Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 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 þ          No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.    þ

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act Rule 12b-2)Act).     Yes o          No þ

The market value of common stock held by non-affiliates of the registrant, computed by reference to the last sales price as of July 1, 2004, the registrant’s first day of “regular-way trading”reported on the New York Stock Exchange as of June 30, 2005, the last business day of the registrant’s most recently completed second fiscal quarter, was $1,811$1,618.7 million. 85,743,159

85,348,676 shares of common stock were outstanding as of February 25, 2005.24, 2006.

Certain information required by Part III of this report is incorporated by reference from the registrant’s proxy statement for the 20052006 annual meeting of stockholders to be held on May 10, 2005.9, 2006.

MoneyGram International, Inc. (“MoneyGram,” the “Company,” “we,” “us” and “our”) is a leading global payment services company. Our mission is to provide consumers with affordable, reliable and convenient payment services. We offer our products and services to consumers and businesses through our network of agents and our financial institution customers. The diverse array of products and services we offer enables consumers, most of whom are not fully served by traditional financial institutions, to make payments and to transfer money around the world, helping them meet the financial demands of their daily lives.

Our business is conducted through our wholly owned subsidiary formerly known as Travelers Express Company, Inc. (“Travelers”), which has been in operation since 1940. WeIn June 1998, we acquired MoneyGram Payment Systems, Inc. in June 1998,(“MPSI”), adding MoneyGram®the MoneyGram^® branded international money transfer services to our group of Global Funds Transfer services. We were incorporated in Delaware on December 18, 2003 in connection with the June 30, 2004 spin-off from our parent company, Viad Corp (“Viad”) (referred to hereafter as the “spin-off”). In the spin-off, Travelers was merged with a wholly owned subsidiary of MoneyGram and then Viad distributed all the issued and outstanding shares of MoneyGram common stock to Viad stockholders in a tax-free distribution. Stockholders of Viad received one share of MoneyGram common stock for every one share of Viad common stock owned. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Our Separation from Viad Corp.”

In March 2004, we completed the sale of our subsidiary, Game Financial Corporation, for approximately $43.0 million in cash, to continue our focus on our core businesses. Game Financial Corporation provides cash access services to casinos and gaming establishments throughout the United States. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Basis of Presentation.”

For additional information regarding our business, including our financial results, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

We operate our business in two segments: Global Funds Transfer and Payment Systems. Following is a description of each segment. For financial information regarding our segments, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Results of Operations — Segment Performance” and Note 17 of the Notes to Consolidated Financial Statements.

Our Global Funds Transfer segment provides money transfer services, money orders and bill payment services to consumers. Our primary consumers are “unbanked,” “underbanked” and “convenience users.” “Unbanked consumers” are those consumers who do not have a traditional relationship with a financial institution. “Underbanked consumers” are consumers who, while they may have a savings account with a financial institution, do not have a checking account. “Convenience users” are consumers who, while they may have a checking account, prefer to use our products and services on the basis of convenience or value.

We conduct our Global Funds Transfer operations through a worldwide network of agents. During 20042005 and 2003,2004, our ten largest agents accounted for 2731 percent and 2127 percent, respectively, of our total revenuesrevenue and 46 percent and 41 percent, and 35 percentrespectively, of the revenuesrevenue of our Global Funds Transfer segment. Our largest agent, Wal-Mart Stores, Inc., accounted for nine13 percent and five9 percent of our total revenuesrevenue and

We provide Global Funds Transfer products and services utilizing a variety of proprietary point-of-salepoint-of-sale platforms. We also operate two customer service call centers in the United States and contract for additional call center services in Bulgaria. These call centers provide multi-lingual customer service for both agents and consumers 24 hours per day, 365 days per year.

MoneyGram Money Transfers: Money transfers are transfers of funds between consumers from one location to another. Money transfers are used by consumers who want to transfer funds quickly, safely and

Our money transfer revenues are derived primarily from consumer transaction fees and revenues from currency exchange on international money transfers.

Money Orders:Money orders, much like checks, can be presented by the consumer to make a payment or for cash. Our Global Funds Transfer segment has its roots in the sale of money orders, a business we have been engaged in since 1940. Based on the number of money orders issued in 2004,2005, we are the nation’s leading issuer of money orders. In 2004,2005, we issued approximately 278273.3 million money orders through our network of almost 54,00053,000 retail agent locations in the United States and Puerto Rico.

Our money orders are sold under the Travelers Express brand, which is being transitioned to the MoneyGram brand following the merger of Travelers into MPSI, and are also sold on a private label basis or co-branded with retail agents. In most cases, we receive transaction fees from our agents for each money order sold. In many cases, we also receive additional monthly dispenser service fees from our agents for the money order dispenser equipment we provide. In addition,Furthermore, we generate income from the investment of funds that are remitted from our agents and which we invest until the money orders are cleared through the banking system, or are escheated to the applicable states. Generally a money order will remain outstanding for fewer than ten days.

