates would change the fair value of our swap agreement by approximately $241,000 as of June 30, 2002. We have not designated the swap as a cash flow hedge;

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accordingly changes in the fair value of the swap are reported in net gain on derivative instruments in the accompanying Condensed Consolidated Financial Statements.

Marketable Securities Exposure

The fair value of our investments in marketable securities as of June 30, 2002 was $96,973,000. Marketable securities consist of equity securities traded on a national securities exchange or reported on the NASDAQ securities market. A significant portion of the marketable securities consists of 3,002,376 shares of SAFECO Corporation common stock. As of June 30, 2002, these shares represented 2.3% of the outstanding common stock of SAFECO Corporation. While we currently do not intend to dispose of our investments in marketable securities, we have classified the investments as available-for-sale under applicable accounting standards. Mr. William W. Krippaehne, Jr., President, CEO, and a Director of the Company, is a Director of SAFECO Corporation. A hypothetical 10 percent change in market prices underlying these securities would result in a $9,697,000 change in the fair value of the marketable securities portfolio. Although changes in securities prices would affect the fair value of the marketable securities portfolio and cause unrealized gains or losses, such gains or losses would not be realized unless the investments are sold.

As of June 30, 2002, 3,000,000 shares of SAFECO Corporation common stock owned by the company were pledged as collateral under a variable forward sales transaction (forward transaction) with a financial institution. A portion of the forward transaction will be considered a derivative and, as such, we will periodically measure its fair value and recognize the derivative as an asset or a liability. The change in the fair value of the derivative is recorded in the income statement. As of June 30, 2002 the derivative portion of the forward transaction had a fair market value of $9,677,000, which is included in net gain on derivative instruments in the accompanying Condensed Consolidated Financial Statements. A hypothetical 10 percent change in the market price of SAFECO Corporation stock would change the market value of the forward transaction by approximately $6,000,000. A hypothetical 10 percent change in interest rates or in volatility would change the market value of the forward transaction by approximately $1,000,000.

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PART II

OTHER INFORMATION

Item 1.    Legal Proceedings

The Company and its subsidiaries are parties to various claims, legal actions and complaints in the ordinary course of their businesses. In the Company’s opinion, all such matters are adequately covered by insurance, are without merit or are of such kind, or involve such amounts, that unfavorable disposition would not have a material adverse effect on the consolidated financial position or results of operations of the Company.

Item 2.    Changes in Securities and Use of Proceeds

None

Item 3.    Defaults Upon Senior Securities

None

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

The Annual Meeting of Stockholders was held April 25, 2002.

The four nominees elected to the Board of Directors for three year terms expiring in 2005 are listed below. There were no broker non-votes with respect to any of the nominees.

	Votes For	Votes Withheld
Jean F. McTavish	6,763,419	183,298
Jacklyn F. Meurk	6,757,968	188,749
George F. Warren	6,710,084	165,633
William W. Warren, Jr.	6,710,034	165,683

Continuing as Directors are James W. Cannon, Phelps K. Fisher, and Robin J. Campbell Knepper, whose terms expire in 2003, and Carol H. Fratt, Donald G. Graham, Jr., Donald G. Graham, III, William W. Krippaehne, Jr., and John D. Mangels, whose terms expire in 2004.

Item 5.    Other Information

None

Item 6.    Exhibits and Reports on Form 8-K

(a)  Exhibits:

10.1	Confirmation of OTC Variable Forward Sale Transaction, dated June 3, 2002
10.2	Confirmation of OTC Variable Forward Sale Transaction, dated June 3, 2002
99.1	Certification of CEO pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
99.2	Certification of CFO pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

(b)  Reports on Form 8-K:

A report on Form 8-K was filed with the Commission on July 3, 2002 announcing that the Company’s Board of Directors had voted to suspend payment of the Company’s quarterly dividend.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

		FISHER COMMUNICATIONS, INC. (Registrant)
Dated	August 14, 2002		/S/    DAVID D. HILLARD
			David D. Hillard Senior Vice President and Chief Financial Officer

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EX-10.1

Exhibit 10.1

[LOGO OF MERRILL LYNCH]

Confirmation of OTC Variable Forward Sale

Transaction

Dated: June 3, 2002

ML Ref: 0281695

To: Fisher Communications, Inc. (“Counterparty”)

Attention: Warren J. Spector

tel: (206) 404-6789

fax: (206) 404-6766

From: Merrill Lynch International (“MLI”)

Ropemaker Place

25 Ropemaker Street

London EC2Y 9L4

Dear Sir / Madam:

The purpose of this letter agreement (this “Confirmation”) is to confirm the terms and conditions of the above-referenced transaction entered into between Counterparty and MLI through its agent Merrill Lynch, Pierce, Fenner & Smith (“MLPFS”) on the Trade Date specified below (the “Transaction”). This Confirmation constitutes a “Confirmation” as referred to in the Master Agreement specified below.

The definitions and provisions contained in the 2000 ISDA Definitions (the “Swap Definitions”) and the 1996 ISDA Equity Derivatives Definitions (the “Equity Definitions” and, together with the Swap Definitions, the “Definitions”), in each case as published by the International Swaps and Derivatives Association, Inc., are incorporated into this Confirmation. In the event of any inconsistency between the Swap Definitions and the Equity Definitions, the Equity Definitions will govern, and in the event of any inconsistency between the Definitions and this Confirmation, this Confirmation will govern.

This Confirmation supplements, forms part of, and is subject to, the ISDA Master Agreement (including the Schedule thereto) between Counterparty and MLI dated as of April 5, 2002, as amended and supplemented from time to time (the “Agreement”). All provisions contained in the Agreement govern this Confirmation except as expressly modified below.

The terms of the particular Transaction to which this Confirmation relates are as follows:

General Terms:

Trade Date: March 21, 2002

Effective Date: April 8, 2002

Termination Date: October 10, 2006

Seller: Counterparty

Buyer: MLI

Shares: The common stock of SAFECO Corporation (Security Symbol SAFC).

Issuer: SAFECO Corporation, a Washington corporation.

Number of Shares: 650,000

Multiplier: One (1)

Initial Price: See pricing chart attached hereto on Annex A (“Annex A”)

Floor Price: See Annex A

Cap Price: See Annex A

Participation Percentage: 20%

Final Price: See Annex A

Premium: See Annex A

Premium Payment Date: April 11, 2002

Notional Amount: The USD amount, as determined by the Calculation Agent, equal to the product of the Initial Price and the Number of Shares.

Additional Payments: In the event the Shares begin trading ex-dividend on any day from but excluding the Trade Date to and including the Termination Date (the “Dividend Period”), Counterparty shall pay on the third Business Day following each date that the respective dividend is paid by the Issuer to the holders of the Shares (each such third Business Day, an “Additional Payment Amount Payment Date”) an amount equal to the Additional Payment Amount (defined below) for such Additional Payment Amount Payment Date; provided that Counterparty may elect, on not fewer than five (5) Business Days’ notice prior to any Additional Payment Amount Payment Date, that, in lieu of paying the Additional Payment Amount to MLI on such Additional Payment Amount Payment Date, the Calculation Agent shall adjust the Cap Price in a commercially reasonable manner to compensate MLI for not receiving such Additional Payment Amount. The Calculation Agent shall give Counterparty and MLI notice of any such adjustment not later than the respective Additional Payment Amount Payment Date.

