Abstract: The invention relates to an apparatus for compensating the output signals from a pendulous induction compass transmitter to eliminate heading errors during turns due to the vertical component of the Earth's magnetic field as well as those due to the horizontal component of the Earth's magnetic field perpendicular to the axis of tilt, i.e., two cycle error. By compensating for the effect of Earth's vertical field component, instabilities and anomalies such as "Northerly Turning Error" are eliminated or minimized. Compensation for vertical field error is achieved by generating a signal proportional to the product of the Earth's magnetic field M, the sine of the magnetic dip angle D at the given latitude and longitude and the sine of the aircraft bank or roll angle .phi.. This signal is combined (by summation) with the demodulated signal from the sin .psi. channel (i.e., the signal from the windings of the compass transmitter which senses the field along the athwartships axis) to cancel vertical error.