Except where law and regulation provide otherwise, bond funds may not invest in the following investment instruments:
1. Stocks.
2. Equity-type securities, provided that convertible corporate bonds, corporate bonds with warrants, exchangeable corporate bonds, and bonds with loss-absorption features issued by a financial institution are not subject to this restriction.
3. Structured interest rate products. However, this restriction shall not apply to floating rate notes.
The total amount of investment in convertible corporate bonds, corporate bonds with warrants, exchangeable corporate bonds, and bonds with loss-absorption features that are eligible capital instruments as defined by the competent authority, by a SITE utilizing a bond fund, may not exceed 10 percent of the net asset value of the fund.
When the convertible corporate bonds, corporate bonds with warrants, or exchangeable corporate bonds held by a bond fund meet conditions such that there is any bond conversion, exercise of warrants, or exchange for stock, the fund shall make adjustments within one year to achieve conformance with requirements.
Any financial institution-issued bonds with loss-absorption features in which a SITE utilizes a bond fund to invest shall have a credit rating at or above a prescribed level from an FSC-approved or recognized credit-rating agency. For any investment in such bonds, the SITE furthermore shall draft as a part of its internal control system the dispositive measures to be taken when the invested bonds are converted into common shares, and shall submit those measures to its board of directors for passage.

The credit rating of an issue of unsecured corporate bonds or financial bonds from any company in which a SITE invests fund assets shall be explicitly stated in the trust agreement.

A bond fund's asset portfolio shall have a weighted average duration of no less than one year, provided that this restriction shall not apply to funds established for less than three months, or in the month prior to the trust agreement's termination date, or to a fund that invests primarily in floating rate notes.