The “Additional Payment Amount” for any Additional Payment Amount Payment Date shall be equal to the product of (i) the Number of Shares multiplied by (ii) the Reference Delta (defined below) as of the ex-dividend date for such Additional Payment Amount Payment Date multiplied by (iii) the difference between the per Share dividend declared by the Issuer and USD 0.185 (assuming a quarterly dividend with appropriate adjustments to the terms of this Transaction in the event that the Issuer pays dividends other than on a quarterly basis); provided that such difference is a positive number; and provided further that, for the avoidance of doubt, if an ex-dividend date occurs with respect to the Shares on or before the Termination Date and no corresponding payments have been received by shareholders of record of the Shares on or before the Termination Date, then the dividends to which such ex-dividend date relates shall nonetheless give rise to an Additional Payment Amount.

“Reference Delta” means, for any date during the Term of this Transaction, the hedge ratio for this Transaction (expressed in percentage terms, provided such percentage shall not exceed 100%) as determined by MLI in its good faith discretion.

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Notwithstanding the foregoing, no Additional Payment Amount shall be payable in respect of, and the foregoing provisions shall not apply to, any extraordinary dividend (or other event) that gives rise to an Adjustment (as provided below).

Settlement Currency: USD

Exchange: Nasdaq National Market

Related Exchange: Any exchange(s) on which options contracts related to the Shares are principally traded.

Business Day: New York

Payment Terms:

Payment Period: The period commencing on the date three (3) Exchange Business Days after the Effective Date and ending on the Termination Date.

Payments: Counterparty may from time to time during the Payment Period designate a date on which a “Payment Amount” (as defined below) will be paid as described herein. Such designation will be made by providing MLI with (i) at least seven (7) Currency Business Days’ prior written notice of the Currency Business Day during the Payment Period (a “Payment Amount Date”) on which such payment is to be made, and (ii) notice of the portion expressed as a USD amount of the Outstanding Notional Payment Amount for such Payment Amount Date (a “Payment Amount Portion”)

Unless the Payment Amount Portion is equal to the entire Outstanding Notional Payment Amount on such Payment Amount Date, such Payment Amount Portion shall be equal to at least 20% of the Initial Notional Payment Amount.

On each Payment Amount Date, MLI shall pay to Counterparty the Payment Amount. “Payment Amount” means an amount in USD equal to the present value on a Payment Amount Date of the related Payment Amount Portion (such present value to be determined by the Calculation Agent using a discount rate equal to the Rate for the period from, and including, such Payment Amount Date to, but excluding, the Settlement Date (the “Payment Calculation Period”), plus Spread).

Notwithstanding any provision in this Agreement to the contrary, if at any time during the Term of this Transaction any obligation (whether present or future, contingent or otherwise) is owed by Counterparty to Merrill Lynch, Pierce, Fenner & Smith, Incorporated (“MLPFS”) (such obligation, a “Loan Obligation”) in respect of borrowed money (“Counterparty Loan”), Counterparty shall be deemed to have requested at such time a Payment Amount Portion equal to the entire Outstanding Notional Payment Amount, or if the related Payment Amount of the Outstanding Notional Payment Amount is greater than the Loan Obligation, a Payment Amount Portion with a related Payment Amount equal to the Loan Obligation. Such Payment Amount will not be paid to Counterparty on the related Payment Date, but instead shall be paid to MLPFS in satisfaction of all or part of such Loan Obligation. Counterparty hereby irrevocably authorizes and instructs MLI to use any such Payment Amount solely to satisfy, in whole or in part, on behalf of Counterparty, any Loan Obligation.

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Initial Notional Payment Amount: The Number of Shares * Floor Price

Outstanding Notional Payment Amount: As of any date during the term of this Transaction, an amount in USD equal to the excess, if any, of (i) the Initial Notional Payment Amount over (ii) (a) the sum of the Payment Amount Portions for all Payment Amount Dates occurring prior to such date (the “Prepaid Notional Amount”) less (b) the sum of all prior Repayment Amounts.

Repayments: Counterparty may from time to time during the Payment Period designate a date on which all or a portion of the Prepaid Notional Amount will be re-paid to MLI as described herein. Such designation will be made by providing MLI with (i) at least seven (7) Currency Business Days’ prior written notice of the Currency Business Day during the Payment Period (a “Repayment Date”) on which such payment is to be made, and (ii) notice of the portion expressed as a USD amount of the Prepaid Notional Amount to be repaid on such Repayment Date (a “Repayment Amount”). Unless the Repayment Amount is equal to the entire Outstanding Notional Payment Amount on such Repayment Date, such Repayment Amount shall be equal to at least 20% of the Initial Notional Payment Amount.

On the Repayment Date, Counterparty shall pay to MLI an amount in USD equal to (i) the present value on such Repayment Date of the related Repayment Amount (such present value to be determined by the Calculation Agent using a discount rate equal to the Rate for the period from, and including, such Repayment Date, to but excluding, the Settlement Date (the “Repayment Calculation Period”), plus Spread) plus (ii) any breakage costs.

Rate: If the Payment Calculation Period or the Repayment Calculation Period, as applicable, is (i) equal to or less than 360 calendar days, the rate shall be the zero coupon rate derived from the prevailing LIBOR curve that appears on page IYC1 I5Z of Bloomberg. If such rate does not appear on page IYC1 I5Z of Bloomberg, the rate will be determined as if the parties had specified “USD-LIBOR-BBA”, or (ii) greater than 360 calendar days, the rate shall be the zero coupon rate derived from the prevailing rate curve that appears on page IYC1 I5Z of Bloomberg. If such rate does not appear on page IYC1 I5Z of Bloomberg, the rate will be determined as if the parties had specified “USD-ISDA-Swap Rate”, in each case, (x) on a semi-annual basis, (y) with a Day Count Fraction (as defined in the 2000 ISDA Definitions) equal to Actual/360, and (z) interpolated as necessary to account for the actual number of calendar days within such Payment Calculation Period or Repayment Calculation Period, as reasonably determined by the Calculation Agent

Spread: See Annex A

Valuation:

Valuation Time: At the close of trading on the Exchange.

Valuation Date: Termination Date

Settlement Terms: Settlement of this Transaction shall be either Cash Settlement or Physical Settlement, as determined by Counterparty in writing to MLI no less than ten

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(10) Business Days prior to the Termination Date. In the event MLI is not notified, the settlement method for this Transaction shall be Cash Settlement.

Physical Settlement Terms:

Physical Settlement: On the Settlement Date, Counterparty will deliver the Counterparty Settlement Shares to MLI, and MLI will pay the MLI Settlement Obligation to Counterparty.

Settlement Date: Three (3) Exchange Business Days after the Valuation Date.

A. MLI shall pay to Counterparty an amount in cash equal to the Outstanding Notional Payment Amount (“MLI Settlement Obligation”).

B. Counterparty shall deliver to MLI a number of Shares equal to the Number of Shares multiplied by the Variability Factor (“Counterparty Settlement Shares”).

Variability Factor: A factor calculated by the Calculation Agent on the Valuation Date based on one of the following three scenarios (as applicable):

                Scenario 1: If the Final Price is less than the Floor Price, then:

        One (1)

                Scenario 2: If the Final Price is greater than the Cap Price, then:

        (Floor Price + ((Final Price—Cap Price) * (1—Participation

        Percentage))) / Final Price

                Scenario 3: If the Final Price is greater than the Floor Price and less than the Cap Price, then:

        Floor Price / Final Price

Cash Settlement Terms:

Cash Settlement: If the Cash Settlement Amount is a positive number, MLI will pay the Cash Settlement Amount to Counterparty. If the Cash Settlement Amount is a negative number, Counterparty will pay the absolute value of the Cash Settlement Amount to MLI. Such amounts shall be paid on the Settlement Date.

