"Much remains to be done in the next 100 days but today we should take heart for what has already been accomplished," Bremer said. "What a difference a year can make in the lives of Iraqi people."

Bremer said he planned to set up a defence ministry at cabinet level later this week and pledged to address the security concerns of many Iraqis as well as fight corruption.

In his speech, in front of Iraqi officials, Bremer listed the economic, political and social achievements since May and praised the recently-signed interim constitution, which will see Iraq through elections and into next year.

He referred repeatedly to the contrast in Iraq compared to when former president Saddam Hussein was in power.

Meanwhile, a rocket slammed into a major Baghdad hotel yesterday in a new targeted attack calculated to add chaos to the already complex process of returning sovereignty to the Iraqis at the end of June.

In the restive town of Fallujah, at least three Iraqis were killed and several people injured, among them two US soldiers, in a series of incidents overnight and into Wednesday morning.

The violence comes as the US civilian administrator, Paul Bremer, was due to deliver a major address to Iraqi officials to mark the start of the last 100 days until sovereignty is returned to the Iraqi people.

The rocket in Baghdad caused no injuries when it hit the sixth floor of the heavily-fortified Sheraton hotel at just after 4:00 am (0100 GMT), but it shook awake guests and sent panic through the area.

Normally darkened like the neighbouring Palestine Hotel at that hour, most lights were on at the Sheraton, which is popular with Western contractors and the media, and lifts could be seen busily shuttling up and down.

In Fallujah, three Iraqis were killed and five people wounded, including two soldiers, overnight when the soldiers came under attack, civilian and military officials said.