LEGAL_1:31622851.1

Fourth Report ofDuff & Phelps Canada Restructuring Inc.as Receiver and Receiver and Manager ofCPI Corp.,CPI Portrait Studios of Canada Corp. andCPI Canadian Images

August 14, 2014

Duff & Phelps Canada Restructuring Inc. Page i of i

Contents Page

1.0 Introduction ......................................................................................................... 11.1 Purposes of this Report............................................................................ 2

2.0 Background ......................................................................................................... 2

3.0 Status of Sale Process ........................................................................................ 3

4.0 Anticipated Next Steps in these Proceedings ...................................................... 4

Appendices

Receivership Order and Endorsement dated April 15, 2013 ..............................................A

Order of the Ontario Superior Court of Justice dated April 30, 2013..................................B

Sale Process Order dated September 16, 2013.................................................................C

Letter dated August 14, 2014 to Employees.......................................................................D

Duff & Phelps Canada Restructuring Inc. Page 1

COURT FILE NO: CV13-10069-00CL

ONTARIOSUPERIOR COURT OF JUSTICE

(COMMERCIAL LIST)

BANK OF AMERICA, N.A.,AS ADMINISTRATIVE AGENT

APPLICANT

- AND -

CPI CORP., CPI PORTRAIT STUDIOS OF CANADA CORP. ANDCPI CANADIAN IMAGES

RESPONDENTS

FOURTH REPORT OFDUFF & PHELPS CANADA RESTRUCTURING INC.AS RECEIVER AND RECEIVER AND MANAGER OF

CPI CORP., CPI PORTRAIT STUDIOS OF CANADA CORP. ANDCPI CANADIAN IMAGES

AUGUST 14, 2014

1.0 Introduction

1. This report (“Report”) is filed by Duff & Phelps Canada Restructuring Inc. (“D&P”)in its capacity as receiver and receiver and manager (in such capacities, the“Receiver”) of the property, assets and undertaking of CPI Corp., CPI PortraitStudios of Canada Corp. (“CPI Portrait”) and CPI Canadian Images (“CPIImages”) (collectively, the “Companies”).

2. Pursuant to an order of the Ontario Superior Court of Justice (Commercial List)(the “Court”) dated April 15, 2013 (the “Receivership Order”), D&P was appointedas Receiver. A copy of the Receivership Order and the Endorsement of theHonourable Justice Morawetz dated April 15, 2013 is attached as Appendix “A”.

Duff & Phelps Canada Restructuring Inc. Page 2

3. Certain of the relief sought in the Receivership Order by Bank of America, N.A.,in its capacity as administrative agent (“Agent”) for a syndicate of lenders, and asapplicant in these proceedings, was adjourned and was subsequently granted byorder of this Court on April 30, 2013 (the “April 30th Order”). A copy of the April30th Order is attached as Appendix “B”.

4. Pursuant to the April 30th Order, Keystone Consulting Group, LLC was appointedas the Companies’ Chief Restructuring Officer (“CRO”).

5. The primary purpose of these receivership proceedings has been to allow theCompanies’ business to continue to operate under its management team, withthe assistance of the CRO, while a Court-supervised sale process for theCompanies’ business and assets was carried out in a stabilized environment.

1.1 Purposes of this Report

1. The Receiver is not seeking specific relief at this time.

2. The purposes of this Report are to:

a) Provide background information about the Companies;

b) Provide a brief update on the status of these proceedings, including theCompanies’ operations and the sale process (“Sale Process”) carried outby the Receiver in accordance with a Court order made on September 16,2013 (“Sale Process Order”); and

c) Summarize the anticipated next steps in these proceedings.

2.0 Background

1. The Companies are subsidiaries of CPI Corp. (“CPI US”), a Delawarecorporation, the shares of which were listed until April, 2013 on the OTCPKexchange under the trading symbol “CPIC”. The Companies, together with CPIUS and its other subsidiaries, are collectively referred to as the “CPI Group”.

2. The CPI Group, headquartered in St. Louis, Missouri, provided professionalportrait photography of young children, individuals and families in Wal-Mart andSears stores across North America. The CPI Group discontinued its USoperations on or around April 5, 2013.

3. On May 1, 2013, CPI US, along with 15 of its affiliates, commenced Chapter 7bankruptcy proceedings in the U.S. Bankruptcy Court for the District of Delaware.

4. The Companies presently operate from 318 retail locations in Canada, comprisedof 248 Wal-Mart locations and 70 Sears locations.