Pay-By-Suite^smBill Payment Services:Our bill payment services allow consumers to make urgent payments or pay routine bills. Our ExpressPayment® urgentThe acquisition of ACH processing capabilities in 2005 will allow us to enhance our bill payment service is offered through our money transfer agent locations in the United States. Our ExpressPayment urgentbusiness and create a multi-faceted, full-cycle service. The bill payment service, which is provided undersuite of services, referred to asPay-By-Suite, will provide our consumer and corporate customers with a full spectrum of payment choices, completing the bill payment cycle from payment origination to reporting and reconciliation starting in 2006.

We contract with billers, enablescreditors, or “billers,” to enable convenience payers,just-in-time payers and delinquent debtors and just-in-time payers to pay bills generally with same-day credit tothrough our network. A biller may afford debtors a growing groupvariety of creditors.payment methods

Our ExpressPayment^® bill payment service, which is offered through our money transfer agent locations in the United States, continues to grow as we add new billers to our network. As of December 31, 2005, we provide our ExpressPayment bill payment services to over 1,500 billers. ExpressPayment bill payment service becamegenerally provides customers with same-day credit to a biller. Our ExpressPayment bill payment service is also available for internet transactions at www.emoneygram.com.

Our Payment Systems segment provides financial institutions with payment processing services, primarily official check outsourcing services and money orders for sale to their customers. Our customers are primarily comprised of financial institutions, thrifts and credit unions. WeAs of December 31, 2005, we provide official check services to over 17,00015,000 branch locations of approximately 1,800over 1,700 financial institutions. Customers include a broad array of financial institutions, including large banks, regional banks and small community banks. During 20042005 and 2003,2004, our ten largest financial institution customers accounted for 1413 percent and 1714 percent, respectively, of our total revenuesrevenue and 39 percent and 4339 percent, respectively, of the revenuesrevenue of our Payment Systems segment. Our largest financial institution customer generated approximately four percent and five4 percent of our total revenuesrevenue in 2005 and approximately ten2004 and 11 percent and 1210 percent of the revenuesrevenue in

We primarily derive revenues from our financial institution customers from the investment of funds underlying the official check or financial institution money order. We invest funds representing customer items from the time the proceeds are remitted until they are cleared. We also derive revenue from fees paid by our customers. In 2004,2005, Payment Systems segment revenue was $294.5$321.6 million and operating income was $27.2$42.4 million. A significant portion of Payment Systems segment revenue is generated by our official check outsourcing services. See Note 17 of the Notes to Consolidated Financial Statements for revenue by product.

Official Check Outsourcing Services:We provide official check outsourcing services through our PrimeLink®PrimeLink^® service. Financial institutions provide official checks, which include bank checks, cashier checks, teller checks and agent checks, to consumers for use in transactions when the payee requires a check drawn on a bank or other third party. Official checks are commonly used in consumer loan closings, such as closings of home and car loans, and other critical situations where the payee requires assurance of payment and funds availability. Financial institutions also use official checks to pay their own obligations. Our PrimeLinkplus^® product is an internet-based check issuance platform that allows financial institutions and other businesses with multiple locations to securely print official checks at remote locations on a client-controlled basis, eliminating the need to overnight the checks from the main office or wire transfer the funds. We provide these outsourcing services at a low cost to financial institutions and pay an agreed upon commission rate on the balance of funds underlying the official checks pending clearing of the items. We clear the official check items pursuant to contracts with clearing banks as a service to our official check customers.

Money Orders:The Payment Systems segment also offers money orders through financial institutions in a manner very similar to money orders offered through our retail agents in our Global Funds Transfer segment. In 2004,2005, approximately 2018.3 million, or sevensix percent, of our total money orders were sold through financial institutions.

Controlled Disbursement Processing:We process WIC checks through our subsidiary, FSMC, Inc. WIC

Global Funds Transfer Segment:We market our Global Funds Transfer segment products and services through a number of dedicated sales and marketing teams. In the United States, our dedicated sales and marketing teams market money transfer services, money orders and bill payment services on a regional basis to our three principal distribution channels: large national agent accounts, smaller, independent accounts and check cashing outlets. We also have dedicated sales and marketing teams that market our urgentPay-By-Suite bill payment services, including ExpressPayment, directly to billers. Our international sales and marketing for money transfer services is conducted by dedicated regional sales and marketing teams that are generally located in or near their regions: Northern Europe; Southern Europe;Western Europe, including the United Kingdom; Eastern Europe; Asia; the Middle East; Africa; and Mexico, Latin America and the Caribbean.

We have introduced corridor pricing capabilities that enable us to establish different consumer prices for our money transfer services by defined transaction corridors, such as narrowly defined zip code regions or widespread direct marketing areas. We are currently adding additional capabilities, including implementing multi-currency technology that allows us to execute our money transfers directly between and among an increased number of different currencies. Where implemented, these capabilities allow our agents to settle with us in local currency and allow consumers to know the exact amount that will be received in the local currency of the receiving nation, or in U.S. dollars or Euro dollarsEuros in certain countries. We also have continued to provide a more simplified consumer fee pricing structure. Our simplified pricing structure includes reducing the number of pricing tiers or bands and allows us to manage our price-volume dynamic while streamlining the point of sale process for our agents and consumers. Our pricing philosophy continues to be to maintain a price point below our higher priced competitor but above the niche players in the market.

