  New and surprisingly simple representation is found for the heterotic string
bosonic effective action in three dimensions in terms of complex potentials.
The system is presented as a K\"ahler $\sigma$--model using complex symmetric
$2\times 2$ matrix (matrix dilaton--axion) which depends linearly on three
Ernst--type potentials and transforms under $U$--duality via matrix valued
$SL(2,R)$. Two discrete automorphisms relating ten isometries of the target
space (U--duality transformations) are found and used to generate the
non--trivial Ehlers--Harrison sector by a map from the trivial gauge sector.
Finite transformations are obtained in a simple form in terms of complex
potentials. New solution generating technique is used to construct EMDA
double--Kerr solution.
