Creating a Function in RPG ?

I have copied following code from Internet, but unable to compile.
The error is:
 Keyword EXTPGM must be specified when DFTACTGRP(*YES) is
 specified on the CRTBNDRPG command.

The Code is:

0001.00  * Prototype for procedure FUNCTION
0002.00 D FUNCTION        PR            10I 0
0003.00 D    TERM1                       5I 0 VALUE
0004.00 D    TERM2                       5I 0 VALUE
0005.00 D    TERM3                       5I 0 VALUE
0006.00 C                   EVAL      *INLR = *ON
0007.00 P Function        B
0008.00  *-------------------------------------------------------------
0009.00  * This procedure performs a function on the 3 numeric values
0010.00  * passed to it as value parameters.
0011.00  *
0012.00  * This illustrates how a procedure interface is specified for a
0013.00  * procedure and how values are returned from a procedure.
0014.00  *-------------------------------------------------------------
0015.00 D Function        PI            10I 0
0016.00 D    Term1                       5I 0 VALUE
0017.00 D    Term2                       5I 0 VALUE
0018.00 D    Term3                       5I 0 VALUE
0019.00 D Result          S             10I 0
0020.00  /free
0021.00     Result = Term1 ** 2 * 17
0022.00                  + Term2 * 7
0023.00                  + Term3;
0024.00     return Result * 45 + 23;
0025.00  /end-free
0026.00 P                 E


Any idea please, what am I missing ?

I want to create various User-Defined Functions in my SQLRPGILE programs, 
which should return values.

Best Regards,

Luqman