Terra Firma, the private equity firm which owns EMI, has written off €1.365 billion ($1.718 billion) in its investments.

The lion's share of that impairment charge is reportedly down to EMI, which it acquired in August 2007 for £2.4 billion ($4.89 billion at August 2007 rates). The impairment figure was revealed in Terra Firma's annual report.

The report noted that the decline of the pound against the euro "had reduced valuations in euro terms, especially at EMI."

"While we are working hard to ensure that the final performance of these investments are positive ones, we must be open and realistic about where the markets stand today and not take credit now for potential future improvements in earnings or market conditions," said the report.

The report also states that "EMI will be more selective in its artist relationships," claiming that only a small number of its 1,300 artists are profitable. However, EMI's recorded music EBITDA has increased for the nine months to December 2008, up to £104 million ($146 million) compared to £12 million ($16.85 million) in the same period in 2007.

Terra Firma is also handing back some €80 million ($100.7 million) of performance fees as a result of the writedown.

"This is absolutely right," said Terra Firma CEO Guy Hands, who is also chairman of EMI. "Our investors have suffered and therefore our rewards should suffer at the same time. Such longer-term rewards throughout the entire financial system would have led to a very different world to the one we find ourselves in today."

Hands has reportedly agreed to give back €40 million ($50.35 million) of fees he personally generated since 2004.