Payment Systems Segment:We market our PrimeLink official check services through a dedicated team of official check sales and marketing professionals. In addition, we have dedicated teams of sales and marketing professionals for our PrimeLinkplusproduct and for our sales of money order services through banks. All marketing efforts are localized and customized to specific segments of the market. Relationship marketing is the substance of our approach to the market. We have an intertwined network of relationships with technology providers, banks that provide marketing endorsements, banking associations, consultants and others, including alliances with Wells Fargo, and the Credit Union National Association.Association and CPS.

Our product development activities have focused on new ways to transfer money and pay bills.bills through enhancements to our current products and the development of new products and services. Recent enhancements and new products supplement our Global Funds Transfer segment. We believe these new features and products will provide customers with added flexibility and convenience to help meet their financial services needs.

Product Enhancements: In March 2004, we launched our MoneyGram eMoney Transfer service that allows online money transfers and bill payments

New Products. We developed a prepaid debit card program that we plan to introducewas introduced in 2005, the first half of 2005. The debitMoneyGram Prepaid MasterCard^® card would allow customers toprogram. Customers can load cash onto a card that can be used to make purchases and ATM withdrawals. TheWe conducted a limited beta test of our prepaid debit card in August 2005, selling the cards would be reloadablethrough company-owned locations in New York and Miami. In December of 2005 we commenced a full beta test, contracting with certain of our agents in key markets to sell and reload the prepaid debit card. We plan the roll-out of the MoneyGram Prepaid MasterCard card program in 2006, with the cards available for purchase and reload at designated MoneyGram agent locations.locations in the US. In addition,2006, we are enhancing our systems to provide customers withwill also begin the ability to transfer money directly into a bank account. We believe these featuresroll-out of thePay-By-Suite bill payment services that will provide customersconsumers with added flexibilityACHpay-by-telephone and convenience to help meet their financial services needs.pay-by-web options.

The various industries in which we operate are very competitive, and we face a variety of competitors across our businesses. New competitors or alliances among established companies may emerge. Consolidation among payment services companies, and money transmitters in particular, has occurred and may continue. We compete for agents and financial institution customers on the basis of value, service, quality, technical and operational differences, price and financial incentives paid to agents once they have entered into an agreement. In turn, we compete for consumers on the basis of number and location of agent locations, price, convenience and technology. Our primary competition comes from First Data Corporation and its subsidiaries, including Western Union, which has substantially greater transaction volume than we do. First Data Corporation and its subsidiaries have a larger agent base, a more established brand name and substantially greater financial and marketing resources than we do. First Data Corporation has announced that it will spin off Western Union in 2006. We cannot anticipate what, if any, effect the spin-off will have on our business or the money transfer industry.

The Global Funds Transfer segment of our business competes in a concentrated industry, with a small number of large competitors and a large number of small, niche competitors. Our large competitors are other providers of money orders and money transfer services, including Western Union, a subsidiary of First Data Corporation, other subsidiaries of First Data Corporation and the U.S. Postal Service with respect to money orders. We also compete with banks and niche person-to-personperson-to-person money transfer service providers that serve select send and receive corridors.

The Payment Systems segment of our business competes in a concentrated industry with a small number of large competitors. Our competitors in this segment are Integrated Payment Systems, a subsidiary of First Data Corporation, and Federal Home Loan Banks. We also compete with financial institutions that have developed internal processing capabilities or services similar to ours and do not outsource these services.

Compliance with legal requirements and government regulations is an integral part of our operations. Financial transaction reporting and state banking department regulations also affect our business.

As a money order issuer and a money transmitter, we must comply with a number of domestic and international regulatory requirements, including:

In the United States, 45 states, the District of Columbia and Puerto Rico require us to be licensed in order to conduct business within their jurisdiction. Requirements to be so licensed generally include minimum net worth, surety bonds, operational procedures and reserves or “permissible investments” that must be maintained in an amount equivalent to all outstanding payment obligations issued by us. The types of securities that are considered “permissible investments” vary from state to state, but generally include U.S. government securities and other highly rated debt instruments. Most states require us to file reports on a quarterly or more frequent basis, verifying our compliance with their requirements.

Internationally, we are registered as required in Germany, Malaysia, the Netherlands, Switzerland, and the United Kingdom. The regulatory requirements in Germany and the United Kingdom and Ukraine. International regulatory requirements are generally focused mainly on money laundering prevention. In addition, many international jurisdictions impose restrictions on the type of entity that can serve as a money transfer agent. In some jurisdictions, we are restricted to doing business with banks or other licensed financial entities.

