THIS ROADMAP WAS BUILT AROUND FIVE priorities: increase customer loyalty, improve quality, strengthen our supply chain, enhance communications and teamwork, and rebuild profitability. The passion and commitment of our people in addressing our challenges and executing our key initiatives has been terrific, and the support and loyalty of our global customer base has also been rewarding.

As a result, I'm pleased to report that, while we still have more hard work ahead, we made significant progress during the year in virtually all areas of our company.

Toward that end, 2006 was about making the right decisions for the long-term health of the company. We took steps to improve our supply chain, streamline critical processes, optimize manufacturing operations, enhance global enterprise resource planning, reorganize our operations and strengthen our management team. More specifically, we have:

•	COMBINED PROCUREMENT, manufacturing engineering and production operations in a single group under the leadership of George Mayes, senior vice president, global manufacturing and supply chain, to ensure these areas work together seamlessly to improve quality and enhance efficiency.
•	REALIGNED GLOBAL MANUFACTURING, opening a new facility in Budapest, Hungary, that began production in the fourth quarter. At the same time, we moved forward with the planned closure of our facility in Cassis, France, and sold our plant in Sumter, S.C.
•	ASSUMED DIRECT CONTROL over our vital information systems. We've brought in house the implementation and support responsibilities for our global enterprise resource planning (ERP) system and other IT-related functions. We also enhanced our IT talent and leadership, adding additional expertise to our team.
•	UNITED OUR FINANCIAL SELF-SERVICE ENGINEERING, product management and marketing, software product management and service functions globally under the leadership of Charles Ducey, senior vice president, global development and services. This will help us to more closely align our global product development and service operations to deliver more value in the products and services we provide.
•	EXPANDED OUR PRESENCE in the government security market under the leadership of Dennis Moriarty, senior vice president, global security division. As we continue to grow our presence in the government, retail and commercial markets, it is important to have a dedicated business leader overseeing each area. With the addition of John Stroia, vice president, government and monitoring solutions, the team is now complete.
•	APPOINTED NEW MANAGEMENT to lead our international operations. James Chen now leads all sales and service operations in the EMEA region, in addition to his previous responsibilities heading our Asia Pacific operations. João Abud, Jr. now oversees our sales and service operations throughout all of Latin America, in addition to his leadership responsibilities in Brazil.

As you can see, the pace of change within our company is rapid, and the strategic actions we have taken required tough decisions. In the short term, these changes and investments have affected our financial performance. But we firmly believe that we are moving in the right direction, making the right decisions and positioning our company to better serve our customers - and our shareholders - in the years ahead.

FINANCIAL STRENGTH

As we move forward with our transformation, we do so from a position of relative strength. Our balance sheet is solid and we continue to generate significant cash flow. Reflecting our financial strength, we increased our cash dividend by 4.9 percent and repurchased approximately 3.6 million shares during the year. In all, we returned $205.5 million to shareholders during 2006 through a combination of dividend payments and share repurchases.

We also remain strong in other key areas. Our brand is known and trusted the world over; our customer relationships are improving; our employees are energized - and our core markets continue to offer significant opportunities for growth and success.

FINANCIAL SELF-SERVICE SOLUTIONS

In financial self-service, financial institutions around the world continue to look for ways to grow revenue, enhance efficiency and differentiate their offerings through their retail branch and ATM networks. The end result is growing opportunities for a range of related software and service solutions.

To capitalize on these opportunities, we continue to invest in our businesses, broadening and deepening our capabilities, developing new offerings and making targeted acquisitions.

One particular area of focus is strengthening our software development capabilities. During 2006, we made great strides in improving the stability and performance of our ATM software platform and launched several new offerings to enhance our leadership position. Diebold's ATM Office Suite™, a comprehensive collection of server-based software modules, provides best-in-class tools to manage and enhance the entire ATM network. OpteView™ Remote Services enables remote troubleshooting and problem diagnosis for the service of ATM networks, helping financial institutions achieve the highest-possible uptime across their networks.

Another area of focus is expanding our deposit automation strategy, including check imaging and envelope-free currency acceptance solutions. In the United States and other more mature markets, deposit automation promises to create demand in the coming years by financial institutions seeking to optimize retail channels, attract new customers and increase efficiency. I believe we are uniquely positioned in this area and we continue to innovate and offer new solutions. For example, in November, we introduced a working prototype of a bulk-check imaging module. Our 15-year history of developing and delivering quality check-imaging devices will enable us to take this solution to market quickly and successfully. In addition, our new ImageWay¨ ATM software solution allows financial institutions to seamlessly integrate check image-capturing functionality into their ATM networks.

We are also strengthening our services footprint and managed services capabilities through acquisitions. These include the purchase of Firstline Inc., an ATM maintenance service provider operating throughout the U.S. West Coast; Genpass Service Solutions, LLC, a third-party ATM maintenance and service provider in 34 states throughout the United States; and Eras, which provides processing and imaging services on an outsourced basis.

SECURITY BUSINESS

In addition, we continue to drive forward with our vision to grow our security business across geographic regions and industries. This dynamic business is evolving toward an integrated physical and logical security solutions model - one in which network design, project engineering and management, software integration and services create a competitive advantage. We believe this evolution plays to our strengths, and we are moving to leverage our advantages. Our focus in particular is on globalizing our security business through organic growth and acquisitions, leveraging and enhancing our expertise in the financial market and further penetrating the commercial, government and retail markets.

During 2006, we continued to make targeted acquisitions to increase our scope and expand our solutions. This includes Actcom, a leader in identification and enterprise security whose primary customers include U.S. federal government agencies such as the Department of Defense, as well as state and municipal government agencies. Internationally, we acquired Bitelco, based in Chile, a leading security company specializing in product integration, installation, project management and service for the financial, commercial, government and retail markets.

ELECTION SYSTEMS

Finally, 2006 was an important election year in the United States and it also marked a significant step forward for the broad acceptance of electronic voting systems. More than 150,000 installed touch screen and optical scan units were used in 34 states, increasing the speed and accuracy of the voting process.

As we move forward in 2007, we will remain focused on satisfying our customers. We will continue the hard work of transforming our company and improving our business. We will continue to drive and capture opportunities in our markets around the world. And we will continue to work on building value for shareholders.

In closing, I would like to thank our board of directors, particularly John Lauer, our non-executive chairman. The board's insight and counsel have been invaluable to me and our management team over this past year. I would also like to thank our customers for their continued confidence in Diebold, and our employees, whose passion and commitment are remarkable and are driving real progress for our company. And thank you to our shareholders for your continued support of our company.

Sincerely,

THOMAS W. SWIDARSKI
President and Chief Executive Officer