Exhibit 10.1

CYS INVESTMENTS, INC.

2013 INCENTIVE COMPENSATION PLAN

CYS Investments, Inc.’s 2013 Incentive Compensation Plan (the “Plan”) is a plan
under which eligible employees of CYS Investments, Inc. (the “Company”) may earn
bonus awards (“Bonus Awards”). Bonus Awards under the Plan will be paid
annually. The amount of a Bonus Award will be based upon the Company’s and the
employee’s performance during the 2013 fiscal year.

The Plan was adopted by the Compensation Committee on March 26, 2013, subject to
the stockholders’ approval of the 2013 Equity Incentive Plan (the “Equity
Plan”), and the Plan will not be effective unless the Equity Plan receives the
requisite approval by the Company’s stockholders at the 2013 annual
stockholders’ meeting. The “Quantitative Component” (described below) of the
Plan is intended to permit the payment of “performance based compensation” under
Section 162(m) of the Internal Revenue Code.

The Quantitative Component establishes the terms of certain awards under the
Equity Plan as described herein. Each participant in the Plan is granted an
Incentive Award pursuant to the Equity Plan. The Incentive Award represents the
right to receive a cash payment of 50% of the amount earned under the
Quantitative Component. However, the maximum amount that will be payable in cash
under the Plan will not exceed 0.50% of the average net assets of the Company
for 2013 (the “Cash Payment Limit”). The Incentive Award also represents the
right to receive shares of restricted common stock of the Company with a value
(on the date the shares are issued) equal to 50% of the amount earned under the
Quantitative Component plus any amount that is earned but that cannot be paid in
cash on account of the Cash Payment Limit. The shares of restricted common stock
issued in settlement of the Incentive Award shall be subject to the vesting
requirements and transfer restrictions as described below.

The Plan also includes the “Qualitative Component” (described below) which is
separate and distinct from the Quantitative Component. The Qualitative Component
is not intended to satisfy the requirements of “performance based compensation”
under Section 162(m) of the Internal Revenue Code. The Qualitative Component is
intended to allow the Compensation Committee, in its discretion, to provide
additional compensation to Participants (as defined below) based on the
Compensation Committee’s evaluation of the Participant’s contributions to the
success of the Company.

Purposes. The Plan is a component of the Company’s overall strategy to pay its
employees for performance. The purposes of the Plan are to: (i) attract and
retain top performing employees; (ii) motivate employees by tying compensation
to the Company’s absolute and relative performance and (iii) reward exceptional
individual performance that supports the Company’s overall objectives.

 

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Eligibility. All employees of the Company are eligible to participate in the
Plan, except for employees who (i) are classified as interns/project employees
or (ii) commence employment pursuant to an offer letter that excludes
participation in the Plan. Those employees who are determined to be eligible for
Bonus Awards under the Plan are called “Participants.” An employee must commence
employment or otherwise become eligible to participate in the Plan no later than
July 1; provided, however that the Compensation Committee of the Board of
Directors of the Company, or its delegate (the “Compensation Committee”), may
make exceptions to this requirement in its sole discretion as it deems
appropriate. Being a Participant does not entitle the individual to receive a
Bonus Award.

Plan Year. The Plan operates on a fiscal year basis, January 1, 2013 through
December 31, 2013 (the “Fiscal Year”).

Bonus Awards. A Participant must be an active employee in good standing and on
the payroll of the Company, or an approved subsidiary, on the day the Bonus
Award is paid to receive any portion of the bonus payment. A Participant who is
not actively employed or on an approved payroll for whatever reason on the date
a Bonus Award is paid is not entitled to a partial or pro rata Bonus Award.
Notwithstanding the foregoing, a Participant may be eligible to receive a Bonus
Award pursuant to his or her employment agreement even if such Participant is
not actively employed or on an approved payroll on the date a Bonus Award is
paid. Additionally, the Compensation Committee may make exceptions to the
foregoing in its sole discretion as it deems appropriate. There is no minimum
award or guaranteed payment. Bonus Awards for the 2013 Fiscal Year will be paid
on a pro-rata basis based on the period of the Fiscal Year during which the
Participant was employed by the Company. Bonus Awards will be paid by March 15,
2014. A Bonus Award is calculated at the discretion of the Compensation
Committee after considering the Company’s absolute and relative performance, the
Participant’s minimum, target and maximum bonus opportunities in light of the
Company’s performance and the employee’s performance for the Fiscal Year.