Cash Settlement Amount: An amount determined by the Calculation Agent on the Valuation Date based on the following formula:

MLI Settlement Obligation – Counterparty Cash Settlement Amount;

Where:

“Counterparty Cash Settlement Amount” means:

        Counterparty Settlement Shares * Final Price

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Conditions to Physical Settlement: Notwithstanding anything contained herein to the contrary, unless all of the following conditions are met, Cash Settlement shall apply to this Transaction:

The Shares are in marketable form without restrictive legends, and such Shares shall not be subject to any Transfer Restrictions (as defined below) in connection with the delivery of the Shares to MLI hereunder or the sale or transfer of such Shares by MLI to a third party, all as determined by MLI in its sole discretion. “Transfer Restriction” means any condition to or restriction on the ability of the holder of the Shares to sell, assign or otherwise transfer such Shares, including, without limitation, (i) any registration or qualification requirement, prospectus delivery requirement or other similar requirements (other than any requirements arising from sales of the Shares by MLI pursuant to Rule 144), (ii) any requirement that any sale, assignment or other transfer or enforcement of such Shares be consented to or approved by any person, including, without limitation, the issuer thereof or any other obligor thereon, (iii) any limitations on the type or status, financial or otherwise, of any purchaser, pledgee, assignee or transferee of such Shares, and (iv) any requirement to deliver any certificate, consent, agreement, opinion of counsel, notice or any other document of any person to the issuer of, any other obligor on or any registrar or transfer agent for, such Shares, prior to the sale, pledge, assignment or other transfer or enforcement of such Shares.

Failure to Deliver: Not applicable.

Clearance System(s): The principal domestic clearance system customarily settling trades on a delivery versus payment basis on the Shares.

Adjustments:

Method of Adjustment: Calculation Agent Adjustment; provided that in the event of the occurrence of a Potential Adjustment Event, the Calculation Agent will determine whether such Potential Adjustment Event has a diluting or concentrative effect on the theoretical value of the Shares and, if so, will (i) make the corresponding adjustment(s), if any, to the Number of Shares, the Floor Price and the Cap Price and, in any case, any other variable relevant to the settlement or payment terms of this Transaction as the Calculation Agent determines (in a commercially reasonable manner) appropriate to account for that diluting or concentrative effect and (ii) determine the effective date(s) of the adjustment(s).

Extraordinary Events:

        Consequences of Merger Event:

        (a) Share-for-Share: Alternative Obligation on the Exchange Business Day immediately following the occurrence of a Merger Event with mutually agreed upon commercially reasonable adjustments to the terms of the Transaction to preserve the economics of the Transaction as originally bargained for pursuant to the terms stated herein; provided that after the Merger Event, MLI shall be permitted to elect Cancellation and Payment within three (3) Exchange Business Days immediately following such Merger Event.

        (b) Share-for-Other: Cancellation and Payment on the Exchange Business Day immediately following the occurrence of a Merger Event.

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        (c) Share-for-Combined: As soon as practicable but not to exceed three (3) Exchange Business Days immediately following the occurrence of a Merger Event has occurred, the parties shall mutually agree upon appropriate adjustments to the terms of the Transaction, and, if the parties are unable to so agree, Cancellation and Payment shall apply.

        Nationalization or Insolvency Negotiated close out.

Additional Provisions:

Events of Default: For the sole purpose of this Transaction and provided that no other transactions under the Agreement other than this Transaction or other substantially similar variable forward sale transactions shall be outstanding between Counterparty and MLI, (i) the “Cross Default” provisions of Section 5(a)(vi) of the Agreement will not apply to MLI and will apply to Counterparty, and for such purpose, “Specified Indebtedness” means solely any Counterparty Loan and the “Threshold Amount” means zero and (ii) the “Credit Event Upon Merger” provisions of Section 5(b)(iv) of the Agreement will not apply to MLI and will not apply to Counterparty.

Additional Termination Event: The occurrence of a Hedging Disruption Event shall constitute an Additional Termination Event with respect to Counterparty, giving MLI the right to designate an Early Termination Date in respect of this Transaction. For this purpose, “Hedging Disruption Event” means (i) any inability of MLI due to market illiquidity, Illegality (as defined in the Agreement, but with respect to the transaction hedge) or lack of availability of third-party institutional stock lenders or MLI otherwise being unable to borrow the Shares, to establish, re-establish or maintain any hedging transaction(s) necessary in the normal course of MLI’s business of hedging the price and market risk of entering into and performing under the Transaction, provided that if MLI is able to borrow Shares from MLPFS under the Counterparty Loan or from Counterparty (including by way of rehypothecation as contemplated in the Collateral provision hereunder) this clause (i) shall not apply; or (ii) an increase in the cost of borrowing the Shares (from an entity other than Counterparty) and Counterparty’s failure (within five (5) Business Days of its receipt of written notice from MLI in this regard) to agree to adjustments to the terms of the Transaction as the Calculation Agent, in its reasonable discretion, deems necessary to compensate MLI for such increase in costs, including, without limitation, any costs incurred by MLI during such five (5) Business Day period.

Absence of Certain Events Representation Section 3(b) of the Agreement is hereby amended by adding the following clause at the beginning of the first line thereof: “Except as previously disclosed in writing by Counterparty to MLI,”.

Calculation Agent: MLI; provided that the Calculation Agent shall make all calculations and determinations in connection with this Transaction in good faith and in a commercially reasonable manner.

Non-Reliance: Each party represents to the other party that it is acting for its own account, and has made its own independent decisions to enter into this Transaction and as to whether this Transaction is appropriate or proper for it based on its own judgment and upon advice from such advisors as it has deemed necessary. It is not relying on any communication (written or oral) of the other party as

7

investment advice or as a recommendation to enter into this Transaction, it being understood that information and explanations related to the terms and conditions of this Transaction shall not be considered investment advice or a recommendation to enter into this Transaction. No communication (written or oral) received from the other party shall be deemed to be an assurance or guarantee as to the expected results of this Transaction.

Governing Law: The laws of the State of New York, including, without limitation, Sections 5-1401 and 5-1402 of the New York General Obligations Law.

Collateral: On or prior to the Trade Date, Counterparty shall have delivered and shall thereafter continually maintain with MLI or its custodian (“Custodian”) during the Term of this Transaction, 650,000 Shares and a stock transfer power related thereto (such Shares, the “Collateral”).

Counterparty represents that (i) it is the legal and record owner of all Collateral free of all liens, claims, equities, and encumbrances, (ii) it has the power and has obtained all of the necessary consents and approvals to grant to MLI a legal, valid, binding and enforceable first priority security interest in, and lien on, the Collateral, and (iii) the pledge of the Collateral shall not breach any covenant in any agreement or contract entered into by Counterparty or any Affiliate thereof.

Counterparty represents that on the Trade Date it granted, and will grant throughout the Term of this Transaction, MLI a first-priority security interest in, and a first-priority lien on, the Collateral for its obligations under this Transaction and the Agreement; provided, however, that if any Counterparty Loan is outstanding at any time from and including the Trade Date to but excluding the third Exchange Business Day immediately following the Effective Date, MLI’s security interest will be subordinate to any security interest and/or lien on the Collateral granted in favor of MLPFS in connection with such Counterparty Loan.

Notwithstanding Section 9-207 of the New York Uniform Commercial Code, MLI will have the right to (i) sell, pledge, rehypothecate, assign, invest, use, commingle or otherwise dispose of, or otherwise use in its business, any Collateral it holds free from any claim or right of any nature whatsoever of Counterparty, including any equity or right of redemption by Counterparty (“Use of Collateral”), provided that MLI shall not have Use of Collateral five Exchange Business Days following the effectiveness of notice from Counterparty to MLI restricting MLI’s Use of Collateral, and (ii) register any Collateral in the name of MLI, its Custodian or a nominee for either. For the avoidance of doubt, nothing in the foregoing is intended to restrict or impede in any way MLI’s ability to foreclose, sell, dispose of, or otherwise exercise its rights and remedies with respect to the Collateral upon a Counterparty Event of Default or Termination Event.

