Cruise Puts Love-Life Rumors to Rest

By Stephen M. Silverman

07/11/2003 at 01:00 AM EDT

Tom Cruise, revealing to this week's PEOPLE how he was shamed by his dyslexia even as an adult, also addresses another subject in his exclusive interview: his love life.

Specifically, the "Mission: Impossible" star, 41, takes on rumors that he and his post-Nicole Kidman squeeze, actress Penelope Cruz, had broken up and that he was back with his ex-wife, whom he divorced two years ago.

"Nic and I were laughing about it on the phone," he tells the magazine, explaining how these rumors get started because "someone sits in an office and goes, 'We've gotta sell a story!'"

PEOPLE confirms that there's no truth to the rumors that Cruise and Cruz are no more, at least for now, describing the couple as arm-in-arm at the June 19 MENTOR/The National Mentoring Partnership awards and reporting that she is close to his kids, Connor, 8, and Isabella, 10.

As a quartet, they have all traveled together to New York and Washington, D.C.

"I'm very happy with my relationship," Cruise tells PEOPLE, though he adds, "There's no engagement."

Instead, he's busy with his career, which will include a third "M:I," to be released next year.

Explaining why he maintains such a busy schedule, the leading man says, "I'm not a guy who likes to hang out on a beach."