CREATE FUNCTION SCHEME.TEST
 (PARAM CHARACTER( 1 )
 ) 
  RETURNS CHARACTER( 1 )
  LANGUAGE SQL
  NOT DETERMINISTIC
  READS SQL DATA
  STATIC DISPATCH
  CALLED ON NULL INPUT
  EXTERNAL ACTION
  INHERIT SPECIAL REGISTERS
  Begin ATOMIC
    declare VAL varchar( 1 );
    set VAL=PARAM;
    IF VAL='Y' then
      set VAL='N';
     end if;
	IF VAL<>'Y' then 	  
      set VAL = ( select class from SCHEME.CLASSES);
      
    end if;
return VAL;
  end;

CREATE FUNCTION SCHEME.TEST_1
 (PARAM CHARACTER( 1 )
 ) 
  RETURNS CHARACTER( 1 )
  LANGUAGE SQL
  NOT DETERMINISTIC
  READS SQL DATA
  STATIC DISPATCH
  CALLED ON NULL INPUT
  EXTERNAL ACTION
  INHERIT SPECIAL REGISTERS
Begin ATOMIC
 declare VAL varchar( 1 ); 

  set VAL=PARAM;
 IF VAL='Y'
   then set VAL='N'; 
   else set VAL = (select class from SCHEME.CLASSES); 

end if;
return VAL;
end;

select SCHEME.TEST_1(char('Y')) from table(values( 1 )) t1
completed successfully.

 1   
-  
N  

 1  row selected in  0 . 01  secs.

select SCHEME.TEST(char('Y')) from table(values( 1 )) t1
[IBM][CLI Driver][DB2/NT] SQL0811N  Результат скалярной полной выборки, оператора SELECT INTO или оператора VALUES INTO 
- больше одной строки таблицы.  SQLSTATE= 21000 

 1   
-  

 0  rows selected because of ERROR.