PROXY STATEMENT

The Board of Directors of General Dynamics Corporation is soliciting your proxy for the Annual Meeting of Shareholders to be held on May 7, 2014, at 9:00 a.m. local time, or at any adjournment or postponement of the meeting. This Proxy Statement, and the accompanying Notice of Annual Meeting of Shareholders and proxy card, are being distributed on or about March 21, 2014, to holders of General Dynamics common stock, par value $1.00 per share (Common Stock).

Proxy Summary

This summary highlights selected information in this Proxy Statement. Please review the entire Proxy Statement and the General Dynamics 2013 Annual Report before voting.

BUSINESS PERFORMANCE HIGHLIGHTS

In 2013, we focused on operational excellence to expand margins, efficiently convert operating earnings into cash and increase return on invested capital. As a result, we achieved:

To achieve these results, our management strengthened performance by continuously improving the operations of each of our businesses. Among our highlights for the year:

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CORPORATE GOVERNANCE HIGHLIGHTS

Our Board of Directors believes that a commitment to good corporate governance enhances shareholder value. Our governance practices include:

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EXECUTIVE COMPENSATION HIGHLIGHTS

Our compensation philosophy at General Dynamics is to align each Named Executive Officer’s compensation with company, business group and individual performance, and to provide the incentives necessary to attract, motivate and retain the executives that help drive the company’s success. In order to achieve these goals, the Compensation Committee and management team:

In summary, we compensate our Named Executive Officers as follows:

VOTING MATTERS AND BOARD RECOMMENDATIONS

At this year’s Annual Meeting, we are asking our shareholders to vote on the following matters:

Important information about the Annual Meeting and voting can be found beginning on page 72.

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ELECTION OF THE BOARD OF DIRECTORS OF THE COMPANY

(PROPOSAL 1)

Director Nominations and Criteria. General Dynamics’ directors are elected at each annual meeting of shareholders and hold office for one-year terms or until successors are elected and qualified. The Nominating and Corporate Governance Committee considers director nominees from various sources and chooses nominees with the primary goal of ensuring the Board collectively serves the interests of shareholders. In assessing director candidates, the committee considers the background and professional experience of the candidates in the context of the current Board composition to ensure a diverse range of backgrounds, talent, skill and expertise. Relevant criteria considered by the committee include: business and financial expertise, technical expertise and familiarity with issues affecting aerospace and defense businesses. The committee also carefully considers any potential conflicts of interest. All nominees must possess good judgment, an inquiring and independent mind, and a reputation for the highest personal and professional ethics, integrity and values. Nominees must be willing to devote sufficient time and effort to carrying out their duties and responsibilities and should be committed to serve on the Board for an extended period of time.

The Nominating and Corporate Governance Committee will consider director nominees recommended by shareholders in the same manner as it considers and evaluates potential directors identified by the company. The information requirements for director nominations can be found in Article II, Section 10 of our Amended and Restated Bylaws available on our website at www.generaldynamics.com, under the “Investor Relations” – “Highlights” headings, or in print upon request.

2014 Director Nominees. The following 12 nominees are standing for election to the Board of Directors at the Annual Meeting. All nominees are currently serving as directors. If any nominee withdraws or for any reason is unable to serve as a director, your proxy will be voted for any remaining nominees (except as otherwise indicated in your proxy) and any replacement nominee designated by the Nominating and Corporate Governance Committee of the Board of Directors.

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Director Retirement Policy. The company’s Bylaws provide that no director shall stand for election beyond the age of 75. Additionally, the Bylaws provide that under circumstances of significant benefit to the company, an individual over the age of 72 years may stand for election as director only with the approval of the Nominating and Corporate Governance Committee and a two-thirds vote of the directors then in office. In March 2014, the committee recommended and the Board unanimously requested that Robert Walmsley stand for re-election. The Board took this action in recognition of the continued valuable counsel and insight that Mr. Walmsley provides to the Board with respect to United Kingdom and international defense matters and the complex operational and governance matters of a global public company.

Your Board of Directors unanimously recommends a vote FOR all the director nominees listed above.

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GOVERNANCE OF THE COMPANY

OUR COMMITMENT TO STRONG CORPORATE GOVERNANCE

General Dynamics is committed to employing strong corporate governance practices to promote a culture of ethics and integrity that defines how we do business. At the core, we are in business to earn a fair return for our shareholders. To that end, our Board of Directors believes that a commitment to good corporate governance helps us compete more effectively, sustain our success over the long term and enhance shareholder value.

On the recommendation of the Nominating and Corporate Governance Committee, the Board has adopted the General Dynamics Corporate Governance Guidelines to provide a framework for effective governance of the Board and the company. The guidelines establish policies and practices with respect to Board operations and responsibilities, including board structure and composition, director independence, executive and director compensation, succession planning and the receipt of concerns and complaints by the Board. The Board regularly reviews these guidelines and updates them periodically in response to changing regulatory requirements, feedback from shareholders on governance matters and evolving best practices in corporate governance.

The Board believes that its commitment to good governance is demonstrated by key corporate governance practices, including: a majority voting standard for the election of directors coupled with a director resignation policy; an independent lead director; disclosure of corporate political contributions and trade association dues on our website; an industry-leading executive stock ownership policy; a policy prohibiting hedging and pledging by directors and officers; an executive compensation recoupment (clawback) policy; and shareholders’ right to call a special meeting. These and other practices are highlighted on page 2.

OUR CULTURE OF ETHICS

As part of our commitment to strong corporate governance practices, we maintain an active and robust ethics program. We have a Standards of Business Ethics and Conduct Handbook that applies to all employees. This handbook, known as the “Blue Book,” has been updated and improved as we have grown and changed over the years. Our ethics program also includes a 24-hour ethics helpline, which employees can access via telephone or online to communicate any business-related ethics concerns, and periodic training on ethics and compliance topics for all employees.

We also have adopted ethics codes specifically applicable to our Board of Directors and our financial professionals. The Code of Conduct for Members of the Board of Directors embodies our Board’s commitment to manage our business in accordance with the highest standards of ethical conduct. The Code of Ethics for Financial Professionals, which supplements the Blue Book, applies to our chief executive officer, chief financial officer, controller and any person performing similar financial functions.

Any amendments to or waivers from the Standards of Business Ethics and Conduct, Code of Ethics for Financial Professionals or Code of Conduct for Members of the Board of Directors on behalf of any of our executive officers, financial professionals or directors will be disclosed on our website.

BOARD LEADERSHIP STRUCTURE

Our Board comprises independent, accomplished and experienced directors who provide advice and oversight to further the interests of our company and our shareholders. Our Board believes that its organizational structure provides a framework for it to provide independent leadership and engagement while ensuring appropriate insight into the operations and strategic issues of the company.

Chairman. Our Board elects a chairman from among the directors and determines whether to separate or combine the roles of chairman and chief executive officer based on what it believes best serves the needs of the company and its shareholders at any particular time. The Board believes that Ms. Novakovic’s deep understanding of the company’s business, day-to-day operations, growth opportunities, challenges and risk management practices gained through several leadership positions enable her to provide strong and effective leadership to the Board and to ensure that the Board is informed of important issues facing the company. The Board also believes that having a combined role promotes a cohesive, strong and consistent vision and strategy for the company.

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Independent Lead Director. The Board has created the position of a lead director, selected annually by the Board from among the independent directors. Mr. Crown currently serves as lead director. The Board believes the lead director position provides additional independent oversight of senior management and board matters. The selection of a lead director facilitates communication among the directors or between any of them and the chairman. Directors frequently communicate among themselves and directly with the chairman.

The lead director’s authority and responsibilities are as follows:

DIRECTOR INDEPENDENCE

Independence Standards. Our Board of Directors assesses the independence of our directors and examines the nature and extent of any relationships between General Dynamics and our directors, their families and their affiliates. Our Board has established an objective that at least two-thirds of the directors be independent directors. For a director to be considered independent, the Board must determine that a director does not have any direct or indirect material relationship with General Dynamics. Our Board has established director independence guidelines (the Director Independence Guidelines) as part of the Corporate Governance Guidelines to assist in determining director independence in accordance with the rules of the New York Stock Exchange.

