American Funds Limited Term Tax-Exempt Bond Fund® Class F-3 FLTEX

With its skilled investors, American Funds Limited-Term Tax-Exempt Bond benefits from a thoughtful and capable investment team that executes a collaborative and robust approach.

The strategy strikes the right balance between incentivizing its two named managers, Mark Marinella and Vikas Malhotra, to pursue a straightforward muni mandate while granting them the flexibility to emphasize the sectors where they see the most value. Consistent with Capital Research’s taxable strategies, this muni team has long taken a multimanager approach with its strategies. That means each manager runs a separate 50% slice of the overall portfolio, which allows the managers to express their own investment views and helps ease the disruption of potential team departures. Although the comanagers make independent decisions, they coordinate risk and positioning and tap nine dedicated muni credit analysts, five muni traders, and the firm’s robust network of analytic resources. Marinella, a nearly 40-year industry veteran, joined this strategy as a named manager in 2019 and ensures collaboration among the team in his role as the strategy’s principal investment officer. The firm added Malhotra as a comanager here in mid-2022 after joining the close-knit muni team in 2016 as an analyst.

The firm's improved risk-management team and sound analytical capabilities enable it to take measured risks appropriately. The team looks for value in the muni market, drawing on deep analyst research and informed traders. The managers steer clear of leveraged structures and tread lightly in the market's most troubled names, aiming to mute volatility. However, the portfolio will hold moderate stakes in midcredit-quality fare and often takes on more interest rate risk than its typical muni-national short Morningstar Category peer. That means it does relatively well in strong muni markets, though relative returns may stumble when interest rates spike. Yet, despite short-term bouts of volatility, the fund’s value-conscious approach has resulted in solid returns over the past decade.

This strategy benefits from Capital Group’s enhanced fixed-income operations, which emphasizes tight coordination among managers, robust tools and resources, and strategic additions to talent. These advancements, combined with disciplined, risk-aware execution, merit a High Process Pillar rating.

While the strategy operates within clear guardrails, it gives managers the flexibility to leverage their expertise, engage analysts and traders in bond valuation and sourcing, and draw on the firm’s broader research capabilities. Each comanager runs an individual sleeve, enabling sector overweights relative to the Bloomberg Municipal Short Intermediate 1-10 Year Index based on their convictions. Industry veteran Mark Marinella, the strategy’s principal investment officer, ensures these allocations remain balanced and aligned with the strategy’s parameters.

The team benefits from extensive resources across Capital Group’s fixed-income platform, including streamlined data, research, and trading coordination—allowing nimble portfolio positioning. At the same time, several enduring themes provide stability, including a preference for revenue bonds with reliable cash flows, an underweight in general-obligation bonds versus the benchmark, and a portfolio that leans toward higher credit quality than most peers.

Duration typically sits near the upper limit of the muni-national short category, but the team avoids large interest rate bets and limits derivative and leverage use to reduce volatility. This value-conscious approach, anchored in bottom-up credit research, has helped the portfolio hold up in downturns while keeping pace during strong muni markets.

The portfolio stands out from most muni-national short category peers in several ways. First, the managers keep the portfolio's duration (a measure of interest rate sensitivity) close to that of the Bloomberg Municipal Short-Intermediate 1-10 Year Index, which has ranged from 3.0 to 4.0 years over the past decade. For example, the portfolio's duration was roughly 3.0 years for most of 2021 and 2022 before it extended to 3.6 years through most of 2024 as interest rates continued to rise. That measure increased to above 3.8 by mid-2025, which more closely reflected its index's duration but was much longer than the 2.3-year category median, a figure that includes a handful of ultrashort muni strategies.

The portfolio also continues to underweight general obligation muni bonds (12% of assets at the end of Sept. 30, 2025, versus the Bloomberg Municipal Short-Intermediate 1-10 Year Index’s roughly 30%) as revenue-backed bonds that offer stable income streams soaked up 81% of assets. That included a 25% allocation to housing-backed revenue bonds (up from 21% in October 2021) and 17% to corporate-backed munis (up from 4%), both of which can be sensitive to interest rate changes and represented overweightings versus the strategy's index and the category norm.

That said, the portfolio's credit quality positioning reflects the team's relatively cautious approach to downgrade and default risk. Roughly 72% of the fund's combined assets were in bonds rated AA or higher and cash in mid-2025. Notably, that cash stake (7%) was down from 15% in 2022 due to outflows and the managers’ willingness to scoop up out-of-favor muni bonds when they saw value.

The strategy’s High People Pillar rating underscores the investment team’s experience and depth as well as its well-structured succession planning.

