Bridging the Gaps & Celebrating Women’s History Month

Bridging the Gaps & Celebrating Women’s History Month

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    As we celebrate National Women’s History month, we want to take the time to acknowledge our female investors, friends, and colleagues at Fenimore Asset Management. We believe women have never been in a better position to achieve financial independence for themselves and their families.

    The Fenimore team is currently 43% female comprising of women employees across all departments including members of the management team as well as Deb Pollard, Fenimore’s President. We are very proud of this statistic as we all move towards bridging the gaps in the financial services industry.

    Our team knows firsthand some of the unique challenges women can face.

    Some women have handled the family’s finances all along, while others may be new to the world of investing. No matter your level of expertise, there’s always room to learn more and adjust your plan based on your current circumstances:

  • Andrew Boord, Portfolio Manager - Fenimore Small Cap Strategy

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If you are a beginning investor:

  • Decide what you are saving for and how much you can afford to invest. Consider dollar cost averaging and increasing your savings each year. Dollar cost averaging is investing a fixed dollar amount over regularly scheduled intervals over time.
  • Don’t postpone getting started. The financial cost of waiting could be significant over time.
  • Don’t be afraid to ask questions. It is important to understand the risk, objectives and fees associated with your investments. There are also various account types to consider that may offer different tax treatment.

If you are a more experienced investor:

  • Review your investment strategy to ensure it aligns with your financial goals, time horizon, and risk tolerance. The key is to try to maximize investment returns at a level of risk that you’re comfortable with.
  • Understand what you own and what role each investment plays in your portfolio.
  • Consider the impact of taxes, fees, trading costs, and inflation.

The team at Fenimore Asset Management is here to help.

Contact us at 1-800-932-3271 or  

Email Us


Fenimore Asset Management does not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction.

There is no guarantee that any of the estimates, targets or projections illustrated in this summary will be achieved. There can be no guarantee that the investment objectives of Fenimore will be achieved. Any investment entails a risk of loss. An investor could lose all or substantially all of his or her investment. Clients or prospective clients should consider the investment objectives, risks, and charges and expenses carefully before investing. You may obtain a copy of the most recent mutual fund prospectus by calling 800-932-3271 and/or visiting www.fenimoreasset.com.

Fenimore Asset Management Inc. is an SEC registered investment adviser; however, such registration does not imply a certain level of skill or training and no inference to the contrary should be made.

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2022 Stock Market Update

2022 STOCK MARKET UPDATE

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    By John Fox, CFA®
    CEO

    After a terrific 2021, the stock market peaked on the first business day of the new year and has been declining ever since. So far, stocks are down 10% to 20% for the year depending on the index you watch.[1] The stocks of smaller companies have fallen the most.

    While the current headlines are on Russia’s invasion of the Ukraine, we believe this is just one of multiple reasons for the drop in stock prices. As long-term stock investors, it’s always helpful to remember that price declines are part of the experience. I mentioned in a recent video we distributed that I have been at Fenimore for 26 years and in every one of those years, but one, the market had a decline of 5% or more during the year. This is a normal part of stock investing.

  • John Fox

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Of course, the reasons for the declines are always different. Today, we see three primary reasons:

1) High Valuations: After great market returns in 2021, stock valuations were at a high level. Because of low interest rates and many years of terrific returns, investors were willing to pay more for a dollar of earnings. This left stock prices at an all-time high and susceptible to a decrease as we turned the calendar. It’s impossible to know when a decline might occur, even if you think prices look high.

2) High Inflation: It’s very clear that inflation is not “transitory” using an often-quoted word from the Federal Reserve Chairman. We believe some parts of inflation will recede over time; other factors are here to stay. As a consequence, the Federal Reserve will be raising interest rates this year beginning at their March meeting in a few weeks. Answers to important questions like how high these rate increases will go and how fast they will occur are unknown. Interest rates have already moved up in anticipation of the Fed’s moves. The 30-year mortgage rate has increased from last year’s low of 2.67% to 4% today.[2] We should point out that while the Fed is raising interest rates, they remain low by historical standards.

3) Russia’s Invasion: Russia’s invasion of Ukraine creates a lot of uncertainty around politics and Europe’s state of affairs. From a purely economic point of view, Russia is a major producer of oil and other commodities like wheat. If this conflict continues, it may increase the prices of these commodities which will impact inflation. Higher inflation brings us right back to the previous point about an interest rate increase.

As you can see, there are a number of interrelated issues. However, even if it seems like one storm ends and another surfaces, this is usually the story in economics, politics, and markets. We have been through numerous international events like the Asian financial crisis in 1998 and two wars in Iraq.

