MSXML - Processing non standard characters

I am trying to transform an HTTP XML document which contains special
characters using MSXML. I receive the following error when the
transformation occurs:
 
XML Error loading '' 
An invalid character was found in text content.

I have no control over the format of the XML document. The XML document has
<?xml version="1.0"?>in the first line. Microsoft's site says: Re-encode the
XML data as proper UTF-8. 
 
I added the following to my XSL file but it still doesn't work: <?xml
version="1.0" encoding="UTF-8" ?>
 
Since I can't change the original XML file, how can I resolve this problem.
 
Any help is appreciated, thanks.
 
 

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