Transmission electron microscopy has been used to examine the spatial distribution of Mg-related precipitates in an Al0.03Ga0.97N layer grown by metal-organic chemical vapour deposition on a grooved sapphire substrate. It is shown that Mg precipitation takes place in vertical, but not in lateral, growth sectors. Evidence is presented for Mg segregation to edge and mixed dislocations leading to these dislocations having hollow cores with diameters of 1-2 nm. It is concluded that during growth Mg segregates to sinks on the (0001) surface, but not on inclined growth facets.