The Timken Company (TKR)

Why a Separation of Timkens Bearings and Steel

Businesses Can Unlock Significant Shareholder Value

March 1, 2013

The following materials present analysis by Relational Investors LLC (Relational) of a potential

separation of the Timken Companys bearings and steel businesses. This presentation is being provided

by Relational and the California State Teachers' Retirement System (CalSTRS) (collectively, the

Parties) to shareholders, industry participants and other interested parties for informational and

discussion purposes.

This presentation does not constitute an offer to sell or a solicitation of an offer to purchase an interest in

Relational, or any of its affiliated funds; nor does it constitute nor should it be considered as investment

advice or a solicitation for investment advisory services offered by Relational. This presentation is not

intended to serve as the basis for any investment decision.

Except as otherwise indicated herein, the information provided is based on matters as they exist as of the

date of preparation and not as of any future date, and will not be updated or otherwise revised to reflect

information that subsequently becomes available, or circumstances existing or changes occurring after

the date hereof. Certain economic and market information contained herein has been obtained from

published sources prepared by other parties. While such sources are believed to be reliable, the Parties

and their respective affiliates assume no responsibility for and have not verified such information and do

not represent that such information is accurate or complete. Statements contained in this presentation

that are not historical facts are based on current expectations, estimates, projections, opinions, and/or

beliefs of the Parties. Due to various risks and uncertainties, actual events or results may differ materially

from those reflected in such opinions. This presentation should be read with reference to any and all

footnotes and the Appendix.

1

Disclaimer

Relational Investors: Overview

Relational Investors LLC (Relational), founded in 1996, is a privately held, $5 billion

asset management firm and registered investment adviser. Relational manages a

concentrated portfolio on behalf of some of the largest public pensions funds in the

world.

Relational invests in publicly traded companies that it believes are undervalued in the

marketplace. The firm seeks to engage the management, board of directors, and

shareholders of its portfolio companies in a constructive dialogue designed to build a

consensus for positive change to improve shareholder value. Major projects involve a

2-5 year investment horizon.

Relationals investment team has advised boards and executives and/or served as

principals of 120 investments involving strategic planning, capital allocation, business

solution optimization and/or corporate governance challenges. Its members have

served on boards of 24 public companies and as Chairman of four public companies,

including five Fortune 100 and 11 Fortune 500 companies. Additionally, its members

have chaired and served on all major types of board committees, including multiple

special committees involving change of control, executive searches, and internal

investigations.

2

The California State Teachers Retirement System (CalSTRS), with a portfolio

valued at $161.4 billion as of January 31, 2013, is the largest educator-only pension

fund in the world. CalSTRS administers a hybrid retirement system, consisting of

traditional defined benefit, cash balance and voluntary defined contribution plans,

as well as disability and survivor benefits. CalSTRS serves California's 862,000

public school educators and their families from the states 1,600 school districts,

county offices of education and community college districts.

3

CalSTRS: Overview

4

Why Relational Invested in Timken

Timkens share price does not reflect the indicated trading values of the Companys Bearings and Steel businesses

Clear path to remove share price discount by separating the Steel business to allow the market to independently value Timkens Bearings and Steel businesses

Successful transformation of Bearings business, which now generates high returns and significant cash flows

Steel business is specialized and has superior financial characteristics with upside opportunities

Why CalSTRS Became Active in TKR

CalSTRS has been a shareholder of Timken for over 15 years

Large passively managed portfolio ensures CalSTRS will continue to hold stakes in separated companies indefinitely

The long-term nature of CalSTRS liabilities, and its responsibilities as a fiduciary to its members, makes the fund keenly interested in governance issues and ensuring that the businesses are optimally presented to the marketplace

5

Separation is a Sound Business Strategy

Valuation discount versus peers is significant, reflecting the markets clear preference for pure-play bearings or steel alternatives

Performing through a cycle, as the company suggests, will not correct this discount

Soft synergies, including joint research and selling, can be retained and are negligible when compared to the market discount

