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The characters of The Court of King Collywobble are introduced. King Collywobble likes to take a stroll in the woods in the morning. While out he hears a voice calling for help, and comes across a little man with a long white beard who is trapped under a stone which has fallen on his beard. The King frees him, and the little man says he will reward the King with a big bag of gold on the condition that for three nights he will hide the gold and if the King finds it once he will have it for his own. The King is delighted as he needs the money. The little man comes to the palace. But he is really a mean little man, and intends to trick the King. The King tells Freddy the Pageboy to keep a watch on the little man. Freddy the Pageboy follows the little man and sees the little man hide the gold in the forest, and marks the place with a cross. The next morning Freddy leads the King to the forest, but all the rocks have a cross marked on it. King Collywobble realises the situation is hopeless.
The next night Billy the Barber’s Boy follows for the King, and Billy cuts a notch in the tree where it is hidden by the little man, but the next morning every tree has been notched. King Collywobble is worried as he has one chance left, so decides to watch for himself. Out creeps the little man and makes his way out of the castle followed by the King. The little man hides the bag in the grass, and makes a circle around the bag, knowing he has been watched. But the King has tricked him. The King knows for sure that the little man never intended to give him the gold, but the little man has to give it to him.