Whether it is adding value for our customers or building value for our shareholders, nothing captures the essence of our company better than these simple words: determination and energy. And they are far more than words, for we saw this spirit at work on a number of fronts in 2001: In the growth generated by our core business around the world. In our success in leveraging core competencies and brand equity to continue our expansion into new, related markets. In the improvements we made to our internal processes to create a more flexible, responsive and faster organization. In our ability to more effectively manage the company to reduce expenses and increase operating efficiency. Our financial performance is, of course, the ultimate arbiter of our success. Here, the record is clear. For the year ended 2001, earnings per share increased to a record $1.96 on record revenue of $1,758,000,000, excluding realignment and special charges. Including realignment and special charges, we reported $.93 per share on revenue of $1,760,000,000. In addition, we were able to achieve earnings commitments in each and every quarter and for the year despite significant economic challenges. As a result, market capitalization rose 24 percent, as we generated a 26 percent total return for the year. For the two-year period ended 2001, market capitalization rose 75 percent, as we generated an 81 percent total return.

CONSTANTLY DRIVING FOR GROWTH
We are proud of our results in the past year, particularly as they came during a time of economic recession and financial market volatility.

Additionally, we are determined to maintain and enhance the energy and enthusiasm we bring to our jobs -- to drive for improved growth and performance -- in the years ahead.

Our corporate vision is the blueprint for our success: We won't rest until we measurably improve the extent to which our customers' customers are delighted with our self-service and security solutions, and until we measurably improve the effectiveness and profitability of our customers' business.

To ensure that our corporate vision becomes a reality, we are focusing on new ways to significantly improve our customers' effectiveness and profitability. This will continue to drive growth for Diebold.

BUILDING OUR CORE BUSINESS
We are absolutely committed to building our core financial self-service business. Yes, we currently enjoy strong financial self-service market positions in many geographic regions, ranking first in North and South America, second in Asia-Pacific and third in Europe, Middle East and Africa. And yes, during 2001 we increased our market share in every geographic region.

But we will not rest -- not when customer demands and market dynamics offer the potential to grow this business and to become the clear leader in all regions.

Today, automated teller machines (ATMs) are far more than hardware-based cash dispensers. Instead, they are evolving into a vital point of contact, offering a customizable distribution channel to customers, a portal for cross-selling products and services -- a software-based, personalized transaction center.

This is an exciting transformation, one we are driving by developing real solutions that integrate hardware, software and service offerings in order to meet the particular needs of our global customer base.

In addition, we continue to see growth in another key market with considerable potential: the maintenance and servicing of ATM systems. During 2001, we reached agreements with several major financial institutions around the world to assume total responsibility for maintenance of their ATM installed base. We also had the opportunity to demonstrate our outstanding multi-vendor service capabilities to many new customers in Europe during the conversion to the new euro currency. This enabled us to establish a number of new relationships with customers, which will help drive future growth in that region.

Reliability. Accuracy. Security. Self-service technology. Services that benefit both our customers and their consumers. These are the hallmarks of Diebold's offerings; they are the core competencies for which we have long been known.

LEVERAGING OUR CORE COMPETENCIES
Equally as exciting as the growth opportunities we face in our core business are those that stem from our ability to leverage our core competencies in financial self-service and apply them to other self-service markets.

The electronic voting market is a case in point. In the United States -- and indeed all over the world -- government entities need and want reliable, accurate self-service voting technology that ensures voters are heard on election day.

We entered this business in late 1999 as part of the acquisition of our Brazilian subsidiary. To further drive growth, Diebold acquired Global Election Systems (now known as Diebold Election Systems), an industry leader in North America. The combination of Global's premier voting solutions and U.S. market expertise, along with Diebold's strong financial, manufacturing, distribution and service resources, makes us a formidable player in an industry that is expected to generate $1.5 billion to $2.0 billion in revenue during the next four to five years -- in the United States alone. The State of Maryland took the first steps toward a uniform voting system when the State Elections Board endorsed a contract to buy nearly 5,000 electronic touch-screen machines and service from Diebold.

