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This work presents a novel reversible data-hiding scheme that embeds secret data into a transformed image and achieves lossless reconstruction of vector quantization (VQ) indices. The VQ compressed image is modified by the side-matched VQ scheme to yield a transformed image. Distribution of the transformed image is employed to achieve high embedding capacity and a low bit rate. Moreover, three configurations, under-hiding, normal-hiding, and over-hiding schemes, are utilized to improve the proposed scheme further for various applications. Experimental results demonstrate that the proposed scheme significantly enhances the compression ratio and embedding capacity. Experimental results also show that the proposed scheme achieves the best performance among approaches in literature in terms of the compression ratio and embedding capacity.