Looking Ahead

At this time, we expect companies to grow earnings over 2021 levels and generate cash profits to invest in growth and return to shareholders through stock buybacks and increased dividends. As I stated in our year-end newsletter, “You don’t have to know the future, but you do have to know your companies.”

This gives us the confidence we need to execute our long-term strategy: investing in what we believe are quality businesses that meet our rigorous financial standards with strong leadership teams that can create value for our investors over time.

Please contact us at 800-721-5391 if you have questions or concerns. Thank you for the opportunity to serve you.

[1] FactSet as of 2/24/2022

[2] https://fred.stlouisfed.org/series/MORTGAGE30US

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Charitable Contributions from IRAs

Charitable Contributions from IRAs

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    Did you know that, if you are at least 70½ years old, you can make tax-free charitable donations directly from your IRA? By making what’s called a qualified charitable distribution (QCD), you can benefit your favorite charity while excluding up to $100,000 annually from gross income. These gifts, also known as “charitable IRA rollovers,” would otherwise be taxable IRA distributions.1

    How QCDs work

    In order to make a QCD, you simply instruct your IRA trustee to make a distribution directly from your IRA (other than SEP and SIMPLE IRAs) to a qualified charity. The distribution must be one that would otherwise be taxable to you. You can exclude up to $100,000 of QCDs from your gross income each year. And if you file a joint return, your spouse (if 70½ or older) can exclude an additional $100,000 of QCDs. Note: You don’t get to deduct QCDs as a charitable contribution on your federal income tax return — that would be double-dipping. QCDs count toward satisfying any required minimum distributions (RMDs) that you would otherwise have to receive from your IRA, just as if you had received an actual distribution from the plan. However, distributions that you actually receive from your IRA (including RMDs) and subsequently transfer to a charity cannot qualify as QCDs.

  • Andrew Boord, Portfolio Manager - Fenimore Small Cap Strategy

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Why are QCDs important?

Without this special rule, taking a distribution from your IRA and donating the proceeds to a charity would be a bit more cumbersome and possibly more expensive. You would request a distribution from the IRA and then make the contribution to the charity yourself. You’d include the distribution in gross income and then take a corresponding income tax deduction for the charitable contribution. But due to IRS limits, the additional tax from the distribution may be more than the charitable deduction. And due to much higher standard deduction amounts ushered in by the Tax Cuts and Jobs Act passed in 2017, itemizing deductions may have become even less beneficial in 2018 and beyond, rendering QCDs even more potentially appealing. QCDs avoid all this by providing an exclusion from income for the amount paid directly from your IRA to the charity — you don’t report the IRA distribution in your gross income, and you don’t take a deduction for the QCD.

Fenimore Asset Management does not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction.

1 Beginning after 2019, if you make deductible contributions to an IRA for the year you reach age 70½ or beyond, this could reduce the allowable amount of your QCD.

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Planting Flowers

Helping Those Who Help Others

HELPING THOSE
WHO HELP OTHERS

The Fenimore team was excited to kickoff summer by planting flowers outside the Cobleskill Regional Hospital. We sincerely hope the beautiful flowers and bright colors serve as a welcome sight for patients, visitors, and our healthcare workers.

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Letter From Cobleskill - Fall 2021

Letter from Cobleskill – Autumn

Letter From Cobleskill

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    Dear Fellow Shareholder,

    Since the pandemics onset, we have taken two steps forward and one step back on several occasions. This is another one of those times. Corporate earnings for 2021’s first two quarters exceeded expectations and stock prices followed upward. During the third quarter, however, we saw the economy, earnings, and stock market slow down. It happened suddenly, but it is nothing to be alarmed about from our long-term investment perspective.

    A visit to your local grocery store provides a telling picture of what is going on — some shelves are sparsely stocked and more customers are wearing masks.

  • Letter From Cobleskill - Fall 2021

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Earlier this year, with COVID-19 cases on the decline and federal stimulus checks in hand, consumers rushed back into the marketplace — buying homes and cars, taking vacations, and attending all sorts of events. This was great for business. Sales were up, corporate profits jumped, and stock prices rose along with them. Until companies just could not keep up.

The reason is when the economy shut down, so did production lines. Then, when consumer demand exploded, manufacturers could not ramp up fast enough or find the employees they needed. Demand is simply outpacing supply. For example, automakers cannot obtain the semiconductors they need to build cars. Homeowners looking to upgrade appliances often cannot find what they need. As a result, people are suddenly spending less.

