#!/usr/bin/perl -w
use strict;
use feature qw( :5.10 );
use Carp;

my $file = q{./yard};
open my $IN, '<:encoding(ISO8859-1)', $file or croak;

binmode STDOUT, ":utf8";  # assuming your terminal is UTF-8

while (my $l = <$IN>) {   # $l is now a Unicode/text string
  chomp $l;
  say "1: $l";
  say "2: ", xlc($l);
}
... sub xlc as you have it