Prince William and Kate Middleton enjoying meetings?

Prince William and Kate Middleton have been enjoying meetings, PEOPLE reports.

"It's true that they have been seeing each other," a source tells PEOPLE in its new issue. Adds a pal: "They [never] loathed each other. It just wasn't working at the time."

The couple were spotted at a June 9 bash in William's Dorset, England, army barracks, where they talked all night and kissed on the dance floor.

The prince and Middleton, both 25, began dating five years ago, and many had Middleton, an accessories buyer at the British fashion company Jigsaw, pegged as the future Queen of England.

Both are expected at the July 1 Concert for Diana.