This example, inserted one of the very last editing operations performed on the XML 1.0 specification, is wrong. In fact, the statement is correct and the text in the example is well-formed. However, the real point is that it would be well-formed if the second line read as follows, with a % instead of a &:
<!ENTITY WhatHeSaid "He said %YN;" >
Copyright © 1998, Tim Bray. All rights reserved.