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Bonus Bonds is a New Zealand unit trust founded in 1970 with a reward scheme based on cash prizes. The New Zealand government launched bonus bonds under the Unit Trusts Act 1960 through the Post Office Savings Bank with the goal of encouraging New Zealanders to save. It is the country's largest retail unit-trust, with around one third of New Zealanders owning bonds.
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Management
As of 2013 the ANZ manages the trust (ANZ acquired PostBank (Post Office Bank Ltd) from the government in 1988). Trustees Executors Limited acts as a trustee for bondholders. Potential customers can purchase bonds from any ANZ branch or from any PostShop.
Management invests trust funds in "safe" assets such as corporate securities, government bonds and securities issued by banks.
Prizes
Each month the trust pays out a total of NZ$7.9 million, consisting of 248,000 random tax-paid cash prizes, based on the amount invested, with three top prizes: 1 of $1,000,000, 1 of $100,000 and 1 of $50,000. In order to participate in a draw, investors must purchase a minimum $20 in bonds, and must have held them for a full calendar month. As of 30 September 2007, Bonus Bonds have paid out NZ$2,921,000,000 (almost $3 billion NZD) in more than 3 million tax-paid cash prizes.
The chances of winning do not exceed 1 in 9,600 per unit - as required by the Finance Act (No 2) 1990. As of 2007 the chance of each unit winning a prize ranged from 1 in 9,600 and 1 in 11,000. In 2015 the odds of winner per unit increased to range from between 1 in 14,000 and 1 in 20,000. A single bonus bond or unit translates to one dollar, and each unit owned has a chance of winning. The average win is apparently around $27.50, giving a tax-free return of around 3.4% . Returns will vary based on security returns, and these are of course averaged figures which will vary greatly due to the random nature of the investment. Mary Holm in The New Zealand Herald describes Bonus Bonds thus: "As I've said before, having a bit in bonus bonds is fine if you regard it as fun. But it is not the place for major savings".
To conduct the draw the Bonus Bonds trust uses a random number generator called ELSIE (Electronic Selection Indicator Equipment), based in the Bonus Bonds Transaction Centre in central Dunedin.
Marketing
Comedian Leigh Hart ('That Guy') promoted Bonus Bonds in a television advertisement, presenting the bonds as an exciting way to invest, with the catchphrase "the money and the bag" (referring to It's in the Bag, a long-running New Zealand radio and television game show).