The Director Independence Guidelines provide that an “independent director”:

For purposes of the Director Independence Guidelines, references to General Dynamics include any of our subsidiaries and the term “immediate family member” includes a person’s spouse, parents, children, siblings, mothers- and fathers-in-law, sons- and daughters-in-law, brothers- and sisters-in-law, and anyone (other than domestic employees) who shares the person’s home.

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Independence Determinations. In March 2014, the Board of Directors considered whether each member of the Board meets the definition of an “independent director” in accordance with the rules of the New York Stock Exchange and the Director Independence Guidelines. The Board determined that Ms. Barra, Ms. Schumacher and Messrs. Crown, Fricks, Kaminski, Keane, Lyles, Mattis, Osborn and Walmsley each qualifies as an independent director. The Board also determined that Mr. Chabraja and Ms. Novakovic are not independent directors. To make these independence determinations, the Board reviewed all relationships between General Dynamics and the directors and affirmatively determined that none of the directors who qualifies as independent has a material business, financial or other type of relationship with General Dynamics, other than as a director or shareholder of the company. Specifically, the Board considered the relationships listed below and the related person transactions listed on page 16 of this Proxy Statement and found them to be immaterial. For each of the relationships that the Board considered for 2011, 2012 and 2013, the payments made or received by General Dynamics, and the charitable contributions made by General Dynamics, fell below the greater of $1 million or 2% of the consolidated gross revenues of the other company.

BOARD MEETINGS AND ATTENDANCE

During 2013, the Board of Directors held 10 meetings. This included a three-day meeting in February to review our 2013 operating plan, including the operating plans of each of our business units and business groups. In August 2013, the Board visited the Sterling Heights, Michigan, facility of our General Dynamics Land Systems business unit and met with that business unit’s management team. Each of our directors attended at least 92% of the meetings of the Board and committees on which they served in 2013. We encourage directors to attend each annual meeting of shareholders. All of our directors attended the 2013 annual meeting of shareholders.

EXECUTIVE SESSIONS OF THE BOARD

Our Board holds executive sessions of the non-management directors in conjunction with all regularly scheduled Board meetings. The non-management directors may also meet without management present at other times as requested by any non-management director. The lead director serves as chair at the executive sessions.

BOARD COMMITTEES

The Board of Directors has established the following four standing committees to assist in executing its duties: Audit, Compensation, Finance and Benefit Plans, and Nominating and Corporate Governance. The primary responsibilities of each of the committees are described below, together with the current membership and number of meetings held in 2013. Currently, three of the four Board committees are composed of independent, non-management directors, including those committees that are required by the rules of the New York Stock Exchange to be composed solely of independent directors. Each of the Board committees has a written charter. Copies of these charters are available on our website at www.generaldynamics.com, under the “Investor Relations” – “Corporate Governance” headings, or in print upon request.

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Committee Members. Listed below are the members of each of the four standing committees as of March 6, 2014.

Audit Committee

Compensation Committee

Finance & Benefit Plans Committee

Nominating & Corporate Governance Committee

Mary T. Barra

Nicholas D. Chabraja

James S. Crown

William P. Fricks

Paul G. Kaminski

John M. Keane

Lester L. Lyles

James N. Mattis

William A. Osborn

Laura J. Schumacher

Robert Walmsley

Lead Director		Chairperson		Member		Financial Expert

Committee Responsibilities. Following are descriptions of the primary areas of responsibility for each of the four committees.

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Pursuant to its charter, the Compensation Committee has engaged PricewaterhouseCoopers LLP (PwC) as a compensation consultant to provide advice on executive compensation matters. In early 2013 and again in early 2014, the committee, after reviewing the factors influencing independence (as specified by the New York Stock Exchange listing standards) including the fees paid by the company to PwC for other services, engaged PwC to provide context on the current executive compensation landscape from the perspective of regulators, shareholders and the competitive market, and to conduct a review of our executive compensation processes. PwC is also available to provide advice to the chair of the Compensation Committee or the Compensation Committee as a whole on executive compensation matters on an as-needed basis. PwC attends Compensation Committee meetings upon the request of the committee’s chair and may also provide observations and insights to the committee related to the amount or form of compensation for our executives.

In 2013, the chair of the Compensation Committee approved fees of approximately $126,000 to PwC in its capacity as external advisor to the Compensation Committee. Fees were higher in 2013 compared to 2012 due to PwC’s increased support of the Compensation Committee, including support provided for the committee chair’s shareholder engagement efforts on executive compensation matters and resulting program enhancements considered by the committee. Management neither made, nor recommended, the decision to engage PwC. The PwC group providing compensation services to the Compensation Committee reports directly to the chair of the Compensation Committee and is not involved in providing any other services to the company. During 2013, we also retained PwC to provide services to the company unrelated to executive compensation including tax and other business-related services. The aggregate fees paid for those services in 2013 were approximately $3 million. In February 2014, the Compensation Committee undertook an assessment of PwC’s services for the committee and the company as well as other factors influencing independence (as specified by the New York Stock Exchange listing standards) and determined that no conflict of interest exists. The committee further concluded that PwC is independent of management as a consultant and is duly qualified to assist the committee.

RISK OVERSIGHT

We believe our Board leadership structure supports a risk-management process in which senior management is responsible for our company’s day-to-day risk-management processes and the Board provides oversight of those processes. The Board oversees management of risks across the company at both the full Board and committee levels. The focus of the Board’s risk management oversight is on the most significant risks facing the company, including strategic, operational, financial and legal risks.

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Board of Directors. The full Board reviews and approves annually a corporate policy addressing the delegation of authority and assignment of responsibility to ensure that the responsibilities and authority delegated to senior management are appropriate from an operational and risk-management perspective. In addition, the Board assesses the company’s strategic and operational risks throughout the year, with particular focus on these risks at an annual three-day Board meeting in late January/early February. At this meeting, senior management reports on opportunities and risks in the markets in which the company conducts business. Additionally, each business unit president and each business group executive vice president presents the unit’s and group’s respective operating plan and strategic initiatives for the year, including notable business opportunities and risks. The Board reviews, adjusts where appropriate, and approves the business unit and business group goals and adopts our company operating plan for the year. These plans and related risks are monitored throughout the year as part of periodic financial and performance reports given to the Board by the chief financial officer and executive vice presidents of each business group. The Board also receives briefings from senior management concerning a variety of matters and related risks to the company, including defense budget and acquisition matters and specific customer or program developments.

In addition, each of the Board committees considers risk as it relates to its particular areas of responsibility.

DIRECTOR ORIENTATION AND CONTINUING EDUCATION

Within six months of election to the Board, each new director receives an orientation that consists of a series of in-person briefings provided by corporate officers on our business operations; operating plans; significant financial, accounting and risk-management matters; corporate governance; ethics; and key policies and practices. The new director receives briefings on the responsibilities, duties and activities of the committees on which the director will initially serve. The new director is also provided the opportunity to visit business units within each of the four business groups and receive briefings from the respective group executive vice president and members of the business unit management team. In addition, to further support directors, the general counsel and chief financial officer periodically provide materials and briefing sessions on subjects that assist directors in discharging their duties. Annually, the Board holds a three-day meeting with our senior management to review and approve the operating plan of each

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of our business units and business groups and the company as a whole. Directors also visit our business units periodically. These visits allow the directors to interact with a broader group of our executives and employees and gain a firsthand view of our operations.