Upon the occurrence of an Event of Default or Termination Event under the Agreement, MLI or its Custodian shall have all of the rights with respect to the Collateral of a secured party under the New York Uniform Commercial Code (“UCC”). MLI or its Custodian shall not be liable for any loss or damages occasioned by any sale or disposal of the Collateral.

Counterparty will use its best efforts to preserve and protect MLI’s security interest in the Collateral, will defend MLI’s right, title, lien, and security interest in and to the Collateral against the claims and demands of all persons whomsoever, and will do all such acts and things and deliver all such documents

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and instruments, including without limitation further pledges, assignments, financing statements, and continuation statements, as MLI and its Custodian may reasonably deem necessary or advisable from time to time in order to preserve, protect, and perfect such security interest or to enable MLI or its Custodian to exercise or enforce its rights with respect to any Collateral.

Counterparty will not permit any lien, security interest, adverse claim, restriction on transfer or, other encumbrance, other than the lien and security interest Counterparty created hereby in favor of MLI, to exist upon any of the Collateral.

Counterparty will not take any action that could in any way limit or adversely affect the ability of MLI to realize upon its rights in the Collateral.

Each of Counterparty and MLI shall perform its obligations and exercise its rights hereunder, as applicable, in compliance with the terms of the UCC.

Representations

and Covenants of Counterparty: Counterparty (i) has such knowledge and experience in financial and business affairs as to be capable of evaluating the merits and risks of entering into the Transaction; (ii) has consulted with its own legal, financial, accounting and tax advisors in connection with the Transaction; (iii) is entering into the Transaction for a bona fide business purpose to hedge an existing position; and (iv) acknowledges that in return for downside protection against a decline in the market price of the Shares below the Floor Price, Counterparty is foregoing, in part, the upside value of an increase in the market price of the Shares above the Cap Price.

Neither Counterparty nor any person who would be considered to be the same “person” (as such term is used in Rule 144(a)(2) under the Securities Act of 1933, as amended (the “Securities Act”)), has sold any Shares (or security entitlements in respect thereof) or hedged (through swaps, options, short sales or otherwise) any long position in the Shares (or security entitlements in respect thereof), including, without limitation, any sales pursuant to an agreement by any such persons to act in concert for the purpose of selling such Shares, during the preceding three (3) months prior to the Trade Date of this Transaction. Counterparty covenants and agrees that until the Effective Date, it will not sell, nor will it permit any person to sell, Shares without the prior written consent of MLI. For the purposes of this paragraph, Shares shall be deemed to include securities convertible into or exchangeable or exercisable for Shares and any other security or instrument that would be subject to aggregation under Rule 144(e) under the Securities Act. As of the Trade Date, Counterparty owns 3,002,376 Shares.

Counterparty does not know or have any reason to believe that the Issuer has not complied with the reporting requirements contained in Rule 144(c)(1) under the Securities Act.

Counterparty acknowledges and agrees that (i) it has not taken and will not take any action that would cause any sale deemed to be made under the Interpretive Letter (as defined below) to exceed the volume limitation of Rule 144(e), (ii) it has not taken and will not take any action that could cause any sale deemed to be made under the Interpretive Letter to fail to meet all applicable requirements of Rule 144 and (iii) on the Trade Date of this Transaction it has transmitted a Form 144 for filing with the Securities and Exchange Commission.

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Counterparty covenants that it will send to MLI via facsimile a copy of each Form 144 and each filing under Section 13 or 16 of the Securities and Exchange Act relating to this Transaction concurrently with filing or transmission for filing, as the case may be, of such form to or with the SEC.

As of the Trade Date of this Transaction, the Shares are eligible for resale under Rule 144. Counterparty shall comply with the terms of the interpretive letter from the SEC to Goldman, Sachs & Co. dated December 20, 1999 (the “Interpretive Letter”).

The directors, officers and/or employees of Counterparty (“Contract Persons”) who are directly or indirectly involved with the negotiation, execution and delivery of this Agreement and the performance of the transactions contemplated by this Agreement have no material, nonpublic information in respect of the Issuer and had no such information on each day from and including the Trade Date to and including the Effective Date. Counterparty further represents that (1) as of the Trade Date it had established and implemented written policies and procedures to ensure that no Contract Person will violate federal and state securities laws prohibiting the purchase or sale of securities on the basis of material nonpublic information in connection with this Agreement and this Transaction and (2) if any third-party cause of action asserts that Counterparty has violated such federal and state securities laws, Counterparty may duly and in good faith assert in its responsive pleading an affirmative defense under Rule 10b5-1 of the Securities Exchange Act of 1934, as amended.

Counterparty represents that all proceeds from the Counterparty Loan and any other credit facility entered into by Counterparty as of the date hereof through and including March 31, 2002 shall be used to satisfy in full all outstanding payment obligations (principal, interest or otherwise) of Counterparty pursuant to (i) the Credit Agreement dated as of May 26, 1998 among Counterparty, Bank of America, N.A., and U.S. Bank National Association, as lenders, and Bank of America, N.A., as administrative agent, as amended; and (ii) the Credit Agreement dated as of June 24, 1999 among Counterparty, the various lenders thereto, Bank of America, N.A., as administrative agent, and Credit Suisse First Boston, as syndication agent, as amended. A breach of this representation shall constitute an Additional Termination Event with respect to Counterparty with Counterparty as the Affected Party, giving MLI a right to designate an Early Termination Date (as defined in the ISDA Master Agreement).

Counterparty is not and has not been the subject of any civil proceeding of a judicial or administrative body of competent jurisdiction that could reasonably be expected to impair materially Counterparty’s ability to perform its obligations hereunder.

Counterparty will by the next succeeding Business Day notify MLI upon obtaining knowledge of the occurrence of any event that would constitute an Event of Default, a Potential Event of Default or a Potential Adjustment Event.

As of the Effective Date, Counterparty is not insolvent.

Representation of MLI: MLI hereby represents and warrants to, and agrees with, Counterparty that it shall comply with (i) the terms of the Interpretive Letter and (ii) the manner of sale requirements of Rule 144 (f) and (g) in connection with the sale of Shares during the hedge period.

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Acknowledgements: (1)    The parties acknowledge and agree that there are no other representations, agreements or other undertakings of the parties in relation to this Transaction, except as set forth in this Confirmation or in the Agreement.

(2)    The parties hereto intend for:

(a)    this Transaction to be a “securities contract” as defined in Section 741(7) of Title 11 of the United States Code (the “Bankruptcy Code”), qualifying for the protections under Section 555 of the Bankruptcy Code;

(b)    a party’s right to liquidate this Transaction and to exercise any other remedies upon the occurrence of any Event of Default under the Agreement with respect to the other party to constitute a “contractual right” as defined in the Bankruptcy Code;

(c)    any cash, securities or other property provided as performance assurance, credit, support or collateral with respect to this Transaction to constitute “margin payments” as defined in the Bankruptcy Code; and

(d)    all payments for, under or in connection with this Transaction, all payments for the Shares and the transfer of such Shares to constitute “settlement payments” as defined in the Bankruptcy Code.

(3)    The parties acknowledge and agree that in the event of an Early Termination Date as a result of an Event of Default, the amount payable under the Agreement will be a cash amount calculated as described therein and that the deliveries specified in this Transaction will no longer be required.

(4)    Upon the execution of this Confirmation, the Agreement shall constitute a “Final Agreement” within the meaning of the Interpretive Letter.

Interpretation: For purposes of the Equity Definitions, this Transaction will be deemed to be a Physically-settled Share Option Transaction if Physical Settlement applies and a Cash-settled Share Option Transaction if Cash Settlement applies, in either case with an Exercise Date equal to the Valuation Date.

