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Why the heir to the throne is called the Prince of Wales?

The Heir Apparent has, since the institution of the title by King Edward I in 1301, usually been 'created' Prince of Wales. Edward I led the conquest of independent Wales between 1277 and 1283. He subsequently proclaimed his son, Edward, born at Caernarfon in Wales in 1284, the Prince of Wales. There is no succession to the title, which is only renewed at the Sovereign's pleasure. The present Prince of Wales is the 21st in line counting several who were never formally invested!

Prince Charles was created Prince of Wales at Caernarfon Castle on July 1st 1969.