In this work we investigated annealing of 350 nm and 450 nm thick sputtered (SP) AlN on sapphire in the temperature range from 1650 degrees C to 1730 degrees C. The most distinct decrease in the threading dislocation density (TDD), from initially 3 x 10(10) cm(-2) to 4 x 10(8) cm(-2), was achieved for 450 nm AlN at an annealing temperature of 1680 degrees C. Unfortunately, for temperatures >= 1680 degrees C the reaction between AlN and sapphire partially disturbs the AlN layer by formation of polycrystalline AlON at the AlN/sapphire interface. In addition, we found epitaxially oriented (1 1 1) AlON on top of the AlN layers that hinders further epitaxial growth. This problem can be prevented by lower annealing temperatures (<= 1680 degrees C) and thick SP AlN layers. The importance of an appropriate AlN sputtered layer thickness and of a precise temperature control during high temperature annealing are shown in this paper to ultimately achieve a balance between low TDD and suppression of excessive AlON formation.