Indemnity: Counterparty agrees to indemnify MLI and its Affiliates and their respective directors, officers, agents and controlling parties (MLI and each such person being an “Indemnified Party”) from and against any and all losses, claims, damages and liabilities, joint and several, to which such Indemnified Party may become subject under, in connection with, relating to, or arising out of, this Agreement or Transaction with respect to any applicable securities laws and will reimburse any Indemnified Party for all reasonable expenses (including reasonable legal fees and reasonable expenses) as they are incurred in connection with the investigation of, preparation for, or defense of any pending or threatened claim or any action or proceeding arising therefrom, whether or not such Indemnified Party is a party thereto. Counterparty will not be liable under this Indemnity paragraph to the extent that any loss, claim, damage, liability or expense is found in a final judgment by a court to have resulted from MLI’s gross negligence, fraud, bad faith and/or willful misconduct.

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Please confirm that the foregoing correctly sets forth the terms of our agreement by executing the copy of this Confirmation enclosed for that purpose and returning it to us by facsimile transmission to the attention of: Peter Barna (Telecopier No. 212-738-1069).

Very truly yours,

MERRILL LYNCH INTERNATIONAL

By:	/s/    CHERYL DENNERLIEN
	Name: Title:

Confirmed as of the date first above written:

FISHER COMMUNICATIONS, INC.

By:	/s/    WARREN SPECTOR
	Name: Title:

Acknowledged and agreed as to matters relating to the Agent:

MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED,

solely in its capacity as Agent hereunder

By:	/s/    VIVIAN JACKSON
	Name: Title:

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EX-10.2

Exhibit 10.2

[LOGO OF MERRILL LYNCH]

Confirmation of OTC Variable Forward Sale

Transaction

Dated: June 3, 2002

ML Ref: 0281705

To: Fisher Communications, Inc. (“Counterparty”)

Attention: Warren J. Spector

tel: (206) 404-6789

fax: (206) 404-6766

From: Merrill Lynch International (“MLI”)

Ropemaker Place

25 Ropemaker Street

London EC2Y 9L4

Dear Sir / Madam:

The purpose of this letter agreement (this “Confirmation”) is to confirm the terms and conditions of the above-referenced transaction entered into between Counterparty and MLI through its agent Merrill Lynch, Pierce, Fenner & Smith (“MLPFS”) on the Trade Date specified below (the “Transaction”). This Confirmation constitutes a “Confirmation” as referred to in the Master Agreement specified below.

The definitions and provisions contained in the 2000 ISDA Definitions (the “Swap Definitions”) and the 1996 ISDA Equity Derivatives Definitions (the “Equity Definitions” and, together with the Swap Definitions, the “Definitions”), in each case as published by the International Swaps and Derivatives Association, Inc., are incorporated into this Confirmation. In the event of any inconsistency between the Swap Definitions and the Equity Definitions, the Equity Definitions will govern, and in the event of any inconsistency between the Definitions and this Confirmation, this Confirmation will govern.

This Confirmation supplements, forms part of, and is subject to, the ISDA Master Agreement (including the Schedule thereto) between Counterparty and MLI dated as of April 5, 2002, as amended and supplemented from time to time (the “Agreement”). All provisions contained in the Agreement govern this Confirmation except as expressly modified below.

The terms of the particular Transaction to which this Confirmation relates are as follows:

General Terms:

Trade Date: March 21, 2002

Effective Date: April 10, 2002

Termination Date: April 9, 2007

Seller: Counterparty

Buyer: MLI

Shares: The common stock of SAFECO Corporation (Security Symbol SAFC).

Issuer: SAFECO Corporation, a Washington corporation.

Number of Shares: 400,000

Multiplier: One (1)

Initial Price: See pricing chart attached hereto on Annex A (“Annex A”)

Floor Price: See Annex A

Cap Price: See Annex A

Participation Percentage: 20%

Final Price: See Annex A

Premium: See Annex A

Premium Payment Date: April 11, 2002

Notional Amount: The USD amount, as determined by the Calculation Agent, equal to the product of the Initial Price and the Number of Shares.

Additional Payments: In the event the Shares begin trading ex-dividend on any day from but excluding the Trade Date to and including the Termination Date (the “Dividend Period”), Counterparty shall pay on the third Business Day following each date that the respective dividend is paid by the Issuer to the holders of the Shares (each such third Business Day, an “Additional Payment Amount Payment Date”) an amount equal to the Additional Payment Amount (defined below) for such Additional Payment Amount Payment Date; provided that Counterparty may elect, on not fewer than five (5) Business Days’ notice prior to any Additional Payment Amount Payment Date, that, in lieu of paying the Additional Payment Amount to MLI on such Additional Payment Amount Payment Date, the Calculation Agent shall adjust the Cap Price in a commercially reasonable manner to compensate MLI for not receiving such Additional Payment Amount. The Calculation Agent shall give Counterparty and MLI notice of any such adjustment not later than the respective Additional Payment Amount Payment Date.

The “Additional Payment Amount” for any Additional Payment Amount Payment Date shall be equal to the product of (i) the Number of Shares multiplied by (ii) the Reference Delta (defined below) as of the ex-dividend date for such Additional Payment Amount Payment Date multiplied by (iii) the difference between the per Share dividend declared by the Issuer and USD 0.185 (assuming a quarterly dividend with appropriate adjustments to the terms of this Transaction in the event that the Issuer pays dividends other than on a quarterly basis); provided that such difference is a positive number; and provided further that, for the avoidance of doubt, if an ex-dividend date occurs with respect to the Shares on or before the Termination Date and no corresponding payments have been received by shareholders of record of the Shares on or before the Termination Date, then the dividends to which such ex-dividend date relates shall nonetheless give rise to an Additional Payment Amount.

“Reference Delta” means, for any date during the Term of this Transaction, the hedge ratio for this Transaction (expressed in percentage terms, provided such percentage shall not exceed 100%) as determined by MLI in its good faith discretion.

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Notwithstanding the foregoing, no Additional Payment Amount shall be payable in respect of, and the foregoing provisions shall not apply to, any extraordinary dividend (or other event) that gives rise to an Adjustment (as provided below).

Settlement Currency: USD

Exchange: Nasdaq National Market

Related Exchange: Any exchange(s) on which options contracts related to the Shares are principally traded.

Business Day: New York

Payment Terms:

Payment Period: The period commencing on the date three (3) Exchange Business Days after the Effective Date and ending on the Termination Date.

Payments: Counterparty may from time to time during the Payment Period designate a date on which a “Payment Amount” (as defined below) will be paid as described herein. Such designation will be made by providing MLI with (i) at least seven (7) Currency Business Days’ prior written notice of the Currency Business Day during the Payment Period (a “Payment Amount Date”) on which such payment is to be made, and (ii) notice of the portion expressed as a USD amount of the Outstanding Notional Payment Amount for such Payment Amount Date (a “Payment Amount Portion”).

Unless the Payment Amount Portion is equal to the entire Outstanding Notional Payment Amount on such Payment Amount Date, such Payment Amount Portion shall be equal to at least 20% of the Initial Notional Payment Amount.

On each Payment Amount Date, MLI shall pay to Counterparty the Payment Amount. “Payment Amount” means an amount in USD equal to the present value on a Payment Amount Date of the related Payment Amount Portion (such present value to be determined by the Calculation Agent using a discount rate equal to the Rate for the period from, and including, such Payment Amount Date to, but excluding, the Settlement Date (the “Payment Calculation Period”), plus Spread).