BOARD AND COMMITTEE PERFORMANCE SELF-ASSESSMENTS

Each year the directors undertake a self-assessment for the Board and each committee on which they serve that elicits feedback on the performance and effectiveness of the Board and its committees. As part of this self-assessment, the directors are asked to consider the Board’s role, relations with management, composition and meetings. Each committee is asked to consider its role and the responsibilities set forth in the committee charter, the composition of the committee and the committee meetings. The self-assessment responses and comments are compiled by the Corporate Secretary and presented to the Nominating and Corporate Governance Committee for initial review. The responses and comments are presented to each committee and the full Board.

COMMUNICATIONS WITH THE BOARD

Any shareholder or other interested party who has a concern or question about the conduct of General Dynamics may communicate directly with our non-management directors or the full Board. Communications may be confidential or anonymous. Communications should be submitted in writing to the chair of the Nominating and Corporate Governance Committee in care of the Corporate Secretary, General Dynamics Corporation, 2941 Fairview Park Drive, Suite 100, Falls Church, Virginia 22042. The Corporate Secretary will receive and process all written communications and will refer all substantive communications to the chair of the Nominating and Corporate Governance Committee in accordance with guidelines approved by the independent members of the Board. The chair of the Nominating and Corporate Governance Committee will review and, if necessary, investigate and address all such communications and will report the status of these communications to the non-management directors as a group or the full Board on a quarterly basis.

Our employees and other interested parties may also communicate concerns or complaints about our accounting, internal control over financial reporting or auditing matters directly to the Audit Committee. Communications may be confidential or anonymous and can be submitted in writing or reported by telephone. Written communications should be submitted to the chair of the Audit Committee in care of our ethics officer at the address in the preceding paragraph or at the address in the Standards of Business Ethics and Conduct Handbook provided to all employees. Our employees can call a toll-free helpline number or access the helpline at a web address, each of which is provided to all employees. The ethics officer will review, investigate and address any concerns or complaints unless the Audit Committee instructs otherwise. The ethics officer will report the status of all concerns and complaints to the Audit Committee. The Audit Committee may also direct that matters be presented to the full Board and may direct special treatment of any concern or complaint addressed to it, including the retention of outside advisors or counsel.

RELATED PERSON TRANSACTIONS POLICY

Our Board of Directors has adopted a written policy on the review and approval of related person transactions. Related persons covered by the policy are:

A related person transaction is defined by this policy as a transaction, arrangement or relationship (or any series of similar transactions, arrangements or relationships) in which: General Dynamics will be a participant; the amount involved exceeds $120,000; and any related person will have a direct or indirect material interest. The following interests and transactions are not subject to the policy:

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The Nominating and Corporate Governance Committee is responsible for reviewing, approving and, where applicable, ratifying related person transactions. If a member of the committee has an interest in a related person transaction, then he or she will not be part of the review process.

In considering the appropriate action to be taken regarding a related person transaction, the committee or the Board will consider the best interests of General Dynamics and whether the transaction is fair to the company, is on terms that would be obtainable in an arm’s-length transaction or is pursuant to a company discount program for which the related person is eligible, serves a compelling business reason and any other factors it deems relevant. As a condition to approving or ratifying any related person transaction, the committee or the Board may impose whatever conditions and standards it deems appropriate, including periodic monitoring of ongoing transactions.

The following transactions with a related person were determined to pose no actual conflict of interest and were approved by the committee pursuant to our related person transactions policy:

DIRECTOR COMPENSATION

We compensate each non-management director for service on the Board of Directors. The Compensation Committee reviews director compensation on an annual basis. In early 2013, at the request of the committee, management reviewed director compensation at peer companies. In support of this review, management engaged Meridian Compensation Partners, LLC (Meridian), to conduct a director compensation survey that included cash retainers, meeting fees, equity compensation and additional director benefits. Meridian provided director compensation data for two peer groups. The first group consisted of the following companies with substantial aerospace or defense revenues:

To assist the Compensation Committee in assessing director compensation practices and trends in the broader industrial base, management also requested director compensation data from Meridian for a larger group of companies comprising the nine companies listed above and 13 additional companies. The companies in the larger group were:

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In each group, the average sales of the group approximated our sales. The Compensation Committee reviewed the survey data for these two peer groups provided to management by Meridian and, based on this review, recommended no change in director compensation, other than introducing a per diem fee for non-employee directors performing specific projects for the company at the request of the chairman. Accordingly, director compensation for 2013 included the following:

In early 2014, as part of its annual review of director compensation, the Compensation Committee requested that management update its director compensation analysis. Management again engaged Meridian to provide survey data for the peer groups listed above. The committee reviewed the survey data regarding director compensation provided by Meridian and, based on this review, recommended no changes.

Non-management directors have the option of receiving all or part of their annual retainers in the form of Common Stock. The annual retainer, additional committee chair retainer (if any) and attendance fees paid to each director during 2013 are reflected in the Fees Earned or Paid in Cash column of the Director Compensation for Fiscal Year 2013 table, irrespective of whether a director took the annual retainer in shares of Common Stock. The annual equity award consists of a restricted stock award and a stock option award.

Information provided in connection with the February 2014 annual review of director compensation showed that $25,000 continued to represent the median of the comparative data for lead director retainers.

In light of the travel required by service on the Board, we also provide each director with accidental death and dismemberment insurance coverage. Payments by General Dynamics for director accidental death and dismemberment insurance premiums are reflected in the All Other Compensation column of the Director Compensation for Fiscal Year 2013 table.

DIRECTOR STOCK OWNERSHIP GUIDELINES

The Board of Directors believes that each director should develop a meaningful ownership position in General Dynamics. Therefore, the Board of Directors adopted stock ownership guidelines for non-management directors. Pursuant to these guidelines, each non-management director is expected to own at least 4,000 shares of our Common Stock. Non-management directors are expected to achieve the target ownership threshold within five years of election to the Board. Each of our directors who has served on the Board for five years or more currently holds more than 4,000 shares of our Common Stock. Management directors are subject to the ownership requirements discussed under “Compensation Discussion and Analysis – Stock Ownership Guidelines.”

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DIRECTOR COMPENSATION TABLE

The table below provides total compensation for the last completed fiscal year for each of General Dynamics’ non-management directors serving during the year. The number of shares of restricted stock and the number of shares subject to options awarded to the directors annually are the same for each director.

DIRECTOR COMPENSATION FOR FISCAL YEAR 2013

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SELECTION OF INDEPENDENT AUDITORS

(PROPOSAL 2)

The Audit Committee of the Board of Directors has the sole authority to retain the company’s independent auditors and is responsible for the compensation and oversight of the work of the independent auditors for the purpose of preparing or issuing an audit report or related work. The Audit Committee has selected KPMG, an independent registered public accounting firm, as our independent auditors for 2014. KPMG has been retained as the company’s independent auditor since 2002. In order to assure continuing auditor independence, the Audit Committee periodically considers whether there should be a regular rotation of the independent auditor firm. The members of the Audit Committee believe that the continued retention of KPMG to serve as the company’s independent auditor is in the best interests of the company and its shareholders.

Your Board of Directors is submitting this selection of KPMG as the independent auditors for 2014 to an advisory vote of the shareholders. The Sarbanes-Oxley Act of 2002 requires that the Audit Committee be directly responsible for the appointment, compensation and oversight of the audit work of the independent auditors. Nevertheless, as a good corporate governance practice, your Board has determined to solicit the vote of the shareholders on an advisory basis in making this appointment.

If the shareholders do not vote on an advisory basis in favor of the selection of KPMG as our independent auditors, the Audit Committee will reconsider whether to engage KPMG and may ultimately determine to engage that firm or another audit firm without resubmitting the matter to shareholders. Even if the shareholders vote in favor of the selection of KPMG, the Audit Committee may in its sole discretion terminate the engagement of KPMG and direct the appointment of another independent auditor at any time during the year.

Audit and Non-Audit Fees

The following table shows aggregate fees for professional services rendered by KPMG for the audit of our annual consolidated financial statements for the years 2012 and 2013, and fees billed for other services rendered by KPMG during those years.

