FR caching problem

[Lemaster, Rob]

FreeRADIUS v.1.0.5

I am trying to enable caching on line 623 in radiusd.conf. 
When I turn on caching and reload, I get the following error:

Info: Reloading configuration files.
Info: Using deprecated naslist file.  Support for this will go away
soon.
Info: HASH:  Reinitializing hash structures and lists for caching...
Error: rlm_unix:  You MUST specify a shadow password file!
Error: HASH:  unable to create user hash table.  disable caching and run
debugs
Error: radiusd.conf[605]: unix: Module instantiation failed. 

When I turn caching back off and reload, FreeRadius starts just fine:

Info: Using deprecated naslist file.  Support for this will go away
soon.
Info: Ready to process requests.

I am using the /etc/passwd and /etc/group for authentication. I am not
using /etc/shadow. Does FR require an /etc/shadow path even if it is not
used?

Any thoughts or suggestions?
thanks