Exhibit 10.1

CYS INVESTMENTS, INC.

INCENTIVE COMPENSATION PLAN FOR THE YEAR ENDING
DECEMBER 31, 2012

CYS Investments, Inc.’s Incentive Compensation Plan (the “Plan”) is a plan under
which CYS Investments, Inc. (the “Company”) pays discretionary bonus awards
(“Bonus Awards”) to eligible employees. 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 fiscal year. The portion of the Plan payable
under the Quantitative Component (as defined below) is intended to provide
employees with “performance-based compensation” within the meaning of Section
162(m) of the Internal Revenue Code.
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.
Effective Date. 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, 2012 through
December 31, 2012 (the “Fiscal Year”).
Bonus Awards. Bonus Awards are discretionary payments. A Participant must be an
active employee in good standing and on the Company’s, or an approved
subsidiary’s, payroll 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 2012 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, 2013. 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,

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Exhibit 10.1

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 70% of the total Quantitative Component and the Relative Return
Sub-Component will represent 30% of the total Quantitative Component. The amount
of each Participant’s bonus will be contingent on whether the Company’s returns
met certain minimum, target or maximum levels (as described below).
Notwithstanding any other provision of the Plan, the aggregate bonus payments
under the Plan shall not exceed an amount equal to $15 million ($10.5 million
for the Absolute Return Sub-Component and $4.5 million for the Relative Return
Sub-Component), unless the Board of Directors of the Company (the “Board”)
elects to make awards in excess of this limitation.
(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 Return
Sub-Component, the Company’s relative three-year total 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 E. Grant
100%
325%
550%
Frances R. Spark
50%
100%
150%
Richard E. Cleary
50%
100%
150%
Thomas A. 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

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Exhibit 10.1

(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
10%-12%
Target
12%-14%
Maximum
Greater than 14%

The Absolute Return Sub-Component of the Quantitative Component will be
calculated for the Fiscal Year for each Participant by multiplying (i) 0.70
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 2012 base salary.
(B)Relative Return Sub-Component. The Relative Return Sub-Component is based on
the Company’s three-year total return to stockholders (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., Capstead
Mortgage Corporation, Hatteras Financial Corp., Invesco Mortgage Capital, Inc.,
MFA Financial, Inc., PennyMac Mortgage Investment Trust, RAIT Investment Trust
and Redwood Trust, Inc. 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
Aggregate Amount of Relative Return Sub-Component
Minimum
45th -54.99th percentile
$1,500,000
Target
55th - 74.99th percentile
$3,000,000
Maximum
75th percentile or higher
$4,500,000

The Relative Return Sub-Component of the Quantitative Component will be
calculated for the Fiscal Year for each Participant by multiplying (i) 0.30
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 2012 base salary.

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Exhibit 10.1

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 shall be
determined by the Compensation Committee as follows:
(A)If no awards are earned pursuant to the Quantitative Component of the Plan,
the Compensation Committee may set the Qualitative Component of each
Participant’s Bonus Award up to an amount equal to what such Participant would
have earned if the minimum thresholds of the Quantitative Component were met.
(B)If awards are earned pursuant to the Quantitative Component of the Plan, the
Compensation Committee may adjust the size of the Quantitative Component of each
Participant’s Bonus Awards by up to 25% of the Quantitative Component, with this
additional amount to be awarded under the Qualitative Component.
The Compensation Committee may consider the following qualitative performance
factors when determining the size of the Qualitative Component 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, shareholder 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 and organizational
development.
(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”) will be 50% of such
Participant’s total Bonus Award, but will not exceed 0.50% of the average net
assets of the Company for the Fiscal Year (the “Cash Cap”). 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 Cap 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 Cap and the Cash

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Exhibit 10.1

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”) will be 50% of such Participant’s total Bonus
Award. If the Cash Component exceeds the Cash Cap, 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 Cap. 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 shares of restricted stock under the
Company’s 2006 Stock Incentive 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.