We and our agents are required to report suspicious activity. In addition, under the PatriotUSA PATRIOT Act, money service businesses, including our agents, are required

Unclaimed property laws of every state, the District of Columbia and Puerto Rico require that we track the relevant information on each money order orpayment instrument and money transfer and, if unclaimed at the end of the statutory abandonment period, that we remit the proceeds of the unclaimed property to the appropriate jurisdiction. State abandonment periods for money orderspayment instruments and money transfers range from three to seven years, while those for official checks are generally three to five years. Certain foreign jurisdictions also may have unclaimed property laws, though we do not have material amounts subject to any such law.

In the ordinary course of our business, we collect certain types of consumer data and thus are subject to privacy laws. We are subject to the Gramm-Leach-Bliley Act of 1999 (the “GLB Act”), which requires that financial institutions have in place policies regarding the collection and disclosure of information considered nonpublic personal information. We comply with the GLB Act by posting a privacy notice on our website, as well as posting a privacy notice on the forms completed by individuals in order to use services (for example, on our money transfer “send” form). We also have confidentiality/information security agreements in place with our third-party vendors and service providers to the extent required by the GLB Act. In addition, we collect personal data flowing from the European Union to other countries, and thus are subject to the European Personal Data Protection Directive (the “Directive”). The Directive prohibits the transfer of personal data to non-European Union member nations that do not provide adequate protection for personal data. We comply with the safe harbor permitted by the Directive by filing with the U.S. Department of Commerce, publicly declaring our privacy policy for information collected outside of the United States by posting our privacy policy on our website, and requiring our agents in the European Union to notify customers of the privacy policy.

If we were to fail to comply with any applicable laws and regulations, this failure could result in restrictions on our ability to provide our products and services, as well as the imposition of civil fines and criminal penalties. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Enterprise Risk Management — Regulatory Risk.“Risk Factors.”

We rely on a combination of patent, trademark, copyright, trade secret law and confidentiality or license agreements to protect our proprietary rights in products, services, know-how and information. Intellectual property laws afford limited protection. Certain rights in processing equipment and software held by us and our subsidiaries provide us with a competitive advantage, even though not all of these rights are protected under intellectual property laws. It may be possible for a third party to copy our products and services or otherwise obtain and use our proprietary information without our permission.

U.S. patents are currently granted for a term of 20 years from the date a patent application is filed. We own U.S. and foreign patents related to our money order technology. Our U.S. patents have in the past given us competitive advantages in the marketplace,

U.S. trademark registrations are for a term of 10 years and are renewable every 10 years as long as the trademarks are used in the regular course of trade. We register our trademarks in a number of other countries where we do business. We maintain a portfolio of trademarks representing substantial goodwill in our businesses. Many of our trademarks, including the MoneyGram®MoneyGram^®, Travelers Express®ExpressPayment^®, ExpressPayment®PrimeLink^®, AgentConnect^®, DeltaWorks^®, and PrimeLink®Delta T3^® marks and our globe with arrows logo, have substantial importance and value to our business.

For the purpose of governing the relationship between MoneyGram and Viad after the spin-off, weWe entered into various agreements with Viad as described below. These agreementsgoverning our division of liabilities at the spin-off, including a Separation and Distribution Agreement, an Employee Benefits Agreement and a Tax Sharing Agreement. We also entered into an Interim Services Agreement with Viad under which Viad provided certain services for us after the spin-off. Pursuant to notices effective September 28, 2005 and March 31, 2006, we will have been filed withterminated the Securities and Exchange Commission, andprovision of a majority of the following sum-

At December 31, 2004,2005, we had approximately 1,5501,575 full-time employees in the United States and 100140 full-time employees internationally. In addition, we use contractors to support certain of our domestic and international sales and marketing efforts. None of our employees are represented by a labor union, and we consider our employee relations to be good.

Philip W. Milne, age 45,46, has served as our President and Chief Executive Officer and as a Director of MoneyGram since June 2004. He is also the President and Chief Executive Officer of MPSI and its predecessor, Travelers Express Company, Inc., our principleprincipal operating subsidiary, a position he has held since 1996. Mr. Milne joined Travelers Express Company, Inc. in 1991 and served as General Manager of the official check business from 1991 until early 1992, as Vice President, General Manager of the Payment Systems segment from 1992 until early 1993, and as Vice President, General Manager of the GlobalRetail Payment Products group from 1993 to 1996.

David J. Parrin, age 50,51, has served as the Executive Vice President, Chief Financial Officer of MoneyGram since June 2004.November 2005. Mr. Parrin joined the company in June 2002previously served as the Vice President and Chief Financial Officer of MoneyGram since June 2004 and Travelers Express Company, Inc. since joining the Company in June 2002. From 1998 to 2002, he was with the investment firm of Dain Rauscher Corporation (now RBC Dain Rauscher Corporation), serving since 1999 as Executive Vice President and Chief Financial Officer. From 1994 to 1998,

Jean C. Benson, age 37,38, has served as the Vice President, Controller of MoneyGram since June 2004. Ms. Benson joined the company in August 2001previously served as the Vice President, Controller of Travelers Express Company, Inc. since joining the Company in August 2001. From 1994 to 2001, Ms. Benson was at Metris Companies, Inc., a financial products and services company, serving as Corporate Controller and Executive Vice President of Finance since 1996. Ms. Benson began her career as an auditor with the accounting firm of Deloitte & Touche LLP from 1990 to 1994.

