NEW YORK - The State of Wisconsin's Investment Board, one of the 10 largest public pension funds in the U.S. and the owner of 3 million shares of Kmart stock, said Monday it opposes the chain's specialty retail stock proposal.

Kmart, however, said it is proceeding with the plan.

James Severance, SWIB's investment director, said, "In Wall Street's judgment, and ours, Kmart continues to pursue a dubious strategy of acquiring and making large investments in a series of specialty stores which have distracted Kmart from its core business and contributed to its loss of ground to Wal-Mart and other retailers."

Kmart plans to take cash from its Sports Authority Group, Borders-Walden bookstore group, OfficeMax and Builder's Square specialty stores through the public sale of stock on each subsidiary to beef up its discount stores and continue to refurbish them.

According to the proposal, Kmart would retain 70 to 80 percent of equity in each subsidiary.

Responding to SWIB, Kmart said the proposal "is in the best interests of Kmart shareholders and provides the company with greater flexibility with regard to the businesses."

The company added that its specialty retail businesses have not distracted management's attention from its Kmart discount stores.

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