There are problems with displaying filenames in UTF8 encoding, as shown here:

$ echo $LANG
en_GB.UTF-8
$ git init
$ git annex init test
[...]
$ touch "Umlaut Ü.txt"
$ git annex add Uml*
add Umlaut Ã.txt ok
(Recording state in git...)
$ find -name U\* | hexdump -C
00000000  2e 2f 55 6d 6c 61 75 74  20 c3 9c 2e 74 78 74 0a  |./Umlaut ...txt.|
00000010
$ git annex find | hexdump -C
00000000  55 6d 6c 61 75 74 20 c3  83 c2 9c 2e 74 78 74 0a  |Umlaut .....txt.|
00000010
$

It looks like the common latin1-to-UTF8 encoding. Functionality other than otuput seems not to be affected.