On August 21, 2012, Messrs. H. David Sherman and Gordon H. Silver resigned as members of the Board of Directors of China HGS Real Estate, Inc. (the "Company"). Messrs. Sherman and Silver also resigned as members of the Company's Audit Committee, Nominating and Corporate Governance Committee and Compensation Committee, effective that same date. The resignations of Messrs. Sherman and Silver were not because of any disagreement with the Company on any matter relating to the Company's operations, policies or practices.

On August 22, 2012, Mr. John Chen and Ms. Christy Young Shue were appointed to fill the vacancies on the Board of Directors of the Company until their respective successors are duly qualified and elected to succeed them at the Company's next annual meeting or such earlier date of their resignation or removal. The Company has determined that both Messrs. Chen and Shue qualify as independent directors as such term is defined by Rule 5605(a)(2) of the Marketplace Rules of The Nasdaq Stock Market, Inc. (the "Nasdaq Marketplace Rules"). Both Mr. Chen and Ms. Shue will serve on each of the Audit Committee, Nominating and Corporate Governance Committee and Compensation Committee. Mr. Chen will be the chairman of the Audit Committee and Ms. Shue will be the chairwoman of the Nominating and Corporate Governance Committee.

In connection with their appointment to the board, the Company entered into director agreements with each Mr. Chen and Ms. Shue (the "Agreements"). The Agreements provide that both Mr. Chen and Ms. Shue will receive an annual fee of $36,000 and $24,000, respectively, during the term of the Agreements, and will receive an option to purchase up to 60,000 shares of the Company's common stock with an exercise price equal to $2.37 per share on the date of the grant of the option. Such option will become exercisable on a quarterly basis in twelve equal installments on the last day of each calendar quarter. Copies of the Agreements are attached as Exhibits 10.1, 10.2 and are incorporated herein by reference.

Mr. Chen, age 40, is a California Certified Public Accountant. Mr. Chen has been the Chief Financial Officer of General Steel Holdings Inc. (NYSE: GSI) since May 2004. From 1997 to 2003, Mr. Chen was a Senior Accountant at Moore Stephens Frazer and Torbet. Mr. Chen received his Bachelor of Science degree in Business Administration, Accounting from California State Polytechnic University. Mr. Chen's strong finance and accounting background and many years of experience as Chief Financial Officer at a public company enable him to be an effective member of the Board of Directors of the Company, which needs financial and finance expertise, and make him well qualified to serve as chairman of the Audit Committee of the Board of Directors of the Company.

Ms. Shue, age 49, served as Executive Vice President, Finance and Investor Relations and Corporate Secretary of Harbin Electric, Inc. (NASDAQ: HRBN) from 2007 through November 2011, when Harbin Electric went private as a result of a management buyout transaction. From 2006 through 2007, Ms. Shue was a Vice President and a Senior Investor Relations Consultant at Christensen, an Investor Relations advisory firm. From 2003 through 2006, Ms. Shue served as Investor Relations Manager at International Paper (NYSE: IP). Ms. Shue received her MBA degree in finance/international business from Stern School of Business, New York University, a Ph.D. in Chemistry from Purdue University, and a Bachelor of Science degree from Sichuan University, China. Ms. Shue's previous experience as an officer and Investor Relations manager for public companies has given her insights into various challenges that a public company faces, as well as extensive knowledge and understanding of capital market related issues such as corporate governance and financial reporting.

Neither Mr. Chen. nor Ms. Shue has any family relationships with any of the executive officers or directors of the Company. There have been no transactions in the past two years to which the Company or any of its subsidiaries was or is to be a party, in which each Mr. Chen and Ms. Shue had, or will have, a direct or indirect material interest.

(d) Exhibits:

No.         Description
10.1        Independent Director Agreement by and between the Company and John
            Chen, dated August 22, 2012.
10.2        Independent Director Agreement by and between the Company and
            Christy Young Shue, dated August 22, 2012.