applet security restrictions prevent you from reading anything from your harddrive.
You can only read files from network addresses on the same server (or more correctly (virtual) host) as the one where the applet resides.
As the applet is in your case not coming from a server it can't read anything at all.
Maybe if you place the applet and file in the same directory you can access it, but that would be due to VM specific laxness rather than official policy.
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duckman
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since Nov 2004