Auditor Independence. The Audit Committee has considered whether the services rendered by KPMG are compatible with maintaining KPMG’s independence. Representatives of KPMG are expected to attend the Annual Meeting, may make a statement if they desire to do so and will be available to respond to questions.

Policy on Pre-Approval. The company and the Audit Committee are committed to ensuring the independence of the external auditors, both in fact and in appearance. Therefore, in accordance with the applicable rules of the Securities and Exchange Commission, the Audit Committee has established policies and procedures for pre-approval of all audit and permitted non-audit services provided by the independent auditors. The Audit Committee determines annually whether to approve all audit and permitted non-audit services proposed to be performed by the independent auditors (including an estimate of fees). If other audit or permitted

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non-audit services not included in the pre-approved services are required during the year, such services, subject to a de minimis exception for non-audit services, must be approved in advance by the Audit Committee. The Audit Committee may delegate authority to grant pre-approvals to its chair or a subcommittee as it deems appropriate, subject to a reporting obligation to the Audit Committee. All audit and permitted non-audit services listed above were pre-approved.

YOUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THIS PROPOSAL.

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The following Audit Committee Report shall not be deemed incorporated by reference by any general statement incorporating by reference this Proxy Statement or any portion hereof into any filing under the Securities Act of 1933, as amended (Securities Act) or the Securities Exchange Act of 1934, as amended (Exchange Act), and shall not otherwise be deemed filed under such acts.

AUDIT COMMITTEE REPORT

The Audit Committee of the Board of Directors has furnished the following report.

Five directors serve on the Audit Committee:

None of these directors is an officer or employee of General Dynamics. They all meet the independence requirements of the New York Stock Exchange and Rule 10A-3 of the Exchange Act. The Board has determined that Mr. Fricks and Mr. Osborn each qualifies as an “audit committee financial expert” as defined by the Securities and Exchange Commission (SEC) in Item 407(d) of Regulation S-K. The Audit Committee is governed by a written charter approved by the Board. In accordance with that charter, the Committee assists the Board in fulfilling its responsibility for oversight of the quality and integrity of the accounting, auditing and financial reporting practices of General Dynamics. The Committee held nine meetings in 2013.

The Audit Committee has reviewed and discussed with management and the company’s independent auditors for 2013, KPMG LLP, an independent registered public accounting firm, the company’s audited consolidated financial statements as of December 31, 2013, and for the year ended on that date. Management is responsible for the company’s financial reporting process, including maintaining a system of internal controls, and for preparing the consolidated financial statements in accordance with U.S. generally accepted accounting principles (GAAP). KPMG is responsible for auditing those consolidated financial statements and for expressing an opinion on the conformity of the consolidated financial statements with GAAP. In addition, in accordance with Section 404 of the Sarbanes-Oxley Act of 2002, the Audit Committee reviewed and discussed with management, the company’s internal auditors and KPMG, management’s report on the operating effectiveness of internal control over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act of 2002, including KPMG’s related report and attestation.

The Audit Committee has discussed with KPMG the matters required under applicable professional auditing standards and regulations adopted by the Public Company Accounting Oversight Board. In addition, the Audit Committee has received and reviewed the written disclosures and letter from KPMG required by applicable requirements of the Public Company Accounting Oversight Board regarding KPMG’s communications with the Audit Committee concerning independence, and has discussed with KPMG its independence, including the compatibility of non-audit services with maintaining KPMG’s independence. Based on the foregoing discussions and reviews, the Audit Committee has satisfied itself as to the independence of KPMG.

In reliance on the reviews and discussions described above, the Audit Committee recommended to the Board, and the Board approved, the inclusion of the audited consolidated financial statements in the company’s Annual Report on Form 10-K as of and for the year ended December 31, 2013, for filing with the SEC.

This report is submitted by the Audit Committee.

March 4, 2014

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ADVISORY VOTE TO APPROVE EXECUTIVE COMPENSATION

(Proposal 3)

As required by the Dodd-Frank Wall Street Reform and Consumer Protection Act, we are seeking shareholder input on our executive compensation as disclosed in this Proxy Statement. The Board and the Compensation Committee actively monitor our executive compensation practices in light of the industry in which we operate and the marketplace for talent in which we compete. We remain focused on compensating our executive officers fairly and in a manner that emphasizes performance while providing the tools necessary to attract and retain the best talent.

As described in the Compensation Discussion and Analysis section beginning on the following page, our Executive Compensation Program is designed to create incentives both for strong operational performance in the current year and for the long-term benefit of the company, thereby closely aligning the interests of management with the interests of our shareholders.

Our Board of Directors, the Compensation Committee and our management team actively sought shareholder feedback about the compensation program in 2013 and have heard the views of our shareholders. As such, we have continued our long-standing effort to improve the compensation program and respond to shareholder concerns and input. We received a disappointing 57% support for our say-on-pay vote in 2013 and 77% in 2012. Following these votes, our shareholders provided us with valuable viewpoints about the program. We made a number of updates this year in response to shareholder feedback and will continue to take shareholder comments into consideration to ensure that our Executive Compensation Program meets the needs of our shareholders and incentivizes our executives to manage the business to maximize shareholder value.

For these reasons, the Board recommends shareholders vote in favor of the following resolution:

“Resolved, that the compensation paid to the company’s named executive officers, as disclosed pursuant to Item 402 of Regulation S-K, including the Compensation Discussion and Analysis, compensation tables and narrative discussion, is hereby APPROVED.”

The vote is advisory and is not binding on the Board. However, the Compensation Committee of the Board expects to take into account the outcome of the vote as it continues to consider the company’s Executive Compensation Program.

YOUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THIS PROPOSAL.

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COMPENSATION DISCUSSION AND ANALYSIS

In the Compensation Discussion and Analysis, we describe the details of our Named Executive Officer Executive Compensation Program.

The section is organized as follows:

Table of Contents

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This Compensation Discussion and Analysis (CD&A) describes the compensation of our Named Executive Officers (NEOs) for 2013 and includes the following individuals:

Ms. Novakovic was promoted to Chairman and CEO on January 1, 2013. Prior to her appointment as Chairman and CEO, she served from May 2, 2012 through December 31, 2012 as President and Chief Operating Officer, and from May 1, 2010 through May 1, 2012 as Executive Vice President, Marine Systems. To the extent there are references to Ms. Novakovic’s compensation prior to 2013 in this CD&A, it includes compensation for service in her prior roles.

Effective March 7, 2013, Mr. Heebner was appointed Executive Vice President of the Information Systems and Technology group, and Mr. Roualet succeeded Mr. Heebner as Executive Vice President of the Combat Systems group. Mr. Roualet was previously President of General Dynamics Land Systems.

Mr. Redd served as Senior Vice President and Chief Financial Officer through December 31, 2013.

BUSINESS OVERVIEW

General Dynamics is an aerospace and defense company that offers a broad portfolio of products and services in:

We are organized into the following business groups:

Our management team delivers shareholder returns through disciplined execution on backlog, efficient cash-flow conversion and prudent capital deployment. We operate through four business groups: Aerospace, Combat Systems, Marine Systems, and Information Systems and Technology, with each group led by an executive vice president. Business group performance measures are among the key metrics the Compensation Committee (the Committee) considers when making executive compensation decisions for the NEOs.

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COMPANY PERFORMANCE HIGHLIGHTS

Getting Back to Basics.  Ms. Novakovic, upon her appointment as Chairman and CEO, articulated to shareholders and to executives that her focus would be on driving improved performance by returning to what she called a focus on getting “Back to Basics” – margin expansion, cash generation and return on invested capital – all of which occurred in 2013. By highlighting operational effectiveness and cost management, each of the four business groups has shown strong and improving performance in 2013. With no acquisitions in 2013, a significant level of free cash flow was returned to shareholders in the form of dividends and share repurchases. As the financial performance summary below indicates, the company achieved all three Back to Basics goals with a direct, positive result on shareholder value.

