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This paper presents a new automatic image annotation algorithm. First, we introduce a new similarity measure between images: compactness. This uses low level visual descriptors for determining the similarity between two images. Compactness shows how close test image features lie to training image feature cluster centers. The measure provides the core for a k-nearest neighbor type image annotation method. Afterward, a formalism for defining different transfer techniques is devised and several label transfer techniques are provided. The method as whole is evaluated on four image annotation benchmarks. The results on these sets validate the accuracy of the approach, which outperforms many state-of-the-art annotation methods. The method presented here requires a simple training process, efficiently combines different feature types and performs better than complex learning algorithms, even in this incipient form. The main contributions of this paper are the usage of compactness as a similarity measure that enables efficient low level feature comparison and an annotation algorithm based on label transfer.