Enabling the min and max values for the mapping does the following:
When the coordinate for the UV is above the one
(when a certain point is above the image on
the UV) then it changes that value to one.
So the sampler will sample a pixel from the coordinate
one, which is the topmost pixel of the image (and also
the zero value is sampled from there). So for every
point that is UV-mapped above or below the image,
the color will be from the top row of the image.
The same applies to the other direction.
A dummy solution would be to add one pixel
transparent black border to the image to achieve
a decal on the mug. But you have to use the alpha
channel to mix the image with the original color.