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5. The Companies lease their head office in St. Louis, Missouri. They also leasepremises in Brampton, Ontario, which serves as an administrative office andwarehouse.

6. CPI Images and CPI Portrait are parties to license agreements with each of Wal-Mart Canada Corp. (“Wal-Mart Canada”) and Sears Canada Inc. (“SearsCanada”), respectively, which govern, inter alia, the basis on which theCompanies utilize space at each location, the fees payable to each licensor andthe corresponding payment mechanisms.

7. The Companies currently have approximately 1,200 full time, part time andtemporary employees. The Companies’ workforce is not unionized.

8. CPI Corp. maintains a frozen defined benefit pension plan (the “Pension Plan”).Pursuant to the April 30th Order, the Receiver is, among other things, authorizedto: (a) cause CPI Corp. to continue to make special payments to the PensionPlan; and (b) direct CPI Corp. to continue to administer the Pension Plan. TheCompanies have continued to perform both (a) and (b) in accordance with theApril 30th Order.

9. Over the course of these proceedings, the Companies’ operations havecontinued without disruption, vendors have continued to be paid in the normalcourse, and a large number of employees have continued to be employed by theCompanies, as provided by Paragraph 14 of the Receivership Order.

10. In order to enhance the long term prospects of the business and to preserveliquidity during these proceedings, the Companies have taken a number of stepsto improve their long term viability prospects. This has included closing anumber of underperforming stores, including two Wal-Mart Canada locations and37 Sears Canada locations. Since the date of receivership, headcount has beenreduced by approximately 140 employees, largely due to the reduction in thenumber of stores. The Companies have paid, and will continue to pay, to anyterminated employees all wages and vacation pay owing to them as of theiremployment termination date.

3.0 Status of Sale Process

1. The Receiver is continuing to advance a sale process for the Company, as it hassince the date these proceedings commenced.

2. The Receiver’s initial sale process efforts focused on a transaction with aprospective purchaser that had expressed an interest in being a stalking horsebuyer in a Court supervised sale process. Negotiations with this partycommenced prior to D&P’s involvement with this matter; that is, this party hadbeen in negotiations with the Companies prior to the commencement of thereceivership. This party ultimately opted not to pursue a transaction for theCompanies.

Appendix “A”

Appendix “B”

Appendix “C”

Appendix “D”

Duff & Phelps Canada Restructuring Inc.

333 Bay Street, 14th Floor

Toronto, Ontario, M5H 2R2

T

F

+1 416 364 9700

+1 647 317 1836

www.duffandphelps.ca

August 14, 2014

Dear Employees of CPI Corp., CPI Portrait Studios of Canada Corp. and CPI Canadian Images

As you are likely aware, on April 15, 2013, Duff & Phelps Restructuring Inc. was appointed as receiver(the “Receiver”) of CPI Corp., CPI Portrait Studios of Canada Corp., and CPI Canadian Images(collectively, the “Company”). The business has been operating in the ordinary course since that timeunder the direction of its management and its Chief Restructuring Officer. The Receiver has marketedthe assets of the business pursuant to a court approved sales process in an effort to sell the business asa going concern.

Following the conclusion of the sale process, a potential purchaser was identified in early January, 2014.Since that time, the Receiver has been working with the potential purchaser to conclude an agreement ofpurchase and sale. The Receiver and the potential purchaser have also been working to address variousissues in connection with closing the transaction, which, unfortunately, have delayed closing longer thanexpected. The Receiver or Management of the Company will advise employees once there has been achange in the status concerning the sale of the Company.

Copies of all materials filed with the Court in these proceedings are available on the Receiver’s website at

http://www.duffandphelps.com/intl/en-ca/Pages/RestructuringCases.aspx?caseId=314, includingthe Receiver’s most recent report dated August 14, 2014.

If you have any questions, please do not hesitate to contact the Receiver at:

Duff & Phelps Canada Restructuring Inc.Bay Adelaide Centre333 Bay Street, 14

thFloor

Toronto, OntarioAttention: Noah GoldsteinPhone: 416 932 6207Email: Noah.Goldstein@duffandphelps.com

Sincerely,

DUFF & PHELPS CANADA RESTRUCTURING INC.

IN ITS CAPACITY AS COURT-APPOINTED RECEIVER AND RECEIVER AND MANAGER OF

CPI CORP., CPI PORTRAIT STUDIOS OF CANADA CORP. AND CPI CANADIAN IMAGES

AND NOT IN ITS PERSONAL CAPACITY