The purpose of this study is to evaluate the efficacy of valsartan, benazepril or the combination of both in reduction of microalbuminuria in Type 2 diabetic patients.

Inclusion Criteria:

• male or female patients aged 35-75 years with type 2 diabetes mellitus and recent evidence of persistent microalbuminuria
• patients with a median (of 3 samples) timed overnight UAER in the microalbuminuric range of 20-200 g/min in the formal screening period prior to entry
• patients who give written, signed, informed consent.
• patients with/without mild /moderate hypertension.
• patients who are not on hypertensive treatment, or if they are already on treatment, those who accept to enter a 3 weeks no-treatment wash-out period before switching their treatment.
• patients without any accompanying systemic disease

Exclusion Criteria:

• pregnant or nursing women, or women of childbearing potential not using an acceptable method of contraception
• patients with type I diabetes mellitus defined by onset below the age of 35 years and requiring insulin within the first year after diagnosis

Other protocol-defined exclusion criteria may apply.