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About transparency knockouts
You use the Knockout Group option in the Transparency palette to make every object of the selected group or layer knock out--that is, visually block out--the other objects in the group or layer that it overlays. Only artwork within the selected group or layer is knocked out. Objects beneath the selected group or in different layers are still visible relative to the group or layer.
You can also control the interaction of transparent fills and strokes within an object if the transparency is applied directly to the fill or stroke in the Appearance palette. To do this, select or target the object and then select a Knockout Group option.
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