Notwithstanding any provision in this Agreement to the contrary, if at any time during the Term of this Transaction any obligation (whether present or future, contingent or otherwise) is owed by Counterparty to Merrill Lynch, Pierce, Fenner & Smith, Incorporated (“MLPFS”) (such obligation, a “Loan Obligation”) in respect of borrowed money (“Counterparty Loan”), Counterparty shall be deemed to have requested at such time a Payment Amount Portion equal to the entire Outstanding Notional Payment Amount, or if the related Payment Amount of the Outstanding Notional Payment Amount is greater than the Loan Obligation, a Payment Amount Portion with a related Payment Amount equal to the Loan Obligation. Such Payment Amount will not be paid to Counterparty on the related Payment Date, but instead shall be paid to MLPFS in satisfaction of all or part of such Loan Obligation. Counterparty hereby irrevocably authorizes and instructs MLI to use any such Payment Amount solely to satisfy, in whole or in part, on behalf of Counterparty, any Loan Obligation

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Initial Notional Payment Amount: The Number of Shares * Floor Price

Outstanding Notional Payment Amount: As of any date during the term of this Transaction, an amount in USD equal to the excess, if any, of (i) the Initial Notional Payment Amount over (ii) (a) the sum of the Payment Amount Portions for all Payment Amount Dates occurring prior to such date (the “Prepaid Notional Amount”) less (b) the sum of all prior Repayment Amounts

Repayments: Counterparty may from time to time during the Payment Period designate a date on which all or a portion of the Prepaid Notional Amount will be re-paid to MLI as described herein. Such designation will be made by providing MLI with (i) at least seven (7) Currency Business Days’ prior written notice of the Currency Business Day during the Payment Period (a “Repayment Date”) on which such payment is to be made, and (ii) notice of the portion expressed as a USD amount of the Prepaid Notional Amount to be repaid on such Repayment Date (a “Repayment Amount”). Unless the Repayment Amount is equal to the entire Outstanding Notional Payment Amount on such Repayment Date, such Repayment Amount shall be equal to at least 20% of the Initial Notional Payment Amount.

On the Repayment Date, Counterparty shall pay to MLI an amount in USD equal to (i) the present value on such Repayment Date of the related Repayment Amount (such present value to be determined by the Calculation Agent using a discount rate equal to the Rate for the period from, and including, such Repayment Date, to but excluding, the Settlement Date (the “Repayment Calculation Period”), plus Spread) plus (ii) any breakage costs

Rate If the Payment Calculation Period or the Repayment Calculation Period, as applicable, is (i) equal to or less than 360 calendar days, the rate shall be the zero coupon rate derived from the prevailing LIBOR curve that appears on page IYC1 I5Z of Bloomberg. If such rate does not appear on page IYC1 I5Z of Bloomberg, the rate will be determined as if the parties had specified “USD-LIBOR-BBA”, or (ii) greater than 360 calendar days, the rate shall be the zero coupon rate derived from the prevailing rate curve that appears on page IYC1 I5Z of Bloomberg. If such rate does not appear on page IYC1 I5Z of Bloomberg, the rate will be determined as if the parties had specified “USD-ISDA-Swap Rate”, in each case, (x) on a semi-annual basis, (y) with a Day Count Fraction (as defined in the 2000 ISDA Definitions) equal to Actual/360, and (z) interpolated as necessary to account for the actual number of calendar days within such Payment Calculation Period or Repayment Calculation Period, as reasonably determined by the Calculation Agent.

Spread: See Annex A

Valuation:

Valuation Time: At the close of trading on the Exchange.

Valuation Date: Termination Date

Settlement Terms: Settlement of this Transaction shall be either Cash Settlement or Physical Settlement, as determined by Counterparty in writing to MLI no less than ten

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(10) Business Days prior to the Termination Date. In the event MLI is not notified, the settlement method for this Transaction shall be Cash Settlement.

Physical Settlement Terms:

Physical Settlement: On the Settlement Date, Counterparty will deliver the Counterparty Settlement Shares to MLI, and MLI will pay the MLI Settlement Obligation to Counterparty.

Settlement Date: Three (3) Exchange Business Days after the Valuation Date.

A. MLI shall pay to Counterparty an amount in cash equal to the Outstanding Notional Payment Amount (“MLI Settlement Obligation”).

B. Counterparty shall deliver to MLI a number of Shares equal to the Number of Shares multiplied by the Variability Factor (“Counterparty Settlement Shares”).

Variability Factor: A factor calculated by the Calculation Agent on the Valuation Date based on one of the following three scenarios (as applicable):

                Scenario 1: If the Final Price is less than the Floor Price, then:

        One (1)

                Scenario 2: If the Final Price is greater than the Cap Price, then:

        (Floor Price + ((Final Price—Cap Price) * (1—Participation

        Percentage))) / Final Price

                Scenario 3: If the Final Price is greater than the Floor Price and less than the Cap Price, then:

        Floor Price / Final Price

Cash Settlement Terms:

Cash Settlement: If the Cash Settlement Amount is a positive number, MLI will pay the Cash Settlement Amount to Counterparty. If the Cash Settlement Amount is a negative number, Counterparty will pay the absolute value of the Cash Settlement Amount to MLI. Such amounts shall be paid on the Settlement Date.

Cash Settlement Amount: An amount determined by the Calculation Agent on the Valuation Date based on the following formula:

MLI Settlement Obligation – Counterparty Cash Settlement Amount;

Where:

“Counterparty Cash Settlement Amount” means:

        Counterparty Settlement Shares * Final Price

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Conditions to Physical

Settlement: Notwithstanding anything contained herein to the contrary, unless all of the following conditions are met, Cash Settlement shall apply to this Transaction:

The Shares are in marketable form without restrictive legends, and such Shares shall not be subject to any Transfer Restrictions (as defined below) in connection with the delivery of the Shares to MLI hereunder or the sale or transfer of such Shares by MLI to a third party, all as determined by MLI in its sole discretion. “Transfer Restriction” means any condition to or restriction on the ability of the holder of the Shares to sell, assign or otherwise transfer such Shares, including, without limitation, (i) any registration or qualification requirement, prospectus delivery requirement or other similar requirements (other than any requirements arising from sales of the Shares by MLI pursuant to Rule 144), (ii) any requirement that any sale, assignment or other transfer or enforcement of such Shares be consented to or approved by any person, including, without limitation, the issuer thereof or any other obligor thereon, (iii) any limitations on the type or status, financial or otherwise, of any purchaser, pledgee, assignee or transferee of such Shares, and (iv) any requirement to deliver any certificate, consent, agreement, opinion of counsel, notice or any other document of any person to the issuer of, any other obligor on or any registrar or transfer agent for, such Shares, prior to the sale, pledge, assignment or other transfer or enforcement of such Shares.

Failure to Deliver: Not applicable.

Clearance System(s): The principal domestic clearance system customarily settling trades on a delivery versus payment basis on the Shares.

Adjustments:

Method of Adjustment: Calculation Agent Adjustment; provided that in the event of the occurrence of a Potential Adjustment Event, the Calculation Agent will determine whether such Potential Adjustment Event has a diluting or concentrative effect on the theoretical value of the Shares and, if so, will (i) make the corresponding adjustment(s), if any, to the Number of Shares, the Floor Price and the Cap Price and, in any case, any other variable relevant to the settlement or payment terms of this Transaction as the Calculation Agent determines (in a commercially reasonable manner) appropriate to account for that diluting or concentrative effect and (ii) determine the effective date(s) of the adjustment(s).

Extraordinary Events:

        Consequences of Merger Event:

        (a) Share-for-Share: Alternative Obligation on the Exchange Business Day immediately following the occurrence of a Merger Event with mutually agreed upon commercially reasonable adjustments to the terms of the Transaction to preserve the economics of the Transaction as originally bargained for pursuant to the terms stated herein; provided that after the Merger Event, MLI shall be permitted to elect Cancellation and Payment within three (3) Exchange Business Days immediately following such Merger Event.