Financial Performance Summary.  The company performed well in 2013 with a focus on driving growth in key areas. The following charts show key performance metrics over relevant periods, including particularly strong one-year total shareholder return since Ms. Novakovic became CEO and, with the management team, implemented the Back to Basics approach. Solid long-term stock performance combined with a history of increasing dividends and share buybacks demonstrate a focus on shareholder value, while improving earnings and return on invested capital results reveal good long-term prospects for the business.

Total Shareholder Return*

2011-13

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Dividend Payment History*

Five-Year Dividend Payment History		Percentage Year-Over-Year Dividend Change

*Dividends are paid quarterly

Earnings from Continuing Operations

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Return on Invested Capital**

Free Cash Flow from Operations**

** See the company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on February 7, 2014, for a reconciliation of these non-GAAP (generally accepted accounting principles) measures to their most directly comparable GAAP measures.

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COMPONENTS OF NEO COMPENSATION AND ALIGNMENT WITH COMPANY PERFORMANCE

We pay each NEO with three primary forms of executive compensation: base salary, annual incentives and long-term incentives. The annual and long-term incentives are variable depending on achieving specific performance objectives.

Structural Alignment of Pay with Performance.  We demonstrate our commitment to aligning compensation with company performance through the following key elements of the program:

CEO Compensation Allocation for 2013*		Other NEO Compensation Allocation for 2013*

*Fixed compensation represents base salary, and variable compensation represents annual bonus, performance restricted stock units, restricted stock and stock options.

The following table summarizes the key components of each NEO’s compensation:

Employing a Disciplined, Structured Approach to Compensation.  NEO compensation is based on clear, measureable goals related to company and business group performance. Annual bonuses and long-term incentive compensation levels are tied directly to measurable objectives. Ms. Novakovic implemented rigorous scorecards for each of the NEOs to demonstrate a heightened focus on structure and discipline around performance management and compensation. Details of each NEO’s scorecard are included beginning on page 43 of this CD&A.

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Linking Pay Levels to the Market.  Each component of our NEO compensation is targeted to the 50^th percentile of a core group of aerospace and defense companies with whom we compete for business and executive talent. To the extent either granted or realizable compensation exceeds the median levels, it is attributable to shareholder value-enhancing performance based on achievement of measurable, clearly defined performance goals. We do not benchmark compensation above the median. If the company and business groups exceed their performance goals, actual compensation may exceed the median. Conversely, total compensation can be substantially less than the median for performance that does not meet company or business group goals, and can include no annual bonus and lower equity awards.

Realizable Pay Demonstrates Alignment.  As the following chart demonstrates, Ms. Novakovic’s realizable compensation over three years (a period in which she served both as Chairman and CEO, and in other executive roles) is strongly linked to company performance. The chart shows Ms. Novakovic’s compensation with target and grant-date values on the left bars, and realizable value on the right bars. The line in the chart shows stock performance over the three-year period.

Three-Year CEO Novakovic’s* Granted and Realizable Compensation Relative to Total Shareholder Return (TSR)

*It is important to note that Ms. Novakovic was promoted to Chairman and CEO on January 1, 2013. As such, the three-year realizable pay table includes compensation from years in which Ms. Novakovic did not serve as Chairman and CEO.

For purposes of this analysis, realizable pay includes the following compensation paid in the most recent three years: intrinsic value as of December 31, 2013 of long-term incentive compensation granted (vested or unvested) and actual values of Base Salary, Bonus and All Other Compensation as reported in the Summary Compensation Table. A detailed description of the calculation methodology is on pages 48 and 49 of this Proxy Statement.

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2013 VARIABLE COMPENSATION DRIVERS AND OUTCOMES

Both annual and long-term incentives are based on measurable financial performance metrics. The following summarizes the rigorous company-wide performance targets against actual 2013 performance for certain key financial metrics. Business group performance targets and achievements along with NEO scorecards are described in detail in the Compensation Process section of this CD&A.

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2013 SHAREHOLDER OUTREACH AND SAY ON PAY RESPONSE

Our Board of Directors, the Committee and our management team have heard the views of our shareholders, and we have responded to their concerns. We received 57% support for our say-on-pay vote in 2013 and 77% in 2012. In 2013 and early 2014, we engaged with holders of over 60% of our outstanding Common Stock to understand shareholder views on our Executive Compensation Program. Our shareholders provided us with valuable viewpoints about the program. We made a number of updates this year in response to shareholder feedback and will continue to take comments into consideration to ensure that our Executive Compensation Program meets the needs of our shareholders and incentivizes our executives to manage the business to maximize shareholder value. Listed below is the shareholder feedback along with management and the Committee’s action in response to shareholder feedback:

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RECENT PROGRAM CHANGES

The Committee and company management team are continuing to seek to improve the Executive Compensation Program and have made several enhancements to the program over the past several years. With the support of management and the independent compensation consultant, each change was based on the Committee’s independent review of emerging corporate governance practices, feedback from shareholders, and an effort to more closely align executive compensation with company performance.

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STRONG, INDEPENDENT COMPENSATION GOVERNANCE AND PRACTICES

The Executive Compensation Program is independently governed by the Committee with the support of company management and an independent compensation consultant. The following are characteristics of the program that demonstrate strong governance of the program:

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The objective of the Executive Compensation Program is to incentivize NEOs to achieve strong operational performance in the current year and to align the interests of each NEO with our shareholders over the longer term. The majority of compensation is equity based, vests over several years and is tied directly to long-term shareholder value creation. Our NEOs have stock ownership requirements from 10 to 15 times base salary, which strengthens their alignment to our shareholders.

General Dynamics’ Executive Compensation Program has been in place for more than 20 years and has been amended, when appropriate, by business and governance requirements. Ms. Novakovic and the Committee will assess the program and amend it as necessary to ensure that it meets the company’s strategic business requirements and the needs of the company’s shareholders.

Each NEO receives a mix of fixed and variable components of compensation. The following charts summarize the various forms of compensation and demonstrate that over 90% of the CEO’s compensation and 80% of other NEO compensation is variable and tied to company performance.

CEO Compensation Mix		Other NEO Compensation Mix

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VARIABLE AND PERFORMANCE-BASED COMPENSATION

The Committee has carefully considered the value drivers of the company and each business group when structuring incentive compensation and has determined to use the following factors and metrics to set compensation for the reasons summarized in the table below. Some of the metrics for the business group executive vice presidents are different, as described below.

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ANNUAL INCENTIVE COMPENSATION

NEOs are eligible for an annual cash bonus based on the company’s prior year’s performance and, for NEOs other than the CEO and CFO, that of their business groups. The bonus, which is paid in cash, is designed to place at risk a significant portion of each NEO’s annual compensation. The bonus payout is based on performance against specific, measureable targets discussed in detail below. The Committee believes these metrics are good indicators of not only business group performance but of the company’s overall performance, particularly over the short term, and lead to the creation of long-term value for our shareholders.

LONG-TERM INCENTIVE COMPENSATION

We base long-term incentive grants for each NEO on two factors:

The rationale for indexing long-term incentive awards to total cash compensation (rather than to base salary, as some other companies do) is that the awards are thereby linked to company and business group performance since total cash compensation includes the 100% performance-linked annual bonus. For example, a year of strong performance will drive a higher annual bonus and total cash compensation and, accordingly, a larger long-term incentive award. Correspondingly, in years when performance is below target, long-term incentive awards are reduced as well.

We award long-term incentive compensation in three forms of equity: performance restricted stock units (25% of award value), restricted stock (25% of award value) and stock options (50% of award value). Each of these forms of equity aligns the NEOs with the company’s shareholders and provides retention incentives through multi-year vesting periods. Performance restricted stock units are further aligned to company performance through a performance measure based on the company’s return on invested capital.

