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i'm not sure how to use illustrator but i bet like all the other programs out there, it has a masking feature; reading what you wrote i am assuming you already know how to make a rounded box; so make a rounded box with the shape of your picture, and then take your photo and mask it with your rounded box; sorry i can't be more detailed; i'm sure an adobe product would have these features but i dont have it myself so cant look at it in detail
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