diff --git a/ChangeLog b/ChangeLog
index b6811dba..d9aa4801 100644
--- a/ChangeLog
+++ b/ChangeLog
@@ -18,6 +18,7 @@ NEW IN WAF 1.7.0
 * Updated the gccdeps tool #1162
 * Improved the C# processing #1154, #1153
 * Removed the empty flags from LIB/INCLUDE in the msvc configuration #1159
+* New 'encoding' parameter to bld.subst()
 
 NEW IN WAF 1.6.11
 -----------------
diff --git a/waflib/TaskGen.py b/waflib/TaskGen.py
index 1bea9aa3..9e4e989b 100644
--- a/waflib/TaskGen.py
+++ b/waflib/TaskGen.py
@@ -692,6 +692,7 @@ class subst_pc(Task.Task):
 				tmp = getattr(self.generator, x, '') or self.env.get_flat(x) or self.env.get_flat(x.upper())
 				d[x] = str(tmp)
 
+		code = code % d
 		try:
 			code = code.encode(getattr(self.generator, 'encoding', 'ISO8859-1'))
 		except AttributeError: