AN ATR72 DESCENDED 300' BELOW THE ASSIGNED ILS INITIAL APP FIX ALTITUDE WHEN THE AUTOPILOT DID NOT CAPTURE THE ADU SELECTED ALTITUDE.

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THIS ALTDEV OCCURRED AT ZZZ ON DEC/TUE/06 FLYING THE ILS RWY 28 APCH. I WAS THE PF AND THE CAPT WAS THE PNF THE LAST XMISSION BEFORE THE DEV OCCURRED WAS 'ACR X FLY HDG THREE ZERO ZERO; (I BELIEVE IT WAS THREE ZERO ZERO; OR IT WAS VERY CLOSE TO THAT) DSND AND MAINTAIN THREE THOUSAND FIVE HUNDRED FT; MAINTAIN 180 KTS TILL THE MARKER CLRED ILS TWO EIGHT APCH.' THE CAPT READ BACK THE CLRNC AND I ARMED THE APCH ON THE AUTO FLT CTL SYS (AFCS) AND THE CAPT SET 3500 IN THE ADVISORY DISPLAY UNIT (ADU). TO KEEP THINGS SIMPLE ON THIS RPT I WILL USE THE TERM AUTOPLT TO REPRESENT THE ADU AND AFCS BECAUSE THEY ARE CONNECTED AND ONE IS NEEDED IN ORDER TO USE THE OTHER. I WAS USING VERT SPD MODE ON THE AUTOPLT AND I BELIEVE I SET ABOUT 1200 FPM. AT THE TIME WE WERE CLRED FOR THE APCH I BELIEVE WE WERE AT 4500 FT 'MEAN' SEA LEVEL (MSL) AND WE WERE STILL DSNDING TO 3500 FT MSL. AS THE AIRPLANE APCHED 3500 FT MSL IT DSNDED THROUGH THAT ALT; BUT THIS IS SOMETIMES NORMAL FOR THIS AUTOPLT BECAUSE IT WILL CLB RIGHT BACK TO THE ALT THAT IT SHOULD; BUT IN THIS CASE IT KEPT DSNDING. I IMMEDIATELY TRIED TO SET VERT SPD MODE AND SELECT A 500 FPM CLB RATE USING THE AUTOPLT. THE AUTOPLT DID NOT RESPOND; BUT INSTEAD SEVERAL DASHES WERE SHOWING IN THE ADU WINDOW IN THE AREA THAT IT WOULD SHOW A POSITIVE CLB OR NEGATIVE CLB RATE. AFTER ALL THIS OCCURRED THE AIRPLANE WAS AROUND 3400-3300 FT MSL AND DSNDING ABOUT 700-1000 FPM. AT THAT POINT I IMMEDIATELY GRABBED THE CTL WHEEL AND PRESSED THE TCS (TOUCH CTL STEERING) BUTTON TO FLY THE PLANE MANUALLY. THE FLT CONDITIONS WERE INST METEOROLOGICAL CONDITIONS (IMC); ICING; AND CONTINUOUS LIGHT CHOP TURB. TO PREVENT PUTTING A LOT OF STRESS ON THE AIRPLANE I PULLED BACK FIRMLY AND SMOOTHLY. BY THE TIME I DID GET A POSITIVE RATE OF CLB THE AIRPLANE WAS SLIGHTLY LOWER THAN 3300 FT MSL. I HELD ON TO THE CTL WHEEL AND MANUALLY CLBED BACK TO 3500 FT MSL. AFTER GETTING THE ACFT STABILIZED I THEN ELECTED TO ENGAGE THE AUTOPLT WHILE KEEPING MY R-HAND ON THE CTL WHEEL SO I COULD PRESS THE TCS IN CASE IT DID NOT RESPOND PROPERLY. SHORTLY AFTER THE ACFT WAS STABILIZED THE LOC BEGAN TO 'COME ALIVE' MEANING THE CDI NEEDLE WAS BEGINNING TO MOVE FROM THE R PANE OF THE HSI WINDOW. I ELECTED TO CONTINUE USING THE AUTOPLT A LITTLE LONGER; BUT LATER DISCONNECTED IT AND HAND FLEW THE APCH TO THE LNDG. IN THIS ENVIRONMENT ATC DID NOT QUERY US TO INDICATE THAT A PROB HAD OCCURRED.