Your telegram 931.  Reviewing all circumstances including advantage of enabling you to meet Portugal's wishes as far as possible we are agreeable to sending to Dilli certain Australian troops now in Dutch Timor to replace equivalent number Dutch troops whom you suggest should be withdrawn from Portuguese Timor to Dutch Timor.
This exchange would mean the transfer of two companies of the A.I.F. from Koepang to Dilli. Because of the importance to Australia of the defence of Koepang, our Chiefs of Staff draw attention to the following additional points:-
(1) That if the Dutch will not be party to the proposed exchange but will withdraw their troops from Dilli, then this should be done. In this event, no Australian troops should be transferred from Koepang to Dilli but the reduced force at Dilli viz. one independent company A.I.F. should be accepted for the present in preference to depleting the forces at Koepang which are already insufficient for their important role.
(2) That the composite force that will be established at Koepang if the proposed exchange is carried out will be less satisfactory than the present force which is entirely or preponderantly Australian.
(3) That in no event should there be any change in the policy whereby the A.I.F. Commander at Koepang  is in command of the composite forces.
(4) That the Department of the Army is investigating the possibility of forming two rifle companies out of available A.I.F.
reinforcements to replace the two companies that will be transferred from Koepang to Dilli if the proposed change is effected.