I have looked into this issue and whilst I understand that a distribution group won't be imported into SharePoint via user profile import security groups however will. I have a security group that is used for audience targeting and also setting permissions, inside that security group is another security group with all the members. However none of the members of that group are appearing in the audience membership list. Seems the only way I can get this to work is by adding the actual user account to the top level security group.
I have seen this setup on another farm and it works just fine.
I just got this to work in SP2013 on premise. You have to create a global audience and compile it (check the membership to make sure all your users are there). If your members aren't showing in your compiled global audience, that's likely because you are not synching the appropriate OU in your sync connection. Fix that and try again.
Use the global audience to trim the navigation link - or whatever else you're trying to audience target.