The whole subject of the sentence is "The most famous annual festival in Wales," which is the solution to your query.
What is the meaning of the term subject?
The person, place, or object that is doing or being something is the subject of a sentence. If you first determine the verb, you may then locate the subject.
Next, enquire: Who/what verbs/verbed? and the sentence's subject is the response to that query.
Hence, In this situation, the question would be: The Royal National Eisteddfod is what, exactly? Wales' best-known annual festival.
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