"My dear Frodo." An old hobbit named Bilbo Baggins lights a match, then uses it to light a candle. He walks through a hallway in Bag End, carrying the candle "You asked me one once if I had told you everything there was to know about my adventures. And while I can honestly say I have told you the truth, I may not have told you all of it." He opens a chest. He glances with fascination and recollection at a sword in its sheath and reaches out to touch it. At the last second, he hurriedly restrains himself and pulls out a large red book from the chest instead. Sitting down at his desk and opening the book, he sees a drawing of his younger self. He picks up the picture and gazes at it. "I am old now, Frodo. I'm not the same Hobbit I once was." He dips his quill in a pot of ink and poises to write in the book. He begins writing. "I think it is time for you to know what really happened. It began long ago in a land far away to the east, the like of which you will not find in the world today." We see a map of Middle-earth. Then, we see a city, Dale, full of humans and dwarves walking happily through markets and bazaars "There was the city of Dale. Its markets known far and wide, full of the bounties of vine and vale. Peaceful, and prosperous.
For this city lay before the doors of the greatest kingdom in Middle-earth: Erebor. Stronghold of Thror, King under the Mountain, mightiest of the dwarf lords." An enormous mountain just behind the city; a massive gateway has been built into the side of the mountain, flanked by humongous stone statues of dwarfs. In the city of Erebor, we see vast chambers and massive, carved statues. Thror sits on his throne as his son, Thrain approaches him; his grandson, Thorin, stands at his right side.
"Thror ruled with utter surety, never doubting his house would endure, for his line lay secure in the lives of his son and grandson. Ahhh, Frodo, Erebor; built deep within the mountain itself, the beauty of this fortress city was legend." We see the vast gold quarries within Erebor; dwarves with magnifying lenses sift through piles of rare jewels; smiths pound metal with mallets. A dwarf quarrying for gold sees a glow in the rock; he peels away the rock and finds a beautiful, glowing gem.
"Its wealth lay in the earth, in precious gems hewed from rock, and in great seams of gold, running like rivers through stone. The skill of the dwarves was unequaled, fashioning objects of great beauty out of diamond, emerald, ruby, and sapphire. Ever they delved deeper, down into the dark. And that is where they found it. The heart of the mountain. The Arkenstone. Thror's granddaughter, Thyri was the one who named it the King's Jewel. Thor took it as a sign, a sign that his his right to rule was divine. All would pay homage to him, even the great Elvenking, Thranduil." The Arkenstone has been placed in a special pedestal on Thror's throne; as he sits on his throne, flanked by his son, grandson, granddaughter and other officers, Thranduil and his aides approach.
"But the years of peace and plenty were not to last. Slowly, the days turned sour, and the watchful nights closed in. Thror's love of gold had grown too fierce. A sickness had begun to grow within him; it was a sickness of the mind. And where sickness thrives, bad things will follow." A shadow begins to cover the massive gates of Erebor. Thror walks through his massive rooms full of treasure, looking consumed with greed.
Thorin and his sister Thyri watch him from a distance, then slowly retreat into a shadow. Some time later, a paper dragon kite is being flown over Dale, along with other children's kites. Suddenly, a great wind comes, blowing the trees on the mountainside until the bend and creak. Thorin and Balin, a fellow dwarf, rush to the battlements and look for any sign of danger. Thyri was already here with some of the guards. She looks at her brother and walks towards him. She whispers into his ear ''Brother. I fear the worst.'' Thorin nods. "The first they heard was a noise like a hurricane coming down from the north. The pines on the mountain creaked and cracked in a hot, dry wind." Thorin tells Balin "Balin, sound the alarm. Call out the guard. Do it now !" Balin asks "What is it ?" Thyri, looking worried, replies "Dragon.'' The twins yell to everyone in the halls ''Dragon !!!" A roar sounds, and torrents of fire rain all over Erebor. "It was a fire drake from the north.'' Thorin pulled Balin behind a pillar just in time to save him from being burned ; whereas Thyri jumps from the battlements with a supernatural speed, avoiding any flames coming from the dragon.''Smaug had come." The kites from earlier are suddenly burned away. The people in the town of Dale scream in fear and panic as Smaug destroys their city, setting fire to many buildings and demolishing others. Smaug swoops about, breathing fire and destroying buildings by smashing into them.
A little girl cries as she watches her doll burn in the street. Thyri helps her as she runs through the running crowd ''I got you.'' She runs towards destroyed buildings et jumps onto the debris. They found themselves in the town center, trapped from the flames around them. "Such wanton death was dealt that day, for this city of men was nothing to Smaug; his eye was set on another prize. For dragons covet gold, with a dark and fierce desire." In Erebor's corridors, Thrain asks his son, worried "Thorin, where is your sister ?" Thorin says with a scared expression "She went to Dale helping its people." Thorin and Thrain, along with many other Dwarf soldiers, wait with weapons ready behind the gates of Erebor "Stand firm !"