Indexing Total Cash Compensation to Set Long-Term Grant Amount. To ensure that long-term incentive awards are reasonably in line with long-term awards at our peer group companies and reflect the financial performance of the company, we use a multiple of total cash compensation to determine the amount of the equity grant. We base the multiple on survey data for the ratio of long-term incentives to cash compensation that our peer group companies award to their executives in similar positions. Unlike many other companies that determine long-term incentive target amounts as a multiple of base salaries, this approach reflects a direct link to the company’s financial and operational performance because a significant portion of total cash compensation is based on company and business group performance measures.

This structure effectively delivers long-term incentives near the 50^th percentile of the peer group when the company and executives achieve target performance goals. Awards can be significantly lower than the median if performance goals are not achieved and as high as an upper limit of the 75^th percentile for overachievement.

Long-Term Incentive Compensation Allocation

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Performance Restricted Stock Units

Performance Restricted Stock Units (PRSUs) are a form of equity compensation tied to the achievement of specific performance goals and linked to the long-term performance of the company’s stock. This element of executive compensation closely connects executives to the company’s financial and stock performance over the long term. PRSUs at General Dynamics are structured as follows:

PRSU Grant = (Total LTI Grant x 25%) x 0 to 200%

The Committee approves challenging PRSU performance targets based on ROIC. In 2012, the NEOs forfeited all of their PRSU awards because the company did not achieve the target ROIC metric of 15.8% (actual ROIC was -0.4%). In 2013, NEOs received 136% of target PRSUs based on ROIC of 16.6%, against a target ROIC of 15.7%.

Restricted Stock

A grant of restricted stock is an award of shares of common stock that cliff vests after four years of service from the grant date. Restricted stock awards are designed to attract and retain executives by providing them with some of the benefits associated with stock ownership during the restriction period, while incentivizing them to remain with General Dynamics. The Committee has determined that the use of cliff vesting (the entire grant vests at once as opposed to ratably over time) on our restricted stock ensures that executives are focused on long-term value creation while supporting the company’s need to attract and retain executives during all market conditions.

Restricted Stock Grant = Total LTI Grant x 25%

During the restriction period, executives may not sell, transfer, pledge, assign, or otherwise convey their restricted shares. Executives are eligible, however, to vote their shares and receive dividend payments and other distributions on our Common Stock when declared by the Board of Directors. Restricted stock awards are service-based, meaning that the executives must remain in the employment of the company during the restriction period in order to receive the shares upon release. Executives who voluntarily resign or are terminated for cause prior to the end of the restriction period forfeit their restricted stock unless otherwise determined by the Committee.

No one participant may be granted an award of more than 200,000 shares of restricted stock in any calendar year. In practice, the number of shares of restricted stock granted to the NEOs is well below this share limit.

Stock Options

The Committee grants stock options to align executive interests with shareholder interests for several years into the future. They are granted to incent executives to prudently increase the stock price over the longer term. They serve as both a retention tool and a value driver. Stock options give our NEOs the right to buy a share of our Common Stock in the future at a predetermined exercise price, which is established as the average of the high and low stock price of our Common Stock on the date of award. In 2013, the exercise price for the annual grant of options was $67.70 for each stock option.

Stock Option Grant = Total LTI Grant x 50%

Stock option grant sizes are calculated by multiplying the overall target LTI economic value determined as noted above by the weighting assigned to the stock options component (50% in 2013) and dividing the result by the value of a single option, determined under the Black-Scholes methodology applying the same assumptions used for recognizing option expense in our audited financial statements. These assumptions are set out in Note O to our financial statements contained in our Annual Report. The Black-Scholes formula is based on a set of key variables and assumptions and is an accepted model for valuing stock options under Financial Accounting Standards Board ASC Topic 718.

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Stock options vest over two years. Fifty percent of the grant is exercisable after one year and the remainder is exercisable after two years. Our outstanding options granted prior to 2011 expire five years after the grant date. Options granted in 2011 and later expire seven years from the grant date. The Committee determined that a seven-year expiration date would better serve the company’s retention and long-term performance goals by bringing the option exercise date more in line with practices of other companies with whom we compete for talent, and more appropriately mitigating employees’ risk exposure to market volatility.

No one recipient may be granted an award of options to purchase more than one million shares of Common Stock in any calendar year. In practice, the number of shares underlying stock option awards granted to the NEOs is well below this share limit. As with restricted stock and PRSU awards, NEOs who voluntarily resign or are terminated for cause immediately forfeit all options that have not vested unless otherwise determined by the Committee. Our equity compensation plan prohibits the repricing of stock options without the approval of shareholders.

FIXED COMPENSATION AND BENEFITS

Base Salary

We pay executives an annual salary in cash that is benchmarked to the median (50^th percentile) for salaries of executives in comparable positions at our peer group companies based on survey data. Salaries are reviewed annually, and increases, when they occur, are driven by changes in the market. We believe that organizations that perform well over the long term, like General Dynamics, make an effort to pay salaries at or near the market median and create opportunities for executives to earn above median compensation through bonus and equity incentives that are awarded based on performance relative to challenging and clear performance goals. The goal of our base salary is to provide a competitive, fixed rate of cash compensation. It is important to note that there is no annual merit pool for NEO base salaries at General Dynamics. Rather, base salaries are strictly benchmarked to the median of the peer group and could be fixed for several years if peer businesses do not grow or if market competitive levels stagnate or contract.

Benefits

General Dynamics-provided benefits are an important tool used to attract and retain outstanding executives. Benefit levels are reviewed periodically to ensure they are cost-effective and competitive and support the overall needs of our employees. The company makes available medical, dental, life insurance and disability coverage to all of the NEOs. NEOs can select the level of coverage appropriate for their circumstances. The company also provides NEOs group life insurance coverage worth two times base salary and 50% long-term disability.

Company-Sponsored Retirement Plans

We provide retirement plans to our eligible employees, including the eligible NEOs, through a combination of qualified and non-qualified plans. Following is a description of the retirement plans in which the NEOs participate:

Defined-Benefit Retirement Plan.  Each NEO participates in a company-sponsored defined-benefit plan called the General Dynamics Salaried Retirement Plan. The Salaried Retirement Plan is a funded, tax-qualified, noncontributory defined-benefit pension plan. It was amended effective January 1, 2007, to exclude any employee initially hired after that date. The benefit formula under the Salaried Retirement Plan for employees hired before December 31, 2006, is 1.0% times a participant’s highest final average pay multiplied by years of service earned on and after January 1, 2007, plus 1.3333% times a participant’s highest final average pay prior to January 1, 2011, multiplied by years of service earned prior to January 1, 2007. The plan was further amended in January 2013 to freeze benefits as of December 31, 2013, under the plan for employees at our corporate headquarters, including the NEOs. The benefit under the plan is payable as a life annuity. An NEO’s base salary and cash bonus are used to calculate retirement benefits. The company makes contributions to the Salaried Retirement Plan through payments into a trust fund from which the benefits are paid.

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Supplemental Retirement Plan.  The amount of cash compensation used to calculate pension benefits for participants in the Salaried Retirement Plan is limited by the Internal Revenue Code ($250,000 in 2012 and $255,000 in 2013). To provide a benefit calculated on compensation in excess of this compensation limit, the company provides eligible executives coverage under the General Dynamics Corporation Supplemental Retirement Plan. Benefits under the Supplemental Retirement Plan are general unsecured obligations of General Dynamics. Each NEO participates in the Supplemental Retirement Plan.

401(k) Plan.  Each NEO is eligible to participate in the General Dynamics Corporation 401(k) Plan, a tax-qualified defined contribution retirement plan. Each NEO is eligible to make before-tax contributions and receive company matching contributions under the 401(k) Plan. During 2013, the 401(k) Plan provided for a company-matching contribution of (1) 100% on before-tax contributions up to the first 3% of a participant’s eligible pay and (2) 50% on before-tax contributions on the next 3% of a participant’s eligible pay. Our matching contributions during 2013 for the NEOs are included in footnote (d) to the All Other Compensation column of the Summary Compensation Table on page 51 of this Proxy Statement.

