5.Investments

Investments are comprised of the following (in millions):



	Ownership	December 31,
	interest	2018		2017

Affiliated companies accounted for by the equity method (1)(2)	20% to 50%	$	354	$	280
Other investments			22		60
Subtotal Investment Assets		$	376	$	340


Affiliated companies accounted for by the equity method - HSG (1)(2)	50%	$		$	105
Subtotal Investment Liabilities		$		$	105

(1)

Amount reflects Corning’s direct ownership interests in the affiliated companies at December 31, 2018 and December 31, 2017. Corning does not control any of such entities.

(2)

HSG indirectly holds an 80.5% interest in a HSG operating partnership. At December 31, 2018, the carrying value of the investment in HSG was $42 million and recorded in Investments. At December 31, 2017, the negative carrying value of the investment in HSG was $105 million and recorded in Other Liabilities.

5.Investments (continued)

Affiliated Companies at Equity

The results of operations and financial position of the investments accounted for under the equity method follow (in millions):



	Years ended December 31,
	2018		2017		2016

Statement of operations:
Net sales	$	1,759	$	2,346	$	4,024
Gross profit	$	424	$	560	$	1,006
Net income	$	835	$	721	$	565
Corning’s equity in earnings of affiliated companies	$	390	$	361	$	284

Related party transactions:
Corning sales to affiliated companies	$	184	$	108	$	95
Corning purchases from affiliated companies	$	11	$	12	$	12
Corning transfers of assets, at cost, to affiliated companies	$	2	$	22	$	44
Dividends received from affiliated companies	$	241	$	201	$	85

	Years ended December 31,
	2018		2017
Balance sheet:
Current assets	$	1,716	$	1,593
Noncurrent assets	$	1,922	$	1,999
Short-term borrowings, including current portion of long-term debt	$	8	$	3
Other current liabilities	$	810	$	700
Long-term debt	$	14	$	16
Other long-term liabilities	$	1,708	$	2,128
Non-controlling interest	$	259	$	313

Related party transactions:
Balances due from affiliated companies	$	95	$	47

We have contractual agreements with several of our equity affiliates which include sales, purchasing, licensing and technology agreements.

As of December 31, 2018 and 2017, the undistributed earnings of equity companies included in our retained earnings were not material.

HSG and Dow Corning

On May 31, 2016, Corning completed the strategic realignment of its equity investment in Dow Corning Corporation (”Dow Corning”) pursuant to the Transaction Agreement announced in December 2015. Under the terms of the Transaction Agreement, Corning exchanged with Dow Corning its 50% stock interest in Dow Corning for 100% of the stock of a newly formed entity, which held an equity interest in Hemlock Semiconductor Group (“HSG”) and approximately $4.8 billion in cash.

5.Investments (continued)

Prior to realignment, HSG, a consolidated subsidiary of Dow Corning, was an indirect equity investment of Corning. Upon completion of the exchange, Corning received a direct equity investment in HSG. Because our ownership percentage in HSG did not change as a result of the realignment, the investment in HSG is recorded at its carrying value, which had a negative carrying value of $383 million at the transaction date. The negative carrying value resulted from a one-time charge to this entity in 2014 for the permanent abandonment of certain assets. Excluding this charge, the entity has been profitable and recovered its equity as of December 31, 2018. The carrying value of the investment in HSG as of December 31, 2018 was $42 million and recorded in Investments.

Corning’s financial statements as of December 31, 2016 include the positive impact of the release of a deferred tax liability of $105 million related to Corning’s tax on Dow Corning’s earnings that were not distributed as of the date of the transaction and a non-taxable gain of $2,676 million on the realignment. Details of the gain are illustrated below (in millions):



Cash	$	4,818
Carrying Value of Dow Corning Equity Investment		(1,560)
Carrying Value of HSG Equity Investment		(383)
Other (1)		(199)
Gain	$	2,676

(1)

Primarily consists of the release of accumulated other comprehensive income items related to unamortized actuarial losses related to Dow Corning’s pension plan and foreign currency translation gains in the amounts of $260 million and $45 million, respectively.

Corning began reporting HSG equity earnings and dividends on June 1, 2016. HSG information presented below is shown for the years ended December 31, 2018 and 2017 and the seven months ended December 31, 2016 (in millions):



	Years ended December 31,
	2018		2017		2016

Statement of operations:
Net sales	$	1,158	$	1,716	$	1,119
Gross profit	$	367	$	469	$	361
Net income	$	814	$	706	$	421
Corning’s equity in earnings of affiliated companies	$	388	$	352	$	212

Related party transactions:
Dividends received from affiliated companies	$	241	$	196	$	65

	Years ended December 31,
	2018		2017
Balance sheet:
Current assets	$	1,188	$	1,206
Noncurrent assets	$	1,414	$	1,522
Short-term borrowings, including current portion of long-term debt	$	3	$	3
Other current liabilities	$	540	$	484
Long-term debt	$	11	$	15
Other long-term liabilities	$	1,708	$	2,126
Non-controlling interest	$	259	$	313