A new and surprisingly simple representation is found for the heteroti
c string bosonic effective action in three dimensions in terms of comp
lex potentials. The system is presented as a Kahler sigma-model using
a complex symmetric 2 x 2 matrix (matrix dilaton-axion) which depends
linearly on three Ernst-type potentials and transforms under U-duality
via the matrix valued SL(2, R). Two discrete automorphisms relating t
en isometries of the target space (U-duality transformations) are foun
d and used to generate the non-trivial Ehlers-Harrison sector from the
gauge one. Finite transformations are obtained in a simple form in te
rms of complex potentials. The new solution generating technique is us
ed to construct the EMDA double-Kerr solution.