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The purpose of higher level fusion is to produce contextual understanding of the states of the environment and prediction of their impact in relation to specific goals of decision makers. One of the main challenges of designing higher level fusion processes is to provide a formal structure of domain-specific types of entities, attributes, situations, and the relations between them for reasoning about situations and threats. This paper presents an attempt at confronting this challenge by describing a process for building formal ontologies that combines a top-down philosophical perspective (from the most abstract levels to domain-specific levels) with a bottom-up application-based perspective (from domain-specific levels to the most abstract levels). The main focus of this paper is to provide a conceptual framework for formally capturing various sorts of complex relation-types, which can serve as a means for a more thorough decomposition of objects, attributes/properties, events, processes, and relations, necessary for higher level fusion processing.