        (b) Share-for-Other: Cancellation and Payment on the Exchange Business Day immediately following the occurrence of a Merger Event.

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        (c) Share-for-Combined: As soon as practicable but not to exceed three (3) Exchange Business Days immediately following the occurrence of a Merger Event has occurred, the parties shall mutually agree upon appropriate adjustments to the terms of the Transaction, and, if the parties are unable to so agree, Cancellation and Payment shall apply.

        Nationalization or

        Insolvency: Negotiated close out.

Additional Provisions:

Events of Default: For the sole purpose of this Transaction and provided that no other transactions under the Agreement other than this Transaction or other substantially similar variable forward sale transactions shall be outstanding between Counterparty and MLI, (i) the “Cross Default” provisions of Section 5(a)(vi) of the Agreement will not apply to MLI and will apply to Counterparty, and for such purpose, “Specified Indebtedness” means solely any Counterparty Loan and the “Threshold Amount” means zero and (ii) the “Credit Event Upon Merger” provisions of Section 5(b)(iv) of the Agreement will not apply to MLI and will not apply to Counterparty.

Additional Termination Event: The occurrence of a Hedging Disruption Event shall constitute an Additional Termination Event with respect to Counterparty, giving MLI the right to designate an Early Termination Date in respect of this Transaction. For this purpose, “Hedging Disruption Event” means (i) any inability of MLI due to market illiquidity, Illegality (as defined in the Agreement, but with respect to the transaction hedge) or lack of availability of third-party institutional stock lenders or MLI otherwise being unable to borrow the Shares, to establish, re-establish or maintain any hedging transaction(s) necessary in the normal course of MLI’s business of hedging the price and market risk of entering into and performing under the Transaction, provided that if MLI is able to borrow Shares from MLPFS under the Counterparty Loan or from Counterparty (including by way of rehypothecation as contemplated in the Collateral provision hereunder) this clause (i) shall not apply; or (ii) an increase in the cost of borrowing the Shares (from an entity other than Counterparty) and Counterparty’s failure (within five (5) Business Days of its receipt of written notice from MLI in this regard) to agree to adjustments to the terms of the Transaction as the Calculation Agent, in its reasonable discretion, deems necessary to compensate MLI for such increase in costs, including, without limitation, any costs incurred by MLI during such five (5) Business Day period.

Absence of Certain Events

Representation: Section 3(b) of the Agreement is hereby amended by adding the following clause at the beginning of the first line thereof: “Except as previously disclosed in writing by Counterparty to MLI,”.

Calculation Agent: MLI; provided that the Calculation Agent shall make all calculations and determinations in connection with this Transaction in good faith and in a commercially reasonable manner.

Non-Reliance: Each party represents to the other party that it is acting for its own account, and has made its own independent decisions to enter into this Transaction and as to whether this Transaction is appropriate or proper for it based on its own judgment and upon advice from such advisors as it has deemed necessary. It is not relying on any communication (written or oral) of the other party as

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investment advice or as a recommendation to enter into this Transaction, it being understood that information and explanations related to the terms and conditions of this Transaction shall not be considered investment advice or a recommendation to enter into this Transaction. No communication (written or oral) received from the other party shall be deemed to be an assurance or guarantee as to the expected results of this Transaction.

Governing Law: The laws of the State of New York, including, without limitation, Sections 5-1401 and 5-1402 of the New York General Obligations Law.

Collateral: On or prior to the Trade Date, Counterparty shall have delivered and shall thereafter continually maintain with MLI or its custodian (“Custodian”) during the Term of this Transaction, 400,000 Shares and a stock transfer power related thereto (such Shares, the “Collateral”).

Counterparty represents that (i) it is the legal and record owner of all Collateral free of all liens, claims, equities, and encumbrances, (ii) it has the power and has obtained all of the necessary consents and approvals to grant to MLI a legal, valid, binding and enforceable first priority security interest in, and lien on, the Collateral, and (iii) the pledge of the Collateral shall not breach any covenant in any agreement or contract entered into by Counterparty or any Affiliate thereof.

Counterparty represents that on the Trade Date it granted, and will grant throughout the Term of this Transaction, MLI a first-priority security interest in, and a first-priority lien on, the Collateral for its obligations under this Transaction and the Agreement; provided, however, that if any Counterparty Loan is outstanding at any time from and including the Trade Date to but excluding the third Exchange Business Day immediately following the Effective Date, MLI’s security interest will be subordinate to any security interest and/or lien on the Collateral granted in favor of MLPFS in connection with such Counterparty Loan.

Notwithstanding Section 9-207 of the New York Uniform Commercial Code, MLI will have the right to (i) sell, pledge, rehypothecate, assign, invest, use, commingle or otherwise dispose of, or otherwise use in its business, any Collateral it holds free from any claim or right of any nature whatsoever of Counterparty, including any equity or right of redemption by Counterparty (“Use of Collateral”), provided that MLI shall not have Use of Collateral five Exchange Business Days following the effectiveness of notice from Counterparty to MLI restricting MLI’s Use of Collateral, and (ii) register any Collateral in the name of MLI, its Custodian or a nominee for either. For the avoidance of doubt, nothing in the foregoing is intended to restrict or impede in any way MLI’s ability to foreclose, sell, dispose of, or otherwise exercise its rights and remedies with respect to the Collateral upon a Counterparty Event of Default or Termination Event.

Upon the occurrence of an Event of Default or Termination Event under the Agreement, MLI or its Custodian shall have all of the rights with respect to the Collateral of a secured party under the New York Uniform Commercial Code (“UCC”). MLI or its Custodian shall not be liable for any loss or damages occasioned by any sale or disposal of the Collateral.

Counterparty will use its best efforts to preserve and protect MLI’s security interest in the Collateral, will defend MLI’s right, title, lien, and security interest in and to the Collateral against the claims and demands of all persons whomsoever, and will do all such acts and things and deliver all such documents

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and instruments, including without limitation further pledges, assignments, financing statements, and continuation statements, as MLI and its Custodian may reasonably deem necessary or advisable from time to time in order to preserve, protect, and perfect such security interest or to enable MLI or its Custodian to exercise or enforce its rights with respect to any Collateral.

Counterparty will not permit any lien, security interest, adverse claim, restriction on transfer or, other encumbrance, other than the lien and security interest Counterparty created hereby in favor of MLI, to exist upon any of the Collateral.

Counterparty will not take any action that could in any way limit or adversely affect the ability of MLI to realize upon its rights in the Collateral.

Each of Counterparty and MLI shall perform its obligations and exercise its rights hereunder, as applicable, in compliance with the terms of the UCC.

Representations and

Covenants of Counterparty: Counterparty (i) has such knowledge and experience in financial and business affairs as to be capable of evaluating the merits and risks of entering into the Transaction; (ii) has consulted with its own legal, financial, accounting and tax advisors in connection with the Transaction; (iii) is entering into the Transaction for a bona fide business purpose to hedge an existing position; and (iv) acknowledges that in return for downside protection against a decline in the market price of the Shares below the Floor Price, Counterparty is foregoing, in part, the upside value of an increase in the market price of the Shares above the Cap Price.

Neither Counterparty nor any person who would be considered to be the same “person” (as such term is used in Rule 144(a)(2) under the Securities Act of 1933, as amended (the “Securities Act”)), has sold any Shares (or security entitlements in respect thereof) or hedged (through swaps, options, short sales or otherwise) any long position in the Shares (or security entitlements in respect thereof), including, without limitation, any sales pursuant to an agreement by any such persons to act in concert for the purpose of selling such Shares, during the preceding three (3) months prior to the Trade Date of this Transaction. Counterparty covenants and agrees that until the Effective Date, it will not sell, nor will it permit any person to sell, Shares without the prior written consent of MLI. For the purposes of this paragraph, Shares shall be deemed to include securities convertible into or exchangeable or exercisable for Shares and any other security or instrument that would be subject to aggregation under Rule 144(e) under the Securities Act. As of the Trade Date, Counterparty owns 3,002,376 Shares.

