I think I have solved the problem. I saved TXT as UTF-8 (originally it was ANSI) and I set manually encoding as UTF-8 and now chaarcters are encoded properly.
However I have increased base font size to 22pt and now I am experiencing another problem - page count is e.g. 379 but I have to turn 3 or 4 pages before counter actually moves one page forward. Moreover page breakes are sometime in the middle of page. How to fix this?