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Act One
In Odense, Denmark, cobbler Hans Christian Andersen is at his shop as children gather around him for a story ("I'm Hans Christian Andersen"). Hans tells the children a tale of a girl smaller than them ("Thumbelina").
Peter, Hans's apprentice, interrupts the story to warn them that the Schoolmaster is upset. The Schoolmaster and Burgomaster enter, furious that the children are not at school. When Hans suggests that there are different ways to learn, the Schoolmaster insists he knows nothing about teaching and demands that Hans be banished from the town. Hans and Peter are left alone to think about what their future will be ("Inchworm"). They decide to try their luck in Copenhagen ("I'm Hans Christian Andersen (Reprise)").
In Copenhagen, Hans sees Madam Doro, a prima ballerina, passing on the street and is smitten. Truls, a captain, tells him he can find her at the Royal Ballet. Hans and Peter set up shop in front of a statue of the King. Hans charms the city's children with his imagination ("Wonderful, Wonderful Copenhagen").
Niels, lead dancer and director of the Royal Ballet, and his colleague Otto desperately need to find a new shoemaker for Madam Doro. Otto comes across Hans's shop and asks if he is up to the job. When Hans realizes he'll be making ballet slippers for Doro, he is overjoyed.
Niels and Doro are rehearsing at the Royal Ballet when Otto brings in Hans. Doro asks Hans if he can make her the slippers she needs, and he promises her he can. Later, Doro and Niels embrace and share a moment together ("No Two People"). The moment is ruined when Niels and Doro argue over her ability to do new choreography. Hans and Otto catch them at the end of the argument. Otto reveals to Hans that Doro and Niels are married. After handing Doro's new shoes to Otto, Hans laments that Doro is married to someone like Niels but nevertheless pines for her ("Anywhere I Wander").
At the marketplace, Peter finds Hans writing. At first, Hans refuses to tell Peter what he's working on. But then he reveals that he has written a story called "The Little Mermaid" for Madam Doro out of determination to help her. Niels and Doro enter the marketplace to thank Hans for the shoes. Niels playfully takes Hans's story and gives it to her. Doro is touched and says she will read it while on tour. Hans is heartbroken to hear she will be away.
Act Two
Lars, a young boy, is teased and picked on by a group of children. Hans takes pity on him and tells him a story to lift his spirits ("The Ugly Duckling").
Hans and Peter talk about the tour coming back to Copenhagen soon. Hans fantasizes about seeing Doro again ("No Two People (Reprise)"). Editor Holm of The Morning News comes to see Hans. Lars, his son, has been changed by Hans's story of the Ugly Duckling. He asks Hans to write down the story to be published in The Morning News. Hans agrees.
Shortly after "The Ugly Duckling" is published, Doro and Niels come to Hans with a request (despite Niels being jealous and wary of Hans's affection for his wife). They have decided to turn "The Little Mermaid" into a ballet and want Hans to be part of the show as the narrator. Although intimidated, Hans says he will do it.
Hans and Doro take a walk together. When Doro asks him why he wrote the story for her, Hans explains to her how he wanted to help her after seeing her and Niels fight. Doro tell Hans that what he saw wasn't the whole picture of their marriage and that she loves Niels very much. Doro encourages Hans to keep writing stories. She thanks him for writing "The Little Mermaid" and leaves ("Anywhere I Wander (Reprise)").
The ballet is performed as Hans narrates the tale of "The Little Mermaid" ("Mermaid Ballet"). The ballet is a huge success!
Hans returns to Odense and enchants the children with more stories. Just as he finishes telling them the story of the "Little Match Girl," the children beg Hans for another story. He tells them the story of a king and his new "clothes" ("The King's New Clothes"). The children and townspeople of Odense love the story. Niels and Doro arrive from Copenhagen with a special order from the King of Denmark: to bestow Hans with a medal and the title "King of Stories". ("Finale Ultimo")
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