Having the same problem with Windows-1250 chars:

<?php
echo PHP_VERSION . '<br />' . PHP_EOL;
echo 'Testing: ' . htmlentities('ščćžđ ŠČĆŽĐ') . '<br />' . PHP_EOL;
echo 'Testing: ' . htmlspecialchars('ščćžđ ŠČĆŽĐ') . '<br />' . PHP_EOL;
echo 'Testing: ' . substr('ščćžđ ŠČĆŽĐ', 0) . '<br />' . PHP_EOL;
?>

substr works fine, htmlentities and htmlspecialchars don't return anything.

Affected: PHP 5.4.X
Works fine in 5.3.X and previous.

Sincerely,

Klemen

Previously htmlspecialchars/htmlentities assumed iso-8859-1, as of PHP 5.4 it 
defaults to UTF-8. You can switch the default back to 8859-1 if you like by 
setting default_charset in your ini file, but you risk not encoding things 
correctly depending on the actual encoding you are feeding the function. Since 
these are security-related functions having 8859-1 as the default wasn't a good 
idea because in that encoding everything is valid. If your encoding doesn't map 
the characters that are special in HTML to the exact same place as iso-8859-1 
then you have a security problem.

So you have two ways to solve it. Change the default in your ini file back to 
5.3 behaviour, or be explicit and pass the encoding as the 3rd param to the 
functions.

Thank you for clarification, should have been more careful when reading the migration guide:
http://php.net/manual/en/migration54.other.php

This works:

<?php echo htmlentities('ščćžđ ŠČĆŽĐ', ENT_COMPAT | ENT_HTML401, 'ISO-8859-1'); ?>

I do expect a lot of broken websites/scripts though when non-utf8 websites start migrating to PHP 5.4.x...

Regards,
Klemen

Actually, Windows-1250 is not supported, so to get it to work correctly I used:

<?php echo htmlentities( iconv('Windows-1250', 'UTF-8', 'ščćžđ ŠČĆŽĐ') ); ?>