(a) Components of the Plan. The Plan shall be divided into two components, a
quantitative component (the “Quantitative Component”) and a qualitative
component (the “Qualitative Component”). The Quantitative Component shall be
further sub-divided into two components, an absolute return sub-component (the
“Absolute Return Sub-Component”) and a relative return sub-component (the
“Relative Return Sub-Component”). The Absolute Return Sub-Component will
represent 50% of the total Quantitative Component and the Relative Return
Sub-Component will represent 50% of the total Quantitative Component. The amount
of each Participant’s bonus under the Quantitative component will be contingent
on whether the minimum, target or maximum levels of performance (as described
below) have been achieved.

(i) Quantitative Component. The size of the Quantitative Component shall be
contingent upon (i) with respect to the Absolute Return Sub-Component, the
Company’s return on net assets (“RONA”) exceeding specified ranges of RONA (the
“Hurdle Rates”) for the Fiscal Year and (ii) with respect to the Relative

 

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Return Sub-Component, the Company’s relative three-year total stockholder return
performance (based on stock price appreciation and dividend yield) compared to a
competitor peer group.

The size of the Quantitative Component, both the Absolute Return Sub-Component
and the Relative Return Sub-Component, of each Participant’s Bonus Award shall
be based on various percentages of his or her base salary with respect to the
following threshold levels:

 

     Percentage of Base Salary  

Name

   Minimum     Target     Maximum  

Kevin Grant

     100 %      325 %      550 % 

Frances Spark

     50 %      100 %      150 % 

Richard Cleary

     50 %      100 %      150 % 

Thomas Rosenbloom

     50 %      100 %      150 % 

All Other Employees

     Will vary based on employee   

(A) Absolute Return Sub-Component. The Absolute Return Sub-Component is based on
RONA. RONA shall equal (i) (A) core earnings, as such term is reported in the
Company’s quarterly and annual reports filed with the Securities and Exchange
Commission, plus (B) adjustments that the Board of Directors recognizes when
arriving at the dividend decision (i.e., drop income), plus or minus (C) the
accretion or dilution, as the case may be, resulting from the issuance of
securities in capital raising transactions, divided by (ii) the average net
assets for the Fiscal Year. Specifically, the bonus threshold levels of the
Absolute Return Sub-Component shall be determined as follows:

 

Bonus Levels

   Hurdle Rates  

Minimum

     9%-10%   

Target

     10%-11%   

Maximum

     Greater than 11 % 

The portion of the Bonus Award earned under the Absolute Return Sub-Component of
the Quantitative Component for the Fiscal Year will be calculated for each
Participant by multiplying (i) 0.50 times (ii) the product of (A) the
percentage(s) that correspond to each Participant’s bonus level (minimum, target
or maximum) and (B) such Participant’s 2013 base salary.

(B) Relative Return Sub-Component. The Relative Return Sub-Component is based on
the Company’s three-year total stockholder return (through stock price
appreciation and dividend yield) compared to a competitor peer group. The peer
group consists of the following companies: American Capital Agency Corp.,
Anworth Mortgage Asset Corporation, Annaly Capital Management, Inc., Armour

 

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Residential REIT, Inc., Capstead Mortgage Corporation and Hatteras Financial
Corp. Specifically, the bonus threshold levels and total size of the Relative
Return Sub-Component will depend on the Company’s ranking amongst its peer
group, as described below:

 

Bonus Levels

   Ranking Amongst Peer Group

Minimum

   45th - 54.99th percentile

Target

   55th - 74.99th percentile

Maximum

   75th percentile or higher

The portion of the Bonus Award earned under the Relative Return Sub-Component of
the Quantitative Component for the Fiscal Year will be calculated for each
Participant by multiplying (i) 0.50 times (ii) the product of (A) percentage(s)
that correspond to each Participant’s bonus level (minimum, target or maximum)
and (B) such Participant’s 2013 base salary.

The size of the Quantitative Component is predicated on the condition that the
Company manages its investment portfolio within leverage parameters established
by the Board, in consultation with the Company’s management. If the Company
exceeds the Board’s pre-determined leverage ratio (which the Board has initially
set for the Fiscal Year as 8 to 1) (the “Leverage Cap”), then any Bonus Awards
under the Quantitative Component attributable to the Company’s leverage ratio
being in excess of the Leverage Cap, with the leverage ratio calculated on a
monthly basis, will not be paid to the Participants. Notwithstanding the
foregoing, the Board may adjust the Leverage Cap at any time during the
applicable fiscal year based upon consultation with the Company’s management.

(ii) Qualitative Component. The size of the Qualitative Component, the
Participants who receive a bonus payment under the Qualitative Component and the
amount of each such payment shall be determined by the Compensation Committee in
its sole discretion. The Compensation Committee may consider the following
qualitative performance factors in addition to any other factors that the
Compensation Committee deems to be appropriate: (i) for the Chairman and Chief
Executive Officer (the “CEO”): (A) leadership of the Board and the Company,
(B) investor relations, stockholder communications and capital raising, (C) the
Company’s performance relative to its budget and (D) risk management and capital
preservation, and (ii) for the other senior executive officers, qualitative
performance objectives determined annually by the CEO and the Board, which may
include criteria such as: (A) business unit/functional area performance and
(B) leadership/organizational development.

(iii) Bonus Formula. For the avoidance of doubt and as described elsewhere in
this Plan, Bonus Awards will be determined and paid in accordance with the
following formula:

Participant’s Bonus Award = (0.5*(Participant’s percentage of Base Salary that
corresponds to the Absolute Return Sub-Component achieved*Participant’s base
salary)) + (0.5*(Participant’s percentage of Base Salary that corresponds to the
Relative Return Sub-Component achieved*Participant’s base salary)) + the
Qualitative Component.

 

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(b) Form of Bonuses.

(i) Size of Cash Component of Bonus Awards. The aggregate cash component of each
Participant’s Bonus Award (the “Cash Component”) shall be paid under an
Incentive Award granted pursuant to the Equity Plan and will be 50% of such
Participant’s total Bonus Award, but will not exceed the Cash Payment Limit.
Each Participant will receive 50% of his or her individual Bonus Award in cash
with such pro-rata reductions as is necessary so that the Cash Payment Limit is
not exceeded; provided, however, that an employee whose Bonus Award is less than
$100,000 shall receive 10% of his or her individual Bonus Award in restricted
stock under the Long-Term Equity Component (as defined below) and the remainder
in cash. Notwithstanding the foregoing sentences in this section, the
Compensation Committee may (i) elect in its discretion to increase the Cash
Payment Limit and the Cash Component of the Bonus Awards to be greater than 50%
if, pursuant to this section, certain employees receive greater than 50% of
their Bonus Award in cash, and (ii) increase the portion of an employee’s Bonus
Award payable in cash, with a corresponding reduction in the amount of the Bonus
Award paid under the Long-Term Equity Component, on a case by case basis in the
discretion of the Compensation Committee.

(ii) Size of Long-Term Equity Component of Bonus Pool. Except as provided in the
section above, the long-term equity component of each Participant’s Bonus Award
(the “Long-Term Equity Component”) shall be issued in settlement of an Incentive
Award granted pursuant to the Equity Plan and will be 50% of such Participant’s
total Bonus Award. If the Cash Component exceeds the Cash Payment Limit, the
Compensation Committee may, but will not be required to, increase the amount of
the Long-Term Equity Component by an amount equal to the excess amount of the
Cash Component over the Cash Payment Limit. Except as provided in certain
circumstances as described in the section above, each Participant will receive
the Long-Term Equity Component of their individual Bonus Award in the same
percentage as the Long-Term Equity Component percentage of the total Bonus
Awards. Awards under the Long-Term Equity Component will be in the form of Stock
Awards (as defined in the Equity Plan) under the Equity Plan that will vest
ratably on an annual basis over a five-year period or such other period as may
be determined by the Compensation Committee. Each Bonus Award paid under the
Plan, whether in cash or restricted stock, will be paid subject to the Company’s
right to recoup or “clawback” all or part of the payment in accordance with the
requirements of Company policy or applicable law.

 

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