The Hong Kong Jockey Club's surplus this year has dropped by nearly 80 per cent, or HK$2.5 billion, due to the global downturn and a huge drop in investment returns, chairman John Chan Cho-chak said yesterday as he disclosed the biggest fall in years. Mr Chan said the club would have to take the rare step of dipping into its reserves to maintain its commitment to charity, a move unprecedented in recent years, The club's surplus for its 2008-09 financial year dropped by HK$2.5 billion, from HK$3.2 billion in 2007-08, to about HK$700 million, Mr Chan said during the fifth annual Community Day race meeting at Sha Tin racecourse. The club's turnover from its horse racing business would fall by about 1 per cent, from about HK$67.7 billion in the last financial year, Mr Chan said, the largest drop in recent years. '[The 1 per cent fall] might not seem a lot, but several other factors were contributing to the sharp fall in surpluses,' he said. 'One is the declining trend in our gross margins from HK$3.5 billion in the 2003-04 season to HK$3.1 billion last year, mainly due to initiatives like the [betting] rebate that we've put in place since the 2006 reforms to fight off illegal and offshore operators.' Another factor was 'the suffocatingly high' betting tax rates the club pays in Hong Kong - 72.5 per cent of gross margin, one of the highest rates worldwide and some five times higher than in Britain, Mr Chan said. Introduced in 2006, punters who place bets of HK$10,000 or more on four key pools - win, place, quinella and quinella-place - are eligible for a 10 per cent rebate on losing bets. Mr Chan also said: 'We've seen a big drop in our return on investments [this financial year] ... we also need to be conscious that the worst may be yet to come as, historically, spending patterns tend to lag an economic downturn by several months.' The diminished surplus fell well short of the club's annual HK$1 billion-plus donations to charitable and community projects, Mr Chan said. He added that the club's Charities Trust would still make this year's donations a record high and, by doing so, it had to correct the imbalance by dipping into its reserves. 'But I'm sure you will understand that we can only keep dipping into reserves for a finite period ... we must be allowed fair room for our business to be sustained and develop,' he said. Mr Chan also said that, apart from ensuring its role in supporting the community could be sustained, the club believed it was important to help the city maintain a stable workforce.