Two other areas that offer us the opportunity to grow by leveraging our core competencies are the security and outsourcing markets.

In 2001 we acquired selected assets and operations of Mosler, Inc., our longtime security competitor in the United States and Canada, after it ceased operations. This action should result in an additional $100 million per year in Diebold revenue. It also offers us another important component, an entry into the government sector, as well as a wider range of commercial and industrial market segments.

In the financial self-service market, we are taking advantage of the desire of financial institutions to focus on their core businesses. Our customers around the world want to outsource business activities outside of their core competency but very much in line with ours. What is driving this demand, with an estimated market size of $300 million to $500 million? Financial institutions need to reduce costs, offer customized solutions and improve quality. Some are also facing an aging installed base of ATMs and want one partner to service their multiple vendor product lines. Today, Diebold can do that. Bank of America is just one of the many financial institutions that selected Diebold in 2001 as a trusted outsourcing partner to move in that direction. In 2002 and beyond, we will continue helping our customers focus on their customers and streamline their businesses through outsourcing arrangements.

The self-service checkout and biometric identification markets offer two other opportunities for Diebold. While we are currently a supplier and integrator in these industries, our intent is to pursue a more active role in these markets, and we are currently evaluating opportunities to align with other companies in these areas. We won't rest until we have capitalized on all of these opportunities and identified even more markets in which to grow.

BECOMING FASTER AND BETTER
Here's another reason we won't rest: the never-ending need to create an organization that is quicker, more flexible, more responsive and more efficient. It is an essential part of our strategy to build value for shareholders.

I am pleased to report that we made solid progress in these areas as we continued to reorganize our internal operations. The steps we took included creating:

• A global product development and engineering team, which will help us to rationalize and standardize architectures, terminal designs and interfaces;
• A global manufacturing and quality function to eliminate redundancies and capture synergies in production while offering a high level of customization; and
• A global procurement capability to enhance our purchasing power and thus reduce costs.
  

Each of these areas reports to Wes Vance, who was named chief operating officer in October 2001. Prior to that, Wes was president of Diebold North America, and he and his team helped to significantly enhance our efficiency by improving our manufacturing processes, lowering fixed costs and reducing cost of goods sold.

This new global organizational structure ensures that we are organized and operating as efficiently as possible on a global basis. This is extremely important now that total international financial self-service revenue in 2001 exceeded North American financial self-service revenue for the first time in Diebold's history. We will continue to take advantage of our size, scale and resources so that we ensure continued successful competition in global markets.

These operational changes are designed to do more than reduce costs. They are also designed to increase the speed with which we do business, both externally and internally. We want to respond to customer requests before they even ask. How we communicate internally is a critical component to making that happen. We continued to make progress in this area in 2001 by rolling out new internal e-systems that help us focus on customer needs even more effectively. We recently launched a new automated order management system, an important tool that our employees around the world use to submit and track orders and share important customer information.

THE YEAR AHEAD
We clearly enter 2002 with a great deal of momentum and from a position of considerable strength. But the fact of the matter is that there is simply too much opportunity for us to rest.

Over the course of the year we will continue to execute our strategy: build our core business; diversify into areas where we can leverage our core competencies; create a faster, more flexible company; and further enhance operating efficiency.

In these ways we will further build shareholder value, and we will not rest as we continue to earn your trust and support.

Sincerely,

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

WESLEY B. VANCE CHIEF OPERATING OFFICER

WALDEN W. O'DELL CHAIRMAN, PRESIDENT AND CHIEF EXECUTIVE OFFICER

THOMAS W. SWIDARSKI VICE PRESIDENT, STRATEGIC DEVELOPMENT AND GLOBAL MARKETING

GREGORY T. GESWEIN SENIOR VICE PRESIDENT AND CHIEF FINANCIAL OFFICER