At the same time, businesses dealing with staffing shortages are reducing hours, further dampening sales. And now the upswing in COVID-19 cases is sending more people back into the safety of their homes and impacting restaurant seatings, air travel, and other elements of the mobile economy. Combined, these economic disruptions have forced some companies to downgrade their earnings estimates and this has slowed stock market growth.

What the fall has in store for us is impossible to predict — and certainly we are concerned about the resurging health impacts of the virus — but in our view the long-term outlook remains bright. Demand for consumer products is still high and the supply chain kinks should get straightened out. Quality businesses typically adapt, continue to grow, and should be bigger and more profitable five years from now than they are today.

We believe this bodes well for the FAM Funds. Our research team seeks quality companies with solid financial footings that we think are ideally positioned to weather any storm and deliver strong results over time. We focus not on the random, day-to-day, short-term turbulence in the economy or market, but on the businesses behind the stocks.

Have there been some unanticipated changes in recent weeks? Sure. But they do not alter our long-term vision. We believe we will take another two steps forward … And the shelves will once again be completely stocked.

Announcing a transition

Fenimore Founder and Executive Chairman Tom Putnam built the framework for a long-term succession plan many years ago to ensure continuity of experience and investment philosophy for years to come. I am pleased to announce the latest step in this plan.

Longtime Fenimore Investment Research Analyst Marc Roberts has been named as a Portfolio Manager of the FAM Value Fund. Marc served successfully in the same role for the FAM Small Cap fund from 2012 to 2016 before relocating to Chicago. He returned to us last year and quickly re-established himself as a key member of our research team. Marc joins me and Drew Wilson in managing the fund.

At the same time, Tom has announced that he will transition away from being a portfolio manager on our funds at the end of 2021 to concentrate fully on his Executive Chairman role. He will continue to be a mentor and an active participant in our research process and strategic direction. The rest of our fund management teams, including those of us who have led these teams for several years, will remain in place. Paul Hogan and Will Preston manage the FAM Dividend Focus Fund and Andrew Boord and Kevin Gioia the FAM Small Cap Fund.

We look forward to continuing Tom’s well-established tradition of collaborative, team management of the FAM Funds and to working diligently every day as we seek to grow your wealth over time.

Lets connect

We value the personal connections we have with our shareholders. You can reach us with any questions at 800-932-3271, through the contact us section of our website, or via info@fenimoreasset.com. Our team also welcomes you to meet with us in either our Albany or Cobleskill office or via Zoom.

We hope to hear from you soon. Thank you for your continued confidence in us.

Sincerely,
John D. Fox, CFA
CHIEF EXECUTIVE OFFICER

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Meeting with Management: Getting Informed and Building Relationships

Meeting with Management: Getting Informed and Building Relationships

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    By: William Preston, CFA®
    Portfolio Manager – FAM Dividend Focus Fund

    Ever since Tom Putnam established Fenimore in 1974, he has maintained the practice of getting out from behind the desk and meeting in-person with management teams, a key tenet of Fenimore’s research process.

    Why do we do it? There are a few factors that support Fenimore’s longstanding belief that face-to-face meetings are a best practice including learning the business better, getting a bigger picture view and building relationships.

    Today, our entire research team is responsible for conducting in-person meetings annually with our portfolio companies with the purpose of achieving the following:

  • Andrew Boord, Portfolio Manager - Fenimore Small Cap Strategy

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  1. Understanding the business better. Many companies communicate their investment thesis through scripted conferences and regulatory filings. However, our in-person meetings give us a much better feel for how the business is managed, how employees are treated and other intangibles, like a great culture, that truly make the business exceptional. These meetings also help increase our conviction to hold onto an investment when the markets become volatile or the stock begins to look expensive, a practice that has served us well throughout our history.
  2. Learning out of the office. While truer in the early days when there was no internet, getting out of the office often grants broader insights about the economy and market environment. Our research team interacts with businesses and management teams in a variety of settings, including at company HQs, store locations, warehouses, distribution centers, manufacturing facilities, industry trade shows and investment conferences, which help provide diverse perspectives.
  3. Building relationships over the long-term. In a world where it is becoming harder for active managers to differentiate themselves, by connecting in-person every year management teams often get an appreciation for Fenimore’s shared long-term investment horizon. This distinguishes us from many short-term investors and traders that are worried about quarterly earnings numbers as opposed to long-term value creation.

Fenimore’s trips to AHR Expo, an annual HVAC (heating, ventilation, an air conditioning) industry trade show, provide a great example of the in-person value we seek to create. Over the years, we have made a number of investments in the HVAC industry and this conference provides an efficient way for us to talk with all of our portfolio companies in this industry, as well as their competitors, suppliers, and customers.

