  In a toroidal orbifold of type IIB string theory we study instanton effects
in N=2 super Yang-Mills theories engineered with systems of wrapped magnetized
D9 branes and Euclidean D5 branes. We analyze the various open string sectors
in this brane system and study the 1-loop amplitudes described by annulus
diagrams with mixed boundary conditions, explaining their role in the stringy
instanton calculus. We show in particular that the non-holomorphic terms in
these annulus amplitudes precisely reconstruct the appropriate Kahler metric
factors that are needed to write the instanton correlators in terms of purely
holomorphic variables. We also explicitly derive the correct holomorphic
structure of the instanton induced low energy effective action in the Coulomb
branch.