Supplemental Savings Plan.  The company provides a Supplemental Savings Plan to key employees, including each NEO. The purpose of the Supplemental Savings Plan is to allow key executives to defer salary and receive matching contributions on compensation in excess of the compensation limit imposed by the Internal Revenue Service on earnings used to calculate 401(k) contributions. Matching contributions during 2013 for the NEOs are included in footnote (d) to the All Other Compensation column of the Summary Compensation Table on page 51 of this Proxy Statement.

Other Retiree Benefits.  Eligible key executives throughout the company, including the NEOs, can purchase group term life insurance prior to retiring of up to two times their base pay. For executives who retire early (prior to age 65), we pay for insurance coverage equal to one-half the executive’s base salary until the executive reaches age 65. For early retirees who elect coverage in excess of one-half of base pay they will pay monthly premiums for the additional coverage. For executives retiring at or after age 65, we pay for insurance coverage up to two times an executive’s base salary. This coverage is ratably reduced over a five-year period following the executive’s retirement, or beginning at age 65 for early retirees, subject to a maximum coverage level of 25% of the coverage in effect at the time of retirement.

Perquisites

We continue to offer only perquisites that the Committee believes are reasonable yet competitive in attracting and retaining a strong executive team. The company provides perquisites to key executive officers, including the NEOs, for purposes of recruiting, retention and security.

We provide perquisites to ensure the security and accessibility of our executives and to facilitate the transaction of business. As a reasonableness test, we compare these perquisites to generally accepted corporate practices. Our policy is to not reimburse executive officers for personal taxes owed by them resulting from their receipt of perquisites.

The perquisites provided to our NEOs in 2013 were: financial planning and tax preparation services, physical examinations, home security systems, personal liability and supplemental accidental death and dismemberment insurance, relocation services, and the personal use of automobiles owned or leased by the company. In addition, personal use of our aircraft was provided only to our chairman and chief executive officer as required by the Board to help ensure her security and accessibility. In February 2013, management proposed and the Committee approved the elimination of leased cars to NEOs, with any existing leases to be terminated no later than December 31, 2014.

We have provided additional information on perquisites in footnote (d) to the All Other Compensation column of the Summary Compensation Table on page 51 of this Proxy Statement.

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POTENTIAL SEVERANCE AND CHANGE-IN-CONTROL BENEFITS

The company has entered into change in control agreements, also known as severance protection agreements, with each of the NEOs. The company believes that these agreements are an important tool for recruiting and retaining highly qualified executives. The agreements are structured to protect the interests of shareholders by including a “double-trigger” mechanism that results in a severance payout only when:

A “change in control” is defined to include specified stock acquisition, merger or disposition transactions involving General Dynamics. The Committee evaluates and reviews payment and benefit levels under the change in control agreements regularly. These reviews support the view that the agreements are consistent with the practices of our peer group companies. The form of severance protection agreement for NEOs appointed after April 2009 excludes any provision for reimbursement of excise taxes that may become due upon a change in control.

Payments and benefits provided to NEOs pursuant to the change in control agreements are described in the Potential Payments upon Termination or Change in Control section beginning on page 59 of this Proxy Statement.

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The Committee, with the support of independent compensation consultants and company management, handles the development and implementation of the Executive Compensation Program. The Committee has designed and implemented an Executive Compensation Program that is structured to:

The Committee objectives are achieved through the use of both short-term and long-term incentives. The company currently targets the median pay of our peers as further discussed in detail below. In addition, through the annual bonus plan, the NEOs are rewarded for achieving annual company and business group goals.

SETTING COMPENSATION LEVELS AND EVALUATING PERFORMANCE

Setting compensation for NEOs is a 16-month process that begins in the fall of each year when senior management establishes company operating goals for the coming year. The business plans are presented to the chairman and chief executive officer annually in November. The chairman, in consultation with the chief financial officer and the executive vice presidents, establishes the business group operating goals and the company operating plan for the coming year based on those business group plans. At a three-day Board meeting in the first quarter of each year, the NEOs present their plans to the Board of Directors. The Board then reviews, adjusts where appropriate, and approves the business group operating goals and adopts our company operating plan for the year. Throughout the year, the Board reviews and monitors company performance as compared to the operating plan through a series of financial and operating reports given by the chief financial officer and the executive vice presidents.

The Committee reviews performance beginning the following January. At that time, the chairman and chief executive officer, the chief financial officer and the executive vice presidents assess the performance of the business groups and the company compared with the operating plan goals adopted the prior year. The chairman and chief executive officer along with senior management report the results of that assessment to the Board of Directors at a meeting in the first quarter of the year. Following these reports, the chairman and chief executive officer, after consultation with senior management, undertakes an initial discussion with the Committee regarding executive compensation for the year. The Committee convenes in early March to review and approve final executive compensation proposals. At this meeting, the chairman and chief executive officer provides the Committee with a performance assessment of each NEO (other than herself) against pre-determined goals. The Committee reviews, refines and approves compensation for the chairman and chief executive officer in executive session at the March meeting.

The Committee bases compensation on the clearly defined and disclosed performance goals described in this Proxy Statement. However, the Committee retains the right and ability to assess achievement and degree of difficulty on an after-the-fact basis, and to adjust compensation awards up or down based on their judgment.

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PEER GROUP AND BENCHMARKING TO THE MARKET

Each year, the Committee, with support from an independent compensation consultant and survey data from Aon Hewitt, identifies a core group of companies that are, in comparison to General Dynamics:

After selecting the peer companies, the Committee considers the median levels (the 50^th percentile) of the following when setting each component of compensation, including: (1) base salaries, (2) total cash compensation and (3) ratios of long-term incentives to annual cash compensation. The ratio of long-term incentives to annual cash compensation is used to determine the grant-date economic value of long-term incentive grants, before the long-term awards are adjusted for performance through the ROIC adjustment on performance restricted stock units. If individual salaries, total cash compensation or the ratio used to set long-term grants results in above-median payouts, it is because of outstanding company or executive performance.

The companies in the core peer group for 2013 are listed below. General Dynamics’ CEO compensation was targeted to the      median of the peer group, while the company was near the median of the peer group as measured by revenue.

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NEO PERFORMANCE METRICS AND TARGETS FOR 2013

The following scorecards demonstrate each NEO’s goals and objectives for the year and performance against those goals and objectives. There is a scorecard for the CEO, CFO and each NEO who leads one of the four General Dynamics business groups.

Chairman and CEO

Senior Vice President and Chief Financial Officer

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Executive Vice President, Information Systems and Technology

  * Excludes results of the group’s United Kingdom business that was restructured during the year and which the Committee did not include in determining   Mr. Heebner’s compensation.

  ** Percentage of aggregate cash flow for all business groups

Executive Vice President, Combat Systems

  * Excludes the effects of market events that were not anticipated at the time the target was set and were beyond the control of the business. This change had minimal   impact on the payout and did not result in achievement of the target.

  ** Percentage of aggregate cash flow for all business groups

Executive Vice President, Marine Systems

  * Percentage of aggregate cash flow for all business groups

Based upon the NEOs’ performance as reflected in these scorecards, the Committee granted bonuses that resulted in total cash compensation slightly above the median of the peer group for Ms. Novakovic and Messrs. Heebner and Casey and somewhat below the median for Messrs. Redd and Roualet.

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ROLE OF THE INDEPENDENT COMPENSATION CONSULTANT

The Committee’s charter provides that the Committee has sole authority to engage the services of an independent compensation consultant and approve fees paid to the consultant by the company. The Committee engaged PricewaterhouseCoopers LLP (PwC) as an independent compensation consultant to provide advice on executive compensation matters. The Committee found that PwC provided important perspectives about the market for executive compensation, peer company analysis and selection, the levels and structure of the compensation program, and compensation governance.

