Remote XML works, local XML brings error

Been given the following actionscript

package menu
{
    import adobe.utils.*;
    import caurina.transitions.*;
    import flash.accessibility.*;
    import flash.display.*;
    import flash.errors.*;
    import flash.events.*;
    import flash.external.*;
    import flash.filters.*;
    import flash.geom.*;
    import flash.media.*;
    import flash.net.*;
    import flash.printing.*;
    import flash.system.*;
    import flash.text.*;
    import flash.ui.*;
    import flash.utils.*;
    import flash.xml.*;
    
    public dynamic class MainTimeline extends flash.display.MovieClip
    {
        public function MainTimeline()
        {
            super();
            addFrameScript(0, john);
            return;
        }

        public function xmlLoaded(frank:flash.events.Event):void
        {
            var event:flash.events.Event;
            var loadSequence:Function;
            var wagwan:*;

            loadSequence = null;
            event = frank;
            loadSequence = function ():*
            {
                var CompleteHandler:Function;
                var loadProgress:Function;
                var loc1:*;

                loadProgress = null;
                CompleteHandler = null;
                loadProgress = function (frank:flash.events.ProgressEvent):void
                {
                    var wagwan:*;

                    wagwan = NaN;
                    wagwan = frank.bytesLoaded / frank.bytesTotal;
                    wagwan = Math.round(wagwan * 100);
                    preloaderBar.gotoAndStop(wagwan);
                    return;
                }
                CompleteHandler = function (frank:flash.events.Event):void
                {
                    var wagwan:*;
                    var qwerty:*;

                    Tweener.addTween(preloaderBar, {"alpha":0, "time":2, "transition":"easeOut"});
                    Tweener.addTween(imageLoader, {"alpha":1, "time":2, "transition":"easeOut"});
                    preloaderBar.visible = false;
                    if (LENGTH != xmlList.length())
                    {
                        i++;
                        loadSequence();
                    }
                    return;
                }
                imageHolder = new MovieClip();
                imageHolder.graphics.drawRect(0, (0), 562, 430);
                imageHolder.x = i * 582;
                imageHolder.y = 0;
                imageLoader = new Loader();
                imageLoader.load(new URLRequest(xmlList*.attribute("source")));
                imageLoader.contentLoaderInfo.addEventListener(ProgressEvent.PROGRESS, loadProgress);
                imageLoader.contentLoaderInfo.addEventListener(Event.COMPLETE, CompleteHandler);
                imageLoader.alpha = 0;
                preloaderBar = new LoaderMC();
                preloaderBar.x = imageHolder.width / 2;
                preloaderBar.y = imageHolder.height / 2;
                preloaderBar.alpha = 0;
                Tweener.addTween(preloaderBar, {"alpha":1, "time":2, "transition":"easeOut"});
                HOLDER.addChild(imageHolder);
                imageHolder.addChild(preloaderBar);
                imageHolder.addChild(imageLoader);
                LENGTH = i + 1;
                return;
            }
            trace("LOADING XML");
            xml = XML(event.target.data);
            xmlList = xml.children();
            MAX = (xmlList.length() - 1);
            loadSequence();
            return;
        }

        public function LEFT(frank:flash.events.MouseEvent):void
        {
            var wagwan:*;
            var qwerty:*;

            if (!Tweener.isTweening(HOLDER))
            {
                if (CLICKS != 0)
                {
                    CLICKS--;
                    Tweener.addTween(HOLDER, {"x":HOLDER.x + 582, "time":1, "transition":"easeOutQuad"});
                    Tweener.isTweening(HOLDER);
                }
            }
            return;
        }

        public function RIGHT(frank:flash.events.MouseEvent):void
        {
            var wagwan:*;
            var qwerty:*;

            trace(HOLDER.x);
            if (!Tweener.isTweening(HOLDER))
            {
                if (MAX != CLICKS)
                {
                    CLICKS++;
                    Tweener.addTween(HOLDER, {"x":HOLDER.x - 582, "time":1, "transition":"easeOutQuad"});
                    Tweener.isTweening(HOLDER);
                }
            }
            return;
        }

        public function leftOVER(frank:flash.events.MouseEvent):void
        {
            Tweener.addTween(LButton, {"alpha":0.8, "time":1, "transition":"easeOutQuad"});
            return;
        }

        internal function john():*
        {
            stop();
            buttonMode = true;
            HOLDER = new MovieClip();
            HOLDER.graphics.drawRect(0, (0), (0), 0);
            HOLDER.x = stage.stageWidth / 2 - 562 / 2;
            addChildAt(HOLDER, 0);
            xmlLoader = new URLLoader();
            i = 0;
           
            xmlLoader.load(new URLRequest("images.xml"));
            xmlLoader.addEventListener(Event.COMPLETE, xmlLoaded);
            LButton.addEventListener(MouseEvent.CLICK, LEFT);
            LButton.addEventListener(MouseEvent.MOUSE_OVER, leftOVER);
            LButton.addEventListener(MouseEvent.MOUSE_OUT, leftOUT);
            RButton.addEventListener(MouseEvent.CLICK, RIGHT);
            RButton.addEventListener(MouseEvent.MOUSE_OVER, rightOVER);
            RButton.addEventListener(MouseEvent.MOUSE_OUT, rightOUT);
            return;
        }

        public function rightOUT(frank:flash.events.MouseEvent):void
        {
            Tweener.addTween(RButton, {"alpha":0.25, "time":1, "transition":"easeOutQuad"});
            return;
        }
        
             
        public function leftOUT(frank:flash.events.MouseEvent):void
        {
            Tweener.addTween(LButton, {"alpha":0.25, "time":1, "transition":"easeOutQuad"});
            return;
        }

        public function rightOVER(frank:flash.events.MouseEvent):void
        {
            Tweener.addTween(RButton, {"alpha":0.8, "time":1, "transition":"easeOutQuad"});
            return;
        }

        public var CLICKS:int;

        public var xml:XML;

        public var xmlLoader:flash.net.URLLoader;

        public var RButton:flash.display.MovieClip;

        public var MAX:int;

        public var imageLoader:flash.display.Loader;

        public var i:Number;

        public var xmlList:XMLList;

        public var HOLDER:flash.display.MovieClip;

        public var LButton:flash.display.MovieClip;

        public var preloaderBar:LoaderMC;

        public var LENGTH:int;

        public var imageHolder:flash.display.MovieClip;
    }
}

Basically, I have an xml - when it links to an image online eg http://www.image.com/1.jpg" it works, but when I point it towards a local image, eg “/images/1.jpg”, i get error

**Error #2044: Unhandled IOErrorEvent:. text=Error #2035: URL Not Found.

**If anyone knows why this is please help,
many thanks.