Letter to Shareholders

Chairman of the Board
Walden W. O'Dell

Fellow Diebold Shareholders:

Since I joined Diebold about 18 months ago, the main focus of our company has been to capitalize on the many opportunities that lie before us and become the global leader in financial self-service solutions. Achieving this goal requires that we have the vision necessary to lead in our industry, and that we manage, execute and drive our businesses towards this vision.

The structure of our annual report this year reflects these two different but closely interrelated themes. The "Imagine" section provides a snapshot of the possibilities we are creating to generate growth, as well as the innovative solutions we are developing and offering around the world. The "Manage" section focuses more on the here and now; it outlines the concrete steps and accomplishments we are making in key areas.

In my first letter to shareholders as chairman of your company, I would like to bridge the Imagine and Manage themes, provide a framework for where we are going and why, and discuss the context for the key developments and accomplishments during 2000.

A Diverse, Changing Market of Opportunity
As a global company, Diebold operates in markets with widely varying economic conditions, financial services practices and consumer preferences. One thing these markets do share, however, is the realization that financial self-service solutions offer tangible benefits to both the institutions that provide them and the consumers who use them.

This fundamental belief underlies what we consider to be substantial growth opportunities. In most developed European countries, for example, there are far fewer ATMs per consumer than there are in the United States. This indicates to us that demand for self-service solutions will increase as the financial services industry in the region consolidates and strives for operating efficiencies. In emerging markets, such as Latin America and Asia-Pacific, the growth of the middle class is a catalyst for change in financial industry practices and services. And in the United States, where many believe the bank-related ATM market is mature, the push by nonfinancial retail customers for ways to generate additional store traffic and revenue is creating opportunities for our products and services.

There is, however, another important element to the story of growth potential that lies ahead for Diebold. This story comes into sharp focus if we consider the ATM not just as a mechanism for dispensing cash, but as a portal to a whole range of services and increased functionality for the consumer; not just as a transaction center, but as a hub for strengthening consumer relationships; not just as a means to realize operating efficiencies, but as a platform for generating growth.

In this chapter of the story - which we are writing today - Diebold provides its customers with a wide range of value-added services and solutions, not just boxes or machines. We help our customers Web-enable their ATM networks; cross-sell their products and services; conduct customized, one-to-one marketing campaigns; optimize their branch networks; and build stronger relationships with consumers.

Consumers, in turn, will be empowered to use ATMs in ways that only a few years ago would have seemed, at best, unlikely. Such as for purchasing a number of event-related tickets - movies, concerts, travel, transportation. Or for accessing a wider range of products and services from their financial services provider, like auto loans, or insurance, or mutual funds. And to be able to access these services around the globe any time, anywhere. As the financial industry continues to offer increased services and functionality at the ATM, demand for Diebold solutions will increase as consumers' use of the technology increases and added convenience at the ATM becomes an expectation in more locations.

These are only a few examples of the possibilities we face. There are opportunities in other self-service fields, as well. Last year, we were awarded the largest contract in the 141-year history of our company to provide voting terminals to the country of Brazil. The contract was for nearly 190,000 election terminals - and a range of related services including software development, installation, training, and logistics - which helped Brazil's 100 million voters cast their ballots in local, state and federal elections. We are working to find the right approach to apply our expertise in voting technology to the United States and other global markets, and anticipate many developments on that front in the coming year.

2000 in Review
This is the vision that drives us today - becoming the global leader in financial self-service solutions - and during the past year we made significant progress. We enhanced our position significantly in key segments of our market, introduced new solutions, programs and initiatives that brought us closer to our customers, streamlined our business operations and processes, and strengthened our management team.

