In March of 2005, the Secretary of Defense issued a new "National Defense Strategy." This strategy recognizes that America is a nation at war. We face a diverse set of security challenges. Yet, we still live in an era of advantage and opportunity. The "National Defense Strategy" outlines an active, layered approach to the defense of the nation and its interests. It seeks to create conditions conducive to respect for the sovereignty of nations and a secure international order favorable to freedom, democracy, and economic opportunity. This strategy promotes close cooperation with others around the world who are committed to these goals. It addresses mature and emerging threats. This 2005 Annual Report to the President and the Congress will examine the Department's efforts to manage challenges while executing the National Defense Strategy.