At the last expo, we gained a better understanding of how powerful the tailwind of sustainability through reduced energy consumption will be for the industry.  We also learned that several companies believed consolidation will continue, particularly as foreign companies try to buy their way into the US market to bypass the tremendous barriers to entry.

While the pandemic has temporarily changed the way we interact with management teams, the industry has done a great job adapting to a virtual world, which has enabled us to continue to have valuable face-to-face engagements with existing and potential investments. Most important, you can be assured that the Fenimore team is eager and planning to get back out on the road and resume in-person meetings as soon as possible.

It is this direct connection, and industry understanding that Fenimore has embraced for nearly 5 decades – a tradition we expect to remain for generations to come.

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Spotting Indicators Before Investing

Financial Statements – Know the Numbers: Spotting Indicators Before Investing

Spotting Indicators Before Investing

Andrew Boord, Portfolio Manager of the FAM Small Cap Fund, discusses how he built a strong foundation for investment research while working with Howard Schilit, author of Financial Shenanigans. Fenimore Director of Sales, Bill McCartan, hosts this engaging conversation.

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FAM Dividend Focus Fund Marks 25th Year

FAM Dividend Focus Fund Marks 25th Year

FAM Dividend Focus Fund Marks 25th Year

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    Fenimore Asset Management, an independent, Capital Region-based investment advisory firm and manager of the FAM Funds family of mutual funds, is celebrating the 25th Anniversary of the establishment of its FAM Dividend Focus Fund (FAMEX).

    When Fenimore Founder Tom Putnam and Portfolio Manager Paul Hogan mapped out the investment strategy for the firm’s second mutual fund a quarter century ago, they focused on mid-cap companies with a history of paying growing dividends. Their goal was laser-focused — an investment vehicle that could provide downside protection in turbulent times and upside potential for long-term capital appreciation.

  • FAM Dividend Focus Fund Marks 25th Year

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FAMEX has done just that. Since its launch on April 1, 1996, FAMEX has weathered the dot-com bubble, the Global Financial Crisis, and the COVID-related market plunge and volatility. Over its life, FAMEX has achieved solid long-term performance with a positive return on investment in 20 of its 25 years.

Additionally, as of February 28, 2021, FAMEX held the top 5-Star Overall Morningstar RatingTM based on performance returns and risk-adjusted returns. (Morningstar, an independent investment research firm, currently follows 407 mutual funds in its Mid-Cap Blend Category. The Morningstar RatingTM is a quantitative assessment of a fund’s past performance — both return and risk — as measured from 1 to 5 stars. It uses focused comparison groups to better measure fund manager skill. As always, the Morningstar RatingTM is intended for use as the first step in the fund evaluation process. A high rating alone is not a sufficient basis for investment decisions.)

April 1 also marks the silver anniversary of Mr. Hogan’s and Mr. Putnam’s joint management of the fund — a rarity in an industry where the average manager tenure is approximately five years. In May 2020, the two were joined in managing FAMEX by Portfolio Manager William Preston.


“The FAM Dividend Focus Fund exemplifies Fenimore’s nearly half-century commitment to investing in quality businesses that have strong leadership and the proven ability to navigate all types of economic and market cycles,” Mr. Hogan said. “We are proud of the Fund’s performance over its first 25 years and look forward to what we are able to accomplish for our shareholders in the years ahead.”

“Fenimore’s team is truly grateful for the strong local support and ownership of the Dividend Focus Fund as well as our national recognition and investors across the country,” Mr. Hogan added. “We are invested alongside our shareholders and truly care about their financial and life goals.”

“The investment philosophy remains strong: Invest in mid-cap companies with the potential to not only grow their earnings but grow the dividends they return to their shareholders,” said Mr. Preston. “As we like to say, a growing dividend can be a good indicator of the health of a company and its potential for future success.”


Founded in Cobleskill in 1974, Fenimore Asset Management is an independent, nationally recognized investment advisor with more than $3.7 billion in assets under management (as of 12/31/2020) through its Cobleskill and Albany offices. Fenimore offers both separately managed accounts and a family of mutual funds that can be used for retirement and other long-term investment planning. The firm’s team of professionals prides itself on investing in carefully selected quality businesses and providing its investors with highly personalized investment services.

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Fenimore IRA's

Individual Retirement Accounts

Individual Retirement Accounts

IRAs RMD Age Change: 70½ to 72
  • The Setting Every Community Up for Retirement Enhancement (SECURE) Act of 2019 pushes back the age at which retirement plan participants need to take required minimum distributions (RMDs) from age 70½ to 72.
  • The SECURE Act also allows retirees to make contributions indefinitely to a Traditional IRA if they have earned income (this feature was already in place for Roth IRA owners).1

 

IRA Beneficiaries — Your Annual Review

We recommend that you review, and update as necessary, both your primary and contingent IRA beneficiaries annually. If your situation has changed, there may be unintended consequences from your beneficiary designations.

