Heteroepitaxial growth of AlN layers on (10 (1) over bar0) m-plane sapphire substrates was investigated by metalorganic vapour phase epitaxy. Different nucleation temperatures were used to achieve single phase (10 (1) over bar0) AlN layers. The crystallinity of the layers further increased with increasing annealing temperature and annealing time. The full-width at half maximum of the symmetric (10 (1) over bar0) X-ray rocking curves decreased from about 2900/1940 arcsec to 1030/800 arcsec along [0001]/[11 (2) over bar0](AlN). The density of basal stacking faults of the annealed layers was found to decrease from similar to 2.8x10(5) to similar to 1.5x10(4) cm(-1). The annealed layers had a larger effective optical bandgap energy of similar to 6.15 eV than similar to 6.04 eV of the as-grown layers due to their better crystallinity and structural order.