Among the most important of our strategic initiatives during the year was the acquisition of the financial self-service business of Getronics NV and Groupe Bull in Europe. The addition of this business - which includes ATMs, cash dispensers and related services - makes us the leader in our industry worldwide, and increases our share of market revenue in Europe to 14 percent. It increases our European workforce to more than 1,300 people - thereby substantially increasing our platform in the region - and brings to us European-specific applications and software development skills that will be vital to our continuing growth and success there. Also, we gained market revenue share in each region of the world in combined ATM-related product and service solutions.

As we increased our international business, we also set the stage for improvements in North America by reorganizing our operations in this region. We did so by creating Diebold North America, a business unit that pulls together all of the critical functions in the region - product development, engineering, manufacturing, sales and services, human resources, marketing - into one single, cohesive business unit. And we recruited an experienced business leader, Wesley B.Vance, to head this unit. As president of Diebold North America, Wes brings strong strategic, business development and operational capabilities acquired over the course of his 20-year business career.

One of my biggest priorities since joining Diebold has been increasing the speed with which we do business, both externally and internally. The reorganization of our North American business was a key step in that direction, but it was just one facet of our overall plan in this area. Among the key initiatives currently under way to improve our efficiencies are:

• Streamlining the product order attainment process
• Simplifying our service pricing program
• Applying lean manufacturing principles to our plants around the world
• Making enhancements to our reporting and forecasting methods.

We also made substantial strides in introducing e-commerce initiatives that tie us closer to our customers and enable us internally to work closer and more quickly on their behalf. One example is our work to conduct online, reverse auctions with suppliers to reduce costs and streamline the direct procurement process.

We also took a major step forward in improving our financial foundation by bringing on board Gregory T. Geswein, our new senior vice president and chief financial officer. Greg's experience in global acquisitions, information systems, and in streamlining financial processes and systems has benefited our efforts to integrate the operations purchased in recent months, and in improving our balance sheet and working capital.

Financial Results
Our results for 2000 reflect both the improvements we have made to our company as well as the challenges we continue to face. Total revenue rose about 30 percent, from under $1.3 billion to more than $1.7 billion. Our acquisitions in Europe and Brazil generated positive income for the fourth quarter, offering optimism for the year ahead. Also, we're gaining share in our service business and, as a result, it continues to represent a larger portion of our overall revenue structure.

Earnings per share increased at a slower rate than the growth in revenue because of the cost of the acquisitions we have made, which includes goodwill amortization, interest expense and currency exchange impact. Diluted EPS was $1.92 versus $1.85 in the prior year.

Looking Forward
If we compare the makeup of our company as we enter 2001 with what it was just two years ago, the dramatic changes that we have made are clearly evident. For example, including the voting terminal business from Brazil, international revenue accounted for 43 percent of Diebold's total revenue, compared with 25 percent in 1999. Total international service revenue rose 189 percent, from $79 million in 1999 to $227 million in 2000. Both of these statistics testify to the success of our efforts to transform Diebold from a U.S.-based manufacturer of hardware to a global provider of self-service solutions.

More work - much more work - remains to be done, if we are to achieve our long-term financial goals: 8 to 10 percent revenue growth and an approximate 10 to 15 percent increase in earnings per share. And we will have to do it against a backdrop of weak economic conditions this year in our key markets. In the United States, we are taking corrective action in anticipation of a slowing economy. We are closing our Staunton, Va., manufacturing facility and are taking other significant cost-reduction steps. Throughout 2001, we will continue to improve internal efficiencies through the use of e-tools and other technologies, and will aggressively pursue emerging opportunities in the various
markets we serve.

We are committed to our approach to doing business. We have the people, the processes and the technology in place to build share in our existing markets, to create new possibilities in new and existing markets, and to operate much more efficiently.

We appreciate the continued support of all our shareholders and customers, and wish to thank our employees and business partners for their hard work and the innovative ideas they generate every day. I am very excited about the tremendous prospects that lie ahead for Diebold. We are imagining and managing our future - and it is a bright one!

Sincerely,
Walden W. O'Dell
Chairman, President and Chief Executive Officer