Theodore F. Ceglia, age 41,42, has served as Vice President, Treasurer of MoneyGram since June 2004. Mr. Ceglia joined the company in February 2003previously served as Vice President, Treasurer of Travelers Express Company, Inc. since joining the Company in February 2003. Mr. Ceglia was the Chief Financial Officer of ArrowHead Capital Management Corp., an asset management firm, since from

Mary A. Dutra, age 53,54, has served as Executive Vice President/ Division President Payment Systems since November 2005. Ms. Dutra previously served as Vice President of MoneyGram and General Manager of Payment Systems from June 2004 to November 2005 and as General Manager and Vice President, Global Operations of MoneyGram sinceTravelers Express Company, Inc. from November 1994 to June 2004. Ms. Dutra joined the companyCompany in 1988 as Manager of Payment Services of Travelers Express Company, Inc. and has served in positions of increasing responsibility, advancing most recently to the position of General Manager and Vice President, Global Operations.responsibility.

Teresa H. Johnson, age 53,54, has served as Executive Vice President, General Counsel and Secretary of MoneyGram since November 2005. Ms. Johnson previously served as Vice President, General Counsel and Secretary of MoneyGram since June 2004. Ms. Johnson served as Vice President2004 and Chief Legal Counsel of Travelers Express Company, Inc. since joining the companyCompany in 1997. From 1992 to 1997, she was employed at SUPERVALU INC., a food retailer and distributor, serving most recently as Associate General Counsel and Corporate Secretary.

William J. Putney, age 42,43, has served as Executive Vice President, Chief Investment Officer of MoneyGram since November 2005. Mr. Putney previously served as Vice President, Chief Investment Officer of MoneyGram sincefrom June 2004. Mr. Putney joined the company in 1993, serving2004 to November 2005 and as Portfolio Manager until being named Vice President, Chief Investment Officer of Travelers Express Company, Inc. from 1996 to 2004. Mr., Putney joined the Company in 1996.1993, serving as Portfolio Manager. Prior to joining the company,Company, Mr. Putney held positions as a trader, investment analyst and portfolio manager.

Anthony P. Ryan, age 42,43, has served as theExecutive Vice President/Division President Global Funds Transfer since November 2005. Mr. Ryan previously served as Vice President of MoneyGram and General Manager of Global Funds Transfer of MoneyGram sincefrom June 2004 to November 2005, a position he had held at Travelers Express Company, Inc. since 2001. He previously served as Chief Financial Officer of Travelers Express Company, Inc. from 1997 to 2001 and as Controller from 1996 to 1997. Prior to joining the company,Company, Mr. Ryan spent 10 years at First Data Corporation, serving most recently as Director of Finance.

Cindy J. Stemper, age 47,48, has served as Executive Vice President, Human Resources and Facilities of MoneyGram since November 2005. Ms. Stemper previously served as Vice President of Human Resources and Facilities of MoneyGram sincefrom June 2004 to November 2005 and Vice President of Human Resources at Travelers Express Company, Inc. from 1996 to June 2004. Ms. Stemper joined the companyCompany in 1984 and has served in positions of increasing responsibility at Travelers Express Company, Inc., advancing most recently to the position of Vice President of Human Resources in 1996.responsibility.

Our principal executive offices are located at 1550 Utica Avenue South, Minneapolis, Minnesota 55416, telephone (952) 591-3000. Our website address is www.moneygram.com. We make our reports on Forms 10-K, 10-Q and 8-K, Section 16 reports on Forms 3, 4 and 5, and all amendments to those reports, available electronically free of charge in the Investor Relations section of our website as soon as reasonably practicable after they are filed with or furnished to the Securities and Exchange Commission.

Information concerning our material properties, all of which are leased, including location, use, approximate area in square feet and lease terms, is set forth above. We also have a number of other smaller office locations in New York, City, Florida, Tennessee and in the United Kingdom, as well as small sales and marketing offices in France, Spain, Germany, Hong Kong, Greece, Dubai,United Arab Emirates, Russia, Italy, South Africa, Australia, China and the Netherlands. We believe that our properties are sufficient to meet our current and projected needs.

We are party to a variety of legal proceedings that arise in the normal course of our business. In these actions, plaintiffs may request punitive or other damages that may not be covered by insurance. We accrue for these items as losses become probable and can be reasonably estimated. While the results of these legal proceedings cannot be predicted with certainty, management believes that the final outcome of these proceedings will not have a material adverse effect on our consolidated results of operations or financial position.

Not applicable.