Comanagers Mark Marinella and Vikas Malhotra lead this strategy. Although their joint track record here began in mid-2022, they have collaborated for much longer. Marinella became the strategy’s principal investment officer on Jan. 1, 2019, following the retirement of longtime manager Neil Langberg. Marinella brings nearly four decades of industry experience, including his tenure as global chief investment officer for fixed income and currencies at State Street Global Advisors. He joined Capital Group in 2013 and transitioned to the municipal team in 2016.

Malhotra was publicly named a portfolio manager for this strategy and American Funds Short-Term Tax-Exempt Bond in July 2022, succeeding Aaron Applebaum upon his retirement. Applebaum had been with Capital Group since 2007 and comanaged this strategy since 2016. Malhotra joined Capital Group in 2016 as a fixed-income investment analyst and previously held roles as vice president at Wells Fargo Securities and financial auditor at Ernst & Young, among others.

The team employs a sleeved approach to managing municipal strategies: Marinella and Malhotra each oversee roughly half of this fund’s assets. They leverage insights from nine municipal credit analysts, many of whom serve as investors through the team’s muni research portfolios, as well as five dedicated muni traders. The team’s quantitative analyst and Capital Group’s broader credit, equity, and macro research resources provide additional support.

Marinella and Malhotra each invest at least USD 100,000 in the fund.

Capital Group stands out from the pack as it enhances capabilities around strong core competencies. It earns a High Parent rating.

Since 1931, Capital Group, parent of American Funds, has thoughtfully built out capabilities to become one of the world’s largest asset managers, managing more than USD 3 trillion dollars. Building on the success of its long-term-oriented, multiple-manager system for global equities, the firm has developed robust fixed-income and multi-asset units, each managing more than USD 500 billion. In January 2026, as part of its periodic review of its now five distinct research organizations, Capital Group implemented changes to its equity investment subsidiaries. This exercise resulted in most equity strategies having at least one portfolio manager change, but according to the firm, it better balances each of Capital Group’s three equity groups in terms of investment breadth and helps the firm better align leadership opportunities across the groups. These kinds of shifts have occurred before, with the last coming in 2018.

Capital Group has also turned its attention to some modern opportunities. To address public/private market convergence trends, it launched in April 2025 two semiliquid funds with private market giant KKR. In keeping with its signature portfolio management approach, it splits those funds into multiple sleeves, which are managed independently by distinct managers at each firm. Capital Group plans to deepen this relationship with target-date and model portfolios, as well as public/private equity funds. On the other end of the spectrum, although the firm is firmly dedicated to active management, it has also acknowledged investor preference for passive investing and has thus partnered with indexing stalwarts Vanguard, BlackRock, and Schwab on active/passive models. Capital Group’s proven investment prowess, strong reputation among investors, and scale mean it can be selective with its partnerships.

In addressing another recent trend, since early 2022, the firm has launched more than 25 active exchange-traded funds globally, most of which are distinct, but several are similar to some of its legacy American Funds mutual funds. Unlike some of its peers, though, it has not filed for SEC exemptive relief to offer ETFs as a share class.

That’s a lot of change for such a storied and sizable firm, but Capital Group has a long history of serving investors well.

The strategy's long-term relative performance is solid. Its F3 shares’ 2.1% annualized return over the past 10 years through October 2025 beat more than three-fourths of distinct peers in the muni-national short category and edged out the 2.0% annualized return of its benchmark, the Bloomberg Municipal Short-Intermediate 1-10 Year Index. Heavier concentrations in transportation, healthcare, and more recently, the muni housing sector have boosted returns. At the same time, the strategy held a longer-duration stance compared with most category peers, which helped drive strong returns relative to this group except for 2022, albeit accompanied by heightened volatility (as measured by standard deviation).

Since portfolio manager Mark Marinella was named on the strategy in January 2019 through October 2025, the fund's results have also stacked up well against both its benchmark and its category peers, even considering its relatively steep loss in 2022. As muni-bond prices declined precipitously as interest rates climbed that year, the fund's painful 4.5% loss matched its bogy's but was more severe than the 2.9% peer median loss. The fund's higher stakes in longer-dated maturities and muni housing bonds were headwinds against that group in 2022 and most of 2023. The team’s selections in the muni housing sector and corporate-backed munis, as well as the strategy’s yield-curve positioning, boosted results from the end of 2023 through 2024.

American Funds Limited Term Tx-Ex B F3's Prospectus Adjusted Expense Ratio is 0.26% per year. It places it in the cheapest quintile of the Morningstar US Fund Muni National Short Category, where the median fee is 0.44% per year. This cost positioning translates into a Medalist Rating Price Score of 1.53, which reflects its relative price positioning within the category. The Price Score ranges from -2.50 (most expensive) to +2.50 (cheapest), with higher scores indicating better cost competitiveness.