 

1www.irs.gov/retirement-plans

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Letter From Cobleskill

Letter From Cobleskill

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    Dear Fellow Shareholder,
    Last year at this time, our economy was caught off guard by a pandemic few of us saw coming.

    This year, I think what is coming is pretty clear — and it is bright. Our team believes that the U.S. is heading into a strong economic recovery.

    • Let’s put 2020 in our rearview mirror and look at what is before us:
    • Projections are that we will have enough vaccine for every American adult by mid-year.
    • We are expecting the economy to fully reopen and people to resume out-of-home activities. That will be great news for airlines, hotels, restaurants, sports venues, theaters, and other hospitality businesses — and for their employees, who account for about 40% of the jobs lost over the past year.
  • Letter from Cobleskill Spring 2021

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  • People have money to spend. Many of those fortunate to have continued working the past 12 months have socked a good chunk of their paychecks away for a sunnier day. A recent report from the U.S. Bureau of Economic Analysis found that Americans have more than $2 trillion in savings — nearly three times what we had just one year ago.
  • Interest rates have started to creep up off historical lows, but the housing industry is still soaring and driving spin-off spending. This includes realtors, attorneys, title companies, lumber manufacturers, appliance makers, and everyone else who has a hand in building and equipping a new home. It also means more people back to work.
  • Virtually every company that I have spoken to in recent weeks, including those we own and those we do not, is projecting 2021 growth that could achieve record-high profits, sales, and dividends. This, in turn, should create an economy where everyone who wants a job can find one.

Are there risks? Of course. It will be some time before we know the true cost consequences of the federal stimulus spending, including whether it leads to a period of inflation and higher interest rates. We will keep these things in our peripheral vision, but our focus is on the positive signs we see ahead.

As always, Fenimore Asset Management (“Fenimore”) will continue to put our confidence only in businesses that meet our stringent quality criteria. We believe in owning shares in businesses that can maximize their growth opportunities, but also have the financial strength and intellectual capital to weather the types of challenges we have been through over the past 12 months.

Our goal every day is to protect and grow your wealth over the long term while providing service that is steeped in responsiveness, transparency, and integrity. We hope that you found this to be true during the very trying past year and we look forward to being alongside you for what we expect to be a much more enjoyable 2021.

SALUTING A SILVER ANNIVERSARY

I am not sure what we were thinking launching a mutual fund on April Fools’ Day, but 25 years later the FAM Dividend Focus Fund (FAMEX) has proven it is very serious about successful, long-term results. Congratulations to our portfolio managers — Paul Hogan, Tom Putnam, and Will Preston — and our entire research team on this milestone anniversary!

Paul and Tom have managed FAMEX since its inception. As Barron’s highlighted in a feature article about Paul Hogan and FAMEX, “The best money managers aren’t the ones who make no mistakes. They don’t exist. The best are ones who learn from their mistakes and improve as a result — and the only way to tell if you’ve found one is if a manager’s been around long enough to see the improvement.”(Barron’s, 12/4/2019, “This Fund Manager Has Beaten 99% of His Peers. How He Picks Winning Dividend Stocks.”)

NEW WEBSITE

Fenimore is launching a new website this spring. Our goal is to create an enhanced user experience for our investors and visitors.

Some of the new features include “News & Insights” prominently displayed on the home page and “Investor Education.” The web address is the same. We hope you find the site to be helpful, timely, and informational.

LET’S CONNECT

You can reach us with any questions at 800-932-3271, through the “Contact Us” section of our website, or at info@fenimoreasset.com. We also welcome you to meet with us via video conference or in our Albany or Cobleskill office.

Thank you for taking a few minutes to read our letter and thank you for the continued confidence you show in our team.

Sincerely,

John D. Fox, CFA

CHIEF EXECUTIVE OFFICER

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Thomas O. Putnam founded Fenimore in 1974 with two passions: conduct in-depth, firsthand, independent investment research and serve investors with excellence and integrity. Today Fenimore Asset Management, manager of the FAM Funds, is nationally recognized, yet locally rooted and independently owned. Decades have passed, but our approach endures.

Securities offered through Fenimore Securities, Inc. Member FINRA/SIPC,
and advisory services offered through Fenimore Asset Management, Inc.

© Fenimore Asset Management. All Rights Reserved.