J:\jtest>java -version
java version "1.4.0-beta"
Java(TM) 2 Runtime Environment, Standard Edition (build 1.4.0-beta-b60)
Java HotSpot(TM) Client VM (build 1.4.0-beta-b60, mixed mode)

Steps to Reproduce :

Consider the following program:

import java.io.*;
public class IncSeq {
    public static void main(String[] args){
        try {
            byte[] bb = new byte[] {(byte)0300};
            ByteArrayInputStream inp = new ByteArrayInputStream(bb);
            InputStreamReader ist = new InputStreamReader(inp,"UTF8");
            ist.read();
        } catch (Throwable t){
            System.out.println(t);
        }
    }
}

when the program is run with java 1.2/3/3.1, it prints:

J:\jtest>java IncSeq
sun.io.MalformedInputException

when it is run with java 1.4 it prints nothing. I.e. it does not
recognize the a single byte 0300 (i.e. 0xc0) is an incomplete UTF8
sequence.