Our stock is traded on the New York Stock Exchange under the symbol MGI. Our Board of Directors declared and paid a quarterly cash dividend of $0.01dividends totaling $0.07 and $0.02 per share of common stock in each of the thirdduring 2005 and fourth quarters of 2004. In addition, the Board of Directors declared a dividend of $0.01$0.04 per share of common stock on February 17, 200516, 2006 to be paid on April 1, 20053, 2006 to stockholders of record on March 17, 2005.2006. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Stockholders’ Equity” and Note 12 of the Notes to Consolidated Financial Statements. The terms of our credit facility place restrictions on the payment of dividends. For a description of the restrictions, see Note 9 of the Notes to the Consolidated Financial Statements. As of February 25, 2005,24, 2006, there were approximately 20,97119,703 stockholders of record of our common stock.

Our separation from Viad Corp was completed on June 30, 2004 and our common stock began “regular-way trading” on the New York Stock Exchange on July 1, 2004. Consequently, historical quarterly price information is not available for shares of our common stock for fiscal 2003 or for the quarterly periods ended March 31, 2004 and June 30, 2004. The high and low sales prices for our common stock for fiscal 2005 and the quarterly periods ended September 30, 2004third and December 31,fourth quarters in 2004 were as follows:

On November 18, 2004, our Board of Directors authorized the repurchase, at our discretion, of up to 2,000,000 common shares on the open market. TheOn August 19, 2005, the Company’s Board of Directors increased its share buyback authorization wasby 5,000,000 shares to a total of 7,000,000 shares. These authorizations were announced publicly in our press releasereleases issued on November 18, 2004. This2004 and August 19, 2005. The repurchase authorization is effective until such time as the Company has repurchased 2,000,0007,000,000 common shares. There were no repurchases of common stock made outside of the Company’s current repurchase authorization. MoneyGram common stock tendered to the Company in connection with the exercise of stock options or vesting of restricted stock are not considered repurchased shares under the terms of the repurchase authorization. As of December 31, 2005, we have repurchased 3,045,950 shares of our common stock under this authorization and have remaining authorization to repurchase up to 3,954,050 shares.

The following table sets forth information in connection with purchases made by us, or on our behalf,repurchases of shares of our common stock during the quarterly period ended December 31, 2004. Included in the November 2004 activity are 85,955 shares surrendered to the Company in connection with the vesting of restricted stock.2005.

The following table presents our selected consolidated financial data for the periods indicated. The information set forth below should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and notes thereto. For the basis of presentation of the information set forth below, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Basis of Presentation.”

The following discussion should be read in conjunction with MoneyGram International, Inc.’s consolidated financial statements and related notes. This discussion contains forward-looking statements that involve risks and uncertainties. MoneyGram’s actual results could differ materially from those anticipated due to various factors discussed under “Forward-Looking Statements” and elsewhere in this Annual Report on Form 10-K.

On July 24, 2003, Viad announced a plan to separate its payment services segment, operated by Travelers Express Company, Inc. (“Travelers”), from its other businesses into a new company, and to effect a tax-free distribution of its shares in that company to Viad’s stockholders. On December 18, 2003, MoneyGram was incorporated in Delaware as a subsidiary of Viad for the purpose of effecting the proposed distribution. On June 30, 2004, Travelers was merged with a wholly owned subsidiary of MoneyGram and then Viad distributed 88,556,077 shares of MoneyGram common stock to

The continuing business of Viad consists of the businesses of the convention show services, exhibit design and construction, and travel and recreation services operations, including Viad’s centralized corporate functions located in Phoenix, Arizona (“New Viad”). Notwithstanding the legal form of the spin-off, due to the relative significance of MoneyGram to Viad, MoneyGram is considered the divesting entity and treated as the accounting successor to Viad for financial reporting purposes in accordance with the Emerging Issues Task Force (“EITF”) Issue No. 02-11Accounting for Reverse Spin-offs. The spin-off of New Viad has been accounted for pursuant to Accounting Principles Board (“APB”) Opinion No. 29,Accounting for Non-Monetary Transactions. MoneyGram charged $426.6 million directly to equity as a dividend, which is the historical cost carrying amount of the net assets of New Viad.

As part of the separation from Viad, we entered into a variety of agreements with Viad to govern each of our responsibilities related to the distribution. These agreements include a Separation and Distribution Agreement, a Tax Sharing Agreement, an Employee Benefits Agreement and an Interim Services Agreement. See “Business — Relationship with Viad.”Note 3 to the Consolidated Financial Statements.

