ANBU SARAVANAN,
When the MAX and MIN limits are mentioned, these terms usually describe the limits of size of a feature. The limits of size in your example are still 1.010 (MAX limit, AKA the MMC limit) and 0.990 (MIN limit, AKA the LMC limit). This is regardless of the cylindricity tolerance and the free state modifier.
What the free state modified does is it enlarges the Outer Boundary of the cylinder from 1.010 (the boundary that exists with rule#1) to the value generated by the effects of the feature's MMC and the cylindricity tolerance. This equals 1.011. The Outer Boundary is the smallest theoretical cylinder in which you could fit the actual cylinder of the largest size and form error as allowed by the limits of size and the cylindricity tolerance. The Inner Boundary, the largest theoretical cylinder which can be fitted all inside the actual cylinder of the smallest size and largest deformation allowed by the cylindricity tolerance, equals 0.989, which is the same with or without rule #1.