"Israel has an educated and young population (median age is just 29), and its government continues to ease its control over the economy. Real GDP growth averaged 5% annually in the five years from 2003 and 2007, and was a strong 4% in turbulent 2008.

"Slower global growth will see real GDP hold steady in 2009, but, according to the Bank of Israel (the nation's central bank), economic growth should rebound to 2.5% in 2010, far ahead of estimates earlier this year of just 1.5% to 2.0%.

"iShares MSCI Israel Capped Investable Market invests in about 75 of Israel's largest companies. It is 'capped' to limit the size of individual positions in the portfolio, and focused only on the 'investable market' for stocks-those with sufficient liquidity and no onerous limitations on foreign ownership.

"Health care is the largest sector at nearly 25%, 24% of which is in Israel's largest company, Teva Pharmaceuticals.

"Financial-services stocks make up another 22%, though no single finance position makes up more than 5% of the overall portfolio.

"The ETF's 16% stake in materials is made up mostly of fertilizer, pesticide and fragrance manufacturers, while the 15% stake in technology is largely composed of security software/services and defense technology. Telecommunications and industrial companies together make up about 20% of assets.

"The outsized position in Teva makes its performance critical to iShares MSCI Israel. Teva is the largest maker of generic drugs in the world.

"Teva tends to be acquisitive, but its purchases have consistently added scale or lucrative franchises, like the inhalant products and technologies it gained by purchasing Ivax.

"Teva is a stable, well-managed company that should benefit mightily from worldwide efforts to limit the growth of health care costs.

"Israel is always subject to intense political pressure and the risk of war, but its export economy continues to thrive in varied political and security climates.

"Since the ETF's late March 2008 inception, its total return is a sober 1.6% loss. However, so far in 2009, the ETF has gained 55%, making it one of the best performing developed markets in the world."

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