In connection with the spin-off, we entered into a bank credit agreement providing availability of up to $350.0 million in the form of a $250.0 million revolving credit facility and a $100.0 million term loan. On June 30, 2004, we borrowed $150.0 million under this facility, which was paid to and used by Viad to repay $188.0 million of its commercial paper. Viad also retired a substantial majority of its outstanding subordinated debentures and medium term notes for an aggregate amount of $52.6 million (including a tender premium), retired industrial revenue bonds of $9.0 million and redeemed outstanding preferred stock at an aggregate call price of $23.9 million. The

Our consolidated financial statements are prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”). The consolidated financial statements include the historical results of operations of Viad in discontinued operations in accordance with the provisions of Statement of Financial Accounting Standards (“SFAS”) No. 144,Accounting for the Impairment or Disposal of Long-Lived Assets. There are certain amounts related to other investment income, debt and costs associated with Viad’s centralized corporate functions that are related to Viad, but in accordance with GAAP are not allowed to be reflected in discontinued operations as these costs were not specifically allocated to Viad subsidiaries. The consolidated financial statements may not necessarily be indicative of our results of operations, financial position and cash flows in the future or what our results of operations, financial position and cash flows would have been had we operated as a stand-alone company during the periods presented.

In March 2004, we completed the sale of Game Financial Corporation for approximately $43.0 million in cash. Game Financial Corporation provides cash access services to casinos and gaming establishments throughout the United States. As a result of the sale, we recorded an after-tax gain of $11.4 million in the first quarter of 2004. In addition, in June 2004, we recorded an after-tax gain of $1.1 million from the settlement of a lawsuit brought by Game Financial Corporation. During 2005, we recorded a $0.7 million gain in connection with the partial resolution of contingencies relating to the sale of Game Financial Corporation. These amounts are reflected in the Consolidated Statements of Income in “Income and gain from discontinued operations, net of tax.tax,”

Following are highlights ofsignificant items impacting operating results from continuing operations and trends in 2004:2005:

In 2003 and 2002,2005, we faced market challenges and difficult economic conditions. While our businesses experienced increasedcontinued to realize strong transaction volume growth in our money transfer product (which includes our bill payment services). Money order volumes and higher investmentaverage investable balances our operating income growth was sloweddeclined as expected, although at a slower rate. The decline in money orders is consistent with the overall decreasing use of paper-based instruments, while the decline in average investable balances is due to historically lowthe continued consolidation of financial institutions. In 2005, we operated in a flat yield curve environment, where short-term and long-term interest rates and unprecedented mortgage refinancing activity. With higher average float balances from greater numbers of

Our net revenue consists of fee and other revenue, investment revenue and net securities gains and losses, less commission expense. We generate net revenue primarily by charging transaction fees in excess of third-party agent commissions, managing foreign currency exchange and managing our investments to provide returns in excess of commissions paid to financial institution customers.

We derive revenue primarily through service fees charged to consumers and through our investments. Fee and other revenue consist of transaction fees, foreign exchange and other revenue. Transaction fees are fees earned on the sale of money transfers, retail money order and bill payment products.products and official check transactions. Money transfer transaction fees are fixed per transaction and may vary based upon the face value of the amount of the transaction and the location in which the money transfer originates and to which it is sent. Money order and bill payment transaction fees are fixed per transaction. Foreign exchange revenue is derived from the management of

Investment revenue consists of interest and dividends generated through the investment of cash balances received from the sale of official checks, money orders and other payment instruments. These cash balances are available to us for investment until the payment instrument is presented for payment. Investment revenue varies depending on the level of investment balances and the yield on our investments. Investment balances vary based on the number of payment instruments sold, the average face amount of those payment instruments and the average length of time that passes until the instruments are presented for payment. Net securities gains and losses consist of realized gains and losses on the sale of investments, as well as other-than-temporary impairments of investments.

We incur commission expense on our money transfer products and our investments. We pay fee commissions to our third-party agents for money transfer services. In a money transfer transaction, both the agent initiating the transaction and the agent disbursing the funds receive a commission. The commission amount generally is based on a percentage of the fee charged to the consumers. We generally do not pay commissions to agents on the sale of money orders. Fee commissions also include the amortization of capitalized incentive payments to agents.

Investment commissions are amounts paid to financial institution customers based on the average outstanding cash balances generated by the sale of official checks, as well as costs associated with swaps and the sale of receivables program. In connection with our interest rate swaps, we pay a fixed amount to a counterparty and receive a variable rate payment in return. To the extent that the fixed rate exceeds the variable rate, we incur an expense related to the swap; conversely, if the variable rate exceeds the fixed rate, we receive income related to the swap. Under our receivables program, we sell our receivables at a discount to accelerate our cash flow; this discount is recorded as an expense. Commissions paid to financial institution customers generally are variable based on short-term interest rates. We utilize interest rate swaps, as described above, to convert a portion of our variable rate commission payments to fixed rate payments. These swaps assist us in managing the interest rate risk associated with the variable rate commissions paid to our financial institution customers.

Compared to 2003,2004, total revenue in 2005 increased by $144.7 million, or 18 percent, and net revenue increased $77.7 million, or 18 percent, primarily driven by transaction growth of 38 percent in the money transfer business, $12.6 million of cash recoveries on previously impaired securities and $6.2 million of income from limited partnership interests. Total revenue in 2004 increased by $89.3 million, or 12 percent, and net revenue increased $63.2 million, or 18 percent, primarilyover 2003, driven by transaction growth in the money transfer business and an increase inhigher net securitiesinvestment gains. Total revenue in 2003 increased by $29.5 million, or four percent, and net revenue increased $10.6 million, or three percent, over 2002, driven by transaction growth in the money transfer business, partially offset by lower investment revenue.

