Two Americans being held for five months by a Philippine rebel group linked to Saudi-born dissident Osama bin Laden are still alive, a local official said yesterday.

"American hostages Martin and Gracia Burnham are still alive contrary to rumours they were beheaded by the Abu Sayyaf over the weekend in this island province," according to a statement of Basilan Governor Wahab Akbar, a copy of which was released by the Basilan crisis management committee.

Akbar said he had sent several people into the hinterlands of his province to verify rumours over the weekend the American couple Martin and Gracia Burnham were decapitated.

"Several reliable sources have informed me that the American hostages are still alive, and their chieftain (Khadaffy) Janjalani has slipped through the military cordon en route to Tawi-Tawi province (a southern Philippine island near Malaysia) to negotiate for the release of the Americans," he said.

Akbar said the Abu Sayyaf reportedly asked for $2 million for the release of the American couple.

The Burnhams and another American were among 20 people abducted by Janjalani's group on May 27. The rebels have executed a third American, Guillermo Sobero.

Local media have said the group freed some Filipino hostages after payment of ransom. Eleven hostages are still being held, including the Burnhams.

The U.S. embassy in Manila voiced concern yesterday over rumours of the beheading.

"We are following this matter up with great great concern and interest. We are still establishing the bonafide of the report. We are calling for the safe release of the hostages," U.S. embassy press attache Karen Kelley said in a telephone interview.