In early 2013 and again in early 2014, the Committee, after reviewing the factors influencing independence (as specified by the New York Stock Exchange listing standards) including the fees paid by the company to PwC for other services, engaged PwC for compensation consulting services. PwC is also available to provide advice to the chairman of the Committee or the Committee as a whole on executive compensation matters on an as-needed basis. PwC attends Committee meetings upon the request of the Committee’s chair and may also provide observations and insights to the Committee related to the amount or form of compensation for our executives.

During 2013, at the Committee’s request, PwC performed the following specific services:

In 2013, the chair of the Committee approved fees of approximately $126,000 to PwC in its capacity as external advisor to the Committee. Fees were higher in 2013 compared to 2012 due to PwC’s increased support of the Committee, including support provided for the Committee chair’s shareholder engagement efforts on executive compensation matters and resulting program enhancements considered by the Committee. Management neither made, nor recommended, the decision to engage PwC. The PwC group providing compensation services to the Committee reports directly to the chair of the Committee and is not involved in providing any other services to the company. During 2013, the company retained PwC to provide services to the company unrelated to executive compensation, including tax and other business-related services. The aggregate fees paid for those services in 2013 were approximately $3 million. In February 2014, the Committee undertook an assessment of PwC’s services for the Committee and the company as well as other factors influencing independence (as specified by the New York Stock Exchange listing standards) and determined that no conflict of interest exists. The Committee further concluded that PwC is independent of management as a consultant and is duly qualified to assist the Committee.

Additionally, the company engaged Pearl Meyer & Partners (PM&P) in 2013 to assist with the development of both a clawback policy and an anti-pledging policy. We expect that PM&P will continue as management’s compensation consultant to advise the chairman and CEO on compensation matters.

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STOCK OWNERSHIP GUIDELINES

Our stock ownership and retention guidelines are among the most stringent of public companies, based on data that we have analyzed from the Center On Executive Compensation and Equilar, Inc. Stock ownership guidelines strongly align the interests of management with the interests of shareholders because executives become shareholders with a considerable investment in General Dynamics.

*Base salary, through termination from company or until no longer a corporate officer

Our stock ownership and retention guidelines preclude NEOs from selling shares of common stock until they own shares with a market value ranging from 10 to 15 times their base salary. Shares held outright, unreleased shares of restricted stock, PRSUs and shares (or share equivalents) held through our 401(k) plans are counted for purposes of meeting the ownership guidelines.

When exercising options, executives who have not yet met the ownership guideline may sell shares acquired upon exercise to cover transaction costs and taxes and are expected to hold any remaining shares until the guidelines are met. Similarly, shares received upon release of restricted stock and PRSUs may not be sold until the ownership guidelines are met. Once an officer attains his or her required ownership level, the officer must maintain that ownership level until he or she no longer serves as an officer. The stock ownership and retention guidelines are reviewed annually by the Committee.

Anti-Hedging and Anti-Pledging Policies.  The company has had a longstanding policy in place that prohibits all directors and executive officers from hedging company securities. In 2014, the Committee adopted a policy prohibiting all directors and officers from pledging company securities that they own directly.

CLAWBACK POLICY

In 2014, the company adopted an executive compensation recoupment policy, or “clawback policy,” which applies to certain executive officers of the company (referred to as the covered executive officers), including the NEOs. In the event of a restatement of our financial results due to a covered executive officer engaging in fraud or intentional illegal conduct, the result of which is that any covered equity or other performance-based compensation paid to that covered executive officer would have been a lower amount had it been calculated based on such restated results, the Committee will have the authority to recover any excess compensation that was awarded to that covered executive officer. In determining the excess compensation, the Committee will take into account its good faith estimate of the value of awarded and actual compensation that may have been affected by the restatement and the events leading to it. This includes all performance-based cash incentives and equity-based grants which may have vested or been exercised during the period in question.

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MONITORING DILUTION AND ANNUAL EQUITY USAGE

The Committee is focused on using equity to compensate executives in a manner that links executive and shareholder interests while focusing on the overall dilutive effect of that equity. The Committee considers the need to attract, motivate and retain the executive talent required to execute the business strategy and achieve operational excellence, as well as the desire to grant equity to executives within the individual business groups and individual business units across the organization. The Committee also actively monitors the level of equity dilution when granting equity-based compensation in several important ways:

Our dilution percentage at the end of 2013 was approximately 10.9% on a fully diluted basis. This was comprised of 5.8% reflecting outstanding grants and 5.1% representing shares reserved and available for future grants. Our three-year average burn rate was 2.1%, calculated on a fully diluted basis.

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REALIZABLE PAY TABLES

Our shareholders have indicated that realizable pay disclosure would provide a helpful tool in assessing the alignment of pay and performance at the company. For purposes of helping our shareholders see the strong alignment of pay and performance in our Executive Compensation Program, we are showing a comparison of Ms. Novakovic’s: (1) grant-date total compensation over three years with realizable pay; and (2) long-term incentive compensation over three years with realizable pay.

Realizable pay reflects the amount of compensation granted over the last three years based upon a value as of December 31, 2013, if all stock options, restricted stock and PRSUs were fully vested. The elements of compensation are described in detail in the tables below.

The following two tables show the target/granted and realizable compensation numbers used to calculate the realizable pay table on page 29 of this CD&A:

CEO Target/Granted Compensation Amounts for Realizable Pay Calculation*

*Ms. Novakovic served as Chairman and CEO beginning on January 1, 2013. As such, to the extent this table covers Ms. Novakovic’s compensation prior to 2013, it is for compensation in her prior roles.

48     General Dynamics 2014 Proxy Statement

CEO Realizable Compensation Amounts for Realizable Pay Calculation*

*Ms. Novakovic served as Chairman and CEO beginning on January 1, 2013. As such, to the extent this table covers Ms. Novakovic’s compensation prior to 2013, it is for compensation in her prior roles.

**Intrinsic value of equity is defined for purposes of this calculation as the difference between the stock price on the grant date and on the calculation date (December 31, 2013).

COMPENSATION AND RISK MANAGEMENT

With the support of management and the independent compensation consultant, the Committee evaluates the company’s overall risk profile relative to the incentive components of compensation to ensure that NEOs are not overly incentivized to focus on short-term stock performance. The use of long-term equity incentive awards as a significant portion of total direct compensation and robust stock ownership guidelines are structured to ensure management is focused on the long-term and not incentivized to take excessive risk.

TAX CONSIDERATIONS

As part of the annual compensation review process, the Committee considers the implications of Section 162(m) of the Internal Revenue Code, which is a provision that precludes the company from taking a tax deduction for individual compensation in excess of $1 million. The Committee also considered the exemptions to the $1 million limit, which are also provided in Section 162(m), including the exemption for “performance-based compensation” as defined in Section 162(m). The Committee has not adopted a policy that any particular amount of compensation must be deductible to the company under Section 162(m), and believes that while tax deductibility is important and should be exercised where possible, it is also important to have flexibility to design a program that best serves the company, shareholders and NEOs.

General Dynamics 2014 Proxy Statement     49

EXECUTIVE COMPENSATION

SUMMARY COMPENSATION

The Summary Compensation Table is formatted in accordance with Item 402(c) of Regulation S-K and shows base salary, cash bonus, equity awards – restricted stock, performance restricted stock units and stock options – and all other compensation, which includes among other things the value of perquisites, 401(k) contributions and tax reimbursements (see footnote (d) to the Summary Compensation Table for a complete listing of categories included in All Other Compensation). The table also includes a column titled Change in Pension Value and Nonqualified Deferred Compensation Earnings. For our eligible named executive officers, this includes only the change in pension value (see footnote (c)), which is an actuarial estimate of the present value of the future cost of pension benefits. The value does not reflect a current cash cost to General Dynamics or, necessarily, the pension benefit that an executive would receive, since that is determined by a number of factors, including length of service, age at retirement and longevity.

50     General Dynamics 2014 Proxy Statement

SUMMARY COMPENSATION TABLE