Fire bursts through cracks in the gates as Smaug tries to smash his way in. Smaug soon breaks through the gate of Erebor and starts killing dwarves left and right, trampling them and burning them. Thorin is nearly stepped on by the dragon, but he escapes. Thror fearfully runs to his throne and detaches the Arkenstone, running away with it. As he runs through a doorway, he sees Smaug in front of him; tripping, he drops the Arkenstone, and it rolls into a massive pile of gold. Thror shouts "No !" Thorin appears and drags him away. The dwarves run away from Erebor. "Erebor was lost, for a dragon will guard his plunder as long as he lives." Thrain cries ''Thyri !!! Thyri, where are you ?'' But, he heard no answer. Thorin says to the survivors "Run for your lives !'' He sees King Thranduil and his elves approaching the mountain and waves at them, screaming ''Help us !" But Thranduil, astride his deer, turns away.
"Thranduil would not risk the lives of his kin against the wrath of the dragon. No help came from the elves that day, or any day since." Thorin glares in anger at the retreating elves. The remnants of the Dwarf kingdom slowly journey across vast, swampy lands. Thorin, at the front, stands on a mountaintop as his people come to him. "Robbed of their homeland, the dwarves of Erebor wandered the wilderness, a once mighty people brought low." Thorin works in a city of men as a smith; he pounds a sword with his mallet with increasing ferocity and anger. "The young dwarf prince took work where he could find it, laboring in the villages of men, but always he remembered the mountain smoke beneath the moon, the trees like torches blazing bright, for he had seen dragon fire in the sky, and his city turned to ash, and never forgave, and he never forgot."
Bilbo is in his study, writing in his book. "That, my dear Frodo, is where I come in. For quite by chance, and the will of a Wizard, fate decided I would become part of this tale. It began, well, it began as you might expect. In a hole in the ground, there lived a Hobbit. Not a nasty, dirty, wet hole, full of worms and oozy smells; this was a Hobbit-hole, and that means good food, a warm hearth, and all the comforts of home." Frodo, eating an apple, walks out of Bag End and picks up the mail from the mailbox. He returns inside and gives the mail to Bilbo. Bilbo, who was laughing while writing in his book, quickly quiets down as Frodo
approaches him and he tells him "Thank you." Frodo picks up the picture of a young Bilbo "What's this ?" Bilbo grabs back the picture "That is private. Keep your sticky paws off. It's not ready yet." Frodo asks "Not ready for what ?" Bilbo simply replies "Reading." Frodo picks up and examines some old object of Bilbo's.
Bilbo examines the pile of letters "What on earth are these ?" Frodo answers his uncle "Replies to the party invitations." Bilbo smiles "Oh ! Good gracious ! Is it today ?" Frodo tells him "They all said they're coming. Except for the Sackville-Bagginses; they're demanding you ask them in person." Bilbo says "Are they, indeed ? Over my dead body." Frodo tells him "They'd probably find that quite agreeable ! They seem to think you have tunnels overflowing with gold." Bilbo says "It was one small chest, hardly overflowing. And it still smells of troll." Bilbo starts hiding his valuables in chests, jars, vases, and other inconspicuous places. Frodo asks "What on earth are you doing ?" Bilbo says "Taking precautions. You know, I caught her making off with the silverware once." Frodo asks "Who ?" Bilbo tells him "Lobelia Sackville-Baggins. She had all my spoons stuffed in her pockets. Hah ! Dreadful woman; make sure you keep an eye on her after I'm ... when I'm ... when I'm..." Frodo approaches him "When you're... what ?" Bilbo says "It's nothing. Nothing." Bilbo looks at some papers on a table. Frodo tells him "You know, some people are beginning to wonder about you, Uncle. They think you're becoming odd." Bilbo asks "Odd ? Hmm." Frodo says "Unsociable." Bilbo tells him "Unsociable ? Me ? Nonsense. Be a good lad and put that on the gate." Bilbo hands Frodo a sign he's made; Frodo looks at it dubiously. Going outside, Frodo nails the sign to the gate of Bag End. It says *NO ADMITTANCE EXCEPT ON PARTY BUSINESS*
Bilbo comes outside and stretches. Frodo asks him "You think he'll come ?" Bilbo asks "Who ?" Frodo says "Gandalf." Bilbo tells him "Ahhh. He wouldn't miss a chance to lit up his whiz-poppers ! He'll give us quite a show, you'll see." Frodo says "Alright then, I'm off." Bilbo asks "Off to where ?" Frodo says "East Farthing woods. I'm going to surprise him." Bilbo tells him "Well, go on then ! You don't want to be late." After Frodo ran, Bilbo sits on a bench outside his door, smoking his pipe.
"He doesn't approve of being late. Not that I ever was. In those days, I was always on time. I was entirely respectable." He blows out a large smoke ring which floats into the sky. "And nothing unexpected ever happened."