Version:           3.2.0 (using KDE 4.2.0)
OS:                Linux
Installed from:    Gentoo Packages

I'm using UTF-8 encoding in locale and also in KDE settings, yet I still get this problem. I suspect it's a problem with the "Kate Session Applet" Plasmoid, because using Kate's own session management works as expected.

Steps of reproduction:
1) Open Kate
2) Save a session using non-ASCII characters in its name (e.g. "Članki")
3) Close Kate
4) Click on the "Kate Session Applet" Plasmoid and select that session

Results:
* It opens up an empty session with wrongly encoded name (e.g. "Älanki")
* Even if you don't save that new faulty session, it shows in the Kate session list (in the Plasmoid and Kate itself)

Extra "fun": Now open the new wrongly saved Kate session from the Plasmoid (e.g. "Älanki") — the result is that an even more garbled session opens up (e.g. "ÃÂlanki"). You can do this pretty much ad infinitum (e.g. "Članki" -> "Älanki" -> "ÃÂlanki" -> "ÃÂÃÂlanki" -> "ÃÂÃÂÃÂÃÂÃÂÃÂÃÂÃÂlanki" -> ...)

Expected results:
* Just opening the session using the appropriate encoding

P.S. This is similar to Bug #140929, but I'm opening it as a new bug, because now the Kate Session Applet is a Plasmoid and not a Kicker widget.