Total expenses, excluding commissions, increased in 20042005 by $62.3$20.4 million, or 236 percent, over 2003.2004. Total expenses in 2004 include debt tender and redemption costs of $20.7 million related to the redemption of Viad’s preferred shares and tender for its subordinated debt and medium term notes in connection with the spin-off. Other increasesexpenses increased $41.0 million, or 13 percent, over 2004 primarily due to total expenses totaled $41.6 million and were driven by transaction growth, marketing and employee-related expenses supporting our revenue growth. Total expenses, excluding commissions, increased in 20032004 by $9.1$62.3 million, or three23 percent, over 2002,2003 primarily due to higher incentivethe 2004 debt tender and profit-sharing compensation as more incentive targets were met,redemption costs and the addition of employees and related compensation expense and higher transaction and operations support costs.same factors noted above.

Fee and other revenue includes fees on money transfer, transactions, money ordersorder and official check transactions. It is a growing portion of our total revenue, increasing to 6162 percent of total revenue for 20042005 from 52 percent in 2002. FeeAs compared to 2004, fee and other revenue in 2004 grew 2021 percent, compared to the prior year, primarily driven by transaction growth in our money transfer and urgent bill payment services, with volumevolumes increasing 3638 percent during the year. Revenue growth rates are lower than money transfer volume growth rates due to targeted pricing initiatives, specifically simplified pricing initiatives, in the money transfer business and product mix (higher money transfer transactionvolume growth with flata decline in money order growth)transactions). Our simplified pricing initiatives include reducing the number of pricing tiers or bands and allows us to manage our price-volume dynamic while streamlining the point of sale process for our agents and customers. Our pricing philosophy continues to be to maintain a price point below our higher priced competitor but above the niche players in the market.

For 20032004 and 2002,2003, fee and other revenue was 5761 and 5257 percent of total revenue, respectively, with 1520 percent growth in 2003 over2004 versus the prior year. This increasegrowth is primarily driven by transaction growth in our money transfer and urgent bill payment services, with volume increasing 3236 percent during 2003.the year. As in 2004,2005, revenue growth rates are lower than money transfer volume growth rates.

Fee commissions consist primarily of fees paid to our third-party agents for the money transfer service. Fee commissions expense was up 2726 percent for 20042005 as compared to the prior year, primarily driven by higher transaction volume. Fiscal 20032004 fee commissions expense was up 2327 percent over 2002,2003, again primarily due to higher transaction volume.

Net fee revenue increased $43.4$58.4 million, or 1618 percent, in 2004 as2005 compared to 2003,2004, driven by the increase in money transfer and urgent bill payment transactions. Growth in net fee revenue was lower than fee and other revenue growth primarily due to the pricing structure of certain large money order customers, as well as product mix. Net fee revenue increased $26.6$43.4 million, or 1116 percent, in 2003 as2004 compared to 20022003 primarily due to the increase in money transfer and urgent bill payment transaction volumes. Growth in net fee revenue was lower than fee and other revenue growth in 2003,2004, primarily due to the pricing structure of certain large money order customers, as well as product mix.

Investment revenue in 2005 increased 16 percent over 2004, primarily driven by higher yields on cash and adjustable rate securities, $12.6 million in cash flows from previously impaired investments and $6.2 million in income from limited partnership interests. Investment revenue declined two percent in 2004 overcompared to 2003, primarily driven by lower average investable balances. The higher average investable balances in 2003 resulted from the unprecedented mortgage refinancing activity that occurred during late 2002 and into 2003 due to the dramatic decline in interest rates. Refinancing activities caused an increase in the sale of official checks and, therefore, an increase in our average investable balances. In 2004, the refinancing activity declined, causing average investable balances to decline. The refinancing activity in 2003 also caused a significant increase in the prepayments of mortgage-backed debt securities in our investment portfolio, the proceeds of which we reinvested at lower interest rates.

Investment revenue decreased eightcommissions expense in 2005 increased nine percent in 2003 versus 2002,over 2004, primarily due to our reinvestment in lower interest rate securities resulting fromhigher short-term rates which increased the significant prepaymentsamount of mortgage-backed debt securities,commissions paid to financial institution customers and the cost of receivables sold, partially offset by higher average investable balances.

Net investment revenue increased 34 percent in 2003 decreased by three percent2005 compared to 2004, with the net investment margin increasing 50 basis points to 1.91 percent. During 2005, the average Fed Funds rate increased 187 basis points and the average 5-year U.S. Treasury Note increased 62 basis points. These changes in interest rates are representative of the flat yield curve environment in which we operated in 2005. The 2005 margin benefited from 2002, primarily due tothe investment revenue items discussed above, as well as the lower swap balances and lower commissions paid to financial institution customers as short-term interest rates declined in 2003.