All back-annotated initial conditions are applied at the top level and no child schematics or subcircuits will be modified.
This introduces a potential problem in that once back-annotated initial conditions are applied, you are no longer able to modify individual initial conditions within a hierarchical block. You will be able to edit them only on the top-level device by using the Edit Additional Parameters... pop-up menu option.
You will be able to use initial conditions defined within a hierarchy or subcircuit if you first disable top-level initial conditions using the menu. This will, of course, disable all initial conditions specified at the top level.
To disable initial conditions for a single hierarchical block, use the Edit Properties... pop-up menu option to set the USEIC property to 0.