It is early December 1933, shortly after 3:00 AM. In the New York City Municipal Orphanage, the littlest orphan, Molly (age 6), cries out for her mother. The other orphans in the room — Kate, the next to littlest, who is 7; Tessie, the cry baby, who is 10; Pepper, the toughest, who is 12; July, the quietest, who is 13; and Duffy, the biggest, who is 13 — wake up and a fight ensues between Pepper and July. Annie, who is 11, has been up cleaning and breaks up the fight. She comforts Molly with the note that her parents left her when she was left at the orphanage. It says that she was “born on October 28th. We will be back to get her soon. We have left half of a silver locket around her neck and kept the other half so that when we come back for her you will know that she’s our baby.” Molly tells Annie that she dreams of having parents again but that Annie is lucky because she really has parents (“Maybe”).
As a far-away church bell chimes 4:00 AM, Annie decides that she will make another attempt to run-away from the orphanage and find her parents. As she gets close to the front door, Miss Hannigan, the orphanage matron, appears and catches her in the act. For Annie’s disobedience, Miss Hannigan orders all the orphans to scrub the floor, strip their beds and “clean this dump until it shines like the top of the Chrysler Building” (“It's the Hard Knock Life”). Miss Hannigan soon returns, blowing her whistle despite her huge hangover, to inspect the room. As the orphans line-up next to their beds, Annie is hatching another plan to run-away. Bundles McCloskey, a laundry man, has arrived to deliver a load of clean sheets. When Miss Hannigan flirts with Bundles and invites him to eat egg foo yung in Chinatown on Christmas, Annie sneaks into his laundry bag. He leaves the orphanage with Annie in tow (“It's the Hard Knock Life – Reprise”). That afternoon, on a street corner at St Mark’s Place, Annie notices two dog catchers in pursuit of stray dogs and finds Sandy, a dog searching for food in the garbage pail. She signals for the dog to come and ensures him that they both won’t get caught (“Tomorrow”).
Lt. Ward, suspicious about Annie being Sandy’s owner, asks her to call the dog to see if it will answer to his name. After a third try, Sandy answers to her and Lt. Ward tells her to have a leash and a license the next time he sees her.
At dusk, Annie and Sandy find themselves in a Hooverville, a Depression-style shanty town of jerry rigged shacks at the edge of the East River, underneath the 59th Street Bridge. Annie asks the Hooverville-ites if they have seen her parents. Sophie, an Apple Annie sort of woman, tells Annie that there is nothing to be optimistic about, given their situation (“We'd Like To Thank You, Herbert Hoover”). As they return to their chores, Lt. Ward tells the “bums to move out” and the police break up the Hooverville.
Back at the Orphanage, Miss Hannigan is blowing her whistle at the orphans telling them, “that’s all the fresh air you get for the month.” Meanwhile, the orphans tell her that Molly threw up on her “favorite shiny satin pillow from Coney Island” and Kate holds a dead mouse to her face. Frustrated, Miss Hannigan orders them back to work and sings about her distaste for them (“Little Girls”).
As Miss Hannigan settles in to listen to her radio show, Lt. Ward arrives to return Annie, informing her that she was found in a Hooverville with a dog that got away. After Lt. Ward leaves, Annie is left in Miss Hannigan’s office when Grace Farrell, secretary to Oliver Warbucks, arrives. Grace tells Miss Hannigan that Warbucks would like to invite an orphan to spend the Christmas holidays at his home.
Annie manipulates the conversation by getting Grace to tell Miss Hannigan that Warbucks in interested in having an 11-year-old red-headed child. Miss Hannigan is reluctant to let Annie go until Grace tells her that she is aware of the incident with the laundry bag and the police. (“Little Girls – Reprise”). Annie and Grace arrive at the Warbucks’ Mansion and Grace tells Annie that she won’t have to clean while she is staying there (“I Think I’m Gonna Like it Here”). Oliver Warbucks returns home after a six-week trip with his mind so focused on work that he does not notice Annie. After he is introduced to Annie, he feels uncomfortable in her presence. He orders Grace to take the child to the movies but after seeing Annie’s imploring puppy dog eyes, Warbucks is won over and decides to accompany her to the movie.
Warbucks decides that since Annie has been cooped up in an orphanage, they will walk to the movie theatre, the Roxy. Grace, Warbucks and Annie encounter different types of New York City citizens on their way to the theatre, including an up and coming actress who has just moved to the city (“N.Y.C.”). When they finally arrive at the theatre, Annie is half asleep; Warbucks and Grace decide to carry her home.
A week passes and Grace has returned to the orphanage to tell Miss Hannigan that Warbucks has decided to adopt Annie. As Grace leaves she runs into Rooster — Miss Hannigan’s wayward brother — and his girlfriend, Lily, who have come to borrow money from Miss Hannigan. As Rooster recalls bumping into Grace, he asks Miss Hannigan about her. Upon learning about Annie’s situation, they begin to plot ways to exploit it for their own gain (“Easy Street”). Back at the Warbucks’ mansion, Grace informs Warbucks that the Tiffany’s jewelry box has arrived and that the papers have been signed for Annie’s adoption (according to the script, an optional song: “Why Should I Change a Thing?” sung by Warbucks, is inserted here). Annie is called into Warbucks’ office and given the present from Tiffany’s: a new silver locket. Warbucks goes to remove Annie’s old tattered locket, but is interrupted when she bursts into tears.
Annie explains that her locket is the only thing her parents left for her at the orphanage. Touched, Warbucks promises to find her parents so they can be reunited (“You Won’t Be an Orphan for Long”).
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