To work on an annotations.xml file, download the XML specification from Advanced tab of the Control Panel. Don't start a file from scratch.
The search annotations XML file, or context file, is the XML specification for Google Custom Search Engine. It specifies how the search engine works and looks, and can be downloaded, edited and used to programatically create search engines on the fly.
An annotations file is simply a list of annotations. Each annotation has two components: * the site * associated labels.
Search Annotations Files can be in any of the following formats: * Outline Processor Markup Language (OPML) * Text files with tab-separated values (TSV) * Custom Search XML
# Workflow
- Editing Custom Search Files
* View the Search Annotations XML file 
* Download the XML file
* Upload the XML file
You should be able to download and upload the annotations.xml file from the CSE Control Panel. However it does not seem to be available.
This image shows the interface for uploading and downloading the annotations XML file - ouseful.files.wordpress.com
When you start editing your annotations file, start out with a small number of annotations, and then test some search queries in the Preview tab of the Control Panel.
It's easier to test and troubleshoot your search engine with a handful of annotations. When you get the results that you expect, incrementally add more annotations.
You can either upload the annotations file to the Control Panel or host it in your own website. For details about file limits, see the Annotations Limits section.