Social impact of separation are insignificant

Timken name survives on both companies

Timken family ownership/Board representation continues at both companies

Separation supports continued compensation of Chairman at Specialty Steel company

Both company headquarters can remain in Canton

Pension will be fully funded by the end of 2013

We do not intend or advocate any change in employment levels at Timkens steel or

bearings operations

6 1 As stated by CFO Glenn Eisenberg, 1/24/13

1

Under Including Pension

Credit Funded Net Debt/ Net Debt/ Net Debt/ Net Debt/ Interest

Mkt. Cap Debt Rating Pension Cash EBITDA Mkt. Cap. Equity Total Cap. Coverage

Current TKR $5,096 $479 BBB- $770 $618 0.7x 12% 28% 22% 21.8x

Bearing Peers

SKF $11,030 $2,410 A- $1,480 $1,268 1.6x 24% 76% 43% 14.4x

TKR Bearings* $4,917 $479 $ -- $98 0.6x 8% 20% 17% 14.5x

Implied Debt Capacity $690 1.6x

Steel Peers

CRS $2,467 $406 BBB $644 $63 2.1x 40% 83% 45% 15.2x

ATI $3,219 $1,480 BBB- $1,077 $305 3.4x 70% 91% 48% 5.4x

STLD $3,238 $2,202 BB+ $ -- $407 2.3x 55% 75% 43% 3.3x

NUE $13,928 $3,660 A $ -- $1,157 1.1x 18% 33% 25% 8.5x

Average 2.2x 46% 70% 40% 8.1x

TKR Steel* $1,291 $ -- $372 $189 0.7x 14% 49% 33% N/A

Implied Debt Capacity $343 2.2x

Total Debt Capacity $1,034

Post-Spin Credit Metrics are Favorable vs. Peers, Creating a Liquidity Cushion

7

After fully funding all major CapEx projects, pension liabilities and deal fees, Timkens separated

businesses have additional debt capacity of over $1B to reach average peer capital structures,

providing an ample liquidity cushion for each business * 2013 year-end pro-forma estimates. Source: Bloomberg, company filings, and RI estimates. All Amounts in $Millions. Peers include SKF AB, Carpenter, Allegheny, Steel Dynamics, and Nucor 1 Since the Company has stated that the pension will be fully funded in 2013, the only remaining liability is OPEB

1

Profitability of Bearings Business is Now Best in Class

8

--

2%

4%

6%

8%

10%

12%

14%

16%

2006A 2007A 2008A 2009A 2010A 2011A 2012A

EBIT

Mar

gin

TKR Bearings SKF NSK NTN

Source: Bloomberg and company filings.

Note: TKR Bearings margins include allocated corporate expense.

Note: Peer group includes : SKF AB (SS:SKFB), NSK Ltd (JT:6471), and NTN Corp (JT:6472).

Steel Business Adds Volatility to Timkens Margins

9 Source: Bloomberg and company filings.

Note: TKR segment margins do not include allocated corporate expense.

-30%

-20%

-10%

0%

10%

20%

30%

EBIT

Mar

gin

Bearings Steel

In November 2012 13D, Relational Showed Potential For 54% Relative Outperformance

10 See Appendix for Assumptions. Source: Bloomberg, Company Filings, and RI Assumptions. 2012 and 2013 TKR segment revenue and EBITDA are based on available analyst estimates and RI projections and aggregate to

total company consensus estimates. $735m pension liability based on company statements at Jefferies Conference on 8/8/12. Assumes Spin Date of 1/1/2013. Pension Addback = (Expected Pension Expense Service Cost)

The valuation discount is significant when compared to soft synergies of joint research and sales

EV/EBITDA Valuation

2013 Pension 2013 EBITDA Enterprise Equity Val.

EBITDA Addback Ex. Pension Multiple Value Per Share

Bearings $700 $47 $748 7.1x $5,308 $47.24

Steel $304 $18 $321 6.2x $1,993 $17.74

Total $1,004 $65 $1,06