Counterparty does not know or have any reason to believe that the Issuer has not complied with the reporting requirements contained in Rule 144(c)(1) under the Securities Act.

Counterparty acknowledges and agrees that (i) it has not taken and will not take any action that would cause any sale deemed to be made under the Interpretive Letter (as defined below) to exceed the volume limitation of Rule 144(e), (ii) it has not taken and will not take any action that could cause any sale deemed to be made under the Interpretive Letter to fail to meet all applicable requirements of Rule 144 and (iii) on the Trade Date of this Transaction it has transmitted a Form 144 for filing with the Securities and Exchange Commission.

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Counterparty covenants that it will send to MLI via facsimile a copy of each Form 144 and each filing under Section 13 or 16 of the Securities and Exchange Act relating to this Transaction concurrently with filing or transmission for filing, as the case may be, of such form to or with the SEC.

As of the Trade Date of this Transaction, the Shares are eligible for resale under Rule 144. Counterparty shall comply with the terms of the interpretive letter from the SEC to Goldman, Sachs & Co. dated December 20, 1999 (the “Interpretive Letter”).

The directors, officers and/or employees of Counterparty (“Contract Persons”) who are directly or indirectly involved with the negotiation, execution and delivery of this Agreement and the performance of the transactions contemplated by this Agreement have no material, nonpublic information in respect of the Issuer and had no such information on each day from and including the Trade Date to and including the Effective Date. Counterparty further represents that (1) as of the Trade Date it had established and implemented written policies and procedures to ensure that no Contract Person will violate federal and state securities laws prohibiting the purchase or sale of securities on the basis of material nonpublic information in connection with this Agreement and this Transaction and (2) if any third-party cause of action asserts that Counterparty has violated such federal and state securities laws, Counterparty may duly and in good faith assert in its responsive pleading an affirmative defense under Rule 10b5-1 of the Securities Exchange Act of 1934, as amended.

Counterparty represents that all proceeds from the Counterparty Loan and any other credit facility entered into by Counterparty as of the date hereof through and including March 31, 2002 shall be used to satisfy in full all outstanding payment obligations (principal, interest or otherwise) of Counterparty pursuant to (i) the Credit Agreement dated as of May 26, 1998 among Counterparty, Bank of America, N.A., and U.S. Bank National Association, as lenders, and Bank of America, N.A., as administrative agent, as amended; and (ii) the Credit Agreement dated as of June 24, 1999 among Counterparty, the various lenders thereto, Bank of America, N.A., as administrative agent, and Credit Suisse First Boston, as syndication agent, as amended. A breach of this representation shall constitute an Additional Termination Event with respect to Counterparty with Counterparty as the Affected Party, giving MLI a right to designate an Early Termination Date (as defined in the ISDA Master Agreement).

Counterparty is not and has not been the subject of any civil proceeding of a judicial or administrative body of competent jurisdiction that could reasonably be expected to impair materially Counterparty’s ability to perform its obligations hereunder.

Counterparty will by the next succeeding Business Day notify MLI upon obtaining knowledge of the occurrence of any event that would constitute an Event of Default, a Potential Event of Default or a Potential Adjustment Event.

As of the Effective Date, Counterparty is not insolvent.

Representation of MLI: MLI hereby represents and warrants to, and agrees with, Counterparty that it shall comply with (i) the terms of the Interpretive Letter and (ii) the manner of sale requirements of Rule 144 (f) and (g) in connection with the sale of Shares during the hedge period.

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Acknowledgements: (1)    The parties acknowledge and agree that there are no other representations, agreements or other undertakings of the parties in relation to this Transaction, except as set forth in this Confirmation or in the Agreement.

(2)    The parties hereto intend for:

(a)    this Transaction to be a “securities contract” as defined in Section 741(7) of Title 11 of the United States Code (the “Bankruptcy Code”), qualifying for the protections under Section 555 of the Bankruptcy Code;

(b)    a party’s right to liquidate this Transaction and to exercise any other remedies upon the occurrence of any Event of Default under the Agreement with respect to the other party to constitute a “contractual right” as defined in the Bankruptcy Code;

(c)    any cash, securities or other property provided as performance assurance, credit, support or collateral with respect to this Transaction to constitute “margin payments” as defined in the Bankruptcy Code; and

(d)    all payments for, under or in connection with this Transaction, all payments for the Shares and the transfer of such Shares to constitute “settlement payments” as defined in the Bankruptcy Code.

(3)    The parties acknowledge and agree that in the event of an Early Termination Date as a result of an Event of Default, the amount payable under the Agreement will be a cash amount calculated as described therein and that the deliveries specified in this Transaction will no longer be required.

(4)    Upon the execution of this Confirmation, the Agreement shall constitute a “Final Agreement” within the meaning of the Interpretive Letter.

Interpretation: For purposes of the Equity Definitions, this Transaction will be deemed to be a Physically-settled Share Option Transaction if Physical Settlement applies and a Cash-settled Share Option Transaction if Cash Settlement applies, in either case with an Exercise Date equal to the Valuation Date.

Indemnity: Counterparty agrees to indemnify MLI and its Affiliates and their respective directors, officers, agents and controlling parties (MLI and each such person being an “Indemnified Party”) from and against any and all losses, claims, damages and liabilities, joint and several, to which such Indemnified Party may become subject under, in connection with, relating to, or arising out of, this Agreement or Transaction with respect to any applicable securities laws and will reimburse any Indemnified Party for all reasonable expenses (including reasonable legal fees and reasonable expenses) as they are incurred in connection with the investigation of, preparation for, or defense of any pending or threatened claim or any action or proceeding arising therefrom, whether or not such Indemnified Party is a party thereto. Counterparty will not be liable under this Indemnity paragraph to the extent that any loss, claim, damage, liability or expense is found in a final judgment by a court to have resulted from MLI’s gross negligence, fraud, bad faith and/or willful misconduct.

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Please confirm that the foregoing correctly sets forth the terms of our agreement by executing the copy of this Confirmation enclosed for that purpose and returning it to us by facsimile transmission to the attention of: Peter Barna (Telecopier No. 212-738-1069).

Very truly yours,

MERRILL LYNCH INTERNATIONAL

By:	/s/    CHERYL DENNERLIEN
	Name: Title:

Confirmed as of the date first above written:

FISHER COMMUNICATIONS, INC.

By:	/s/    WARREN SPECTOR
	Name: Title:

Acknowledged and agreed as to matters relating to the Agent:

MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED,

solely in its capacity as Agent hereunder

By:	/s/    VIVIAN JACKSON
	Name: Title:

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EX-99.1

Exhibit 99.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO SECTION 906

OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Fisher Communications, Inc. (the “Company”) on Form 10-Q for the period ended June 30, 2002 as filed with the Securities and Exchange Commission on the date hereof (the “Form 10-Q”), I William W. Krippaehne Jr., Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Form 10-Q fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and

(2) The information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated:  August 14, 2002

/s/    William W. Krippaehne Jr.        

William W. Krippaehne Jr.

President and Chief Executive Officer

EX-99.2

Exhibit 99.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO SECTION 906

OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Fisher Communications, Inc. (the “Company”) on Form 10-Q for the period ended June 30, 2002 as filed with the Securities and Exchange Commission on the date hereof (the “Form 10-Q”), I David D. Hillard, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Form 10-Q fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and

(2) The information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated:  August 14, 2002

/S/    DAVID D. HILLARD        

David D. Hillard

Senior Vice President and

Chief Financial Officer