We are not able to use the JBDS 7 feature "Replace with Latest Version" when using Git

Issue

We have a project stored in a Git repository and I am trying to perform a roll back to the latest version in Git.

I have added new Java packages and files to the src folder, but have not yet committed these. I perform a:

right click on the project --> Replace with --> Latest version

I then see a dialog prompt informing that this will discard all local changes, and I click OK. JBDS shows messages on the status bar that the changes are being discarded, and that the project is being rebuilt. But none of the recently added local files are removed from the project.